TIDMUAV
RNS Number : 4819X
Unicorn AIM VCT PLC
24 November 2017
Unicorn AIM VCT plc (the "Company" or the "VCT")
LEI: 21380057QDV7D34E9870
Annual Results Announcement for the year ended 30 September
2017
The full Annual Report and Accounts for the year ended 30
September 2017 can be found on the Company's website
www.unicornaimvct.co.uk
FINANCIAL HIGHLIGHTS
(for the year ended 30 September 2017)
-- Offers for Subscription raised GBP28.9 million (after costs)
-- Net asset value ("NAV") total return for the year ended 30
September 2017, after adding back the dividends of 9.25p paid in
the year, was 7.4%
-- Final dividend of 3.5p proposed for the financial year ended 30 September 2017
Fund performance
Ordinary Shares Shareholders' Net asset Cumulative Net asset Share price
Funds* value dividends** value plus (p)
(GBP million) per share paid per cumulative
(NAV) share (p)*** dividends
(p) paid per share
(p)***
30 September
2017 175.5 163.1 41.50 204.60 141.5
31 March 2017 163.3 162.4 38.50 200.94 137.0
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
* Shareholders funds/net assets as shown on the Statement of
Financial Position below.
** The Board has recommended a dividend of 3.5 pence per share
for the year ended 30 September 2017. If approved by Shareholders,
this payment will bring total dividends paid since the merger with
Unicorn AIM VCT II plc on 9 March 2010 to 45.0p.
***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 sixteenth Annual Report of the
Company.
Economic & Market Review
Despite considerable and continuing political and economic
uncertainty, the period under review has been another positive one
for UK equity markets. The twelve months to 30 September 2017, saw
the FTSE 100 Index climb to record levels in May 2017, before
tracking within a 5% range for the remainder of the year, and
closing the period at 7,372, giving a total return for the twelve
months under review of 11.2%.
Uncertainty however, has been the dominant theme throughout the
past twelve months and, in the UK, this uncertainty has largely
arisen as a direct consequence of the UK electorate's relatively
narrow majority decision, in June 2016, to leave the European
Union.
The unpredictability of modern politics was also starkly
illustrated by Theresa May's subsequent decision to call a snap
General Election in June 2017, at which point opinion polls showed
the Government holding a twenty-plus point lead over the Labour
Party. As it turned out, following the election, the Conservative
Party ended up with no overall majority and was then faced with the
need to do a deal with the Democratic Unionist Party of Northern
Ireland, simply in order to remain in power. The inescapable
consequence of this unsuccessful political gamble is that the Prime
Minister has weakened the UK's negotiating position with the
European Union.
It is sobering to reflect on the fact that it has now been
approximately ten years since the start of the Global Financial
Crisis, during which time UK economic growth has remained
stubbornly weak, while levels of consumer and corporate debt have
grown to levels that seem neither sensible nor sustainable.
Meanwhile, wage growth has remained subdued and productivity levels
show little sign of improvement.
Rising inflation, driven mainly by a weakening of Sterling
relative to other major global currencies, has added further
pressure to the UK economy. Since the year end, the Bank of England
has raised interest rates in response to the rising level of
inflation. The increased cost of importing food and fuel in
particular, has caused prices to rise at a faster rate than
anywhere in the G7 group of leading global economies, according to
the Organisation for Economic Co-operation and Development
("OECD").
The annual growth in prices in the UK jumped to 2.9% in August
from 2.6% in July, equalling a four year high in the consumer price
index ("CPI"). Meanwhile, wage growth in the UK has failed to keep
pace with inflation, which in turn is now starting to have a direct
and negative impact on UK consumer spending. This is evidenced by a
recent stream of news releases from trade bodies and the Office for
National Statistics, which confirm, among other things, that the
rate of new car sales is falling, while the profitability of the
restaurant sector continues to decline. Trading conditions for
clothing and food retailers also remain extremely challenging.
Investment Performance Review
It is pleasing to report that the twelve month period ended 30
September 2017, has been another year of positive total returns.
Performance has been steady, with Net Asset Value per share
increasing from 160.5 pence to 163.1 pence during the year, making
this the eighth consecutive financial year in which total returns
to Shareholders have been positive. After adding back the dividends
paid in the year, the total return to Shareholders was +7.4%.
Therefore, despite all the considerable economic and political
uncertainty, the Company remains in sound operational and financial
health.
At the financial year end, the investment portfolio consisted of
72 VCT qualifying companies and 18 non-qualifying companies.
Approximately 70% of all 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 year under review, dividends were paid, or proposed, by
56 of the 90 companies held in the portfolio. Income received from
underlying investments grew from GBP2.4 million in the financial
year ended 30 September 2016 to GBP3.1 million in the year ended 30
September 2017. The steady growth in the annual income received by
the Company is testament to the financial strength of the
underlying investee companies, and should help with the dividend
distributions made by the Company.
Net Assets
By the end of the financial year, the audited net assets of the
Company had increased to GBP175.5 million, as compared to the
GBP147.7 million of net assets at the start of the period. This
growth in total net assets was partly due to continued strong
performance from the investment portfolio, but was also assisted by
the support received from new and existing Shareholders under the
Offers for Subscription that have been made during the year.
Portfolio Activity
In total, GBP3.8 million of capital was invested in two new VCT
qualifying investments, while a further three secondary investments
were made in order to support the growth plans of investee
companies already held in the portfolio. The total cost of the VCT
qualifying investments made during the period was GBP6.9
million.
A total gross investment of GBP14.2 million was made in large
liquid, non-qualifying investments during the year.
Total proceeds from disposals amounted to GBP19.5 million,
resulting in an overall realised capital profit of GBP6.5
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
As at 30 September 2017, 73.6% of the Company's total assets
(valued in accordance with VCT rules) were invested in VCT
qualifying companies meeting HMRC requirements. Excluding new
capital raised in recent Offers for Subscription, the VCT
qualifying percentage rises substantially. The Board continues to
monitor this figure closely. All other HM Revenue & Customs
tests have been complied with and the Board has been advised by PWC
that the Company continues to maintain its Venture Capital Trust
status.
Dividends
A maiden interim dividend of 3.0 pence per share, in respect of
the half year ended 31 March 2017, was paid to Shareholders on 11
August 2017.
The Board has considered the payment of a final dividend for the
financial year ended 30 September 2017, and is recommending a final
dividend of 3.5 pence per share (income: 1.0 pence; capital: 2.5
pence) to Shareholders, payable on 2 February 2018 to Shareholders
on the register as at 12 January 2018.
As Shareholders will be aware, dividend payments made by the
Company are exempt from tax for eligible UK Shareholders and,
subject to receiving Shareholder approval for payment of the
proposed final dividend, total dividends in respect of the
financial year ended 30 September 2017, will be 6.5 pence per share
compared with 6.25 pence per share for the year ended 30 September
2016. This represents a yield of almost 4.0% based on the year end
Net Asset Value of 163.1 pence per share as at 30 September
2017.
Share Buybacks and Issues
The Board continues to believe that it is in the best interests
of the Company and its Shareholders to make market purchases of its
shares from time to time. A total of 2,350,170 shares were
purchased for cancellation during the course of the year.
In February 2017, the Company raised GBP14.6m after costs from
the first Offer for Subscription and raised a further GBP33.6
million after costs from the second offering which closed on 17
November 2017.
Outlook
The UK equity market has been reassuringly resilient during the
year under review. On a relative basis, UK equities remain
attractive when compared to other major asset classes. The
short-term outlook for the UK economy however, remains uncertain
and appears increasingly dependent on a successful conclusion to
complex Brexit negotiations.
Realistically, a satisfactory withdrawal from the European Union
seems less likely now than a year ago, the Government's problems
have since been compounded by an unsuccessful early General
Election, which saw the Conservative Party lose its overall
majority. Deep divisions are evident within both main political
parties, especially when it comes to the UK's interaction within
Europe, once we do finally leave the European Union.
All of this uncertainty and political fragility is unhelpful and
may already be damaging the UK's economic growth prospects,
especially in the short term. To date, however, with few
exceptions, the companies held in the portfolio remain in good
operational and financial health and management teams remain
optimistic of being able to maintain growth. The portfolio consists
mainly of specialist businesses that are profitable and cash
generative and where balance sheet strength remains a key
positive.
Clearly, few businesses can expect to be completely immune from
the negative impacts of rising input costs but, for those that
trade internationally, the continued weakness of sterling is
generally helpful. For those domestically focused businesses, the
challenge is to continue making efficiency and productivity
improvements, while aiming to pass on cost increases to customers
wherever possible in order to maintain acceptable levels of
profitability. The evidence to date, suggests that this is being
successfully achieved by the majority of the investee companies
held in the portfolio.
The Company's portfolio is in sound health and well-placed to
withstand short-term challenges. The Investment Manager continues
to adopt a long-term approach, and remains confident that the new
funds received from the current Offer for Subscription can be
carefully deployed in attractive, albeit relatively early stage,
investment opportunities over the next three years.
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 ("AGM").
The AGM is scheduled for 11 January 2018 and is to be held at The
Great Chamber, The Charterhouse, Sutton's Hospital, Charterhouse
Square, London EC1M 6AN.
Peter Dicks
Chairman
24 November 2017
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 and ISIN GB00B1RTFN43.
The Company is an externally managed fund with a Board
comprising four 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 4 of
the Annual Report. Further information on each of the service
providers is outlined in the Corporate Governance Statement on page
35 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.
The effect of any borrowing is discussed further on page 28 of
the Annual Report under "AIFMD".
Performance during the year
As at 30 September 2017, the audited NAV of the Company was
163.1 pence per share, having risen by 2.6 pence (2016: 4.9 pence)
from 160.5 pence per share at the start of the financial year under
review. After adding back dividends of 9.25 pence per share paid in
the year, this is a total return to Shareholders of 11.85 pence
(2016: 11.15 pence) or 7.4% (2016: 7.2%) of the opening NAV for the
year. In comparison, the total return from the FTSE AIM All-Share
Total Return Index was 24.4% over the same period. The audited net
assets of the Company were GBP175.5 million (2016: GBP147.7
million) at the financial year end.
At the financial year end, there were 72 active VCT qualifying
companies and 18 non-qualifying companies held in the portfolio.
These investments are spread across 24 different sectors. 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 normally been committed to new
companies if they are 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 2017, a total of GBP19.5 million was
realised through the sale of investments while GBP28.9 million
(after costs) was raised from the two Offers for Subscription.
Capital amounting to GBP21.1 million was deployed in new
investments and approximately GBP8.7 million was paid out as
dividends to Shareholders. A further GBP7.0 million was spent on
share buybacks and in meeting the operating costs of the
Company.
Over the 12 months to 30 September 2017 there was a net gain on
investments of GBP11.5 million and the total profit on ordinary
activities was GBP10.9 million, equivalent to earnings of 11.2
pence per share. The profit on the revenue account was GBP1.7
million.
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 123%, including the payment of
41.50 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
- Annual and cumulative total return
- Running costs
Further details can be found on pages 6 and 7 of the Annual
Report.
Running Costs
The Ongoing Charges of the Company for the financial year under
review represented 2.2% (2016: 2.2%) of average net assets, which
is well below the agreed cap of 3.6% and remains competitive.
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. The costs exclude trail
commission paid.
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 GBP28.9 million (after costs) through the two
Offers for Subscription and issued 17,855,965 shares, details of
which are given in note 13 on page 56 of the Annual Report.
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. Total dividends of 9.25
pence per share were paid during the year which amounted to GBP8.7
million. Since the original launch of Unicorn AIM VCT in 2001,
Shareholders have, in aggregate, received approximately GBP51.9
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.
The Company paid an interim dividend for the first time during
the year. The amount of 3.0 pence per share was paid on 11 August
2017.
A final dividend of 3.5 pence will be proposed at the Annual
General Meeting to be held on 11 January 2018 making total
dividends of 6.5 pence for the year under review.
-- 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 reasonable discount to
underlying net assets, help modestly to enhance NAV per share.
-- Implementing share buybacks on a regular basis which may help
to control the discount to NAV.
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 2,350,170 shares with a nominal value of
GBP23,501 were purchased for cancellation during the course of the
year, at an average price of 140.81 pence per share, for a total
consideration of GBP3.3 million. At the financial year end, the
Company's shares were quoted at a price of 141.5 pence per share
representing a discount to NAV per share of 13.2%.
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, Market Abuse
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 17 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 Unsuitable investment Regular review of investment
strategic risk strategy or stock selection strategy by the Board.
could lead to poor returns Monitoring of the performance
to Shareholders. of the investment portfolio
on a regular basis.
All unquoted investments
require prior investment
authorisation from the
Board.
Regulatory and The Company is required Regulatory and legislative
tax risk to comply with the Companies developments are kept
Act 2006, ITA, The Alternative under review by the Board.
Investment Fund Managers The Company's VCT qualifying
Directive ("AIFMD") (as status is continually
applicable to small registered reviewed by the Investment
UK AIFMs), UKLA Rules Manager and the Administrator.
and UK Accounting Standards. PricewaterhouseCoopers
Breaching these rules LLP has been retained
may result in a public by the Board to undertake
censure, suspension from an independent VCT status
the Official List and/or monitoring role.
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.
Operational risk The Company has no employees Internal control reports
and is therefore reliant are provided by service
on third party service providers on an annual
providers. Failure of basis.
the systems at third The Board considers the
party service providers performance of the service
could lead to inaccurate providers annually and
reporting or monitoring. monitors activity on a
Inadequate controls could monthly basis.
lead to the misappropriation
of assets.
Fraud and dishonesty Fraud involving company Internal control reports
risks assets may occur, perpetrated are provided by service
by a third party, the providers on a regular
Investment Manager or basis.
other service provider. The Administrator is independent
The Company faces further of the Investment Manager.
risks from cyber attacks The Board has engaged
which could impact on a cyber-security firm
the Company's reputation. to review the Company's
systems and those of its
suppliers.
Financial Instrument The main risks arising The Board regularly reviews
risks from the Company's financial and agrees policies for
instruments are due to managing these risks and
fluctuations in their full details can be found
market prices, interest in Note 17 on pages 57
rates, credit risk and to 63 of the Annual Report.
liquidity risk.
Economic risk Events such as recession, While no single policy
inflation or deflation, can obviate such risks
movements in interest the Company invests in
rates and technological a diversified portfolio
change can affect trading of companies, whilst seeking
conditions and consequently to maintain adequate liquidity.
the value of the Company's
investments.
The withdrawal of the
UK from the European
Union creates significant
uncertainty in markets
and regulatory environments
which may affect the
value of the Company's
investments.
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 three 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 requirement 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 28
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
approximately GBP13.0 million invested in readily realisable listed
shares and a further GBP25.5 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 (as reduced by the Company's
investments in Unicorn funds) equates to 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
24 November 2017
Investment Manager's Review
Introduction
The audited net assets of the Company as at 30 September 2017
totalled GBP175.5 million, while audited net asset value per share
was 163.1 pence. New capital received from the Offers for
Subscription, combined with another year of positive investment
performance, has resulted in net assets increasing by GBP27.8
million during the financial year under review. The net proceeds
from new shares issued and allotted in the period through the
Offers for Subscription, totalled GBP28.9 million after costs,
while the capital gain from the portfolio amounted to 9.4 pence per
share. After adding back the GBP8.7 million in dividends paid in
the year, the total return amounted to 11.8 pence per share;
representing an increase of 7.4% on the opening net asset value of
160.5 pence.
Market Review
The total return from the FTSE All-Share Index was 11.9% in the
financial year under review, while the total return from the FTSE
AIM All-Share Index was 24.4% over the same twelve month
period.
Although the Company's performance is somewhat disappointing
relative to that of the FTSE AIM All-Share Index, it is important
to remember that the Alternative Investment Market has a pattern of
delivering significant outperformance in bull market phases, while
tending to fall in value, sometimes dramatically and
disproportionately, during periods when equity markets are
weak.
Our aim is to 'smooth out' these extremes of performance and
deliver outperformance over the longer-term by constructing a
portfolio of companies that can thrive during good times and,
perhaps more importantly, can successfully weather periods of
market and economic stress.
The decline in value recorded by the FTSE AIM All-Share Index in
2008 is a perfect illustration of the extremes of performance that
AIM stocks can produce. In the twelve month period ended 31
December 2008, the FTSE AIM All-Share Index fell by 61.8% in total
return terms, which compared poorly with the FTSE All-Share Index
total return which fell by 29.9% over the same period. In contrast,
the five different Unicorn AIM VCT share classes that were in
existence at that time, fell by an average of 32% over the same
period.
The AIM has performed strongly so far in 2017, as it continues
to benefit from the current fashion for momentum investing. This
momentum trend in equity markets is perhaps best evidenced by the
collective valuation of the so-called FANG stocks in the United
States. As at 30 September 2017, the combined market capitalisation
of Facebook, Amazon, Netflix and Google owner, Alphabet was over
$1.7 trillion. According to a recent survey by Alliance Bernstein,
a leading US based investment management and research firm, these
four stocks have contributed over a quarter of the total increase
in the value of the S&P 500 Index during the first eight months
of 2017.
The surge in the value of technology stocks is being fed by the
nature of Exchange Traded Funds ("ETF"), which automatically
increase weightings in stocks that have gone up in price, and
reduce those that have fallen, in order to maintain a mirror image
of the Index that the ETF is tracking. This robotic behaviour
potentially exposes a blind spot in attitudes to fundamental risk.
In other words, it is easy for the average investor to fall into
the trap of thinking that if a stock is going up in value, then it
must be a 'good' stock to own, almost regardless of its valuation
multiple.
To put this danger in context, the aforementioned FANG stocks
now trade on a combined forward price to earnings ratio of 43 times
current earnings. In simple terms, this means that, should earnings
remain unchanged, an investor who invested in these stocks at age
18, would be 61 years old before the total combined earnings per
share from these four companies matched the initial price paid per
share by the investor. By any objective measure, this kind of
valuation multiple implies a relatively low return on what should
still be considered quite a high risk investment. Of course, it is
possible that we may be entering a new era for equity market
investment, but many people mistakenly believed this to be the case
during the height of the TMT boom in the late 1990's.
Unsurprisingly, the team members at Unicorn Asset Management do not
subscribe to this view and we continue to adopt a cautious,
selective and risk averse approach to making new investments.
On a positive note, equities still appear to be one of the more
attractive asset classes available. This is especially true for
those investors seeking both long term capital gains and an
immediate, attractive and sustainable dividend income stream.
Meanwhile, the global economy finally seems to be emerging from
many years of low growth. If the global economy, driven primarily
by the United States, continues to recover, there is a good chance
that equity markets can maintain their upward progress. It is
therefore perhaps understandable that the risk premium normally
expected/demanded by professional investors for investing in
equities, has fallen noticeably in recent times.
Performance Review
The investment portfolio has again made steady progress during
the period under review, albeit at a slower pace than the market as
a whole. As previously noted, many equity investors currently seem
content to adopt a momentum strategy. As a result, despite the
considerable economic and political upheaval experienced over the
past twelve months, the main UK equity market continued its ascent,
with the FTSE 100 Index recording a record closing high of 7,547 in
May 2017, ending the financial year under review at 7,372.
As ever, there have been a few disappointing setbacks from
investee companies during the period under review, which have been
more than offset by strong performances from the majority of
holdings in the portfolio. The investment portfolio remains
diversified both by number of holdings and by sector exposure.
Qualifying Investments
The percentage of net assets invested in VCT qualifying
companies amounted to 71.3% as at 30 September 2017. A review of
the ten most meaningful contributors to performance (both positive
and negative) follows:
(bracketed figures represent the share price movement for the
year under review or since the date of investment on a mid-price
basis)
Abcam (+21.4%) is a global leader in the supply of research
tools to the life sciences sector. In its financial year ended 30
June 2017, Abcam delivered further strong growth with an increase
in total revenue of 26.5% to GBP217.1 million (FY 2016: GBP171.7
million), while reported earnings per share increased by 11.9% to
20.7 pence (FY 2016: 18.5 pence). The business remains highly cash
generative with a net cash inflow from operating activities of
GBP66.4 million (FY 2016: GBP47.3 million) and a closing net cash
position of GBP84.8 million (FY 2016: GBP68.9 million). As a
consequence of continued strong trading, the proposed full year
dividend was increased by 14% to 10.2 pence per share (FY 2016:8.9
pence).
Anpario (+61.0%) is a specialist manufacturer and distributor of
natural feed additives for animal health, nutrition and
biosecurity. Interim results for the six-month period ended 30 June
2017 were announced in September 2017. The results confirmed
revenue growth of 39% to GBP14.8 million (2016: GBP10.7 million),
while adjusted earnings per share rose by 21.3% to 9.1 pence (2016:
7.5 pence). Growth was primarily achieved through strong demand for
Anpario's products in Asia, the Americas and the Middle East.
Anpario is starting to enjoy the benefits of a strategy aimed at
strengthening direct commercial relationships with end users. The
balance sheet remains healthy with net cash at the period end of
GBP12.6 million (31 December 2016: GBP11.1 million), which,
together with positive cash generation, provides a solid platform
for further investment in the business and selective earnings
enhancing acquisitions. A maiden interim dividend of two pence per
share was declared, reflecting the board's confidence in the
company's outlook.
Keywords Studios (+229.8%) is a provider of technical services
to the global video games industry. Keywords continues to make good
progress in its stated objective of consolidating the fragmented
market for outsourced services to the video games industry. A
number of acquisitions were completed during the period, while
Keywords also maintained healthy levels of organic growth,
reporting an increase in organic revenues of 17% during the first
half of its financial year. Encouragingly, this growth was achieved
without sacrificing margins. In fact, the Group recorded a two
percentage point increase in gross margins as it benefited from
delivering higher value services such as art creation.
MaxCyte (+191.2%) is a business focused on accelerating the
discovery, development and commercialisation of next-generation,
cell-based medicines. In September 2017, MaxCyte released interim
results covering the six months ended 30 June 2017. These results
highlighted a 13.6% growth in group revenues to $6.2 million (2016:
$5.5 million), while gross margins remained stable at approximately
90%. Operating expenses increased to $9.5 million compared to $5.9
million for the same period in 2016, including a $1.6 million
increase in investments for 'CARMA', an immune-oncology cell
therapy platform that MaxCyte is developing. The reported net loss
for the six month period therefore grew to $4.3 million, compared
to a loss of $1.3 million in the equivalent prior six month period.
MaxCyte also successfully raised a further GBP20 million during the
period via a placing of new shares on AIM. The Company participated
in this capital raise, making an additional VCT qualifying
investment of GBP1.65 million. The new funds raised will be
deployed in supporting and accelerating the development of
MaxCyte's new CARMA technology platform, which is being aimed at
what is forecast to develop into a multi-billion dollar market for
cell therapy treatment over the next few years.
ULS Technology (+92.5%) is a provider of online technology
platforms for the UK conveyancing and financial intermediary
markets. The company released full year results in June 2017, for
the 12 month period to 31 March 2017, which recorded revenue growth
of 8% to GBP22.3 million and a 9% increase in gross profits. The
numbers also demonstrated good market share growth and management
described current trading as being "buoyant", indicating that
momentum has continued into the current financial year.
Crawshaw Group (-50.0%) is a retailer of fresh meat and food
to-go with stores across the Midlands and the North of England. In
September, Crawshaw released interim results for the six months
ended 30 July 2017, during which period group revenues grew by 2.3%
to GBP22.1 million (2016: GBP21.6 million) while gross margins fell
to 42.9% from 45.2% due primarily to the depreciation of sterling
resulting in increased costs of imported meat. Management has
focused on improving customer numbers to rebuild momentum. The
actions taken to date have seen like-for-like sales improve in the
second quarter of the year. A potentially transformative
partnership with 2 Sisters Food Group, one of the UK's biggest food
groups, was announced in May, which should enable the company to
secure fresh meat supplies, reduce costs and improve margins.
Directa Plus (-55.9%) is a producer and supplier of graphene
based products for use in consumer and industrial markets. The
business operates in the fast-developing, but still early stage,
field of graphene technology and, as such, Directa Plus remains
loss making. The company's interim results for the six month period
ended 30 June 2017 reported that product sales declined to EUR0.3
million (2016: EUR0.4 million) largely as a result of a reduction
in volume of graphene material sales into the bicycle tyre segment.
However, the loss after tax reduced from EUR3.8 million in H1 2016
to EUR2.1 million in H1 2017, primarily due to a decrease in
finance expenses. The company remains well capitalised with EUR8.2
million of closing cash on the balance sheet. Directa Plus is now
primarily focusing on high and sustainable growth markets such as
the supply of graphene based materials into the advanced textile
sector and specialised graphene materials for use in pollution
control products.
NCC Group (-47.0%) is a global information assurance specialist
providing software escrow and security consulting services. NCC
endured a challenging year both financially and operationally, with
financial performance being hampered by contract wins not being
converted as quickly as hoped. A change in revenue recognition
policy was also required, which led to the departure of the founder
and chief executive. The group's finance director, Brian Tenner has
taken over as interim chief executive and is undertaking the
restructuring required before the business is in a position to
return to sustainable growth.
Surface Transforms (-43.9%) develops and manufactures next
generation, carbon ceramic brake discs for the automotive and
aircraft industries. The company has recently completed a
significant investment in a new factory, which was necessary in
order to secure volume contracts from a number of leading European
car makers. Full year results were released in September, which
recorded a decline in revenues to GBP0.7 million (2016: GBP1.4
million), largely caused by capacity constraints during the factory
move. During the period, Surface Transforms raised a further GBP3.7
million in a placing and oversubscribed open offer to support
ongoing investment. The Company contributed GBP0.9 million to this
latest fund raise.
Tracsis (-16.3%) is a leading provider of software and services
for the traffic data and transportation industry. Tracsis' share
price reacted negatively to a trading update released in February
2017, which indicated that a particularly strong second half would
be required in order to meet full year financial guidance. As a
result, forecasts for the full year were modestly reduced. Tracsis
has since released a full year trading update, which noted that
trading for the full year was strong and ahead of the previous
year.The company has an impressive long-term financial track record
and is exposed to structural growth drivers such as rising global
passenger numbers in both rail and road and increased operator
accountability for both safety and performance.
Material Contributions
In absolute terms, the top five positive contributors, as
described above, generated a combined realised and unrealised
capital gain of GBP14.9 million. The next five largest contributors
were; Tristel (+65.6%), Animalcare Group (+30.9%), Cohort (+28.9%),
Mattioli Woods (+14.4%) and Gama Aviation (+82.9%). In aggregate,
these five investments generated a capital gain (realised and
unrealised) of GBP6.6 million.
The five largest detractors from performance, as described
above, generated a combined unrealised capital loss of GBP7.9
million. In absolute terms, the next five largest negative
contributions came from; Instem (-50.1%), Totally (-24.4%), Augean
(-51.0%), European Wealth Group (-59.6%) and Redcentric (-55.1%).
The aggregate unrealised capital loss in the period from these five
investments amounted to GBP3.8 million.
Finally, it is disappointing to report that Blue Inc., a
privately owned high street fashion retailer, went into
administration during the period and the Company's holding in the
VCT was written down to zero value as a result. In reality, the
impact on performance was minimal for the financial year under
review since the investment had already been heavily impaired in
last year's results.
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 two exceptions, the non-qualifying investments, which
consist mainly of large, liquid companies listed on the FTSE 350
Index performed reasonably well in the period under review. The
strongest contributors to performance included; IQE (+309.0%),
Unicorn UK Growth Fund (+29.1%), and the Unicorn UK Smaller
Companies' Fund (+23.0%). In contrast, the biggest detractor from
overall performance was WYG (-39.6%), which registered an
unrealised capital loss of GBP0.6 million in the period. WYG is an
international consultancy business, which experienced unexpected
project delays and margin pressures during the period.
Hayward Tyler (-40%), a specialist engineering business, has
also been experiencing challenging trading conditions. As a result,
Hayward Tyler became increasingly vulnerable to a bid approach and
eventually received a takeover offer and was acquired by
Avingtrans, an engineering business in which the Company already
holds a stake. The acquisition was funded by the issue of new
Avingtrans shares with a total value received of GBP726,193 at the
completion date. This compared to a book cost for the investment in
Hayward Tyler of GBP867,000.
Investment Activity
The financial year under review was relatively quiet in terms of
new investment activity. In aggregate, GBP6.9 million was invested
in VCT qualifying companies. Of this total, GBP3.8 million was
committed to two new VCT qualifying opportunities, while just over
GBP3 million was allocated to follow-on investments in three VCT
qualifying companies in which the Company already held a stake.
The two VCT qualifying investments in companies new to the
portfolio were as follows:
ECSC Group (-22.2%), a specialist in the provision of cyber
security services. Prior to listing on AIM in December 2016, the
company had established a 15 year track record of consistent growth
and profitability as a growing and consistently profitable private
business. The company raised GBP4.2 million in net new funds in an
Initial Public Offering ("IPO"), of which the Company invested
GBP2.6 million. The funds raised at IPO were required to help
achieve a rapid increase in the scale and scope of the business,
with investment focused on a significant increase in sales and
marketing capability. While this would result in a substantial
increase in the operating costs of the business, the expectation
was that these costs would be offset by a rapid increase in
revenues. Unfortunately, management over-estimated the rate at
which new sales leads would be generated, while also significantly
under-estimating the length of time it would take to convert the
sales pipeline into committed orders and revenue. As a consequence,
the company was forced to announce a profit warning, which in turn
sent the share price into sharp decline. The board of ECSC is now
attempting to stabilise the situation by implementing cost savings,
thereby materially reducing the company's monthly cash burn. As a
case study for management teams and NOMADs in how not to undertake
a flotation on AIM, this is a classic example. Their subsequent
problems have been mainly self-inflicted and were based on
avoidable mistakes including; over-optimistic initial growth
assumptions, an excessive and too rapid build-up in the cost base
and a set of overly challenging initial broker forecasts, which
left little margin for error. While the fall in the share price is
extremely disappointing, it is at least encouraging that Ian Mann,
the founder and CEO of ECSC remains the largest shareholder in the
business and is fully committed to rectifying the issues and
restoring shareholder value over time.
Escape Hunt (+5.9%) is a global provider of 'escape the room'
experience games. The first Escape Hunt branch was opened in 2013
in Bangkok, Thailand. Since then, the business has grown and, as at
December 2016, Escape Hunt operates a franchised global network of
branches across 19 countries. An escape room is a physical
adventure game in which players are locked in a themed room and
have to find clues and solve puzzles in order to escape against a
countdown clock. Escape Hunt's games typically require players to
solve within 60 minutes a crime story or mystery, which has been
tailored to the location of the branch. The popularity of such
themed experience games has been growing rapidly in recent years.
Escape Hunt reversed into an AIM-listed cash shell and raised
GBP10.8 million of net new capital in the process. The Company
invested just over GBP1.2 million in this fundraising round in
exchange for a 4.5% stake in the business. The investment was
qualifying for VCT purposes and the business has got off to an
acceptable start on AIM, with the share price enjoying modest gains
on the back of positive early news flow.
Follow-on VCT qualifying investments totalling just over GBP3
million were made in Maxcyte, Surface Transforms and Totally.
The pipeline of possible future VCT qualifying investments looks
promising, although it should be remembered that following the
introduction of new and more restrictive rules surrounding
eligibility for State Aid funding in November 2015, the risk
profile of new investments has inevitably increased. HM Treasury
and HMRC are quite rightly keen to ensure that new capital raised
under tax efficient schemes, such as Venture Capital Trusts, is
directed toward earlier stage businesses that are looking to
scale-up their operations, but where alternative forms of funding,
such as bank debt, are far harder to come by and typically too
expensive. Unicorn Asset Management is fully supportive of this
policy and has a long established track record of successfully
supporting early stage businesses.
Realisations
Disposals totalling GBP19.5 million were made in the financial
year to 30 September 2017. Two AIM-listed companies (Pinewood Group
and Hayward Tyler) were sold to trade buyers in the period
realising net proceeds of GBP2.8 million and a capital gain of
GBP0.9 million. A number of other partial disposals in qualifying
holdings together with full and partial disposals in non-qualifying
investments were also made. These transactions generated total
proceeds of GBP16.7 million and an aggregate capital profit of
GBP5.6 million.
Prospects
The financial year to 30 September 2017 proved to be another
period of steady progress for your Company. The portfolio currently
consists of 90 investments in individual companies, of which 72 are
VCT qualifying. These businesses operate across a wide range of
sectors; most are profitable and in sound financial health, while
many of them have rapidly expanding international operations.
Clearly, the UK will continue to face considerable economic and
political challenges, especially related to the ongoing BREXIT
negotiations. Despite this increasingly uncertain backdrop, we
believe that the Company is well placed to deliver further progress
in the current financial year. The existing portfolio represents a
solid platform from which to build and, with considerable cash
resources now available for further investment, the longer term
outlook is also promising.
Chris Hutchinson
Unicorn Asset Management Limited
24 November 2017
EXTRACT FROM DIRECTORS' REPORT
Share Capital
At the year-end there were 107,581,106 (2016: 92,075,311)
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 13 on page 56 of the Annual Report.
Subsequent to the year end, the Company has issued 11,827,331
shares and bought back 164,200 shares. At the date of this
announcement the Company therefore had 119,244,237 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 2017, the Company held
cash balances of GBP18.1 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
24 November 2017
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the years ended
30 September 2017 or 30 September 2016 but is derived from those
accounts. Statutory accounts for the year ended 30 September 2016
have been delivered to the Registrar of Companies and statutory
accounts for the year ended 30 September 2017 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 2017
Year ended Year ended
30 September 2017 30 September 2016
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net unrealised
gains on
investments - 9,823 9,823 - 9,365 9,365
Net gains
on realisation
of investments - 1,653 1,653 - 819 819
Income 2 3,115 - 3,115 2,360 - 2,360
Investment
management
fees 3 (750) (2,252) (3,002) (651) (1,953) (2,604)
Other expenses (655) - (655) (631) - (631)
-------- -------- -------- -------- -------- --------
Profit on
ordinary
activities
before taxation 1,710 9,224 10,934 1,078 8,231 9,309
-------- -------- -------- -------- -------- --------
Tax on profit
on ordinary
activities - - - - - -
Profit on
ordinary
activities
after taxation
for the
financial
year 1,710 9,224 10,934 1,078 8,231 9,309
-------- -------- -------- -------- -------- --------
Basic and
diluted
earnings
per share:
Ordinary
Shares 5 1.75p 9.44p 11.19p 1.22p 9.34p 10.56p
-------- -------- -------- -------- -------- --------
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 Income Statement, 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 2017
30 September
2017 30 September 2016
Notes GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments at fair
value 157,471 144,282
Current assets
Debtors 416 422
Cash at bank and
in hand 18,093 3,298
-------- ---------
18,509 3,720
Creditors: amounts
falling due within
one year (474) (259)
-------- ---------
Net current assets 18,035 3,461
Net assets 175,506 147,743
-------- ---------
Capital
Called up share capital 1,076 921
Capital redemption
reserve 77 53
Share premium account 87,090 58,394
Capital reserve 65,784 58,323
Special reserve 13,736 21,756
Profit and loss account 7,743 8,296
Equity Shareholders'
funds 175,506 147,743
-------- ---------
Net asset value per
share :
Ordinary shares 6 163.14p 160.46p
-------- ---------
The financial statements were approved and authorised for issue
by the Board of Directors on 24 November 2017 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 2017
Called Capital Share Unrealised Special Profit Total
up share redemption premium capital reserve* and loss
capital reserve account reserve account*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2016 921 53 58,394 58,323 21,756 8,296 147,743
Shares repurchased
for cancellation
and cancelled (24) 24 - - (3,309) - (3,309)
Shares issued
under Offers
for Subscription 179 - 29,386 - - - 29,565
Expenses of
shares issued
under Offers
for Subscription - - (690) - - - (690)
Transfer to
special reserve - - - - (4,711) 4,711 -
Gains on disposal
of investments
(net of transaction
costs) - - - - - 1,653 1,653
Realisation
of previously
unrealised
valuation
movements - - - (4,742) - 4,742 -
Permanent
diminution
realised - - - 2,380 - (2,380) -
Net increases
in unrealised
valuations
in the year - - - 9,823 - - 9,823
Dividends
paid - - - - - (8,737) (8,737)
Investment
Management
fee charged
to capital - - - - - (2,252) (2,252)
Revenue return
for the year - - - - - 1,710 1,710
---------- ------------ --------- ----------- ---------- ---------- ----------
At 30 September
2017 1,076 77 87,090 65,784 13,736 7,743 175,506
---------- ------------ --------- ----------- ---------- ---------- ----------
Called Capital Share Unrealised Special Profit Total
up share redemption premium capital reserve* and loss
capital reserve account reserve account*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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)
Revenue return
for the year - - - - - 1,078 1,078
---------- ------------ --------- ----------- ---------- ---------- ----------
At 30 September
2016 921 53 58,394 58,323 21,756 8,296 147,743
---------- ------------ --------- ----------- ---------- ---------- ----------
* 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 2017
30 September
2017 30 September 2016
Notes GBP'000 GBP'000 GBP'000 GBP'000
Operating activities
Investment income
received 3,091 2,226
Investment management
fees paid (2,987) (2,604)
Other cash payments (729) (686)
--------- --------- ---------- --------
Net cash outflow
from operating
activities (625) (1,064)
Investing activities
Rensburg unclaimed
dividends and
other income - 147
Rensburg liquidation
costs + (8) -
Purchase of investments (21,090) (13,370)
Sale of investments 19,496 13,450
Decrease in current
investments - 1
--------- --------- ---------- --------
Net cash (outflow)/inflow
from investing
activities (1,602) 228
Net cash outflow before
financing (2,227) (836)
Financing
Dividends paid 4 (8,737) (5,431)
Shares issued
under Offers
for Subscription
(net of transaction
costs) 29,068 9,818
Shares repurchased
for cancellation (3,309) (2,206)
Net cash inflow
from financing 17,022 2,181
--------- --------- ---------- --------
Net increase
in cash and cash
equivalents 14,795 1,345
--------- --------- ---------- --------
Cash and cash
equivalents at
30 September
2016 3,298 1,953
--------- --------- ---------- --------
Cash and cash
equivalents at
30 September
2017 18,093 3,298
--------- --------- ---------- --------
+ As stated in last year's Annual Report, Rensburg AIM VCT
merged with the Company on 11 January 2016. Rensburg has now been
placed into voluntary liquidation.
The notes below form part of these financial statements.
Notes to the Financial Statements
for the year ended 30 September 2017
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 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
2017 2016
GBP'000 GBP'000
Income from investments:
- from equities 2,727 2,007
- from loan stocks 242 226
- from money-market funds and Unicorn managed OEICs
(including reinvested dividends) 146 127
-------- --------
Total income 3,115 2,360
-------- --------
Total income comprises:
Dividends 2,873 2,134
Interest 242 226
-------- --------
3,115 2,360
-------- --------
Income from investments comprises:
Listed UK securities 817 315
Unlisted UK securities (AIM and unquoted companies) 2,298 2,045
-------- --------
3,115 2,360
-------- --------
3 Investment Manager's fees
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unicorn Asset
Management
Limited 750 2,252 3,002 651 1,953 2,604
-------- -------- -------- -------- -------- --------
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 2017, UAML also earned fees of GBP54,000 (2016:
GBP56,000), 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 Fund 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 2016/17 or the prior year.
Under an Amended Incentive Agreement with UAML dated 12 April
2010, the Investment Manager was 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. No incentive fee
was payable for the year ended 30 September 2016 and then on 17
July 2017 the Company announced that UAML had agreed to waive its
entitlement to future possible performance incentive fees. The
Incentive Agreement was therefore terminated.
4 Dividends
2017 2016
GBP'000 GBP'000
Amounts recognised as distributions to equity holders in the year:
Interim capital dividend of 2.5 pence (2016: nil) per share for the year ended 30 September
2017 paid on 11 August 2017 2,499 -
Interim income dividend of 0.5 pence (2016: nil) per share for the year ended 30 September
2017 paid on 11 August 2017 500 -
Final capital dividend of 5.25 pence (2016: 5.25 pence) per share for the year ended 30 September
2016 paid on 3 February 2017 4,820 4,562
Final income dividend of 1.0 pence (2016: 1.0 pence) per share for the year ended 30 September
2016 paid on 3 February 2017 918* 869
-------- --------
8,737 5,431
-------- --------
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 2016 differs from
that shown in last year's Annual Report as 265,734 were bought back
between 1 October 2016 and the record date of 13 January 2017.
Set out below are the total income dividends payable in respect
of the 2016/17 financial year, which is the basis on which the
requirements of Section 274 of the Income Tax Act 2007 are
considered.
2017 2016
GBP'000 GBP'000
Revenue available for distribution by way of dividends for the year 1,710 1,078
Interim income dividend paid of 0.5 pence (2016: nil) 500 -
-------- --------
Proposed final income dividend of 1.0 pence (2016: 1.0 pence) for the year ended 30 September
2017 1,192+ 919
-------- --------
+Based on 119,244,237 shares in issue at the date of this
announcement.
5 Basic and diluted earnings and return per share
2017 2016
GBP'000 GBP'000
Total earnings after taxation: 10,934 9,309
Basic and diluted earnings per share (Note a) 11.19p 10.56p
----------- -----------
Net revenue from ordinary activities after taxation 1,710 1,078
Revenue earnings per share (Note b) 1.75p 1.22p
----------- -----------
Total capital return 9,224 8,231
Capital earnings per share (Note c) 9.44p 9.34p
----------- -----------
Weighted average number of shares in issue in the year 97,674,986 88,133,530
----------- -----------
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
2017 2016
GBP'000 GBP'000
Net Assets 175,506 147,743
Number of shares in issue 107,581,106 92,075,311
------------ -----------
Net asset value per share 163.14p 160.46p
------------ -----------
7 Post balance sheet events
On 11 October 2017, the Company issued 3,351,644 Ordinary shares
of 1p each at a price range of between 166.4 pence and 172.6 pence.
Proceeds raised amounted to GBP5.5 million after costs.
On 13 October 2017, the Company purchased 164,200 Ordinary
shares of 1p each, representing approximately 0.15% of the issued
share capital, for cancellation at a total cost of GBP233,500
equivalent to 142.2 pence per share.
On 7 November 2017, the Company issued 4,703,731 Ordinary shares
of 1p each at a price range of between 167.9 pence and 174.1 pence.
Proceeds raised amounted to GBP7.7 million after costs.
On 21 November 2017, the Company issued 3,771,956 Ordinary
shares of 1p each at a price range of between 166.3 pence and 169.8
pence. Proceeds raised amounted to GBP6.2 million after costs.
8 Shareholder information
Dividend
The Directors have proposed a final dividend of 3.5 pence per
share. Subject to Shareholder approval the dividend will be paid on
2 February 2018 to Shareholders on the Register on 12 January
2018.
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, Link Asset Services on +44
(0)371 664 0324, or by writing to them at Link Asset Services, The
Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or register
on the Portal at https://www.signalshares.com or e-mailing them at
VCTS@linkgroup.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
2017 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 2017 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, 11 January 2018 at The Great Chamber, The
Charterhouse, Suttons Hospital, Charterhouse Square, London EC1M
6AN.
11 National Storage Mechanism
A copy of the 2017 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
END
FR OKQDKBBDDNDB
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November 24, 2017 07:08 ET (12:08 GMT)
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