Final Results

Unicorn AIM VCT PLC 23 November 2005 Unicorn AIM VCT plc 23 November 2005 Preliminary results for the year ended 30 September 2005 Chairman's Statement The Company continued to make encouraging progress during the year and its performance compares favourably with that of most other VCTs. The Net Asset Value (NAV) of the Ordinary Share Fund as at 30 September 2005 was 103.5 pence per share and 109.2 pence per share for the Series 2 ('S2') Share Fund. The Board is pleased to recommend a final dividend of 5 pence per share for the Ordinary Fund Shareholders, totalling 10 pence per share for the full year (10 pence per share in 2004), and an increased dividend of 1 penny per share for S2 Shareholders (0.75 pence per share in 2004). The Board's policy is to maximise the stream of dividend distributions to Shareholders from the income and capital gains generated by the portfolio. Whilst the latter objective is likely to take some time for the S2 Share Fund, the goal is to return realised gains to Shareholders whilst maintaining the NAV at around 100 pence per share. Your Company continued to comply with the VCT legislative requirements in the period. The Ordinary Share Fund is now four years old and has exceeded the minimum required level of 70% of funds being invested in qualifying investments. Other HM Revenue & Customs tests have been complied with and your Board has been advised that the Ordinary Share Fund has maintained its venture capital trust status. The 70% qualifying target for the S2 Share Fund has to be met by September 2006. In the year to 30 September 2005 the Ordinary Share Fund made thirteen new qualifying investments and four follow-on investments at a total cost of £6.6 million. Three of the new qualifying investments were in existing Alternative Investment Market (AIM) quoted companies, eight were new admissions to the AIM and two were unquoted investments. The S2 Share Fund participated alongside the Ordinary Share Fund increasing the total invested by that Fund in qualifying investments to £6.0 million. At the year-end the Ordinary Share Fund had 36 qualifying investments and the S2 Share Fund had 20 qualifying investments. These figures include two qualifying investments, Belgravium Technologies and Datong Electronics, which began trading shortly after the financial year-end. Ordinary Fund Shareholders who have held their investment for the minimum three-year term under the VCT regulations, are now able to sell their holding without losing the income tax relief received at the time of investment. Shareholders considering selling shares should be aware that a disposal could crystallise the capital gain that may have been deferred when making this investment. Shareholders are therefore advised to consult their financial adviser before making a decision. During the period under review 1,425,000 Ordinary Shares and 20,000 S2 Shares were bought back for cancellation at a total cost of £1.4 million while 10,225 new S2 Shares were issued at 100 pence per share. The Company continues to hold substantial reserves and to date has distributed £9.3 million to Shareholders through a regular programme of share buy-backs and dividend distributions. The Board will continue to monitor the market in the Company's shares and make further market purchases as appropriate. Shareholders may be aware that there have been some recent changes to UK accounting rules. These will apply to the Company for the first time in the current financial year and further details will be set out in the 2006 Interim Report. One change which will have a direct impact on the NAV of the Company is the requirement to value quoted investments at the bid price as opposed to using the mid-market price. Had bid prices been used for the year-end valuation, the NAV at 30 September 2005 would have reduced from 103.5 pence to 99.9 pence for the Ordinary Share Fund and from 109.2 pence to 108.0 pence for the S2 Share Fund. The Board is pleased with the progress achieved to date and is confident that your Investment Manager's focus on proven, profitable, established businesses will deliver attractive returns for Shareholders. Peter Dicks Chairman For further information please contact: Sean O'Flanagan, Unicorn Asset Management Limited, Tel: 020 7253 0889 Investment Manager's Review Investment policy It is the aim of the Investment Manager to identify and invest in a diversified portfolio of companies 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. Performance The NAV of the Ordinary Share Fund as at 30 September 2005 was 103.5 pence per share, representing an increase of 9.6% over the previous year after adding back dividends paid. Since the first allotment on 5 November 2001 the initial NAV of the Ordinary Share Fund has increased by 32.2% on a total return basis. The NAV of the S2 Share Fund at 30 September 2005 was 109.2 pence per share, representing an increase of 16.7% over the previous year after adding back dividends paid. Since the first allotment on 5 February 2004 the initial NAV of the S2 Fund has increased by 17.4% on a total return basis. The AIM has grown significantly during recent years in the number of companies, the size of companies and the diversity of sectors they serve. The stringent criteria for AIM qualifying investments means that many constituent companies are not available for investment and therefore, comparison of performance versus the AIM indices has become less relevant. Investment strategy The adopted investment policy has avoided over-ambitious start-ups in new markets, which require a leap of faith and have been priced as though they have already succeeded. Instead, the Investment Manager has focused on the strength of companies' balance sheets and the inherent ability to pay progressive dividends, thereby safeguarding capital and maximising the tax-free income stream available to Shareholders. AIM market review Despite our concerns at certain sectors of the AIM, specifically the resource sector (which now represents over 30% of the AIM Index), we believe that the number and quality of companies that satisfy our investment criteria is increasing. Qualifying investments The performance of the qualifying investments made in previous years continues to be encouraging and the overall quality of the Ordinary Share Fund was enhanced following the sale of Cobra Bio-Manufacturing, Eckoh Technologies, Ingenta and Screen. Inevitably we have experienced some disappointments during the year in particular Centurion Electronics, Invox and Longbridge International. On a more positive note the Ordinary Share Fund received two cash offers and witnessed excellent results from Glisten, Printing.com and TRL Electronics. In recognition of AttentiV's established market position in the credit management software market the group received a cash offer from a Nordic IT services company during the year providing a 55% return in just over 12 months. Nectar Taverns successfully created a chain of 29 freehold public houses and a 111% return was realised upon exit shortly before the year-end reflecting an uplift in property valuations and resilient trading. Following this success a similar unquoted vehicle, Amber Taverns, was created using the same structure and management team. In addition, Tellings Golden Miller returned 60 pence per share via a special dividend following the sale of the London bus division. This compares favourably with the 70 pence per share initially subscribed and reflects the increased focus upon the regional coach business. Your Manager has sought to identify growth businesses that are easy to understand but which have significant barriers to entry. Two such examples are eg solutions and Sanastro. eg solutions provides proprietary workflow management software designed to improve operational efficiencies to large back offices with a focus upon financial services. The group is currently operating in one of the fastest growing sub-sectors of the IT industry and the new money will provide the ambitious management team with additional sales and marketing resource to expand into the public sector and new geographic regions. Sanastro is an unquoted publishing group with a number of established titles focusing upon financial services. Rather than seeking to maximise short-term profits the group has invested in increased editorial and marketing costs in order to increase brand recognition and contractual income. Although your Manager remains optimistic about the long-term prospects for the company the Board has prudently reduced the value of the Company's holding in Sanastro to reflect the impact of increased investment on the forecast results. Buy and build models have proved very popular on the AIM. The new money raised for Access Intelligence, Avingtrans, Careforce Group, Lees Foods, Maxima Holdings, Sanderson Group and Urban Dining provides a currency for proven entrepreneurs with a track record of creating significant shareholder value to consolidate an industry or sector. Access Intelligence provides a range of information and IT services to small and medium sized businesses and the public sector. The experienced board intends to build a business with a high element of recurring revenue through acquisition. Avingtrans was established to create a specialist engineering company focusing on the manufacture of precision engineered components. The group is currently achieving record results reflecting the opportunistic nature of the acquisitions combined with a recovery in the underlying market. Careforce Group provides domiciliary care services, primarily for the elderly in their own homes. New money was raised to accelerate the rate of growth in a market with an ageing UK population and the irreversible trend for local authorities to outsource services to private partners. Lees Foods is a manufacturer of confectionery products which it supplies to major UK food retailers. Lees is a well-invested, cash generative, business seeking to replicate the success of similar vehicles such as Glisten, by expanding out of the group's core northern heartland, raising brand awareness and increasing product innovation. Maxima Holdings and Sanderson Group have similar business models developing software modules designed to meet the operational needs of a broad range of UK based customers. Both businesses benefit from a high element of recurring revenue due to contracted support and maintenance income and a general improvement in business confidence has recently re-invigorated top-line growth. Maxima particularly, has enjoyed a successful debut as a public company exceeding initial expectations. In order to enable the conservative management team to build a high quality business a follow-on investment was made to support an earnings-enhancing acquisition. Urban Dining was supported as a newly created cash shell to build a substantial quoted restaurant group by acquiring branded concepts. To date the management team has successfully completed the acquisition of Tootsies Restaurants, a well established and simple burger bar concept with significant roll-out potential. Your Company has also supported four transactions advised by Marwyn Capital. This relatively new corporate finance boutique has focused upon businesses facing increased regulation and legislation and has proved effective at exploiting the price differential at which private vendors are willing to sell their businesses and the multiple the quoted market is willing to pay. Augean acquired two hazardous waste landfill sites in anticipation of new legislation extending the definition of hazardous waste and restricting the methods of treatment. The group is expected to benefit from upward pressure on gate prices due to a lack of future potential landfill sites combined with an onerous planning and licensing application process. Inspicio was formed as a cash shell to seek opportunities in the inspection and testing market. Shortly after the year end the group acquired Inspectorate, a global verification services business focusing upon the commodities and food safety markets. Talarius acquired the Quicksilver high street chain of coin operated gaming centres. The group has a profitable, highly cash generative core business providing the opportunity to consolidate a fragmented industry and develop an online offering. Zetar acquired Kinnerton, a well-invested niche manufacturer of chocolate confectionery specialising in childrens' and adult confectionery novelties. Kinnerton provides the experienced management team with the opportunity to build a pan-European food business. The sale of AFA Systems, AttentiV Systems Group, Nectar Taverns and Spring Grove Property Maintenance to trade buyers reflects the Unicorn investment style and the increasing maturity of the portfolio. Corporate activity may well be an ongoing feature within the portfolio during the next 12 months. The average market capitalisation of the qualifying investments at the financial year-end increased to over £25 million. In the current financial year 31 of the qualifying investments are forecast to report a profit and 17 are expected to pay a dividend. We continue to believe that the pragmatic, and conservative Unicorn approach of focusing upon proven, established, cash generative business models will serve investors well over the coming years. Non-qualifying portfolio The performance record of the Unicorn Free Spirit Fund and Unicorn Mastertrust Fund remains excellent and both are amongst the top performing funds within their respective sectors from launch. Whilst the relative performance of the Unicorn UK Smaller Companies Fund has been disappointing, the Fund has nevertheless provided a positive absolute return. Moreover it is believed that the contrarian decisions taken by the Fund are likely to be rewarded with above average returns over the longer term as consumer spending slows and news from the industrial and business service sectors of the economy continues to improve. Prospects The Investment Manager is pleased with the progress achieved to date and is confident that the focus on identifying well-managed, entrepreneurial driven businesses will deliver attractive returns for Shareholders over the longer term. Non-Statutory analysis between the Ordinary Share and S2 Share Funds Statement of Total Return for the year ended 30 September 2005 Ordinary Share Fund S2 Share Fund Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Gains and losses on - 2,916,084 2,916,084 - 2,581,729 2,581,729 investments Income 643,894 858,103 1,501,997 287,897 - 287,897 Investment (194,143) (582,428) (776,571) (53,966) (161,899) (215,865) management fees Other expenses (352,913) - (352,913) (164,900) - (164,900) Return on ordinary 96,838 3,191,759 3,288,597 69,031 2,419,830 2,488,861 activities before taxation Tax on ordinary - - - (6,396) 6,396 - activities Return attributable 96,838 3,191,759 3,288,597 62,635 2,426,226 2,488,861 to equity shareholders Dividends in respect (166,721) (3,228,953) (3,395,674) (55,179) (102,331) (157,510) of equity shares Transfer (from)/to (69,883) (37,194) (107,077) 7,456 2,323,895 2,331,351 reserves Return per ordinary share 0.28p 9.34p 9.62p 0.40p 15.39p 15.79p Average number of shares in issue 34,190,165 15,761,353 Adjustments Total of both Funds (per Statutory Profit and Loss account) Ordinary S2 Shares Shares Fund Fund Capital Capital Revenue Capital Total £ £ £ £ £ Gains and losses on investments (1,128,894) (2,488,232) - 1,880,687 1,880,687 Income 931,791 858,103 1,789,894 Investment management fees (248,109) (744,327) (992,436) Other expenses (517,813) (517,813) - Return on ordinary (1,128,894) (2,488,232) 165,869 1,994,463 2,160,332 activities before taxation Tax on ordinary activities (6,396) 6,396 - Return attributable to (1,128,894) (2,448,232) 159,473 2,000,859 2,160,332 equity shareholders Dividends in respect of (221,900) (3,331,284) (3,553,184) equity shares Transfer (from)/to reserves (1,128,894) (2,488,232) (62,427) (1,330,425) (1,392,852) Note: The adjustment columns represent unrealised gains in the year, which are part of the capital component of the total shareholder return for the year. However, they are not reported in the Profit and Loss account, to which the 'Total of both funds' columns reconcile to. These unrealised gains (total being £3,617,126) are however reported as part of the Statement of Total Recognised Gains and Losses. Balance Sheet as at 30 September 2005 Ordinary Share Fund S2 Share Fund £ £ Fixed assets Investments 31,956,779 14,767,779 Current assets Debtors and prepayments 2,254,446 41,956 Current investments 2,603,792 3,160,792 Cash at bank 49,897 29,131 ----------- ------------ 4,908,135 3,231,879 Creditors: amounts (2,364,386) (803,312) falling due within one year ----------- ------------ Net current assets 2,543,749 2,428,567 =========== ============ Net assets 34,500,528 17,196,346 =========== ============ Capital and reserves Called up share capital 333,442 157,433 Share premium account - 10,148 Revaluation reserve 8,252,144 2,529,528 Capital redemption 16,555 302 reserve Special distributable 23,944,613 14,458,547 reserve Profit and Loss account 1,953,774 40,388 =========== ============ Equity shareholders' 34,500,528 17,196,346 funds =========== ============ Number of shares in 33,344,234 15,743,314 issue Net asset value per 1p 103.47p 109.23p Share Adjustment Total of both funds (see note below) (per Statutory Balance Sheet) £ £ £ Fixed assets Investments 46,724,558 Current assets Debtors and (93,280) 2,203,122 prepayments Current investments 5,764,584 Cash at bank 79,028 (93,280) 8,046,734 Creditors: amounts 93,280 (3,074,418) falling due within one year Net current assets 4,972,316 Net Assets - 51,696,874 Capital and reserves Called up share 490,875 capital Share premium account 10,148 Revaluation reserve 10,781,672 Capital redemption 16,857 reserve Special distributable 38,403,160 reserve Profit and Loss 1,994,162 account Equity shareholders' 51,696,874 funds Note: The adjustment above nets off the inter-fund debtor and creditor balances, so that the 'Total of both funds' balance sheet agrees to the Statutory balance sheet. Profit and Loss Account For the year ended 30 September 2005 30 September 2005 30 September 2004 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Gains/(losses) on - 1,880,687 1,880,687 - 941,964 941,964 realisation of investments Income 931,791 858,103 1,789,894 854,348 - 854,348 Investment (248,109) (744,327) (992,436) (231,936) (695,808) (927,744) management fees Other expenses (517,813) - (517,813) (442,889) - (442,889) ------------- --------------- -------------- -------------- ------------- -------------- Profit on ordinary 165,869 1,994,463 2,160,332 179,523 246,156 425,679 activities before taxation Tax on ordinary (6,396) 6,396 - - - - activities ------------- -------------- ------------- ------------- ------------- ------------- Profit on ordinary 159,473 2,000,859 2,160,332 179,523 246,156 425,679 activities after taxation for the financial year Dividends in (221,900) (3,331,284) (3,553,184) (118,148) (3,476,923) (3,595,071) respect of equity shares ------------- --------------- -------------- ------------- -------------- ------------- Retained profit/ (62,427) (1,330,425) (1,392,852) 61,375 (3,230,767) (3,169,392) (loss) for the year transferred to/ (from) reserves ======== ========= ========= ======== ======== ======== Earnings per share Ordinary Shares 6.32p 1.15p S2 Shares 0.00p 0.20p All the items in the above statement derive from continuing operations. Statement of Total Recognised Gains and Losses for the year ended 30 September 2005 30 September 2005 30 September 2004 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Profit for the 159,473 2,000,859 2,160,332 179,523 246,156 425,679 year Unrealised gains 3,617,126 3,617,126 1,763,696 1,763,696 on revaluation of - - investments Total recognised 159,473 5,617,985 5,777,458 179,523 2,009,852 2,189,375 gains during the year Return per share: Ordinary Shares 0.28p 9.34p 9.62p 0.20p 5.80p 6.00p S2 Shares 0.40p 15.39p 15.79p 0.96p (0.11)p 0.85p Note of Historical Cost Profits and Losses for the year ended 30 September 2005 30 September 2005 30 September 2004 Profit on ordinary 2,160,332 425,679 activities before taxation Realisation of 885,981 1,639,713 revaluation gains of previous years Historical cost 3,046,313 2,065,392 profit on ordinary activities before taxation Historical cost (506,871) (1,529,679) profit/(loss) for the year after taxation and dividends Balance Sheet as at 30 September 2005 30 September 2005 30 September 2004 £ £ Fixed assets Investments 46,724,558 40,629,972 Current assets Debtors and prepayments 2,203,122 126,077 Current investments 5,764,584 7,606,909 Cash at bank 79,028 2,861,302 ----------- ------------ 8,046,734 10,594,288 Creditors: amounts falling due (3,074,418) (365,844) within one year ----------- ------------ Net current assets 4,972,316 10,228,444 =========== ============ Net assets 51,696,874 50,858,416 =========== ============ Capital and reserves Called up share capital 490,875 505,223 Share premium account 10,148 - Revaluation reserve 10,781,672 8,050,527 Capital redemption reserve 16,857 2,407 Special distributable reserve 38,403,160 42,147,756 Profit and loss account 1,994,162 152,503 =========== ============ Equity shareholders' funds 51,696,874 50,858,416 =========== ============ Net asset value per share of 1 Basic Basic pence each Ordinary Shares 103.47p 103.49p S2 Shares 109.23p 94.43p Cash Flow Statement for year ended 30 September 2005 Year ended Year ended 30 September 2005 30 September 2004 Operating activities £ £ Dividends received 1,575,700 477,923 Deposit and similar interest 11,245 378,865 Investment management fees paid (992,436) (927,744) Other cash payments (487,777) (397,951) ----------- ----------- Net cash inflow/(outflow) from 106,732 (468,907) operating activities Investing activities Purchase of investments (10,765,279) (19,522,977) Sale of investments 9,196,261 12,709,837 ----------- ----------- (1,569,018) (6,813,140) Equity dividends Payment of dividends (1,846,688) (3,634,240) ----------- ----------- Net cash outflow before financing (3,308,974) (10,916,287) and liquid resource management Financing Issue of S2 shares (net of expenses) 10,250 14,903,715 Purchase of own shares (1,325,875) (188,408) ----------- ----------- (1,315,625) 14,715,307 Management of liquid resources Increase/(decrease) in current 1,842,325 (994,601) investments =========== ============ Net (increase)/decrease in cash (2,782,274) 2,804,419 =========== ============ Reconciliation of net revenue before taxation to net cash outflow from operating activities 2005 2004 £ £ Profit/(loss) on ordinary activities before taxation 2,160,332 425,679 (Gains)/losses on realisation of investments (1,880,687) (941,964) Decrease/(Increase) in debtors (155,164) 1,896 Increase in creditors and accruals 31,440 45,482 Dividend receivable converted into an investment (49,189) - Net cash outflow from operating activities 106,732 (468,907) Notes 1. The audited results for the year ended 30 September 2005 have been prepared under the historical cost convention, modified to include the revaluation of investments, and in accordance with applicable accounting standards and, to the extent that it does not conflict with the Companies Act 1985, the 2003 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies. 2. These are not full accounts in terms of section 240 of the Companies Act 1985. The Annual Report for the year to 30 September 2005 will be sent to shareholders shortly and will then be available for inspection at One Jermyn Street, London SW1Y 4UH, the registered office of the Company. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The audited accounts for the year ended 30 September 2005 contain an unqualified audit report. 3. In accordance with the policy statement published under ' Management, Fees and Administration' in the Company's prospectus dated 2 October 2001, the Directors have charged 75% of the investment management expenses to the capital reserve. 4. Total earnings after taxation for the year were £2,160,332 (2004: £425,679), comprising a profit on the Ordinary Shares Fund after taxation of £2,159,703 (2004: £402,389), and a profit after taxation on the S2 Shares Fund of £629 (2004: £23,290). The basic earnings per Ordinary Share is based on the net profit from ordinary activities and on 34,190,165 (2004:34,847,936) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year. The basic earnings per S2 Share is based on the net profit from ordinary activities and on 15,761,353 (2004: 11,564,057) S2 Shares, being the weighted average number of S2 Shares in issue during the year. The revenue return per Ordinary Share is based on the net revenue from ordinary activities after taxation of £96,838 (2004: £68,377) and on 34,190,165 (2004: 34,847,936) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year. The revenue return per S2 Share is based on the net revenue from ordinary activities after taxation of £62,635 (2004: £111,146) and on 15,761,353 (2004: 11,564,057) S2 Shares, being the weighted average number of S2 Shares in issue during the year. The capital return per Ordinary Share is based on net realised capital gains of £1,787,190 (2004: £941,964), on net unrealised capital gains of £1,128,894 (2004: £1,688,240), capital income of £858,103 (2004:£nil) capital expenses of £582,428 (2004: £607,952) and on 34,190,165 (2004: 34,847,936) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year. The capital return per S2 Share is based on net realised capital gains of 93,497 (2004: £nil), on net unrealised capital gains of £2,488,232 (2004: £75,456), capital expenses of £155,503 (2004: £87,856) and on 15,761,353 (2004: 11,564,057) S2 Shares, being the weighted average number of S2 Shares in issue during the year. 5. The Ordinary fund has paid a dividend of 5 pence per Ordinary Share during the year, costing £1,728,462. A final dividend of 5 pence per Ordinary Share will be paid to Ordinary Fund Shareholders on 30 January 2006 to shareholders on the register on 6 January 2006, costing £1,667,212 in total. 0.5 pence of this proposed dividend is an income dividend and the remaining 4.5 pence represents a capital dividend. 6. A final dividend of 1 penny per S2 Share will be paid to S2 Shareholders on 30 January 2006 to shareholders on the register on 6 January 2006, costing £157,433 in total. 0.35 pence of this proposed dividend is an income dividend and the remaining 0.65 pence represents a capital dividend. 7. The Annual General Meeting of the Company will be held at 11.00 am on 20 January 2006 at One Jermyn Street, London SW1Y 4UH. This information is provided by RNS The company news service from the London Stock Exchange

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