Amati AIM VCT plc (the
"Company")
Legal Entity Identifier:
213800HAEDBBK9RWCD25
Annual Report & Financial
Statements
For the
year ended 31 January 2024
The Directors are pleased to present
the Annual Financial Results of the Company for the year ended 31
January 2024.
The information set out below does
not constitute the Company's full statutory
accounts for the year ended 31 January
2024 in terms of Section
434 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for the
year ended 31 January 2024 will be posted to Shareholders and
delivered to the Registrar of Companies, in due course. The
Auditors have reported on those accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to
which the Auditors 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
Auditors' report can be found in the Company's full Annual Report
and Accounts. Audited statutory accounts for the year to 31 January
2023, which were unqualified, have been lodged with the Registrars
of Companies.
OUR
STRATEGY
The investment objective of the
Company is to generate tax free capital gains and income on
investors' funds through investments primarily in AIM-traded
companies.
DIVIDEND POLICY
The Board aims to pay annual
dividends of around 5% of the Company's Net Asset Value at its
immediately preceding financial year end, subject to distributable
reserves and cash resources, and with the authority to increase or
decrease this level at the Directors' discretion.
Highlights
For the year ended 31 January
2024
NAV Total return
for the year†
-22.6%
(2023: -22.2%)
£13.3m
invested in qualifying
holdings during the year
(2023: £12.4m)
2.0%
Ongoing charges**†
(2023: 1.9%)
Year end
Net Asset Value per
share†
94.7p
(2023: 132.8p)
6.6%
Discount to NAV†
(2023: 7.0%)
5.3%
Dividend yield***†
(2023: 5.3%)
Key
data
|
31/01/24
|
31/01/23
|
Net Asset Value ("NAV")
|
£143.1m
|
£201.3m
|
Shares in issue
|
151,069,824
|
151,548,993
|
NAV per share†
|
94.7p
|
132.8p
|
Share price
|
88.5p
|
123.5p
|
Market capitalisation
|
£133.7m
|
£187.2m
|
Share price discount to
NAV†
|
6.6%
|
7.0%
|
NAV Total Return for the
year
|
|
|
(assuming re-invested
dividends)
|
-22.6%
|
-22.2%
|
Deutsche Numis Alternative
Markets
|
|
|
Total Return Index*
|
-12.1%
|
-20.7%
|
Ongoing charges**†
|
2.0%
|
1.9%
|
Dividends paid and
declared
|
|
|
in respect of the year
|
5.0p
|
7.0p
|
* Deutsche Numis
Alternative Markets Index is included as a comparator benchmark for
performance as this index includes all companies listed on
qualifying UK alternative markets.
** Ongoing charges
calculated in accordance with the Association of Investment
Companies' ("AIC's") guidance.
*** Dividend
yield based on year end NAV.
† See Alternative
Performance Measures on pages 78 and 79 of the full Annual Report
and Accounts.
Table of investor returns
to 31 January 2024
From
|
Date
|
NAV
Total
Return
with
dividends
re-invested
|
Deutsche
Numis
Alternative
Markets
Total
Return
Index
|
NAV following re-launch of the VCT
under management of Amati Global
|
|
|
|
Investors ("Amati")
|
9 November 2011*
|
85.5%
|
15.2%
|
NAV following appointment of
Amati
|
|
|
|
as Manager of the VCT, which was
known as ViCTory VCT at the time
|
25 March 2010
|
94.7%
|
18.4%
|
*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 77 of the full Annual Report and
Accounts.
Dividends paid and
declared
-28.6%
2024 total dividends per
share
5.0p
5.3% of NAV
Cumulative dividends per
share
97.74p
Dividend history
Since the re-launch of the VCT under
the management of Amati Global Investors*
Year ended 31 January
|
Total
dividends
per
share**
p
|
Cumulative
dividends
per
share
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
|
2020
|
7.75
|
66.24
|
2021
|
10.50
|
76.74
|
2022
|
9.00
|
85.74
|
2023
|
7.00
|
92.74
|
2024
|
5.00
|
97.74
|
*On 25 March
2010 Amati Global Investors was 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
A graph depicting the Amati AIM VCT
NAV Total Return and Deutsche Numis Alternative Markets Total
Return Index from change of Manager on 19 March 2010 (first Net
Asset Value calculated on 25 March 2010) to 31 January 2023 can be
found on page 3 of the full Annual Report and Accounts.
Historic performance
A graph depicting the Amati AIM VCT
NAV Total Return and Deutsche Numis Alternative Markets Total
Return Index from inception of fund to 31 January 2024 can be found
on page 3 of the full Annual Report and Accounts.
Extracts from 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.
Overview and Investment Performance
This felt like a year of ongoing
risk-aversion, with 2023 undoubtedly one of the most hostile
markets for junior AIM companies since the financial crisis of
2008. This was most notable for companies which were relying on
raising additional funds and in some cases were unable to access
further VCT monies due to an evolving debate around the application
of the VCT Regulations. In addition, some of our long-standing
investments in companies which have matured into medium-sized
businesses were impacted by cyclical downturns and negative
sentiment. The NAV total return for the period was -22.6%, which
compares to a return of -12.1% for the Deutsche Numis Alternative
Markets Index. With the market having turned negative in late 2021,
this has resulted in over two years of decline in the value of the
portfolio and inevitably raises some questions about the health of
the AIM market overall. The more mature businesses in the
portfolio, which have taken many years to reach this point, should
provide good exposure to any recovery in the market. The fortunes
of early-stage companies are more fragile, and it is likely to take
longer for this part of AIM to recover. This is discussed in more
detail in the Manager's Review which follows below.
The number of VCT qualifying deals
on AIM remained relatively low this year and only a handful were of
sufficient quality to be of interest. A total of £13.3m was
invested in qualifying holdings, slightly more than in the prior
year, but still well down on the 2021 level. At the same time some
profits were taken in a few of the longer standing holdings, and
some were sold outright, with total sales amounting to £12.9m that
resulted in net losses realised of £8.9m. Further details are again
provided in the Manager's Review below. As a result, cash and
current asset investments levels remained high at the end of the
period at £45.6m. Cash and current asset investments are held
mainly in a combination of interest bearing overnight bank deposits
and money market funds.
Dividends
The Board aims to pay annual
dividends of around 5% of the Company's Net Asset Value at its
immediately preceding financial year end, subject to the Company's
distributable reserves and cash resources, and with the authority
to increase or decrease this level at the Directors'
discretion.
At the end of November, the Board
took the decision to pay a second interim dividend. This meant that
the payment was made around six months earlier than would have been
the case had this been a final dividend. This reflected the
scarcity of qualifying investment opportunities on AIM of an
acceptable quality and a lack of visibility over the timing of
further qualifying investments. When combined with significant
realisations of qualifying holdings the Board felt it prudent to
accelerate the timing of the dividend payment so as to have a
bigger margin of comfort against the VCT qualifying
tests.
As at 31 January 2024 the net asset
value was 94.7p. The Board paid an interim dividend of 2.5p per
share in November and the second interim dividend of 2.5p per share
in January, making a total for the year of 5.0p per share, which is
5.3% of year end NAV.
The Board would like to remind
shareholders that the company has moved to paying all cash
dividends by bank transfer, rather than by cheque and details are
provided in Shareholder Information on page 77 of the full Annual
Report and Accounts. Please check that you have received your
dividends and contact the registrar if you have not. Unpaid
dividends are kept by the registrar for a period of 10 years after
the payment date and we make every effort to ensure that dividends
are received correctly by shareholders.
With cash levels still remaining
high and the rate of new investments still running at relatively
low levels, the Board is not planning to raise further funds in the
near term.
Strategic Review
In March, the Board announced that
it was considering the Company's strategic options in the light of
the ongoing challenges in the AIM market and the resultant impact
on the company's performance. As part of this review, the Board had
been working with the Manager on a proposal that would have
addressed the Board's concerns and enabled the Company to widen its
investment strategy to facilitate investments in a broader range of
securities. As this opportunity did not conclude, the Board and the
Manager are continuing to review the strategic direction of the VCT
and evaluating other alternatives available to the
Company.
VCT
Legislation
The VCT legislation contains a
"sunset clause" which would have brought income tax relief to an
end on 5 April 2025. Following confirmation by the Chancellor in
his Autumn statement that the scheme will continue, the Finance Act
has now been passed which allows VCT income tax relief to be
available for subscriptions for VCT shares until 5 April 2035. This
however can only come into force when the EU gives approval. The
Board understands that HM Treasury officials expect approval to be
given, but the timescale for this is not yet known.
Annual General Meeting ("AGM")
The AGM this year will be held at
Barber-Surgeons' Hall, Monkwell Square, Wood Street, London EC2Y
5BL starting at 2pm on Thursday 13 June 2024. This will be followed
by presentations from the Manager and investee companies. Details
are being sent to you with this report.
The Notice of AGM is set out on
pages 80 to 85 of the full Annual Report.
The Board recognises that the
Company's AGM represents an important forum for shareholders to put
questions to the Directors, to express their views on governance
and to become fully informed about matters relating to the AGM
resolutions. We understand that attending in person may not be
possible for all shareholders who wish to attend. Therefore, the
Company intends to also make available a live stream facility to
allow shareholders to watch and listen to the AGM and the Investor
Event which follows. If shareholders wish to use this facility,
please register your interest by emailing info@amatiglobal.com and
shortly ahead of the event the Company's Manager will post a link
and instructions on how to join the event on its homepage at
www.amatiglobal.com. Shareholders watching the AGM will not be
counted towards the quorum of the meeting and will not be able to
participate in the formal business of the meeting, including asking
questions and voting on the day. The Board encourages shareholders
to engage with the Board and the Company's Manager. In addition to
asking questions at the AGM, shareholders can email any questions
they may have on the business of the AGM to info@amatiglobal.com by
7 June 2024. The Company's Manager will publish questions together
with answers on the page dedicated to the AGM on the Manager's
website prior to the AGM being held. The Company's Manager will
reply to any individual shareholder questions submitted by the
deadline of 7 June 2024, before the AGM.
Outlook
The AIM market remains in a fragile
state, especially for companies capitalised at less than £100m and
pre-profit early-stage companies. The bright spots we had hoped for
last year were few and far between. We have noted a growing trend
towards companies opting for a private sale or fundraising rather
than an AIM listing. Shareholders frequently ask why the Manager
does not buy more shares in existing portfolio holdings whose share
prices have been pounded. Unfortunately, the changes to the VCT
legislation in 2016-17 specifically prevent VCTs from making
non-qualifying investments in AIM or unquoted companies. This means
the VCT can only acquire more shares in portfolio companies if they
raise further funds and are still qualifying under the rules, which
in many cases they are not. The problems for investments made under
post 2017 VCT rule changes are discussed in further detail in the
Manager's review below.
Historically there is evidence that
companies that come through this kind of a market crisis tend to
emerge a good deal stronger. In a falling interest rate
environment, it would not take much for market dynamics to become a
good deal more positive and this should benefit our existing
portfolio.
There are still many headwinds for
the economy to navigate which may, directly or indirectly, affect
the AIM market in an election year. We can only hope that the
building blocks will be put in place to maximise the potential for
young and growing UK companies to thrive once again in public
markets.
Contact us
The Board is always keen to hear
from shareholders. You can contact me at: AmatiAIMVCTChair@amatiglobal.com.
You can also find regularly updated
information on the Company, including a factsheet and performance
data on the Company's website: www.amatiglobal.com
Fiona Wollocombe
Chairman
11 April 2024
For any matters relating to your
shareholding in the Company, dividend payments, or the Dividend
Re-investment Scheme, please contact The City Partnership on 01484
240 910, or by email at registrars@city.uk.com.
For any other matters please contact
Amati Global Investors ("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
In what was another poor year for
AIM companies, especially those at an early stage of growth, global
markets recovered their poise during the period under review, in
large part thanks to a boom in US technology companies poised to
lead the way in the deployment of artificial intelligence. Japanese
and European markets also saw meaningful recoveries. By contrast,
the UK equity market as a whole remained in the doldrums with the
Deutsche Numis All Share Total Return Index returning only 1.6%
over the period and the Deutsche Numis Alternative Markets Total
Return Index falling by 12.1%, reflecting ongoing risk-aversion and
weak liquidity at the lower end of the UK market. 2023 was probably
the toughest market for junior AIM companies since 2008.
The gains in the large global
technology companies were achieved despite a deteriorating and
fragile geo-political environment. Russia's invasion of Ukraine
appears to have reached something of a stalemate and the outcome
remains dependent on ongoing Western support for Ukraine being
maintained. A new and significant conflict emerged in October, as
war erupted in Palestine in response to Hamas attacks on Israel.
This brought considerable instability into the region, which shows
no signs of abating. Investors also remain concerned about the
ongoing potential for China to become more bellicose in a year
where elections are taking place in a number of major economies.
Despite these concerning developments, commodity prices remained
subdued with oil prices down during the period and gas prices
falling materially from their post-Ukraine highs of the previous
year.
The dominant economic theme during
the year was the global fight against inflation, with the Fed, the
European Central Bank and the Bank of England simultaneously
increasing interest rates rapidly from historically low levels.
This in turn led to rises in bond yields in most G7 markets as
central banks sought to normalise policy. Despite this more
uncertain environment there was evidence that the global financial
system remained robust, with the collapse of SVB Bank, First
Republic and Signature in the US and the unravelling of Credit
Suisse in Europe all seeing bailouts by larger, better capitalised
institutions. As the year progressed, we saw evidence that
inflation was being brought under control with headline numbers
falling sharply in the US, UK and Europe, albeit from elevated
levels. This was consistent with a deterioration in global growth
prospects as both Europe and the UK began flirting with recession
and Chinese growth prospects faded meaningfully.
In the final months of the period
under review both large and midcap equity and bond markets enjoyed
strong recoveries from depressed levels, taking heart from the
expectation that an end to the period of monetary tightening is now
in sight. We have seen rate expectations fall in the US, EU and UK
and there is now a firm belief that 2024 will be a year of monetary
easing. However, this path will not necessarily be a straight one
and inflation data in early 2024 has been more elevated than
markets would have hoped, leading to bond yields rising again. The
direction of travel may be clear but the speed less so.
Returning to UK markets we have seen
ongoing material outflows from open-ended UK equity funds,
continuing the weak trend of recent years, and there are
considerable challenges in re-establishing the UK market as an
attractive place for companies to list and raise capital. However,
we do detect a greater commitment from the Chancellor, the FCA and
politicians across the political spectrum to address these
increasingly urgent problems. This is particularly pressing with
regards to AIM, where a lack of Initial Public Offerings (IPOs) and
concerns about changes to taxation regimes have contributed to an
ongoing shrinkage of the market.
Performance Review
The VCT's NAV Total Return for the
period was -22.6%. This was substantially behind the benchmark, the
Deutsche Numis Alternative Markets Total Return Index, which fell
-12.1%. Data compiled by Deutsche Numis, which analyses the
performance of UK smaller companies from 1955 onwards, shows that
2023 was a particularly outlying year. For nearly seventy years,
the smallest market capitalisation companies in the UK market
(defined as the bottom 70%) have cumulatively outperformed their
larger peers - the so-called small company "premium". However, in
2023, "smaller" significantly underperformed "larger" as a factor
in the UK market. This was caused by the smallest AIM stocks
generally being by far the worst performers in the period covered
by this review, as investors shied away from taking the liquidity
risk inherent at this end of the market. Since this segment of AIM
is the target universe for VCT qualifying companies, incorporating
very early-stage businesses, this represented a particularly
difficult environment for the portfolio.
A significant portion of the
portfolio saw share price falls during the year. The largest falls
related to companies requiring further financing in a market which
was increasingly reluctant to finance early-stage companies. For
these companies being quoted on AIM in this environment tended to
prove detrimental, as tightened disclosure regulations can force
companies to make announcements about funding requirements before
they are able to optimise a plan to address them.
The biggest negative contributor to
performance was Polarean
Imaging, a lung medical imaging company, which fell 82% in
the period. The company had a poor start to the year announcing its
cash reserves would last until May 2024, and that it would move to
a dual strategy of self-commercialisation while seeking a partner.
It also indicated that it would require further funding, at a time
when both private and public equity markets had turned their back
on earlier stage healthcare companies. On the positive side, a new
CEO was recruited, more suited to taking the company through its
next stage of development, and the company established a US
reimbursement code while it continued to build a pipeline of sales
opportunities and trimmed costs to extend the cash runway.
Education of hospitals about the technology and the benefits it can
bring, is a multi-faceted task involving clinicians as well as
hospital administrators. Articulating the value and revenue it can
generate and converting this into purchase orders is a lengthy
process.
Another significant underperformer
was the outsourced services specialist to the global video games
industry, Keywords Studios,
which fell 42% in the period. This was despite the company
reporting full year revenue growth of 13%, with around 6% of this
organic augmented by five completed acquisitions, and an operating
margin of over 15%. Whilst this performance was behind previous
levels, the company had significant trading headwinds to mitigate,
including the US entertainment strikes and a slowdown across the
global industry. Nevertheless, Keywords still managed to outpace
organic market growth, thus taking market share. Sentiment also
played a part in the share weakness, with expectations that
Artificial Intelligence (AI) machine-created technology will
present games publishers with in-house alternatives to outsourced
services. However, such spend on AI will likely be beyond the reach
of some customers, and Keywords was already investing in this area
to improve its competitiveness, service quality and product
offering.
e-learning specialist, Learning Technologies, also impacted
the portfolio's performance, falling 42%. In its full year results,
the company reported an organic revenue decline of 2%. This
reflected a slowdown in transactional and project-based work from
its key financial services and technology clients, plus
difficulties with the integration of a recent acquisition.
Cost-cutting, however, protected operating margins at more than
17%, and also significantly reduced debt. Learning Technologies'
share price was also impacted by AI concerns about machine-created
education, but again, the company is examining its own investment
into this and the potential productivity gains which could be
generated.
One of the few successful flotations
on AIM within the last couple of years has been high-end
semiconductor chip designer and manufacturer, Ensilica, which specialises in
Application Specific Integrated Circuits (ASICs). Since its listing
in late 2022, the company has broadened its customer base from the
automotive market into industrial, healthcare and satellite
communication applications. Revenues grew 34% year-on-year to May
2023, with significantly higher margins and operating profits. Last
November it sought to raise up to £5m equity to support the
execution of a growing pipeline of new business opportunities. By
this stage of its growth, however, the company had ceased to be
VCT-qualifying, and so, frustratingly, the Company was unable to
support the fund raise. The difficult environment for risk appetite
meant that only c£1.5m was eventually raised at a substantial
discount. This impacted the shares, which fell 58% in the
period.
Velocys, which developed
catalytic reactor technology for use in the production of
Sustainable Aviation Fuel (SAF) from wood chips or waste sources,
and which was developing large scale projects in both the UK and
US, struggled during the period to refinance its currently
loss-making operations. This was despite receiving c£30m of
government grants in late-2022 and having significant SAF offtake
agreements with customers. Negotiations continued for much of the
second half of the period under review, and during this time the
decision was taken to reduce, and ultimately exit, the position in
view of the funding risks involved. The shares fell 95% in the
period, and in February 2024 the company was eventually taken
private.
Video gaming developer and
publisher, Frontier
Developments, had a challenging year in keeping with the
slowdown in consumer demand across the industry. In November, the
company announced a strategic review, to move away from third-party
publishing and re-focus on its own, core, creative management
simulation games. This has involved a major cost cutting programme,
targeting a return to profitability in financial year ending May
2025. The company retains significant cash resources. The shares
fell 70%.
Other negative contributors included
Saietta, the developer of
eDrive systems for electric vehicles. Similar to Ensilica, Saietta also no longer
qualified for VCT investment. The company raised £7m of highly
dilutive funding in November, as part of a larger fund raise
intended to complete in March 2024. Unfortunately when the company
lost a cash flow boosting contract in February, and one of its
customers in India failed to deliver on a promised contract, the
March fund raise became too difficult to complete with the result
that the company appointed an administrator. This was a sad end to
what had seemed a highly promising business. Energy and water
efficiency solutions provider, Eneraqua, and IT training business,
Northcoders, experienced
difficult trading conditions during the period after achieving
successful listings in 2021. Both were hit by demand downturns
involving key customers. Eneraqua's local authority social housing
base has been impacted by budgetary constraints, alongside priority
spending on insulation, fire cladding, and damp and mould
renovations. Accordingly, funding in these areas has pushed back
investment in new utility systems. Northcoder's corporate business,
where training programmes are developed for specific employers, was
hit by a general environment of cutbacks in staff spending. The
already partially written down unquoted convertible loan holding in
electronics company eleXsys
was written down to zero during the period, as long expected
investment in the company to commercialise the company's grid
management technology failed to materialise.
Offsetting these negatives were good
performances in the period from some of the longer held investments
within the portfolio. Healthcare software specialist, Craneware, which has been a holding for
almost 20 years, gained 51%. This followed an improving market
backdrop, whereby US hospitals and pharmacy providers re-focused on
future growth and operational efficiency following a prolonged
period of spending slowdown and shifted priorities, due to an
overhang from the pandemic. First half revenue growth accelerated
to 8%, and earnings also grew reversing the decline seen in the
previous year.
Franchised property services
operator, Belvoir, which
has been a holding since 2012, gained 43%. Whilst franchisee fees
from estate agencies declined in 2023, this was more than offset by
growth from lettings agencies and also financial services such as
mortgage advice. Overall, the company achieved growth progress in a
difficult trading environment as interest rates climbed, and this
reflects the robustness of the franchise business structure. More
importantly it was announced in January of this year that Belvoir
was the subject of a nil premium merger with another portfolio
holding, Property Franchise
(held since 2013) whose shares gained 40%. This welcome development
creates a company with a combined market capitalisation of almost
£200m, which will broaden the investor audience for the shares.
There is scope for the larger group to generate meaningful revenue
and cost synergies in due course.
Glantus, the accounts payable
analytics software provider, which had a difficult time since
listing in 2021 as it restructured and missed revenue forecasts,
received an industry buyer approach as trading improved. The shares
rose nearly four-fold in the period.
Property services group,
Kinovo, a holding since
2015, announced strong interim results with operating profit growth
significantly ahead of revenue growth due to a favourable mix of
high margin business. This was principally within electrical
services, where new legislation, such as the Building Safety Acts,
is driving non-discretionary landlord spend following the Grenfell
Tower disaster. The shares gained 97%.
Other positive contributors were
Equals, Creo Medical and
Eden Research. Equals, the
FX payment services specialist held since 2014, continues to trade
strongly as it shifts its focus from consumers to corporates,
generating stronger growth and profit margins. In November, the
company announced it was exploring a potential sale with interested
parties, discussions with which are ongoing. Creo Medical, an
endoscopy medical device company, gained after announcing an
oversubscribed fundraise. This cleared a material overhang in the
stock and gave it a very comfortable runway to breakeven and
beyond. In the period, the company continued to generate positive
news flow about the regulatory approval of its advanced energy
devices and their use in surgical procedures globally. Most
impressively, the company highlighted the progression of its
partnership with Intuitive Surgical, the global leader in robotic
assisted surgery, as the companies move towards integrating their
technologies. Eden Research, a sustainable biopesticide company,
also rose following an oversubscribed fundraise and news of a major
partnering for its products. Corteva, a global agriculture company,
partnered with Eden Research on the development and
commercialisation of Ecovelex in the UK and EU. Ecovelex is a bird
deterrent seed treatment. The product is derived from plant based
chemistry which works by creating an unpleasant odour and taste
which repels birds.
Portfolio Activity
Over the course of the period under
review, the Company made five new investments and seven follow-on
investments. A total of £9.8m was invested in the five new
investments and £4.5m in the seven follow-on investments (of which
one, the follow-on investment of £1m in Verici DX, settled out of the reporting
period).
The new investments comprised two
IPOs and two secondary placings on AIM, as well as one unquoted
investment.
In the first half of the period, the
Company participated in the flotation of Fadel Partners, a developer of
cloud-based software for royalties' management, digital asset
management and brand compliance. Fadel's customers are licensors
and licensees across a range of markets covering media,
entertainment, publishing, consumer brands and technology. The
products incorporate sophisticated image and video recognition
powered by AI search tools. The business reported revenue of $14.5m
for 2023. In the second half of the year the Company participated
in the IPO of Tan Delta, a
developer and supplier of sensors and systems which uses innovative
real time oil analysis technology to allow operators of engineering
equipment to cut maintenance costs, improve reliability, and reduce
carbon footprint.
Traditionally, oil monitoring is
managed in compliance with preset service intervals, which results
in lubrication oil being discarded when it can still have 30-50% of
its useful life left. With limited sales resource prior to its IPO,
Tan Delta has built a customer list with major names such as Shell,
Schlumberger and Aggreko, and its technological edge lies in it
being able to test many types of installed equipment and oil types.
The addressable market is significant and global. A key positive is
that the Non-Executive Chairman is already known to us as CEO of
another portfolio holding, SRT Marine Systems.
In March, an unquoted investment was
made in 2 Degrees,
alongside Maven Capital Partners. The company provides large
corporates and their suppliers with an online Software as a Service
platform to measure, manage and reduce carbon within supply chains,
thereby helping to achieve the Green House Gas Protocol Scope 3
emissions standard. The platform includes a planning tool and
AI-driven recommendations for best practices to reduce carbon.
Current markets are in food retail and automotive, with scope to
grow beyond this.
Investments through secondary
placings in existing AIM companies involved Itaconix and Cordel. Both were completed in the
first half. The former is a US developer of a plant-based polymer
used to decarbonise everyday consumer products. The company has
been on AIM since 2012, but only achieved commercial breakthrough
in 2020 with a bio-polymer ingredient for dishwasher detergent.
Close to 150 consumer products now use Itaconix ingredients,
involving major retailers such as Amazon, Walmart, Aldi and Tesco.
With opportunities to grow into personal hygiene and beauty
products, the company is forecast to breakeven in its current
financial year. Cordel floated on AIM in 2018, and a year later
acquired its current business activity, an AI analytical software
platform to automate inspection and management of rail
infrastructure. Using highly accurate Light Detection and Ranging
sensors mounted onto train rolling stock, the technology replaces
human surveying of vegetation infringements, infrastructure
clearances, crossings, drainage and ballast, in order to meet
regulatory requirements and prevent accidents. Commercial success
to date includes contracts with Network Rail, Angel Trains and
Amtrak. The company is forecast to breakeven in the current
financial year.
Three of the seven follow- on
investments took place in the first half of the period and involved
antibody developer Fusion
Antibodies; fire safety product specialist Zenova; and sustainable biopesticides
formulator Eden Research. A
small placing participation with Fusion Antibodies was limited to
our equity percentage, to avoid dilution. Fusion Antibodies has had
to broaden its customer offering to provide an end-to-end
therapeutic antibody service, which captures earlier stage
customers and generates repeat business. Alongside the raise there
was a management commitment to significant cost cuts being made
through to 2024. Zenova was also a modest investment, within an
overall placing to get the company to breakeven after a slow start
to revenue growth from its range of fire prevention products with
mass market potential. Despite difficulties caused by Covid delays,
Eden Research (reported on above) is continuing to develop a global
portfolio of biopesticide products with international approvals.
The company has made excellent strides in reorganising its
distributor base to bring in higher quality companies, and further
product submissions are ongoing.
In the second half of the period,
follow-on investments were made in composite aircraft component
manufacturer, Velocity
Composites; autonomous vehicle developer, Aurrigo; automotive wiring connector
specialist, Strip Tinning;
and organ transplant diagnostics developer, Verici DX. Velocity Composites is
seeing a significant pick-up in its European and US business in
line with the recovery in the commercial aerospace market, driven
by Middle Eastern airline demand and a global transition to more
fuel-efficient aircraft. In December 2022, the company announced a
five year $100m contract with GKN Aerospace involving a diverse
range of high-performance composite structures across military,
civil, and business jet programmes. The significant fundraise was
used to provide working capital and further investment into the
company's US facility. Aurrigo has made progress on a number of
fronts since its IPO in 2022. Luggage tug trials are continuing at
Changhi airport in Singapore, a project has been won for a cargo
version for UPS, and further work is being done on a passenger
shuttle vehicle. Airport development clients now include Changhi,
Stuttgart, Schiphol and Cincinnati, with the latter involving
carrier IAG. We participated pro rata to our equity percentage in
the fundraise. Strip Tinning raised significant working capital,
partly in the form of convertible loan in which the Company
participated, to fund a pipeline of glazing and EV nominations from
large automotive original equipment manufacturers. Having cut costs
in a tough post-Covid environment for the industry, the company has
now returned to breakeven. After securing a licensing agreement in
November with global major Thermo Fisher Scientific for an early
rejection, pre-kidney transplant test, Verici DX raised significant
funding to take it through to 2025 when it hopes to reach
profitability on the back of similar deals.
In addition to the exits from
Glantus and Velocys noted above, there were a number of other
disposals from the portfolio during the period. Rare disease
biopharmaceutical company Amryt
Pharmaceuticals was sold following the recommended offer in
January by Chiesi Farmaceutici S.p.A. This has been a successful
investment for the Company. Angle, the liquid biopsy developer, was
sold on concerns that its technology could be superseded by
alternative circulating tumour DNA diagnostics. Anpario, the animal feeds additive
specialist, was exited as it had been a holding for around fifteen
years and had reached a stage of maturity in terms of its
prospects. Allergy
Therapeutics, Bonhill,
Falanx and Itsarm
(formerly In the Style) were also exited as they had become
sub-scale positions.
After strong performance from the
shares in the first half of the period, the opportunity was taken
to reduce our large holding in AB
Dynamics, the designer and supplier of testing and
simulation technology to the automotive industry. This crystallised
£2.2m in realised gains from original cost. Profits were also taken
in the portfolio's largest holding, Keywords Studios, crystallising gains
of £1.4m from original cost. With Aurrigo's shares reaching a peak of
more than three times the listing price, a small trim was made to
the weighting which subsequently provided portfolio flexibility to
participate in the placing. In the period, we also reduced our
position in Polarean.
Recognising that it was likely that the VCT Rules would not allow
the Company to make further investments in Polarean, the decision
was taken to sell part of our holding to Nukem, a long term
strategic investor in Polarean. A decision was also taken to reduce
our position in Frontier
Developments, following a sequence of disappointing game
launches plus a step-back to monitor how the strategic review is
executed.
Treasury Management
With the rise in the Bank of England
base interest rate that began in February 2022 with an increase to
0.5%, quickly increasing incrementally to 5.25% by August 2023 at
which level it has remained, opportunities to earn a good return on
cash became available. Following consultation with the Company's
VCT status adviser the decision was taken to allocate a proportion
of cash held to overnight or up to 7-day term deposit accounts
offering interest rates at or close to central bank base rates with
A+ rated financial institutions. We placed the majority of the
remainder with short term money market funds. Such deployment of
cash provides an attractive means of generating additional,
low-risk income for the Company while awaiting suitable VCT
qualifying opportunities.
Outlook
The junior end of the UK stock
market has been through a traumatic period over the last two years,
since it peaked in September 2021. In the past a rally in the
leading tech stocks in the US tended to filter through to venture
capital stage companies in the UK, whether quoted or unquoted. This
time, however, the dramatic rise in the leading US tech stocks has
exacerbated flows of money away from the UK stock market as savers
have sought to reallocate capital to these already giant
companies.
As at the end of March, the VCT
qualifying portfolio is roughly split 50/50 in value between a
group of 18 relatively mature small and medium sized businesses
originally purchased between 2005 and 2015. These have been highly
profitable investments, even with some of the big share price falls
they have seen over the last two years.
In managing the VCT we have had a
strong tendency to want to preserve these holdings as much as
possible, because it will take a long time for investments made
under post 2017 VCT rule changes to match them in maturity, scale
and quality.
The outlook for this group of
companies has improved significantly from a year ago, with growth
coming through in many cases and a sense that ratings are now
bottoming out. This sets up the conditions for a rebound if UK
interest rates fall towards the end of the year, as expected. In
general we were too slow to take profits from this part of the
portfolio in 2021, having cultivated a strategy of running winners
that was highly effective for the prior ten years. The VCT rules
are much easier to negotiate with this policy of running winners.
However, we failed to anticipate exactly how far the deratings
could run, and how much some of these companies suffered from
downgrades. In general, we are increasing our propensity to take
profits from this part of the portfolio where we see significant
valuation risk. But as things stand, we think the risks are now
more biased towards an upwards re-rating and for better growth
metrics returning.
The other half of the portfolio by
value are holdings in around 40 companies which are still at the
venture capital stage, loss making or break even, undertaking the
long and difficult journey to sustainable profitability. One of
these, Maxcyte, is now NASDAQ listed, having raised sufficient cash
to aim for demanding growth targets and to maximise the commercial
opportunity it has. In most cases, however, the share prices of
this group of companies are distressed. They are more fragile, and
their fortunes will depend substantially on hitting corporate
targets and de-risking business plans. Where they can do this, the
upside from current depressed prices will be significant. For those
that don't deliver on expectations then this end of the market is a
friendless place.
We recognise that we have had too
much of a tendency to stick with investee companies that fail to
meet expectations in the hope that over time they will find their
way through to profitable growth, in part because this makes
negotiating the severe constraints of the VCT legislation more
manageable, especially whilst new investment opportunities have
been fewer. In other cases, low levels of liquidity can make it
difficult to sell stakes in a meaningful way, but the ability to do
so remains one of the attractions of investing in quoted companies.
This said, in this part of the portfolio, 59% of the holdings by
value is in companies that are expected to turn profitable or
return to profitability in 2024, and another 31% where this is
expected during 2025. Once profitable, these companies have an
opportunity to gain a wider investor base on AIM and should see
more positive share price dynamics. Our experience from previous
market downturns is that companies that survive this far tend to
come through in better shape than they went in, having had to
really hone strategy and cut out non-essential costs.
Looking at the impact on the
portfolio of the VCT rule changes in 2016-17 shows that
satisfactory returns have been difficult to achieve in the period
since then, albeit this is looking back from the point of view of a
low point. In some cases the rules and their interpretation (such
as the revised implementation of the financial distress rules and
the restrictions on making non-qualifying investments into existing
qualifying investments where the rules don't allow qualifying
investments to be made) create senseless restrictions on Managers
which damage the value that can be delivered to shareholders for no
apparent policy benefit. Some changes could be made that would cost
nothing and improve the ways in which VCTs can support venture
capital stage companies in the UK. VCTs also play a key role in
replenishing the AIM exchange by supporting companies at IPO and
through their early phases being quoted, something which is all too
easily forgotten when times are good. Most policy makers understand
the importance of this junior market, and it is to be hoped that
whoever forms the next Government will take the time necessary to
understand how to rejuvenate it. In the meantime we continue to
review with the Board, possible ways of expanding the range of
qualifying investments we can encompass.
Dr
Paul Jourdan, David Stevenson and Scott McKenzie
Amati Global Investors
11 April 2024
Investment Portfolio
as at 31 January 2024
Company name
|
Original
Amati VCT
bookcost at 4 May 2018#
£'000
|
Cost*
£'000
|
Aggregate
Cost**
£'000
|
Fair
value
£'000
|
Fair
value
movement
in
year***
£'000
|
Market
Cap
£m
|
Industry Sector
|
Yield
NTM
%
|
%
of
net
assets
|
Waystone Amati UK Listed Smaller
Companies Fund
|
3,331
|
6,757
|
10,088
|
11,546
|
(1,286)
|
-
|
Financials
|
3.2
|
8.1
|
Keywords Studios
plc1,3
|
259
|
3,897
|
4,156
|
6,777
|
(4,818)
|
1,311.4
|
Information Technology
|
0.1
|
4.7
|
AB Dynamics
plc1
|
151
|
1,721
|
1,872
|
5,706
|
(228)
|
401.4
|
Industrials
|
0.4
|
4.0
|
Learning Technologies Group
plc1,3
|
780
|
3,771
|
4,551
|
5,596
|
(4,078)
|
641.4
|
Information Technology
|
2.0
|
3.9
|
Craneware
plc2,3
|
298
|
3,601
|
3,899
|
4,619
|
1,568
|
760.0
|
Health Care
|
1.4
|
3.2
|
Aurrigo International
plc1
|
-
|
2,305
|
2,305
|
4,020
|
385
|
41.2
|
Industrials
|
-
|
2.8
|
MaxCyte Inc.1
|
449
|
1,536
|
1,985
|
3,911
|
(802)
|
405.5
|
Health Care
|
-
|
2.7
|
GB Group plc2
|
236
|
2,967
|
3,203
|
3,176
|
(802)
|
711.8
|
Information Technology
|
1.5
|
2.2
|
Water Intelligence
plc2
|
180
|
1,038
|
1,218
|
3,014
|
(1,629)
|
64.5
|
Industrials
|
-
|
2.1
|
Fadel Partners,
Inc1
|
-
|
3,000
|
3,000
|
2,937
|
(62)
|
28.5
|
Information Technology
|
-
|
2.1
|
Top
Ten
|
|
|
36,277
|
51,302
|
(11,752)
|
|
|
|
35.8
|
Chorus Intelligence
Limited
Ordinary
Shares1,4
|
-
|
301
|
301
|
151
|
-
|
-
|
Information Technology
|
-
|
0.1
|
Chorus Intelligence Limited 10%
Convertible Loan Notes1,4
|
-
|
2,699
|
2,699
|
2,699
|
-
|
-
|
Information Technology
|
-
|
1.9
|
Solid State
plc2
|
259
|
261
|
520
|
2,626
|
(83)
|
144.1
|
Industrials
|
1.7
|
1.8
|
Diaceutics plc1
|
-
|
1,557
|
1,557
|
2,110
|
(41)
|
87.2
|
Health Care
|
-
|
1.5
|
Belvoir Group
plc1
|
404
|
379
|
783
|
2,070
|
621
|
97.0
|
Real Estate
|
4.4
|
1.5
|
Nexteq plc2
|
419
|
3,777
|
4,196
|
2,039
|
(802)
|
77.8
|
Consumer Discretionary
|
-
|
1.4
|
Ensilica plc1
|
-
|
2,450
|
2,450
|
2,009
|
(2,744)
|
33.6
|
Information Technology
|
-
|
1.4
|
2 Degrees Limited
A11
|
-
|
1,867
|
1,867
|
1,867
|
-
|
-
|
Information Technology
|
-
|
1.3
|
2 Degrees Limited
A21
|
-
|
133
|
133
|
133
|
-
|
-
|
Information Technology
|
-
|
0.1
|
Velocity Composites
plc1
|
496
|
2,107
|
2,603
|
1,921
|
(523)
|
18.2
|
Industrials
|
-
|
1.4
|
Sosandar plc1
|
-
|
1,872
|
1,872
|
1,810
|
(1,373)
|
36.0
|
Consumer Discretionary
|
-
|
1.3
|
Equals Group
plc1
|
-
|
1,137
|
1,137
|
1,755
|
491
|
221.4
|
Information Technology
|
-
|
1.2
|
Top
Twenty
|
|
|
56,395
|
72,492
|
(16,206)
|
|
|
|
50.7
|
Brooks Macdonald Group
plc2,3
|
-
|
1,154
|
1,154
|
1,658
|
(315)
|
302.5
|
Financials
|
4.4
|
1.2
|
Intelligent Ultrasound
plc1
|
-
|
2,194
|
2,194
|
1,652
|
(507)
|
24.5
|
Health Care
|
-
|
1.2
|
Northcoders Group
plc1
|
-
|
2,111
|
2,111
|
1,597
|
(1,708)
|
11.6
|
Consumer Discretionary
|
-
|
1.1
|
SRT Marine Systems
plc1
|
709
|
465
|
1,174
|
1,425
|
(347)
|
82.4
|
Information Technology
|
-
|
1.0
|
Kinovo plc2
|
-
|
1,681
|
1,681
|
1,401
|
689
|
40.8
|
Industrials
|
-
|
1.0
|
Arecor Therapeutics
plc1
|
-
|
1,910
|
1,910
|
1,393
|
(464)
|
50.5
|
Health Care
|
-
|
1.0
|
Tan Delta Systems
plc1
|
-
|
1,875
|
1,875
|
1,298
|
(577)
|
13.2
|
Industrials
|
-
|
0.9
|
Accesso Technology Group
plc1,3
|
-
|
221
|
221
|
1,214
|
(595)
|
229.0
|
Information Technology
|
-
|
0.8
|
Property Franchise Group plc
(The)2
|
155
|
197
|
352
|
988
|
280
|
108.1
|
Real Estate
|
4.3
|
0.7
|
Itaconix plc1
|
-
|
2,000
|
2,000
|
941
|
(1,059)
|
16.2
|
Industrials
|
-
|
0.7
|
Eden Research
plc1
|
-
|
1,057
|
1,057
|
921
|
(72)
|
29.3
|
Materials
|
-
|
0.6
|
Saietta Group
plc1,3
|
-
|
5,100
|
5,100
|
805
|
(1,770)
|
21.8
|
Consumer Discretionary
|
-
|
0.6
|
Strip Tinning Holdings plc Ordinary
shares1
|
-
|
1,054
|
1,054
|
228
|
(114)
|
7.3
|
Industrials
|
-
|
0.2
|
Strip Tinning Holdings plc 10%
Unsecured Convertible Loan Notes1
|
-
|
500
|
500
|
500
|
-
|
-
|
Industrials
|
-
|
0.4
|
One Media iP Group
plc1
|
-
|
1,240
|
1,240
|
709
|
(354)
|
8.9
|
Financials
|
-
|
0.5
|
Polarean Imaging
plc1
|
-
|
2,065
|
2,065
|
696
|
(3,279)
|
15.1
|
Health Care
|
-
|
0.5
|
Cordel Group
plc1
|
-
|
915
|
915
|
641
|
(275)
|
8.4
|
Information Technology
|
-
|
0.4
|
Flylogix Limited Ordinary
shares1,4
|
-
|
300
|
300
|
-
|
-
|
-
|
Information Technology
|
-
|
-
|
Flylogix Limited 10% Convertible loan
notes1,4
|
-
|
2,700
|
2,700
|
610
|
(15)
|
-
|
Information Technology
|
-
|
0.4
|
Getech Group
plc1
|
-
|
1,700
|
1,700
|
580
|
(502)
|
5.1
|
Energy
|
-
|
0.4
|
Netcall plc2
|
-
|
110
|
110
|
575
|
(6)
|
154.1
|
Information Technology
|
0.9
|
0.4
|
Creo Medical Group
plc1,3
|
-
|
1,613
|
1,613
|
535
|
284
|
150.0
|
Health Care
|
-
|
0.4
|
Frontier Developments
plc1
|
197
|
2,509
|
2,706
|
518
|
(1,219)
|
57.0
|
Communication Services
|
-
|
0.4
|
Block Energy
plc1
|
-
|
3,000
|
3,000
|
511
|
(51)
|
7.3
|
Energy
|
-
|
0.4
|
Ixico plc1
|
-
|
1,367
|
1,367
|
488
|
(635)
|
4.8
|
Health Care
|
-
|
0.3
|
Byotrol plc Ordinary
shares1,4
|
511
|
348
|
859
|
138
|
(363)
|
2.5
|
Materials
|
-
|
0.1
|
Byotrol plc
9% Convertible loan notes1,4
|
-
|
350
|
350
|
350
|
(3)
|
-
|
Materials
|
-
|
0.2
|
Clean Power Hydrogen
plc1
|
-
|
2,500
|
2,500
|
472
|
(861)
|
22.8
|
Industrials
|
-
|
0.3
|
Science in Sport
plc1
|
804
|
1,136
|
1,940
|
431
|
45
|
26.4
|
Consumer Staples
|
-
|
0.3
|
Hardide plc1
|
695
|
1,666
|
2,361
|
430
|
(158)
|
5.6
|
Materials
|
-
|
0.3
|
Verici Dx
Limited1
|
-
|
800
|
800
|
360
|
(80)
|
15.3
|
Health Care
|
-
|
0.3
|
Eneraqua plc1
|
-
|
1,955
|
1,955
|
282
|
(1,764)
|
13.3
|
Industrials
|
-
|
0.2
|
Synectics plc2
|
-
|
342
|
342
|
212
|
41
|
27.6
|
Information Technology
|
3.0
|
0.1
|
Brighton Pier Group plc
(The)1
|
314
|
175
|
489
|
208
|
(61)
|
20.5
|
Consumer Discretionary
|
-
|
0.1
|
Zenova Group
plc1
|
-
|
900
|
900
|
208
|
(357)
|
2.9
|
Materials
|
-
|
0.1
|
MyCelx Technologies
Corporation1
|
440
|
205
|
645
|
206
|
85
|
11.7
|
Industrials
|
-
|
0.1
|
Fusion Antibodies
plc1
|
565
|
1,829
|
2,394
|
150
|
(953)
|
2.7
|
Health Care
|
-
|
0.1
|
Rosslyn Data Technologies
plc1
|
614
|
1,308
|
1,922
|
120
|
(127)
|
3.0
|
Information Technology
|
-
|
0.1
|
Rua Life Sciences
plc1
|
-
|
931
|
931
|
88
|
(362)
|
7.0
|
Health Care
|
-
|
0.1
|
Trellus Health
plc1
|
-
|
700
|
700
|
79
|
(61)
|
7.3
|
Health Care
|
-
|
0.1
|
Merit Group
plc1
|
-
|
596
|
596
|
48
|
27
|
16.1
|
Communication Services
|
-
|
-
|
Aptamer Group
plc1
|
-
|
3,672
|
3,672
|
31
|
(1,161)
|
4.7
|
Health Care
|
-
|
-
|
FireAngel Safety Technology Group
plc1
|
-
|
690
|
690
|
31
|
(24)
|
15.1
|
Consumer Discretionary
|
-
|
-
|
Investments held at nil
value
|
-
|
-
|
2,691
|
-
|
(900)
|
-
|
-
|
-
|
-
|
Total non-money market investments
|
|
|
123,231
|
98,220
|
(35,854)
|
|
|
|
68.7
|
Money market funds
|
|
|
|
|
|
|
|
|
|
Royal London Short Term
Money Market Fund
|
-
|
-
|
14,347
|
14,417
|
70
|
|
|
|
10.1
|
Goldman Sachs Sterling
Liquid
Reserves Fund
|
-
|
-
|
8,065
|
8,065
|
-
|
|
|
|
5.6
|
Northern Trust Global The
Sterling Fund
|
-
|
-
|
8,065
|
8,065
|
-
|
|
|
|
5.6
|
Total money market funds
|
|
|
30,477
|
30,547
|
70
|
|
|
|
21.3
|
Total investments
|
|
153,708
|
128,767
|
(35,784)
|
|
|
|
90.0
|
Other net current assets
|
|
|
14,311
|
|
|
|
|
10.0
|
Net
assets
|
|
|
143,078
|
|
|
|
|
100.0
|
1 Qualifying
holdings.
2 Part qualifying
holdings.
3 These investments are also held by
other funds managed by Amati.
4 The investments of Ordinary Shares
and Convertible loan notes: Flylogix Limited ("Flylogix") consists
of 392 Ordinary Shares in Flylogix at fair value of nil and 10%
Convertible Loan Notes ("CLNs") at £610,000. The company was put
into administration on 2 March 2023. The Convertible Loan Note
agreement prescribes that if Flylogix is not listed on AIM,
interest is payable at 10% per annum for a term of 5 years. The
fair value of the CLNs is that amount which the administrator has
indicated should be payable including interest.
Elexsys Energy plc ("Elexsys")
consists of 202,737 Ordinary Shares in Elexsys at fair value of nil
and 8% Convertible Loan Notes at nil.
Chorus Intelligence Limited
("Chorus") consists of 232 Ordinary Shares in Chorus at fair value
of £151,000 and 10% Convertible Loan Notes at
£2,699,000.
Byotrol plc ("Byotrol") consists of
25,000,001 Ordinary Shares in Byotrol at fair value of £138,000 and
9% Convertible Loan Notes at £350,000. Interest is being received
quarterly on the Byotrol CLNs.
Strip Tinning consists of 569,699
ordinary shares at fair value of £228,000 and 10% Convertible Loan
Notes at £500,000. Interest is payable upon redemption of the
CLNs.
# This column shows the original
book cost of the investments acquired from Amati VCT plc on 4 May
2018.
* This column shows the bookcost to
the Company as a result of market trades and events.
** This column shows the aggregate
book cost to the Company either as a result of trades and events or
asset acquisition from Amati VCT plc on 4 May 2018.
*** This column shows the movement
in fair value, the unrealised gains/(losses) on investments during
the year, see notes 1 and 8 on pages 61 and 68 for further
details.
NTM Next twelve months consensus
estimate (Source: Refinitiv, Fidessa and Amati Global
Investors))
The Manager rebates the management
fee of 0.75% on the WS Amati UK Listed 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 plc1, Elexsys Energy plc,
Leisurejobs.com Limited1 (previously The Sportweb.com
Limited), Rated People Limited1, Sorbic International
plc, TCOM Limited1, VITEC Global
Limited1.
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 is
100%.
Analysis as at 31 January 2024
Qualifying portfolio
The portfolio of qualifying
investments in the Company as at 31 January 2024 is analysed in the
graph which can be found on page 18 of the full Annual Report and
Accounts, 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 2024 is analysed in the graph by sector
which can be found on page 18 of the full Annual Report and
Accounts. This includes a sector split of the investments within
the WS Amati UK Listed Smaller Companies Fund which in the
Investment Portfolio table above is classed as
Financials.
Investment Policy, Investment Objectives and Investment
Strategy
Investment Objectives
The investment objectives of the
Company are to generate tax free capital gains and regular dividend
income for its shareholders while complying with the requirements
of the rules and regulations applicable to Venture Capital Trusts
("VCTs").
Investment Policy
The Company's investment policy is
to hold a diversified portfolio across a broad range of sectors to
mitigate risk. It makes Qualifying Investments (as defined in the
Income Tax Act 2007 (as amended)) primarily in companies traded on
AIM or on the Aquis stock exchange ("Aquis") and non-Qualifying
Investments as allowed by the VCT legislation. The Company manages
its portfolio to comply with the requirements of the rules and
regulations applicable to VCTs.
Investment Parameters
Whilst the investment policy is to
make Qualifying Investments primarily in companies traded on AIM or
Aquis, the Company may also make Qualifying Investments in
companies likely to seek a quotation on AIM or Aquis. With regard
to the non-Qualifying portfolio the Company makes investments which
are permitted under the VCT legislation, 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. 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.
Borrowing
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.
Investment Strategy for Achieving Objectives
The investment strategy for
achieving the Company 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.
(a)
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.
(b)
Non-Qualifying Investments Strategy
The assets of the portfolio which
are not in Qualifying Investments will be invested by the Manager
on behalf of the Company 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
WS Amati UK Listed 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.
Environmental, Social and Governance ("ESG")
Policies
The Investment Manager recognises
that managing investments on behalf of clients involves taking into
account a wide set of responsibilities in addition to seeking to
maximise financial returns for investors. Industry practice in this
area has been evolving rapidly and Amati has been an active
participant in seeking to define and strengthen its principles
accordingly. This involves both integrating ESG considerations into
the Investment Manager's investment decision-making process as a
matter of course, and also signing up to major external bodies who
are leading influencers in the formation of industry best practice.
The following is an outline of the kinds of ESG factors that the
Investment Manager will consider and question as part of its
investment process, reflecting the specific inputs and outputs of a
business.
·
Environmental - climate change;
use of natural resources; pollution; waste and impact on
bio-diversity; and taking into account any positive environmental
impacts.
· Social
- use of human capital; potential product or
service liabilities; stakeholder opposition; and taking into
account any positive social considerations.
·
Governance - ownership and
control; management structure and quality; pay and alignment;
accounting issues; business ethics; and tax
transparency.
·
Human
rights - weighing up the risks of
activities in countries with Freedom House Scores below 33 and
based on Clean Trade principles; not investing in companies
extracting natural resources in countries which score below 15;
risk of exposure to corruption and unreliable legal frameworks;
risk of benefiting from slave labour; risk from adverse political
developments impacting a business negatively.
The Board is conscious of the
potential impact of its investments on the environment as well as
its social and governance responsibilities. The Board and the
Manager believe that sustainable investment involves the
integration of ESG factors within the investment appraisal process
and that these factors should be considered alongside strategic,
commercial and financial issues. Further details can be found on
page 28 of the full Annual Report.
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.
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 below;
·
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 full Annual Report and
Accounts;
·
Comparison against the Deutsche Numis Alternative
Markets Total Return Index. See graph on page 3 of the full Annual Report and Accounts;
·
Dividend distributions. See table of investor
returns above;
·
Share price. See key data above; and
·
Ongoing charges ratio. See key data
above.
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 dated 19 March 2010, and
subsequently revised and updated in two separate agreements, an
Investment Management Deed ("IMA") and a Fund Administration,
Secretarial Services and Fund Accounting Agreement ("FASSFAA"), on
30 September 2019, 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 WS Amati UK Listed
Smaller Companies Fund, a small and mid-cap fund managed by the
Manager. The Company receives 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 waived all
performance fees from 31 July 2014 onwards.
Administration Arrangements
Under the terms of the FASSFAA, the
Investment Manager also agreed to provide certain fund
administration, company secretarial and accounting services to the
Company. As disclosed in last year's annual report, the Manager and
Board agreed that a new Company Secretary would be sought and that
the Board would contract directly with the new Company Secretary.
The Board appointed Law Debenture as Company Secretary of the
Company with effect from 1 February 2022.
Under the FASSFAA, the Investment
Manager has the right to appoint suitable representatives to
provide fund accounting and administration services to the Company.
The Manager engages Link Alternative Fund Administrators Limited to
act as fund accountant and administrator.
For the year ending 31 January 2024
the Company agreed to pay to the Investment Manager a fee of
£78,336 (2023: £72,000) quarterly in arrears in respect of the
provision of fund accounting and administration services. This fee
is subject to an annual increase in line with the consumer prices
index. The appointment of the Investment Manager as investment
manager and/or fund accountant and administrator may be terminated
with twelve months' notice.
Where the Investment Manager
negotiates and structures an investment directly with a company,
most commonly as a convertible loan, the Investment Manager retains
the right to charge the investee company a fee. Any legal expenses
incurred by the Investment Manager will be paid out of this
fee.
Fund Manager's Engagement
The Board regularly appraises the
performance and effectiveness of the managerial, administration 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 work closely with the Manager but report directly
to the Board.
Principal and Emerging Risks
The Audit Committee regularly
reviews the Company's risk register, which assesses each risk and
classifies the likelihood of the risk and the potential impact of
each risk on the Company. The Board considers that the Company
faces the following major risks and uncertainties:
Potential Risk
|
Potential Impact
|
Mitigation
|
Investment Risk
|
A substantial portion of the
Company's investments is 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. With the changes to
VCT regulations introduced in the Finance Act 2018 focusing
investment in knowledge based companies, newer investments may well
be made at an earlier stage in the lifecycle and may result in a
reduced exposure to asset based businesses leading to increased
volatility in the value of an investee company's shares. Further,
the majority of the new investments will be in companies which have
invested in developing and commercialising intellectual property,
which brings with it the risk that another company might develop
superior technology, or that the commercialisation strategy may
fail. In addition, the liquidity of these shares can be low and the
share prices volatile.
|
The Board places reliance upon the
skills and expertise of the Manager, including 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 diversified portfolio with
companies in different areas within sectors and markets at
different stages of development.
Investments in unquoted companies in
particular are subject to strict controls and investment limits in
recognition of the significant risks involved. In relation to
investments of this nature there is an expectation that the
investee company is likely to seek admission to AIM, in order to
de-risk the investment, to the extent that this is possible, within
an acceptable time frame. It may be that an investment is realised
via a trade sale as this option is always a possibility. The
Manager ensures Board representation or monitoring is a requirement
of the investment agreement and, if a listing or trade sale does
not occur, will continue to oversee board and operational
management performance.
|
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.
The VCT legislation contains a
"sunset clause" which would have brought income tax relief to an
end on 5 April 2025. Following confirmation by the Chancellor in
his Autumn statement that the scheme will continue, the Finance Act
has now been passed which allows VCT income tax relief to be
available for subscriptions for VCT shares until 5 April 2035. This
however can only come into force when the EU gives approval. The
Board understands that HM Treasury officials expect approval to be
given, but the timescale for this is not yet known.
|
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 VCT Status 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.
Other tax reliefs such as tax-free
dividends and exemption from capital gains tax would remain
unaffected by the sunset clause.
|
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 Act,
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.
The Alternative Investment Fund
Managers (Amendment etc.) (EU Exit) Regulations 2019 ("AIFMD") is a
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, the Company
Secretary and other professional bodies.
|
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.
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 page 41 of the full Annual
Report and Accounts.
|
The Board seeks to mitigate the
internal control risk by setting policy, regular reviews of
performance by the Manager and service providers, enforcement of
contractual obligations and monitoring progress and
compliance.
|
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 has from time to time
been exposed to currency risk.
|
The Company's policies for managing
these risks are outlined in full in notes 16 to 19 to the financial
statements below. The Company is financed wholly through
equity.
|
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 economic
future for the UK and the wider world would appear to be as
uncertain as it has ever been in the last few decades. Wars in
Europe and the Middle East combine to give grave concern for the
future. This follows two years of the Covid-19 pandemic and the
ensuing impacts on the UK and global economies, where government
debt has not been as high as it is now since World War
2.
Government actions to deal with
Covid-19 and to boost the economy during the pandemic resulted in
rising inflation and therefore interest rates, the impacts on the
cost of living being exacerbated by high energy prices caused by
poor Government energy policy decision-making in the rush to go
green, reliance for energy supplies on Russia and the impact of
that country's invasion of Ukraine. The Covid-19 pandemic and the
measures taken to control the outbreak had already led to
volatility in stock markets and other financial markets in the UK
and a downturn in the UK economy.
|
The Manager seeks to mitigate
economic 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.
|
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 the Nomination Committee of the Company considers third-party
suppliers' performance annually. The Board considers the Manager's
performance at every quarterly meeting.
|
Concentration Risk
|
Although the Company has a
diversified portfolio of investments, the twenty largest
investments account for just over half of the total investments. A
material fall in any one investment can have a significant impact
on the overall net asset value.
|
Portfolio weighting limits apply to
the portfolio's largest holdings such that no holding is allowed to
approach a size of 10% of the portfolio, with action normally taken
well before that level particularly where the shares have become
overbought with no underlying earnings justification.
|
Section 172 Statement
Directors' Duty to Promote the Success of the
Company
This section sets out the Company's
Section 172 Statement and should be read in conjunction with the
other contents of the Strategic Report. The Directors have a duty
to promote the success of the Company for the benefit of its
members as a whole and in doing so to have regard to a number of
matters including:
·
the likely consequences of any decision in the
long term;
·
the interests of the Company's
employees;
·
the need to foster business relationships with
suppliers, customers and others;
·
the impact of the company's operations on the
community and the environment;
·
the desirability of the Company maintaining a
reputation for high standards of business conduct; and
·
the need to act fairly between members of the
Company.
As an externally managed investment
company, the Company does not have employees. Its main stakeholders
therefore comprise the shareholders, the Investment Manager, other
service providers and investee companies.
To ensure that the Directors are
aware of, and understand, their duties they are provided with a
tailored induction, including details of all relevant regulatory
and legal duties as a Director of a UK public limited company when
they first join the Board, and continue to receive regular and
ongoing updates and training on relevant legislative and regulatory
developments.
They also have continued access to
the advice and services of the Company Secretary, and when deemed
necessary, the Directors can seek independent professional advice.
The Terms of Reference of the Board's committees are reviewed
annually and describe the Directors' responsibilities and
obligations and include any statutory and regulatory
duties.
Stakeholder
|
Importance
|
Board Engagement
|
Shareholders
|
Continued shareholder support and
engagement are critical to the continuing existence of the business
and its future growth.
|
The Board places great importance
on communication with its shareholders
and encourages shareholders to attend the AGM and an annual
investor event and welcomes communication
from shareholders as described more fully
on page 39 of the full Annual Report
and Accounts.
|
Investment Manager
|
The Manager's performance is
fundamental for the Company to successfully deliver its investment
strategy, meet its investment objective and its long-term
success.
|
The Board's decisions are intended
to achieve the Company's objective to generate tax free capital
gains and income on investors' funds and maintaining the Company's
status as a VCT is a critical element of this.
The Board regularly monitors the
Company's performance in relation to its investment objectives and
seeks to maintain a constructive working relationship with the
Manager. Representatives of the Manager attend each quarterly board
meeting and provide an update on the investment portfolio along
with presenting on macroeconomic issues. The Board also
expects good standards at the companies within which the Company is
invested and, as described on page 28
, the Manager remains a signatory to
the UK Stewardship Code, and the Principles for Responsible
Investment.
|
Other service providers, including:
the registrar, the receiving agent,
the tax adviser, the auditor, the lawyers, the Company Secretary
and the Fund Accountant
|
In order to function as an
investment trust with a premium listing on the London Stock
Exchange, the Company engages a diverse and experienced range of
advisors for support with meeting all relevant
obligations.
|
The Board maintains regular contact
with its key external service providers, and the quality of the
provision of these services is considered by the Board at Board
meetings, as well as being subject to a more formal annual review
of both performance and fees by the Remuneration
Committee.
|
Investee companies
|
The Company's performance is
directly linked to the performance of its underlying investee
companies and accordingly communication with those entities is
regarded as very important.
|
The Manager does not have board
representation in any quoted investee company but does interact
with Directors and senior management of quoted investee companies
regularly. The Manager does ensure direct or indirect
representation is achieved on the boards of unquoted
companies.
The Board's primary focus in
promoting the long-term success of the Company for the benefit of
the members as a whole is to direct the Company with a view to
achieving the investment objective in a manner consistent with its
stated investment policy and strategy.
|
Key
decision making
The mechanisms for engaging with
stakeholders are kept under review by the Directors and discussed
at Board meetings to ensure they remain effective. The Board has
policies for dividends, share buybacks and the dividend
re-investment scheme, all of which it is considered are for the
benefit of shareholders.
During the year the Directors
discussed these and reaffirmed their commitment to the policies. An
example of a principal decision made during the year, and how the
Board fulfilled its duties under Section 172, is set out
below:
Principal Decision
|
Long-term impact
|
Stakeholder Engagement
|
Second Interim Dividend
|
Payment of a second interim dividend
gave additional comfort that the 80% test would be maintained,
given the challenging market conditions, which had resulted in
fewer fund raises on AIM this year.
|
The Board considered how
shareholders would receive a second interim dividend, but agreed
that such a payment remained within the dividend policy and was in
line with market practice, noting that other peer VCTs had also
paid second interim dividends.
|
Environmental, Social and Governance ("ESG") Policies, and
Responsible Ownership
The Company has no employees and no
premises and the Board has decided that the direct impact of its
activities is minimal; therefore it has no policies relating to
social, community and human rights issues. However, the Board does
consider the impact of its operations on the environment and over
the past couple of years the Board made the decision to no longer
pay all cash dividends via cheque and to no longer provide printed
copies of the Company's Half-Yearly report in order to reduce the
use of paper. The Company engaged with its shareholders on the
matter.
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.
In terms of external validation and
support, Amati Global Investors, the Manager, is signatory to the
UK Stewardship Code which aims to enhance the quality of engagement
between investors and companies to help improve long-term risk
adjusted returns to shareholders. Amati's approach to Stewardship
and Shareholder Engagement can be found at
https://www.amatiglobal.com/storage/644/Stewardship
_and_Shareholder_Engagement-v2.pdf.
Amati is also a signatory to the
UN-supported Principles for Responsible Investment (PRI), which
works to support its international network of signatories in
incorporating ESG factors into their investment and ownership
decisions. The PRI acts in the long-term interests of its
signatories, of the financial markets and economies in which they
operate and ultimately of the environment and society as a
whole.
Voting on portfolio investments
In 2023, the Manager voted in
respect of 59 Amati AIM VCT holdings at 78 company meetings on a
range of ESG issues.
Business Conduct
The Board takes its responsibility
to prevent bribery very seriously and has a zero-tolerance policy
towards bribery. It has committed to carry out all business in an
honest and ethical manner and to act professionally, fairly and
with integrity in all its business dealings and relationships. The
Manager has its own anti-bribery and corruption policy.
Global Greenhouse Gas Emissions
The Company is a low energy user and
is therefore exempt from the reporting obligations under the
Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013 or the Companies (Directors' Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018,
implementing the UK Government's policy on Streamlined Energy and
Carbon Reporting. The Company has no greenhouse gas emissions or
energy consumption to report from the operations of the Company,
nor does it have responsibility for any other emission producing
sources. Under listing rule 15.4.29(R), the Company, as a closed
ended investment fund, is currently exempt from complying with the
Task Force on Climate related Financial Disclosures.
Other Matters
VCT
Regulations
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 80% 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 (this percentage
rose from 70% to 80% for accounting periods beginning on or after 6
April 2019 which for the Company was from 1 February 2020). At
least 70% by VCT value must be ordinary shares which carry no
preferential rights. 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 £15 million of gross assets at the time of
investment and £16 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 £5 million
(£10 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 £12 million (£20 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 a 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 "nonqualifying" 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;
and
(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 Regulations
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.
Statement on Long-term Viability
In accordance with the UK Corporate
Governance Code published in July 2018 (the "Code"), the Directors
have carried out a robust assessment of the prospects of the
Company for the period to January 2029, taking into account the
Company's performance 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 and
cash flow 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. This time frame allows for 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.
The Directors have considered in
particular the likely economic effects and the impacts on the
Company's operations of the war taking place in Ukraine, rising
inflation and interest rates.
The longer-term economic outlook is
very difficult to predict but in considering preparing the long
term viability of the Company the Directors noted the Company holds
a portfolio of liquid investments and cash balances whose value is
a multiple of liabilities.
Other Disclosures
The Company had no employees during
the year and has three non-executive directors, two of whom are
female and one is male.
On behalf of the Board
Fiona Wollocombe
Chairman
11 April 2024
Extracts from the Directors' Remuneration
Report
Directors' fees for the year (Audited)
The fees payable to individual
Directors in respect of the year ended 31 January 2024 are shown in
the table below.
|
Year ended 31 January
2024
(audited)
|
|
Fees
|
Taxable
benefits†
|
Total
|
Total Fixed
remuneration
|
Total variable
remuneration
|
|
£
|
£
|
£
|
£
|
£
|
Julia Henderson
|
26,462
|
525
|
26,987
|
26,462
|
-
|
Brian Scouler
|
28,579
|
-
|
28,579
|
28,579
|
-
|
Fiona Wollocombe
|
30,697
|
-
|
30,697
|
30,697
|
-
|
|
85,738
|
525
|
86,263
|
85,738
|
-
|
|
Year ended 31 January
2023
(audited)
|
|
Fees
|
Taxable
benefits†
|
Total
|
Total Fixed
remuneration
|
Total variable
remuneration
|
|
£
|
£
|
£
|
£
|
£
|
Peter Lawrence*
|
10,130
|
531
|
10,661
|
10,130
|
-
|
Julia Henderson
|
24,500
|
303
|
24,803
|
24,500
|
-
|
Susannah Nicklin**
|
15,333
|
363
|
15,696
|
15,333
|
-
|
Brian Scouler
|
26,000
|
-
|
26,000
|
26,000
|
-
|
Fiona Wollocombe
|
27,019
|
-
|
27,019
|
27,019
|
-
|
|
102,982
|
1,197
|
104,179
|
102,982
|
-
|
† Reimbursement of travel
expenses
* retired at the end of the AGM on
16 June 2022
** resigned on 19 September
2022
Directors are remunerated
exclusively by fixed fees and do not receive bonuses, share
options, long-term incentives, pension or other benefits. There
have been no payments to past Directors during the financial year
ended 31 January 2024, whether for loss of office or
otherwise.
Directors' shareholdings (Audited)
The Directors who held office at 31
January 2024 and their interests in the shares of the Company
(including beneficial and family interests) were:
|
31 January
2024
|
31
January 2023
|
|
Shares held
|
% of issued
share
capital
|
Shares
held
|
% of
issued
share
capital
|
Julia Henderson
|
22,376
|
0.01
|
22,376
|
0.01
|
Brian Scouler
|
69,341
|
0.05
|
63,806
|
0.04
|
Fiona Wollocombe
|
19,763
|
0.01
|
19,763
|
0.01
|
The Company confirms that it has not
set out any formal requirements or guidelines for a Director to own
shares in the Company.
On behalf of the Board
Julia Henderson
Chairman of the Remuneration
Committee
11 April 2024
Statement of Directors'
Responsibilities
The Directors are responsible for
preparing the annual report and the financial statements in
accordance with UK Financial Reporting Standards and applicable law
and regulations.
Company law requires the Directors
to prepare financial statements for each financial year. Under that
law the Directors are required to prepare the company's financial
statements and have elected to prepare the company financial
statements in accordance with UK Financial Reporting Standards.
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 period.
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 UK Financial Reporting 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 group
and the company will continue in business;
·
prepare a directors' report, a strategic 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.
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 group's 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. 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 have been prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit 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 it faces.
On behalf of the Board
Fiona Wollocombe
Chairman
11 April 2024
Income Statement
for the year ended 31 January
2024
|
Note
|
2024
Revenue
£'000
|
2024
Capital
£'000
|
2024
Total
£'000
|
2023
Revenue
£'000
|
2023
Capital
£'000
|
2023
Total
£'000
|
Loss on investments
|
8
|
-
|
(44,781)
|
(44,781)
|
-
|
(55,748)
|
(55,748)
|
Gain on current asset
investments
|
|
-
|
55
|
55
|
-
|
-
|
-
|
Foreign exchange losses
|
|
-
|
(32)
|
(32)
|
-
|
-
|
-
|
Investment Income
|
2
|
3,196
|
-
|
3,196
|
1,810
|
-
|
1,810
|
Management fee
|
3
|
(676)
|
(2,029)
|
(2,705)
|
(930)
|
(2,788)
|
(3,718)
|
Other expenses
|
4
|
(537)
|
(13)
|
(550)
|
(588)
|
-
|
(588)
|
Profit/(loss) on ordinary activities
before taxation
|
|
1,983
|
(46,800)
|
(44,817)
|
292
|
(58,536)
|
(58,244)
|
Taxation on ordinary
activities
|
5
|
-
|
-
|
-
|
-
|
-
|
-
|
Profit/(loss) and total
comprehensive income attributable to
shareholders
|
|
1,983
|
(46,800)
|
(44,817)
|
292
|
(58,536)
|
(58,244)
|
Basic and diluted earnings/(loss) per ordinary
share
|
7
|
1.31p
|
(31.02)p
|
(29.71)p
|
0.19p
|
(38.99)p
|
(38.80)p
|
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 ('AIC SORP'). 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 below form part of these
financial statements.
Statement of Changes in Equity
for the year ended 31 January
2024
|
Non-distributable reserves
|
Distributable reserves
|
|
Share
capital
£'000
|
Share
premium
£'000
|
Merger
reserve
£'000
|
Capital
redemption
reserve
£'000
|
Capital
reserve
(non-
distributable)
£'000
|
Special
reserve
£'000
|
Capital
reserve
(distributable)
£'000
|
Revenue
reserve
£'000
|
Total
reserves
£'000
|
Opening balance as at 1 February
2023
|
7,578
|
940
|
425
|
908
|
12,918
|
177,385
|
3,108
|
(1,981)
|
201,281
|
(Loss)/profit and total comprehensive
income for the year
|
-
|
-
|
-
|
-
|
(37,561)
|
|
(9,239)
|
1,983
|
(44,817)
|
Contributions by and distributions to
shareholders:
|
Repurchase of shares
|
(142)
|
|
|
142
|
|
(2,896)
|
|
|
(2,896)
|
Shares issued
|
117
|
2,251
|
|
|
|
|
|
|
2,368
|
Costs of share issues
|
-
|
(54)
|
-
|
-
|
-
|
|
|
|
(54)
|
Dividends paid
|
-
|
-
|
-
|
-
|
-
|
12,804
|
|
|
(12,804)
|
Closing balance as at 31 January 2024
|
7,553
|
3,137
|
425
|
1,050
|
(24,643)
|
161,685
|
(6,131)
|
2
|
143,078
|
|
for the year ended 31 January
2023
|
|
|
|
|
|
Opening balance as at 1 February
2022
|
6,836
|
109,545
|
425
|
819
|
80,666
|
57,160
|
(6,104)
|
(2,273)
|
247,074
|
(Loss)/profit and total
comprehensive income for the year
|
-
|
-
|
-
|
-
|
(67,748)
|
-
|
9,212
|
292
|
(58,244)
|
Contributions by and distributions to
shareholders:
|
Repurchase of shares
|
(89)
|
-
|
-
|
89
|
-
|
(2,451)
|
-
|
-
|
(2,451)
|
Shares issued
|
831
|
26,351
|
-
|
-
|
-
|
-
|
-
|
-
|
27,182
|
Costs of share issues
|
-
|
(132)
|
-
|
-
|
-
|
-
|
-
|
-
|
(132)
|
Dividends paid
|
-
|
-
|
-
|
-
|
-
|
(12,110)
|
-
|
-
|
(12,110)
|
Cancellation of share
premium*
|
-
|
(134,824)
|
-
|
-
|
-
|
134,824
|
-
|
-
|
-
|
Expenses in relation to
cancellation
of share premium account
|
-
|
-
|
-
|
-
|
-
|
(38)
|
-
|
-
|
(38)
|
Closing balance as at 31 January 2023
|
7,578
|
940
|
425
|
908
|
12,918
|
177,385
|
3,108
|
(1,981)
|
201,281
|
*Following Court approval and the
subsequent registration of the Court order with the Registrar of
Companies on 14 September 2022, the cancellation of the Company's
share premium account became effective and an amount of
£134,824,000 was transferred from the Share Premium account to the
Special Reserve. The Special Reserve is available for distribution
as determined in accordance with the Companies Act 2006 and HMRC
rules specific to venture capital trusts.
The accompanying notes below are an
integral part of these financial statements.
Balance Sheet
as at 31 January 2024
|
Notes
|
2024
£'000
|
2023
£'000
|
Fixed assets
|
|
|
|
Investments held at fair
value
|
8
|
98,220
|
142,354
|
|
|
|
|
Current assets
|
|
|
|
Debtors
|
9
|
261
|
329
|
Money market funds
|
9
|
30,547
|
-
|
Cash at bank
|
10
|
15,003
|
59,595
|
|
|
45,811
|
59,924
|
|
|
|
|
Current liabilities
|
|
|
|
Creditors: amounts falling due within
one year
|
11
|
(953)
|
(997)
|
|
|
(953)
|
(997)
|
|
|
|
|
Net current assets
|
|
44,858
|
58,927
|
Total assets less current
liabilities
|
|
143,078
|
201,281
|
|
|
|
|
Capital and reserves
|
|
|
|
Called-up share capital*
|
12
|
7,553
|
7,578
|
Share premium account*
|
|
3,137
|
940
|
Merger reserve*
|
|
425
|
425
|
Capital redemption
reserve*
|
|
1,050
|
908
|
Capital reserve
(non-distributable)*
|
|
(24,643)
|
12,918
|
Special reserve
|
|
161,685
|
177,385
|
Capital reserve
(distributable)
|
|
(6,131)
|
3,108
|
Revenue reserve
|
|
2
|
(1,981)
|
|
|
|
|
Equity shareholders' funds
|
|
143,078
|
201,281
|
|
|
|
|
Net
asset value per share
|
13
|
94.7p
|
132.8p
|
* These reserves are not
distributable.
The financial statements above and
below were approved and authorised for issue by the Board of
Directors on 11 April 2024 and were signed on its behalf
by
Fiona Wollocombe
Chairman
Company Number 04138683
The accompanying notes below are an
integral part of these financial statements.
Statement of Cash Flows
for the year ended 31 January
2024
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
Cash flows from operating activities
|
|
|
|
Investment income
received
|
|
2,204
|
1,299
|
Investment management fees
paid
|
|
(2,957)
|
(3,910)
|
Transaction costs
|
|
(13)
|
-
|
Other operating costs
|
|
(559)
|
(572)
|
Net cash outflow from operating
activities
|
|
(1,325)
|
(3,183)
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Purchase of investments
|
|
(13,276)
|
(12,422)
|
Sale of investments
|
|
12,887
|
31,166
|
Purchase of current
assets
|
|
(69,952)
|
-
|
Disposal of current
assets
|
|
40,229
|
-
|
Net cash (outflow)/inflow from
investing activities
|
|
(30,112)
|
18,744
|
Net cash (outflow)/inflow before
financing activities
|
|
(31,437)
|
15,561
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Proceeds of share issues*
|
|
-
|
24,931
|
Issue costs
|
|
(35)
|
(132)
|
Share buy-backs
|
|
(2,684)
|
(2,701)
|
Equity dividends paid
|
|
(10,436)
|
(9,859)
|
Costs of share premium
cancellation
|
|
-
|
(38)
|
Net
cash (outflow)/inflow from financing activities
|
|
(13,155)
|
12,201
|
|
|
|
|
(Decrease)/increase in cash
|
|
(44,592)
|
27,762
|
|
|
|
|
Opening cash & cash
equivalents
|
|
59,595
|
31,833
|
|
|
|
|
Closing cash & cash equivalents
|
|
15,003
|
59,595
|
|
|
|
|
Reconciliation of Loss on Ordinary Activities Before Taxation
to Net Cash Outflow from Operating Activities
|
|
|
|
Loss on ordinary activities before
taxation
|
|
(44,817)
|
(58,244)
|
Loss on investments
|
|
44,781
|
55,748
|
Gain on current assets
|
|
(55)
|
-
|
Foreign exchange loss on currency
balances
|
|
32
|
-
|
Less dividends reinvested
|
|
(1,059)
|
(223)
|
Decrease in creditors
|
|
(275)
|
(188)
|
Increase/(decrease) in
debtors
|
|
68
|
(276)
|
|
|
|
|
Net
cash outflow from operating activities
|
|
(1,325)
|
(3,183)
|
*Adjusted to exclude non-cash
dividends re-invested under the Dividend Re-investment
Scheme.
The accompanying notes below are an
integral part of these financial statements.
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 AIC
SORP.
Basis of Preparation
The functional currency of the
Company is Pounds Sterling because this is the currency of the
primary economic environment in which the Company operates. The
financial statements are presented in Pounds Sterling rounded to
the nearest thousand, except where otherwise indicated.
Going Concern
The financial statements have been
prepared on a going concern basis and on the basis that the Company
maintains its VCT Status.
The Directors have made an
assessment of the Company's ability to continue as a going concern
and are satisfied that the Company has adequate resources to
continue in operational existence for a period of 12 months from
the date these financial statements were approved.
In making this assessment, the
Directors have considered in particular the likely impacts of
international and economic uncertainties on the Company, operations
and investment portfolio.
The Directors noted that the
Company, with the current cash balance and holding a portfolio of
liquid listed investments, is able to meet the obligations of the
Company as they fall due. The cash available enables the Company to
meet any funding requirements and finance future additional
investments. The Company is a closed-end fund, where assets are not
required to be liquidated to meet day-to-day
redemptions.
The Directors have reviewed stress
testing and scenario analysis prepared by the Investment Manager to
assist them in assessing the impact of changes in market value and
income with associated cash flows. In making this assessment, the
Investment Manager has considered plausible downside scenarios.
These tests included the modelling of a reduction in income of 50%,
increase in costs of 50% and a reduction in net asset value of 50%,
any or all of which could apply to any set of circumstances in
which asset value and income are significantly impaired. It was
concluded that in a plausible downside scenario, the Company could
continue to meet its liabilities. Whilst the economic future is
uncertain, and the Directors believe that it is possible the
Company could experience further reductions in income and/or market
value, the opinion of the Directors is that this should not be to a
level which would threaten the Company's ability to continue as a
going concern.
The Directors, the Investment
Manager and the Company's other service providers have put in place
contingency plans to minimise disruption. The Board was satisfied
that there has been minimal impact to the services provided during
the year and is confident that this will continue. Furthermore, the
Directors are not aware of any material uncertainties that may cast
significant doubt on the Company's ability to continue as a going
concern, having taken into account the liquidity of the Company's
investment portfolio and the Company's financial position in
respect of its cash flows, borrowing facilities and investment
commitments (of which there are none of significance). Therefore,
the financial statements have been prepared on the going concern
basis.
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, estimates and
assumptions that affect the application of policies and reported
amounts in the financial statements. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgements about
carrying values of assets and liabilities and the allocation of
income and expenses that are not apparent from other sources. 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 unquoted
investments at fair value through profit or loss. The policies for
these are set out in the notes to the financial statements below.
The Company values unquoted investments by following the
International Private Equity Venture Capital Valuation ("IPEV")
guidelines. Further areas requiring judgement and estimation are
recognising and classifying unusual or special dividends received
as either capital or revenue in nature. The estimates and
underlying assumptions are reviewed on an ongoing basis. There are
no further significant judgements or estimates in these financial
statements.
Income
Dividends receivable on quoted
equity shares are taken to revenue on an ex-dividend basis except
where, in the opinion of the Directors, their nature indicates they
should be recognised in the Capital Account. Where no ex-dividend
date is quoted, dividends are brought into account 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,
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.
All other income is accounted for on
a time-apportioned accrual basis and is recognised in the Income
Statement.
Costs in relation to the purchase or
sale of investments are recognised as a capital expense.
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.
Transaction costs in relation to the
purchase and sale of investments are allocated to capital. Prior to
1 February 2023 these were included within the cost and/or disposal
of investment.
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
In accordance with FRS 102, Sections
11 and 12, all investments held by the Company are designated as
held at fair value upon initial recognition and are measured at
fair value through profit or loss in subsequent accounting periods.
Investments are initially recognised at cost, being the fair value
of the consideration given. After initial recognition, investments
are measured at fair value, with changes in the fair value of
investments recognised in the Income Statement and allocated to
capital. Realised gains and losses on investments sold are
calculated as the difference between sales proceeds and cost. Until
31 January 2023, included within this heading were transaction
costs in relation to the purchase and sale of investments. However,
from 1 February 2023 transaction costs in relation to the purchase
or sale of investments have been recognised as a capital
expense.
In respect of investments that are
traded on AIM or are fully listed, these are 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 the last traded price as this is considered to be a more
accurate indication of fair value.
Fair values for unquoted
investments, or for investments for which the market is inactive,
are established by using various valuation techniques in accordance
with IPEV guidelines. These are constantly monitored for value and
impairment. The fair values are approved by the Board. The shares
may be valued by using the most appropriate methodology recommended
by the IPEV guidelines, including revenue multiples, net assets,
discounted cashflows and industry valuation benchmarks.
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 WS Amati UK Listed Smaller Companies Fund is based on
the published share price. The valuation is provided by the
Authorised Corporate Director of the fund, Waystone Fund Managers
Limited.
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. Any gain or loss arising from a change
in exchange rate subsequent to the date of the transaction is
included as an exchange gain or loss in the capital reserve or the
revenue account depending on whether the gain or loss is of a
capital or revenue nature.
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.
All financial instruments are designated upon initial recognition
as held at fair value through profit or loss, and are measured at
subsequent reporting dates at fair value, 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 at Bank
For the purposes of the Balance
Sheet, cash comprises cash in hand and demand deposits.
Demand deposits are short term
deposits with deposit taking banks readily realisable at the
Company's discretion.
For the purposes of the Statement of
Cash Flows, cash consist of cash at bank and demand deposits as
defined above, net of outstanding bank overdrafts when
applicable.
Current Asset Investments
Current asset investments comprise
of investments in money market funds and are designated as Fair
Value through Profit or Loss. Gains and losses arising from changes
in fair value of current investments are recognised as part of the
capital return within the income statement and allocated to the
capital reserve.
The current asset investments are
readily convertible into cash at the choice of the Company within
seven days. The money market funds are used to enhance returns on
surplus cash awaiting investment. These are actively managed and
the performance evaluated by the Investment Manager.
Debtors
Trade receivables, prepayments and
other debtors are measured at amortised cost or estimated fair
value, with balances revalued for exchange rate movements. Any
losses arising from impairment are recognised in the income
statement in other operating expenses upon notification.
Creditors
Trade payables and accruals are
measured at amortised cost and revalued for exchange rate
movements.
Dividends Payable
Final dividends are included in the
financial statements when they are approved by shareholders.
Interim dividends payable are included in the financial statements
on the date on which they are paid.
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
represents non-distributable reserves that arise from the purchase
and cancellation of shares.
Special Reserve
The special reserve was created by
the cancellation of the share premium account by order of the Court
and forms part of the distributable reserves. Distributions may be
restricted as determined in accordance with the Companies Act 2006
and HMRC rules specific to venture capital trusts. The following
items are taken to this reserve:
• costs of
share buybacks; and
• dividends
payable to shareholders.
Capital Reserve
The following are taken to the
capital reserve through the capital column in the Income
Statement:
Capital reserve - other, forming
part of the distributable reserves:
·
gains and losses on the disposal of current
investments;
·
realised exchange gains and losses of a capital
nature;
·
expenses allocated to this reserve in accordance
with the above policies; and
·
capital expenses.
Capital reserve - investment holding gains, not
distributable:
·
increase and decrease in the value of investments
held at the year end; and
·
unrealised exchange gains of a capital
nature.
Revenue Reserve
The revenue reserve represents
accumulated profits and losses and any surplus profit is
distributable by way of dividends.
2
Income
|
Year to
31 January
2024
£'000
|
Year
to
31
January
2023
£'000
|
Dividends from UK
companies
|
835
|
843
|
Dividends from money market
funds
|
1,372
|
-
|
UK loan stock interest
|
253
|
447
|
Interest from deposits
|
736
|
519
|
Other income
|
-
|
1
|
|
3,196
|
1,810
|
3
Management Fees
The Manager provides investment
management and fund accounting and administration services to the
Company under an Investment Management Agreement ("IMA") and a Fund
Administration, Secretarial and Fund Accounting Agreement
("FASSFAA"). Details of these agreements are given
above.
Under the IMA the Manager receives
an investment management fee of 1.75% of the net asset value of the
Company quarterly in arrears.
The Company received a rebate of its
management fee for the investment in the WS Amati UK Listed Smaller
Companies Fund.
The investment management fee for
the year was as follows:
|
Year to
31 January
2024
£'000
|
Year
to
31
January
2023
£'000
|
Due to the Manager by the Company at
1 February
|
857
|
1,049
|
Investment management fee charged to
revenue and capital for the year
|
2,705
|
3,718
|
Fees paid to the Manager during the
year
|
(2,957)
|
(3,910)
|
Due to the Manager by the Company at
31 January
|
605
|
857
|
In addition to the investment
management fee the Manager also received a fund accounting and
administration fee of £78,000 (2023: £72,000) paid quarterly in
arrears. See note 4.
No performance fee is payable in
respect of the year ended 31 January 2024, 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
average net assets over the period, 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). Annual running
costs as a percentage of net assets are 1.8%.
There was no excess of expenses for
the year ended 31 January 2024 nor for the prior year.
4 Other
Expenses
|
Year to
31 January
2024
£'000
|
Year
to
31
January
2023
£'000
|
Income:
|
|
|
Directors' remuneration
|
86
|
103
|
Directors' employer's national
insurance
|
3
|
9
|
Directors' expenses
|
1
|
2
|
Auditor's remuneration - audit of
statutory financial statements
|
50
|
45
|
Administration fee
|
78
|
71
|
Company secretarial
services
|
55
|
48
|
Other expenses
|
264
|
310
|
Total income expenses
|
537
|
588
|
Capital:
|
|
|
Transaction costs on investment
transactions charged to capital
|
13
|
-
|
Total
|
550
|
588
|
The Company has no employees. The
Directors are therefore the only key management
personnel.
Details of Directors' remuneration
are provided in the audited section of the directors' remuneration
report on page 44 of the full Annual Report and
Accounts.
5
Tax on Ordinary Activities
5a Analysis of
charge for the year
|
Year to
31 January
2024
£'000
|
Year
to
31
January
2023
£'000
|
Charge for the year
|
-
|
-
|
5b Factors affecting the
tax charge for the year
|
Year to
31 January
2024
£'000
|
Year
to
31
January
2023
£'000
|
Loss on ordinary activities before
taxation
|
(44,817)
|
(58,244)
|
Corporation tax at standard rate of
24.03% (2023: 19.00%)
|
(10,770)
|
(11,066)
|
Effect of:
|
|
|
Non-taxable dividends
|
(201)
|
(160)
|
Non-taxable losses on
investments
|
10,748
|
10,592
|
Movement in excess management
expenses
|
212
|
634
|
Non-deductible expenses
|
11
|
-
|
Tax charge for the year (note
5a)
|
-
|
-
|
Due to the Company's tax status as
an approved Venture Capital Trust, deferred tax has not been
provided on any capital gains arising on the disposal or valuation
of investments as such gains are not taxable. We remain of the view
that the provisions of CTA 2009 sections 396 and 641 apply to treat
any gains/losses on loan instruments as taxable under the
chargeable gains provisions in TCGA 1992 and further exempt the VCT
from tax under the provisions in s100.
No deferred tax asset has been
recognised on surplus management expenses carried forward as it is
not envisaged that future taxable profits will be available against
which the Company can use the benefits. The amount of unrecognised
deferred tax asset is £7,047,000 (31 January 2023: £6,827,000)
based on a corporate tax rate of 25%.
6
Dividends
Amounts recognised as distributions
to equity holders during the year:
|
2024
Revenue
£'000
|
2024
Capital
£'000
|
2023
Revenue
£'000
|
2023
Capital
£'000
|
Final dividend for the year ended 31
January 2023 of 3.50p per ordinary share paid on 21 July
2023
|
-
|
5,275
|
-
|
-
|
Interim dividend for the year ended
31 January 2024 of 2.50p per ordinary share paid on 24 November
2023
|
-
|
3,761
|
-
|
-
|
Second interim dividend for the year
ended 31 January 2024 of 2.50p per ordinary share paid on12 January
2024
|
-
|
3,768
|
-
|
-
|
Final dividend for the year ended 31
January 2022 of 4.50p per ordinary share paid on 22 July
2022
|
-
|
-
|
-
|
6,803
|
Interim dividend for the year ended
31 January 2023 of 3.50p per ordinary share paid on 25 November
2022
|
-
|
-
|
-
|
5,307
|
|
-
|
12,804
|
-
|
12,110
|
Set out below are the interim and
final dividends paid or proposed on ordinary shares in respect of
the financial year:
|
2024
Revenue
£'000
|
2024
Capital
£'000
|
2023
Revenue
£'000
|
2023
Capital
£'000
|
Interim dividend for the year ended
31 January 2024 of 2.50p per ordinary share (2023:
3.50p)
|
-
|
3,761
|
-
|
5,307
|
Second interim dividend for the year
ended 31 January 2024 of 2.50p per ordinary share (2023:
0.00p)
|
-
|
3,768
|
-
|
-
|
Final dividend declared for the year
ended 31 January 2023 of 3.50p per ordinary share
|
-
|
-
|
-
|
5,287
|
|
-
|
7,529
|
-
|
10,594
|
7
Earnings per
Share
|
2024
|
2023
|
|
Net profit/
(loss)
£'000
|
Weighted
average
shares
|
Basic and
diluted
Earnings
per share
pence
|
Net
profit/ (loss)
£'000
|
Weighted
average
shares
|
Basic
and
diluted
Earnings
per
share
pence
|
Revenue
|
1,983
|
-
|
1.31
|
292
|
|
0.19
|
Capital
|
(46,800)
|
-
|
(31.02)
|
(58,536)
|
|
(38.99)
|
Total
|
(44,817)
|
150,837,712
|
(29.71)
|
(58,244)
|
150,110,568
|
(38.80)
|
8
Investment
|
Level
1*
|
Level
2*
|
Level
3*
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Opening cost as at 1 February
2023
|
120,593
|
-
|
9,071
|
129,664
|
Opening investment holding
gains/(losses)
|
17,246
|
-
|
(4,328)
|
12,918
|
Opening unrealised loss recognised in
realised reserve
|
(228)
|
-
|
-
|
(228)
|
Opening fair value as at 1 February
2023
|
137,611
|
-
|
4,743
|
142,354
|
Analysis of transactions during the
year:
|
|
|
|
|
Purchases at cost*
|
11,051
|
-
|
2,500
|
13,551
|
Transfer to Level 1
|
4
|
-
|
(4)
|
-
|
Disposals- proceeds
received
|
(12,904)
|
-
|
-
|
(12,904)
|
- realised loss on
disposals
|
(8,927)
|
-
|
-
|
(8,927)
|
(Decrease) in investment holding
gains during the year
|
(34,925)
|
-
|
(929)
|
(35,854)
|
Closing fair value as at 31 January
2024
|
91,910
|
-
|
6,310
|
98,220
|
Closing cost as at 31 January
2024
|
111,689
|
-
|
11,542
|
123,231
|
Closing investment holding
gains/(losses) as at 31 January 2024
|
(19,551)
|
-
|
(5,232)
|
(24,783)
|
Closing unrealised loss recognised in
realised reserve as at 31 January 2024
|
(228)
|
-
|
-
|
(228)
|
Closing fair value as at 31 January
2024
|
91,910
|
-
|
6,310
|
98,220
|
Equity shares
|
91,910
|
-
|
2,151
|
94,061
|
Convertible loan notes
|
-
|
-
|
4,159
|
4,159
|
Closing fair value as at 31 January
2024
|
91,910
|
-
|
6,310
|
98,220
|
Holdings of ordinary shares in
unquoted companies rank pari passu for voting purposes.
The Company received £12,904,000
(2023: £29,247,000) from the sale of investments in the year. The
book cost of these investments when they were purchased was
£21,831,000 (2023: £18,509,000). These investments have been
revalued over time and until they were sold any unrealised
gains/(losses) were included in the fair value of the
investments.
|
2024
£'000
|
2023
£'000
|
Realised losses on
disposal
|
(8,927)
|
(4,156)
|
Unrealised losses on investments
during the year
|
(35,854)
|
(51,592)
|
Net losses on investments
|
(44,781)
|
(55,748)
|
Transaction Costs
During the year the Company incurred
transaction costs of £nil (31 January 2023: £nil) and £13,000 (31
January 2023: £14,000) on purchases and sales of investments
respectively. These amounts are included in capital expenses;
(2023: included in investment gains on investments) as disclosed in
the Income Statement.
9
Current assets: Debtors and money market funds
|
2024
£'000
|
2023
£'000
|
Prepayments and accrued
income
|
261
|
329
|
Money market funds
|
30,547
|
-
|
|
30,808
|
329
|
10
Cash at bank
|
2024
£'000
|
2023
£'000
|
Cash at bank
|
3,003
|
59,595
|
Cash on deposit
|
12,000
|
-
|
|
15,003
|
59,595
|
11 Creditors:
Amounts Falling due within One Year
|
2024
£'000
|
2023
£'000
|
Payable for share
buybacks
|
212
|
-
|
Fundraising costs
|
19
|
-
|
Accruals and other
payables
|
722
|
997
|
|
953
|
997
|
The Company at 31 January 2024 had
commitments of £1,000,000 to invest in qualifying holdings (2023:
nil).
12 Share
Capital
|
2024
|
2024
|
2023
|
2023
|
Ordinary shares (5p
shares)
|
Number
|
£'000*
|
Number
|
£'000*
|
Allotted, issued and fully paid at 1
February
|
151,548,993
|
7,578
|
136,720,797
|
6,836
|
Issued during the year
|
2,351,086
|
117
|
16,617,329
|
831
|
Repurchase of own shares for
cancellation
|
(2,830,255)
|
(142)
|
(1,789,133)
|
(89)
|
At 31 January
|
151,069,824
|
7,553
|
151,548,993
|
7,578
|
* nominal value
During the year a total of 2,830,255
ordinary shares of 5p each were purchased by the Company at an
average price of 101.8p per share.
Further details of the Company's
share capital and associated rights are shown in the Directors'
Report on page 33 of the full Annual Report and
Accounts.
13 Net Asset Value
per Ordinary Share
|
2024
|
2023
|
|
Net
assets
£'000
|
Ordinary
shares
|
NAV
per
share
pence
|
Net
assets
£'000
|
Ordinary
shares
|
NAV
per
share
pence
|
Ordinary share
|
143,078
|
151,069,824
|
94.7
|
201,281
|
151,548,993
|
132.8
|
14 Significant
Interests
The Company has the following
significant interests (amounting to an investment of 3% or more of
the equity capital of an undertaking):
|
%
held
|
Northcoders Group plc
|
13.8
|
Getech Group plc
|
11.5
|
Velocity Composites plc
|
10.6
|
Fadel Partners, Inc
|
10.3
|
Ixico plc
|
10.1
|
Tan Delta Systems plc
|
9.8
|
Aurrigo International plc
|
9.8
|
One Media iP Group plc
|
8.0
|
Hardide plc
|
7.7
|
Cordel Group plc
|
7.6
|
Zenova Group plc
|
7.2
|
Block Energy plc
|
7.1
|
Intelligent Ultrasound
plc
|
6.7
|
Ensilica plc
|
6.0
|
Itaconix plc
|
5.8
|
Fusion Antibodies plc
|
5.6
|
Byotrol plc
|
5.5
|
Sosander plc
|
5.0
|
Water Intelligence plc
|
4.7
|
Polarean Imaging plc
|
4.6
|
Rosslyn Data Technologies
plc
|
4.0
|
Saietta Group plc
|
3.7
|
Kinovo plc
|
3.4
|
Eden Research plc
|
3.1
|
Strip Tinning Holdings
plc
|
3.1
|
15 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,
money market funds, or companies to be traded on AIM.
Classification of financial instruments
The Company held the following
categories of financial instruments at 31 January:
|
2024
£'000
|
2023
£'000
|
Assets at fair value through profit
or loss:
|
|
|
Investments
|
98,220
|
142,354
|
Money market funds
|
30,547
|
-
|
Cash at bank and demand
deposits
|
15,003
|
59,595
|
Creditors (amounts due within one
year) measured at amortised cost:
|
|
|
Payable for share repurchases
outstanding
|
(212)
|
-
|
Accrued expenses and other
payables
|
(741)
|
(997)
|
Total for financial
instruments
|
142,817
|
200,952
|
The investments are measured at fair
value through profit or loss. 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, currency 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.
The Company measures fair values
using the following fair value hierarchy into which the fair value
measurements are categorised. A fair value measurement is
categorised in its entirety on the basis of the lowest level input
that is significant to the fair value measurement of the relevant
asset as follows:
Level 1 - the unadjusted quoted
price in an active market for identical assets or liabilities that
the entity can access at the measurement date.
Level 2 - inputs other than
quoted prices included within Level 1 that are observable (i.e.
developed using market data) for the asset or liability, either
directly or indirectly.
The Company's level 2 assets are
valued using models with significant observable market
parameters.
Level 3 - inputs are
unobservable (i.e. for which market data is unavailable) for the
asset or liability.
Level 3 fair values are measured
using a valuation technique that is based on data from an
unobservable market. Discussions are held with management,
statutory accounts, management accounts and cashflow forecasts are
obtained, and fair value is based on multiples of
revenue.
The table below sets out the fair
value measurement of financial instruments as at the year end, by
the level in the fair value hierarchy into which the fair value
measurement is categorised:
Financial assets at fair value
|
Year
ended 31 January 2024
|
Year
ended 31 January 2023
|
|
Level
1
£'000
|
Level
2
£'000
|
Level
3
£'000
|
Total
£'000
|
Level
1
£'000
|
Level
2
£'000
|
Level
3
£'000
|
Total
£'000
|
Equity shares
|
91,910
|
-
|
2,151
|
94,061
|
137,611
|
-
|
166
|
137,777
|
Convertible loan notes
|
-
|
-
|
4,159
|
4,159
|
-
|
-
|
4,577
|
4,577
|
Money
market funds
|
30,547
|
-
|
-
|
30,547
|
-
|
-
|
-
|
-
|
|
122,457
|
-
|
6,310
|
128,767
|
137,611
|
-
|
4,743
|
142,354
|
The fair value of investments are
derived as follows:
For quoted securities this is the
bid price or, in the case of SETS securities, the last traded
price. The Company's Level 1 investments are AIM traded companies
and fully listed companies. Investments in WS Amati UK Listed
Smaller Companies Fund are based on the published fund mid-price
NAV.
Unquoted investments are valued by
the Directors using rules consistent with IPEV guidelines. Where
there is no observable input the investments are designated as
Level 3 and the fair values determined as follows:
Equity shares are valued by using
revenue multiples, net assets, discounted cashflows and industry
valuation benchmarks. These multiples are derived from a basket of
comparable quoted companies, with appropriate discounts applied.
These discounts are subjective, based on the Manager's experience
and assessment of disclosures made by the underlying investee
company.
Convertible Loan Notes (CLNs) are
fair valued using the present value of future cashflows using
appropriate discount rates, benchmarking and assessing market
transactions of a similar CLN's. Further to this the fair value and
interest accrued of the CLN's will be referenced to the assessment
of disclosures made by the underlying investee company, (for
example management accounts and forecasts), the terms of the
agreement and referenced to the underlying assets held by the
investee company. The inputs and information utilised in
determining the fair value are subjective and based upon the
Manager's experience. The fair values are reviewed by the Directors
using rules consistent with IPEV guidelines. The details of the
CLNs' fair value and interest are noted in the Investment Portfolio
above.
Money market funds are fair valued
at the latest published price.
The transfer to level 1 from level 3
is a security suspended recommenced trading.
Details of movements in Level 3
financial assets are set out below:
Level 3 financial assets at fair value
|
Year
ended 31 January 2024
|
Year
ended 31 January 2023
|
|
Equity
|
Preference
|
Loan
|
|
|
Equity
|
Preference
|
|
Loan
|
|
|
shares
|
shares
|
Stock
|
Total
|
|
shares
|
shares
|
CVR
|
Stock
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
£'000
|
£'000
|
£'000
|
£000
|
£'000
|
Opening balance at 1
February
|
166
|
-
|
4,577
|
4,743
|
|
501
|
-
|
711
|
4,500
|
5,712
|
Transfer (to)/from
Level 1
|
(4)
|
-
|
-
|
(4)
|
|
67
|
-
|
-
|
-
|
67
|
Purchases at cost
|
2,000
|
-
|
500
|
2,500
|
|
301
|
-
|
-
|
3,049
|
3,350
|
Disposal proceeds
|
-
|
-
|
-
|
-
|
|
-
|
-
|
(119)
|
-
|
(119)
|
Total net losses recognised in the
income statement
|
(11)
|
-
|
(918)
|
(929)
|
|
(703)
|
-
|
(592)
|
(2,972)
|
(4,267)
|
Closing balance at 31 January
|
2,151
|
-
|
4,159
|
6,310
|
|
166
|
-
|
-
|
4,577
|
4,743
|
16
Risks
The identified risks arising from
the financial instruments are market risk (which comprises market
price risk and foreign currency risk), liquidity risk and credit
and counterparty risk.
The Board and Investment Manager
consider and review the risks inherent in managing the Company's
assets which are detailed below.
17
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 by the way of price movements, interest rate movements,
exchange rate movements and systematic risk
(risk inherent to the market,
reflecting economic and geopolitical factors).
The Company's strategy on the
management of market risk is driven by the Company's investment
objective as outlined above. 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 regularly monitored by the Board and
at quarterly Board meetings.
Market price risk
Market price risk arises from any
fluctuations in the valuation of investments held by the Company.
Adherence to investment policies mitigates the risk of excessive
exposure to any particular type of security or issuer. The
portfolio is managed with an awareness of the effects of adverse
price movements through detailed and continuing analysis with the
objective of maximising overall returns to shareholders.
The assessment of market risk is
based on the Company's portfolio as held at the year end. The
assessment uses the AIM All-Share Index as a proxy for the AIM
Qualifying Investments and quoted Non-Qualifying Investments and
illustrates, based on historical price movements, their potential
change in value to the AIM All-Share Index.
The review has also examined the
potential impact of a movement in the market on the CLN investments
held by the Company, whose values will vary according to the value
of the underlying security into which the loan note instrument has
the option to convert.
Investments of £91,910,000 as at 31
January 2024 are traded (31 January 2023: £ 137,611,000). A 30%
decrease in stock prices as at 31 January 2024 would have decreased
the net assets attributable to the Company's shareholders and
increased the loss for the year by £27,573,000 (31 January 2023:
£41,283,000); an equal change in the opposite direction would have
increased the net assets attributable to the Company's shareholders
and reduced the loss for the year by an equal amount.
The money market funds as at 31
January 2024 £30,547,000 (31 January 2023: £nil) are not subject to
significant market volatility through predominantly holding cash
with regulated institutions.
As at 31 January 2024 4.9% (31
January 2023: 3.32%) of the Company's investments are in unquoted
companies held at fair value. A change in market and company
specific inputs that would result in a 30% decrease in the fair
value of unquoted investments at 31 January 2024 would have
decreased the net assets attributable to the Company's shareholders
and increased the loss for the year by £1,893,000 (31 January 2023:
£1,418,000); an equal change in the opposite direction would have
increased the net assets attributable to the Company's shareholders
and reduced the loss for the year by an equal amount.
Currency risk
The Company's performance is
measured in sterling, a proportion of the Company's assets may be
either denominated in other currencies or are in investments with
currency exposure. Any income denominated in a foreign currency is
converted into sterling upon receipt. At the Balance Sheet date,
the Company had no exposure to any foreign currency (31 January
2023: £3,366,000). The Company may have exposure through investee
companies.
A 5% rise or decline of Sterling
gains foreign currency (i.e. non Pounds Sterling) assets and
liabilities held at year end would have increased/decreased the net
asset value by £nil (2023: £168,000).
This exposure is representative at
the Balance Sheet date and may not be representative of the year as
a whole.
Interest Rate Risk
Interest rate movements may affect
the level of income receivable on cash deposits, any fixed interest
securities and money market funds. The Company held four fixed
interest investments of £4,159,000 (2023: £4,577,000), the weighted
average interest of the convertible loan interest is 6.08% (2023:
3.87%). The details of the convertible loan notes' terms of
agreement, fair value, interest chargeable and provisions are noted
in the Investment Portfolio above.
Changes in interest rates will
impact the fair value of the convertible loan notes due to the
changes in inputs changing the present value of future payments and
the benchmarking to similar convertible loan notes.
A change in market inputs, through
changes in interest rates, that would result in a 1% decrease in
the fair value of convertible loan notes at 31 January 2024 would
have decreased the net assets attributable to the Company's
shareholders and increased the loss for the year by £41,000 (31
January 2023: £46,000); an equal change in the
opposite direction would have
increased the net assets attributable to the Company's shareholders
and reduced the loss for the year by an equal amount, if the level
of holdings was maintained for a year. The convertible loan notes
are fixed interest.
The Company held a cash balance at
31 January 2024 of £15,003,000 (2023: £59,595,000). If the level of
cash was maintained for a year, a 1% increase in interest rates
would increase the revenue return and net assets by £150,000 (2023:
£596,000). Management proactively manages cash balances. If there
were a fall of 1% in interest rates, it would potentially reduce
revenue of the Company by £150,000 (2023: £596,000).
The Company held £30,547,000 at 31
January 2024 in three money market funds. If the level of holdings
was maintained for a year, a rise of interest rates of 1% would
increase revenue by £305,000 or a fall reduce revenue by
£305,000.
18 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 2024,
the financial assets exposed to credit risk, representing
convertible loan stock instruments, amounts due from brokers,
accrued income, money market funds and cash amounted to £49,970,000
(31 January 2023: £64,474,000).
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 The 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 2024, cash is held at
The Bank of New York Mellon (BNYM), in deposit accounts at two A+
rated banks, and in three money market funds for the purposes of
diversification and risk management. 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. The Board monitors the credit worthiness of BNYM, currently
rated at Aa1 (Moody's), and the banks in which deposits are
held.
There were no significant
concentrations of credit risk to counterparties at 31 January 2024
or 31 January 2023.
19 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 quickly
liquidate 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 above. The Company's overall liquidity risks are monitored
on a quarterly basis by the Board.
The Company has diversified the
holding of cash through the holding of deposits with A+ rated banks
and money market funds that are readily convertible to known
amounts of cash and which are subject to insignificant risk of
changes in value.
The Company maintains sufficient
investments in cash and readily realisable securities to pay
expenses and finance future additional investments. At 31 January
2024, these investments were valued at £45,958,000 (31 January
2023: £123,326,000). The Directors consider that frequently traded
AIM investments with a market capitalisation of greater than £200m
represent readily realisable securities. The Company is a
closed-end fund, assets do not need to be liquidated to meet
redemptions, and sufficient liquidity is maintained to meet
obligations as they fall due.
20 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 80% by value of its
investments in VCT qualifying holdings, which are relatively
high-risk UK smaller companies. In addition at least 30% of new
money 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. In satisfying these
requirements, 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 12 and details of the Company's
reserves are shown in the Statement of Changes in Equity
above.
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 £50,000;
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.
21 Post Balance
Sheet Events
The following transactions have
taken place between 31 January 2024 and the date of this
report:
1,507,233 shares bought
back
22 Related
Parties
The Company retains Amati Global
Investors as its Manager. Details of the agreement with the Manager
are set out above. The number of ordinary shares in the Company
(all of which are held beneficially) by certain members of the
management team are:
|
31
January
2024
shares
held
|
31
January
2024
% shares
held
|
31
January
2023
shares
held
|
31
January
2023
% shares
held
|
Paul Jourdan*
|
632,805
|
0.42%
|
596,806
|
0.39%
|
David Stevenson
|
26,753
|
0.02%
|
26,753
|
0.03%
|
* includes 26,931 shares held by a
Person Closely Associated to Paul Jourdan
The remuneration of the Directors,
who are key management personnel of the Company, is disclosed in
the Directors' Remuneration Report on page 44 of the full Annual Report and Accounts, and in note 4 above.
Corporate Information
Directors
Fiona Wollocombe
Julia Henderson
Brian Scouler
all of:
8th Floor
100 Bishopsgate
London
United Kingdom
EC2N 4AG
Secretary
LDC Nominee Secretary
Limited
8th Floor, 100
Bishopsgate
London
EC2N 4AG
Fund Manager
Amati Global Investors
Limited
8 Coates Crescent
Edinburgh
EH3 7AL
VCT
Status Adviser
Philip Hare & Associates
LLP
6 Snow Hill
London
EC1A 2AY
Registrar
The City Partnership (UK)
Limited
The Mending Rooms
Park Valley Mills
Meltham Road
Huddersfield
HD4 7BH
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Solicitors
Dickson Minto W.S.
16 Charlotte Square
Edinburgh
EH2 4DF
Custodian
The Bank of New York Mellon
SA/NV
London Branch
160 Queen Victoria Street
London
EC4V 4LA
Annual General Meeting
Attendance at the meeting
The Annual General Meeting of Amati
AIM VCT plc (the "Company") will be held at the Barber-Surgeons'
Hall, Monkwell Square, Wood Street, Barbican, London EC2Y 5BL on
Thursday 13 June 2024 starting at 2pm.
As is our normal practice, there
will be live voting for those physically present at the AGM.
Shareholders are advised that it will not be possible to vote or
ask questions virtually during the live-stream and we therefore
request that all shareholders, and particularly those who cannot
attend physically, submit their votes by proxy, ahead of the
deadline of 2.00 pm on Tuesday 11 June 2024 to ensure that their
vote counts at the AGM. If you hold your shares in a nominee
account, such as through a share dealing service or platform, you
will need to contact your provider and ask them to submit the proxy
votes on your behalf. For further instructions on proxy voting,
please refer to the notes on pages 83 to 84 of the full Annual
Report and Accounts.
Shortly ahead of the AGM, the
Company's Manager will post a link and instructions on how to join
the event on its homepage at www.amatiglobal.com.
Shareholders who are unable to join
the Meeting physically can email any questions they may have either
on the business of the AGM or the portfolio to info@amatiglobal.com
by 7 June 2024. The Company's Manager will publish questions
together with answers on the page dedicated to the AGM on the
Manager's website prior to the AGM being held.
The full audited Annual Report and
Accounts for the year ended 31 January 2024 will shortly be
available on the Company's website www.amatiglobal.com.
It will also be submitted to the National Storage Mechanism ("NSM")
and will be available for inspection there, situated at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
A copy of the Annual Report and
Accounts, which includes the Notice of Annual General Meeting, will
be posted to shareholders shortly.
For further information, please
contact the investor line at Amati
Global Investors on 0131 503 9115 or by email
at info@amatiglobal.com.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on this announcement (or
any other website) is incorporated into, or forms part of, this
announcement.