TIDMUAVT
Unicorn AIM VCT II plc
4 March 2009
Final results for the year ended 31 December 2008
Investment Objective
The objective of the Company is to provide Shareholders with an attractive
return from a diversified portfolio of investments predominantly in the shares
of AIM-quoted companies. This will be achieved by maximising the stream of
dividend distributions to Shareholders from the income and capital gains
generated by the portfolio.
To achieve Venture Capital Trust qualifying status, 70% of the
Company's total investments must be invested in qualifying investments within
three years of each share issue.
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 displays a majority of the following
characteristics:
- experienced and well-motivated management;
- products and services supplying growing markets;
- sound operational and financial controls; and
- good cash generation to finance development allied with a
progressive dividend policy.
Asset allocation and risk diversification policies, including
maximum exposures, are to an extent governed by prevailing VCT legislation.
Specific conditions for HMRC approval of VCTs include the requirement that at
no time must any single holding represent more than 15% (by value) of the
Company's investments.
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 regular basis. When the Investment Manager proposes to make
an investment in an unquoted company the prior approval of the Board is
required.
Where capital is available for investment while awaiting suitable
VCT qualifying opportunities, or in excess of the 70% VCT qualification
threshold, it may be invested in collective investment funds or in
non-qualifying shares and securities of smaller listed UK companies.
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 20% of net assets, should circumstances suggest
that such action is in the interests of Shareholders.
Chairman's Statement
The twelve months to 31 December 2008 were an extraordinarily
difficult period for equity markets. The crisis in the global financial system
triggered a rapid and comprehensive collapse in investor & consumer
confidence, which in turn has tipped developed economies around the world into
recession. The prospect of earnings declining, coupled with severe difficulty
in securing debt funding meant that many UK quoted companies across all
sectors, suffered significant and sustained falls in their market value. In
the year under review, the FTSE All-Share Index fell by almost 30% on a total
return basis, whilst the FTSE AIM All-Share Index declined by almost 62%.
Almost all classes of equity investment have been affected by the
recent turmoil and the performance of your Company has been no exception. It
is disappointing to report that as at 31 December 2008, the Net Asset Value
(NAV) of the Ordinary Share Fund was 67.54 pence per share representing a
decline in the period of 31.82% after adding back dividends paid, whilst the
NAV of the C Share Fund fell 35.65% to 58.07 pence per share. The
non-qualifying OEIC holdings accounted for approximately 17% of the Ordinary
Share Fund decline and 44% of the C Share Fund decline during the year.
The NAVs quoted above reflect an upward adjustment for reclaim of
VAT from HMRC of 0.8 of a penny per Ordinary Share and 0.4 of a penny per C
Share. The Company is in the process of claiming this amount from HMRC and
expects to receive proceeds in the near future.
As shareholders will be aware, the technical requirements of AIM
based VCTs are such that the Investment Manager has limited flexibility to
reposition portfolios. Because of the rules imposed by HMRC, at least 70% of
the Company's total assets must be held in VCT qualifying investments. The
available investment universe therefore consists of smaller, illiquid, AIM
quoted companies which tend to suffer disproportionately in times of fear and
uncertainty. Given these constraints and despite serious setbacks from a
number of investee companies, the Funds have at least weathered the storm
significantly better than the FTSE AIM AllShare Index.
Unsurprisingly, given market conditions, the flow of new VCT
qualifying investment opportunities during the past twelve months has been
significantly weaker than in previous years. As a result, there have been
relatively few changes to the Ordinary Share Fund which made three new
investments in VCT qualifying companies and participated in one secondary
fundraising. The total cost of these purchases was GBP934,000 whilst total
proceeds from partial disposal of non-qualifying investments amounted to
GBP2.1m. The C Share Fund added six new businesses to its VCT qualifying
portfolio and made two follow on investments in existing holdings at a
combined total cost of GBP1.04m. Partial disposal of non-qualifying investments
raised GBP1.1m. The scale of new investment in the Funds was modest in
comparison to previous years reflecting the Investment Manager's cautious
approach.
At the financial year end, the portfolio of the Ordinary Share Fund
contained forty-two VCT qualifying companies, whilst the C Share Fund
portfolio comprised twenty-seven qualifying investments. Further details on
the performance of both Funds and on the companies in which the Funds have
invested can be found in the Investment Manager's Review below.
Following the closure of a small top-up Share Offer in April 2008,
a total of 276,628 new Ordinary Shares and 79,246 new C Shares were issued.
The Board would like to take this opportunity to welcome new Shareholders to
the Company.
During the period 1,306,593 Ordinary Shares were bought back for
cancellation at an average price of 68.5 pence per share.
The Board has previously stated that it will seek to maximise the
stream of tax free dividend distributions to Shareholders whilst maintaining
the NAV in each Fund at around 100 pence per share. Because of the extremely
difficult market conditions experienced in recent months, the NAVs of both
Funds are currently considerably below this level. After careful consideration
of the reserves available for distribution and the cash resources available to
fund such a distribution, the Board is proposing to pay a capital dividend of
1 pence per share to holders of Ordinary Shares (see note 5 below). The Board
does not propose paying a dividend to holders of C Shares at this time.
Although showing significant and painful declines, the NAVs in both
Funds nonetheless performed significantly better than the FTSE AIM All-Share
Index, thus reversing the experience of the previous year. As highlighted in
last year's Annual Report, the AIM has developed a significant concentration
in a small number of sectors. Despite heavy falls, the Oil & Gas and Mining
sectors still accounted for almost 28% of the FTSE AIM All-Share Index by
value as at the end of December 2008. It is worth repeating that your Company
does not invest in businesses operating in these areas of the market since
they tend to be early stage and unprofitable. In addition, under existing HMRC
legislation they typically fail to achieve VCT qualifying status.
Unfortunately, during the past twelve months, a considerable number
of investee companies were obliged to issue profit warnings. In the majority
of cases, these warnings were related to the rapidly deteriorating economic
conditions rather than being specifically caused by internal issues. However,
in certain cases, the level of debt and the difficulties associated with
attempting to refinance that debt has become an insurmountable problem. As a
result of funding difficulties Fishworks, Greatfleet and Shieldtech have all
been forced to suspend trading in their shares pending clarification of their
financial position. Sadly, in the case of Greatfleet, administrative receivers
have since been appointed and, since the year end, Fishworks has also
appointed administrators. The carrying value of each of these investments has
been written down to zero in the portfolios in which they were held.
It has to be expected that there will be many more companies which
become permanent casualties of the current economic downturn and these may
well include companies in which the Funds have invested. However, on a more
positive note, a healthy proportion of the value in each Fund is held in
businesses which are well managed, have little or no debt and which will
almost certainly survive the current malaise.
In summary, both portfolios are now well diversified and the
majority of investments are in companies which remain profitable and cash
generative. Investor sentiment and market conditions will undoubtedly improve
eventually, at which point the Board is confident that the process of
recovering the ground lost in the past twelve months will begin. In the
meantime, the Investment Manager will maintain focus on preserving capital
wherever possible and on selectively taking advantage of investment
opportunities that meet its defined criteria.
Peter Andrews
Chairman
4 March 2009
The Directors confirm that to the best of their knowledge that:
(a) the financial statements, prepared in accordance with UK Generally
Accepted Accounting Practice (UK GAAP) and the 2003 Statement of Recommended
Practice, `Financial Statements of Investment Trust Companies' (SORP), revised
December 2005, give a true and fair view of the assets, liabilities, financial
position and the loss of the Company.
(b) the annual report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that they face.
For and on behalf of the Board:
Peter Andrews
Chairman
Principal risks and uncertainties
The Directors review, and agree policies for managing, the
principal risks faced by the Company as part of the internal controls process
(see the Corporate Governance Statement in the Annual Report for further
information). The principal risks identified by the Directors are:
- Investment and strategic risk - Unsuitable investment strategy or
stock selection could lead to poor returns to shareholders.
- Regulatory and tax risk - The Company is subject to relevant laws
and regulations including Companies Acts 1985 and 2006, Income Tax Act
2007 and UK Listing Authority Rules. There is a risk that the Company may
breach these rules and face 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 Income Tax Act 2007 before shareholders have held
their shares for the minimum period to retain their tax reliefs. Should
the Company lose its VCT status, shareholders may lose any upfront income
tax relief they received and be taxed on any future dividends paid and
capital gain received if they dispose of their shares. Inappropriate
accounting policies or failure to comply with accounting standards could
lead to misreporting or breaches of regulations.
- 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 may lead to the misappropriation or insecurity of
assets.
- Financial Instruments risks - The main risks arising from the
Company's financial instruments are due to fluctuations in the market
price and interest rates, credit risk and liquidity risk. Full details can
be found in note 20 in the Annual Report.
- Economic risk - Economic 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.
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 on a bid price basis as at 31
December 2008 was 67.54 pence per share, representing a decline of 31.82% over
the previous year after adding back dividends paid. Since shares were first
allotted in November 2001, the initial NAV of the Ordinary Share Fund has
decreased by 22.18% on a total return basis.
The NAV of the C Share Fund on a bid price basis was 58.07 pence
per share, which represents a decrease for the year of 35.65% after adding
back dividends paid. The total return on initial NAV is a decline of 36.43%.
Investment Strategy
The policy of investing in companies which have a demonstrable record of
profitability and positive cash generation remains unchanged. The Ordinary
Share Fund and the C Share Fund portfolios are now well diversified both by
sector and by number of investments held. The Funds are now comfortably above
the threshold required to retain VCT qualifying status (whereby a minimum of
70% of combined assets must be invested in VCT qualifying holdings). The
Investment Manager will continue to adopt a highly selective approach to new
investment opportunities for the Funds.
Alternative Investment Market Review
In the year under review, the FTSE AIM All-Share Index fell by
almost 62%.
The past twelve months has been a period of unprecedented global
financial turmoil during which stock markets worldwide have suffered
significant falls. One of the immediate consequences of the rapidly deepening
banking crisis has been a wholesale re-assessment of risk. Smaller quoted
companies, which are traditionally perceived as being at the riskier end of
the investment spectrum, have been hit particularly hard. Liquidity in the
smaller end of the market has almost completely dried up, which in turn has
caused further downward pressure on share prices. In addition, from June 2008
onwards there has been a severe de-rating of the junior mining and oil
exploration stocks quoted on AIM. As commented upon in last year's Review, the
FTSE AIM All-Share Index has been dominated by mining and resource stocks
which together accounted for 32% of the Index by value at the start of 2008.
As the financial crisis deepened, a realisation dawned that demand for oil and
metals was likely to fall dramatically as developed economies entered a period
of recession and as supernormal growth from emerging markets such as China
slowed dramatically. Given their very significant weighting, it is estimated
that between them the Oil and Mining sectors accounted for over twenty
percentage points of the total fall in the FTSE AIM All-Share's Index.
In this environment it is unsurprising that the flow of
opportunities to invest in high quality businesses seeking an initial listing
on AIM also dried up. Fortunately, the portfolios are well invested and the
Company was comfortably above the minimum threshold required to maintain VCT
status with over 75% of total assets held in qualifying investments as at the
financial year end.
Qualifying Investments
The Ordinary and the C Share Funds are well diversified with their
portfolios containing forty-two and twenty-seven qualifying holdings
respectively. However, in the year under review, many of the individual
holdings in these portfolios suffered share price declines that were at least
as steep as the falls suffered by the wider market. Performance in the Funds
was also affected by a higher than average incidence of profit warnings. In
addition, given weak investor appetite, there were very few investee companies
which managed to produce a positive contribution for the year under review.
At the smaller end of the quoted market, companies which fail to
meet expectations invariably get hit hard. In addition, share price declines
tend to be harsher during periods of uncertainty and fear. Unfortunately, many
of our investee companies generated earnings that were lower than originally
anticipated, which, in general, reflects the fact that they have been
operating in a rapidly deteriorating trading environment. The impact on the
share price of these companies has been severe and sadly, in some cases,
terminal. The major contributors to NAV decline in the year include:-
Claimar Care is a provider of domiciliary care services to the
public sector. Claimar has experienced a year of operational difficulties
related to increased labour and fuel costs combined with delays to, and costs
associated with, implementing new contracts. As a result, profits for the
financial year to 30 September 2008 were significantly below expectations. The
management team has since implemented a number of initiatives designed to
stabilise the business and have confirmed that trading in the current
financial year has started well.
Discover Leisure has grown rapidly since flotation in May 2005 to become one of the
UK's leading caravan and leisure industry retailers. However, the Group has built
its market presence primarily through debt-funded acquisitions. A sharp slowdown in
sales of caravans and motorhomes combined with the collapse in commercial property
values experienced over the past twelve months has placed Discover Leisure's balance
sheet under increasing strain. At the end of December 2008, Discover Leisure released
its results for the financial year ended 31 August 2008. The auditors have reported
on these accounts and although their report was unqualified it did include an emphasis
of matter paragraph which highlighted a dependence on continued support from the
Group's bankers and therefore indicates the existence of a material uncertainty which
may cast significant doubt about the Group's ability to continue as a going concern.
Fishworks is a specialist fish restaurant chain. In the past year the Company has
experienced increasingly challenging market conditions as discretionary consumer
spending tightened. Regrettably, administrators were appointed to the Company on
21 January 2009. Discussions with potential buyers of the business are ongoing,
but it has to be considered unlikely that any value will be recovered for shareholders
and the holding has been written down to zero after the year end.
Greatfleet was a specialist recruitment company which, having
struggled to recover from a long history of operational issues under previous
management, found itself operating in an increasingly challenging and
competitive market. Greatfleet suffered a cashflow crisis and despite a change
of management and a modest injection of capital, the Company was eventually
forced into administration by a major creditor in August 2008.
Hexagon Human Capital is a recruitment company specialising in Senior Interim
Management and Executive Search. In the Interim Report released at the end of
November 2008, the Board of Hexagon confirmed that although current trading
levels remain positive, medium term trading conditions were uncertain given the
global economic downturn. Hexagon's share price has suffered a significant decline
over the past twelve months reflecting a collapse in confidence in the prospects
for the recruitment sector as a whole.
Individual Restaurant Company operates thirty-one restaurants
across the UK which predominantly trade under the Piccolino brand name. The
business had been expanding rapidly through a roll-out programme. However, it
is now clear that the programme of new restaurant openings will need to be
shelved for the time being whilst management focus on securing the survival of
the Group in what is a fiercely competitive sector entirely dependent on
discretionary consumer spending.
Maxima Holdings is an IT managed services and systems integration
company, which has grown rapidly through a combination of both organic and
acquisitive growth. Maxima Holdings floated on AIM in November 2004 and has
since completed ten acquisitions. In that time turnover has grown revenues
from approximately GBP10m to over GBP45m per annum, whilst profits before tax have
risen from GBP1m to GBP5.2m. Unfortunately, following the loss of a major client,
the GBP5.2m of pre-tax profit delivered in the year to 31 May 2008 was lower
than expected and the share price more than halved. The business remains
profitable, is inherently cash generative and has manageable levels of debt.
However, it will take an extended period of consistent performance before
investor confidence is restored.
Shieldtech came to AIM in July 2007 with the intention of pursuing a buy and
build strategy focused on acquiring businesses which supply products and services
to the Homeland Security market. The funding environment for small, acquisitive
businesses like Shieldtech has deteriorated significantly and the Group was unable
to secure the financing needed to fund acquisitions. In addition, the core business;
Aegis, which specialises in the manufacture and supply of body armour systems to
police forces, experienced delays to a number of significant expected orders. As
a result of these delays and because the Group had built a central overhead designed
to accommodate a much larger entity, Shieldtech delivered losses in the year to
30 June 2008. Despite a recent trading update confirming strong sales and a return
to profitability for the current financial year, the shares have been suspended
from trading pending the completion of a required re-financing. There can be no
certainty that attempts to re-finance the Company will be successful.
Tangent is a technology led digital marketing group. In 2007
Tangent acquired Ravensworth, a market leader in digital printing.
Ravensworth's revenues were heavily dependent on producing the printed listing
particulars required by Estate Agents and the Group has struggled primarily
because the volume of property transactions has collapsed in the wake of the
emerging financial crisis.
In a particularly difficult year for smaller quoted companies,
there was nonetheless a select group of companies held in the Funds, which
delivered meaningful share price gains and which deserve special mention:-
Abcam is a manufacturer and distributor of therapeutic antibodies
which has successfully exploited web based technology to build a substantial
business targeting the worldwide life science research market. The company has
grown rapidly from humble beginnings in 1998 and now generates annual sales of
more than GBP30m from an online catalogue of over 44,000 products. The business
is inherently high margin and cash generative and prospects for continued
growth remain strong. In the past year, the Board has invested significantly
in expanding their own manufacturing capability. The new facilities are now
complete and production of commercial scale antibodies have commenced. In
time, this initiative should further enhance margins as well as giving Abcam
much greater control over the antibody market as a whole. During the past
twelve months Abcam's share price has risen by 55%, outperforming the FTSE AIM
AllShare Index by over 115%.
Animalcare, Pressure Technologies, Tracsis and Vindon Healthcare
also performed strongly during the year, delivering share price gains of
59.1%, 28.8%, 19.3% and 18.8% respectively.
New Qualifying Investments
In view of the increasingly difficult market conditions, the
Investment Manager made only a limited number of new VCT qualifying
investments during the year under review, including:-
Essentially is an independent sports marketing, media, management and services
agency. In April, the Group raised GBP6m to help fund the acquisition of a successful
and consistently profitable competitor which specialises in stadium perimeter
advertising and which has exclusive arrangements with the owners of some of the
biggest stadia in the UK. This acquisition has now been successfully integrated.
However, the particularly dramatic decline in business confidence experienced in
the second half of 2008 has impacted on the Group's profitability. Earnings for the
financial year to 31 December 2008 are now expected to be significantly below market
expectations.
IS Pharma is a profitable, cash generative and fast growing hospital medicines
business which targets the development and commercial exploitation of late-stage
pharmaceuticals and medical devices in the specialist hospital medicines sector.
In April 2008, the company successfully raised GBP10m to fund the acquisition of
SEPI AG, a Swiss-based pharmaceutical company with a profitable portfolio of
specialist hospital pharmaceutical products. The combined Group is now primarily
focused in the areas of critical care, neurology and oncology and operates
internationally through a strong network of distributors.
Optare manufactures buses and coaches which it sells into the UK
public transport market. Following a reverse acquisition in July 2008, the
enlarged Group has become an important competitor in the UK bus and coach
industry and is focused on developing the next generation of fuel efficient
vehicles.
Praesepe is an operator of adult gaming centres in the UK. The
intention is to grow the business through a series of acquisitions in what
remains a highly fragmented market. The business is run by Nick Harding who
previously created substantial shareholder value for investors in Talarius,
which was a similar business that also expanded rapidly and successfully
through acquisition and was then sold to a trade buyer at the end of 2006.
A follow on investment in Snacktime, the UK's only national snack
vending company, was made by both Funds in the form of 8% Convertible Loan
Notes.
The C Share Fund also invested a further GBP100,000 in Tracsis, a
small, but highly specialised provider of resource optimisation software used
in the processing of labour scheduling by passenger rail and bus service
operators.
Non-qualifying portfolios
The contribution to performance from the investment in sub-funds of
the Unicorn Investment Funds OEIC was negative in line with wider equity
market declines. Market exposure was significantly reduced in both Funds via a
series of disposals of the OEIC investments, which raised over GBP2m in cash for
the Ordinary Share Fund and over GBP1m for the C Share Fund.
Prospects
It has been a torrid year for equity markets. As many investors
have discovered to their cost, even the biggest, most highly regarded and
internationally diverse businesses can be hugely risky investment
propositions. The disintegration and subsequent part-nationalisation of the UK
banking sector bears witness to this fact.
The Investment Manager has previously highlighted the particular
risks associated with investment in small, illiquid, AIM quoted companies,
whilst also setting out a clear Investment Policy designed to mitigate this
risk as far as possible. Inevitably, at the smaller end of the market and with
a limited number of qualifying companies to choose from, there will always be
investments which disappoint. However, during the past twelve months there has
been extraordinary upheaval in financial systems around the world which has
fundamentally changed people's perception of risk. The dramatic decline in the
value of AIM quoted companies is an example of this re-pricing of risk.
It is important to note that the Company's Investment Policy
continues to be consistently applied. Each Share Fund now contains a diverse
range of predominantly profitable, well-capitalised businesses most of which
will survive the current malaise and which therefore offer good long term
potential. However, for the time being the economic outlook remains bleak and
there will now almost certainly need to be a prolonged period of readjustment
before confidence and stability can return.
Non-statutory analysis between the Ordinary Share Fund and C Share Fund
1. Profit and loss account
for the year ended 31 December 2008
Ordinary Share fund C Share fund
Notes Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Net unrealised losses on investments - (7,312,852) (7,312,852) - (3,751,951) (3,751,951)
Realised losses on investments - (354,779) (354,779) - (357,454) (357,454)
Income 267,157 - 267,157 174,254 - 174,254
VAT recoverable 31,582 94,747 126,329 10,086 30,258 40,344
Investment management fees (79,167) (237,499) (316,666) (24,155) (72,467) (96,622)
Other expenses (262,177) - (262,177) (120,802) - (120,802)
----- ----- ----- ----- ----- -----
(Loss)/profit on ordinary activities
before taxation (42,605) (7,810,383) (7,852,988) 39,383 (4,151,614) (4,112,231)
Tax on ordinary activities - - - - - -
----- ----- ----- ----- ----- -----
(Loss)/profit for the year (42,605) (7,810,383) (7,852,988) 39,383 (4,151,614) (4,112,231)
=== === === === === ===
(Loss)/profit per ordinary share
(pence per share) 6 (0.19)p (34.35)p (34.54)p 0.31 p (33.06)p (32.75)p
Average number of shares in issue 22,735,783 12,558,244
Total of both funds
(per Statutory Profit and Loss
Account)
Notes Revenue Capital Total
GBP GBP GBP
Net unrealised losses on investments - (11,064,803) (11,064,803)
Realised losses on investments - (712,233) (712,233)
Income 441,411 - 441,411
VAT recoverable 41,668 125,005 166,673
Investment management fees (103,322) (309,966) (413,288)
Other expenses (382,979) - (382,979)
----- ----- -----
(Loss)/profit on ordinary activities
before taxation (3,222) (11,961,997) (11,965,219)
Tax on ordinary activities - - -
----- ----- -----
(Loss)/profit for the year (3,222) (11,961,997) (11,965,219)
=== === ===
2. Balance sheet
as at 31 December 2008
Ordinary Share fund C Share fund
Notes
GBP GBP GBP GBP
Fixed Assets
Investments at fair value 14,142,124 5,871,522
Current Assets
Debtors and prepayments 310,049 88,118
Current investments 515,821 1,408,910
Cash at bank 33,382 34,669
----- -----
859,252 1,531,697
Creditors: amounts falling due within one year (128,108) (98,992)
----- ----- ----- -----
Net current assets 731,144 1,432,705
----- -----
Net assets 14,873,268 7,304,227
==== ====
Capital and reserves
Called up share capital 220,206 125,791
Capital redemption reserve 13,466 -
Share Premium account 253,562 65,942
Revaluation reserve (5,869,174) (4,067,033)
Special distributable reserve 18,517,884 11,119,975
Profit and loss account 1,737,324 59,552
----- -----
Equity shareholders' funds 14,873,268 7,304,227
==== ====
Number of shares in issue: 22,020,616 12,579,053
Net asset value per 1p share: 7 67.54p 58.07p
Adjustments Total of both funds
(per Statutory
Notes (see note below) Balance Sheet)
GBP GBP GBP
Fixed Assets
Investments at fair value 20,013,646
Current Assets
Debtors and prepayments (66,296) 331,871
Current investments 1,924,731
Cash at bank 68,051
------ ------
(66,296) 2,324,653
Creditors: amounts falling due within one year 66,296 (160,804)
------ ------
Net current assets 2,163,849
------
Net assets - 22,177,495
====
Capital and reserves
Called up share capital 345,997
Capital redemption reserve 13,466
Share Premium account 319,504
Revaluation reserve (9,936,207)
Special distributable reserve 29,637,859
Profit and loss account 1,796,876
------
Equity shareholders' funds 22,177,495
====
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 below.
3. Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2008
Ordinary Share fund C Share fund Total of both funds
(per Statutory
Balance Sheet)
GBP GBP GBP
As at 1 January 2008 24,521,943 11,474,721 35,996,664
Net share capital (bought back)/issued in
the year (643,170) 66,735 (576,435)
Loss for the year (7,852,988) (4,112,231) (11,965,219)
Dividends paid (1,152,517) (124,998) (1,277,515)
----- ----- -----
Closing shareholders' funds at 31 December 2008 14,873,268 7,304,227 22,177,495
==== ==== ====
Profit and loss account
for the year ended 31 December 2008
31 December 2008 31 December 2007
Notes Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Net unrealised losses on investments - (11,064,803) (11,064,803) - (2,959,092) (2,959,092)
Realised losses on investments - (712,233) (712,233) - (759,338) (759,338)
Income 2 441,411 - 441,411 639,775 - 639,775
VAT recoverable 3 41,668 125,005 166,673 - - -
Investment management fees (103,322) (309,966) (413,288) (137,523) (412,569) (550,092)
Other expenses (382,979) - (382,979) (380,103) - (380,103)
----- ----- ----- ----- ----- -----
(Loss)/profit on ordinary activities
before taxation (3,222) (11,961,997) (11,965,219) 122,149 (4,130,999) (4,008,850)
Tax on ordinary activities 4 - - - (13,418) 13,418 -
----- ----- ----- ----- ----- -----
(Loss)/profit for the year (3,222) (11,961,997) (11,965,219) 108,731 (4,117,581) (4,008,850)
=== === === === === ===
Basic and diluted earnings per Share
Ordinary shares 6 (0.19)p (34.35)p (34.54)p (0.10)p 12.88p (12.98)p
C Shares 6 0.31p (33.06)p (32.75)p 1.06p (9.18)p (8.12)p
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
There were no other recognised gains or losses in the year.
Other than revaluation movements arising on investments held at fair value
through the Profit and Loss Account, there were no differences between the
profit /(loss) as stated above and at historical cost.
Balance sheet
as at 31 December 2008
31 December 2008 31 December 2007
Notes GBP GBP
Fixed assets
Investments at fair value 20,013,646 33,035,473
Current assets
Debtors and prepayments 331,871 479,171
Current investments 8 1,924,731 2,594,553
Cash at bank 68,051 68,952
----- -----
2,324,653 3,142,676
Creditors: amounts falling due within one year (160,804) (181,485)
----- -----
Net current assets 2,163,849 2,961,191
----- -----
Net assets 22,177,495 35,996,664
==== ====
Capital and reserves
Called up share capital 345,997 355,504
Capital redemption reserve 13,466 400
Share Premium account 319,504 -
Revaluation reserve (9,936,207) 1,472,625
Special distributable reserve 29,637,859 31,295,511
Profit and loss account 1,796,876 2,872,624
----- -----
Equity Shareholders' funds 22,177,495 35,996,664
==== ====
Net asset value per Ordinary Share - basic and diluted 7 67.54p 106.38p
Net asset value per C Share - basic and diluted 7 58.07p 91.80p
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2008
31 December 2008 31 December 2007
GBP GBP
At 1 January 2008 35,996,664 40,290,790
Net share capital bought back in the year (576,435) (45,026)
Loss for the year (11,965,219) (4,008,850)
Dividends paid (1,277,515) (240,250)
------ ------
Closing shareholders' funds at 31 December 2008 22,177,495 35,996,664
==== ====
Cash Flow Statement
for the year ended 31 December 2008
31 December 2008 31 December 2007
Notes GBP GBP GBP GBP
Operating activities
Dividends received 453,541 642,706
Deposits and similar interest 8,157 8,308
Investment management fees paid (530,718) (550,092)
Other cash payments (408,881) (417,975)
----- ----- ----- -----
Net cash outflow from operating activities (477,901) (317,053)
Investing activities
Acquisitions of investments (1,978,866) (13,685,134)
Disposals of investments 3,639,994 8,755,605
----- ----- ----- -----
Net cash inflow/(outflow) from investing activities 1,661,128 (4,929,529)
Dividends
Equity dividends paid 5 (1,277,515) (240,250)
----- -----
Cash outflow before financing and liquid resource (94,288) (5,486,832)
management
Management of liquid resources
Decrease in current investments 669,822 5,521,879
Financing
Share capital (bought back)/raised (net of expenses) (576,435) (45,026)
----- -----
Net decrease in cash for the year (901) (9,979)
=== ===
Notes to the Accounts
for the year ended 31 December 2008
1. Accounting policies
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 Generally Accepted
Accounting Practice (UK GAAP) and the 2003 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies', revised December 2005
("SORP").
b) Presentation of the Profit and Loss Account
In order to better reflect the activities of a VCT and in
accordance with the SORP, supplementary information which analyses the Profit
and Loss Account between items of a revenue and capital nature has been
presented alongside the Profit and Loss Account. The revenue column of the
profit and loss account is the measure the Directors believe appropriate in
assessing the Company's compliance with certain requirements set out in
section 274 Income Tax Act 2007.
c) Investments
Investments are accounted for on a trade date basis.
All investments held by the Company are classified as "fair value
through profit and loss" as the Company's business is to invest in financial
assets with a view to profiting from their total return in the form of capital
growth and income. For investments actively traded in organised financial
markets, fair value is generally determined by reference to Stock Exchange
market quoted bid prices at the close of business on the balance sheet date.
Unquoted investments are valued by the Directors at fair value.
Accordingly, in the absence of a market price, the Directors have valued
unquoted investments in accordance with International Private Equity Venture
Capital Valuation (IPEVCV) guidelines:
(i) Investments which have been made in the last 12 months are at
fair value which, unless another methodology gives a better indication of fair
value, will be at cost.
(ii) Investments in companies at an early stage of their
development are also valued at fair value which, unless another methodology
gives a better indication of fair value, will be at cost.
(iii) Where investments have gone beyond the stage of their
development in (ii) above, the shares may be valued by applying a suitable
price-earnings ratio to that company's post-tax earnings (the ratio used being
based on a comparable listed company or sector but discounted to reflect lack
of marketability).
(iv) Where a value is indicated by a material arms-length
transaction by a third party in the shares of a company, this value will be
used.
Unquoted investments will not normally be re-valued upwards for a
period of at least twelve months from the date of acquisition for early stage
investments. Where a company's underperformance against plan indicates a
diminution in the value of the investment, provision against cost is made, as
appropriate.
Where the value of an investment has become permanently impaired
below cost, the loss is treated as a permanent impairment and as a realised
loss, even though the investment is still held. The Board assess the portfolio
for such investments, and after agreement with the Manager, will agree the
values that represent the extent to which an investment has become permanently
impaired. This is based upon an assessment of objective evidence of that
investment's future prospects, to determine whether there is potential for the
investment to recover in value.
d) Income
Dividends receivable on quoted equity shares are brought into
account on the ex-dividend date. Dividends receivable on unquoted equity
shares are brought into account when the Company's right to receive payment is
established and there is no reasonable doubt that payment will be received.
Fixed returns on non-equity shares are recognised on a time apportionment
basis so as to reflect the effective interest rate, provided there is no
reasonable doubt that payment will be received in due course. Fixed returns on
debt securities are recognised on a time-apportioned basis so as to reflect
the effective interest rate.
e) Expenses
All expenses are accounted for on an accruals basis. Expenses are
charged wholly to revenue, with the exception of expenses incidental to the
acquisition or disposal of an investment, which are charged to capital, and
with the further exception that 75% of the fees payable to the Investment
Managers are charged against capital. This is in line with the Board's
expected long-term split of returns from the investment portfolio of the
Company. IFA trail commission is expensed in the period in which it is
incurred.
Where expenses relate specifically to the Ordinary Share Fund or
the C Share Fund, they have been allocated to those respective Funds. Of other
expenses which do not relate specifically to either Fund, 68% have been
attributed to the Ordinary Share Fund and 32% to the C Share Fund. These
percentages represented the share of net assets of the Ordinary and C Share
funds at 31 December 2007.
2. Income
Total income comprises 2008 2007
GBP'000 GBP'000
Dividends from equities 191,985 98,424
Dividends from Unicorn OEICs 157,871 239,917
Dividends from money-market funds 83,831 283,986
Interest 7,724 17,448
----- -----
441,411 639,775
===== =====
3. VAT recoverable
Revenue Capital Total Revenue Capital Total
2008 2008 2008 2007 2007 2007
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- ----- ----- ----- ----- -----
VAT
recoverable 41,668 125,005 166,673 - - -
===== ===== ===== ===== ===== =====
VAT recoverable above is the likely amount of VAT
recoverable from HMRC in respect of VAT charged upon management fees in past
years. 25% of this amount has been credited to the Revenue return, while the
balance of 75% has been credited to the Capital return. An additional GBP63,430
of further VAT incurred in respect of the current year has been set against
investment manager's fees. This income is not expected to recur in future
years, other than in respect of any adjustments between the amounts recognised
above and the amounts eventually received from HMRC.
4. Taxation
There is no tax charge for the period, as the Company has incurred
taxable losses in the period.
5. Dividends
2008 2007
GBP GBP
Amounts recognised as distributions to equity holders
in the year:
Ordinary shares - final dividend for the year ended 31
December
2007 of nil p (2006: 0.5p) per share - 115,252
Ordinary shares - Capital dividend for the year ended
31 December
2007 of 5 pence (2006: nil pence) per share 1,152,517
C Shares - final dividend for the year ended 31
December 2007
of 1p (2006: 1p) per share 124,998 124,998
----- -----
Total 1,277,515 240,250
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.
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.
Proposed distributions to equity holders at the 2008 2007
year-end:
Ordinary Share Fund: GBP GBP
Revenue available for distribution by way of dividends
for the year (42,605) (23,487)
Proposed final income dividend for the year ended 31
December
2008 of nil p (2007: nil) per Ordinary Share - -
C Share Fund:
Revenue available for distribution by way of dividends
for the year 39,383 132,220
Proposed final income dividend for the year ended 31
December
2008 of nil p (2007: 1p) per share - 124,998
The proposed final capital dividend of 1p per share payable to
Ordinary Fund Shareholders will be paid on 8 May 2009 to shareholders on the
register on 14 April 2009, subject to shareholder approval at the Annual
General Meeting on 21 April 2009.
6. Earnings and return per share
2008 2008 2008 2007 2007 2007
Ordinary Fund C Fund Total Ordinary Fund C Fund Total
GBP GBP GBP GBP GBP GBP
Total earnings after taxation: (7,852,988) (4,112,231) (11,965,219) (2,993,046) (1,015,804) (4,008,850)
Basic and diluted earnings per
share (34.54)p (32.75)p (12.98)p (8.12)p
Net revenue from ordinary
activities after taxation (42,605) 39,383 (23,489) 132,220
Revenue return per share (0.19)p 0.31p (0.10)p 1.06p
Net realised capital losses (354,779) (357,454) (759,338) -
Net unrealised capital losses (7,312,852) (3,751,951) (1,912,923) (1,046,169)
Capital element of VAT recoverable 94,747 30,258 - -
Capital expenses (237,499) (72,467) (297,296) (101,855)
----- ----- ----- -----
Total capital return (7,810,383) (4,151,614) (2,969,557) (1,148,024)
Capital return per share (34.35)p (33.06)p (12.88)p (9.18)p
Weighted average number of shares
in issue in the year 22,735,783 12,558,244 23,057,594 12,499,807
Notes
a) Basic earnings per share is total earnings after taxation
divided by the weighted average number of shares in issue.
b) Revenue return per share is net revenue earnings after taxation
divided by the weighted average number of shares in issue.
c) Capital return per share is total capital return earnings after
taxation divided by the weighted average number of shares in issue.
7. Net asset values
2008 2008 2008 2007 2007 2007
O Fund C fund Company O Fund C fund Company
Net assets 14,873,268 7,304,227 22,177,495 24,521,943 11,474,721 35,996,664
Number of shares in issue 22,020,616 12,579,053 23,050,581 12,499,807
Basic Net asset value per share 67.54p 58.07p 106.38p 91.80p
8. Current investments
These comprise investments in seven Dublin based OEIC money markets
funds, managed by Royal Bank of Scotland, Blackrock Investment Management (UK)
Limited (formerly named Merrill Lynch), Goldman Sachs, Insight Investment
Management, Barclays Global Investors, Scottish Widows Investment Management
and Fidelity Investment Management. GBP1,923,667 (2007: GBP2,593,543) of this sum
is subject to same day access while GBP1,064 (2007: GBP1,010) is subject to two
day access. These sums are regarded as monies held pending investment.
9. Related party transactions
Kenneth Vere Nicoll is a director of, and owns 2.23% of the shares
in Matrix Group Limited. One of its subsidiaries is Matrix-Securities Limited,
which has acted as Promoter to the Company and provides administration
services to the Company, as disclosed in the Annual Report. Jeremy Hamer is a
non-executive director of, and owns 1.9% of the shares in Access Intelligence
plc, in which the Ordinary Share Fund has invested GBP176,000 and the C Share
Fund has invested GBP88,000. Both holdings are carried at fair value. Malcolm
Diamond is a shareholder in the Company's Investment Manager, who earned
GBP413,288 (2007: GBP550,092) in investment management fees, as disclosed in the
Annual Report.
10.
These are not full accounts in terms of section 240 of the
Companies Act 1985. The Annual Report for the year to 31 December 2008 will be
sent to shareholders shortly and will then be available for inspection at One
Vine Street, London W1J 0AH, the registered office of the Company. Copies of
the Annual Report will be available from 20 March 2009 on the Company
Secretary's website, www.matrixgroup.co.uk and the Investment Manager's
website, www.unicornam.com. Statutory accounts will be delivered to the
Registrar of Companies after the Annual General Meeting. The audited accounts
for the year ended 31 December 2008 contain an unqualified audit report.
11.
The Annual General Meeting of the Company will be held at 12 noon
on 21 April 2009 at One Vine Street, London W1J 0AH.
For further information please contact:
Chris Hutchinson, Unicorn Asset Management Limited, Tel: 020 7253 0889
Robert Brittain, Matrix-Securities Limited, Tel: 020 3206 7000
END
Grafico Azioni Unicorn Aim Vct Ii (LSE:UAVT)
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