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Spark VCT 2 PLC (KAY2)

  Print      Mail a friend       Annual reports

Friday 29 August, 2008

Spark VCT 2 PLC

Half-yearly Report



Financial highlights
Per ordinary share (pence)       30.06.08     31.12.07 30.04.07
Net asset value                      44.3         46.5     54.8
Dividend (1)                          1.0          1.0      1.0
Cumulative dividend(2)                6.9          5.9      5.9
Total return (3)                     51.2         52.4     60.7
Return including tax benefits (4)    71.2         72.4     80.7

(1)	Dividend paid in the financial period 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 
since the launch of the Company
(4)	Return after 20% income tax relief but excluding capital gains deferral

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

Chairman's statement

Net assets

The movement in net assets and net assets per share is summarised in the table

                                                  £'000    Pence
Net asset value at 31 December 2007              21,745     46.5    
Income                                              129      0.3     
Operating expenses                                (473)     (1.0)   
Movement on venture capital investments                         
Unquoted investments                               (99)     (0.2)   
Quoted venture capital investments                  81       0.2     
Listed equity investments                         (287)     (0.7)   
Net loss on disposal and revaluation                            
Net assets before dividends and share            21,096      45.1    
Dividend paid                                     (464)      (1.0)   
Share buy-backs                                   (182)       0.2     
Net asset value at 30 June 2008                  20,450      44.3    

The half-year to 30 June 2008 has seen a broadly stable performance in the
venture capital portfolio.

The successful realisation of the investment in Nomad Payments Limited and the
trade sale of Identum Limited, both of which closed in January 2008, were
detailed in the last Annual Report. More recently, the good progress made by a
number of the portfolio companies has been somewhat offset by the general
change in market sentiment which in certain respects has held back the
performance of the Fund.

Following the review of the portfolio and the investment strategy referred to
in the last Annual Report, members of the new management team within SPARK
Venture Management Limited ("SPARK") have continued to make an energetic
contribution in working with the portfolio companies and dealing with the
issues affecting the Fund as a whole.

A number of companies within the portfolio are now cash positive, growing
satisfactorily and, given the right market conditions, would be nearing
readiness for an exit. The earlier stage companies are in most cases also
showing satisfactory progress. In the healthcare portfolio there have been some
significant achievements, notably in the winning of FDA approval by Oxford
Immunotec Limited, but there have also been disappointments with the failure of
the key drug trial of Oxford BioMedica plc and the decision to discontinue
support to Lectus Therapeutics Limited, both of which have led to significant
losses in value.

The change in market sentiment does not generally have a direct effect on those
companies in the portfolio that are addressing new markets growing on the back
of new technologies or services. As long as they are not seeking to approach
the capital markets for further funding or a sale, the value in the companies
themselves will continue to develop. The change in financing conditions has,
however, had an adverse effect on the valuations attributed to Antenova Limited
and Cluster Seven Limited, because in both cases they needed to raise further
capital. In the case of Antenova, despite that company's satisfactory business
progress, the refinancing of the business could only be completed at a much
reduced valuation to the previous carrying value. In order to mitigate the
effects of this, the Fund has participated in the refinancing so as to take 
advantage of the favourable terms for new investors. In the case of Cluster 
Seven the company has dramatically cut its cost base so as to ensure that it 
can continue to trade without new capital. Nevertheless, its valuation has 
been reduced to reflect the reduced prospects for the business.

During the half year one significant exit opportunity was lost as a result of
the change in market sentiment. The environment for disposals and funding shows
no sign of improving in the short term.

In these circumstances the rate of investment in recent months has been
constrained, with one new investment being made alongside a moderate level of
commitment of resources to follow-on investments. The opportunity of the new
investment in Isango! Limited, a growth stage company operating an online
travel website offering users a source of travel experiences worldwide, briefly
referred to in the last Annual Report, was won largely on the basis of SPARK's
reputation in the digital media and internet commerce sector. Isango! has made
encouraging progress since the investment was made.

In view of the potential requirements for cash over the next two years, in
market conditions in which exits may be more difficult to achieve, the
precaution was taken in early July of selling the entire portfolio of listed
equities. Over the six months to 30 June 2008 a fall of £287,000 was suffered
in the value of this portfolio; the sale in July involved a further loss of 

The Board has not declared an interim dividend.

The Board has today announced that it has entered into talks with the board of
SPARK VCT 3 plc for a merger of the two companies, with the intention that the
merger should be structured as a share-for-share exchange through a Scheme of
Arrangement under Part 26 of the Companies Act 2006, with the share exchange
ratio being determined by reference to formula asset values (NAV per share,
less the expenses of the transaction). SPARK VCT 3 plc is under the same
management as the Company and had net assets at 30 June 2008 of £14.1 million.
In the Board's view, a merger has become desirable because the decline in
net asset values suffered by both companies over recent years has brought them
to a point where they could become more efficient as investment vehicles by
merging. With this reduction in the scale of the funds, fixed costs get out of
proportion with the assets managed. In addition, the financial resources
required to ensure that good investments are supported, and exits are achieved
at the optimal point in the economic cycle, may be curtailed, thereby
increasing the risk of continued underperformance. Finally, there is a risk
that the funds available for new investments will be insufficient to allow the
investment strategy of the new SPARK management team to effect any meaningful
turnaround in performance. The Board believes that, by enabling cost savings 
and allowing the Manager additional flexibility in the allocation of financial 
resources, the merger would address all these issues. Provided the talks 
progress to a successful conclusion, full details of the proposals will be 
communicated to shareholders as soon as possible and the appropriate General
Meeting of the Company will be convened to seek shareholders' approval to the merger.

Robert Wright Chairman

29 August 2008

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 has 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 set of financial statements, and a
    description of the principal risks and uncertainties for the remainder of
    the financial year; and
  * the condensed set of 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 29 August 2008
and the above responsibility statement was signed on its behalf by the

Investment manager's report

The period covered by this interim management report has seen a change in
market sentiment brought about by the `sub-prime' crisis. A number of key
transactions were completed prior to the change in market sentiment, notably
the sales of Nomad Payments Limited and Identum Limited as described in the
last Annual Report. More recently, however, the tendency towards risk aversion
in the private equity and venture capital markets has made financing conditions
for a number of portfolio companies more difficult, delayed opportunities for
exits and depressed the terms on which exits may be achievable. Against this,
however, for companies in the portfolio that are addressing new markets which
are growing on the back of new technologies or services, the general decline in
market sentiment will not stop that growth. As long as they are not approaching
the capital markets for further funding or a sale, then the value in these
companies will continue to develop, and there are examples of companies in
this category within the portfolio.

Realisation of investments

Details of the successful exit from Nomad Payments Limited by trade sale to
Metavante Technologies, Inc. (NYSE: MV), which closed on 10 January 2008, were
set out in the last Annual Report. This transaction realised £3,020,000 (of
which £2,449,000 has been received in cash and £571,000 is held in escrow), for
a multiple of 1.9 times original cost.

The trade sale of Identum Limited to Trend Micro, Inc., a global leader in
antivirus and content security, which also closed in January 2008, brought in
proceeds of a further £763,000.

New investments

In the first six months of the year, the Company has closed one new investment,
with £450,000 being committed to Isango! Limited, a growth stage company
operating an online travel website offering users an authoritative source of
travel experiences such as holiday tours, sightseeing, attractions and
activities in more than 50 countries across the world. Isango! has seen monthly 
revenues grow by 25% on average month-on-month since the investment was made.

Progress of investments

During the six months to 30 June 2008 both the early stage companies and the
more developed companies within the venture capital portfolio have shown
generally satisfactory business progress.

Oxford Immunotec Limited, the Oxford University spinout company commercialising
a new test for the diagnosis of tuberculosis, has gained pre-market approval
from the US Food and Drug Administration (FDA) for its T-SPOT®.TB test. This
represents a significant milestone for the company: it has already been
achieving sales success for T-SPOT®.TB in Europe and is now able to access the
much larger potential of the United States market.

A total of £529,000 was committed to follow-on investments during the half
year, with an additional £223,000 being advanced as bridge finance to Xention
Limited, the drug discovery company with an emerging pipeline of drug
candidates in atrial fibrillation, over-active bladder and pain, and smaller
individual amounts being invested in a range of other portfolio companies.

Among the Company's investments in the TMT sector, Antenova Limited has
demonstrated satisfactory progress in winning more profitable business but in
consequence will require additional working capital: in present conditions, the
terms of the new funding round will inevitably be less attractive than would
have been expected earlier. However, by participating in this round at a level
more than pro-rata to its previous holding, the Fund will be taking advantage
of these terms to enhance its position in the investment.

UniServity Limited, which markets a web-based collaborative learning
environment for schools, is achieving considerable success in winning contracts
with Local Education Authorities in the UK and is beginning to make progress
also in international markets.

Among the more developed companies in the portfolio, marketing communications
software company Elateral Holdings Limited has shown encouraging trading
results allowing for an increase in the valuation of the Fund's investment.
However, Elateral was a victim of the sentiment change in markets when an offer
for the acquisition of the company at substantially above this level was
withdrawn by a private equity buyer on account of market turmoil.

In the healthcare sector, the merger of Celldex Therapeutics, Inc. with the
NASDAQ-listed AVANT Immunotherapeutics, Inc., which closed in March 2008, has
been well received in the market and the share price has performed well. The
share price of MediGene AG also improved over the half year and the opportunity
was taken to sell one-third of this holding. It was disappointing, however,
that Oxford BioMedica plc announced in early July that its most important drug
candidate TroVax® had failed in a key kidney cancer test, prompting a collapse
in the share price. In the absence of any likelihood of early recovery, the
decision was taken for an immediate sale of this entire holding.

Valuation changes

Venture capital portfolio

In the venture capital portfolio, the sale of shares in MediGene AG generated
proceeds of £268,000 and a £54,000 gain on disposal. Revaluation of unquoted
investments produced a gain of £569,000 in respect of Elateral Holdings
Limited, offset by a write-down of £457,000 in respect of Antenova Limited and
other items, for an overall downward adjustment of £86,000.

Valuation changes in the quoted venture capital portfolio produced a surplus of
£299,000 over the figures at 31 December 2007, including increases in the
values of the holdings in AVANT Immunotherapeutics, Inc., MediGene AG and
Celoxica Holdings plc, partially offset by disappointing performances of other

However, a total of £367,000 has been written off as an impairment of value,
mainly in respect of Oxford BioMedica plc, ahead of the sale of this holding in

Listed equity and bond portfolio

The valuation of the listed equity portfolio (including losses in the half year)
fell by £287,000 over the half year. In mid July this entire portfolio was 
sold (at a loss of £163,000 compared with the valuation at 30 June 2008) in order
to protect against the possibility of further declines in stock markets and 
ensure the availability of liquidity to fund necessary follow-on investments 
and the operations of the Company.


Following the change in market sentiment, the pace of new investment is being
constrained, pending better visibility on the timing of planned exits and the
consequent availability of resources. The management team continues to adopt a
stringent approach designed to ensure that the Company's follow on investment
resources are most effectively applied.

It remains an objective to refresh the portfolio as soon as possible to take
advantage of new investment opportunities available to SPARK, for example in
the digital media and software applications sectors and in medical devices and
diagnostics. Continued attention will be given to the possibility of early
exits from underperforming investments in order to make this possible, although
present market conditions make the achievement of this objective more

SPARK Venture Management Limited Manager

29 August 2008

Fund summary as at 30 June 2008

                                Industry      Cost Valuation Equity  % of   
                                sector         (1)           % held  fund by
                                                       £'000         value  
Fifteen largest venture capital                                             
Workshare Limited               TMT          1,910     2,591 7.3%    12.7%  
Xention Limited                 Healthcare   1,273     1,348 5.1%    6.6%   
Celona Technologies Limited     TMT          2,059     1,307 8.6%    6.4%   
Xtera Communications, Inc.      TMT          2,687     1,275 1.0%    6.2%   
Oxford Immunotec Limited        Healthcare   1,801     1,215 6.3%    5.9%   
Elateral Holdings Limited (2)   TMT            479     1,049 13.8%   5.1%   
Teraview Limited                Healthcare   1,064       827 5.4%    4.0%   
UniServity Limited              TMT            700       700 11 .6%  3.5%   
Sift Group Limited              TMT            917       698 8.0%    3.4%   
MediGene AG FRANKFURT           Healthcare     781       597 0.4%    2.9%   
AVANT Immunotherapeutics, Inc.  Healthcare   1,400       472 0.4%    2.3%   
Isango! Limited                 TMT            450       450 9.3%    2.2%   
Arithmatica Limited             TMT            676       370 13.7%   1.8%   
Antenova Limited                TMT          1,384       322 4.7%    1.6%   
Portrait Software plc AIM       TMT          1,130       288 2.7%    1.4%   
                                            18,711    13,509         66.0%  
Other venture capital                                                       
Celoxica Holdings plc (2) AIM   TMT            192       287 2.6%    1.4%   
Vivacta Limited                 Healthcare     228       286 1.8%    1.4%   
Cluster Seven Limited           TMT            334       255 1 .9%   1.3%   
Allergy Therapeutics plc AIM    Healthcare     700       239 1.1%    1.2%   
Perpetuum Limited               TMT            146       166 1.5%    0.8%   
Level Four Software Limited     TMT            112       112 0.7%    0.5%   
Oxford BioMedica plc AIM        Healthcare     103       103 0.3%    0.5%   
Other investments:                                                          
valuations less than £100,000                  491       193         0.9%   
                                             2,306     1,641         8.0%   
Total venture capital                       21,017    15,150         74.0%  
Total quoted venture capital                 4,698     2,077         10.2%  
Total unquoted venture capital              16,319    13,073         63.8%  
                                            21,017    15,150         74.0%  
Listed equity investments                    2,140     2,894         14.2%  
Total investments                           23,157    18,044         88.2%  
Cash and other net assets                    2,406     2,406         11.8%  
Net assets                                  25,563    20,450         100.0% 

 1. Amounts shown as cost represent acquisition cost as reduced in certain
    cases (2) by amounts written off as an impairment in value
 2. Cost reduced by amounts written off as representing an impairment in value

Condensed financial statements

Profit and loss account

                                       Notes  Six months  Six months  Fourteen
                                                      to          to months to
                                                30.06.08    30.04.07  31.12.07
                                             (unaudited) (unaudited) (audited)
                                                   £'000       £'000     £'000
Loss on investments at fair value          3       (305)     (4,340)   (7,862)
through profit or loss                                                        
Income                                               129         125       307
Investment management fee                          (283)       (395)     (924)
Other expenses                                     (187)       (223)     (332)
Loss on operating activities                       (646)     (4,833)   (8,811)
Interest payable on loan notes                       (3)         (3)       (6)
Loss on ordinary activities before                 (649)     (4,836)   (8,817)
Tax on loss on ordinary activities                     -           -         -
Loss on ordinary activities after                  (649)     (4,836)   (8,817)
Basic and fully diluted loss per share     4     (1.4)p      (10.0)p   (18.5)p

All 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 profit and loss account of the Company.

The accompanying notes are an integral part of this statement.

Balance sheet

                                       Notes     30 June         31    30 April
                                                    2008   December        2007
                                             (unaudited)       2007 (unaudited)
                                                   £'000  (audited)       £'000
Fixed assets                                                                   
Investments at fair value through          5      18,044     21,534      24,939
profit or loss                                                                 
Current assets                                                                 
Debtors                                              737         14          34
Cash at bank                                       2,099        599       1,601
                                                   2,836        613       1,635
Creditors: amounts falling due                     (331)      (302)       (314)
within one year                                                                
Net current assets                                 2,505        311       1,321
Creditors: amounts falling due in                   (99)      (100)       (100)
over one year                                                                  
Net assets                                        20,450     21,745      26,160
Capital and reserves                                                           
Called-up equity share capital                       462        467         476
Share premium account                                339        339         338
Capital redemption reserve                            72         67          56
Special reserve                                   21,528     23,157      32,416
Revaluation reserve                              (5,113)    (4,701)     (9,444)
Profit and loss account                            3,162      2,416       2,318
Total equity shareholders' funds                  20,450     21,745      26,160
Net asset value per share                  6       44.3p      46.5p       54.8p

The accompanying notes are an integral part of this statement.

Condensed financial statements (continued)

Summarised cash flow statement

                                        Note  Six months  Fourteen  Six months
                                                      to months to          to
                                                30.06.08  31.12.07    30.04.07
                                             (unaudited) (audited) (unaudited)
                                                   £'000     £'000       £'000
Cash outflow from operating activities     7       (332)     (982)       (531)
Financial investment                                                          
Purchase of venture capital investments            (979)   (4,396)     (3,341)
Purchase of listed equity                          (159)     (645)       (252)
Sale of venture capital investments                3,345       982       1,122
Sale/redemption of listed equity and fixed           190     5,287       3,816
interest investments                                                          
Amounts recovered from investments                    82         -           -
previously written off                                                        
Total net financial investment                     2,479     1,228       1,345
Equity dividends paid                              (464)     (487)       (458)
Buy-back of ordinary shares                                  (907)       (499)
Issue of shares under the terms of the                 -        32          29
dividend reinvestment scheme                                                  
Repayment of redeemable loan notes                   (1)         -           -
Total financing                                              (875)       (470)
Increase/(decrease) in cash for the period         1,500   (1,116)       (114)
Reconciliation of net cash flow to                                            
movement in net funds                                                         
Increase/(decrease) in cash for the period         1,500   (1,116)       (114)
Net funds at the start of the period                 599     1,715       1,715
Net funds at the end of the period                 2,099       599       1,601

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  Revaluation    Profit   Total
                      capital   premium  redemption reserve      reserve  and loss        
                      £'000     account     reserve                         account   £'000
                                  £'000      £'000    £'000        £'000     £'000 
At 1 January 2008         467     339            67  23,157       (4,701)    2,416  21,745
Shares purchased for      (5)       -             5   (182)            -        -     (182)
Realisation of prior        -       -             -       -         (400)      400       -
years' net gains on                                                           
Transfer from special       -       -             - (1,447)           -      1,447       -
reserve to profit and                                                         
loss account                                                                  
Net loss on                 -       -             -       -          (12)       12       -
revaluation of                                                                
Loss on ordinary            -       -              -       -           -     (649)   (649)
activities after                                                              
Dividends paid              -       -              -       -           -     (464)   (464)
At 30 June 2008           462     339              72  21,528     (5,113)    3,162  20,450

The accompanying notes are an integral part of this statement.

Condensed financial statements (continued)


 1. The financial information contained in this Half-Yearly Financial Report
    has been prepared on the basis of the accounting policies set out in the
    Annual Report for the 14 months ended 31 December 2007.
    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 the applicable UK accounting standards.

 2. A final dividend in respect of the period ended 31 December 2007 of 1 p per
    share totalling £463,755 was paid on 27 June 2008.
 3. The overall 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       Fourteen            
                                        30.06.08       30.04.07      months to            
                                     (unaudited)    (unaudited)       31.12.07            
                                           £'000          £'000      (audited)            
Net (loss)/gain on disposal                     (8)            184         436
Write-off of investments                      (367)              -     (5,061)
Recoveries made in respect of                    82              -           -
investments previously written off                                            
Net loss on revaluation of                     (12)        (4,524)     (3,237)
                                              (305)        (4,340)     (7,862)
Unquoted venture capital investments           (99)          (179)     (7,326)
Quoted venture capital investments               81        (4,590)     (1,378)
Bonds and equity investments                  (287)            429         842
                                              (305)        (4,340)     (7,862)

`Net (loss)/gain 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 loss per share of 1 .4p (six months ended 30 April 2007: loss 10.0p) is
    based on the loss on ordinary activities after tax of £649,000 (six months
    ended 30 April 2007: loss £4,836,000) and on the weighted average number of
    ordinary shares in issue during the period of 46,380,000 (six months ended
    30 April 2007: 48,259,627).
    The loss per share of 18.5p for the fourteen month period to 31 December 2007 is based
    on the loss on ordinary activities after tax of £8,81 7,000 and on the weighted
    average number of ordinary shares in issue during the period of 47,714,817.

5. Movements in investments during the six months ended 30 June 2008 are as

                                    Venture       Listed             Total
                                    capital       equity                  
                                investments  investments             £'000
                                      £'000        £'000                  
Cost at 1 January 2008               23,999        2,236            26,235
Net (loss)/gain at 1 January 2008   (5,677)          976           (4,701)
Valuation at 1 January 2008          18,322        3,212            21,534
Movements in the period:                                                  
Purchases at cost                       979          159             1,138
- proceeds                          (4,051)        (190)           (4,241)
- net gains/(losses) on disposal         54         (62)               (8)
Impairment in value                   (367)            -             (367)
Net gain/(loss) on revaluation of       213        (225)              (12)
Valuation at 30 June 2008            15,150        2,894            18,044
Book cost at 30 June 2008            21,017        2,139            23,156
Net (loss)/gain at 30 June 2008     (5,867)          755           (5,112)
Valuation at 30 June 2008            15,150        2,894            18,044

Amounts shown as cost represent acquisition cost, less any reduction made on
account of perceived impairment in value which is regarded as permanent.

 6. The net asset value per share as at 30 June 2008 of 44.3p (31 December
    2007: 46.5p) is based on net assets of £20,450,000 (31 December 2007: £
    21,745,000) and on the 46,168,525 ordinary shares in issue as at that date
    (31 December 2007: 46,715,525).There is no dilution effect as at 30 June
    2008 (31 December 2007: nil).
 7. Reconciliation of operating loss to cash flow from operating activities for
    the period is as follows:
                                                          Fourteen   Six months
                                     Six months to       months to           to                
                                          30.06.08        31.12.07     30.04.07             
                                        (unaudited)       (audited)  (unaudited)                      
                                              £'000           £'000        £'000                    
Loss on ordinary activities                     (646)      (8,811)      (4,833)
Loss on investments at fair value                 305        7,862        4,340
through profit or loss                                                         
(Increase)/decrease in debtors                   (17)          134          114
Increase/(decrease) in creditors                   29        (161)        (149)
Interest payable on loan notes                    (3)          (6)          (3)
Cash outflow from operating                     (332)        (982)        (531)

 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 2008, fees of £11,000 attributable to the investments of
    the Company were received pursuant to these arrangements (14 months ended
    31 December 2007: £43,000 paid to Quester Services Limited of which APG
    Holmes and JA Spooner were directors until 11 May 2007 and JR Patel was a
    director from that date).
 9. The financial information contained in this Half-Yearly Financial Report is
    not the Company's statutory accounts. The financial information for the six
    months ended 30 June 2008 and 30 April 2007 is not for a financial year and
    has not been audited. The statutory accounts for the financial period ended
    31 December 2007 have been delivered to the Registrar of Companies and
    received an audit report which was unqualified, did not include a reference
    to any other matters to which the auditors drew attention by way of
    emphasis without qualifying the report and did not contain statements under
    section 237(2) and (3) of the Companies Act 1985.
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 19 May and 19 November each year.

11 .Copies of the Half-Yearly Financial Report are expected to be sent to
    shareholders on or about 3 September 2008. Further copies can be obtained from
    the Company's registered office.

Independent review report to SPARK VCT 2 plc


We have been engaged by the Company to review the condensed set of financial
statements in the Half-Yearly Financial Report for the six months ended 30 June
2008 which comprises the profit and loss account, balance sheet, summarised
cash flow statement, the reconciliation of movements in shareholders' funds and
notes 1 to 11. We have read the other information contained in the Half-Yearly
Financial Report which comprises only the financial highlights, Chairman's
statement, Directors' responsibility statement, fund summary and investment
manager's report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.

This report is made solely to the Company in accordance with guidance contained
in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information
performed by the Independent Auditor of the Entity". Our review work has been
undertaken so that we might state to the Company those matters we are required
to state to them in a review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our review work, for this report, or for the
conclusion we have formed.

Directors' responsibilities

The Half-Yearly Financial Report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
Half-Yearly Financial Report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Services Authority.

As disclosed in Note 1, 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. The condensed set of financial statements included 
in this Half-Yearly Fianancial Report has been prepared in accordance with 
the Accounting Standards Board's Statement "Half-Yearly Financial Reports.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Half-Yearly Financial Report based on our

Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.


Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-Yearly
Financial Report for the six months ended 30 June 2008 is not prepared, in all
material respects, in accordance with the Accounting Standards Board Statement
"Half-Yearly Financial Reports" and the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.

Grant Thornton UK LLP Auditor

Chartered Accountants London

29 August 2008

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


a d v e r t i s e m e n t