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  Print      Mail a friend       Annual reports

Thursday 09 April, 2009


Annual Financial Report

Financial highlights as at 31 December 2008

Per ordinary share (pence)    31.12.08   31.12.07   28.02.07     
Net asset value                   26.8       33.2       41.6
 Dividend paid                     2.8        4.2        3.9
 Cumulative dividend              53.7       50.9       46.7
Total return                                              
SPARK VCT plc                     80.5       84.1       88.3
Return including tax benefits    100.5      104.1      108.3
Total return to former                                    
 shareholders of:                                          
Quester VCT 2 plc, per 100p       66.5       70.2       74.5
 invested in shares of that                                
Return including tax benefits     86.5       90.2       94.5
Quester VCT 3 plc, per 100p       40.1       43.7       47.8
 invested in shares of that                                
Return including tax benefits     60.1       63.7       67.8

The directors do not propose a dividend for the year ended 31 December 2008.

Composition of the fund by value                    31.12.08

Unquoted venture capital investments                   60.1%
Quoted venture capital investments                      2.0%
Listed fixed interest investments                       9.8%
Cash and other net current assets                      28.1%

Total                                                 100.0%

Chairman's statement

Results for the year

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

                                            Venture     Bonds,    Total   Pence
                                            capital   equities              per
                                        investments        and    £'000   share 
                                              £'000        net           
Net asset value at 31 December 2007          25,634     12,042   37,676    33.2   
Net gains/(losses) on disposal                  728     (1,020)    (292)   (0.2)  
Income net of operating expenses                  -        (43)     (43)      -
Net (loss)/gain on revaluation of            (2,888)        26   (2,862)   (2.6)  
Net investment                               (5,039)     5,039        -       -
Net assets before dividends and              18,435     16,044   34,479    30.4   
share buy-backs                                                               
Dividend and incentive fee paid                   -     (4,175)  (4,175)   (3.7)  
Share buy-backs                                   -       (573)    (573)    0.1    
Net asset value at 31 December 2008          18,435     11,296   29,731    26.8   

The managed portfolio before the effect of dividends and buy-backs showed a
reduction of £3.2 million, or 2.8p per share. The principal movements consisted
of net write-downs on the venture capital portfolio of £2.9 million and the
loss on disposal of the listed portfolio of FTSE equities of £1.0 million. The
reduction in value of the venture capital portfolio was concentrated in the
main amongst the second tier early stage and developing companies, rather than
the more mature and larger companies. It was offset by realised gains of £0.7
million. While the loss on the equity portfolio was disappointing, the decision
to sell proved fortunate in light of the crash which followed soon thereafter.
£3.3 million was invested in the venture capital portfolio split broadly
between new and follow-on investments.

In very uncertain markets, the overall performance of the portfolio was
satisfactory. The Manager encouraged investee companies to live within their
cash resources and has been similarly prudent in only providing follow-on
funding to investments which show real promise. In fact, a substantial
proportion of the portfolio consists of relatively mature companies, a small
number of which might have been sold if there had been exit opportunities.

The environment for funding and disposals continues to show no sign of
improving in the short term.

The dividend approved by shareholders last year amounted to 2.8p per share (£
3.1 million). It triggered a payment of £1.0 million (0.9p) to the Manager
under the incentive scheme at that time. The Board's decision to recommend this
dividend was driven by the dividend pay-out policy which was central to your
Board's new policy at the time of the merger in 2005.The incentive scheme was
put in place to motivate the Manager to free up funds for a payout. £23.6
million was realised. The Board concluded last year that the basic intent of
the agreement was that the Manager should be rewarded if funds were released.
Nevertheless, conscious that the shareholders should decide, the Board drew all
of the relevant factors clearly to their attention, not only in the Annual
Report but within the text of the resolution on the proxy form. Shareholders
voted for the dividend payment by 81.6% and 12.8% votes against in full
knowledge of the facts. Dividends of £14.3 million (12.2p per share) have been
paid since 2005 compared to none in the preceding 5 years.

Over the period since June 2005, the total return has dropped by only 4.5p per
share or 10.4%, of which 3.7p (8.5%) occurred in 2008. While it is
disappointing to see a fall, it is smaller than delivered by many other
investment classes over that 3i2 year period, or the last 12 months. Unquoted
early stage and technology driven companies are not necessarily driven by the
same financial or economic factors which have overshadowed some other
investments recently. The underlying growth in the companies is evident in the
Business review and can deliver value.
The Board

Following the successful transition of the management of your company from
Quester to SPARK, the Board has decided that it is the right time to revitalise
its membership, particularly as some have been on this Board and predecessor
Boards for over 10 years.

Robin Field joined the Board in January 2009. He is well versed in VCTs, has
experience of companies in SPARK's space and is well accustomed to the
governance of listed companies. Subject to your agreement, it is proposed he
become Chairman at the Annual General Meeting. Tom Sooke, Christopher Wright
and I will not be putting ourselves up for re-election. You are fortunate to
have three new excellent candidates including David Adams who has a deep
experience of the VCT sector and Greg Lockwood who has spent many years
investing in early stage technology companies, both of whom have joined the
Board in March 2009 and will be up for election at the AGM.

The Board is grateful to Tom Sooke and Christopher Wright for their
contribution to the Board's strategy and their diligent attention to all
aspects of your Company's affairs over a good number of years.

Dividend and Outlook

The Board is conserving cash resources to follow good investments and take
opportunities for new investment to build a valuable portfolio. Profits have
not been generated in this year. No dividend is proposed. In addition, the
Board will carefully consider whether resources are sufficient to make share

Success in early stage investing depends on having a spread of opportunities to
develop significant businesses, a few of which can drive the returns
shareholders are expecting. The mature investments need to be sold when good
prices can be obtained, to produce the resources to create that spread.
Meanwhile, prices for new investments are beginning to look attractive and when
cash is released from the portfolio it can be put to work to achieve attractive

Meanwhile, solid progress can be obtained by the investee companies in their
own markets, within the cash resources available to them and with the support
of the Manager.

Jock Birney 
9 April 2009

Fund summary as at 31 December 2008

                               Industry         Cost    Valuation  Equity  % of fund by  
                               sector           £'000       £'000  % held      by value
Fifteen largest venture capital investments                                                            
Sift Group Limited             TMT              2,395       2,249   20.2%          7.6%  
Imagesound plc                 TMT              2,848       1,920   11.8%          6.5%  
Elateral Holdings Limited      TMT              1,009       1,783   24.3%          6.0%  
Vivacta Limited                Healthcare       1,067       1,336    8.5%          4.5%  
Cluster Seven Limited          TMT              1,569       1,197    9.0%          4.0%  
UniServity Limited             TMT              1,000       1,000   16.5%          3.4%  
Isango! Limited                TMT              1,000       1,000    2.3%          3.4%  
Skinkers Limited               TMT              1,056         970    5.6%          3.3%  
Workshare Limited              TMT                695         909    1.9%          3.1%  
Level Four Software Limited    TMT                855         855    5.1%          2.9%  
We7 Limited                    TMT                816         816   10.0%          2.7%  
Secerno Limited                TMT                978         688    8.3%          2.3%  
Perpetuum Limited              TMT                686         585    7.0%          2.0%  
Community Internet Europe      TMT                327         510   22.5%          1.7%  
Haemostatix Limited            Healthcare         502         502   10.6%          1.7%  
                                               16,803      16,320                 55.1% 
Other venture capital investments                                                                    
Antenova Limited               TMT              1,307         495    4.7%          1.7%  
Lab M Holdings Limited         Healthcare         690         440   23.9%          1.5%  
(formerly IDG)                                                                 
Gemini Holdings Limited        Healthcare         455         228   12.8%          0.8%  
MediGene AG  FRANKFURT         Healthcare         316         202    0.1%          0.7%  
Celldex Therapeutics, Inc.     Healthcare         625         135    0.2%          0.5%  
Oxonica plc AIM                Healthcare         204         127    1.5%          0.4%  
Artisan Software Tools Limited TMT                120         120   23.4%          0.4%  
TeraView Limited               Healthcare       1,172         100    5.4%          0.3%  
Other investments: valuations                   1,629         268                  0.7%  
less than £100,000                                                             
                                                6,518       2,115                  7.0%  
Total venture capital investments              23,321      18,435                 62.1% 

Total unquoted venture capital investments     21,313      17,839                 60.1% 
Total quoted venture capital investments        2,008         596                  2.0%  

                                               23,321      18,435                 62.1% 
Listed fixed interest investments               2,854       2,898                  9.8%  
Total investments                              26,175      21,333                 71.9% 
Cash and other net assets                       8,398       8,398                 28.1% 
Net assets                                     34,573      29,731                100.0%

Business review

The Business review has been prepared in accordance with Section 234ZZB of the
Companies Act 1985 and forms part of the Directors' report to shareholders.
This Business review does not contain information about environmental matters,
the Company's employees and social and community issues.

Portfolio update and overview

Recent months have seen a great deal of activity on the part of members of the
SPARK management team in working with the portfolio companies, preparing them
for the increasingly difficult financial and economic climate. This work has
built on the new team's detailed review of the portfolio referred to last year,
which included classifying the companies according to their potential to
deliver capital growth, and most importantly identifying those that are key to
producing a good return for the whole portfolio, which has informed all of the
SPARK team's subsequent decision-making.

Team members have been particularly focused on cost control and rates of cash
burn, against the background of the risk of slower than expected revenue growth
and the reduced availability of venture capital finance. At the same time,
there has been an emphasis on working with CEOs on strategic reviews and the
promotion of growth opportunities.

Present conditions in the private equity and venture capital markets make the
raising of additional finance for portfolio companies more difficult and have
delayed opportunities for exits and depressed prices. For companies that are
addressing new markets, which are growing on the back of new technologies or
services, the general decline in sentiment in the financial markets does not
necessarily have a direct effect on business growth. The earlier-stage
companies are, however, potentially vulnerable to commercial setbacks, such as
delays in the award of key customer contracts.

The SPARK management team's current assessment of the prospects for individual
portfolio companies is that returns are probably looking more vulnerable, and
certainly more delayed than indicated 12 months ago. We now expect the bulk of
the realisations of the key portfolio companies to be concentrated in 2011 at
the earliest.

Fund summary

The Fund summary above lists the venture capital investments held by the
Company at 31 December 2008 with their cost and valuation at that date. The 15
largest venture capital investments held at 31 December 2008 collectively
account for 55.1% of the net assets at the balance sheet date. Highlights of a
number of key developments in the portfolio are set out under "Portfolio
progress" below.

Portfolio progress

The venture capital portfolio of the Company is well balanced between
investments in companies at development stage (42% of the total) and companies
at early stage (55% of the total).The top three investments in the portfolio
are all in development stage companies and together account for 20.1% of net
assets at 31 December 2008. All three have demonstrated satisfactory business
progress over the year, growing top-line revenues by between 7% and 40% (Sift
Group Limited +20%, Imagesound plc +7%, Elateral Holdings Limited +40%).
Additionally, over the last 12 months, the development of the early stage
companies which have been held in the portfolio for some time and are now in
revenue generation has been positive with encouraging growth, albeit generally
from a small base (examples of year-on-year revenue growth in the TMT sector
include Antenova Limited +85%; UniServity Limited +62%; and in life sciences 
Celldex Therapeutics, Inc. +173%, MediGene AG +37%).

In the healthcare sector, the two key companies which are still at the stage of
scientific development (Vivacta Limited and Haemostatix Limited) have largely
met the milestones set for them over 2008. In the same sector, however, we have
been disappointed in the performance of one other unquoted company and by a
couple of the quoted investments.

As noted above, recent months have seen a great deal of activity on the part of
members of the SPARK team in working with the portfolio companies, preparing
them for the increasingly difficult financial and economic climate. Team
members have been particularly focused on cost control and rates of cash burn.
At the same time, there has been an emphasis on working with CEOs on strategic
reviews and the promotion of growth opportunities.

The extent of the activity of SPARK management team members is illustrated by
the fact that, during 2008 and in the current year to date, in relation to the
Fund's top 15 venture capital investments, action has been taken in 10 cases to
ensure a reduction in the investee company's cost base, in nine cases
additional venture capital funding has been raised and in seven cases
significant management changes have been made (including a change in the CEO in
five cases and the appointment of a new chairman in five cases).

Highlights of specific business achievements during the year from among the
largest venture capital investments are as follows:

  * Sift Group Limited: After a difficult trading year in 2007, Sift delivered
    a strong 20% top-line growth in 2008, along with a marked improvement in
    profitability despite challenging market conditions. Whilst these
    challenges remain in 2009, Sift will be looking to take advantage of
    dislocation in the trade publication market to further strengthen its
  * Imagesound plc: Imagesound took the decision to de-list from AIM in May
    2008 as a result of the detrimental effect that the illiquidity of its
    stock in that market was having on the company's ability to develop the
    business and work towards an exit for its investors. During the year, many
    of the company's retail clients have suffered from the dramatic
    deterioration in consumer confidence and spending. Nevertheless, Imagesound
    was able to pick up sufficient new business in the fourth quarter of 2008
    to deliver a respectable growth in top-line revenues of 7% for the year.
  * Elateral Holdings Limited: Elateral is a global leader in brand asset
    management software. In the early part of the year, the company was a
    victim of the sentiment change in markets when an acquisition offer was
    withdrawn by a private equity buyer on account of market turmoil. For 2008
    as a whole, Elateral reported top-line revenue growth of 40% and announced
    a number of significant client wins including Autodesk, NetApp and Toyota.
    The company was also able to renew and extend its relationship with
    existing blue chip clients, including Cisco which entered into its ninth
    year of usage of the product.
  * Vivacta Limited: Vivacta is a diagnostics company developing
    instrumentation and cartridges for point-of-care tests. The company has
    achieved its technical targets for its first test. The process of scale-up
    and manufacturing is underway. It is beginning commercial discussions with
    a view to licensing its technology.
  * Cluster Seven Limited: Cluster Seven is the leading provider of spreadsheet
    management solutions; its product Enterprise Spreadsheet Manager targets
    the needs of financial institutions and Fortune 500 financial reporting
    groups, and addresses gaps in existing risk management and compliance
    solutions. During 2008 the business suffered from the well known
    uncertainty and turbulence in the financial services industry;
    nevertheless, the software is now installed in more than 20 tier one
    customers and greater emphasis on regulation and compliance is not only
    expanding the range of applications for the product, but also opening the
    possibility of selling Cluster Seven's solution as an integrated service
    for users of broad enterprise solutions.
  * UniServity Limited: UniServity markets a web-based collaborative learning
    environment for schools. It has achieved considerable success in winning
    contracts with Local Education Authorities in the UK and is beginning to
    make progress also in international markets. In November 2008 it announced
    a major step towards breaking into the Chinese market through a strategic
    partnership brokered by SPARK Venture Management Limited with the Chinese
    publishing and media company Time Media Co. Under the terms of the
    framework agreement, Time Media will launch and promote UniServity's highly
    successful web-based learning platform to schools throughout mainland
  * Isango! Limited: is an early stage online travel website company offering
    users an authoritative source of travel experiences such as holiday tours,
    sightseeing, attractions and activities in more than 50 countries across the
    world. Since the investment was completed in the first quarter of the year,
    Isango! has been impacted by the downturn but has continued to develop its
    partnership strategy and recently became the exclusive partner of Accor Hotels
    and for tours and activities.

  * Skinkers Limited: a software company delivering information broadcast
    solutions to large enterprises, has completed the development of the Live
    Notification Platform, an industry leading push communications platform,
    and started winning its first clients. The downturn in the financial
    services sector has impacted the sales cycle; however the company has
    recently won accounts with MBNA and Capital One and has a good sales
    pipeline. The application for MBNA is a new online secure delivery service
    and was recently selected as the "Best Online Initiative" by the credit
    card industry.
  * Workshare Limited: Workshare, the global leader in content protection and
    control solutions for secure information management, recently announced
    that more than 11,000 companies now use its latest software product
    Workshare Professional. Workshare remains the de facto standard for
    comparison technology with over 78% of users of its earlier DeltaView
    product now migrated to the improved comparison technology and the
    remaining 22% expected to switch. Workshare added 3,000 new customers in
    2008, and can now count 99% of the top 200 US law firms as customers.
  * Level Four Software Limited: Level Four is the leading independent vendor
    of automated testing solutions for banks' networks of automated teller
    machines (ATMs). Based in Dunfermline, Scotland, the company serves a
    global client base of tier one banks and processors through offices in
    Dubai and Charlotte, North Carolina. The company has continued to grow over
    the last 12 months with notable new client wins including Barclays Bank,
    HBOS and National Bank of Kuwait.
New investments

During the year under review, the pace of new investment was constrained by the
existing level of cash resources and the currently poor visibility on the
generation of cash proceeds from realisations. Two new investments were
completed, one in the TMT (technology, media and telecoms) sector and one in
healthcare, as follows:

Company Sector                          £'000

Unquoted companies:

Gemini Holdings Limited   Healthcare      455
Isango! Limited           TMT           1,000


Information on Isango! Limited, the investment in which was completed in the
first quarter of 2008, has been provided in the previous section.

Gemini Holdings Limited is the holding company of Gemini Biomedical Limited,
a specialist healthcare screening company which provides medical screening 
services to life insurance companies and underwriters. Gemini's service is                     
provided through a network of pharmacies contracted to Gemini and easily 
accessed by applicants. Its GemTrack software enables capture of the 
comprehensive screening data required for timely and accurate underwriting of
The selection of these two new investments was in line with the indications 
given in last year's Business review, namely that the programme of new 
investment should be expected to include (a) within the TMT sector, a greater
emphasis on opportunities in the digital media and software applications                  
sectors and a reduced exposure to `hardware' investments and(b) in healthcare,
a reduced exposure to drug discovery and a greater emphasis on other areas.  
The early progress of Gemini Holdings Limited, since the investment was
completed in the third quarter of 2008, has been disappointing and slower than
had been expected. The company is receiving close attention from members of the                      
SPARK management team, with fresh milestones being set for the progress expected
over the coming months.                                 

Follow-on investments

The year to 31 December 2008 saw continued investment in a number of key
companies in the portfolio, although at a reduced rate compared with 2007, as
summarised in the table below:

Company Sector                          £'000

Follow-on rounds in unquoted companies:

Antenova Limited              TMT         173
Cluster Seven Limited         TMT         372
Haemostatix Limited           Healthcare  255
Level Four Software Limited   TMT         130
Secerno Limited               TMT         532
We7 Limited                   TMT         142
Other companies (3)                       128


Bridge finance ahead of planned realisation:

Arithmatica Limited           TMT         112


Among the companies receiving the most significant amounts of follow-on
finance, Antenova Limited grew top-line revenues by 85% and demonstrated
satisfactory progress in winning more profitable business, but in consequence
required additional working capital to maintain adequate stock levels. The
terms of the funding round completed in the fourth quarter of 2008 were
inevitably less attractive than would have been expected earlier, but by
participating in the round at a level more than pro-rata to its previous
holding, the Company took advantage of these terms to enhance its position in
the investment. Two other long-established portfolio companies in the TMT
sector received additional support: an additional £372,000 was advanced as loan
finance to Cluster Seven Limited, the specialist provider of spreadsheet
management software, and £130,000 to Level Four Software Limited, which
specialises in the provision of ATM software solutions. Secerno Limited, which
specialises in the supply of software and appliances to protect against
internal and external threats to databases, was successful in concluding in
July 2008 a US$16 million financing led by Amadeus Capital Partners with
participation by the SPARK-managed funds including £532,000 from the Company. 
We7 Limited, the free to user, advertisement-funded online music service
founded with musician Peter Gabriel, completed a £2.5m additional financing led
by Eden Ventures in December 2008 with the Company adding £142,000 to its
earlier investment.

In the healthcare sector, a follow-on investment of £255,000 was made in 
Haemostatix Limited, the early stage company focused on platelet replacement
therapies: this followed good early scientific results and a decision to
accelerate the rate of development of the company.


In the Business review for the period ended 31 December 2007, details were
given of the successful exit from Nomad Payments Limited in January 2008, in a
transaction which realised £7,263,000 (with £5,888,000 received in cash and £
1,375,000 currently being held in escrow).

In the healthcare sector, the share price of MediGene AG improved over the
first half of the year and the opportunity was taken to sell part of this

Valuation changes

The valuations of the unquoted investments in the portfolio have been reviewed
as at 31 December 2008 on the basis of the International Private Equity and Venture
Capital Valuation Guidelines, having regard mainly to (i) prices of recent
financing rounds and/or the terms of financing rounds expected within the next
12 months, (ii) earnings multiples, and (iii) industry valuation benchmarks and
/or M&A valuation criteria. In a number of cases (Arithmatica Limited, Gemini
Holdings Limited, Perpetuum Limited, TeraView Limited) the write-down reflects
disappointing business progress by the investee company, but in the main the
valuation changes parallel the reductions that are being seen in the valuations
of financial assets generally.

Total revaluations in respect of venture capital investments amounted to a
write-down of £1,929,000 of which £1,616,000 related to unquoted investments
and £313,000 to quoted investments.

Unquoted venture capital investments                                           
During the year ended 31 December 2008, in respect of unquoted investments, the
review has resulted in a reduction in valuation of £1,616,000, net of gains    
totalling £1,171,000:                                                          

Company                                                                  £'000                        

Antenova Limited                                                          (442) 
Arithmatica Limited                                                       (236)
Cluster Seven Limited                                                     (371)
Community Internet Europe Limited                                          183
Elateral Holdings Limited                                                  774
Lab M Holdings Limited (formerly IDG)                                     (250)
Gemini Holdings Limited                                                   (228)
Perpetuum Limited                                                         (195)
TeraView Limited                                                          (727)
Workshare Limited                                                          214
Others (4)                                                                (338) 
Quoted venture capital investments                                             
Market movements during the year ended 31 December 2008 resulted in a          
net reduction in valuation of £313,000.                                        
Company                                                                   £'000
Allergy Therapeutics plc AIM                                               (239)
Celldex Therapeutics, Inc. NASDAQ                                            65
Oxonica plc AIM                                                            (107)
Others (2)                                                                  (32)


Listed equity and bond portfolio

The valuation of the listed equity portfolio fell by £685,000 over the first
half of the year. In mid-July 2008 the entire portfolio of listed equities was
sold (at a level somewhat below the valuation at 30 June 2008, bringing the
loss in this portfolio to £1,020,000) 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. In the event, despite crystalising a loss, this strategy has proved to
have been the correct one, as the value of the portfolio would otherwise have
declined by another £1.6 million as at the date of this report.


The turmoil in capital markets and the increasingly constrained resources of
the Company are now making it more difficult to make confident predictions for
the overall outcome in terms of both valuations and timing of exits.
Nevertheless, there was good growth over the last year, by and large, and many
of the companies have adapted quickly to the changing market.

The early stage of many of the investments means that a considerable degree of
involvement by members of the SPARK management team in individual portfolio
companies will continue to be required for a number of years ahead.

On the assumption of successful progress of the key investments, investors
should now expect that the bulk of the distributions of realisation proceeds
will occur no earlier than 2011.

SPARK Venture Management Limited Manager

9 April 2009

Directors' responsibility statement

Company law requires the Directors to prepare financial statements for each
financial year that give a true and fair view of the state of affairs of the
Company and of the profit or loss for that year. Under that law the Directors
have elected to prepare the financial statements in accordance with UK
accounting standards.

In preparing those financial statements, the Directors are required to:

  * select suitable accounting policies and then apply them consistently;
  * make judgements and estimates that are reasonable and prudent;
  * state whether applicable UK accounting standards have been followed,
    subject to any material departures disclosed and explained in the financial
    statements; and
  * prepare the financial statements on the going concern basis unless it is
    inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.

The financial statements are published on the website, which
is a website maintained by the Manager. The maintenance and integrity of the
website maintained by the Manager is, so far as it relates to the Company, the
responsibility of the Manager. The work carried out by the auditor does not
involve consideration of the maintenance and integrity of this website and
accordingly, the auditor accepts no responsibility for any changes that have
occurred to the financial statements since they were initially presented on the
website. Visitors to the website need to be aware that legislation in the
United Kingdom governing the preparation and dissemination of the financial
statements may differ from legislation in their jurisdiction.

Under applicable law and regulations, the Directors are responsible for
preparing a Directors' report, Directors' remuneration report and corporate
governance statement that comply with that law and those regulations.

The Directors confirm to the best of their knowledge that:

  * the financial statements, prepared in accordance with applicable UK
    accounting standards, give a true and fair view of the assets, liabilities,
    financial position and loss of the Company; and
  * the Directors' report includes a fair review of the development and
    performance of the business and the position of the Company, together with
    a description of the principal risks and uncertainties that the Company
On behalf of the Board

Jock Birney 
9 April 2009

Profit and loss account for the year to 31 December 2008

                                                     Notes     Twelve      Ten
                                                            months to   months
                                                             31.12.08       to
                                                                £'000 31.12.07
Loss on investments at fair value through            11(d)    (3,154)  (4,314)
profit or loss                                                                
Income                                                   2        784      636
Recoverable VAT                                          3        322        -
Investment management fee: annual fee                    4      (734)    (776)
                           performance incentive fee     5    (1,040)        -
Other expenses                                           6      (415)    (432)
Loss on ordinary activities before taxation                   (4,237)  (4,886)
Tax on loss on ordinary activities                       8          -        -
Loss on ordinary activities after taxation                    (4,237)  (4,886)
Basic and fully diluted loss per share                  10     (3.7)p   (4.3)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 as at 31 December 2008

                                                    Notes         31         31       
                                                            December   December 
                                                                2008       2007
                                                               £'000      £'000     
Fixed assets                                           
Investments at fair value through profit               11(a)  21,333     36,294                
or loss                                                                       
Current assets                                                                
Debtors                                                12      1,936        177
Cash at bank                                                   6,965      1,417
                                                               8,901      1,594
Creditors: amounts falling due within                  13      (503)      (212)
one year                                                                      
Net current assets                                             8,398      1,382
Net assets                                                    29,731     37,676
Capital and reserves                                                          
Called-up equity share capital                         14      5,553      5,673
Share premium account                                  15        150        150
Capital redemption reserve                             15        731        611
Special reserve                                        15     23,751     27,615
Revaluation reserve                                    15    (4,842)        945
Profit and loss account                                15      4,388      2,682
Total equity shareholders' funds                              29,731     37,676
Net asset value per share                              16      26.8p      33.2p

The financial statements were approved by the Directors on 9 April 2009 and were
signed on their behalf by:

Jock Birney 

The accompanying notes are an integral part of this statement.

Cash flow statement for the year to 31 December 2008

                                                    Notes     Twelve         Ten
                                                           months to   months to
                                                            31.12.08    31.12.07
                                                               £'000       £'000
Cash (outflow)/inflow from operating                   17     (2,564)        125
Financial investment                                                          
Purchase of venture capital investments             11(b)     (3,299)     (3,764)
Purchase of listed equities and fixed               11(b)     (1,488)     (7,514)
 interest investments                                                          
Sale of venture capital investments                 11(b)      7,928       1,237
Sale/redemption of listed equity and fixed          11(b)      8,269      11,926
 interest investments                                                          
Amounts recovered from investments                  11(d)        410         159
 previously written off                                                        
Total net financial investment                                11,820       2,044
Equity dividends paid                                   9     (3,135)     (4,911)
Buy-back of ordinary shares                            15       (573)       (968)
Issue of shares under the terms of the                             -         113
 dividend reinvestment scheme                                                  
Total financing                                                 (573)       (855)
Increase/(decrease) in cash for the period                     5,548      (3,597)
Reconciliation of net cash flow to movement                                   
 in net funds                                                                  
Increase/(decrease) in cash for the period                     5,548      (3,597)
Net funds at the start of the period                           1,417       5,014
Net funds at the end of the period                             6,965       1,417
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 for the year to 31 December

                        Share    Share    Capital  Special  Revaluation  Profit   Total
                      capital  premium redemption  reserve      reserve     and        
                        £'000  account    reserve                 £'000    loss   £'000
                                 £'000      £'000    £'000              account        
At 31 March 2007        5,805       51        465   38,820       (1,102)  4,289  48,328
Shares issued under        14       99          -        -            -       -     113
 the dividend                                                                         
 reinvestment scheme                                                                  
Shares purchased for     (146)       -        146     (968)           -       -    (968)
Realisation of prior        -        -          -        -        1,613  (1,613)      -
 years' net losses on                                                                 
Transfer from special       -        -          -  (10,237)           -  10,237       -
 reserve to profit and                                                                
 loss account                                                                         
Net gain on                 -        -          -        -          434    (434)      -
 revaluation of                                                                        
Loss on ordinary            -        -          -        -            -  (4,886) (4,886)
 activities after                                                                     
Dividends                   -        -          -        -            -  (4,911) (4,911)
At 31 December 2007     5,673      150        611   27,615          945   2,682  37,676
Shares purchased for     (120)       -        120     (573)           -       -    (573)
Realisation of prior        -        -          -        -       (3,884)  3,884       -
 years' net unrealised                                                                
 gains on investments                                                                 
Transfer from special       -        -          -   (3,291)           -   3,291       -
 reserve to profit and                                                                
 loss account                                                                         
Unrealised loss on          -        -          -        -       (1,903)  1,903       -
 revaluation of                                                                       
Loss on ordinary            -        -          -        -            -  (4,237) (4,237)
 activities after                                                                     
Dividends                   -        -          -        -            -  (3,135) (3,135)
At 31 December 2008     5,553      150        731   23,751       (4,842)  4,388  29,731

The accompanying notes are an integral part of these statements.

Notes to the financial statements

1 Accounting policies

A summary of the principal accounting policies, all of which have been applied
consistently throughout the period, is set out below:

Basis of accounting

These financial statements have been 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 Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth.
This portfolio of financial assets is managed and its performance evaluated on
a fair value basis, in accordance with a documented investment policy, and
information about the portfolio is provided internally on that basis to the

Accordingly, upon initial recognition (using trade date accounting) the
investments are designated by the Company as `at fair value through profit or
loss'. They are included initially at fair value, which is taken to be their
cost (excluding expenses incidental to the acquisition which are written off to
the profit and loss account).

Subsequently, the investments are valued at `fair value', which is measured as

  * UK listed and AIM-traded investments are valued at their bid prices at the
    close of the period as issued by the London Stock Exchange; investments
    listed overseas are valued at bid prices (where a bid price is available)
    or otherwise at fair value based on published price quotations.
  * unquoted investments, where there is not an active market, are valued using
    an appropriate valuation technique so as to establish what the transaction
    price would have been at the balance sheet date. Such investments are
    valued in accordance with the International Private Equity and Venture
    Capital Valuation Guidelines. Indicators of fair value are derived using
    established methodologies including earnings multiples, prices of recent
    investment rounds, net assets and industry valuation benchmarks. Where the
    Company has an investment in an early stage enterprise, the price of a
    recent investment round is often the most appropriate approach to
    determining fair value. In situations where a period of time has elapsed
    since the date of the most recent transaction, consideration is given to
    the circumstances of the investee company since that date in determining
    fair value. This includes consideration of whether there is any evidence of
    deterioration or strong definable evidence of an increase in value. In the
    absence of these indicators, the investment in question is valued at the
    amount reported at the previous reporting date. Examples of events or
    changes that could indicate such a diminution include:
  * the performance and/or prospects of the underlying business are
    significantly below the expectations on which the investment was based;
  * a significant adverse change either in the investee company's business or
    in the technological, market, economic, legal or regulatory environment in
    which the business operates; or
  * market conditions have deteriorated, which may be indicated by a fall in
    the share prices of quoted businesses operating in the same or related
The Company does not exercise control or significant influence over investee
companies and in accordance with the exemptions under FRS 9 "Associates and
Joint Ventures", where the Company holds more than 20% but less than 50% of an
investment and the investment is not a subsidiary, it is not treated as an
associated company.

Gains and losses on investments

When the Company revalues its investments during an accounting period, any
gains or losses are recognised in the profit and loss account within `gains/
(losses) on investments at fair value through profit or loss'. Any losses that
are not considered by the Directors to reflect an impairment in the value of
the investment, or gains on investments, are subsequently transferred from/to
the revaluation reserve. When an investment is sold or the Directors consider
that its value is impaired, any amount held in the revaluation reserve is
transferred to the profit and loss account. Where the overall result on the
sale of an investment is a loss, or there is an impairment in the value of an
investment, a transfer is made from the special reserve, created on 3 November
2000 following the reduction of the share premium account, to the profit and
loss account equal to the amount of such losses.


Dividends receivable on listed equity shares are brought into account on the
ex-dividend date. Income receivable on unquoted equity and non-equity shares
and loan notes are brought into account when the Company's right to receive
payment and expect settlement is established. Fixed returns on non-equity
shares and debt securities are recognised on a time apportionment basis
(including amortisation of any premium or discount to redemption) so as to
reflect the effective interest rate, provided there is no reasonable doubt that
payment will be received in due course.


All expenses, including expenses incidental to the acquisition or disposal of
an investment, are accounted for on an accruals basis and are charged wholly to
the profit and loss account. Any costs associated with the issue of shares are
charged to the share premium account. Any costs associated with the buy-back of
shares are charged to the special reserve.


Corporation tax is applied to profits chargeable to corporation tax, if any, at
the applicable rate for the period. The Company has not provided for deferred
tax on any capital gains/losses arising on the revaluation or disposal of
investments as these items are not subject to tax whilst the Company maintains
its Venture Capital Trust status. The Company intends to continue to meet the
conditions required for it to hold approved Venture Capital Trust status for
the foreseeable future. Deferred tax assets in respect of surplus management
expenses are only recognised to the extent that those expenses are likely to be
recoverable against future taxable profits of the Company.

Foreign exchange

The currency of the primary economic environment in which the Company operates
(the functional currency) is pounds sterling ("Sterling"), which is also the
presentational currency of the Company. Transactions involving currencies other
than Sterling are recorded at the exchange rate ruling on the transaction date.
At each balance sheet date, monetary items and non-monetary assets and
liabilities that are measured at fair value, which are denominated in foreign
currencies, are retranslated at the closing rates of exchange. Exchange
differences arising on settlement of monetary items and from retranslating at
the balance sheet date of investments and other financial instruments measured
at fair value through profit or loss, and other monetary items, are included in
the profit and loss account. Exchange differences relating to investments and
other financial instruments measured at fair value are subsequently included in
the transfer to the revaluation reserve.


Dividends payable to equity shareholders are recognised in the reconciliation
of movements in shareholders' funds when they are paid, or have been approved
by shareholders in the case of a final dividend and become a liability of the

2 Income

                                                               Twelve        Ten
                                                            months to  months to
                                                             31.12.08   31.12.07
                                                                £'000      £'000
Dividend income                                                         
   - Listed companies                                             167        387         
Interest receivable                                                           
   - Listed fixed interest securities                             202        108
   - Loans to venture capital investee companies                   72         42
   - Bank deposits                                                 74         38
Other income                                                      269         61
                                                                  784        636
3 Recoverable VAT                                                             

HM Revenue and Customs (HMRC) announced in March 2008, following the European
Court of Justice decision in the JPMorgan Claverhouse case, that the provision
of management services to venture capital trusts is exempt from VAT.
Accordingly the Manager ceased to charge VAT on management fees payable by the
Company with effect from 30 September 2008.

On the basis of information supplied by the Manager and discussions with the
Company's professional advisors, the Directors consider it virtually certain
that the Company will in the foreseeable future obtain a repayment of VAT of
not less than £322,000. This amount has been recognised as a separate item in
the income statement. It is possible that additional amounts of VAT will be
recoverable in due course but the Directors are unable at this stage to
quantify the sums involved.

4 Investment management fee

                                                               Twelve          Ten
                                                            months to    months to
                                                             31.12.08     31.12.07
                                                                £'000        £'000
Investment management fee                                         671          653
Irrecoverable VAT                                                  63          123
                                                                  734          776

SPARK Venture Management Limited ("SVML") provides investment management
services to the Company under an amended and restated agreement dated 20 May

SVML is a wholly owned subsidiary of SPARK Ventures plc, a company of which AB
Carruthers is an executive director and in which he is a beneficial
shareholder. AB Carruthers is an executive director of SVML.

SVML is entitled to receive a management fee, determined quarterly in arrears,
at the annual rate of 2.0% on the value of the Company's net assets at the end
of each quarter. This fee is capped to ensure that the Company's running costs
do not exceed 3.25% of closing net asset value. Running costs in respect of the
period were less than 3.25% of closing net asset value and accordingly there
was no reduction in the management fee in respect of the cap (ten months to 31
December 2007: nil).

Irrecoverable VAT was charged on the investment management fee up to 30
September 2008, as mentioned in note 3, in line with the ruling against HMRC.
This amount is part of the total claimed back from HMRC representing VAT paid
on management fees for the three years prior to 30 September 2008.

SVML also provides administrative and secretarial services to the Company for
which it was entitled to a fee of £65,000 for the period (ten months to 31
December 2007: £53,000) adjusted annually in line with changes in the Retail
Price Index.

The investment management agreement may be terminated by the Company or the
Manager giving not less than twelve months notice. Such notice may be given at
any time after the date of the agreement. There are no provisions for
compensation payable in the event of termination of the agreement.

5 Performance incentive fee

Following the declaration at the Annual General Meeting of a final dividend of
2.8p per share in respect of the period ended 31 December 2007, the total of cash 
dividends paid or declared amounted to 11.15p per share or 25% of the Fair Asset 
Value at the time of the merger in 2005. This triggered the performance incentive 
fee of £1,040,000 which was paid on 17 October 2008.

6 Other expenses

                                                               Twelve         Ten
                                                            months to   months to
                                                             31.12.08    31.12.07
                                                                £'000       £'000
Administrative and secretarial services                            65          53
Directors' remuneration (note 7)                                   55          47
Auditor's remuneration                                                        
- Fees payable to the Company's auditor for audit of the           17          16
financial statements                                                          
- Fees payable to the Company's auditor and its associates          8           8
for other services relating to tax                                            
Legal and professional expenses                                    31          47
Insurance                                                          28          27
Management fees payable to OLIM Limited                            39          53
Transaction costs                                                  15           8
Irrecoverable VAT                                                  32          40
Payment on account to HMRC                                         31           -
Other                                                              94         133
                                                                  415         432

Following a routine inspection into the PAYE records of the Company,
discussions are underway with HMRC over the treatment of amounts paid in prior
tax years to Directors and former Directors of SPARK VCT and the companies that
merged into it. Payments have historically been made to directors' service
companies rather than being treated as salary with PAYE deducted.The
Company's professional advisers have advised that the likely total liability
for SPARK VCT is in the region of £25,000 on the assumption that 25% of amounts
paid to Directors service companies are now viewed by HMRC as having been
incorrectly paid gross of any taxation or national insurance deductions and
that the Company is unable to recover this possible tax liability from its
Directors and former Directors. In the event that the arguments of the
company's advisers are unsuccessful, the total liability could be £155,000
including £33,000 of employer's national insurance. The Company has accrued for
a potential liability of £31,000 in the accounts for the year to 31 December
2008 representing a payment on account made after the balance sheet date. From
1 January 2009 all directors' fees are paid as salary with PAYE and National
Insurance deducted.

7 Directors' remuneration

                                                   Twelve          Ten
                                                months to    months to
                                                 31.12.08     31.12.07
                                                    £'000        £'000

Amounts payable to Directors or companies 
associated with them                                   55           47

                                                       55           47

8 Tax on ordinary activities

                                                   Twelve          Ten
                                                months to    months to
                                                 31.12.08     31.12.07
                                                    £'000        £'000

Corporation tax                                         -            -
                                                        -            -

Reconciliation of loss on ordinary activities to taxation

                                                   Twelve          Ten
                                                months to    months to
                                                 31.12.08     31.12.07                
                                                    £'000        £'000
Loss on ordinary activities before taxation        (4,237)      (4,886)
Tax on loss on ordinary activities at standard UK    
corporation tax rate of 28.5% (31 December 2007:                              
30%)                                               (1,208)      (1,466)                    
Effects of:                                                                   
Non taxable items - UK dividends and net losses       851        1,178
on investments                                                                
Unutilised management expenses                        357          288

                                                        -            -

The Company has excess trading losses of £7,453,000 (31 December 2007: £
6,217,000) that are available for offset against future profits. A deferred tax
asset of £2,087,000 (31 December 2007: £1,865,000) has not been recognised in
respect of those losses as they will be recoverable only to the extent that the
Company has sufficient future taxable profits.

9 Dividends
                                                   Twelve          Ten
                                                months to    months to
                                                 31.12.08     31.12.07
                                                    £'000        £'000

Final dividend paid, period ended 31 December 2007:
2.8p per share paid 15 October 2008                 3,135            -
Interim dividend, period ended 31 December 2007:
1.4p per share paid 7 December 2007                    -        1,612
Second interim dividend, year ended 28 February 2007:
2.8p per share paid 21 March 2007                       -        3,299

                                                    3,135        4,911

10 Earnings per share

The loss per share of 3.7p (ten months to 31 December 2007: loss 4.3p) is based
on the loss on ordinary activities after tax of £4,237,000 (ten months to 31
December 2007: loss £4,886,000) and on the weighted average number of ordinary
shares in issue during the period of 112,145,822 (ten months to 31 December
2007: 114,784,742).

There is no dilution effect in respect of the period ended 31 December 2008 
(31 December 2007: nil).                                        

11 Investments                                                                
 a. Summary of investments                                                             
                                                      31.12.08  31.12.07       
                                                         £'000     £'000

Venture capital investments                             18,435    25,634
Bonds and equity investments                             2,898    10,660
                                                        21,333    36,294
Bonds and equity investments comprise:                                        
Listed fixed interest investments                        2,898     4,860
Listed equity investments                                    -     5,800
                                                         2,898    10,660
 b. Movements in investments                                                  
                                                   Venture      Bonds &    Total
                                                   capital       equity         
                                               investments  investments         
                                                     £'000        £'000    £'000
Cost at 1 January 2008                              25,098       10,252   35,350
Net gain at 1 January 2008                             536          408      944
Valuation at 1 January 2008                         25,634       10,660   36,294
Movements in the period:                                                      
Purchases at cost                                    3,299        1,488    4,787
  - proceeds                                        (7,928)      (8,269) (16,197)
  - net gains/(losses) on disposal                     318       (1,020)    (702)
Impairment in value                                   (959)           -     (959)
Amortisation of fixed interest investments               -           13       13
Net (loss)/gain on revaluation of investments       (1,929)          26   (1,903)
Valuation at 31 December 2008                       18,435        2,898   21,333
Book cost at 31 December 2008                       23,321        2,854   26,175
Net (loss)/gain at 31 December 2008                 (4,886)          44   (4,842)
Valuation at 31 December 2008                       18,435        2,898   21,333

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

 c. Venture capital investments
                                      Valuation  Additions  Disposals  Write-offs        Other  Valuation       
                                             at                                   revaluations         at       
                                       01.01.08                                                  31.12.08       
                                          £'000      £'000      £'000       £'000        £'000      £'000
Fifteen largest venture capital investments                                                                      
Sift Group Limited                        2,249          -          -           -            -      2,249
Imagesound plc                            1,859          -          -           -           61      1,920
Elateral Holdings Limited                 1,009          -          -           -          774      1,783
Vivacta Limited                           1,336          -          -           -            -      1,336
Cluster Seven Limited                     1,196        372          -           -         (371)     1,197 
UniServity Limited                        1,000          -          -           -            -      1,000
Isango! Limited                               -      1,000          -           -            -      1,000
Skinkers Limited                          1,001         56          -           -          (87)       970
Workshare Limited                           695          -          -           -          214        909
Level Four Software Limited                 725        130          -           -            -        855
We7 Limited                                 674        142          -           -            -        816
Secerno Limited                             447        532          -           -         (291)       688
Perpetuum Limited                           780          -          -           -         (195)       585
Community Internet Europe Limited           317         10          -           -          183        510
Haemostatix Limited                         247        255          -           -            -        502
                                         13,535      2,497          -           -          288     16,320
Other unquoted venture capital            3,239        740          -        (556)      (1,904)     1,519
Other quoted venture capital investments  1,487         -        (175)       (403)        (313)       596

                                         18,261      3,237       (175)       (959)      (1,929)    18,435
Investments exited during the year                                                                  
Nomad Payments Limited                    7,263         -      (7,263)          -            -          -
Casella Group Limited                       110         -        (110)          -            -          -
Pelikon Limited                               -        62         (62)          -            -          -
                                         25,634     3,299      (7,610)       (959)      (1,929)    18,435

 d. Loss on investments 

The overall loss on investments at fair value through profit or loss disclosed in 
the profit and loss account is analysed as follows:
                                                                Twelve           Ten        
                                                             months to     months to        
                                                              31.12.08      31.12.07        
                                                                 £'000         £'000        
Net (loss)/gain on disposals                                      (702)          169
Recoveries made in respect of investments                          410           159
previously written off                                                        
Write-off of investments                                          (959)       (5,076)
Net (loss)/gain on revaluation of investments                   (1,903)          434
                                                                (3,154)       (4,314)

Net (loss)/gain on disposals' 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 proportion
of the carrying value that have, in the opinion of the Directors, suffered an
impairment in value.

11(e) Significant holdings

Details of shareholdings in those companies where the company's holding at 31
December 2008 represents more than 20 per cent of the allotted equity share
capital of any class; more than 20 per cent of the allotted share capital; or
more than 20 per cent of the assets of the company itself, are given below. All
of the companies are incorporated in Great Britain.

Company                              Class of share                Number   Proportion of  
                                                                     held      class held      
Artisan Software Tools Limited       Ordinary shares (3p)         218,155            2.6%      
                                     A Ordinary shares (3p)     8,923,649           31.8%     
                                     B Ordinary shares (3p)       194,186            2.3%      
Community Internet Europe Limited    Ordinary shares (£1)         227,470           13.6%     
                                     `B' Ordinary shares (25p)    606,945           25.8%     
Elateral Holdings Limited            Ordinary shares(0.001p)   14,423,285           21.8%     
                                     Preference shares(0.001p) 81,699,667           28.5%     
Lab M Holdings Limited(formerly IDG) A Ordinary shares (10p)    2,280,000          100.0%    
                                     B Ordinary shares (10p)          600           60.0%     
                                     Cumulative redeemable 
                                     preference shares (£1)       600,000           60.0%     
                                     Preferred ordinary 
                                     shares(10p)                  389,940           52.3%     
Sift Group Limited                   Ordinary shares (1p)       5,566,184           17.6%     
                                     A Ordinary shares          2,977,480           25.9%     
                                     B Ordinary shares          2,977,480           25.9%     

12 Debtors                                                                     
                                                            31.12.08   31.12.07
                                                               £'000      £'000
Other debtors                                                  1,811         92
Prepayments and accrued income                                   125         85
                                                               1,936        177
13 Creditors (amounts falling due within one year)                             
                                                             31.12.08   31.12.07
                                                                £'000      £'000
Accruals                                                         345        212
Other creditors                                                  158          -
                                                                 503        212
14 Called-up equity share capital                                              
                                                            31.12.08   31.12.07
                                                               £'000      £'000
200,000,000 (31.12.07: 200,000,000) ordinary                  10,000     10,000
shares of 5p                                                                   
Allotted, issued and fully paid:                                               
111,061,138 (31.12.07:113,453,270) ordinary shares             5,553      5,673
of 5p                                                                          

The Company bought back for cancellation 2,392,132 ordinary shares,
representing 2.1% of the opening issued share capital, at a cost of £572,111.

15 Reserves

                                 Share      Capital Special Revaluation  Profit
                                 premium redemption reserve     reserve     and
                                 account    reserve                        loss
                                   £'000      £'000   £'000       £'000   £'000
At 1 January 2008                    150        611  27,615         945   2,682
Shares purchased for                   -        120    (573)          -       -
Realisation of prior years' net        -          -       -      (3,884)  3,884
  gains on investments                                                           
Transfer from special reserve to       -          -  (3,291)          -   3,291
  profit and loss account                                                        
Loss on revaluation of                 -          -       -      (1,903)  1,903
Loss on ordinary activities            -          -       -           -  (4,237)
  after taxation                                                                 
Dividends                              -          -       -           -  (3,135)
At 31 December 2008                  150        731  23,751      (4,842)  4,388

The capital redemption reserve was created in March 2005 to reflect the
repurchase and cancellation of shares.

The special reserve is a distributable reserve and it allows the Company,
amongst other things, to fund the buy-back of its ordinary shares as and when
it is considered by the Board to be in the best interests of shareholders and
also to facilitate the payment of dividends to shareholders earlier than would
otherwise have been possible as transfers can be made from this reserve to the
profit and loss account to offset losses on disposal of investments and
impairments in value of investments. Accordingly, a transfer of £3,291,000
(including £2,000,000 representing impairments in value of investments during
the period and £1,291,000 representing losses of previous years now treated as
impairments in value) has been made from the special reserve to the profit and
loss account.

Other gains and losses arising on the inclusion of investments at fair value,
are transferred to the revaluation reserve.

16 Net asset value per share

The net asset value per share as at 31 December 2008 of 26.8p (31 December
2007: 33.2p) is based on net assets of £29,731,000 (31 December 2007: £
37,676,000) divided by the 111,061,138 ordinary shares in issue at that date
(31 December 2007: 113,453,270).There is no dilution effect as at 31 December 
2008 (year ended 31 December 2007: nil).

17 Reconciliation of operating loss to net cash (outflow)/inflow from operating

                                                               Twelve         Ten
                                                            months to   months to
                                                             31.12.08    31.12.07
                                                                £'000       £'000
Loss on ordinary activities before tax                         (4,237)     (4,886)
Loss on investments at fair value through profit or loss        3,154       4,314
(Increase)/decrease in debtors                                 (1,759)        812
Increase/(decrease) in creditors                                  291        (122)
Amortisation of fixed interest investments                        (13)          7
Cash (outflow)/inflow from operating                           (2,564)        125

18 Commitments and guarantees

As at 31 December 2008 there were no legal commitments (31 December 2007: £
70,000) in respect of further funding to be provided to existing investee
companies.There were no guarantees outstanding (31 December 2007: £nil).

19 Financial instruments

As a Venture Capital Trust the Company invests in unquoted and AIM-traded UK
companies. In addition to its venture capital portfolio, which is invested
mainly in technology-related companies in the TMT and healthcare sectors, the
Company maintains liquidity balances in the form of cash, listed fixed interest
securities and listed equities held for follow-on financing and new venture
capital investment and debtors and creditors that arise directly from its
operations. At 31 December 2008, 62.1% (£18.4 million) of the Company's net
assets were invested in venture capital investments and 37.9% (£11.3 million)
in liquidity balances.

In pursuing its investment policy, the Company is exposed to risks that could
result in a reduction in the value of net assets and consequently funds
available for distribution by way of dividend or for re-investment.

These risks and the management of them, which is the responsibility of the
Manager and monitored by the Directors, are unchanged from the previous
accounting period and are set out below.

Market risk

The fair value or the future cash flows of financial instruments held by the
Company may fluctuate because of changes in market prices. Market risk
comprises currency risk, interest rate risk and other price risk:

* Currency risk 
The Company has no significant financial instruments denominated in foreign
* Interest rate risk
As the Company has no borrowings it only has limited interest rate risk. The
impact is on income and operating cash flows and arises from changes in market
interest rates.

The assets that are exposed to interest rate risk are tabled below. Interest
received on cash balances is at a margin over LIBOR or its foreign currency
equivalent (2007: same). With interest income of £348,000 to 31 December 2008,
any further upward or downward movement in interest rates is unlikely to be material.

* Other price risk
Venture capital investments carry a significant risk of failure. The management
of risk within the venture capital portfolio is addressed through careful
investment selection, by diversification across different industry segments
within the TMT and healthcare sectors, by maintaining a wide spread of holdings
in terms of financing stage and by limitation of the size of individual
holdings. The Directors monitor the Manager's compliance with the investment
policy, review and agree policies for managing this risk and monitor the
overall level of risk on the investment portfolio on a regular basis.

A movement of 1.9% (the annual average percent reduction in total return over
the last five accounting periods) in the fair value of the total venture
capital portfolio would result in a movement of £0.4 million in profit before
tax, which would affect the net asset value by 0.32p per share (2007: movement
of 1.6% would affect net asset value by 0.36p per share).

Liquidity risk

The Company's assets comprise quoted and unquoted equity and non-equity shares,
fixed income securities, short term money market investments and cash. Although
the Company's AIM traded and unquoted investments are less liquid than
securities listed on the London Stock Exchange, the Company has 37.9% of the
investment portfolio invested in cash, short-term debtors and creditors and
readily realisable securities, which are sufficient to meet any funding
commitments that may arise. As at the period end, the Company had no

The liquidity balances include £2.9m of fixed interest securities that are
subject to market price changes. The Directors monitor the performance of the
portfolio on a regular basis and review and agree policies with the manager for
managing this risk. A movement of 1.9% in the fair value of the listed equity
and fixed interest securities portfolio would result in a movement of £0.1 
million in profit before tax, which would affect the net asset value by 0.05p
per share (2007: movement of 1.6% would affect net asset value by 0.15p per share).

Credit risk

Credit risk is the risk that a party to a financial instrument will fail to
discharge an obligation or commitment that it has entered into with the
Company, resulting in a financial loss.

The Investment Manager has in place a monitoring procedure in respect of
counterparty risk which is reviewed on an ongoing basis.

At the reporting date, the Company's financial assets exposed                  
to credit risk amounted to the following:                                      
                                                              31.12.08 31.12.07
                                                                 £'000    £'000
Investments in fixed interest instruments                        2,898    4,860
Cash and cash equivalents                                        6.965    1,417
                                                                 9,863    6,277

The risk is managed as follows:
- where the Manager makes an investment in a bond, corporate or otherwise, the
credit rating of the issuer is taken into account so as to determine the risk
to the Company of default;
- investment transactions are carried out by the fixed interest investment
adviser, whose reports are received and reviewed on a monthly basis by the
- cash at bank is held only with banks with high quality external credit

The Company also has an exposure to credit risk in respect of the loan stock
investments it has made into investee companies, most of which have no security
attached to them, and where they do, such security ranks beneath any bank debt
that an investee company may owe.

These loan stock investments are made as part of the qualifying investments  
within the investment portfolio, and the risk management processes applied to
the loan stock investments have already been set out under other price risk above.                     

Fair values of financial assets and financial liabilities

Financial assets and liabilities are carried in the balance sheet at either
their fair value (investments), or the balance sheet amount is a reasonable
approximation of the fair value (amounts due from brokers, dividends
receivable, accrued income, due to brokers, accruals, and cash at bank).

Capital disclosures

The Company's objective is to deliver, as far as is consistent with venture
capital investment, steady growth in the net asset value of the fund and in
total return (net asset value plus cumulative dividends paid).

Future dividends depend on the rate of reinvestment of the liquid resources and
the overall performance of the portfolio. It is the Company's policy that
dividends will be dependent to a significant degree on the level of the
Company's net income and realised capital gains.

The capital subscribed to the Company by original investors has been managed in
accordance with the Company's objectives. The available capital at 31 December
2008 is £29.7 million (31 December 2007: £37.7 million) as shown in the Balance
Sheet, which includes the Company's share capital and reserves.

The Board periodically reviews the need for share buy-backs. The purpose of
share buy-backs is to satisfy demand from those shareholders who seek to sell
their shares, given that there is a very limited secondary market for shares in
Venture Capital Trusts generally. The Company may be able to buy back limited
volumes of its shares from time to time. However its ability to do so may be
constrained by the level of its own liquid resources, VCT specific legislation
and the regulations of the UKLA. The Company's current policy in this respect
is unchanged from the previous accounting period.

The Company has no borrowings and there are no externally imposed capital
requirements other than the minimum statutory share capital requirements for
public limited companies.

20 Related party disclosures

Spark Investors Limited, (a fellow subsidiary of the Manager) for which AB
Carruthers acted as a Director, is from time to time eligible to receive
transaction fees and/or Directors' fees from investee companies. During the
period ended 31 December 2008, fees of £31,000 attributable to the investments
of the Company were received pursuant to these arrangements (ten months to 31
December 2007: £39,000).

During the year there were no transactions by Directors or in which SPARK VCT
plc has invested (ten months to 31.12.07: one director made market purchases of
shares: Imagesound plc (£5,000), MediGene AG (£10,000) and Vernalis plc (£

21 Co-investment

The Company has made venture capital investments in companies in which other
funds managed by SVML have also invested.

For the purpose of this note, the following abbreviations apply:

SPARK Ventures plc - SPK
SPARK VCT 2 plc - SVCT 2
Quester Venture Partnership - QVP
Isis College Fund Limited Partnerships and Second Isis College Fund Limited
  Partnership - ICF 
Lachesis Seed Fund Limited Partnership - Lachesis

Company                                   Co-investors

Academia Networks Limited                 ICF, SPK and SVCT 2
Allergy Therapeutics plc                  SVCT 2
Antenova Limited                          QVP and SVCT 2
Arithmatica Limited                       QVP and SVCT 2
Celldex Therapeutics,Inc.                 QVP and SVCT 2
Cluster Seven Limited                     QVP and SVCT 2
Elateral Holdings Limited                 SVCT 2
Gemini holdings Limited                   SVCT 2
Haemostatix Limited                       Lachesis, QVP and SVCT 2
Imagesound plc                            SVCT 2
Isango! Limited                           SPK and SVCT 2
Lectus Therapeutics Limited               QVP and SVCT 2
Level Four Software Limited               QVP and SVCT 2
MediGene AG                               ICF, QVP and SVCT 2
Nanotecture Group Limited                 QVP
Oxonica plc                               ICF and SVCT 2
Perpetuum Limited                         QVP and SVCT 2
Secerno Limited                           ICF and SVCT 2
Sift Group Limited                        SVCT 2
Skinkers Limited                          SPK and SVCT 2
Symetrica Limited                         SVCT 2
TeraView Limited                          SVCT 2
UniServity Limited                        SVCT 2
Vivacta Limited                           QVP and SVCT 2
We7 Limited                               SVCT 2
Workshare Limited                         QVP and SVCT 2

22 Post balance sheet events

Subsequent to the year end the Company has not made any new investments in
excess of 20% of the equity capital of an investee company or any follow-on
investments that would raise the Company's existing stake above 20% of the
equity capital of an investee company.


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