20th May 2011 16:36
UNICORN AIM VCT plc ("the Company")
Half-Yearly Report for the six months ended 31 March 2011
Investment Objective
The objective of the Company is to provide Shareholders with an attractive return from a diversified portfolio of investments, predominantly in the shares of AIM quoted companies, by maximising the stream of dividend distributions to Shareholders from the income and 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 value must be in ordinary shares carrying no preferential rights 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 agreedan Investment Policy which requires the Investment Manager to identify andinvest in a diversified portfolio, predominantly of VCT qualifying companiesquoted 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 development allied with a progressive dividend policy.
Asset allocation and risk diversification policies, including maximumexposures, are to an extent governed by prevailing VCT legislation. Specificconditions for HMRC approval of VCTs include the requirement that no singleholding may represent more than 15% (by value) of the Company's investments,at the date of that investment.The Investment Manager is responsible for managing sector and stock specificrisk 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 anappropriate spread of investment risk is achieved, the Board receives andreviews comprehensive reports from the Investment Manager and theAdministrator on a regular basis. When the Investment Manager proposes to makean investment in an unquoted company the prior approval of the Board isrequired.Where capital is available for investment while awaiting suitable VCTqualifying opportunities, or in excess of the 70% VCT qualification threshold,it may be invested in collective investment funds or in non-qualifying sharesand securities in smaller listed UK companies.To date the Company has operated without recourse to borrowing. The Board mayhowever consider the possibility of introducing modest levels of gearing up toa maximum of 10% of net assets, should circumstances suggest that such actionis in the interests of shareholders.
Key Data
As at 31 March 2011
As at 31 March Net assets Net asset Cumulative NAV total Share2011 value per dividends return to price (p) (£ million) share (NAV) paid per shareholders (p) share (p) since launch per share (p)Ordinary Shares31 March 2011 64.6 109.5 5.0 114.5 97.530th September 62.3 104.2 1.0 105.2 85201031st March 2010 58.0 94.6 1.0 95.6 73
Most shareholders in the Company originally invested in one of the 5 formershare classes of either the Company and/or Unicorn AIM VCT II plc. As a resultof the merger of all 5 former share classes in March 2010, all shareholdersnow only hold Ordinary shares, These were formerly called S3 shares. To enablesuch shareholders in each former share class to monitor the performance oftheir original investment, the table below shows the NAV total return at 31March 2011 for a shareholder that invested £10,000 at £1 per share at the dateof launch of a particular fundraising, before initial income tax relief:Unicorn AIM VCT plc FundsShare class and year of No. of NAV at 31 Dividends Dividends NAV totalfundraising shares held March 2011 paid paid return post merger pre-merger post-merger (£) (£) (£) (£)
Ordinary Shares (raised in 2011, 8,620 9,438 n/a - 9,438*issued at average price of 116p)Ordinary Shares (formerly S3 10,000 10,950 100 400 11,450Shares raised in 2006/07)Original Ordinary Shares (raised 6,078 6,655 4,550 243 11,448in 2001)Original Ordinary Shares 2007/08 8,442 9,243 903 338 10,484top-up (13,890 shares issued for£10,000 investment at 72p pershare)Series 2 Shares (raised in 2004) 7,750 8,486 2,125 310 10,921Series 2 Shares 2007/08 top-up 8,424 9,224 489 337 10,050(10,870 shares issued for£10,000 investment at 92p pershare)\* This loss represents the impact of initial costs of the Offer of 5.5%
Former Unicorn AIM VCT II plc Funds
Share class and year of No. shares NAV at 31 Dividends Dividends NAV totalfundraising held post March 2011 paid paid return merger pre-merger post-merger (£) (£) (£) (£)
Ordinary Shares (raised in 2005) 8,283 9,070 1,300 331 10,701Ordinary Shares 2007/08 top-up 8,452 9,254 1,225 338 10,817(10,205 shares issued for£10,000 investment at 98p pershare)C Shares (raised in 2006) 7,267 7,957 245 291 8,493C Shares 2007/08 top-up (11,235 8,165 8,940 169 326 9,435shares issued for £10,000investment at 89p per share)
Initial income tax relief of up to 20% was available for shareholders that invested in tax years 2001/2002 or 2003/2004, 40% for shareholders that invested in 2004/2005 and 2005/2006 and 30% for shareholders that invested in tax years since 2006/2007. Additional capital gains tax deferral relief was also available for shareholders that invested in 2001/2002 and 2003/2004.
Dividend History Unicorn Ordinary Original VCT II (formerly S3) Ordinary Ordinary
Unicorn VCTCalendar year paid Shares Shares S2 Shares Shares II C Shares 2003 - 1.00 - - -2004 - 10.45 - - -2005 - 5.00 0.75 - -2006 - 10.00 1.00 0.50 -2007 - 12.55 10.00 0.50 1.002008 - - 5.00 5.00 1.002009 1.00 3.00 2.00 1.00 -2010 - 3.50 2.50 6.00 0.452011* 4.00 2.43* 3.10* 3.31* 2.91* 5.00 47.93 24.35 16.31 5.36
* the dividends in 2011 on the Ordinary (formerly S3) shares for each year for each of the former share classes have been calculated in proportion to the merger conversion ratios.
Chairman's Statement
I am pleased to present the Half-Yearly Report of the Company for the six months ended 31 March 2011.
Review of performance
The UK equity market continued to make progress during the first six months ofthe Company's financial year, managing to deliver a positive return despite aseries of significant and disruptive events.The devastating earthquakes in New Zealand and Japan, the emergence ofwidespread civil unrest in the Middle East and North Africa, the perceivedslowdown in Chinese economic growth, the continuing requirement to help fundthe financial bail-outs of EU member states and increasing concernssurrounding the strength and sustainability of UK economic recovery could eachhave caused a justifiable degree of investor concern. In the face of thisuncertainty, UK equity markets have shown considerable resilience. The FTSEAllShare Index delivered a total return of 8.4% in the period, whilst the FTSEAIM AllShare Index continued its strong recovery from the all-time lowsreached in March 2009, registering a gain of 15.4% (Source: FinancialExpress).Part of the explanation for the resilience of equity markets lies in the factthat most other asset classes remain unattractive to investors. In addition,with the FTSE AllShare Index currently trading on around 10.5x forwardearnings (Source:- MSCI, Bloomberg), the market is being valued at a levelconsiderably below its 20 year historic average of 14.8x (Source:- Standard &Poors). The global nature of UK quoted companies is also a significant factor,with the constituents of the FTSE AllShare Index on average generating almost50% of their earnings from overseas.The Company's investment portfolio also performed relatively well with netasset value rising to 109.5 pence per share, representing an increase of 5.1%for the period. After adding back the 4 pence per share in dividends paid inthe period, the underlying increase in net asset value amounts to 9%. Thisperformance has been achieved despite the portfolio having no direct exposureto the mining and oil & gas sectors which continue to dominate the FTSE AIMAllShare Index and which again significantly outperformed the wider market.The price of the Company's shares rose from 85.5p at the start of the periodto 98p as at 31 March 2011, an increase of 14.6%. In addition, it should benoted that the discount between the share price and underlying net asset valuehad narrowed from 19.7% as at 30 September 2010 to 10.5% by the half-year end.The net assets of the Company as at 31 March 2011 were £64.6 million. Duringthe six month period under review a total of £2.2m was spent on share buybacksat an average discount to net assets of 10.4%, thereby enhancing net assetvalue per share for continuing shareholders.Over the six months there was a net gain on investments of £5.7 million andthe total capital gain on ordinary activities after taxation was £5.3 million,the equivalent of 8.9 pence per share. The surplus on the revenue account was£54,000.A total of £2.8 million in new ordinary shares had been subscribed under thecurrent Offer for Subscription and subsequently allotted in the tax year to 5April 2011. In the new tax year, a further £137,000 in subscriptions has beenreceived and allotted. I would like to take this opportunity to welcome allnew shareholders and to thank our existing shareholders for their continuedsupport. The Offer remains open to further subscription in the current taxyear until 30 June 2011.
Dividends
The Board remains committed to a policy of maximising the stream of dividenddistributions to Shareholders from the income and capital gains generated bythe portfolio. The policy in recent years has been to declare a dividendannually linked to the release of the Company's full year results. The Boardis therefore not proposing an interim dividend, but will consider the paymentof dividends when reviewing the Annual Report and Accounts after the end ofthe current financial year.
Qualifying Investments
A number of our existing qualifying investments delivered exceptional returns in the period under review including:-
Animalcare (+72%) is a manufacturer and supplier of pharmaceutical and otherpremium products to the veterinary and animal livestock sectors. In the sixmonths to 31 December 2010, the Company grew turnover by 14% which translatedinto operating profit of £1.5m, representing growth of 33%. Animalcare has astrong product pipeline of new licensed veterinary medicines with two newproducts launched in the first half of its current financial year and at leasttwo launches planned in the second half.Avingtrans (+60%) designs, manufactures and supplies criticalcomponents and associated services to the medical, energy, industrial andglobal aerospace sectors. Avingtrans struggled during the economic downturn,but is now witnessing improving demand across the majority of their markets.Productivity improvements have also been completed within the Company's threemain divisions. The interim results to 30 November 2010 reflect this recoverywith turnover up 25% and operating profit increasing almost fivefold from alow base, highlighting the inherent operational gearing of the business. TheBoard has also declared that it is to reinstate a progressive dividend policy.Idox (+54%) is a leading independent supplier of software and services to theUK public sector and other markets. In the financial year to 31 October 2010,the Company was able to increase margins and grow normalised pre-tax profit by21% to £8m despite recording a small decline in year on year revenues. TheCompany also completed three earnings enhancing acquisitions during the yearcosting £10.6m, whilst generating sufficient cash to ensure that net debtremained below £1m at the year end. The dividend was increased by 125%,reflecting the Board's confidence in the long term strength of the business.Prologic (+100%) is a specialist provider of software and services to the fashion & lifestyle sector. The business has remained profitable, cash generative and debt free throughout the recession and although revenue growth remains elusive the Company is now reporting increased interest from both existing and new clients.Surgical Innovations (+81%) the designer and manufacturer ofinnovative medical devices continued to trade well in the second half of itsfinancial year. The Company's final results for the financial year ended 31December 2010 were released in April 2011 and highlight the considerableprogress being made by this fast growing business. Revenues for the yearincreased by 55% to £7 million, whilst pre-tax profits rose by 487% to £1.5million and operating margins increased to 22% from 6% in the prior year.Tangent Communications (+84%) combines technical and creativeskills with marketing expertise to deliver personalised and bespoke digitalcommunications for leading brands. Despite suffering from very difficulttrading conditions during the economic downturn, the Company has emerged fromrecession in good shape. In a recently released trading update for thefinancial year ended 28 February 2011, management confirmed that Tangent'srevenues and margins had increased significantly over the prior year, and thatpre-tax profits are ahead of expectations.
One other holding in the portfolio is also worthy of comment:-
Abcam (+9%), a world leading manufacturer and distributor oftherapeutic antibodies is, by a considerable margin, the largest singleholding in the portfolio. During the period under review, Abcam released astrong set of interim results which recorded turnover growth of 23.7% to £39.4million, profit before tax up 35.4% to £15.2 million and a net cash positionof £47 million as at 31 December 2010. The interim dividend was also increasedby 33.8%. Whilst trading in the second half of the year was reported to havestarted well, there is still pressure on Western governments to reduce budgetdeficits, which may result in reduced research funding in certain of Abcam'smarkets. To date, over £3 million in capital gains have been realised througha series of partial disposals and the Investment Manager will continue tomonitor the exposure to Abcam and make further realisations if deemedappropriate.
Five new VCT qualifying companies were added to the portfolio in the period as detailed below. It is pleasing to report that, in aggregate, they have also made a meaningful initial contribution to performance.
Accumuli (+31%) is a `buy and build' company focused on acquiring businesses operating in the managed security services sector of the IT market. Following a period of restructuring and management change, the Company successfully completed a fundraising in November 2010 and has since announced that it is
to acquire three businesses, all operating in the fast growing IT security sector.
Brady (+29%) provides a range of transaction and risk managementsoftware, which help producers, consumers, financial institutions and tradingcompanies manage their commodity transactions in a single integrated solution.In the financial year ended 31 December 2010, sales grew by 36% to £11m whilstoperating profits increased 33% to £1.5m. Net cash at the year-end was £11.6m.Although economic conditions have been difficult and it remains challenging toforecast accurately the timing of new deals, the Group's trading in the newfinancial year is reported to be in line with the Board's expectations.Hangar 8 (-8%) is one of Europe's largest operators of privatelyowned passenger jet aircraft. The Company manages twenty-one jets on behalf oftheir owners and charters them out to third party customers. The size ofHangar 8's fleet today enables it to offer cost effective management fees andattractive levels of charter income for owners, whilst providing chartercustomers with a competitively priced service. The Company listed on AIM inNovember 2010. Interim results for the period ended 31 October 2010 showedstrong growth in turnover, profitability and net cash.
Instem Life Science Systems (+25%), a leading provider of IT applications to the healthcare market, listed on AIM in October 2010 following a successful
placing of shares which raised £9m. Instem's software products help to accelerate drug development by automating processes and increasing productivity, thereby ultimately leading to safer and more effective drugs. The Company has over 80 customers including seven of the world's top ten pharmaceutical and biotech companies. Maiden financial results for the year ended 31 December 2010 were in line with expectations and the outlook statement highlighted management's confidence in delivering further growth in the current financial year.Omega Diagnostics (+21%) an AIM-listed medical diagnostics company raised£7.8m from institutional investors, including Unicorn AIM VCT, in November2010. The proceeds of the placing have been used to fund the acquisition of aprofitable European allergy testing business. The combined businesses nowestablish Omega as one of the UK's leading companies in the fast growing areasof food intolerance and allergy testing. The Company is also a specialist intesting for infectious diseases such as Syphilis, TB, Dengue Fever andMalaria.Although the operating environment remains tough, especially for smallercompanies, the majority of holdings in the portfolio performed well.Reassuringly, of the companies which struggled in share price terms, mostremain in fundamentally good shape with their fall in value relating more totechnical issues such as poor liquidity and a lack of buying interest ratherthan because they are suffering from deteriorating trading conditions orsignificant operational issues.The single largest negative contribution to performance in the period camefrom Green Compliance (-50%), which provides water, fire and pest controlservices to UK companies. The business has grown rapidly through acquisitionsince raising £10m from institutional investors in December 2009 at asignificant discount to the share price prevailing at the time. Interimresults for the six months to 30 September 2010 were released in December 2010and were in line with expectations. Recent share price weakness appears tohave been caused by a large overhang of stock and should recover once thisissue is resolved.Other investee companies which struggled in share price terms included AccessIntelligence (-21%), Brulines (-23%), Crawshaw Group (-29%), Mears Group(-18%) and SnackTime (-17%). All of these businesses remain fundamentallysound with strong management teams, good long term prospects, high levels ofrecurring revenues and sound balance sheets. The Investment Manager isconfident that their market valuations can recover in due course.
Since the period end Maxima Holdings, an IT managed services firm, has warned that revenues and profits will decline in its fiscal second half following the delay or cancellation of a number of orders. Maxima's board of directors has also announced that it will undertake a strategic review to include a possible sale of all or part of the business.
As previously reported, Shieldtech, a company specialising in the manufacture and supply of body armour systems appointed administrators in October 2010. The remaining value of this investment had already been written down to zero in last year's Report & Accounts.The disposal of Amber Taverns, an unquoted operator of public houses in the North West of England, completed in the period. Amber Taverns was acquired for cash by a private equity firm following a competitive sales process. The total proceeds from this disposal were received in full in the period under review and amounted to more than £5.3m, generating a realised capital profit of £3.3m, the majority of which had been recognised in previous accounts.In aggregate, the Fund remains well above the VCT qualifying thresholdrequired by HM Revenue & Customs, with approximately 85% of the Company'stotal assets being invested in VCT qualifying companies, when measured by taxvalues (shareholders should note that the tax values used to calculate thepercentage held in VCT qualifying companies differs from the values shown inthe Investment Portfolio Summary).
All other HM Revenue & Customs tests have been complied with and your Board has been advised by PWC that the Company has maintained its venture capital trust status.
A list of the qualifying investments held at the period end (which does not include AIM stocks that each represent less than 0.3% of net assets, and Unlisted investments that each represent less than 0.2% of net assets) is included below.
Non-Qualifying Investments
The non-qualifying portfolio continued to perform well with a large number ofholdings producing returns considerably ahead of the overall market. Includedamong the more notable share price gains recorded in the period are:- Hargreaves Services (+36%) is a major force in the supply, movementand management of coal and in the provision of support services to the energyand waste industries. Group activities are managed through four divisions:Production, Energy & Commodities, Transport and Industrial Services. The Grouprecently announced solid interim results, with revenue in the periodincreasing by £42.3m from £211.6m to £253.9m. Underlying operating profitincreased by £2.4m to £20.9m. The Board expressed confidence in meetingexpectations for the full year.Macfarlane Group (+35%) is a manufacturer and distributor of packagingproducts. Macfarlane employs 700 people at 22 sites across the UK and Ireland.In the financial year ended 31 December 2010 the Group attained growth in bothturnover and profits whilst also reducing its pension deficit and total debt.This result was achieved despite testing trading conditions and challengingcost pressures. Despite continuing economic uncertainty, the Board haveexpressed cautious optimism about trading prospects in 2011.Microgen (+31%) is a specialist software business focused on thefinancial services sector. In the year to 31 December 2010, Microgen reportedfurther strong operating performance. Revenue growth was 16%, operatingmargins increased to 24%, all research and development costs were expensed asincurred and cash generated from operations was £11.3 million. The Group'syear end net cash position grew to £25.4m after returning £8.2m toshareholders during the year through dividends and the tender offer whichcompleted in September.Optos (+87%) is a medical devices business supplying machines that capturedigital images of the retina. Retinal examinations are a routine part of eyeexams and an important tool in screening and verifying the health of the eye.In a recent trading update covering the first three months of its currentfinancial year, Optos confirmed continued growth with revenues up 10.3%,driven by an increase in the customer base and an improvement in theutilisation of the installed machine base.Renold (+35%) is a manufacturer of industrial chains and related powertransmission products. Its products are sold worldwide and are installed across awide variety of industrial applications. A trading update issued in February 2011highlighted that market conditions had improved across all areas of operation andthat the Company continues to gain market share. Scapa Group (+32%) is a leading manufacturer of technical adhesive tapes. Thebusiness was severely impacted by a steep decline in demand during the recession,in particular from the automotive market, resulting in significant losses and agrowing level of net debt. Following a change in management eighteen months ago,the business has stabilised and there has been continuing improvement infinancial performance as a result. The positive momentum achieved in the firsthalf of the year has been maintained and the Board remains confident of reportingon further profit progress for the financial year ended 31 March 2011.
Three new stocks were added to the non-qualifying portfolio in the period, each of which has delivered positive initial returns:-
Specialist Energy Group (+54%), a worldwide market leader in the design, engineering and manufacturing of boiler circulating pumps for the global energy market.
Stadium Group (+7%), a manufacturer of electronics and power products.
VP Group (+46%), a specialist equipment rental group.
There were four investments in the non-qualifying portfolio which did not fare as well as expected:-
ATH Resources (-25%), an established, profitable and cash generative producer of surface coal in the UK.
Caretech (-58%), a provider of high quality accommodation and support to the severely disabled.
Charles Taylor Consulting (-22%), a leading provider of management and consultancy services to the global insurance market.
London Capital Group (-43%), the provider of spread betting products on financial markets to retail customers and professional traders.
The investment case for each of these companies remains intact and the holdings are being retained in the expectation that their share prices will recover in due course.
Four holdings were sold having met the Investment Manager's strategic investment objectives: Elementis, Renew Holdings, Robert Walters and Xaar. The total realised capital gain on original cost amounted to just under £900,000.
The performance of the Unicorn Investment Funds OEIC, held in the non-qualifying portfolio, has been particularly strong. Total returns in the period from the five sub-funds ranged between 9.5% and 19.3% and, in aggregate, generated a positive, unrealised contribution of £1.5m.
It is noteworthy to report that these consistently strong performing fundshave now been recognised by the wider investment community, with Unicorn AssetManagement recently receiving two prestigious awards from Lipper. The awards,for Unicorn UK Income Fund and for Unicorn Outstanding British Companies Fund,which are both holdings in the non-qualifying portfolio, were presented toUnicorn's investment management team in March 2011. The criteria for winningwas based on these Funds having achieved the best, most consistent,risk-adjusted performance in the three year period ended 31 December 2010.These awards reinforce the Board's view that the Investment Manager's clearand consistently successful approach to small company stock selection cancontinue to deliver superior returns for shareholders in future and justifiesour long-term commitment to investing in these funds.
Outlook
The Alternative Investment Market has experienced a strong recovery over thepast two years, albeit from all-time lows reached in March 2009. The Index hasmore than doubled in value during this time. The dominant Oil & Gas and Miningsectors have been responsible for a disproportionate amount of these recentgains. History would indicate that booms in such sectors are cyclical innature and there is some evidence emerging that the appetite for speculativeinvestment in commodities boom may be approaching a peak.In the meantime, businesses operating in more mainstream sectors have alsostarted to recover from the recession. In general terms, demand for productsand services across a range of sectors has picked up and this is starting tobe reflected in the re-rating of many smaller capitalised companies as growthin earnings continues.Economic recovery in the UK has been weak so far, but the Investment Manager'sfocus on well managed, profitable and cash generative businesses with strongleadership positions in niche, growing markets has served the Company well.These businesses often have significant international exposure and aretherefore not so dependent on either domestic consumer or public sectorspending. The positive effects of reduced competition, continued weakness ofsterling and significant cost-cutting during the downturn are translating intoimproved margins and profits for many of our investee companies. TheInvestment Manager is cautiously optimistic that this more favourable tradingenvironment can be maintained.
The relatively modest price/earnings ratio of the portfolios as a whole also indicates that the Company retains the potential to deliver further gains during the second half of the financial year.
Finally, the government's proposals, announced in the Chancellor's budgetspeech, are designed to relax the investment criteria surrounding VCTqualifying companies. These changes, if passed into law, will be very helpfuland are to be welcomed. In time they may also act as a significant catalystfor further interest in the VCT market as a whole. The case for investing insuccessful and established AIM-based VCTs looks increasingly compelling andthe long term outlook is bright.
Conclusion
The Board is pleased with the progress of the Company. Unicorn AIM VCT is nowthe largest AIM-based VCT in the market with net assets of almost £65m at theperiod end. Performance relative to other AIM-based VCTs over both the shortand long term has been creditable, material cost savings resulting from themerger twelve months ago are being realised and reserves available fordistribution are growing steadily. The portfolio consists of a diverse rangeof companies that have emerged from the downturn largely intact; many of thesebusinesses are now delivering considerable growth. Given the establishednature of the portfolio and the government's recently announced proposals torelax VCT qualifying criteria, the Investment Manager is now in a position toexercise considerable flexibility when considering new investmentopportunities. For these reasons, we remain cautiously optimistic that netasset value per share can continue to grow in the second half of the Company'sfinancial year.Peter DicksChairman20 May 2011
Principal risks and uncertainties
In accordance with DTR 4.2.7, the Board confirms that the principal risks anduncertainties facing the Company have not materially changed since thepublication of the Annual Report and Accounts for the year ended 30 September2010.
The principal risks faced by the Company are:
- investment and strategic risk
- regulatory and tax risk- operational risk- financial instruments risk- economic risk
A more detailed explanation of these can be found in the Directors' Report onpage 30 of the 2010 Annual Report and Accounts - copies can be found via theCompany's website, www.unicornaimvct.com.
Related Party Transactions
There were no related party transactions during the period under review.
Responsibility Statement
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements, which have beenprepared in accordance with the statement "Half-Yearly Reports" issued by theAccounting Standards Board, give a true and fair view of the assets,liabilities, financial position and profit of the Company as at 31 March 2011,as required by DTR 4.2.4;
(b) the interim management report included within the Chairman's Statement, and Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7 being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;
(c) a description of the principal risks and uncertainties facing the Company for the remaining six months is set out above, in accordance with DTR 4.2.7; and
(d) the financial statements include a description of the relatedparty transactions in the first six months of the current financial year thathave materially affected the financial position or performance of the Companyduring the period, and any material changes to the related party transactionssince the last Annual Report, in accordance with DTR 4.2.8.
For and on behalf of the Board:
Peter DicksChairman20 May 2011Investment Portfolio SummaryAs at 31 March 2011 Book cost Valuation % of net assets by value £'000 £'000Qualifying investmentsAIM/PLUS quoted investments:Abcam plc 2,483 9,419 14.6%Animalcare Group plc 1,702 2,536 3.9%Mattioli Woods plc 1,680 2,466 3.8%Kiotech International plc 1,766 2,008 3.1%Maxima Holdings plc 2,251 1,636 2.5%SnackTime plc 2,102 1,448 2.2%Green Compliance plc 2,100 1,413 2.2%Surgical Innovations plc 331 1,333 2.1%
Instem Life Science Systems plc
985 1,227 1.9%Avingtrans plc 996 1,061 1.6%Pressure Technologies plc 980 1,049 1.6%Idox plc 530 941 1.5%Tristel plc 878 899 1.4%Tracsis plc 838 862 1.3%Cohort plc 1,414 852 1.3%Access Intelligence plc 1,467 803 1.2%IS Pharma plc 704 788 1.2%Zetar plc 772 772 1.2%Omega Diagnostics Group plc 500 604 0.9%Hasgrove plc 975 588 0.9%Prologic plc 806 538 0.8%Accumuli plc 400 523 0.8%Vindon Healthcare plc 475 523 0.8%EG solutions plc 406 447 0.7%Brulines Group plc 584 437 0.7%Datong Electronics plc 784 430 0.7%Specialist Energy Group plc 270 416 0.6%Sanderson Group plc 770 416 0.6%Crawshaw Group plc 538 392 0.6%Dods (Group) plc (formerly Huveaux Plc) 1,000 360 0.6%HML Holdings plc 347 306 0.5%Printing.com plc 231 269 0.4%Keycom plc 340 255 0.4%Pilat Media Global plc 275 235 0.4%Hangar 8 plc 250 230 0.4%Lees Foods plc 260 221 0.4%Tangent Communications plc 163 212 0.3%Praesepe plc 521 196 0.3%Driver Group plc 552 175 0.3%Twelve investments, each valued at less than 0.3% of net assets 1,590 910 1.4% ------ ------ ------ 36,016 40,196 62.1% Fully listed investments:Mears Group plc 2,216 1,866 2.9%Chime Communications plc 347 477 0.7%Microgen plc 181 375 0.6% ------ ------ ------ 2,744 2,718 4.2%Unlisted investments:
Access Intelligence plc - loan stock
750 750 1.2%SnackTime plc - loan stock 550 550 0.9%Invu plc - loan stock 200 100 0.2% Seven investments, each valued at less than 0.2% of net assets 4,467 29 0.0% ------ ------ ------ 5,967 1,429 2.3% ------ ------ ------Total qualifying investments 44,727 44,343 68.6% Non-qualifying investmentsUnicorn UK Smaller Companies Fund (OEIC) 3,430 5,097 7.9%AIM quoted investments 4,434 4,891 7.6%Listed UK equities 2,937 3,333 5.2%Unicorn Mastertrust Fund (OEIC) 1,228 1,889 2.9%Unicorn Free Spirit Fund (OEIC) 828 1,260 1.9%Unicorn UK Income Fund (OEIC) 769 1,053 1.6%Unicorn Outstanding British Companies Fund (OEIC)
508 712 1.1%Money market funds 1 448 448 0.7%Unlisted investments 5 - 0.0% ------ ------ ------Total non-qualifying investments 14,587 18,683 28.9% ------ ------ ------Total investments 59,314 63,026 97.5% Other assets 1,882 2.9%Current liabilities (290) (0.4%) ------ ------ ------Net assets 64,618 100.0% ====== ====== ======
1 Disclosed within 'current investments' under current assets in the Balance Sheet
Unaudited Income StatementFor the six months ended 31 March 2011 Six months
ended 31 March Six months ended 31 March
2011 (unaudited) 2010 (unaudited) Notes Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Net unrealised gains on investments 7 - 5,116 5,116 - 2,664 2,664Net realised gains on investments 7 -
584 584 - 473 473Income 465 - 465 326 - 326Investment management fees 2 (137) (410) (547) (75) (226) (301)Other expenses (274) - (274) (360) - (360)Merger costs - - - - - - ------ ------ ------ ------ ------ ------Profit/(loss) on ordinary activities before taxation 54 5,290 5,344 (109) 2,911 2,802Tax on profit/(loss) on ordinary activities 3 -
- - - - -
------ ------ ------ ------ ------ ------(Loss)/profit on ordinary activities after taxation 54
5,290 5,344 (109) 2,911 2,802
====== ====== ====== ====== ====== ======Basic and diluted earnings per share:Ordinary shares 1a, 4 0.09p 8.92p 9.01p (0.26)p 6.89p 6.63p Year
ended 30 September 2010 (audited)
Notes Revenue Capital Total £'000 £'000 £'000
Net unrealised gains on investments 7 - 7,184 7,184Net realised gains on investments 7 - 1,557 1,557Income 930 - 930Investment management fees 2 (195)
(585) (780)Other expenses (539) - (539)Merger costs (98) - (98) ------ ------ ------
Profit/(loss) on ordinary activities before taxation 98 8,156 8,254Tax on profit/(loss) on ordinary activities 3 - - - ------ ------ ------(Loss)/profit on ordinary activities after taxation 98 8,156 8,254 ====== ====== ======Basic and diluted earnings per share:Ordinary shares 1a, 4 0.20p 16.57p 16.77pUnaudited Balance SheetAs at 31 March 2011 As at 31 March 2011
As at 31 March 2010 As at 30 September 2010
(unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 Non current assetsInvestments at fair value 1c, 7 62,578 53,733 61,432 Current assetsDebtors and prepayments 718 278 452Current investments 8 448 3,006 375Cash at bank 1,164 1,447 349 ------ ------ ------ 2,330 4,731 1,176
Creditors: amounts falling due within one year (290)
(416) (329) ------ ------ ------Net current assets 2,040 4,315 847 ------ ------ ------Net assets 64,618 58,048 62,279 ====== ====== ======Share capital and reservesShare capital 9 590 614 598Capital redemption reserve 9 263 224 240Share premium account 9 26,748 25,143 25,143Revaluation reserve 9 7,184 618 5,955
Special distributable reserve 9 21,605
26,988 24,263Profit and Loss account 9 8,228 4,461 6,080 ------ ------ ------Equity shareholders' funds 64,618 58,048 62,279 ====== ====== ======Net asset value per share of 1p eachOrdinary shares 6 109.50p 94.60p 104.15p
The financial information for the six months ended 31 March 2011 and the six months ended 31 March 2010 has not been audited.
Unaudited Reconciliation of Movements in Shareholders' Funds For the six months ended 31 March 2011
Six months ended Six months ended Year ended 31 March 2011 (unaudited) 31 March 2010 (unaudited) 30 September 2010 (audited) Notes £'000 £'000 £'000Opening shareholders' funds 62,279 32,138 32,138Net share capital bought back in the period (2,233) (45) (1,267)Net share capital subscribed in the period 1,620 - -Shares issued upon merger - 24,669 24,670Transaction costs in relation to theacquisition of assets and liabilities fromUnicorn AIM VCT II plc - (98) (98)Profit for the period 5,344 2,802 8,254Dividends paid in period 5 (2,392) (1,418) (1,418) ------ ------ ------Closing Shareholders' funds 64,618 58,048 62,279 ====== ====== ======
The financial information for the six months ended 31 March 2011 and the six months ended 31 March 2010 has not been audited.
Unaudited Statement of Cash FlowsFor the six months ended 31 March 2011 Six months ended Six months ended Year ended 31 March 2011 31 March 2010 30 September 2010 (unaudited) (unaudited) (audited) (as restated) £'000 £'000 £'000Operating activitiesInvestment income received 722 307 708Other income received - - 50
Investment management fees paid (546) (272)
(743)
Other cash payments (545) (316)
(655)
Payments of merger costs of thecompany - (193)
(120)
Net cash outflow from operatingactivities (369) (474) (760) Investing activitiesPurchase of investments (4,904) (2,504) (8,128)Sale of investments 9,599 2,429 6,002Net cash inflow/(outflow) frominvesting activities 4,695 (75)
(2,126)
Dividends
Equity dividends paid to UnicornAIM VCT plc shareholders (2,392) (1,418)
(1,418)
Equity dividends paid in respectof dividends declared to UnicornAIM VCT II plc shareholders butnot paid before assets andliabilities were transferred toUnicorn AIM VCT plc - (1,353)
(1,353)
Cash inflow/(outflow) beforefinancing and liquid resourcemanagement 1,934 (3,320)
(5,657)
Management of liquid resources(Increase)/decrease in moniesheld pending investment (73) 906
3,537
Financing
Cash received on acquisition ofassets and liabilities fromUnicorn AIM VCT II plc - 3,736
3,736
Stamp duty on shares issued toacquire net assets of UnicornAIM VCT II plc - (98)
(98)
Payments to meet merger costs ofUnicorn AIM VCT II plc (170)Share capital raised 1,080 - -Share capital re-purchased (2,126) (143) (1,365) (1,046) 3,495 2,103 Increase/(decrease) in cash 815 1,081 (17) Reconciliation of net cash flowto movement in net funds Increase/(decrease) in cash forthe period 815 1,081 (17)Net funds at start of period 349 366 366 Net funds at end of period 1,164 1,447 349 Reconciliation of operatingprofit/(loss) to net cashoutflow from operatingactivities Profit on ordinary activitiesbefore taxation 5,344 2,802 8,254Net gains on realisations ofinvestments (584) (473) (1,557)Net unrealised gains oninvestments (5,116) (2,664) (7,184)Transaction costs (141) (11) (49)Decrease in debtors 309 165 7Decrease in creditors (181) (293) (231) Net cash outflow from operatingactivities (369) (474)
(760)
Notes to the unaudited financial statements
1. Principal accounting policies
The following accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report.
a) Basis of accounting
The unaudited results cover the six months to 31 March 2011 andhave been prepared under UK Generally Accepted Accounting Practice (UK GAAP),consistent with the accounting policies set out in the statutory accounts forthe year ended 30 September 2010 and the Statement of Recommended Practice,'Financial Statements of Investment Trust Companies and Venture CapitalTrusts' ('the SORP') issued by the Association of Investment Trust Companiesin January 2009.The results for the six months ended 31 March 2010 and the yearended 30 September 2010 reflected the activities of what were previously theOrdinary Share Fund, the S2 Share Fund and the S3 Share Fund of the Company,which were consolidated on 9 March 2010, for the whole period. In addition,these results included the transfer of the assets and liabilities of UnicornAIM VCT II PLC to the Company, with effect from 9 March 2010. Results for thecurrent period are reported for the one share class of the enlarged VCT now inissue, namely Ordinary shares. These were formerly the S3 shares of theCompany, redesignated Ordinary shares on 9 March 2010.
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.
The half-yearly report has not been audited nor has it been reviewed by the auditors pursuant to the Auditing Practices Board (APB) guidance on Review of Interim Financial Information.
b) Presentation of the Income Statement
In order to better reflect the activities of a VCT and inaccordance with the SORP, supplementary information which analyses the IncomeStatement between items of a revenue and capital nature has been presentedalongside the Income Statement. The revenue column of profit attributable toequity shareholders is the measure the Directors believe appropriate inassessing the Company's compliance with certain requirements set out inSection 274 Income Tax Act 2007.
c) Investments
All investments held by the Company are classified as "fair value through profit and loss", in accordance with International Private Equity Venture Capital Valuation (IPEVCV) guidelines as updated in September 2009. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
For investments actively traded in organised financial markets,fair value is determined by reference to Stock Exchange market quoted bidprices at the close of business on the balance sheet date. Purchases and salesof quoted investments are recognised on the trade date where a contract ofsale exists whose terms require delivery within a time frame determined by therelevant market. Purchases and sales of unlisted investments are recognisedwhen the contract for acquisition or sale becomes unconditional.
Unquoted investments are valued by the Directors at fair value by the Directors in accordance with the following rules, which are consistent with the IPEVCV guidelines:
All unquoted investments are held at the price of a recentinvestment for an appropriate period where there is considered to have been nochange in fair value. Where such a basis is no longer considered appropriate,the following factors will be considered:
(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used.
(ii) In the absence of i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-
a) an earnings multiple basis. The shares may be valued by applyinga suitable price-earnings ratio to that company's historic, current orforecast post-tax earnings before interest and amortisation (the ratio usedbeing based on a comparable sector but the resulting value being adjusted toreflect points of difference identified by the Investment Manager compared tothe sector including, inter alia, a lack of marketability).
or:-
b) where a company's underperformance against plan indicates adiminution in the value of the investment, provision against cost is made, asappropriate. Where the value of an investment has fallen permanently belowcost, the loss is treated as a permanent impairment and as a realised loss,even though the investment is still held. The Board assesses the portfolio forsuch investments and, after agreement with the Investment Manager, will agreethe values that represent the extent to which an investment loss has becomerealised. This is based upon an assessment of objective evidence of thatinvestment's future prospects, to determine whether there is potential for theinvestment to recover in value.
(iii) Premiums on loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered receoverable.
(iv) Where an earnings multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied.
d) Cash Flow Statement
The comparatives for the year ended 31 March 2010 have been restated to be consistent with the figures shown for the other two periods disclosed in this half-yearly report.
2. Investment Manager's Fees
The Directors have charged 75% of the investment management fee to the capital reserve, being their estimate of the split of long-term returns from capital to shareholders.
3. Taxation
There is no tax charge for the period, as the Company has incurred taxable losses in the period.
Basic and diluted earnings and4. return per share Six months ended 31 Six months ended 31 Year ended 30 March 2011 March 2010 September 2010 (unaudited) (unaudited) (audited) £'000 £'000 £'000
Total earnings after taxation: 5,344 2,802 8,254 Basic and diluted earnings per share 9.01p 6.63p 16.77p Net revenue/(loss) from ordinary activities after taxation 54 (109) 98 Revenue return per share 0.09p (0.26)p 0.20p Net unrealised capital gains/(losses) 5,116 2,664 7,184 Net realised capital gains 584 473 1,557 Capital expenses (net of taxation) (410) (226) (585) Total capital return 5,290 2,911 8,156 Capital return per share 8.92p 6.89p 16.57p Weighted average number of shares in issue in the period 59,317,309 42,279,070 49,209,889 5. Dividends Six months ended 31 Six months ended 31 Year ended 30 September March 2011 March 2010 2010 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Interim paid - 1,058 1,058 Final paid on 14 January 2011 - year ended 30 September 2010 2,392 - - S2 Share Fund Interim paid on 29th January 2010 - 360 360 2,392 1,418 1,418 6. Net asset value At 31 March 2011 At 31 March
2010 At 30 September 2010
(unaudited) (unaudited) (audited) £'000 £'000 £'000 Net assets 64,618 58,048 62,279 Number of shares in issue 59,014,330 61,373,010 59,795,232 Net asset value per share 109.50p 94.60p 104.15p 7. Investments Traded on Unlisted Unlisted Unicorn AIM/PLUS ordinary preference Unlisted Loan OEIC Fully Listed Market shares shares stock funds Total £'000 £'000 £'000 £'000 £'000 £'000 £'000s Book cost at 30 September 2010 6,626 37,589 5,838 1,050 1,950 7,735 60,788 Unrealised gains at 30 September 2010 623 1,636 1,142 549 157 1,848 5,955 Permanent impairment in value of investments - (1,240) (4,071) - - - (5,311) Valuation at 30 September 2010 7,249 37,985 2,909 1,599 2,107 9,583 61,432 Purchases at cost 354 4,548 - - - 2 4,904 Sale proceeds ((2,288) (826) (3,001) (1,603) (707) (1,174) (9,599) Realised gains 398 60 122 4 - 141 725 Increase in unrealised appreciation 336 3,321 - - - 1,459 5,116 Closing valuation at 31 March 2011 6,049 45,088 30 - 1,400 10,011 62,578 Book cost at 31 March 2011 5,680 40,451 5,712 - 1,500 6,763 60,106 Unrealised gains/(losses) at 31 March 2011 369 5,877 (2,210) - (100) 3,248 7,184 Permanent impairment in value of investments - (1,240) (3,472) - - - (4,712) Valuation at 31 March 2011 6,049 45,088 30 - 1,400 10,011 62,578
Realised gains above of £725,000 differs from net realised gains per the Income Statement of £584,000 due
to transaction costs of £141,000. 8. Current Investments
These comprise investments in two Dublin based OEIC money market funds, managed by Royal Bank of
Scotland and Blackrock Investment Management UK Ltd and one UK based money market fund managed by Prime
Rate Capital Management. £448,000 (31 March 2010: £3,005,000; 30 September 2010: £375,000) of this sum
is subject to same day access, while £nil (31 March 2010: £1,000; 30 September 2010: £nil) is subject to
two day access. These sums are regarded as monies held pending investment. 9. Reserves Called up Capital Share Special share redemption account Revaluation
distributable Profit and
capital reserve premium reserve reserve loss account Total £000 £'000 £'000 £'000 £'000 £'000 £'000At 1 October 2010 598 240 25,143 5,955 24,263 6,080 62,279Shares issued 15 - 1,697 - - - 1,712Shares bought back (23) 23 - - 2,233) - (2,233)Expenses of shareissue - - (92) - - - (92)Transfer to specialdistributable reserve - - - - (425) 425 -Gains on disposal ofinvestments (net oftransaction costs) - - - - - 584 584Realisation ofpreviously unrealisedappreciation - - - (3,887) - 3,887 -Net increase inunrealised valuationsfor the period - - - 5,116 - - 5,116Loss for the period - - - - - (356) (356)Dividends paid - - - - - (2,392) (2,392)
At 31 March 2011 590 263 26,748 7,184
21,605 8,228 64,618
10. Related party transactions
David Royds resigned as a director of the Company on 9 March 2010.He is a director and shareholder of Matrix Group Limited, which ownsMatrix-Securities Limited and has significant interests in Prime Rate CapitalManagement LLP ("PRCM") and Matrix Corporate Capital ("MCC"). David Royds isalso a director of Matrix-Securities Limited, which acted as Promoter to theCompany for a fee of £nil (31 March 2010: £nil, 30 September 2010: £nil) andprovides administration services to the Company for a fee of £86,000 (31 March2010: £97,000; 30 September 2010: £182,000). £nil (31 March 2010: £52,000; 30September 2010: £42,000) was due to Matrix-Securities Limited at the end ofthe period. The Company has £42,000 invested in a liquidity fund managed byPRCM, and has earned income of £1,000 from this fund in the period to 31 March2011 (31 March 2010: £5,000; 30 September 2010: £7,000). MCC are the Company'sbrokers and fees of £7,000 have been charged for the period (31 March 2010:£8,000; 30 September 2010: £15,000). Seven (31 March 2010: Two; 30 September2010: nine) share buybacks were undertaken by MCC on the Company's instructiontotalling £2,233,000 (31 March 2010: £45,000; 30 September 2010: £1,270,000).£107,000 (31 March 2010: £nil; 30 September 2010: £nil) was owed to MCC
at theperiod-end.11. Post balance sheet events On 5th April 2011, the Company allotted and issued 1,071,328 newOrdinary Shares of 1p each at a price of 115.9p per share under the Offer forSubscription launched on 14 December 2010, raising further net funds of £1.17million.On 5th May, a further 124,368 shares were allotted at 116.3p pershare, raising further net funds of £0.14 million.
12. The financial information for the six months ended 31 March 2011 and the six months ended 31 March 2010 has not been audited.
The financial information contained in this half-yearly reportdoes not constitute statutory accounts as defined in Section 434 of theCompanies Act 2006. The financial statements for the year ended 30 September2010 have been filed with the Registrar of Companies. The auditors havereported on these financial statements and that report was unqualified and didnot contain a statement under either section 498(2) or 498(3) of the CompaniesAct 2006.
Copies of this statement are being sent to all shareholders. Further copies are available free of charge from the Company's registered office, One Vine Street, London W1J 0AH, or from www.unicornam.com or www.matrixgroup.co.uk/asset_management/vct_services/unicorn_vcts
Shareholder Information
The Company's Ordinary Shares (Code: UAV) are listed on the London Stock Exchange. Shareholders can visit the London Stock Exchange website, www.londonstockexchange.com, for the latest news and share price of the Company. The share price is also quoted in the Financial Times.
Shareholder enquiries:
For general Shareholder enquiries, please contact Robert Brittain of Matrix-Securities Limited (the Company Secretary) on 020 3206 7000 or by e-mail on unicorn@matrixgroup.co.uk.
For enquiries concerning the performance of the Company, please contact the Investment Manager, Unicorn Asset Management Limited, on 020 7253 0889 or by e-mail on info@unicornam.com.
Electronic copies of this report and other published information can be found via the Company's website, www.unicornaimvct.com.
To notify the Company of a change of address or to request a dividend mandateform (should you wish to have future dividends paid directly into your bankaccount) please contact the Company's Registrars, Capita Registrars on 0871664 0300, (calls cost 10p per minute plus network extras - if calling fromoverseas please dial +44 208 639 3399) or by writing to them at CapitaRegistrars, Northern House, Woodsome Park, Fennay Bridge, Huddersfield, WestYorkshire HD8 0LA. Should you prefer you may visit their website,www.capitaregistrars.com.
Information rights for beneficial owners of shares
Please note that beneficial owners of shares who have been nominated by theregistered holder of those shares to receive information rights under section146 of the Companies Act 2006 are required to direct all communications to theregistered holder of their shares, rather than to the Company's registrar,Capita Registrars, or to the Company directly.
Corporate Information
Directors Peter Dicks (Chairman) Malcolm Diamond James H Grossman Jeremy Hamer Jocelin Harris All of whom are non-executive and of: One Vine Street London W1J 0AH Secretary & Administrator Matrix-Securities Limited One Vine Street London W1J 0AH Company Registration Number : 04266437 Investment Manager Auditor RegistrarUnicorn Asset Management PKF (UK) LLP Capita RegistrarsLimitedFirst Floor Office Farringdon Place The RegistryPreacher's Court 20 Farringdon Road 34 Beckenham RoadThe Charterhouse London BeckenhamCharterhouse Square EC1M 3AP KentLondon BR3 4TUEC1M 6AU VCT Tax Adviser Custodian SolicitorsPricewaterhouseCoopers LLP The Bank of New York Martineau1 Embankment Place One Canada Square No 1 Colmore SquareLondon London BirminghamWC2N 6RH E14 5AL B4 6AA Stockbroker BankersMatrix Corporate Capital LLP National Westminster Bank plcOne Vine Street City of London OfficeLondon PO Box 12264W1J 0AH 1 Princes Street London EC2R 8PB
vendorRelated Shares:
Unicorn Asset Management