Prospectus • Feb 29, 2012
Prospectus
Open in ViewerOpens in native device viewer
This document, which constitutes a prospectus relating to Hargreave Hale AIM VCT 1 plc and Hargreave Hale AIM VCT 2 plc, has been prepared in accordance with the Prospectus Rules made by the Financial Services Authority pursuant to Part VI of the Financial Services and Markets Act 2000 ("FSMA"), and has been approved by and filed with the Financial Services Authority.
Application has been made to the UK Listing Authority and the London Stock Exchange for the Ordinary Shares and C Shares to be issued pursuant to the Offers to be admitted to the premium segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange's market for listed securities. It is expected that such admission will become effective and that dealings in the Ordinary Shares and C Shares will commence within 10 business days of their allotment.
Each of the Directors of Hargreave Hale AIM VCT 1 plc and Hargreave Hale AIM VCT 2 plc (the "Companies"), whose names are set out on page 18 of this document and the Companies, accept responsibility for the information contained in this document. To the best of the knowledge of the Directors and the Companies (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and contains no omission likely to affect its import.
Howard Kennedy Corporate Services LLP (the "Sponsor"), which is authorised and regulated by the Financial Services Authority, is acting for the Companies in connection with the Offers and is not advising any other person or treating any other person as a customer in relation to the Offers and will not be responsible to any such person for providing the protections afforded to customers of the Sponsor (subject to the responsibilities and liabilities imposed by FSMA and the regulatory regime established thereunder) or for providing advice in connection with the Offers. The Sponsor does not give any representation, warranty or guarantee that the Companies will qualify as venture capital trusts or that investors will obtain any tax relief in respect of their investment.
The whole of this document should be read. In particular, your attention is drawn to the risk factors on pages 9 to 11 of this document.
____________________________________________________________________________
(Incorporated in England and Wales under the Companies Act 1985 with registered number 05206425)
(Incorporated in England and Wales under the Companies Act 1985 with registered number 05941261)
of Ordinary Shares of 1p each in Hargreave Hale AIM VCT 1 to raise up to £5,000,000,
C Shares of 5p each in Hargreave Hale AIM VCT 1 to raise up to £10,000,000 and
Ordinary Shares of 1p each in Hargreave Hale AIM VCT 2 to raise up to £10,000,000
____________________________________________________________________________
The subscription list for those Ordinary Shares and C Shares which are being offered to the public under the Offers will open at 10 am on 29 February 2012 and may be closed at any time thereafter but, in any event, not later than 12 pm on 5 April 2012 for the 2011/12 tax year and 12 pm on 31 August 2012 for the 2012/2013 tax year, unless extended (but to no later than 22 February 2013) or closed prior to that date. All subscription monies will be payable in full in cash on application. The terms and conditions of the Offers are set out in Part VI of this document followed by an Application Form for use in connection with the Offers.
The Offers in relation to the C Shares in Hargreave Hale AIM VCT 1 will not proceed unless valid subscriptions amounting to not less than £700,000 after expenses under the C Share Offer are received by 12 p.m. on 5 April 2012.
Completed Application Forms must be posted or delivered by hand to Hargreave Hale Limited.
No person receiving a copy of this document or an Application Form in any territory other than the UK may treat the same as constituting an offer or invitation to him to subscribe for or purchase new Ordinary Shares and/or C Shares unless, in such territory, such offer or invitation could lawfully be made.
CONTENTS
| Page | |
|---|---|
| Summary Risk Factors Definitions Expected Timetable Offer Statistics Directors, Investment Manager and Advisers What is a VCT? |
2 9 12 16 17 18 19 |
| PART I Introduction About the Hargreave Hale AIM VCTs Dividend History & Policy The Investment Opportunity Investment Policy Proposed Revised Investment Policy Management of Share Liquidity Risk Management Enhanced Share Buy Back Allotment of Ordinary Shares and C Shares under the Offers and the Relevant Offer Price Investments of Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 Top Investments of Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 Tax Benefits for Investors Directors The Investment Manager: Hargreave Hale Limited Management Remuneration and Expenses Life of the Companies and Annual Accounts Taxation VCT Status and Monitoring Further Details Relating to The Offers and the Tender Offers |
21 22 23 25 29 29 38 39 40 42 44 48 56 59 61 63 64 64 65 65 |
| Part II Taxation Considerations for Investors |
67 |
| PART III Conditions to be met by Venture Capital Trusts |
70 |
| PART IV Financial Information on the Companies |
73 |
| PART V Additional Information |
76 |
| PART VI Terms and Conditions Guide to the Application Form Application Form |
114 118 121 |
This summary should be read as an introduction to the Prospectus. Any decision to invest in the Ordinary Shares and/or C Shares should be based on consideration of the prospectus as a whole by the investor. Where a claim relating to the information contained in a prospectus is brought before a court, the plaintiff investor might, under the national legislation of the EEA states, have to bear the costs of translating the prospectus before the legal proceedings are initiated. Civil liability attaches to the persons responsible for this summary including any translation of the summary, but only if the summary is misleading, inaccurate or inconsistent when read together with other parts of this Prospectus.
The Boards of both Hargreave Hale AIM VCTs have decided to launch offers for subscription to give investors an opportunity to subscribe for New Shares in the 2011/12 and 2012/13 tax years.
The Boards acknowledge the difficulties facing investors as they weigh up risk and reward at a time of considerable uncertainty and weak economic growth. They also accept that investors look for different qualities in VCTs: some are more focused on the tax reliefs attached to the investment than the potential for income and capital appreciation, whilst others are more risk orientated. As such, we are presenting investors with two very different options that, we hope, will allow them to find a balance between risk and reward that meets their needs; existing Shareholders who have held their Shares for 5 years can also participate in the Offers through the Enhanced Share Buy Back. Whilst at their heart, both our VCTs will continue to focus on investing in small companies with a quotation on AIM, the different structures will likely lead to quite different performance and risk characteristics, at least in the early years.
In an important departure from its existing investment policy, Hargreave Hale AIM VCT 2 will at the appropriate time be investing some of the proceeds of the Offers into the Marlborough Special Situations Fund, which is run by the same award winning investment team as the VCTs. The Marlborough Special Situations Fund has returned 1089%1 since coming under Hargreave Hale's management, and the Board believe that its inclusion in the amended investment policy for Hargreave Hale AIM VCT 2 will help drive returns whilst the Investment Manager identifies suitable opportunities for investment into Qualifying Companies.
1 1 July 1998 to 24 February 2012, source: Hargreave Hale & Bloomberg
The basic rationale remains unchanged from previous offers: namely, to raise new capital into both VCTs to ensure they have sufficient capital to support their investment objectives of investing in both VCT qualifying and non-qualifying opportunities; promote their long term viability; meet expenses and reduce the Total Expense Ratios. At the same time, the Offers will provide existing and new investors with the opportunity to invest into small companies through a tax efficient structure and with an award winning investment team that has a long track record of successful investment into small companies.
Hargreave Hale AIM VCT 2 is seeking to raise £10m through an offer for subscription of New Shares. Existing Shareholders can also participate in the Offer through the Enhanced Share Buy Back.
New Ordinary Shares issued pursuant to the Offers (other than the C Share Offer but including the Tender Offers) will be priced at a 5% premium to the last published Net Asset Value per share of an existing Ordinary Share as released by the relevant Company to the London Stock Exchange prior to the allotment. In the case of Hargreave Hale AIM VCT 1, the C Shares will be issued at 100 pence per C Share.
The Companies are also proposing to launch an Enhanced Share Buy Back for Existing Shareholders. The Companies will buy back Ordinary Shares at the Net Asset Value per Ordinary Share as most recently announced to the London Stock Exchange prior to the purchase, where the selling Shareholder subscribes for New Shares in the same VCT under the Offers with the net proceeds from the Tender Offers.
UK taxpayers subscribing under the Offers should be entitled to tax reliefs that include 30% income tax relief on the initial investment, tax free dividends and exemption from capital gains tax on the disposal of their Shares.
The maximum investment which can be made in order to qualify for the personal tax reliefs available from a venture capital trust is currently £200,000 per person per tax year.
The principal investment objective of both VCTs is unchanged: to maintain a diversified portfolio of Qualifying Investments, primarily being companies which are traded on AIM and have the potential for significant value appreciation.
Both Companies have secondary objectives: to boost the performance of the Company through targeted investment in equities which are Non-Qualifying Investments on an opportunistic basis.
Subject to Shareholder approval, the Investment Manager intends to make two changes to the Companies' published investment policy. These will affect the C Share Fund and Hargreave Hale AIM VCT 2, but not the Ordinary or new Ordinary Shareholders in Hargreave Hale AIM VCT 1.
The primary purpose of the investment strategy is to ensure that the Companies maintain their status as VCTs. To achieve this, both Companies must have 70% of all net funds raised from the issue of shares invested in Qualifying Investments throughout accounting periods beginning no later than 3 years after the date on which those shares are issued.
The Ordinary Shares of both VCTs will have additional Non-Qualifying Investments in UK equities 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 that class of share. The C Share Fund will not participate in this type of investment activity.
The Offers in respect of each Company are conditional upon the passing of certain Resolutions. The offers are not conditional upon Resolutions authorising the Boards to issue up to 10% of the issued share capital of each Company, and cancelling the share premium accounts of the Companies.
The Boards of the Companies both comprise three Directors, two of whom are independent of the Investment Manager. The Directors operate in a non-executive capacity and are responsible for overseeing the investment strategy of the Companies and ensuring appropriate levels of corporate governance.
Hargreave Hale is a fund manager with approximately £1,528m under management (source: Hargreave Hale). Hargreave Hale has been managing investments in UK Small & Micro Cap companies for 13 years and VCTs for 7 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. It has won numerous awards for its management of these funds, most recently the 2012 Quoted Company 'Investor of the Year' Award. The Marlborough Special Situations Fund, in which Hargreave Hale AIM VCT 2 will invest, has returned 1089%2 since coming under the management of Giles Hargreave in July 1998.
Below is a table outlining Shareholder returns as at 24 February 2012 for the 3 initial share offers launched by the Companies to date. The returns, which assume an initial investment of £10,000, are net of fees and assume a gross price paid of 100 pence per Ordinary Share. When establishing the return net of tax relief, the calculation assumes a net cost to shareholders of 60 pence per share for shares in Hargreave Hale AIM VCT 1 and 70 pence per share for shares in Hargreave Hale AIM VCT 2.
| Tax Year | Company | NAV GBP |
Dividends GBP |
Total Return1 GBP |
Return excl. Tax Relief |
Return incl. Tax Relief |
FTSE AIM All-Share2 |
|---|---|---|---|---|---|---|---|
| 2004/5 | Hargreave Hale AIM VCT 1 (Ordinary Shares) |
6,024 | 2,500 | 8,542 | -15% | +42% | -24% |
| 2005/6 | Hargreave Hale AIM VCT 1 (C Shares3 ) |
7,466 | 1,683 | 9,149 | -9% | +53% | -31% |
| 2006/7 | Hargreave Hale AIM VCT 2 (Ordinary Shares) |
9,522 | 2,100 | 11,622 | +16% | +66% | -28% |
Notes:
2 1 July 1998 to 24 February 2012, source: Hargreave Hale & Bloomberg
Both Companies have well established track records of paying out tax free dividends to their Shareholders. The intention is to continue the existing policy of targeting a 5% distribution yield (referenced to the Net Asset Value per share), although the ability to pay dividends will clearly be influenced by various factors, including performance. The table below shows the cumulative dividend distributions paid to date.
| Launch Year | Company | Total Dividend Distributions |
|---|---|---|
| 2004/05 | Hargreave Hale AIM VCT 1 (Ordinary Shares) | 25.00p |
| 2005/06 | Hargreave Hale AIM VCT 1 (C Shares) | 16.83p |
| 2006/07 | Hargreave Hale AIM VCT 2 (Ordinary Shares) | 21.00p |
In order to improve the liquidity in the Shares of both Companies, the Boards have established buy-back policies whereby each Company will purchase Shares for cancellation. Hargreave Hale AIM VCT 1 has consistently demonstrated its commitment to improving shareholder liquidity through its regular share buyback policy, which has seen it acquire 7.8m Ordinary Shares at a discount of approximately 10% to the prevailing Net Asset Value per share. The Directors believe it is in Shareholders' best interest to target a reduced buy-back discount. As a guide, and subject to the Boards' discretion and providing that, in the opinion of the Boards, there is adequate surplus cash available, each Company will consider buying back Ordinary Shares and C Shares at a 5% discount to the last published Net Asset Value per share after the Enhanced Share Buy Backs have closed.
The Directors believe that reducing the discount between the share price and the Net Asset Value per share is in Shareholders' best interest: it will improve returns on exit and may help attract new capital. The 5% buy-back discount is non-binding and at the Directors' discretion. They reserve the right to return to the previous policies of purchasing shares at 10% below Net Asset Value per share.
The value of New Shares, and the income from them, may go down as well as up. An investor may not get back the amount originally invested.
Whilst it is the intention of the Directors that the Companies maintain their status as VCTs, there can be no guarantee that they will continue to qualify. A failure to maintain the Companies' status as VCTs could result in adverse tax consequences for Investors.
Although the significant tax benefits available to Investors in Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 reduce the risk of the investment, prospective Investors should consider carefully the following risk factors. If any of the risks described below were to occur, it could have a material effect on each of the Companies' businesses, financial condition or results of operations. The risks described below are those specific to the Companies and all the material risks in respect of the New Shares. The value of the New Shares could decline due to any of the risk factors described below and prospective investors could lose part or all of their investment. This document does not constitute financial advice and prospective investors are recommended to consult an independent financial adviser authorised under the FSMA before deciding whether to apply for New Shares under the terms of the Offers.
The Investment Manager's ability to obtain maximum value from the investments (for example, through sale) may be limited by the requirements imposed in order to maintain the VCT qualification status of the Companies.
Whilst it is the intention of the Directors that the Companies will be managed so as to continue to qualify as a VCT, there can be no guarantee that the status will be maintained. A failure to maintain the qualifying status could result in the Companies losing the tax reliefs previously obtained, resulting in adverse tax consequences for Investors. Possible adverse consequences include: a requirement to repay the 30% income tax relief for those who have not held their shares for 5 years; loss of income tax relief on dividends paid (or subsequently payable) by the Companies; loss of tax relief previously obtained in relation to corporation tax on capital gains made by the Companies; a liability to capital gains tax on the disposal of New Shares; and the potential cancellation of the shares from the London Stock Exchange's Official List, which would require shareholder approval.
implemented have not yet been published. The Boards do not believe that the "disqualifying purpose" test will apply to investments of the Companies; however, there is a risk that the rules could be implemented in a way that would restrict investment opportunities of the Companies. For VCT funds raised after 5 April 2012, it is proposed that there be an exclusion on the use of VCT funds for the purchase by Qualifying Companies of shares in another company. This may limit the number of Qualifying Investments available to the VCTs.
| DEFINITIONS | |||||
|---|---|---|---|---|---|
| "Act" | the Companies Act 2006 (as amended) | ||||
| "Admission" | the admission of the New Shares issued, and to be issued, pursuant to the Offers to the premium segment of the Official List and to trading on the London Stock Exchange becoming effective |
||||
| "Annual Running Costs" | means the running costs of the relevant Company and include the management fees payable to the Investment Manager (excluding any performance incentive fee), accounting and administration fees, as well as fees for directors, auditors, taxation advisers, sponsor, registrar, and the costs of communicating with shareholders; however, such costs shall exclude any VAT payable thereon and any trail commissions to financial intermediaries (the payment of which is the responsibility of the respective Company) |
||||
| "AIM" | the AIM Market operated by the London Stock Exchange | ||||
| "Application Form" | the form of application for New Shares under the Offers set out at the end of this document |
||||
| "Circular" | the Circular to Shareholders issued by each Company dated 29 February 2012 convening general meetings to approve various proposals in connection with the Offers |
||||
| "Companies" or "Funds" | Hargreave Hale AIM VCT 1 and/or Hargreave Hale AIM VCT 2 and "Company" or "Fund" means either one of them, as the context requires |
||||
| "CREST" | the relevant system (as defined in the Regulations) operated by Euroclear |
||||
| "C Shares" | C shares of 5p each in the capital of Hargreave Hale AIM VCT 1 | ||||
| "C Share Fund" | the assets of Hargreave Hale AIM VCT 1 attributable to the C Shares | ||||
| "C Share Offer" | the offer for subscription for C Shares by Hargreave Hale AIM VCT 1 as described in this document. |
||||
| "Directors" or "Board" | the directors of each Company | ||||
| "Disclosure and Transparency Rules" |
the Disclosure and Transparency Rules published by the FSA from time to time |
||||
| "Enhanced Share Buy Back" | application for New Shares under the Offers out of the proceeds of the sale of Shares tendered by Existing Shareholders under the Tender Offer |
||||
| "Existing Shareholders" | holders of Shares as at the date of this document | ||||
| "FSA" | the Financial Services Authority | ||||
| "Hargreave Hale AIM VCT 1" | Hargreave Hale AIM VCT 1 plc | ||||
| "Hargreave Hale AIM VCT 1 GM" | the general meeting of Hargreave Hale AIM VCT 1 to be held on 26 |
| March 2012 (and any adjournment thereof) convened by a notice contained in the Circular |
||||
|---|---|---|---|---|
| "Hargreave Hale AIM VCT 1 Offer Price" |
as determined by the Pricing Formula | |||
| "Hargreave Hale AIM VCT 1 Tender Offer" |
the tender offer under which Hargreave Hale AIM VCT 1 will buy back up to 9,000,000 Ordinary Shares from its participating Existing Shareholders at the Net Asset Value per Ordinary Share most recently announced to the London Stock Exchange prior to the purchase of those Ordinary Shares |
|||
| "Hargreave Hale AIM VCT 2" | Hargreave Hale AIM VCT 2 plc | |||
| "Hargreave Hale AIM VCT 2 GM" | the general meeting of Hargreave Hale AIM VCT 2 to be held on 26 March 2012 (and any adjournment thereof) convened by a notice contained in the Circular |
|||
| "Hargreave Hale AIM VCT 2 Offer Price" |
as determined by the Pricing Formula | |||
| "Hargreave Hale AIM VCT 2 Tender Offer" |
the tender offer under which Hargreave Hale AIM VCT 2 will buy back up to 3,500,000 Ordinary Shares from its participating Existing Shareholders at the Net Asset Value per Ordinary Share most recently announced to the London Stock Exchange prior to the purchase of those Ordinary Shares |
|||
| "HMRC" | HM Revenue & Customs | |||
| "ITA" | Income Tax Act 2007, as amended | |||
| "Investment Manager" or "Hargreave Hale" |
Hargreave Hale Limited, which is authorised and regulated by the FSA |
|||
| "Investor(s)" | subscriber for New Shares under the Offers | |||
| "Listing Rules" | the listing rules prescribed by the UK Listing Authority | |||
| "London Stock Exchange" | London Stock Exchange plc | |||
| "Marlborough Special Situations Fund" |
The Marlborough Special Situations Fund launched on 12 July 1995 being an authorised collective investment scheme as defined in FSMA |
|||
| "Management Agreements" | the agreement dated 10 September 2004 (as amended) between Hargreave Hale AIM VCT 1 and Hargreave Hale Limited governing the management of Hargreave Hale AIM VCT 1's investments and the agreement dated 8 December 2006 between Hargreave Hale AIM VCT 2 and Hargreave Hale Limited governing the management of Hargreave Hale AIM VCT 2's investments |
|||
| "Maximum Subscription" | the receipt of the maximum subscription monies under the Offer, being an aggregate amount of £15,000,000 in relation to Hargreave Hale AIM VCT 1, and an aggregate amount of £10,000,000 in relation to Hargreave Hale AIM VCT 2 |
|||
| "Net Asset Value" or "NAV" | the value of each Company's assets and/or the relevant share pool, less its liabilities (divided by the appropriate number of shares in issue) |
|||
| "Net Proceeds" | the gross proceeds of the Offers less the 5% expenses of the Offers |
| "New Shares" | New Ordinary Shares in Hargreave Hale AIM VCT 1 and/or Hargreave Hale AIM VCT 2 and/or new C Shares in Hargreave Hale AIM VCT 1 issued pursuant to the Offer |
|---|---|
| "Non-Qualifying Investment" | investments made by the Companies which do not qualify as Qualifying Investments |
| "Offer Agreement" | the offer agreement detailed in paragraph 9 of Part V of this document |
| "Offer(s)" | any one or more of the offers for subscription by Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 as described in this document. |
| "Official List" | the Official List of the UK Listing Authority |
| "Ordinary Shares" | ordinary shares of 1p each in the capital of the Companies |
| "Ordinary Share Fund" | the net assets of Hargreave Hale AIM VCT 1 attributable to the Ordinary Shareholders |
| "Overseas Shareholders" | Shareholders and/or prospective Shareholders (as the context may require) who are resident in, or who are citizens of, or who have registered interest in, territories other than the United Kingdom. |
| "Performance Incentive Fee" | the fee payable to the Investment Manager, as described in paragraphs 12.3 and 12.3 |
| "Pricing Formula" | the last Net Asset Value of an existing Ordinary Share (with an appropriate adjustment for any performance fee potentially payable based on the Net Asset Value at that date) as published by the relevant Company prior to the date of allotment divided by 0.95 to allow for issue costs of 5% calculated, in pence, to two decimal places |
| "Prospectus Rules" | as defined in section 73A(4) of the Financial Services and Markets Act 2000, rules expressed to relate to transferable securities |
| "Qualifying Investment(s)/ Company(ies)" |
an investment made by a venture capital trust in a trading company which comprises a qualifying holding under Chapter 4 of Part 6 ITA |
| "Regulations" | the Uncertificated Securities Regulations 2001 (S.I. 2001/3755) |
| "Resolutions" | the resolutions set out in the notices for the Hargreave Hale AIM VCT 1 GM and the Hargreave Hale AIM VCT 2 GM (as applicable) |
| "Shareholder" | a holder of Shares |
| "Share(s)" | shares in the capital of Hargreave Hale AIM VCT 1 and/or Hargreave Hale AIM VCT 2 |
| "Sponsor" | Howard Kennedy Corporate Services LLP, which is authorised and regulated by the FSA and is a member of the London Stock Exchange |
| "Tender Offers" | the Hargreave Hale AIM VCT 1 Tender Offer and the Hargreave Hale AIM VCT 2 Tender Offer, and "Tender Offer" means either one of them as the context requires |
| "Total Expense Ratio" | the total costs of managing and operating each Company divided by its NAV |
| "Total Return" | the sum of (i) the most recent published Net Asset Value of that Share plus (ii) all dividends paid or declared in respect of that Share |
|---|---|
| "UK Listing Authority" | the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Markets and Services Act 2000 |
| "VCT" or "Venture Capital Trust" | venture capital trust as defined in section 259 ITA |
| Offers opens | 10 a.m. on 29 February 2012 |
|---|---|
| Record Date for the Tender Offers | 6 p.m. on 30 March 2012 |
| Latest date for receipt of proxies for Hargreave Hale AIM VCT 1 GM |
11 a.m. on 23 March 2012 |
| Latest date for receipt of proxies for Hargreave Hale AIM VCT 2 GM |
12 p.m. on 23 March 2012 |
| GM of Hale AIM VCT 1 | 11 a.m. on 26 March 2012 |
| GM of Hale AIM VCT 2 | 12 p.m. on 26 March 2012 |
| Enhanced Share Buy Back closes | 6 p.m. on 30 March 2012 |
| Deadline for receipt of applications for investment in the Offers for the 2011/12 tax year |
12 p.m. on 5 April 2012 |
| Deadline for receipt of applications for investment in the Offers for the 2012/13 tax year |
12 p.m. on 30 April 2012 |
| First allotment | On or before 4 April 2012 |
| First Admission and dealings expected to commence |
Within 10 business days of any allotment |
| Dispatch of Share Certificates | Within 10 business days of any allotment |
The deadline for receipt of applications is subject to the Offers not being fully subscribed by an earlier date. The final closing date of the Offers may be extended by the Directors at their absolute discretion (but to no later than 22 February 2013). The Directors reserve the right to allot and issue New Shares at any time whilst the Offers remain open. Definitive share and tax certificates will be despatched as soon as practicable following allotment of New Shares. The Offers are not underwritten.
| Offer Price per Ordinary Share in relation to the relevant Company |
The price at which the Ordinary Shares in the relevant Company will be allotted will be calculated on the basis of the following formula (the "Pricing Formula"): |
||
|---|---|---|---|
| The last Net Asset Value of an existing Ordinary Share in issue in the relevant Company (with an appropriate adjustment for any performance fee potentially payable based on the Net Asset Value at that date) as published by the relevant Company prior to the date of allotment divided by 0.95 to allow for issue costs of 5% calculated, in pence, to two decimal places. |
|||
| Existing Shareholders participating in the Enhanced Share Buy Back will receive additional Ordinary Shares equivalent to 2% of the amount subscribed with the proceeds of their Tender Offer. |
|||
| Hargreave Hale AIM VCT 1 | |||
| Maximum net proceeds of the Offer of Ordinary Shares |
£4,750,000 | ||
| Maximum number of Ordinary Shares in issue following the Offer* |
25,644,179 |
Maximum net proceeds of the Offer of C Shares £9,500,000 Maximum number of C Shares in issue following the Offer 10,000,000
Minimum individual investment £3,000
The Offers in relation to the C Shares in Hargreave Hale AIM VCT 1 will not proceed unless valid subscriptions amounting to not less than £700,000 net of expenses under the C Share Offer are received by 12 p.m. on 5 April 2012.
| Maximum net proceeds of the Offer of Ordinary Shares |
£9,500,000 |
|---|---|
| Maximum number of Ordinary Shares in issue following the Offer* |
16,689,119 |
| Minimum individual investment | £3,000 |
* Assuming that the Maximum Subscription is achieved for each Company and all the allotments were made on the basis of the NAV per Ordinary Share for the relevant Company as at 24 February 2012 (as announced on 27 February 2012), including 2,711,134 Ordinary Shares held in treasury
Hargreave Hale AIM VCT 1 Sir Aubrey Thomas Brocklebank Bt. David Michael Brock Giles St George Hargreave
Hargreave Hale AIM VCT 2 David Alan Hurst-Brown Philip Simon Cammerman Giles St George Hargreave
in all cases of 19 Cavendish Square London W1A 2AW
19 Cavendish Square London W1A 2AW
Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA
Stuart Brookes 9-11 Neptune Court Hallam Way Blackpool FY4 5LZ
The Royal Bank of Scotland plc 5th Floor Kirkstane House 139 St Vincent Street Glasgow G2 5JF
Howard Kennedy LLP 19 Cavendish Square London W1A 2AW
Hargreave Hale Limited 9-11 Neptune Court Hallam Way Blackpool FY4 5LZ
9-11 Neptune Court Hallam Way Blackpool FY4 5LZ
Howard Kennedy Corporate Services LLP 19 Cavendish Square London W1A 2AW
Hargreave Hale Limited 9-11 Neptune Court Blackpool FY4 5LZ
PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH
BDO LLP 55 Baker Street London W1U 7EU
A Venture Capital Trust is a company, broadly similar to an investment trust, which has been approved by HMRC and which subscribes for shares in, (or lends money to), small unquoted companies, including those quoted on AIM or Plus markets. Under the VCT scheme, VCTs and their investors enjoy certain tax reliefs. The VCT scheme is designed to encourage investment in small unquoted companies. Individuals invest by holding shares in a VCT. The VCT invests in a spread of small unquoted companies, enabling investors to spread their risk, just as they do by holding shares in an ordinary investment trust.
An approved VCT has a number of tax advantages. The following is only a summary of the current law concerning the tax position of individual investors in VCTs. Potential Investors who are in any doubt about the taxation consequences of investing in a VCT are recommended to consult their own independent professional adviser.
The tax reliefs set out below are available to individuals aged 18 or over who subscribe under the Offer for New Shares. Tax reliefs will only be given to the extent that an individual's total investments in VCTs in any tax year do not exceed the qualifying limit, which is currently £200,000. Investors who intend to invest more than £200,000 in VCTs in any one tax year should seek professional advice.
Income tax relief at the rate of 30% will be available on subscriptions for shares in VCTs up to a maximum of £200,000 in any tax year. Relief is limited to the amount which reduces the investor's income tax liability to nil. This relief must be repaid should the shares be sold or otherwise disposed of within five years, other than in the event of death.
An Investor who subscribes for or acquires up to a maximum of £200,000 of New Shares in a VCT in any given tax year will not be liable to UK income tax on dividends paid by the VCT on those shares.
A disposal by an Investor of Shares (whether acquired by subscription for new shares or subsequent acquisition) in a VCT will give rise to neither a chargeable gain nor an allowable loss for the purposes of UK capital gains tax. This relief is limited to disposals of shares acquired within the limit of £200,000 for any tax year. On the death of an Investor or a spouse who has acquired shares in a VCT within marriage, no capital gains tax or income tax will become payable by either the investor, their spouse or anyone inheriting the shares, as a result of the death.
Each Investor will be issued with a certificate which can be used to claim income tax relief, either immediately by obtaining an adjustment to their tax coding from HMRC or by waiting until the end of the tax year and using their tax return to claim relief.
Investors who are not resident in the UK, or who may cease to be resident in the UK, should seek their own professional advice as to the consequences of making an investment in the Companies.
The Boards of both of the Companies have decided to launch offers for subscription to give investors an opportunity to subscribe for New Shares in the 2011/12 and 2012/13 tax years. The rationale for the fund raising remains unchanged from previous offers: namely, to raise new capital into the Companies to ensure they have sufficient capital to support their investment in Qualifying Companies. As the size of the VCTs increase from the proceeds of the Offers, their Total Expense Ratios will fall. The Government has tabled proposals that, if approved by the European Union, would allow the Companies to invest in larger companies than is possible under the current VCT legislation.
The Boards acknowledge the difficulties facing investors as they weigh up risk and reward at this time of considerable uncertainty and weak economic growth. They also accept that investors look for different qualities in VCTs: some are more focused on the tax reliefs attached to the investment than the potential for capital appreciation and tax free income streams, whilst others are more risk orientated. As such, these subscription offers provide a number of different options that should allow Investors to meet their particular objectives; existing shareholders who have held their Shares for 5 years can also participate in the Offers through the Enhanced Share Buy Back. Whilst at their heart, both VCTs will continue to focus on investing in small companies with a quotation on AIM, the different structures may lead to quite different performance and risk characteristics, at least in the early years.
In an important departure from its existing investment policy, Hargreave Hale AIM VCT 2 will be investing up to 75% of the proceeds of the Offer into the Marlborough Special Situations Fund, subject to a maximum of 20% of the gross assets of the Company. The Marlborough Special Situations Fund is run by the same award winning investment team as the VCTs and has returned 1089%3 since coming under Hargreave Hale's management. The Board believes its inclusion in the amended investment policy for Hargreave Hale AIM VCT 2 will help drive returns whilst the Investment Manager identifies suitable opportunities for investment into Qualifying Companies.
The Boards believe that the Offers and Enhanced Share Buy Back will benefit existing and new investors by increasing the number of investors committed for multi-year periods. They will also indirectly benefit the small companies that they support through their investment activities.
3 1 July 1998 to 24 February 2012, source: Hargreave Hale & Bloomberg
Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 are existing Venture Capital Trusts. Both Companies share a common objective, namely to make tax-free dividend distributions from capital gains and income generated through investment in a diversified portfolio of Qualifying Companies. The Investment Manager will seek to enhance this return through targeted Non-Qualifying Investments in equities and fixed income where appropriate.
In both cases, the Investment Manager has already built an existing and diversified portfolio of Qualifying Investments. Both Funds met the HMRC guidelines for VCTs by the required date and have continued to do so since. The existing portfolios have a strong bias towards companies with a quotation on AIM, however, there are a limited number of investments in PLUS-quoted and private companies.
Hargreave Hale AIM VCT 1 is an established VCT that was originally launched in August 2004 as the Keydata AIM VCT and on 30 September 2009 was renamed Hargreave Hale AIM VCT 1 plc. The fund raised £14.3m through an Ordinary Share issue in 2004/5 and then a further £17.9m in 2005/6 through a C Share issue. The C Shares were converted into Ordinary Shares on 8 October 2008 based on the audited Net Asset Value per share on 30 September 2008. Hargreave Hale has been the appointed Investment Manager and custodian from the outset. A further £1.8m was raised between March 2010 and June 2011 through an offer for subscription and a top up offer.
On 24 February 2012, the VCT had unaudited net assets of £15.7m, including £12.0m invested in 43 Qualifying investments, £2.4m of fixed income investments, £0.5m of cash and £0.9m of non- qualifying equity investments (Source: unaudited NAV of Hargreave Hale AIM VCT 1 plc, 24 February 2012). As at 24 February 2012, Hargreave Hale AIM VCT 1's unaudited Net Asset Value per Ordinary Share was 60.53 pence per share. Investors who subscribed for Hargreave Hale AIM VCT 1 Ordinary Shares through the original offer in 2004/5 have received 25 pence per share of dividends, whilst those who invested through the 2005/6 C Share issue have received dividend distributions equivalent to 16.83 pence per share. As a result, their Total Returns are 85.53 pence and 91.85 pence respectively (Source: unaudited NAV of Hargreave Hale AIM VCT 1 plc, 24 February 2012).
As at 24 February 2012 the total cost of investments including Qualifying Investments, non-qualifying equities, government securities and other fixed income securities was £14.0m with a current unaudited valuation of £14.9,m.
As at 31 January 2012 Hargreave Hale AIM VCT 1 was 93.9% invested in Qualifying Investments.
Hargreave Hale AIM VCT 2 is an established VCT that was originally launched in September 2006 as the Keydata AIM VCT 2 and on 30 September 2009 was renamed Hargreave Hale AIM VCT 2 plc. The VCT raised £4.6m through an Ordinary Share issue in 2006/7 and then a further £2.5m between March 2010 and July 2011 through an offer for subscription and top up offer
As of 24 February 2012, the VCT had unaudited net assets of £6.4m, including £4.1m invested in 29 Qualifying Investments, £0.8m of fixed income investments, £1.1 million of cash and £0.6m of non-qualifying equity investments (Source: unaudited NAV of Hargreave Hale AIM VCT 2, 24 February 2012). The cost of investments including Qualifying Investments, non-qualifying equities, government securities and other fixed income securities was £4.5m with a current unaudited valuation of £5.3m.
As at 24 February 2012, Hargreave Hale AIM VCT 2's unaudited net asset value per Ordinary Share was 95.23 pence per share (Source: unaudited NAV of Hargreave Hale AIM VCT 2, 24 February 2012). Investors who subscribed for Hargreave Hale AIM VCT 2 Ordinary Shares through the original offer in 2006/7 have received 21 pence per share of dividends. Their Total Return is 116.23 pence (Source: unaudited NAV of Hargreave Hale AIM VCT 2, 24 February 2012).
As at 31 January 2012 Hargreave Hale AIM VCT 2 was 90.4% invested in Qualifying Investments.
Both Companies have well established track records of paying out tax free dividends to their shareholders. The table below shows the cumulative dividend distributions paid to date for the three initial share offers launched to date.
| Launch Year | Company | Total Dividend Distribution |
|---|---|---|
| 2004/05 | Hargreave Hale AIM VCT 1 (Ordinary Shares) | 25.00p |
| 2005/06 | Hargreave Hale AIM VCT 1 (C Shares) | 16.85p |
| 2006/07 | Hargreave Hale AIM VCT 2 (Ordinary Shares) | 21.00p |
The intention is to continue the existing policy of targeting a 5% distribution yield (referenced to the Net Asset Value of the Company), although the ability to pay dividends will clearly be influenced by the underlying investment performance of the relevant share class and the relevant Company's available reserves and cash resources, the Act and the Listing Rules. In good years, the Directors may consider a higher dividend payment; in poor years, the Directors may reduce or even pay no dividend.
Below is a table outlining Shareholder returns as at 24 February 2012 for the three initial share offers launched by the Companies to date. The returns, which assume an initial investment of £10,000 are net of fees and assume a gross price paid of 100 pence per Ordinary Share. When establishing the return net of tax relief, the calculation assumes a net cost to Shareholders of 60 pence per share for shares in Hargreave Hale AIM VCT 1 and 70 pence per share for shares in Hargreave Hale AIM VCT 2.
| Tax Year | Company | NAV GBP |
Dividends GBP |
Total Return1 GBP |
Return excl. Tax Relief |
Return incl. Tax Relief |
FTSE AIM All-Share2 |
|---|---|---|---|---|---|---|---|
| 2004/5 | Hargreave Hale AIM VCT 1 (Ordinary Shares) |
6,053 | 2,500 | 8,553 | -14% | +43% | -24% |
| 2005/6 | Hargreave Hale AIM VCT 1 (C Shares3 ) |
7,502 | 1,683 | 9,185 | -8% | +53% | -31% |
| 2006/7 | Hargreave Hale AIM VCT 2 (Ordinary Shares) |
9,523 | 2,100 | 11,623 | +16% | +66% | -28% |
Notes:
Source: Bloomberg– from the closing value of the relevant index on 5 April of the year of issue of the relevant shares to 24 February 2012.
The C Shares in Hargreave Hale AIM VCT 1 were converted into Ordinary Shares on 8 October 2008.
1. Returns based on unaudited NAV of Hargreave Hale AIM VCT and Hargreave Hale AIM VCT 2 as at 24 February 2012.
• Hargreave Hale AIM VCT 2 is seeking to raise £10m through the offer for subscription of New Ordinary Shares. Existing Shareholders can also participate in the Offer through the Enhanced Share Buy-Back. Investors are invited to subscribe for an amount in pounds Sterling rather than apply for a particular number of New Shares. The price of the New Shares to be issued pursuant to the Offer will be calculated on the basis of the Pricing Formula.
The Hargreave Hale AIM VCT 1 Offers are to raise up to £5,000,000 through the issue of New Shares, combined with a Tender Offer for up to 9,000,000 Ordinary Shares, and to raise up to £10,000,000 through the issue of new C Shares.
| VCT | Share Class | New Investors |
Enhanced Share Buy Back |
Existing Portfolio of Qualifying Companies |
Non-Qualifying Equity Investment Strategy |
Marlborough Special Situations Fund |
Fixed Income Strategy |
|---|---|---|---|---|---|---|---|
| HH AIM VCT 1 | Ordinary | No | Yes | Yes | 0-30% of NAV | No | 0-30% of NAV |
| HH AIM VCT 1 | C Share | Yes | No | No | No | No | Yes |
| HH AIM VCT 2 | Ordinary | Yes | Yes | Yes | 0-30% of NAV | Yes | 0-30% of NAV |
The 2011/12 Offer will remain open until 12 p.m. on 5 April 2012 and the 2012/13 Offer until 12 p.m. on 31 August 2012, unless extended (but to no later than 12 p.m. on 22 February 2013), enabling Investors to subscribe in either or both of the 2011/12 tax year and 2012/13 tax year.
The Offers are conditional on inter alia, the Offer Agreement referred to in paragraphs 9 of Part V becoming unconditional and not being terminated in accordance with its terms. The Offers are not inter-conditional.
The C Share Offer will not proceed unless valid subscriptions amounting to not less than £700,000 (after expenses) under the C Share Offer are received by 12 p.m. on 5 April 2012. If this minimum level of applications is not reached, application monies which have been received will be returned without interest by cheque sent by post at the applicant's risk to the address stated in the applicant's Application Form.
In the event that applications are received for Ordinary Shares and C Shares in excess of the Maximum Subscriptions under the Offers, the Directors reserve the right to exercise their discretion in the allocation of successful applications, although allocation will usually be on a first come first served basis.
The Offers in respect of each Company are also subject to the passing of the Resolutions of the relevant Company. These include resolutions to: authorise the Enhanced Share Buy Back and Offers, extend the life of the Companies to 2018, adopt new Articles of Association, change the investment policy of the Companies, approve the payment of the promoters fees in connection with the Offers to Hargreave Hale Limited and approve a variation to the investment management fee in respect of Hargreave Hale AIM VCT 2. If each of these Resolutions are not passed by the relevant Company then that Company's Enhanced Share Buy Back and Offer will not proceed.
Shareholders will also be asked to vote on two further Resolutions for each Company authorising the Boards to issue up to 10% of the issued share capital of each Company and cancel the share premium accounts of the Companies.
The minimum subscription per Investor is £3,000 (per share class per Company) in respect of the Offers. The maximum investment which can be made in order to qualify for the personal tax reliefs available from a VCT is currently £200,000 per person per tax year. Applicants may make multiple applications under each of the Offers, provided that the investor guidelines for VCTs are followed. The Investor should take appropriate independent financial advice.
The raising of further funds by way of the Offers is intended to create the following benefits:
Investors' subscription monies will be allocated between Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 as prescribed by the Investors in their Application Form. An investment in Ordinary Shares in Hargreave Hale AIM VCT 1 can only be made through participation in the Enhanced Share Buy Back (see below).
• New Ordinary Shares. The price of the new Ordinary Shares to be issued pursuant to the Offers (including the Tender Offers) will be calculated by reference to the last Net Asset Value of an existing Ordinary Share as published on the London Stock Exchange by the relevant Company prior to the date of allotment. The new Ordinary Shares will be priced according to the Pricing Formula:
Price of new Ordinary Share = Last Net Asset Value per Ordinary Share 0.95
The price will be calculated in pence to two decimal places. New Ordinary Shares will be issued at a 5% premium to the Net Asset Value per share to make allowance for the costs of the Offer and commission payable to intermediaries.
• C Shares. The C Shares will be issued at 100 pence per share.
Currently, both Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 share a common published investment policy. It is now proposed that those policies be varied, subject to Shareholder approval, for the following reasons:
Set out below are the proposed amendments that will be effected if the revised investment policies of the Companies are adopted at the General Meetings. If Shareholder approval to make these changes is not received the relevant Offer will not proceed.
The principal investment objective of Hargreave Hale AIM VCT 1 will remain unchanged: to maintain a diversified portfolio of Qualifying Investments, primarily being small UK companies which are traded on AIM and which have the opportunity for significant value appreciation.
The Hargreave Hale AIM VCT 1 Ordinary Share Fund will continue with its existing secondary objective: to boost the performance of the VCT through targeted investment in equities which are non-VCT qualifying investments on an opportunistic basis to boost the performance of the Ordinary Shares. The C Share Fund will not participate in this type of investment activity.
Subject to Shareholder approval, the Investment Manager intends to introduce a new investment objective, although it will only apply to the C Share Fund:
Within the C Share Fund, the Investment Manager will seek "to preserve Shareholder value through selective investment of surplus funds, namely funds that are not invested in Qualifying Investments, in a non-VCT qualifying portfolio of fixed income securities and cash. "
There are no material proposed revisions to the Asset Allocation under the Company's investment policy. However, this section of the investment policy has been divided into two sections headed "Asset Allocation" and "Investment Strategy" in order to describe this element of the Company's investment policy in greater detail.
The full text of the proposed revised investment policy of Hargreave Hale AIM VCT 1 (with the revised elements set out in italics) is as follows:
The Company's investment objectives are:
*being the net assets of the Company attributable to the Ordinary Shares
• (C Share Fund** only) to preserve shareholder value through selective investment of surplus funds, namely funds that are not invested in Qualifying Investments, in a non-VCT qualifying portfolio of fixed income securities and cash.
**being the net assets of the Company attributable to the C Shares
Hargreave Hale AIM VCT 1 will have a range of investments in three distinct asset classes:
o primarily be made in AIM companies, but the Company's investment manager ("Investment Manager") will also consider PLUS-quoted companies and private companies that meet the investment criteria summarised below.
o vary in size from £50,000 to £1 million.
The Investment Manager will maintain the Ordinary Share Fund's 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 Hargreave Hale AIM VCT 1 maintains it status as a VCT. To achieve this, the Company must have 70% of all net 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. Funds raised in April 2012 will therefore be included within the HMRC investment test from 1 October 2014 onwards.
The C Share Fund will start with a completely clean structure with no equity exposure, qualifying or nonqualifying. The Investment Manager will gradually build a diversified portfolio of Qualifying Investments within the C Share Fund over a 2 to 3 year period following the receipt of the proceeds of this Offer.
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 the net assets of the C Share Fund or of the Ordinary Share Fund as appropriate.
The Investment Manager has expanded the key selection criteria used in deciding which Qualifying Investments to make. The criteria will include, inter alia:
The Investment Manager will follow a stock 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 already 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.
The two share classes will have different investment strategies applied to their portfolio of non-VCT Qualifying Investments to reflect their different investment objectives:
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.
It is not the Company's 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.
The principal investment objective of the VCT will remain unchanged: to maintain a diversified portfolio of Qualifying Investments, primarily being companies which are traded on AIM and which have the opportunity for significant value appreciation.
Hargreave Hale AIM VCT 2 will maintain its existing secondary objective: to boost the performance of the VCT through targeted investment in equities which are non-VCT qualifying equities on an opportunistic basis to boost the performance of the Company's funds.
Subject to Shareholder approval, the Investment Manager intends to introduce a new investment objective relating to the management of the proceeds of the Offer: 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. The Marlborough Special Situations Fund is an authorised unit trust which is not listed. The Directors of Hargreave Hale AIM VCT 2 expect the Investment Manager to invest up to 75% of the net proceeds of the Hargreave Hale AIM VCT 2 into the Marlborough Special Situations Fund to offset dilution from the funds raised under the Offers, subject to a maximum of 20% of the gross assets of the Company. The Marlborough Special Situations Fund is a £449m fund that sits within the IMA UK Small Cap sector. It has an impressive track record and is sufficiently liquid to allow the Company to invest and withdraw capital without interfering with that fund's investment strategy. This will enable the Company to maintain its exposure to UK small companies indirectly, whilst the Investment Manager identifies opportunities to invest directly into small UK companies through a suitable number of Qualifying Investments. The investment into the Marlborough Special Situations Fund will not be a Qualifying Investment. The Investment Manager manages the Marlborough Special Situations Fund.
There are no material proposed revisions to the Asset Allocation under the Company's investment policy. However, this section of the Investment Policy has been divided into two sections headed "Asset Allocation" and "Investment Strategy" in order to describe this element of the Company's Investment Policy in greater detail.
The full text of the proposed revised investment policy of Hargreave Hale AIM VCT 2 with the revised elements set out in italics) is as follows:
The Company's investment objectives are:
Hargreave Hale AIM VCT 2 will have a range of investments in three distinct asset classes:
• Equity investments in Qualifying Companies, referred to as "Qualifying Investments". Qualifying Investment will:
The Investment Manager will maintain the Company's 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 Hargreave Hale AIM VCT 2 maintains it 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 beginning no later than three years after the date on which those shares are issued. Funds raised in April 2012 will therefore be included within the HMRC investment test from 1 March 2015.
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 Investment Manager has expanded the key selection criteria used in deciding which Qualifying Investments to make. The criteria will include, inter alia:
The Investment Manager will follow 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 have previously 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.
Hargreave Hale AIM VCT 2 will have additional non-qualifying equity exposure to UK and international equities through targeted investments made on an opportunistic basis to boost the performance of the Company. 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 will 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 its 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.
It is not the Company's 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.
The investment team manages approximately £750m, of which approximately £400m 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 and many years of investing in AIM and PLUS-quoted (formerly OFEX) companies help attract deal flow.
The investment team has regular meetings, typically 15 per week, with small companies, a number of which would be suitable for investment by the Funds. These relationships, along with the ability to co-invest alongside the other funds managed by the Investment Manager, should increase the quality and quantity of the investment pipeline.
The Companies will invest primarily in companies trading on AIM, a market associated with young and growing companies.
In 2011, Hargreave Hale AIM VCT 1 made 9 Qualifying Investments, whilst Hargreave Hale AIM VCT 2 made 8 Qualifying Investments.
The Investment Manager manages other funds that can invest in the same companies as Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2, including the Marlborough Special Situations Fund and the Marlborough UK Micro Cap Growth Fund. Therefore, in appropriate circumstances, the Companies will invest alongside other funds managed by the Investment Manager. When contemplating a co-investment, the Investment Manager will first consider factors such as the risk profiles and investment strategies of the participating funds, the size of the fund raising and anticipated allocations when deciding on how much each fund will subscribe for. Any scaling back of applications made by the Investment Manager for shares in investee companies, on behalf of the different funds it manages, will be pro rata to the amount originally applied for by each fund.
Where the Companies intend to invest in the same companies as other funds managed by the Investment Manager, any such investment must first be approved by those Directors of the Board who are independent of the Investment Manager, unless the investment is made either at the same time and on the same terms, or in accordance with a pre-existing agreement between the Companies and the Investment Manager. The Investment Manager will notify the Boards but will not require approval prior to the co-investment if circumstances prevent full consultation.
The Investment Manager monitors each investment closely and usually expects to meet with the management of Investee Companies twice a year.
As the values of underlying investments increase, the Investment Manager will monitor opportunities for the Funds to realise a proportion of the capital gain, and to make tax-free distributions to Shareholders.
Investments in AIM and PLUS-quoted shares will be valued at the prevailing bid price.
All other investments will be valued in accordance with BVCA guidelines.
In order to improve the liquidity in the Shares of both Companies, the Boards have established buy-back policies whereby each Company will purchase Shares for cancellation. Hargreave Hale AIM VCT 1 has consistently demonstrated its commitment to improving shareholder liquidity through its regular share buyback policy, which has seen it acquire 7.8m Ordinary Shares at a discount of approximately 10% to the prevailing Net Asset Value per share.
As a guide, and subject to the Boards' discretion, and providing that in the opinion of the Boards, there is adequate surplus cash available, each Company will consider buying back Shares at a 5% discount to the last published Net Asset Value per share of the relevant class of share. This reduced discount will not come into effect until after the Tender Offer has closed. The target is non-binding and at the Directors' discretion and they reserve the right to return to the previous policies of purchasing shares at 10% below Net Asset Value per share should the move bring instability to the Shareholder base and place the Companies' liquid assets under undue pressure.
Share buy-backs are subject to the Listing Rules, which may restrict the Companies' ability to buy Shares in. For example, the price will be limited by the Listing Rules to a maximum of 105% of the average market value of the Ordinary Shares over the preceding 5 Business Days.
The Directors also believe that, whilst the current policy of buying shares back at 10% below Net Asset Value per share is consistent with several other leading AIM VCTs, the discount still acts as a deterrent to significant investment by some potential investors.
The Boards intend to continue to publish NAV on a weekly basis. Shareholders are reminded that they must hold their Ordinary Shares and C Shares for at least five years. Shareholders are likely to lose their income tax relief if they dispose of their Shares within that period.
The design of the structure of the Companies' funds, and their investment strategies, has been developed to reduce risk as much as possible. The key risk management features are detailed below.
The Enhanced Share Buy Back is only open to Existing Shareholders. An Existing Shareholder participating in the Enhanced Share Buy Back will be able to sell their Ordinary Shares back to the Companies at a price per share equal to the Net Asset Value per Ordinary Share as most recently announced to the London Stock Exchange prior to the purchase, subject to the Ordinary Shareholder applying the full proceeds of their share sale to subscribe for New Shares under the relevant Offer. The reinvestment will be at a 5% premium to the same Net Asset Value per share. The funds required for the Enhanced Share Buy Back, and the stamp duty payable by each Company as a result, will be financed from each Company's cash and liquid resources.
The Investment Manager will offer existing Shareholders who subscribe for New Shares under the Enhanced Share Buy Back a rebate through the issue of additional New Shares in the relevant Company equivalent to 2% of the amount subscribed with the proceeds of the Tender Offer(s). Where applicable, the introducing agent or intermediary will receive a 1% initial commission, payable by the Investment Manager.
Existing Ordinary Shareholders who sell their Shares back to either Company under a Tender Offer and subsequently subscribe for New Shares under the Offers should not regard this, for tax purposes, as continuing with their existing holdings. They will be subscribing for New Shares which will carry relief from income tax of up to 30%, but which will also carry the requirement to hold the New Shares for five years from the date of subscription if they are to retain the new income tax relief. Shareholders who sell the New Shares earlier than this time (except in the event of death) will have to repay the 30% income tax relief. Income tax relief on subscription will be subject to an Investor's personal circumstances and is limited to an amount which reduces the Investor's income tax liability to nil, subject to a maximum investment of £200,000 per person per tax year. Ordinary Shareholders who acquired their Ordinary Shares on or after 4 April 2007 will have to repay all of the income tax relief they received on subscription if they dispose of their Ordinary Shares pursuant to the Tender Offer.
The Boards believe that the Enhanced Share Buy Back, combined with the Offers, are in the best interests of the Companies as New Shares issued under the Offers will serve to improve the long-term nature of the Companies' funding.
The Enhanced Share Buy Backs will be open on 29 February 2012 until 6 p.m. on 30 March 2012. The Enhanced Share Buy Backs are not conditional on a minimum application being achieved.
In addition to the New Shares acquired with his or her proceeds from the Tender Offer(s), an Existing Shareholder participating in the Enhanced Share Buy Back is also able to subscribe for additional New Shares in the relevant Company (or C Shares in the case of Hargreave Hale AIM VCT 1), subject to the usual VCT limits on the amount of income tax relief that can be claimed in any one year as described elsewhere in this document.
A copy of this document containing details of the Tender Offers has been submitted to HMRC who have confirmed that subject to the personal circumstances of Investors, they should be eligible for VCT income tax relief of up to 30% on the total amount subscribed in New Shares under the Offers out of the proceeds of sale of Ordinary Shares disposed of under the Tender Offer.
The Offers will open on 29 February 2012. The first allotment under the Offers in respect of the 2011/12 tax year is expected to be on 4 April 2012. Thereafter, in respect of the 2012/13 tax year, the Directors reserve the right to allot Ordinary Shares and C Shares at any time whilst the Offers remains open.
Dealings in New Shares are expected to commence within 10 business days of the relevant allotments. The closing date for the Offers in respect of the 2011/12 tax year will be at 12p.m. on 5 April 2012. If the Offers are not fully subscribed at that time, the Directors reserve the right to allow the Offers to remain open for at least part of the 2012/13 tax year, but not beyond 22 February 2013. The Offers will not be withdrawn after dealings in the New Shares have commenced. The results of the Offers will be announced through a regulatory information service within 3 business days of the closing of the Offers.
Investors are invited to subscribe an amount in pounds Sterling rather than apply for a particular number of Ordinary Shares and/or C Shares.
The price of the new Ordinary Shares to be issued pursuant to the Offers (including the Tender Offers) will be calculated by reference to the last Net Asset Value of an existing Ordinary Share as published by the relevant Company prior to the date of allotment. The new Ordinary Shares will be priced according to the Pricing Formula:
Price of new Ordinary Share = Last Net Asset Value per Ordinary Share 0.95
The price will be calculated in pence to two decimal places. New Ordinary Shares will be issued at a 5% premium to the Net Asset Value per Share to make allowance for the costs of the Offers and commission payable to intermediaries.
The C Shares will be issued at 100 pence per Share.
As at 24 February 2012, the unaudited Net Asset Value per Ordinary Share of Hargreave Hale AIM VCT 1 was 60.53 pence, which would have resulted in an Offer Price of 63.72 pence per new Ordinary Share (60.53 pence divided by 0.95).
As at 24 February 2012, the unaudited net asset value per Ordinary Share of Hargreave Hale AIM VCT 2 was 95.23 pence, which would have resulted in an Offer Price of 100.24 pence per new Ordinary Share (95.23 pence divided by 0.95). Monies which are not sufficient to buy one new Ordinary Share will not be returned to applicants but will be retained by the relevant Company and fractions of new Ordinary Shares will not be issued. The new Ordinary Shares to be issued pursuant to the Offers will rank pari passu with the existing Ordinary Shares of the relevant Company.
Hargreave Hale AIM VCT 1 The investment portfolio of Hargreave Hale AIM VCT 1 as at 24 February 2012 (being the latest practical date prior to publication of this document) is as follows (all of which information is unaudited):
| Cost | (Unaudited) | (Unaudited) | |
|---|---|---|---|
| Valuation | Valuation | ||
| Qualifying Investments | £000 | £000 | % |
| Abcam | 100 | 1018 | 6.44 |
| Adv Computer Software | 400 | 1224 | 7.74 |
| Advanced Power | 149 | 99 | 0.63 |
| Animal Care | 300 | 856 | 5.42 |
| Bglobal | 258 | 124 | 0.79 |
| Brulines | 387 | 267 | 1.69 |
| Cohort | 800 | 675 | 4.27 |
| Corac | 150 | 115 | 0.73 |
| Craneware | 150 | 346 | 2.19 |
| Egdon Resources | 158 | 189 | 1.19 |
| EKF | 300 | 470 | 2.97 |
| Feedback | 194 | 113 | 0.72 |
| Hardide | 535 | 228 | 1.44 |
| Idox | 150 | 585 | 3.70 |
| In-Deed | 234 | 212 | 1.34 |
| Infoserve | 200 | 1 | 0.01 |
| Infrastrata | 46 | 18 | 0.12 |
| IS E&P | 50 | 50 | 0.32 |
| IS NV | 50 | 50 | 0.32 |
| Instem life | 298 | 275 | 1.74 |
| Intercede | 452 | 931 | 5.89 |
| Invocas | 169 | 12 | 0.08 |
| Sinclair IS Pharma | 350 | 253 | 1.60 |
| Jelf | 174 | 116 | 0.74 |
| K3 | 270 | 459 | 2.91 |
| Keycom | 300 | 113 | 0.71 |
| Maxima | 251 | 47 | 0.30 |
| Mexican Grill A Prefs | 185 | 252 | 1.60 |
| Mexican Grill Ords | 21 | 28 | 0.18 |
| Microsaic | 246 | 246 | 1.56 |
| Mycelx | 300 | 328 | 2.08 |
| Omega Diagnostics | 107 | 94 | 0.59 |
| Plastics Cap | 250 | 168 | 1.06 |
| Pressure Tech | 340 | 329 | 2.08 |
| Progressive Digital | 173 | 58 | 0.37 |
| Porta Comms | 225 | 141 | 0.89 |
| Reneuron | 298 | 148 | 0.94 |
| Sphere Medical | 300 | 253 | 1.60 |
| Tangent Comms | 300 | 115 | 0.73 |
| Tasty | 288 | 165 | 1.05 |
| TLA | 300 | 300 | 1.90 |
| TMO | 200 | 200 | 1.27 |
| Universe | 210 | 45 | 0.28 |
| Vertu | 600 | 270 | 1.71 |
| -------- | -------- | -------- | |
| Total qualifying investments | 11216 | 11986 | 75.87 |
| -------- | -------- | -------- |
| Treasury 2.25% 2014 | 978 | 1038 | 6.57 |
|---|---|---|---|
| UKTI 2.5% 2016 | 504 | 600 | 3.80 |
| ------- | ------- | ------- | |
|---|---|---|---|
| Total – UK gilts | 1482 | 1637 | 10.36 |
| ------- | ------- | ------- | |
| Nationwide 7.971% 2049 | 242 | 247 | 1.56 |
| Scot Ami 8.5% 2049 | 256 | 255 | 1.61 |
| Petrobras 6.25% 2026 | 247 | 259 | 1.64 |
| Total – UK corporate bonds | ------- 745 |
------- 760 |
------- 4.81 |
| ------- | ------- | ------- | |
| Brady | 77 | 105 | 0.67 |
| Cap-XX | 30 | 46 | 0.29 |
| In-Deed | 34 | 31 | 0.19 |
| Mexican Grill A Prefs | 34 | 34 | 0.21 |
| OMG | 61 | 47 | 0.29 |
| Prophotonix | 110 | 118 | 0.75 |
| Skill P&L | 100 | 58 | 0.37 |
| Spectra System | 58 | 46 | 0.29 |
| Microsaic | 1 | 1 | 0.00 |
| ------ | ------ | ------ | |
| Total – non-qualifying equities | 504 | 485 | 3.07 |
| ------ | ------ | ------ | |
| Total – Non-Qualifying Investments | 2731 | 2882 | 18.24 |
| ------ | ------ | ------ | |
| Cash | 930 ------ |
930 ------ |
5.89 ------- |
| Total investments | 14877 | 15799 | 100.00 |
Hargreave Hale AIM VCT 2 The investment portfolio of Hargreave Hale AIM VCT 2 as at 24 February 2012 (being the latest practical date prior to publication of this document) is as follows (all of which information is unaudited):
| Book Cost | (Unaudited) Valuation |
(Unaudited) Valuation |
|
|---|---|---|---|
| Qualifying Investments | £000 | £000 | % |
| Adv Computer Software | 100 | 306 | 4.76 |
| Animal Care | 100 | 285 | 4.44 |
| Corac | 100 | 77 | 1.19 |
| Ideagen | 100 | 144 | 2.25 |
| EKF | 150 | 235 | 3.66 |
| Electric Word | 185 | 115 | 1.79 |
| Fulcrum Utlility | 100 | 180 | 2.80 |
| Futura Medical | 75 | 110 | 1.71 |
| Hardide | 110 | 310 | 4.83 |
| Image Scan | 93 | 15 | 0.24 |
| In-Deed | 117 | 106 | 1.65 |
| Intercede | 96 | 198 | 3.08 |
| IS E&P | 25 | 25 | 0.39 |
| IS NV | 25 | 25 | 0.39 |
| Lidco | 146 | 207 | 3.23 |
| Lombard Risk | 92 | 196 | 3.04 |
| Paragon Entertainment | 100 | 83 | 1.28 |
| Mexican Grill A Prefs | 277 | 379 | 5.89 |
| Mexican Grill Ords | 31 | 42 | 0.65 |
| Microsaic | 117 | 117 | 1.82 |
| Mycelx | 150 | 164 | 2.56 |
| Omega Diagnostics | 151 | 106 | 1.65 |
| Photonstar | 97 | 22 | 0.34 |
| Plastics Cap | 100 | 67 | 1.04 |
| Porta Comms | 100 | 63 | 0.97 |
| Reneuron | 75 | 121 | 1.89 |
| Sphere Medical | 150 | 126 | 1.97 |
| Synchronica | 100 | 28 | 0.43 |
| TLA | 150 | 150 | 2.33 |
| Tristel | 100 | 90 | 1.40 |
| Total qualifying investments | -------- 3311 |
------- 4092 |
------- 63.67 |
| -------- | ------- | ------- | |
| Non-Qualifying investments | |||
| UK Treasury 2.25% 2014 | 294 | 311 | 4.84 |
| ------- | ------- | ------ | |
| Total – UK gilts | 294 ------- |
311 ------- |
4.84 ------ |
| Nationwide 7.971% 2049 | 145 | 148 | 2.31 |
| Scot Ami 8.5% 2049 | 154 | 153 | 2.38 |
| Petrobras 6.25% 2026 | 148 | 155 | 2.41 |
| Total – UK corporate bonds | ------ | ------ | ------- |
| 447 | 456 | 7.10 | |
| ------ | ------ | ------- | |
| Genargo | 26 | 31 | 0.47 |
| Cohort | 56 | 66 | 1.03 |
| Egdon Resources | 80 | 66 | 1.03 |
| GW Pharma | 52 | 46 | 0.71 |
|---|---|---|---|
| In-Deed | 17 | 15 | 0.24 |
| Instem Life | 35 | 32 | 0.50 |
| Mexican Grill A Prefs | 3 | 3 | 0.05 |
| OMG | 31 | 23 | 0.36 |
| Prophotonix | 40 | 43 | 0.67 |
| Skill Ports | 50 | 29 | 0.45 |
| TMO | 50 | 50 | 0.78 |
| Westmount | 16 | 18 | 0.27 |
| Paragon Entertainment | 1 | 1 | 0.01 |
| Microsaic | 1 | 1 | 0.01 |
| ------- | ------- | ------- | |
| Total – non-qualifying equities | 458 | 424 | 6.60 |
| ------- | ------- | ------- | |
| Total – Non-Qualifying Investments | 1199 | 1191 | 18.55 |
| ------- | ------- | ------- | |
| Cash | 1143 | 1143 | 17.78 |
| ------- | ------- | --------- | |
| Total investments | 5654 | 6427 | 100.00 |
Investments of Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 representing more than 50% of the net asset value of the relevant Company.
| Investment date | July 2008 | Unaudited results for six months to | August 2011 | |
|---|---|---|---|---|
| Equity held | 0.66% | Turnover (£'000) | 47 | |
| Av. Purchase Price | 17.0p | Profit before tax (£'000) | 3,700 | |
| Cost (£'000) | 400 | Net assets (£'000) | 89 | |
| Valuation (£'000) | 1,224 | |||
| Commercial Sector: Software & Computer Services | Geographical Location: UK |
Advanced Computer Software (7.7% NAV) 52p
Advanced Computer Software Group plc is a supplier of software and IT services to the healthcare and commercial sectors with a primary focus on delivering high quality products and services to enable first class delivery of care in the community. Advanced also delivers back-office systems for NHS trusts, local authorities and care providers and is further strengthening its position in the health checks and pharmacy services markets. Working with partners in the NHS, local government and the private sector, Advanced delivers IT in support of safe and efficient care delivery and greater information for both the commissioner and care provider. The company offers a range of integrated health and care solutions from patient-facing IT systems through to back-end operational systems and services. Advanced is also a leading supplier of software and IT services to the commercial sector, which represents 35% of the company's revenues.
| UK Treasury 2.25% 2014 (6.6% NAV) | 103.77p | |||
|---|---|---|---|---|
| Investment date Purchase Price Cost (£'000) Valuation (£'000) |
March 2009 97.78p 978 1,038 |
|||
| Abcam (6.4% NAV) | 339.25p | |||
| Investment date Equity held Av. Purchase Price Cost (£'000) Valuation (£'000) Commercial Sector: |
October 2005 0.16% 33.4p 100 1,018 Pharmaceuticals & Biotechnology |
Audited results for year ended Turnover (£'000) Profit before tax (£'000) Net assets (£'000) |
June 2011 83,272 32,111 73,920 Geographical Location: UK |
|
Abcam is a producer and distributor of high quality protein research tools. The proteins enable scientists to analyse components of living cells at the molecular level, which is essential to understanding health and disease. Abcam produces and distributes its own and third party produced antibodies to academic and commercial users throughout the world. Product ordering is available through their website where customers are also able to access up-to-date and detailed technical product data sheets.
| Investment date | May 2007 | Unaudited results for six months to | September 2011 | |
|---|---|---|---|---|
| Equity held | 2.83% | Turnover (£'000) | 3,528 | |
| Av. Purchase Price | 33.0p | Profit before tax (£'000) | 653 | |
| Cost (£'000) | 452 | Net assets (£'000) | 5,911 | |
| Valuation (£'000) | 931 | |||
| Commercial Sector: | Software & Computer Services | Geographical Location: UK |
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 identities of people and their associated identity credentials within a single, integrated, workflow driven plaform. This includes enabling and managing: secure registration, biometric capture, application vetting and approval through to smart card personalisation, issuance and management.
| Animalcare (5.4%NAV) | 157p | |||
|---|---|---|---|---|
| Investment date | December 2007 | Audited results for year ended | December 2011 | |
| Equity held | 2.66% | Turnover (£'000) | 5,400 | |
| Purchase Price | 55.0p | Profit before tax (£'000) | 1,090 | |
| Cost (£'000) | 300 | Net assets (£'000) | 16,135 | |
| Valuation (£'000) | 856 | |||
| Commercial Sector: | Pharmaceuticals & Biotechnology | Geographical Location: UK |
Animalcare is a leading supplier of generic veterinary medicines and animal identification products to companion animal verterinary 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.
| Cohort (4.3% NAV) | 110p | ||
|---|---|---|---|
| Investment date | October 2007 | Unaudited results for six months to | October 2011 |
| Equity held | 1.51% | Turnover (£'000) | 37,363 |
| Av. Purchase Price | 130.2p | Profit before tax (£'000) | 1,803 |
| Cost (£'000) Valuation (£'000) |
800 675 |
Net assets (£'000) | 49,182 |
| Commercial Sector: | Aerospace & Defense | Geographical Location: UK |
Cohort is the parent company of three well established, wholly owned subsidiaries providing a wide range of services and products for UK and international customers. 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 systems engineering, software and electronic engineering services and solutions, including specialist design and manufacture.
| UK Treasury Index Linked 2.5% 2016 (3.8% NAV) | 342.645p |
|---|---|
| ----------------------------------------------- | ---------- |
| Investment date | March 2009 |
|---|---|
| Purchase Price | 280.65p |
| Cost (£'000) | 504 |
| Valuation (£'000) | 600 |
| Idox (3.7% NAV) | 29.25p | |||
|---|---|---|---|---|
| Investment date | May 2007 | Audited results for six months to | October 2011 | |
| Equity held | 0.58% | Turnover (£'000) | 38,605 | |
| Av. Purchase Price | 7.5p | Profit before tax (£'000) | 5,614 | |
| Cost (£'000) | 150 | Net assets (£'000) | 34,371 | |
| Valuation (£'000) | 585 | |||
| Commercial Sector: | Software & Computer Services | Geographical Location: UK |
Idox is a leading software and information managements solutions provider. The business consists of four divisions: Public Sector Software, Engineering Information Management Software, Information Solutions and Recruitment Services. The Idox Group provides information management, web development and online publishing products to clients across the public and private sectors. It also provides software solutions and information services to the public sector and is a leading applications provider to local government for core functions relating to land, people and property.
| EKF (3.0% NAV) | 23.5p | ||
|---|---|---|---|
| Investment date | June 2010 | Unaudited results for six months to | June 2011 |
| Equity held | 0.80% | Turnover (£'000) | 7,380 |
| Purchase Price | 15.0p | Profit before tax (£'000) | (1,552) |
| Cost (£'000) | 300 | Net assets (£'000) | 35,740 |
| Valuation (£'000) | 470 | ||
| Commercial Sector: | Health Care Equipment & Services | Geographical Location: UK |
The EKF Group is a worldwide manufacturer of point of care equipment for the measurement of glucose, lactate, haemoglobin, haematocrit and glycated haemoglobin (HbA1c). The range of blood analysers are simple to use and designed to quickly deliver accurate results to aid the diagnosis of anaemia, diabetes and associated conditions. EFK analysers are used in more than 70 countries by healthcare professionals in blood banks, GP surgeries, diabetes clinics, pharmacies, hospitals, sports medicine and laboratories.
| K3 (2.9% NAV) | 153p | |||
|---|---|---|---|---|
| Investment date | September 2005 | Audited results for year ended | June 2011 | |
| Equity held | 1.05% | Turnover (£'000) | 52,800 | |
| Av. Purchase Price | 90.0p | Profit before tax (£'000) | 4,908 | |
| Cost (£'000) | 270 | Net assets (£'000) | 37,242 | |
| Valuation (£'000) | 459 | |||
| Commercial Sector: | Software & Computer Services | Geographical Location: UK |
K3 supplies integrated business systems encompassing Enterprise Resource Planning (ERP) software, Customer Relationship Management (CRM) software, Business Intelligence and e-commerce, hosting and managed services to the supply chain industry. Focussed on the retail, manufacturing and distribution markets, the company supports more than 3,000 customers in over 20 countries.
| Craneware (2.2%NAV) | 295p | |||
|---|---|---|---|---|
| Investment date | September 2007 | Unaudited results for six months to | December 2011 | |
| Equity held | 0.43% | Turnover (\$'000) | 8,754 | |
| Purchase Price | 128.0p | Profit before tax (\$'000) | 3,821 | |
| Cost (£'000) | 150 | Net assets (\$'000) | 33,290 | |
| Valuation (£'000) | 346 | |||
| Commercial Sector: | Software & Computer Services | Geographical Location: UK |
Craneware is a leader in automated revenue integrity solutions that improve financial performance for healthcare organisations. Craneware is the leader in automated revenue integrity solutions that improve financial performance for healthcare organisations. Craneware's SAAS solutions help hospitals and other healthcare providers more effectively price, charge, code and retain earned revenue for patient care services and supplies. This optimises reimbursement, increases operational efficiency and minimises compliance risk.
| Investment date | October 2009 | Preliminary results for year ended | September 2011 |
|---|---|---|---|
| Equity held | 7.38% | Turnover (£'000) | 4,095 |
| Av. Purchase Price | 2059.0p | Profit before tax (£'000) | 35 |
| Cost (£'000) | 311 | Net assets (£'000) | 1,899 |
| Valuation (£'000) | 424 | ||
| Commercial Sector: | Travel & Leisure | Geographical Location: UK |
Mexican Grill, is a private company that operates seven fast casual California-Mexican restaurants that provide fresh, made to order cuisine for eat in or take-away. The seven sites are in London at Islington, Bankside (near Tate Modern), Market Place (near Oxford Circus), Canary Wharf, Leadenhall, Hammersmith & Westfield Stratford making it amongst the largest chains within its niche. Bar the most recent opening, each of the sites is profitable, most notably Canary Wharf which is generating an annual return on capital in excess of 50%. The company is profitable as a whole and has a strong balance sheet following the recent £3.5m fundraising from Quilvest Private Equity.
| Investment date | March 2009 |
|---|---|
| Purchase Price | 98.07p |
| Cost (£'000) | 294 |
| Valuation (£'000) | 311 |
| Investment date | June 2009 | Preliminary results for year ended | September 2011 |
|---|---|---|---|
| Equity held | 3.81% | Turnover (£'000) | 1,947 |
| Av. Purchase Price | 0.3p | Profit before tax (£'000) | (446) |
| Cost (£'000) | 110 | Net assets (£'000) | 106 |
| Valuation (£'000) | 310 | ||
| Commercial Sector: | Chemicals | Geographical Location: UK |
Hardide manufactures and applies tungsten carbide-based coatings to a wide range of engineering components. The patented technology is proven to offer cost savings through reduced downtime and extended part life. Customers include leading companies operating in oil and gas exploration and production, valve and pump manufacturing, general engineering and aerospace. The company recently raised £0.75m from new and existing investors at 0.6p.
| Advanced Computer Software (4.8% NAV) | 52p | |||
|---|---|---|---|---|
| Investment date | July 2008 | Unaudited results for six months to | August 2011 | |
| Equity held | 0.17% | Turnover (£'000) | 47 | |
| Purchase Price | 17.0p | Profit before tax (£'000) | 3,700 | |
| Cost (£'000) | 100 | Net assets (£'000) | 89 | |
| Valuation (£'000) | 306 | |||
| Commercial Sector: | Software & Computer Services | Geographical Location: UK |
Advanced Computer Software Group plc is a supplier of software and IT services to the healthcare and commercial sectors with a primary focus on delivering high quality products and services to enable first class delivery of care in the community. Advanced also delivers back-office systems for NHS trusts, local authorities and care providers and is further strengthening its position in the health checks and pharmacy services markets. Working with partners in the NHS, local government and the private sector, Advanced delivers IT in support of safe and efficient care delivery and greater information for both the commissioner and care provider. The company offers a range of integrated health and care solutions from patient-facing IT systems through to back-end operational systems and services. Advanced is also a leading supplier of software and IT services to the commercial sector, which represents 35% of the company's revenues.
| Investment date | December 2007 | Unaudited results for six months to | December 2011 | |
|---|---|---|---|---|
| Equity held | 0.89% | Turnover (£'000) | 5,400 | |
| Av. Purchase Price | 55.0p | Profit before tax (£'000) | 1,090 | |
| Cost (£'000) | 100 | Net assets (£'000) | 16,135 | |
| Valuation (£'000) | 285 | |||
| Commercial Sector: | Pharmaceuticals & Biotechnology | Geographical Location: UK |
Animalcare is a leading supplier of generic veterinary medicines and animal identification products to companion animal verterinary 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.
| EKF (3.7% NAV) | 23.5p | ||
|---|---|---|---|
| Investment date | June 2010 | Unaudited results for six months to | June 2011 |
| Equity held | 0.40% | Turnover (£'000) | 7,380 |
| Purchase Price | 15.0p | Profit before tax (£'000) | (1,552) |
| Cost (£'000) | 150 | Net assets (£'000) | 35,740 |
| Valuation (£'000) | 235 | ||
| Commercial Sector: | Health Care Equipment & Services | Geographical Location: UK |
The EKF Group is a worldwide manufacturer of point of care equipment for the measurement of glucose, lactate, haemoglobin, haematocrit and glycated haemoglobin (HbA1c). The range of blood analysers are simple to use and designed to quickly deliver accurate results to aid the diagnosis of anaemia, diabetes and associated conditions. EFK analysers are used in more than 70 countries by healthcare professionals in blood banks, GP surgeries, diabetes clinics, pharmacies, hospitals, sports medicine and laboratories
| Lidco (3.2% NAV) | 14.25p | ||
|---|---|---|---|
| Investment date | May 2009 | Unaudited results for six months to | July 2011 |
| Equity held | 0.84% | Turnover (£'000) | 3,215 |
| Purchase Price | 10.0p | Profit before tax (£'000) | (242) |
| Cost (£'000) Valuation (£'000) |
146 207 |
Net assets (£'000) | 4,338 |
| Commercial Sector: | Health Care Equipment & Services | Geographical Location: UK |
LiDCO is a supplier of minimally invasive hemodynamic monitoring equipment and disposables to hospitals. These products are used primarily for the management of hospital patients requiring critical care or at major cardiovascular risk. LiDCO's computer-based technology significantly reduces the complications (particularly infections) and costs associated with major surgery. The technology was invented in the Department of Applied Physiology based at St Thomas' Hospital, London. LiDCO is based in the UK.
| Intercede (3.1% NAV) | 68.0p | ||
|---|---|---|---|
| Investment date | May 2007 | Unaudited results for six months to | September 2011 |
| Equity held | 0.60% | Turnover (£'000) | 3,528 |
| Av. Purchase Price | 33.0p | Profit before tax (£'000) | 653 |
| Cost (£'000) | 96 | Net assets (£'000) | 5,911 |
| Valuation (£'000) | 198 |
Commercial Sector: Software & Computer Services Geographical Location: UK
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 identities 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.
| Investment date | September 2009 | Unaudited results for six months to | September 2011 | |
|---|---|---|---|---|
| Equity held | 1.09% | Turnover (£'000) | 6,352 | |
| Av. Purchase Price | 4.0p | Profit before tax (£'000) | 1,752 | |
| Cost (£'000) | 92 | Net assets (£'000) | 4,287 | |
| Valuation (£'000) | 196 | |||
| Commercial Sector: | Software & Computer Services | Geographical Location: UK |
.
Lombard Risk is a provider of collateral management and regulatory compliance solutions to financial organizations and large corporations, They currently serve over 300 financial businesses around the world. Clients include over 20 of the world's top 50 banks, as well as other investment firms, asset managers, hedge funds, fund administrators, and global corporations.
| Fulcrum Utility (2.8% NAV) | 18p | ||
|---|---|---|---|
| Investment date | July 2010 | Unaudited results for six months to | September 2011 |
| Equity held | 0.65% | Turnover (£'000) | 19,600 |
| Purchase Price | 10.0p | Profit before tax (£'000) | (3,750) |
| Cost (£'000) | 100 | Net assets (£'000) | 1,477 |
| Valuation (£'000) | 180 | ||
| Commercial Sector: | Utilities | Geographical Location: UK |
Fulcrum Utility is an energy solutions company operating across mainland UK. Combining customer focus with extensive knowledge and experience in the utility industry, the company has a portfolio of products and services that provide an end to end multi utility and environmental service for all customer categories. As a gas transporter, Fulcrum designs, constructs, owns and operates distribution systems.
| Mycelx (2.6% NAV) | 230p | ||
|---|---|---|---|
| Investment date | August 2011 | Unaudited results for six months to | June 2011 |
| Equity held | 0.55% | Turnover (\$'000) | 3,027 |
| Purchase Price | 210.0p | Profit before tax (\$'000) | 103 |
| Cost (£'000) | 150 | Net assets (\$'000) | 1,428 |
| Valuation (£'000) | 164 | ||
| Commercial Sector: | Oil Equipment, Services & Distribution Geographical Location: US |
Mycelx is a, clean water technology company. It provides clean water solutions to the oil, gas and petrochemical industries, as well as marine, power, utilities and heavy manufacturing. Its patented polymer is capable of permanently removing free, emulsified and dissolved hydrocarbons in water
Investment date December 2011 Purchase Price 98.647p Cost (£'000) 148 Valuation (£'000) 155
| Investment date | April 2010 |
|---|---|
| Purchase Price | 102.402p |
| Cost (£'000) | 154 |
| Valuation (£'000) | 153 |
| Investment date | November 2011 | Unaudited results | - |
|---|---|---|---|
| Equity held | 1.17% | ||
| Purchase Price | 20.0p | ||
| Cost (£'000) | 150 | ||
| Valuation (£'000) | 150 | ||
| Commercial Sector: | Support Services | Geographical Location: US |
TLA Worldwide is a newly formed company that has used its IPO proceeds to consolidate/merge two sports agencies focused on dominating the fragmented US baseball space. TLA's aim is to become the preeminent, fully integrated representation and marketing services provider initially to the baseball industry and, over time, to a range of other sports. The Group, which will have offices in London, Los Angeles and New York, will combine baseball talent representation with sport marketing, management and event capabilities.
Investment and portfolio information on pages 44 to 55 has been derived from the relevant Company's accounting records and, in respect of the information on the portfolio companies, from available published information in respect of those companies the latest financial accounts published by those companies. In respect of the information on the portfolio companies, the Companies confirm that this information has been accurately reproduced and, as far as the Companies are aware and able to ascertain from the information published, no facts have been omitted which would render the reproduced information inaccurate or misleading.
The portfolio analysis on pages 48 to 55 represents not less than 50% of the NAV of each Company as at 24 February 2012 (being the latest practical date prior to publication of this document).
The tax reliefs set out below are available to individuals aged 18 or over who subscribe under the Offer for New Shares. Tax reliefs will only be given to the extent that an individual's total investments in VCTs in any tax year do not exceed the qualifying limit, which is currently £200,000. Investors who intend to invest more than £200,000 in VCTs in any one tax year should seek professional advice.
Income tax relief at the rate of 30% will be available on subscriptions for shares up to a maximum investment of £200,000 in any one tax year, or that amount which reduces the investor's income tax liability to nil. This relief must be repaid should the shares be sold or otherwise disposed of within five years, other than in the event of death.
An investor who subscribes for or acquires up to a maximum of £200,000 of New Shares in a VCT in any given tax year will not be liable to UK income tax on dividends paid by the VCT on those shares. This tax relief applies to shares acquired through the Offers and shares acquired through subsequent acquisition.
A disposal by an Investor of Shares (whether acquired by subscription for new shares or subsequent acquisition) in a VCT will give rise to neither a chargeable gain nor an allowable loss for the purposes of UK capital gains tax. This relief is limited to disposals of New Shares acquired within the limit of £200,000 for any tax year. This tax relief applies to shares acquired through the Offers and shares acquired through subsequent acquisition.
An Investor can transfer their shares to their spouse within 5 years of subscription without triggering the repayment of the initial income tax relief. Shares acquired through spousal transfer will continue to benefit from capital gains tax relief and income tax relief.
Each investor will be issued with a certificate which can be used to claim income tax relief, either immediately by obtaining an adjustment to their tax coding from HMRC or by waiting until the end of the tax year and using their tax return to claim relief.
Investors who are not resident in the UK, or who may cease to be resident in the UK, should seek their own professional advice as to the consequences of making an investment.
The following table illustrates the effect of the increased tax reliefs for an individual who subscribes £10,000 through the Offers:
| Effect net cost to investor | 7,000 |
|---|---|
| Less income tax relief at 30% | (3,000) |
| Initial investment | 10,000 |
| Value £ |
The following tables show what an Investor would need to earn on a gross basis from both bank interest and taxable income from investments in bonds and equities to achieve the same equivalent net yield from a dividend distribution by a VCT. The yields detailed below, which are for illustration purposes only, are calculated with reference to the cost of investment net of the initial 30% income tax relief.
They are presented for
(i) an additional rate taxpayer, with a marginal income tax rate on interest income of 50% and a marginal income tax rate on dividend income of 42.5% on dividends. After adjusting for the 10% tax credit, the effective tax rate on dividend income falls to 36.1%.
(ii) a higher rate taxpayer, with a marginal income tax rate on interest income of 40% and a marginal income tax rate on dividend income of 32.5%. After adjusting for the 10% tax credit, the effective tax rate on dividend income falls to 25.0%.
(iii) a basic rate taxpayer, with a marginal income tax rate on interest income of 20% and a marginal income tax rate on dividend income of 10%. After adjusting for the 10% tax credit, the effective tax rate on dividend income falls to nil.
| Tax Rate | Effective Tax Rate (adjusting for tax credit) |
3 p |
5 p |
7 p |
|---|---|---|---|---|
| Nil | Nil | 4.3 | 7.1 | 10.0 |
| 50% | 50% | 8.6 | 14.3 | 20.0 |
| 42.5% | 36.1% | 6.7 | 11.2 | 15.6 |
| Tax Rate | ||||
| Nil | Nil | 4.3 | 7.1 | 10.0 |
| 40% | 40% | 7.1 | 11.9 | 16.7 |
| 32.5% | 25% | 5.7 | 9.5 | 13.3 |
| Tax Rate | Effective Tax Rate (adjusting for tax credit) |
3 | p | 5 | p | 7 | p |
|---|---|---|---|---|---|---|---|
| Tax Rate | |||||||
| Nil | Nil | 4.3 | 7.1 | 10.0 | |||
| 20% | 20% | 5.4 | 8.9 | 12.5 | |||
| 10% | 0% | 4.3 | 7.1 | 10.0 | |||
Investors should obtain their own independent financial advice on their eligibility for tax relief. A general guide to the conditions to be met in order for the tax reliefs to be available is given in Part II of this document.
The Boards of the Companies both comprise three Directors, two of whom are independent of the Investment Manager. The Directors operate in a non-executive capacity and are responsible for overseeing the investment strategy of the Companies and ensuring high levels of corporate governance. The Boards have a wide range of investment experience and are actively engaged in the management of VCTs. Whilst the Investment Manager operates under a discretionary fund management mandate, it will, where possible, disseminate an investment report for a proposed Qualifying Investment to the boards of Directors for consideration before making an investment. The Investment Manager will not commit to an investment into a private company with no firm intention to float without the prior approval of the board of Directors.
After qualifying as a chartered accountant Sir Aubrey Brocklebank worked for Guinness Mahon from 1981 to 1986, initially in its corporate finance department before assisting in the establishment of a specialist development capital department. From 1986 to 1990 he was a director of Venture Founders Limited, managing a £12m venture capital fund, which had been raised to invest in early stage ventures. He managed the Avon Enterprise Fund (a venture capital fund of £4.5m, investing in approximately 20 companies) from 1990 until all investments had been realised in 1997. He is on the board of two other VCTs, Downing Planned Exit VCT 2011 Plc and Puma VCT 8 plc as chairman of each company. He is, and has also been, a director of a number of companies, some of which are, or have been, quoted on AIM.
David was, until July 1997, a main board director of MFI Furniture Group plc and managing director of MFI International Limited having been involved at a senior level in both MFI's management buyout and its subsequent floatation. He started his career at Marks & Spencer Group plc. He is currently chairman of Kitwave Limited, Episys Group Limited and Elderstreet VCT plc and is a non executive director of Puma VCT 8 plc.
See page 61 for Giles Hargreave's CV.
David worked for over 25 years in the investment banking industry starting as an investment analyst with Rowe and Pitman and becoming a partner of the firm in 1985. Following takeovers by SG Warburg and Swiss Bank Corporation and the subsequent merger with Union Bank of Switzerland, David in the corporate finance division of UBS Warburg. In this capacity, amongst his various duties, he was responsible for establishing a smaller companies business unit. He was a consultant to UBS from 1999 to 2002. David is presently a non executive director of Imagination Technologies Group Plc, Anite Plc and FFastfill Plc.
See page 61 for Giles Hargreave's CV.
Philip has over 20 years experience in engineering and high-tech industries and has worked in both the UK and USA. He has spent the last 27 years in the venture capital industry, playing a major part in the development of the YFM Group into the most active investor in UK SME's. He retired from all YFM Group business in April 2008 following their disposal to GLE Capital. Philip has been responsible for a wide range of venture capital deals in a variety of industries including software, computer maintenance, engineering, printing, safety equipment, design and textiles. In addition to his directorship of Hargreave Hale AIM VCT 2 plc, Philip is a non executive director of Pressure Technologies plc and British Smaller Companies VCT plc.
Aubrey Brocklebank has committed to participate in the Enhanced Share Buy Back in respect of 5,000 Hargreave Hale AIM VCT 1 Ordinary Shares.
Giles Hargreave has committed to participate in the Enhanced Share Buy Back in respect of 109,163 Hargreave Hale AIM VCT 1 Ordinary Shares and 51,500 Hargreave Hale AIM VCT 2 Ordinary Shares.
David Hurst-Brown and his associates have committed to participate in the Enhanced Share Buy Back in respect of 25,750 Hargreave Hale AIM VCT 1 Ordinary Shares and 26,250 Hargreave Hale AIM VCT 2 Ordinary Shares and to subscribe for a further £20,000 of Hargreave Hale AIM VCT 2 Ordinary Shares under the Offers.
David Brock is intending to invest £10,000 into the Hargreave Hale AIM VCT 1 C Share Fund, under the Offers.
Philip Cammerman is intending to invest £3,000 into Hargreave Hale AIM VCT 2, under the Offers.
The Companies are managed by Hargreave Hale Limited, a fund manager with approximately £1,528m under management (source: Hargreave Hale). Hargreave Hale has been managing investments in UK Small and Micro Cap companies for 13 years and VCTs for 7 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. The Marlborough Special Situations Fund, in which Hargreave Hale AIM VCT 2 will invest, has returned 1089% since coming under the management of Hargreave Hale in July 1998.
The investments of the two Companies are co-managed by Giles Hargreave and Oliver Bedford, with support from the rest of the firm's investment team of six. The investment team manages approximately £750m, of which approximately £400m 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:
Giles Hargreave is the chief executive of Hargreave Hale Limited. After leaving Cambridge in 1969, Giles began his career as a trainee analyst with James Capel before moving to Management Agency and Music Plc as a private fund manager in 1974. In 1986 he founded Hargreave Investment Management, which he then merged with Hargreave Hale & Co in 1988. In 1998, Giles took over as the fund manager of the Marlborough Special Situations Fund. He also manages the Marlborough UK Micro Cap Growth Fund, the Marlborough Multi Cap Income Fund and both VCTs. Giles heads up Hargreave Hale's investment committee and chairs the weekly meetings in which the team reviews existing and potential investments.
Oliver Bedford graduated from Durham University in 1995 with a degree in Chemistry. He served in the British Army for 9 years before joining Hargreave Hale in 2004. Oliver co-manages the Hargreave Hale AIM VCTs with Giles Hargreave and supports the other unit trusts through the investment committee. He also runs the Hargreave Hale Multi Asset Model Portfolio Service.
George has been involved in institutional research and fund management since graduating from Oxford University in 1970. He joined Hargreave Hale in 1988 following positions at both Kemp Gee and GT Management. George, who specialises in 'Old Economy' and resource companies, enjoys a particularly broad mandate that allows him to unearth thematic plays and under-researched companies, often with an international dimension.
Guy Feld, a graduate of Oxford University, has over 16 years City experience in both fund management and broking at BZW, UBS and Teather & Greenwood. Guy joined the team as a research adviser in 2003 and has a particular focus on the technology sector and other "New Economy" and growth companies. Guy co-manages the Marlborough UK Micro Cap Growth Fund with Giles Hargreave.
Richard qualified as a Chartered Accountant at Ernst & Young in 1994 and subsequently joined Singer & Friedlander in 1995 as a small companies fund manager. He moved to Hargreave Hale in 2005 and now comanages the Marlborough UK Leading Companies Fund with Giles Hargreave whilst also deputising for him on the Marlborough Special Situations Fund. He manages a substantial private mandate and runs Hargreave Hale's IHT portfolio service.
Sid graduated from Edinburgh University with a masters in economics in 2002. Sid co-manages the Marlborough Multi Cap Income Fund with Giles Hargreave and also supports the other funds, where his background in Pan European (including UK) small and mid-cap equities and understanding of Indian companies brings an additional new dimension to the team. Formerly of DSP, Sid joined Hargreave Hale in 2007.
Gracie joined Hargreave Hale in 2010 after spending nearly 4 years at Morgan Stanley in Foreign Exchange Strategy and CDO Structuring. Gracie holds a BA Hons and MMath in Mathematics from the University of Cambridge and provides investment support to the VCTs. She also runs the valuations and provides wider management support to VCTs.
Hargreave Hale provides discretionary investment management and advisory services to both Companies in respect of their portfolio of Qualifying Investments and Non-Qualifying Investments.
For Hargreave Hale AIM VCT 1, the Investment Manager receives investment management fees (exclusive of VAT) equal to 1.5% per annum of the Net Asset Value of the relevant Company and a Performance Incentive Fee.
For Hargreave Hale AIM VCT 2, the Investment Manager receives investment management fees (exclusive of VAT) equal to 1.3% per annum of the Net Asset Value of the Company and a Performance Incentive Fee. At the General Meeting, Shareholders will be asked to approve an increase in the investment management fee from 1.3% per annum of the Net Asset Value of the Company to 1.5% per annum of the Net Asset Value.
The appointment may be terminated on 12 calendar months' notice by either party.
In line with normal VCT practice, a performance related incentive fee will be payable subject to certain criteria. This will be payable at the rate of 20% of any dividends paid to Ordinary Shareholders in excess of 6 pence per Ordinary Share per annum, provided that the Net Asset Value per Ordinary Share is at least 95p, with any cumulative shortfalls below 6 pence per Ordinary Share having to be made up in subsequent years.
Additionally, a performance related incentive fee will be payable at the rate of 20% of any dividends paid to C Shareholders in excess of 6 pence per C Share per annum, provided that the Net Asset Value per C Share is at least 95p, with any cumulative shortfalls below 6 pence per C Share having to be made up in subsequent years.
A maximum of 75% of the Investment Manager's annual fee (plus irrevocable VAT, but excluding any incentive fee) will be chargeable against capital reserves, with the remainder of the Investment Manager's annual fee being chargeable against revenue.
Hargreave Hale AIM VCT 1's annual report and accounts are made up to 30 September in each year and are normally sent to shareholders in December of each year. It is the current intention of the Directors that the first report to be sent to Investors after the close of the Offers will be the audited annual accounts for the year ending 30 September 2012.
It is intended that Hargreave Hale AIM VCT 1 should have an unlimited life, but the Directors consider that it is desirable for shareholders to have the opportunity to review the future of the Company at appropriate intervals. Hargreave Hale AIM VCT 1's articles of association require the Directors to put a proposal to shareholders concerning the continuation of that company at the annual general meeting in 2016 and, if passed, at every fifth anniversary thereafter.As there is a risk for Shareholders who participate in the Enhanced Share Buy Back and for new Shareholders under the Offers that if the continuation vote is passed in favour of discontinuance, they will thereby be deemed to have disposed within their five year holding period, it is a condition to the Offers therefore that prior Shareholder approval is granted to delay the continuation vote until 2018 and to adopt new articles of association accordingly. The Directors have also taken this opportunity to update the new articles of association to reflect the Companies Act 2006.
Hargreave Hale AIM VCT 2's annual report and accounts are made up to 28 February in each year and are normally sent to shareholders in June of each year. It is the current intention of the Directors that the first report to be sent to Investors after the close of the Offers will be the unaudited half yearly reports in respect of the six month period ending 31 August 2012.
It is intended that Hargreave Hale AIM VCT 2 should have an unlimited life, but the Directors consider that it is desirable for shareholders to have the opportunity to review the future of the Company at appropriate intervals. Hargreave Hale AIM VCT 2's articles of association require the Directors to put a proposal to shareholders concerning the continuation of the Company at the annual general meeting in 2013 and, if passed, at every fifth anniversary thereafter. As there is a risk for Shareholders who participate in the Enhanced Share Buy Back and for new Shareholders under the Offers that if the continuation vote is passed in favour of discontinuance, they will thereby be deemed to have disposed within their five year holding period, it is a condition to the Offers therefore that prior Shareholder approval is granted to delay the continuation vote until 2018 and to adopt new articles of association accordingly. The Directors have also taken this opportunity to update the new articles of association to reflect the Companies Act 2006.
The Directors intend to continue conducting the affairs of the Companies so that they satisfy the conditions for approval as a VCT laid down in section 274 of ITA. Whilst it is the intention of the Directors that the Companies will continue to be managed so as to qualify as VCTs, there can be no guarantee that they will continue to qualify or that such status will be maintained. A failure to meet the qualifying criteria could result in the Companies losing the tax reliefs previously obtained, resulting in adverse tax consequences for investors, including a requirement to repay the 30% income tax relief.
Any potential Investors in doubt as to the personal tax reliefs which are available as a result of investing in a VCT, or the taxation consequences of the investment, disposal or holding of shares in a VCT, should consult an appropriately qualified professional adviser.
Further details of the tax position of VCTs are set out in Part II of this document.
Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 have retained PricewaterhouseCoopers to advise on tax matters generally and, in particular, the maintenance of VCT status. HMRC has confirmed that both of the Companies qualify as VCTs, PricewaterhouseCoopers will assist the Investment Manager in establishing the status of investments as Qualifying Investments and monitoring these investments and will report directly to the Board. In order to continue comply with VCT requirements, both Companies must have 70% of all net funds raised from the issue of shares invested in Qualifying Investments throughout accounting periods beginning no later than 3 years after the date on which those shares are issued. As at 31 January 2012 Hargreave Hale AIM VCT 1 was 93.9% invested in Qualifying Investments. As at 31 January 2012 Hargreave Hale AIM VCT 2 was 90.4% invested in Qualifying Investments
Application will be made to the UK Listing Authority and the London Stock Exchange for the New Shares to be admitted to the premium segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange. All New Shares will be issued in registered form, will be transferable and will rank pari passu in all respects with each other. In the case of Investors requesting share certificates, it is intended that definitive shares certificates will be despatched within 10 business days of allotment. Prior to despatch of definitive share certificates, transfers will be certified against the register. No temporary documents of title will be issued. The Companies will allot and issue New Shares in certificated form.
A typical investor for whom the Offers are designed is a high net worth or retail individual who is a UK income taxpayer over 18 years of age with an investment range of between £3,000 and £200,000 per tax year who considers the investment policy as detailed in Part I of this document to be attractive and can accept the high level of risk associated with an investment into a VCT. Investment in a VCT will not be suitable for every type of investor and should be considered as a medium to long term investment with a minimum holding period of five years. Before deciding whether to apply for New Shares under the terms of the Offers Investors are strongly encouraged to consult an independent adviser authorised under FSMA and to carefully consider the suitability of an investment into the Companies in light of their personal circumstances.
Introductory commission is being offered to authorised financial intermediaries at the rate of 2.25% on the value of successful applications submitted through them. The initial introductory commission may be waived and reimbursed by cheque or through an additional allotment of New Shares.
Existing Shareholders participating in the Enhanced Share Buy Back will not be paid any introductory commission, but instead they will receive additional New Shares equivalent to 2% of the amount subscribed with the proceeds of their Tender Offer.
The following is only a summary of the law concerning the tax position of individual investors in VCTs. Potential investors who are in any doubt about the taxation consequences of investing in a VCT are recommended to consult a professional adviser.
The tax reliefs set out below are available to individuals aged 18 or over who subscribe for Ordinary Shares under the Offers. Whilst there is no specific limit on the amount of an individual's acquisition of shares in a VCT, tax reliefs will only be given to the extent that the total of an individual's subscriptions or other acquisitions of shares in VCTs in any tax year do not exceed £200,000. Investors who intend to invest more than £200,000 in VCTs in any one tax year should seek professional advice.
(a) Income tax
Income tax relief at the rate of 30% will be available on subscriptions for Ordinary Shares up to a maximum of £200,000 in any tax year. This relief is limited to the amount which reduces the investor's income tax liability to nil.
The effect of this relief for an investor subscribing £10,000 for Ordinary Shares is shown below:
| Effect net cost to investor | 7,000 |
|---|---|
| Less income tax relief at 30% | (3,000) |
| Initial investment | 10,000 |
| Value £ |
To obtain relief an investor must subscribe on his own behalf although the Ordinary Shares may subsequently be transferred to a nominee. Investments to be used as security for or financed by loans may not qualify for relief, depending on the circumstances.
An investor who acquires in any tax year VCT shares having a value of up to £200,000 will not be liable to income tax on dividends paid by the VCT on those shares.
An individual purchaser of existing VCT shares in the market will be entitled to claim dividend relief (as described in paragraph (ii) above) but not relief from income tax on investment (as described in paragraph (i) above).
Relief from income tax on a subscription for VCT shares will be withdrawn if the VCT shares are disposed of (other than between spouses or in the event of death) within five years of issue or if the VCT loses its approval within this period.
(i) Relief from capital gains tax on the disposal of shares
A disposal by an investor of Ordinary Shares will give rise to neither a chargeable gain nor an allowable loss for the purposes of UK capital gains tax. The relief is limited to the disposal of VCT shares acquired within the limit of £200,000 for any tax year.
(ii) Purchasers in the market
An individual purchaser of Ordinary Shares in the market will be entitled to claim relief from capital gains tax on disposal (as described in paragraph (b)(i) above).
The Companies will provide to each investor a certificate which the investor may use to claim income tax relief, either by obtaining from HMRC an adjustment to his tax coding under the PAYE system or by waiting until the end of the tax year and using his tax return to claim relief.
Investors not resident in the UK should seek professional advice as to the consequences of making an investment in a VCT as they may be subject to tax in other jurisdictions as well as in the UK.
No taxation will be withheld at source on any income arising from the Ordinary Shares and the Companies assume no responsibility for such withholding.
If a company which has been granted approval as a VCT subsequently fails to comply with the conditions for approval, approval as a VCT may be withdrawn or treated as never having been given. In these circumstances, relief from income tax on the initial investment is repayable unless loss of approval occurs more than five years after the issue of the relevant VCT shares. In addition, relief ceases to be available on any dividend paid in respect of profits or gains in any accounting period ending when VCT status has been lost and any gains on the VCT shares up to the date from which loss of VCT status is treated as taking effect will be exempt, but gains thereafter will be taxable.
The Companies have to satisfy a number of tests to qualify as VCTs. A summary of these tests is set out below.
To qualify as a VCT, a company must be approved as such by HMRC. To obtain such approval it must:
A Qualifying Investment consists of shares or securities first issued to the VCT (and held by it ever since) by a company satisfying certain conditions and for which not more than £1 million was subscribed by the VCT in any one tax year (nor more than £1 million in, broadly, any period of 6 months straddling two tax years). The conditions are detailed but include that the company must be a Qualifying Company, have gross assets not exceeding £7 million immediately before and £8 million immediately after the investment, apply the money raised for the purposes of a Qualifying Trade within certain time periods and not be controlled by another company. In any twelve month period the company can receive no more than £2 million from VCT funds and Enterprise Investment Schemes, raised after 5 April 2007. The company must have fewer than 50 full time (or equivalent) employees at the time of making the investment. In certain circumstances, an investment in a company by a VCT can be split into part Qualifying Investment and part non-Qualifying Investment.
A Qualifying Company must be unquoted (for VCT purposes this includes companies whose shares are traded on the PLUS Market and AIM) and must carry on a Qualifying Trade. For this purpose certain activities are excluded (such as dealing in land or shares or providing financial services). The Qualifying Trade must either be carried on by, or be intended to be carried on by, the Qualifying Company or by a Relevant Qualifying Subsidiary (see below) at the time of the issue of shares or securities to the VCT (and at all times thereafter). A Qualifying Company must have a permanent establishment in the UK. A company intending to carry on a Qualifying Trade must begin to trade within two years of the issue of shares or securities to the VCT and continue it thereafter.
A Qualifying Company may have no subsidiaries other than Qualifying Subsidiaries, which must be more than 50% owned.
A Relevant Qualifying Subsidiary must be a 90% directly held subsidiary of the company invested in, its wholly owned subsidiary, or a wholly owned subsidiary of a 90% directly held subsidiary.
A VCT must be approved at all times by HMRC. Approval has effect from the time specified in the approval.
A VCT cannot be approved unless the tests detailed above are met throughout the most recent complete accounting period of the VCT and HMRC is satisfied that they will be met in relation to the accounting period of the VCT which is current when the application is made. However, in order to facilitate the launch of a VCT, HMRC may approve a VCT notwithstanding that certain of the tests are not met at the time of application, provided HMRC is satisfied that the tests will be met within certain time limits. In particular, in the case of the test described at (d) under the heading "Qualification as a VCT" above, approval may be given if HMRC is satisfied that this will be met throughout an accounting period of the VCT beginning no more than three years after the date on which approval takes effect.
The Directors intend to conduct the affairs of the Companies so that they satisfy the conditions for approval as VCTs and that such approval will be maintained. HMRC has granted the Companies approval under section 274 ITA as VCTs. The Companies intend to comply with section 274 ITA and have retained PricewaterhouseCoopers LLP to advise them on VCT taxation matters.
Approval of a VCT may be withdrawn by HMRC if the various tests set out above are not satisfied. Withdrawal of approval generally has effect from the time when notice is given to the VCT but, in relation to capital gains of the VCT only, can be backdated to not earlier than the first day of the accounting period commencing immediately after the last accounting period of the VCT in which all of the tests were satisfied.
On 6 December 2011, the draft Finance Bill 2012 was published which contained measures, in respect of investments made on or after 6 April 2012 (subject to EU State Aid approval), to increase certain limits on restrictions relating to Qualifying Investments. Subject to EU State Aid approval, the Government plans to increase the limit on the number of employees from 50 to 250, the limit on gross assets immediately prior to investment from £7 million to £15 million, the limit on gross assets immediately after investment from £8 million to £16 million and the limit on the amount that can be invested in an individual company from £2 million to £10 million. Other measures include removing the annual £1 million limit on the amount a VCT can invest in a Qualifying Investment and a "disqualifying purpose" test under which an investment will not be a Qualifying Investment if the investee company has been set up for the purpose of accessing tax reliefs, although the details of how this will be implemented have not yet been published. For VCT funds raised after 5 April 2012 it is proposed that there be an exclusion on the use of VCT funds for the purchase of shares in another company.
The above is only a summary of the conditions to be satisfied for a company to be treated as a VCT.
Full audited financial information on the Company for the accounting years ended 30 September 2009, 30 September 2010 and 30 September 2011 are available free of charge at the Company's registered office or can be downloaded at http://www.hargreave-hale.co.uk/fund-management/venture-capital-trusts/hargreavehale-aim-vct-1/factsheets-and-reports/
The annual reports for the years ended 30 September 2009, 30 September 2010 and 30 September 2011 were audited by BDO LLP of 55 Baker Street, London W1U 7EU. All audit reports were unqualified under the the Act.
The annual reports referred to above were prepared in accordance with UK generally accepted accounting practice (GAAP) and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. The annual reports contain a description of the relevant Company's financial condition, changes in financial condition and results of operation for each relevant financial year and are being incorporated by reference and can be accessed at the following website:
http://www.hargreave-hale.co.uk/fund-management/venture-capital-trusts/hargreave-hale-aim-vct-1/factsheets-and-reports/
Where these documents make reference to other documents, such other documents are not incorporated into and do not form part of this document.
The information indicated below is incorporated by reference into this document (excluding such other information as may be included in those documents)
| Audited financial statements for the period ended 30 September 2009 |
Audited financial statements for the period ended 30 September 2010 |
Audited financial statements for the period ended 30 September 2011 |
|
|---|---|---|---|
| Page numbers | |||
| Income statements | 25 | 26 | 25 |
| Statement of changes in equity |
27-28 | 28-29 | 27-28 |
| Balance sheets | 26 | 27 | 26 |
| Cash flow statements | 27 | 28 | 27 |
| Accounting policies | 29 | 30 | 29-30 |
| Notes to the accounts | 29-37 | 30-39 | 29-38 |
| Independent auditor's report | 23-24 | 24-25 | 23-24 |
| Audited financial statements for the period ended 30 September 2009 |
Audited financial statements for the period ended 30 September 2010 |
Audited financial statements for the period ended 30 September 2011 |
|
|---|---|---|---|
| Page numbers | |||
| Chairman's statement | 4 | 5-6 | 4-5 |
| Investment Manager's report | 6-7 | 8-9 | 7 |
This information in the annual reports has been prepared in a form consistent with that which will be adopted in the Company's next published annual financial statements having regard to accounting standards and policies and legislation applicable to those financial statements.
As at the date of this document, there has been no significant change in the financial or trading position of Hargreave Hale AIM VCT 1 since 30 September 2011 (being the date on which audited financial information was last published).
Full audited financial information on the Company for the accounting years ended 28 February 2009, 28 February 2010 and 28 February 2011 and audited information for the half-year accounts for the six months ended 31 August 2010 and 31 August 2011 are available free of charge at the Company's registered office or can be downloaded at http://www.hargreave-hale.co.uk/fund-management/venture-capitaltrusts/hargreave-hale-aim-vct-2/factsheets-and-reports/
The annual reports for the years ended 28 February 2009, 28 February 2010 and 28 February 2011 were audited by BDO LLP of 55 Baker Street, London W1U 7EU. All audit reports were unqualified under the Act.
The annual reports referred to above were prepared in accordance with UK generally accepted accounting practice (GAAP) and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. The annual reports and half-yearly accounts contain a description of the relevant company's financial condition, changes in financial condition and results of operation for each relevant financial year and, together with the half-yearly reports referred to, are being incorporated by reference and can be accessed at the following website: http://www.hargreave-hale.co.uk/fund-management/venture-capitaltrusts/hargreave-hale-aim-vct-2/factsheets-and-reports/
Where these documents make reference to other documents, such other documents are not incorporated into and do not form part of this document.
The information indicated below is incorporated by reference into this document (excluding such other information as may be included in those documents):
| Unaudited | |||||
|---|---|---|---|---|---|
| Audited | Audited | Unaudited | half yearly | ||
| financial | financial | Audited | half yearly | financial | |
| statements | statements | financial | financial | statements | |
| for the | for the | statements | statements | for the six | |
| period | period | for the period | for the six | months | |
| ended 28 | ended 28 | ended 28 | months | ended 31 | |
| February | February | February | ended 31 | August | |
| 2009 | 2010 | 2011 | August 2010 | 2011 | |
| Page numbers | |||||
| Income statements | 24 | 25 | 24 | 4 | 3 |
| Statement of changes in equity | 26 | 27-28 | 26-27 | 7 | 5-6 |
| Balance sheets | 25 | 26 | 25 | 5 | 4 |
| Cash flow statements | 26 | 27 | 26 | 6 | 5 |
| Accounting policies | 27 | 29 | 28 | n/a | n/a |
| Notes to the accounts | 27-34 | 29-37 | 28-37 | 8 | 6 |
| Independent auditor's report | 22-23 | 23-24 | 22-23 | n/a | n/a |
| Audited financial statements for the period ended 28 February 2009 |
Audited financial statements for the period ended 28 February 2010 |
Audited financial statements for the period ended 28 February 2011 |
Unaudited half yearly financial statements for the six months ended 31 August 2010 |
Unaudited half yearly financial statements for the six months ended 31 August 2011 |
|
|---|---|---|---|---|---|
| Page numbers | |||||
| Chairman's statement | 5 | 5 | 4-5 | 2 | 1 |
| Investment Manager's report | 7 | 7 | 7 | 3 | 2 |
This information in the annual reports has been prepared in a form consistent with that which will be adopted in the Company's next published annual financial statements having regard to accounting standards and policies and legislation applicable to those financial statements.
As at 31 August 2011, the date to which the most recent unaudited half-yearly financial information on the Company has been drawn up, the Company had unaudited net assets of £6.3 million or 93.84 pence per Ordinary Share.
As at the date of this document, there has been no significant change in the financial or trading position of Hargreave Hale AIM VCT 2 since 31 August 2011 (being the date on which unaudited interim financial information was last published).
| 3.3.1 | to authorise the Directors to allot securities under Section 80 of the Companies Act 1985; |
|
|---|---|---|
| 3.3.2 | to increase the authorised share capital of the Company; | |
| 3.3.3 | to authorise the Directors pursuant to Section 95 of the Companies Act 1985 to allot equity securities for cash without regard to pre-emption rights; |
|
| 3.3.4 | to amend the Articles of Association; | |
| 3.3.5 | (on the conversion date) to divide the C Shares into C Shares of 1p each; | |
| 3.3.6 | (on the conversion date) to alter the share capital by the conversion of C Shares into Ordinary Shares and deferred shares and the repurchase and redesignation of the deferred shares; |
|
| 3.3.7 | to authorise the purchase of C Shares; | |
| 3.3.8 | to cancel the share premium account to be created upon the issue of the C shares; | |
| 3.3.9 | to authorise the Directors to offer Shareholders the right to receive Shares in lieu of dividends in terms of the Dividend Reinvestment Schemes; |
|
| 3.3.10 | to approve the proposed management and performance incentive arrangements for Hargreave Hale Limited in relation to the proposed C Share Fund; and |
|
| 3.3.11 | to approve the appointment of Keydata Investment Services Limited as the Promoter in relation to the C Share Offer. |
|
| 3.4 | Ordinary and special resolutions were passed on 19 May 2009: | |
| 3.4.1 | to ratify and approve the purchase of Ordinary Shares by the Company in the period from 22 January to 30 September 2008; |
|
| 3.4.2 | to ratify and approve the conduct of all the Directors of the Company in relation to the purchase of Ordinary Shares by the Company in the period from 22 January to |
30 September 2008;
At the Annual General Meeting held on 20 December 2011 the following resolutions were passed:
authorise the Directors to allot Ordinary Shares under Section 551 of the Companies Act 2006.
authorise the continuation of the Company as a venture capital trust for a further five year period.
authorise the Directors pursuant to Section 570 of the Companies Act 2006 to allot equity securities for cash without regard to pre-emption rights.
expiring on the fifth anniversary of this resolution (unless previously revoked, varied or extended by the Company in general meeting), but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require shares to be allotted after such expiry.
Provided however that the power conferred by this Resolution shall be limited:
The power and authority conferred by this resolution shall be in substitution for all previous authorities.
3.6.3 THAT, a class of C Shares of 5p each in the capital of the Company shall be and are hereby created, having attached thereto the right and being subject to the restrictions set out in the new Articles of Association to be adopted pursuant to the resolution described at paragraph 3.6.10 below
3.6.4 THAT, an offer agreement entered into between (1) the Company, (2) the Directors of the Company, (3) Hargreave Hale Limited and (4) Howard Kennedy Corporate Services LLP, be approved.
(d) the maximum price (exclusive of expenses) which may be paid for a C Share or an Ordinary Share shall be 105% of the average of the middle market prices shown in the quotations for a share in The London Stock Exchange Daily Official List for the five business days immediately preceding the day on which that share is purchased and
(e) the authority conferred by this resolution shall expire on 25 March 2013 save that the Company may, before the expiry of the authority granted by this resolution, enter into a contract to purchase C Shares or Ordinary Shares (as applicable) which will or may be executed wholly or partly after the expiry of such authority.
3.8 The subscribers to the memorandum of association were Oyez Professional Services Limited of Oyez House, 7 Spar Road, London SE16 3QQ, a company formation agent and Howard Kennedy Limited of 19 Cavendish Square, London W1A 2AW.
3.9 Ordinary and special resolutions were passed on 21 November 2006:
3.12.1 THAT, in substitution for existing authorities, the Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies Act 2006 (the "Act") to exercise all the powers of the Company to allot shares in the capital of the Company and to grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal value of £110,000 during the period commencing on the passing of this resolution and expiring on the fifth anniversary of this resolution (unless previously revoked, varied or extended by the Company in general meeting), but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require shares to be allotted after such expiry. Provided however that the power conferred by this Resolution shall be limited:
The power and authority conferred by this resolution shall be in substitution for all previous authorities.
3.12.4 THAT, on the terms set out on page 20 of the Circular the deed of variation entered into between (1) the Company and (2) Hargreave Hale Limited be approved.
(d) the authority conferred by this resolution shall expire on March 2013 save that the Company may, before the expiry of the authority granted by this resolution, enter into a contract to purchase Ordinary Shares (as applicable) which will or may be executed wholly or partly after the expiry of such authority.
3.12.7 THAT, in substitution for existing authorities, the Directors be and are hereby empowered in accordance with section 570(1) of the Act during the period commencing on the passing of this resolution and expiring on the fifth anniversary of this resolution (unless previously revoked, varied or extended by the Company in general meeting), to allot equity securities (as defined in Section 560 of the Act) for cash pursuant to the general authority conferred upon the Directors in 3.12.1 above as if section 561 of the Act did not apply to any such allotment provided that this power shall expire on the fifth anniversary of the resolution but so that this authority shall allow the Company to make offers or agreements before the expiry and the Directors may allot equity securities in pursuance of such offers or agreements as if the powers conferred hereby had not so expired.
| Class of shares | Nominal value | Issued (fully paid) | ||||
|---|---|---|---|---|---|---|
| £ | no | |||||
| Hargreave VCT 1 |
Hale | AIM | Ordinary Shares | £0.01 | 258,961.79 | 25,896,179 |
| Hargreave VCT 2 |
Hale | AIM | Ordinary Shares | £0.01 | 67,080.62 | 6,708,062 |
*Including 2,711,134.00 Ordinary Shares held in treasury
3.14 The issued fully paid share capital of the Companies immediately after the Offers have closed (assuming the Offers are fully subscribed and excluding any additional Ordinary Shares issued to Shareholders (and in the case of Hargreave Hale AIM VCT 1 C Shares) in accordance with the section entitled "Introductory Commissions" on page 66) will be as follows:
| Class of shares | Nominal value | Issued (fully paid) | ||||
|---|---|---|---|---|---|---|
| £ | no | |||||
| Hargreave VCT 1 |
Hale | AIM | Ordinary Shares | £0.01 | 256,441.79 | 25,644,179 |
| 'C' Shares | £0.01 | 500,000.00 | 10,000,000 | |||
| Hargreave VCT 2 |
Hale | AIM | Ordinary Shares | £0.01 | 166891.19 | 16,689,199 |
exceptions, unless the approval of Shareholders in a general meeting is obtained, the Companies must normally offer shares to be issued for cash to holders on a pro rata basis.
conjunction with the application for the Ordinary Shares (and also in the case of Hargreave Hale AIM VCT 1, 'C' Shares) to be admitted to the Official List.
Subject to any special terms as to voting on which any Shares may be issued, on a show of hands every member present in person (or being a corporation, present by authorised representative) shall have one vote and, on a poll, every member who is present in person or by proxy shall have one vote for every Share of which he is the holder. The Shares shall rank pari passu as to rights to attend and vote at any general meeting of the relevant Company.
The Ordinary Shares are in registered form and will be freely transferable. All transfers of Ordinary Shares must be effected by a transfer in writing in any usual form or any other form approved by the Directors. The instrument of transfer of an Ordinary Share shall be executed by or on behalf of the transferor and, in the case of a partly paid share by or on behalf of the transferee. The Directors may refuse to register any transfer of a partly paid Share, provided that such refusal does not prevent dealings taking place on an open and proper basis and may also refuse to register any instrument of transfer unless:
4.4.1 it is duly stamped (if so required), is lodged at the relevant Company's registered office or with its registrars or at such other place as the Directors may appoint and is accompanied by the certificate for the shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer;
Each Company may in general meeting by ordinary resolution declare dividends in accordance with the respective rights of the members, provided that no dividend shall be payable in excess of the amount recommended by the Directors. The Directors may pay such interim dividends as appear to them to be justified. No dividend or other monies payable in respect of an Ordinary Share shall bear interest as against the relevant Company. There are no fixed dates on which entitlement to a dividend arises.
All dividends unclaimed for a period of twelve years after being declared or becoming due for payment shall be forfeited and shall revert to the relevant Company.
If any member or other person appearing to be interested in shares of either of the Companies is in default in supplying within 42 days (or 28 days where the shares represent at least 0.25% its the share capital) after the date of service of a notice requiring such member or other person to supply to the relevant Company in writing all or any such information as is referred to in section 793 of the Act, the Directors may, for such period as the default shall continue, impose restrictions upon the relevant shares.
The restrictions available are the suspension of voting or other rights conferred by membership in relation to meetings of the Companies in respect of the relevant shares and additionally in the case of a shareholder representing at least 0.25% by nominal value of any class of shares of the relevant Company then in issue, the withholding of payment of any dividends on, and the restriction of transfer of, the relevant shares.
On a winding-up any surplus assets of each Company respectively will be divided amongst the holders of its Shares according to the respective numbers of Shares held by them in the relevant Company and in accordance with the provisions of the Act, subject to the rights of any shares which may be issued with special rights or privileges. The articles of association provide that the liquidator may, with the sanction of a resolution and any other sanction required by the Act, divide amongst the members in specie the whole or any part of the assets of the relevant Company in such manner as he may determine.
4.8.1 Without prejudice to any rights attaching to any existing shares, any share may be issued with such rights or restrictions as each Company may by ordinary resolution determine or in the absence of such determination, as the Directors may determine. Subject to the Act, each Company may issue shares, which are, or at the option of the relevant Company or the holder are, liable to be redeemed.
Whenever the capital of either Company is divided into different classes of shares, the rights attached to any class may (unless otherwise provided by the terms of issue of that class) be varied or abrogated either with the consent in writing of the holders of not less than threefourths of the nominal amount of the issued shares of the class or with the sanction of a resolution passed at a separate meeting of such holders.
Unless and until otherwise determined by either Company in General Meeting pursuant to Article 122 the number of Directors shall not be less than two nor more than ten. The continuing Directors may act notwithstanding any vacancy in their body, provided that if the number of the Directors be less than the prescribed minimum the remaining Director or Directors shall forthwith appoint an additional Director or additional Directors to make up such minimum or shall convene a General Meeting of that Company for the purpose of making such appointment.
Any Director may in writing under his hand appoint (a) any other Director, or (b) any other person who is approved by the Board of Directors as hereinafter provided to be his alternate. A Director may at any time revoke the appointment of an alternate appointed by him. Every person acting as an alternate Director shall be an officer of the Company, and shall alone be responsible to the Company for his own acts and defaults, and he shall not be deemed to be the agent of or for the Director appointing him.
Subject to the provisions of the Act, the Directors may from time to time appoint one or more of their body to be Managing Director or Joint Managing Directors of either Company or to hold such other executive office in relation to the management of the business of that Company as they may decide.
A Director of a Company may continue or become a Director or other officer, servant or member or any company promoted by that Company or in which it may be interested as a vendor shareholder, or otherwise, and no such Director shall be accountable for any remuneration or other benefits derived as director or other officer, servant or member of such company.
The Directors may from time to time appoint a President of a Company (who need not be a Director of the Company) and may determine his duties and remuneration and the period for which he is to hold office.
The Directors may from time to time provide for the management and transaction of the affairs of the Company in any specified locality, whether at home or abroad, in such manner as they think fit.
4.11.3.4 any proposal concerning any other company in which he is interested, directly or indirectly, whether as an officer or shareholder or otherwise, provided that he and any persons connected with him do not to his knowledge hold an interest in shares representing one % or more of any class of the equity share capital of such company or of the voting rights available to members of the relevant company;
4.11.3.5 any proposal relating to an arrangement for the benefit of the employees of the relevant Company or any subsidiary undertaking which does not award to any Director as such any privilege or advantage not generally awarded to the employees to whom such arrangement relates; and
A Director shall also retire from office at or before the third annual general meeting following the annual general meeting at which he last retired and was re-elected. A retiring Director shall be eligible for re-election. A Director shall be capable of being appointed or reappointed a Director despite having attained any particular age.
Subject as provided below, the Directors may exercise all the powers of each Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital.
The Directors shall restrict the borrowings of each Company and exercise all voting and other rights or powers of control over its subsidiary undertakings (if any) so as to secure that the aggregate amount at any time outstanding in respect of money borrowed by the group, being that Company and its subsidiary undertakings for the time being (excluding intragroup borrowings), shall not without the previous sanction of an ordinary resolution of the Company exceed a sum equal to 15 % of the aggregate total amount received from time to time on the subscription of shares of that Company.
At any time when either Company has given notice in the prescribed form (which has not been revoked) to the Registrar of Companies of its intention to carry on business as an investment company ("a Relevant Period") the distribution of that Company's capital profits (within the meaning of section 266(2)(c) of the 1985 Act) shall be prohibited. The Board shall establish a reserve to be called the capital reserve. During a Relevant Period, all surpluses arising from the realisation or revaluation of investments and all other monies realised on or derived from the realisation, payment or other dealing with any capital asset in excess of the book value thereof and all other monies which are considered by the Board to be in the nature of accretion to capital shall be credited to the capital reserve. Subject to the 1985 Act, the Board may determine whether any amount received by the relevant Company is to be dealt with as income or capital or partly one way and partly the other. During a Relevant Period, any loss realised on the realisation or payment or other dealing with investments, or other capital losses, and, subject to the 1985 Act, any expenses, loss or liability (subscription therefore) which the Board considers to relate to a capital item or which the Board otherwise considers appropriate to be debited to the capital reserve shall be carried to the debit of the capital reserve. During a Relevant Period, all sums carried and standing to the credit of the capital reserve may be applied for any of the purposes for which sums standing to any revenue reserve are applicable except and provided that during a Relevant Period no part of the capital reserve or any other money in the nature of accretion to capital shall be transferred to the revenue reserves of the relevant Company or be regarded or treated as profits of that Company available for distribution (as defined in section 263(2) of the 1985 Act) or be applied in paying dividends on any shares in that Company. In periods other than a Relevant Period, any amount standing to the credit of the capital reserve may be transferred to the revenue reserves of the relevant Company or be regarded or treated as profits of the Company available for distribution (as defined by section 263(2) of the 1985 Act) or applied in paying dividends on any shares in the Company.
Annual general meetings shall be held at such time and place as may be determined by the Directors and not more than fifteen months shall elapse between the date of one general meeting and that of the next.
The Directors may, may whenever they think fit, convene a general meeting of a Company, and general meetings shall also be convened on such requisition or in default may be convened by such requisitionists as are provided by the Act. Any meeting convened under this Article by requisitionists shall be convened in the same manner as near to as possible as that in which meetings are to be convened by the Directors.
An annual general meeting shall be called by not less than twenty-one days notice in writing, and all other general meetings of a Company shall be called by not less than fourteen days notice in writing. The notice shall be exclusive of the day on which it is given and of the day of the meeting and shall specify the place, the day and hour of meeting, and in case of special business the general nature of such business. The notice shall be given to the members, other than those who, under the provisions of the articles or the terms of issue of the shares they hold, are not entitled to receive notice from the Company, to the Directors and to the Auditors. A notice calling an annual general meeting shall specify the meeting as such and the notice convening a meeting to pass a special resolution or an ordinary resolution as the case may be shall specify the intention to propose the resolution as such.
In every notice calling a meeting of a Company or any class of the members of a Company there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him, and that a proxy need not also be a member.
If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened by or upon the requisition of members, shall be dissolved. In any other case it shall stand adjourned to such time (being not less than fourteen days and not more than twenty-eight days hence) and at such place as the Chairman shall appoint. At any such adjourned meeting the member or members present in person or by proxy and entitled to vote shall have power to decide upon all matters which could properly have been disposed of at the meeting from which the adjournment took place. A Company shall give not less than seven clear days notice of any meeting adjourned for the want of a quorum and the notice shall state that the member or members present as aforesaid shall form a quorum.
The Chairman may, with the consent of the meeting (and shall, if so directed by the meeting) adjourn any meeting from time to time and from place to place. No business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.
The Directors shall put an ordinary resolution to the annual general meeting of the Company in 2016 (in respect of the Hargreave Hale Aim VCT 1) and 2013 (in respect of Hargreave Hale Aim VCT 2) and, if passed, to every fifth subsequent annual general meeting, proposing that the Company should continue as a Venture Capital Trust for a further five year period. If any such resolution is not passed, the Directors shall draw up proposals for the reorganisation, reconstruction or voluntary winding up of the Company for submission to the members of the Company at an extraordinary general meeting to be convened by the Directors on a date not more than 9 months after such annual general meeting. Implementation of the proposals will require the approval of members by ordinary resolution. For the purposes of this, an ordinary resolution will not have been carried only if those members in person or by proxy who vote against such resolution hold in aggregate not less than twenty five % of the issued share capital of the Company at such time entitled to attend and vote at such a meeting.
The C Shares to be issued by Hargreave Hale AIM VCT1 under the Offers will be created pursuant to a resolution passed at the General Meeting of the Companies convened for 26 March 2012 and will represent C Ordinary Shares of 5p each in the capital of Hargreave Hale AIM VCT 1. They will be created under the Act and will have the rights and liabilities set out in the New Articles of Association to be adopted pursuant to that General Meeting. They will rank pari passu in all respects with the Ordinary Shares except that the assets and liabilities of the separate share class pools will be segregated and represented by the respective assets and liabilities attributable to the relevant share pool.
The Directors have also taken the opportunity to update the Articles of Association which are proposed to be adopted at the relevant General Meeting, to reflect the implementation of the Companies Act 2006.
CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by a written instrument.
are or are expected to be as follows:
| As at the date of this Document |
After the Offer has closed** | ||||
|---|---|---|---|---|---|
| Director | Number of Ordinary Shares |
Percentage of issued share capital* |
Number of Ordinary Shares |
Percentage of issued share capita*l |
|
| Hargreave Hale AIM VCT 1 |
Aubrey Brocklebank |
5,000 | 0.02 | 4,860 | 0.02 |
| David Brock | 0 | 0.00 | 10,000 | 0.10 | |
| Giles Hargreave | 109,163 | 0.42 | 106,106 | 0.41 | |
| Hargreave Hale AIM VCT 2 |
David Hurst Brown*** |
26,250 | 0.39 | 45,467 | 0.27 |
| Phillip Cammerman |
0 | 0.00 | 2,992 | 0.02 | |
| Giles Hargreave | 143,085 | 2.13 | 141,643 | 0.85 |
* excluding 2,711,134 Ordinary Shares held in treasury in relation to Hargreave Hale VCT 1
** assuming that the Maximum Subscription is achieved in relation to Ordinary Shares, that the Tender Offers are fully subscribed and that all the allotments are made on the basis of the NAV per Ordinary Share for the relevant Company as at 24 February 2012
*** includes 26,250 Ordinary Shares held by Jacqueline Mary Hurst-Brown
6.2 At the date of this document and after the Offer has closed, the Companies are aware of the following persons who are or will hold, directly or indirectly, voting rights representing 3 % or more of the issued share capital of the Companies to which voting rights are attached (assuming that the Offer is fully subscribed):
| As at the date of this Document | After the Offer has closed** | ||||
|---|---|---|---|---|---|
| Name | Number of Ordinary Shares* |
Percentage of voting rights* |
Number of Ordinary Shares* |
Percentage of voting rights of the Ordinary Shares* |
|
| Hargreave Hale AIM VCT 1 |
Treasury Shares |
2,711,134 | Nil | 2,711,134 | Nil |
| Hargreave Hale AIM VCT 1 |
Hargreave Hale Nominees |
1,268,574 | 4.85 | 1,268,574 | 3.6 |
| Hargreave Hale AIM VCT 2 |
Mrs Patricia Davenport |
203,000 | 3.02% | 203,000 | 0.79 |
| Dr Alisdair Gordon Nairn |
239,181 | 3.56% | 239,181 | 1.43 |
| Frank Nominees Ltd |
263,900 | 3.93% | 263,900 | 1.58 |
|---|---|---|---|---|
| Hargreave Hale Nominees |
808,503 | 12.04 | 808,503 | 4.84 |
excluding 2,711,134 Ordinary Shares held in treasury in relation to Hargreave Hale VCT 1
*
** assuming that the Maximum Subscription is achieved, that the Tender Offers are fully subscribed and that all the Shareholders listed above do not participate in the Enhanced Share Buy-Back or subscribe for any shares under the Offers.
| Name | Current Directorships/Partnership Interests |
Past Directorships/ Partnership Interests |
|---|---|---|
| Sir Aubrey Brocklebank |
Aubrey Brocklebank & Associates Limited |
AT Communications Group Plc |
| Downing Planned Exit VCT 2011 Plc |
Backglass Limited | |
| Hargreave Hale AIM VCT 1 Plc Puma VCT VIII Plc The Media Vehicle Group plc The Classic 2CV Racing Club Limited Epiquest Live Inc Innventive Property Holdings Limited |
Bar Room Bar Limited Brocklebank & Co. Limited Downing Distribution VCT 1 Plc Grasshopper Management LLP (dissolved) Hargreave Hale AIM VCT 2 Plc Innvotec Limited |
|
| NGS Corporation PLC | Legacy Associates Plc Octopus Second AIM VCT Plc (dissolved) Old Park Lane Plc Pennine AIM VCT 6 Plc (dissolved) Puma VCT Plc (in liquidation) Puma VCT II Plc (in liquidation) Puma VCT III Plc (in liquidation) Puma VCT IV Plc(in liquidation) Reinventure Limited Liability Partnership (dissolved) Top Ten Holdings Plc Vetcell Bioscience Limited |
|
| David Hurst-Brown* | Acuity VCT 3 Plc Anite Plc Ffastfill Plc Hargreave Hale AIM VCT 2 Plc Imagination Technologies Group Plc Leadhall Bay Limited Woodham School Limited |
Grove House Publishing Limited Hargreave Hale AIM VCT 1 Plc Key Data Income VCT 2 Plc(in liquidation) Keydata Income VCT 1 Plc (in liquidation) MGHB Investments Limited Red Labell Limited Woodham Catering Limited (dissolved) Woodham House Limited |
| Giles Hargreave | Hargreave Hale AIM VCT 1 Plc Hargreave Hale AIM VCT 2 Plc Hargreave Hale Limited Hargreave Hale Nominees Limited Progress Nominees Limited |
|
| Philip Cammerman | British Smaller Companies VCT Plc Clarendon Fund Managers Limited Clarendon Fund Nominees Limited Connect Yorkshire Hargreave Hale AIM VCT 2 Plc Howmac Limited N I Venture Partners Limited Nitech Venture Partners Limited |
British Smaller Companies VCT 2 Plc British Smaller Technology Companies VCT Plc (dissolved) Chandos Fund GP Limited Cornblow Limited(dissolved) GCC GP (Development) Limited GCC GP (Investment) Limited GCC London Limited GCC South West Limited |
| Pressure Technologies Plc | GCC Yorkshire Limited JKN 138 GP Limited London Fund Managers Limited London GP Limited NWBIS General Partner Limited PIF GP No 1 Limited PIF GP No 2 Limited PIF GP No 3 Limited PIF GP No 4 Limited PIF GP No 5 Limited PIF GP No 6 Limited South West GP Limited South West Venures Limited White Rose Investments Limited White Rose Nominee Investments Limited White Rose Ventures Limited YFM Equity Partners Limited YFM Group (Holdings) Limited YFM Private Equity Limited YFM Venture Finance Limited YFM Workspace Limited Yorkshire and Humber GP Limited Yorkshire Enterprise Finance (Holdings) Limited Yorkshire Enterprise Finance Limited Yorkshire Enterprise Small Firms Fund Limited Yorkshire Enterprise Limited Yorkshire Fund Managers (General Partner) Limited Yorkshire Fund Managers (Investments) Limited YVF GP (Development) Limited YVF GP (Investment) Limited |
|
|---|---|---|
| David Michael Brock |
Elderstreet VCT Plc | Jane Norman (Holdings) Limited (in administration/administrative receiver) |
| Episys Group Limited Hargreave Hale AIM VCT 1 Plc |
Americana International Limited JN Group Limited (proposal to strike off) |
|
| Puma VCT 8 Plc Kitwave Limited |
Americana International Group Limited Puma VCT IV Plc (in liquidation) Phase Eight EBT Trustee Company Patsy Seddon Limited Phase Eight (Fashion & Designs) Limited Blackstar Group Plc (converted/closed) Actif Group Plc Conveco Limited (dissolved) Inhoco 4071 Limited (dissolved) Ossian Retail Group Limited (dissolved) Inhoco 4055 Limited (dissolved) Phase Eight Bidco Limited (dissolved) Phase Eight Holdco Limited (dissolved) |
Elderstreet Millennium Venture Capital Trust Plc (dissolved)
Puma VCT Plc (in liquidation)
Puma VCT III Plc (in liquidation)
* David Hurst-Brown was a director of Smart Approach Group Plc when it went into administration in February 2006. It was subsequently dissolved on 2 November 2007 after its business was sold by the administrator.
The business address of all the Directors is: 19 Cavendish Square London W1A 2AW
6.9 None of the Directors has at any time within the last five years:
7.1 In the financial year ended 30 September 2011, the remuneration of the Directors from Hargreave Hale AIM VCT 1 was £48,000 and for financial year ended 29 February 2011, the remuneration of the Directors from Hargreave Hale AIM VCT 2 was £48,000. The remuneration of the Directors in respect of the current financial year (under the arrangements in force at the date of this document) is expected to be £48,000 for each Company.
The Companies do not have any subsidiaries.
Under the Offer Agreement dated 29 February 2012 and made between the Companies (1), the Directors (2), the Sponsor (3), and the Investment Manager (4), the Sponsor has agreed to act as sponsor to the Offers and the Investment Manager has undertaken as agent of the Companies to use its reasonable endeavours to procure subscribers under the Offers. Under the Offer Agreement, subject to Shareholder approval, the Companies will pay the Investment Manager a commission of 5 % of the aggregate value of accepted applications for Ordinary Shares and 'C' Shares received pursuant to the Offers.
Out of this fee, the Investment Manager will pay all other costs and expenses of or incidental to the Offers.
Under the Offer Agreement, which may be terminated by the parties in certain circumstances, the Investment Manager, the Companies and the Directors have given certain warranties and indemnities to the Sponsor. Warranty claims must be made by no later than 3 months after the second annual general meeting of the relevant Company following the closing date of the Offers at which Shareholders approve the relevant Company's accounts or by the date the relevant Company is subject to a takeover. The warranties and indemnities are in usual form for a contract of this type and the warranties are subject to limits of the total proceeds of the Offers for the Investment Manager, and one year's director fees for each Director. The Companies have also agreed to indemnify the Sponsor in respect of its role as Sponsor and under the Offer Agreement. The Offer Agreement may be terminated, inter alia, if any statement in the Prospectus is untrue, any material omission from the Prospectus arises or any breach of warranty occurs.
The City Code on Takeovers and Mergers (the "Code") applies to all takeover and merger transactions in relation to the Companies, and operates principally to ensure that shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover, and that shareholders of the same class are afforded equivalent treatment. The Code provides an orderly framework within which takeovers are conducted and the Panel on Takeovers and Mergers has now been placed on a statutory footing. The Takeovers Directive was implemented in the UK in May 2006 and since 6 April 2007 has effect through the Companies Act 2006. The Directive applies to takeovers of companies registered in an EU member state and admitted to trading on a regulated market in the EU or EEA.
The Code is based upon a number of General Principles which are essentially statements of standards of commercial behaviour. General Principle One states that all holders of securities of an offeree company of the same class must be afforded equivalent treatment and if a person acquires control of a company the other holders of securities must be protected. This is reinforced by Rule 9 of the Code which requires a person, together with persons acting in concert with him, who acquires shares carrying voting rights which amount to 30% or more of the voting rights to make a general offer. "Voting rights" for these purposes means all the voting rights attributable to the share capital of a company which are currently exercisable at a general meeting. A general offer will also be required where a person who, together with persons acting in concert with him, holds not less than 30% but not more than 50% of the voting rights, acquires additional shares which increase his percentage of the voting rights. Unless the Panel consents, the offer must be made to all other shareholders, be in cash (or have a cash alternative) and cannot be conditional on anything other than the securing of acceptances which will result in the offeror and persons acting in concert with him holding shares carrying more than 50% of the voting rights.
There are not in existence any current mandatory takeover bids in relation to the Companies.
Section 979 of the Act provides that if, within certain time limits, an offer is made for the share capital of either Company, the offeror is entitled to acquire compulsorily any remaining shares if it has, by virtue of acceptances of the offer, acquired or unconditionally contracted to acquire not less than 90% in value of the shares to which the offer relates and in a case where the shares to which the offer relates are voting shares, not less than 90%, of the voting rights carried by those shares. The offeror would effect the compulsory acquisition by sending a notice to outstanding shareholders telling them that it will compulsorily acquire their shares and then, six weeks from the date of the notice, pay the consideration for the shares to the relevant Company to hold on trust for the outstanding shareholders. The consideration offered to shareholders whose shares are compulsorily acquired under the Act must, in general, be the same as the consideration available under the takeover offer.
Section 983 of the Act permits a minority shareholder to require an offeror to acquire its shares if the offeror has acquired or contracted to acquire shares in either Company which amount to not less than 90%, in value of all the voting shares in the relevant Company and carry not less than 90%, of the voting rights. Certain time limits apply to this entitlement. If a shareholder exercises its rights under these provisions, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.
The provisions of DTR 5 will apply to the Companies and their shareholders. DTR 5 sets out the notification requirements for shareholders and the Companies where the voting rights of a shareholder exceed, reach or fall below the threshold of 3% and each 1% thereafter up to 100%. DTR 5 provides that disclosure by a shareholder to the relevant Company must be made within two trading days of the event giving rise to the notification requirement and the relevant Company must release details to a regulatory information service as soon as possible following receipt of a notification and by no later than the end of the trading day following such receipt.
The following are the only contracts (not being contracts entered into in the ordinary course of business) which have been entered into by the Companies in the two years immediately preceding the date of this document or which are expected to be entered into prior to Admission and which are, or may be, material or which have been entered into at any time by the Companies and which contain any provision under which either Company has any obligation or entitlement which is, or may be, material to the relevant Company as at the date of this document:
Sponsor agreed to act as sponsor to the 2010 Offers and the Investment Manager undertook as agent of the Companies to use its reasonable endeavours to procure subscribers under the 2010 Offer. Under the 2010 Offer Agreement, the Companies each paid the Investment Manager a commission of 5 % of the aggregate value of accepted applications for Ordinary Shares received by that Company pursuant to the 2010 Offers.
Out of this fee, the Investment Manager was paid all other costs and expenses of or incidental to the 2010 Offers.
Under the 2010 Offer Agreement, the Companies and their directors gave certain warranties and indemnities to the Sponsor. Warranty claims must be made by no later than 3 months after the second annual general meeting of the relevant Company following the closing date of the 2010 Offers at which Shareholders approved the relevant Company's accounts or by the date the company is subject to a takeover. The warranties and indemnities were in usual form for a contract of this type and the warranties are subject to limits of the total proceeds of the 2010 Offer for the Investment Manager, and one year's director fees for each of the relevant directors. The Companies also agreed to indemnify the Sponsor in respect of its role as Sponsor and under the 2010 Offer Agreement.
12.3 An agreement (the "HH1 Investment Management Agreement") dated 10 September 2004 (as amended) between Hargreave Hale AIM VCT 1 (1) and the Investment Manager (2) under which the Investment Manager agreed to provide discretionary investment management and advisory services to the Company in respect of its portfolio of Qualifying Investments and Non-Qualifying Investments. This was amended by a deed of variation dated 13 October 2005 in relation to the previous offer of C shares (which have since converted into Ordinary Shares).
Under the agreement, the Investment Manager received fees (exclusive of VAT) equal to 0.9% per annum of the net asset value of the Company until the termination of the HH1 Investment Management Agreement, payable quarterly in arrears. The Investment Manager is also entitled to receive the Performance Incentive Fees and reimbursement of expenses incurred in performing its obligations. In respect of investments made in companies that are not quoted on AIM, the Investment Manager is entitled to charge expenses and initial management fees to investee companies that, without the Board's consent, will not exceed 1% of the value of the total investment by the Company (and any other investor to whom the Company syndicates any part of its investment) plus, in the case of periodical fees, £10,000 per annum (plus VAT, if applicable).
In line with normal VCT practice, a performance related incentive fee will be payable to the Investment Manager. This annual performance related incentive fee will payable at the rate of 20 % of any dividends paid to Shareholders in excess of 6 pence per Ordinary Share per annum, provided that the Net Asset Value per Ordinary Share is at least 95 pence. The first payment of the performance related incentive fee was payable after 30 September 2007 and would be payable provided cumulative distributions in the first three accounting periods exceeded 18 pence per Ordinary Share. Thereafter, a performance related incentive fee will be payable annually, provided the hurdles have been exceeded, with any cumulative shortfalls below 6 pence per Ordinary Share having to be made up in subsequent years before the incentive fee becomes payable. No performance related incentive fee will be payable unless the NAV per Ordinary Share is at least 95 pence.
The appointment may be terminated on 12 calendar months' notice by either party. No benefits are payable on termination.
Management Agreement referred to in paragraph 12.3 above with (i) the Investment Manager providing an indemnity in relation to Annual Running Costs of the company exceeding 3.5% of the net assets of the Company with effect from 1 October 2010 and (ii) the annual management fee payable to the Investment Manager increasing to 1.5 % of the net asset of the Company.
12.7 Under an agreement between Hargreave Hale AIM VCT 1 (1), and the Investment Manager (2), dated 27 February 2012, the Company agreed, subject to Shareholder approval, to the variation of the terms of the HH1 Investment Management Agreement referred to in paragraph whereby that agreement was varied so as to extend the rights and obligations of the Managers to the assets attributable to the new Ordinary Shares and the C Shares in Hargreave Hale AIM VCT 2. Under the relevant Deed of Variation, the Investment Manager will receive an annual investment management fee of 1.5% of the net assets attributable to the new Ordinary Shares and the C Shares and a Performance Incentive Fee in respect of the new Ordinary Shares and the C Shares.
Under the agreement, the Investment Manager received fees (exclusive of VAT) equal to 0.9 % per annum of the net asset value of the Company until the termination of the HH2 Investment Management Agreement, payable quarterly in arrears. The Investment Manager is also entitled to receive Performance Incentive Fees and reimbursement of expenses incurred in performing it obligations. In respect of investments made in companies that are not quoted on AIM, the Investment Manager is entitled to charge expenses and initial management fees to investee companies that, without the Board's consent, will not exceed 1 % of the value of the total investment by the Company (and any other investor to whom the Company syndicates any part of its investment) plus, in the case of periodical fees, £10,000 per annum (plus VAT, if applicable).
In line with normal VCT practice, a performance related incentive fee will be payable to the Investment Manager. This annual performance related incentive fee will be payable at the rate of 20 % of any dividends paid to Shareholders in excess of 6 pence per Ordinary Share per annum, provided that the Net Asset Value per Ordinary Share is at least 95p. The first payment of the performance related incentive fee was payable after 28 February 2010 and would be payable provided cumulative distributions in the first three accounting periods exceeded 18 pence per Ordinary Share. Thereafter, a performance related incentive fee will be payable annually, provided the hurdles have been exceeded, with any cumulative shortfalls below 6 pence per Ordinary Share having to be made up in subsequent years before the incentive fee becomes payable. No performance related incentive fee will be payable unless the NAV per Ordinary Share is at least 95p.
The appointment may be terminated on 12 calendar months' notice by either party. No benefits are payable on termination.
net assets of the Company with effect from 1 October 2010 and (ii) the annual management fee payable to the Investment Manager increasing to 1.3 % of the net asset of the Company.
Other than the agreements, deeds and shareholdings referred to in paragraphs 12.1 and 12.2, paragraphs 12.4 to 12.6, and paragraphs 12.8 to 12.15 and paragraph 6.1, there have been no related party transactions relating to the Companies between 1 October 2008 (in the case of Hargreave Hale AIM VCT 1) and 1 March 2008 (in the case of Hargreave Hale AIM VCT 2) and the date of this document.
twice yearly to the Companies as a part of their annual and interim reporting obligations. In respect of any breach of the VCT rules, the relevant Company, together with PricewaterhouseCoopers LLP, will report directly and immediately to HMRC to rectify the breach and announce the same immediately to the relevant Company's shareholders via a Regulatory News Service provider. In addition, the Companies intend to maintain the investment approach as detailed in the section entitled "Investment Policy" in Part I of this document.
In the event of any suspension, valuations are held at the suspended price and a view is taken with consideration to best market practice and information from advisers.
14.12 The Directors do not anticipate any circumstances arising under which the valuations may be suspended. Should the determination of net asset value differ from that set out above then this will be communicated to investors in Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 through a Regulatory News Service provider.
Hargreave Hale Limited is regulated and authorised by the Financial Services Authority. It was incorporated as a private limited company in England and Wales on 16 January 1996 under number 209741 and operates under the Acts and the regulations made under those Acts. Hargreave Hale Limited is domiciled in the UK. Its registered office is Marsden House, 4-10 Springfield Road, Blackpool FY1 1QW. The telephone number is 01253 621575.
The original administrator of each Company was Keydata Investment Services Limited. Keydata Investment Services Limited went into administration on 8 June 2009. The assets and business of the Companies were ring fenced from the activities of Keydata Investment Services Limited and as such were not affected by the administration. The investment, management and custody of the Companies' assets was at all times undertaken by Hargreave Hale Limited.
17.1 The capitalisation and indebtedness of the Companies as at 24 February 2012 was as follows:
| Hargreave Hale AIM VCT 1 | Hargreave Hale AIM VCT 2 | |
|---|---|---|
| Shareholders' equity: | (£'000) | (£'000) |
| Share capital | 19,905 | 6,053 |
| Reserves | (4,219) | 783 |
| Total | 15,686 | 6,836 |
| Cash at bank | 545 | 846 |
| Hargreave Hale AIM VCT 1 | Hargreave Hale AIM VCT 2 | ||
|---|---|---|---|
| (£'000) | (£'000) | ||
| A | Cash | 545 | 846 |
| B | Cash equivalents | - | - |
| C | Trading securities | 2,398 | 766 |
| D | Liquidity (A+B+C) | 2,943 | 1,612 |
| E | Current financial receivable | 44 | 21 |
| F | Current bank debt | - | - |
| G | Current position of non-current debt | - | - |
| H | Other current financial debt | (179) | (76) |
| I | Current financial debt (F+G+H) | (179) | (76) |
| J | Net current financial indebtedness (I-E-D) | 2,808 | 1,557 |
| K | Non-current bank loans | - | - |
| L | Bonds issued | - | - |
| M | Other non-current loans | - | - |
| N | Non-current financial indebtedness (K+L+M) | - | - |
| O | Net financial indebtedness (J+N) | 2,808 | 1,557 |
17.2 All of the indebtedness of the Companies is unsecured and unguaranteed. The Companies have incurred no indirect or contingent indebtedness. Each Company has power to borrow under its respective articles of association, details of which are set out in the paragraph entitled "Borrowing powers" on page 91.
Each Board is accountable to shareholders for the governance of each Company's affairs and is committed to maintaining the highest standards of corporate governance. Accordingly, each Board has adopted the 2010 FRC Combined Code on Corporate Governance and reports against the principles and recommendations of this Code (the "Code"). Considering the principles detailed in the Code the Boards believe that, insofar as they are relevant to the size and structure of each Company's business, each Company as at the date of this document complies, save as disclosed below in relation to committees, with the provisions of the Code throughout the financial year (in the case of Hargreave Hale AIM VCT 1 ended 30 September 2011 (as detailed on pages 18-21 of its Annual Report and Accounts for the period ended 30 September 2011) and in the case of Hargreave Hale AIM VCT 2 ended 28 February 2011 (as detailed on pages 18 to 21 of its Annual Report and Accounts for the period ended 28 February 2011) which can both be downloaded at incorporated by reference, as set out below:
| Hargreave Hale AIM VCT 1 | Hargreave Hale AIM VCT 2 | |
|---|---|---|
| Audited financial statements for the period ended 30 September 2011 |
Audited financial statements for the period ended 28 February 2011 |
|
| Page numbers | ||
| Corporate Governance | 18-21 | 18-21 |
| Statement: | ||
| Departures from the Code: | 18 | 20 |
Due to the size of the Boards, each Board has not set up separate audit, nomination and remuneration committees (as required by Code C3.1, A4.1 and B2.1 respectively) on the grounds that the Board as a whole considers these matters. As all Directors are non-executives, each Board has not appointed a senior independent non-executive director (Code A3.3) as the Chairman performs the role.
There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Companies are aware) during the 12 months preceding the date of this document, which may have, or have had in the recent past, significant effects on either of the Companies' financial positions or profitability.
Companies for those financial years have been delivered to the Registrar of Companies in England and Wales pursuant to section 242 of the Act.
Copies of the following documents will be available for inspection during normal business hours on any weekday (Saturdays and public holidays excepted) at the registered office of each Company at the offices of Howard Kennedy LLP, 19 Cavendish Square, London W1A 2AW whilst the Offers remain open:
Dated 29 February 2012
that you indemnify it against all costs, damages, losses, expenses and liabilities arising out of or in connection with the failure of your remittance to be honoured on first presentation) and you agree that, at any time prior to the unconditional acceptance by the Companies, it may (without prejudice to other rights) avoid the agreement to allot such Ordinary Shares and/or C Shares and may allot such Ordinary Shares and/or C Shares to some other person, in which case you will not be entitled to any payment in respect of such Ordinary Shares and/or C Shares;
(viii) warrant that if you sign the Application Form on behalf of somebody else you have due authority to do so on behalf of that other person and such person will also be bound accordingly and will be deemed also to have given the confirmations, warranties and undertakings contained herein and undertake to enclose your power of attorney or a copy thereof duly certified by a solicitor with the Application Form;
(ix) agree that all applications, acceptances of applications and contracts resulting therefrom under the Offers shall be governed by and construed in accordance with English law, and that you submit to the jurisdiction of the English Courts and agree that nothing shall limit the right of the Companies to bring any action, suit or proceedings arising out of or in connection with any such applications, acceptances of applications and contracts in any other manner permitted by law or in any court of competent jurisdiction;
(d) No person receiving a copy of this document or an Application Form in any territory other than the United Kingdom may treat the same as constituting an invitation or offer to him, nor should he in any event use such Application Form unless, in the relevant territory, such an invitation or offer could lawfully be made to him or such Application Form could lawfully be used without contravention of any registration or other legal requirements. It is the responsibility of any person outside the United Kingdom wishing to make an application hereunder to satisfy himself as to full observance of the laws of any relevant territory in connection therewith, including obtaining any requisite governmental or other consents, observing any other formalities requiring to be observed in such territory and paying any issue, transfer or other taxes required to be paid in such territory.
(e) The Ordinary Shares have not been and will not be registered under the United States Securities Act 1933 (as amended) and, subject to certain exceptions, the Ordinary Shares may not be offered, sold, renounced, transferred or delivered, directly or indirectly, in the United States or to any person in the United States. Persons subscribing for Ordinary Shares shall be deemed, and (unless the Companies are satisfied that their respective Ordinary Shares can be allotted without breach of United States securities laws) shall be required, to represent and warrant to the Companies that they are not a person in the United States and that they are not subscribing for such Ordinary Shares for the account of any such person and will not offer, sell, renounce, transfer or deliver, directly or indirectly, such Ordinary Shares in the United States or to any such person. As used herein, "United States" means the United States of America (including each of the States and the District of Columbia), its territories or possessions or other areas subject to its jurisdiction. In addition, the Companies have not been and will not be registered under the United States Investment Company Act of 1940, as amended. The Manager is not registered under the United States Investment Advisers Act of 1940, as amended.
Copies of this document and the Application Form are available until the Offers close from:
Hargreave Hale Limited, 9-11 Neptune Court, Hallam Way, Blackpool FY4 5LZ; and Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 (at www.hargreave-hale.co.uk/fund-management/venture-capitaltrusts/).
The following instructions should be read in conjunction with the Application Form.
Applications may only be made by persons aged 18 or over.
Your cheque or bankers' draft must be payable to "Office Account of Hargreave Hale AIM VCT 1 plc/Hargreave Hale AIM VCT 2 plc" and should be crossed "A/C Payee". Receipt of your application will be acknowledged within a day of its having boon received. Your cheque or bankers' draft must be drawn in sterling on an account at a bank, and must hear the appropriate sort code number in the top right hand corner. The right is reserved to reject any application. Applications may be accompanied by a cheque or bankers' draft drawn by someone other than the applicant(s), but any monies to be returned will be sent by crossed cheque in favour of the person(s) named in Section 1.
It is a term of the Offers that, to ensure compliance with the Money Laundering Regulations 2007, Hargreave Hale Limited may at its absolute discretion require verification of identity from any person lodging an Application Form (the "Applicant") in an amount greater than £11,000 and without prejudice to the generality of the foregoing, in particular any person who either (i) tenders payment by way of cheque or bankers' draft drawn on an account in the name of a person or persons other than the Applicant or (ii) appears to be acting on behalf of some other person. In the former case, verification of the identities of both the Applicant and the third party may be required. In the latter case, verification of the identity of any person on whose behalf the Applicant appears to be acting may be required.
If within a reasonable period of time following a request for verification of identity and in any case by no later than 3.00 p.m. on the relevant date of allotment Hargreave Hale Limited have not received evidence satisfactory to them as aforesaid, the Companies with the agreement of Hargreave Hale may, at their absolute discretion, reject any such application in which event the remittance submitted in respect of that application will be returned to the Applicant (without prejudice to the rights of the Companies to undertake proceedings to recover any loss suffered by them as a result of the failure to produce satisfactory evidence of identity).
Where possible Applicants should make payment by their own cheque. If a third party cheque, bankers' draft or building society cheque is used, the Applicant should:
The above information is provided by way of guidance to reduce the likelihood of difficulties, delays and potential rejection of an Application Form (but without limiting Hargreave Hale Limited's right to require verification of identity as indicated above).
Commission will be paid at 3% of the amount paid for the Ordinary Shares issued in respect of such valid Application Form.
No commission is payable on Ordinary Shares subscribed for out of the proceeds of the Tender Offers. Authorised financial intermediaries may agree to waive part or all of their initial commission in respect of an application. If this is the case, then such application will be treated as an application to subscribe the amount stated in Section 2 together with the amount of commission waived. Commission will be paid only in respect of the amount stated in Section 2. Financial intermediaries should keep a record of such Application Form submitted bearing their stamp to substantiate any claim for introductory commission. Claims for introductory commission must be made and substantiated on submission of an Application Form.
Send the completed Application Form together with your cheque or bankers' draft by post, or deliver it by hand (during normal business hours only), to Hargreave Hale Limited, 9-11 Neptune Court, Blackpool, FY4 5LZ so as to be received no later than 12 pm. on 5 April 2012 (unless the Offer is otherwise closed earlier)
If you post your Application Form you are recommended to use first class post and to allow at least two working days for delivery.
Before completing this Application Form you should read the Terms and Conditions of Application. The Offers open on 29 February 2012 and will close at 12 p.m. on 31 August 2012 unless previously extended beyond that date, or earlier if the Maximum Subscription has been reached before then. Please send this Application Form together with your cheque or bankers' draft, if appropriate, and proof of identity if required, to Hargreave Hale Limited, 9-11 Neptune Court, Hallam Way, Blackpool, Lancashire FY4 5LZ.
| Section 1 | ||
|---|---|---|
| Title (Mr/Mrs/Miss/Ms/Other): | Surname: | |
| Forename(s) in full: | ||
| Date of Birth: | National Insurance Number: |
You should be able to find your NI number on a payslip, form P45 or P60, a letter from the HMRC, a letter from the DSS, or pension order book
| Permanent residential address: | |
|---|---|
| Postcode: | |
| Email: | |
| Telephone (work): | Telephone (home): |
These contact details will be used for all communications, distributions and dividends.
If you wish to nominate another address to receive your share and income tax relief certificates, please complete Section 5.
I offer to subscribe the following amount for New Shares on the Terms and Conditions of Application set out in this document dated 29 February 2012 and the Memoranda and Articles of Association of the Companies. Applications must be for a minimum of £3,000 in total and may be made for any higher amount in multiples of £1,000.
| Hargreave Hale AIM VCT 1 C Share Offer |
Hargreave Hale AIM VCT 2 Ordinary Share Offer |
Total | |
|---|---|---|---|
| Offers for the 2011/2012 tax year | £ | £ | £ |
| Offers for the 2012/2013 tax year | £ | £ | £ |
| TOTAL | £ | £ | £ |
Please mark with an 'x' as appropriate:
| I enclose a cheque or bankers' draft(s) drawn on a UK clearing bank made payable to: | ||
|---|---|---|
| "Joint Offer Account of Hargreave Hale AIM VCT 1 plc and Hargreave Hale AIM VCT 2 plc" | ||
| I have instructed my bank to make an electronic payment to: | ||
| Account Name: Bank: |
Joint Offer Account of Hargreave Hale AIM VCT 1 plc and Hargreave Hale AIM VCT 2 plc RBS (Glasgow City Branch) |
|
| Account Number: 10565882 | ||
| Sort Code: | 83-07-06 | |
| Please quote your surname as a reference when making this electronic payment |
By signing this form I hereby declare that I have read the terms and conditions of subscription contained in the Offer Document and agree to be bound by them.
Section 4
For completion by authorised financial intermediaries ONLY
| Name of Firm: | Stamp: |
|---|---|
| Address: | |
| Postcode: | |
| Telephone: | |
| Fax: | |
| Name of Contact: | |
| Email Address: | |
| Signature of authorised signatory of authorised financial intermediary: |
Date: |
| Commission payment details |
|---|
| (to be used if commission to be paid to a Network or other third party) |
| Name: |
| Contact: |
| Address: |
| Postcode: |
| Email: |
| Commission options | ||
|---|---|---|
| Choose either options A or B, but not both | ||
| A. Introductory Commission of 3 per cent. | B. Introductory Commission of 2.25 per cent. plus trail commission |
|
| (A1) to receive introductory commission of 3 per cent. place an 'X' in this box |
(B1) to receive introductory commission of 2.25 per cent. place an 'X' in this box |
| (A2) Insert the amount of 3 per cent. commission you wish to be | (B2) Insert the amount of 2.25 per cent. introductory commission you | |
|---|---|---|
| waived and reinvested in additional New Ordinary Shares for your | wish to be waived and reinvested in additional New Ordinary Shares | |
| client (e.g. 0%, 1%, 1.5%, 2%, 3%). | for your client (e.g. 0%, 1%, 2.25%). | |
Please complete Section 5 if you wish to nominate an alternative address, such as an accountant or financial adviser, for your share and income tax relief certificates
| Title (Mr/Mrs/Miss/Ms/Other): | Surname: |
|---|---|
| Forename(s) in full: | |
| Company Name: | |
| Reference (if required): | |
| Address: | |
| Postcode: |
All dividends paid on Shares held in Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 may be paid directly into bank and building society accounts. In order to facilitate this, please complete the dividend mandate instruction form below. Dividends paid directly to your account will be paid in cleared funds on the dividend payment dates. Your bank or building society statement will identify details of the dividend as well as the dates and amounts paid
Please forward until further notice, all dividends that may from time to time become due on any Shares now standing, or which may hereafter stand, in my name in the register of members of each of the Hargreave Hale AIM VCT 1 and Hargreave Hale AIM VCT 2 to:
| Name of Bank/Building Society: | |
|---|---|
| Title of Branch: | |
| Address of Branch: | |
| Account Number: | |
| Sort Code Number: | |
| Account Name (BLOCK capitals please): | |
| Signature: | |
| Date: | |
| Applicant's name and Postcode: | |
| (in BLOCK capitals please, as given in Section 1) | Postcode: |
The Companies and their Registrars 'Equiniti' cannot accept responsibility if any details provided by you are in incorrect.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.