Unicorn Asset Management Regulatory News (UAV)

Unicorn AIM VCT plc ("the Company")

Interim Management Statement

For the period from 1 April 2022 to 30 June 2022

Introduction

This voluntary Interim Management Statement (IMS) covers the three-month period ended 30 June 2022, together with relevant information up to the date of publication. 

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 ("VCT"), so that Shareholders benefit from the taxation advantages that this brings. To achieve this, at least 80% of the Company's total assets are to be invested in qualifying investments of which 70% by VCT value (30% in respect of investments made before 6 April 2018 from funds raised before 6 April 2011) must be in ordinary shares, which carry no preferential rights (save as permitted under VCT rules) to dividends or return of capital and no rights to redemption.

Performance

Net asset value per share continued to decline during the period under review. The performance of equity markets overall was also weak, as the war in Ukraine continued and the outlook for economic growth deteriorated further. As at 30 June 2022, the unaudited net asset value was 178.9 pence per share, which represents a decrease of 8.6% on the unaudited closing net asset value of 195.7 pence per share as at 31 March 2022.

By comparison, the FTSE AIM All-Share Total Return Index declined by 15.6%, while the FTSE All-Share Index (ex. Investment Trusts) declined by 4.6% over the same period.

The performance of the Company's diverse portfolio of investments has been relatively resilient throughout the period, although the de-rating of certain sectors such as life sciences and biotechnology has been particularly harsh, which has resulted in a significant decline in the market value of our investee companies that operate in these particular areas. Encouragingly however, the vast majority of the businesses in which the Company holds investments are well-financed and are therefore equipped to withstand an extended period during which the funding environment may remain challenging. The Company also has limited exposure to businesses dependent upon consumer spending, which further insulated the portfolio from the worst of the equity market falls experienced during the period under review. 

In addition, toward the end of the period, an unusually high proportion of total net asset value was held in cash. This elevated cash level was predominantly due to the receipt of proceeds from the sale of the Company's stake in Interactive Investor, whose acquisition by abrdn finally completed during the period. The significant cash proceeds received have therefore helped the performance.

Following the fully subscribed Offer for Subscription, which closed at the end of March 2022, we now have cash available to deploy in those investment opportunities that pass our due diligence process. It is important however, to remind Shareholders, that the new capital raised will, by regulatory necessity, be targeted at younger, less well-established businesses. Early stage, scale-up businesses are typically loss-making and cash consumptive and therefore present considerable risk to the investor.

Deal-flow declined markedly during the period, as management teams chose to delay or defer plans to list their businesses on the Alternative Investment Market (AIM). As a result of this reduced deal-flow and, in anticipation that equity markets were likely to remain weak, the Investment Manager decided to be even more selective than usual in regard to committing shareholder funds to new investment opportunities. As a result, no new investments were made during the period under review.

In the current inflationary environment, our ability to provide scale-up capital has become more crucial than ever for businesses that are in the early stages of their development, however it should again be emphasised that not all of our investee companies will ultimately be successful. We are therefore likely to remain cautious when it comes to deploying shareholder capital until there is better evidence of economic and equity market stability.

Despite the increased risks associated with early-stage investment and the uncertainty created by the re-emergence of inflation, your Investment Manager is confident that the portfolio, as a whole, remains well-positioned to deliver attractive total returns over the longer term.

Material Transactions

As previously noted, the Company's holding in Interactive Investor Limited was sold in its entirety during the period, realising proceeds of £55.1 million and crystallising a capital profit on disposal of £51.6 million.

Top Ten VCT Qualifying Holdings as at 30 June 2022

Share Buy-Backs

During the period from 1 April 2022 to 30 June 2022, the Company bought back 785,645 of its own Ordinary Shares for cancellation, at an average price of 164 pence per share excluding costs. As at 30 June 2022, there were 160,289,307 Ordinary Shares in issue.

Dividends

As advised in the Interim Report, the Board has declared an interim dividend of 3.0 pence per share in respect of the Company's half-year ended 31 March 2022. This interim dividend will be paid on 11 August 2022 to Shareholders who were on the register on 15 July 2022. In addition, following the receipt of proceeds due from the takeover of Interactive Investor by abrdn, the Board has decided to distribute the entire realised capital gain of £51.6 million by way of a Special Dividend of 32.0 pence per share, which will be paid alongside the interim dividend on 11 August.

Chris Hutchinson

Unicorn Asset Management

Investment Director

26 July 2022