Hargreave Hale AIM VCT 2 Plc
Unaudited Interim Results for the six month period ending 31 August 2016
FINANCIAL HIGHLIGHTS
| Ordinary Shares (as at 31 August): | 31 August 2016 | 31 August 2015 | 29 February 2016* |
| Net asset value per share | 104.58p | 106.62p | 101.18p |
| Cumulative distributions paid per share since launch | 47.00p | 41.00p | 43.00p |
| Total return per share | 151.58p | 147.62p | 144.18p |
| Half Yearly/Annual Returns per share (basic and diluted): | |||
| Revenue return | (0.09)p | (0.52)p | (0.98)p |
| Capital return | 7.04p | 0.93p | (2.41)p |
| Combined return | 6.95p | 0.41p | (3.39)p |
| Dividends per share: | |||
| Interim proposed/paid | 2.00p | 2.00p | 2.00p |
| Final paid | 4.00p | 4.00p | 4.00p |
| Ongoing expense ratio** | 2.09% | 2.41% | 2.28% |
| Performance Benchmark: | |||
| FTSE AIM All-share Index (rebased to 100 at 6 April 2007) | 68.38 | 63.49 | 66.01 |
* 29 February 2016 financial highlights represent annual results
** Calculated as total expenses (annualised for half yearly results) minus ad hoc legal costs, divided by period end net assets
INVESTMENT OBJECTIVE
The objective of the VCT is to achieve long term capital growth and to maximise tax free distributions to shareholders by investing in a diversified portfolio of small UK companies primarily traded on AIM. At least 70% of the Company's funds must be invested in qualifying holdings within three years of raising the funds. The balance of the Company's funds will be invested in liquid assets (such as gilts, other fixed interest and bank deposits) and non-qualifying equity investments on an opportunistic basis to boost the Company's performance. The Company is managed as a Venture Capital Trust in order that shareholders in the Company may benefit from the tax relief available.
CHAIRMAN'S STATEMENT
INTRODUCTION
In the first half of the financial year the Net Asset Value per share (NAV) increased from 101.18 pence to 104.58 pence equivalent to an increase of 7.3% after adding back the 4 pence dividend distributed in July 2016. During the same period the FTSE 100 Total Return Index gained 14.0% and the FTSE AIM All Share Index gained 15.1%.
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 in November 2015. By and large, based on the investments that we made during the last 18 months, we do not think these rules will greatly affect the fund. One change which is certain is that we will no longer be able to invest our non-qualifying monies into AIM listed stocks directly. We will be able to continue to invest via the Marlborough Special Situations Fund and we will be free to invest in companies listed on the main market. Under the new guidelines, gilts would appear not to be an allowable investment; however, we are seeking clarification on this from HMRC.
RESULTS
The gain per share for the six month period was 6.95 pence per share (comprising revenue losses of 0.09 pence and capital gains of 7.04 pence). At 31 August 2016 the total return since inception of the fund was 151.58 pence.
INVESTMENTS
The investment manager, Hargreave Hale Limited, invested a further £2.06 million in eleven qualifying companies during the period. The fair value of qualifying investments at 31 August 2016 was £16.32 million invested in sixty AIM companies and three unquoted companies (Mexican Grill Ltd, Portr Ltd and Laundrapp Ltd). The balance of the funds was held in a mix of cash, fixed income and other non-qualifying equities.
At 31 August 2016 the VCT was 81.4% invested in qualifying companies calculated in accordance with HMRC guidelines.
DIVIDEND
A final dividend for the year ended 29 February 2016 of 4 pence was paid on 20 July 2016.
The Directors continue to maintain a policy of distributing at least 5% of the year end NAV to shareholders. An interim dividend of 2 pence (2015 - 2p) will be paid on 2 December 2016, with an ex-dividend date of 10 November 2016 and a record date of 11 November 2016.
BUYBACKS
We have been able to maintain our policy of offering our shareholders an efficient exit route through the buyback scheme. In total, 197,045 shares were repurchased during the six month period ending 31 August 2016 at a weighted average price of 99.56 pence per share. Since the period end 101,778 shares have been purchased at a cost of £100,825.
The Board continues to target a share price discount of 5% of 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.
ISSUE OF EQUITY
The Directors of the Company announced on 2 December 2015 the launch of a new joint offer for subscription for shares in both Hargreave Hale AIM VCTs to raise up to £15 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 2016 and is open to both new and existing shareholders. On 6 July 2016, the Directors announced their intention to utilise the over-allotment facility to increase the number of shares available for subscription in the Company by £5 million.
Since its launch, the offer has resulted in gross funds being received of £10.78 million and the issue of 10.15 million new shares in Hargreave Hale AIM VCT 2 plc. The offer will close at 12pm on 16 November 2016 or earlier if the maximum subscription has been reached before then.
ELECTRONIC COMMUNICATIONS
Your Board believes that adopting electronic communications would be beneficial to the Company and its shareholders. The benefits include substantial cost savings and improved timeliness and transparency of communications. The Board intends to seek authority at the Company's next general meeting.
OUTLOOK
The period under review includes the EU Referendum, a time of considerable market volatility. Our portfolio comprises mostly domestic companies that are yet to see as much benefit from sterling`s devaluation as the wider market. In these circumstances, we are reasonably pleased with the fund`s performance albeit it has lagged the indices. Post Brexit, the economy seems to have performed much better than many had predicted. However, there remains plenty of room for caution with uncertainty around what, in reality, Brexit will mean for the economy and business in the longer term.
SHAREHOLDER COMMUNICATION
The Company's daily share price can be found on various financial websites under the EPIC code 'HHVT'.
DAVID HURST-BROWN
Chairman
Date: 3 November 2016
INVESTMENT MANAGER'S REPORT
This report covers the first half of the financial year, 1 March 2016 to 31 August 2016. The manager's report contains references to movements in the Net Asset Value per share (NAV) and Total Return per share (net asset value 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
The period under review has been an interesting and at times challenging one for UK equities. March and April were very strong as the mood in global markets dramatically improved after a poor start to the year. This was largely because a number of central banks either intervened or appeared set to intervene in financial markets to ensure stability, with support from a rally in global commodities driven by improving economic data from China. In June, the UK's decision to leave the European Union led to severe volatility in equity markets and we regret to inform that we were not immune to the chaos that followed the vote to leave. The NAV fell 5.3% in June, from 106.00p to 100.35p. Some soothing words from the Bank of England restored much needed stability in the market and allowed the NAV to recover. Investors have since had time to reflect on the potential consequences of our decision to leave the European Union and assess the impact of a weaker currency on the UK economy and foreign denominated earnings. The stock market has been remarkably strong, although the response at the bottom end of the market was more muted initially.
We feel it is too early to know the impact (if any) of Brexit on our portfolio; that seems unlikely to change in the short-term. By and large we have left the portfolio of qualifying and non-qualifying investments untouched. We went into the referendum with 17% cash and continue to maintain a healthy cash balance. While we are cautious of certain sectors, financials and consumer discretionary for example, we continue to find interesting investment opportunities in qualifying companies that we believe can grow regardless of the outcome. To that end, we intend to continue with business as usual while keeping a close eye on events as they unfold and, perhaps, reducing at the margin some of our non-qualifying equity risk.
PERFORMANCE
In the six months to 31 August 2016, the NAV increased from 101.18p to 104.58p. A 4 pence per share dividend was paid, giving investors a total return of 7.40 pence per share, which translates to a gain of 7.3%. During the same period the FTSE AIM All-Share Total Return gained 15.1%, whilst the FTSE 100 gained 11.2% (14.0% on a total return basis).
The qualifying investments made a net contribution of 4.29 pence per share with thirty-six out of the seventy making gains, five unchanged and twenty-nine losing ground. The balance was the net of non-qualifying portfolio gains, running costs and investment income.
DP Poland was the top performing qualifying investment (+100.0%, +1.63 pence per share) as the shares responded to a set of strong results in March, an encouraging trading update in July and substantial director's buying. Science in Sport also performed well (+45.8%, +0.63 pence per share) after reporting a strong interim trading update in July. Total sales increased 24%, driven by strong growth in the UK e-commerce platform and the tangible evidence of traction in international markets. Other stocks that made a significant contribution included Surface Transforms (+62.5%, +0.40 pence per share) and Fulcrum Utility (+50.5%, +0.41 pence per share).
The biggest losses within the period came from Eagle Eye (-43.8%, -0.43 pence per share) after they downgraded their 2016 revenue estimates in a June trading update. Other losses came from Learning Technologies Group (-13.9%, -0.38 pence per share), Microsaic (-78.4%, -0.34 pence per share) and Lombard Risk (-33.3%, -0.25 pence per share).
We invested £2.06m into eleven qualifying investments over the period, three further investments into existing qualifying companies (one private company); four IPOs; three secondary placings into listed companies and one additional private investment.
Within the qualifying portfolio we reduced our investments in DP Poland, Imaginatik and Directa Plus. All three companies experienced strong runs in the market. We completely exited Sphere Medical and Nektan following prolonged periods of poor progress. We also exited Tangent Communications through a Management Buyout.
PORTFOLIO STRUCTURE
The VCT is comfortably through the HMRC defined investment test and ended the period at 81.4% invested as measured by the HMRC investment test. By market value, the VCT had a 45.7% weighting to qualifying investments.
The allocation to non-qualifying equity investments increased marginally from 18.4% to 19.0%. 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% to 11.0%. The non-qualifying investments contributed +3.68 pence per share to the overall gains. Fixed income as a percentage of the fund increased from 0.9% to 2.1% and cash fell from 23.4% to 22.7%.
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 interim management statement. 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 PERIOD END UPDATE
Deal flow has been good since period end and we have made three follow on investments in existing qualifying holdings, one investment in a new listed qualifying company and one investment in an unquoted qualifying company. We also have a number of deals in the pipeline which we expect to complete in the coming weeks.
For further information, please contact:
| STUART BROOKES |
| Company Secretary |
| Hargreave Hale AIM VCT2 plc |
| 01253 754740 |
Date: 3 November 2016
INVESTMENT PORTFOLIO SUMMARY as at 31 August 2016
| Book Cost | Valuation | Valuation | Net Assets | Sector | |
| Qualifying investments | £000 | £000 | % | % | |
| Mexican Grill Ltd (A Preference Shares)* | 277 | 1,154 | 4.16 | 3.23 | Consumer Discretionary |
| Trakm8 Holdings plc | 91 | 931 | 3.35 | 2.61 | Information Technology |
| DP Poland plc | 262 | 872 | 3.14 | 2.44 | Consumer Discretionary |
| Learning Technologies Group plc | 534 | 788 | 2.84 | 2.21 | Information Technology |
| Ideagen plc | 190 | 743 | 2.68 | 2.08 | Information Technology |
| Science in Sport plc | 518 | 673 | 2.42 | 1.88 | Consumer Discretionary |
| Quixant plc | 120 | 600 | 2.16 | 1.68 | Consumer Discretionary |
| Portr Ltd* | 538 | 538 | 1.94 | 1.51 | Information Technology |
| Animalcare Group plc | 100 | 458 | 1.65 | 1.28 | Health Care |
| TLA Worldwide plc | 150 | 405 | 1.46 | 1.13 | Consumer Discretionary |
| Fulcrum Utility Services Ltd | 100 | 365 | 1.31 | 1.02 | Utilities |
| Surface Transforms plc | 217 | 351 | 1.26 | 0.98 | Industrials |
| Osirium Technologies plc | 301 | 346 | 1.25 | 0.97 | Information Technology |
| Belvoir Lettings plc | 335 | 323 | 1.16 | 0.90 | Real Estate |
| Gfinity plc | 290 | 312 | 1.12 | 0.87 | Information Technology |
| Laundrapp Ltd* | 301 | 300 | 1.08 | 0.84 | Information Technology |
| Loopup Group plc | 257 | 297 | 1.07 | 0.83 | Information Technology |
| Intercede Group plc | 91 | 284 | 1.02 | 0.79 | Information Technology |
| Hardide plc | 76 | 255 | 0.92 | 0.71 | Materials |
| Sanderson Group plc | 200 | 255 | 0.92 | 0.71 | Information Technology |
| Tristel plc | 79 | 254 | 0.92 | 0.71 | Health Care |
| Premaitha Health plc | 330 | 234 | 0.84 | 0.66 | Health Care |
| Angle plc | 252 | 233 | 0.84 | 0.65 | Health Care |
| ULS Technology plc | 139 | 229 | 0.83 | 0.64 | Information Technology |
| Medaphor Group plc | 251 | 228 | 0.82 | 0.64 | Consumer Discretionary |
| Everyman Media Group plc | 172 | 223 | 0.80 | 0.62 | Consumer Discretionary |
| Clearstar Inc | 360 | 221 | 0.80 | 0.62 | Industrials |
| CentralNic Group plc | 207 | 218 | 0.79 | 0.61 | Information Technology |
| Plastics Capital plc | 202 | 216 | 0.78 | 0.60 | Materials |
| Reneuron Group plc | 262 | 199 | 0.72 | 0.56 | Health Care |
| Eagle Eye Solutions plc | 385 | 192 | 0.69 | 0.54 | Information Technology |
| Maxcyte Inc | 160 | 187 | 0.67 | 0.52 | Health Care |
| Mirada plc | 393 | 180 | 0.65 | 0.50 | Information Technology |
| E G Solutions plc | 200 | 178 | 0.64 | 0.50 | Information Technology |
| Electrical Geodesics Inc | 145 | 174 | 0.63 | 0.49 | Health Care |
| Lombard Risk Management plc | 92 | 172 | 0.62 | 0.48 | Information Technology |
| Directa Plus plc | 83 | 162 | 0.58 | 0.45 | Materials |
| Satellite Solutions Worldwide Group plc | 103 | 160 | 0.58 | 0.45 | Information Technology |
| APC Technology Group plc | 350 | 149 | 0.54 | 0.42 | Information Technology |
| Omega Diagnostics Group plc | 129 | 148 | 0.53 | 0.41 | Health Care |
| Kalibrate Technologies plc | 161 | 147 | 0.53 | 0.41 | Information Technology |
| EKF Diagnostics Holdings plc | 150 | 145 | 0.52 | 0.41 | Health Care |
| Flowgroup plc | 268 | 145 | 0.52 | 0.41 | Industrials |
| MartinCo plc | 113 | 141 | 0.51 | 0.39 | Real Estate |
| Genedrive plc | 140 | 131 | 0.47 | 0.37 | Health Care |
| Electric Word plc | 185 | 128 | 0.46 | 0.36 | Consumer Discretionary |
| Mexican Grill Ltd (Ordinary Shares)* | 31 | 128 | 0.46 | 0.36 | Consumer Discretionary |
| Paragon Entertainment Ltd | 200 | 100 | 0.36 | 0.28 | Industrials |
| Verona Pharma plc | 71 | 100 | 0.36 | 0.28 | Health Care |
| Cloudcall Group plc | 234 | 97 | 0.35 | 0.27 | Information Technology |
| Porta Communications plc | 200 | 95 | 0.34 | 0.27 | Consumer Discretionary |
| Midatech Pharma plc | 150 | 93 | 0.34 | 0.26 | Health Care |
| Audioboom plc | 126 | 87 | 0.31 | 0.24 | Information Technology |
| Imaginatik plc | 164 | 85 | 0.31 | 0.24 | Information Technology |
| Lidco Group plc | 146 | 84 | 0.30 | 0.24 | Health Care |
| Fusionex International plc | 69 | 79 | 0.28 | 0.22 | Information Technology |
| Haydale Graphene Industries plc | 64 | 67 | 0.24 | 0.19 | Materials |
| Synairgen plc | 90 | 58 | 0.21 | 0.16 | Health Care |
| WANDisco plc | 53 | 53 | 0.19 | 0.15 | Information Technology |
| TP Group plc | 125 | 50 | 0.18 | 0.14 | Industrials |
| Ilika plc | 53 | 49 | 0.18 | 0.14 | Industrials |
| Microsaic Systems plc | 272 | 30 | 0.11 | 0.08 | Information Technology |
| Mycelx Technologies Corporation plc (D1 shares) | 150 | 13 | 0.05 | 0.04 | Industrials |
| Mporium Group plc | 150 | 11 | 0.04 | 0.03 | Information Technology |
| ------- | -------- | ---------- | ---------- | ||
| Total-qualifying investments | 12,607 | 16,323 | 58.80 | 45.68 | |
| ------- | -------- | ---------- | ---------- |
| Book Cost | Valuation | Valuation | Net Assets | Sector | |
| Non-Qualifying investments | £000 | £000 | % | % | |
| UK Treasury Stock 0.125% 2068 | 312 | 449 | 1.62 | 1.26 | |
| UK Treasury Stock 2.5% 2024 | 121 | 130 | 0.47 | 0.36 | |
| -------- | -------- | -------- | -------- | ||
| Total - UK gilts | 433 | 579 | 2.09 | 1.62 | |
| -------- | -------- | -------- | -------- | ||
| Scottish Amicable 8.5% 2049 | 154 | 161 | 0.58 | 0.45 | |
| -------- | -------- | -------- | -------- | ||
| Total - Corporate bonds | 154 | 161 | 0.58 | 0.45 | |
| -------- | -------- | -------- | -------- | ||
| MFM Special Situations Fund* | 3,280 | 3,921 | 14.13 | 10.98 | |
| -------- | -------- | -------- | -------- | ||
| Total - Unit Trusts | 3,280 | 3,921 | 14.13 | 10.98 | |
| -------- | -------- | -------- | -------- | ||
| Royal Dutch Shell plc | 333 | 388 | 1.40 | 1.09 | Energy |
| Melrose Industries plc | 278 | 368 | 1.33 | 1.03 | Industrials |
| BP plc | 288 | 365 | 1.31 | 1.02 | Energy |
| Merlin Entertainments plc | 332 | 360 | 1.30 | 1.01 | Consumer Discretionary |
| Atkins (WS) plc | 304 | 349 | 1.26 | 0.98 | Industrials |
| RPC Group plc | 253 | 322 | 1.16 | 0.90 | Materials |
| Cohort plc | 176 | 320 | 1.15 | 0.90 | Industrials |
| Crawshaw Group plc | 220 | 314 | 1.13 | 0.88 | Consumer Staples |
| Micro Focus International plc | 238 | 314 | 1.13 | 0.88 | Information Technology |
| FCFM Group Ltd* | 150 | 283 | 1.02 | 0.79 | Financials |
| On the Beach Group plc | 357 | 272 | 0.98 | 0.76 | Consumer Discretionary |
| Ladbrokes plc | 259 | 269 | 0.97 | 0.75 | Consumer Discretionary |
| Babcock International Group plc | 238 | 261 | 0.94 | 0.73 | Industrials |
| Just Eat plc | 200 | 243 | 0.88 | 0.68 | Information Technology |
| Taylor Wimpey plc | 299 | 234 | 0.84 | 0.66 | Information Technology |
| ARM Holdings plc | 115 | 212 | 0.76 | 0.59 | Information Technology |
| JD Sports Fashion plc | 202 | 212 | 0.76 | 0.59 | Consumer Discretionary |
| Mccarthy and Stone plc | 225 | 193 | 0.70 | 0.54 | Health Care |
| Fulcrum Utility Services Ltd | 56 | 178 | 0.64 | 0.50 | Utilities |
| Finsbury Food Group plc | 70 | 150 | 0.54 | 0.42 | Consumer Staples |
| Learning Technologies Group plc | 80 | 137 | 0.49 | 0.38 | Information Technology |
| Egdon Resources plc | 140 | 113 | 0.41 | 0.32 | Energy |
| Everyman Media Group plc | 85 | 108 | 0.39 | 0.30 | Consumer Discretionary |
| Horizon Discovery Group plc | 124 | 108 | 0.39 | 0.30 | Health Care |
| Sportech plc | 130 | 106 | 0.38 | 0.30 | Consumer Discretionary |
| Sanne Group plc | 73 | 89 | 0.32 | 0.25 | Financials |
| Midatech Pharma plc | 134 | 83 | 0.30 | 0.23 | Health Care |
| Flowgroup plc | 200 | 81 | 0.29 | 0.23 | Industrials |
| Amerisur Resources plc | 167 | 78 | 0.28 | 0.22 | Energy |
| The Fulham Shore plc | 38 | 68 | 0.24 | 0.19 | Consumer Discretionary |
| Regent Pacific Group Ltd | 93 | 42 | 0.15 | 0.12 | Health Care |
| Reneuron plc | 41 | 41 | 0.15 | 0.11 | Health Care |
| Plexus Holdings plc | 125 | 40 | 0.14 | 0.11 | Energy |
| Audioboom plc | 31 | 25 | 0.09 | 0.07 | Information Technology |
| Eagle Eye Solutions plc | 44 | 24 | 0.09 | 0.07 | Information Technology |
| MYCELX Technologies Corporation plc (S+ shares) | 170 | 11 | 0.04 | 0.03 | Industrials |
| Mexican Grill Ltd (A Preference Shares)* | 3 | 10 | 0.04 | 0.03 | Consumer Discretionary |
| Genagro Ltd* | 22 | 2 | 0.01 | 0.01 | Industrials |
| MYCELX Technologies Corporation plc (D1 shares)** | 8 | 0 | 0.00 | 0.00 | Industrials |
| ------- | -------- | -------- | ------- | ||
| Total - non-qualifying equities | 6,301 | 6,773 | 24.40 | 18.97 | |
| -------- | -------- | -------- | ------- | ||
| Total - non-qualifying investments | 10,168 | 11,434 | 41.20 | 32.02 | |
| -------- | -------- | -------- | ------- | ||
| Total investments | 22,775 | 27,757 | 100.00 | 77.70 | |
| -------- | -------- | -------- | ------- | ||
| Cash at bank | 8,096 | 22.66 | |||
| Prepayments & Accruals | (129) | (0.36) | |||
| -------- | -------- | ||||
| Net Assets | 35,724 | 100.00 | |||
| -------- | -------- | ||||
| * Unquoted Companies | |||||
| ** Actual holding of less than £500 | |||||
The majority of investments held within the portfolio are listed and/or headquartered 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 |
| Fulcrum Utility Services Ltd | UK | UK | Cayman Islands |
| Fusionex International plc | UK | UK | Jersey |
| Maxcyte Inc | UK | USA | USA |
| MYCELX Technologies Corporation plc | UK | USA | USA |
| Paragon Entertainment Ltd | UK | Jersey | Cayman Islands |
| Royal Dutch Shell plc | UK | Netherlands | UK |
| Sanne Group plc | UK | Jersey | Jersey |
| WANDisco plc | UK | UK | Jersey |
| Unlisted private companies: | |||
| FCFM Group Ltd | - | UK | UK |
| Genagro Ltd | - | Jersey | Jersey |
| Laundrapp Ltd | - | UK | UK |
| Mexican Grill Ltd | - | UK | UK |
| Portr Ltd | - | UK | UK |
| Authorised unit trust: | |||
| Marlborough Special Situations Fund | - | UK | UK |
TOP TEN INVESTMENTS
As at 31 August 2016 (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 the net cash values are drawn from published accounts in most cases.
| Mexican Grill Ltd | 8550.0p | |||
| Investment date | October 2009 | Results for year to | December 2015 | |
| Equity held | 4.25% | Turnover (£'000) | 21,314 | |
| Av Purchase Price | 2053.0p | Profit/(loss) before tax (£'000) | 16 | |
| Cost (£'000) | 311 | Net Cash (£'000) | (1,307) | |
| Valuation (£'000) | 1,292 | Net Assets December 2015 (£'000) | 4,978 | |
| Dividends received in period by the Company | - | |||
| COMPANY DESCRIPTION Mexican Grill, is a private company that operates 31 fast casual California-Mexican restaurants that provide fresh, made to order cuisine for eat in or take-away, making it amongst the largest chains within its niche. | ||||
| Trakm8 Holdings plc | 225.0p | ||||
| Investment date | October 2009 | Forecasts for year to | March 2017 | ||
| Equity held | 1.27% | Turnover (£'000) | 34,000 | ||
| Av Purchase Price | 22.0p | Profit/(loss) before tax (£'000) | 5,900 | ||
| Cost (£'000) | 91 | Net Cash (£'000) | (1,090) | ||
| Valuation (£'000) | 931 | Net Assets March 2016 (£'000) | 17,074 | ||
| COMPANY DESCRIPTION Trakm8 is a telematics company using Big Data analytics to improve driver behaviour. The company designs, develops and manufactures telematics products and solutions. The group also provides vehicle monitoring and tracking services direct to the B2B market. Trakm8's IP owned products and services allow vehicles and drivers to be monitored, allowing organisations to manage deliveries and services, or track stolen vehicles. | |||||
| Learning Technologies Group plc | 31.0p | |||
| Investment date | April 2014 | Forecasts for year to | December 2016 | |
| Equity held | 0.61% | Turnover (£'000) | 30,000 | |
| Av Purchase Price | 21.0p | Profit/(loss) before tax (£'000) | 6,200 | |
| Cost (£'000) | 614 | Net Cash (£'000) | (9,795) | |
| Valuation (£'000) | 925 | Net Assets December 2015 (£'000) | 25,479 | |
| COMPANY DESCRIPTION Learning Technologies Group (LTG) provides a comprehensive and integrated range of digital learning technologies and services to corporate and government clients across Europe, the US, Latin America and Asia. | ||||
| DP Poland plc | 52.0p | |||
| Investment date | October 2013 | Forecasts for year to | December 2016 | |
| Equity held | 1.29% | Turnover (£'000) | 4,500 | |
| Av Purchase Price | 15.6p | Profit/(loss) before tax (£'000) | (2,200) | |
| Cost (£'000) | 262 | Net Cash (£'000) | 6,855 | |
| Valuation (£'000) | 872 | Net Assets December 2015 (£'000) | 9,677 | |
| COMPANY DESCRIPTION DP Poland is a fast food service company. The company operates a sub-franchise of a pizza delivery brand across cities in Poland. It currently operates 29 stores, 16 corporate and 13 sub-franchised. | ||||
| Ideagen plc | 54.0p | |||
| Investment date | March 2011 | Forecasts for year to | April 2017 | |
| Equity held | 0.76% | Turnover (£'000) | 25,400 | |
| Av Purchase Price | 13.8p | Profit/(loss) before tax (£'000) | 6,700 | |
| Cost (£'000) | 190 | Net Cash (£'000) | 6,300 | |
| Valuation (£'000) | 743 | Net Assets April 2016 (£'000) | 33,683 | |
| COMPANY DESCRIPTION Ideagen specialises in information management solutions for organisations that operate within industries that are subject to onerous regulatory standards. Using a portfolio of software products, the group provides content lifecycle solutions that enable organisations to meet their regulatory and quality compliance standards, helping them to reduce costs and improve efficiency. | ||||
| Science in Sport plc | 70.0p | |||
| Investment date | April 2014 | Forecasts for year to | December 2016 | |
| Equity held | 2.23% | Turnover (£'000) | 12,002 | |
| Av Purchase Price | 53.9p | Profit/(loss) before tax (£'000) | (1,187) | |
| Cost (£'000) | 518 | Net Cash (£'000) | 6,622 | |
| Valuation (£'000) | 673 | Net Assets December 2015 (£'000) | 12,016 | |
| COMPANY DESCRIPTION Science in Sport plc manufactures and sells sports nutrition products. The company develops and distributes food, nutritional supplements, and beverages formulated to hydrate, energize, recover, and enhance sports performance. | ||||
| Quixant plc | 230.0p | |||
| Investment date | May 2013 | Forecasts for year to | December 2016 | |
| Equity held | 0.4% | Turnover ($'000) | 82,500 | |
| Av Purchase Price | 46.0p | Profit/(loss) before tax ($'000) | 13,000 | |
| Cost (£'000) | 120 | Net Cash ($'000) | (3,300) | |
| Valuation (£'000) | 600 | Net Assets December 2015 ($'000) | 25,651 | |
| COMPANY DESCRIPTION Quixant designs and manufactures 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. | ||||
| Portr Ltd | 599.2p | |||
| Investment date | July 2015 | Results for year to | December 2015 | |
| Equity held | 3.43% | Turnover (£'000) | 26 | |
| Av Purchase Price | 599.2p | Profit/(loss) before tax (£'000) | (2,200) | |
| Cost (£'000) | 538 | Net Cash (£'000) | 826 | |
| Valuation (£'000) | 538 | Net Assets December 2015 (£'000) | 659 | |
| Dividends received in period by the Company | - | |||
| COMPANY DESCRIPTION Under its AirPortr brand, Portr operates a same day luggage transfer service within London and the Home Counties. In its most basic form, the company delivers luggage through a flexible, transparent and cost efficient solution to or from London Airports to your hotel, office or home. Additional functionality will allow users to specify service enhancements such as carousel collection and delivery and off-airport check in solutions. | ||||
| Animalcare Group plc | 252.0p | |||
| Investment date | December 2007 | Forecasts for year to | June 2017 | |
| Equity held | 0.86% | Turnover (£'000) | 15,100 | |
| Av Purchase Price | 55.0p | Profit/(loss) before tax (£'000) | 3,200 | |
| Cost (£'000) | 100 | Net Cash (£'000) | 7,118 | |
| Valuation (£'000) | 458 | Net Assets June 2016 (£'000) | 22,515 | |
| COMPANY DESCRIPTION Animalcare is a leading supplier of generic veterinary medicines and animal identification products to companion animal veterinary markets. It develops and sells goods and services to veterinary professionals principally for use in companion animals, operating directly in the UK and through distribution and development partners in key markets in Western Europe. Its principle product lines are licensed veterinary medicines and companion animal identification products and services. | ||||
| TLA Worldwide plc | 54.0p | |||
| Investment date | November 2011 | Forecasts for year to | December 2016 | |
| Equity held | 0.52% | Turnover ($'000) | N/A | |
| Av Purchase Price | 20.0p | Profit/(loss) before tax ($'000) | N/A | |
| Cost (£'000) | 150 | Net Cash ($'000) | (25,800) | |
| Valuation (£'000) | 405 | Net Assets December 2015 ($'000) | 37,181 | |
| COMPANY DESCRIPTION TLA Worldwide is an integrated athlete representation and sports marketing business with a strong focus on the US and Australian markets. It is particularly strong in baseball. | ||||
STATEMENT OF DIRECTOR'S RESPONSIBILITIES
in respect of the half-yearly financial report
In accordance with Disclosure Transparency Rule (DTR) 4.2.10, David Hurst-Brown (Chairman), Philip Cammerman and Giles Hargreave, the Directors, confirm that to the best of their knowledge:
- The half yearly financial statements have been prepared in accordance with Financial Reporting Standard 104 ("FRS104") issued by the Financial Reporting Council and the half-yearly report includes a fair review of the assets, liabilities, financial position and profit of the Company as at 31 August 2016 as required by DTR 4.2.4;
- The interim management report included within the chairman's statement, investment manager's report, investment portfolio summary and notes to the half yearly report includes a fair review of the information required by the Financial Conduct Authority Disclosure and Transparency Rules, being;
- an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;
- a description of the principal risks and uncertainties for the remaining six months of the year; and
- a description of related party transactions that have taken place in the first six months of the current financial year, that may have materially affected the financial position or performance of the Company during that period and any changes in the related party transactions described in the last annual report that could do so.
-
On behalf of the Board
DAVID HURST-BROWN
Chairman
Date: 3 November 2016
CONDENSED INCOME STATEMENT
for the six month period to 31 August 2016 (unaudited)
| For the six month period to | For the six month period to | |||||
| 31 August 2016 (unaudited) | 31 August 2015 (unaudited) | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Realised gains on investments | - | 228 | 228 | - | 906 | 906 |
| Unrealised gains/(losses) on investments | - | 2,328 | 2,328 | - | (527) | (527) |
| Income | 164 | - | 164 | 66 | - | 66 |
| ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | |
| 164 | 2,556 | 2,720 | 66 | 379 | 445 | |
| Management fee | (60) | (179) | (239) | (50) | (149) | (199) |
| Other expenses | (134) | - | (134) | (143) | - | (143) |
| ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | |
| (194) | (179) | (373) | (193) | (149) | (342) | |
| ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | |
| (Loss)/return on ordinary activities before taxation | (30) | 2,377 | 2,347 | (127) | 230 | 103 |
| Taxation | - | - | - | - | - | - |
| ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | |
| (Loss)/return and total other comprehensive | (30) | 2,377 | 2,347 | (127) | 230 | 103 |
| income after taxation attributable to equity shareholders | ----------- | ---------- | ---------- | ----------- | ---------- | ---------- |
| (Loss)/return per share (Note 2) | (0.09)p | 7.04p | 6.95p | (0.52)p | 0.93p | 0.41p |
| (basic and diluted) | ||||||
The total column of this statement is the income statement of the Company. All revenue and capital items in the above statement derive from continuing operations. The Company has no recognised gains or losses other than the results for the six month period as set out above. The accompanying notes are an integral part of these financial statements.
CONDENSED INCOME STATEMENT
for the year ended 29 February 2016 (audited)
| For the year to | |||
| 29 February 2016 (audited) | |||
| Revenue | Capital | Total | |
| £000 | £000 | £000 | |
| Realised gains on investments | - | 1,676 | 1,676 |
| Unrealised losses on investments | - | (1,976) | (1,976) |
| 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) and total other comprehensive income after | (248) | (608) | (856) |
| taxation attributable to equity shareholders | ----------- | ----------- | ----------- |
| (Loss) per share (Note 2) | (0.98)p | (2.41)p | (3.39)p |
| (basic and diluted) | |||
The total column of this statement is the income statement of the Company. All revenue and capital items in the above statement derive from continuing operations. There are no recognised gains or losses other than the loss for the year. The accompanying notes are an integral part of these financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
as at 31 August 2016 (unaudited)
| 31 August | 31 August | 29 February | |
| 2016 | 2015 | 2016 | |
| (unaudited) | (unaudited) | (audited) | |
| £000 | £000 | £000 | |
| Fixed assets | |||
| Investments at fair value through profit or loss | 27,757 | 21,458 | 23,031 |
| ----------- | ----------- | ----------- | |
| Current assets | |||
| Prepayments and accrued income | 54 | 16 | 20 |
| Cash at bank | 8,096 | 5,391 | 6,994 |
| ----------- | ----------- | ----------- | |
| 8,150 | 5,407 | 7,014 | |
| Creditors: amounts falling due within one year | |||
| Accruals and deferred income | (183) | (149) | (191) |
| ----------- | ----------- | ----------- | |
| Net current assets | 7,967 | 5,258 | 6,823 |
| ----------- | ----------- | ----------- | |
| Total assets less current liabilities | 35,724 | 26,716 | 29,854 |
| ----------- | ----------- | ----------- | |
| Capital and Reserves | |||
| Called up share capital | 342 | 251 | 295 |
| Share premium | 26,509 | 16,673 | 21,484 |
| Capital redemption reserve | 9 | 4 | 7 |
| Special reserve | 3,699 | 6,011 | 5,250 |
| Capital reserve - realised | 1,416 | 756 | 1,367 |
| Capital reserve - unrealised | 4,981 | 4,102 | 2,653 |
| Revenue reserve | (1,232) | (1,081) | (1,202) |
| ----------- | ----------- | ----------- | |
| Total shareholders' funds | 35,724 | 26,716 | 29,854 |
| ----------- | ----------- | ----------- | |
| Net asset value per share (basic and diluted) (Note 4) | 104.58p | 106.62p | 101.18p |
The accompanying notes are an integral part of these financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the six month period to 31 August 2016 (unaudited)
| Ordinary Shares | Called up | Share | Capital | Special | Capital | Capital | Revenue | Total |
| share | premium | redemption | reserve | reserve | reserve | reserve | ||
| capital | reserve | realised | unrealised | |||||
| £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* | (2) | - | 2 | (198) | - | - | - | (198) |
| Share issues | 49 | 5,153 | - | - | - | - | - | 5,202 |
| Issue costs | - | (128) | - | - | - | - | - | (128) |
| Equity dividends paid | - | - | - | (1,353) | - | - | - | (1,353) |
| Realised gains on investments | - | - | - | - | 228 | - | - | 228 |
| Unrealised gains on investments | - | - | - | - | - | 2,328 | - | 2,328 |
| Management fee charged to capital | - | - | - | - | (179) | - | - | (179) |
| Revenue loss after taxation for the period | - | - | - | - | - | - | (30) | (30) |
| Total profit after taxation | - | - | - | - | 49 | 2,328 | (30) | 2,347 |
| ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | --------- | |
| At 31 August 2016 | 342 | 26,509 | 9 | 3,699 | 1,416 | 4,981 | (1,232) | 35,724 |
| ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | --------- | |
* 197,045 shares were bought back in the period with a nominal value of £1,970.45.
Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 31 August 2016 were £3.88 million. The accompanying notes are an integral part of these financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the six month period to 31 August 2015 (unaudited)
| Ordinary Shares | Called up | Share | Capital | Special | Capital | Capital | Revenue | Total |
| share | premium | redemption | reserve | reserve | reserve | reserve | ||
| capital | reserve | realised | unrealised | |||||
| £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* | (1) | - | 1 | (111) | - | - | - | (111) |
| Share issues | 33 | 3,644 | - | - | - | - | - | 3,677 |
| Issue costs | - | (89) | - | - | - | - | - | (89) |
| Equity dividends paid | - | - | - | (1,002) | - | - | - | (1,002) |
| Realised gains on investments | - | - | - | - | 906 | - | - | 906 |
| Unrealised loss on investments | - | - | - | - | - | (527) | - | (527) |
| Management fee charged to capital | - | - | - | - | (149) | - | - | (149) |
| Revenue loss after taxation for the period | - | - | - | - | - | - | (127) | (127) |
| Total loss after taxation | - | - | - | - | 757 | (527) | (127) | 103 |
| ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | --------- | |
| At 31 August 2015 | 251 | 16,673 | 4 | 6,011 | 756 | 4,102 | (1,081) | 26,716 |
| ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | --------- | |
* 105,941 shares were bought back in the period with a nominal value of £1,059.41.
Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 31 August 2015 were £5.69 million. The accompanying notes are an integral part of these financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the year ended 29 February 2016 (audited)
| Ordinary Shares | Called up | Share | Capital | Special | Capital | Capital | Revenue | Total |
| share | premium | redemption | reserve | reserve | reserve | reserve | ||
| capital | reserve | realised | unrealised | |||||
| £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 loss on investments | - | - | - | - | - | (1,976) | - | (1,976) |
| Management fee charged to capital | - | - | - | - | (308) | - | - | (308) |
| Revenue loss after taxation for the period | - | - | - | - | - | - | (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 |
| ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | ---------- |
* 366,182 shares were bought back in the period with a nominal value of £3,661.82
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.
CONDENSED STATEMENT OF CASH FLOWS
for the six month period to 31 August 2016 (unaudited)
| 31 August 2016 | 31 August 2015 | 29 February 2016* | |
| (unaudited) | (unaudited) | (audited) | |
| £000 | £000 | £000 | |
| Return/(loss) on ordinary activities before taxation | 2,347 | 103 | (856) |
| Realised (gains) on investments | (228) | (906) | (1,676) |
| Unrealised (gains)/losses on investments | (2,328) | 527 | 1,976 |
| (Increase)/decrease in debtors | (34) | 10 | 6 |
| Increase/(decrease) in creditors | (8) | 8 | 50 |
| ----------- | ----------- | ----------- | |
| Net cash generated from/(used in) operating activities | (251) | (258) | (500) |
| Cash flows from investing activities | |||
| Purchase of investments | (7,309) | (5,549) | (11,321) |
| Disposal of investments | 5,139 | 2,014 | 5,534 |
| ----------- | ----------- | ----------- | |
| Net cash from investing activities | (2,170) | (3,535) | (5,787) |
| Cash flows from financing activities | |||
| Proceeds from share issues | 5,202 | 3,677 | 8,616 |
| Share issue costs | (128) | (89) | (170) |
| Purchase of own shares for cancellation | (198) | (111) | (372) |
| Equity dividends paid | (1,353) | (1,002) | (1,502) |
| ----------- | ----------- | ----------- | |
| Net cash from financing activities | 3,523 | 2,475 | 6,572 |
| ----------- | ----------- | ----------- | |
| Increase/(decrease) in cash and cash equivalents | 1,102 | (1,318) | 285 |
| ----------- | ----------- | ----------- | |
| Analysis of net funds | |||
| Net cash at beginning of period/year | 6,994 | 6,709 | 6,709 |
| Net cash inflows/(outflows) | 1,102 | (1,318) | 285 |
| Net cash at end of period/year | 8,096 | 5,391 | 6,994 |
* 29 February 2016 cash flow represents annual results
EXPLANATORY NOTES
for the six month period to 31 August 2016 (unaudited)
- ACCOUNTING POLICIES
Basis of preparation
The Company has prepared its half-yearly financial results for the six month period ending 31 August 2016 in accordance with Financial Reporting Standard 104 (FRS104) and the Statement of Recommended Practice for "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (the SORP).
The same accounting policies and methods of computation are followed in the half-yearly financial results as compared with the most recent annual financial statements.
Investments
Listed investments and investments traded on AIM are stated at closing bid market prices. Investments are recognised and derecognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are measured initially at fair value.
Investments will be managed and their performance evaluated on a fair value basis in accordance with a documented investment strategy and information about them is provided internally on that basis to the Board. Accordingly, as prescribed by FRS 102 s.11 and s.12, the investments are designated as fair value through profit or loss. Subsequent to initial recognition, listed investments are valued using bid market prices as required for level (a) investments under FRS 102.
Unit Trust investments, classified as level (b) investments, are valued at the price of the most recent transaction. Unquoted investments, classified as level (c) investments, are valued in accordance with European Private Equity and Venture Capital Association Reporting Guidelines.
Gains and losses arising from changes in fair value (realised and unrealised) are included in the net profit or loss for the period as a capital item in the income statement and are ultimately recognised in the unrealised capital reserve or realised capital reserve (as appropriate).
Financial Instruments - fair value measurement hierarchy
FRS 102 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement.
The fair value hierarchy has the following levels:
| Level | Methodology |
| (a) | The best evidence of fair value is a quoted price for an identical asset in an active market. Quoted in an active market in this context means quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted price is usually the current bid price. |
| (b) | When quoted prices are unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If the entity can demonstrate that the last transaction price is not a good estimate of fair value (e.g. because it reflects the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale), that price is adjusted. |
| (c) | If the market for the asset is not active and recent transactions of an identical asset on their own are not a good estimate of fair value, an entity estimates the fair value by using a valuation technique. The objective of using a valuation technique is to estimate what the transaction price would have been on the measurement date in an arm's length exchange motivated by normal business considerations. |
| Level (a) Investments £'000 | Level (b) Investments £'000 | Level (c) Investments £'000 | Total Investments £'000 | |
| Six months ended 31 August 2016 (unaudited) | 21,421 | 3,921 | 2,415 | 27,757 |
| Year ended 29 February 2016 (audited) | 17,155 | 3,899 | 1,977 | 23,031 |
| Six months ended 31 August 2015 (unaudited) | 16,665 | 2,653 | 2,140 | 21,458 |
Recognition of impairment and realised losses
If an investment has been impaired such that there is no realistic expectation that there will be a full return from the investment, the loss is treated as a permanent impairment and is recognised as a realised loss in the financial statements.
Determining fair value
Where the classification of a financial instrument requires it to be stated at fair value, this is determined by reference to the quoted bid price in an active market wherever possible. Where no such active market exists for the particular asset or liability, the Company uses a valuation technique to arrive at the fair value, including the use of prices obtained in recent arms-length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants. 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.
Key judgements and estimates
The preparation of the financial statements requires the Board to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Key estimation uncertainties mainly relate to the fair valuation of unquoted investments, which are based on historical experience and other factors that are considered reasonable including the transfer price of the most recent transaction on an arm's length basis. The estimates are under continuous review with particular attention paid to the carrying value of the investments. The process of estimation is also affected by the determination of the fair value hierarchy.
Income
Equity dividends are taken into account on the ex-dividend date, net of any associated tax credit. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to reflect the effective yield, provided there is no reasonable doubt that payment will be received in due course. All other income, including deposit interest receivable, is recognised on an accruals basis. All revenue and capital items in the unaudited income statement derive from continuing operations. There are no other items of comprehensive income other than those disclosed in the unaudited income statement.
Expenditure
All expenditure is accounted for on an accruals basis. 75% of investment management fees are allocated to the capital reserve realised and 25% to the revenue account in line with the Board's expected long term split of investment returns in the form of capital gains to the capital column of the income statement. All other expenditure is charged to the revenue account.
Capital Reserves
Realised profits and losses on the disposal of investments, losses realised on investments considered to be permanently impaired and 75% of investment management fees are accounted for in the capital reserve realised.
Increases and decreases in the valuation of investments held at the period end are accounted for in the capital reserve unrealised.
Operating Segments
There is considered to be one operating segment as reported to the chief operating decision maker being investment in equity and debt securities.
Taxation
The tax effect of expenditure is allocated between capital and revenue on the same basis as the particular item to which it relates, using the Company's effective rate of tax for the period. Any liability to corporation tax is based on net revenue for the period.
Dividends
Only dividends paid during the period are deducted from revenue or capital reserves. Dividends which are declared subsequent to the balance sheet date will not be shown as a liability in the balance sheet.
Summary of dividends paid in the six months to 31 August 2016 and the financial year ending 29 February 2016 are detailed below:
| Six months ended 31 August 2016 (unaudited) £'000 | Year ended 29 February 2016 (audited) £'000 | |
| Final capital dividend of 4 pence per share for the year ended 28 February 2015 paid on 28 August 2015 | - | 1,002 |
| Interim capital dividend of 2 pence per share for the half year ended 31 August 2015 paid on 11 December 2015 | - | 500 |
| Final capital dividend of 4 pence per share for the year ended 29 February 2016 paid on 20 July 2016 | 1,353 | - |
| Total | 1,353 | 1,502 |
Functional Currency
In accordance with FRS 102 the Company is required to nominate a functional currency, being the currency in which the Company predominantly operates. The Board has determined that Sterling is the Company's functional currency. Sterling is also the currency in which these accounts are presented.
Repurchase of shares to hold in Treasury
The cost of repurchasing shares into treasury, including the related stamp duty and transaction costs is charged to capital reserves and dealt with in The Reconciliation of Movements in Shareholder's Funds. Share repurchase transactions are accounted for on a trade date basis. Where shares held in treasury are subsequently cancelled, the nominal value of those shares is transferred out of share capital and into capital redemption reserve.
Should shares held in treasury be reissued, the sale proceeds will be treated as a realised profit up to the amount of the purchase price of those shares and will be transferred to capital reserves. The excess of the sale proceeds over the purchase price will be transferred to share premium.
Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments of the Company at the 31 August 2016.
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.
Reserves
A description of each of the reserves follows:
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 and losses on realisation of investments.
Capital Reserve Unrealised
Unrealised gains and losses on investments.
Revenue Reserve
Net revenue profits and losses of the Company.
2. EARNINGS PER SHARE (BASIC AND DILUTED)
The gain per ordinary share of 6.95 pence at 31 August 2016 (31 August 2015: gain 0.41 pence and 29 February 2016: loss 3.39 pence) is based on the profit after tax for the period of £2,347,000 (31 August 2015: profit £102,694 and 29 February 2016: loss £855,742) and the weighted average number of ordinary shares in issue over the period of 33,764,458 (31 August 2015: of 24,771,103 and 29 February 2016: 25,200,417).
- CAUTIONARY STATEMENT
The results should not be taken as a guide to the results for the financial period ending 28 February 2017. This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be considered as a profit forecast.
- NET ASSET VALUE PER SHARE
The net asset value per ordinary share at 31 August 2016 of 104.58 pence (31 August 2015: 106.62 pence and 29 February 2016: 101.18 pence) after deducting the 4.00 pence dividend paid in August 2015 is based on net assets of £35,723,815 (31 August 2015: £26,716,143 and 29 February 2016: £29,854,033) and on 34,159,249 shares (31 August 2015: 25,058,142 shares and 29 February 2016: 29,507,084 shares), being the number of ordinary shares in issue as at 31 August 2016.
- PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in the 31 August 2016 income statement, balance sheet, cash flow statement and reconciliation of movements in shareholders' funds does not constitute full financial statements and has not been audited.
- PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks facing the Company relate to the Company's investment activities and include regulatory risk, investment risk and discount volatility. Other risks faced by the Company include market risk, currency risk, interest rate risk, liquidity risk and credit risk. These risks and the way in which they are managed are described in more detail in the Company's annual report and accounts for the year ended 29 February 2016. The Company's principal risks and uncertainties have not changed materially since the date of that report.
7. TRANSACTIONS IN SHARES
Buybacks
In total, the Company repurchased 197,045 shares during the six month period ending 31 August 2016 at a total cost of £197,668
Share Issues
In total, the Company issued 4,849,210 new shares during the six month period ending 31 August 2016 raising net proceeds of £5,074,419.
- RELATED PARTY TRANSACTIONS
Giles Hargreave, a director of the Company, is the chairman of Hargreave Hale Limited and has an interest in excess of 7% in that company. As such, Hargreave Hale Limited is considered to be a related party to the Company. Hargreave Hale Limited acts as investment manager, administrator, custodian and provides one non-executive director and the company secretary to the Company. All of the 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 assets of the Company, calculated and payable quarterly in arrears. Fees for the half-year are £238,524 (2015: £198,739). In relation to the other support functions described above, Hargreave Hale Limited also provides administration services, custody services, company secretarial services and one non-executive director and receive fees of £40,000 per half-year (2015: £38,500) in relation to these services. Of those fees, £137,010 (2015: £105,240) was still owed at the half-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 by Hargreave Hale in the first half of the financial year under the indemnity.
During the half year, the Company issued 4,849,210 ordinary shares (nominal value £48,492) in a joint offer for subscription which resulted in gross funds being received of £5,201,811. As marketing adviser and receiving agent to the Company, and in return for covering the costs of the joint offer, Hargreave Hale Limited was entitled to 3.5% of the gross proceeds (£182,063), often referred to as the 'premium'. From this, Hargreave Hale Limited paid for the allotment of additional shares to investors with a value of £54,672 and introducer commission of £675, resulting in net fees payable to Hargreave Hale of £126,716.
- GOING CONCERN
After making enquires, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
10. POST BALANCE SHEET EVENTS
There are no post balance sheet events to disclose
COMPANY INFORMATION
| SECRETARY AND REGISTERED OFFICE Stuart Brookes Accurist House 44 Baker Street London W1U 7AL | DIRECTORS David Hurst-Brown, Chairman Giles Hargreave Philip Cammerman |
| MANAGER Hargreave Hale Limited Accurist House 44 Baker Street LONDON W1U 7AL | AUDITORS BDO LLP 55 Baker Street London W1U 7EU |
| REGISTRARS Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA | VCT STATUS ADVISER Philip Hare & Associates LLP 4-6 Staple Inn High Holborn London WC1V 7QH |
| SOLICITORS Howard Kennedy No. 1 London Bridge London SE1 9BG | BROKERS Singer Capital Markets Limited One Hanover Street London W1S 1YZ COMPANY REGISTRATION NUMBER 05941261 in England and Wales |
For further information please contact:
| STUART BROOKES |
| Company Secretary |
| Hargreave Hale AIM VCT2 plc |
| 01253 754740 |
3 November 2016