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Spark VCT 2 PLC (KAY2)

  Print      Mail a friend       Annual reports

Friday 13 August, 2010

Spark VCT 2 PLC

Half-yearly Report


SPARK VCT 2 PLC

HALF YEARLY FINANCIAL REPORT



FINANCIAL HIGHLIGHTS
Per ordinary share(pence)                             30.06.10         31.12.09          30.06.09
                                                           
Net asset value                                           30.0             31.0              33.4
                                                           
Dividends                                                                                                               

Dividend paid (1)                                            -                -                 -
Cumulative dividend (2)                                    6.9              6.9               6.9
                                                            
Total return per share (3)                                  
                                                            
SPARK VCT 2 plc                                           36.9             37.9              40.3
                                                             
Return including tax benefits (5)                         56.9             57.9              60.3
                                                            
Total return per 100p invested (4)                          
                                                           
SPARK VCT 3 plc                                           47.3             48.8              52.3
                                                           
Return including tax benefits (5)                         67.3             68.8              72.3
                                                                                                                                                                                    
(1) Dividend paid in the financial year ended on the date stated.
(2) Cumulative dividends paid by SPARK VCT 2 plc. 
(3) Net asset value plus cumulative dividend per share to ordinary shareholders in
SPARK VCT 2 plc since the launch of the Company (then called Quester VCT 4 plc) in
November 2000.                                      
(4) Total return to former shareholders in SPARK VCT 3 plc, launched inDecember 2001
(under the name Quester VCT 5 plc), which was merged with SPARK VCT 2 plc in November
2008. The share exchange ratio for former shareholders in SPARK VCT 3 plc was 1.4613. 
The total return stated is applicable only to subscribers of shares in Quester VCT 5 
plc at the time of launch of the Companyin 2001-2. It does not represent the return
to subsequent subscribers or purchasers of shares.                                       
(5) Return after 20% income tax relief but excluding capital gains deferral.                                                                                                                                                                              
The Directors propose an interim dividend of 1.0 pence per share for the year ending
31 December 2010.                                 
                                                                                                                                                                                    
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

In the last annual report we indicated that for 2010 the Company's primary
objective would be to ensure that the portfolio remains stable, but that there
would now be a greater emphasis on positioning some of the more developed
companies for an exit and, provided conditions develop favourably, making a
start on turning some of the more significant assets into cash.

We can now report useful progress in this direction.

Realisations have been achieved of two of the more significant investments
within the portfolio, Portrait Software plc and Secerno Limited, together
producing net proceeds of £1,651,000 (including amounts retained in escrow) and
a profit of £687,000 over the equivalent carrying value at 31 December 2010.

With the inclusion of certain other investment sales and cash recoveries,
realisations in the half year have produced total proceeds of £1,927,000
(including amounts retained in escrow) and a profit of £748,000 over the
previous carrying value.  This has enabled the Board to declare an interim
dividend of 1.0p per share.

Recent trading results of the more mature companies within the portfolio have
been generally encouraging.  A number of these companies are now reaching the
stage at which they can appropriately be considered as acquisition candidates
by major corporates looking for new sources of growth for their own
businesses.  Members of the management team are alive to these opportunities
and are working with the companies concerned to make the best of the
opportunities.

Results for the six months ended 30 June 2010

The movement in net assets and net assets per share in the six months to 30
June 2010 is summarised in the table below.

                                                  Venture        Net                       
                                                  Capital        Current              Pence
                                                  Investments    Assets     Total     per  
                                                        £'000      £'000     £'000   Share
                                                                                           
Net asset value at 31 December 2009                     17,743      6,286    24,029    31.0
                                                                                           
Income                                                       -         26        26       -
                                                                                           
Operating expenses                                           -      (424)     (424)   (0.5)
                                                                                           
Net gain on disposal                                       734         14       748     1.0
                                                                                           
Net loss on valuation of investments                   (1,166)          -   (1,166)   (1.5)
                                                                                           
Net investment                                         (1,335)      1,335         -       -
                                                                                           
                                                                                           
Net assets before dividends and share buybacks          15,976      7,237    23,213    30.0
                                                                                           
Dividends paid                                               -          -         -       -
                                                                                           
Share buybacks                                               -       (30)      (30)       -
                                                                                           
                                                                                           
Net asset value at 30 June 2010                         15,976      7,207    23,183    30.0
                                                                                           
 

The net gain of £748,000 on realisation of investments during the half year
(1.0p per share) is offset by net operating expenses (income less operating
expenses) of £398,000 (0.5p per share) and a downward movement in valuation of
remaining investments of £1,166,000 (1.5p per share), the latter reflecting the
stringent approach that has been taken to the further funding of certain early
stage investments within the portfolio.

Overall, the net result for the half year is a fall in net assets per share of
3%, from 31.0p at 31 December 2009 to 30.0p at 30 June 2010.

The total return to shareholders from the launch of the Company in November
2000 to 30 June 2010, inclusive of all dividends paid, now amounts to 36.9p per
share before taking account of tax reliefs.

The total return to original shareholders in SPARK VCT 3 plc from its launch in
December 2001 (under the name Quester VCT 5 plc) to 30 June 2010, inclusive of
all dividends paid, amounts to 47.3p per share before taking account of tax
reliefs.

Dividend

In the last Chairman's statement we set out the results of the Board's review
of the future strategy of the Company, originally announced in January.  In
relation to dividend policy, it was decided that in future priority should be
given to the payment of dividends as and when realisations are achieved.  In
particular, subject to any tax or regulatory constraints, 50% of the proceeds
from any realisations from within the existing venture capital portfolio would
be regarded as available for distribution.

The realisations achieved in the half year have enabled the Board to declare an
interim dividend of 1.0p per share (a total of £773,000).  The dividend will be
payable on 24 September 2010 to shareholders on the register on 27 August 2010.

Net proceeds of realisation of £1,154,000 will be retained.  It remains the
Company's policy to continue to support those of the existing investee
companies that are considered to have strong growth prospects, to enable them
to develop long enough to allow an optimal realisation.

Outlook

The Board believes that the present portfolio of venture capital investments
offers the prospect of significant capital growth from present levels, provided
the investee companies can maintain stability and there is no major
deterioration in business and financial conditions.

It is encouraging that the realisations achieved in this first half of the year
have shown useful gains over the previous carrying values.  There is now clear
evidence of an improving M&A market and an appetite among major corporates for
strategic acquisition opportunities among venture-backed companies.

We are hopeful that it may be possible to announce further progress in
realisations by the date of release of the annual report.  Any final dividend
will be dependent on actual achievement in this respect.

As regards the longer-term future of the Company, the conclusion of the Board's
strategy review was that the Company should continue as a Venture Capital Trust
and that, within the parameters of its existing investment policy, there should
in future be a focus on investments selected with a view to yield as well as
capital stability.  Accordingly, as and when funds are available for new
investment, the SPARK management team will seek investments in companies which
are already revenue generating with a stable business base, and are able to
deliver a flow of dividends or be capable of exit within a 3-year period.  The
start of this process will, however, depend on the timing of more substantial
realisation proceeds from within the existing portfolio.

Robert Wright
Chairman
12 August 2010

 

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm to the best of their knowledge that:                               
                                                                                         
• the condensed 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 interim management report 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) include 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 12 August 2010 and the          
above responsibility statement was signed on its behalf by the Chairman.                 
                                                                                         

 

 

INVESTMENT MANAGER'S REPORT

Over the half year to 30 June 2010 the activity of the Investment Manager has
been conducted against the background of the strategy agreed with the Board at
the beginning of the year and summarised in the Chairman's statement in the
last annual report.

The strategy review undertaken at that time took into account that most of
SPARK VCT 2's existing investments had been held in the portfolio for a long
time, with successful realisations of investments having been few in number and
dividend payments to shareholders having been very limited.  At the time of the
annual report we said it was too soon to predict the timing of any exits but
that the shape of possible exits from a number of companies was starting to
become clearer.  In line with the new strategy described in the Chairman's
statement, the intention would be to give priority to the payment of dividends
as and when realisations were achieved.

Under the new strategy, the key points in relation to investment management
are:

It will be the policy to continue to support those of the existing investee
companies that are considered to have strong growth prospects, to enable them
to develop long enough to allow an optimal realisation;

As and when funds are available for new investment, the SPARK management team
will seek to take advantage of opportunities available at this current stage of
the economic cycle, particularly opportunities to participate in later-stage
financing rounds of venture-backed companies within the existing sector focus. 
The aim will be to seek investments in companies which are already revenue
generating with a stable business base, and are able to deliver a flow of
dividends or be capable of exit within a 3-year period.

Realisations

During the half year significant steps have been taken in the implementation of
this strategy, in particular towards the realisation of existing portfolio
investments.  We are pleased to report two significant and profitable
realisations:

Portrait Software plc: this company, specialising in customer interaction
optimisation software, was acquired by Pitney Bowes in an agreed takeover offer
at 31p per share announced on 10 June 2010 - the sale of SPARK VCT2's shares
under the offer and in earlier market transactions produced proceeds of £
1,160,000 against a carrying value at 31 December 2009 of £736,000, resulting
in a profit of £424,000 in the half year to 30 June 2010;

Secerno Limited: this Oxford-based data security business was sold to Oracle
Corporation in a private transaction completed in June- this produced net
proceeds of £492,000 (including a proportion retained in escrow), against a
carrying value at 31 December 2009 of £229,000, resulting in a profit in the
half year to 30 June 2010 of £263,000.

The opportunity has also been taken to realise cash from certain other quoted
venture capital investments, with the sale of the entire holding in Quadnetics 
Group plc and part of the holding in Celldex Therapeutics, Inc.  Overall,
proceeds generated from these transactions, together with certain other cash
recoveries, have totalled £1,927,000 in the half year to 30 June 2010.

These realisations have enabled the Board to declare an interim dividend of
1.0p per share.

Progress of investments

In the Business review in the last annual report we described SPARK VCT 2's
venture capital investments as falling into four categories: quoted venture
capital investments and three categories of unquoted investments, namely
"maturing" venture capital investments, "developing" venture capital
investments and "early stage" investments.  Following the realisations referred
to above, the proportions that investments in each category represent in the
venture capital portfolio by valuation at 30 June 2010 are as follows:

                                                                    Percent. of
                                                                venture capital
                                                                   portfolio by
                                                                      valuation
                                                                               
Quoted and "maturing" venture capital investments:                             
                                                                               
 - companies whose shares are traded on AIM, NASDAQ or                         
Frankfurt Stock Exchange                                                       
                                                                               
 - unquoted companies with stable and growing revenue                          
streams, achieving profitable trading or very close to it,                     
and with stable cash positions                                                 
                                                                               
examples: Elateral Holdings Limited, Imagesound plc, Sift                      
Group Limited, UniServity Limited, Workshare Limited, Xtera                    
Communications, Inc., and quoted companies Allergy                             
Therapeutics plc (AIM), Celldex Therapeutics, Inc.(NASDAQ)                60.5%
and MediGene AG (Frankfurt)                                                    
                                                                               
"Developing" venture capital investments:                                      
                                                                               
 - unquoted companies with developed business models and                       
growing revenue streams, though still facing uncertainties,                    
and breaking through into cash-flow positive trading                           
                                                                               
examples: Antenova Limited, Cluster Seven Limited, Level                  12.6%
Four Software Limited                                                          
                                                                               
"Early stage" investments                                                      
                                                                               
 - unquoted companies still establishing their business                        
model or, in the case of businesses in the life sciences                       
sector, still at the product development stage                                 
                                                                               
examples: Academia Networks Limited, Celona Technologies                       
Limited, Celoxica Holdings plc, Haemostatix Limited, Isango!                   
Limited, Oxford Immunotec Limited, Perpetuum Limited,                          
Vivacta Limited, We7 Limited, Xention Limited                                  
                                                                          26.9%

The percentage of the venture capital portfolio now represented by quoted and
"maturing" venture capital investments provides a reasonably stable base to the
portfolio and, taking into account the current business progress of the most
significant of the early stage investments, means that the net asset value of
SPARK VCT 2 is less exposed than previously to the risks associated with early
stage investment.

Significant recent business developments within the portfolio are summarised
below:

• Workshare Limited continues to enjoy very high market penetration in the
legal IT market for its document comparison software.  New management has
undertaken some significant restructuring, with a particular focus on the sales
model and distribution network, reducing the overall level of operating cost
and improving profitability, while the company maintains a robust cash
position.

• Xtera Communications, Inc: this privately-held US company, into which SPARK
VCT 2's investment in Azea Networks was merged in 2007, is making successful
commercial progress based in part on the technology acquired with Azea.  It has
recently announced a new contract to upgrade part of Global Crossing's Atlantic
crossing network, linking New York and the UK, to meet growing customer demand
for broadband services.  It has also acquired an additional company in the UK,
to reinforce its position in providing high capacity solutions for submarine
and terrestrial fibre cable systems.

• UniServity Limited:following management changes towards the end of last year
and a dramatic reduction in the cost base, financial performance has
significantly improved.  Sales have remained ahead of budget despite
uncertainty about policy changes and public procurement following the change of
Government, and profitability is now strong and consistent.  After a successful
launch of the 'parent portal' product, resources are now being concentrated on
completing the build of a new technology platform ready for launch at the
beginning of the new year.

• Oxford Immunotec Limited has continued to show significant growth in sales,
both in the United States and Europe, with the establishment of the company's
own analytical laboratory in Massachusetts having proved to be a key step. 
Details have been announced of the US$25 million Series D financing closed in
July 2009, backed by specialist US investors New Leaf Venture Partners and
Kaiser Permanente Ventures and bringing their substantial experience in
building successful and innovative high-value diagnostics companies, which has
put the company in a position of financial strength from which to invest for
the future.

• Elateral Holdings Limited had another very successful year to 31 March 2010
delivering 17% revenue growth and a substantial improvement in EBITDA margin.
New client wins for the year included NetApp and major customers Coca Cola and
SAP renewed their contracts, taking additional services and territorial
licences at the same time.

• Level Four Software Limited has seen sales growth of 35% in its year to 30
June 2010 and has reached profitability: it continues to show impressive growth
in the range of its customer contacts within the banking industry for its ATM
testing tools business, and potential for further expansion both geographically
and into other sectors.

Follow-on funding provided to existing portfolio companies in the half year has
been limited to a total of £532,000, including £261,000 advanced to Celona
Technologies Limited to provide additional working capital, £199,000 to Oxford
Immunotec Limited as the second tranche of the Series D financing referred to
above, £57,000 advanced to Sift Group Limited in a loan instrument with an
attractive coupon (alongside the company's management and SPARK's syndicate
partner) and £15,000 to Haemostatix Limited to support product development.

Against the background of the overall strategy for SPARK VCT 2 referred to
above, and with the growing maturity of some of the key investments, members of
the SPARK management team are increasingly focused on working with portfolio
company managements on positioning the companies as attractive acquisition
candidates for major corporates.  A number of the companies are now reaching
the stage at which a transaction of this type can realistically be planned for
some time over the next two years, enabling the businesses concerned to be
taken forward to the next stage of growth under new ownership and achieving
cash realisations for SPARK VCT 2.

Subject to no deterioration in business and financial conditions, we expect to
be able to announce a number of positive developments in this respect by the
date of release of the annual report.

Valuation changes

Valuations of the unquoted investments have been determined under the
application of the International Private Equity and Venture Capital Valuation
Guidelines. The quoted venture capital investments (shares traded on AIM, the
Frankfurt stock exchange and NASDAQ) have been valued at their bid prices at 30
June 2010.

A downward revaluation of investments of £1,166,000 has been recorded for the
half year, including £948,000 in respect of the early stage investments and £
218,000 in respect of quoted venture capital investments.

Principal risks and uncertainties

As a Venture Capital Trust the Company invests in unquoted and AIM-traded UK
companies in accordance with its investment policy. In addition to its venture
capital porfolio, the Company maintains liquidity balances in the form of cash
held for follow-on financing and new venture capital investment and debtors and
creditors that arise directly from its operations. Its principal risks are
therefore market risk, credit risk and liquidity risk. Other risks faced by the
Company include economic, loss of approval as a VCT, investment and strategic,
regulatory, reputational, operational and financial risks. These risks, and the
ways in which they are managed, are described in more detail in the Company's
Annual Report and Accounts for the year ended 31 December 2009. The Company's
principal risks and uncertainties have not changed materially since the date of
that report.

Outlook

Earlier evidence of an improving M&A market is confirmed not only by the
transactions completed by SPARK VCT 2 in the year to date but also by
transactions seen elsewhere, with major corporates looking for growth now
clearly interested in strategic acquisition opportunities among venture-backed
companies.

As long as business and financial conditions remain stable, we believe that
opportunities should emerge during the remainder of the current year and over
2011 and 2012 for significant realisations and the extraction of value for
SPARK VCT 2 shareholders.

This will enable both the distribution of substantial amounts of cash by way of
dividend and a start to be made on a programme of investment in new qualifying
investments: in line with the new strategy, this will be focused on companies
more advanced in their development and representing relatively lower risk
opportunities.
 

SPARK Venture Management Limited
Manager
12 August 2010
 

Fund summary as at 30 June 2010                                                                           
                                                                     Accounting                           
                                                                       Cost (1) Valuation Equity % of fund
                                             Industry sector              £'000     £'000 % held  by value
                                                                                                          
                                                                                                          
Fifteen largest venture capital investments                                                               
                                                                                                          
Workshare Limited                            TMT                          2,947     3,076  10.2%     13.3%
                                                                                                          
Xtera Communications, Inc.                   TMT                          3,191     1,779   1.3%      7.7%
                                                                                                          
UniServity Limited                           TMT                          1,692     1,692  28.7%      7.3%
                                                                                                          
Oxford Immunotec Limited                     Healthcare                   2,729     1,545   6.2%      6.8%
                                                                                                          
Elateral Holdings Limited          (2)       TMT                            479     1,161  13.3%      5.0%
                                                                                                          
Level Four Software Limited                  TMT                            795       795   7.3%      3.4%
                                                                                                          
Cluster Seven Limited                        TMT                            845       765   5.8%      3.3%
                                                                                                          
Vivacta Limited                              Healthcare                     889       732   4.7%      3.2%
                                                                                                          
Sift Group Limited                           TMT                          1,021       704   8.9%      3.0%
                                                                                                          
Imagesound plc                               TMT                            489       489   0.5%      2.1%
                                                                                                          
Xention Limited                              Healthcare                   2,438       451   6.9%      1.9%
                                                                                                          
Antenova Limited                             TMT                          1,718       448   6.2%      1.9%
                                                                                                          
Celona Technologies Limited                  TMT                          3,120       409  10.3%      1.8%
                                                                                                          
Haemostatix Limited                          Healthcare                     328       328   7.7%      1.4%
                                                                                                          
MediGene AG                        Frankfurt Healthcare                     797       325   0.4%      1.4%
                                                                                                          
                                                                         23,478    14,699            63.5%
                                                                                                          
Other venture capital investments                                                                         
                                                                                                          
Celldex Therapeutics, Inc.         NASDAQ    Healthcare                   1,233       252   0.3%      1.1%
                                                                                                          
Allergy Therapeutics plc           AIM       Healthcare                     795       195   0.6%      0.8%
                                                                                                          
Isango! Limited                              TMT                            750       188  11.5%      0.8%
                                                                                                          
Perpetuum Limited                            TMT                            479       146   4.4%      0.6%
                                                                                                          
Celoxica Holdings plc              (2)       TMT                            208       121   3.7%      0.5%
                                                                                                          
Academia Networks Limited                    TMT                             44       120   1.7%      0.5%
                                                                                                          
TeraView Limited                             Healthcare                   1,064       100   4.8%      0.4%
                                                                                                          
Other investments: valuations less than £100,000 (5 investments)          1,049       155             0.7%
                                                                                                          
                                                                          5,622     1,277             5.4%
                                                                                                          
                                                                                                          
Total venture capital investments                                        29,100    15,976            68.9%
                                                                                                          
                                                                                                          
Total unquoted venture capital investments                               26,275    15,204            65.6%
                                                                                                          
Total quoted venture capital investments                                  2,825       772             3.3%
                                                                                                          
                                                                                                          
Total investments                                                        29,100    15,976            68.9%
                                                                                                          
Cash and other net assets                                                 7,207     7,207            31.1%
                                                                                                          
                                                                                                          
Net assets                                                               36,307    23,183           100.0%
                                                                                                          
                                                                                                          
(1)          Amounts shown as accounting cost represent acquisition cost in the case of                   
             investments originally made by the Company and/or the valuation attributed to                
             investments acquired from SPARK VCT 3 plc at the date of the merger in 2008,                 
             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                   
             (Celoxica Holdings plc reduction of £1,250,000 and Elateral Holdings Limited of              
             £676,000).                                                                                   

 
Income statement                                                                                                        
                                             Six months to 30 June   Six months to 30 June   Year to 31 December 2009
                                                   2010 (unaudited)        2009 (unaudited)            2009 (audited)   
                                         Revenue   Capital    Total  Revenue Capital  Total     Revenue  Capital Total
                                   Notes   £'000     £'000    £'000    £'000   £'000  £'000       £'000   £'000  £'000
                                                                                                                 
Loss on valuation of investments at 
fair value through profit or loss      3       -    (1,166)  (1,166)      -  (2,022) (2,022)         -  (3,950) (3,950)

                                                                                                                 
Gain on disposal of investments 
at fair value through profit or loss   3       -       748      748       -      10      10          -     188     188
                                                                                                                 
Income                                        26         -       26      61       -      61        114       -     114
                                                                                                                 
Investment management fee                   (289)        -     (289)   (329)      -    (329)      (512)      -    (512)
                                                                                                                 
Other expenses                              (135)        -     (135)   (129)      -    (129)      (260)      -    (260)
                                                                                                                 
Loss on ordinary activities before 
taxation                                    (398)     (418)    (816)   (397) (2,012) (2,409)      (658) (3,762) (4,420)
                                                                                                                 
Tax on loss on ordinary activities             -         -        -       -       -       -          -       -       -
                                                                                                                                                                                                                                         
Loss on ordinary activities after 
taxation                                    (398)     (418)    (816)   (397) (2,012) (2,409)      (658) (3,762) (4,420)
                                                                                                                                                                                                                                         
Basic and fully diluted loss per 
share                                 4    (0.5)p    (0.5)p    (1.0)p (0.5)p  (2.6)p  (3.1)p     (0.9)p  (4.8)p  (5.7)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 of the Company.                                                                             
                                                                                                                 
The accompanying notes are an integral part of this statement.                                                   
 

Balance sheet                                                                                                        
                                                                       30 June 2010   31 December 2009   30 June 2009
                                                                        (unaudited)          (audited)    (unaudited)
                                                                 Notes        £'000              £'000          £'000
                                                                                                                     
Fixed assets                                                                                                         
  Investments at fair value through profit or loss                 5         15,976             17,743         19,045
                                                                                                                     
Current assets                                                                                                       
  Debtors                                                                     1,250                282            903
  Cash at bank                                                                6,204              6,136          6,310
                                                                                                                     
                                                                              7,454              6,418          7,213
                                                                                                                     
Creditors: amounts falling due within one year                                (247)              (132)          (158)
                                                                                                                     
Net current assets                                                            7,207              6,286          7,055
                                                                                                                     
Net assets                                                                   23,183             24,029         26,100
                                                                                                                     
                                                                                                                     
Capital and reserves                                                                                                 
  Called-up equity share capital                                                773                775            780
  Share premium account                                                         339                339            339
  Capital redemption reserve                                                     91                 89             84
  Special reserve                                                            19,717             20,056         20,305
  Investment holding losses                                                (13,124)           (12,962)       (11,154)
  Merger reserve                                                             12,615             12,615         12,615
  Profit and loss account                                                     2,772              3,117          3,131
                                                                                                                     
Total equity shareholders' funds                                             23,183             24,029         26,100
                                                                                                                     
Net asset value per share                                          6          30.0p              31.0p          33.4p
                                                                                                                     
                                                                                                                     
                                                                                                                     
The accompanying notes are an integral part of this statement.                                                       
                                                                                                           
                                                                                                           
                                                                                                           
Cash flow statement                                                                                        
                                                                       Six months                Six months
                                                                               to     Year to            to
                                                                         30.06.10    31.12.09      30.06.09
                                                                      (unaudited)   (audited)   (unaudited)
                                                                 Note       £'000       £'000         £'000
                                                                                                           
Net cash (outflow)/inflow from operating activities               7       (1,251)         159         (175)
                                                                                                           
Financial investment                                                                                       
  Purchase of venture capital investments                                   (532)     (1,335)         (578)
  Sale of venture capital investments                                       1,867          84             -
  Amounts recovered from investments previously written off                    14         235            10
                                                                                                           
Total net financial investment                                              1,349     (1,016)         (568)
                                                                                                           
Equity dividends paid                                                           -           -             -
                                                                                                           
Financing                                                                                                  
  Buyback of ordinary shares                                                 (30)       (146)          (86)
                                                                                                           
Increase/(decrease) in cash for the period                                     68     (1,003)         (829)
                                                                                                           
Reconciliation of net cash flow to movement in net funds                                                   
  Increase/(decrease) in cash for the period                                   68     (1,003)         (829)
  Net funds at the start of the period                                      6,136       7,139         7,139
                                                                                                           
Net funds at the end of the period                                          6,204       6,136         6,310
                                                                                                           
                                                                                                           
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                 
                                                                                                                                              
                                                                                                                                              
Six months to 30 June 2010                    
                           
                                          Called-up                                                 Profit        
                                             equity   Share    Capital         Investment              and        
                                              share premium redemption Special    holding  Merger     loss
                                            capital account    reserve reserve     losses reserve  account   Total
                                              £'000   £'000       £'000   £'000      £'000   £'000   £'000   £'000
                      
At 1 January 2010                               775     339          89  20,056   (12,962)  12,615   3,117  24,029
                         
Shares purchased for cancellation               (2)       -           2    (30)          -       -       -    (30)
                                 
Realisation of prior years' net unrealised 
losses on investments                            -       -           -       -      1,004       - (1,004)       -
                                          
Transfer from special reserve to profit and 
loss account                                     -       -           -   (309)          -       -     309       -
                           
Investment holding losses on valuation of 
investments                                      -       -           -       -    (1,166)       -   1,166       -
                         
Loss on ordinary activities after taxation       -       -           -       -          -       -   (816)   (816)
                                          
Dividends                                        -       -           -       -          -       -       -       -
                                                                                                                                                                  
At 30 June 2010                                773     339          91  19,717   (13,124)  12,615   2,772  23,183
                                                                                                                                              
                                                                                                                                              
Year to 31 December 2009
                      
At 1 January 2009                              785     339          79  21,196    (9,937)  12,615   3,518  28,595
                      
Shares purchased for cancellation             (10)       -          10   (146)          -       -       -   (146)
                                 
Realisation of prior years' net 
unrealised losses on investments                 -       -           -       -        925       -   (925)       -
                                   
Transfer from special reserve to profit
and loss account                                 -       -           -   (994)          -       -     994       -
                            
Investment holding losses on valuation 
of investments                                   -       -           -       -    (3,950)       -   3,950       -
                             
Loss on ordinary activities after taxation       -       -           -       -          -       - (4,420) (4,420)
                                          
Dividends                                        -       -           -       -          -       -       -       -
                                                                                                                                                                  
At 31 December 2009                            775     339          89  20,056   (12,962)  12,615   3,117  24,029
                      
                      
                                                                                                                                              
Six months to 30 June 2009                  
                          
At 1 January 2009                              785     339          79  21,196    (9,937)  12,615   3,518  28,595
                          
Shares purchased for cancellation               (5)       -           5    (86)          -       -       -    (86)
                                 
Realisation of prior years' net unrealised 
losses on investments                             -       -           -       -        805       -   (805)       -
                                        
Transfer from special reserve to income 
statement                                         -       -           -   (805)          -       -     805       -
                             
Investment holding losses on valuation of 
investments                                       -       -           -       -    (2,022)       -   2,022       -
                             
Loss on ordinary activities after taxation        -       -           -       -          -       - (2,409) (2,409)
                             
Dividends                                         -       -           -       -          -       -       -       -
                                          
At 30 June 2009                                 780     339          84  20,305   (11,154)  12,615   3,131  26,100
                                                                                                                                               

Notes                                                                                                                                             
                          
1  The Financial Statements have been prepared under the historical cost 
convention, except for the measurement at fair value of investments, and in
accordance with applicable UK accounting standards and the Statement of
Recommended Practice 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts' issued by the Association of Investment Companies in
January 2009.          
                          
2  The total reserves available for distribution by way of a dividend is 
£9,365,000 (31 December 2009: £10,211,000, 30 June 2009 £12,282,000), being made
up of the Special reserve and Profit and loss account less Investment holding losses.                                                                                                                                           

3  The overall gain/(loss) on investments at fair value through profit or loss
disclosed in the profit and loss account is analysed as follows:                  
                          
                                 Six months to        Six months to       Year to
                                      30.06.10             30.06.09      31.12.09            
                                    (unaudited)          (unaudited)     (audited)            
                                         £'000                £'000          £'000            
                                                                      
Loss on valuation of investments
at fair value through profit or loss                                                                          

Net loss on valuation of investments    (1,166)              (2,022)       (3,950)            
Write-off of investments                     -                    -             -            
                                        (1,166)              (2,022)       (3,950)            
                                                                      
Gain/(loss) on disposal of investments at fair value through profit or loss                                                                    

Net gain/(loss) on disposal                734                    -           (47)            
Recoveries made in respect of 
investments previously written off          14                   10            235            
                                                                    
                                           748                   10            188            
                                         
                                          (418)              (2,012)        (3,762)            
                                                                                                                                                  
'Net gain/(loss) on disposal' represents the difference between proceeds
received and the carrying values of those investments sold during the period.
                                                                                                                                                  
4  The revenue loss per share of 0.5p (30 June 2009: loss 0.5p and 31 December
2009: loss 0.9p) is based on the revenue loss on ordinary activities after tax 
of £398,000 (30 June 2009: loss £397,000 and 31 December 2009: loss £658,000)
and on the weighted average number of ordinary shares in issue during the 
period of 77,501,217 (30 June 2009: 78,023,615 and 31 December 2009: 77,968,095).           
                          
The capital loss per share of 0.5p (30 June 2009: loss 2.6p and 31 December 2009:
loss 4.8p) is based on the capital loss on ordinary activities after tax of £418,000
(30 June 2009: loss £2,012,000 and 31 December 2009: loss £3,762,000) and on the
weighted average number of ordinary shares in issue during the period of 77,501,217 
(30 June 2009: 78,023,615 and 31 December 2009: 77,968,095).              
                          
The total loss per share of 1.0p (30 June 2009: loss 3.1p and 31 December 2009: 
loss 5.7p) is based on the loss on ordinary activities after tax of £816,000
(30 June 2009: loss £2,409,000 and 31 December 2009: loss £4,420,000) and on 
the weighted average number of ordinary shares in issue during the period of 
77,501,217 (30 June 2009: 78,023,615 and 31 December 2009: 77,968,095).                                                                                                                                      
5  Movements in investments during the six months ended 30 June 2010 are as follows:                                                                                                                                                                                     Venture
                                                                     capital
                                                                 investments
                                                                       £'000
                                                                       
Cost at 1 January 2010                                                30,705
                                                                      
Investment holding losses at 1 January 2010                          (12,962)
                                                      
Valuation at 1 January 2010                                           17,743
                                
Movements in the period:                     
Purchases at cost                                                        532
Disposals            
- proceeds                                                            (1,867)
- net gains on disposal                                                  734
Net loss on valuation of investments                                  (1,166)
                                    
Valuation at 30 June 2010                                             15,976
                          
Book cost at 30 June 2010                                             29,100
                           
Investment holding losses at 30 June 2010                            (13,124)
                                             
Valuation at 30 June 2010                                             15,976
                                                                                                                                                                                                                                                                          
Amounts shown as cost represent acquisition cost, less any reduction made on
account of impairment in value.

                   
6   The net asset value per share as at 30 June 2010 of 30.0p (31 December 2009: 
31.0p and 30 June 2009: 33.4p) is based on net assets of £23,183,000 (31 December
2009: £24,029,000 and 30 June 2009: £26,100,000) divided by the 77,309,035 ordinary
shares in issue as at that date (31 December 2009: 77,554,035 and 30 June 2009: 
77,990,533). There is no dilution effect in respect of the period ended 30 June 
2010 (31 December 2009: nil, 30 June 2009: nil).                     

                          
7  Reconciliation of operating loss to net cash flow from operating activities                                                                    
                            
                                   Six months                                  Six months
                                           to               Year to                    to
                                     30.06.10              31.12.09              30.06.09
                                   (unaudited)             (audited)           (unaudited)
                                        £'000                 £'000                 £'000
                          
Loss on ordinary activities              (816)               (4,420)               (2,409)
                           
Loss on investments at fair value 
through profit or loss                    418                  3,762                 2,012
                          
Increase)/decrease in debtors            (968)                 1,082                   461
                             
Increase/(decrease) in creditors          115                  (265)                 (239)
                                  
Net cash (outflow)/inflow from 
operating activities                   (1,251)                  159                  (175)
                                                                                                                                                  
                                                                                                                                                  
8  Spark Investors Limited (a fellow subsidiary of the Manager), of which JR Patel
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 2010, fees of
£12,000 attributable to the investments of the Company were received pursuant to 
these arrangements (30 June 2009: £12,000, 31 December 2009: £23,000).                 
                          
During the six months to 30 June 2010 there were no transactions by Directors in 
shares of companies in which the Company has invested (31 December 2009: none; 
30 June 2009 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 2009 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.                     

 

For further information, please contact:

Spark VCT plc    www.sparkvct.com     Tel: 0207 8517777