Hargreave Hale AIM VCT 2 plc : Half-year Report

Hargreave Hale AIM VCT 2 Plc Unaudited Interim Results for the six month period ending 31 August 2017

FINANCIAL HIGHLIGHTS

* 28 February 2017 financial highlights represent annual results ** Calculated as total expenses (annualised for half yearly results) minus ad hoc legal costs, divided by period end net assets

INVESTMENT OBJECTIVE The objective of the VCT is to achieve long term capital growth and to maximise tax free distributions to shareholders by investing in a diversified portfolio of small UK companies primarily traded on AIM. At least 70% of the Company's funds must be invested in qualifying holdings within three years of raising the funds. The balance of the Company's funds will be invested in liquid assets (such as fixed income securities and bank deposits) and non-qualifying equity investments on an opportunistic basis. The Company is managed as a Venture Capital Trust in order that shareholders in the Company may benefit from the tax relief available.

CHAIRMAN'S STATEMENT

INTRODUCTION In the first half of the financial year the Net Asset Value per share (NAV) increased from 109.86 pence to 115.47 pence equivalent to an increase of 8.7% after adding back the 4 pence dividend distributed in July 2017. During the same period the FTSE 100 Total Return Index gained 4.7% and the FTSE AIM All Share Total Return Index gained 12.2%.

RESULTS The gain per share for the period was 9.57 pence per share (comprising revenue losses of 0.18 pence and capital gains of 9.75 pence). At 31 August 2017 the total return since inception was 168.47 pence.

INVESTMENTS The investment manager, Hargreave Hale Limited, invested a further £4.37 million in 12 qualifying companies during the period. The fair value of qualifying investments at 31 August 2017 was £26.52 million invested in 58 AIM companies and 10 private companies. The balance of the funds was held in a mix of cash, fixed income and other non-qualifying equities.

At 31 August 2017 the VCT was 89.3% invested in qualifying companies calculated in accordance with HMRC guidelines.

DIVIDEND A final dividend for the year ended 28 February 2017 of 4 pence was paid on 25 July 2017.

The Directors continue to maintain their policy of targeting a tax free dividend yield equivalent to 5% of the year end NAV. An interim dividend of 2 pence (2016 - 2p) will be paid on 1 December 2017, with an ex-dividend date of 9 November 2017 and a record date of 10 November 2017.

BUYBACKS We have been able to maintain our policy of offering our shareholders an efficient exit route through the buyback scheme. In total, 430,945 shares were repurchased during the six month period ending 31 August 2017 at a weighted average price of 109.28 pence per share. Since the period end a further 75,978 shares have been purchased at a cost of £85,845.

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.    JOINT OFFER FOR SUBSCRIPTION The Directors of the Company announced on 14 December 2016 the launch of a joint offer for subscription for shares in both Hargreave Hale AIM VCTs to raise up to £10 million in Hargreave Hale AIM VCT 1 plc and up to £10 million in the Company. The offer was approved by shareholders of the Company at a general meeting on 12 January 2017 and was open to both new and existing shareholders.

The offer was fully subscribed and resulted in gross funds being received of £10 million and the issue of 8.96 million new shares in the Company.

On 18 September 2017 the Company announced its intention to re-open the Offer by making the Over-Allotment facility available and increasing the facility from £5 million to £7.5 million. A Supplementary Prospectus was published on 2 October 2017 as increasing the offer amount constitutes a significant event under the Prospectus Rules.

The Offer will close on 17 November 2017 unless fully subscribed before then.

AUDIT TENDER As announced in the annual report and accounts for the year ended 28 February 2017 mandatory audit tendering legislation states that the maximum period for which a firm can be appointed auditor of a public listed entity is 10 years. BDO LLP were approaching the maximum term permitted and as such an audit tender has been completed.

The process was led by the Audit Committee who invited several firms to participate in the tender process. Companies were chosen based on their reputation or by recommendation/personal experience and where it was known they had specific knowledge and experience of VCT/investment trust auditing.

The Committee documented the Company's objectives and agreed on a selection criteria and scorecard to enable them to assess each applicant on a fair basis. Proposals and presentations were reviewed by the committee and a recommendation made to the Board.

I am pleased to announce that the Board agreed BDO LLP were the strongest candidate and re-appointed them as statutory auditor for the Company.

OUTLOOK The progress we have made in recent months in identifying and increasing our investment in the qualifying portfolio has encouraged us to re-open our December 2016 share offer. In particular, we have completed investments in a number of early stage private companies, many of whom have exciting and 'disruptive' business plans. The potential of some of these is considerable but we recognise their higher risk profiles and illiquidity and will proceed cautiously with this part of the fund.

Given the ever increasing uncertainty with domestic politics we are a little surprised at how benign equity markets have been over recent months and, as our fund manager states in his report, 'we remain cautious'. Nonetheless, as long term investors we will continue to build our qualifying portfolio when the right opportunities present themselves.

DAVID HURST-BROWN Chairman

Date: 19 October 2017

INVESTMENT MANAGER'S REPORT

This report covers the first half of the financial year, 1 March 2017 to 31 August 2017. The manager's report contains references to movements in the Net Asset Value (NAV) per share and Total Return per share (NAV per share plus distributed earnings per share). Movements in the NAV per share do not necessarily mirror the earnings per share (EPS) reported in the accounts and elsewhere, which convey the profit after tax within the company within the reported period as a function of the weighted average number of shares in issue for the period.

INVESTMENT REPORT The period under review has been generally positive with global equity markets advancing off the back of strong corporate earnings and encouraging economic data. In contrast, the FTSE 100 was volatile over the period and ended flat as investors grappled with the implications of the election result for Sterling, for inflation and for Government policy in several areas, most obviously our path out of the European Union. That aside, small and mid-caps continued to make ground as robust corporate news flow helped feed investors' appetite for growth companies with large and global addressable markets, which in turn fed through to some strong performance in the junior indices.

As we look towards the second half of the financial year we remain cautious given the potential headwinds approaching. UK inflation has risen to 3% and the Bank of England has insinuated that a rate rise is possible this year. The potential impact on consumer spending and corporate investment is unknown but potentially negative. We have witnessed weaker trading from several 'high street' brands, particularly in retail and casual dining, as companies struggle to manage margin pressure (input price inflation, higher business rates and the living wage) against the backdrop of an increasingly cautious consumer. In parallel, the UK government continues to try and navigate a way out of the EU. We still feel it is too early to know the impact (if any) of Brexit on our portfolio; that seems unlikely to change in the short term. By and large we have left the portfolio of qualifying and non-qualifying investments untouched. While we are cautious of certain sectors, consumer discretionary for example, we continue to find interesting investment opportunities in qualifying companies that we believe can grow regardless of the outcome. To that end, we intend to continue with business as usual while keeping a close eye on events as they unfold and, perhaps, reducing at the margin some of our non-qualifying equity risk.

Performance was good in the six months to 31 August 2017 with the NAV increasing from 109.86p to 115.47p and the payment of a 4 pence per share dividend. The total return of 9.61 pence per share translates to a gain of 8.7%. During the same period the FTSE AIM All-Share Total Return gained 12.2%.

The qualifying investments made a net contribution of 5.54 pence per share with the non-qualifying investments adding a further 4.83 pence per share. The balance was a mixture of costs, income and small gains made through share buy backs.

Zoo Digital, a recent investment, was the top performing qualifying investment (+166.7%, +1.90 pence per share) as the shares responded to strong revenue growth and a significantly improved balance sheet. Gfinity also performed well (+76.7%, +0.76 pence per share) after announcing broadcasting agreements with BT Sport and the BBC and a partnership with Formula 1 to deliver the Formula 1 ESports Series. Other stocks that made a significant contribution included Faron Pharmaceuticals (+100.0%, +0.74 pence per share), Eagle Eye (+91.7%, +0.69 pence per share) and Tristel (+79.4%, +0.60 pence per share).

The biggest loss within the period came from Portr (-30.0%, -0.75 pence per share), which we marked to the price of a recent funding round that saw a large UK listed company make a strategic investment into the company. Although the new mark was lower than the prior round, it remains above our entry price. Commercial progress has been made through Portr's partnership with British Airways and we look forward to news of progress with other airlines over the coming months. Other losses came from DP Poland (-27.2%, -0.64 pence per share) following a consolidation in the share price despite recent reports of strong trading; Science in Sport (-14.1%, -0.28 pence per share), TLA (-50.0%, -0.26 pence per share) and Creo Medical (-14.4%, -0.22 pence per share).

We made 12 qualifying investments over the period, which included 6 additional investments into existing qualifying companies (1 private company), 2 IPOs, 2 secondary placings into listed companies and 2 private investments. We invested a total of £4.37 million into qualifying investments over the period.

Within the qualifying portfolio, we reduced our investments in Gfinity, Faron Pharma and Hardide following strong runs in their share prices.  We exited Electrical Geodesics, Kalibrate and Electric Word through M&A activity and disposed of all our shares in ECSC, Haydale Graphene, Audioboom, Directa Plus and Synairgen following prolonged periods of poor news flow. We also sold our shares in Free Agent after a disappointing update that hinted at potential weakness in their model.

PORTFOLIO STRUCTURE The VCT is comfortably through the HMRC defined investment test and ended the period at 89.3% invested as measured by the HMRC investment test. By market value, the VCT had a 52.4% weighting to qualifying investments.

The allocation to non-qualifying equity investments increased marginally from 20.6% to 21.5%.  We continued to make use of the Marlborough Special Situations Fund as a temporary home for proceeds from fundraising; the allocation increased from 12.0% to 14.8%. Fixed income as a percentage of the fund decreased from 0.4% to 0.3% and cash fell from 20.3% to 11.4%.

The HMRC investment tests are set out in Chapter 3 of Part 6 Income Tax Act 2007, which should be read in conjunction with this section of the investment manager's report. Funds raised by VCTs are first included in the investment tests from the start of the accounting period containing the third anniversary of the date on which the funds were raised. Therefore, the allocation of qualifying investments as defined by the legislation can be different to the portfolio weighting as measured by market value relative to the net assets of the VCT.

POST PERIOD END UPDATE Deal flow has been good since period end with 4 additional qualifying investments being made in Gfinity, Laundrapp, Faron Pharma and Angle. There are a number of deals in the pipeline which we expect to complete in the coming weeks. .

For further information, please contact:                            

 Date: 19 October 2017

INVESTMENT PORTFOLIO SUMMARY As at 31 August 2017

* Unquoted Company holding of less than £500 **Unquoted Companies

The majority of investments held within the portfolio are listed and/or headquartered in the UK with the exception of the following:

TOP TEN INVESTMENTS As at 31 August 2017 (By Market Value)

The top 10 equity investments are shown below; each is valued by reference to the bid price, or, in the case of unquoted companies, values are either based on the last arm's length transaction or valuation techniques, such as earnings multiples. Forecasts, where given, are drawn from a combination of broker research and/or Bloomberg consensus forecasts and exclude amortisation, share based payments and exceptional items. Forecasts are in relation to a period end for which the company results are yet to be released. The net cash values are drawn from published accounts in most cases.

For further information please contact:

STUART BROOKES   Company Secretary Hargreave Hale AIM VCT 2 plc 01253 754740

Date: 19 October 2017

STATEMENT OF DIRECTOR'S RESPONSIBILITIES in respect of the half-yearly financial report

In accordance with Disclosure Transparency Rule (DTR) 4.2.10, David Hurst-Brown (Chairman), Philip Cammerman and Oliver Bedford, the Directors, confirm that to the best of their knowledge:  

• The half yearly financial results have been prepared in accordance with UK GAAP and give a true and fair review of the assets, liabilities, financial position and profit of the Company as at 31 August 2017 as required by DTR 4.2.4;  
• The interim management report included within the chairman's statement, investment manager's report, investment portfolio summary and notes to the half yearly report includes a fair review of the information required by the Financial Conduct Authority Disclosure and Transparency Rules, being;  
  • an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;  
  • a description of the principal risks and uncertainties for the remaining six months of the year; and  
  • a description of related party transactions that have taken place in the first six months of the current financial year, that may have materially affected the financial position or performance of the Company during that period and any changes in the related party transactions described in the last annual report that could do so.

On behalf of the Board

DAVID HURST-BROWN Chairman

Date: 19 October 2017

CONDENSED INCOME STATEMENT for the six month period to 31 August 2017 (unaudited)

The total column of this statement is the income statement of the Company. All revenue and capital items in the above statement derive from continuing operations. The Company has no other comprehensive income other than the results for the six month period as set out above. The accompanying notes are an integral part of these financial statements.

CONDENSED INCOME STATEMENT for the year ended 28 February 2017 (audited)

The total column of this statement is the income statement of the Company. All revenue and capital items in the above statement derive from continuing operations. The Company has no other comprehensive income other than the results for the year as set out above. The accompanying notes are an integral part of these financial statements.

CONDENSED BALANCE SHEET as at 31 August 2017 (unaudited)

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

CONDENSED STATEMENT OF CHANGES IN EQUITY for the six month period to 31 August 2017 (unaudited)

The distributable reserves are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 31 August 2017 were £37.73 million of which £6.91 million is available to pay dividends now. The accompanying notes are an integral part of these financial statements.

CONDENSED STATEMENT OF CHANGES IN EQUITY for the six month period to 31 August 2016 (unaudited)

Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 31 August 2016 were £3.88 million. The accompanying notes are an integral part of these financial statements.

CONDENSED STATEMENT OF CHANGES IN EQUITY for the year ended 28 February 2017 (audited)

Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 28 February 2017 were £2.17 million. The accompanying notes are an integral part of these financial statements.

CONDENSED STATEMENT OF CASH FLOWS for the six month period to 31 August 2017 (unaudited)

* 28 February 2017 cash flow represents annual results

The accompanying notes are an integral part of these financial statements

EXPLANATORY NOTES for the six month period to 31 August 2017 (unaudited)

1. ACCOUNTING POLICIES

Basis of preparation The Company has prepared its half-yearly financial results for the six month period ending 31 August 2017 in accordance with Financial Reporting Standard 104 (FRS104) and the Statement of Recommended Practice for "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (the SORP).

The same accounting policies and methods of computation are followed in the half-yearly financial results as compared with the most recent annual financial statements.

Investments All investments are classified as fair value through profit or loss. Investments are measured initially and subsequently at fair value which is deemed to be bid market prices for listed investments and investments traded on AIM. Unquoted investments are valued using the most appropriate methodology recommended by the International Private Equity Venture Capital ("IPEV") guidelines.

Where the classification of a financial instrument requires it to be stated at fair value, this is determined by reference to the quoted bid price in an active market wherever possible. Where no such active market exists for the particular asset or liability the Company holds the investment at cost for a period where there is considered to be no change in fair value.

Valuations of unquoted investments are reviewed on a six monthly basis and more frequently if events occur that could have a material impact on the investment. Where cost is no longer considered appropriate the Company will use a value indicated by a material arms-length transaction by an independent third party in the shares of a company. Where no such transaction exists, the Company will use the most appropriate valuation technique including discounted cash flow analysis, earnings multiples, net assets and industry valuation benchmarks. All inputs are market observable with the exception of level C financial instruments.

Investments are recognised and derecognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. Transaction costs are included in the initial book cost or deducted from the disposal proceeds as appropriate.

These investments will be managed and their performance evaluated on a fair value basis in accordance with a documented investment strategy and information about them is provided internally on that basis to the Board.

Gains and losses arising from changes in fair value (realised and unrealised) are included in the net profit or loss for the period as a capital item in the income statement and are taken to the unrealised capital reserve or realised capital reserve as appropriate.

If an investment has been impaired such that there is no realistic expectation that there will be a full return from the investment, the loss is treated as a permanent impairment and transferred to the capital reserve realised.

Financial Instruments - fair value measurement hierarchy FRS 102 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement.                   The fair value hierarchy has the following levels:

Key judgements and estimates The preparation of the financial statements requires the Board to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Key estimation uncertainties mainly relate to the fair valuation of unquoted investments, which are based on historical experience and other factors that are considered reasonable including the transfer price of the most recent transaction on an arm's length basis. The estimates are under continuous review with particular attention paid to the carrying value of the investments. The process of estimation is also affected by the determination of the fair value hierarchy.                    Income         Equity dividends are taken into account on the ex-dividend date, net of any associated tax credit. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to reflect the effective yield, provided there is no reasonable doubt that payment will be received in due course. All other income, including deposit interest receivable, is recognised on an accruals basis. All revenue and capital items in the unaudited income statement derive from continuing operations. There are no other items of comprehensive income other than those disclosed in the unaudited income statement.                    Expenditure         All expenditure is accounted for on an accruals basis. 75% of management fees are allocated to the capital reserve realised and 25% to the revenue account in line with the Board's expected long term split of investment returns in the form of capital gains to the capital column of the income statement. All other expenditure is charged to the revenue account.                    Trail commission         Trail commission previously due is held as a creditor until such time as claims are made by the relevant intermediary and supporting documentation provided. If claims are not received these amounts are written off after a period of six years.                    Capital reserves         Realised profits and losses on the disposal of investments, due diligence costs and income in relation to private company investments, losses realised on investments considered to be permanently impaired and 75% of investment management fees are accounted for in the capital reserve realised.                   Increases and decreases in the valuation of investments held at the year end are accounted for in the capital reserve unrealised.                    Operating Segments         There is considered to be one operating segment as reported to the chief operating decision maker being investment in equity and debt securities.                    Taxation         Deferred tax is recognised in respect of all timing differences that have originated but not yet reversed at the balance sheet date. Deferred tax assets are only recognised to the extent that recovery is probable in the foreseeable future.                   Current tax is expected tax payable on the taxable revenue for the period using the current tax rate. The tax effect of different items of income and expenditure is allocated between capital and revenue on the same basis as the particular item to which it relates.                   Approved VCTs are exempt from tax on capital gains from the sale of fixed asset investments. The Directors intend that the Company will continue to conduct its affairs to maintain its VCT status, no deferred tax has been provided in respect of any capital gains or losses arising from the revaluation or disposal of investments.                    Dividends         Only dividends recognised during the period are deducted from revenue or capital reserves. Final and interim dividends are recognised in the accounts when the Company's liability to pay them has been established.                   Summary of dividends paid in the six months to 31 August 2017 and the financial year ending 28 February 2017 are detailed below:

          Functional Currency In accordance with FRS 102 s.30, the Company is required to nominate a functional currency, being the currency in which the Company predominantly operates. The Board has determined that sterling is the Company's functional currency. Sterling is also the currency in which these accounts are presented.

Repurchase of shares to hold in Treasury The cost of repurchasing shares into treasury, including the related stamp duty and transaction costs is charged to the special reserve and dealt with in the statement of changes in equity. Share repurchase transactions are accounted for on a trade date basis. Where shares held in treasury are subsequently cancelled, the nominal value of those shares is transferred out of share capital and into capital redemption reserve.

Should shares held in treasury be reissued, the sale proceeds will be treated as a realised profit up to the amount of the purchase price of those shares and will be transferred to capital reserves. The excess of the sale proceeds over the purchase price will be transferred to share premium.

 Contingencies, guarantees and financial commitments  There were no contingencies, guarantees or financial commitments of the Company at the 31 August 2017.

 Legal form and principal activities The Company was incorporated and registered in England and Wales on 20 September 2006 under the Companies Act 1985, registered number 05941261.

The Company has been approved as a Venture Capital Trust by HMRC under section 259 of the Income Taxes Act 2007. The shares of the Company were first admitted to the Official List of the UK Listing Authority and trading on the London Stock Exchange on 16 April 2007 and can be found under the TIDM code "HHVT". The Company is premium listed.

The Company's principal activity is to invest in a diversified portfolio of qualifying small UK based companies, primarily trading on AIM, with a view to maximising tax free dividend distributions to shareholders.

The Company is an externally managed fund with a Board comprising of three non-executive directors. Hargreave Hale Limited acts as investment manager, administrator and custodian to the Company and provide the company secretary.

The Board has overall responsibility for the Company's affairs including the determination of its investment policy, however, the Board may exercise these responsibilities through delegation to Hargreave Hale as it considers appropriate.

The Directors have managed and continue to manage the Company's affairs in such a manner as to comply with Section 259 of the Income Taxes Act 2007.

The Company's registered office is Accurist House, 44 Baker Street, London, W1U 7AL.

CAPITAL STRUCTURE

Share capital Ordinary shares are classed as equity. The ordinary shares in issue have a nominal value of one pence and carry one vote each.

Reserves A description of each of the reserves follows:

Share premium This reserve represents the difference between the issue price of shares and the nominal value of shares at the date of issue, net of related issue costs.

Capital redemption reserve This reserve is used for the cancellation of shares bought back under the buyback facility.

Special reserve Distributable reserve used to pay dividends and re-purchase shares under the buyback facility.

Capital reserve realised Gains/losses on disposal of investments, due diligence costs and income from private company investments, permanent impairment of financial assets and 75% of the investment management fee are accounted for in the capital reserve realised.

Capital reserve unrealised Unrealised gains and losses on investments held at the year-end arising from movements in fair value are taken to the capital reserve unrealised.

Revenue reserve Net revenue returns and losses of the Company.

2. EARNINGS PER SHARE (BASIC AND DILUTED)

The gain per ordinary share of 9.57 pence at 31 August 2017 (31 August 2016: gain 6.95 pence and 28 February 2017: gain 14.54 pence) is based on a net gain for the period of £4,187,739 (31 August 2016: gain £2,347,000 and 28 February 2017: gain £4,989,474) and the weighted average number of ordinary shares in issue over the period of 43,776,326 (31 August 2016: of 33,764,458 and 28 February 2017: 34,327,158).

3. CAUTIONARY STATEMENT

The results should not be taken as a guide to the results for the financial period ending 28 February 2018. This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be considered as a profit forecast.

4. NET ASSET VALUE PER SHARE

The net asset value per ordinary share at 31 August 2017 of 115.47 pence (31 August 2016: 104.58 pence and 28 February 2017: 109.86 pence) is based on net assets of £50,648,374 (31 August 2016: £35,723,815 and 28 February 2017: £45,366,681) and on 43,863,946 shares (31 August 2016: 34,159,249 shares and 28 February 2017: 41,296,035 shares), being the number of ordinary shares in issue as at 31 August 2017.

5. PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information contained in the 31 August 2017 income statement, balance sheet, statement of cash flows and statement of changes in equity does not constitute full financial statements and has not been audited.

6. PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks facing the Company relate to the Company's investment activities and include venture capital trust approval, investment, discount volatility, compliance, economic, fraud, operational, reputational, liquidity and outsourcing risk. Other risks faced by the Company include market, currency, interest rate and credit risk. These risks and the way in which they are managed are described in more detail in the Company's annual report and accounts for the year ended 28 February 2017. The Company's principal risks and uncertainties have not changed materially since the date of that report.

7.         TRANSACTIONS IN SHARES  Buybacks In total, the Company repurchased 430,945 shares during the six month period ending 31 August 2017 at a total cost of £474,473. The repurchased shares represent 1.04% of ordinary shares in issue on 1 March 2017. The acquired shares have been cancelled.

 Share Issues In total, the Company issued 2,998,856 new shares during the six month period ending 31 August 2017 raising net proceeds of £3,326,563.

8. RELATED PARTY TRANSACTIONS

Hargreave Hale Limited is considered to be a related party to the Company. Oliver Bedford, a non-executive director of the Company and a member of its key management personnel, is an employee of Hargreave Hale Limited. In addition, Hargreave Hale Limited acts as investment manager, administrator and custodian to the Company and it provides the company secretary. All of the support functions performed by Hargreave Hale Limited are segregated by department and location and are independent of each other.

        Hargreave Hale Limited in its capacity as investment manager of the fund receives annual fees of 1.5% per annum of the net assets of the Company, calculated and payable quarterly in arrears. Fees for the half-year are £373,557 (2016: £238,524). In relation to the other support functions described above, Hargreave Hale Limited also provides administration services, custody services, company secretarial services and one non-executive director and receive fees of £50,000 per half-year (2016: £40,000) in relation to these services. Of those fees, £192,975 (2016: £137,010) was still owed at the half-year end.                   Hargreave Hale Limited has agreed to indemnify the Company against annual running costs (such costs excluding VAT, any performance incentive fee and any trail commissions the payment of which is the responsibility of the Company) exceeding 3.5% of its net assets. No fees were waived by Hargreave Hale in the first half of the financial year under the indemnity.                   During the half year, the Company issued 2,998,856 ordinary shares (nominal value £29,989) in a joint offer for subscription which resulted in gross funds being received of £3,407,743. As marketing adviser and receiving agent to the Company, and in return for covering the costs of the joint offer, Hargreave Hale Limited was entitled to 3.5% of the gross proceeds (£119,271), often referred to as the 'premium'. From this, Hargreave Hale Limited paid for the allotment of additional shares to investors with a value of £38,091 and introducer commission of £990, resulting in net fees payable to Hargreave Hale of £80,190.

9. GOING CONCERN

After making enquires, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

10. POST BALANCE SHEET EVENTS

Buybacks Since the period end, a further 75,978 ordinary shares have been repurchased at a total value of £85,845.

New investments An investment in the following company has been made since the period end: Charter Court Financial Services Group plc

Qualifying companies The Company has made additional investments into the following qualifying companies since the period end: Gfinity plc (£60k) Laundrapp Ltd (£501k) Faron Pharmaceuticals Oy (£469k) Angle plc (£100k)

SHAREHOLDER INFORMATION

The Company's ordinary shares (Code: HHVT) are listed on the London Stock Exchange. Shareholders can visit the London Stock Exchange website, www.londonstockexchange.com , for the latest news and share prices of the Company. Further information for the Company can be found on its website at www.hargreaveaimvcts.co.uk .

NET ASSET VALUE PER SHARE The Company's NAV per share as at 13 October 2017 was 120.80 pence per share. The Company publishes its unaudited NAV per share on a weekly basis.

DIVIDENDS The Board has approved the payment of an interim dividend of 2 pence in respect of the six months ended 31 August 2017.

Shareholders who wish to have future dividends paid directly into their bank account rather than sent by cheque to their registered address can complete a mandate for this purpose. Mandates can be obtained by contacting the Company's registrar, Equiniti.

SELLING YOUR SHARES Hargreave Hale AIM VCT 2 plc operates a share buy-back policy to improve the liquidity in its ordinary shares.  Share buy-back policies are subject to the Act, the Listing Rules and tax legislation, which may restrict the VCTs' ability to buy shares back in. The policy is non-binding and is at the discretion of the Board.

The buy-back policy targets a 5% discount to the last published NAV per share as announced on the London Stock Exchange through a regulatory news service provider. The discount is measured against the mid-price per share as listed on the London Stock Exchange and reflects the price at which the Company buys its shares off the market makers. The Company publishes its unaudited NAV per share on a weekly basis.

VCT share disposals settle two business days post trade if the shares are already dematerialised or placed into CREST ahead of the trade, or ten days post trade if the stock is held in certificated form.

VCT share disposals are exempt of capital gains tax when the disposal is made at arms' length, which means a shareholder must sell their shares to a market maker through a stockbroker or another share dealing service. Hargreave Hale has particular expertise in the sale of VCT shares and is able to act for VCT shareholders who wish to sell their shares. However, you are free to nominate any stockbroker or share dealing service to act for you. If you would like Hargreave Hale to act for you as their client (as opposed to a shareholder in the Company) then please contact Andrew Pang for further information (020 7009 4900, andrew.pang@hargreave.com).

Please note that Hargreave Hale will need to be in possession of the share certificate and a completed CREST transfer form before executing the sale. If you have lost your share certificate, then you can request a replacement certificate from the Company's registrar Equiniti. The registrar will send out an indemnity form, which you will need to sign. The indemnity form will also need to be countersigned by a UK insurance company or bank that is a member of the Association of British Insurers. Since indemnification is a form of insurance, the indemnifying body will ask for a payment to reflect their risk. Fees will reflect the value of the potential liability.

SHAREHOLDER ENQUIRIES: For general Shareholder enquiries, please contact Hargreave Hale Limited on 01253 754755 or by e-mail to aimvct@hargreave.com.

For enquiries concerning the performance of the Company, please contact the investment manager on 0207 009 4937 or by e-mail to aimvct@hargreave.com.

Electronic copies of this report and other published information can be found on the Company's website at www.hargreaveaimvcts.co.uk .

CHANGE OF ADDRESS To notify the Company of a change of address please contact the Company's registrar.

COMPANY INFORMATION