The fund management team at Hargreave Hale has been managing the AIM VCT since 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.
Launched in August 2004, Hargreave Hale AIM VCT plc merged with Hargreave Hale AIM VCT 2 plc on 23 March 2018. Hargreave Hale has been the appointed investment manager and custodian of the company’s assets since inception.
The board has five experienced non-executive directors, including four that are independent of Hargreave Hale. 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, Primrose Group Ltd and Honest Brew Ltd and a non- executive director of Puma VCT 12 plc.
After qualifying as a chartered accountant and following a career in corporate finance and venture capital, Aubrey assumed his first role within the VCT industry in 1997. Since then he has gone on to become one of the most experienced directors within the industry. Aubrey maintains a wide range of business interests and has been a director of six AIM listed companies. He is chairman of Downing VCT 4 plc and a director of Edge Performance VCT.
Oliver sits on the Board as part of his role as lead manager at the investment manager in relation to the Company.
Ashton Bradbury was appointed a director on 14 May 2018. He is a non-executive director of Standard Life UK Smaller Companies Trust plc and has previously held roles at Charterhouse Tilney, HillSamuel Investment Management and HSBC Asset Management Europe. He was until 2014 a fund manager with Old Mutual Global Investors where he established its UK small and mid cap equities team.
Angela Henderson was appointed on 29 October 2019. Angela is a non-executive director at Credit Suisse Asset Management Ltd. She was European legal counsel for Citco Fund Services before working in the equities divisions of Deutsche Bank and Barclays from 2000 to 2015. She has invested in and held board seats at small UK companies in the technology and financial services sectors and is a trustee of CW+, a hospital charity. Angela is a graduate (LLB Fr Hons) of the University of Leicester and solicitor of the Supreme Court of England and Wales.
30 September 2020
|Launch Date||September 2004|
|Share Price (13.10.20)||71.00p|
|NAV per share||73.66p|
|Last Div. Paid (24.07.20)||1.00p|
|Total Divs. Paid||60.15p|
|NAV Yield (30.09.19)||5.31%|
|Discount to NAV (13.10.20)||3.61%|
|Number of Shares||199,514,929|
The investment objectives of the Company 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.
The Company intends to achieve its investment objectives by making qualifying investments in companies listed on AIM, private companies and companies listed on the AQSE Growth Market, as well as non-qualifying investments as allowed by the VCT Rules.
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 of high risk, will have the potential for significant capital appreciation.
To maintain its status as a VCT the Company must have 80 per cent. 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 per cent.
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 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 per cent. of the net assets of the Company. The value of funds held in bank deposits will vary between nil and 30 per cent. of the net assets of the Company.
The Company may make co-investments in investee companies alongside other funds, including other funds managed by the investment manager.
Other than bank deposits,no individual investment shall exceed 10 per cent. of the Company's net assets at the time of investment.
Investment process and strategy
The investment manager follows a stock specific investment approach based on fundamental analysis of the investee company.
The Hargreave Hale fund management 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 the investment manager usually meets or engages with their senior leadership team at least twice each year. Where appropriate the Company may co-invest alongside the other funds managed by the investment manager.
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.
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 the investment manager.
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 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.
The Hargreave Hale VCT Team works closely with the wider Hargreave Hale fund management 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 Company 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 Company.
The structure of the Company's investment portfolio and its investment strategy has been developed to mitigate risk where possible.
- The Company 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 current 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 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 Company aims to improve liquidity and to maintain a discount of approximately 5 per cent. 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.
This policy is non-binding and at the discretion of the Board. Its operation depends on a range of factors including the Company'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 Company from achieving its objectives
The company has established dividend policies that target tax-free dividend yields equivalent to 5% of the year end net asset value.
- Established track record
- Semi-annual distributions
- Distributions will vary with investment performance.
The ability to pay dividends is also dependent on the VCT's available reserves and cash resources, the Companies Act 2006 (as amended) and the listing rules. The policy is non-binding and at the discretion of the VCT board. Dividend payments may vary from year to year in both quantum and timing. In good years, the directors may consider a higher dividend payment; in poor years, the directors may reduce or even pay no dividend.