REG - Unicorn AIM VCT PLC - Final Results
08/12/2023 07:00
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RNS Number : 1046W Unicorn AIM VCT PLC 08 December 2023
Unicorn AIM VCT plc (the "Company" or the "VCT")
LEI: 21380057QDV7D34E9870
Annual Results Announcement for the year ended 30 September 2023
The full Annual Report and Accounts for the year ended 30 September 2023 can
be found on the Company's website www.unicornaimvct.co.uk
FINANCIAL HIGHLIGHTS
(for the year ended 30 September 2023)
· Net asset value ("NAV") total return for the year ended 30 September
2023, after adding back the dividends of 6.5 pence per share paid in the year,
fell by 4.3%. By comparison the FTSE AIM All-Share Total Return Index fell by
8.3%.
· Offer for Subscription raised £14.6 million (after costs).
· Final dividend of 3.5 pence per share proposed for the financial year
ended 30 September 2023.
· New offer for Subscription announced to raise up to £20.0 million.
Fund Performance
Net asset value per share (NAV) (p) Cumulative dividends + paid per share (p) Net asset value plus cumulative dividends paid per share (p)
Shareholders' Funds*
(£ million) Share price (p)
Ordinary Shares
30 September 2023 211.9 122.6 105.5 228.1 103.5
31 March 2023 218.4 125.5 102.5 228.0 103.5
30 September 2022 221.1 134.8 99.0 233.8 126.5
31 March 2022 315.3 195.7 64.0 259.7 167.0
* Shareholders funds/net assets as shown on the Statement of Financial
Position below.
+ The Board has recommended a final dividend of 3.5 pence per share for the
year ended 30 September 2023 bringing total dividends for the year to 6.5
pence per share. If approved by Shareholders, this payment will bring total
dividends paid in the last ten years from 30 September 2013 to 109.0 pence per
share.
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 a comprehensive analysis of the
development of the business during the financial year and the position of the
Company's main investments at the end of the year.
Chair's Statement
I am pleased to present the Company's Audited Annual Report for the year ended
30 September 2023.
Introduction
The financial year ended 30 September 2023 has been another challenging period
for the Alternative Investment Market ("AIM"). In developed economies interest
rates were increased repeatedly throughout the period under review, as central
banks attempted to control mounting inflationary pressures. These actions are
finally having an impact, with the rate of inflation now softening and
currently well below the peak reached in the final quarter of 2022. The
challenge facing investors in equity markets lies in trying to understand how
long it will take for the interest rate cycle to unwind and, should rates
remain at elevated levels, what impact that might have on prospects for global
economic growth. Longer dated bond yields currently indicate that markets
expect rates to remain higher for longer, with investors remaining
understandably cautious about the near-term economic outlook.
The current uncertain environment is challenging for smaller quoted companies;
investment decisions are more likely to be delayed and valuations of higher
growth companies have suffered considerable downward pressure. This dynamic is
particularly relevant for the AIM where a key component of current equity
valuations is driven by the discounted value of future cash flows.
Economic & Market Review
Against a backdrop of heightened inflation and rising interest rates, economic
activity in the UK has remained surprisingly resilient. The recession that
many predicted is yet to materialise and it appears that prospects for modest
economic growth are improving. It is encouraging that consumer spending has so
far held up, although the significant overall increase in mortgage service
costs has yet to be fully incorporated into discretionary spending patterns.
The period under review was a tough one for the junior end of the UK equity
market. The FTSE AIM All-Share Total Return Index fell by 8.3% in the twelve
months to 30 September 2023, whilst the FTSE 100 Total Return Index delivered
a positive total return of 14.7%. This wide divergence in performance reflects
an aversion to risk that continues to prevail among both institutional and
retail investors, with interest rate sensitive sectors (banks) and
beneficiaries of the higher inflationary environment (commodities) performing
strongly.
Following a particularly difficult prior period, the further declines on AIM
have been disappointing and we have seen the FTSE AIM All-Share Total Return
Index end the period over 40% below the 20 year high reached in September
2021.
Net Assets
As at 30 September 2023, the audited net assets of the Company were £211.9
million, representing a decline of £9.2 million over the course of the
financial year. There were a number of components that contributed to this
fall, notably; an £8.0 million loss on the investment portfolio, £10.9
million of dividends paid and £3.8 million of share buybacks. The decline in
assets was partially offset by the fully subscribed Offer for Subscription,
which raised net proceeds of £14.6 million. After adding back all dividends
paid, the total return in the period was -4.3%.
Investment Performance Review
The Company's total return of -4.3% meaningfully outperformed the FTSE AIM
All-Share Total Return Index, which delivered a total return of -8.3% over the
same period.
The investment portfolio remains well diversified, with holdings ranging from
early-stage companies incurring losses and consuming cash, to well-established
businesses that are profitable, cash generative and dividend paying.
At the financial year end, the portfolio comprised of 81 active VCT qualifying
companies. Most investee companies within the portfolio remain well
capitalised, with over three quarters currently reporting healthily positive
levels of net cash on their balance sheets.
The adverse macroeconomic and geopolitical environment has inevitably taken a
heavy toll on smaller quoted companies in general. It is therefore encouraging
to again be able to report on another year of relative outperformance,
especially given a difficult start to the financial year under review. The
largely specialised nature of the products and services offered by the
investee companies in the portfolio has undoubtedly helped to insulate your
Company from the wider losses suffered by the AIM during the period.
One other notable trend during the financial year has been an increase in
M&A activity, with six completed and/or potential acquisitions having been
announced in the period. Depressed valuations and a weak currency have
combined to make UK quoted companies increasingly attractive to overseas
buyers.
Portfolio Activity
Following the significant decline in the valuations of AIM quoted companies in
the previous financial year, deal flow remained muted in the early months of
the period under review. Encouragingly, fundraising activity picked up in the
second half of the year with a growing number of interesting and potentially
high growth companies choosing to list on AIM. As the Initial Public Offering
(IPO) market continues to improve, it is encouraging to report that the
Investment Manager has a growing number of new and attractive-looking
opportunities in the pipeline.
Four new VCT qualifying investments were made during the period, at a total
cost of £6.5 million. In addition, £1.1 million of VCT qualifying capital
was allocated across three of the existing investee companies, to support
their future growth.
A number of full and partial disposals were also made during the financial
year. Total proceeds from disposals of qualifying investments amounted to
£2.6 million, realising an overall capital loss of £1.2 million.
The Investment Manager also invested in two money market funds during the
period. This enabled Shareholders to benefit from the higher interest rate
environment, while also maintaining the strong liquidity position needed to
fund new qualifying investment opportunities. The initial combined investment
was £19.0 million, which had been reduced to £12.1 million by the end of the
period, as capital has been deployed into qualifying investments.
A more detailed analysis of investment activity and performance can be found
in the Investment Manager's Review below.
Dividends
An interim dividend of 3.0 pence per share, for the half year ended 31 March
2023, was paid to Shareholders on 11 August 2023.
Despite the market difficulties and the resulting decline in the Company's net
assets, the Board is also pleased to recommend a final dividend of 3.5 pence
per share for the financial year ended 30 September 2023. This dividend, if
approved by Shareholders at the Company's forthcoming AGM, will be payable on
14 February 2024 to Shareholders on the register as at 5 January 2024.
Total dividends in respect of the financial year ended 30 September 2023 are
therefore expected to be 6.5 pence per share.
Share Buybacks & Share 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.
During the period from 1 October 2022 to 30 September 2023, the Company bought
back 3,398,754 of its own Ordinary Shares for cancellation, at an average
price of 110.8 pence per share excluding costs.
Future repurchases of shares will continue to be made in accordance with
guidelines established by the Board 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 the Listing Rules and
any applicable law at the relevant time. Shares bought back in the market are
normally cancelled.
An Offer for Subscription was soft launched on 24 January 2023. The Offer was
again strongly supported, having formally opened and closed, fully subscribed,
on 6 February 2023. The total raised, net of all costs, was £14.6 million and
resulted in the issue of 11.1 million new shares. On behalf of the Board, I
would like to welcome all new Shareholders and to thank existing Shareholders
for their continued support. As at 30 September 2023, there were 172,876,156
Ordinary Shares in issue.
New Offer
On 28 November 2023, the Company announced the intention to launch an Offer
for Subscription to raise up to £20 million through the issue of new ordinary
shares. The prospectus, which will contain the full details and terms and
conditions of the Offer, is expected to be available in January 2024.
Board Refresh
Jeremy Hamer has served on the Board for thirteen years and has indicated his
intention to stand down in 2025. He has agreed to stand for re-election at the
AGM in February 2024 but intends to stand down at the 2025 AGM.
The Board will engage an outside recruitment agency to identify a suitable
candidate to replace Jeremy and will announce any appointment in the normal
way. Board diversity will be considered as part of the recruitment process.
VCT Status
There were no changes to VCT legislation during the period under review.
The Government last introduced new legislation pertaining to Venture Capital
Trusts in November 2017. The most important of these new rules came into
effect in the 2019/2020 tax year and are designed to ensure that capital is
directed at young, developing businesses, which might otherwise find it
difficult to secure funding to finance their planned growth.
One of the key tests, from accounting periods commencing after 5 April 2019,
is the requirement for at least 80% (previously 70%) by VCT tax value of a
Venture Capital Trust's total investments to be invested in VCT qualifying
companies. I am pleased to report that, excluding new capital raised in Offers
for Subscription within the last three years, Unicorn AIM VCT's qualifying
percentage was 91.2% of total assets as of 30 September 2023. All other HM
Revenue & Customs tests have also been complied with during the period,
and the Board has been advised by its VCT status advisor, PwC, that the
Company continues to maintain its Venture Capital Trust status. It will, of
course, remain a key priority of the Board to ensure that the Company retains
this VCT status.
Annual General Meeting
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, which is to be held on 7 February 2024. Full details
of the AGM including location, timing, and the business to be conducted, are
given in the Notice of the Meeting on pages 90 and 91 of the Annual Report.
Shareholders' views are important, and the Board therefore encourages all
Shareholders to vote on the resolutions within the Notice of Annual General
Meeting on pages 90 and 91 of the Annual Report using the proxy form, or
electronically at www.unicornaimvct.com. The Board has carefully considered
the business to be approved at the AGM and recommends that Shareholders vote
in favour of all the resolutions being proposed.
Outlook
The year under review saw a continuation of trends outlined in prior reports,
with smaller quoted companies again out of favour as investors prioritise
investment opportunities that are perceived to carry lower levels of risk.
Your Company was not immune to this trend but nonetheless continues to
demonstrate resilience by again delivering a total return meaningfully ahead
of that delivered by the FTSE AIM All-Share Total Return Index.
The Initial Public Offering (IPO) market has been showing early signs of
recovery. In recent months, the Investment Manager has developed a promising
pipeline of potential new VCT qualifying investments. The manager remains
highly selective in the approach to new investments, but this expanding
pipeline is an encouraging sign.
The existing portfolio also continues to perform creditably, both at a
financial and operational level, with an attractive combination of
established, profitable, well capitalised, cash-generative companies held,
alongside an interesting and potentially exciting selection of earlier stage
high growth businesses. Many of these investments are aligned with highly
attractive structural growth themes and continue to successfully execute their
long-term strategies. The balance sheet strength of many of the Company's
investment holdings provides reassurance that they will be able to weather
this extended period of uncertainty and should thrive when the economic
backdrop becomes more constructive.
Your Board continues to share the Investment Manager's confidence that, when
market sentiment and economic conditions improve, the portfolio should deliver
significant Shareholder value and go on to provide continued long term capital
growth. Encouragingly, there now appears to be an emerging political
realisation that action needs to be taken to improve the relative appeal of UK
equities, with a particular focus on smaller companies. Any supportive
legislative developments would clearly be well received. On the other hand,
the persistent threat of inflation, high interest rates and recession could
delay an improvement in the performance of smaller quoted companies and the
Board therefore remains cautious about prospects in the near term.
Tim Woodcock
Chair
7 December 2023
Investment Manager's Review
Introduction
Global equity markets experienced diverging performance during the
twelve-month period ended 30 September 2023. In the US, the S&P 500 Index
and NASDAQ Composite Index delivered strong positive total returns of +21.6%
and +26.1% respectively. While both of these indices remain below the all-time
highs that they reached in late 2021, the strong returns recorded during the
period under review are striking, particularly when considered against the
backdrop of sharply rising US interest rates.
However, much of this performance can be attributed to the so called
"Magnificent Seven" stocks (Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia
and Tesla). These mega-cap companies account for large weightings in US equity
indices and all of them, except Tesla, posted strong, double-digit returns. In
particular, Nvidia was a notable beneficiary of the recent excitement
surrounding Artificial Intelligence (AI) and its share price gained over 250%
during the year ended 30 September 2023.
In the UK, equity market performance was led by the FTSE 100 Total Return
Index, which recorded a total return of +14.7% over the twelve months ended 30
September 2023. The positive performance of the FTSE 100 Index was largely due
to its large weighting in the Banking and Oil & Gas sectors, which were
the two largest contributors to the Index's total return, and which were
direct beneficiaries of the higher inflationary and interest rate environment
during the period. Investors also sought the perceived safe haven of large,
internationally diversified businesses, at the expense of smaller, higher
growth companies whose present value is principally based on the successful
delivery of less predictable future cash flows.
Unfortunately, a direct consequence of investor preference for large cap
companies, especially those which generate a large proportion of overseas
earnings, has meant that the hundreds of smaller companies listed on AIM have
remained firmly out of favour and, in many cases, have experienced prolonged
and significant share price declines.
Over the twelve-month period ended 30 September 2023, the FTSE AIM All-Share
Total Return Index registered a total return of -8.3%, as a brief period of
recovery for the AIM Index during the final calendar quarter of 2022 was more
than outweighed by the three consecutive quarters of negative returns that
followed.
Higher UK interest rates continue to weigh particularly heavily on early-stage
growth companies, in which the majority of the Company's assets must be
invested. The Bank of England's decision to raise interest rates on seven
successive occasions from 2.25% in September 2022 to 5.25% by August 2023, in
an attempt to tackle persistently high inflation, was the sharpest monetary
'tightening' cycle experienced for several decades. Against this economic
backdrop, it is unsurprising that the Company's portfolio of early-stage
companies has continued to experience challenging market conditions.
Net Asset Performance
As at 30 September 2023, the audited net assets of the Company amounted to
£211.9 million, which equates to a decline of £9.2 million during the
twelve-month period under review.
The audited Net Asset Value per Share was 122.6 pence as at 30 September 2023,
which represents a capital decline (excluding dividends paid) of -9.1% on the
closing NAV per share of 134.8 pence as at 30 September 2022. After adding
back dividends paid during the financial year, the Net Asset Value ("NAV")
Total Return of the Company was -4.3%.
The total reduction in net assets was partly due to the negative return
generated by the Company's investment portfolio but was also due to the £10.9
million in dividends that were paid to Shareholders in the period. A further
£3.8 million was returned to Shareholders by way of share buybacks during the
financial year.
While it is disappointing to report a loss during any financial year, the
Investment Manager takes some heart from the relative outperformance of the
Company's NAV total return compared to that of the FTSE AIM All-Share Total
Return Index, which registered a significantly greater loss, in total return
terms, of -8.3% over the same twelve-month period.
The reduction in the Company's net assets during the financial year was offset
by the proceeds received from a fully subscribed Offer for Subscription which
opened, and closed, on 6 February 2023, having been soft launched on 24
January 2023. It is highly encouraging that both new and existing Shareholders
chose to participate in the Offer for Subscription which raised net proceeds
after expenses of £14.6 million.
The Investment Manager always adopts a cautious approach to deploying new
capital. Whilst the total amount of new funds raised by companies on AIM is
generally much reduced in 2023 in comparison to previous years, it is pleasing
to report that several VCT qualifying investments in both new and follow-on
investment opportunities have been made since the proceeds were received from
the Offer for Subscription. In the main, these investments have performed well
over a short-term holding period and are well-positioned to deliver meaningful
positive contributions to future long-term growth in net assets.
Performance Review
The financial year under review has been another challenging period for the
Company.
A significant number of investee companies suffered further declines in their
share price, which is particularly disappointing since it follows on from the
steep falls in value that were experienced in the prior financial year. In
particular, the Company's investments in early-stage, scale-up businesses,
including those in Life Sciences, Technology and Pharmaceutical sectors, which
typically require multiple funding rounds, were notably affected by the
difficult market conditions. In addition, the inflationary environment and
volatile geo-political situation have also created more difficult trading
conditions for some of the larger, more mature companies in the portfolio.
Unsurprisingly, the overall effect of this set of circumstances has been to
negatively impact the net assets of the Company in the period under review.
As a reminder, the Investment Manager is required by VCT legislation to ensure
that all new qualifying investments are directed toward early-stage, scale-up
businesses. Clearly, investment in less mature businesses carries with it a
higher degree of risk. The Investment Manager therefore fully expects to see a
wide divergence of returns between successful investments in early-stage
businesses and those which fail. Importantly however, many of the Company's
longer-standing investments are in established, sustainably profitable, and
cash-generative businesses. Such businesses typically operate with strong
balance sheets where there is often no further requirement for equity or debt
funding and are therefore less sensitive to higher interest rates.
The investment portfolio remains diversified both by number of holdings and by
sector exposure. At the financial year end, the Company held investments in 81
active VCT qualifying companies and 10 non-qualifying investments. These
investments are spread across 26 different sectors.
Despite the difficult market conditions, several investee companies delivered
positive returns during the period under review. A review of the ten most
meaningful contributors to performance from VCT qualifying investments (both
positive and negative) follows:-
Largest Contributors
Abcam* (9.4% of net assets, +£5.9 million) is a global life science company
that supplies researchers with the tools needed to study proteins. Researchers
in laboratories worldwide have come to rely on Abcam's products in order to
facilitate their studies and experiments aimed at understanding the most
prevalent of human diseases and thereby helping to develop new and innovative
treatment therapies.
Following a period of active shareholder engagement with its founder, Dr.
Jonathan Milner, Abcam announced that it was undertaking a strategic review in
order to maximise shareholder value. Abcam subsequently announced that it had
agreed the terms of a recommended takeover offer from Danaher Corporation,
which is a global science and technology company. Danaher has now entered into
a definitive agreement to acquire Abcam for a price of $24 per share,
reflecting a premium of approximately 26% to the level at which the share
price traded in the days before bid rumours began to circulate. In the absence
of a counterbid at a meaningfully higher valuation, this transaction is
expected to complete shortly.
Hasgrove (11.2% of net assets, +£4.7 million) is the unquoted holding
company, which wholly-owns an operating subsidiary called Interact. Interact
is a fast-growing global provider of corporate intranet solutions that
operates a Software-as-a-Service (SaaS) business model. In its most recent
annual results statement, Hasgrove reported revenue growth of 28% to £29.4
million and operating profit growth of 31% to £8.1 million when compared to
its prior financial year. The performance for the current financial year
remains in line with management's expectations, marked by a growing stream of
highly predictable recurring revenues. As a consequence of this continued
strong growth, the carrying Fair Value of the Company's investment in Hasgrove
was raised to £23.6 million, representing an increase of +24.9% on the
closing Fair Value of £18.9 million as at 30 September 2022.
Aurrigo International ("Aurrigo") (3.4% of net assets, +£3.8 million) is a
leading provider of highly specialised autonomous transport solutions which
are predominately for use in the aviation ground handling industry. Aurrigo's
autonomous vehicles have the potential to significantly improve ground
handling performance, including; more efficient baggage transportation to and
from the aircraft, reducing reliance on labour and reducing the frequency and
severity of accidents.
In its first year as an AIM listed company, Aurrigo International achieved a
noteworthy milestone by securing a multi-year partnership agreement with
Changi Airport Group in Singapore, for the continued collaborative development
and testing of Aurrigo's autonomous vehicles, Auto-Dolly and Auto-DollyTug, as
well as its airport simulation software platform Auto-Sim. Furthermore,
Aurrigo continues to receive substantial interest from other airport groups
and expects to see an accelerated level of interest in its innovative aviation
solutions for future deployments within Europe and North America.
Oxford Biodynamics ("OBD") (2.8% of net assets, +£3.1 million) is a
biotechnology company which is developing precision medicine tests based on
the EpiSwitch™ 3D genomics platform. OBD has developed biomarkers using its
technology for applications in drug discovery, diagnostics, and personalised
medicine, with a focus on various diseases, including cancer and
neurodegenerative disorders.
Towards the end of the financial year, OBD announced the successful validation
of its EpiSwitch Prostate Screening blood test (PSE) in its US clinical
laboratory, which is now available to men at risk of prostate cancer in the US
and UK. Given the recognised limitations of the current widely used
prostate-specific antigen (PSA) test, with over 25 million such tests taking
place per year, this provides OBD with a significant market opportunity.
Tristel (3.4% of net assets, +£2.1 million) is a specialised company at the
forefront of infection prevention and control within healthcare. Tristel's
product range includes high-level disinfectants essential for the effective
sanitisation of medical instruments and devices, which thereby reduces the
risk of healthcare-associated infections in hospitals and clinics.
In June 2023, Tristel announced that the U.S. Food and Drug Administration
(FDA) had approved the immediate sale of Tristel ULT, classifying it as a
high-level disinfectant for use on ultrasound probes. In addition, Tristel
DUO, which is an intermediate level disinfectant for cleaning surfaces, is now
also authorised for sale in all US states. A large number of ultrasound scans
are performed in the US each year. An estimated 215 million are performed
annually and about 20% of these scans require high level disinfection, which
can now be addressed more efficiently and effectively through the use of
Tristel ULT. The approval of these two products gives Tristel a unique
advantage in the market, offering comprehensive solutions for all levels of
disinfection associated with use of ultrasound equipment.
Instem* (2.2% of net assets, +£1.4 million) is a leading provider of IT
solutions to the global life sciences market. Instem's software and services
help life sciences organisations efficiently access, capture, analyse, report,
and submit high-quality regulatory data. Instem also helps life sciences
companies bring new drugs and therapies to market faster and more efficiently.
In August 2023, Instem announced that its Board had agreed the terms of a
recommended takeover offer from Archimed, which is a French healthcare-focused
private equity firm. The offer values Instem at approximately £203 million
and represents a 41% premium to the company's closing price on the day prior
to the announcement. Instem subsequently received additional approaches from
other parties, but no competing offers were made. Instem's Board therefore
continue to believe that the offer from Archimed represents attractive value
for shareholders.
The City Pub Group (1.1% of net assets, +£0.9 million) is a UK based pub
company that owns and manages a portfolio of over fifty pubs located in the
southern regions of England and Wales.
Over the past couple of years, City Pub Group has faced numerous operational
challenges, largely due to the sudden re-emergence of inflationary pressures,
particularly in energy, food and labour costs. In addition, the poor summer
weather in the UK and numerous train strikes, have also had a negative impact
on key trading periods. Despite all these problems, the business has displayed
remarkable resilience.
Overall, trading results for the first half of City Pub Group's financial year
were strong, with revenues increasing by 21% to £31.7 million, while
profitability was maintained despite the many and varied inflationary
pressures. The Group also expanded its pub portfolio in the period under
review by announcing that it acquired a majority stake in Mosaic Pubs which
owns nine pubs across London and Birmingham. City Pub Group continues to
operate with one of the lowest levels of debt in the hospitality sector, which
enables management to take advantage of increasingly attractive opportunities
to pursue further bolt-on acquisitions.
AB Dynamics (2.0% of net assets, +£0.8 million) specialises in providing
testing and measurement solutions for the automotive industry. Its offerings
encompass vehicle dynamics testing, autonomous and Advanced Driver Assistance
Systems (ADAS) testing, track testing, and driving simulation. These solutions
are essential for assessing vehicle performance, safety, and autonomous
driving technologies. Despite the obvious challenges, the company has
continued to thrive, achieving record results, which included strong growth in
revenues and profitability. AB Dynamics continues to enhance its strategic
position through selective investment in new products and services and remains
well-placed to take advantage of the growing opportunities in core markets.
Destiny Pharma (1.0% of net assets, +£0.7 million) is a biotechnology firm
focused on creating innovative anti-infection solutions. Destiny Pharma's
interim results for the first half of 2023 focused on the company's strong
robust financial position, with net cash balances of £9.8 million at period
end. A further highlight in the period was the announcement of successful
Phase 2b trials of XF-73 Nasal, a specially formulated nasal spray designed to
combat post-operative infections caused by staphylococcal bacteria. Destiny
Pharma also agreed a deal with Sebela Pharmaceuticals in North America
covering its other lead product, which has a potential lifetime value of up to
$570 million, plus royalty payments.
* under offer
Avacta (2.5% of net assets, +£0.6 million) is a clinical-stage biotechnology
company developing novel cancer therapies and powerful diagnostics based on
its proprietary Affimer® and pre|CISION™ platforms. In its recently
published interim results, Avacta's management focused on the progress made in
the Therapeutics Division, where the company's AVA6000 Phase 1 study continues
to display a strong safety profile, while delivering highly promising
indications of therapeutic effectiveness. In the Diagnostics Division,
management highlighted numerous growth opportunities, including; geographic
expansion, cross selling opportunities and a rapid expansion to the division's
range of products.
Largest Detractors
MaxCyte (2.9% of net assets, -£7.7 million) is a leading cell engineering
company, which provides a technology platform to enable the precision
engineering of cells for a wide range of therapeutic applications. Leading
drug developers and academic institutions are using the company's technology
to develop new cell therapies for the treatment of cancer, central nervous
system disorders, and rare genetic diseases. The period under review has been
challenging for most early-stage life biotechnology companies and MaxCyte was
no exception. The onset of an extremely difficult funding environment in the
sector has forced MaxCyte's customers to focus on getting later stage
pharmaceutical drugs to market in order to accelerate revenue generation. The
impact of this switch in priorities has therefore lengthened the timelines for
the research and development of early-stage clinical development projects, of
the type with which MaxCyte is most typically involved. Despite these
short-term challenges, management remain optimistic about MaxCyte's long-term
prospects as innovative cell therapies gain traction.
Anpario (2.3% of net assets, -£2.8 million) is a manufacturer and distributor
of natural feed additives for animal health, nutrition, and biosecurity.
Anpario's products are used by livestock producers in over 80 countries around
the world. The past twelve months has been a challenging period for the global
agricultural industry and this has had a profound impact on Anpario's
revenues. In its most recent financial half year sales of £15.3 million were
down 7% when compared to the prior first half financial period. Demand for
natural feed additives declined as farmers struggled to cope with mounting
costs of production. In addition, an outbreak of swine fever decimated pig
herds in China, thereby badly affecting Anpario's sales in the region. Despite
these obstacles, the Group continues to maintain a strong balance sheet,
including a healthy cash balance of over £7 million and no debt. In due
course, Anpario's management team fully expects to report an improvement in
profitability driven by a reduction in the cost of raw materials and a
recovery in sales volumes.
Access Intelligence (1.8% of net assets, -£2.5 million) operates a Software
as a Service (SaaS) business model focused on providing management teams with
the tools necessary to enable them to control and manage the reputations of
the businesses which they lead. An extended sales cycle, an increasingly
uncertain outlook for US corporates and the execution risk associated with a
recent acquisition of Isentia, have all weighed heavily on investor sentiment
and the company's share price has suffered as a result. However, the
management team is now starting to see a recovery in contract wins in Asia and
a general improvement in demand, which are encouraging indicators for future
growth.
Surface Transforms (2.3% of net assets, -£2.1 million) is a manufacturer of
carbon fibre ceramic brake discs for theautomotive industry. Despite
announcing new contracts of substantial value, the share price declined during
the period, which reflects investor concerns surrounding production issues
announced in early 2023. In response, the company's management team was
strengthened and production volumes are now steadily improving. A new furnace
has also been installed in order to generate the capacity required to satisfy
the significantly larger order book. As at the period end the value of
existing contracts had risen to £290 million, while the prospective pipeline
now stands at circa £420 million.
Saietta Group (0.5% of net assets, -£2.0 million) is a global engineering
business specialising in the design, development, and supply of powertrains
for electric vehicles, including; scooters, buses, and marine applications.
Despite making significant progress toward becoming a key provider of electric
drivetrain solutions, Saietta's share price came under severe pressure as a
result of a series of operational miss-steps, which included a poorly executed
move into the US heavy-duty vehicle market. However, a new Chief Executive
Officer has now been recruited and the business is re-focusing on maximising
the commercial opportunity in its key lightweight electric vehicle market.
Encouragingly, Saietta has also recently received a purchase order from a
global Original Equipment Manufacturer (OEM) that is one of the largest
manufacturers of light commercial vehicles in India.
Keywords Studios (1.8% of net assets, -£1.9 million) is a leading provider of
technical and creative services to the global video games industry. Keywords
offers a wide range of services, including art and animation, audio, game
development, localisation, quality assurance, and testing. The period under
review was difficult in terms of share price performance, as industry
consolidation, strikes in the US entertainment industry, a slowdown in sales
of video games and project delays by some key customers began to negatively
affect investor sentiment. However, Keywords Studios has a strong track record
of delivering growth and has the potential to leverage its healthy balance
sheet and established industry connections to exploit emerging opportunities
to develop new revenue streams, particularly through the use of innovative
technologies like Artificial Intelligence.
Tracsis (6.2% of net assets, -£1.8 million) is a leading provider of
software, hardware, data analytics and services for the rail, traffic data,
and wider transport industries. Products and services provided by Tracsis help
their customers improve the efficiency and safety of their operations, reduce
costs, make better decisions, and improve customer service. In a recent
trading update, the company's management team confirmed that trading
performance for the current financial year remains in line with expectations,
despite some delays to customer orders, which are likely to result in a higher
proportion of full year revenues being generated in the second half. From an
operational perspective, Tracsis continues to perform strongly and is
well-positioned to benefit from the digital transformation of the rail
industry, both in the UK and North American markets.
Engage XR (0.3% of net assets, -£1.7 million) is a professional metaverse
platform that provides a virtual workspace where users can meet, collaborate,
and learn in a more immersive and engaging way than traditional online
conferencing tools. Engage XR experienced a significant fall in its share
price during the period as investors faced up to the reality of a sharp
decline in technology spending worldwide.
Directa Plus (1.3% of net assets, -£1.6 million) is a leading supplier of
graphene, an innovative material with a wide range of applications across a
variety of industries, including; consumer, energy, automotive, and aerospace.
Directa Plus continues to develop the impressive technology that has enabled
the company to become a world leader in graphene production, but, like many
other industrial firms, the business is experiencing delays to expected
contract awards due to supply chain issues and general macro and geopolitical
uncertainty. However, Directa Plus is finally beginning to see increased
adoption of graphene technology and, as the market grows, the company remains
in prime position to capitalise on these opportunities.
Angle (0.2% of net assets, -£1.4 million) is a medical technology company
that develops and manufactures products and technologies for the early
detection of cancer. Angle's flagship product is an FDA authorised system
called Parsortix, which is a blood-based liquid biopsy platform that can
capture and analyse circulating tumour cells from blood samples.
Early in its financial year, the management of Angle released a trading
update, which focused on the problems being faced by the life sciences sector
as a whole. An ongoing, industry-wide squeeze on the availability of the
capital required to fund research projects, has negatively impacted Angle in a
variety of ways. As a result, Angle's management team have acted swiftly to
control costs and preserve cash. As at 30 June 2023, Angle remained well
funded with a net cash balance of £22.2 million.
Non-Qualifying Investments
The non-qualifying investments made by the Investment Manager are typically in
larger, more liquid quoted companies that are listed on the FTSE 350 Index.
Non-qualifying investments are normally held in the portfolio in lieu of cash,
in order to generate additional dividend income for future distribution to
Shareholders, while awaiting suitable VCT qualifying investment opportunities.
In the main, these investments performed satisfactorily during the period
under review.
During the twelve-month period ended 30 September 2023, the Company also took
advantage of the attractive yields available on short-term money market funds
to generate additional income for the Company. While short-term bond yields
remain high, the Investment Manager expects this to remain an attractive means
of generating additional, low-risk income, while awaiting suitable VCT
qualifying opportunities.
Offer for Subscription
The fully subscribed Offer for Subscription that closed in February 2023, was
a very pleasing outcome and a humbling endorsement, in particularly
challenging times, of the Investment Manager's proven and successful long-term
approach. The new funds raised will enable the Investment Manager to continue
the established and successful strategy of selectively growing the existing
portfolio of investments by continuing to provide much needed capital to
emerging 'scale-up' businesses. The deployment of capital into new investment
opportunities will continue to be rigorously controlled, especially in view of
the difficult investment landscape.
Investment Activity
In terms of investment activity, the number of companies raising money on AIM
was much reduced in 2023 due to the difficult market conditions. This was
particularly evident in the first six months of the Company's financial year
in which the market for Initial Public Offerings (IPOs) on AIM was quiet.
Although the pipeline of VCT qualifying investment opportunities improved in
the final quarter of the financial year, only four new investments in VCT
qualifying companies were made during the twelve-month period under review.
Three of these investments were in AIM IPOs, while Oxford Biodynamics was
already listed on AIM, but was a new investment for the Company. In total,
£6.5 million was invested in new VCT qualifying companies.
In addition, three follow-on investments were completed in companies already
held in the portfolio, in order to support their future growth plans. In
total, £1.1 million was invested in these follow-on opportunities.
As highlighted in the table below, the VCT qualifying investments made during
the financial year have delivered mixed returns thus far. The standout
performer has been the investment made in Oxford Biodynamics which has
generated very strong short-term gains, which have more than offset the small,
initial and unrealised capital losses recorded by the other new investments.
Value at 30 September 2023
£
VCT Cost Profit/(loss) Return
Trade Date Q/N £ £ %
NEW INVESTEE COMPANIES
Oxford Biodynamics 28 October 2022 Q 2,000,000 3,480,000 1,480,000 74.0
Tan Delta 7 August 2023 Q 503,620 464,880 (38,740) (7.7)
Tribe Technology 5 September 2023 Q 2,000,000 1,900,000 (100,000) (5.0)
Oberon Investments 21 September 2023 Q 2,000,000 1,666,667 (333,333) (16.7)
Total 6,503,620 7,511,547 1,007,927 15.5
FOLLOW ON INVESTMENTS
SulNOx 06 January 2023 Q 100,000 173,913 73,913 73.9
Fusion Antibodies 08 June 2023 Q 250,000 275,000 25,000 10.0
Oxford Biodynamics 18 August 2023 Q 750,000 2,372,727 1,622,727 216.4
Total 1,100,000 2,821,640 1,721,640 156.5
Although the performance of the new investments has been variable, the returns
generated by these new investments as a whole have significantly outperformed
the returns generated by the FTSE AIM All-Share Index over this short-term,
initial holding period. The Investment Manager believes that each of these
companies has the potential to generate significant long term capital growth.
As a reminder, the Investment Manager is required, by virtue of the strict
investment rules surrounding Venture Capital Trusts, to invest in businesses
that are typically at an early stage in their development. These rules, which
the Investment Manager fully supports, do however increase the risk of
incurring capital losses, especially given that progress toward sustainable
and growing profitability is rarely straightforward. In testing macroeconomic
conditions, such as those currently being experienced, it is therefore
unsurprising that some of the investments made in recent years, have struggled
to perform in share price terms.
The Investment Manager will continue to adopt a prudent approach to committing
capital to new investment opportunities during the current financial year.
Realisations
In aggregate, £2.6 million was raised from the full and partial disposal of
VCT qualifying investments during the period. A further £7.0 million was
redeemed from non-qualifying investments and from Short-Term Money Market
Funds during the financial year.
As a reminder, the normal purpose of disposals is threefold; to ensure stock
specific risk is contained, to lock in capital profits for future distribution
to Shareholders via dividend payments, and to help manage liquidity
requirements.
During the period, corporate activity resulted in two realisations. In July
2023, ECSC Group was acquired by Daisy Group Holdings, resulting in net
proceeds of £0.8 million and realised a loss on investment of £1.6 million.
In August, the Company's shares in Bonhill Group were tendered, resulting in
net proceeds of £0.1 million and crystallising a capital loss of £1.2
million. Both of these investments were ultimately very disappointing but, in
each case, the Unicorn investment team worked hard to secure an outcome that
mitigated losses, thereby recovering as much value as possible for
Shareholders.
Partial disposals of three VCT qualifying investments were made throughout the
year which in aggregate generated total proceeds of £1.7 million and realised
an aggregate capital gain of £1.6 million.
The total value of all disposals made during the period therefore amounted to
£9.6 million. Including partial disposals, the total realised capital loss
from the sale of investments amounted to £1.2 million.
Outlook
The financial year began in challenging fashion and, as a consequence, the
total return delivered in the first half was disappointing. Although the
current period began in cautiously optimistic fashion, market conditions
remained volatile and confidence was further undermined by financial events
around the world. These included a serious property crisis in China, the
collapse of Silicon Valley Bank in America and the forced financial rescue of
Credit Suisse in Europe.
Economic headwinds remain substantial with elevated levels of inflation and
rising interest rates hampering business investment and squeezing consumer
discretionary spending. While the increases to Bank of England base rates have
been well documented, what is arguably more relevant to stability in equity
markets is the level of the long-term government bond yields. In this regard,
the Ten-Year Gilt yield has risen from circa 3.5% at the start of year to
almost 5% at the time of writing this review. This has clearly had a negative
impact on the valuations applied to growth stocks, which are often based on
the present value of their expected future cash flows.
In addition, the re-emergence of a worrying and significant conflict between
Israel and Palestine since October has further heightened the already volatile
geo-political situation. Consequently, investor sentiment towards faster
growing, higher risk companies remain fragile and the near-term economic
outlook is also unpredictable. The current financial year has therefore begun
in much the same fashion as the prior financial year ended.
Despite this backdrop, there are some early signs which indicate that a
recovery in value for the UK equity market in general, and for the Alternative
Investment Market in particular, may not be too far away. Inflation appears to
be on a downward trend, and this has resulted in an expectation that interest
rates will now be cut earlier than previously expected. Company management
teams are reporting that supply chain bottlenecks are easing and input costs
such as energy and materials are stabilising or, in some cases, declining.
Should some or all of these catalysts materialise, then, in the opinion of the
Investment Manager, it is likely that there will be a significant recovery in
the overall value of the Company's portfolio.
In the meantime, the portfolio of investee companies broadly remains in good
health, with the majority of investee companies continuing to trade well.
Importantly, most of these businesses remain well-funded and are operating
with balance sheets that are sufficiently robust to enable them to
successfully navigate an extended period of economic and equity market
uncertainty.
The appetite for Initial Public Offerings on AIM is slowly improving and, in
recent months, the Investment Manager has seen a welcome increase in the
number and quality of VCT qualifying investment opportunities.
Unicorn's approach to raising new capital for investments through Offers for
Subscription has always been prudent and will remain so. As a result, the
Investment Manager is able to adopt a selective approach to making new VCT
qualifying investments, while also focusing on nurturing the established and
diverse portfolio of existing investee companies in order that they have the
best opportunity to generate healthy returns for Shareholders over the longer
term.
Finally, the Investment Manager is encouraged by the initial proposals set out
in the Chancellor's Mansion House speech in July, which aim to improve growth
across the economy by directing significantly greater levels of capital
towards early-stage UK companies. Future legislation to support this proposal
has the potential to enhance the appeal of investing in early-stage growth
companies, including those listed on AIM.
Chris Hutchinson
Unicorn Asset Management Limited
7 December 2023
Financial and Performance Review
Net Assets
As at 30 September 2023, the audited net assets of the Company were £211.9
million, compared to £221.1 million on 1 October 2022. The decline in total
net assets was due mainly to the fall in value of the portfolio and the
distribution of dividends to Shareholders. These were partially offset by the
support received from new and existing Shareholders under the Offer for
Subscription, which raised £14.6 million net of costs.
Performance during the year
As at 30 September 2023, the audited NAV of the Company was 122.6 pence per
share, having fallen by 12.2 pence from 134.8 pence per share at the start of
the financial year under review, compared with a fall of 113.8 pence per share
in the year ended 30 September 2022. After adding back dividends of 6.5 pence
per share paid in the year, the total return to Shareholders decreased by 5.7
pence or 4.3% compared with an decrease of 68.3 pence or 27.5% in the previous
year. In comparison, the total return from the FTSE AIM All-Share Total Return
Index was a decline of 8.3% over the year to 30 September 2023 (2022: 34.3%
decline).
At the financial year end, there were 81 active VCT qualifying and 10
non-qualifying investments held in the portfolio. These investments are spread
across 26 different sectors.
In the year to 30 September 2023, a total of £9.6 million was realised
through the sale of investments, (including money market funds) approximately
£26.6 million was deployed in new investments (including money market funds)
and approximately £10.9 million was paid out as dividends to Shareholders. A
further £4.9 million was spent on the operating costs of the Company and
£3.8 million on share buybacks.
Share Issues and Buybacks
The Company raised £14.6 million (after costs) through an Offer for
Subscription and issued 11,108,248 shares, at prices ranging from 134.97 pence
to 139.26 pence. Full details are given in Note 13 on page 76 of the Annual
Report.
In addition, the Company allotted 1,143,459 shares under the Dividend
Reinvestment Scheme ("DRIS") at an average price of 123.69 pence per share.
During the year a total of 3,398,754 (2022: 2,515,309) shares were bought back
for cancellation at an average price of 111.35 pence per share (including
costs), for a total cost of £3.8 million (2022: £4.4 million).
Total Return
The Company generates returns and losses from both capital growth and dividend
income. For the year ended 30 September 2023, the total loss was £ 10.6
million (2022: £105.2 million), of which there was a £11.1 million loss
(2022: £104.8 million loss) from capital and a £0.5 million gain (2022:
£0.4 million loss) from revenue. Full details of the total return can be
found in the Income Statement below. The Company's allocation of expenses is
described in Note 1 (g) on page 69 of the Annual Report.
The total net losses per share were 6.2p (2022: 67.3p). The total net losses
per share were made up of 6.5p loss from capital and 0.3p gain from revenue.
Revenue Return
The income of £2.3 million (2022: £1.7 million) represents dividend income
derived from the Company's investments and interest on cash balances.
Capital Return
At the year end the investment portfolio was valued at £207.5 million (2022:
£198.5 million). The investment portfolio delivered a realised profit on
disposals of £1.0 million (2022: £12.8 million) and unrealised valuation
losses on investment of £9.0 million (2022: £113.6 million). The valuation
basis of the Company's investments is described in Note 1 (d) on pages 67 and
68 of the Annual Report.
Ongoing Charges and Running Costs
The Ongoing Charges of the Company for the financial year under review was
2.2% (2022: 2.0%) of average net assets, which remains below the cap of 2.75%.
The total expenses amounted to £4.9 million (2022: £6.1 million) and include
investment management fees of £4.2 million (2022: £5.3 million), Directors'
fees of £0.1 million (2022: £0.1 million), administrative service fees of
£0.2 million (2022: £0.2 million) and other third-party service providers
fees of £0.2 million (2022: £0.2 million).
Under the revised management agreement effective from 1 October 2018 and the
side letter effective from 1 January 2022 and as shown in Note 3, the
Investment Manager receives a management fee of 2% per annum of net assets up
to £200 million, 1.5% per annum of net assets in excess of £200 million and
1% in excess of £450 million (other than on investments in OEICs managed by
the Investment Manager). Other expenses are shown in Note 4 on page 71 of the
Annual Report.
Further information in respect of the Company's performance can be found in
the Financial Highlights above.
Cash and Cash Equivalents
During the year the Company increased its cash balances through the Offer for
Subscription and the sale of investments. This was offset by the purchase of
investments, the payment of running costs, share buybacks and dividends and at
the year end the cash balance had decreased to £5.4 million (2022: £23.8
million). In addition, £12.1 million was held in money market funds.
Key Performance Indicators
The Board uses the key indicators below as Alternative Performance Measures
("APM's") to measure the Investment Manager's performance, thereby helping
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
- 5 year NAV and share price comparison
- Running costs
Further details can be found on pages 23 and 24 of the Annual Report.
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. A summary of the VCT regulations is
shown on page 88 of the Annual Report.
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 currently 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 25 of the Annual Report. Further information
on the service providers is outlined in the Corporate Governance Statement on
pages 49 and 50 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.
A summary of the relationship between the Board, the Company's Shareholders
and the external service providers is depicted on page 25 of the Annual
Report.
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 80% for accounting
periods commencing after 6 April 2019 (previously 70%) of the Company's total
assets are to be invested in qualifying investments of which 70% by VCT value
(30% made in respect of investments made before 6 April 2018 from funds raised
before 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
· potential for good cash generation, in due course, to finance ongoing
development and support for 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 80% VCT qualification
threshold for accounting periods commencing after 6 April 2019 (previously
70%), 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 41 of the Annual
Report under "AIFMD".
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.
The ability to pay dividends and the amount of such dividends is at the
Board's discretion and is 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.
Details of the Company's Dividend Reinvestment Scheme are outlined on page 85
of the Annual Report.
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:
1. Regular share buybacks provide a reliable mechanism through which
Shareholders can realise their investment in the Company, rather than being
reliant on a very limited secondary market.
2. Share buybacks, when carried out at a discount to underlying net assets,
help modestly to enhance NAV per share for continuing Shareholders.
3. Implementing share buybacks on a regular basis helps to control the
discount to NAV.
The Board decides 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.
Details of the shares purchased for cancellation are shown on pages 21 and 76
of the Annual Report. At the financial year end, the Company's shares were
quoted at a mid-price of 103.5 pence per share representing a discount to NAV
per share of 15.5%.
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 cancelled.
Principal and Emerging Risks
The Directors have carried out a robust review of the principal and emerging
risks faced by the Company as part of the internal controls process, as
outlined below. Note 17 to the Financial Statements on page 78 to 84 of the
Annual Report also provides information on the Company's financial risk
management objectives and exposure to risks. The Directors process for
monitoring these risks is shown below.
During the year the Board has reviewed in detail its approach to risk. It has
sought to identify new and 'Emerging Risks' alongside the principal risks
faced by the Company and the mitigating steps being taken by both the Board
and the Company's service providers to reduce the impact of each risk. The
results have been summarised in a heat map and are reviewed for sensitivity
quarterly.
During the review with the key service providers evidence was requested of the
mitigating actions being taken and on which the Board is relying. Balance
sheet reconciliations, asset valuations and VCT qualification being examples
of such reviews.
Risk Possible consequence How the Board monitors and mitigates risk
1. Investment and strategic risk Unsuitable investment strategy or investment selection could lead to poor Regular review of investment strategy by the Board.
returns to Shareholders.
Monitoring of the performance of the investment portfolio on a regular basis.
All purchases or sales of unquoted investments require prior investment
authorisation from the Board.
2. Regulatory and tax risk The Company is required to comply with the Companies Act 2006, ITA, AIFMD (as Regulatory and legislative developments are kept under close review by the
applicable to small registered UK AIFMs), FCA Listing Rules and UK Accounting Board, the Investment Manager, the Company Secretary and the Administrator.
Standards. Breaching these rules may result in a public censure, suspension
from the Official List and/or financial penalties. There is a risk that the The Company's VCT qualifying status is continually reviewed by the Investment
Company may lose its VCT status under the ITA. Should this occur, Shareholders Manager and the Administrator.
may lose any upfront income tax relief they received and be taxed on any
future dividends paid and capital gains if they dispose of their shares. PricewaterhouseCoopers LLP has been retained by the Board to undertake a
bi-annual independent VCT status monitoring role.
3. Operational risk The Company has no employees and is therefore reliant on third party service Internal control reports are provided by service providers on an annual basis.
providers. Failure of the systems at third party service providers could lead
to inaccurate reporting or monitoring. Inadequate controls could lead to the The Board considers the performance of the service providers annually and
misappropriation of assets. monitors activity on a monthly basis.
The Board discusses succession planning with its key service providers.
4. Fraud, dishonesty and cyber risks Fraud involving Company assets may occur, perpetrated by a third party, the Internal control reports are provided by service providers on a regular basis.
Investment Manager or other service provider.
The Administrator is independent of the Investment Manager.
Cyber-attacks on the Company could lead to financial loss and impact on the
Company's reputation. The Company minimises as far as practical the amount of personal data held by
our service providers and the Board.
All service providers use third party professionals to review cyber security
exposure and act on any material recommendations made.
5. Financial Instrument risks The main risks arising from the Company's financial instruments are from The Board regularly reviews and agrees policies for managing these risks and
fluctuations in their market prices, interest rates, credit risk and liquidity further details can be found in Note 17 on pages 78 to 84 of the Annual
risk. Report.
6. Economic and political risks Events such as recession, inflation or deflation, movements in interest rates While no single policy can obviate such risks the Company invests in a
and technological change can affect trading conditions and consequently the diversified portfolio of companies, whilst seeking to maintain adequate
value of the Company's investments. liquidity.
Other geo-political issues may affect the Company's performance at both macro
and micro economic level.
Labour and material shortages may affect the value of the Company's
investments.
Russia's invasion of Ukraine and the current situation in the Middle East
could adversely affect investee companies.
7. Black Swan events Events such as pandemics could adversely affect investee companies and /or The Board liaises with the Investment Manager to obtain an understanding of
other service providers. the impact on the investee companies.
Environmental disasters may adversely affect investee companies and/or service The Investment Manager reviews the impact of staff availability, raw materials
providers. availability, energy supply and inflationary impact on portfolio companies.
The Board is responsible for assessing the possibility of new and emerging
risks and, in addition to the principal risks, the Board has identified the
following emerging risks:
Emerging risks The physical impact of climate change on investee companies. Increasing the influence of ESG matters around investment decisions.
The changes to investee company business models brought about by the need to Investment Manager focus on these issues when reviewing portfolio.
reduce carbon footprints.
The increasing use of Artificial Intelligence ("AI") and its effect on the
investee companies although AI will also have positive effects on some
investee companies.
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 when making
investment decisions.
Recruitment and succession planning
As reported last year Jocelin Harris stood down as a Director at the AGM on 7
February 2023. The Board have an ongoing process to review and refresh the
Board taking into account the needs of the Company and regulation. Jeremy
Hamer has indicated his intention to step down at the AGM in 2025. The Board
will engage an external recruitment agency with a view to making a new
appointment in the next calendar year. This process will include the
assessment of key skills the suitable candidate should possess and will also
take account of Board diversity.
Diversity
The Board is aware of the requirement of Listing Rule 9.8.6R and the
composition of the Board. As disclosed on page 49 of the Annual Report the
Board does not meet the requirement to have at least one director from an
ethnic minority. Being externally managed and comprising of only four
non-executive directors there is reduced scope to fully comply with the
requirements. However, the Board will continue to consider these requirements
in any recruitment process.
Anti-bribery, corruption and tax evasion policy
The Company has a zero tolerance approach to bribery. It is the Company's
policy to conduct all of its business in an honest and ethical manner and it
is committed to acting professionally, fairly and with integrity in all its
business dealings and relationships where it operates.
Directors and service providers must not promise, offer, give, request, agree
to receive or accept a financial or other advantage in return for favourable
treatment, to influence a business outcome or to gain any other business
advantage on behalf of themselves or of the Company or encourage others to do
so.
The Company has communicated its anti-bribery policy to each of its service
providers. It requires each of its service providers to have policies in place
which reflect the key principles of this policy and procedures and which
demonstrate that they have adopted procedures of an equivalent standard to
those instituted by the Company.
Further information relating to the Company's anti-bribery policy can be found
on its website: www.unicornaimvct.co.uk. A full copy of the VCT's anti-bribery
policy and procedures can be obtained from the Company Secretary by sending an
email to: unicornaimvct@iscaadmin.co.uk (mailto:unicornaimvct@iscaadmin.co.uk)
.
Environmental and social responsibility
Full details of the Company's ESG approach can be found on page 31 of the
Annual Report.
In relation to the Company's own practices the Company encourages electronic
communication to reduce paper usage, has withdrawn its dividend by cheque
service and the printing of the Half-Yearly Report and has taken advantage at
times of electronic meetings. Where we are required to print Annual Reports we
will use recycled paper and offset our carbon footprint.
Viability Statement
The Board' assessment of the ability of the Company 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 is shown in the Corporate
Governance Statement on page 41 of the Annual Report.
Under the UK Corporate Governance Code there is a requirement that the Board
performs a robust assessment of the Company's principal and emerging risks and
the disclosures in the Annual Report that describe the principal risks and the
procedures in place to identify emerging risks and explain how they are being
managed or mitigated. The last review was performed in November 2023.
The Directors have considered 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. The last
allotment of shares took place in March 2023.
The Directors consider that the Company is viable for the five-year time
horizon for the following reasons:
■ At the year end the Company had a diversified investment portfolio in
addition to its VCT qualifying investments comprising: £7.3 million invested
in non-qualifying, fully listed shares which are readily realisable, a further
£15.6 million in daily dealing open ended funds and £5.4 million in cash.
The Company therefore has sufficient immediate liquidity in the portfolio for
any near-term requirements.
■ The ongoing charges ratio of the Company as calculated using the AIC
recommended methodology equates to 2.2% of net assets.
■ The Board anticipates that there will continue to be suitable qualifying
investments available that will enable the Company to maintain its operations
over the five-year time horizon.
■ The Company has no debt or other external funding apart from its
ordinary shares.
■ The payment of dividends and buybacks are at the discretion of the
Board.
■ The continuation of the State Aid regulations to 2035.
In order to maintain viability, the Company has a 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 regular basis to ensure that controls
are working as prescribed. In addition, formal reviews of all service
providers are undertaken annually and activity is monitored at least monthly.
In its assessment of the viability of the Company, the Board has recognised
factors such as the continuation of the current State Aid regulations to 2035,
the ability of the Company to raise money from future Offers for Subscription
and there being sufficient VCT qualifying investment opportunities available.
The Directors have also considered the viability of the Company should there
be a slowdown in the economy or a correction 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 investment in Unicorn funds) equates to 2.0% of net assets up to
£200 million and 1.5% of net assets in excess of £200 million. In November
2021 the Company entered into an agreement with the Investment Manager to
reduce fees to 1% for any assets exceeding £450 million. As these fees are
based on a percentage of assets any fall in the value of net assets will
result in a corresponding fall in the major expense of the Company.
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 Chair's Statement above.
For and behalf of the Board
Tim Woodcock
Chair
7 December 2023
EXTRACT FROM DIRECTORS' REPORT
Share Capital
At the year-end there were 172,876,156 (2022: 164,023,203) 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 on page 21 and in Note 13 on
page 76 of the Annual Report. No shares have been bought back subsequent to
the year end, therefore, at the date of this announcement, the Company had
172,876,156 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 a period of at least 12 months from the date of the approval of
the Financial Statements and that it is appropriate to apply the going concern
basis in preparing the Financial Statements. As at 30 September 2023, the
Company held cash balances of £5.4 million, £7.3 million in fully listed
stocks and £15.6 million in open ended investment funds. The majority of the
Company's investment portfolio remains invested in qualifying and
non-qualifying AIM traded equities which may be realised, subject to the need
for the Company to maintain its VCT status. The 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 access
to sufficient liquidity 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;
- prepare a Directors' Report, a Strategic Report and Directors'
Remuneration Report which comply with the requirements of the Companies Act
2006; and
- prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume the Company will continue in business.
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 the Disclosure Guidance and
Transparency Rule 4 of the UK Listing Authority
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
loss 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.
• The Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
Shareholders to assess the position and performance, business model and
strategy of the Company.
For and on behalf of the Board
Tim Woodcock
Chair
7 December 2023
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's
statutory accounts for the years ended 30 September 2023 or 30 September 2022
but is derived from those accounts. Statutory accounts for the year ended 30
September 2022 have been delivered to the Registrar of Companies and statutory
accounts for the year ended 30 September 2023 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 (http://www.unicornaimvct.co.uk) .
PRIMARY FINANCIAL STATEMENTS
Income Statement
for the year ended 30 September 2023
Year ended Year ended
30 September 2023 30 September 2022
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net unrealised losses on investments 6 - (8,975) (8,975) - (113,641) (113,641)
Net gains on realisation of investments 6 - 994 994 - 12,771 12,771
Income 2 2,312 - 2,312 1,753 - 1,753
Investment management fees 3 (1,048) (3,144) (4,192) (1,322) (3,965) (5,287)
Other expenses (725) (725) (771) (771)
- -
Profit /(loss) on ordinary activities before taxation 539 (11,125) (10,586) (340) (104,835) (105,175)
Tax on profit/(loss) on ordinary activities - - - - - -
Profit/(loss) on ordinary activities after taxation for the financial year 539 (11,125) (10,586) (340) (104,835) (105,175)
Basic and diluted earnings per share:
Ordinary Shares 5 0.32p (6.55)p (6.23)p (0.22)p (67.10)p (67.32)p
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 ("AIC SORP") issued in July 2022 by the Association of Investment
Companies.
Other than revaluation movements arising on investments held at fair value
through profit or loss, there were no differences between the profit/ (loss)
as stated above and at historical cost.
The notes below form part of these financial statements.
Statement of Financial Position
as at 30 September 2023
30 September 2023 30 September 2022
Notes £'000 £'000 £'000 £'000
Non-current assets
Investments at fair value 6 207,531 198,541
Current assets
Debtors 675 515
Cash and cash equivalents 5,357 23,751
6,032 24,266
Creditors: amounts falling due within one year (1,707) (1,681)
Net current assets 4,325 22,585
Net assets 211,856 221,126
Capital
Called up share capital 1,729 1,640
Capital redemption reserve 147 113
Share premium account 100,974 85,063
Capital reserve 56,883 55,038
Special reserve 39,040 68,338
Profit and loss account 13,083 10,934
Equity Shareholders' funds 211,856 221,126
Net asset value per Ordinary share:
Ordinary shares 7 122.55p 134.81p
The financial statements were approved and authorised for issue by the Board
of Directors on 7 December 2023 and were signed on their behalf by:
Tim Woodcock
Chair
The notes below form part of these financial statements.
Statement of Changes in Equity
for the year ended 30 September 2023
Called up share capital Capital redemption reserve Share premium account Unrealised capital reserve Profit and loss account**
Special reserve*
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 October 2022
1,640 113 85,063 55,038 68,338 10,934 221,126
Shares repurchased and cancelled (34) 34 (3,785) (3,785)
- - -
Shares issued under Offer for Subscription 111 14,885 14,996
- - - -
Expenses of shares issued under Offer for Subscription (377) (377)
- - - - -
Proceeds from DRIS share issues 12 1,438 1,450
- - - -
Expenses of DRIS share issues - - (35) - - - (35)
Transfer to special reserve *** (14,568) 14,568
- - - - -
Gains on disposal of investments (net of transaction costs) 994 994
- - - - -
Realisation of previously unrealised valuation movements**** 10,820 (10,820)
- - - - -
Net decreases in unrealised valuations in the year (8,975) (8,975)
- - - - -
Dividends paid - - - - (10,945) 12 (10,933)
Investment Management fee charged to capital - - - - - (3,144) (3,144)
Revenue return for the year 539 539
- - - - -
At 30 September 2023 1,729 147 100,974 56,883 39,040 13,083 211,856
Called up share capital Capital redemption reserve Share premium account Unrealised capital reserve Profit and loss account**
Special reserve*
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 October 2021
1,491 88 53,602 222,185 87,659 5,773 370,798
Shares repurchased and cancelled
(25) 25 - - (4,440) - (4,440)
Shares issued under Offer for Subscription
127 - 24,868 - - - 24,995
Expenses of shares issued under Offer for Subscription
- - (587) - - - (587)
Proceeds from DRIS share issues
47 - 7,212 - - - 7,259
Expenses of DRIS share issues
- - (32) - - - (32)
Transfer to special reserve
- - - - (4,872) 4,872 -
Gains on disposal of investments (net of transaction costs)
- - - - - 12,771 12,771
Realisation of previously unrealised valuation movements
- - - (53,506) - 53,506 -
Net decreases in unrealised valuations in the year
- - - (113,641) - - (113,641)
Dividends paid - - - - (10,009) (61,683) (71,692)
Investment Management fee charged to capital
- - - - - (3,965) (3,965)
Revenue return for the year
- - - - - (340) (340)
At 30 September 2023
1,640 113 85,063 55,038 68,338 10,934 221,126
* The special reserve and profit and loss account are distributable to
Shareholders. The special reserve was created by the cancellation of the Share
premium account and Capital redemption reserve in March 2019.
** The profit and loss account consists of the Revenue reserve of £(0.132)
million and the realised capital reserve of £13.215 million.
*** Transfer of realised losses in accordance with accounting policy f(iii) on
page 68 of the Annual Report.
**** Transfer of previously unrealised valuation movements on investments sold
in the year
The notes form part of these financial statements.
Statement of Cash Flows
for the year ended 30 September 2023
30 September 2023 30 September 2022
Notes £'000 £'000 £'000 £'000
Operating activities
Investment income received 2,145 1,609
Investment management fees paid (4,227) (5,831)
Other cash payments (766) (778)
Net cash outflow from operating activities (2,848) (5,000)
Investing activities
Purchase of investments (26,604) (9,813)
Sale of investments 9,636 79,022
Net cash (outflow)/inflow from investing activities (16,968) 69,209
Net cash (outflow)/inflow before financing (19,816) 64,209
Financing
Dividends paid 4 (9,483) (64,433)
Unclaimed dividends returned 504 -
Shares issued under Offer for Subscription (net of transaction costs) 14,619 24,407
Expenses of DRIS share issues (35) (32)
Shares repurchased for cancellation (4,183) (4,042)
Net cash inflow/(outflow) from financing 1,422 (44,100)
Net(decrease)/ increase in cash and cash equivalents (18,394) 20,109
Cash and cash equivalents at 30 September 2022 23,751 3,642
Cash and cash equivalents at 30 September 2023 5,357 23,751
The notes below form part of these financial statements.
Notes to the Financial Statements
for the year ended 30 September 2023
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 67 to 69 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 July 2022.
In accordance with the requirements of FRS 102, those undertakings in which
the Company holds more than 20% of the equity as part of an investment
portfolio are not accounted for using the equity method. In these
circumstances the investment is measured at "fair value through profit or
loss". The Company is exempt from preparing consolidated accounts under the
investment entities exemption as permitted by FRS 102.
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 or 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.
The Directors' assessment of the Company as a going concern is given on page
41 of the Annual Report.
2 Income
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income from investments:
- equities 1,590 - 1,590 1,525 - 1,525
- loan stocks 148 - 148 - - -
- bank interest 115 - 115 27 - 27
- Unicorn managed OEICs (including reinvested dividends) 193 - 193 201 - 201
- Other OEICs and Unit Trusts 266 - 266 - - -
Total income 2,312 - 2,312 1,753 - 1,753
Total income comprises:
Dividends 2,049 - 2,049 1,726 - 1,726
Loan stocks 148 - 148 - - -
Interest 115 - 115 27 - 27
2,312 - 2,312 1,753 - 1,753
Income from investments comprises:
Listed UK securities 210 - 210 248 - 248
AIM and unquoted companies 1,987 - 1,987 1,478 - 1,478
2,197 - 2,197 1,726 - 1,726
The loan stock interest was reinstated during the year and received subsequent
to the year end.
3 Investment Management fees
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Unicorn Asset Management Limited 1,048 3,144 4,192 1,322 3,965 5,287
The management fee is calculated as follows:
Net Assets Fee from 1 January 2022
Up to £200 million 2.0% per annum as at the relevant quarter date
In excess of £200 million and up to £450 million
1.5% per annum as at the relevant quarter date
In excess of £450 million 1.0% per annum as at the relevant quarter date
At 30 September 2023, officers and employees of the Investment Manager held
1,513,695 shares in the Company.
During the year, Unicorn Asset Management Limited ("UAML") received an annual
management fee, as detailed above, of the net asset value of the Company,
excluding the value of the investments in the Unicorn OEIC.
If the Company raises further funds during a quarter the net asset value for
that quarter is reduced by an amount equal to the amount raised, net of costs,
multiplied by the percentage of days in that quarter prior to the funds being
raised. The annual management fee charged to the Company is calculated and
payable quarterly in arrears. In the year ended 30 September 2023, UAML also
earned fees of £27,000 (2022: £36,000), being OEIC management fees
calculated on the value of the Company's holdings in the OEIC on a daily
basis. This management fee is 0.75% per annum of the net asset value of the
Unicorn UK Ethical Fund OEIC.
The management fee will be subject to repayment to the extent that the annual
costs of the Company incurred in the ordinary course of business have exceeded
2.75% of the closing net assets of the Company at each year end. There was no
excess of expenses for year 2022/23 or the prior year.
4 Dividends
2023 2022
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Interim capital dividend of 3.0 pence (2022: 3.0 pence) per share for the year 5,204 4,809
ended 30 September 2023 paid on 11 August 2023
Special interim capital dividend of nil pence (2022: 32.0 pence) per share - 51,292
Final capital dividend of 3.5 pence (2022: 3.5 pence) per share for the year 5,741 5,200
ended 30 September 2022 paid on 14 February 2023
Special interim capital dividend of nil pence (2022: 7.0 pence) per share - 10,400
Total dividends paid in the year 10,945 71,701
Unclaimed dividends returned (12) (9)
Total dividends * 10,933 71,692
* The difference between total dividends and that shown in the Cash Flow
Statement is £1,450,000 which is the amount of dividends reinvested under the
DRIS.
The 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.
Set out below are the total income dividends payable in respect of the 2022/23
financial year, which is the basis on which the requirements of Section 274 of
the Income Tax Act 2007 are considered.
2023 2022
£'000 £'000
Profit/ (loss) for the year 539 (340)
Proposed final income dividend of nil pence (2022: nil pence) for the year - -
ended 30 September 2023 *
* Despite the revenue profit for the year, no revenue dividend can be made due
to the deficit on the revenue reserve as shown in the footnote to the
Statement of Changes in Equity above.
5 Basic and diluted earnings and return per share
2023 2022
Total earnings after taxation: (£'000) (10,586) (105,175)
Basic and diluted earnings per share (Note a) (pence) (6.23) (67.32)
Net revenue from ordinary activities after taxation (£'000) 539 (340)
Revenue earnings per share (Note b) (pence) 0.32 (0.22)
Total capital return (£'000) (11,125) (104,835)
Capital earnings per share (Note c) (pence) (6.55) (67.10)
Weighted average number of shares in issue during the year 169,795,766 156,227,923
Notes
a) Basic and diluted earnings per share is total earnings after taxation
divided by the weighted average number of shares in issue during the year.
b) Revenue earnings per share is net revenue after taxation divided revenue
off that the weighted average number of shares in issue during the year.
c) Capital earnings per share is total capital return divided by the weighted
average number of shares in issue during the year.
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 Investments at fair value
Fully Traded Unlisted Unlisted loan Other
2023 2022
listed on AIM shares stock funds Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening book cost at 30 September 2022 8,357 122,935 14,303 500 4,483 150,578 153,489
Unrealised (losses)/gains at 30 September 2022 (2,275) 47,514 11,392 (375) (1,218) 55,038 222,185
Permanent impairment in value of investments
- (2,442) (4,633) - - (7,075) (7,075)
Opening valuation at 30 September 2022 6,082 168,007 21,062 125 3,265 198,541 368,599
Shares delisted - (188) 188 - - - -
Purchases at cost - 7,604 - - 19,002 26,606 9,829
Sale proceeds - (2,627) (9) - (7,000) (9,636) (79,022)
Net realised gains - 977 7 - 11 995 12,776
Movement in unrealised gains 1,220 (15,968) 5,118 375 280 (8,975) (113,641)
Closing valuation at 30 September 2023 7,302 157,805 26,366 500 15,558 207,531 198,541
Book cost at 30 September 2023 8,357 126,473 14,488 500 16,496 166,314 150,578
Unrealised (losses)/gains at 30 September 2023 (1,055) 42,352 16,524 - (938) 56,883 55,038
Permanent impairment in value of investments - (11,020) (4,646) - - (15,666) (7,075)
Closing valuation at 30 September 2023 7,302 157,805 26,366 500 15,558 207,531 198,541
Transaction costs on the purchase and disposal of investments of £1,000 were
incurred in the year. These have not been deducted from realised gains shown
above of £995,000 but have been deducted in arriving at gains on realisation
of investments disclosed in the Income Statement of £994,000.
The shares delisted during the year relate to La Chemeau Group.
* Other funds include the Unicorn Ethical Fund, the BlackRock Cash Fund and
the Royal London Short-Term Money Market Fund.
Note: Permanent impairments of £7,075,000 were held in respect of losses on
investments held at the previous year end. Additional impairments of
£8,591,000 provided for in the year relate to Bonhill Group, £1,755,000,
British Honey Company, £3,101,000, Kellan Group, £13,000, Miroma Holdings,
£1,000, Osirium Technologies, £1,971,000 and Trackwise Designs, £1,750,000.
Reconciliation of cash movements in investment transactions
The difference between the purchases in Note 6 and that shown in the Cash
Flows is £2,000 which represents the reinvested dividends on the Unicorn
Ethical Fund.
7 Net asset value
2023 2022
Net Assets £211,856,000 £221,126,000
Number of shares in issue 172,876,156 164,023,203
Net asset value per share 122.55p 134.81p
8 Post balance sheet events
On 28 November 2023, the Company announced an Offer for Subscription as
detailed in the Chair's Statement above.
On 6 December 2023, the Court sanctioned the transaction on Abcam and proceeds
amounting to $25.9 million are expected to be received shortly.
9 Capital commitments and contingent liabilities
On 27 July 2023, the Company made a capital commitment to invest £1,500,000
in Eden Research. This transaction was completed on 6 October 2023.
10 Shareholder information
Dividend
The Directors have proposed a final dividend of 3.5 pence per share. Subject
to Shareholder approval, the dividend will also be paid on 14 February 2024 to
Shareholders on the Register on 5 January 2024.
The Board has previously decided the Company will in future pay all cash
dividends by bank transfer rather than by cheque.
Shareholders will have the following options available for future dividends:
• Complete a bank mandate form and receive dividends via direct credit to
a UK domiciled bank account.
• Reinvest the dividends for additional shares in the Company through the
Dividend Reinvestment Scheme (DRIS).
For those Shareholders who previously received their dividend by cheque and
who have not provided their bank details to the Registrar, a bank mandate form
will be available on the Company's website. Once completed the form should be
sent to the Company's Registrars, City Partnership at the address shown on
page 89 of the Annual Report. If Shareholders have any questions regarding the
completion of the form, they are advised to contact the City Partnership on
01484 240910 or by email: registrars@city.uk.com.
Dividend Reinvestment Scheme
Shareholders may elect to reinvest their dividends by subscribing for new
shares in the Company. Shares will be issued at the latest published Net Asset
Value prior to the allotment. For details of the scheme see the Company's
website www.unicornaimvct.co.uk/dividend-reinvestment-scheme or contact the
scheme administrators, The City Partnership, on 01484 240910.
11 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 2023 will be sent to Shareholders shortly and will then be available for inspection at ISCA Administration Services Limited, The Office Suite, Den House, Den Promenade, Teignmouth, TQ14 8SY the registered office of the Company. Copies of the Annual Report will shortly be available on the Company's website,
www.unicornaimvct.co.uk (http://www.unicornaimvct.co.uk)
. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting.
12 Annual General Meeting
The Annual General Meeting of the Company will be held at 11.30 am on Wednesday, 7 February 2024 at The Great Chamber, The Charterhouse, Charterhouse Square, London EC1M 6AN. Shareholders will be able to attend this meeting in person, arrangements for the meeting are detailed on pages 41 and 42 of the Annual Report. Voting on all Resolutions will be conducted on a poll including all proxy votes submitted. The Notice of the Meeting is included on pages 90 to 94 of the Annual Report and a separate proxy form has been included with Shareholders' copies of the Annual Report. Proxy forms should be completed in accordance with the instructions printed thereon and sent to the Company's Registrars, The City Partnership (UK) Limited, at the address given on the form, to arrive no later than 11.30am on 5 February 2024. Please note that you can vote your shares electronically athttps://proxy-unicorn.cpip.io/.
13 National Storage Mechanism
A copy of the 2023 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:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Contact details for further enquiries:
Chris Hutchinson of Unicorn Asset Management Limited (the Investment Manager),
on 020 7253 0889.
ISCA Administration Services Limited (the Company Secretary) on 01392 487056
or by e-mail on unicornaimvct@iscaadmin.co.uk
(mailto:unicornaimvct@iscaadmin.co.uk)
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