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Unicorn AIM VCT PLC  -  UAV   

Annual Financial Report

Released 07:00 24-Nov-2016

RNS Number : 9970P
Unicorn AIM VCT PLC
24 November 2016
 

Unicorn AIM VCT plc (the "Company" or the "VCT")

 

Annual Results Announcement for the year ended 30 September 2016

The full Annual Report and Accounts for the year ended 30 September 2016 can be found on the Company's website www.unicornaimvct.co.uk

 

FINANCIAL HIGHLIGHTS

(for the year ended 30 September 2016)

·     Offer for Subscription raised £9.8 million (after costs)

·     Net asset value ("NAV") total return for the year ended 30 September 2016, after adding back the dividend of 6.25p paid in the year, was 7.2%

·     Final dividend of 6.25p proposed for the financial year ended 30 September 2016

 

Fund performance

Ordinary Shares

Shareholders' Funds*

(£ million)

Net asset value per share (NAV) (p)

Cumulative dividends** paid per share (p)***

Net asset value plus cumulative dividends paid per share (p)***

Share price (p)

30 September 2016

147.7

160.5

32.25

192.75

139.0

31 March 2016

139.5

150.9

32.25

183.15

130.5

30 September 2015

124.6

155.6

26.0

181.6

137.0

31 March 2015

99.1

137.0

26.0

163.0

123.0

 

* Shareholders funds/net assets as shown on the Statement of Financial Position below.

 

** The Board has recommended a dividend of 6.25 pence per share for the year ended 30 September 2016. If approved by Shareholders, this payment will bring total dividends paid since the merger of with Unicorn AIM VCT II plc on 9 March 2010 to 38.5p.

 

***Since the merger of the Company with Unicorn AIM VCT II plc on 9 March 2010 and merger of all former share classes.

 

STRATEGIC REPORT

The purpose of this Strategic Report is to inform Shareholders of the Company's progress on key matters and assist them in assessing the extent to which the Directors have performed their legal duty to promote the success of the Company in accordance with section 172 of the Companies Act 2006.

The Investment Manager's Review also includes what is believed to be a balanced and comprehensive analysis of the development of the business during the financial year and the position of the Company's investments at the end of the year.

 

CHAIRMAN'S STATEMENT

I am pleased to present the fifteenth Annual Report of the Company.

Economic Review

The key economic and political event of the past twelve months was undoubtedly the UK electorate's majority decision to leave the European Union. Regardless of the rights and wrongs of the debate, the outcome of the Referendum appears to have been a surprise to both the Government and the main opposition parties. As a consequence, there appears to have been no plan for extricating the UK from the EU efficiently, nor any apparent thought given to minimising the possible negative economic effects of BREXIT.

 

Despite the uncertainty, the Prime Minister has stated that she will invoke Article 50 of the Lisbon Treaty during 2017 which, in turn, will formally trigger the process required for the UK to leave the EU.

 

It remains to be seen whether this inevitably protracted process will have a significantly negative impact on the UK economy which, so far, appears to have been largely unaffected by the Referendum vote. To date, the biggest and most obvious initial impact has been on the value of Sterling which, at the time of writing, had fallen considerably against the US Dollar. The continued weakness of Sterling relative to both the US Dollar and the Euro is good news for UK businesses that export their goods and services overseas, and has been reflected in the recent strong performance of the FTSE 100 Index, which is composed mainly of truly international British businesses. Opinion remains sharply divided however, over the long-term economic effects of leaving the EU. Major UK firms such as Easyjet and John Lewis have already highlighted that the slump in Sterling is going to increase their costs significantly. Inflation in the UK economy is likely to increase markedly in the coming months.

 

The UK has also seen its creditworthiness downgraded by the international ratings agencies, which have all indicated that the referendum result will lead to deterioration in the performance of the UK economy. The cost of Government borrowing is therefore set to rise. The Government is hoping that the Bank of England's decision to cut interest rates to a record low of 0.25%, will help mitigate the impact of inflation on consumer spending and business investment, thereby potentially averting another recession.

 

Since the financial year end, economic and equity market uncertainty has increased following the unexpected outcome of the US Presidential election. Equity markets dislike uncertainty and further volatility is therefore to be expected during the current financial year.

 

Investment Performance Review

Despite the economic and political turmoil, your Company remains in sound health.

 

It is particularly pleasing to report that the twelve month period ended 30 September 2016, has again delivered positive total returns to Shareholders. Performance has been strong, with Net Asset Value per share increasing from 155.6 pence to 160.5 pence during the year, marking the seventh consecutive financial year of positive total returns. After adding back the dividend of 6.25 pence per share paid in the period, the total return to Shareholders was 7.2%.

 

At the financial year end, the investment portfolio consisted of 70 active VCT qualifying companies and 23 non-qualifying companies. Approximately 75% of the companies held in the portfolio are profitable and the majority of these businesses are now sufficiently cash generative to allow for the payment of dividends. During the period under review, dividends were paid, or proposed, by over two-thirds of the companies in the portfolio. Income received from underlying investments grew in the period under review from £1.9 million in the financial year ended 30 September 2015 to £2.4 million in the financial year ended 30 September 2016. This should be regarded as tangible evidence of the increasing financial strength of companies in the portfolio and a positive indicator for the future.

 

Net Assets & Acquisition

By the end of the financial year under review, the audited net assets of the Company increased significantly, rising to £147.7 million, which compares favourably with the £124.6 million of net assets recorded at the end of the previous financial year. This growth in total net assets was helped by a fully subscribed, £10 million Share Offer.

 

In addition, as previously reported in our Half-Yearly Report, the Company completed the acquisition of the assets and liabilities of Rensburg AIM VCT (Rensburg) during the period. The net assets acquired amounted to just over £11.5 million. In order to facilitate the acquisition, Unicorn Asset Management Limited paid the majority of the costs incurred by both the Company and Rensburg in relation to this transaction.

 

Rensburg was an AIM focused VCT with the majority of its assets invested in qualifying, AIM-listed companies. Unicorn AIM VCT already held investments in many of these companies. The acquisition has therefore resulted in your Company acquiring additional qualifying investments to support VCT qualification, while also increasing total net assets over which the fixed costs are spread, thereby benefitting all Shareholders.

 

I would like to take this opportunity to welcome all former Rensburg AIM VCT shareholders.

 

Portfolio Activity

In addition to the successful acquisition of the Rensburg assets, the twelve months ended 30 September 2016 was a busy and productive period for investment activity. In total, almost £8.2 million of capital was invested in six new VCT qualifying investments. Although still early days, it is pleasing to report that, in aggregate, these new holdings have made a healthy initial contribution to overall performance, generating an unrealised aggregate capital gain on investment cost of 47.2% in the period.

 

In addition to investing in new VCT qualifying companies, the Manager also committed further VCT qualifying capital, totalling £3.2 million, to three companies already held in the portfolio, as well as making a number of full and partial disposals during the period.

 

Total proceeds from disposals amounted to £13.5 million, resulting in an overall realised capital profit of £0.8 million.

 

A detailed report on the performance of both the qualifying and the non-qualifying investments is contained in the Investment Manager's Review below.

 

VCT Status

In aggregate, the percentage of the Company's total assets remains above that required by HMRC in order to retain VCT status. As at 30 September 2016, approximately 77% of our Company's total assets (valued in accordance with VCT rules) were invested in VCT qualifying companies. Excluding new capital raised in Offers for Subscription within the last three years, our VCT qualifying percentage rises to 87% of total assets. The Board and its advisers continue to monitor this figure closely. All other HMRC tests have been complied with and the Board has been advised by PwC that the Company continues to maintain its Venture Capital Trust status.

 

New VCT Regulations

The Venture Capital Trust sector is subject to a complex set of regulations. During the course of 2015, the UK government, working with the European Union, formulated a number of new rules, which were passed into law in November 2015. These new rules focus on restrictions surrounding a company's eligibility to benefit from State Aid funding (which also applies to VCTs because of the favourable tax treatment). The main changes are summarised below:

·     An age restriction of seven years (twelve years for knowledge intensive companies) from first commercial sales, after which companies no longer qualify for State Aid funding, although follow-on investment is allowed if they have received such funding within the seven years.

·     A lifetime restriction on total State Aid funding of £12 million per company (£20 million for knowledge intensive companies).

·     A stricter definition of what VCT funding may be used for.

·     Further restrictions on 'non-qualifying' investments.

 

It remains difficult to accurately assess the long term impact that these new regulations will have on your Company. As a result of the new legislation, there are fewer AIM listed companies that remain eligible to apply for State Aid funding, but your Investment Manager also believes that there may be a decline in the number of VCT qualifying companies seeking an initial listing on the Alternative Investment Market. For these reasons, both the Board and the Manager intend to maintain a prudent approach when it comes to the size of future fund raisings.

While the new legislation presents a number of challenges to the VCT sector as a whole, the Investment Manager remains confident of being able to operate within the confines of the new rules, having established a long track record of successfully adapting to previous rule changes.

Board Changes

Following the announcement in December last year of James Grossman's intention to retire from the Board at the AGM early next year, we were pleased to announce the appointment of Charlotta Ginman as a Director of the Company with effect from 14 July 2016.

Following qualification as a chartered accountant with Ernst & Young, Charlotta spent several years in investment banking, followed by executive roles at Nokia Corporation and Vertu Corporation. She was a non-executive director at Wolfson Microelectronics and Kromek plc and is currently on the boards of Polar Capital Technology Trust plc, Pacific Assets Trust plc and Motif Bio plc, where she chairs the audit committees. Charlotta is also a non-executive director of Consort Medical plc.

I would like to take this opportunity to welcome Charlotta to the Board and to thank James for his wise counsel and valuable contribution over the past eight years.

On behalf of the Board, I would also like to wish James a long and happy retirement.

Dividends

The final dividend of 6.25 pence per share, for the financial year ended 30 September 2015, was paid to Shareholders on 19 February 2016. Dividends are tax free to qualifying UK Shareholders and this dividend represented a yield of 4.0% based on the Net Asset Value of 155.6 pence per share as at 30 September 2015.

 

The Board has considered the payment of a dividend for the financial year ended 30 September 2016, and is recommending a final dividend of 6.25 pence per share (income: 1.00 pence; capital: 5.25 pence) to Shareholders, payable on 3 February 2017 to Shareholders on the register on 13 January 2017.

 

After careful consideration, and after taking into account the views of the Company's Shareholders, it is the Board's intention to move to twice yearly dividend payments. An interim dividend payment is therefore expected to be proposed in relation to the six month period ended 31 March 2017. It is anticipated that the Half-Yearly Report covering this period will be released in May 2017 and will contain details as to the quantum of the interim dividend.

 

As ever, all future decisions regarding dividend payments will remain subject to a number of factors including; market conditions, satisfactory performance and availability of cash and distributable reserves.

 

Outlook

The outlook for the majority of companies held in the portfolio appears to be positive, albeit the economic outlook remains clouded by the uncertainty created by BREXIT. The current portfolio consists mainly of profitable, cash generative businesses, many of which carry little or no debt on their balance sheets. The management teams of these businesses are, however, alert to the possible negative impacts of higher input prices that may soon emerge following the recent weakening of Sterling against other major currencies. It is to be hoped that through a combination of efficiency or productivity improvements, and modest customer price increases, much of this expected increase in input costs can be absorbed, or passed on, without impacting profit margins or triggering a noticeable decline in demand. In theory, this should be achievable for many of our investee companies, given the specialist nature of the products and services they provide.

Untangling the UK from the European Union will be a complex and lengthy process, however, and will almost certainly present unforeseen challenges for both the domestic economy and for the businesses in which your Company invests. It remains to be seen whether this process will have a lasting impact on the valuation of UK quoted companies. Regardless of the eventual outcome of BREXIT, be it positive or negative, your Board will continue to work closely with the Investment Manager to help ensure the best possible outcome for Shareholders.

Finally, I would like to take this opportunity to thank all Shareholders for their continued support of the Company and to invite you to attend the Company's Annual General Meeting. This is scheduled for 12 January 2017 and is to be held at The Great Chamber, The Charterhouse, Sutton's Hospital, Charterhouse Square, London EC1M 6AN.

Peter Dicks

Chairman

23 November 2016

 

The Company and its Business Model

The Company is registered in England and Wales as a Public Limited Company (registration number 04266437) and is approved as a Venture Capital Trust (VCT) under section 274 of the Income Tax Act 2007 (the "ITA"). In common with many other VCTs, the Company revoked its status as an investment company as defined in section 266 of the Companies Act 1985 on 17 August 2004, to make it possible to pay dividends from capital.

The Company's shares are listed on the London Stock Exchange main market under the code UAV.

The Company is an externally managed fund with a Board comprising five non-executive Directors. Investment management and operational support are outsourced to external service providers, with the strategic and operational framework and key policies set and monitored by the Board as described in the diagram on page 6 of the Annual Report. Further information on each of the service providers is outlined in the Corporate Governance Statement on page 36 of the Annual Report.

 

The Board has overall responsibility for the Company's affairs including the determination of its investment policy. Risk is spread by investing in a number of different businesses across different industry sectors. The Investment Manager is responsible for managing sector and stock specific risk and the Board does not impose formal limits in respect of such exposures. However, in order to maintain compliance with HMRC rules and to ensure that an appropriate spread of investment risk is achieved, the Board receives and reviews comprehensive reports from the Investment Manager on a monthly basis. When the Investment Manager proposes to make any investment in an unquoted company, the prior approval of the Board is required.

 

The Board's Strategy

 

Investment Objective

The Company's objective is to provide Shareholders with an attractive return from a diversified portfolio of investments, predominantly in the shares of AIM quoted companies, by maintaining a steady flow of dividend distributions to Shareholders from the income as well as capital gains generated by the portfolio.

 

It is also the objective that the Company should continue to qualify as a Venture Capital Trust, so that Shareholders benefit from the taxation advantages that this brings. To achieve this at least 70% of the Company's total assets are to be invested in qualifying investments of which 30% by VCT value (70% for funds raised after 6 April 2011) must be in ordinary shares which carry no preferential rights (save as permitted under VCT rules) to dividends or return of capital and no rights to redemption.

 

Investment Policy

In order to achieve the Company's investment objective, the Board has agreed an investment policy which requires the Investment Manager to identify and invest in a diversified portfolio, predominantly of VCT qualifying companies quoted on AIM that display a majority of the following characteristics:

·     experienced and well-motivated management;

·     products and services supplying growing markets;

·     sound operational and financial controls; and

·     good cash generation to finance ongoing development allied with a progressive dividend policy.

 

Asset allocation and risk diversification policies, including maximum exposures, are to an extent governed by prevailing VCT legislation. No single holding may represent more than 15% (by VCT value) of the Company's total investments and cash, at the date of investment.

 

There are a number of VCT conditions which need to be met by the Company which may change from time to time. The Investment Manager will seek to make qualifying investments in accordance with such requirements.

 

Asset mix

Where capital is available for investment while awaiting suitable VCT qualifying opportunities, or is in excess of the 70% VCT qualification threshold, it may be held in cash or invested in money market funds, collective investment vehicles or non-qualifying shares and securities of fully listed companies registered in the UK.

 

Borrowing

To date the Company has operated without recourse to borrowing. The Board may, however, consider the possibility of introducing modest levels of gearing up to a maximum of 10% of the adjusted capital and reserves, should circumstances suggest that such action is in the interests of Shareholders.

 

Performance during the year

As at 30 September 2016, the audited NAV of the Company was 160.5 pence per share, having risen by 4.9 pence (2015:11.9 pence) from 155.6 pence per share at the start of the financial year under review. After adding back the dividend of 6.25 pence per share paid in the year, this is a total return to Shareholders of 11.15 pence (2015: 17.9 pence) or 7.2% (2015: 12.5%) of the opening NAV for the year. In comparison, the total return from the FTSE AIM All-Share Index, although not a representative benchmark due its weighting in mining and oil exploration stocks, was 14.7% over the same period. The audited net assets of the Company were £147.7 million (2015: £124.6 million) at the financial year end.

 

At the financial year end, there were 70 active VCT qualifying companies held in the portfolio. Most of these businesses are cash generative and operate with strong balance sheets. The Investment Manager continues to focus on a select number of key metrics in order to monitor and assess the financial health of these businesses. These metrics continue to improve for most of the companies held in the portfolio. Historically, investment has typically been committed to a new company if it is profitable at the time of first investment, although given the new State Aid funding rules, future VCT qualifying investments are likely to be made in earlier stage businesses.

 

In the year to 30 September 2016, a total of £13.5 million was realised through the sale of investments while £9.8 million (after costs) was raised from an Offer for Subscription. Capital amounting to £13.4 million was deployed in new investments and approximately £5.4 million was paid out as dividends to Shareholders. A further £3.2 million was spent on share buybacks and in meeting the operating costs of the Company.

 

Over the 12 months to 30 September 2016 there was a net gain on investments of £10.2 million and the total profit on ordinary activities was £9.3 million, equivalent to earnings of 10.6 pence per share. The profit on the revenue account was £1.1 million. At the financial year end, the portfolio consisted of 70 qualifying and 23 non-qualifying investments in active businesses.

 

Since the merger with Unicorn AIM VCT II plc, which was completed in March 2010 when all share classes merged, the total return to Shareholders has been 110.0%, including the payment of 32.25 pence per share in dividends, which have been tax free to qualifying Shareholders.

 

Key Performance Indicators

The Board uses the following key indicators to measure the Investment Manager's performance, thereby allowing Shareholders to assess how the Company is performing against its objective:

-      NAV per share, cumulative dividends paid and cumulative total shareholder return

-      Earnings per share

-      Running costs

Further details can be found on pages 8 and 9 of the Annual Report.

 

Running Costs

The Ongoing Charges of the Company for the financial year under review represented 2.2% (2015: 2.2%) of average net assets, which is well below the agreed cap of 3.6% and remains competitive when compared with other AIM focused VCTs.

As shown in note 3, the Investment Manager receives a management fee of 2% of net assets per annum. Other expenses are shown in note 4 on page 51 of the Annual Report.

Shareholders should note that this ratio has been calculated in accordance with the Association of Investment Companies' ("AIC") recommended methodology, published in May 2012. This figure indicates the annual percentage reduction in shareholder returns as a result of recurring operational expenses. Although the Ongoing Charges figure is based on historic information, it does provide Shareholders with a guide to the level of costs that may be incurred by the Company in the future.

Further information in respect of the Company's performance can be found in the financial highlights above.

Key Events during the Year

The Company raised £9.8 million (after costs) through the Offer for Subscription and issued 6,561,716 shares, details of which are given in note 14 on page 56 of the Annual Report.

 

The Company announced on 17 July 2015 that, subject to HMRC and regulatory approval, a scheme of reconstruction would be put to the shareholders of Rensburg. This was approved by Rensburg shareholders on 27 November 2015 and on 12 January 2016 the Company acquired the assets of Rensburg, in consideration for the issue of 7,075,352 new Ordinary Shares in the Company to Rensburg shareholders.

 

Key Policies

The Board sets the Company's policies and objectives and ensures that its obligations to Shareholders are met. Besides the Investment Policy already referred to, the other key policies set by the Board are outlined below.

 

Dividend policy

The Board remains committed to a policy of maintaining a steady flow of dividend distributions to Shareholders from the income and capital gains generated by the portfolio. Dividends of 6.25 pence per share were paid during the period which amounted to £5.4 million. Since the original launch of Unicorn AIM VCT in 2001, Shareholders have, in aggregate, received approximately £43.2 million in dividend distributions, including those paid to former shareholders in Unicorn AIM VCT II plc.

 

The ability to pay dividends and the amount of such dividends are influenced by the performance of the Company's investments, available distributable reserves and cash, as well as the need to retain funds for further investment and ongoing expenses.

 

With effect from the year ending 30 September 2017 the Company proposes to change to an interim and final dividend as detailed in the Chairman's Statement.

 

Share buybacks and discount policy

The Board believes that it is in the best interests of the Company and its Shareholders to make market purchases of its shares from time to time.

 

There are three main advantages to be gained from maintaining a flexible approach to share buybacks; namely:

·     Regular share buybacks provide a reliable mechanism through which Shareholders can realise their investment in the Company, rather than being reliant on what is typically a limited secondary market.

·     Share buybacks, when carried out at a sensible discount to underlying net assets, help modestly to enhance NAV per share.

·     Implementing share buybacks on a regular basis can assist in controlling the discount to NAV that might otherwise prevail during periods of market stress.

 

The Board agrees the level of discount to NAV at which shares will be bought back and keeps this under regular review. The Board seeks to maintain a balance between the interests of those wishing to sell their shares and continuing Shareholders.

 

The Company has continued to buy back shares for cancellation at various points throughout the financial year in accordance with the above policy. A total of 1,641,988 shares with a nominal value of £16,420 were purchased for cancellation during the course of the year, at an average price of 134.4 pence per share, for a total consideration of £2.2 million. At the financial year end, the Company's shares were quoted at a price of 139.0 pence per share representing a discount to NAV per share of 13.4%.

 

The Board intends to continue with the above buyback policy. Any future repurchases will be made in accordance with guidelines established by the Board from time to time and will be subject to the Company having the appropriate authorities from Shareholders and sufficient funds available for this purpose. Share buybacks will also be subject to prevailing market conditions, Listing Rules and any other applicable law at the relevant time. Shares bought back are normally cancelled.

 

Principal risks and uncertainties

The Directors have carried out a review of the principal risks faced by the Company as part of the internal controls process, as outlined below. Note 18 to the Financial Statements on pages 57 to 63 of the Annual Report also provides information on the Company's financial risk management objectives and exposure to risks.

 

Risk

Possible consequence

How the Board guards against risk

Investment and strategic risk

Unsuitable investment strategy or stock selection could lead to poor returns to shareholders.

Regular review of investment strategy by the Board.

Monitoring of the performance of the investment portfolio on a regular basis.

All unquoted investments require prior investment authorisation from the Board.

Regulatory and tax risk

The Company is required to comply with the Companies Act 2006, ITA, The Alternative Investment Fund Managers Directive ("AIFMD") (as applicable to small registered UK AIFMs), UKLA Rules and UK Accounting Standards. Breaching these rules may result in a public censure, suspension from the Official List and/or financial penalties. There is a risk that the Company may lose its VCT status under the ITA. Should this occur, Shareholders may lose any upfront income tax relief they received and be taxed on any future dividends paid and capital gains received if they dispose of their shares.

 

Regulatory and legislative developments are kept under review by the Board.

The Company's VCT qualifying status is continually reviewed by the Investment Manager and Administrator.

PricewaterhouseCoopers LLP has been retained by the Board to undertake an independent VCT status ongoing monitoring role.

Operational risk

The Company has no employees and is therefore reliant on third party service providers. Failure of the systems at third party service providers could lead to inaccurate reporting or monitoring. Inadequate controls could lead to the misappropriation of assets.

 

Internal control reports are provided by service providers on an annual basis.

The Board considers the performance of the service providers annually and monitors activity on a monthly basis.

Fraud and dishonesty risks

Fraud may occur involving company assets perpetrated by a third party, the Investment Manager or other service provider.

 

Internal control reports are provided by service providers on a regular basis.

The Administrator is independent of the Investment Manager.

Financial Instrument risks

The main risks arising from the Company's financial instruments are due to fluctuations in their market prices, interest rates, credit risk and liquidity risk.

 

The Board regularly reviews and agrees policies for managing these risks and full details can be found in Note 18 of the Annual Report.

Economic risk

Events such as recession, inflation or deflation, movements in interest rates and technological change can affect trading conditions and consequently the value of the Company's investments.

While no single policy can obviate such risks the Company invests in a diversified portfolio of companies, whilst seeking to maintain adequate liquidity.

 

The Regulatory Environment

The Board and Investment Manager are required to consider the regulatory environment when setting the Company's strategy and making investment decisions. A summary of the key considerations is outlined below.

 

Human rights

The Board seeks to conduct the Company's affairs responsibly and expects the Investment Manager to consider human rights implications as far as possible, particularly with regard to investment decisions.

 

Diversity

The Directors are aware of the need to have a Board which, as a whole, comprises an appropriate balance of skills, experience and diversity. Appointments to the Board are made according to expertise and knowledge. Following the appointment of Charlotta Ginman on 14 July 2016, the Board currently comprises four male and one female non-executive Directors and the Board has confirmed that it is content with its current composition. The Board will consider gender diversity in making future appointments

 

Anti-bribery policy

The Company has adopted a zero tolerance approach to bribery and will not tolerate bribery under any circumstances in any transaction in which it is involved. The Company values its reputation for ethical behaviour and for financial probity and reliability and the Directors are committed to working to the highest ethical standards.

 

The Company expects and requires each of its service providers to work to the same standard and has obtained confirmation from them that this is the case.

 

Environmental and social responsibility

The Board seeks to conduct the Company's affairs responsibly and expects the Investment Manager to consider relevant social and environmental matters when appropriate, particularly with regard to investment decisions. The Company offers electronic communications where acceptable, to reduce the volume of paper it uses in sending communications to Shareholders. In addition, Board and Committee meetings are held by conference call where it is appropriate to do so. The Company's Annual and Half-Yearly reports are printed on paper sourced from forests certified by the Forestry Stewardship Council ("FSC") that meet its environmental, social and economic standards.

 

Viability Statement

The Board has considered the need to confirm that the Company is able to meet all liabilities when due and that it can continue to operate for a period of at least twelve months from the date of signing the Annual Report. The Directors state on page 29 of the Annual Report that they consider the Company is a going concern over this timeframe.

 

Under the UK Corporate Governance code there is a requirement that the Board performs a robust assessment of the principle risks relating to the Company.

 

The Directors consider the viability of the Company as part of their continuing programme of monitoring risk and conclude that five years is a reasonable time horizon to consider the continuing viability of the Company. This is also in line with the requirement for the Company to continue in operation so investors subscribing for new shares issued by the Company can hold their shares for the minimum five year period to allow them to benefit from the tax incentives offered when those shares were issued.

 

In order to maintain viability, the Company has a detailed risk control framework which has the objective of reducing the likelihood and impact of: poor judgement in decision-making; risk-taking that exceeds the levels agreed by the Board; human error; or control processes being deliberately circumvented. These controls are reviewed by the Board on a quarterly basis to ensure that controls are working as prescribed. In addition, reviews of all service providers are undertaken regularly.

 

The Directors consider that the Company is viable for the five year time horizon for the following reasons:

■    The Company has a diversified investment portfolio including over approximately £9.4 million invested in readily realisable listed shares and a further £11.1 million in open ended funds and cash. The Company therefore has sufficient liquidity in the portfolio.

■    The ongoing charges ratio of the Company as calculated using the AIC recommended methodology equates to 2.2% of net assets, which is competitive for the VCT sector.

■    The Board anticipates that there will continue to be suitable qualifying investments available that will enable the Company to maintain its operations successfully over the five year time horizon.

■    The Company has no debt or other external funding apart from its ordinary shares.

 

The Directors have also considered the viability of the Company should there be a slowdown in the economy or a collapse of the markets leading to lower dividend receipts and asset values. As stated above ongoing charges equate to 2.2% of net assets of which the Investment Management fee is 2.0% of net assets. Therefore, any fall in the value of net assets will result in a corresponding fall in the major expense of the Company.

As a result of these factors, the Directors have concluded that there is a reasonable expectation that the Company can continue in operation over the five year period.

 

Prospects

The prospects for the Company are discussed in detail in the Outlook section of the Chairman's Statement above.

For and behalf of the Board

 

Peter Dicks

Chairman

23 November 2016

 

Investment Manager's Review

 

Introduction

The financial year to 30 September 2016 proved to be another period of solid progress for your Company.

 

The audited net assets of the Company as at 30 September 2016 totalled £147.7 million, while audited NAV per share was 160.5 pence. This represents an increase in net assets of £23.1 million and a capital gain equivalent to 4.9 pence per share during the year. After adding back dividends paid of 6.25 pence per share in the period, the total return amounted to 11.15 pence per share; representing an increase of 7.2% on the opening NAV of 155.6 pence.

 

Performance Review

Although the total return performance of the Company was healthy in the period under review, it did not match the particularly strong returns generated by UK equity indices. The total return from the FTSE All-Share Index amounted to 16.8% in the year, while the total return from the FTSE AIM All-Share Index was also strong at 14.7%.

In both cases, this positive performance has largely been delivered in the three month period following the BREXIT referendum at the end of June 2016. The sharp decline in the value of Sterling helps explain the share price improvement of many large, international companies, which typically export their goods and services and are therefore beneficiaries of a weaker pound. At the other end of the spectrum, the FTSE AIM All-Share Index responded positively to a recovery in oil and commodity prices, due to its meaningful weighting in junior mining and oil exploration stocks.

To put these performances in context however, the FTSE AIM-All Share Index has still not reached its previous peak in March 2014, while the FTSE All-Share Index is only marginally higher than it was two and a half years ago. By contrast, the Company has delivered a total return to Shareholders of 21% over the same 30 month period. Over the longer term, relative performance also remains strong. In the period since the merger of Unicorn's two AIM focused VCTs on 9 March 2010, NAV per share has increased from 91.8 pence to 160.5 pence as at 30 September 2016. In addition, a total of 32.25 pence has been distributed to Shareholders by way of dividends, tax free to qualifying Shareholders. After adding back these dividends the total return to Shareholders during this period is 110%. This compares to a total return of 65% from the FTSE All-Share Index and 27% from the FTSE AIM All-Share Index. Total returns are, of course, calculated after absorbing the ongoing charges of the Company which, for a Venture Capital Trust, has continued to run at a competitive 2.2% of total assets on an annualised basis.

The Company maintained an active approach to share buybacks in the period under review. The total number of shares purchased was 1,641,988 at a total cost of £2.2 million. These shares were bought back at an average discount to underlying net assets of 13.1% and were all subsequently cancelled.

The established, selective and disciplined approach to managing the Company's assets has enabled the Company to continue its successful growth, while at the same time delivering an attractive and, hopefully sustainable, tax free dividend stream to Shareholders. The Board has proposed a final dividend of 6.25 pence per share in respect of the financial year ended 30 September 2016, which, if approved by Shareholders will be paid on 3 February 2017.

The investment portfolio remains diversified both by number of holdings and by sector exposure. At the financial year end, the Company held 70 active VCT qualifying companies together with 23 non-qualifying investments. These investments are spread across 19 different sectors.

 

Qualifying Investments

(bracketed figures represent the share price movement for the year under review or since the date of investment on a mid-price basis):

 

The percentage of total assets invested in VCT qualifying companies amounted to 77% as at 30 September 2016.

 

A review of the ten most meaningful contributors to performance (both positive and negative) follows:

Abcam (+45%) is a global leader in the supply of life science research tools. The business continues to grow at a healthy rate. In its financial year to 30 June 2016, Abcam increased sales on a reported basis by 19.2% to £171.7 million (FY 2015: £144.0 million). Reported diluted earnings per share were flat at 18.5 pence (FY 2015: 18.5 pence), reflecting a previously announced investment in systems and processes together with meaningful acquisition and integration costs. The business remains highly cash generative, with the closing net cash position increasing to £70.7 million (30 June 2015: £58.7 million). As a consequence of continued strong trading, the proposed full year dividend was increased by 8.5% to 8.9 pence per share (FY 2015: 8.2 pence).

 

Animalcare Group (+34%) is a leading supplier of veterinary medicines. In October, the Board of Animalcare announced results for the year ended 30 June 2016, which demonstrate that the business continues to perform. In recent years, the management team has built a strong and scalable platform, which should allow the business to continue its consistent growth, while also enabling a progressive dividend policy to be maintained. Overall, revenues for the year were up 8.6% to £14.7 million (2015: £13.5 million), while underlying basic earnings per share increased 3.2% to 13.0p (2015: 12.6p). As a consequence of continued strong cash generation, the balance sheet also strengthened during the year, with net cash increasing to £7.1 million (2015: £5.8 million) as at 30 June 2016. The total recommended dividend was increased by 6.6% to 6.5p (2015: 6.1p). The management team intends using the strong balance sheet to invest in a wider range of products and new opportunities to help ensure the long-term success of the business.

 

Anpario (-21%) is a specialist producer of natural feed additives that promote animal health, hygiene and good nutrition. Interim results for the six month period ended 30 June 2016 were released in September, revealing that Anpario had delivered a modest increase in adjusted profit before tax from continuing operations to £1.7 million (2015: £1.6 million), together with a significantly improved net cash balance of £10.9 million (2015: £7.9 million). Although share price performance has been weak of late, as growth has been slower and taken longer than originally anticipated, the financial strength and established investment strategy has placed the business in a good position to build commercial relationships in new international territories, from which long term organic growth should be secured.

Avingtrans (+71%) is a designer, manufacturer and supplier of critical components to the global energy and medical sectors. During an exceptionally busy period, Avingtrans successfully expanded and then sold its Aerospace Division for an enterprise value of £65.0 million, announced a £28 million tender offer to return cash to shareholders and lastly, reported on major contract wins for its Energy and Medical divisions. Although revenue from continuing operations decreased by 6% to £21.2 million (2015: £22.6 million), adjusted profit before tax improved to £0.1 million (loss 2015: £0.7 million), while cash generated from operating activities improved dramatically to £7.8 million (2015: £1.6 million). As a result of strong underlying cash generation combined with the proceeds from the disposal of the Aerospace division, net cash increased to £51.0 million (2015: net debt £5.9 million) at 31 May 2016, Avingtrans' financial year end. The Energy and Medical divisions performed in line with expectations in the period and with attractive structural growth markets and durable customer relationships, the business is well placed to deliver further value over the longer term.

 

Crawshaw Group (-56%) is a retailer of fresh meat and food-to-go, which recently delivered disappointing Interim Results. As a consequence, Crawshaw's share price has been very weak, falling by 63% from a peak reached in November 2015. Despite recording a 29% increase in group turnover to £21.6 million (2015: £16.7 million) and a 31% increase in gross profit to £9.8 million (2015: £7.5 million), like-for-like sales declined 4.4% (2015: increased 1.0%) and losses before tax increased to £0.4m (2015: £0.1m). As a result, net cash was £4.0 million at 31 July 2016 (31 July 2015: £6.0 million) and the interim dividend has been dropped (2015: 0.10 pence per share). Although the business has continued to grow, with the store expansion programme making considerable progress, the recent like-for-like sales performance has been very disappointing. The management team is acting quickly to restore sales momentum by focusing on a local value-led proposition that has proved successful in the past. Re-introducing a locally driven, value-led promotion strategy is reported to be increasing customer numbers, although this initiative will inevitably have an impact on margins and has therefore resulted in a significant downward revision to profit expectations.

 

Gama Aviation (-55%) is one of the world's largest business aviation service providers. Despite continued strong growth in revenues, the business continues to record losses after currency adjustments. The weakening of Sterling combined with a material investment in international expansion, has resulted in Gama's market capitalisation remaining under significant pressure, with the share price declining by over 50% in the period under review. The fundamental strength of the Gama business model is that revenues are underpinned by long term renewable contracts, which, when combined with geographical diversity and proven industry expertise, should enable the business to deliver improving financial results, despite challenging trading conditions in the UK and Europe.

 

IDOX (+68%) is a leading supplier of specialist information management solutions and services. In its most recently announced half year results for the six months ended 30 April 2016, IDOX's revenues grew by 26% to £37.2 million (H1 2015: £29.6 million), which included modest organic growth of 5%. As a result, adjusted profit before tax was 36% higher at £7.9 million (H1 2015: £5.8 million). Net debt as at 30 April 2016 stood at £13.9 million (H1 2015 £9.7 million), following payment of £9.3 million in respect of two acquisitions made during the second half of 2015.

 

Following a strong first half performance, the business retains a healthy pipeline and order book. Together with a full year contribution from recent acquisitions, the Board has been able to re-confirm its confidence in meeting market expectations for the financial year as a whole.

 

Mattioli Woods (+19%) is a specialist wealth management and employee benefits business. In its financial year ended 31 May 2016, the Group reported revenue growth of 24% to £43 0 million (2015: £34.6million) and an increase in adjusted earnings per share of 14.0% to 31.0p (2015: 27.2p). As a result, the proposed total dividend was increased by 19.0% to 12.5p (2015: 10.5p). At the Group's financial year end, the financial position remained very strong with the net cash position standing at £29.8 million (2015: £10.6 million). Mattioli Woods continues to expand through a combination of organic growth and selective acquisitions, while maintaining its core focus on delivering quality advice, services and products, thereby helping to grow the value of its clients' assets and enhancing their financial outcomes.

 

Tracsis (+19%) is a leading provider of software and services for the traffic data and transportation industry. The Group recently released its annual results which confirmed another strong year of trading. The financial year ended 31 July 2016 has been one of significant progress for Tracsis. Core operations continued to perform well, while the Group completed the acquisitions of Ontrac Limited and SEP Limited. These acquisitions are reported to be performing well, with Ontrac having secured several major orders for its software products, while SEP has experienced a record year of trading. Both these newly acquired businesses are trading profitably and performing to expectations. Revenues for the Group as whole were £32.6 million in the financial year, a rise of 29% (2015: £25.4 million). Adjusted profits before tax for the year ended 31 July 2016 were up 18% to £6.9 million (2015: £5.8 million). As at 31 July 2016, Group cash balances remained strong at £11.4 million (2015: £13.3 million), the modest decline reflecting the cash utilised on acquisitions and investments during the year. The Group continues to be debt free and highly cash generative.

 

Tristel (+61%) is a developer and manufacturer of infection control, contamination control and hygiene products. The Group's results for the financial year ended 30 June 2016 were released in October 2016 and revealed that turnover increased to more than £17 million (2015: £15.3 million) with adjusted pre-tax profits of £3.3 million (2015: £2.6 million). Both turnover and pre-tax profits were ahead of market expectations. Tristel also continues to generate significant levels of cash and at 30 June 2016 net cash balances were £5.7 million compared to £4.0 million at 30 June 2015. Accordingly, the Board has announced a special dividend of 3 pence per share in order that it returns to shareholders the cash that is considered surplus to investment and operational requirements.

 

After the payment of this special dividend and payment of the consideration associated with a recent acquisition, the Group's ongoing intention is to retain cash reserves of at least £3 million. The previous special dividend of 3 pence per share was paid in August 2015.

 

The management team at Tristel continue to believe that the business will be able to take advantage of current trends in the global disinfection market and the outlook for the Group therefore remains very promising.

 

Review of Non-Qualifying Investments

(bracketed figures represent the share price movement for the year under review or since the date of investment on a mid-price basis):

 

With one notable exception, the non-qualifying investments performed well in the period under review. The strongest contributors to performance included; Macfarlane Group (+19%), Mears Group (+18%), Pinewood Group (+32%) and the Unicorn Mastertrust Fund (+19.2%). The one meaningful disappointment was Renold (-43%), a manufacturer of industrial chain and torque transmission products, which suffered from uncertainty and volatility in its key markets. There were no other material movements among the non-qualifying investments.

 

Investment Activity

Aside from the important acquisition of the VCT qualifying and non-qualifying assets of Rensburg AIM VCT, which is covered in greater detail in the Chairman's Statement, the financial year under review also saw meaningful levels of new investment activity. In aggregate, over £13.4 million was invested in qualifying and non-qualifying investments during the year.

 

Having made one new VCT qualifying investment and three further qualifying investments into existing holdings during the first half of the year, the rate of investment activity accelerated in the second half. Five new qualifying investments were made during the second half, at a total cost of just under £6.7 million. In aggregate, the performance of the new investments has been very pleasing. The total unrealised capital gain on all new qualifying investments made during the course of the year was £3.8 million, which is equivalent to a return on investment of 47.2% as at the financial year end.

 

The six VCT qualifying investments in companies new to the portfolio were as follows:

 

Directa Plus (+74%), is a rapidly expanding producer and supplier of graphene-based products for use in consumer and industrial markets. Directa Plus was admitted to AIM on 27 May 2016, successfully raising £12.8 million at 75 pence per share, of which Unicorn AIM VCT committed £3 million to VCT qualifying shares. The business operates in the fast developing, but still early stage field of graphene technology and, as such, Directa remains loss- making. In its maiden interim results, for the six month period ended 30 June 2016, revenues from product sales increased significantly to €0.40 million (H1 2015: €0.11 million), which resulted in a loss after tax for the period of €2.3 million (H1 2015: €1.3 million loss). As a consequence of the successful fund raise, however, the business is now well-capitalised with cash and cash equivalents at 30 June 2016 of €13.1 million (31 December 2015: €2.0 million; 30 June 2015: €3.0 million). The interim results provide encouraging evidence that Directa Plus is engaging with a growing number of customers and working with them to ensure that the incorporation of graphene-based materials enables them to add significant value to their products. Directa's production process is low cost, scalable and flexible, creating an opportunity for the business to establish a market-leading position in what is expected to be a major new segment of the industrial materials sector.

 

Genedrive (-15%) is a molecular diagnostics company that recently changed its name from Epistem Holdings. In 2015/16, the Company achieved significant growth in revenue driven by development income related to Genedrive, a novel diagnostics management platform, which offers attractive and potentially high growth market opportunities. An example of this is the recent launch of Genedrive's tuberculosis resistance test in India. In addition, David Budd was appointed as CEO during the period, bringing strong diagnostics management experience to the business. In July 2016, your Company contributed £0.2 million to an oversubscribed £6.0 million placing.

 

MaxCyte (+21%) is an established and revenue generating developer and supplier of cell engineering products and services to biopharmaceutical firms engaged in cell therapy and drug discovery. The business successfully completed its IPO on AIM in March 2016 raising gross proceeds of £10 million. Unicorn AIM VCT subscribed £1.5 million in this fundraising, receiving VCT qualifying shares in exchange. With consistently increasing revenue performance and strong revenue visibility, combined with careful investment in sales, marketing and operations to drive further growth, the business is expected to make further progress toward profitability over the next 24 months.

 

Osirium Technologies (+26%) is a UK based cyber-security software provider that was admitted to AIM in April 2016 raising £5.1 million net of expenses via a placing of new ordinary shares. Unicorn AIM VCT invested £1.0 million in new VCT qualifying shares as part of this placing, enabling the business to appoint additional staff members, fund an increase in sales and marketing activity and invest in the continued research and development of new and enhanced software modules. Although still at an early stage in its development, the business is already reported to be benefiting from its admission to AIM with a strengthened balance sheet and a raised profile in the marketplace. This is manifesting itself through a strong and growing pipeline of commercial prospects offering the business a significant opportunity to establish itself as a leading operator in the thriving and fast growing cyber-security market.

 

Surface Transforms (+74%) is an established AIM-listed company focused on the development and manufacture of next-generation, carbon ceramic brake discs for the automotive and aircraft industries. In April 2016, Surface Transforms completed a £6million placing and open offer. Unicorn committed £1.5 million to this VCT qualifying fundraising. As a result of this funding round, the balance sheet has been considerably strengthened and the business now has the capital it requires to invest in essential factory expansion. This investment in new plant and equipment is required because of the significant recent progress Surface Transforms has made with its key automotive customers, which includes the signing of a pre-production contract with a major German automotive manufacturer. Although the business remains loss-making, it now has the foundations in place to enable it to grow its revenues substantially over the next two years.

 

Syndicate Room (n/a) is an early stage, unquoted business that has built an online equity investing platform that allows the private investor to participate in investment opportunities ranging from Seed Enterprise Investment Schemes all the way through to initial public offerings. Syndicate Room's philosophy is based around the belief that everyone should have equal access to sophisticated investment opportunities, and that private investors should be able to invest on the same terms as professional investors. This philosophy manifests itself in an 'investor-led' equity investing model. Since pioneering this investor-led model the business has collaborated with leading industry players and become the first crowd-funding platform to give its members access to public markets. Unicorn AIM VCT has taken a 4.2% stake in the business, having subscribed for £1 million in VCT qualifying shares in a recently completed fund-raising round. Although the business remains at an early stage in its development, it has already established a significant reputation for innovation and is rapidly expanding its range of services all designed to make investing fairer, more sustainable and more transparent.

 

Other Investment Activity

Apart from the assets acquired from Rensburg AIM VCT, no other new investments in qualifying or non-qualifying companies were made during the year.

 

Realisations

Realisations totalling £13.5 million were made in the financial year to 30 September 2016 resulting in an overall capital profit of £0.8 million. Two AIM-listed companies were sold to trade buyers in the period realising net proceeds of £1.4 million. Seventeen non-qualifying holdings were sold in their entirety in the open market and a number of other partial disposals in qualifying and non-qualifying investments were also made. These transactions generated total proceeds of £12.1 million.

 

Prospects

The investment portfolio contains a diverse range of established, successful and growing businesses, the majority of which appear to be sustainably profitable. As a result, despite considerable uncertainty surrounding the prospects for the UK economy, we remain optimistic that the established strategy will deliver further attractive returns for Shareholders over time.

 

Chris Hutchinson

Unicorn Asset Management Limited

23 November 2016

EXTRACT FROM DIRECTORS' REPORT

 

Share Capital

At the year-end there were 92,075,311 (2015: 80,080,231) Ordinary shares of 1p each in issue, none of which are held in Treasury. The issues and buybacks of the Company's shares during the year are shown in note 14 of the Annual Report. Subsequent to the year end, the Company bought back 190,981 shares. At the date of this announcement the Company therefore had 91,884,330 shares in issue. All shares are listed on the main market of the London Stock Exchange.

 

Going concern

After due consideration, the Directors believe that the Company has adequate resources for the foreseeable future and that it is appropriate to apply the going concern basis in preparing the financial statements. As at 30 September 2016, the Company held cash balances with a value of £3.3 million. The majority of the Company's investment portfolio remains invested in fully listed and AIM quoted equities which may be realised, subject to the need for the Company to maintain its VCT status. Cash flow projections covering a period of at least twelve months from the date of approving the financial statements have been reviewed and show that the Company has sufficient funds to meet both contracted expenditure and any discretionary cash outflows from buybacks and dividends. The Company has no borrowings in place and is therefore not exposed to any gearing covenants.

 

The full Annual Report and Accounts contains the following statement regarding responsibility for the financial statements.

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Company's Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP') (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.

 

In preparing these financial statements the Directors are required to:

 

-    select suitable accounting policies and then apply them consistently;

-    make judgements and accounting estimates that are reasonable and prudent;

-    state whether they have been prepared in accordance with UK GAAP subject to any material   departures disclosed and explained in the Financial Statements; and

-    prepare a Director's Report, a Strategic Report and Director's Remuneration Report which comply with the requirements of the Companies Act 2006.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.

 

Website publication

The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.

 

Directors' responsibilities pursuant to DTR4

The Directors confirm to the best of their knowledge:

• The Financial Statements have been prepared in accordance with UK GAAP and give a true and fair view of the assets, liabilities, financial position and profit of the Company.

• The Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces.

 

For and on behalf of the Board

Peter Dicks

Chairman

23 November 2016

 

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2016 or 30 September 2015 but is derived from those accounts. Statutory accounts for the year ended 30 September 2015 have been delivered to the Registrar of Companies and statutory accounts for the year ended 30 September 2016 will be delivered to the Registrar of Companies in due course. The Auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's reports can be found in the Company's full Annual Report and Accounts at www.unicornaimvct.co.uk.

 

PRIMARY FINANCIAL STATEMENTS

 

Income Statement

for the year ended 30 September 2016

 

 

 

Year ended

Year ended

 

 

30 September 2016

30 September 2015

 

Notes

Revenue

Capital

Total

Revenue

Capital

Total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Net unrealised gains on investments

 

9,365 

9,365 

14,384 

14,384 

Net gains on realisation of investments

 

819 

819 

470 

470 

Income

2

2,360 

2,360 

1,885 

1,885 

Investment management fees

3

(651)

(1,953)

(2,604)

(477)

(1,430)

(1,907)

Other expenses

 

(631)

 

(631)

(585)

(585)

Profit on ordinary activities before taxation

 

1,078 

8,231 

9,309 

823 

13,424 

14,247 

Tax on profit on ordinary activities

 

Profit on ordinary activities after taxation for the financial year

 

1,078 

8,231 

9,309 

823 

13,424 

14,247 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

 

 

 

 

 

 

Ordinary Shares

5

1.22p 

9.34p 

10.56p 

1.11p 

18.12p 

19.23p

 

All revenue and capital items in the above statement derive from continuing operations of the Company.

 

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with applicable Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies ("AIC SORP").

 

Other than revaluation movements arising on investments held at fair value through the Profit and Loss Account, there were no differences between the profit as stated above and at historical cost.

 

The notes below form part of these financial statements.

 

Statement of Financial Position

as at 30 September 2016

 

 

 

30 September 2016

30 September 2015

 

Notes

£'000

£'000

£'000

£'000

Non-current assets

 

 

 

 

 

Investments at fair value

 

 

144,282

 

122,582

 

 

 

 

 

 

Current assets

 

 

 

 

 

Debtors

 

422 

 

367 

 

Current investments

 

 

 

Cash at bank

 

3,298 

 

1,952 

 

 

 

3,720 

 

2,320 

 

Creditors: amounts falling due within one year

 

(259)

 

(286)

 

Net current assets

 

 

3,461

 

2,034

Net assets

 

 

147,743

 

124,616

 

 

 

 

 

 

Capital

 

 

 

 

 

Called up share capital

 

 

921

 

801

Capital redemption reserve

 

 

53

 

37

Share premium account

 

 

58,394

 

37,206

Capital reserve

 

 

58,323

 

49,322

Special reserve

 

 

21,756

 

27,927

Profit and loss account

 

 

8,296

 

9,323

Equity Shareholders' funds

 

 

147,743

 

124,616

 

 

 

 

 

 

Net asset value per share of 1 pence each:

 

 

 

 

 

Ordinary shares

6

 

160.46p

 

155.61p

 

The financial statements were approved and authorised for issue by the Board of Directors on 23 November 2016 and were signed on their behalf by:

 

Peter Dicks

Chairman

 

The notes below form part of these financial statements.

 

Statement of Changes in Equity

for the year ended 30 September 2016

 

 

Called up share capital

Capital redemption reserve

Share premium account

Unrealised capital reserve

Special reserve*

Profit and loss account*

Total

 

£'000

£'000

£'000 

£'000 

£'000 

£'000 

£'000 

At 1 October 2015

 

801 

 

37

 

37,206 

 

49,322

 

27,927 

 

9,323 

 

124,616 

Shares repurchased for cancellation and cancelled

 

(16)

 

16

 

 

 

(2,206)

 

 

(2,206)

Shares issued under Offer for Subscription

 

65 

 

-

 

9,934 

 

 

 

 

9,999 

Expenses of shares issued under Offer for Subscription

 

 

 

 

-

 

 

(181)

 

 

 

 

 

 

 

 

(181)

Shares issued as part of the Rensburg Merger

 

 

71 

 

 

-

 

 

11,435 

 

 

 

 

 

 

 

 

11,506 

Unclaimed dividends released by Rensburg

 

 

 

 

-

 

 

 

 

 

 

 

 

131 

 

 

131 

Transfer to special reserve

 

 

-

 

 

 

(3,965)

 

3,965 

 

Gains on disposal of investments (net of transaction costs)

 

 

 

 

-

 

 

 

 

 

 

 

 

819 

 

 

819 

Realisation of previously unrealised valuation movements

 

 

 

 

-

 

 

 

 

(364)

 

 

 

 

364 

 

 

-

Net increases in unrealised valuations in the year

 

 

 

 

-

 

 

 

 

9,365 

 

 

-

 

 

-

 

 

9,365 

Dividends paid

 

 

-

 

 

 

 

(5,431)

 

(5,431)

Investment Management fee charged to capital

 

 

-

 

 

 

 

(1,953)

 

(1,953)

Profit for the year

 

-

 

 

 

 

1,078 

 

1,078 

At 30 September 2016

 

53

 

58,394 

 

58,323 

 

21,756 

 

8,296 

 

147,743 

 

 

Called up share capital

Capital redemption reserve

Share premium account

Unrealised capital reserve

Special reserve*

Profit and loss account*

Total

 

£'000

£'000

£'000 

£'000 

£'000 

£'000 

£'000 

At 1 October 2014

 

642 

 

24

 

13,372 

 

32,320

 

34,402 

 

11,452 

 

92,212 

Shares repurchased for cancellation and cancelled

 

(13)

 

13

 

 

 

(1,643)

 

 

(1,643)

Shares issued under Offer for Subscription

 

172 

 

-

 

24,400 

 

 

 

 

24,572 

Expenses of shares issued under Offer for Subscription

 

 

-

 

 

-

 

 

(566)

 

 

 

 

 

 

 

 

(566)

Transfer to special reserve

 

-

 

-

 

 

 

(4,832) 

 

4,832 

 

Gains on disposal of investments (net of transaction costs)

 

 

-

 

 

-

 

 

 

 

 

 

 

 

470 

 

 

470 

Realisation of previously unrealised valuation movements

 

 

-

 

 

-

 

 

 

 

2,618 

 

 

 

 

(2,618)

 

 

-

Net increases in unrealised valuations in the year

 

 

-

 

 

-

 

 

 

 

14,384 

 

 

-

 

 

-

 

 

14,384 

Dividends paid

 

-

 

-

 

 

 

 

(4,206)

 

(4,206)

Investment Management fee charged to capital

 

-

 

-

 

 

 

 

(1,430)

 

(1,430)

Profit for the year

 

-

 

-

 

 

 

 

823 

 

823 

At 30 September 2015

 

37

 

37,206 

 

49,322 

 

27,927 

 

9,323 

 

124,616 

 

* The special reserve and profit and loss account are distributable to Shareholders.

 

The notes form part of these financial statements.

 

Statement of Cash Flows

for the year ended 30 September 2016

 

 

 

30 September 2016

30 September 2015

 

Notes

£'000

£'000

£'000

£'000

Operating activities

 

 

 

 

 

Investment income received

 

2,226 

 

1,699 

 

Investment management fees paid

 

(2,604)

 

(1,907)

 

Other cash payments

 

(686)

 

(474)

 

Net cash outflow from operating activities

 

 

(1,064)

 

(682)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Rensburg unclaimed dividends and other income

 

147 

 

 

Purchase of investments

 

(13,370)

 

(19,542)

 

Sale of investments

 

13,450 

 

2,855 

 

Decrease in current investments

 

 

 

 

 

 

228 

 

(16,687)

 

 

 

 

 

 

Net cash outflow before financing

 

(836)

 

(17,369)

 

 

 

 

 

 

Financing

 

 

 

 

 

Dividends paid

4

(5,431)

 

(4,206)

 

Shares issued under Offer for Subscription (net of transaction costs)

 

9,818 

 

24,000 

 

Shares repurchased for cancellation

 

(2,206)

 

(1,643)

 

 

 

 

 

2,181 

 

18,151 

Net increase in cash and cash equivalents

 

 

1,345 

 

782 

Cash and cash equivalents at 30 September 2015

 

 

1,953 

 

1,171 

Cash and cash equivalents at 30 September 2016

 

 

3,298 

 

1,953 

 

The notes below form part of these financial statements.

 

NOTES TO THE FINANCIAL STATEMENTS

 

1    Accounting policies

A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out on pages 48 and 49 of the Annual Report.

 

a)  Basis of accounting

The Financial Statements have been prepared under FRS 102 and the SORP issued by the Association of Investment Companies in November 2014.

 

The Company has adopted FRS 102 for the first time which applies to accounting periods commencing after 1 January 2015. The transition to FRS 102 has had no impact on the previously reported financial position and financial performance.

 

The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement at fair value of investments designated as fair value through profit and loss.

 

As a result of the Directors' decision to distribute capital profits by way of a dividend, the Company revoked its investment company status as defined under section 266(3) of the Companies Act 1985, on 17 August 2004.

 

2        Income

 

2016

2015

 

£'000

£'000

Income from investments:

 

 

-  from equities

2,007

1,610

-  from loan stocks

226

196

-  from money-market funds and Unicorn managed OEICs

127

79

Total income

2,360

1,885

 

 

 

Total income comprises:

 

 

Dividends

2,134

1,689

Interest

226

196

 

2,360

1,885

Income from investments comprises:

 

 

Listed UK securities

315

339

Unlisted UK securities (AIM and unquoted companies)

2,045

1,546

 

2,360

1,885

 

3        Investment Management fees

 

2016

2015

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Unicorn Asset Management Limited

651

1,953

2,604

477

1,430

1,907

 

Unicorn Asset Management Limited ("UAML") receives an annual management fee of 2% of the net asset value of the Company, excluding the value of the investments in the OEICs, which are also managed by UAML. The annual management fee charged to the Company is calculated and payable quarterly in advance. In the year ended 30 September 2016, UAML also earned fees of £56,000 (2015: £52,000), being OEIC management fees calculated on the value of the Company's holdings in each OEIC on a daily basis. This management fee is 0.75% per annum of the OEIC value for each of Unicorn UK Smaller Companies OEIC, Unicorn UK Growth OEIC (formerly Unicorn Free Spirit OEIC), Unicorn Mastertrust OEIC and Unicorn UK Ethical Income OEIC.

 

The management fee will be subject to repayment to the extent that there is an excess of the annual costs of the Company incurred in the ordinary course of business over 3.6% of the closing net assets of the Company at the year end. There was no excess of expenses for 2015/16 or the prior year.

 

Under an Amended Incentive Agreement with UAML dated 12 April 2010, the Investment Manager is entitled to a performance incentive fee of 20% of any cash distributions (by dividend or otherwise) paid to Shareholders in excess of 6 pence per Ordinary share paid in any accounting period - "the target return" and subject to the maintenance of a net asset value (NAV) per share of 125 pence or more, as calculated in the Annual Report and accounts for the year relating to such payments. The target return applies for accounting periods starting after 1 October 2010. In the event that the target return of 6 pence per share is not paid in a particular accounting period, the shortfall of such distributions will be carried forward to subsequent accounting periods and any incentive fee will not be payable until this shortfall is met. No incentive fee is payable for the year ended 30 September 2016 and none was due for the year ended 30 September 2015.

 

4        Dividends

 

2016

2015

 

£'000

£'000

Amounts recognised as distributions to equity holders in the year:

 

 

Final capital dividend of 5.25 pence (2015: 5.50 pence) per share for the year ended 30 September 2015 paid on 19 February 2016

4,562  

3,856

Final income dividend of 1.00 pence (2015: 0.50 pence) per share for the year ended 30 September 2015 paid on 19 February 2016

 

869*

 

350

 

5,431  

4,206

 

Any proposed final dividend is subject to approval by Shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

 

* The amount actually paid in dividends for 2015 differs from that shown in last year's Annual Report as 7,075,352 shares were issued and 257,426 bought back between 1 October 2015 and the record date of 29 January 2016. 

 

Set out below are the total income dividends payable in respect of the 2015/16 financial year, which is the basis on which the requirements of Section 274 of the Income Tax Act 2007 are considered.

 

 

2016

2015

 

£'000

£'000

Revenue available for distribution by way of dividends for the year

1,078  

823

Proposed final income dividend of 1.00 pence (2015: 1.00 pence) for the year ended 30 September 2016

919+

800

 

+based on 91,844,330 shares in issue at the date of this announcement.

 

5        Basic and diluted earnings and return per share

 

2016

2015

 

£'000

£'000

Total earnings after taxation:

9,309

14,247

Basic and diluted earnings per share (Note a)

10.56p

19.23p

Net revenue from ordinary activities after taxation

1,078

823

Revenue earnings per share (Note b)

1.22p

1.11p

Total capital return

8,231

13,424

Capital earnings per share (Note c)

9.34p

18.12p

 

 

 

Weighted average number of shares in issue in the year

88,133,530

74,087,534

 

Notes

a) Basic and diluted earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.

b) Revenue earnings per share is net revenue after taxation divided by the weighted average number of shares in issue.

c) Capital earnings per share is total capital return divided by the weighted average number of shares in issue.

 

There are no instruments in place that will increase the number of shares in issue in future.  Accordingly, the above figures currently represent both basic and diluted returns.

 

6        Net asset value

 

2016

2015

 

£'000

£'000

Net Assets

147,743

124,616

Number of shares in issue

92,075,311

80,080,231

Net asset value per share

160.46p

155.61p

 

7        Post balance sheet events

On 13 October 2016, the Company repurchased 74,245 Ordinary Shares, representing 0.08% of the share capital in issue, for cancellation at a total cost of £104,000 equivalent to 140.2 pence per share.

 

On 9 November 2016, the Company repurchased 116,736 Ordinary Shares, representing 0.13% of the share capital in issue, for cancellation at a total cost of £160,000 equivalent to 137.1 pence per share.

 

8        Shareholder information

Dividend

The Directors have proposed a final dividend of 6.25 pence per share. The dividend will be paid on 3 February 2017 to Shareholders on the Register on 13 January 2017.

 

Shareholders who wish to have 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 telephoning the Company's Registrars, Capita Asset Services on +44 (0)371 664 0324, or by writing to them at Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or register on the Portal at https://www.capitashareportal.com or e-mailing them at VCTS@capita.co.uk.

 

9        Statutory information

These are not full accounts in terms of section 434 of the Companies Act 2006. The Annual Report for the year to 30 September 2016 will be sent to Shareholders shortly and will then be available for inspection at Suite 8, Bridge House, Courtenay Street, Newton Abbot TQ12 2QS, the registered office of the Company. Copies of the Annual Report will shortly be available on the Company's website, www.unicornaimvct.co.uk.  Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The audited accounts for the year ended 30 September 2016 contain an unqualified audit report.

 

10     Annual General Meeting

The Annual General Meeting of the Company will be held at 11.30 am on Thursday, 12 January 2017 at The Great Chamber, The Charterhouse, Suttons Hospital, Charterhouse Square, London EC1M 6AN.

 

11     National Storage Mechanism

A copy of the 2016 Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/NSM.

 

Contact details for further enquiries:

Chris Hutchinson of Unicorn Asset Management Limited (the Investment Manager), on 020 7253 0889.

 

Jon Carslake at ISCA Administration Services Limited (the Company Secretary) on 01392 487056 or by e-mail on unicornaim vct@iscaadmin.co.uk 

 

DISCLAIMER

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Annual Financial Report - RNS