Annual Financial Report 30 September 2015

RNS Number : 7987I

Unicorn AIM VCT PLC

11 December 2015

 



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

Annual Results Announcement for the year ended 30 September 2015

The full Annual Report and Accounts for the year ended 30 September 2015 can be found on the Company's website www.unicornaimvct.co.uk

Investment Objective

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

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

Investment Policy

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

➢ experienced and well-motivated management;

➢ products and services supplying growing markets;

➢ sound operational and financial controls; and

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

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

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

Asset mix

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

FINANCIAL HIGHLIGHTS

(for the year ended 30 September 2015)

-      Offer for Subscription raised £24.0 million.

-      Net asset value ("NAV") total return for the year ended 30 September 2015 was 12.5%.

-      Dividend of 6.25p proposed.

Fund performance

Ordinary Shares	Total assets (£ million)	Net asset value per share (NAV) (p)	Cumulative dividends* paid per share (p)**	Net asset value plus cumulative dividends paid per share (p)**	Share price (p)
30th September 2015	124.6	155.6	26.0	181.6	137.0
31st  March 2015	99.1	137.0	26.0	163.0	123.0
30th September 2014	92.2	143.7	20.0	163.7	130.0
31st  March 2014	86.3	142.8	20.0	162.8	123.5

* The Board has recommended a dividend of 6.25 pence per share for the year ended 30 September 2015. If approved by Shareholders, this payment will bring total dividends paid since the merger of with Unicorn AIM VCT II plc on 9 March 2010 to 32.25p.

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

CHAIRMAN'S STATEMENT

I am pleased to present the fourteenth Annual Report of the Company for the financial year ended 30 September 2015.

Economic Review

The UK economy has been experiencing steady, if unspectacular, growth for some time now. In the three months to 30 September 2015, the economy expanded by 0.5%, marking eleven consecutive quarters of economic growth. In recent quarters, this improvement has largely been driven by an increase in business investment and exports as management teams have become more confident about the prospects for their businesses. The UK's dominant services sector, however, which accounts for almost 80% of total Gross Domestic Product, expanded at its weakest pace in nearly two and a half years in September, suggesting that Britain's economic recovery may be losing steam. Economic slowdown in China, coupled with uncertainty over the prospects for many emerging markets and pedestrian recovery in the Eurozone may be leading to businesses deferring investment decisions.

If the current deceleration in the rate of UK economic growth persists, then expansion in the final quarter is likely to fall to its weakest since the final three months of 2012, when the economy contracted by 0.1%.

Despite this recent, and hopefully short term, slowdown, there is nonetheless good reason for optimism when it comes to the majority of businesses in which the Company holds stakes. Many of the smaller companies in the portfolio continue to experience growth in demand for the specialised products or services they provide. As a result, they have been able to deliver healthy and sustained growth in earnings, which, in turn, has been reflected in positive share price development. It is therefore pleasing to be able to report on another successful year for the Company.

Investment Performance Review

The performance during the year is shown in the Strategic Report below. The twelve months ended 30 September 2015 marks the sixth consecutive financial year of positive total returns for Shareholders. Relative performance has again been strong, with the Company outperforming the FTSE All- Share Index and the FTSE AIM All-Share Index on a total return basis, by 14.8% and 14.6% respectively. Capital returns from the portfolio have again been positive, reflecting the improving financial and operational health of many of the portfolio's investee companies.

By the end of the financial year under review, the audited net assets of the Company had risen by more than a third to £124.6 million, which compared to £92.2 million of net assets recorded at the end of the previous financial year. This significant growth in total net assets was partly due to continued strong performance from the investment portfolio, but was also helped by a well-supported Offer for Subscription, which raised a total of £24.0 million during the period. I would like to take this opportunity to welcome all new Shareholders and to thank existing Shareholders for their continued support.

As at the financial year end, approximately 80% of the companies held in the portfolio are expected to be profitable. The majority of these businesses also continue to generate cash in excess of that required to fund their future growth plans and are consequently in an increasingly strong position to maintain, and potentially grow, dividend payments. During the period under review dividends were paid, or proposed, by 42 of the 72 companies held in the portfolio. Income received from underlying investments grew strongly from £1.2 million in the financial year ended 30 September 2014 to £1.9 million in the period under review.

Portfolio Activity

The twelve months ended 30 September 2015 saw increased levels of investment activity. In total, almost £20 million was invested in qualifying and non-qualifying investments. The Manager's selective approach to new investment has, however, been maintained, with just four new VCT qualifying companies being introduced to the portfolio. The total cost of these VCT qualifying investments was approximately £4.3 million. Although still early days, it is pleasing to report that, in aggregate, these investments have delivered a strong contribution to overall performance, generating an unrealised capital gain on investment cost of over 20% in the period.

In addition to investing in new VCT qualifying companies, the Manager also provided further VCT qualifying capital, totalling over £4 million, to eight companies already held in the portfolio.

Non-qualifying investments amounting to £11.0 million were made in a number of new and existing holdings.

Three investee companies received bid approaches during the year under review. While two of these holdings were sold for cash, new shares in the acquiring company were accepted for the third. In addition, one non-qualifying investment was sold outright and partial disposals were made in a number of both qualifying and non-qualifying investments. Cash proceeds from disposals amounted to £2.9 million, resulting in an overall realised capital profit of £0.5 million.

A detailed report on the performance of both the qualifying and the non-qualifying investments is contained in the Investment Manager's Review. In addition, I refer you to the Board's Strategic Report which can be found below.

 VCT Status

In aggregate, the percentage of the Company's total assets remains above that required by HMRC in order to retain VCT status. As at 30 September 2015, approximately 73% of the Company's total assets (valued in accordance with VCT rules) were invested in VCT qualifying companies. Excluding new capital raised in Offers for Subscription within the last three years, the VCT qualifying percentage rises to 84%. The Board continues to monitor this figure closely. All other HM Revenue & Customs ("HMRC") tests have been met and PriceWaterhouseCoopers LLP ("PwC") has confirmed to the Board that the Company continues to maintain its Venture Capital Trust status.

VCT Legislation

VCT legislation continues to evolve. The 2015 Finance Bills which recently received Royal Assent includes changes to VCT qualifying rules. These changes are designed to ensure that VCTs meet stricter State Aid funding rules being imposed by the European Union ("EU"). The legislation is complex and involves various amendments to existing rules as well as the introduction of new rules. The main purpose of the changes appears to be to ensure that State Aid investment is focused on supporting companies in the earlier stages of their development. The key new criteria include a restriction on the age of companies that can be considered eligible for State Aid investment, an absolute limit to the total amount of State Aid investment that a company can receive and a new rule designed to prevent investee companies from using the proceeds of State Aid funding to acquire (or acquire shares in) other companies.

The new legislation presents a number of challenges to the VCT sector as a whole. Your Manager, however, is confident of being able to operate within the confines of these new rules and has a long and successful track record of adapting to previous rule changes.

Dividends

The final dividend of six pence per share, for the financial year ended 30 September 2014, was paid to Shareholders on 20 February 2015. Dividends are tax free to qualifying UK Shareholders and represented a yield of 4.2% based on the NAV of 143.7 pence per share as at 30 September 2014.

The Board has considered the payment of a final dividend for the financial year ended 30 September 2015, and is recommending a final dividend of 6.25 pence per share (income: 1.0 pence; capital: 5.25 pence) payable on 19 February 2016 to Shareholders on the register on 29 January 2016.

Proposed Acquisition of Assets

Your Board was pleased to announce on 15 July 2015 that, subject to HMRC and regulatory approvals, it had reached agreement in principle with the board of Rensburg AIM VCT plc ("Rensburg") to acquire the assets of Rensburg pursuant to a scheme of reconstruction following completion of a tender offer in which Rensburg intends to offer its shareholders the opportunity to buy back their shares for cash up to a value of £5 million.

The Scheme will involve Rensburg being placed into members' voluntary liquidation and the transfer of its assets and liabilities, in consideration for new ordinary shares in the Company being issued directly to Rensburg shareholders.

Our Manager has agreed to pay the costs incurred by the Company in relation to the Scheme.

The Shareholders of Rensburg voted in favour of the Scheme on 27 November 2015 and tender offers have been received totalling approximately £3.0 million. The Net Asset Value of Rensburg following the Tender Offer is expected to be approximately £12 million. Rensburg is a VCT with the majority of its qualifying investments being in AIM companies, some of which the Company already holds as an investment. The acquisition is expected to result in the Company acquiring additional qualifying investments to support VCT qualification, while simultaneously increasing the net asset base over which annual running costs are spread, thereby benefitting all Shareholders.

It is not expected that further authorities will be required from Shareholders to implement the Scheme. The Scheme will, however, require the further approval of Rensburg shareholders. The acquisition should also be outside the provisions of The City Code on Takeovers and Mergers.

Outlook

Softening demand in China and other emerging economies, greater financial market volatility and higher levels of risk aversion are creating a more challenging backdrop for UK businesses. Helping to offset this, the U.S. has been maintaining a reasonably healthy recovery and the Euro Zone as a whole has returned to economic growth. While external risks will continue to demand attention, the management teams of many smaller UK based businesses remain positive about their opportunity to maintain growth.

In performance terms, the Company has experienced another good year, which in large part remains due to careful stock selection and prudent portfolio management. This cautious, disciplined and selective approach to investing and managing the Company's assets has proved successful over many years and will be maintained.

The current outlook for the majority of investee companies held in the portfolio continues to be positive. The management teams of these businesses are generally experiencing increased levels of demand for their products and services and they therefore remain confident of delivering further growth in earnings and dividends, which in turn should help deliver satisfactory returns to Shareholders in the current financial year.

I would like to take this opportunity to thank all Shareholders for their continued support of the Company and to invite you to attend the Company's Annual General Meeting ("AGM"), which is due to be held on 11 February 2016 at The Great Chamber, The Charterhouse, Sutton's Hospital, Charterhouse Square, London EC1M 6AN. Full details are given on page 63 of the Annual Report.

Peter Dicks

Chairman

11 December 2015

STRATEGIC REPORT

The purpose of this Strategic Report is to inform Shareholders of the Company on several 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 below also includes what is believed to be a balanced and comprehensive analysis of the development of the business during the financial year and the position of the Company's investments at the end of the year.

The Company and its Business Model

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

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

The Company is an externally managed fund with a Board comprising of 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 5 of the Annual Report. Further information on each of the service providers is outlined in the Corporate Governance Statement on page 35 of the Annual Report.

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

The Board's Strategy

 Investment objective and policy

The Company's investment objective and policy is shown on the inside front cover of the Annual Report.

To achieve this objective, the Company's strategy is to invest in companies which meet the criteria referred to in the investment policy, which requires the Investment Manager to identify and invest in a diversified portfolio, predominantly of VCT qualifying companies quoted on the Alternative Investment Market ("AIM').

Performance during the year

As at 30 September 2015, the audited NAV of the Company was 155.6 pence per share, having risen by 11.9 pence from 143.7 pence per share at the start of the financial year under review. After adding back the dividend of 6.0 pence per share paid in the year, this is a total return to Shareholders of 17.9 pence or 12.5% of the opening NAV for the year. In comparison, the total return from the FTSE AIM All-Share Index, although not a representative benchmark due its weighting in mining and oil exploration stocks, was negative 2.1% over the same period. The audited net assets of the Company were £124.6 million at the financial year end.

At the financial year end, there were 53 active VCT qualifying companies held in the portfolio. Most of these businesses are cash generative and operate with strong balance sheets. The Investment Manager continues to focus on a select number of key metrics in order to monitor and assess the financial health of these businesses. These metrics continue to improve for most of the companies held in the portfolio. As a starting point, investment in new companies is typically only made if a company is profitable at the time of first investment.

In the year to 30 September 2015, a total of £2.9 million was realised through the sale of investments while £24.0 million was raised from an Offer for Subscription. Capital amounting to £19.5 million was deployed in new investments while approximately £4.2 million was paid out as dividends to Shareholders. A further £3.2 million was spent on share buybacks and in meeting the operating costs of the Company.

Over the 12 months to 30 September 2015 there was a net gain on investments of £14.9 million and the total profit on ordinary activities was £14.2 million, equivalent to earnings of 19.2 pence per share. The profit on the revenue account was £823,000. At the financial year end, the portfolio consisted of 53 qualifying and 19 non-qualifying investments in active businesses.

Since the merger with Unicorn AIM VCT II plc, which was completed in March 2010 when all share classes merged, the total return to Shareholders has been 97.8%, including the payment of 26 pence per share in tax free dividends to qualifying Shareholders.

Key Performance Indicators

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

-      Net asset value ("NAV") per share, cumulative dividends paid & cumulative total shareholder return

-      Earnings per share

-      Running costs

Further details can be found on pages 6 and 7 of the Annual Report.

• Running Costs

The Ongoing Charges of the Company for the financial year under review represented 2.2% (2014: 2.5%) of average net assets, which remains competitive when compared with other AIM focused VCTs.

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

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

Key Events during the Year

During the year, the Company sought Shareholders' approval to update the Investment Policy. A circular was sent to Shareholders giving details of the change and the resolution was passed on 14 August 2015. The revised Investment Policy is shown on the inside front cover of the Annual Report.

The Company raised £24.0 million and issued 17,191,119 shares as part of an Offer for Subscription details of which are given in note 14 of the Annual Report.

As stated in the Chairman's Statement, the Company announced on 15 July 2015 that, subject to HMRC and regulatory approval, a scheme of reconstruction would be put to the Shareholders of Rensburg. This was approved by Rensburg shareholders on 27 November 2015 and the Company will acquire the assets of Rensburg, in consideration for the issue of new Ordinary Shares in the Company to Rensburg shareholders.

Key Policies

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

• Dividend policy

The Board remains committed to a policy of maintaining a steady flow of dividend distributions to Shareholders from the income and capital gains generated by the portfolio. Dividend payments during the period amounted to £4.2 million, equivalent to 6.0 pence per share. Since the original launch of Unicorn AIM VCT in 2001, Shareholders have, in aggregate, received approximately £37.8 million in dividend distributions, including those paid to former shareholders in Unicorn AIM VCT II plc.

The Board has considered the payment of a final dividend for the financial year ended 30 September 2015, and is recommending a final dividend of 6.25 pence per share (income: 1.0 pence; capital: 5.25 pence) to Shareholders, payable on 19 February 2016 to Shareholders on the register on 29 January 2016.

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

• 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, given the limited secondary market for VCT shares generally, and to seek both to enhance NAV and to reduce, to a degree, any prevailing discount to NAV in the current market price that might otherwise prevail. The Board agrees the discount to NAV at which shares will be bought back and keeps this under regular review. The Board seeks to maintain a balance between the interests of those wishing to sell their shares and continuing Shareholders.

The Company has continued to buy back shares for cancellation at various points throughout the financial year in accordance with the above policy. A total of 1,279,000 shares with a nominal value of £12,790 were purchased for cancellation during the course of the year, at an average price of 128.5 pence per share, for a total consideration of £1.6 million. At the financial year end, the Company's shares were quoted at a price of 137.0 pence per share representing a discount to NAV per share of 12.0%.

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

• Principal risks and uncertainties

The Directors have carried out a review of the principal risks faced by the Company as part of the internal controls process, as outlined below. Note 19 to the Financial Statements on pages 56 to 61 of the Annual Report also provides information on the Company's financial risk management objectives and exposure to risks.

Risk	Possible consequence	How the Board guards against risk
Investment and strategic risk	Unsuitable investment strategy or stock selection could lead to poor returns to shareholders.	-     Regular review of investment strategy by the Board. -     Careful consideration of the performance of the investment portfolio on a regular basis. -     All unquoted investments require pre- investment authorisation from the Board.
Regulatory and tax risk	The Company is required to comply with the Companies Act 2006, ITA, The Alternative Investment Fund Managers Directive ("AIFMD") (as applicable to small registered UK AIFMs), UKLA Rules and UK Accounting Standards. Breaching these rules may result in a public censure, suspension from the Official List and/or financial penalties. There is a risk that the Company may lose its VCT status under the ITA. Should this occur, Shareholders may lose any upfront income tax relief they received and be taxed on any future dividends paid and capital gains received if they dispose of their shares.	-     Regulatory and legislative developments are kept under review by the Board. -     The Company's VCT qualifying status is continually reviewed by the Investment Manager and Administrator. -     PricewaterhouseCoopers LLP has been retained by the Board to undertake an independent VCT status ongoing monitoring role.
Operational risk	The Company has no employees and is therefore reliant on third party service providers. Failure of the systems at third party service providers could lead to inaccurate reporting or monitoring. Inadequate controls could lead to the misappropriation of assets.	-     Internal control reports are provided by service providers on a regular basis. -     The Board considers the performance of the service providers annually and monitors activity on a monthly basis.
Fraud and dishonesty risks	Fraud may occur involving company assets perpetrated by a third party, the Investment Manager or other service provider.	-     Internal control reports are provided by service providers on a regular basis. -     The Administrator is independent of the Investment Manager.
Financial Instrument risks	The main risks arising from the Company's financial instruments are due to fluctuations in their market prices, interest rates, credit risk and liquidity risk.	-     The Board regularly reviews and agrees policies for managing these risks and full details can be found in Note 19 of the Annual Report.
Economic risk	Events such as recession, inflation or deflation and movements in interest rates could affect trading conditions for smaller companies and consequently the value of the Company's investments.	While no single policy can obviate such risks the Company invests in a diversified portfolio of companies, whilst maintaining adequate liquidity.

The Regulatory Environment

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

Human rights

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

Diversity

The Directors are aware of the need to have a Board which, as a whole, comprises an appropriate balance of skills, experience and diversity. Appointments to the Board are made according to expertise and knowledge. The Board currently comprises four male non-executive Directors and the Board has confirmed that it is content with its current composition but will review this during the current year. The Board will, consider gender diversity in making future appointments.

Anti-bribery policy

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

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

Environmental and social responsibility

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

Viability Statement

The Board has considered the need to confirm that the Company is able to meet all liabilities when due and that it can continue to operate for a period of at least twelve months from the date of signing the Annual Report. The Directors state on pages 27 and 28 of the Annual Report that they consider the Company is a going concern over this timeframe.

Under the revisions to the UK Corporate Governance code there is a new requirement that the Board also has to consider its operations over the longer term.

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

In order to maintain viability, the Company has a detailed risk control framework which has the objective of reducing the likelihood and impact of: poor judgement in decision-making; risk-taking that exceeds the levels agreed by the Board; human error; or control processes being deliberately circumvented.

These controls are reviewed by the Board on a quarterly basis to ensure that controls are working as prescribed. In addition, reviews of all service providers are undertaken regularly.

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

• The Company has a diversified investment portfolio including over £11 million invested in readily realisable listed shares and a further £10 million in open ended funds and cash. The Company therefore has sufficient liquidity in the portfolio.

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

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

• The Company has no debt or other external capital funding.

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

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

Prospects

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

For and behalf of the Board

Peter Dicks

Chairman

11 December 2015

Investment Manager's Review

The audited net assets of the Company as at 30 September 2015 totalled £124.6 million, representing an all-time high of 155.6 pence per share. After adding back dividends paid of 6 pence per share in the period, the total return amounted to 17.9 pence for the year or 12.5% upon the opening NAV of 143.7 pence per share.

Alternative Investment Market (AIM) Review

In the year ended 30 September 2015, the FTSE AIM All-Share Index delivered a disappointing total return of -2.1%. The decline in the value of the Index was mainly caused by the rapid fall in the oil price during the year. The collapse in energy prices created particularly challenging trading conditions for junior oil & gas exploration companies, which have historically accounted for a significant proportion of Index value as a whole.

The Alternative Investment Market (AIM) is celebrating its 20th anniversary this year and despite setbacks from specific sectors, it remains a vibrant, rapidly evolving market with a significant number of potential investee companies from which to choose. As at 30 September 2015, there were over 1,000 different businesses listed on AIM, with a combined market capitalisation of over £72 billion. This makes AIM easily the largest junior investment market in Europe and a natural place for young and fast growing companies to seek their first public listing.

The small size, lack of maturity and limited profitability of smaller quoted companies are often cited as reasons for avoiding investment on AIM. While these concerns may be understandable, they are arguably misplaced. For example, approximately one quarter of all the businesses currently listed on AIM are forecast to pay a dividend in their current financial year, which is testament to the balance sheet strength and cash generative, profitable nature of these businesses.

Analysis of the qualifying holdings within the Company's portfolio also reveals some surprising facts. At the time of writing, the largest qualifying holding in the portfolio; Abcam, had a market capitalisation of more than £1 billion. There are two companies within the portfolio that have market capitalisations of £250 million or more, ten that are valued at more than £100 million, and a further seventeen holdings that have market capitalisations of between £20 million and £100 million.

Performance Review

The total return performance of the Company was again strong during the period under review.

The predominant theme during the year was one of continued improvement in the trading environment for a significant proportion of the companies held in the portfolio. Customer demand for specialised products and services, particularly those with a clear and rapid payback on investment, has been steadily increasing. Following a number of years during which achieving revenue growth was difficult, we are now in a more benign economic environment, enabling many of our businesses to grow their top line sales, which typically results in substantially improved profitability.

The investment portfolio remains diversified both by number of holdings and by sector exposure. At the financial year end, the portfolio consisted of 53 active VCT qualifying companies and 19 non-qualifying investments. These investments are spread across 17 different sectors.

A review of the key contributors to performance (both positive and negative) and a summary of the main purchases and disposals made during the year follows.

Review of Qualifying Investments (bracketed figures represent the mid-price share price movement for the year under review or, if purchased after 30 September 2014, since the date of investment):-

Abcam (+45%) is a global leader in the supply of innovative protein research tools. The business has experienced another successful year of solid revenue and profit growth. Highlights included a 14.2% growth in total revenues to £144 million while earnings per share increased by 9.1% to 18.6 pence per share (2013/14: 17.0 pence). The closing net cash balance also grew to £58.7 million (30 June 2014: £56.9 million), while a full year dividend increase of 5.9% to 8.2 pence per share (2013/14: 7.75 pence) was proposed. The new financial year is reported to have started well.

Animalcare Group (+46%) is a leading supplier of veterinary medicines. Animalcare's results for the financial year ended 30 June 2015 highlighted revenue and gross profit growth of 5.1% and 6.0% respectively. Animalcare is a cash generative business that remains debt free and is therefore in a strong financial position to invest in future growth. The proposed dividend was increased by 10.9% and given the company's strong balance sheet, the Animalcare board expects to maintain this progressive dividend policy during the current investment phase. By continuing to invest in, and develop, enhanced veterinary generic pharmaceuticals, Animalcare should be able to deliver further sustained growth over the next three to five years.

Anpario (+25%) is a specialist producer of natural feed additives that promote animal health, hygiene and good nutrition. For the financial half-year ended 30 June 2015, Anpario recorded an 8% increase in profit before tax from continuing operations to £1.6 million (2014: £1.5 million) as the business continued to focus on selling specialist, higher margin feed additives into growth markets. The balance sheet remained strong with net cash balances of £7.9 million at 30 June 2015 (31 Dec 2014:

£6.6 million). Anpario's strategy of international expansion continued to be successful, with strong profit growth achieved in the Americas and Asia Pacific of 17% and 11% respectively. The subsidiary in China also made healthy progress with sales in the region growing by 31%, albeit from a low base. The second half of Anpario's financial year is reported to have started well and the management team remain confident of delivering further growth.

Avingtrans (-18%) is a designer, manufacturer and supplier of critical components to the global aerospace, energy and medical sectors. Following disappointing interim results for the six month period ended 30 November 2014, Avingtrans' management team quickly implemented a restructuring and cost reduction programme in order to manage lower levels of activity from both aerospace and oil and gas customers. Having responded swiftly, management were able to contain the impact on full year profits and have recently reported better than expected results for the company's financial year ended 31 May 2015. In the full year, revenue decreased by 4% to £57.8 million (2014: £60.3 million), while adjusted profit before tax decreased by 16%, to £2.9 million (2014: £3.5 million). Net debt increased in the period to £5.9 million (31 May 2014: £3.6 million), as a result of restructuring costs and continued investment in capability and capacity. Gearing however, remained at a manageable 17% (2016: 11%), while the full year dividend was increased by 11% to 3 pence per share, reflecting management's confidence in the outlook for the business.

Castleton Technology (+137%) is a provider of software and managed services to the public and not-for-profit sectors. In its financial year ended 31 March 2015, Castleton completed four acquisitions of software and IT services assets, while simultaneously growing revenues organically. The acquisitions were funded by way of two over-subscribed placings of new Castleton shares, which in aggregate raised £7.8 million. Given the high quality nature of the software and IT services assets that Castleton has acquired, the business now has the potential to become the market leading supplier of software and IT services to the social housing sector. The management team at Castleton is now focused on fully integrating the acquired companies with the aim of delivering additional value to the customer base. The new financial year is reported to be progressing well, with the Group as whole trading in line with market expectations.

Cohort (+32%) is an independent technology group, primarily operating in defence and related markets. At the end of September, Cohort released an AGM statement and trading update, which reported on continued strong trading. Having delivered record levels of revenue, operating profit and net cash in the financial year ended 30 April 2015, the three main operating businesses; SCS, SEA and MASS, all continue to trade well, while the acquisitions of MCL and J+S are also reported to be making a positive contribution. The net cash balance at the financial year end was £19.7 million, after total expenditure of £17 million on acquisitions. The group's order book remains strong at £134 million, with around 66% of expected 2015/16 revenue underpinned by customer orders. This is an encouraging figure, since it represents a slightly higher percentage compared to the previous year.

Crawshaw Group (+36%) is a retailer of fresh meat and food-to-go, which continues to deliver strong organic and acquisitive growth. In its interim results for the six months ended 31 July 2015, the business recorded a 42% increase in total sales to £16.7 million (2014: £11.8million), which translated into 27% growth in adjusted profits before tax to £0.9 million (2014: £0.7 million). Following the acquisition of a competitor together with a number of new store openings, Crawshaw ended its first half with 33 retail outlets. The expansion plan, which is expected to be largely self-funding, should hopefully see the business grow to more than 200 retail outlets over the next few years. Growth of this scale requires investment in infrastructure and in accelerated opening costs, which will inevitably depress profitability during the expansion phase. The business retains a strong balance sheet however, with net cash at the financial year end of £6.0 million. The strength of the balance sheet, together with positive cash flow from the underlying estate, should be sufficient to support the store opening programme, while leaving funds available to maintain a modestly progressive dividend policy.

Driver Group (-38%) is a global management and advisory consultancy firm focused on the construction and engineering industries. In a pre-close trading update released in October 2015, Driver Group announced that revenues in the second half of its financial year were at record levels, driven by organic growth of 20%. As a result, the group's cash position is expected to be marginally better than market expectations, Short term working capital requirements will, however, mean an increase in debt during the coming year, before cash generative profits return the group to a positive cash position in the medium term. Underlying operating profits for the year ended 30 September 2015 are reported to be in line with market expectations, but approximately £0.5 million of exceptional costs are expected.

Eclectic Bar Group (-66%) is an operator of premium bars located in major towns and cities across the UK. Eclectic operates nineteen premium bars across a number of concepts. The financial year ended 28 June 2015 was something of a disaster, with the group experiencing extremely challenging trading conditions, resulting in a loss before tax of £6.2 million following a significant impairment of fixed assets and goodwill. Management have responded to the challenging trading conditions by reducing head office costs, closing non- profitable sites and renegotiating its principal supply contracts. The benefit of these cost savings should be felt during the group's current financial year. In addition, Luke Johnson, a serial entrepreneur, best known for his involvement in Pizza Express, has been appointed as executive chairman, and has also acquired an 18.8% stake in the business as part of a £1.6 million share placing.

Hardide (-49%) is a provider of advanced surface coating technology to a wide range of applications. In a pre-close trading update, ahead of the publication of preliminary results for the year ended 30 September 2015, Hardide announced that it expects to report preliminary year end results that are in line with current market expectations. Unfortunately, after a record first six months, the business experienced weaker demand in the second half of its financial year. This is a direct result of reduced activity in the global oil and gas sector. Despite this setback, Hardide continues to make progress in diversifying its customer base, both geographically and by sector. Potentially significant customer trials are reported to be advancing well.

Mattioli Woods (+42%) is a specialist wealth management and employee benefits business. In its financial year ended 31 May 2015, the group achieved revenue growth of 17.8% to £34.6 million (2014: £29.4 million), while adjusted earnings per share grew by a modest 0.8% to 27.5p (2014: 27.3p). Basic earnings per share fell by 9.8% to 19.8p (2014: 22.0p), with 6.8% growth in operating profits offset by a significant increase in the effective rate of taxation to 24.0% (2014: 16.3%). Total client assets under management, administration and advice increased by 16.8% to £5.4 billion at the financial year end. Growth in fees, based on the value of clients' assets under management and advice, increased recurring revenues to 81.4% (2014: 78.1%) of revenue, with the value of discretionary assets under management now in excess of £1 billion. The proposed total dividend has been increased by 15.4% to 10.5p (2014: 9.1p), while the balance sheet remained strong, with net cash of £10.6 million (2014: £9.5 million) at the period end. After the financial year end, the financial position was further strengthened as a result of a placing of new shares, which raised gross proceeds of £18.6 million. The new funds will provide flexibility to pursue further acquisition opportunities and increase headroom on regulatory capital requirements.

Pressure Technologies (-75%) is a designer and manufacturer of high pressure stainless steel cylinders, which are used in a variety of specialised applications. The group has pursued a strategy of diversification in recent years, but, despite this, revenues remain weighted towards the oil and gas sector. Due to the significant and prolonged weakness in the global oil price, oil exploration companies have materially reduced capital spending on new projects. Unsurprisingly, this has had a negative impact on the group's order book. As a result, expectations for the current financial year have been revised downwards. Pressure Technologies' share price fell sharply during the period under review; however the holding is being retained in anticipation of a strong recovery in value once energy prices rise.

Redcentric (+48%) is a leading UK IT managed services provider. The business offers a range of IT and Cloud services designed to support organisations as they migrate from traditional IT infrastructure to the Cloud. After the end of the period under review, Redcentric released Interim Results covering its six months to 30 September 2015. The results confirmed that trading remained in line with market expectations, underpinned by continued strong organic growth in recurring revenues. In addition, Redcentric reported on healthy new business activity, referring to some notable, £1 million plus, contract wins.

Tangent Communications (-68%) is a digital marketing and printing specialist. Operational issues and a challenging trading environment continue to depress the share price of Tangent. In an AGM statement released in June 2015, the board of Tangent acknowledged the scale of the problem. Forecasts for the remainder of their financial year have now been significantly lowered due mainly to under performance in their digital agency business, Tangent Snowball. Unfortunately, Tangent Snowball has not developed the expected pipeline of new business and this has ultimately resulted in the group having to issue a profit warning. Management change has now been implemented in this division but the lack of new business means that profits within Tangent Snowball are likely to be at least £0.5 million below expectations. Net cash at the end of the year is expected to be in excess of £2 million.

Tracsis (+14%) is a leading provider of software and technology led products and services for the transportation industry. The group announced a strong set of interim results in April 2015, which demonstrated that Tracsis continues to benefit from increased demand across all areas of the business. A trading update released in August confirmed that this momentum had been maintained across the group's three key divisions. Full year results are now expected to be ahead of both the previous financial year and market forecasts. The board has reported that group revenue will be circa £25 million (2014: £22.4 million) with adjusted pre-tax profit expected to be comfortably ahead of market expectations of £5.5 million. Pleasingly, the year-end cash balance was in excess of £12 million (2014: £8.9 million), and the business remains debt free.

Tristel (+45%) is a developer and manufacturer of infection control, contamination control and hygiene products. The results for the financial year ended 30 June 2015 were released in October 2015 and revealed that turnover had increased by 14% to £15.3 million, while pre-tax profits grew by 44% to £2.6 million. Encouragingly, sales growth was achieved both in the UK and overseas, with overseas sales contributing a meaningful 36% of the group total. As a result of a lower than expected tax rate, basic earnings per share increased by 67% to 5.4p. The business is inherently cash generative and, as a result, net cash on the balance sheet at the financial year end grew by £1.3 million to £4.0 million. The total dividend per share increased to 5.7p (2014: 1.6p), which included a special dividend of 3p per share. The management team believe that the business is well placed to take advantage of current trends in the global disinfection market and the outlook for the group remains promising.

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

Non-qualifying investments performed well in the period under review, with the most notable contributions to performance coming from Arbuthnot Banking Group (+34%), BCA Marketplace (+14%), Epwin Group (+29%), Macfarlane Group (+28%), Pinewood Group (+13%), Renold (+27%) and Sinclair IS Pharma (+38%). There were no material disappointments among the non-qualifying investments.

Investment Activity

In terms of new investment, the financial year under review was another productive period.

In total, ten new investments were made, at a total cost of just over £11.5 million. Four of these investments were in VCT qualifying companies that are new to the portfolio, while the remainder, including the purchase of units in the Unicorn Outstanding British Companies Fund, were in new non-qualifying investments. Although it is still early days, the performance of these new investments has been pleasing. In aggregate, the unrealised capital gain on these new investments was £2.3 million as at the financial year end, which is equivalent to a return on investment of 20.6%.

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

Belvoir Lettings (-2%) is one of the UK's largest residential property lettings franchises. In September, Belvoir released interim results for the six months ended 30 June 2015, which highlighted strong growth in Management Service Fees of 14% to £1.8 million (H1 2014: £1.5 million) while profit after tax was maintained at £0.6 million (H1 2014: £0.6 million). As part of its stated expansion strategy, Belvoir has recently completed two acquisitions, each of which was part-funded by oversubscribed VCT qualifying share placings. The Company participated in both of these fundraising rounds, committing £1.9 million of capital in exchange for a near 4% stake in the enlarged business. As a consequence of the acquisitions, the Belvoir network now stands at 211 outlets nationwide. Trading in the second half of Belvoir's financial year is traditionally stronger than the first half and there appears to be no reason why this year should be any different. Trading since the period end is reported to be in line with expectations.

European Wealth Group (+5%) is a wealth management group. In June 2015, the Company participated in a placing of new VCT qualifying shares in European Wealth Group in order to help the business deliver its next phase of planned growth. A total of £1.8 million was committed to this new investment, which equates to an ownership stake in European Wealth of slightly below 10%. In September 2015, the group announced unaudited interim results for the six month period to 30 June 2015, which highlighted healthy growth in funds under management to £1.1 billion (30 June 2014: £0.8 billion). As a result, group revenue for the period increased by 90% to £3.8 million (H1 2014: £2.0 million) and, although this translated to a loss before tax for the period of £0.4 million (H1 2014: £0.3 million profit), this was due to significant investment in people and systems.

Stride Gaming (+118%) is a multi-branded online gaming operator focused primarily on low stake, high frequency bingo games. The business listed on AIM in May 2015, having successfully raised £11.2 million of new funding. The Company invested £1.4 million in the VCT qualifying shares of Stride Gaming at this time. Stride is a profitable business run by a management team with a proven record of success in the gaming sector. The business has subsequently released a series of positive updates and management recently confirmed that strong trading has continued in the second half of the financial year. As a result, net gaming revenue for the financial year ended 31 August 2015 is expected to be not less than £25 million, while earnings before interest, tax, depreciation and amortisation should be not less than £7 million. Share price performance has been strong during Stride's first months as a publicly quoted company.

Totally (+89%) is a provider of a range of services to the healthcare sector. The group's principal activities are the design, implementation and delivery of services designed to help individuals better understand their health and promote long term behaviour change, which in turn is aimed at reducing reliance on the NHS. In September 2015, Totally completed a £1 million placing of VCT qualifying shares with institutional and other investors and appointed Bob Holt, chairman of Mears Group PLC, as its new non-executive chairman. The Company participated in this fundraising in the belief that health coaching will become a key tool in the Government's drive to reduce hospital admission rates and lessen the burden on the public sector caused by avoidable ill health. It is expected that the net proceeds of this first subscription will be used to roll out the first phase of Totally's direct-to-consumer clinical health-coaching service and to further develop the company`s existing business-to-business health-coaching offering.

The main investments in new non-qualifying companies were:-

BCA Marketplace (+14%) is the market leader in the European used vehicle marketplace operating in 13 countries and selling approximately one million vehicles per annum. The business was formerly known as British Car Auctions and was renamed after being acquired in 2014 by a new management team who used an AIM listed cash shell to achieve a public listing for the group. The acquisition was funded by an equity issue of £1.0 billion and a term loan of £200 million accompanied by a move from the AIM Index to the FTSE All-Share Index. Trading performance in the brief period since listing has been positive. Group auction volumes in the first quarter have increased to 274,300 units; a 7.7% improvement compared with the same quarter in 2014. Revenue for the period increased by 17.8% to £243.4 million and adjusted EBITDA, increased to £23.0 million. In a trading statement released on 25 August 2015, the board of BCA confirmed that the underlying business was continuing to perform well, while highlighting that it is actively evaluating projects designed to accelerate growth and increase capacity.

Communisis (+8%) is a leading provider of personalised customer communication services. In July, the business reported interim results for the six months ended 30 June 2015, which demonstrated strong growth in profitability, operating margin and earnings per share, while also highlighting improved free cash flow and reduced bank debt. As a consequence, the proposed dividend was increased for the fifth consecutive year, in line with the board's stated progressive dividend policy. Recent success in winning and retaining important multi-year contracts from new and existing customers means that the board has expressed confidence in delivering further revenue growth, together with improving profitability and cash generation in the remainder of the group's current financial year.

Pinewood Group (+13%) is a world leading studio and production services operator to the film, television and computer gaming industries. The group's audited results for the financial year ended 31 March 2015 confirmed another year of record revenues, which translated into strong earnings and dividend growth. Revenues grew to £75.0 million (year ended 31 March 2014: £64.1 million), while basic earnings per share increased by 17% to 13.5p (year ended 31 March 2014: 11.5p). Cash generated from operations was also strong at £18.4 million (year ended 31 March 2014: £14.0 million), a 31% increase on the previous year. This healthy cash flow has enabled the board to declare a 47% increase in the final dividend to 2.8p per share (year ended 31 March 2014: 1.9p). Encouragingly, the current financial year is reported to have started strongly.

In addition to securing attractive and interesting new investment opportunities, a number of existing holdings were also increased in size through secondary investment in both VCT qualifying and non-qualifying shares. In total, almost £8 million of new capital was deployed in this way, of which about 40% was VCT qualifying. A brief summary of these investments follows:-

The City Pub Company (East and West) is an unquoted, predominantly freehold, pub business founded in December 2011. At the start of the financial year under review the total VCT qualifying investment in City Pubs amounted to £1.0 million. A further VCT qualifying investment of £1.3 million was made in October 2014. This was followed by a £2 million, non-qualifying investment in new convertible preference shares. The convertible preference shares attract interest of 6% per annum and are convertible at 160 pence per share. Both City Pub companies are continuing to experience stronger than expected trading. An independent valuation of the combined City Pub property assets has recently been completed, indicating that tangible net asset value has increased to 140 pence per share. The Company's investments in the equity of The City Pub Company (East & West) were made at 100 and 120 pence per share respectively.

A further five follow-on VCT qualifying investments were made. The largest of these was a £1.25 million commitment to support an acquisition proposed by Interactive Investor, a leading online investment platform for retail investors. £500,000 was committed to APC Technology Group, £300,000 each to Castleton Technology and EG Solutions and £250,000 to Dillistone Group. All of these were follow-on investments in established companies within the portfolio and were made to assist these companies in achieving their growth plans.

Additional follow-on investments were made in Gama Aviation (£750,000) and Macfarlane Group (£201,000). Due to their large size, neither of these companies met HMRC's VCT qualifying rules.

A holding in Kainos Group was acquired when the company listed on the main market in July 2015 and was subsequently sold, realising a capital gain of 41.6%.

Realisations

Realisations totalling £2.9 million were made in the financial year to 30 September 2015. Two holdings from the non- qualifying portfolio were sold in the open market generating a total capital profit of £140,000.

Merger and acquisition activity resulted in one VCT qualifying company; Accumuli, being acquired by a quoted competitor. Accumuli is a leading UK-based IT security specialist, which announced in March 2015, that it had reached agreement with NCC Group, an independent provider of escrow, assurance and internet domain services, on the terms of a recommended offer pursuant to which NCC Group acquired the entire issued ordinary share capital of Accumuli. This acquisition completed on 30 April 2015. The shares offered by NCC Group as consideration for the acquisition have been retained in the portfolio for the time being, since they remain qualifying for VCT purposes for a period of up to two years, by virtue of the fact that NCC Group is a fully listed UK company. The investment in Accumuli, made in November 2010, has been another notable success for the Company's portfolio, with the carrying value of the holding, at the period end date, being over 5 times original book cost.

There was one outright sale of an unquoted, VCT qualifying, investment. Synarbor is a recruitment business focused on the UK education sector that was bought by a private equity firm during the period. Synarbor had been held in the portfolio for many years, but the business struggled as a publicly quoted company and de-listed from AIM in 2008. Since that time, some recovery in value has been achieved, but the sale nonetheless crystallised a loss on book cost of £722,000.

Shortly before the Company's financial year end, Alkane Energy, one of the UK's fastest growing independent power generators, received a recommended cash bid from Balfour Beatty. The position in Alkane was therefore realised in full, at a figure that was close to book cost.

Partial disposals were made in a number of holdings. These disposals were predominantly of non-qualifying holdings, thereby improving the percentage of total assets invested in VCT qualifying companies. Including partial disposals, the total realised capital gain from the sale of investments amounted to £0.5 million.

Prospects

The financial year to 30 September 2015 was another period of solid progress for the Company.

From the Investment Manager's perspective, one of the most pleasing aspects of this progress has been the continued growth and development achieved by so many of the investee companies. Having confronted and survived the extremely difficult trading conditions that prevailed during the financial crisis and subsequent economic downturn, it is very encouraging to see many of these businesses now in a position to grow their revenues in a meaningful way. A significant proportion of these businesses have been held in the portfolio for at least five years, and, during this time, they have managed to deliver impressive growth despite, at times, facing exceptionally difficult trading conditions. The outlook for these businesses appears brighter today than it has for many years.

The investment portfolio continues to hold a diverse range of established and predominantly profitable businesses, that typically operate in specialised niche markets offering sustainable long term growth potential. As a result, we remain optimistic that many of these investment holdings can continue to prosper and grow over time.

The percentage of total assets held in VCT qualifying companies remains above the threshold required by HMRC and, as highlighted in the Strategic Report, the proposed acquisition of the assets of Rensburg should further improve this percentage.

Meanwhile, the existing portfolio of investments continues to strengthen and develop and, as a result, we remain confident that the established strategy can deliver further attractive returns for Shareholders.

Chris Hutchinson

Unicorn Asset Management Limited

11 December 2015

EXTRACT FROM DIRECTORS' REPORT

Share Capital

At the year-end there were 80,080,231 (2014: 64,168,112) Ordinary shares of 1p each in issue, none of which are held in Treasury. The issues and buybacks of the Company's shares during the year are shown in note 14 of the Annual Report. Subsequent to the year end, the Company bought back 100,000 shares. At the date of this announcement the Company therefore had 79,980,231 shares in issue. All shares are listed on the main market of the London Stock Exchange.

Going concern

After due consideration, the Directors believe that the Company has adequate resources for the foreseeable future and that it is appropriate to apply the going concern basis in preparing the financial statements. As at 30 September 2015, the Company held cash balances with a value of £1.95 million. The majority of the Company's investment portfolio remains invested in fully listed and AIM quoted equities which may be realised, subject to the need for the Company to maintain its VCT status. Cash flow projections covering a period of at least twelve months from the date of approving the financial statements have been reviewed and show that the Company has sufficient funds to meet both contracted expenditure and any discretionary cash outflows from buybacks and dividends. The Company has no external loan finance 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 are required to prepare the Financial Statements and have elected to prepare the Company's Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP') (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.

In preparing these financial statements the Directors are required to:

- select suitable accounting policies and then apply them consistently;

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

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

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

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

Website publication

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

Directors' responsibilities pursuant to DTR4

The Directors confirm to the best of their knowledge:

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

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

For and on behalf of the Board

Peter Dicks

Chairman

11 December 2015

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2015 or 30 September 2014 but is derived from those accounts. Statutory accounts for the year ended 30 September 2014 have been delivered to the Registrar of Companies and statutory accounts for the year ended 30 September 2015 will be delivered to the Registrar of Companies in due course. The Auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's reports can be found in the Company's full Annual Report and Accounts at www.unicornaimvct.co.uk.

PRIMARY FINANCIAL STATEMENTS

Income Statement

for the year ended 30 September 2015

				Year ended				Year ended
				30 September 2015				30 September 2014
		Notes		Revenue	Capital	Total		Revenue	Capital	Total
				£'000	£'000	£'000		£'000	£'000	£'000
Net unrealised gains on investments				-	14,384	14,384		-	8,048	8,048
Net gains on realisation of investments				-	470	470		-	3,855	3,855
Income		2		1,885	-	1,885		1,232	-	1,232
Investment management fees		3		(477)	(1,430)	(1,907)		(382)	(1,145)	(1,527)
Other expenses				(585)	-	(585)		(500)	-	(500)
Profit on ordinary activities before taxation				823	13,424	14,247		350	10,758	11,108
Tax on profit on ordinary activities				-	-	-		-	-	-
Profit on ordinary activities after taxation for the financial year				823	13,424	14,247		350	10,758	11,108
Basic and diluted earnings per share:
Ordinary Shares		5		1.11p	18.12p	19.23p		0.57p	17.60p	18.17p

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

There were no other recognised gains or losses in the year.

The total column of this statement is the profit and loss account of the Company.

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

The notes below form part of these financial statements.

Balance Sheet

As at 30 September 2015

		30 September 2015			30 September 2014
	Notes	£'000	£'000		£'000	£'000
Non-current assets
Investments at fair value			122,582			91,105
Current assets
Debtors		367			190
Current investments		1			1
Cash at bank		1,952			1,170
		2,320			1,361
Creditors: amounts falling due within one year		(286)			(254)
Net current assets			2,034			1,107
Net assets			124,616			92,212
Capital
Called up share capital			801			642
Capital redemption reserve			37			24
Share premium account			37,206			13,372
Revaluation reserve			49,322			32,320
Special reserve			27,927			34,402
Profit and loss account			9,323			11,452
Equity Shareholders' funds			124,616			92,212
Net asset value per share of 1 pence each:
Ordinary shares	6		155.61p			143.70p

The financial statements were approved and authorised for issue by the Board of Directors on 11 December 2015 and were signed on their behalf by:

Peter Dicks

Chairman

The notes below form part of these financial statements.

Reconciliation of Movements in Shareholders' Funds

For the year ended 30 September 2015

			30 September 2015		30 September 2014
	Notes		£'000		£'000
Opening Shareholders' funds at 1 October 2014			92,212		73,673
Share capital raised  - net of expenses			24,006		13,448
Share capital bought back - including expenses			(1,643)		(2,462)
Profit for the year			14,247		11,108
Dividends paid	4		(4,206)		(3,555)
Closing Shareholders' funds at 30 September 2015			124,616		92,212

Cash Flow Statement

For the year ended 30 September 2015

		30 September 2015			30 September 2014
	Notes	£'000	£'000		£'000	£'000
Operating activities
Investment income received		1,699			1,209
Investment management fees paid		(1,907)			(1,527)
Other cash payments		(474)			(578)
Net cash outflow from operating activities			(682)			(896)
Investing activities
Purchase of investments		(19,542)			(17,380)
Sale of  investments		2,855			9,456
			(16,687)			(7,924)
Equity dividends
Dividends paid	4		(4,206)			(3,555)
Net cash outflow before liquid resource management and financing			(21,575)			(12,375)
Management of liquid resources
Decrease in current investments			-			153
Financing
Shares issued as part of Offer for Subscription (net of transaction costs)		24,000			13,448
Shares bought back		(1,643)			(2,462)
			22,357			10,986
Net increase/(decrease) in cash			782			(1,236)

The notes below form part of these financial statements.

NOTES TO THE ACCOUNTS

1        Basis of accounting

A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below:

a)  Basis of accounting

The accounts have been prepared under UK GAAP and the SORP issued by the Association of Investment Companies in January 2009.

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

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

2        Income

	2015	2014
	£'000	£'000
Income from investments:
-  from equities	1,610	1,016
-  from loan stocks	196	168
-  from money-market funds and Unicorn managed OEICs	79	48
Total income	1,885	1,232
Total income comprises:
Dividends	1,689	1,064
Interest	196	168
	1,885	1,232
Income from investments comprises:
Listed UK securities	339	83
Unlisted UK securities  - (AIM and unquoted companies)	1,546	1,149
	1,885	1,232

3        Investment Manager's fees

	2015	2015	2015	2014	2014	2014
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Unicorn Asset Management Limited	477	1,430	1,907	382	1,145	1,527

Unicorn Asset Management Limited ("UAML") receives an annual management fee of 2% of the net asset value of the Company, excluding the value of the investments in the OEICs, which are also managed by UAML. The annual management fee charged to the Company is calculated and payable quarterly in advance. In the year ended 30 September 2015, UAML also earned fees of £52,000 (2014: £69,000), being OEIC management fees calculated on the value of the Company's holdings in each OEIC on a daily basis. This management fee is 0.75% per annum of the OEIC value for each of Unicorn Smaller Companies OEIC, Unicorn UK Growth OEIC (formerly Unicorn Free Spirit OEIC), Unicorn Mastertrust OEIC and Unicorn Outstanding British Companies OEIC.

The management fee will be subject to repayment to the extent that there is an excess of the annual costs of the Company incurred in the ordinary course of business over 3.6% of the closing net assets of the Company at the year end. There was no excess of expenses for 2014/15 or the prior year.

Under an Amended Incentive Agreement with UAML dated 12 April 2010, the Investment Manager is entitled to a performance incentive fee of 20% of any cash distributions (by dividend or otherwise) paid to Shareholders in excess of 6 pence per Ordinary share paid in any accounting period - "the target return" and subject to the maintenance of a net asset value (NAV) per share of 125 pence or more, as calculated in the Annual Report and accounts for the year relating to such payments. The target return applies for accounting periods starting after 1 October 2010. In the event that the target return of 6 pence per share is not paid in a particular accounting period, the shortfall of such distributions will be carried forward to subsequent accounting periods and any incentive fee will not be payable until this shortfall is met. No incentive fee is payable for the year ended 30 September 2015 and none was due for the year ended 30 September 2014.

4        Dividends

	2015		2014
	£'000		£'000
Amounts recognised as distributions to equity holders in the year:
Final capital dividend of 5.50 pence (2014: 5.25 pence)per share for the year ended 30 September 2014 paid on 20 February 2015	3,856		3,110
Final income dividend of 0.50 pence (2014: 0.75 pence)per share for the year ended 30 September 2014 paid on 20 February 2015	350*		445
	4,206		3,555

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

 * The amount actually paid in dividends for 2014 differs from that shown in last year's Annual Report as 6,428,546 shares were issued and 495,000 bought back between 1 October 2014 and the record date of 16 January 2015.

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

	2015		2014
	£'000		£'000
Revenue available for distribution by way of dividends for the year	823		350
Proposed final income dividend of 1.00 pence (2014: 0.50 pence) for the year ended 30 September 2015	800**		340*

          **based on 79,980,231 shares in issue at the date of this announcement.

5        Basic and diluted earnings and return per share

	2015		2014
	£'000		£'000
Total earnings after taxation:	14,247		11,108
Basic and diluted earnings per share (Note a)	19.23p		18.17p
Net revenue from ordinary activities after taxation	823		350
Revenue earnings per share (Note b)	1.11p		0.57p
Total capital return	13,424		10,758
Capital earnings per share (Note c)	18.12p		17.60p
Weighted average number of shares in issue in the year	74,087,534		61,135,718

Notes

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

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

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

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

6        Net asset values

	2015		2014
	£'000		£'000
Net Assets	124,616		92,212
Number of shares in issue	80,080,231		64,168,112
Net asset value per share	155.61p		143.70p

7        Dividends

The Directors have proposed a final dividend of 6.25 pence per share. The dividend will be paid on 19 February 2016 to Shareholders on the Register on 29 January 2016.

Shareholders who wish to have dividends paid directly into their bank account rather than sent by cheque to their registered address can complete a mandate for this purpose. Mandates can be obtained by telephoning the Company's Registrars, Capita Asset Services on [phone], or by writing to them at Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or register on the Portal at https://www.capitashareportal.com or emailing them at [e-mail].

8        Post balance sheet events

On 10 November, the Company repurchased 100,000 Ordinary Shares, representing 0.12% of the share capital in issue, for cancellation at a total cost of £143,000 equivalent to 143.0 pence per share.

Rensburg shareholders voted in favour of the merger with the Company at a General Meeting held on 27 November 2015 and subject to the remaining Rensburg shareholders approving the resolutions to be proposed at a second General Meeting called for 12 January 2016 the Company is expecting to complete the merger during January 2016.

9        Statutory information

These are not full accounts in terms of section 434 of the Companies Act 2006. The Annual Report for the year to 30 September 2015 will be sent to Shareholders shortly and will then be available for inspection at 2 Barnfield Crescent, Exeter EX1 1QT, the registered office of the Company. Copies of the Annual Report will shortly be available on the Investment Manager's website, details of which can be found at www.unicornaimvct.co.uk.  Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The audited accounts for the year ended 30 September 2015 contain an unqualified audit report.

10     Annual General Meeting

The Annual General Meeting of the Company will be held at 11.30 am on Thursday, 11 February 2016 at The Great Chamber, The Charterhouse, Suttons Hospital, Charterhouse Square, London EC1M 6AN.

 

11     National Storage Mechanism

A copy of the 2015 Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/NSM.

Contact details for further enquiries:

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

Jon Carslake at ISCA Administration Services Limited (the Company Secretary) on 01392 487056 or by e-mail on unicornaim [e-mail] 

DISCLAIMER

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

 

END

 

 

FR TBBLTMBABMTA