Unicorn Asset Management Regulatory News (UAV)

Unicorn AIM VCT plc ("the Company")

Interim Management Statement

For the period from 1 April 2016 to 30 June 2016 

Introduction

This voluntary Interim Management Statement (IMS) covers the three month period ended 30 June 2016, 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 the 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 carrying no preferential rights (save as permitted under VCT rules) to dividends or return of capital and no rights to redemption.

Performance

Despite experiencing extreme volatility in the days following the UK's vote to leave the European Union, the FTSE All-Share Total Return Index returned (+4.7%) and the FTSE AIM All-Share Index (+0.0%) ended flat over the three month period to 30 June 2016.

The performance of the Company remained resilient during the period under review, with unaudited Net Asset Value per share increasing from 150.9 pence at the start of April, to 154.3 pence as at 30 June 2016. This represents a total return of 2.3% for the period under review. The Company's net assets were £142.6 million at the period end.

VCT Qualifying Investments

A number of VCT qualifying holdings performed strongly in the period under review. The most notable of these, in terms of absolute contribution, were:-

Abcam (+30.6%) is a global leader in the supply of innovative protein research tools. Despite an absence of newsflow, Abcam's share price appreciated strongly in the latter part of the period under review, mainly in reaction to a weakening of sterling relative to other major world currencies following the UK's vote to leave the EU. Abcam is a truly international business, with the majority of its revenues being dollar denominated. The relative weakening of the British pound is therefore helpful in improving the competitiveness of its products, while there are also additional benefits as foreign earnings are converted back into sterling.

Avingtrans (+27.7%) is a manufacturer of critical components and associated services to the global energy and medical sectors. Avingtrans has recently completed the disposal of its Aerospace Division and, as a consequence, net cash increased to more than £47 million. The Board has announced that it intends to return almost £28 million to shareholders by way of a Tender Offer. The balance of the net proceeds will be used to pursue the Group's strategy of investing in the Energy and Medical markets.

Belvoir Lettings (+45.1%) is primarily a specialist property lettings agency although, since listing on AIM in February 2012, Belvoir has diversified by broadening into property sales. Belvoir's share price has been strong since the business released final results for its financial year ended 31 December 2015 in April 2016, which highlighted 19% growth in revenues to £6.9 million (2014: £5.9m) and profit before tax of £2.2 million (2014: £1.8 million).  

IDOX (+23.9%) is a leading supplier of specialist information management solutions and services. In June, the business announced half year results for the six month period ended 30 April 2016. Financial highlights included revenue growth of 26% to £37.2 million (H1 2015: £29.6 million) and profit before tax 110% higher at £6.5 million (H1 2015: £3.1 million). IDOX currently enjoys strong visibility of revenues and a healthy pipeline and order book.

Mattioli Woods (+17.1%) is a specialist pension planning, wealth management and employee benefits business. Shortly after the end of the period under review, Mattioli Woods issued a positive trading update, confirming continued strong growth during its financial year ended 31 May 2016, with revenues up by over 20% on the prior year, while client assets grew by 22% to £6.6 billion.

Other significant positive contributions came from Crawshaw Group (+9.2%), Instem (+11.6%), Keywords Studios (+28.0%), Omega Diagnostics (+18.2%), and Tracsis (+11.3%).

The short term impact of the UK electorate's unexpected vote to leave the European Union was profound. In the immediate aftermath of the vote, the value of Sterling fell dramatically, while UK equity markets experienced sharp declines. The share prices of many smaller UK quoted companies were particularly hard hit, as investors worried about the possible negative implications of BREXIT on the UK economy. As a consequence, a number of the VCT qualifying investments held in the portfolio performed poorly.

In terms of negative absolute contribution, the worst performers in the portfolio were; Anpario (-6.9%), Cohort (-26.0%), Gama Aviation (-38.3%), Totally (-14.3%) and Tracsis (-16.4%). The total unrealised loss generated during the period from these five VCT qualifying investments amounted to over £4.5 million. It is important to note however, that these falls in value were in line with the declines seen in UK equity markets generally and were a consequence of the wider of macro-economic uncertainties triggered by the BREXIT vote, rather than being as a result of poor trading or operational issues at the individual companies.

Non-Qualifying Investments

The share prices of the non-qualifying investments in the portfolio also came under pressure toward the end of the period under review. The most significant detractors from performance were; Communisis (-24.5%), Epwin Group (-14.4%), Macfarlane (-18.1%) and WYG (-18.6%). In absolute terms, these four investments generated a total unrealised capital loss of approximately £1.1 million during the three months ended 30 June 2016. Again, it is important to emphasise that none of these share price declines were triggered by profit warnings or company specific issues.

Material Transactions

Three new VCT qualifying investments were made during the period, at a total cost of just under £5.5 million:-

Directa Plus (+125.3%) is one of the world's largest producers and suppliers of graphene-based materials for use in consumer and industrial products. Directa's graphene-based materials are natural, chemical-free, sustainably produced and sold into commercial manufacturers of products as diverse as smart textiles, tyres, composite materials and environmental solutions. The business has a unique and patented technology process and a scalable manufacturing model. The grapheme products are manufactured at a factory near Milan in Italy. The business listed on AIM in May 2016, having successfully raised gross proceeds of £12.8 million. Unicorn AIM VCT invested £3 million in the Initial Public Offering (IPO), becoming Directa's third largest shareholder as a result.

Osirium Technologies (+13.1%) is a UK-based, cyber-security software business. Its customer base includes managed security service providers, large multinational companies and government agencies. Revenues are generated through the sale of annually renewable licences of software modules alongside consultancy services. Customer numbers have grown rapidly resulting in compound revenue growth of more than 45% per annum over the past three years. Despite this rapid growth, Osirium is still at a relatively early stage of development and is therefore not expected to achieve profitability until 2017. The business secured funding of £8.8 million and its shares were admitted to trading on AIM on 15 April 2016. Unicorn AIM VCT participated in this oversubscribed placing and secured a 6% stake in Osirium at a total cost of £1 million.

Surface Transforms (+7.8%) is a manufacturer of carbon-ceramic brake discs for specialist automotive and aircraft applications. Surface Transforms has developed its unique materials technology over more than a decade and built up an enviable reputation on racetracks and with niche supercar manufacturers. The brake discs manufactured by the business demonstrate significant advantages over competing products being lighter, stronger and able to maintain lower operating temperatures combined with lower wear rates. The effectiveness of the disc brakes is fully tested and proven and the business is now receiving substantial interest from several British and German performance car manufacturers. As a consequence, Surface Transforms needs to build additional capacity and has raised an additional £4.5 million to fund this expansion. Unicorn Aim VCT invested £1.5 million in this recently completed fundraising.

Non-Qualifying Investments

£1 million was allocated to purchasing units of the Unicorn UK Ethical Income Fund. In addition, a number of disposals and partial disposals were made in non-qualifying investments in order to manage the cash requirements of the Company.

Top 10 Equity Holdings at 30 June 2016

Share Buy-Backs/ Issues

During the period from 1 April 2016 to 30 June 2016, the Company bought back 475,000 of its own Ordinary Shares for cancellation, at an average price of 132.8 pence per share.

As part of the Offer for Subscription the Company issued, 405,935 shares raising £0.6 million.

There were 92,405,435 Ordinary Shares in issue as at 30 June 2016.

Material Events

There were no material events during the period from 1 April 2016 to 30 June 2016.

Chris Hutchinson

Unicorn Asset Management

Investment Manager

19 July 2016