Final Results

Final Results

Hargreave Hale AIM 1

Hargreave Hale AIM VCT1 plc

Preliminary Announcement of Final Results for the year ending 30 September 2015.

FINANCIAL HIGHLIGHTS

Ordinary Shares (as at 30 September):   2015   2014
 
Net asset value per share 74.64p 80.31p
Cumulative distributions paid per share since launch 38.00p 33.75p
Total return per share 112.64p 114.06p
 
Annual Returns per share (basic and diluted):
Revenue return (0.40)p (0.41)p
Capital return (0.66)p 10.91p
Combined return (1.06)p 10.50p
 
Dividends per share:
Interim paid 1.75p 1.75p
Final proposed/paid 2.25p 2.50p
Total dividend for year 4.00p 4.25p
 
Ongoing Expense Ratio 2.24% 2.39%
 
Performance Benchmark:
FTSE AIM All-share Index (results rebased to 100 at 29 October 2004) 75.24 77.82

CHAIRMAN’S STATEMENT



Introduction

At 30 September 2015 the net asset value (“NAV”) was 74.64 pence which after adjusting for the dividends paid gives a Total Return since inception of 112.64 pence. The loss per ordinary share for the year was 1.06 pence per share (comprising a revenue loss of 0.40 pence and capital losses of 0.66 pence).

Investments

The investment manager, Hargreave Hale Limited, invested a further £4.84 million in 18 Qualifying Companies during the year. The fair value of Qualifying Investments at 30 September 2015 was £25.53 million invested in 63 AIM companies and 7 unquoted companies. £10.59 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 1.75 pence was paid on 17 July 2015 (interim 2014 – 1.75 pence).

A final dividend of 2.25 pence is proposed (2014 – 2.50 pence) which, subject to shareholder approval at the Annual General Meeting will be paid on 20 January 2016, to ordinary shareholders on the register on 18 December 2015.

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, 1,173,259 shares were purchased during the year at an average price of 72.38 pence per share. A further 172,797 shares have been purchased since the year end at an average price of 73.46 pence per share.

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

On 18 August 2015 the joint offer for subscription for new shares in Hargreave Hale AIM VCT 1 plc and AIM VCT 2 plc (launched in October 2014) was closed fully subscribed with £10m raised for Hargreave Hale AIM VCT 1 plc.

New Joint Offer for Subscription of ordinary shares

The Directors of the Company announced on 2 December 2015 the launch of a new joint offer for subscription for new shares in both Hargreave Hale AIM VCTs to raise up to £15 million in Hargreave Hale AIM VCT 1 plc and £10 million in Hargreave Hale AIM VCT 2 plc.

The offer is to be approved by shareholders of the Company at a General Meeting on 12 January 2016 and is open to both new and existing shareholders.

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 89.35% and have satisfied all the relevant tests.

Administration Charges

As disclosed in the Interim Report your Board, together with that of Hargreave Hale AIM VCT 2 plc, has agreed to an increase in the Company’s administration fee of £20,000 per annum per VCT. The proposed increase in the administration fee is the first since the company was incorporated in 2004.

Changes to VCT Rules

You may be aware that considerable changes have been made to the VCT rules in order for the VCT scheme to be granted a State Aid exemption by the EU and some of these changes have more draconian consequences, than hitherto. We have examined the effects that these might have on your Company and conclude that of the companies in which we invested in the fourteen months to 31 August 2015 over 80 per cent. would have qualified under the new rules. We think that the only major change that will affect us is that we will no longer be able to make non qualifying investments in AIM listed companies. However until HMRC issue their guidance notes we will proceed with caution.

Outlook

Having emerged from the political uncertainties of a general election and the prospect of a Greek exit from the Eurozone we were hit by the decision of the Chinese authorities to make a downward realignment of their currency to the US dollar. The markets have been turbulent on the back of the evident slowdown in the Chinese economy. Your Company still has a significant amount of non-qualifying investments held in cash and other readily realisable investments which would allow the Company to adopt a more defensive posture should market sentiment further deteriorate.

The UK and US economies seem to be making satisfactory progress and whilst a rise in interest rates on either side of the Atlantic may dampen growth this seems set to carry on for the next couple of years. However the markets look to be volatile as some of our other trading partners go through periods of turmoil, in particular the Eurozone and China. The Chinese curse “May you live in interesting times” seems particularly apposite at the moment.

The manager invests for the long term in good quality, well run companies with strong growth prospects, which in the long term should prosper even if the share prices fluctuate in the meantime.

Sir Aubrey Brocklebank BT

Chairman

Date: 10 December 2015

STRATEGIC REPORT

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.

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 three distinct asset classes:

  • Equity investments in Qualifying Companies, referred to as “Qualifying Investments”. Qualifying Investment 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 ISDX quoted companies (formally PLUS) and private companies that meet the investment criteria summarised below; and
  • vary in size from £50,000 to £1 million.
  • Sovereign debt, 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 £6.0 billion under administration and £5.2 billion under managed accounts. Hargreave Hale has been managing investments in UK Small and Micro Cap companies for 17 years and VCTs for 11 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, most recently the 2012 Quoted Company ‘Investor of the Year’ Award. 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 2,066% (to 30 September 2015) 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 £3.1 billion, of which approximately £2.2 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 gilts, 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.

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.

Business Review

A review of the Company’s business during the year and consideration of its future development and prospects are contained in the chairman’s statement and investment manager’s report. The financial position of the Company at 30 September 2015 was strong with no debt or gearing.

Overview of the year

In the financial year under review, net assets increased from £29.3m to £35.9m. In this period the NAV per share decreased from 80.31p to 74.64p. This resulted in a loss to ordinary shareholders of 1.42 pence per share after adjusting for dividends paid of 4.25 pence per share.

Dividends

An interim dividend of 1.75 pence was paid on 17 July 2015 and a final dividend of 2.25p has been proposed.

Buybacks

In total, 1,173,259 shares were purchased during the year at an average price of 72.38 pence per share.

Investments

As a whole, during the year, the qualifying portfolio increased from £23.3m to £25.5m. The Company invested in 19 qualifying investments at a cost of £4.8m, of which 10 were investments into new Qualifying Companies.

For further details please refer to the investment managers report.

Earnings per Share

The Company’s earnings per share for the year ended 30 September 2015 was -1.06 pence per share (2014: 10.50p).

Ongoing Expenses

The ongoing charges of the Company for the financial year under review represented 2.24% (2014: 2.39%) of average net assets. Shareholders should note this ratio has been calculated in accordance with the Association of Investment Companies’ (“AIC”) recommended methodology.

Key Performance Indicators

At each board meeting, the Directors consider a number of performance measures to assess the Company’s success in achieving its objectives. The key performance indicators (KPIs) are established industry measures and are as follows:

  • Net asset value;
  • Total return;
  • 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.

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 principal risks facing the Company relate to the Company’s investment activities and include risks stated below:

i. Regulatory 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. The Board receives a half yearly compliance report prepared by Philip Hare & Associates LLP to monitor compliance with regulations;

ii. Investment risk – Many of the Company’s investments are held in small to medium sized unlisted private companies or AIM listed companies making them by nature risky investments. The Directors aim to mitigate the risk by ensuring the maximum initial investment in any single company does not exceed 15% of the Company’s net assets; and

iii. 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.

Additional risks and further details of the above risks and how they are managed are explained in Note 17 of the financial statements.

Long term viability statement

In accordance with provision C.2.2 of the 2014 revision of the Code, the Directors have assessed the prospect of the Company 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:

i. falls in line with the Company continuation vote and investors minimum holding period to retain tax relief; and

ii. covers a sufficient period for all funds raised to comply with HMRC investment test rules.

The Directors have taken account of the Company’s current position and the potential impact of the principal risks documented in this report. 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 5 years. In making this statement the Directors have considered the current position of the Company, carried out a robust assessment of the principal risks facing the Company in severe but reasonable scenarios and the effect of any mitigating actions and considered the potential impact of these risks on the business model, future performance and liquidity of the Company.

Additional disclosures required by the Companies Act

Employees

The Company had no employees during the year and all Directors are male.

By order of the Board of Directors.

STUART BROOKES

Company Secretary

Date: 10 December 2015

INVESTMENT MANAGER’S REPORT

Introduction

This report covers the 2014/15 financial year, 1 October 2014 to 30 September 2015. 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 dividends 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 financial year featured multiple episodes of elevated volatility across global financial markets as markets responded to weakness in the Eurozone economies, Grexit, disinflation/deflation and collapsing oil prices. More recently, the focus has shifted to the slowing Chinese economy and the implications for global growth, the devaluation of the Renminbi and weakness in emerging market equities. Overlying all of this was the prospect of the first increase in US interest rates.

Whilst a sluggish China has clear implications for certain industries (commodities, autos and capital goods), we still believe the outlook for small UK companies looks healthy with the impact of lower energy prices, strong real wage growth and low unemployment all feeding through to increased consumer confidence and consumer spending. Business investment has started to pick up, which should in turn support UK domestic growth and improved productivity. We are yet to see what impact the living wage will have on profit margins within the leisure industry; however, management teams appear confident of their ability to pass the cost burden through to consumers through modest price increases. Domestically orientated mid and small caps have outperformed off the back of strong corporate news-flow. While certain parts of the portfolio are exposed (in some cases materially) to the cyclical headwinds referred to above, our predominant focus on UK centric small businesses with secular growth leads us to believe that our long term returns are unlikely to be materially influenced by events in China. We therefore continue to deploy capital into attractively valued UK centric companies that should benefit from a business friendly government and a healthy UK economy.

Performance

In the twelve months to 30 September 2015, the NAV decreased from 80.31 pence per share to 74.64 pence per share. After adjusting for the 4.25 pence per share distributed to shareholders through dividend payments, the Company recorded an adjusted loss of 1.42 pence per share (-1.8%). During the same period, the FTSE 100 Total Return Index fell 5.1%, whilst the FTSE AIM All-Share fell 3.3%.

The qualifying investments made a net loss of 0.42 pence per share with 31 out of the 71 making gains, 3 unchanged and 37 falling in value. The balance was a mixture of non-qualifying portfolio gains (0.17 pence per share), costs, income and small gains made through buy backs.

Cohort was the biggest driver of gains within the portfolio (+85.8%, +2.07 pence per share) after reporting results for the year to 30 April 2015 that were materially ahead of expectations. Contract wins and an earnings enhancing acquisition have further boosted earnings and sentiment towards the shares. TrakM8 was another to make a significant contribution (+174.3%, +1.65 pence per share) after reporting a 94% increase in 2015 revenues as a result of strong organic and acquisition led growth. Adjusted earnings per share climbed 66% year on year. A strong outlook statement guided the market to material upgrades for 2016. Other stocks that made a significant contribution included Abcam (+44.4%, +0.81 pence per share), TLA (+53.9%, +0.65 pence per share) and Vision Direct (+148.3%, +0.67 pence per share).

The biggest losses within the period came from Flowgroup (-71.3%, -1.65 pence per share), Audioboom (-78.8%, -1.76 pence per share) and Pressure Technology (-74.8%, -1.23 pence per share).

We made 19 qualifying investments over the twelve months, which comprised 11 additional investments into existing qualifying companies, five secondary placings into listed companies, two IPOs and one private investment. We invested a total of £4.84m into qualifying investments over the period.

Within the portfolio of qualifying investments, Vista Partners completed their acquisition of Advanced Computer Software, realising a gain of £1.47m (+724%). Over the period we reduced the size of our investments in Premaitha Health, Audioboom, Illika, Imaginatik, TrakM8 and Cohort following particularly strong runs in the shares. We also reduced our positions in Nektan following its listing on AIM, Tangent Communications, which continues to report difficult trading and Pressure Technologies.

Portfolio Structure

The VCT is comfortably through the HMRC defined investment test and ended the period at 89.35% invested as measured by the HMRC investment test. By market value, the VCT had 71.03% weighting to qualifying investments.

The allocation to non-qualifying equity investments increased from 6.5% to 13.8% as we sought to deploy more of the proceeds of the 2014/15 offer into the market following the correction in late August. At the same time, we further increased our investment in the Marlborough Special Situations Fund, lifting the weighting from 1.0% to 4.4% of net assets. Cash ended the period much how it started with a 10.5% weighting (versus 10.9% as at 30 September 2014). This weighting fluctuation significantly over the period as the Company received funds from the 2014/15 offer and gradually deployed the cash. Fixed income as a percentage of the fund fell from 2.7% to 0.8%.

The HMRC investment tests are set out in Chapter 3 of Part 6 Income Tax 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 Company.

Post Period Update

Five additional qualifying investments have been made in Belvoir, Gfinity, Mirada, Science in Sports and Haydale Graphene following the period end.

For further information please contact:

Stuart Brookes

Company Secretary

Hargreave Hale AIM VCT1 plc

01253 754740

Date: 10 December 2015

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.

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 (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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) subject to any material departures disclosed and explained in the financial statements; 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, and understandable and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

Directors’ Responsibility Statement pursuant to DTR4

Sir Aubrey Brocklebank (Chairman), David Brock and Giles Hargreave, the Directors confirm to the best of their knowledge:

  • The financial statements have been prepared in accordance with UK Generally Accepted Accounting

Practice 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.

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’ REMUNERATION

The Directors’ Remuneration Report was approved by the Board of Directors on 10 December 2015 and will be further subject to an advisory vote at the Annual General Meeting being held on the 12 January 2016 and every year thereafter.

INCOME STATEMENT

For the year ended 30 September 2015

Note  
  Revenue   Capital   Total
£000 £000 £000
Net gain on investments held at fair value through profit or loss - 88 88
Income 240 - 240
-------- -------- --------
240 88 328
-------- -------- --------
Management fee (127) (381) (508)
Other expenses (290) - (290)
-------- -------- --------
(417) (381) (798)
-------- -------- --------
(Loss) on ordinary activities before taxation (177) (293) (470)
Taxation - - -
-------- -------- --------
(Loss) after taxation (177) (293) (470)
-------- -------- --------
(Loss) per share basic and diluted 2 (0.40)p (0.66)p (1.06)p

 

-------- -------- --------

INCOME STATEMENT

For the year ended 30 September 2014

Note  
  Revenue   Capital   Total
£000 £000 £000
Net gain on investments held at fair value through profit or loss - 3,953 3,953
Income 230 - 230
-------- -------- --------
230 3,953 4,183
-------- -------- --------
Management fee (101) (302) (403)
Other expenses (266) - (266)
-------- -------- --------
(367) (302) (669)
-------- -------- --------
(Loss)/Profit on ordinary activities before taxation (137) 3,651 3,514
Taxation - - -
-------- -------- --------
(Loss)/Profit after taxation (137) 3,651 3,514
-------- -------- --------
(Loss)/Profit per share basic and diluted 2 (0.41)p 10.91p 10.50p

 

-------- -------- --------

The total column of these statements 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.

BALANCE SHEET Company registration number: 5206425

As at 30 September 2015 (in England and Wales)

    2015   2014
Note        
£000 £000
 
Fixed assets
Investments at fair value through profit or loss 32,353 26,248
-------- --------
 
Current assets
Debtors 32 35
Cash at bank 3,764 3,203
-------- --------
3,796 3,238
 
Creditors: amounts falling due within one year (208) (193)
-------- --------
Net current assets 3,588 3,045
-------- --------
Net assets 35,941 29,293
-------- --------
 
Capital and Reserves
Called up share capital 482 365
Share premium 10,987 1,308
Capital redemption reserve 16 4
Special reserve 22,044 24,734
Capital reserve – realised (3,506) (4,917)
Capital reserve – unrealised 6,254 7,958
Revenue reserve (336) (159)
-------- --------
Total shareholders’ funds 35,941 29,293
-------- --------
 
Net asset value per share 3 74.64p 80.31p

These financial statements were approved and authorised for issue by the Board of Directors on 10 December 2015 and signed on its behalf by

Sir Aubrey Brocklebank Bt

Chairman

The accompanying notes are an integral part of these financial statements.

CASH FLOW STATEMENT

For the year ending 30 September 2015

      2015   2014
 
    £000     £000
Net cash (outflow) from operating activities (540) (428)
Net cash (outflow) from investment activities (6,017) (4,295)
Dividends paid (1,840) (1,320)
--------- ---------
(8,397) (6,043)
 
Net cash inflow from financing activities 8,958 7,169
--------- ---------
Increase in cash 561 1,126
--------- ---------

RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS

For the year ending 30 September 2015

 

 

Share Capital

 

Share Premium

  Capital Redemption Reserve   Capital Reserve Realised   Capital Reserve Unrealised  

Special Reserve

 

Revenue Reserve

 

Total

£000 £000 £000 £000 £000 £000 £000 £000
At 1 October 2014 365 1,308 4 (4,917) 7,958 24,734 (159) 29,293
 
Share buybacks (12) 12 (850) (850)
Share Issues 129 9,871 10,000
Issue Costs (192) (192)
Equity dividends paid                       (1,840)       (1,840)
Realised gains on investments 1,792 1,792
Unrealised gains on investments (1,704) (1,704)
Management fee charged to capital (381) (381)
Revenue loss after taxation for the year                           (177)   (177)
Total loss after taxation 1,411 (1,704) (177) (470)
 
------ --------- ------ --------- --------- --------- ------ ---------
At 30 September 2015 482 10,987 16 (3,506) 6,254 22,044 (336) 35,941
------ --------- ------ --------- --------- --------- ------ ---------

Reserves available for distribution are capital reserve realised, special reserve and revenue reserve.

RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS

For the year ending 30 September 2014

 

 

Share Capital

 

Share Premium

  Capital Redemption Reserve   Capital Reserve Realised   Capital Reserve Unrealised  

Special Reserve

 

Revenue Reserve

 

Total

£000 £000 £000 £000 £000 £000 £000 £000
At 1 October 2013 304 9,186 884 (5,606) 4,996 10,188 (22) 19,930
 
Share buybacks (32) 32 (409) (409)
Subscriptions 93 7,485 7,578
Capital Reduction (15,363) (912) 16,275 -
Equity dividends paid                       (1,320)       (1,320)
Realised gains on investments 991 991
Unrealised gains on investments 2,962 2,962
Management fee charged to capital (302) (302)
Revenue loss after taxation for the year                           (137)   (137)
Total profit after taxation 689 2,962 (137) 3,514
 
------ --------- ------ --------- --------- --------- ------ ---------
At 30 September 2014 365 1,308 4 (4,917) 7,958 24,734 (159) 29,293
------ --------- ------ --------- --------- --------- ------ ---------

Reserves available for distribution are capital reserve realised, special reserve and revenue reserve.

Notes to the preliminary announcement

1. Basis of Preparation

The financial information set out in this preliminary announcement does not constitute the Company’s statutory accounts for the years ended 30 September 2015 or 30 September 2014. Statutory accounts for the year ended 30 September 2014 have been filed with the Registrar of Companies and those of the year ended 30 September 2015 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 30 September 2014 and 30 September 2015 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 and have elected to prepare the Company’s financial statements in accordance with UK GAAP and the Statement of Recommended Practice (SORP) for Financial Statements of Investment Trust Companies issued in January 2009. 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. 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.

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 30 September 2015 and 30 September 2014. The full statutory annual accounts will be published in December 2015. Copies may in due course be obtained during normal business hours from Hargreave Hale Limited, 9-11 Neptune Court, Hallam Way, Blackpool, FY4 5LZ.

The Annual General Meeting of the Company will be held at the Company’s registered office on 12 January 2016 at 12.00pm.

2. Earnings per share (basic and diluted)

Revenue return per ordinary share based on a net revenue loss on ordinary activities after taxation of £176,700 (2014 - £136,659 loss) and on 44,087,008 (2014 –33,452,489) ordinary shares, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share based on a net capital loss of £292,746 (2014 – £3,650,579 profit) for the year and on 44,087,008 (2014 – 33,452,489) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

3. Net asset value per share

The net asset value per ordinary share at 30 September 2015 of 74.64p (2014 – 80.31) is based on net assets of £35,941,073 (2014 - £29,293,115) and on 48,152,281 (2014 – 36,473,134) ordinary shares being the number of shares in issue at year end.

4. Principle 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 Strategic Report.

5. Related party transactions

Hargreave Hale Limited

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 asset value of the Company, calculated and payable quarterly in arrears. Fees for the year are £507,556 (2014 – £403,037) as detailed in Note 3. 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 received fees of £78,500 (2014: £77,000) in relation to these services. Of those fees, £57,177 (2014: £48,585) 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 October 2014 and 30 September 2015 and no fees were waived between 1 October 2013 and 30 September 2014 under the indemnity.

Joint Offer for Subscription of Ordinary Shares

During the year, the Company issued 12,852,406 ordinary shares (nominal value £128,524) in a joint offer for subscription which resulted in gross funds being received of £10,000,000. 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 (£350,000), often referred to as the ‘premium’. From this, Hargreave Hale Limited paid for the allotment of additional shares to investors with a value of £157,442 and introducer commission of £150, resulting in net fees payable to Hargreave Hale of £192,408.

The offer closed on 18 August 2015.

New Joint Offer for Subscription of Ordinary Shares

The Directors of the Company announced on 2 December 2015 the launch of a new joint offer for subscription for new shares in both Hargreave Hale AIM VCTs to raise up to £15 million in Hargreave Hale AIM VCT 1 plc and £10 million in Hargreave Hale AIM VCT 2 plc.

The offer is to be approved by shareholders of the Company at the General Meeting on 12 January 2016 and is open to both new and existing shareholders.

6. 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.

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.

INVESTMENT PORTFOLIO SUMMARY

Ordinary Share Fund

As at 30 September 2015

  Book Cost   Valuation   Valuation
Qualifying investments £000 £000 %
 
Cohort plc 651 1,830 5.66
Abcam plc 67 1,161 3.59
TrakM8 Holdings plc 124 1,139 3.52
K3 Business Technology Group plc 270 894 2.76
TLA Worldwide plc 300 877 2.71
Intercede Group plc 247 802 2.48
AnimalCare Group plc 220 800 2.47
Craneware plc 150 782 2.42
Mexican Grill Ltd (A Preference Shares) 185 769 2.38
Idox plc 135 729 2.25
Learning Technologies Group plc 663 726 2.24
Vertu Motors plc 600 670 2.07
Eagle Eye Solutions Ltd 541 643 1.99
Ideagen plc 410 561 1.73
Portr Ltd 550 550 1.70
Vision Direct Group Ltd 205 510 1.58
Quixant plc 160 504 1.56
Tasty plc 288 433 1.34
Angle plc 348 428 1.32
Kalibrate Technologies plc 323 428 1.32
CentralNic Group plc 293 424 1.31
Premaitha Health plc 432 411 1.27
Reneuron Group plc 534 402 1.24
EKF Diagnostics Holdings plc 300 400 1.24
DP Poland plc 333 380 1.17
Belvoir Lettings plc 453 374 1.16
MartinCo plc 225 362 1.12
Clearstar Inc 449 339 1.05
Science in Sport plc 240 336 1.04
Instem plc 297 323 1.00
ULS Technology plc 221 315 0.97
Hardide plc 635 314 0.97
Flowgroup plc 577 311 0.96
Fusionex International plc 138 309 0.95
Porta Communications plc 505 303 0.94
Microsaic Systems plc 350 298 0.92
Jelf Group plc 148 294 0.91
Universe Group plc 210 277 0.86
Verona Pharma plc 127 268 0.83
Mirada plc 444 257 0.79
Plastics Capital plc 250 255 0.79
Imaginatik plc 200 235 0.73
Electrical Geodesics Inc 200 231 0.71
APC Technology Group plc 498 224 0.69
Audioboom plc 166 209 0.65
Midatech Pharma plc 200 198 0.61
Everyman Media Group plc 172 188 0.58
Pressure Technologies plc 170 186 0.57
Synety Group plc 259 185 0.57
Gfinity plc 125 184 0.57
Lidco Group plc 220 147 0.45
Satellite Solutions Worldwide Group plc 154 141 0.44
Progressive Digital Media Group plc 173 137 0.42
Egdon Resources plc 158 131 0.40
Sphere Medical Holdings plc 407 120 0.37
Nektan Ltd 92 116 0.36
Redcentric plc 214 97 0.30
Mexican Grill Ltd (Ordinary Shares) 21 85 0.26
Ilika plc 68 78 0.24
Synairgen plc 140 78 0.24
Tangent Communications plc 337 70 0.22
Outsourcery Group Ltd 650 63 0.19
WANDisco plc 89 62 0.19
Mycelx Technologies Corporation plc 300 57 0.18
TP Group plc 185 52 0.16
Proxama plc 105 34 0.11
Mporium Group plc 301 14 0.04
Brigantes Energy Ltd 50 9 0.03
Corfe Energy Ltd 50 9 0.03
Infoserve Group plc* 0 0 0.00
Invocas Group plc* 169 0 0.00
-------- --------- -------
Total qualifying investments 19,471 25,528 78.89
 
* Actual holdings of less than £500.
 
Non-qualifying investments
 
MFM Special Situations Fund 1,528 1,584 4.90
-------- --------- -------
Total – Unit Trusts 1,528 1,584 4.90
 
Scottish Amicable Finance 8.5% 2049 256 277 0.86
-------- --------- -------
Total – UK corporate bonds 256 277 0.86
 
FC Fund Managers Ltd 300 300 0.93
Finsbury Food Group plc 150 254 0.79
Fulcrum Utility Services Ltd 129 245 0.76
Clipper Logistics plc 127 220 0.68
Mexican Grill Ltd (A Preference Shares) 128 196 0.61
Horizon Discovery Group plc 219 182 0.56
Eurocell plc 146 172 0.53
Greene King plc 171 167 0.52
Quixant plc 159 164 0.51
Cineworld Group plc 155 149 0.46
Reneuron Group plc 104 146 0.45
JD Sports Fashion plc 123 143 0.44
Legal and General Group plc 152 143 0.44
Workspace Group plc 136 141 0.44
Babcock International Group plc 143 137 0.42
Midatech Pharma plc 134 133 0.41
Tarsus Group plc 134 132 0.41
DS Smith plc 123 130 0.40
Dart Group plc 129 125 0.39
Puretech Health plc 152 117 0.36
Clinigen Group plc 84 110 0.34
Dixons Carphone plc 106 106 0.33
AA plc 116 99 0.31
Playtech plc 104 99 0.31
Restaurant Group plc 100 101 0.31
Learning Technologies Group plc 76 98 0.30
RPC Group plc 94 95 0.29
Everyman Media Group plc 85 91 0.28
Johnson Service Group plc 75 89 0.28
Melrose Industries plc 79 79 0.24
Plexus Holdings plc 125 78 0.24
Amerisur Resources plc 167 74 0.23
Mycelx Technologies Corporation plc 200 73 0.23
Mithril Capital plc 63 72 0.22
Audioboom plc 59 67 0.21
Eagle Eye Solutions Ltd 44 56 0.17
The Fulham Shore plc 37 51 0.16
Fevertree Drinks plc 26 47 0.15
Plethora Solutions Holdings plc 149 44 0.14
Mexican Grill Ltd (Ordinary Shares) 26 26 0.08
Abcam plc 3 3 0.01
Craneware plc 2 2 0.01
AnimalCare Group plc 1 1 0.00
CentralNic Group plc 1 1 0.00
Gfinity plc 0 1 0.00
Hardide plc 1 1 0.00
MartinCo plc 1 1 0.00
TLA Worldwide plc 0 1 0.00
ULS Technology plc 1 1 0.00
Verona Pharma plc 1 1 0.00
APC Technology Group plc* 0 0 0.00
Angle plc* 1 0 0.00
Premaitha Health plc* 1 0 0.00
Science in Sport plc* 1 0 0.00
-------- --------- -------
Total – non-qualifying equities 4,843 4,964 15.35
 
-------- --------- -------
 
Total – non-qualifying investments 6,627 6,825 21.11
--------- --------- -------
Total investments 26,098 32,353 100.00
--------- --------- -------
 
* Actual holdings 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 London Jersey
Clearstar Inc UK Cayman Islands Cayman Islands
Electrical Geodesics Inc UK USA USA
Fulcrum Utility Services plc UK South Yorkshire Cayman Islands
Fusionex International plc UK London Jersey
Mycelx Technologies Corporation plc UK USA USA
Nektan Ltd UK Gibraltar Gibraltar
Playtech plc UK Isle of Man Isle of Man
Tarsus Group Ltd UK Dublin Jersey
WANDisco plc UK Sheffield Jersey
Unlisted private companies:
Brigantes Energy Ltd - Middlesex UK
Corfe Energy Ltd - Middlesex UK
FC Fund Managers Ltd - Cornwall UK
Genagro Ltd - Jersey Jersey
Infoserve Group plc - Leeds UK
Invocas Group plc - Livingston UK
Mexican Grill Ltd - London UK
Portr Ltd - London UK
Vision Direct Group Ltd - London UK
Authorised unit trust:
Marlborough Special Situations Fund - Bolton UK

TOP TEN INVESTMENTS

As at 30 September 2015 (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. The net asset figures are drawn from audited accounts and net cash values are from published accounts in most cases.

Cohort plc           366.0p
Investment date   February 2006       Forecasts for year to   April 2016
Equity held 1.22%   Turnover (£’000) 115,300
Av. Purchase Price 130.2p Profit before tax (£’000) 12,100
Cost (£’000) 651 Net Cash (£'000) 19,700
Valuation (£’000) 1,830 Net Assets 30 April 2015 (£’000) 62,847
 
Company Description
Cohort is the parent company of four well established, wholly owned subsidiaries providing a wide range of services and products for UK and international companies. Mass designs, manufactures and supports electronic systems and software, and provides specialist services and training. SCS specialises in providing advice and support based on sound technical knowledge coupled with experience of its practical application. SEA delivers system engineering, software and electronic engineering services and solutions, including specialist design and manufacture. MCL designs, services and supports advanced electronic and surveillance equipment.
Abcam plc           580.5p
Investment date   November 2010       Forecasts for year to   June 2016
Equity held 0.10% Turnover (£’000) 161,200
Av. Purchase Price 34.7p Profit before tax (£’000) 52,300
Cost (£’000) 70 Net Cash (£'000) 58,700
Valuation (£’000) 1,164 Net Assets 30 June 2015 (£’000) 214,104
 
Company Description
Abcam plc produces and distributes research-grade antibodies via an online catalogue. The Company's customers include universities, research institutes and pharmaceutical and biotechnology companies in countries around the world.
Mexican Grill Ltd   8550.0p
Investment date   October 2009       Forecasts for year to   December 2015
Equity held 3.55% Turnover (£’000) -
Purchase Price 2850.0p Profit before tax (£’000) -
Cost (£’000) 360 Estimated Net Cash (£'000) -
Valuation (£’000) 1,076 Net Assets 31 December 2014 (£’000) 4,797
 
Company Description
Mexican Grill is a private company that operates 26 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.
TrakM8 Holdings plc           203.00p
Investment date   October 2013       Forecasts for year to   March 2016
Equity held 1.86% Turnover (£’000) 26,000
Av. Purchase Price 22.0p Profit before tax (£’000) 3,600
Cost (£’000) 124 Net Cash (£'000) -2,200
Valuation (£’000) 1,139 Net Assets 30 April 2015 (£’000) 11,626
 
Company Description
TrakM8 provides market leading Fleet Management Solutions and Vehicle Tracking Systems, Engineering Services and Telematics Devices to organisations worldwide. TrakM8’s customers range from corporate fleets to small businesses that all benefit from improved operational efficiency, driver safety and fuel economy from utilising TrakM8’s products and services.
K3 Business Technology Group plc           298.0p
Investment date   September 2005   Forecasts for year to   June 2016
Equity held 0.94%   Turnover (£’000) 90,000
Purchase Price 90.0p Profit before tax (£’000) 9,700
Cost (£’000) 270 Net Cash (£'000) -12,100
Valuation (£’000) 894 Net Assets 30 June 2015 (£’000) 53,495
 
Company Description
K3 Business Technology Group specialises in the provision of enterprise resource planning software, which encompasses supply chain management and e-business solutions products and services. More than 200 companies rely on K3 Business Solutions to advise, recommend, implement and support their critical business systems.
TLA Worldwide plc           58.50p
Investment date   November 2011       Forecasts for year to   December 2015
Equity held 1.05%   Turnover ($’000) 33,900
Av. Purchase Price 20.0p Profit before tax ($’000) 12,700
Cost (£’000) 300 Net Cash ($'000) 22,400
Valuation (£’000) 878 Net Assets 30 June 2015 ($’000) 10,414
 
Company Description
TLA Worldwide is an integrated sports representation and marketing business. The Company owns and operates sports agencies involved in athlete representation and sports marketing, with a focus primarily on professional baseball in the United States.
Learning Technologies Group           23.0p
Investment date   November 2014   Forecasts for year to   December 2015
Equity held 1.01% Turnover (£’000) 21,500
Purchase Price 20.6p Profit before tax (£’000) 4,000
Cost (£’000) 739 Net Cash (£'000) 3,000
Valuation (£’000) 824 Net Assets 31 December 2014 (£’000) 14,409
 
Company Description
Learning Technologies 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.
Intercede Group plc           107.0p
Investment date   May 2007       Forecasts for year to   March 2016
Equity held 1.54%   Turnover (£’000) 11,600
Av. Purchase Price 33.0p Profit before tax (£’000) -200
Cost (£’000) 247 Net Cash (£'000) 5,800
Valuation (£’000) 802 Net Assets 30 September 2015 (£’000) 4,680
 
Company Description
Intercede is the producer of the MyID® Identity and Credential Management System. MyID® is the only IDCMS software product that enables organisations to easily and securely manage the identitites of people and their associated identity credentials within a single, integrated, workflow driven platform. This includes enabling and managing: secure registration, biometric capture, application vetting and approval through to smart card personalisation, issuance and management.
AnimalCare Group plc           200.0p
Investment date   December 2007       Forecasts for year to   June 2016
Equity held 1.90% Turnover (£’000) 13,800
Av. Purchase Price 55.2p Profit before tax (£’000) 2,900
Cost (£’000) 221 Net Cash (£'000) 5,800
Valuation (£’000) 801 Net Assets 30 June 2015 (£’000) 20,991
 
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 principal product lines are licensed veterinary medicines and companion animal identification products and services.
Craneware plc           667.0p
Investment date   September 2007       Forecasts for year to   June 2016
Equity held 0.44% Turnover ($’000) 52,000
Av. Purchase Price 129.2p Profit before tax ($’000) 14,900
Cost (£’000) 152 Net Cash ($'000) 41,832
Valuation (£’000) 784 Net Assets 30 June 2015 ($’000) 47,630
 
Company Description
Craneware develops and sells billing software analysis tools for the United States healthcare sector. The Company’s software automates the checking process, aids in cash flow and revenue generation, and ensures accurate submission of claims and managing compliance risk.

Date: 10 December 2015

For further information please contact:

Stuart Brookes

Company Secretary

Hargreave Hale AIM VCT1 plc

01253 754740

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