TIDMAMAT
RNS Number : 4852W
Amati AIM VCT PLC
17 April 2019
Amati AIM VCT plc
ANNUAL REPORT & FINANCIAL STATEMENTS
For the year ended 31 January 2019
The Annual Report and Financial Statements ("Annual Report") for
the year ended 31 January 2019 and the Notice of Annual General
Meeting will be posted to shareholders shortly and is available in
electronic format for download on Amati Global Investors website
www.amatiglobal.com Copies of the Annual Report will be submitted
to the UK Listing Authority's National Storage Mechanism and will
be available at http://www.morningstar.co.uk/uk/nsm
Page numbers and cross-references in this announcement below
refer to page numbers and cross-references in the PDF of the Annual
Report.
Non-statutory Accounts
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 January 2019 or
31 January 2018 but is derived from those accounts. Statutory
accounts for the year ended 31 January 2018 have been delivered to
the Registrar of Companies and statutory accounts for the year
ended 31 January 2019 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.amatiglobal.com
OUR STRATEGY
The investment objective of the Company is to generate tax free
capital gains and income on investors' funds through investment
primarily in AIM-traded companies.
DIVID POLICY
The policy of the Company is to pay an annual dividend of
between five and six percent of the year end net asset value.
Highlights
For the year ended 31 January 2019
NAV Total return for the Year end
year Net Asset Value per share
-10.0% 146.1p
(2018: 45.2%) (2018: 170.7p)
-------------------------------- --------------------------------------
GBP13.7m invested in qualifying GBP30m
holdings during the year The prospectus offer launched
by Amati VCT and Amati AIM in October 2017 was fully subscribed
VCT and raised GBP30m for the Company
(2018: GBP5.4m)
-------------------------------- --------------------------------------
Merger with Amati VCT plc Change of name from Amati VCT
on 4 May 2018 2 plc to Amati AIM VCT plc
-------------------------------- --------------------------------------
Key data
31/01/19* 31/01/18
----------------------------------------- ----------- -----------
Net Asset Value ("NAV") GBP125.0m GBP61.6m
Shares in issue 85,549,682 36,057,095
NAV per share 146.1p 170.7p
Share price 134.5p 157.5p
Market capitalisation GBP115.1m GBP56.8m
Share price discount to NAV 7.9% 7.7%
NAV Total Return for the year (assuming
re-invested dividends) -10.0% 45.2%
Numis Alternative Markets Total
Return Index** -13.6% 23.2%
Ongoing charges*** 2.0% 2.3%
----------------------------------------- ----------- -----------
Dividends paid and proposed in
respect of the year 7.50p 8.50p
----------------------------------------- ----------- -----------
*On 4 May 2018 the Company merged with Amati VCT plc and the
assets and liabilities of Amati VCT plc were acquired. Further
details are set out in notes 2 and 9 of this report.
** Numis Alternative Markets Index is included as a benchmark
for performance
***Ongoing charges calculated in accordance with the Association
of Investment Companies' ("AIC's") guidance. See Alternative
Performance Measures on page 60 of the Annual Report.
Table of investor returns
to 31 January 2019
Numis Alternative
NAV Total Markets
Return Total Return
with dividends Index**
From Date re-invested
--------------------------------------------- ------------ ----------------- ------------------
NAV following re-launch of the VCT
under management of Amati Global Investors 9 November
("Amati") 2011* 114.0% 31.5%
NAV following appointment of Amati
as Manager of the VCT, which was known 25 March
as ViCTory VCT at the time 2010 124.5% 35.2%
--------------------------------------------- ------------ ----------------- ------------------
*Date of the share capital reconstruction when the NAV was
rebased to approximately 100p per share.
A table of historic returns is included on page 59 of the Annual
Report.
**Numis Alternative Markets Index is included as a benchmark for
performance.
Dividends declared and recommended
2019 total dividends per share 2019 cumulative dividends
7.50p per share
58.49p
-------------------------------- --------------------------
5.1% of NAV 14.7%
Dividend History
Since the re-launch of the VCT under the management of Amati
Global Investors*
Total dividends Cumulative dividends
per share** per share
Year ended 31 January p p
----------------------- ---------------- ---------------------
2011 4.74 4.74
2012 5.50 10.24
2013 6.00 16.24
2014 6.75 22.99
2015 6.25 29.24
2016 6.25 35.49
2017 7.00 42.49
2018 8.50 50.99
2019 7.50 58.49
----------------------- ---------------- ---------------------
*On 25 March 2010 Amati Global Investors were appointed as
Manager of ViCTory VCT. On 8 November 2011 Invesco Perpetual AIM
VCT merged with ViCTory VCT and the name was changed to Amati VCT
2. On 4 May 2018 the Company merged with Amati VCT and the name was
changed to Amati AIM VCT.
**Total dividends per share are the declared dividends of the
financial year.
Fund performance
Amati AIM VCT NAV Total Return and Numis Alternative Markets
Total Return Index from change of Manager on 25 March 2010 to 31
January 2019 is shown on page 3 of the Annual Report.
Historic performance
Amati AIM VCT NAV Total Return and Numis Alternative Markets
Total Return Index from inception of fund to 31 January 2019 is
shown on page 3 of the Annual Report.
STRATEGIC REPORT
Chairman's Statement
This report has been prepared by the directors in accordance
with the requirements of Section 414A of the Companies Act
2006.
Peter A. Lawrence
Chairman
Overview
The net asset value ("NAV") per share at the year end was 146.1p
per share. Having made gains in the first half of the year, there
were sharp market corrections during the second half which resulted
in a negative total NAV return of 10.0% for the year under review.
This compares to a fall in the Numis Alternative Markets Total
Return Index of 13.6%. Further details about the market movements
during the year and the portfolio's performance and activity are
given in the Fund Manager's Review.
In May, the Company merged with Amati VCT plc and changed its
name to Amati AIM VCT plc. The merger increased the net assets of
the Company to GBP125.0m at the year end and has further lowered
the expense ratio to 2.0%; this ratio has been reducing over the
last few years as the Company has grown.
A Joint Prospectus Share Offer was launched by the two Amati
VCTs in October 2017, seeking to raise up to GBP20m and also
catering for the shares issued to Amati VCT plc shareholders as
part of the merger. The Prospectus also allowed for an
over-allotment option for a further GBP10m fund raising following
the merger. With the GBP20m target having been reached prior to the
merger, the Board took the decision in June to make use of the
over-allotment option when it became clear that the Company's rate
of new investment in the first half was higher than expected. The
additional GBP10m was raised in full during September and October.
A further GBP6.8m (the maximum allowed under the non-prospectus
rules) was raised from a Top Up Share Offer subsequent to the
period under review and on which I have reported more fully under
VCT Legislation below.
The rate of making new qualifying investments slowed in the
second half, reflecting the weakening market environment. After
investing GBP10.5m in new qualifying investments in the first half
(GBP1.0m of which was invested by Amati VCT prior to the merger),
the Company invested a further GBP3.2m in the second half, making a
total of GBP13.7m.
Other Corporate Developments
As a result of the merger, the directors of the two VCTs formed
a new Board and I would like to reiterate my thanks to the two
retiring directors, Julian Avery and Charles Pinney, for many years
of outstanding service to the Amati VCTs. It is with our regret
that Mike Killingley will retire from our Board at the conclusion
of the AGM on 26 June 2019. Mike has served with great diligence
and contributed vastly to the benefit of our VCT and its
shareholders since he joined the Board in 2006. He has been an
outstanding chairman of our audit committee and will be missed by
his fellow directors. Both we and the Manager wish him well in his
retirement and offer our sincere thanks for his hard work and care
during his term of office. There were also some changes in the fund
management team at Amati Global Investors, with Anna Wilson joining
in February and Douglas Lawson leaving in August to manage a data
analytics company in which he was a founder investor. Anna brings
with her many years of experience in managing funds focused on the
Alternative Investment Market ("AIM").
Investment Performance and Dividend
For some years the dividend policy of the Company has been to
pay an annual dividend of between five and six percent of year end
net asset value, subject to sufficient liquidity and distributable
reserves. At 31 January 2019 the net asset value was 146.1p per
share. In line with this policy the Board is proposing a final
dividend of 4.0p per share, to be paid on 26 July 2019 to
shareholders on the register on 21 June 2019. When added to the
interim dividend of 3.5p per share paid in November 2018, this
would make total dividends for the year of 7.50p per share, which
is 5.1% of year end NAV.
VCT Legislation
The legislation governing VCTs has become increasingly complex
as the new rules from the 2018 Budget come into force.
Nevertheless, following the Patient Capital Review and significant
input to HM Treasury from our Manager, the Board believes that the
VCT industry is facing a more stable environment going forward
albeit with more restrictive investment criteria.
One of the more important changes is a new test which came into
force for the Company from 1 February 2019. From this date, 30% of
funds raised during an accounting period must be invested in
qualifying holdings within 12 months of the end of the financial
year in which the funds are raised.
Following the end of the period under review, the Company raised
GBP6.8m from a Top Up Share Offer. Existing shareholders were given
priority for the first two weeks and the Top Up Offer was fully
subscribed by the end of February 2019. Under the new rules, at
least GBP2.0m of this money must now be invested in further
qualifying investments before 31 January 2021. In addition, from 1
February 2020, the requirement for the Company to hold 70% of its
tested assets in qualifying holdings will rise to 80%.
During 2018, HMRC stopped issuing pre-clearance letters for VCT
investments. EIS pre-clearance letters provide a strong level of
assurance in their own right, as almost without exception, if an
investment qualifies for EIS relief, it will also qualify under the
VCT legislation. HMRC's stated ambition was to bring down the
waiting time for the issue of Enterprise Investment Scheme ("EIS")
pre-clearance letters from three months to three weeks for
prospective fund raisings. However this has not yet resulted in the
bottle-neck easing. The result is that the Manager and the Board
have to rely increasingly on specialist advisors to provide an
opinion on the qualifying status of new investments and a set of
working practices has been established to mitigate the risks
involved as much as possible, whilst enabling the Manager to make
new investments in the absence of formal clearance from HMRC
The annual investment limit for Knowledge Intensive Companies
has doubled to GBP10m in a 12 month period and this change allowed
the Company to make the recent investment in Creo Medical Group and
gain a more substantial holding than it could otherwise have done
under the previous rules.
Outlook
Whilst many uncertainties remain in the current political and
economic climate, the portfolio of 65 stocks held by Amati AIM VCT
plc together with the 66 stocks in the TB Amati UK Smaller
Companies Fund provide diverse exposure to many industries and
global markets and most of these are now more modestly priced than
six months ago. The longer established and larger robust holdings
are becoming relatively mature companies and this should stand the
Company in good stead as the UK's pathway becomes clearer over the
coming months. Nevertheless, we continue to monitor these holdings
closely and, as we did last year, are prepared to take some profits
when we think valuations are full or in response to other
developments. We must also be prepared for higher levels of
volatility resulting from Brexit but our intention to hold these
larger and maturing stocks into the long term should be to the
benefit of all shareholders.
Annual General Meeting ("AGM")
The AGM will again be held at the Guildhall School of Music and
Drama, starting at 2.00 p.m. on Wednesday 26 June 2019 at Milton
Court Theatre, Guildhall School of Music and Drama, 1 Milton
Street, Barbican, London, EC2Y 9BH (the entrance is on the corner
of Milton Street and Silk Street). This will be followed by further
events and presentations, including the sixth Amati Guildhall
Creative Entrepreneurs Award, to which shareholders are invited,
details of which are being sent to you with this report. I do hope
that as many shareholders as possible will be able to join us. RSVP
to info@amatiglobal.com if you would like to attend.
Peter A. Lawrence
Chairman
17 April 2019
For any matters relating to your shareholding in the Company,
dividend payments, or the Dividend Re-investment Scheme, please
contact Share Registrars on 01252 821390, or by email at
enquiries@shareregistrars.uk.com. For any other matters please
contact Amati Global Investors Limited ("Amati") on 0131 503 9115
or by email at info@amatiglobal.com. Amati maintains an informative
website for the Company - www.amatiglobal.com - on which monthly
investment updates, performance information, and past company
reports can be found.
Fund Manager's Review
Market Review
Just as in politics, a year can be a long time in stock markets.
At the start of 2018, after a prolonged period of strong gains,
discussion was all about synchronised global growth, the
continuation of positive momentum and low volatility in capital
markets. In fact, the year ended on a sour note, with cash
outperforming both equities and bonds for the first time since
1994.
Interestingly, that year was another in which the US central
bank raised interest rates to cool a strong economy. In 2018 the
Federal Reserve took this step four times and the Bank of England
once. These moves were certainly amongst the catalysts
destabilising global markets, as many years of monetary easing
turned into tightening while the global political backdrop also
contributed. During 2018, US/China trade disputes, UK/EU Brexit
tensions and the US government shutdown, all combined to play a
part in unsettling investors.
In the first quarter of the year, a jump in US bond yields
sparked an initial correction in global stock markets with the UK
falling 10% from its early January high point. However, the
stimulatory effects of Trump's tax reliefs created a robust results
season for US corporates, prompting a rebound in investor appetite.
The UK market recovered all of its losses by early summer, but this
marked the peak for the year. A UK interest rate rise in August,
alongside deteriorating economic data in most key economies and the
ongoing uncertainty surrounding Brexit negotiations, sparked a
sell-off which continued through to the end of the year. In the
last quarter this was particularly focused on premium growth stocks
and notably those on the Alternative Investment Market ("AIM").
Reasons for this included the de-rating effect that rising interest
rates have on the valuation of future earnings streams, sharp
declines in US technology stocks and the significant investment
gains made on AIM in recent years. Following a more than 20%
decline from October to December, AIM swung from being the best
performing segment of the UK market at the mid-point of 2018, to
being the worst by the close of the year. Whilst January saw a
noteworthy rebound across the whole of the UK market, with AIM
providing strong leadership, the durability of these gains will
depend largely on the Brexit outcome over the coming months.
Performance
The Company's Net Asset Value Total Return was -10.0% for the
year to 31 January 2019. This outperformed the benchmark Numis
Alternative Markets Total Return Index, which showed a decline of
-13.6% over the same period.
The most significant contributor to performance was AB Dynamics,
which gained 93% over the year to become the second largest holding
in the portfolio. This reflected a succession of positive trading
announcements by the company, culminating in final results which
were significantly ahead of market expectations. This growth has
primarily come from its track testing products which are used in
the development and testing of semi-autonomous and fully autonomous
vehicle technology. Other trading highlights included the first
orders for innovative new products such as the Advanced Driving
Simulator and the Advanced Driver Assistance System platform. These
target the growing demand from automotive manufacturers for complex
testing scenarios with multiple moving objects, as they try to keep
pace with rapidly evolving vehicle safety regulations. AB Dynamics
remains the only supplier of a full suite of interactive track
testing products managed from a single software environment.
Turnover, which is 98% overseas, grew by more than 50%, whilst
pre-tax profits increased by 78%.
Water Intelligence, the US based provider of precision water
leak detection and remediation solutions, also rose 93% during the
period. The company announced a series of acquisitions of its
regional franchisees, for conversion to corporate-run operations,
and saw strong organic growth across all business lines including
its business to business insurance channel, and its parts &
equipment sales. The company is investing in new products,
including a proprietary device to analyse blockages in sewer lines
which would give it competitive advantage in bidding for municipal
work.
Ideagen, the specialist supplier of Governance, Risk &
Compliance ("GRC") software solutions to organisations operating in
highly regulated industries, enjoyed another year of combined
organic and acquisitive growth, and the shares gained 14%. Ideagen
is transitioning from perpetual licence revenues to a Software as a
Service ("SaaS") based subscription model. Recent interim results
show that recurring revenues now represent 67% of the total, with a
client retention rate of 95%. Total revenues grew 22%, with
underlying organic growth of 8%. During the year Ideagen made its
first two acquisitions in the US, involving healthcare and quality
inspection software providers, and in the UK it also acquired an
internal audit management software company.
Rosslyn Data Technologies ("Rosslyn"), the provider of RAPid, a
cloud based enterprise data analytics platform, had a successful
year of contract wins which drove the shares ahead by 52%. RAPid
allows clients to automatically aggregate, organise and make sense
of data and documents, delivering productivity savings and
compliance management benefits. Although still loss-making, Rosslyn
anticipates being cash flow breakeven within the current financial
year.
Cloud based SaaS accounting software provider, FreeAgent, was
the subject of a recommended cash offer in March 2018 from The
Royal Bank of Scotland, which crystallised a share gain of 62% for
the year. The offer valued the company at GBP53m, equating to a
turnover multiple of five times. With FreeAgent still loss-making
in a highly competitive market place, this represented an
attractive outcome for shareholders.
Other positive contributors to performance over the period
included US-based clean water technology company MyCelx
Technologies, which gained 90%, and identity verification software
provider GB Group and infection prevention product manufacturer
Tristel, both up 6%.
Around three times as many portfolio holdings fell during the
year as made gains, reflecting the weak market backdrop for AIM.
Technology companies suffered the worst declines, impacted by the
late year sell-off amongst the large US NASDAQ stocks. Despite
announcing partnerships with Google and Groupon in the last quarter
of 2018, ticketing and queuing software provider Accesso Technology
Group ("Accesso") suffered a 36% share price drop. The company had
been the subject of some earnings downgrades by analysts following
its interim results in September (mainly to reflect the adoption of
the new revenue accounting standard IFRS 15, a slower organic
growth rate for US theme park queuing and higher development
capital expenditure). The correction in the shares has taken the
forward earnings multiple to a substantial discount to its five
year average. A February 2019 announcement, which highlighted a
review of investment priorities and a slower second half in 2018,
has raised further questions and pushed the shares even lower.
Accesso was a holding only in the Company and not in Amati VCT, so
its weighting in the portfolio halved at merger from 6% to 3%.
Video game developer and publisher, Frontier Developments
("Frontier"), dropped 34% in the period despite producing record
results driven by the success of its third franchise, Jurassic
World Evolution, which was launched in June 2018. Interim results
to November 2018 showed six month revenues of GBP65m, almost twice
the level achieved for the whole of the previous year. Frontier is
currently developing a fourth game franchise, with release targeted
for financial year 2019/20. Regulated gaming technology platform
manufacturer, Quixant, fell 37% over the year, driven by a
shortfall against profit expectations in January 2019. This was
caused by reduced revenues from its non-core monitor business as
management scaled back this lower margin product. In the face of a
small single digit downgrade, the shares fell almost 20% after the
announcement, showing the fragile nature of the stock market
environment. Faron Pharmaceuticals, a biopharmaceutical company
developing treatments for medical conditions with unmet needs, fell
87% over the period. This was prompted by the failure of its lead
drug candidate, Traumakine, in a Phase III clinical trial. The
company's other products were not considered sufficiently mature in
their development cycle and so the position was sold. Keywords
Studios, a technical services provider to the video games industry,
was also impacted by the weakness in technology stocks, falling 20%
in the period. However the company also experienced a slowing of
organic growth in the second half of 2018, downgrades due to end
market disruption caused by the closure of some game publisher
studios and the impact of free downloadable game formats like
Fortnite.
Portfolio Activity
The Company invested a total of GBP13.7 million in the period,
in two Initial Public Offerings ("IPOs") and seven placings
involving businesses already quoted on AIM but not previously held
in the portfolio.
The first of the IPOs was Block Energy ("Block"), a UK-based oil
exploration and production company whose main country of operation
is the Republic of Georgia. This represented a rare opportunity to
invest in a VCT-qualifying resources company. Block has acquired
three producing blocks, each with a substantial resource base but
mixed reservoir quality. The investment thesis rests on Block's
ability to apply new drilling technology to improve production at
these sites. The opportunity to invest in Block came at an
attractive valuation and, whilst operations will have their
challenges, the upside could be significant. The Company also
invested in the IPO of i-nexus Global ("i-nexus"), a SaaS provider
to large enterprises to manage business improvement and change.
i-nexus software supports Hoshin, a strategy development
methodology introduced in Japan in the 1960s. Hoshin is a planning,
implementation and review methodology which is seeing increasing
adoption amongst large corporates to ensure that strategic goals
are being communicated to all employees and actioned at all levels
of an organisation.
The first placing the Company participated in was for Diurnal
Group ("Diurnal"), a developer of hormone therapeutics to treat
adrenal insufficiency, where adrenal glands produce insufficient
amounts of cortisol (a steroid hormone), causing low blood pressure
and fatigue. Diurnal has two mature products in its pipeline that
are both reformulated versions of hydrocortisone - the lead
product, Alkindi, was approved in Europe in early 2018 and is in
commercial roll-out, whilst the second, Chronocort, is still under
discussion with European regulators following a disappointing Phase
III trial result in October. The Company next participated in an
over-subscribed placing for IXICO, the developer of a digital
imaging platform called Trial Tracker, which helps to identify
changes in brain scans that may be invisible to the human eye. The
funds raised will allow IXICO to extend its product range into
other therapeutic areas such as Multiple Sclerosis. A position was
also added in Angle, a leading liquid biopsy company which is
commercialising a pioneering platform technology in cancer
research. When cancers start to form, some cancer cells enter the
bloodstream and this is one of the earliest analysable indications
of the specific cancer being present. Angle's technology can
isolate live Circulating Tumour Cells, capturing them for analysis,
and their devices are now being used by customers involved in
ground breaking treatments. Another placing participation was in
Creo Medical Group ("Creo Medical"), a medical device company
focused on surgical endoscopy. Its lead product, the Speedboat RS2,
enables non-invasive bowel surgery, replacing high risk major
surgery with a simple outpatient procedure. The device has already
been approved in both Europe and the US, and since we invested has
been used in successful operations, with Creo Medical now entering
into distribution agreements. The Company also participated in a
fundraising for Falanx Group ("Falanx"), a cyber security and
intelligence services company. Falanx has partnered with a large
NASDAQ listed company, SolarWinds, whose software they already
license. Falanx will offer network monitoring products and services
to SolarWinds' 2000 UK Managed Service Providers ("MSPs"). MSPs are
a key route to market, since they have established client
relationships which can assist with the adoption of security
software. A position was also taken in media group, Bonhill Group
("Bonhill"), through a placing with qualifying funds providing
working capital and the balance of the funds raised financing the
purchase of US owned Investment News, an established and industry
leading title serving wealth managers and financial advisers. The
revenues from this acquisition dwarf Bonhill's existing business
(previously known as Vitesse Media), and it creates a combined
group with GBP20m of sales focused on the financial services and
technology markets with scope to expand in events media. The final
placing in the period was for Polarean Imaging, a developer of
technology which enables existing MRI scanners to achieve an
improved level of lung imaging by using Xenon gas as an agent. This
technique displays detail down to the smallest airways of the lung
and the related vasculature. The company did not raise all of the
funding required for Phase III trials at the time of its IPO in
March 2018, providing an opportunity for the Company to invest
after subsequent supportive news flow involving
additional patents and a licensing deal.
We exited a number of qualifying holdings during the period,
including Faron Pharmaceuticals as explained in the Performance
section above. We also sold IDOX, the provider of document
management software to local authorities and the engineering
sector, after revenue accounting errors and the enforced absence of
the CEO due to sick leave; Crawshaw Group, the discount butchers
chain, following poor trading and the departure of both the CEO and
CFO; Tasty, the owner of the London-focused Italian restaurant
chain Wildwood, due to an ongoing difficult trading environment;
Fox Marble, the European marble quarry operator, following
repayment of the Company's convertible loan; and Venn Life
Sciences, the provider of clinical trial services to healthcare
organisations, after a prolonged period of disappointing trading.
In addition, three significant holdings were reduced after
outperformance had increased their portfolio weighting
substantially. Around 10% of the positions in Frontier
Developments, Keywords and AB Dynamics were sold at close to the
share price peaks for the year.
Outlook
One year forward from the expected synchronised global growth of
early 2018, there is now evidence of economic weakness in most
developed economies, with China, Germany and the US amongst the
most concerning. This reflects a combination of headwinds from
trade tensions plus monetary policy tightening and, in the case of
the UK, political uncertainty impeding consumer and corporate
spending. Against such a backdrop, many investors may still be
attracted to cash as the best performing asset class of last year,
but there has in fact been a meaningful rebound across all segments
of the UK stock market in January 2019, particularly for AIM.
Clearly, no one knows whether this is a short term bounce or a
longer term opportunity. For the UK, the next few months in the
Brexit saga will be hugely important. However, these gains may
provide some support for the old maxim that time in the market is
more important than timing the market. UK stocks have been de-rated
substantially and now look cheap by international comparison. Any
resolution of the current uncertainty could spur further investor
appetite, although the prospect of a general election may
counteract this.
Dr Paul Jourdan, David Stevenson and Anna Wilson
Amati Global Investors
17 April 2019
Fund Manager Biographies
Amati Global Investors
Amati Global Investors is a specialist fund management business
based in Edinburgh. It focuses on UK small and mid-sized companies,
with a universe ranging from fully listed constituents of the FTSE
Mid 250 and FTSE Small Cap indices, to stocks quoted on the
Alternative Investment Market. It is the manager of Amati AIM VCT,
the TB Amati UK Smaller Companies Fund, and it also offers an AIM
IHT portfolio service. It is incorporated in Scotland and 51% owned
by its staff, and 49% owned by Mattioli Woods plc, which invested
in the company in February 2017. Amati Global Investors is a Tier 1
signatory to the UK Stewardship Code and a signatory to the
UN-supported Principles for Responsible Investment (PRI).
Dr Paul Jourdan is an award winning fund manager, with a strong
track record in small cap investment. He co-founded Amati Global
Investors following the management buyout of Noble Fund Managers
from Noble Group in 2010, having joined Noble in 2007 as Head of
Equities. His fund management career began in 1998 with Stewart
Ivory where he gained experience in UK, emerging market and global
equities. In 2000, Stewart Ivory was taken over by First State and
Paul became manager of what is now TB Amati UK Smaller Companies
Fund. In early 2005, he launched Amati VCT and then also became
manager of Amati VCT 2 plc after the investment management contract
moved to Amati Global Investors in 2010. In September 2014 Amati
launched the Amati AIM IHT Portfolio Service, which Paul co-manages
with David Stevenson and Anna Wilson. Prior to 1998 Paul worked as
a professional violinist, including a four year period with the
City of Birmingham Symphony Orchestra. He is CEO and a director of
Amati and a director of Sistema Scotland, a Scottish registered
charity, and also a trustee of Clean Trade, a charity registered in
England and Wales.
David Stevenson joined Amati in 2012. In 2005 he was a
co-founding partner of investment boutique Cartesian Capital, which
managed a range of retail and institutional UK equity funds in long
only and long/short strategies. Prior to that he was Assistant
Director at SVM, where he also managed equity products including
the UK Opportunities small/midcap fund which was ranked top decile
for the 5 year period from inception to 2005. David started his
career at KPMG where he qualified as a Chartered Accountant. He
latterly specialised in corporate finance, before moving into
private equity with Dunedin Fund Managers. David has co-managed
both the TB Amati UK Smaller Companies Fund and Amati AIM VCT since
2012 and the Amati AIM IHT Portfolio Service since 2014.
Anna Wilson (previously Anna Croze) is an experienced fund
manager specialising in UK equities. Anna joined the Amati team in
2018 from Adam and Company, where she led research for the Private
Asset Management award winning wealth manager. She brings her
expertise running a successful AIM-listed portfolio service to
Amati as well as a breadth of experience in managing substantial
OEICs, private client and charity portfolios. She co-managed the
Adam Worldwide Fund and the Stewart Ivory Investment Markets Fund
which won three Lipper Awards under her stewardship.
Investment Portfolio
as at 31 January 2019
Fair
value Fund
movement Market Dividend %
Cost Valuation in year Cap Yield(NTM) of
GBP'000 GBP'000 GBP'000* GBPm Sector % NAV
--------------------------- --------- ---------- ---------- ------- ------------------- ------------ ------
TB Amati UK Smaller
Companies Fund 9,317 10,937 (724) - Financials 2.0 8.8
AB Dynamics plc(1,3) 3,350 9,044 4,184 305.0 Industrials 0.2 7.2
Ideagen plc(2) 3,303 6,663 1,112 306.9 Technology 0.2 5.3
Keywords Studios
plc(1,3) 5,174 6,058 (2,289) 763.4 Industrials 0.1 4.9
Craneware plc(2) 3,899 5,951 2,052 739.6 Technology 0.9 4.8
Learning Technologies
Group plc(1,3) 5,078 5,790 (1,407) 501.3 Industrials 0.5 4.6
Frontier Developments
plc(1) 4,698 5,548 (2,712) 344.8 Consumer goods - 4.5
GB Group plc(2,3) 3,203 5,178 (136) 704.4 Technology 0.4 4.1
Tristel plc(2) 3,290 5,163 (13) 124.1 Health care 1.6 4.1
Quixant plc(2,3) 4,196 4,793 (2,652) 182.5 Technology 0.9 3.8
Top Ten 45,508 65,125 52.1
Accesso Technology
Group plc(1,3) 221 3,118 (1,791) 384.3 Technology - 2.5
Hardide plc(1) 2,361 3,075 (9) 28.9 Basic materials - 2.5
Creo Medical Group
plc(1) 1,613 2,915 1,303 272.3 Health care - 2.3
LoopUp Group plc(1,3) 2,577 2,880 (787) 165.4 Technology - 2.3
Water Intelligence
plc(2) 1,218 2,868 1,100 53.6 Industrials - 2.3
Premier Technical
Services Group
plc(2,3) 2,141 2,441 (805) 178.6 Industrials 1.2 1.9
Anpario plc(2) 1,829 2,219 (817) 78.7 Health care 1.9 1.8
Angle plc(1) 1,615 1,906 291 84.7 Health care - 1.5
Science in Sport
plc(2) 1,956 1,589 (680) 64.9 Consumer goods - 1.3
Brooks Macdonald
Group plc(2) 1,154 1,519 (442) 234.4 Financials 2.8 1.2
Top Twenty 62,193 89,655 71.7
Polarean Imaging
plc(1) 1,200 1,457 257 17.1 Health care - 1.2
Block Energy plc(1) 1,500 1,425 (75) 9.8 Oil & Gas - 1.1
Bilby plc(2) 1,681 1,401 (716) 26.4 Industrials 3.7 1.1
Amryt Pharma plc(1,3) 1,563 1,360 (186) 44.0 Health care - 1.1
Ixico plc(1) 1,409 1,358 (50) 12.6 Health care - 1.1
FairFX Group plc(1) 1,137 1,354 53 141.4 Financials - 1.1
Falanx Group Limited(1) 1,350 1,350 - 12.0 Industrials - 1.1
SRT Marine Systems
plc(1) 1,174 1,251 134 45.4 Technology - 1.0
i-nexus Global
plc(1) 2,500 1,108 (1,392) 10.4 Technology - 0.9
Rosslyn Data Technologies
plc(1) 947 1,104 398 13.5 Technology - 0.9
Solid State plc(2) 520 869 181 35.6 Industrials 2.9 0.7
Oncimmune Holdings
plc(1) 1,013 792 (282) 58.5 Health care - 0.6
MyCelx Technologies
Corporation(1) 645 768 353 35.7 Oil & Gas - 0.6
Belvoir Lettings
plc(1) 783 756 (12) 33.2 Financials 7.1 0.6
Bonhill Group plc(1) 670 745 75 30.5 Consumer services - 0.6
Byotrol plc(1) 859 650 (124) 11.2 Basic materials - 0.5
Fusion Antibodies
plc(1) 1,444 604 (1,187) 9.9 Health care - 0.5
MaxCyte, Inc.(1) 820 572 (240) 92.4 Health care - 0.5
Universe Group
plc(1) 488 526 (176) 10.2 Industrials - 0.4
Escape Hunt plc(1) 752 488 (204) 16.2 Consumer services - 0.4
Brady plc(2) 395 395 - 50.9 Technology - 0.3
Property Franchise
Group plc (The)(2) 352 348 (50) 30.5 Financials 6.4 0.3
EU Supply plc(1) 532 301 (98) 7.2 Technology - 0.2
Synectics plc(2) 342 253 (12) 32.9 Industrials 2.1 0.2
Diurnal Group plc(1) 1,440 240 (1,200) 19.7 Health care - 0.2
Velocity Composites
plc(1) 820 235 (556) 7.2 Industrials - 0.2
Netcall plc(2) 110 196 (92) 45.8 Technology 1.6 0.2
Mirriad Advertising
plc(1) 834 191 (404) 15.8 Consumer services - 0.2
Ilika plc(1) 265 182 25 26.2 Oil & Gas - 0.2
Genedrive plc(1) 442 180 (86) 7.8 Health care - 0.1
Brighton Pier Group
plc (The) (1) 489 171 (218) 16.8 Consumer services - 0.1
FireAngel Safety
Technology Group
plc(1) 690 169 (520) 12.4 Industrials - 0.1
Dods (Group) plc(1) 596 144 (132) 24.6 Consumer services - 0.1
Antenova Limited
Ordinary shares
& A Preference
Shares(1) 100 128 - 4.2 Telecommunications - 0.1
appScatter Group
plc(1) 338 92 (847) 16.4 Technology - 0.1
Allergy Therapeutics
plc(1) 29 36 (40) 87.5 Health care - -
Sabien Technology
Group plc(1) 408 13 (34) 0.6 Industrials - -
Investments held
at nil value 2,253 - (38) - - -
--------------------------- --------- ---------- ---------- ------- ------------------- ------------ ------
Total investments 95,083 112,867 90.3
--------------------------- --------- ---------- ---------- ------- ------------------- ------------ ------
Net current assets 12,122 9.7
--------------------------- --------- ---------- ---------- ------- ------------------- ------------ ------
Net assets 124,989 100.0
--------------------------- --------- ---------- ---------- ------- ------------------- ------------ ------
(1) Qualifying holdings.
(2) Part of holding qualifying, part is non-qualifying.
(3) These investments are also held by other funds managed by Amati.
* The fair value movement of the investments held by Amati VCT
is calculated from the date of the merger.
NTM Next Twelve Months Consensus Estimate (Sources: FactSet and
Fidessa).
The Manager rebates the management fee of 0.75% on the TB Amati
UK Smaller Companies Fund and this is included in the yield.
All holdings are in ordinary shares unless otherwise stated.
Investments held at nil value: Celoxica Holdings plc(1), China
Food Company plc, Leisurejobs.com Limited(1) (previously Sportweb.com),
Polyhedra Group plc(1), Rated People Limited(1), Sorbic International
plc, TCOM Limited(1) and VITEC Global Limited(1).
As at the year end, the percentage of the Company's portfolio
held in qualifying holdings for the purposes of Section 274 of
the Income and Corporation Taxes Act 2007 was 80.9%.
Analysis as at 31 January 2019
Qualifying portfolio
The portfolio of qualifying investments in the Company as at 31
January 2019 is analysed in the graph on page 14 of the Annual
Report by date of initial investment and market capitalisation. The
size of the circles represents the relative size of the holdings in
the portfolio by value. The top ten qualifying portfolio companies
are labelled. The dates of investments in securities held solely by
Amati VCT plc prior to the merger with Amati VCT 2 plc in May 2018,
are given as the dates those securities were originally acquired by
Amati VCT plc.
Sector split
The portfolio of investments in the Company as at 31 January
2019 is analysed in the graph on page 14 of the Annual Report by
sector. This includes a sector split of the investments within the
TB Amati UK Smaller Companies Fund which in the Investment
Portfolio table above is classed as Financials.
Investment Objectives and Policy
Investment Objectives
The investment objectives of the Company are to generate tax
free capital gains and regular dividend income for its
shareholders, primarily through Qualifying Investments in
AIM-traded companies and through non-qualifying investments as
allowed by the VCT legislation. The Company will manage its
portfolio to comply with the requirements of the rules and
regulations applicable to VCTs. The Company's policy is to hold a
diversified portfolio across a broad range of sectors to mitigate
risk.
A. INVESTMENT POLICY
Unless specified otherwise, defined terms shall have the meaning
given to them in the FCA Handbook from time to time.
"ITA" means the Income Tax Act 2007 (as amended).
"Manager" means Amati Global Investors Limited.
"VCT" means a venture capital trust under section 842AA of the
Income and Corporation Taxes Act 1988.
"Qualifying Investment" means an investment in shares in, or
securities of a company or group carrying on a qualifying trade
wholly or mainly in the UK satisfying the conditions in Chapter 4
of Part 6 of ITA, and held by a VCT which meets the requirements
described in Part 6 of ITA.
Investment Parameters
Whilst the objective is to make Qualifying Investments primarily
in companies traded on AIM or on NEX, the Company may also make
Qualifying Investments in companies likely to seek a quotation on
AIM or NEX. With regard to the non-qualifying portfolio the Company
makes investments which are permitted under the VCT regulations,
including shares or units in an Alternative Investment Fund (AIF)
or an Undertaking for Collective Investment in Transferable
Securities (UCITS) fund, and shares in other companies which are
listed on a regulated market such as the Main Market of the London
Stock Exchange. For continued approval as a VCT under the ITA the
Company must, within three years of raising funds, maintain at
least 70%* of its value (based on cost price, or last price paid
per share if there is an addition to the holding) in qualifying
investments. Any investments by the Company in shares or securities
of another company must not represent more than 15% of the
Company's net asset value at the time of purchase.
B. STRATEGY FOR ACHIEVING OBJECTIVES
The strategy for achieving the Investment Objectives which
follows is not part of the formal Investment Policy. Any material
amendment to the formal Investment Policy may only be made with
shareholder consent, but that consent applies only to the formal
Investment Policy above and not to any part of the Strategy for
Achieving Objectives or Key Performance Indicators below.
Qualifying Investments Strategy
The Company is likely to be a long term investor in most
Qualifying Investments, with sales generally only being made where
an investment case has deteriorated or been found to be flawed, or
to realise profits, adjust portfolio weightings, fund new
investments or pay dividends. Construction of the portfolio of
Qualifying Investments is driven by the historic investments made
by the Company and by the availability of suitable new investment
opportunities. The Manager may co-invest in companies in which
other funds managed by Amati Global Investors invest.
Non-Qualifying Investments Strategy
The assets of the portfolio which are not in Qualifying
Investments will be invested by the Manager in investments which
are allowable under the rules applicable to VCTs. Currently, cash
not needed in the short term is invested in a combination of the
following (though ensuring that no more than 15% of the Company's
funds are invested in any one entity at the time of purchase):
(i) the TB Amati UK Smaller Companies Fund (which is a UCITS
fund), or other UCITS funds approved by the Board;
(ii) direct equity investments in small and mid-sized companies
and debt securities in each case listed on the Main Market of the
London Stock Exchange; and
(iii) cash or cash equivalents (including money market funds)
which are redeemable within 7 days.
*80% for accounting periods beginning on or after 6 April
2019.
Borrowing Policy
The Company has the flexibility to borrow money up to an amount
equal to its adjusted capital and reserves but the Board's policy
is not to enter into borrowings.
Environmental, Social and Governance ("ESG") Policies
The Board has considered the requirements of Section 172 of the
Companies Act 2006 (regarding promoting the success of the Company
for the benefit of stakeholders) and the EU Non-Financial Reporting
Directive (EU/2014/95). The Company has no employees and no
premises and the Board has decided that the direct impact of its
activities is minimal. The Company's indirect impact occurs through
the range of organisations in which it invests and for this it
follows a policy of Responsible Ownership.
Responsible Ownership
Amati Global Investors, the Manager, is a signatory to the
Principles for Responsible Investment. This United Nations
supported initiative has sustainability as its core value and the
tenet that environmental, social and governance issues can affect
the performance of investment portfolios and should be considered
alongside the more traditional considerations given to
investment.
Amati has endorsed the UK Stewardship Code. This sets out the
responsibilities of institutional investors in relation to the
companies in which it invests.
Voting on portfolio investments
In 2018 the Manager voted in respect of 55 Amati AIM VCT
holdings at 68 company meetings on a range of ESG issues.
Board Diversity of Investee Companies.
The Board, through the Manager, considers Board diversity to be
an important consideration in its investment decision on investee
companies.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the
operations of the Company, nor does it have responsibility for any
other emission producing sources under the Companies Act 2006
(Strategic Report and Directors' Reports) Regulations 2013,
including those within its underlying investment portfolio.
Key Performance Indicators
The Board expects the Manager to deliver a performance which
meets the objectives of the Company. A review of the Company's
performance during the financial year, the position of the Company
at the year end and the outlook for the coming year is contained in
the Chairman's Statement and Fund Manager's Review. The Board
monitors on a regular basis a number of key performance indicators
which are typical for VCTs, the main ones being:
-- Compliance with HMRC VCT regulations to maintain the
Company's VCT Status. See page 18 of the Annual Report.
-- Net asset value and total return to shareholders (the
aggregate of net asset value and cumulative dividends paid to
shareholders, assuming dividends re-invested at ex-dividend date).
See graphs on page 3 of the Annual Report.
-- Comparison against the Numis Alternative Markets Total Return
Index. See graphs on page 3 of the Annual Report.
-- Dividend distributions. See table of investor returns on page 2 of the Annual Report.
-- Share price. See key data on page 1 of the Annual Report.
-- Ongoing charges ratio. See key data on page 1 of the Annual Report.
Fund Management and Key Contracts
Management Agreement
Amati Global Investors was appointed as Manager to the Company
on 19 March 2010. Under an Investment Management and Administration
Agreement ("IMA") dated 19 March 2010 the Manager agreed to manage
the investments and other assets of the Company on a discretionary
basis subject to the overall policy of the directors. The Company
will pay to the Manager under the terms of the IMA a fee of 1.75%
of the net asset value of the Company quarterly in arrears. In
November 2014, with shareholder consent, the Company amended its
non-qualifying investment policy to permit investment in the TB
Amati UK Smaller Companies Fund, a small and mid cap fund managed
by the Manager. The Company will receive a full rebate on the fees
payable by the Company to the Manager within this fund either
through a reduction of fees payable by the Company or a direct
payment by the Manager.
Annual running costs are capped at 3.5% of the Company's net
assets, any excess being met by the Manager by way of a reduction
in future management fees. The annual running costs include the
directors' and Manager's fees, professional fees and the costs
incurred by the Company in the ordinary course of its business (but
excluding any commissions paid by the Company in relation to any
offers for subscription, irrecoverable VAT and exceptional costs,
including winding-up costs). No performance fee is payable as the
Manager has waived all performance fees from 31 July 2014
onwards.
Administration Arrangements
Under the IMA, the Manager has also agreed to provide
secretarial and administration services to the Company. The Manager
has engaged The City Partnership (UK) Limited to act as company
secretary and Link Alternative Fund Administrators Limited to act
as fund administrator. The fee in respect of these services payable
to the Manager for the year ended 31 January 2019 is GBP81,600;
this fee is paid quarterly in arrears and is subject to an annual
increase in line with the retail prices index.
The appointment of the Manager as investment manager and/or
administrator and company secretary may be terminated on one year's
notice.
Fund Manager's Engagement
The Board regularly appraises the performance and effectiveness
of the managerial and secretarial arrangements of the Company. As
part of this process, the Board will consider the arrangements for
the provision of investment management and other services to the
Company on an ongoing basis and a formal review is conducted
annually. In the opinion of the Board, the continuing appointment
of the Manager, on the terms agreed, is in the interests of the
shareholders. The directors are satisfied that the Manager will
continue to manage the Company in a way which will enable the
Company to achieve its objectives.
VCT Status Adviser
Philip Hare & Associates LLP ("Philip Hare &
Associates") is engaged to advise the Company on compliance with
VCT requirements. Philip Hare & Associates review new
investment opportunities, as appropriate, and review regularly the
investment portfolio of the Company. Philip Hare & Associates
works closely with the Manager but reports directly to the
Board.
Principal Risks and Other Matters
VCT REGULATION
The Company's investment policy is designed to ensure that it
meets the requirements of HM Revenue & Customs to qualify and
to maintain approval as a VCT.
(i) The Company must, within three years of raising funds,
maintain at least 70% of its investments by VCT value (cost, or the
last price paid per share, if there is an addition to the holding)
in shares or securities comprised in qualifying holdings, of which
at least 70% by VCT value must be ordinary shares which carry no
preferential rights. For funds raised prior to April 2011 at least
30% by VCT value must be in ordinary shares which carry no
preferential rights (80% for accounting periods beginning on or
after 6 April 2019). A further condition requires that 30% of new
funds raised in accounting periods beginning after 5 April 2018 are
to be invested in qualifying holdings within 12 months of the
accounting period following the issuance of shares.
(ii) The Company may not invest more than 15% of its investments
in a single company and it must have at least 10% by VCT value of
its total investments in any qualifying company in qualifying
shares approved by HM Revenue & Customs.
(iii) To be classed as a VCT qualifying holding, companies in
which investments are made must have no more than GBP15 million of
gross assets at the time of investment and GBP16 million after
investment; they must be carrying on a qualifying trade and satisfy
a number of other tests including those outlined below; the
investment must also be made for the purpose of promoting growth or
development.
(iv) VCTs may not invest new capital in a company which has
raised in excess of GBP5 million (GBP10 million from 6 April 2018
if the company is deemed to be a Knowledge Intensive Company) from
all sources of state-aided capital within the 12 months prior to
and including the date of investment.
(v) No investment may be made by a VCT in a company that causes
that company to receive more than GBP12 million (GBP20 million if
the company is deemed to be a Knowledge Intensive Company) of state
aid investment (including from VCTs) over the company's lifetime. A
subsequent acquisition by the investee company of another company
that has previously received State Aid Risk Finance can cause the
lifetime limit to be exceeded.
(vi) No investment can be made by a VCT in a company whose first
commercial sale was more than 7 years prior to date of investment,
except where previous State Aid Risk Finance was received by the
company within 7 years (10 years in each case for Knowledge
Intensive Company) or where both a turnover test is satisfied and
the money is being used to enter a new product or geographical
market.
(vii) No funds received from an investment into a company can be
used to acquire another existing business or trade.
(viii) Since 6 April 2016 a VCT must not make "non-qualifying"
investments except for certain specified investments held for
liquidity purposes and redeemable within seven days. These include
investments in UCITS (Undertakings for Collective Investments in
Transferable Securities) funds, AIF (Alternative Investment Funds)
and in shares and securities purchased on a Regulated Market. In
each of these cases the restrictions in (iii) - (vii) above are not
applied.
(ix) Non-qualifying investments in AIM-quoted shares are not
permitted as AIM is not a Regulated Market.
During 2018, HMRC stopped issuing pre-clearance letters for VCT
investments. They are encouraging VCTs not to use the advance
assurance service for investments and have stated that where a VCT
has taken reasonable steps to ensure an investment is qualifying,
the VCT status will not be withdrawn where an investment is
ultimately found to be non-qualifying. The Manager and the Board
rely on advice from Philip Hare & Associates regarding the
qualifying status of new investments. The Manager monitors
compliance with VCT qualifying rules on a day to day basis through
a combination of automated and manual compliance checks in place
within the business. Philip Hare & Associates also review the
portfolio bi-annually to ensure the Manager has complied with
regulations and has reported to the Board that the VCT has met the
necessary requirements during the year.
PRIIPs REGULATION
The Company is required to publish a Key Information Document
(KID), which sets out the key features, risks, potential future
performance and costs of PRIIPs (Packaged Retail and
Insurance-based Investment Products). This document is available at
the website of Amati Global Investors: www.amatiglobal.com.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the Company faces the following major
risks and uncertainties:
1. Investment Risk
A substantial portion of the Company's investments are in small
AIM traded companies as well as some unquoted companies. By their
nature these investments involve a higher degree of risk than
investments in larger fully listed companies. These companies tend
to have limited product lines and niche markets. They can be
reliant on a few key individuals. They can be dependent on securing
further financing. In addition, the liquidity of these shares can
be low and the share prices volatile.
To reduce the risk, the Board places reliance upon the skills
and expertise of the Manager and its strong track record for
investing in this segment of the market. Investments are actively
and regularly monitored by the Manager and the Board receives
detailed reports on the portfolio in addition to the Manager's
report at regular Board meetings. The Manager also seeks to limit
these risks through building a highly diversified portfolio with
companies in different sectors and markets at different stages of
development.
2. Venture Capital Trust Approval Risk
The current approval as a venture capital trust allows investors
to take advantage of income tax reliefs on initial investment and
ongoing tax-free capital gains and dividend income. Failure to meet
the qualifying requirements could result in investors losing the
income tax relief on initial investment and loss of tax relief on
any tax-free income or capital gains received. In addition, failure
to meet the qualifying requirements could result in a loss of
listing of the shares.
To reduce this risk, the Board has appointed the Manager which
has significant experience in venture capital trust management, and
is used to operating within the requirements of the venture capital
trust legislation. In addition, to provide further formal
reassurance, the Board has appointed Philip Hare & Associates
as taxation adviser to the Company. Philip Hare & Associates
reports every six months to the Board to confirm compliance with
the venture capital legislation, to highlight areas of risk and to
inform on changes in legislation independently.
3. Compliance Risk
The Company has a premium listing on the London Stock Exchange
and is required to comply with the rules of the UK Listing
Authority, as well as with the Companies Acts, Financial Reporting
Standards and other legislation. Failure to comply with these
regulations could result in a delisting of the Company's shares, or
other penalties under the Companies Acts or from financial
reporting oversight bodies.
In July 2013 the Alternative Investment Fund Directive ("AIFMD")
was implemented, a European directive affecting the regulation of
VCTs. Amati AIM VCT has been entered in the register of small
registered UK AIFMs on the Financial Services register at the
Financial Conduct Authority ("FCA"). As a registered firm there are
a number of regulatory obligations and reporting requirements which
must be met in order to maintain its status as an AIFM.
Board members and the Manager have considerable experience of
operating at senior levels within quoted businesses. In addition,
the Board and the Manager receive regular updates on new
regulations from the auditor, lawyers and other professional
bodies.
4. Internal Control Risk
Failures in key controls within the Board or within the
Manager's business could put assets of the Company at risk or
result in reduced or inaccurate information being passed to the
Board or to shareholders.
The Board seeks to mitigate the internal control risk by setting
policy, regular reviews of performance, enforcement of contractual
obligations and monitoring progress and compliance.
5. Financial Risk
By its nature, as a venture capital trust, the Company is
exposed to market price risk, credit risk, liquidity risk and
interest rate risk. The Company's policies for managing these risks
are outlined in full in notes 19 to 22 to the financial statements
on pages 56 and 57 of the Annual Report.
The Company is financed through equity.
6. Liquidity Risk
The Company's investments may be difficult to realise. As a
closed-end vehicle the Company does have the long-term funding
appropriate for making investments in illiquid companies. However,
if the underlying investee companies run into difficulties then
their shares can become illiquid for protracted periods of time. In
these circumstances the Manager would work with the investee
company and its advisors to seek appropriate solutions.
7. Market Risk
Investment in AIM-traded and unquoted companies, by its nature,
involves a higher degree of risk than investment in companies on
the Main Market of the London Stock Exchange. In particular,
smaller companies often have limited product lines, markets or
financial resources and may be dependent for their management on a
smaller number of key individuals. At times of adverse market
sentiment the shares of small companies can become very difficult
to sell, and values can fall rapidly. The Company's closed-end
structure is important in this regard, in that it is less likely to
become a forced seller at such points. The Company's investment
policy also allows the Manager to invest in much larger, more
liquid, companies through non-qualifying holdings. These can
provide liquidity in times of market adversity.
8. Economic Risk
Events such as economic recession, not only in the UK, but also
in the core markets relevant to our investee companies, together
with a movement in interest rates, can affect investor sentiment
towards liquidity risk, and hence have a negative impact on the
valuation of smaller companies. The Manager seeks to mitigate this
risk by seeking to adopt a suitable investment style for the
current point in the business cycle, and to diversify the exposure
to geographic end markets.
9. Reputational Risk
Inadequate or failed controls might result in breaches of
regulations or loss of shareholder trust. The Manager operates a
robust risk management system which is reviewed regularly to ensure
the controls in place are effective in reducing or eliminating
risks to the Company. Details of the Company's internal controls
are on pages 27 and 28 of the Annual Report.
10. Operational Risk
Failure of the Manager's, or other contracted third parties',
accounting systems or disruption to their businesses might lead to
an inability to provide accurate reporting and monitoring or loss
to shareholders. The Manager regularly reviews the performance of
third party suppliers at monthly management meetings and quarterly
board meetings of the Manager.
STATEMENT ON LONG-TERM VIABILITY
In accordance with the UK Corporate Governance Code published in
April 2016 (the "Code"), the directors have carried out a robust
assessment of the prospects of the Company for the period to
January 2024, taking into account the Company's current position
and emerging and principal risks, and are of the opinion that, at
the time of approving the financial statements there is a
reasonable expectation that the Company will be able to continue in
operation and meet liabilities as they fall due over that
period.
To come to this conclusion, the Manager prepares and the
directors consider an income statement forecast for the next five
years which is considered to be an appropriate time period due to
its consistency with the UK Government's tax relief minimum holding
period for an investment in a VCT. The directors consider that for
the purpose of this exercise it is not practical or meaningful to
look forward over a period of more than five years. This time frame
allows for reasonable forecasts to be made to allow the Board to
provide shareholders with reasonable assurance over the viability
of the Company. In making their assessment the directors have taken
into account the nature of the Company's business and Investment
Policy, its risk management policies, the diversification of its
portfolio, the cash holdings and the liquidity of non-qualifying
investments.
OTHER DISCLOSURES
The Company had no employees during the year and has five
non-executive directors, three of whom are male and two are
female.
On behalf of the Board
Peter A. Lawrence
Chairman
17 April 2019
Board of Directors
Peter Lawrence joined the Board in May 2018 and is chairman of
the Company. He is also chairman of Baronsmead VentureTrust plc and
of Anpario plc, which is also traded on AIM. He is a director of
Algatechnologies Limited, which is backed by private equity. Peter
was chairman of Amati VCT plc prior to the merger with Amati AIM
VCT plc. On 7 March 2019 he retired as chairman of ECO Animal
Health Group plc, an AIM-traded company which he founded in
1972.
Julia Henderson joined the Board in May 2018. She has
specialised in advising quoted and unquoted companies for over
thirty years. Her corporate finance career began at ANZ Merchant
Bank after which she became a co-founder of Beeson
Gregory Limited, a mid-market investment bank. Since 2004 she
has been an independent consultant, chairman and
non-executive director to companies across a broad range of
sectors. Previous non-executive directorships include ECO
Animal Health Group plc, GTL Resources plc, Alkane Energy plc
and TP Group plc. She was a director of Amati VCT plc
prior to the merger with Amati AIM VCT plc.
Mike Killingley joined the Board in February 2006. He is a
former non-executive chairman of a number of AIM and listed
companies, including Beale plc, Southern Vectis plc, Conder
Environmental plc and Advanced Technology (UK) plc, and a
former non-executive director of AIM-quoted Falkland Islands
Holdings plc. He was a senior partner with KPMG, chartered
accountants, from 1988 until retiring from the firm in 1998; he
is the chairman of the audit committee of the Company. Mike is
retiring from the Board following the conclusion of the AGM.
Susannah Nicklin joined the Board in May 2016. She is an
investment and financial services professional with 20 years
of experience in executive roles at Goldman Sachs and Alliance
Bernstein in the US, Australia and the UK. She has
also worked in the social impact private equity sector with
Bridges Ventures and the Global Impact Investing Network.
Susannah is a non-executive director and senior independent
director at Pantheon International plc, a non-executive
director and senior independent director of City of London
Investment Group plc, a non-executive director of the North
American Income Trust and a non-executive director of Baronsmead
Venture Trust plc. She holds the Chartered Financial
Analyst credential from the CFA Institute.
Brian Scouler joined the Board in May 2018. He spent 25 years in
Private Equity with Charterhouse, Royal Bank
of Scotland and Dunedin. He has wide experience of buying and
selling private companies and investment portfolio
management, sitting on numerous investee company boards. He was
formerly manager of a quoted investment trust and a
member of the steering committee of LPEQ, the listed private
equity group. He is a Chartered Accountant with a number of
non-executive and advisory appointments. He was a director of
Amati VCT plc prior to the merger with Amati AIM VCT plc.
Directors' Report
The Corporate Governance report on pages 25 to 28 of the Annual
Report forms part of the directors' report.
Principal Activity and Status
The Company is registered as a public limited company under the
Companies Act 2006 (Registration number 04138683). The address of
the registered office is 27/28 Eastcastle Street, London, W1W 8DH.
The principal activity of the Company is to invest in a portfolio
of companies whose shares are primarily traded on AIM. The
directors have managed and intend to continue to manage the
Company's affairs in such a manner as to comply with section 274 of
the Income Tax Act 2007. A review of the Company's business during
the year is contained in the Chairman's Statement and Fund
Manager's Review.
Directors
The directors of the Company during the year under review were
Peter Lawrence, Julian Avery, Julia Henderson, Mike Killingley,
Susannah Nicklin and Brian Scouler. Julian Avery retired from the
Board on 4 May 2018. Peter Lawrence, Julia Henderson and Brian
Scouler were appointed to the Board on 4 May 2018. Mike Killingley
is retiring from the Board following the conclusion of the AGM. The
Company indemnifies its directors and officers and has purchased
insurance to cover its directors.
Management
The Company's investments are managed by Amati Global Investors
Limited, subject to an Investment Management Agreement dated 19
March 2010 (the "Agreement"). Pursuant to the Agreement, Amati is
entitled to an investment management fee of 1.75% per annum charged
on the net asset value of the Company at the quarter end, payable
quarterly in arrears.
The Manager waived the right granted in the Agreement to receive
a performance fee.
The Agreement may be terminated by either party on twelve
months' notice. There are several events that could allow immediate
termination by the Company, including insolvency, material breach,
loss of FCA authorisation, a change of control of the Manager, and
Paul Jourdan ceasing to work on a day to day basis unless a
replacement acceptable to the Company is appointed within twenty
business days.
Manager Evaluation
The Board reviews the Manager's engagement, including its
management processes, risk controls and the quality of support
provided to the Board and believes that its continuing appointment,
on its current terms, remains in the interests of shareholders at
this time.
Dividend
The Company paid an interim dividend of 3.5p per share on 23
November 2018. The Board is recommending a final dividend of 4.0p
per share for the year ended 31 January 2019 payable on 26 July
2019.
Share Capital
There were 85,549,682 ordinary shares in issue at the year end.
During the year 10,053,218 shares in the Company were allotted at
an average price of 176.7p per share raising GBP17.8m net of issue
costs. On 4 May 2018 41,231,436 shares were issued to shareholders
of Amati VCT plc in return for the transfer of the assets and
liabilities of Amati VCT plc to the Company. Since the year end,
4,744,624 shares have been issued under the Offer for Subscription,
please refer to Note 16 on page 53 of the Annual Report for further
details.
During the year 1,792,067 shares in the Company with a nominal
value of 5p per share were bought back for an aggregate
consideration of GBP2.8m at an average price of 154.9p per share
(representing 5.0% of the shares in issue at 31 January 2018).
Since the year end, 431,144 shares have been bought back for an
aggregate consideration of GBP0.6m at an average price of 131.6p
per share. All of the shares were cancelled after purchase. The
purpose of the share buybacks was to satisfy demand from those
shareholders who sought to sell their shares during the period,
given that there is a very limited secondary market for shares in
Venture Capital Trusts generally. It remains the Board's policy to
buy back shares in the market, subject to the overall constraint
that such purchases are in the Company's interest including the
maintenance of sufficient resources for investment in new and
existing investee companies and the continued payment of dividends
to shareholders. At the Company's year end authority remained for
the Company to buy back 10,263,192 shares.
The rights and obligations attached to the Company's ordinary
shares are set out in the Company's Articles of Association, copies
of which can be obtained from Companies House. The Company has one
class of share, ordinary shares, which carry no right to fixed
income. The holders of ordinary shares are entitled to receive
dividends when declared, to receive the Company's report and
accounts, to attend and speak at general meetings, to appoint
proxies and to exercise voting rights. There are no restrictions on
the voting rights attaching to the Company's shares or the transfer
of securities in the Company.
Annual General Meeting - Authority to Allot Shares
Authority is sought at the upcoming AGM of the Company that the
directors be authorised pursuant to Section 551 of the Companies
Act 2006 to allot relevant securities up to a maximum aggregate
nominal value of GBP1,500,000.
Substantial Shareholdings
31 January 2019 As at the date of
this report
No of ordinary % of shares No of ordinary % of shares
shares held in issue shares held in issue
-------------------------------- --------------- ------------ --------------- ------------
Hargreaves Lansdown (Nominees)
Limited 4,300,087 5% 4,700,924 5%
-------------------------------- --------------- ------------ --------------- ------------
Auditor
A resolution to re-appoint BDO LLP as auditor will be proposed
at the forthcoming AGM.
Re-election of Directors
In accordance with corporate governance best practice, all
directors, except Mike Killingley who is retiring from the Board
following the conclusion of the AGM, are proposed for re-election
at the AGM.
Going Concern
In accordance with FRC Guidance for directors on going concern
and liquidity risk the directors have assessed the prospects of the
Company having adequate resources to continue in operational
existence for at least twelve months from the date of approval of
these financial statements. The directors took into account the
nature of the Company's business and Investment Policy, its risk
management policies, the diversification of its portfolio, the cash
holdings and the liquidity of non-qualifying investments. The
Company's business activities, together with the factors likely to
affect its future development, performance and position including
the financial risks the Company is exposed to are set out in the
Strategic Report on pages 19 and 20 of the Annual Report. As a
consequence, the directors have a reasonable expectation that the
Company has sufficient cash and liquid investments to continue to
operate and that together with funds raised after the end of the
financial year under the new offer the Company is well placed to
manage its business risks successfully and meet its liabilities as
they fall due. Thus the directors believe it is appropriate to
continue to adopt the going concern basis in preparing the
financial statements.
Accountability and Audit
The independent auditor's report is set out on pages 34 to 38 of
the Annual Report. The directors who were in office on the date of
approval of these Annual Report and Financial Statements have
confirmed that, as far as they were aware, there is no relevant
audit information of which the auditor is unaware. Each of the
directors has taken all the steps they ought to have taken as
directors in order to make themselves aware of any relevant audit
information and to establish that it has been communicated to the
auditor.
Financial Instruments
The Company's financial instruments comprise equity and fixed
interest investments, cash balances and liquid resources including
debtors and creditors. Further details, including details about
risk management, are set out in the Strategic Report and in notes
18 to 22 on pages 54 to 57 of the Annual Report.
Future Developments
Significant events which have occurred after the year end are
detailed in note 16 on page 53 of the Annual Report. Future
developments which could affect the Company are discussed in the
outlook sections of the Chairman's Statement and Fund Manager's
Review.
On behalf of the Board
Peter A. Lawrence
Chairman
17 April 2019
Statement of Corporate Governance
Background
The Board of Amati AIM VCT plc recognises the importance of
sound corporate governance. The Board has considered the principles
and recommendations of the 2016 AIC Code of Corporate Governance
("AIC Code") by reference to the AIC Corporate Governance Guide for
Investment Companies ("AIC Guide") available on the AIC website
www.theaic.co.uk. The AIC Code, as explained by the AIC Guide,
addresses the principles of the UK Corporate Governance Code (the
"Code"), as well as setting out additional principles and
recommendations on issues which are of specific relevance to the
Company as a venture capital trust. The Board considers that
reporting within the principles and recommendations of the AIC
Code, and by reference to the AIC Guide (which incorporates the
Code), will provide better information for shareholders.
The Company has complied with the recommendations of the AIC
Code and the relevant provisions of the Code except as set out
below. For the reasons set out in the AIC Guide, and in the
preamble to the Code, the Board considers that the provisions
relating to the role of chief executive, executive directors'
remuneration and the need for an internal audit function are not
relevant to the position of the Company, due to the size and
specialised nature of the company, the fact that all directors are
independent and non-executive, and the costs involved.
Board of Directors
The Company has a Board of five directors, all of whom are
considered independent non-executive directors under the AIC Code.
As all directors have acted in the interests of the Company
throughout the period of their appointment and demonstrated
commitment to their roles the Board recommends they be re-elected
at the AGM except Mike Killingley who is not seeking re-election at
the AGM as he is retiring from the Board following the conclusion
of the AGM.
The Company may by ordinary resolution appoint any person who is
willing to act as a director, either to fill a vacancy or as an
additional director. No director has a contract of service with the
Company. All of the directors have been provided with letters of
appointment which are available for inspection by shareholders
immediately before and after the Company's annual general
meeting.
Directors are provided with key information on the Company's
activities including regulatory and statutory requirements and
internal controls by the Manager. The Manager, in the absence of
explicit instructions from the Board, is empowered to exercise
discretion in the use of the Company's voting rights. All
shareholdings are voted, where practical, in accordance with the
Manager's own corporate governance policy, which is to seek to
maximise shareholder value by constructive use of votes at company
meetings and by endeavouring to use its influence as an investor
with a principled approach to corporate governance.
The AIC Code states that the Board should have a formal schedule
of matters specifically reserved to it for decision, to ensure that
it has firm direction and control of the Company. This is achieved
by a management agreement between the Company and the Manager,
which sets out the matters over which the Manager has authority and
the limits above which Board approval must be sought. All other
matters including strategy, investment and dividend policies,
gearing and corporate governance proceedings are reserved for the
approval of the Board of directors. All the directors are equally
responsible for the proper conduct of the Company's affairs. In
addition, the directors are responsible for ensuring that the
policies and operations are in the best interests of all the
Company's shareholders and that the best interests of creditors and
suppliers to the Company are properly considered. The Chairman and
the company secretary establish the agenda for each Board meeting.
The necessary papers for each meeting are distributed well in
advance of each meeting ensuring all directors receive accurate,
timely and clear information.
Independence of Directors
The Board regularly reviews the independence of each director
and of the Board as a whole in accordance with the guidelines in
the AIC Code. Directors' interests are noted at the start of each
Board meeting and any director would not participate in the
discussion concerning any investment in which he or she had an
interest. The Board does not consider that length of service will
necessarily compromise the independence or effectiveness of
directors and no limit has been placed on the overall length of
service. The Board consider that such continuity and experience can
be of significant benefit to the Company and its shareholders. The
Board believes that each director has demonstrated that they are
independent in character and judgment and there are no
relationships or circumstances which could affect their
objectivity.
Board Performance
The Board carries out a performance evaluation of the Board,
committees and individual directors each year. Due to the size of
the Company, the fact that all directors are independent and
non-executive, and the costs involved, external facilitators are
not used in evaluation of the Board. The directors consider that
the balance of skills is appropriate and all directors contribute
fully to discussion in an open, constructive and objective way. The
composition of the Board and its committees is considered adequate
for the effective governance of the Company. The biographies of the
directors, set out on page 22 of the Annual Report demonstrate the
wide range of investment, commercial and professional experience
that they contribute.
Board Committees
Copies of the terms of reference of the Company's committees are
available from the company secretary and can be found on Amati's
website: http://amatiglobal.com/amat_the_board.php
Report of the Audit Committee
The audit committee comprises Mike Killingley (chairman), Julia
Henderson, Peter Lawrence, Susannah Nicklin and Brian Scouler.
Following Mike Killingley's retirement at the conclusion of the AGM
Brian Scouler will become chairman of the audit committee. The
Board is satisfied that the committee as a whole has competence
relevant to the venture capital trust sector.
During the year ended 31 January 2019 the audit committee met
twice and:
-- reviewed all financial statements released by the Company
(including the annual and half-yearly report);
-- reviewed the Company's accounting policies;
-- monitored the effectiveness of the system of internal controls and risk management;
-- approved the external auditor's plan and fees;
-- received a report from the external auditors following their
detailed audit work, and discussed key issues arising from that
work; and
-- reviewed its own terms of reference.
The directors carried out a robust assessment of the principal
risks facing the Company and concluded that the key areas of risk
which threaten the business model, future performance, solvency or
liquidity of the Company are:
-- compliance with HM Revenue & Customs to maintain the Company's VCT status; and
-- valuation of unquoted investments.
These matters are monitored regularly by the Manager, and
reviewed by the Board at every Board meeting. They were also
discussed with the Manager and the auditor at the audit committee
meeting held to discuss the annual financial statements.
The committee concluded:
VCT status - the Manager confirmed to the audit committee that
the conditions for maintaining the Company's status had been
complied with throughout the year. The Company's VCT status is also
reviewed by the Company's tax adviser, Philip Hare &
Associates, as described on page 17 of the Annual Report.
Valuation of unquoted investments - the Manager confirmed to the
audit committee that the basis of valuation for unquoted companies
was consistent with the prior year and in accordance with published
industry guidelines, taking account of the latest available
information about investee companies and current market data. A
comprehensive report on the valuation of unquoted investments is
presented and discussed at every Board meeting; directors are also
consulted about material changes to those valuations between Board
meetings.
The Manager and auditor confirmed to the audit committee that
they were not aware of any material unadjusted misstatements.
Having reviewed the reports received from the Manager, the audit
committee is satisfied that the key areas of risk and judgement
have been properly addressed in the financial statements and that
the significant assumptions used in determining the value of assets
and liabilities have been properly appraised and are sufficiently
robust.
The audit committee has managed the relationship with the
external auditor and assessed the effectiveness of the audit
process. When assessing the effectiveness of the process for the
year under review the Committee considered the auditor's technical
knowledge and that it has a clear understanding of the business of
the Company; that the audit team is appropriately resourced; that
the auditor provided a clear explanation of the scope and strategy
of the audit and that the auditor maintained independence and
objectivity. As part of the review of auditor effectiveness and
independence, BDO LLP has confirmed that it is independent of the
Company and has complied with applicable auditing standards. BDO
LLP does not provide any non-audit services to the Company and the
audit committee must approve the appointment of the external
auditor for any non-audit services. BDO LLP and prior to their
merger PKF (UK) LLP has held office as auditor for a total of 9
years; in accordance with professional guidelines the engagement
partner is rotated after at most five years, and the current
partner started working with the Company for the 31 January 2016
audit.
Following the review as noted above the audit committee is
satisfied with the performance of BDO LLP and recommends the
services of BDO LLP to the shareholders in view both of that
performance and the firm's extensive experience in auditing Venture
Capital Trusts.
Remuneration Committee
Following the merger, the directors established a Remuneration
Committee which comprises Brian Scouler (chairman), Julia
Henderson, Peter Lawrence, Mike Killingley and Susannah Nicklin.
The Committee did not meet during the year but the directors agreed
the terms of reference of the Remuneration Committee and resolved
to meet once a year in future years to discuss in particular fees
payable to advisers (other than the Company's auditors), terms of
appointment and remuneration of the directors and make
recommendations to the Board. The Remuneration Committee's annual
report can be found on pages 30 to 33 of the Annual Report.
Nomination Committee
During the year the directors also established a Nomination
Committee which comprises Julia Henderson (chairman), Peter
Lawrence, Mike Killingley, Susannah Nicklin and Brian Scouler. The
Committee did not meet during the year, but the directors agreed
the terms of reference of the Nomination Committee whose duties
include making recommendations to the Board on Board structure,
size and composition (including the knowledge, experience, skills
and diversity), drawing up plans for succession and identifying and
nominating candidates to fill Board vacancies.
The Board has considered the recommendations of the UK Corporate
Governance Code concerning gender diversity and welcomes
initiatives aimed at increasing diversity generally. The Board
believes, however, that all appointments should be made on merit
rather than positive discrimination. The Board is clear that
maintaining an appropriate balance round the board table through a
diverse mix of skills, experience, knowledge and background is of
paramount importance and gender diversity is a significant element
of this. Any search for new board candidates is conducted, and
appointments made, on merit, against objective selection criteria
having due regard, among other things, to the benefits of diversity
on the board, including gender.
Board and Committee Meetings
The following table sets out the directors' attendance at full
Board and audit committee meetings held during the year ended 31
January 2019. There were no meetings of the Remuneration Committee
or Nomination Committee during the year.
Audit committee
Board meetings meetings
Director held attended held attended
--------------------------------- ------ --------- -------- ----------
Peter Lawrence* 6 6 1 1
Julian Avery* 3 3 1 1
Julia Henderson* 6 6 1 1
Mike Killingley 9 8 2 2
Susannah Nicklin 9 9 2 2
Brian Scouler* 6 6 1 1
--------------------------------- ------ --------- -------- ----------
*Peter Lawrence, Julia Henderson and Brian Scouler were
appointed, and Julian Avery retired from the Board, on
4 May 2018.
The Board is in regular contact with the Manager between Board
meetings.
Internal Control
The Board acknowledges that it is responsible for the Company's
internal control systems and for reviewing their effectiveness. In
accordance with the AIC Code and the Guidance on Risk Management
published by the Financial Reporting Council in 2014, the audit
committee has established an ongoing process for identifying,
evaluating and managing the significant risks faced by the Company.
Internal controls are designed to manage the particular needs of
the Company and the risks to which it is exposed. The internal
control systems aim to ensure the maintenance of proper accounting
records, the reliability of the financial information upon which
business decisions are made and which is used for publication, and
that the assets of the Company are safeguarded. They can by their
nature only provide reasonable and not absolute assurance against
material misstatement or loss. The financial controls operated by
the Board include the authorisation of the investment strategy and
regular reviews of the results and investment performance.
The Board has delegated contractually to third parties, as set
out on page 17 of the Annual Report, the management of the
investment portfolio, the custodial services, including the
safeguarding of the assets, the day-to-day accounting, company
secretarial and administration requirements and registration
services. Each of these contracts was entered into after full and
proper consideration by the Board of the quality and cost of
services offered. The Board receives and considers regular reports
from the Manager. Ad hoc reports and information are supplied to
the Board as required. It remains the role of the Board to keep
under review the terms of the management agreement with the
Manager.
A bi-annual review of the control systems is carried out which
covers consideration of the key risks in three major areas:
corporate strategy and compliance with laws and regulations;
financial management and company reporting and relationships with
service providers. Each risk is considered with regard to the
controls exercised at Board level, reporting by service providers
and controls relied upon by the Board. The company secretary
reviews the annual statutory accounts to ensure compliance with
Companies Acts and the AIC Code and the audit committee reviews
financial information prior to its publication. The principal
features of the internal control systems which the Company has in
place in respect of financial reporting include segregation of
duties between the review and approval of unquoted investment
valuations and the recording of these valuations in the accounting
records. Bank reconciliations, cash forecasts and investment
valuations are produced on a weekly basis for review by the
Manager. Quarterly management accounts are produced for review and
approval by the Manager and the Board.
Relations with Shareholders
The Company welcomes the views of shareholders and places great
importance on communication with its shareholders. Shareholders
have the opportunity to meet the Board at the annual general
meeting. All shareholders are welcome to attend the meeting and to
ask questions of the directors. The Board is also happy to respond
to any written queries made by shareholders during the course of
the year. All communication from shareholders is recorded and
reviewed by the Board to ensure that shareholder enquiries are
promptly and adequately resolved.
The notice of the AGM accompanies this annual report, which is
sent to shareholders. A separate resolution is proposed for each
substantive issue. The Board and representatives of the Manager are
available to answer any questions shareholders may have.
The Company also communicates with shareholders through annual
and half-yearly reports, which appear on the Company's website
(http://amatiglobal.com/amat_literature.php). The Board as a whole
approves the terms of the Chairman's Statement and Fund Manager's
Review which form part of these reports. The directors consider the
annual report and financial statements taken as a whole are fair,
balanced and understandable and provide the information necessary
for shareholders to assess the Company's position and performance,
business model and strategy.
On behalf of the Board
Peter A. Lawrence
Chairman
17 April 2019
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
have prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (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 year.
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
applicable UK accounting standards, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
-- prepare a Strategic Report, a Directors' Report and
Directors' 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 and, as
regards the Company financial statements, Article 4 of the
International Accounting Standards Regulation. 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 provide the information necessary for
shareholders to assess the Company's position, 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, this
website is maintained by the Manager on behalf of the Company.
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 which have been prepared in
accordance with UK Generally Accepted Accounting Practice give a
true and fair view of the assets, liabilities, financial position
and loss 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 of the principal risks and
uncertainties that they face.
On behalf of the Board
Peter A. Lawrence
Chairman
17 April 2019
DIRECTORS' REMUNERATION REPORT
Introduction
This report has been prepared in accordance with the
requirements of the Companies Act 2006 and The Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (the "Regulations"). An ordinary
resolution for the approval of the Directors' Annual Report on
remuneration will be put to members at the AGM on 26 June 2019.
The Company's auditor, BDO LLP, is required to give its opinion
on certain information included in this report. The disclosures
which have been audited are indicated as such. The auditor's
opinion on these and other matters is included in the Independent
Auditor's Report on pages 34 to 38 of the Annual Report.
Annual Statement from the Chairman of the Company
Directors' fees are reviewed annually and are set by the Board
to attract individuals with the appropriate range of skills and
experience. In determining the level of fees their duties and
responsibilities are considered, together with the level of time
commitment required in preparing for and attending meetings. The
Company appointed a remuneration committee in the financial year
under review and any decisions on remuneration to date were taken
by the Board as a whole. The remit of the newly formed remuneration
committee regarding remuneration is included in the Statement of
Corporate Governance on page 27 of the Annual Report. The Board
last agreed to increase annual fees with effect from 4 May 2018
when directors' fees were increased to GBP22,000 per annum and the
Chairman's fee to GBP24,325 per annum.
Directors' Remuneration Policy
The Board's policy is that the remuneration of directors should
reflect the experience of the Board as a whole, be fair and
comparable with that of other companies that are similar in size
and nature to the Company and have similar objectives and
structures. Directors' fees are set with a view to attracting and
retaining the directors required to oversee the Company effectively
and to reflect the specific circumstances of the Company, the
duties and responsibilities of the directors and the value and
amount of time committed to the Company's affairs. It is the
intention of the Board that, unless any revision to this policy is
deemed necessary, this policy will continue to apply in the
forthcoming and subsequent financial years. The Board has not
received any views from the Company's shareholders in respect of
the levels of directors' remuneration.
The directors are not eligible for bonuses, pension benefits,
share options, long-term incentive schemes or other benefits. No
arrangements have been entered into between the Company and the
directors to entitle any of the directors to compensation for loss
of office.
This policy was last approved by the members at the AGM in 2017,
and will next be voted on by the members at the AGM to be held in
2020.
The Company's Articles of Association provide for a maximum
level of total remuneration of GBP120,000 per annum in
aggregate.
Directors' Annual Report on Remuneration
Terms of appointment
No director has a contract of service with the Company. All of
the directors have been provided with letters of appointment which
include details of fees payable. The letters of appointment provide
that directors are subject to re-election by shareholders at the
first annual general meeting after their appointment. In accordance
with corporate governance best practice, the Board has resolved
that all directors will stand for annual re-election. Their
re-election is subject to shareholder approval. The letters of
appointment are available for inspection on request from the
company secretary. There is no period of notice to be given to
terminate the letters of appointment and no provision for
compensation upon early termination of appointment.
The following table shows, for each director, the original
appointment date and the annual general meeting at which they may
stand for re-election.
Director Date of original Due date for
appointment re-election
----------------- ----------------- -------------
Peter Lawrence 4 May 2018 2019 AGM
Julia Henderson 4 May 2018 2019 AGM
Mike Killingley* 22 February 2006 n/a
Susannah Nicklin 4 May 2016 2019 AGM
Brian Scouler 4 May 2018 2019 AGM
----------------- ----------------- -------------
*Mike Killingley is retiring from the Board following the
conclusion of the AGM.
Directors' fees for the year (Audited)
The fees payable to individual directors in respect of the year
ended 31 January 2019 are shown in the table below.
Total fee for year Total fee for
Director ended year ended
31 January 2019 31 January 2018
GBP GBP
------------------ ------------------- -----------------
Peter Lawrence* 18,125 -
Julian Avery* 6,235 23,500
Julia Henderson* 16,395 -
Mike Killingley 21,365 19,000
Susannah Nicklin 20,710 16,500
Brian Scouler* 16,395 -
------------------ ------------------- -----------------
99,225 59,000
------------------ ------------------- -----------------
*Peter Lawrence, Julia Henderson and Brian Scouler were
appointed, and Julian Avery retired from the Board, on 4 May
2018.
Directors are remunerated exclusively by fixed fees and do not
receive bonuses, share options, long term incentives, pension or
other benefits.
Relative importance of spend on pay
The table below shows the remuneration paid to directors and
shareholder distributions in the year to 31 January 2019 and the
prior year:
2019 2018 Percentage
GBP GBP increase/(decrease)
------------------------- ---------- ---------- ---------------------
Total dividend paid to
shareholders 7,218,163 2,577,461 180.05%
Total repurchase of own
shares 2,789,542 1,513,633 84.29%
Total directors' fees 99,225 59,000 68.18%
------------------------- ---------- ---------- ---------------------
Directors' shareholdings (Audited)
The directors who held office at 31 January 2019 and their
interests in the shares of the Company (including beneficial and
family interests) were:
31 January 2019 31 January 2018
% of issued % of issued
Shares held share capital Shares held share capital
------------------ ------------ -------------- ------------ --------------
Peter Lawrence 641,420 0.75 n/a n/a
Julia Henderson 13,295 0.02 n/a n/a
Mike Killingley 52,697 0.06 52,697 0.15
Susannah Nicklin 8,531 0.01 2,933 0.01
Brian Scouler 40,280 0.05 n/a n/a
------------------ ------------ -------------- ------------ --------------
The Company confirms that it has not set out any formal
requirements or guidelines for a director to own shares in the
Company.
Company Performance
The Board is responsible for the Company's investment strategy
and performance, although the management of the Company's
investment portfolio is delegated to the Manager through the
management agreement. The graph on page 32 of the Annual Report
compares the Company's share price with dividends added back at the
ex-dividend date to the Numis Alternative Markets Total Return
Index for the period from the launch of the Company. This index was
chosen for comparison purposes, as it is the benchmark used for
investment performance measurement purposes.
Shareholder Voting
At the AGM held on 27 June 2018 83.9% of shareholders voted for,
16.1% voted against and 16,625 shares were withheld in respect of
the resolution approving the Directors' Remuneration Report. At the
AGM held on 28 June 2017, 97.7% of shareholders voted for the
Remuneration Policy with 2.3% voting against and 25,689 shares
withheld. An ordinary resolution for the approval of the Directors'
Annual Report on Remuneration will be put to shareholders at the
forthcoming AGM.
On behalf of the Board
Peter A. Lawrence
Chairman
17 April 2019
INCOME STATEMENT
for the year ended 31 January 2019
Note 2019 2019 2019 2018 2018 Capital 2018
Revenue Capital Total Revenue GBP'000 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
(Loss)/ gain on
investments 10 - (14,939) (14,939) - 19,511 19,511
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
Income 3 596 - 596 403 - 403
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
Investment management
fees 4 (488) (1,464) (1,952) (227) (681) (908)
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
Other expenses 5 (376) - (376) (289) - (289)
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
(Loss)/profit on
ordinary activities
before taxation (268) (16,403) (16,671) (113) 18,830 18,717
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
Taxation on ordinary 6 - - - - - -
activities
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
(Loss)/profit and
total comprehensive
income attributable
to shareholders (268) (16,403) (16,671) (113) 18,830 18,717
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
Basic and diluted
(loss)/earnings
per Ordinary share 8 (0.38)p (22.90)p (23.28)p (0.33)p 54.85p 54.52p
------------------------ ----- ---------- ----------- ----------- ---------- ------------- ---------
The total column of this Income Statement represents the profit
and loss account of the Company. The supplementary revenue and
capital columns have been prepared in accordance with The
Association of Investment Companies' Statement of Recommended
Practice. There is no other comprehensive income other than the
results for the year discussed above. Accordingly a Statement of
Total Comprehensive Income is not required.
All the items above derive from continuing operations of the
Company.
The notes on pages 44 to 58 of the Annual Report form part of
these financial statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 January 2019
Non-distributable reserves Distributable reserves
Share Capital
capital Share Merger redemption Capital reserve Special Capital Revenue Total
GBP'000 premium reserve reserve (non-distributable) reserve reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 (distributable) GBP'000 GBP'000
GBP'000
------------------------- -------- ---------- --------- ----------- --------------------- --------- ----------------- ---------- -----------
Opening balance as at
1 February 2018 1,804 19,359 425 418 33,359 10,386 (4,073) (127) 61,551
Loss and total
comprehensive
income for the year - - - - (14,492) - (1,911) (268) (16,671)
Total comprehensive
income
for the year 1,804 19,359 425 418 18,867 10,386 (5,984) (395) 44,880
------------------------- -------- ---------- --------- ----------- --------------------- --------- ----------------- ---------- -----------
Contributions by and
distributions to
shareholders:
Repurchase of shares (91) - - 91 - (2,790) - - (2,790)
Shares issued 503 17,278 - - - - - - 17,781
Shares issued as part
of the merger 2,062 70,688 - - - - - - 72,750
Merger costs - (357) - - - (56) - - (413)
Other costs charged to
capital - - - - - (1) - - (1)
Dividends paid - - - - - (7,218) - - (7,218)
Cancellation of share
premium - (96,397) - - - 96,397 - - -
Total contributions by
and distributions to
shareholders 2,474 (8,788) - 91 - 86,332 - - 80,109
------------------------- -------- ---------- --------- ----------- --------------------- --------- ----------------- ---------- -----------
Closing balance as at
31 January 2019 4,278 10,571 425 509 18,867 96,718 (5,984) (395) 124,989
------------------------- -------- ---------- --------- ----------- --------------------- --------- ----------------- ---------- -----------
Further information on the shares issued as part of the merger
is included in note 9.
for the year ended 31 January 2018
Non-distributable reserves Distributable reserves
Share Capital
capital Share Merger redemption Capital reserve Special Capital Revenue Total
GBP'000 premium reserve reserve (non-distributable) reserve reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 (distributable) GBP'000 GBP'000
GBP'000
--------------- -------- --------- --------- ----------- --------------------- ---------- ----------------- ---------- ----------
Opening
balance as at
1 February
2017 1,633 13,044 425 364 16,487 14,477 (6,031) (14) 40,385
Profit/(loss)
and total
comprehensive
income
for the year - - - - 16,872 - 1,958 (113) 18,717
Total
comprehensive
income
for the year 1,633 13,044 425 364 33,359 14,477 (4,073) (127) 59,102
--------------- -------- --------- --------- ----------- --------------------- ---------- ----------------- ---------- ----------
Contributions
by and
distributions
to
shareholders:
Repurchase of
shares (54) - - 54 - (1,514) - - (1,514)
Shares issued 225 6,439 - - - - - - 6,664
Share issue
costs - (124) - - - - - - (124)
Dividends paid - - - - - (2,577) - - (2,577)
Total
contributions
by
and
distributions
to
shareholders 171 6,315 - 54 - (4,091) - - 2,449
--------------- -------- --------- --------- ----------- --------------------- ---------- ----------------- ---------- ----------
Closing
balance as at
31 January
2018 1,804 19,359 425 418 33,359 10,386 (4,073) (127) 61,551
--------------- -------- --------- --------- ----------- --------------------- ---------- ----------------- ---------- ----------
BALANCE SHEET
as at 31 January 2019
Note 2019 2018
GBP'000 GBP'000
------------------------------------------- ----- --------- ---------
Fixed assets
------------------------------------------- ----- --------- ---------
Investments held at fair value 10 112,867 58,273
------------------------------------------- ----- --------- ---------
Current assets
------------------------------------------- ----- --------- ---------
Debtors 11 38 867
------------------------------------------- ----- --------- ---------
Cash at bank 12,756 2,823
------------------------------------------- ----- --------- ---------
Total current assets 12,794 3,690
------------------------------------------- ----- --------- ---------
Current liabilities
------------------------------------------- ----- --------- ---------
Creditors: amounts falling due within one
year 12 (672) (412)
------------------------------------------- ----- --------- ---------
Net current assets 12,122 3,278
------------------------------------------- ----- --------- ---------
Total assets less current liabilities 124,989 61,551
------------------------------------------- ----- --------- ---------
Capital and reserves
------------------------------------------- ----- --------- ---------
Called up share capital* 13 4,278 1,804
------------------------------------------- ----- --------- ---------
Share premium account* 10,571 19,359
------------------------------------------- ----- --------- ---------
Merger reserve* 425 425
------------------------------------------- ----- --------- ---------
Capital redemption reserve* 509 418
------------------------------------------- ----- --------- ---------
Capital reserve (non-distributable)* 18,867 33,359
------------------------------------------- ----- --------- ---------
Special reserve 96,718 10,386
------------------------------------------- ----- --------- ---------
Capital reserve (distributable) (5,984) (4,073)
------------------------------------------- ----- --------- ---------
Revenue reserve (395) (127)
------------------------------------------- ----- --------- ---------
Equity shareholders' funds 124,989 61,551
------------------------------------------- ----- --------- ---------
Net asset value per share 14 146.1p 170.7p
------------------------------------------- ----- --------- ---------
* These reserves are not distributable.
The financial statements on pages 39 to 58 of the Annual Report
were approved and authorised for issue by the Board of directors on
17 April 2019 and were signed on its behalf by
Peter A. Lawrence
Chairman
Company Number 04138683
The accompanying notes on pages 44 to 58 of the Annual Report
are an integral part of the balance sheet.
STATEMENT OF CASH FLOWS
for the year ended 31 January 2019
Note 2019 2018
GBP'000 GBP'000
-------------------------------------------- ----- --------- --------
Cash flows from operating activities
-------------------------------------------- ----- --------- --------
Investment income received 585 408
--------------------------------------------- ----- --------- --------
Investment management fees 4 (1,686) (818)
--------------------------------------------- ----- --------- --------
Other operating costs (398) (287)
--------------------------------------------- ----- --------- --------
Net cash outflow from operating activities (1,499) (697)
--------------------------------------------- ----- --------- --------
Cash flows from investing activities
-------------------------------------------- ----- --------- --------
Purchases of investments 10 (12,832) (5,466)
--------------------------------------------- ----- --------- --------
Disposals of investments 10 6,692 5,679
--------------------------------------------- ----- --------- --------
Net cash (outflow)/inflow from investing
activities (6,140) 213
--------------------------------------------- ----- --------- --------
Net cash outflow before financing (7,639) (484)
--------------------------------------------- ----- --------- --------
Cash flows from financing activities
-------------------------------------------- ----- --------- --------
Cash received as part of asset acquisition
of Amati VCT 9 9,462 -
--------------------------------------------- ----- --------- --------
Net cash paid in respect of assets (101) -
and liabilities of Amati VCT
-------------------------------------------- ----- --------- --------
Merger costs of the Company (413) -
-------------------------------------------- ----- --------- --------
Net proceeds of share issues 18,630 6,228
--------------------------------------------- ----- --------- --------
Payments for share buy-backs (2,788) (1,599)
--------------------------------------------- ----- --------- --------
Equity dividends paid 7 (7,218) (2,577)
--------------------------------------------- ----- --------- --------
Net cash inflow from financing activities 17,572 2,052
--------------------------------------------- ----- --------- --------
Increase in cash 9,933 1,568
--------------------------------------------- ----- --------- --------
Reconciliation of net cash flow to
movement in net cash
-------------------------------------------- ----- --------- --------
Increase in cash during the year 9,933 1,568
--------------------------------------------- ----- --------- --------
Net cash at 1 February 2,823 1,255
--------------------------------------------- ----- --------- --------
Net cash at 31 January 12,756 2,823
--------------------------------------------- ----- --------- --------
Reconciliation of (Loss)/Profit on Ordinary Activities Before
Taxation to Net Cash Outflow from Operating Activities
--------------------------------------------------------------------
(Loss)/profit on ordinary activities before
taxation (16,671) 18,717
---------------------------------------------- --------- ---------
Net loss/(gain) on investments 14,939 (19,511)
---------------------------------------------- --------- ---------
Increase in creditors, excluding corporation
tax payable 257 91
---------------------------------------------- --------- ---------
(Increase)/decrease in debtors (24) 6
---------------------------------------------- --------- ---------
Net cash outflow from operating activities (1,499) (697)
---------------------------------------------- --------- ---------
Further information on the asset acquisition of Amati VCT is
included in note 9.
The accompanying notes on pages 44 to 58 of the Annual Report
are an integral part of the statement.
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting Policies
Basis of Accounting
The financial statements have been prepared under FRS 102 'The
Financial Reporting Standard applicable in the UK and Republic of
Ireland' and in accordance with the SORP issued by the Association
of Investment Companies ("AIC") and on the assumption that the
Company maintains VCT status.
Income
Dividends on quoted shares are recognised as income to the
Revenue Account (except where, in the opinion of the Directors, its
nature indicates it should be recognised in the Capital Account) on
the date that the related investments are marked ex dividend and,
where no dividend date is quoted, when the Company's right to
receive payment is established.
Fixed returns on non-equity shares and debt securities are
recognised on a time apportionment basis so as to reflect the
effective yield, provided there is no reasonable doubt that payment
will be received in due course. Interest receivable is included in
the accounts on an accruals basis. Where interest is rolled up or
payable on redemption it is recognised as income unless there is
reasonable doubt as to its receipt.
Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the income statement, all expenses have been prescribed as revenue
items except as follows:
Expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the
investments held can be demonstrated, and accordingly the
investment management fee is currently allocated 25% to revenue and
75% to capital, which reflects the directors' expected long-term
view of the nature of the investment returns of the Company.
Issue costs in respect of ordinary shares issued by the Company
are deducted from the share premium account.
Taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance
sheet date. Deferred tax assets are only recognised when they arise
from timing differences where recovery in the foreseeable future is
regarded as more likely than not. Timing differences are
differences arising between the Company's taxable profits and its
results as stated in the financial statements which are capable of
reversal in one or more subsequent periods. Deferred tax is not
discounted.
Current tax is expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at the
balance sheet date and any adjustment to tax payable in respect of
previous years. The tax effect of different items of expenditure is
allocated between revenue and capital on the same basis as a
particular item to which it relates, using the Company's effective
rate of tax, as applied to those items allocated to revenue, for
the accounting year.
No tax liability arises on gains from sales of fixed asset
investments by the Company by virtue of its VCT status.
Investments
Investments are designated on initial recognition as Fair Value
through Profit or Loss and are measured at subsequent reporting
dates at fair value.
In respect of investments that are traded on AIM or are fully
listed, these are generally valued at bid prices at close of
business on the Balance Sheet date. Investments traded on SETS
(London Stock Exchange's electronic trading service) are valued at
closing price as this is considered to be a more accurate
indication of fair value.
Unquoted investments are shown at fair value as assessed by the
directors in accordance with International Private Equity Venture
Capital Valuation ("IPEV") guidelines December 2018. Valuations of
unquoted investments are reviewed quarterly:
-- the shares may be valued by using the most appropriate
methodology recommended by the IPEV guidelines, including earnings
multiples, net assets, discounted cashflows and industry valuation
benchmarks.
-- alternatively where a value is indicated by a material
arms-length transaction by a third party in the shares of the
company the valuation will normally be based on this.
Convertible loan stock instruments are valued using present
value of future payments discounted at a market value of interest
for a similar loan and valuing the option at fair value.
The valuation of the Company's investment in TB Amati UK Smaller
Companies Fund is based on the published share price. The valuation
is provided by the Authorised Corporate Director of the fund, T
Bailey Fund Managers Limited.
Realised and unrealised surpluses or deficits on the disposal of
investments, the revaluation of investments and permanent
impairments in the value of investments are taken to the capital
reserve.
Financial Instruments
The Company classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement. Financial instruments are
recognised on trade date when the Company becomes a party to the
contractual provisions of the instrument. Investments are held at
fair value through profit or loss with changes in the fair value
recognised in the Income Statement and allocated to capital.
Financial instruments are derecognised on the trade date when
the Company is no longer a party to the contractual provisions of
the instrument.
Cash and cash equivalents
For the purposes of the Balance Sheet, cash comprises cash in
hand and demand deposits. Cash equivalents are short-term, highly
liquid investments and money market funds that are readily
convertible to known amounts of cash and which are subject to
insignificant risk of changes in value.
For the purposes of the Statement of Cash Flows, cash and cash
equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts when applicable.
Foreign Currency
Foreign currency assets and liabilities are translated into
sterling at the exchange rates ruling at the balance sheet date.
Transactions during the year are converted into sterling at the
rates ruling at the time the transactions are executed. All
exchange differences are reflected in the income statement.
Short-term Debtors and Creditors
Debtors and creditors with no stated interest rate and
receivable within one year are recorded at transaction price. Any
losses arising from impairment are recognised in the income
statement in other operating expenses.
Segmental Reporting
The directors are of the opinion that the Company is engaged in
a single segment of business, being investment business. The
Company primarily invests in companies listed in the UK.
Judgements and Key Sources of Estimation Uncertainty
The preparation of the Financial Statements requires management
to make judgments and estimates that affect the application of
policies and reported amounts of assets, liabilities, income and
expenses. The nature of estimation means that the actual outcomes
could differ from those estimates, possibly significantly. The most
critical estimates and judgments relate to the determination of
carrying value of investments at fair value through profit or loss
(see notes 10 and 18 on pages 51 and 54 of the Annual Report
respectively). The Company values investments by following the IPEV
guidelines.
Dividends Payable
Dividends are included in the financial statements on the date
on which they are declared, or, in the case of final dividends,
when they are approved by shareholders.
Share Premium
The share premium account is a non-distributable reserve which
represents the accumulated premium paid on the issue of shares in
previous periods over the nominal value, net of any expenses.
Merger Reserve
The merger reserve is a non-distributable reserve which
originally represented the share premium on shares issued when the
Company merged with Singer & Friedlander AIM VCT and Singer
& Friedlander AIM 2 VCT in February 2006. The merger reserve is
released to the realised capital reserve as the assets acquired as
a consequence of the merger are subsequently disposed of or
permanently impaired. There have been no disposals of these assets
during the year.
Capital Redemption Reserve
The capital redemption reserve is a non-distributable reserve
which is created when shares are repurchased for cancellation
resulting in a reduction of share capital.
Special Reserve
The special reserve is a distributable reserve which is created
by the authorised reduction of the share premium account and can be
applied in any manner in which the Company's profits available for
distribution (as determined in accordance with the Companies Act
2006) are able to be applied.
Capital Reserve
The following are taken to the capital reserve:
-- gains and losses on the disposal of investments
-- increase and decrease in the value of investments held at the year end
-- expenses allocated to this reserve in accordance with the above policies
Revenue Reserve
The revenue reserve represents accumulated profits and losses
and any surplus profit is distributable by way of dividends.
2 Merger of the Company with Amati VCT plc ("AVCT") - Basis of Accounting
On 4 May 2018 the merger took place between the Company and
Amati VCT plc. The method of accounting for this was that the
Company acquired the assets and liabilities of AVCT in exchange for
shares in the Company. The transaction was accounted for as an
asset acquisition and further details are set out in note 9 of this
report. The income and costs for the period to 3 May 2018 and the
comparable period to 31 January 2018 reflect the activities of the
Company before the acquisition and after that date reflect those of
the enlarged company.
Amati VCT 2 plc was renamed Amati AIM VCT plc with effect from 4
May 2018.
3 Income
Year to Year to
31 January 31 January
2019 2018
GBP'000 GBP'000
----------------------------- ----------- -----------
Income:
----------------------------- ----------- -----------
Dividends from UK companies 571 353
----------------------------- ----------- -----------
UK loan stock interest - 44
----------------------------- ----------- -----------
Interest from deposits 25 6
----------------------------- ----------- -----------
596 403
----------------------------- ----------- -----------
4 Management Fees
The Manager provides investment management and secretarial and
administration services to the Company under a management
agreement. Details of this agreement are given on page 17 of the
Annual Report.
Under this agreement the Manager receives an investment
management fee of 1.75% of the net asset value of the Company
quarterly in arrears.
The investment management fee for the year was as follows:
Year to Year to
31 January 31 January
2019 2018
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Due to the Manager by the Company at
1 February 260 170
----------------------------------------- ------------ ------------
Investment management fee charged to
revenue and capital for the year 1,952 908
----------------------------------------- ------------ ------------
Fee paid to the Manager during the year (1,686) (818)
----------------------------------------- ------------ ------------
Due to the Manager by the Company at
31 January 526 260
----------------------------------------- ------------ ------------
In addition to the investment management fee the Manager also
receives a secretarial and administration fee of GBP81,600 (2018:
GBP78,000) (subject to an annual increase in line with the retail
prices index), paid quarterly in arrears. See note 5.
No performance fee is payable in respect of the year ended 31
January 2019 or the year ended 31 January 2018 as the Manager has
waived all performance fees from 31 July 2014 onwards.
Annual running costs are capped at 3.5% of the Company's net
assets. If the annual running costs of the Company in any year are
greater than 3.5% of the Company's net assets, the excess is met by
the Manager by way of a reduction in future management fees. The
annual running costs include the directors' and Manager's fees,
professional fees and the costs incurred by the Company in the
ordinary course of its business (but excluding any commissions paid
by the Company in relation to any offers for subscription, any
performance fee payable to the Manager, irrecoverable VAT and
exceptional costs, including winding-up costs).
5 Other Expenses
Year to Year to
31 January 31 January
2019 2018
GBP'000 GBP'000
--------------------------------------------- ----------- -----------
Directors' remuneration 99 59
--------------------------------------------- ----------- -----------
Directors' national insurance 5 2
--------------------------------------------- ----------- -----------
Directors' expenses 4 1
--------------------------------------------- ----------- -----------
Auditor's remuneration - audit of statutory
financial statements 24 21
--------------------------------------------- ----------- -----------
Administration and secretarial services 82 78
--------------------------------------------- ----------- -----------
Other expenses 162 128
--------------------------------------------- ----------- -----------
376 289
--------------------------------------------- ----------- -----------
The Company has no employees other than directors, they are
therefore the only key management personnel.
Details of directors' remuneration are provided in the audited
section of the directors' remuneration report on page 31 of the
Annual Report.
6 Tax on Ordinary Activities
6a Analysis of charge for the year
Year to Year to
31 January 31 January
2019 2018
GBP'000 GBP'000
-------------------- ----------- -----------
Charge for the year - -
-------------------- ----------- -----------
6b Factors affecting the tax charge for the year
Year to Year to
31 January 31 January
2019 2018
GBP'000 GBP'000
---------------------------------------- ----------- -----------
(Loss)/ profit on ordinary activities
before taxation (16,671) 18,717
---------------------------------------- ----------- -----------
Corporation tax at standard rate of
19.00% (2018: 19.16%) (3,167) 3,586
---------------------------------------- ----------- -----------
Effect of:
---------------------------------------- ----------- -----------
Non-taxable dividends (109) (68)
---------------------------------------- ----------- -----------
Non-taxable gains on investments 2,838 (3,738)
---------------------------------------- ----------- -----------
Movement in excess management expenses 438 220
---------------------------------------- ----------- -----------
Tax charge for the year (note 6a) - -
---------------------------------------- ----------- -----------
Due to the Company's tax status as an approved Venture Capital
Trust, deferred tax has not been provided on any net capital gains
arising on the disposal of investments as such gains are not
taxable.
No deferred tax asset has been recognised on surplus management
expenses carried forward as it is not envisaged that any such tax
will be recovered in the foreseeable future. The amount of
unrecognised deferred tax asset is GBP2,147,000 (31 January 2018:
GBP1,775,000).
7 Dividends
Amounts recognised as distributions to equity holders during the
year:
2019 2019 2018 2018
Revenue Capital Revenue Capital
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------- ---------- --------- --------- ---------
Final dividend for the year ended 31 January 2017 of 4.25p per ordinary
share paid on 21 July
2017 - - - 1,462
------------------------------------------------------------------------- ---------- --------- --------- ---------
Interim dividend for the year ended 31 January 2018 of 3.25p per
ordinary share paid on 24
November 2017 - - - 1,115
------------------------------------------------------------------------- ---------- --------- --------- ---------
Second interim dividend for the year ended 31 January 2018 of 5.25p per
ordinary share paid - 4,223 - -
on 27 July 2018
------------------------------------------------------------------------- ---------- --------- --------- ---------
Interim dividend for the year ended 31 January 2019 of 3.50p per
ordinary share paid on 23 - 2,995 - -
November 2018
------------------------------------------------------------------------- ---------- --------- --------- ---------
- 7,218 - 2,577
------------------------------------------------------------------------------------ --------- --------- ---------
Set out below are the interim and final dividends paid or
proposed on ordinary shares in respect of the financial year.
2019 2019 2018 2018
Revenue Capital Revenue Capital
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------- ---------- --------- --------- ---------
Interim dividend for the year ended 31 January 2019 of 3.50p per
ordinary share (2018: 3.25p) - 2,995 - 1,115
------------------------------------------------------------------------- ---------- --------- --------- ---------
Second interim dividend for the year ended 31 January 2018 of 5.25p per
ordinary share - - - 2,037
------------------------------------------------------------------------- ---------- --------- --------- ---------
Proposed final dividend for the year ended 31 January 2019 of 4.0p per -
ordinary share (2018: - 3,595 -
5.25p)*
------------------------------------------------------------------------- ---------- --------- --------- ---------
- 6,590 - 3,152
------------------------------------------------------------------------------------ --------- --------- ---------
*Based on shares in issue on -- April 2019. The payment of a
final dividend will, as always, be subject to shareholder approval
and ensuring that the Company has sufficient distributable reserves
at the time of payment.
8 Earnings per Share
2019 2019 2019 2018 2018 2018
Net Weighted Basic Net Weighted Basic
(loss) average and diluted (loss)/profit average and diluted
GBP'000 shares Earnings GBP'000 shares Earnings
per share per share
pence pence
--------- --------- ----------- ------------- --------------- ----------- -------------
Revenue (268) 71,619,496 (0.38)p (113) 34,329,245 (0.33)p
--------- --------- ----------- ------------- --------------- ----------- -------------
Capital (16,403) 71,619,496 (22.90)p 18,830 34,329,245 54.85p
--------- --------- ----------- ------------- --------------- ----------- -------------
Total (16,671) 71,619,496 (23.28)p 18,717 34,329,245 54.52p
--------- --------- ----------- ------------- --------------- ----------- -------------
9 Asset Acquisition of Amati VCT plc ("AVCT")
On 4 May 2018 the Company acquired the assets and liabilities of
AVCT in accordance with the supplementary prospectus and circular
published on 9 March 2018. The assets and liabilities of AVCT were
transferred to the Company on 4 May 2018 and in exchange the
assenting shareholders of AVCT were allotted 41,231,436 ordinary
shares in the Company, being 5.98787 ordinary shares for each 10
ordinary shares of 10p each held in the capital of AVCT.
The assets and liabilities of AVCT as at 4 May 2018 which were
acquired are set out below:
GBP'000
------------------------------------------------ --------
Fixed assets -
------------------------------------------------ --------
Investments held at fair value 63,393
------------------------------------------------ --------
Current assets
------------------------------------------------ --------
Debtors 142
------------------------------------------------ --------
Cash at bank 9,462
------------------------------------------------ --------
Current liabilities
------------------------------------------------ --------
Creditors: amounts falling due within one year (247)
------------------------------------------------ --------
Net Current Assets 9,357
------------------------------------------------ --------
Total assets less current liabilities 72,750
------------------------------------------------ --------
10 Investments
Level Level 2* Level 3* Total
1* GBP'000 GBP'000 GBP'000
GBP'000
-------------------------------- --------- --------- ---------- ----------
Cost as at 1 February
2018 23,364 - 2,816 26,180
-------------------------------- --------- --------- ---------- ----------
Opening unrealised gain/(loss) 34,760 - (1,401) 33,359
-------------------------------- --------- --------- ---------- ----------
Opening unrealised loss
recognised in realised
reserve (296) - (970) (1,266)
-------------------------------- --------- --------- ---------- ----------
Opening valuation as
at 1 February 2018 57,828 - 445 58,273
-------------------------------- --------- --------- ---------- ----------
Movements in the year:
-------------------------------- --------- --------- ---------- ----------
Reclassification in
the year
-------------------------------- --------- --------- ---------- ----------
Purchases 12,832 - - 12,832
-------------------------------- --------- --------- ---------- ----------
Stocks received as part
of asset acquisition** 63,393 - - 63,393
-------------------------------- --------- --------- ---------- ----------
Sales - proceeds (6,413) - (279) (6,692)
-------------------------------- --------- --------- ---------- ----------
Realised loss on sales (4,625) - - (4,625)
Unrealised loss in the
year (10,276) - (38) (10,314)
Valuation as at 31 January
2019 112,739 - 128 112,867
-------------------------------- --------- --------- ---------- ----------
Cost at 31 January 2019 92,729 - 2,353 95,082
-------------------------------- --------- --------- ---------- ----------
Unrealised gain/(loss)
as at 31 January 2019 20,306 - (1,439) 18,867
-------------------------------- --------- --------- ---------- ----------
Closing unrealised loss
recognised in realised
reserve (296) - (786) (1,082)
-------------------------------- --------- --------- ---------- ----------
Valuation as at 31 January
2019 112,739 - 128 112,867
-------------------------------- --------- --------- ---------- ----------
Equity shares 112,739 - 81 112,820
Preference shares - - 47 47
-------------------------------- --------- --------- ---------- ----------
Valuation as at 31 January
2019 112,739 - 128 112,867
-------------------------------- --------- --------- ---------- ----------
*Refer to note 18 for definitions
**The investments of AVCT were transferred into the Company at
fair value on the date of the asset acquisition. The original book
cost of these assets in AVCT was GBP28,157,000 being GBP35,236,000
less than the transfer at fair value shown above.
2019 2018
GBP'000 GBP'000
-------------------------------------------------- --------- --------
Realised (losses)/ gains on disposal (4,625) 2,719
-------------------------------------------------- --------- --------
Unrealised (losses)/ gains on investments during
the year (10,314) 16,792
-------------------------------------------------- --------- --------
Net (loss)/ gain on investments (14,939) 19,511
-------------------------------------------------- --------- --------
Transaction Costs
During the year the Company incurred transaction costs of GBPnil
(31 January 2018: GBPnil) and GBP7,000 (31 January 2018: GBP14,000)
on purchases and sales of investments respectively. These amounts
are included in the gain on investments as disclosed in the income
statement.
11 Debtors
2019 2018
GBP'000 GBP'000
-------------------------------- -------- --------
Prepayments and accrued income 38 867
-------------------------------- -------- --------
38 867
-------------------------------- -------- --------
12 Creditors: Amounts Falling due within One Year
2019 2018
GBP'000 GBP'000
-------------------------------- -------- --------
Payable for investments bought 59 57
-------------------------------- -------- --------
Other creditors 613 355
-------------------------------- -------- --------
672 412
-------------------------------- -------- --------
13 Called Up Share Capital
2019 2019 2018 2018
Ordinary shares (5p shares) Number GBP'000 Number GBP'000
----------------------------- ------------ -------- ------------ --------
Allotted, issued and fully
paid at 1 February 36,057,095 1,804 32,643,069 1,633
----------------------------- ------------ -------- ------------ --------
Issued during the year 10,053,218 503 4,500,279 225
----------------------------- ------------ -------- ------------ --------
Issued in respect of merger
(see notes 2 and 9) 41,231,436 2,062 - -
----------------------------- ------------ -------- ------------ --------
Repurchase of own shares
for cancellation (1,792,067) (91) (1,086,253) (54)
----------------------------- ------------ -------- ------------ --------
At 31 January 85,549,682 4,278 36,057,095 1,804
----------------------------- ------------ -------- ------------ --------
During the year a total of 1,792,067 ordinary shares of 5p each
were purchased by the Company at an average price of 155.66p per
share.
Further details of the Company's share capital and associated
rights are shown in the Directors' Report on page 23 of the Annual
Report.
14 Net Asset Value per Ordinary Share
2019 2019 2018 2018
Net 2019 NAV Net 2018 NAV
assets Ordinary per share assets Ordinary per
GBP'000 shares pence GBP'000 shares share
pence
---------------- --------- ----------- ----------- --------- ----------- -------
Ordinary share 124,989 85,549,682 146.1 61,551 36,057,095 170.7
---------------- --------- ----------- ----------- --------- ----------- -------
15 Significant Interests
The Company has the following significant interests (amounting
to an investment of 3% or more of the equity capital of an
undertaking):
Nominal % held
------------------------------- ------------ -------
Block Energy plc 37,500,000 14.5%
------------------------------- ------------ -------
Falanx Group Limited 45,000,000 11.2%
------------------------------- ------------ -------
Ixico plc 5,031,300 10.8%
------------------------------- ------------ -------
i-nexus Global plc 3,164,557 10.7%
------------------------------- ------------ -------
Hardide plc 180,878,526 10.7%
------------------------------- ------------ -------
Polarean Imaging plc 8,571,429 8.5%
------------------------------- ------------ -------
Rosslyn Data Technologies plc 15,774,692 8.2%
------------------------------- ------------ -------
Fusion Antibodies plc 1,341,463 6.1%
------------------------------- ------------ -------
Byotrol plc 25,000,001 5.8%
------------------------------- ------------ -------
Water Intelligence plc 814,660 5.4%
------------------------------- ------------ -------
Bilby plc 2,155,010 5.3%
------------------------------- ------------ -------
Universe Group plc 11,956,199 5.2%
------------------------------- ------------ -------
EU Supply plc 3,011,000 4.2%
------------------------------- ------------ -------
Amryt Pharma plc 8,500,000 3.1%
------------------------------- ------------ -------
Escape Hunt plc 610,000 3.0%
------------------------------- ------------ -------
16 Post Balance Sheet Events
The following transactions have taken place between 31 January
2019 and the date of this report:
-- 4,744,624 shares were allotted raising net proceeds of GBP6.8m.
-- 431,144 shares were bought back for an aggregate consideration of GBP0.6m.
17 Related Parties
The Company retains Amati Global Investors as its Manager.
Details of the agreement with the Manager are set out on page 17 of
the Annual Report. The number of ordinary shares in the Company
(all of which are held beneficially) by certain members of the
management team are:
31 January 31 January 31 January 31 January
2019 shares 2019 % shares 2018 shares 2019 %
held held held shares
held
----------------- ------------- --------------- ------------- -----------
Paul Jourdan 495,264 0.58% 276,762 0.77%
----------------- ------------- --------------- ------------- -----------
David Stevenson 17,583 0.02% 9,120 0.03%
----------------- ------------- --------------- ------------- -----------
The remuneration of the directors, who are key management
personnel of the Company, is disclosed in the Directors'
Remuneration Report on page 31 of the Annual Report, and in note 5
on page 48 of the Annual Report.
18 Financial Instruments
The Company's financial instruments comprise equity and fixed
interest investments, cash balances and liquid resources including
debtors and creditors. The Company holds financial assets in
accordance with its investment policy to invest in qualifying
investments predominantly in AIM traded companies or companies to
be traded on AIM.
Classification of financial instruments
The Company held the following categories of financial
instruments at 31 January:
2019 2019 2018 2018
(Book value) (Fair (Book value) (Fair
value) value)
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------- -------- ------------- --------
Assets at fair value through profit
or loss
------------------------------------- ------------- -------- ------------- --------
Investment portfolio 112,867 112,867 58,273 58,273
------------------------------------- ------------- -------- ------------- --------
Assets measured at amortised cost:
------------------------------------- ------------- -------- ------------- --------
Receivable for investments sold - - - -
------------------------------------- ------------- -------- ------------- --------
Accrued income and other debtors 38 38 867 867
------------------------------------- ------------- -------- ------------- --------
Cash at bank 12,756 12,756 2,823 2,823
------------------------------------- ------------- -------- ------------- --------
Liabilities measured at amortised
cost:
------------------------------------- ------------- -------- ------------- --------
Payable for investments bought (59) (59) (57) (57)
------------------------------------- ------------- -------- ------------- --------
Accrued expenses (613) (613) (355) (355)
------------------------------------- ------------- -------- ------------- --------
Total for financial instruments 124,989 124,989 61,551 61,551
------------------------------------- ------------- -------- ------------- --------
Fixed asset investments (see note 10) are measured at fair
value. For quoted securities this is generally the bid price or, in
the case of SETS securities, the closing price. As explained in
note 1, unquoted investments are valued in accordance with the IPEV
guidelines. Changing one or more inputs for level 3 assets would
not have a significant impact on the valuation. For example,
earnings multiple calculations are used to value some unquoted
equity holdings. These multiples are derived from a basket of
comparable quoted companies, with appropriate discounts applied.
These discounts are subjective and based on the Manager's
experience. In respect of unquoted investments, these are valued by
the directors using rules consistent with IPEV guidelines.
Investments in TB Amati UK Smaller Companies Fund are based on the
published fund mid price NAV. The fair value of all other financial
assets and liabilities is represented by their carrying value in
the balance sheet.
The Company's investing activities expose it to various types of
risk that are associated with the financial instruments and markets
in which it invests. The most important types of financial risk to
which the Company is exposed are market risk, credit risk and
liquidity risk. The nature and extent of the financial instruments
outstanding at the balance sheet date and the risk management
policies employed by the Company are discussed below.
In order to provide further information on the valuation
techniques used to measure assets carried at fair value, the
measurement basis has been categorised into a "fair value
hierarchy" as follows:
- Quoted market prices in active markets - "Level 1"
Inputs to Level 1 fair values are quoted prices in active
markets. An active market is one in which transactions occur with
sufficient frequency and volume to provide pricing information on
an ongoing basis. The Company's investments classified within this
category are AIM traded companies and fully listed companies.
- Valued using models with significant observable market
parameters - "Level 2"
Inputs to Level 2 fair values are inputs other than quoted
prices included within Level 1 that are observable for the asset,
either directly or indirectly.
- Valuation technique; - "Level 3"
Level 3 fair values are measured using a valuation technique
that is based on data from an unobservable market.
Financial assets at fair value
Year ended 31 January 2019 Year ended 31 January
2018
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- -------- -------- ---------- ---------- -------- -------- --------
Equity shares 112,739 - 81 112,820 57,828 - 398 58,226
------------------- -------- -------- -------- ---------- ---------- -------- -------- --------
Preference shares - - 47 47 - - 47 47
------------------- -------- -------- -------- ---------- ---------- -------- -------- --------
112,739 - 128 112,867 57,828 - 445 58,273
------------------- -------- -------- -------- ---------- ---------- -------- -------- --------
Level 3 financial assets at fair value
Year ended 31 January Year ended 31 January
2019 2018
Equity Preference Loan Equity Preference Loan
shares shares stock Total shares shares stock Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---------- ----------- -------- -------- -------- ----------- -------- --------
Opening balance
at 1 February 398 47 - 445 691 47 491 1,229
-------------------------- ---------- ----------- -------- -------- -------- ----------- -------- --------
Transfer to level
1* - - - - (284) - - (284)
-------------------------- ---------- ----------- -------- -------- -------- ----------- -------- --------
Disposal proceeds - - (279) (279) (8) - (635) (643)
-------------------------- ---------- ----------- -------- -------- -------- ----------- -------- --------
Total net (losses)/gains
recognised in the
income statement (317) - 279 (38) (1) - 144 143
-------------------------- ---------- ----------- -------- -------- -------- ----------- -------- --------
Closing balance
at 31 January 81 47 - 128 398 47 - 445
-------------------------- ---------- ----------- -------- -------- -------- ----------- -------- --------
*Mirriad Advertising plc was reclassified as Level 1 due to the
admission of the ordinary shares to AIM.
19 Market Risk
Market risk arises from uncertainty about the future prices of
financial instruments held in accordance with the Company's
investment objectives. It represents the potential loss that the
Company might suffer through holding positions in the face of
market uncertainty.
The Company's strategy on the management of investment risk is
driven by the Company's investment objective as outlined on page 15
of the Annual Report. The management of market risk is part of the
investment management process. The Board seeks to mitigate the
internal risks by setting policy, regular reviews of performance,
enforcement of contractual obligations and monitoring progress and
compliance with an awareness of the effects of adverse price
movements through detailed and continuing analysis, with an
objective of maximising overall returns to shareholders.
Investments in unquoted stocks and AIM traded companies, by their
nature, involve a higher degree of risk than investments in the
Main Market. Some of that risk can be mitigated by diversifying the
portfolio across business sectors and asset classes. The Company's
overall market positions are monitored by the Board on a quarterly
basis.
Details of the Company's investments at the balance sheet date
are disclosed in the Investment Portfolio on pages 12 and 13 of the
Annual Report. FRS 102 requires the directors to consider the
impact of changing one or more of the inputs used as part of the
valuation process to reasonable possible alternative
assumptions.
As at 31 January 2019 99.89% (31 January 2018: 99.24%) of the
Company's investments are traded. A 10% increase in stock prices as
at 31 January 2019 would have increased the net assets attributable
to the Company's shareholders and added profit for the year of
GBP11,274,000 (31 January 2018: GBP5,783,000); an equal change in
the opposite direction would have decreased the net assets
attributable to the Company's shareholders and increased the loss
for the year by an equal amount.
As at 31 January 2019 0.11% (31 January 2018: 0.76%) of the
Company's investments are in unquoted companies held at fair value.
A 10% increase in the valuations of unquoted investments at 31
January 2019 would have increased the net assets attributable to
the Company's shareholders and added profit for the year of
GBP13,000 (31 January 2018: GBP45,000); an equal change in the
opposite direction would have decreased the net assets attributable
to the Company's shareholders and increased the loss for the year
by an equal amount.
20 Interest Rate Risk
Fixed rate
Three of the Company's financial assets are interest bearing at
a fixed rate, no assets have a floating interest rate, all other
assets are non-interest bearing. As a result, the Company is
subject to exposure to fair value interest rate risk due to
fluctuations in the prevailing levels of market interest rates,
however the impact of a reasonable movement in interest rates would
not be significant to the net assets and loss for the year.
The total current market value of these stocks is GBPnil (31
January 2018: GBPnil), the weighted average interest rate is nil%
(31 January 2018: nil%) and the average period to maturity is 0
years (31 January 2018: 0 years).
Details of the Company's investments at the balance sheet date
are provided on pages 12 and 13 of the Annual Report.
21 Credit Risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The carrying amount of
financial assets best represents the maximum credit risk exposure
at the balance sheet date. At 31 January 2019, the financial assets
exposed to credit risk, representing convertible loan stock
instruments, amounts due from brokers, accrued income and cash
amounted to GBP12,771,000 (31 January 2018: GBP2,827,000). The
convertible loans in China Food Company plc and Sorbic
International plc are secured over the buildings and land use
rights of the companies.
Credit risk arising on transactions with brokers relates to
transactions awaiting settlement. Risk relating to unsettled
transactions is considered to be small due to the short settlement
period involved, the high credit quality of the brokers used and
the fact that almost all transactions are on a 'delivery versus
payment' basis. The Manager monitors the quality of service
provided by the brokers used to further mitigate this risk.
All the assets of the Company which are tradeable on AIM are
held by Bank of New York Nominees, the Company's custodian.
Bankruptcy or insolvency of the custodian may cause the Company's
rights with respect to securities held by the custodian to be
delayed or limited.
At 31 January 2019, cash held by the Company was held by The
Bank of New York and UBS. Bankruptcy or insolvency of the
institutions may cause the Company's rights with respect to the
cash held by it to be delayed or limited. Should the credit quality
or the financial position of the institutions deteriorate
significantly the Company has the ability to move the cash at short
notice.
There were no significant concentrations of credit risk to
counterparties at 31 January 2019 or 31 January 2018.
22 Liquidity Risk
The Company's financial instruments include investments in
unlisted equity investments which are not traded in an organised
public market and which generally may be illiquid. As a result, the
Company may not be able to liquidate quickly some of its
investments in these instruments at an amount close to their fair
value in order to meet its liquidity requirements, or to respond to
specific events such as deterioration in the creditworthiness of
any particular issuer. The proportion of the portfolio invested in
unlisted equity investments is not considered significant given the
amount of investments in readily realisable securities.
The Company's liquidity risk is managed on an ongoing basis by
the Manager in accordance with policies and procedures in place as
described in the Strategic Report on page 20 of the Annual Report.
The Company's overall liquidity risks are monitored on a quarterly
basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses.
At 31 January 2019, these investments were valued at GBP64,540,000
(31 January 2018: GBP32,375,000). The directors consider that
frequently traded AIM investments with a market capitalisation of
greater than GBP200m represent readily realisable securities.
23 Capital Management Policies and Procedures
The Company's capital management objectives are:
-- to ensure that it will be able to continue as a going concern;
-- to satisfy the relevant HMRC requirements; and
-- to maximise the income and capital return to its shareholders.
As a VCT, the Company must have, within 3 years of raising its
capital, at least 70% by value of its investments in VCT qualifying
holdings (80% for accounting periods beginning on or after 6 April
2019), which are relatively high risk UK smaller companies. In
satisfying this requirement, the Company's capital management scope
is restricted. The Company does have the option of maintaining or
adjusting its capital structure by varying dividends, returning
capital to shareholders, issuing new shares or selling assets to
maintain a certain level of liquidity. There has been no change in
the objectives, policies or processes for managing capital from the
previous year.
The structure of the Company's capital is described in note 13
and details of the Company's reserves are shown in the Statement of
Changes in Equity on page 40 of the Annual Report.
The Board, with the assistance of the Manager, monitors and
reviews the broad structure of the Company's capital on an ongoing
basis. This review includes:
-- the need to buy back equity shares for cancellation, which
takes account of the difference between the net asset value per
share and the share price (i.e. the premium or discount);
-- the need for new issues of shares; and
-- the extent to which revenue in excess of that which is to be distributed should be retained.
The Company is subject to externally imposed capital
requirements:
a. as a public limited company, the Company is required to have
a minimum share capital of GBP50,000; and
b. in accordance with the provisions of the Income Tax Act 2007,
the Company as a Venture Capital Trust:
i) is required to make a distribution each year such that it
does not retain more than 15% of income from shares and securities;
and
ii) is required to derive 70% of its income from shares and securities.
These requirements are unchanged since last year and the Company
has complied with them at all times.
SHAREHOLDER INFORMATION
Share Price
The Company's shares are listed on the London Stock Exchange.
The bid price of the Company's shares can be found on Amati Global
Investors' website: http://www.amatiglobal.com/amat.php
Net Asset Value per Share
The Company's net asset value per share as at 31 January 2019
was 146.1p. The Company normally announces its net asset value on a
weekly basis. Net asset value per share information can be found on
the Amati Global Investors' website:
http://amatiglobal.com/amat.php.
Dividends
Shareholders who wish to have future dividends re-invested in
the Company's shares or wish to have dividends paid directly into
their bank account rather than sent by cheque to their registered
address should contact Share Registrars Limited on 01252 821390 or
email enquiries@shareregistrars.uk.com.
Financial Calendar
26 June 2019 Annual General Meeting
September 2019 Half-yearly Report for the six months ending 31
July 2019 to be circulated to shareholders
31 January 2020 Year-end
Annual General Meeting
The Annual General Meeting of the Company will be held on
Wednesday 26 June 2019 at 2.00pm at Milton Court Theatre, The
Guildhall School of Music & Drama, 1 Milton Street, Barbican,
London EC2Y 9BH. The notice of the meeting, together with the
enclosed proxy form, is included on pages 62 to 68 of the Annual
Report.
Table of Historic Returns from launch to 31 January 2019
attributable to shares issued by the original VCTs which have made
up Amati AIM VCT
Numis
Alternative
NAV Total Markets
Return NAV Total Total
with dividends Return with Return
re-invested dividends Index
not re-invested
Launch date Merger Index
date
------------------------- -------------- ------------- ---------------- ----------------- -------------
Singer & Friedlander 8 December
AIM 3 VCT ('C' shares) 4 April 2005 2005 24.2% 9.1% 10.3%
24 March 4 May
Amati VCT plc 2005 2018 98.9% 58.3% 6.4%
Invesco Perpetual 8 November
AIM VCT 30 July 2004 2011 9.9% -14.9% 35.2%
Singer & Friedlander 29 January
AIM 3 VCT* 2001 n/a 13.3% -0.6% -20.8%
Singer & Friedlander 29 February 22 February
AIM 2 VCT 2000 2006 -13.2% -23.7% -59.6%
Singer & Friedlander 28 September 22 February
AIM VCT 1998 2006 -40.8% -25.6% 23.1%
------------------------- -------------- ------------- ---------------- ----------------- -------------
*Singer & Friedlander AIM 3 VCT changed its name to ViCTory
VCT on 22 February 2006, to Amati VCT 2 on 8 November 2011 and to
Amati AIM VCT plc on 4 May 2018.
ALTERNATIVE PERFORMANCE MEASURES
The Company uses the following Alternative Performance
Measures:
Net Asset Value ("NAV") per share
The NAV per share of the Company is the sum of the underlying
assets less the liabilities of the Company divided by the total
number of shares in issue.
Discount/Premium
The price of a share is derived from buyers and sellers agreeing
a price at which to trade their shares. For Venture Capital Trusts
the company sets its own share price because it is the principal
buyer of the shares of sellers via buybacks (see Capital Management
in note 23 of the Annual Report). The share price may not be
identical to the NAV per share of the underlying assets less
liabilities of the Company. If the share price is lower than the
NAV per share, the shares are trading at a discount. Shares trading
at a price above NAV per share are said to be at a premium.
Ongoing charges ratio
All operating costs expected to be regularly incurred, be they
of a capital or revenue nature, and that are payable by the
Company. These exclude the costs of acquisition or disposal of
investments, financing charges, and gains or losses on investments.
They are the best estimate of future costs. The ongoing charges
ratio is the annualised operating costs divided by the average NAV
over the period.
Total Return
The return to shareholders calculated on a per share basis by
adding dividends paid in the period to the increase or decrease in
the Share price or NAV per share in the period. The dividends are
assumed to have been re-invested in the form of shares or net
assets respectively, on the date on which the shares were quoted
ex-dividend.
CORPORATE INFORMATION
Directors Registrar
Peter Lawrence Share Registrars
Julia Henderson The Courtyard
Mike Killingley 17 West Street
Susannah Nicklin Farnham
Brian Scouler GU9 7DR
all of:
27/28 Eastcastle Street
London Auditor
W1W 8DH BDO LLP
55 Baker Street
Secretary London
The City Partnership (UK) Limited W1U 7EU
110 George Street
Edinburgh
EH2 4LH Solicitors
Rooney Nimmo
8 Walker Street
Edinburgh
Fund Manager EH3 7LH
Amati Global Investors Limited
8 Coates Crescent Custodian
Edinburgh The Bank of New York Mellon
SA/NV
EH3 7AL London Branch
160 Queen Victoria Street
VCT Tax Adviser London
Philip Hare & Associates LLP EC4V 4LA
Suite C, First Floor
4-6 Staple Inn
Holborn London
WC1V 7QH
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UBSWRKKASARR
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