Hargreave Hale AIM 2

Annual Financial Report

Hargreave Hale AIM 2

Hargreave Hale AIM VCT2 plc announced its results for the year ended 28 February 2015 on 26 June 2015. The full Financial Statements can be accessed on the Company's website at http://www.hargreave-hale.co.uk/fund-management/venture-capital-trusts/hargreave-hale-aim-vct-2/factsheets-and-reports/ or alternatively by following the link at the bottom of this report.

FINANCIAL HIGHLIGHTS

Ordinary Shares (as at 28 February): 2015 2014
Net asset value per share 110.33p 120.24p
Cumulative distributions paid per share since launch 37.00p 31.00p
Total return per share 147.33p 151.24p
Annual returns per share (basic and diluted):
Revenue return (1.09)p (1.73)p
Capital return (1.88)p 33.61p
Combined return (2.97)p 31.88p
Dividends per share:
Interim paid 2.00p 2.00p
Final proposed/paid 4.00p 4.00p
Total dividend for year 6.00p 6.00p
Ongoing expense ratio 2.10% 2.35%
Performance Benchmark:
FTSE AIM All-Share Index (rebased to 100 at 6 April 2007) 61.7 77.1

CHAIRMAN'S STATEMENT

Introduction

Following the success of our joint offer for subscription I would like to welcome a large number of new shareholders.

At 28 February 2015 the net asset value ("NAV") was 110.33 pence which after adjusting for the dividends paid gives a Total Return since inception of 147.33 pence. The loss per ordinary share for the year was 2.97 pence per share (comprising revenue losses of 1.09 pence and capital losses of 1.88 pence). During the financial year as a whole the FTSE AIM All Share Index fell by 20.0% and the FTSE All-Share index rose by 2.1%.

Investments

The investment manager, Hargreave Hale Limited, invested a further £3.0 million through 19 Qualifying Investments during the year. The fair value of Qualifying Investments at 28 February 2015 was £13.0 million invested in 54 AIM companies and 4 private companies. The balance of the fund, £11.3 million was held in a mix of cash, fixed income and other non-qualifying equities.

Dividend

An interim dividend of 2 pence was paid on 31 October 2014 (2013 - 2 pence).

A final dividend of 4 pence is proposed (2014 - 4 pence) which, subject to shareholder approval at the Annual General Meeting will be paid on 28 August 2015, to ordinary shareholders on the register on 7 August 2015.

Provided the underlying investment performance of the Company remains acceptable and the liquidity position allows, it remains our policy to target a 5% distribution yield referenced to the year end NAV per share of the Company.

Buybacks

In total, 68,085 shares were purchased during the year at an average price of 103.59 pence per share. A further 93,866 shares have been purchased since the year end at an average price of 103.83 pence.

The Board continues to target a share price discount of 5% of the NAV per share (as measured against the mid-price) for market purchases. It should be emphasised that this target is non-binding and dependent on circumstances including the Company's liquidity from time to time and market conditions.

Issue of Equity

The 2013-2014 joint offer for subscription (together with Hargreave Hale AIM VCT 1) closed on 25 September 2014 and resulted in funds being received for Hargreave Hale AIM VCT 2 of £7.11 million and the issue of 6.21 million shares.

Current Joint Offer for Subscription of Ordinary Shares

The Directors of the Company announced on 3 October 2014 the launch of a joint offer for subscription for new shares in both Hargreave Hale AIM VCTs to raise up to £10 million into each company. The offer was approved by shareholders of the Company at a General Meeting on 7 November 2014 and is open to both new and existing shareholders.

Since its launch, the offer has resulted in funds being received of £9.89 million and the issue of 8.92 million shares. The offer will close at 12pm on 30 September 2015 or earlier if the maximum subscription has been reached before then.

VCT Status

To maintain its VCT qualifying status we must invest at least 70% of the net funds raised in any one accounting period in Qualifying Investments by the start of the accounting period containing the third anniversary of the date on which the funds were raised. I am pleased to report that we continue to make good progress against this test and, at the year end, we had achieved 88.53% and have satisfied all the relevant tests.

Administration Charges

In addition to acting as the investment manager to the Company, Hargreave Hale provide administration, custody and company secretarial services to the VCT. For the past 6 years these charges have remained unchanged at £62,000 per annum whilst the burden of regulation and scale of the funds administered have increased substantially. Accordingly a resolution is being put to shareholders at the Annual General Meeting to increase this annual charge by £20,000. If approved by shareholders this will contribute towards the recruitment of another accountant dedicated to the VCT's affairs.

Outlook

Following the unexpected UK General Election result, the political and taxation environment for business and VCTs remains positive. This bodes well for the results of our portfolio companies. However there remain significant stresses and strains within the Eurozone. Most recently this has seen the Greek relationship in the spotlight. In due course no doubt markets will also concern themselves with the UK referendum. It seems inevitable therefore that markets will remain volatile.

The success of the joint offer has materially increased the net assets of the Company, and our immediate task is to invest wisely the substantial amount of cash that we presently hold on our balance sheet. The risks inherent in our business are mitigated by our existing mature portfolio of successful investments that we have held over a number of years.

David Hurst-Brown

Chairman

Date: 26 June 2015

Annual Report and Accounts - Year Ended 28 February 2015

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