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Spark VCT PLC (KAY)

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Monday 24 August, 2009

Spark VCT PLC

Half-yearly Report


Financial highlights


Per ordinary share (pence)              30.06.09 31.12.08 30.06.08

Net asset value                             24.3     26.8     28.7
Dividends
Dividend paid (1)                              -      2.8      2.8
Cumulative dividend (2)                     53.7     53.7     53.7
Total return (3)
SPARK VCT plc                               78.0     80.5     82.4
Return including tax benefits (6)           98.0    100.5    102.4
Total return to former shareholders of:
Quester VCT 2 plc per 100p invested in
shares of that company (4)                  63.9     66.5     68.4
Return including tax benefits (6)           83.9     86.5     88.4
Quester VCT 3 plc per 100p invested in
shares of that company (5)                  37.7     40.1     41.9
Return including tax benefit (6)            57.7     60.1     61.9


(1) Dividend paid in the financial period ended on the date stated.

(2) Cumulative dividends paid by SPARK VCT plc.

(3) Net asset value plus cumulative dividend per share to ordinary
shareholders in SPARK VCT plc since the launch of the Company (then called
Quester VCT plc) in April 1996.

(4) Total return to former shareholders in Quester VCT 2 plc, launched in
March 1998, which merged with SPARK VCT plc (then called Quester VCT plc) in
June 2005, the share exchange ratio for former shareholders in Quester VCT 2
plc being 1.0249.

(5) Total return to former shareholders in Quester VCT 3 plc, launched in
February 2000, which merged with SPARK VCT plc (then called Quester VCT plc)
in June 2005, the share exchange ratio for former shareholders in Quester VCT
3 plc being 0.9816.

(6) Return after 20% income tax relief but excluding capital gains deferral.

The Directors do not recommend an interim dividend.

The Interim management report comprises the Chairman's statement, the
Investment manager's report, the fund summary and note 8 to the condensed
financial statements.


Chairman's statement

INTRODUCTION

This is my first report to shareholders since your new Board was confirmed
in office at the Annual General Meeting in May 2009.

Since then, your Board has been gaining a deeper understanding of the
portfolio, in particular the unquoted venture investments, assessing the
Manager's and other service providers’ performance and considering the 
Company's strategy both in the short and the long term. We are also 
addressing certain issues that arose in the period before we took office, 
as shareholders requested at the Annual General Meeting.

SPARK Ventures plc, the parent company of the Company’s manager, 
SPARK Venture Management Limited, recently announced a proposal for a 
management buyout of its investment fund management business, which 
includes the contract for the provision of investment management services 
to the Company. SPARK Ventures plc also announced proposals for a change 
to its investment strategy, including the cessation of new investments on 
its own account. The latter proposals have been approved by its shareholders 
but the vote to approve the proposed buyout of its fund management business 
was adjourned. Following third party expressions of interest in acquiring 
SPARK Ventures plc it has also entered into an offer period. Presently, the 
outcome of these developments is uncertain.Your Board continues to monitor 
the situation closely, with a view to ensuring that the interests of shareholders 
in the Company are best served. We will update shareholders further once we are
in a position to do so.

PERFORMANCE

Shareholders will be aware that financial markets remain deeply troubled. 
Despite the rise in some quoted equity prices since March 2009, corporate 
liquidity remains very tight and trading in very many sectors remains subdued. 
Early stage companies of the sort to which much of venture capital trust investment 
is restricted are suffering an unusually difficult time. Slow trading tends to delay 
their break even point and often forces them to raise more capital, bank finance of 
all sorts is severely restricted, and equity investors are wary.

In the portfolio, many of the less established, early stage companies are currently 
operating at a severely reduced level of activity while others remain vulnerable to 
slower than expected sales growth and a consequent need for more capital than previously 
anticipated to support market development. Even solid companies with proven business 
models frequently find that in raising fresh capital they have to accept lower valuations 
than those that were placed on them as recently as twelve months ago. Over the six months 
to 30 June 2009, the focus of the Manager has been on working with the portfolio companies, 
with a particular emphasis on cost control and rates of cash burn.

There have been no realisations in the 6 months to 30 June 2009. In view of the poor 
visibility on future realisations, no new investments have been made in the period under 
review and we do not anticipate any new investments being made prior to the next 
Annual General Meeting.

With these factors in mind we have reviewed the carrying values of our unquoted portfolio.
The result of this review, and of changes elsewhere in the portfolio, has reduced net 
asset value from 26.8 pence per share on 31 December 2008 to 24.3 pence per share on 30 June 2009. 

Clearly such a reduction is disappointing. However, in the case of Sift Group Limited,
the valuation change reflects a general fall in comparable valuation measures, rather 
than a dramatic deterioration in that company’s performance.  The reductions in the 
valuations of Isango! Limited and We7 Limited have been made against the background of 
difficult trading in very tough markets and the upcoming requirement in each company to 
raise the next round of venture capital finance and the possibility that such finance will 
only be available on more stringent terms than hitherto. As announced in the Interim Management 
Statement on 19 May 2009, Skinkers Limited had earlier in the year faced a similar requirement 
for additional finance at a significantly reduced valuation which has resulted in the lower 
valuation.  Further information on the valuation changes is given in the Investment manager’s 
report on pages 6 to 8.

Such a reduction in the net asset per share, following several years of similar attrition, 
can never be good news for shareholders but we are convinced that all parties will benefit 
from a realistic approach to valuations in these present difficult times.

NET ASSETS

The movement in net assets is summarised in the table below:

                                                  
                                      Venture      Bonds  
                                      capital    and net
                                  investments    current
                                       £'000      assets   Total Pence per
                                                   £'000   £'000     Share

Net asset value at 31 December         18,435     11,296  29,731      26.8
2008
Net gain on disposal of                    60          -      60         -
investments
Net loss on revaluation of            (2,445)       (17) (2,462)     (2.2)
investments
Income                                      -        131     131       0.1
Operating expenses                          -      (483)   (483)     (0.4)
Net investment                            (8)          8       -         -
Net assets before dividends and        16,042     10,935  26,997      24.3
share
buy-backs
Dividend paid                               -          -       -         -
Share buy-backs                             -       (56)    (56)         -

Net asset value at 30 June 2009        16,042     10,879  26,921      24.3

STRATEGY

The reaction of some investors to the current global financial crisis has been 
to liquidate venture portfolios at whatever reduced prices they can obtain. Such 
a policy seems short sighted to your Board and one which would not best serve 
shareholders’ interests especially in view of the special tax status applicable 
to the Company as a venture capital trust.

As required by the Articles of Association, shareholders will be asked at the 
next Annual General Meeting to consider a resolution on the continuation of 
the Company as a venture capital trust (a “Continuation Vote”).The Board 
believes many of our investors, in particular those that rolled over capital 
gains on their initial investment into one of the former Quester VCT’s, would 
be significantly disadvantaged were the Company to cease to qualify as a VCT, 
by reason of winding up or otherwise. In such circumstances, some investors 
might find that their tax liabilities would exceed the exit proceeds 
available to them.

Accordingly, one principle of strategy that appears clear to your Board is that 
it will be in the best interests of shareholders to maintain the Company as a 
qualifying VCT.Your Board continues to review the strategic options for the 
Company which will not only include the investment focus and management of the 
portfolio but also how realisation proceeds and cash surpluses may best be 
returned to shareholders.

On the question of continued VCT qualification I am glad to report that on 
30 June 2009 75.3% of total investments were in qualifying holdings. VCT 
legislation requires a minimum of 70% of total investments to be in such 
qualifying holdings and we will continue to monitor the position carefully.

Whilst your Board will be recommending that shareholders support the 
Continuation Vote, we have agreed with the Manager not to make any new 
venture investments, other than in exceptional circumstances, at least 
until the Continuation Vote has taken place.The Company will, however, 
continue to support its more promising investments with follow on 
funding where appropriate.

DIVIDENDS AND SHARE PRICE

One of the obvious attractions of VCT investment is the possibility of 
tax free dividends and your Board is considering a policy of annual 
dividends, whether or not short term profits have been made, providing 
the Company has sufficient liquidity and distributable reserves. We will 
address this issue at the year end thus giving shareholders the 
opportunity to vote upon any dividend that may be recommended.

The Board is concerned about the extreme discount between net asset value 
and the share price available to those shareholders wishing to sell. We 
are not opposed in principle to share buy-backs but, for the immediate 
future, given the recessionary economic conditions and in order to enable 
resources to be concentrated on the development of existing portfolio companies, 
the Board will use this mechanism with caution. We will also examine other 
mechanisms of providing liquidity to shareholders.

CONCLUSION

Your Board is very conscious that shareholders have seen a substantial 
decline in the net asset value per share and in the quoted market share 
price over the last three years. This has been exacerbated by the current 
crisis in financial markets with M&A markets subdued and early stage 
companies struggling.

Nevertheless we believe that the future, whilst always uncertain, may 
offer more opportunities than are now evident and will be doing everything 
in our power to ensure the success of this Company.

We shall assiduously evaluate strategic alternatives and strive to adopt one 
that is in shareholders’ best long term interests.


Robin Field

Chairman

21 August 2009



Directors' responsibility statement

The Directors confirm to the best of their knowledge that:

- the condensed set of financial statements contained within the Half-Yearly
Financial Report have been prepared in accordance with the Accounting
Standards Board's Statement 'Half-Yearly Financial Reports'; and

- the Chairman's statement includes a fair review of the information required
by Disclosure and Transparency Rule 4.2.7R of important events that have
occurred during the first six months of the financial year and their impact on
the condensed financial statements, and a description of the principal risks
and uncertainties for the remainder of the financial year; and

- the condensed financial statements (note 8) includes a fair review of the
information concerning related parties transactions as required by Disclosure
and Transparency Rule 4.2.8R.

The half yearly financial report was approved by the Board on 21 August 2009
and the above responsibility statement was signed on its behalf by the
Chairman.


Investment manager's report

Over the six months to 30 June 2009, members of the SPARK management team have
continued to be focused on working with the portfolio companies, with a
particular emphasis on cost control and rates of cash burn, against the
background of the risk of slower than expected revenue growth and the reduced
availability of venture capital finance.

Generally, the commercial performance of businesses within the portfolio has
been "on plan" following the downward revision to expectations at the end of
last year. Nevertheless, the economic and therefore funding environment
continues to be very uncertain, with the result that all but one of the
valuation movements have been downwards in the period. Of these downward
revaluations, a substantial proportion by value have been triggered because
valuation metrics generally are still declining in the capital markets -
whether this is reflected in the refinancing terms or in comparable
revenue/earnings multiples.

The more developed companies within the portfolio represent a reasonably
stable base - in particular, Elateral Holdings Limited, Imagesound Limited and
Sift Group Limited.Among the less established, early stage companies, however,
more are currently obliged to operate in "survival" mode while others remain
vulnerable to slower than expected sales growth and a consequent need for more
capital than previously anticipated to support the market development phase.

Against this background, it is important that the Fund retains resources to
continue developing the value of the more promising portfolio companies 
and to maintain its position in follow-on funding rounds.

With the M&A market effectively being closed, we continue to
believe that achievement of significant profitable exits will not be possible
before 2011 at the earliest. There were no realisations during the six months
to 30 June 2009, although £225,000 was returned in cash by one of the
portfolio companies, Community Internet Europe Limited, following the sale of
a subsidiary.

In view of the above, and given the currently poor visibility on the
generation of cash proceeds from realisations, no new investments were made
during the six months to 30 June 2009.


Progress of investments

The six months to 30 June 2009 saw significant follow-on investment in two
companies in the portfolio. Agreement was reached in two other cases for
follow-on investment to be completed during the current quarter.

Company                                                 Sector           £'000

Follow-on investments completed in the six months 
to 30 June 2009:

Secerno Limited                                            TMT             202
Skinkers Limited                                           TMT             122
Other companies (2)                                                         28

                                                                           352

Follow-on investments committed, for completion 
in the quarter to 30 September 2009:

UniServity Limited                                         TMT              83
Vivacta Limited                                     Healthcare             142

                                                                           225

The additional funding of Secerno Limited, which specializes in the supply of 
software and appliances to protect against internal and external threats to 
databases, has been provided to support that its market development phase.
This followed an earlier follow-on round in mid-2008 but at a lower valuation
(anticipated in the financial statements at 31 December 2008). Skinkers Limited,
a software company delivering information broadcast solutions to large 
enterprises, faced a similar requirement for additional finance, as its sales 
cycle had been impacted by the downturn in the financial services sector. The 
Fund contributed in a follow-on round at a significantly reduced valuation, 
as part of arrangements which also involved the spin-off of the smaller consumer
activity (Livestation) and the focusing of the company on its mainstream 
activities.

Looking ahead to the quarter ending 30 September 2009, in the case
of Vivacta Limited, the Fund has committed its share of a new round, structured 
as an extension of the Series B round completed in November 2007, which it is 
expected will fund the company through to regulatory approval of the first of its 
point-of-care diagnostic tests, for TSH (thyroid function). The Fund has also
agreed to provide bridge finance to UniServity Limited ahead of a third-party 
funding round being planned for later in the year.

Significant recent business developments within the portfolio are summarised
below:

- Elateral Limited: had an excellent year to 31 March 2009 delivering 44%
revenue growth, ahead of budgeted expectations. The company won a number of
new customer contracts including Ciena, Linksys, NetApp, Toyota and Symantec.
At the same time, it renewed and extended its relationship with a number of
existing customers including SAP, Coca Cola and New Balance and celebrated its
10th year in partnership with British Telecom.

- Imagesound Limited: has seen sales on target for music services, but fallen
behind on hardware sales. Nevertheless, margins have remained robust keeping
the company profitable.

- Isango! Limited: an early stage online travel website company offering users
an authoritative source of travel experiences such as holiday tours,
sightseeing, attractions and activities, was impacted in autumn 2008 by the
downturn in the travel sector. More recently, while revenues have improved 
somewhat and the company has recently launched its new website which broadens
the range of its travel and holiday offering, growth continues to be slower 
than had been expected.

- Sift Group Limited: has performed solidly in anticipating revenues for the
year ahead of 2008. However, margins have been squeezed and although profits
are expected, they will be lower than the last year.

- UniServity Limited: is close to signing its first sales in the US market
which would be a major step in the development of the business, particularly
as the number of new contracts currently coming up for tender in the UK is
low.The company is awaiting the results of a trial in China, following the
framework agreement for the promotion of the company's web-based learning 
platform in that country.

In relation to Gemini Holdings Limited, the fresh milestones set by the SPARK
management team (following the company's initial difficulties) were not met. 
The decision was therefore taken to provide no further support for this 
company and to seek to recover as much as possible of the cash invested.

Valuation changes

The valuations of the unquoted investments have been reviewed as at 30 June
2009 on the basis of the International Private Equity and Venture Capital 
Valuation Guidelines, having regard mainly to (i) prices of recent financing
rounds and/or the terms of financing rounds expected in the relatively near 
future, (ii) earnings multiples and (iii) industry valuation benchmarks 
and/or M&A valuation criteria.

The net reduction in valuation of unquoted venture capital investments is
as follows:


Company                                         £'000

Elateral Holdings Limited                         207
Isango! Limited                                 (750)
Sift Group Limited                              (731)
Skinkers Limited                                (563)
We7 Limited                                     (408)
Others (2)                                      (114)
                                              (2,359)


In the case of Sift Group Limited, the valuation change reflects a general
fall in comparable valuation measures given the current business and market
conditions, rather than a dramatic deterioration in the business
performance.

Among the early stage companies in the TMT sector, Skinkers Limited has 
recently raised additional finance at a lower valuation. The reductions in 
the valuations of Isango! Limited and We7 Limited have been made against the 
background of difficult trading in very tough markets and the upcoming 
requirement in each company to raise the next round of venture capital 
finance and the possibility that such finance will only be available on 
more stringent terms than hitherto.

The recent trading results of Elateral Holdings Limited have supported an 
upward revaluation of the investment on the basis of an earnings multiple.

Movements in valuation of the quoted venture capital investments over the six
months produced a net reduction of £86,000 in the overall valuation of this
portfolio.

Bond portfolio

During the half year the bond portfolio was reduced by £1.0 million upon the
maturity of one of the holdings, the proceeds being reinvested in a global
treasury fund.

Outlook

Progress will depend greatly on the return of more favourable conditions in
the M&A markets, permitting the more mature investments in the portfolio to be
sold when better valuations can be achieved. Meanwhile, the development of
some of the early stage companies continues to be dependent on success in
winning customer contracts and favourable conditions for the raising of
additional venture capital to support the next phase of development, both of
which requirements carry significant risks at the present time.

SPARK Venture Management Limited
Manager
21 August 2009



Fund summary as at 30 June 2009

                                               Cost
                                                (1)                      % of
                                 Industry           Valuation Equity     fund
                                 sector       £'000     £'000 % held by value
Fifteen largest venture capital
investments
Elateral Holdings Limited        TMT          1,009     1,990  23.4%     7.4%
Imagesound plc                   TMT          2,848     1,920  11.7%     7.1%
Sift Group Limited               TMT          2,395     1,518  21.1%     5.6%
Vivacta Limited                  Healthcare   1,067     1,336   7.3%     5.1%
Cluster Seven Limited            TMT          1,569     1,197   9.0%     4.4%
UniServity Limited               TMT          1,000     1,000  16.5%     3.7%
Workshare Limited                TMT            695       909   1.9%     3.4%
Level Four Software Limited      TMT            855       855   7.8%     3.2%
Secerno Limited                  TMT          1,180       841   6.9%     3.1%
Perpetuum Limited                TMT            686       585   7.0%     2.2%
Skinkers Limited                 TMT          1,178       529   9.7%     2.0%
Haemostatix Limited              Healthcare     502       502  12.5%     1.9%
Antenova Limited                 TMT          1,307       495   4.7%     1.8%
Lab M Holdings Limited (2)       Healthcare     690       440  26.8%     1.6%
We7 Limited                      TMT            816       408  13.1%     1.5%

                                             17,797    14,525           54.0%

Other venture capital
investments
Isango! Limited                  TMT          1,000       250   9.1%     0.9%
Community Internet Europe        TMT             28       211  20.9%     0.8%
Limited
MediGene Ag FRANKFURT            Healthcare     316       174   0.1%     0.6%
Gemini Holdings Limited          Healthcare     455       163  12.8%     0.6%
Artisan Software Tools Limited   TMT            120       120  28.4%     0.4%
(2)
Allergy Therapeutics plc AIM     Healthcare     772       119   0.3%     0.4%
Celldex Therapeutics, Inc.       Healthcare     625       101   0.2%     0.4%
NASDAQ
Teraview Limited                 Healthcare   1,172       100   4.8%     0.4%

Other investments: valuations                   481       279           1 .0%
less than £100,000 (2)

                                              4,969     1,517            5.5%


Total venture capital                        22,766    16,042           59.5%
investments
Total unquoted venture capital               20,758    15,533           57.7%
investments
Total quoted venture capital                  2,008       509            1.8%
investments
                                             22,766    16,042           59.5%
Listed fixed interest                         1,854     1,881            7.0%
investments
Total investments                            24,620    17,923           66.5%
Cash and other net assets                     8,998     8,998           33.5%
Net assets                                   33,618    26,921          100.0%


(1) Amounts shown as cost represent the original cost to the
Company and/or the valuation attributed to the investment at the date of the
merger in 2005, plus any subsequent acquisition cost, as reduced in certain
cases (2) by amounts written off as representing an impairment in value.

(2) Cost reduced by amounts written off as representing an
impairment in value.


Condensed financial statements (unaudited) Income statement

                                                                                   Twelve months to
                                                                                   31 December 2008
                                                                                       (audited)

                        Revenue  Six months   Total Revenue  Six months   Total Revenue Capital   Total
                                         to                          to
                                    30 June                     30 June
                                       2009                        2008
                                (unaudited)                 (unaudited)
 
                                    Capital                     Capital

                  Notes   £'000       £'000   £'000   £'000       £'000   £'000   £'000   £'000   £'000
Loss on
revaluation of
investments at
fair
value through
profit
or loss               3       -     (2,462) (2,462)       -     (1,084) (1,084)       - (2,862) (2,862)
Gain/(loss) on
disposal of
investments at
fair value
through profit or
loss                  3       -          60      60                 348     348       -   (292)   (292)
Income                      131           -     131     458           -     458     784       -     784
Recoverable VAT               -           -       -       -           -       -     322       -     322
Investment
management
fee:
annual fee                (288)           -   (288)   (448)           -   (448)   (734)       -   (734)
performance                   -           -       - (1,040)             (1,040) (1,040)         (1,040)
incentive
fee
Other expenses            (195)           -   (195)   (216)           -   (216)   (415)       -   (415)
Loss on ordinary
activities
before taxation           (352)     (2,402) (2,754) (1,246)       (736) (1,982) (1,083) (3,154) (4,237)
Tax on loss on                -           -       -       -           -       -       -       -       -
ordinary
activities
Loss on ordinary
activities
after taxation            (352)     (2,402) (2,754) (1,246)       (736) (1,982) (1,083) (3,154) (4,237)
Basic and fully
diluted loss
per share             4  (0.3)p      (2.2)p  (2.5)p (1.1 )p      (0.7)p (1 .8)p  (0.9)p  (2.8)p  (3.7)p


The 'Total' column of this statement is the profit and loss account of the
Company; the supplementary revenue return and capital return columns have been
prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing
operations.

The Company has only one class of business and derives its income from
investments made in shares and securities and from bank deposits.

There are no gains and losses for the period other than those passing through
the income statement. The accompanying notes are an integral part of this
statement.



Balance sheet

                                            30 June 31 December     30 June
                                               2009        2008        2008
                                        (unaudited)   (audited) (unaudited)

                                  Notes       £'000       £'000       £'000
Fixed assets
 
Investments at fair value through
profit or loss                        5      17,923      21,333      29,405
Current assets
Debtors                                       1,747       1,936       1,535
Cash at bank                                  7,618       6,965       5,767
                                              9,365       8,901       7,302
Creditors: amounts falling due                (367)       (503)     (4,481)
within
one year
Net current assets                            8,998       8,398       2,821
Net assets                                   26,921      29,731      32,226
Capital and reserves
Called-up equity capital                      5,538       5,553       5,608
Share premium account                           150         150         150
Capital redemption reserve                      746         731         676
Special reserve                              23,068      23,751      25,272
Investment holding losses                   (6,697)     (4,842)     (2,931)
Profit and loss account                       4,116       4,388       3,451
Total equity shareholders' funds             26,921      29,731      32,226
Net asset value per share             6       24.3p       26.8p       28.7p


The accompanying notes are an integral part of this statement.



Cash flow statement


                                        Notes  Six months Twelve months  Six months
                                                       to            to          to
                                                  30 June   31 December     30 June
                                                     2009          2008        2008
                                              (unaudited)     (audited) (unaudited)

                                                    £'000         £'000       £'000

Net cash outflow from operating             7       (299)       (2,564)       (104)
activities
Financial investment
Purchase of venture capital investments             (352)       (3,299)     (2,429)
Purchase of listed equity and fixed
interest investments                                    -       (1,488)     (1,490)
Sale of venture capital investments                   280         7,928       6,038
Sale/redemption of listed equity and
fixed interest investments                          1,000         8,269       2,253
Amounts recovered from investments
previously written off                                 80           410         410
Total net financial investment                      1,008        11,820       4,782
Equity dividends paid                                   -       (3,135)           -
Financing
Buy-back of ordinary shares                          (56)         (573)       (328)
Increase in cash for the period                       653         5,548       4,350
Reconciliation of net cash flow to
movement in net funds
Increase in cash for the period                       653         5,548       4,350
Net funds at the start of the period                6,965         1,417       1,417
Net funds at the end of the period                  7,618         6,965       5,767


The accompanying notes are an integral part of this statement. Net funds
comprise cash at bank and on short-term deposit.

Reconciliation of movements in shareholders' funds

                           Share   Share Capital Special Investment  Profit   Total
                         capital premium redemp- reserve    holding     and
                                 account    tion             losses    loss
                                         reserve                    account

Six months to 30 June      £'000   £'000   £'000   £'000      £'000   £'000   £'000
2009

At 1 January 2009          5,553     150     731  23,751    (4,842)   4,388  29,731
Shares purchased for        (15)       -      15    (56)          -       -    (56)
cancellation
Realisation of prior
years' net losses on
investments                    -       -       -       -        607   (607)       -
Transfer from special
reserve to
profit and loss account        -       -       -   (627)          -     627       -
Net loss on revaluation
of
investments                    -       -       -       -    (2,462)   2,462       -
Loss on ordinary
activities after
taxation                       -       -       -       -          - (2,754) (2,754)
Dividends                      -       -       -       -          -       -       -
At 30 June 2009            5,538     150     746  23,068    (6,697)   4,116  26,921
Twelve months to 31
December
2008
At 1 January 2008          5,673     150     611  27,615        945   2,682  37,676
Shares purchased for       (120)       -     120   (573)          -       -   (573)
cancellation
Realisation of prior
years' net gains
on investments                 -       -       -       -    (3,884)   3,884       -
Transfer from special
reserve to
profit and loss account        -       -       - (3,291)          -   3,291       -
Net loss on revaluation
of
investments                    -       -       -       -    (1,903)   1,903       -
Loss on ordinary
activities after
taxation                       -       -       -       -          - (4,237) (4,237)
Dividends                      -       -       -       -          - (3,135) (3,135)
At 31 December 2008        5,553     150     731  23,751    (4,842)   4,388  29,731
Six months to 30 June
2008
At 1 January 2008          5,673     150     611  27,615        945   2,682  37,676
Shares purchased for        (65)       -      65   (328)          -       -   (328)
cancellation
Realisation of prior
years' net
gains on investments           -       -       -       -    (3,429)   3,429       -
Transfer from special
reserve to
profit and loss account        -       -       - (2,015)          -   2,015       -
Net loss on revaluation
of
investments                    -       -       -       -      (447)     447       -
Loss on ordinary
activities after
taxation                       -       -       -       -          - (1,982) (1,982)
Dividends                      -       -       -       -          - (3,140) (3,140)
At 30 June 2008            5,608     150     676  25,272    (2,931)   3,451  32,226


The accompanying notes are an integral part of this statement.

Notes

1. The financial information contained in this Half-Yearly Financial
Report has been prepared in accordance with the Statement of Recommended
Practise (SORP) 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts' and in accordance with the accounting policies set out
in the Annual Report for the year ended 31 December 2008. As a change to the
presentation previously adopted in the Annual Report, the results for the
half-year are presented in the form of an Income statement in three columns,
"Revenue","Capital" and "Total", instead of a single column profit and loss
account. The revaluation reserve has been renamed investment holding losses".
Additionally, note 2 states the amount of the total reserves of the Company
that is available for distribution by way of a dividend.

The annual financial statements of the Company are prepared under
the historical cost convention, except for the measurement at fair value of
fixed asset investments, and in accordance with applicable UK accounting
standards.

2. The total reserves available for distribution by way of a
dividend is £20,487,000 (31 December 2008: £23,297,000, 30 June 2008
£25,792,000), being made up of the Special reserve, Investment Holding losses
and Profit and Loss account.

3. The overall loss on investments at fair value through profit or loss
disclosed in the profit and loss account is analysed as follows:


                                                                 Twelve
                                       Six months  Six months    months 
                                               to          to        to
                                         30.06.09    30.06.08  31.12.08
                                      (unaudited) (unaudited) (audited)
 
                                            £'000       £'000     £'000

Net loss on disposal                         (20)        (62)     (702)
Recoveries made in respect of
investments
previously written off                         80         410       410
Write-off of investments                        -       (637)     (959)
Net loss on revaluation of                (2,462)       (447)   (1,903)
investments
                                          (2,402)       (736)   (3,154)


'Net loss on disposal' represents the difference between proceeds received and
the carrying values of those investments sold during the period.

The amounts reported under 'write-off of investments' represent the
proportions of the carrying value that have, in the opinion of the Directors,
suffered an impairment in value.

4 The revenue loss per share of 0.3p (31 December 2008: loss 0.9p
and 30 June 2008: loss 1 .1 p) is based on the revenue loss on ordinary
activities after tax of £352,000 (31 December 2008: loss £1,083,000 and 30
June 2008: loss £1,246,000) and on the weighted average number of ordinary
shares in issue during the period of 110,781,028 (31 December 2008:
112,145,822 and 30 June 2008: 112,759,987).

The capital loss per share of 2.2p (31 December 2008: loss 2.8p and
30 June 2008: loss 0.7p) is based on the capital loss on ordinary activities
after tax of £2,402,000 (31 December 2008: loss £3,154,000 and 30 June 2008:
loss £736,000) and on the weighted average number of ordinary shares in issue
during the period of 110,781,028 (31 December 2008: 112,145,822 and 30 June
2008: 112,759,987).

The total loss per share of 2.5p (31 December 2008: loss 3.7p and
30 June 2008: loss 1 .8p) is based on the loss on ordinary activities after
tax of £2,754,000 (31 December 2008: loss £4,237,000 and 30 June 2008: loss
£1,982,000) and on the weighted average number of ordinary shares in issue
during the period of 110,781,028 (31 December 2008: 112,145,822 and 30 June
2008: 112,759,987).


5 Movements in investments during the six months ended 30 June 2009 are as
follows:


                                  Venture capital                                             
                                      investments      Bonds   Total
 
                                            £'000      £'000   £'000

Cost at 1 January 2009                     23,321      2,854  26,175
Net loss/gain at 1 January 2009           (4,886)         44 (4,842)
Valuation at 1 January 2009                18,435      2,898  21,333
Movements in the period:
Purchases at cost                             352          -     352
Disposals
- proceeds                                  (280)    (1,000) (1,280)
- net losses on                              (20)          -    (20)
disposal
Net loss on revaluation of                (2,445)       (17) (2,462)
investments
Valuation at 30 June 2009                  16,042      1,881  17,923
Book cost at 30 June 2009                  22,766      1,854  24,620
Net (loss)/gain at 30 June 2009           (6,724)         27 (6,697)
Valuation at 30 June 2009                  16,042      1,881  17,923


Amounts shown as cost represent the valuation attributed to the investment at
the date of the merger in 2005 or subsequent acquisition cost, less any
reduction made on account of impairment in value.

6 The net asset value per share as at 30 June 2009 of 24.3p (31
December 2008: 26.8p and 30 June 2008: 28.7p) is based on net assets of
£26,921,000 (31 December 2008: £29,731,000 and 30 June 2008: £32,226,000)
divided by the 110,761,138 ordinary shares in issue as at that date (31
December 2008: 111,061,138 and 30 June 2008: 112,157,948). There is no
dilution effect as at 30 June 2009 (31 December 2008: nil and 30 June 2008:
nil).

7 Reconciliation of operating loss to cash flow from operating activities for
the period is as follows:

                                       Six months    Twelve  Six months
                                               to months to          to
                                          30.06.09 31.12.08    30.06.08
                                                                  
                                      (unaudited) (audited) (unaudited)
 
                                            £'000     £'000       £'000

Loss on ordinary activities               (2,754)   (4,237)     (1,982)
Loss on investments at fair value           2,402     3,154         736
through profit or loss
Decrease/(increase) in debtors                189   (1,759)          17
(Decrease)/increase in creditors            (136)       291       1,129
Amortisation of fixed interest                  -      (13)         (4)
investments
Net cash outflow from operating             (299)   (2,564)       (104)
activities


8 Spark Investors Limited (a fellow subsidiary of the Manager), of
which AB Carruthers is a director, may from time to time be eligible to
receive transaction fees and/or directors' fees from investee companies.
During the period to 30 June 2009, fees of £13,000 attributable to the
investments of the Company were received pursuant to these arrangements (year
ended 31 December 2008: £31,000, period to 30 June 2008: £22,000).

During the six months to 30 June 2008 there were no transactions by Directors
in shares of companies in which the Company has invested (31 December 2008:
none; 30 June 2008 none).

9 This Half Yearly Financial Report has been neither audited nor
reviewed by the Company's auditors and does not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006. The statutory
accounts for the period ended 31 December 2008 have been delivered to the
Registrar of Companies and received an audit report which was unqualified, did
not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain any
statements under Section 498(2) and (3) of the Companies Act 2006.

10 Interim management statements relating to the first and third
quarters of the financial year will be released via the Regulatory News
Service on or shortly before 18 May and 18 November each year.

11 Copies of the half yearly financial report are expected to be sent to
shareholders on 25 August 2009. Further copies can be obtained from the
Company's registered office and on the Company's website.

A copy of the above document is to be submitted to the UK Listing Authority,
and will shortly be available for inspection at the UK Listing Authority's
Document Viewing Facility, which is situated at:

Financial Services Authority

25 North Colonnade

Canary Wharf

London E14 5HS