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Our VCT

The Hargreave Hale AIM VCT was launched in 2004. To date, the VCT has rewarded investors with strong performance and an attractive tax-free dividend stream, in addition to the income tax relief available at the point of investment.

Introduction

The Hargreave Hale AIM VCT is an established venture capital trust that aims to generate capital gains and income from a diversified portfolio of qualifying investments, principally small UK companies listed on AIM, and to make distributions from capital or income to shareholders whilst maintaining its status as a VCT. In addition to investing in companies listed on AIM, the VCT may also invest in private companies and companies listed on the AQSE Growth Market. 

Qualifying companies are typically small companies which are either UK based or have a UK presence. Investments in qualifying companies often carry high levels of investment risk but offer the potential for significant capital appreciation. The Hargreave Hale AIM VCT is a venture capital trust and a public limited company, listed on the London Stock Exchange and incorporated in the United Kingdom. Information on the VCT’s investment objectives and investment policy can be found in the ‘Key policies’ tab above.

Directors of the Hargreave Hale AIM VCT

The board has six experienced non-executive directors, including five that are independent of the investment manager. Their duties include:

  • overseeing delivery of the investment strategy
  • monitoring compliance with VCT rules
  • maintaining corporate governance standards
  • producing reports and accounts for shareholders.

An experienced company chairman in both private and public companies and a former main board director of MFI Furniture Group plc, David joined the Board in September 2010. David is chairman of Draper Esprit VCT plc, Episys Group Ltd and and a non-executive director of Puma VCT 12 plc.

Oliver sits on the Board as part of his role as lead manager at the Investment Manager in relation to the Company.

Angela Henderson is a non-executive director at Credit Suisse Asset Management Limited and Macquarie Capital (Europe) Limited following an executive career in financial services. She has invested in and held non-executive board seats at small UK companies in the technology and asset management sectors and has previously served on the governing body of a London hospital foundation trust. She currently serves on the board of a healthcare charity and a school.

Justin Ward was appointed in November 2020 and assumed the role of chairman of the Audit Committee at the AGM in February 2021. Justin is a qualified Chartered Accountant and is a non-executive director and chairman of the Audit Committee of The Income and Growth VCT PLC and Roehampton Club Members Limited. He is also non-executive director of School Explained Limited and has previously served on the board of a number of private companies. Justin formerly led growth equity and private equity buyout transactions at CVC Capital Partners, Hermes Private Equity and Bridgepoint Development Capital.

Busola Sodeinde is a qualified Chartered Accountant and has spent most of her executive career in Financial Services. Until 2019, she was a Managing Director/CFO - Global Markets EMEA for State Street Bank. She was appointed to Board of Governors for Church Commissioners (and sits on its Audit & Risk Committee), is a non-executive director at The Ombudsman Services and a Trustee of The Scouts, where she chairs its People & Culture Committee. She is the founder of a social start up, and is also an activator supporting women-led ventures.

Megan McCracken is a non-executive director with State Street Trustees Limited, GB Bank, and Folk2Folk. Previously, she worked across financial services (HSBC and Citibank), consulting (PwC), and engineering (Boeing Satellite Systems). Megan is passionate about the future of financial services, including digital products and services, innovative technology, and sustainable investing. She has an MBA from MIT Sloan School of Management, a Bachelor of Science in Aerospace Engineering from the University of Notre Dame, and was awarded the Institute of Directors Chair’s Award.

Summary

31 July 2022

Ticker HHV
Launch Date September 2004
Year End September
Share Price (02.08.22) 62.75p
NAV per share  67.33p
Last Div. Paid (29.07.22) 1.00p
Next Div. N/A
Total Divs. Paid 71.20p
NAV Yield* (30.09.21) 7.37%
Discount to NAV (02.08.22) 6.80%
Number of Shares 267,122,498
Market Cap £167.62m
Charges (AMC) 1.70%
Ongoing Expenses 2.07%
SEDOL Number B02WHS0
ISIN Number GB00B02WHS05

*Please refer here for the NAV yields for the VCT over the previous five years. Please also refer to the 'Dividend policy' for more information on how the NAV yield is calculated. Please note that the NAV yield is not a forward-looking statement, refers to the past and is not a reliable indicator of future results. The NAV yield is not therefore a guide to the future performance of the VCT.

Investment objectives

The investment objectives of the Hargreave Hale AIM VCT are to generate capital gains and income from its portfolio and to make distributions from capital or income to shareholders whilst maintaining its status as a Venture Capital Trust.

Investment policy

The Hargreave Hale AIM VCT intends to achieve its investment objectives by making qualifying investments in companies listed on AIMprivate companies and companies listed on the AQSE Growth Market, as well as non-qualifying investments as allowed by the VCT Rules.

Qualifying investments

The investment manager will maintain a diversified portfolio of qualifying investments which may include equities and fixed interest securities as permitted by the VCT Rules. Investments will primarily be made in companies listed on AIM but may also include private companies that meet the investment manager's criteria and companies listed on the AQSE Growth Market. These small companies will be UK based or have a UK presence and, whilst high risk, will have the potential for significant capital appreciation.

To maintain its status as a VCT, the VCT must have 80% 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. To provide some protection against an inadvertent breach of this rule, the investment manager targets a threshold of approximately 85%.

Non-qualifying investments

The non-qualifying investments must be permitted by the VCT Rules and may include equities and exchange traded funds listed on the Main Market of the London Stock Exchange, fixed income securities, bank deposits that are readily realisable and the Marlborough Special Situations Fund. Subject to the investment controls noted below, the allocation to each of these investment classes will vary to reflect the investment manager's view of the market environment and the deployment of funds into qualifying companies. The market value of the non-qualifying investments (excluding bank deposits) will vary between nil and 50% of the net assets of the Hargreave Hale AIM VCT. The value of funds held in bank deposits will vary between nil and 30% of the net assets of the VCT.

Investment controls

Subject to the control framework described in the Hargreave Hale AIM VCT’s co-investment policy, the investment manager may make co-investments in investee companies alongside other funds, including other funds managed by CGFM.

Other than bank deposits, no individual investment shall exceed 10% of the Hargreave Hale AIM VCT’s net assets at the time of investment.

Investment process and strategy

The VCT management team follows a stock specific investment approach based on fundamental analysis of the investee company.

The broader CGFM team has significant reach into the market and meets with large numbers of companies each week. These meetings provide insight into investee companies, their end markets, products and services, or the competition. Investments are monitored closely and CGFM usually meets or engages with their senior leadership team at least twice each year. Where appropriate, the Hargreave Hale AIM VCT may co-invest alongside the other funds managed by CGFM, as noted above.

The key selection criteria used in deciding which investments to make include, inter alia:

  • the strength and depth of the management team;
  • the business strategy;
  • a prudent approach to financial management and forecasting;
  • a strong balance sheet;
  • profit margins, cash flows and the working capital cycle;
  • barriers to entry and the competitive landscape; and
  • the balance of risk and reward over the medium and long term.

Qualifying investments

Investments are made to support the growth and development of a qualifying company. The investment manager will maintain a diversified portfolio that balances opportunity with risk and liquidity. Qualifying investments will primarily be made in companies listed on AIM but may also include private companies and companies listed on the AQSE Growth Market. Seed funding is rarely provided and only when the senior leadership team includes proven business leaders known to CGFM.

Working with advisers, the investment manager will screen opportunities, often meeting management teams several times prior to investment to gain a detailed understanding of the relevant company. Investments will be sized to reflect the risk and opportunity over the medium and long term. In many cases, the investment manager will provide further funding as the need arises and the investment matures. When investing in private companies, the investment manager will shape the investment to meet the investee company's needs whilst balancing the potential for capital appreciation with risk management.

Investments will be held for the long term unless there is a material adverse change, evidence of structural weakness, or poor governance and leadership. Partial realisations will be made where necessary to balance the portfolio or, on occasion, to capitalise on significant mispricing within the stock market.

Non-qualifying investments

The VCT team works closely with the wider CGFM team to deliver the investment strategy when making non-qualifying investments, as permitted by the VCT Rules. The investment manager will vary the exposure to the available asset classes to reflect its view of the equity markets, balancing the potential for capital appreciation with risk management, liquidity and income.

The non-qualifying investments will typically include a focussed portfolio of direct investments in companies listed on the main market of the London Stock Exchange. The portfolio will mix long-term structural growth with more tactical investment to exploit short-term mispricing within the market.

The use of the Marlborough Special Situations Fund enables the Hargreave Hale AIM VCT to maintain its exposure to small UK companies whilst the investment manager identifies opportunities to invest the proceeds of fundraisings into qualifying companies.

The investment manager may use certain exchange traded funds listed on the main market of the London Stock Exchange to gain exposure to asset classes not otherwise accessible to the VCT.

Risk management

The structure of the Hargreave Hale AIM VCT investment portfolio and its investment strategy has been developed to mitigate risk where possible.

  • The VCT has a broad portfolio of investments to reduce stock specific risk.
  • Flexible allocations to non-qualifying equities, exchange traded funds listed on the main market of the London Stock Exchange, fixed income securities, bank deposits that are readily realisable and the Marlborough Special Situations Fund, allow the investment manager to adjust portfolio risk without compromising liquidity.
  • Regular meetings with investee companies aid the close monitoring of investments to identify potential risks and allow corrective action where possible. In order to address the additional risks posed by the COVID-19 pandemic on smaller businesses, the investment manager has increased the number and frequency of meetings that it is holding with investee companies.
  • Regular board meetings and dialogue with the VCT’s directors, along with policies to control conflicts of interests and co-investment with the Marlborough fund mandates, support strong governance.

Discount control policy and management of share liquidity

The Hargreave Hale AIM VCT aims to improve liquidity and to maintain a discount of approximately 5% to the last published NAV per share (as measured against the mid-price) by making secondary market purchases of its shares in accordance with parameters set by the board of directors of the VCT (the Board).

This policy is non-binding and at the discretion of the Board. Its operation depends on a range of factors including the Hargreave Hale AIM VCT’s liquidity, shareholder permissions, market conditions and compliance with all laws and regulations. These factors may restrict the effective operation of the policy and prevent the VCT from achieving its investment objectives.

Dividend policy

The VCT’s dividend policy is to target a tax-free dividend yield equivalent to 5% of the year end net asset value. The VCT has a well-established track record of paying out tax free dividends to shareholders. Whether a shareholder qualifies to receive tax free dividends from the VCT or not will depend on the personal circumstances of each individual shareholder. If an investor is uncertain as to their tax position they should consult their accountant or financial adviser. 

The Hargreave Hale AIM VCT aims to pay an interim dividend in July each year and a final dividend in February. Special dividends may also be paid by the VCT following significant realisations of investments. 

The ability to pay dividends is dependent on the VCT’s available distributable reserves and cash resources, the Companies Act 2006 (as amended), the Listing Rules and the VCT Rules. The policy is non-binding and at the discretion of the Board. Dividend payments may vary from year to year in both quantum and timing. The level of dividend paid each year will depend on the performance of the VCT’s portfolio. In years where there is strong investment performance, the directors may consider a higher dividend payment, including the payment of special dividends. In years where investment performance is not as strong, the directors may reduce the dividend or pay no dividend. 

As part of this, the VCT calculates its NAV yield on an ongoing basis. The NAV yield is calculated by dividing the dividends payable in relation to a financial year expressed as a percentage of the relevant closing NAV per share. Whilst a helpful metric, it is a statement of historical fact and is not therefore a forward-looking statement or a guide to future performance.