Preliminary Announcement of Final Results for the year ended 28 February 2017
FINANCIAL HIGHLIGHTS
| Ordinary Shares (as at 28/29 February): | 2017 | 2016 |
| Net asset value per share | 109.86p | 101.18p |
| Cumulative distributions paid per share since launch | 49.00p | 43.00p |
| Total return per share | 158.86p | 144.18p |
| Annual Returns per share (basic and diluted): | ||
| Revenue return | (0.43)p | (0.98)p |
| Capital return | 14.97p | (2.41)p |
| Combined return | 14.54p | (3.39)p |
| Dividends per share: | ||
| Interim paid | 2.00p | 2.00p |
| Final proposed/paid | 4.00p | 4.00p |
| Total dividend for year | 6.00p | 6.00p |
| Ongoing Expense Ratio* | 1.82% | 2.28% |
| Performance Benchmark: | ||
| FTSE AIM All-share Index (results rebased to 100 at 6 April 2007) | 78.38 | 66.01 |
| *Calculated as total expenses minus ad hoc legal costs and adjusted for trail commission written off, divided by year-end net assets |
CHAIRMAN'S STATEMENT
INTRODUCTION
Following the success of our joint offer for subscription I would like to welcome a large number of new shareholders.
At 28 February 2017 the Net Asset Value (NAV) was 109.86 pence which after adjusting for the dividends paid gives a total return since inception of 158.86 pence. The gain per ordinary share for the year was 14.54 pence per share (comprising a revenue loss of 0.43 pence and capital gains of 14.97 pence). Total return for the period increased by 10.2% compared to a gain of 33.1% in the FTSE AIM All-share Total Return Index. Given the constraints placed on managers of VCT funds we are pleased with this performance.
INVESTMENTS
The investment manager, Hargreave Hale Limited, invested a further £5.52 million in 21 qualifying companies during the year. The fair value of Qualifying Investments at 28 February 2017 was £21.39 million invested in 64 AIM companies and 7 unquoted companies. £24.16 million was held in a mix of cash, fixed income and other non-qualifying equities; more detail can be found in the investment manager's report.
DIVIDEND
An interim dividend of 2.00 pence was paid on 2 December 2016 (Interim 2016: 2.00 pence).
A final dividend of 4.00 pence is proposed (2016: 4.00 pence) which, subject to shareholder approval at the Annual General Meeting will be paid on 25 July 2017, to ordinary shareholders on the register on 16 June 2017.
Provided the underlying investment performance of the Company remains acceptable and the liquidity position allows, it remains our policy to target a 5% distribution yield referenced to the year end NAV per share of the Company.
BUYBACKS
In total, 312,908 shares were purchased during the year at a weighted average price of 99.25 pence per share. A further 341,473 shares have been purchased since the year end at a weighted average price of 109.70 pence.
The Board continues to target a share price discount of 5% to the NAV per share (as measured against the mid-price) for market purchases. It should be emphasised that this target is non-binding and dependent on circumstances including the Company's liquidity from time to time and market conditions.
JOINT OFFER FOR SUBSCRIPTION - 2015
On 17 November 2016 the joint offer for subscription for new shares in Hargreave Hale AIM VCT 1 plc and Hargreave Hale AIM VCT 2 plc (launched in December 2015) was closed with £11.5 million raised for Hargreave Hale AIM VCT 2 plc.
JOINT OFFER FOR SUBSCRIPTION - 2016
The Directors of the Company announced on 14 December 2016 the launch of a new joint offer for subscription for shares in both Hargreave Hale AIM VCTs to raise up to £10 million in Hargreave Hale AIM VCT 1 plc and up to £10 million in the Company. The offer was approved by shareholders of the Company at a general meeting on 12 January 2017 and was open to both new and existing shareholders.
The offer was fully subscribed and resulted in gross funds being received of £10 million and the issue of 8.96 million new shares in the Company.
VCT STATUS
To maintain its VCT qualifying status we must invest at least 70% of the net funds raised in any one accounting period in Qualifying Investments by the start of the accounting period containing the third anniversary of the date on which the funds were raised. I am pleased to report that we continue to make good progress against this test and, at the year end, we had achieved 88.88% and have satisfied all the relevant tests.
VCT REGULATION
In order to comply with EU regulations regarding State Aid, the VCT rules were subject to substantial changes in the budget on 8 July 2015, which came into effect on 18 November 2015. In the round we do not think these rules have greatly affected the Company, although we will no longer be able to make non-qualifying investments in companies listed on AIM or UK government bonds. We are able to continue to invest via the Marlborough Special Situations Fund and we are free to invest in companies listed on the main market.
BOARD CHANGES
Giles Hargreave stepped down as a director of the Company on 13 December 2016. I would like to take this opportunity to thank Giles for all his hard work on the Board. Following the resignation of Giles Hargreave, Oliver Bedford was appointed as a non-executive director of the Company on 13 December 2016.
ELECTRONIC COMMUNICATIONS
Following approval at a general meeting on 12 January 2017, the Company has adopted electronic communications. Your Board believes this is beneficial to the Company and its shareholders and will result in substantial cost savings and improved timeliness and transparency of communications.
CAPITAL REDUCTION
Following approval at a general meeting on 12 January 2017 the balance of the share premium account was cancelled on 18 May 2017 resulting in £37.5 million being transferred to the special reserve Reserves available for distribution as at the date of this document are £7.9 million.
AUDIT TENDER
Mandatory audit tendering legislation states that the maximum period for which a firm can be appointed auditor of a public listed entity is 10 years. BDO LLP are approaching the maximum term and as such a tender process will be completed in the current financial year.
OUTLOOK
The year has started well with a further increase in NAV up until 31 May 2017 of 9.72 pence equivalent to 8.8%. Further successful fundraising during the past year has increased our net assets as at the present date to around £45m for the first time. This has led to greater diversity in our portfolio.
So far the investment climate post Brexit has remained surprisingly benign. However, it would be dangerous to be too complacent. Company valuations have benefited from the steady economic upswing of the past few years and AIM in particular has attracted interest, and consequently higher valuations, from investors seeking Inheritance Tax relief.
Less than half of our net assets at 28 February were invested in qualifying assets. Our main challenge therefore is to identify and invest in more high quality, VCT qualifying, opportunities. To this end we have been more active investing in private companies which now account for 8.8% of the portfolio. We are seeing some exciting opportunities in this field but will take a measured approach recognising that the work involved in this style of investment is more time consuming and these investments are typically early stage high risk companies; also there is rarely any secondary market liquidity until there is a change of control or a public market listing.
David Hurst-Brown
Chairman
Date: 5 June 2017
STRATEGIC REPORT
The purpose of the strategic report is to inform shareholders on key matters and help them to assess how the Directors have performed in their duty to promote the success of the Company. The report has been prepared by the Directors in accordance with the requirements of Section 414A of the Companies Act 2006. The Company's independent auditor is required by law to report on whether the information given within the strategic report is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
THE COMPANY AND ITS BUSINESS MODEL
The Company was incorporated and registered in England and Wales on 20 September 2006 under the Companies Act 1985, registered number 5941261.
The Company has been approved as a Venture Capital Trust by HMRC under section 259 of the Income Taxes Act 2007. The shares of the Company were first admitted to the Official List of the UK Listing Authority and trading on the London Stock Exchange on 6 April 2007 and can be found under the TIDM code "HHVT". The Company is premium listed.
In common with many other VCTs, the Company revoked its status as an investment company as defined in section 266 of the Companies Act 1985 on 20 September 2007 to facilitate the payment of dividends out of capital profits.
The Company's principal activity is to invest in a diversified portfolio of qualifying small UK based companies, primarily trading on AIM, with a view to maximising tax free dividend distributions to shareholders.
The Company is an externally managed fund with a Board comprising of three non-executive directors. Hargreave Hale Limited acts as investment manager, administrator and custodian to the Company and provide the company secretary.
The Board has overall responsibility for the Company's affairs including the determination of its investment policy, however, the Board may exercise these responsibilities through delegation to Hargreave Hale as it considers appropriate.
The Directors have managed and continue to manage the Company's affairs in such a manner as to comply with Section 259 of the Income Taxes Act 2007.
INVESTMENT OBJECTIVES
The Company's investment objectives are:
- to invest in a diversified portfolio of small UK based companies on a high risk, medium term capital growth basis, primarily being companies which are traded on AIM and which have the opportunity for significant value appreciation;
- to invest in smaller companies which may not be readily accessible to private individuals and which also tend to be more risky;
- to maximise distributions to shareholders from capital gains and income generated from the Company's funds;
- targeted investment in equities which are non-qualifying investments on an opportunistic basis; and
- to maintain the Company's exposure to small companies through an initial investment of new capital into the Marlborough Special Situations Fund pending investment into Qualifying Companies.
ASSET ALLOCATION
The Company will have a range of investments in four distinct asset classes:
- Equity investments in qualifying companies, referred to as "Qualifying Investments". Qualifying Investments will:
- comprise qualifying holdings for a VCT as defined in Chapter 4 Part 6 of the Income Tax Act 2007;
- primarily be made in AIM companies, but the Company's investment manager will also consider NEX Exchange-quoted companies (formerly ISDX) and private companies that meet the investment criteria summarised below; and
- vary in size from £50,000 to £1 million.
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- Quasi-sovereign debt, bonds and other fixed income securities;
- Bank deposits that are readily realisable; and
- Non qualifying equity exposure in the form of equity exposure to UK and international equities through targeted investments made on an opportunistic basis or through an investment into the Marlborough Special Situations Fund.
INVESTMENT MANAGER
The Company is managed by Hargreave Hale Limited, a fund manager with approximately £8.6 billion under administration and £7.5 billion under managed accounts. Hargreave Hale has been managing investments in UK Small and Micro Cap companies for 19 years and VCTs for 13 years. It has a long established reputation that stems from its management of the Marlborough Special Situations Fund and the Marlborough UK Micro Cap Fund, and more recently the VCTs. It has won numerous awards for its management of small cap funds. In accordance with the investment policy, both Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 have made investments in the Marlborough Special Situations Fund, which has returned 2,498% (to 28 February 2017) since Giles Hargreave took responsibility for it in July 1998.
The investments of the Company are co-managed by Giles Hargreave and Oliver Bedford, with support from the rest of the firm's investment team together comprising a total investment team of 14. The investment team manages approximately £4.0 billion, of which approximately £2.6 billion is invested in small companies, many of which are quoted on AIM. The breadth of the investment team, the scale of investment in small companies and the investment manager's track record help attract deal flow.
INVESTMENT STRATEGY
QUALIFYING INVESTMENTS
The investment manager will maintain a diversified and fully invested portfolio of Qualifying Investments, primarily in small UK companies with a quotation on AIM. The primary purpose of the investment strategy is to ensure the Company maintains its status as a VCT. To achieve this, the Company must have 70% of all funds raised from the issue of shares invested in Qualifying Investments throughout accounting periods of the VCT beginning no later than three years after the date on which those shares are issued.
Although VCTs are required to invest and maintain a minimum of 70% of their funds invested in Qualifying Investments as measured by the VCT rules, it is likely that the investment manager will target a higher threshold of approximately 80% in order to provide some element of protection against an inadvertent breach of the VCT rules. The Company's maximum exposure to a single Qualifying Investment is limited to 15% of net assets.
The key selection criteria used in deciding which Qualifying Investments to make include, inter alia:
- the strength and credibility of the management team;
- the business plan;
- the risk/reward profile of the investment opportunity;
- the quality of the finance function and budgetary process;
- the strength of the balance sheet relative to anticipated cash flow from operations; and
- the existing balance of investments within the portfolio of Qualifying Investments.
The investment manager follows a stock specific, rather than sector specific, investment approach and is more likely to provide expansionary capital than seed capital.
The investment manager will primarily focus on investments in companies with a quotation on AIM or plans to trade on AIM. The investment manager prefers to participate in secondary issues of companies that are quoted on AIM as such companies have an established track record that can be more readily assessed and greater disclosure of financial performance. Secondary issues are often priced at an attractive discount to the market price.
NON-QUALIFYING INVESTMENTS
The Company will have additional non-qualifying equity exposure to UK and international equities through targeted investments made on an opportunistic basis. This will vary in accordance with the investment manager's view of the equity markets and may fluctuate between nil and 30% of the net assets of the Company. The investment manager will also invest in other fixed income securities and cash.
The investment manager may invest up to 75% of the net proceeds of any issue of new shares into the Marlborough Special Situations Fund subject to a maximum of 20% of the gross assets of the Company. This will enable the Company to maintain their exposure to small companies indirectly, whilst the investment manager identifies opportunities to invest directly into small UK companies through a suitable number of Qualifying Investments.
The allocation between asset classes in the non-qualifying portfolio will vary depending upon opportunities that arise with a maximum exposure of 100% of the non-qualifying portfolio to any individual asset class.
BUSINESS REVIEW
The chairman's statement and investment manager's report contain a balanced and comprehensive analysis of the business during the financial year and the position of the investments at the year end. The financial position of the Company at 28 February 2017 was strong with no debt or gearing.
KEY PERFORMANCE INDICATORS
At each board meeting, the Directors consider a number of performance measures to assess the investment manager's performance, thereby helping shareholders to assess how the Company is performing against its objectives. The key performance indicators (KPIs) are established industry measures and are as follows:
- Net asset value;
- Total return;
- Ongoing expense ratio;
- Earnings and dividend per share; and
- Percentage invested in Qualifying Companies
Commentary on the performance of these KPIs has been discussed in the chairman's statement and investment manager's report. In addition to the above, the Board considers peer group comparative performance. Performance is also measured against the Company's closest benchmark, the FTSE AIM All-share Index. The performance measures for the year are included in the financial highlights.
OVERVIEW OF THE YEAR
In the financial year under review, net assets increased from £29.9m to £45.4m. In this period the NAV per share increased from 101.18p to 109.86p. This resulted in a gain to ordinary shareholders of 14.68 pence per share after adjusting for dividends paid of 6.00 pence per share.
ONGOING EXPENSES
The ongoing charges of the Company for the financial year under review represented 1.82% (2016: 2.28%) of year end net assets, which remains competitive when compared with other AIM focused VCTs. Shareholders should note that this ratio has been calculated as total expenses minus ad hoc legal costs, adjusted for trail commission written off in the year and divided by year-end net assets.
EARNINGS PER SHARE
The Company's earnings per share for the year ended 28 February 2017 was 14.54 pence per share (2016: loss -3.39 pence per share). The Board remains pleased with the Company's performance.
DIVIDENDS
An interim dividend of 2.00 pence was paid on 2 December 2016 and a final dividend of 4.00p has been proposed.
INVESTMENTS
As a whole, during the year, the qualifying portfolio increased from £13.4m to £21.4m. The Company made 22 qualifying investments at a cost of £5.5m, of which 15 were investments into new Qualifying Companies.
For further details please refer to the investment manager's report.
BORROWINGS
It is not the Company's present intention to have any borrowings. The Company does, however, have the ability to borrow a maximum amount up to 15% of the "Adjusted Capital and Reserves" amount (as such term is defined in the Articles of Association of the Company), which is effectively the aggregate of the nominal capital of the Company issued and paid up and the amount standing to the credit of the consolidated reserves of the Company, less specified adjustments, exclusions and deductions. There are no plans to utilise this ability at the current time.
BUYBACKS
In total, 312,908 shares were purchased during the year at a weighted average price of 99.25 pence per share.
PRINCIPAL RISKS AND UNCERTAINTIES
The Directors acknowledge that they are responsible for the effectiveness of the Company's risk management and internal controls and periodically review the principal risks faced by the Company at the quarterly board meetings. The Board may exercise these responsibilities through delegation to Hargreave Hale Limited as it considers appropriate.
The principal risks facing the Company relate to the Company's investment activities and include risks stated below:
| Risk | How the Board mitigates risk |
| Venture Capital Trust approval risk - the Company operates in a complex regulatory environment and faces a number of related risks. A breach of section 259 of the Income Taxes Act 2007 could result in the disqualification of the Company as a VCT and the loss of tax reliefs for the Company and individual shareholders. | To reduce this risk, the Board has appointed the investment manager, who has significant experience in venture capital trust management and reports to the Board regularly throughout the year. In addition, to provide further formal assurance, the Board has appointed Philip Hare & Associates LLP to monitor compliance with regulations and provide half yearly compliance reports to the Board. |
| Investment risk - Many of the Company's investments are held in high risk companies, which are either listed on AIM or privately held. | The investment manager maintains a broad portfolio of investments and holds regular company meetings to monitor investments and identify potential risk. Regular board meetings and dialogue with the Directors support strong governance. Whilst tax legislation limits each Company's maximum exposure to a single Qualifying Investment to 15% of net assets (at book cost), the investment manager's preference for portfolio diversification means that Qualifying Investments rarely exceed 5% of net assets. |
| Discount volatility - Venture Capital Trust shares tend to trade at discounts to their underlying net asset values, which can fluctuate considerably. | To minimise the impact of such fluctuations, the Company has a share buyback policy whereby the Company purchases shares for cancellation. |
| Compliance risk - The Company is required to comply with the rules of the UK Listing Authority, the Companies Act, Accounting Standards and other legislation. The Company is also a small registered Alternative Investment Fund Manager ("AIFM") and has to comply with the requirements of the AIFM Directive. | Failure to comply with these regulations could result in a delisting of the Company's shares, financial penalties, qualified audit report or loss of shareholder trust. Board members and the investment manager have considerable experience of operating at senior levels within quoted businesses. Regulatory requirements are continually reviewed and the Board seek legal advice when appropriate. |
| Economic risk - Events such as economic recession and movement in interest rates could affect smaller companies' valuations. | The investment manager constantly monitors the markets and the portfolio companies and reports to the Board at each meeting. The risk that the value of a security or portfolio of securities could decline in the future is mitigated by holding a diversified portfolio, across a broad range of sectors. |
| Fraud - Fraud may occur enacted by a third party, the investment manager or administrator. | Internal controls are documented and periodically reviewed on a quarterly basis by senior management. The investment management and administration functions are segregated by department and location. |
| Operational risk - Failure of the investment manager/administrator's systems or disruption to their business could result in the inability to provide accurate reporting. | The Board regularly reviews the system of internal controls, both financial and non-financial, operated by the Company and Hargreave Hale Ltd. Hargreave Hale Ltd has in place its own internal policies and procedures including a documented business continuity plan and a regularly tested disaster recovery plan to mitigate risk. |
| Reputational risk - Inadequate or failed controls might result in breaches of regulations or loss of shareholder trust. | The investment manager operates a robust risk management system which is reviewed regularly to ensure controls remain effective in mitigating risks to the Company. Details of the Company's internal controls are included in the corporate governance statement. |
| Liquidity risk - Investments in small companies are often illiquid and may be difficult to realise. | The funds liquidity is monitored on a monthly basis. |
| Outsourcing risk - Any task outsourced to an external company. | Reputable firms used and documents reviewed internally. |
Additional risks and further details of the above risks and how they are managed are explained in Note 16 of the financial statements. Trends affecting future developments are discussed in the chairman's statement and in the investment manager's report.
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY
The Board conducts the Company's affairs responsibly and expects the investment manager to consider social and environmental matters when appropriate, particularly with regard to investment decisions. The Company offers electronic communications where acceptable to reduce the volume of paper it uses.
HUMAN RIGHTS
The Board conducts the Company's affairs responsibly and expects the investment manager to consider human rights when fulfilling their role, particularly with regard to investment decisions.
LONG TERM VIABILITY STATEMENT
In accordance with provision C.2.2 of the UK Corporate Governance Code, the Directors have carried out a robust assessment of the principal risks relating to the Company. This assessment has been carried out over a longer period than the 12 months required by the 'Going Concern' provision. The Board conducted this review for a period of five years, which was selected because it:
- falls in line with the Company continuation vote and investors minimum holding period to retain tax relief; and
- covers a sufficient period for all funds raised to comply with HMRC investment test rules.
The Board consider the viability of the Company as part of their continuing programme of monitoring risk. The Company has a detailed risk control framework, documented procedures and forecasting model in place to reduce the likelihood and impact of risk taking that exceeds the agreed levels by the Board. These controls are reviewed by the Board and Hargreave Hale on a quarterly basis.
The Board has considered severe but reasonable scenarios and the effect of any mitigating actions, the potential impact of these risks on the business model, future performance and liquidity of the Company.
The Directors consider the Company to be viable for a further five years for the following reasons:
- The Company maintains a broad portfolio of investments including approximately £15.0 million invested in non-qualifying investments and a further £9.0 million in cash. The Company therefore has sufficient liquidity and this is monitored on a monthly basis;
- The Company is well invested against the VCT status test and ended the year at 88.88% invested in qualifying companies. The Board anticipate that there will continue to be suitable qualifying investments available over the next five years;
- The ongoing expense ratio of the Company for the year end was 1.82%, which is competitive for the VCT sector;
- The financial position of the Company at 28 February 2017 was strong with no debt or gearing; and
- The Company has sufficient procedures in place to identify, monitor and control risk.
Based on this assessment the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years.
PROSPECTS
The prospects and future development of the Company are discussed in detail in the outlook section of the chairman's statement.
ADDITIONAL DISCLOSURES REQUIRED BY THE COMPANIES ACT
EMPLOYEES
The Company had no employees during the year. Board members are appointed according to knowledge and expertise. The Board currently comprises of three male non-executive directors who confirm they will consider gender diversity when making future appointments
By order of the Board of Directors.
STUART BROOKES
Company Secretary
Date: 5 June 2017
INVESTMENT MANAGER'S REPORT
INTRODUCTION
This report covers the 2016/17 financial year, 1 March 2016 to 28 February 2017. The manager's report contains references to movements in the Net Asset Value (NAV) per share and Total Return per share (NAV per share plus distributed earnings per share). Movements in the NAV per share do not necessarily mirror the earnings per share (EPS) reported in the accounts and elsewhere, which convey the profit after tax within the company within the reported period as a function of the weighted average number of shares in issue for the period.
INVESTMENT REPORT
Global equity markets had a strong year against a backdrop of significant political uncertainty and change. Politics aside, global economic growth was largely strong, with US GDP growth and low interest rates leading developed markets higher. Emerging markets also performed well, supported by recovering commodity prices.
The UK's decision to leave the European Union dominated the year; doubtless it will continue to do so this year and next. The decline in Sterling provided welcome support to the major UK indices as investors moved to re-price those companies with significant overseas earnings. By and large, VCT regulations channel us into small domestically focussed growth companies, so we were unable to fully benefit from the trend that persisted through the second half of our financial year, although we did derive some benefit through parts of our non-qualifying portfolio. The final quarter saw a notable uptick in risk sentiment within small cap equities.
The new financial year has already thrown up several risks, the French and UK elections being the most recent examples. No doubt there will be more; however, for now the UK economy feels strong enough, although we have seen some evidence of weakness within the housing market and elements of the casual dining sub-sector. We expect the UK consumer to be more challenged this year as real wage growth turns negative, with some weakness already showing up in consumer confidence data. On balance, the macro picture remains workable and we find most companies to be positive about the outlook; there seems to be reasonable demand for new capital to support their growth and development.
PERFORMANCE
In the twelve months to 28 February 2017, the NAV increased from 101.18p to 109.86p. 6.0p in dividends were paid, giving investors a total return of 14.68 pence per share, which translates to a gain of 14.5%. During the same period the FTSE AIM All-Share Total Return gained 33.1%.
The qualifying investments made a net contribution of 9.91 pence per share with 42 out of the 77 making gains, 6 marking time and 29 losing ground. The non-qualifying investments contributed 6.16 pence per share. The balance was a mixture of costs, income and small gains made through share buy backs.
DP Poland was the top performing qualifying investment (+115.4%, +1.87 pence per share). The company reported a series of strong updates over the year whilst demonstrating material traction as they roll out the Domino's Pizza proposition across Poland. In February, they announced seventeen consecutive quarters of double digit like for like system sales growth, with thirty-nine operational sites in fourteen towns and cities. The recent equity raise was well received and they are now on track to finish 2017 with fifty operational sites. Quixant (+98.9%, +1.32 pence per share) announced a very good set of 2016 interim results that featured strong organic sales growth, a better than expected contribution from the Densitron acquisition and cash flows ahead of expectations. Post (our) year end, the company has since released its 2016 full year results which, once again, came in ahead of market expectations and triggered further upgrades to forecasts for this financial year. Ideagen (+70.2%, +1.24 pence per share) and Science in Sport (+91.7%, +1.18 pence per share) also performed well.
The biggest losses within the period came from TrakM8 (-99.7%, -1.86 pence per share), which announced a material profit downgrade after contract deferrals left the company exposed to an overhead that was outsized relative to the revised revenue outcome. Other losses came from Intercede (-59.3%, -0.57 pence per share), Mirada (-57.1%, -0.38 pence per share) and Microsaic (-85.1%, -0.36 pence per share), all of which posted poor updates.
We made 22 qualifying investments over the year, which included 7 additional investments into existing qualifying companies (1 private); 4 secondary placings into listed companies; 7 IPOs; and 4 private investments. We invested a total of £5.52m into qualifying investments over the year.
Within the qualifying portfolio, a number of our investee companies experienced strong runs in the market, which led us to make partial disposals in Creo, Directa Plus, DP Poland, ECSC, Imaginatik, Loop Up, Maxcyte and Surface Transforms. Due to continued poor performance, we exited investments in Sphere Medical, Tangent Communications (via an MBO), Nektan and Outsourcery.
PORTFOLIO STRUCTURE
The VCT is comfortably through the HMRC defined investment test and ended the period at 88.88% invested as measured by the HMRC investment test. By market value, the VCT had a 47.2% weighting to qualifying investments.
The allocation to non-qualifying equity investments increased from 18.4% to 20.6%, representing the funds on-going participation in non-qualifying equity investments. In line with the investment policy, we continued to make use of the Marlborough Special Situations Fund as a temporary home for proceeds from fundraising. The allocation marginally decreased from 13.1% last year to 12.0% this year. Fixed income as a percentage of the fund fell from 0.9% to 0.4% and cash fell from 23.4% to 20.3%
The HMRC investment tests are set out in Chapter 3 of Part 6 Income Tax Act 2007, which should be read in conjunction with this section of the investment manager's report. Funds raised by VCTs are first included in the investment tests from the start of the accounting period containing the third anniversary of the date on which the funds were raised. Therefore, the allocation of qualifying investments as defined by the legislation can be different to the portfolio weighting as measured by market value relative to the net assets of the VCT.
POST YEAR END UPDATE
Deal flow has been solid since year end with 5 additional qualifying investments being made in Dorcaster plc, Eagle Eye Solutions Group plc, Portr Ltd, Velocity Composites plc and Zoo Digital Group plc. We have a strong pipeline of deals we expect to complete in the coming weeks.
NAV performance has also been good post period end, with the NAV per share gaining 8.8% to 119.58 pence per share.
For further information please contact:
STUART BROOKES
Company Secretary
| Registered office: Hargreave Hale AIM VCT 2 plc, Accurist House, 44 Baker Street London W1U 7AL 01253 754740 |
Date: 5 June 2017
STATEMENT OF DIRECTORS' RESPONSIBILITIES
In respect of the financial statements
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the annual report includes information required by the Listing Rules of the Financial Conduct Authority.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the financial statements and have elected to prepare the Company's financial statements in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP") (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
- state whether they have been prepared in accordance with UK GAAP; subject to any material departures disclosed and explained in the financial statements;
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and
- prepare a director's report, a strategic report and director's remuneration report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
WEBSITE PUBLICATION
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
DIRECTORS' RESPONSIBILITY STATEMENT PURSUANT TO DTR4
David Hurst-Brown (Chairman), Philip Cammerman and Oliver Bedford, the Directors, confirm to the best of their knowledge that:
- The financial statements have been prepared in accordance with UK GAAP and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company.
- The annual report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces.
For and on behalf of the Board
DAVID HURST-BROWN
Chairman
Date: 5 June 2017
DIRECTORS' REMUNERATION
The directors' remuneration report was approved by the Board of Directors on 5 June 2017 and will be further subject to an advisory vote at the Annual General Meeting being held on 20 July 2017 and every year thereafter.
INCOME STATEMENT
For the year ended 28 February 2017
| Note | ||||
| Revenue | Capital | Total | ||
| £000 | £000 | £000 | ||
| Net gain on investments held at fair value through profit or loss | - | 5,537 | 5,537 | |
| Income | 286 | 15 | 301 | |
| -------- | -------- | -------- | ||
| 286 | 5,552 | 5,838 | ||
| Management fee | (129) | (387) | (516) | |
| Other expenses | (305) | (28) | (333) | |
| -------- | -------- | -------- | ||
| (434) | (415) | (849) | ||
| -------- | -------- | -------- | ||
| (Loss)/gain on ordinary activities before taxation | (148) | 5,137 | 4,989 | |
| Taxation | - | - | - | |
| -------- | -------- | -------- | ||
| (Loss)/gain after taxation | (148) | 5,137 | 4,989 | |
| -------- | -------- | -------- | ||
| (Loss)/gain per share basic and diluted | 2 | (0.43)p | 14.97p | 14.54p |
| -------- | -------- | -------- | ||
INCOME STATEMENT
For the year ended 29 February 2016 (Comparative Information)
| Note | ||||
| Revenue | Capital | Total | ||
| £000 | £000 | £000 | ||
| Net loss on investments held at fair value through profit or loss | - | (300) | (300) | |
| Income | 146 | - | 146 | |
| -------- | -------- | -------- | ||
| 146 | (300) | (154) | ||
| -------- | -------- | -------- | ||
| Management fee | (103) | (308) | (411) | |
| Other expenses | (291) | - | (291) | |
| -------- | -------- | -------- | ||
| (394) | (308) | (702) | ||
| -------- | -------- | -------- | ||
| (Loss) on ordinary activities before taxation | (248) | (608) | (856) | |
| Taxation | - | - | - | |
| -------- | -------- | -------- | ||
| (Loss) after taxation | (248) | (608) | (856) | |
| -------- | -------- | -------- | ||
| (Loss) per share basic and diluted | 2 | (0.98)p | (2.41)p | (3.39)p |
| -------- | -------- | -------- | ||
The total column of these statements is the income statement of the Company. All revenue and capital items in the above statements derive from continuing operations. There was no other comprehensive income other than the gain/loss for the year.
The accompanying notes are an integral part of these financial statements.
BALANCE SHEET Company registration number: 5941261
As at 28 February 2017 (in England and Wales)
| 2017 | 2016 | ||||
| Note | |||||
| £000 | £000 | ||||
| Fixed assets | |||||
| Investments at fair value through profit or loss | 36,359 | 23,031 | |||
| -------- | -------- | ||||
| Current assets | |||||
| Debtors | 37 | 20 | |||
| Cash at bank | 9,190 | 6,994 | |||
| -------- | -------- | ||||
| 9,227 | 7,014 | ||||
| Creditors: amounts falling due within one year | (219) | (191) | |||
| -------- | -------- | ||||
| Net current assets | 9,008 | 6,823 | |||
| -------- | -------- | ||||
| Total assets less current liabilities | 45,367 | 29,854 | |||
| -------- | -------- | ||||
| Capital and reserves | |||||
| Called up share capital | 413 | 295 | |||
| Share premium | 34,246 | 21,484 | |||
| Capital redemption reserve | 10 | 7 | |||
| Special reserve | 2,891 | 5,250 | |||
| Capital reserve - realised | 628 | 1,367 | |||
| Capital reserve - unrealised | 8,529 | 2,653 | |||
| Revenue reserve | (1,350) | (1,202) | |||
| -------- | -------- | ||||
| Total shareholders' funds | 45,367 | 29,854 | |||
| -------- | -------- | ||||
| Net asset value per share | 3 | 109.86p | 101.18p | ||
These financial statements were approved and authorised for issue by the Board of Directors on 5 June 2017 and signed on its behalf by
David Hurst-Brown
Chairman
5 June 2017
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 28 February 2017
| Called up Share Capital | Share Premium | Capital Redemption Reserve | Special Reserve | Capital Reserve Realised | Capital Reserve Unrealised | Revenue Reserve | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 March 2016 | 295 | 21,484 | 7 | 5,250 | 1,367 | 2,653 | (1,202) | 29,854 |
| Share buybacks | (3) | 3 | (313) | (313) | ||||
| Share Issues | 121 | 13,034 | 13,155 | |||||
| Issue Costs | (272) | (272) | ||||||
| Equity dividends paid | (2,046) | (2,046) | ||||||
| Realised losses on investments | (339) | (339) | ||||||
| Unrealised gains on investments | 5,876 | 5,876 | ||||||
| Management fee charged to capital | (387) | (387) | ||||||
| Arrangement Fee Income | 15 | 15 | ||||||
| Due Diligence investment costs | (28) | (28) | ||||||
| Revenue loss after taxation for the year | (148) | (148) | ||||||
| Total gain after taxation | (739) | 5,876 | (148) | 4,989 | ||||
| ------ | --------- | --------- | --------- | --------- | --------- | ------ | --------- | |
| At 28 February 2017 | 413 | 34,246 | 10 | 2,891 | 628 | 8,529 | (1,350) | 45,367 |
| ------ | --------- | --------- | --------- | --------- | --------- | ------ | --------- | |
Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 28 February 2017 were £2.17 million. The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 29 February 2016 (Comparative Information)
| | Called up Share Capital | Share Premium | Capital Redemption Reserve | Special Reserve | Capital Reserve Realised | Capital Reserve Unrealised | Revenue Reserve | Total |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 March 2015 | 219 | 13,118 | 3 | 7,124 | (1) | 4,629 | (954) | 24,138 |
| Share buybacks | (4) | 4 | (372) | (372) | ||||
| Share Issues | 80 | 8,536 | 8,616 | |||||
| Issue Costs | (170) | (170) | ||||||
| Equity dividends paid | (1,502) | (1,502) | ||||||
| Realised gains on investments | 1,676 | 1,676 | ||||||
| Unrealised losses on investments | (1,976) | (1,976) | ||||||
| Management fee charged to capital | (308) | (308) | ||||||
| Revenue loss after taxation for the year | (248) | (248) | ||||||
| Total loss after taxation | 1,368 | (1,976) | (248) | (856) | ||||
| ------ | --------- | --------- | --------- | --------- | --------- | ------ | --------- | |
| At 29 February 2016 | 295 | 21,484 | 7 | 5,250 | 1,367 | 2,653 | (1,202) | 29,854 |
| ------ | --------- | --------- | --------- | --------- | --------- | ------ | --------- | |
Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 29 February 2016 were £5.42 million. The accompanying notes are an integral part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 28 February 2017
| 2017 | 2016 | ||
| £000 | £000 | ||
| Total gain/(loss) on ordinary activities before taxation | 4,989 | (856) | |
| Realised loss/(gain) on investments | 339 | (1,676) | |
| Unrealised (gain)/loss on investments | (5,876) | 1,976 | |
| (Increase)/Decrease in debtors | (17) | 6 | |
| Increase in creditors | 28 | 50 | |
| ---------- | ---------- | ||
| Net cash (outflow) from operating activities | (537) | (500) | |
| ---------- | ---------- | ||
| Purchase of investments | (16,778) | (11,321) | |
| Sale of investments | 8,987 | 5,534 | |
| ---------- | ---------- | ||
| Net cash (outflow) from investment activities | (7,791) | (5,787) | |
| ---------- | ---------- | ||
| Share buybacks | (313) | (372) | |
| Issue of share capital | 12,883 | 8,446 | |
| Dividends paid | (2,046) | (1,502) | |
| ---------- | ---------- | ||
| Net cash inflow from financing activities | 10,524 | 6,572 | |
| ---------- | ---------- | ||
| Increase in cash | 2,196 | 285 | |
| ---------- | ---------- | ||
| Opening cash | 6,994 | 6,709 | |
| Cash movement | 2,196 | 285 | |
| ---------- | ---------- | ||
| Closing cash | 9,190 | 6,994 |
The accompanying notes are an integral part of these financial statements.
Notes to the preliminary Announcement
- Basis of Preparation
The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 28 February 2017 or 29 February 2016. Statutory accounts for the year ended 29 February 2016 have been filed with the Registrar of Companies and those of the year ended 28 February 2017 will be delivered to the Registrar in due course; both have been reported on by the independent auditors. The independent auditor's reports on the Statutory accounts for the years ended 29 February 2016 and 28 February 2017 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
The accounts of the Company are prepared in accordance with Accounting Standards applicable in the United Kingdom. The Company's financial statements are prepared in accordance with FRS 102 and the Statement of Recommended Practice (SORP) for Financial Statements of Investment Trust Companies issued in November 2014.
The accounting policies used in preparing this preliminary announcement are consistent with those used in the preparation of the financial statements.
All AIM investments are valued at bid price. Unquoted companies are included at fair value. Where cost is no longer considered appropriate the Company will use a value indicated by a material arms-length transaction by an independent third party in the shares of a company. Where no such transaction exists the Company will use the most appropriate valuation technique including discounted cash flow analysis, earnings multiples, net assets and industry valuation benchmarks. The fair value of such assets or liabilities will be reviewed on a 6 monthly basis and more frequently if events occur that could have a material impact on the investment.
The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the years ended 28 February 2017 and 29 February 2016. The full statutory annual accounts will be published in June 2017. Copies may in due course be obtained during normal business hours from Hargreave Hale Limited, Talisman House, Boardmans Way, Blackpool, FY4 5FY.
The Annual General Meeting of the Company will be held at the Company's registered office on 20 July 2017 at 1.30pm.
- Earnings per share (basic and diluted)
Revenue return per ordinary share is based on a net revenue loss on ordinary activities after taxation of £148,026 (2016: £247,629) and on 34,327,158 (2016: 25,200,417) ordinary shares, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on a net capital gain of £5,137,499 (2016: loss £608,113) for the year and on 34,327,158 (2016: 25,200,417) ordinary shares, being the weighted average number of ordinary shares in issue during the year. Total return per ordinary share is based on a net gain of £4,989,474 for the year and on 34,327,158 (2016: 25,200,417) ordinary shares, being the weighted average number of ordinary shares in issue during the year.
- Net asset value per ordinary share
The net asset value per ordinary share at 28 February 2017 of 109.86 pence (2016: 101.18 pence) is based on net assets of £45,366,681 at the year-end (2016: £29,854,033) and on 41,296,035 ordinary shares, being the number of shares in issue at year end (2016: 29,507,084).
- Principal Risks and Uncertainties
The principal risks facing the Company relate to the Company's investment activities and include venture capital trust approval risk, Investment risk, discount volatility, compliance risk, economic risk, fraud, operational risk, reputational risk, liquidity risk and outsourcing risk. Other risks faced by the Company include market risk, currency risk, interest rate risk and credit risk. These risks and the way in which they are managed are described in more detail in the Strategic Report.
5. Related party transactions
Hargreave Hale Limited
Hargreave Hale Limited is considered to be a related party to the Company. Oliver Bedford, a non-executive director of the Company and a member of its key management personnel, is an employee of Hargreave Hale Limited. In addition Hargreave Hale Limited acts as investment manager, administrator and custodian to the Company and it provides the company secretary. All of the support functions performed by Hargreave Hale Limited are segregated by department and location and are independent of each other.
Hargreave Hale Limited in its capacity as investment manager of the fund receives annual fees of 1.5% per annum of the net asset value of the Company, calculated and payable quarterly in arrears. Fees for the year are £515,272 (2016: £411,258) as detailed in Note 3. In relation to the other support functions described above, Hargreave Hale Limited received fees of £90,000 (2016: £80,000). Of those combined fees, £153,253 (2016: £120,835) was still owed at the year end.
Hargreave Hale Limited has agreed to indemnify the Company against annual running costs (such costs excluding VAT, any performance incentive fee and any trail commissions the payment of which is the responsibility of the Company) exceeding 3.5% of its net assets. No fees were waived between 1 March 2016 and 28 February 2017 under the indemnity.
.
6. Shares Issued
During the year, the Company issued 12,101,859 ordinary shares of 1 pence per share (nominal value £121,019) which resulted in funds being received of £13,155,057. The 3.5% premium of £460,427 was payable to Hargreave Hale Limited to cover the cost of additional shares allotted of £188,425 resulting in net fees payable to Hargreave Hale Limited of £272,002.
- Capital Structure
Share capital
Ordinary shares are classed as equity. The ordinary shares in issue have a nominal value of one pence and carry one vote each. Substantial holdings in the Company are disclosed in the directors' report.
Share premium
This reserve represents the difference between the issue price of shares and the nominal value of shares at the date of issue, net of related issue costs.
Capital redemption reserve
This reserve is used for the cancellation of shares bought back under the buyback facility.
Special reserve
Distributable reserve used to pay dividends and re-purchase shares under the buyback facility.
Capital reserve realised
Gains/losses on disposal of investments, due diligence costs and income from private company investments, permanent impairment of financial assets and 75% of the investment management fee are accounted for in the capital reserve realised.
Capital reserve unrealised
Unrealised gains and losses on investments held at the year-end arising from movements in fair value are taken to the capital reserve unrealised.
Revenue reserve
Net revenue profits and losses of the Company.
INVESTMENT PORTFOLIO SUMMARY
Ordinary Share Fund
As at 28 February 2017
| Qualifying Investments | Cost £000 | Valuation £000 | Valuation % | Net Assets % | Sector |
| Mexican Grill Ltd (A Preference Shares)** | 277 | 1,154 | 3.17 | 2.54 | Consumer Discretionary |
| Ideagen plc | 190 | 1,100 | 3.03 | 2.43 | Information Technology |
| Learning Technologies Group plc | 534 | 1,068 | 2.94 | 2.36 | Information Technology |
| DP Poland plc | 324 | 987 | 2.72 | 2.18 | Consumer Discretionary |
| Portr Ltd** | 538 | 950 | 2.61 | 2.09 | Information Technology |
| Quixant plc | 120 | 908 | 2.50 | 2.00 | Consumer Discretionary |
| Science in Sport plc | 518 | 885 | 2.43 | 1.95 | Consumer Staples |
| Zappar Ltd** | 701 | 700 | 1.93 | 1.54 | Information Technology |
| AnimalCare Group plc | 100 | 664 | 1.83 | 1.46 | Health Care |
| Creo Medical Group plc | 559 | 660 | 1.82 | 1.46 | Health Care |
| Fulcrum Utility Services Ltd | 100 | 620 | 1.70 | 1.37 | Utilities |
| Infinity Reliance Ltd (My 1st Years)** | 501 | 500 | 1.38 | 1.10 | Consumer Discretionary |
| Maxcyte Inc | 142 | 467 | 1.28 | 1.03 | Health Care |
| Gfinity plc | 290 | 446 | 1.23 | 0.98 | Information Technology |
| Hardide plc | 227 | 420 | 1.16 | 0.93 | Materials |
| Aquis Exchange Ltd** | 401 | 400 | 1.10 | 0.88 | Information Technology |
| ECSC Group plc | 301 | 378 | 1.04 | 0.83 | Information Technology |
| Loopup Group plc | 237 | 349 | 0.96 | 0.77 | Information Technology |
| ULS Technology plc | 139 | 340 | 0.94 | 0.75 | Information Technology |
| Faron Pharmaceuticals Oy | 260 | 336 | 0.92 | 0.74 | Health Care |
| Tristel plc | 79 | 330 | 0.91 | 0.73 | Health Care |
| Laundrapp Ltd** | 301 | 300 | 0.82 | 0.66 | Information Technology |
| Sanderson Group plc | 200 | 280 | 0.77 | 0.62 | Information Technology |
| TrakM8 Holdings plc | 91 | 273 | 0.75 | 0.60 | Information Technology |
| Eagle Eye Solutions Group plc | 385 | 269 | 0.74 | 0.59 | Information Technology |
| Freeagent Holdings plc | 185 | 268 | 0.74 | 0.59 | Information Technology |
| Premaitha Health plc | 330 | 262 | 0.72 | 0.58 | Health Care |
| Plastics Capital plc | 202 | 261 | 0.72 | 0.58 | Materials |
| CentralNic Group plc | 207 | 241 | 0.66 | 0.53 | Information Technology |
| Surface Transforms plc | 201 | 238 | 0.65 | 0.52 | Industrials |
| Everyman Media Group plc | 172 | 233 | 0.64 | 0.51 | Consumer Discretionary |
| Belvoir Lettings plc | 335 | 232 | 0.64 | 0.51 | Real Estate |
| Paragon Entertainment Ltd | 200 | 227 | 0.63 | 0.50 | Industrials |
| TLA Worldwide plc | 150 | 225 | 0.62 | 0.50 | Consumer Discretionary |
| Angle plc | 252 | 213 | 0.59 | 0.47 | Health Care |
| Osirium Technologies plc | 301 | 212 | 0.58 | 0.47 | Information Technology |
| Lombard Risk Management plc | 92 | 201 | 0.55 | 0.44 | Information Technology |
| E G Solutions plc | 200 | 200 | 0.55 | 0.44 | Information Technology |
| Satellite Solutions Worldwide Group plc | 103 | 195 | 0.53 | 0.43 | Telecommunication Services |
| Clearstar Inc | 360 | 189 | 0.52 | 0.42 | Industrials |
| Ilika plc | 203 | 186 | 0.51 | 0.41 | Industrials |
| Reneuron Group plc | 262 | 183 | 0.50 | 0.40 | Health Care |
| EKF Diagnostics Holdings plc | 150 | 180 | 0.49 | 0.40 | Health Care |
| Electric Word plc | 185 | 179 | 0.49 | 0.39 | Consumer Discretionary |
| Electrical Geodesics Inc | 145 | 167 | 0.46 | 0.37 | Health Care |
| Omega Diagnostics Group plc | 129 | 159 | 0.44 | 0.35 | Health Care |
| MartinCo plc | 113 | 157 | 0.43 | 0.35 | Real Estate |
| Medaphor Group plc | 251 | 139 | 0.38 | 0.31 | Consumer Discretionary |
| Intercede Group plc | 91 | 138 | 0.38 | 0.30 | Information Technology |
| Mexican Grill Ltd (Ordinary Shares)** | 31 | 128 | 0.35 | 0.28 | Consumer Discretionary |
| Cloudcall Group plc | 234 | 128 | 0.35 | 0.28 | Telecommunication Services |
| Kalibrate Technologies plc | 161 | 120 | 0.33 | 0.27 | Information Technology |
| Imaginatik plc | 164 | 114 | 0.31 | 0.25 | Information Technology |
| WANDisco plc | 53 | 114 | 0.31 | 0.25 | Information Technology |
| APC Technology Group plc | 350 | 105 | 0.29 | 0.23 | Information Technology |
| Mirada plc | 95 | 95 | 0.26 | 0.21 | Information Technology |
| Verona Pharma plc | 71 | 93 | 0.25 | 0.20 | Health Care |
| Audioboom plc | 126 | 87 | 0.24 | 0.19 | Information Technology |
| Lidco Group plc | 146 | 84 | 0.23 | 0.19 | Health Care |
| TP Group plc | 125 | 71 | 0.20 | 0.16 | Industrials |
| Porta Communications plc | 200 | 70 | 0.19 | 0.15 | Consumer Discretionary |
| Midatech Pharma plc | 150 | 69 | 0.19 | 0.15 | Health Care |
| Fusionex International plc | 69 | 68 | 0.19 | 0.15 | Information Technology |
| Haydale Graphene Industries plc | 64 | 68 | 0.19 | 0.15 | Materials |
| Genedrive plc | 140 | 67 | 0.18 | 0.15 | Health Care |
| Directa Plus plc | 45 | 65 | 0.18 | 0.14 | Materials |
| Flowgroup plc | 54 | 54 | 0.15 | 0.12 | Industrials |
| Synairgen plc | 90 | 45 | 0.12 | 0.10 | Health Care |
| Mycelx Technologies Corporation plc (Com SHS $0.025 REG S+ shares) | 150 | 36 | 0.10 | 0.08 | Industrials |
| Mporium Group plc | 23 | 23 | 0.06 | 0.05 | Information Technology |
| Microsaic Systems plc | 20 | 20 | 0.06 | 0.05 | Information Technology |
| Brigantes Energy Ltd* | - | - | - | - | Energy |
| Total Qualifying Investments | 14,895 | 21,393 | 58.83 | 47.16 | |
| Non-Qualifying Investments | Cost £000 | Valuation £000 | Valuation % | Net Assets % | Sector |
| MFM Special Situations Fund** | 4,542 | 5,462 | 15.02 | 12.04 | |
| Total - Unit Trusts | 4,542 | 5,462 | 15.02 | 12.04 | |
| UK Treasury Stock 0.0125% 2068 | 154 | 159 | 0.44 | 0.35 | |
| Total - UK gilts | 154 | 159 | 0.44 | 0.35 | |
| RPC Group plc | 588 | 689 | 1.89 | 1.52 | Materials |
| Melrose Industries plc | 444 | 660 | 1.82 | 1.46 | Industrials |
| Dechra Pharmaceuticals plc | 462 | 515 | 1.42 | 1.14 | Health Care |
| BP plc | 502 | 499 | 1.37 | 1.10 | Energy |
| Atkins (WS) plc | 463 | 495 | 1.36 | 1.09 | Industrials |
| NMC Health plc | 426 | 488 | 1.34 | 1.08 | Health Care |
| Royal Dutch Shell plc | 379 | 478 | 1.31 | 1.05 | Energy |
| Cohort plc | 176 | 462 | 1.27 | 1.02 | Industrials |
| On the Beach Group plc | 376 | 429 | 1.18 | 0.94 | Consumer Discretionary |
| Merlin Entertainments plc | 386 | 428 | 1.18 | 0.94 | Consumer Discretionary |
| Sanne Group plc | 331 | 421 | 1.16 | 0.93 | Financials |
| JD Sports Fashion plc | 265 | 316 | 0.87 | 0.70 | Consumer Discretionary |
| Fulcrum Utility Services Ltd | 56 | 302 | 0.83 | 0.67 | Utilities |
| FCFM Group Ltd** | 150 | 283 | 0.78 | 0.62 | Financials |
| Lloyds Banking Group plc | 285 | 275 | 0.76 | 0.61 | Financials |
| Taylor Wimpey plc | 299 | 261 | 0.72 | 0.57 | Consumer Discretionary |
| DFS Furniture plc | 288 | 248 | 0.68 | 0.55 | Consumer Discretionary |
| Hilton Food Group plc | 252 | 235 | 0.65 | 0.52 | Consumer Discretionary |
| Clipper Logistics plc | 234 | 227 | 0.63 | 0.50 | Consumer Discretionary |
| Wizz Air Holdings plc | 220 | 200 | 0.55 | 0.44 | Consumer Discretionary |
| Learning Technologies Group plc | 80 | 185 | 0.51 | 0.41 | Information Technology |
| Micro Focus International plc | 121 | 175 | 0.48 | 0.39 | Information Technology |
| Sportech plc | 130 | 156 | 0.43 | 0.34 | Consumer Discretionary |
| Finsbury Food Group plc | 70 | 137 | 0.38 | 0.30 | Consumer Staples |
| Everyman Media Group plc | 85 | 113 | 0.31 | 0.25 | Consumer Discretionary |
| Horizon Discovery Group plc | 124 | 110 | 0.30 | 0.24 | Health Care |
| Regent Pacific Group Ltd | 93 | 82 | 0.22 | 0.18 | Health Care |
| Egdon Resources plc | 140 | 79 | 0.22 | 0.17 | Energy |
| Amerisur Resources plc | 167 | 66 | 0.18 | 0.15 | Energy |
| The Fulham Shore plc | 38 | 65 | 0.18 | 0.14 | Consumer Discretionary |
| Midatech Pharma plc | 134 | 61 | 0.17 | 0.13 | Health Care |
| Plexus Holdings plc | 125 | 43 | 0.12 | 0.09 | Energy |
| Reneuron Group plc | 41 | 38 | 0.10 | 0.08 | Health Care |
| Eagle Eye Solutions Group plc | 44 | 33 | 0.09 | 0.07 | Information Technology |
| Flowgroup plc | 30 | 30 | 0.08 | 0.07 | Industrials |
| Audioboom plc | 31 | 25 | 0.07 | 0.06 | Information Technology |
| Mycelx Technologies Corporation plc (Com SHS $0.025 + (D1) shares) | 170 | 23 | 0.06 | 0.05 | Industrials |
| Mexican Grill Ltd (A Preference Shares)** | 3 | 10 | 0.03 | 0.02 | Consumer Discretionary |
| Genagro Ltd** | 22 | 2 | 0.01 | - | Industrials |
| Mycelx Technologies Corporation plc (Com SHS $0.025 REG S+ shares) | 8 | 1 | - | - | Industrials |
| Total - Non-Qualifying equities | 8,238 | 9,345 | 25.71 | 20.59 | |
| Total -Non-Qualifying Investments | 12,934 | 14,966 | 41.17 | 32.98 | |
| Total investments | 27,829 | 36,359 | 100.00 | 80.14 | |
| Cash at bank | 9,190 | 20.26 | |||
| Prepayments & Accruals | (182) | (0.40) | |||
| Net Assets | 45,367 | 100.00 | |||
| * Unquoted Company holding of less than £500 | |||||
| **Unquoted Companies |
The majority of listed investments held within the portfolio are listed, headquartered and registered in the UK with the exception of the following:
| Listed | Headquartered | Registered | |
| AIM listed Investments: | |||
| Audioboom plc | UK | UK | Jersey |
| Clearstar Inc | UK | Cayman Islands | Cayman Islands |
| Electrical Geodesics Inc | UK | USA | USA |
| Faron Pharmaceuticals Oy | UK | Finland | Finland |
| Fulcrum Utility Services Ltd | UK | UK | Cayman Islands |
| Fusionex International plc | UK | UK | Jersey |
| Maxcyte Inc | UK | USA | USA |
| Mycelx Technologies Corporation plc (Com SHS $0.025 + (D1) shares) | UK | USA | USA |
| Mycelx Technologies Corporation plc (Com SHS $0.025 REG S+ shares) | UK | USA | USA |
| Paragon Entertainment Ltd | UK | Cayman Islands | Cayman Islands |
| Regent Pacific Group Ltd | UK | Hong Kong | UK |
| Royal Dutch Shell plc | UK | Netherlands | UK |
| Sanne Group plc | UK | Jersey | Jersey |
| WANDisco plc | UK | UK | Jersey |
| Wizz Air Holdings plc | UK | Jersey | Jersey |
| Unlisted private companies: | |||
| Aquis Exchange Ltd | - | UK | UK |
| Brigantes Energy Ltd | - | UK | UK |
| FCFM Group Ltd | - | UK | UK |
| Genagro Ltd | - | Jersey | Jersey |
| Laundrapp Ltd | - | UK | UK |
| Mexican Grill Ltd (A Preference Shares) | - | UK | UK |
| Mexican Grill Ltd (Ordinary Shares) | - | UK | UK |
| Infinity Reliance Ltd (My 1st Years) | - | UK | UK |
| Portr Ltd | - | UK | UK |
| Zappar Ltd | - | UK | UK |
| Authorised unit trust: | |||
| Marlborough Special Situations Fund | - | UK | UK |
TOP TEN INVESTMENTS
As at 28 February 2017 (By Market Value)
The top 10 equity investments are shown below; each is valued by reference to the bid price, or in the case of unquoted companies, values are either based on the last arm's length transaction or valuation techniques, such as earnings multiples. Forecasts, where given, are drawn from a combination of broker research and/or Bloomberg consensus forecasts and exclude amortisation, share based payments and exceptional items. Forecasts are in relation to a period end for which the company results are yet to be released. Forecasts are not shown for private companies. The net asset figures are drawn from audited accounts and net cash values are from published accounts in most cases.
| Mexican Grill Ltd | 8550.0p | |||
| Investment date | October 2009 | Results for the year to | December 2015 | |
| Equity held | 4.25% | Turnover (£'000) | 21,314 | |
| Av. Purchase Price | 2059.1p | Profit/(loss) before tax (£'000) | (475) | |
| Cost (£'000) | 311 | Net Cash (£'000) | (668) | |
| Valuation (£'000) | 1,292 | Net Assets December 2015 (£'000) | 4,337 | |
| Income recognised in period (£) | 0 | |||
| COMPANY DESCRIPTION | ||||
| Mexican Grill is a private company that operates 36 fast casual California-Mexican restaurants that provide fresh, made to order cuisine for eat in or take-away, making it among the largest chains within its niche. | ||||
| Learning Technology Group plc | 42.0p | ||
| Investment date | April 2014 | Forecasts for the year to | December 2017 |
| Equity held | 0.55% | Turnover (£'000) | 49,600 |
| Av. Purchase Price | 20.6p | Profit/(loss) before tax (£'000) | 10,000 |
| Cost (£'000) | 614 | Net Cash (£'000) | (8,486) |
| Valuation (£'000) | 1,253 | Net Assets December 2016 (£'000) | 30,710 |
| COMPANY DESCRIPTION | |||
| Learning Technologies Group (LTG) provides a comprehensive and integrated range of e-learning services and technologies to corporate and government clients. LTG is making good progress towards its goal of establishing a substantial global organisation of specialist digital learning businesses from Europe, US, Latin America and Asia to form a market-leading technologies agency. | |||
| Ideagen plc | 80.0p | ||
| Investment date | March 2011 | Forecasts for the year to | April 2017 |
| Equity held | 0.75% | Turnover (£'000) | 27,100 |
| Av. Purchase Price | 13.8p | Profit/(loss) before tax (£'000) | 6,910 |
| Cost (£'000) | 190 | Net Cash (£'000) | 6,317 |
| Valuation (£'000) | 1,100 | Net Assets April 2016 (£'000) | 33,683 |
| COMPANY DESCRIPTION | |||
| Ideagen is a supplier of compliance based information management software with operations in the UK and the United States. The company specialises in enterprise governance, risk and compliance and healthcare solutions for organisations operating within highly regulated industries. Ideagen provides complete content lifecycle solutions that enable organisations to meet their regulatory and quality compliance standards, helping them to reduce costs and improve efficiency. | |||
| DP Poland plc | 56.0p | |||
| Investment date | November 2012 | Forecasts for the year to | December 2017 | |
| Equity held | 1.28% | Turnover (£'000) | 10,900 | |
| Av. Purchase Price | 18.4p | Profit/(loss) before tax (£'000) | (1,900) | |
| Cost (£'000) | 324 | Net Cash (£'000) | 6,001 | |
| Valuation (£'000) | 987 | Net Assets December 2016 (£'000) | 11,210 | |
| COMPANY DESCRIPTION | ||||
| DP Poland (Domino's Pizza Poland) is a fast food company that operates a sub-franchise of the Domino's Pizza brand in Poland. The company operate in fourteen Polish cities, with 16 corporate and 23 sub-franchised stores. They continue to roll out and anticipate finishing the current year with 50 operational sites, with a longer-term ambition of 100 stores by 2020. | ||||
| Portr Ltd | 1058.0p | |||
| Investment date | July 2015 | Results for the year to | December 2015 | |
| Equity held | 3.17% | Turnover (£'000) | - | |
| Av. Purchase Price | 599.5p | Profit/(loss) before tax (£'000) | - | |
| Cost (£'000) | 538 | Net Cash (£'000) | 816 | |
| Valuation (£'000) | 950 | Net Assets December 2015 (£'000) | 819 | |
| Income recognised in period (£) | 0 | |||
| COMPANY DESCRIPTION | ||||
| Portr run's AirPortr, London's same day luggage transfer service. In its most basic form they deliver luggage from London Airports to your hotel, office or home and vice versa. They recently launched an off airport check in solution in partnership with British Airways, allowing you to check in your bag from your house, hotel or office for an outbound flight from London airports. | ||||
| Fulcrum Utility Services Ltd | 62.0p | ||
| Investment date | July 2010 | Forecasts for the year to | March 2017 |
| Equity held | 0.89% | Turnover (£'000) | 35,500 |
| Av. Purchase Price | 10.5p | Profit/(loss) before tax (£'000) | 6,520 |
| Cost (£'000) | 156 | Net Cash (£'000) | 8,323 |
| Valuation (£'000) | 922 | Net Assets March 2016 (£'000) | 5,837 |
| COMPANY DESCRIPTION | |||
| Fulcrum Utility Services provides utility infrastructure solutions. The company offers solutions that include gas connection, multi utility, meter installation, outlet pipe work, and gas disconnection services, renewable energy solutions and consulting services. | |||
| Quixant plc | 348.0p | ||
| Investment date | May 2013 | Forecasts for the year to | December 2017 |
| Equity held | 0.40% | Turnover ($'000) | 102,300 |
| Av. Purchase Price | 46.0p | Profit/(loss) before tax ($'000) | 15,800 |
| Cost (£'000) | 120 | Net Cash ($'000) | (69) |
| Valuation (£'000) | 908 | Net Assets December 2016 ($'000) | 34,306 |
| COMPANY DESCRIPTION | |||
| Quixant designs and manufactures complete advanced hardware and software solutions for the pay-for-play gaming and slot machine industry. Quixant's specialised products provide an all-in-one solution, based on PC technology but with additional hardware features and operating software developed specifically to address the requirements of the gaming industry. | |||
| Science in Sport plc | 92.0p | ||
| Investment date | April 2014 | Forecasts for the year to | December 2017 |
| Equity held | 2.22% | Turnover (£'000) | 15,200 |
| Av. Purchase Price | 53.9p | Profit/(loss) before tax (£'000) | (1,700) |
| Cost (£'000) | 518 | Net Cash (£'000) | 6,130 |
| Valuation (£'000) | 885 | Net Assets December 2016 (£'000) | 10,819 |
| COMPANY DESCRIPTION | |||
| Science in Sport manufactures and sells sports nutrition products. The company develops and distributes food, nutritional supplements, and beverages formulated to hydrate, energise, recover, and enhance sports performance. | |||
| Zappar Ltd | 7445.0p | ||
| Investment date | December 2016 | Results for the year to | March 2016 |
| Equity held | 3.12% | Turnover (£'000) | - |
| Av. Purchase Price | 7460.0p | Profit/(loss) before tax (£'000) | - |
| Cost (£'000) | 701 | Net Cash (£'000) | 884 |
| Valuation (£'000) | 700 | Net Assets March 2016 (£'000) | 248 |
| Income recognised in period (£) | 0 | ||
| COMPANY DESCRIPTION | |||
| Zappar is a small UK company in the rapidly evolving market for AR-enabling (Augmented Reality) product and infotainment experiences on handheld devices. Using proprietary patented technology, Zappar works closely with leading brands, license partners and retailers across the world to produce innovative, customisable solutions that link the digital world to the physical world. | |||
| RPC Group plc | 912.5p | ||
| Investment date | August 2015 | Forecasts for the year to | March 2017 |
| Equity held | 0.02% | Turnover (£'000) | 2,714,000 |
| Av. Purchase Price | 778.4p | Profit/(loss) before tax (£'000) | 256,667 |
| Cost (£'000) | 588 | Net Cash (£'000) | (775,000) |
| Valuation (£'000) | 689 | Net Assets March 2016 (£'000) | 893,900 |
| COMPANY DESCRIPTION | |||
| RPC Group is a design and engineering company specialising in polymer conversion with centres worldwide. The company offers product design capabilities across all conversion technologies, and through its global manufacturing base provides a wide range of consumer products and technical components for the packaging and non-packaging markets. | |||
| Co-Investment As at 28 February 2017, other funds managed by Hargreave Hale Ltd were also invested in all of the investments held within the Company's portfolio with the exception of the following: Electric Word plc, Omega Diagnostics Group plc, Paragon Entertainment Ltd, UK Treasury Stock 0.0125% 2068 and Tristel plc . |