TIDMAT2
RNS Number : 5767D
Amati VCT 2 plc
27 April 2017
Amati VCT 2 plc
ANNUAL REPORT & FINANCIAL STATEMENTS
For the year ended 31 January 2017
The Annual Report and Financial Statements ("Annual Report") for
the year ended 31 January 2017 and the Notice of Annual General
Meeting will be posted to shareholders shortly and is available in
electronic format for download on Amati Global Investors website
www.amatiglobal.com. Copies of the Annual Report will be submitted
to the UK Listing Authority's National Storage Mechanism and will
be available at www.hemscott.com/nsm.do.
Page numbers and cross-references in this announcement below
refer to page numbers and cross-references in the PDF of the Annual
Report.
Highlights
-- NAV Total Return for the year 22.0%.
-- Year end NAV 123.72p.
-- Proposed final dividend of 4.25p per share bringing the total
declared in respect of the year to 7.00p per share which is 5.7% of
year end NAV.
-- GBP2.2m invested in qualifying holdings during the year.
-- The Top Up Share Issue launched on 8 November 2016 together
with Amati VCT plc has raised GBP4m for the Company as at 25 April
2017 and was fully subscribed for tax year 2016/17.
Table of investor returns to 31 January 2017
NAV Total FTSE AIM
Return All-Share
with Total
From Date dividends Return
reinvested Index
--------------------------------- ------------ ------------ -----------
Re-launch as Amati VCT 2 9 November
following merger 2011* 63.8% 28.2%
Appointment of Amati Global
Investors ("Amati") as Manager
of Amati VCT 2, which was
known as ViCTory VCT at the 25 March
time 2010 71.9% 33.4%
--------------------------------- ------------ ------------ -----------
*Date of the share capital reconstruction when the NAV was
rebased to approximately 100p per share.
Amati VCT 2 NAV Total Return and FTSE AIM All-Share Total Return
Index from change of Manager on 25 March 2010 to 31 January 2017 is
on page 1 of the Annual Report.
Key data
31/01/17 31/01/16
----------------------------------- ----------- -----------
Net Asset Value ("NAV") GBP40.4m GBP32.4m
Shares in issue 32,643,069 30,259,489
NAV per share 123.7p 107.1p
Bid price 115.5p 102.5p
Mid price 115.8p 102.8p
Market capitalisation GBP37.8m GBP31.1m
Share price discount to NAV 6.4% 4.0%
NAV Total Return for the year
(assuming re-invested dividends) 22.0% 6.1%
FTSE AIM All-Share Total Return
Index 29.3% 1.8%
Ongoing charges* 2.6% 2.6%
----------------------------------- ----------- -----------
Dividends proposed/declared
in respect of the year 7.00p 6.25p
----------------------------------- ----------- -----------
*Ongoing charges calculated in accordance with the Association
of Investment Companies' ("AIC's") guidance.
Dividends declared and recommended since the re-launch following
the merger
Total dividends Cumulative
dividends
per share per share
Year ended 31 p p
January
--------------- ---------------- -----------
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
--------------- ---------------- -----------
Historic performance
Amati VCT 2 NAV Total Return assuming re-invested dividends,
FTSE AIM All-Share Total Return Index and Numis Alternative Markets
Total Return Index is on page 2 of the Annual Report.
Table of Historic Returns from launch to 31 January 2017
attributable to shares issued by VCTs which have been merged into
Amati VCT 2
FTSE
AIM
NAV Total All-Share
Return Total
with
dividends Return
Launch Merger re-invested Index
date date
------------------------- -------------- ------------- ------------ ----------
Singer & Friedlander 4 April 8 December
AIM 3 VCT ('C' shares) 2005 2005 -4.9% -7.4%
Invesco Perpetual 30 July 8 November
AiM VCT 2004 2011 -15.9% 16.5%
Amati VCT 2 (originally
Singer & Friedlander 29 January
AIM 3 VCT*) 2001 n/a -13.3% -28.2%
Singer & Friedlander 29 February 22 February
AIM 2 VCT 2000 2006 -33.6% -62.0%
Singer & Friedlander 28 September 22 February
AIM VCT 1998 2006 -54.7% 23.2%
*Singer & Friedlander AIM 3 VCT changed its name to ViCTory
VCT on 22 February 2006 and to Amati VCT 2 on 8 November 2011.
STRATEGIC REPORT
The purpose of this report is to inform shareholders and help
them to assess how the directors have performed in their duty to
promote the success of the Company. This report has been prepared
by the directors in accordance with the requirements of Section
414A of the Companies Act 2006.
CHAIRMAN'S STATEMENT
Overview
A year ago I wrote about some significant changes to the
Company's policies in respect of both qualifying and non-qualifying
investments. These changes are now beginning to bear fruit and it
is pleasing to be able to report a strong performance for the
portfolio over the last twelve months. In the qualifying portfolio,
the decision to hold shares in successful companies for the longer
term, rather than sell for shorter term profit generation, has
resulted in the Company's portfolio having a greater weighting in
mature, profitable businesses, and this is showing through in the
overall performance. This strategy has also, as expected, led to a
lower turnover in holdings. In parallel, our decision to manage our
non-qualifying holdings primarily through the TB Amati UK Smaller
Companies Fund has also resulted in strong returns. The performance
of the portfolio, and its individual components, is described in
greater detail in the Manager's report.
A year ago we anticipated a fall-off in the number of new
investment opportunities as the new regulations were being
digested. This proved to be the case, but the flow of opportunities
began increasing in the second half and a reasonable number of new
investments have been made towards the end of the year. We also
indicated that we expected that the Manager would be making fewer,
but larger, new qualifying investments, targeting companies at the
more mature end of the spectrum allowed by the VCT regulations.
This ambition has been more difficult to realise, as the new rules
often mean that companies can raise less money from VCTs than
before, and there is therefore high demand for the most attractive
investments, especially while the number of opportunities remains
constrained. This can result in smaller position sizes than we
would have ideally liked for some new investments.
As also reported we have raised some additional funds, and in
doing so we have aimed to match the level of funds raised to the
level of anticipated new qualifying investment opportunities. The
Company is in the fortunate position of being very fully invested
in qualifying holdings so we are under no pressure to make new
investments simply to maintain our VCT status.
Investment Performance and Dividend
The NAV Total Return for the period was 22.0%, which compares to
a rise of 29.3% for the FTSE AIM All-Share Total Return Index.
Having been just ahead of the AIM index at the half year end, the
portfolio lagged the exceptional strength of AIM in the second half
which was led by a resurgence of natural resources stocks and
ongoing demand from investors to own AIM stocks for the tax
benefits, which tends to be focused on the largest companies.
The dividend policy of the Company is to pay between five and
six percent of year-end net asset value, subject to the
availability of liquidity and sufficient distributable reserves. At
31 January 2017 the net asset value was 123.72p per share. In line
with this policy the Board is proposing a final dividend of 4.25p
per share, to be paid on 21 July 2017 to shareholders on the
register on 16 June 2017. This would make total dividends for the
year 7.00p.
The Company has thus far used the FTSE AIM All-Share Total
Return Index as its comparator index. For some years this index has
been the only one available against which to measure performance
for AIM focused investment companies, but unfortunately the cost of
using it has been high. However, Numis have recently decided to
extend their well known range of UK smaller company indices to
include an AIM index, and the Amati VCTs and the Manager have
agreed to subscribe to this index instead, which should result in a
worthwhile saving to the Company, while providing a very similar
comparable measurement index to the FTSE product. The historic
performance chart on page 2 in the Annual Report gives an
indication of how similar the two indices are in practice. Future
reports will use the Numis Alternative Markets Total Return Index
as the comparator for performance.
It is worth noting to shareholders that, following a period of
strong performance, the Company is now benefitting from the Manager
having waived all rights to future performance fees in 2014. Had
this not happened, we would now be accruing for a further
performance fee. The Amati VCTs remain very unusual amongst VCTs in
no longer paying performance fees.
Other Corporate Developments
A further joint top up share issue (the "Share Issues") with
Amati VCT plc ("Amati VCT") was launched in November 2016. The
available capacity under these offers for the 2016/17 tax year was
filled for both VCTs, at around GBP3.6m each. At the time of
writing a small amount of capacity remains available for the
2017/18 tax year. The capacity of each allotment will be subject to
the rules governing non-prospectus offers, which are set out in the
Share Issues document, and the offers will close on 14 July 2017,
or as soon as full capacity is reached if earlier.
Investors wishing to make further investments in the Company may
also wish to consider joining the Dividend Re-investment Scheme
("DRIS"), which remains open to all shareholders. Please contact
the company's registrar, Share Registrars, if you wish to join or
leave the DRIS.
At the Annual General Meeting ("AGM") in June the Company is
seeking shareholders' consent to send or supply documents and
information to them in electronic form and via its website
(www.amatiglobal.com).
Increased use of electronic communications will deliver savings
to the Company in terms of administration, printing and postage
costs, as well as speeding up the provision of information to
shareholders. The reduced use of paper will also have environmental
benefits.
Under the proposal, when new Documents and Information become
available on the website, we will notify you by letter to your
normal address or, if you have consented to email notification and
provided an email address, by email. Shareholders will be able to
opt out of electronic communications and continue to receive
printed documents in the post if they wish.
The Company is also seeking shareholders' approval to amend the
Investment Policy of the Company at the AGM in June; further
information is included in the Directors' Report on page 18 in the
Annual Report and the full text of the proposed new Investment
Policy is detailed on page 49 in the Annual Report.
Outlook
As reported above, the portfolio is now concentrated around the
more successful, mature, holdings and this is proving beneficial to
the Company's performance. We believe that these companies have
scope for significant further growth and will therefore become
attractive to a wider group of investors. The Board has also been
pleased with the new additions to the portfolio during the year,
several of which have already made a positive contribution to
performance. The Company is well placed to add new investments
selectively, without being under any undue pressure to do so.
AGM
The AGM will again be held at the Guildhall School of Music and
Drama, starting at 2.00pm on Wednesday 28 June 2017 at Milton Court
Theatre, The Guildhall School of Music and Drama, Silk Street,
Barbican, London, EC2Y 9BH (the entrance is on the corner of Milton
Street and Silk Street). This will be followed by further events
and presentations, including the fourth Amati Guildhall Creative
Entrepreneurs Award, to which shareholders are invited, details of
which are being sent to you with this report. I do hope that as
many shareholders as possible will be able to join us. Please RSVP
to rachel.lederf@amatiglobal.com if you would like to attend.
Julian Avery
Chairman
27 April 2017
For any matters relating to your shareholding in the Company,
dividend payments, or the Dividend Re-investment Scheme, please
contact Share Registrars on 01252 821390, or by email at
enquiries@shareregistrars.uk.com. For any other matters please
contact Amati Global Investors ("Amati") on 0131 503 9115 or by
email at vct-enquiries@amatiglobal.com. Amati maintains an
informative website for the Company - www.amatiglobal.com - where
monthly investment updates, performance information, and past
company reports can be found.
FUND MANAGER'S REVIEW
Market Review
The year under review was dominated by two major political
events, the UK's vote to leave the European Union and the election
of Donald Trump to the office of US President. In both cases stock
markets stalled ahead of the voting. After the Brexit vote they
fell sharply and then recovered, breaking into new highs, with a
similar pattern and much briefer fall after the US election.
Overall the second half of the year produced strong returns. In our
view, the strong stock markets should be seen as the result of a
long term policy of low interest rates and quantitative easing
("QE") which has had the effect of normalising the bank lending
environment, and forcing money into risk assets, both of which are
strongly stimulative for the economy. In 2016 evidence emerged that
this policy had done its job, but investors delayed entering the
stock market due to the uncertainty created by these political
events. Once they were completed, even though the results were
unexpected and may cause many problems in the future, the cash
awaiting investment waited no longer.
In the case of the EU referendum, the leave result triggered a
dramatic fall in the value of sterling, and it has so far remained
weak. This in turn led to the outperformance of UK larger
companies, which have a bias towards overseas earnings, with the
FTSE 100 enjoying a total return of 21.4% for the period, whilst
the FTSE 250 lagged with a gain of 13.2% due to its heavier
dependence on UK based earnings. Something different was happening
in AIM, however, which beat every Full List index with a gain of
29.3%. The AIM market is increasingly being dominated by a small
group of large companies, which in the main posted strong gains in
2016 and set the tempo for the overall performance of the index.
Together with the recovery in commodity prices (particularly in
sterling terms), which translated into a reversal of the share
price declines in the Oil and Gas and Basic Materials sectors, this
provided a further catalyst for AIM outperformance.
Performance
The Company returned a NAV total return of 22.0% for the year to
31 January 2017. The FTSE AIM All-Share Index enjoyed even stronger
gains, ending the same period up 29.3%.
The greatest contributor to performance was Accesso Technology
Group ("Accesso"). Accesso continued its progress in its main
business segments: electronic queuing, where two new parks were
added, including another LEGOLAND site; and ticketing, where sales
via mobile devices are driving growth. With the bulk of its
revenues earned in US dollars, Accesso was also a beneficiary of
sterling weakness following the Brexit vote. Following a share
price rise of 80%, Accesso grew to represent over 10% of the
portfolio late in the year, and we took the decision to take some
profits, selling around GBP780k worth of shares in order to manage
the position size. At the end of the period it represented 8.4% of
the portfolio, and we remain comfortable with this overweight
position. At the time of writing Accesso's market capitalisation is
now in excess of GBP350 million, and this size acts as a useful
diversifier to the smaller companies that were acquired for the VCT
more recently. The continued success of Accesso, as well as other
long-standing positions in the Company, serve to increase the
overall maturity and liquidity of the portfolio. As well as this,
we believe in 'running our winners' and Accesso has been the most
outstanding of these since we took on the management of the VCT in
2010. Quixant, the designer and manufacturer of hardware and
software for gaming machines, has also been an exceptional stock,
and was the next most significant contributor to performance, with
a further share price rise of 113% during the period. Quixant
upgraded its forecasts with demand from gaming customers exceeding
expectations and a maiden contribution from the acquisition of
Densitron, a supplier of electronic displays. Like Accesso,
Quixant's success has enabled its evolution from a small AIM
business with a limited audience, to a business capitalised at
around GBP230 million at the period end that is attracting the
interest of a large pool of AIM investors. Continuing this theme,
Keywords Studios ("Keywords") climbed 170%. This was the
consequence of two factors. Firstly, Keywords made a series of
earnings enhancing acquisitions, thus driving the forward earnings
per share (based on next twelve months) higher - from 11 pence to
18 pence over the year. Secondly, Keywords has become a favourite
of a wide pool of AIM investors, and has seen a re-rating as a
result, with the price to earnings (P/E) ratios rising from 19x to
29x over the year. Other notable performers were AB Dynamics, the
designer of test equipment for vehicle suspension, steering, noise
and vibration, which ended the year 86% ahead; IDOX, the software
supplier to local authorities, which gained 30%; and Science in
Sport, the supplier of sports nutrition products, which climbed
71%. The TB Amati UK Smaller Companies Fund ("the Fund") also
made a valuable contribution to performance, following a 23%
increase in value over the year.
The most significant detractor from performance was Bilby, the
gas heating, electrical and building services business that was the
prior year's greatest contributor to performance. Unfortunately,
the gains that were enjoyed in 2015 were reversed in 2016 following
a delay to anticipated work with a large, long standing public
sector customer. This was followed by the announcement of a
restatement of its prior year financial statements due to
additional, unrecognised costs and disputed revenues, which had a
material impact on the previously reported profit. The consequence
was a share price fall of 61% over the year. Also weak was Crawshaw
Group, the operator of butcher shops throughout Yorkshire,
Humberside, Nottinghamshire and Lincolnshire. The shares fell 76%
over the year, with most of the damage inflicted following a poor
trading update in September, in which the company blamed adverse
weather, an even more price-focussed consumer post-Brexit, and
aggressive price promotions by supermarket competitors for
sustained reductions in like for like sales. The residual value in
the convertible loan to Polyhedra Group was written down to nil
following the failure of the group to renew a contract with a
customer that represents most of its turnover. Despite attempts to
diversify the business, there appears to be little progress towards
any return of value from this position. TLA Worldwide ("TLA"), the
sports management and marketing agency, fell 45% following the
withdrawal of a takeover bid from a Nasdaq listed cash shell. The
convertible loans in Rame Energy ("RAME") were also written off.
RAME was unable to fulfil its promise of becoming a niche
independent power producer in Latin America and entered
administration, a process that is unlikely to yield much value for
creditors.
Transactions
Qualifying portfolio
The Company completed five material new qualifying investments
during the year under review, investing GBP2.0 million in the
process. The Company participated in the IPO of LoopUp Group
("LoopUp"), a provider of high quality remote meeting technology.
LoopUp addresses the frustrations that are familiar to regular
participants in conference calls such as getting all the right
participants on a call, background noise, sharing content and
security. Amongst its features, LoopUp's software can call each
participant, rather than waiting for them to join, enables screen
sharing and identifies who is talking and who is on the call at any
stage. These features have already attracted nearly 2,000 customers
globally, in a market that is growing at 15% per annum. We took a
position in Faron Pharmaceuticals ("Faron"), which raised capital
in a secondary placing to fund safety trials for the US development
of its lead product, Traumakine, for the treatment of Acute
Respiratory Distress Syndrome (ARDS), a severe lung condition with
a mortality rate of 30-40% and no current cure. The defining moment
for Faron will be the publication of Phase III trials in mid-2017.
The Company also participated in a placing of new funding for
Hardide, a long-standing holding in Amati VCT and, as such, well
known to us since 2007. Hardide has patented several surface
coating technologies based around tungsten carbide which, when
applied to industrial components provides a super-hard coating
which extends life spans and reduces downtime. The primary end
market since inception of the business has been oil and gas but
Hardide has been selling increasingly into other sectors, shortly
to include aerospace, where long sales cycles are compensated for
by long-term, high value contracts. We took part in the IPO of
FreeAgent Holdings ("FreeAgent"), a developer of accounting
software for small businesses. Specifically, FreeAgent has targeted
the freelancer market and companies with up to ten employees. It
has built an intuitive and unintimidating user interface that was
designed by non-accountants for non-accountants. FreeAgent has two
routes to market: direct to the end customer; and sales via
accountancy practices that specialise in advising very small
businesses. Like many software products, revenues are 'sticky',
meaning that customers tend to renew year after year due to
increasing familiarity with the functionality. Revenues have been
growing at over 30% per annum. During the first half, we made a
small investment in Genedrive, a point of care diagnostics
business. Since the Company's investment, Genedrive has made
progress with its Hepatitis C test and CE Marking submission, to
allow the distribution of this product in Europe, which is imminent
following encouraging performance results. However, the
tuberculosis test has so far fared poorly, with end user sales in
India having been challenging and Genedrive is working to address
some issues customers are experiencing around the preparation of
samples, which they believe are holding back repeat orders.
Small follow-on investments totalling GBP0.2 million were made
in Fox Marble Holdings, the Kosovo-based producer of high quality
marble, which recently commissioned its cutting and polishing
factory; Sabien Technology, the designer of boiler efficiency
technology; Microsaic Systems, the developer of smaller-scale mass
spectrometry instruments; and Ilika, the material sciences
business.
A total of GBP1.9 million was realised from the sale of
qualifying investments, predominantly due to the profit taking in
Accesso (see above) and the sale of TLA. During the failed bid
period we were able to reduce the Company's holding in TLA and
continued to sell following the withdrawal of the bid.
Non-qualifying portfolio
We continued to add to the Company's position in the TB Amati UK
Smaller Companies Fund (the "Fund"). The Fund performed well
against its peer group (IA UK Smaller Companies) and its benchmark
(Numis Smaller Companies Index, plus AIM, excluding Investment
Companies) over the year.
The Company's non-qualifying holding in Hiscox, the mid cap
commercial and personal lines insurance group was sold to raise
cash for qualifying investments.
Outlook
The year ahead is likely to be characterised by more volatility
as Article 50 is triggered on this side of the Atlantic and an
unpredictable administration goes about its business stateside.
Investor sentiment will ebb and flow with this volatility and there
is little we can do to respond to it. If we sell a qualifying
holding in a good quality company, we can't buy it back in the
future. As ever, therefore, we need to be confident that the stocks
that we buy, and those that we hold, are in companies that we
believe can perform over the long term.
Alongside volatility, another headwind for 2017 is inflation,
which is already creeping into most areas of the economy but its
full force is yet to be felt by consumers and businesses. If this
does happen, the companies with real pricing power will become
apparent, will endure and should emerge stronger. The chief
underlying threat is of interest rates rising in an uncontrolled
fashion, particularly at the long end of the curve. After such a
long period of ultra low rates, no portfolio can be immune from
this. However, whilst we are cognisant of the macro risks, we
believe that smaller dynamic growth companies remain some of the
most compelling investment propositions, and this is what we seek
to buy and hold for the long term for the Amati VCTs.
Dr Paul Jourdan, Douglas Lawson and David Stevenson
Amati Global Investors
27 April 2017
AMATI GLOBAL INVESTORS
Dr Paul Jourdan is an award winning fund manager, with a strong
track record in small cap investment. He co-founded Amati Global
Investors following the management buyout of Noble Fund Managers
from Noble Group in 2010, having joined Noble in 2007 as Head of
Equities. His fund management career began in 1998 with Stewart
Ivory, which was taken over by First State in 2000 at which time
Paul became manager of what is now TB Amati UK Smaller Companies
Fund. In early 2005 he launched what is now Amati VCT and he also
manages Amati VCT 2 after the investment management contract moved
to Amati Global Investors in 2010. In September 2014 Amati launched
the Amati AIM IHT Portfolio Service, which Paul co-manages with
Douglas Lawson and David Stevenson. Prior to 1998 Paul worked as a
professional violinist, including a four year period with the City
of Birmingham Symphony Orchestra. He is CEO of Amati and a Director
of Sistema Scotland.
Douglas Lawson co-founded Amati Global Investors with Paul
Jourdan. Prior to this he worked in corporate finance and private
equity, initially focusing on middle market UK private equity and
listed company M&A at British Linen Advisors, and latterly as
an investment manager in the private equity team at Noble. Douglas
has co-managed the TB Amati UK Smaller Companies Fund and Amati VCT
since 2009, Amati VCT 2 since 2010 and the Amati AIM IHT Portfolio
Service since 2014. Douglas started his career at Ernst & Young
in London, where he qualified as a Chartered Accountant in 2002. He
is a Director of Amati.
David Stevenson joined Amati in 2012. In 2005 he was a
co-founding partner of investment boutique Cartesian Capital, which
managed a range of retail and institutional UK equity funds in long
only and long/short strategies. Prior to that he was Assistant
Director at SVM, where he also managed equity products including
the UK Opportunities small/midcap fund which was ranked top decile
for the 5 year period from inception to 2005. David started his
career at KPMG where he qualified as a Chartered Accountant. He
latterly specialised in corporate finance, before moving into
private equity with Dunedin Fund Managers. David has co-managed the
TB Amati UK Smaller Companies Fund and the Amati VCTs since 2012
and the Amati AIM IHT Portfolio Service since 2014.
INVESTMENT PORTFOLIO
as at 31 January 2017
Market Dividend
Cost Valuation Cap Yield(NTM) Fund
GBP'000 GBP'000 GBPm Sector Status % %
------------------------ -------- ---------- ------- ------------------- ------------- ------------ ------
TB Amati UK
Smaller Companies
Fund@ 2,815 3,898 - Financials OEIC 1.4 9.7
Accesso Technology
Group plc*@ 221 3,372 339.7 Technology AIM - 8.3
Quixant plc
@ 386 2,757 215.7 Technology AIM 0.7 6.8
IDOX plc*@ 239 2,115 262.8 Technology AIM 1.7 5.2
Keywords Studios
plc @ 437 1,917 293.9 Industrials AIM 0.2 4.7
Brooks Macdonald
Group plc @ 1,154 1,824 277.7 Financials AIM 2.4 4.5
AB Dynamics
plc @ 259 1,638 104.2 Industrials AIM 0.6 4.1
GB Group plc
@ 224 1,575 393.3 Technology AIM 0.9 3.9
Learning Technologies
Group plc*@ 746 1,564 185.2 Industrials AIM 0.6 3.9
Ideagen plc
@ 496 1,517 124.1 Technology AIM 0.3 3.8
Top Ten 6,977 22,177 54.9
Frontier Developments Consumer
plc @ 549 1,418 93.8 goods AIM - 3.5
Tristel plc Health
@ 439 1,370 66.1 care AIM 2.3 3.4
Science in Consumer
Sport plc @ 710 1,178 36.4 goods AIM - 2.9
Universe Group
plc*@ 244 901 19.7 Industrials AIM - 2.2
Anpario plc Health
@ 272 847 62.9 care AIM 2.2 2.1
LoopUp Group
plc*@ 470 808 70.1 Technology AIM - 2.0
SRT Marine
Systems plc*@ 579 741 49.8 Technology AIM - 1.9
Premier Technical
Services Group
plc @ 403 657 75.1 Industrials AIM - 1.6
Fox Marble
Holdings plc
Ordinary shares
& 8% Convertible
Loan Note*@ 818 618 13.1 Basic Materials AIM/Unquoted - 1.5
Consumer
Tasty plc 320 600 77.7 services AIM - 1.5
Top Twenty 11,781 31,315 77.5
FreeAgent Holdings
plc*@ 361 576 54.4 Technology AIM - 1.4
Hardide plc*@ 500 563 13.8 Basic materials AIM - 1.4
Bilby plc @ 574 544 21.8 Industrials AIM - 1.3
Faron Pharmaceuticals Health
Oy*@ 390 484 81.6 care AIM - 1.2
Solid State
plc @ 243 471 39.7 Industrials AIM 2.8 1.2
FairFX Group
plc*@ 463 447 44.1 Financials AIM - 1.1
Water Intelligence
plc @ 170 439 13.3 Industrials AIM - 1.1
Belvoir Lettings
plc*@ 339 395 37.2 Financials AIM 6.3 1.0
Netcall plc 110 355 80.7 Technology AIM 3.6 0.9
Sportsweb.com* 352 317 2.8 Industrials Unquoted - 0.8
MirriAd Advertising
Limited*@ 486 284 34.5 Technology Unquoted - 0.7
Dods (Group) Consumer
plc* 596 270 46.0 services AIM - 0.7
Venn Life Sciences Health
Holdings plc*@ 274 259 12.5 care AIM - 0.6
Synectics plc 342 246 32.0 Industrials AIM 2.5 0.6
Kalibrate Technologies
plc*@ 350 239 18.3 Technology AIM - 0.6
Health
Genedrive plc*@ 299 205 10.3 care AIM - 0.5
Brighton Pier
Group plc (The) Consumer
*@ 292 192 33.4 services AIM - 0.5
EU Supply plc*@ 330 190 8.8 Technology AIM - 0.5
MartinCo plc
@ 141 180 32.4 Financials AIM 6.5 0.5
Crawshaw Group Consumer
plc @ 369 162 14.6 services AIM - 0.4
Ilika plc*@ 192 158 36.8 Oil & Gas AIM - 0.4
Antenova Limited
Ordinary shares
& A Preference
Shares* 100 128 4.2 Telecommunications Unquoted - 0.3
Consumer
Mirada plc*@ 416 88 3.1 services AIM - 0.2
Rosslyn Data
Technologies
plc*@ 365 79 5.5 Technology AIM - 0.2
MyCelx Technologies
Corporation*@ 425 78 3.4 Oil & Gas AIM - 0.2
Sabien Technology
Group plc @ 501 77 1.3 Industrials AIM - 0.2
Allergy Therapeutics Health
plc* 29 68 152.8 care AIM - 0.2
Microsaic Systems
plc*@ 419 60 5.4 Industrials AIM - 0.1
Nujira Limited*@ 117 9 2.3 Technology Unquoted - -
Investments
held at nil
value 3,093 - - - - - -
------------------------ -------- ---------- ------- ------------------- ------------- ------------ ------
Total investments 24,419 38,878 96.3
------------------------ -------- ---------- ------- ------------------- ------------- ------------ ------
Net current
assets 1,507 3.7
------------------------ -------- ---------- ------- ------------------- ------------- ------------ ------
Net assets 24,419 40,385 100.0
------------------------ -------- ---------- ------- ------------------- ------------- ------------ ------
* Qualifying holdings.
Part qualifying holdings.
@ These investments are also held by other funds managed by
Amati.
The Manager rebates the management fee of 0.75% on the TB Amati
UK Smaller Companies Fund and this is included in the yield.
All holdings are in ordinary shares unless otherwise stated.
Investments held at nil value: Polyhedra Group plc*@, China Food
Company plc@; Sorbic International plc@, Rame Energy plc*@,
Conexion Media Group plc*, Rated People Limited*@, Celoxica
Holdings plc*, TCOM Limited*@.
As at the year end, the percentage of the Company's portfolio
held in qualifying holdings for the purposes of Section 274 of the
Income and Corporation Taxes Act 2007 is 90.25%.
(NTM) Next Twelve Months Consensus Estimates (no guidance given
for Bilby plc and Premier Technical Services plc). Source:
FactSet.
OBJECTIVES AND KEY POLICIES
Investment Policy
Below is the current Investment Policy of the Company. The
Company is seeking shareholder authority to amend its Investment
Policy. An explanation for the reasons behind the change in
Investment Policy is included on page 18 in the Annual Report and
the full text of the proposed new Investment Policy is included on
page 49 in the Annual Report.
Investment Objectives
The Investment Objectives of the Company are to generate tax
free capital gains and income on investors' funds through
investment primarily in AIM-traded companies whilst mitigating risk
appropriately within the framework of the structural requirements
imposed on all VCTs.
Risk Diversification
Portfolio risk will be mitigated through appropriate
diversification of holdings within the relevant portfolio.
The Manager may use exchange-traded or over-the-counter
derivatives with a view to reducing overall market risk in the
portfolio as a whole. The Manager shall only seek to hedge a
limited amount of market risk and shall always be covered by the
assets of the portfolio. The use of derivatives is on a strictly
controlled basis only and is part of a total risk mitigation
exercise, not a separate investment policy. The Company's
overriding investment principle in relation to the use of
derivatives is to seek to reduce any potential capital loss in the
equity portions of the Qualifying and Non-Qualifying Investment
portfolios in a falling market. The Manager has not used
exchange-traded or over-the-counter derivatives to date.
Asset Allocation
The Manager intends that by the date from which all funds raised
are required to meet the VCT qualifying rules, the Company's
investment profile (as defined by the valuation methodology set out
in sections 278-9 of the Income Tax Act 2007 in which assets are
valued on the basis of last purchase price rather than by market
price) will be approximately:
(i) Between 70% and 85% in Qualifying Investments, whether
equity or non-equity securities in (a) companies traded on AIM or
on ISDX, or (b) companies likely to seek a quotation on AIM or on
ISDX or (c) likely to be the subject of a trade sale within a 24
month period.
(ii) Between 0% and 30% in Non-Qualifying investments in small
and mid-sized companies where such companies are either (a) quoted
in London (b) constituents of the TB Amati UK Smaller Companies
Fund, (c) likely to seek a
quotation in London within a 24 month period, or (d) likely to
be the subject of a trade sale within a 24 month period.
Investments may also include derivative instruments.
(iii) Between 0% and 30% in cash or cash equivalents (including
money market funds) or government or investment grade bonds.
Consistent with the conditions for eligibility as an investment
company under the Companies Act 2006, any holdings by the Company
in shares or other securities in a company will not represent more
than 15% by value of the Company's investments.
While Qualifying investments are being sourced, the assets of
the portfolio which are not in Qualifying companies will be
actively invested by the Manager in a combination of the above
(always ensuring that no more than 15% of the Company's funds are
invested in any one entity).
As described above, the Manager will also have the facility to
seek to reduce market risk from the equity portfolio held by the
Company through the use of derivatives. The derivatives used will
either be traded on an over-the-counter market or will be
exchange-traded. They will be in highly liquid markets bearing a
reasonable level of correlation to the FTSE AIM All-Share Total
Return index, ensuring that the value is normally transparent, and
enabling positions to be closed rapidly when needed.
Strategy for Achieving Objectives
Qualifying Investments Strategy
The construction of the portfolio of Qualifying Investments is
driven by the availability of suitable opportunities. The Manager
may co-invest in companies in which other funds managed by Amati
Global Investors invest, in accordance with the Qualifying
Investments strategy.
The ability of VCTs to mitigate market risk is restricted by the
requirement to maintain a minimum of 70% of their assets (as
defined by the methodology set out in sections 278-9 of the Income
Tax Act 2007) in Qualifying Investments after an initial three year
period. A VCT's ability to invest and mitigate risk is therefore
restricted in three important respects:
(i) Qualifying Companies are likely to be small, liable to be
highly illiquid and their prospects can improve or deteriorate very
rapidly. The liquidity risk itself cannot be adequately
diversified, because larger, more liquid stocks cannot be purchased
in the qualifying portion of a VCT's portfolio;
(ii) Qualifying Investments have to be purchased as
opportunities arise. This is a long-term process, the pace of which
cannot be determined solely by the Manager; and
(iii) VCTs are less able to respond readily to the changing risk
environment in the market as a whole because the ability to sell
Qualifying Investments may be dependent on the opportunity to
replace that holding with another Qualifying Investment, and an
appropriate opportunity may not be available at the right time.
The Company seeks to address these issues through the
Non-Qualifying Investment strategy set out below. In addition the
Company benefits from an existing Qualifying Investment portfolio
of some maturity, in which, due to strong performance, the most
successful companies have tended to become the largest holdings.
This mature portfolio serves to mitigate the risks for subscribers
for New Ordinary Shares, as new Qualifying Investments purchased
with the proceeds of subscriptions will sit alongside well
established ones.
Non-Qualifying Investments Strategy
While Qualifying Investments are being sourced, the assets of
the portfolio which are not in Qualifying Companies will be
actively invested by the Manager in a combination of the following
(though ensuring that no more than 15% of the Company's funds are
invested in any one entity):
(i) direct equity and non-equity investments in small and
mid-sized companies quoted in London, or likely to seek a quotation
in London or to be sold within a 24 month period;
(ii) investment in the TB Amati UK Smaller Companies Fund;
(iii) government or investment grade corporate bonds; and
(iv) money market funds.
The Manager seeks to adjust the non-qualifying portfolio to
reflect the nature of Qualifying Investments as they are purchased,
such that the portfolio remains well balanced and diversified. If
the Manager holds a negative outlook on the equity markets then
funds may be invested in cash or bonds as outlined above, and, in
addition, the Manager may seek to reduce market risk in the equity
portfolio with the use of suitable derivative instruments. Asset
allocation between these categories will remain flexible.
In relation to the use of derivatives, the directors and the
Manager believe that their use under the controlled and prudent
parameters which have been put in place in relation to the Company
could help to reduce the total risk facing investors in relation to
their investments. The Company has not made use of derivative
investments to date.
The use of derivatives will not prevent the Company from losing
money overall in a falling market. However, insofar as derivatives
are used, the Manager's objective will be partially to reduce
losses and also to provide cash for investment at moments when the
market is weak. The Company will only enter into such transactions
for the purposes of efficient portfolio management in line with
conventional practice.
Strict internal guidelines on the use of derivatives have been
put in place by the Manager. Additionally, such derivatives as are
used are required to offer both good liquidity and, in the
Manager's opinion, reasonable correlation to the AIM market. Your
attention is drawn to the risk factors relating to the use of
derivatives set out on page 11 of the Annual Report.
The Manager is under no obligation to use any one of these
approaches and provides no guarantee that market risk management
will be in place during a falling market. The use of any or all of
these instruments will reflect the Manager's view of the market
risks which may be taken at any time.
Key Performance Indicators
The Board expects the Manager to deliver a performance which
meets the objectives of the Company. A review of the Company's
performance during the financial year, the position of the Company
at the year end and the outlook for the coming year is contained in
the Chairman's Statement and Fund Manager's Review. The Board
monitors on a regular basis a number of key performance indicators
which are typical for VCTs, the main ones being:
-- Compliance with HMRC VCT regulations to maintain the
Company's VCT Status. See page 14 in the Annual Report.
-- Net asset value and total return to shareholders (the
aggregate of net asset value and cumulative dividends paid to
shareholders, assuming dividends re-invested at ex-dividend date).
See graphs on pages 1 and 2 in the Annual Report.
-- Dividend distributions. See table of investor returns on page 2 in the Annual Report.
-- Share price. See key data on page 2 in the Annual Report.
-- Ongoing charges ratio. See key data on page 2 in the Annual Report.
FUND MANAGEMENT AND KEY CONTRACTS
Management Agreement
Amati Global Investors was appointed as Manager to the Company
on 22 March 2010. Under an Investment Management and Administration
Agreement ("IMA") dated 22 March 2010 the Manager has 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 in arrears. In
November 2014, with shareholder consent, the Company amended its
non-qualifying investment policy to permit investment in the TB
Amati UK Smaller Companies Fund, a small and mid cap fund managed
by the Manager. The Company will receive a full rebate on the fees
payable by the Company to the Manager within this fund either
through a reduction of fees payable by the Company or a direct
payment by the Manager.
Annual running costs are capped at 3.5% of the Company's net
assets, any excess being met by the Manager by way of a reduction
in future management fees. The annual running costs include the
directors' and Manager's fees, professional fees and the costs
incurred by the Company in the ordinary course of its business (but
excluding any commissions paid by the Company in relation to any
offers for subscription, irrecoverable VAT and exceptional costs,
including winding-up costs). No performance fee is payable as the
Manager has waived all performance fees from 31 July 2014
onwards.
Administration Arrangements
Under the IMA, the Manager has also agreed to provide
secretarial and administration services for the Company. The
Manager has engaged The City Partnership (UK) Limited to act as
company secretary and Capita Asset Services to act as fund
administrator. The fee in respect of these services payable to the
Manager for the year ended 31 January 2017 is GBP76,000; this fee
is paid annually in arrears and is subject to an annual increase in
line with the retail prices index.
The appointment of the Manager as investment manager and/or
administrator and company secretary may be terminated on one year's
notice.
Fund Manager's Engagement
The Board regularly appraises the performance and effectiveness
of the managerial and secretarial arrangements of the Company. As
part of this process, the Board will consider the arrangements for
the provision of investment management and other services to the
Company on an ongoing basis and a formal review is conducted
annually. In the opinion of the Board, the continuing appointment
of the Manager, on the terms agreed, is in the interests of the
shareholders. The directors are satisfied that the Manager will
continue to manage the Company in a way which will enable the
Company to achieve its objectives.
VCT Status Adviser
Philip Hare & Associates LLP ("Philip Hare &
Associates") are engaged to advise the Company on compliance with
VCT requirements. Philip Hare & Associates reviews new
investment opportunities, as appropriate, and reviews regularly the
investment portfolio of the Company. Philip Hare & Associates
works closely with the Manager but reports directly to the
Board.
OTHER MATTERS
VCT REGULATION
The Company's investment policy is designed to ensure that it
meets the requirements of HM Revenue & Customs to qualify and
to maintain approval as a VCT.
(i) The Company must, within three years of raising funds,
maintain at least 70% of its investments by VCT value (cost, or the
last price paid per share, if there is an addition to the holding)
in shares or securities comprised in qualifying holdings, of which
at least 70% by VCT value must be ordinary shares which carry no
preferential rights (for funds raised prior to April 2011 at least
30% by VCT value must be in ordinary shares which carry no
preferential rights).
(ii) It may not invest more than 15% of its investments in a
single company and it must have at least 10% by VCT value of its
total investments in any qualifying company in qualifying shares
approved by HM Revenue & Customs.
(iii) To be classed as a VCT qualifying holding, companies in
which investments are made must have no more than GBP15 million of
gross assets at the time of investment and GBP16 million after
investment; they must be carrying on a qualifying trade and satisfy
a number of other tests including those outlined below; the
investment must also be made for the purpose of promoting growth or
development.
(iv) VCTs may not invest new capital in a company which has
raised in excess of GBP5 million from all sources of state-aided
capital within the 12 months prior to and including the date of
investment.
(v) No investment may be made by a VCT in a company that causes
that company to receive more than GBP12 million (GBP20 million if
the company is deemed to be a Knowledge Intensive Company) of state
aid investment (including from VCTs) over the company's lifetime. A
subsequent acquisition by the investee company of another company
that has previously received State Aid Risk Finance can cause the
lifetime limit to be exceeded.
(vi) No investment can be made by a VCT in a company whose first
commercial sale was more than 7 years prior to date of investment,
except where previous State Aid Risk Finance was received by the
company within 7 years (10 years in each case for Knowledge
Intensive Company) or where both a turnover test is satisfied and
the money is being used to enter a new product or geographical
market.
(vii) No funds received from an investment into a company can be
used to acquire another existing business or trade.
(viii) Since 6 April 2016 a VCT must not make "non-qualifying"
investments except for certain specified investments held for
liquidity purposes and redeemable within seven days. These include
investments in UCITS (Undertakings for Collective Investments in
Transferable Securities) funds, AIF (Alternative Investment Funds)
and in shares and securities purchased on a Regulated Market. In
each of these cases the restrictions in (iv) - (vii) above are not
applied. Non-qualifying investments in AIM-quoted shares are not
permitted as AIM is not a Regulated Market.
Prior to making any qualifying investment the Manager requests
HMRC VCT clearance letters from investee companies and takes advice
from Philip Hare & Associates to ensure the documentation
regarding the investment does not contravene the qualifying status
of the investment. 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.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the Company faces the following major
risks and uncertainties:
Investment Risk
A substantial portion of the Company's investments are in small
AIM traded companies as well as some unquoted companies. By their
nature these investments involve a higher degree of risk than
investment in larger fully listed companies. These companies tend
to have limited product lines and niche markets. They can be
reliant on a few key individuals. They can be dependent on securing
further financing. In addition, the liquidity of these shares can
be low and the share prices volatile.
To reduce the risk, the Board places reliance upon the skills
and expertise of the Manager and its strong track record for
investing in this segment of the market. Investments are actively
and regularly monitored by the Manager and the Board receives
detailed reports on the portfolio in addition to the Manager's
report at regular Board meetings. The Manager also seeks to limit
these risks through building a highly diversified portfolio with
companies in different sectors and markets at different stages of
development.
Venture Capital Trust Approval Risk
The current approval as a venture capital trust allows investors
to take advantage of income tax reliefs on initial investment and
ongoing tax-free capital gains and dividend income. Failure to meet
the qualifying requirements could result in investors losing the
income tax relief on initial investment and loss of tax relief on
any tax-free income or capital gains received. In addition, failure
to meet the qualifying requirements could result in a loss of
listing of the shares.
To reduce this risk, the Board has appointed the Manager which
has significant experience in venture capital trust management, and
is used to operating within the requirements of the venture capital
trust legislation. In addition, to provide further formal
reassurance, the Board has appointed Philip Hare & Associates
as taxation adviser to the Company. Philip Hare & Associates
reports every six months to the Board to confirm independently
compliance with the venture capital legislation, to highlight areas
of risk and to inform on changes in legislation.
Compliance Risk
The Company has a premium listing on the London Stock Exchange
and is required to comply with the rules of the UK Listing
Authority, as well as with the Companies Acts, Financial Reporting
Standards and other legislation. Failure to comply with these
regulations could result in a delisting of the Company's shares, or
other penalties under the Companies Acts or from financial
reporting oversight bodies.
In July 2013 the Alternative Investment Fund Directive ("AIFMD")
was implemented, a European directive affecting the regulation of
VCTs. Amati VCT 2 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 regulation
from the auditor, lawyers 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.
The Board seeks to mitigate the internal control risk by setting
policy, regular reviews of performance, enforcement of contractual
obligations and monitoring progress and compliance. Details of the
Company's internal controls are on pages 22 and 23 in the Annual
Report.
Financial Risk
By its nature, as a venture capital trust, the Company is
exposed to market price risk, credit risk, liquidity risk and
interest rate risk. The Company's policies for managing these risks
are outlined in full in notes 19 to 22 to the financial statements
on pages 45 to 47 in the Annual Report.
The Company is financed through equity.
Liquidity Risk
The Company's investments may be difficult to realise. As a
closed-end vehicle the Company does have the long-term funding
appropriate to making investments in illiquid companies. However,
if the underlying investee companies run into difficulties then
their shares can become illiquid for protracted periods of time. In
these circumstances the Manager would work with the investee
company and its advisors to seek appropriate solutions.
Market Risk
Investment in AIM-traded, ISDX-traded and unquoted companies, by
its nature, involves a higher degree of risk than investment in
companies on the main market. In particular, smaller companies
often have limited product lines, markets or financial resources
and may be dependent for their management on a smaller number of
key individuals. At times of adverse market sentiment the shares of
small companies can become very difficult to sell, and values can
fall rapidly. The Company's closed-end structure is important in
this regard, in that it is less likely to become a forced seller at
such points. The Company's investment policy also allows the
Manager to invest in much larger more liquid companies through
non-qualifying holdings. These can provide liquidity in times of
market adversity.
Economic Risk
Events such as economic recession, not only in the UK, but also
in the core markets relevant to our investee companies, together
with a movement in interest rates, can affect investor sentiment
towards liquidity risk, and hence have a negative impact on the
valuation of smaller companies. The Manager seeks to mitigate this
risk by seeking to adopt a suitable investment style for the
current point in the business cycle, and to diversify the exposure
to geographic end markets.
Reputational Risk
Inadequate or failed controls might result in breaches of
regulations or loss of shareholder trust. The Manager operates a
robust risk management system which is reviewed regularly to ensure
the controls in place are effective in reducing or eliminating
risks to the Company. Details of the Company's internal controls
are on pages 22 and 23 in the Annual Report.
Operational Risk
Failure of the Manager's, or other contracted third parties',
accounting systems or disruption to their businesses might lead to
an inability to provide accurate reporting and monitoring or loss
to shareholders. The Manager regularly reviews the performance of
third party suppliers at monthly management meetings and quarterly
board meetings of the Manager.
STATEMENT ON LONG-TERM VIABILITY
In accordance with the revisions to the UK Corporate Governance
Code in 2014 (the "2014 Code"), the directors have carried out a
robust assessment of the prospects of the Company for the period to
January 2022, taking into account the Company's current position
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.
The directors consider that for the purpose of this exercise it
is not practical or meaningful to look forward over a period of
more than five years. This time frame allows for reasonable
forecasts to be made to allow the Board to provide shareholders
with reasonable assurance over the viability of the Company. In
making their assessment the directors have taken into account the
nature of the Company's business and Investment Policy, its risk
management policies, the diversification of its portfolio, the cash
holdings and the liquidity of non-qualifying investments.
OTHER DISCLOSURES
The Company had no employees during the year and has three
non-executive directors, two of which are male and one is female.
The Company, being an investment company with no employees, has no
policies in relation to environmental matters, social, community
and human rights issues.
On behalf of the Board
Julian Avery
Chairman
27 April 2017
BOARD OF DIRECTORS
Julian Avery is Chairman of the Company. He is a solicitor and
was chief executive of Wellington Underwriting plc until September
2004. He was a non-executive director of Aspen Insurance Holdings
Limited until May 2007 and chairman of Equity Insurance Group until
its acquisition by the Australian insurance group, IAG in January
2007. He was a non-executive director of Warner Estate Holdings plc
and Charles Taylor plc. He was also previously a senior adviser to
Fenchurch Advisory Partners. He is a Trustee of the Butler Trust
and President of St. Michael's Hospice, Hastings.
Mike Killingley is a former non-executive chairman of a number
of AIM and listed companies, including Beale plc, Southern Vectis
plc, Conder Environmental plc and Advanced Technology (UK) plc, and
a former non-executive director of AIM-quoted Falkland Islands
Holdings plc. He was a senior partner with KPMG, chartered
accountants, from 1988 until retiring from the firm in 1998; he is
Chairman of the audit committee of the Company and the senior
independent director.
Susannah Nicklin is an investment and financial services
professional with 20 years of experience in executive roles at
Goldman Sachs and Alliance Bernstein in the US, Australia and the
UK. She has also worked in the social impact private equity sector
with Bridges Ventures and the Global Impact Investing Network.
Susannah is a non-executive director and senior independent
director at Pantheon International Plc and a member of the
investment committee of private equity fund Impact Ventures UK. She
is a CFA charterholder and member of STEP.
DIRECTORS' REPORT
Directors
The directors of the Company during the year under review were
Julian Avery, Mike Killingley, Christopher Macdonald, Christopher
Moorsom and Susannah Nicklin. The current directors of the Company
are Julian Avery, Mike Killingley and Susannah Nicklin. The Company
indemnifies its directors and officers and has purchased insurance
to cover its directors.
Dividend
The Board is recommending a final dividend of 4.25p per share
for the year ended 31 January 2017 payable on 21 July 2017.
Share Capital
There were 32,643,069 ordinary shares in issue at the year end.
During the year 3,031,153 shares in the Company were allotted at an
average price of 114.07p per share raising GBP3.4m net of issue
costs. Since the year end, 1,884,298 shares have been issued under
the Top Up Offer, please refer to Note 15 on page 42 in the Annual
Report for further details.
During the year 647,573 shares in the Company with a nominal
value of 5p per share were bought back for an aggregate
consideration of GBP0.7m at an average price of 109.11p per share
(representing 2.1% of the shares in issue at 31 January 2016). All
of the shares were cancelled after purchase. The purpose of the
share buybacks was to satisfy demand from those shareholders who
sought to sell their shares during the period, given that there is
a very limited secondary market for shares in Venture Capital
Trusts generally. It remains the Board's policy to buy back shares
in the market, subject to the overall constraint that such
purchases are in the Company's interest including the maintenance
of sufficient resources for investment in new and existing investee
companies and the continued payment of dividends to shareholders.
At the Company's year end authority remains for the Company to buy
back 4,365,694 shares.
The rights and obligations attached to the Company's ordinary
shares are set out in the Company's Articles of Association, copies
of which can be obtained from Companies House. The Company has one
class of share, ordinary shares, which carry no right to fixed
income. The holders of ordinary shares are entitled to receive
dividends when declared, to receive the Company's report and
accounts, to attend and speak at general meetings, to appoint
proxies and to exercise voting rights. There are no restrictions on
the voting rights attaching to the Company's shares or the transfer
of securities in the Company.
Annual General Meeting
Authority to Allot Shares
At a general meeting of the Company held on 7 March 2013 the
following resolution was passed: The directors were authorised
pursuant to Section 551 of the Companies Act 2006 to allot relevant
securities up to a maximum aggregate nominal value of GBP1,250,000.
This authority expires on 7 March 2018; a resolution to renew this
authority is being proposed at the AGM to be held on 28 June
2017.
New Investment Policy
The Company's current investment policy as set out on page 11 in
the Annual Report dates back to the change of manager to Amati
Global Investors in March 2010, when the policy was made the same
as that of Amati VCT. This policy was drawn up at the launch of
Amati VCT in 2005 and was designed with the initial investment
phase in mind. Since then, and particularly in the last few years,
the VCT legislation has changed profoundly. The changes introduced
during 2015 in particular have meant that some of the original
investment policy is now in conflict with the legislation and is
therefore unsuitable. In particular there are now severely limited
options over what non-qualifying investments VCTs can make. As a
result the Board is proposing a resolution at the AGM that an
updated investment policy be adopted by the Company. The proposed
policy is set out on page 49 in the Annual Report. It is much
simplified and more accurately reflects the current VCT legislation
and the ways in which the Company has adapted to the new rules in
practice.
The formal investment policy has been reduced to two sections,
Investment Policy and Strategy for Achieving Objectives. The
Company's principal activity of making qualifying investments
predominantly in AIM or NEX Exchange ("NEX") traded companies
remains unaltered. The non-qualifying investment policy is now
completely aligned with what is allowed under the VCT legislation,
so that the VCT will be able to make the few types of investment
that the legislation allows for and nothing more. The strategy for
achieving the objectives is set out separately from the formal
investment policy, and may therefore be amended by the Board
without a further AGM resolution being put to shareholders. The
non-qualifying investment policy is mainly reduced in scope from
the previous investment policy, but is more permissive in two
respects: it would potentially allow the Company to invest in UCITS
(Undertakings for Collective Investments in Transferable
Securities) funds other than the TB Amati UK Smaller Companies
Fund; and allows it to invest in any corporate bonds which are
listed on a Recognised Exchange, whereas previously the scope for
investing in corporate bonds was based on the requirement to be
investment grade. The Board does not regard either of these
elements as significant changes.
Electronic Communications
The Company is seeking shareholders' consent to send or supply
documents and information ("Documents and Information") to them in
electronic form and via its website (www.amatiglobal.com).
Increased use of electronic communications will deliver savings to
the Company in terms of administration, printing and postage costs,
as well as speeding up the provision of information to
shareholders. The reduced use of paper will also have environmental
benefits. Under the proposal, when new Documents and Information
become available on the website, we will notify you by letter to
your normal address or, if you have consented to email notification
and provided an email address, by email.
The directors recommend that shareholders vote in favour of this
resolution and sign up to Electronic Communications as described in
further detail on page 50 in the Annual Report by completing the
Consent Form.
Substantial Shareholdings
At the year end and at the date of this report there was no
individual shareholding exceeding 3% of the issued ordinary share
capital.
Auditor
A resolution to re-appoint BDO LLP as auditor will be proposed
at the forthcoming AGM.
Global Greenhouse Gas Emissions
All of the Company's activities are outsourced to third parties.
The Company therefore has no direct greenhouse gas emissions to
report from its operations.
Going Concern
In accordance with FRC Guidance for directors on going concern
and liquidity risk the directors have assessed the prospects of the
Company for the foreseeable future and are of the opinion that, at
the time of approving the financial statements, the Company has
adequate resources to continue in business. In reaching this
conclusion the directors took into account the nature of the
Company's business and Investment Policy, its risk management
policies, the diversification of its portfolio, the cash holdings
and the liquidity of non-qualifying investments. The Company's
business activities, together with the factors likely to affect its
future development, performance and position including the
financial risks the Company is exposed to are set out in the
Strategic Report on pages 14 to 16 in the Annual Report. As a
consequence, the directors have a reasonable expectation that the
Company has sufficient cash and liquid investments to continue to
operate and that together with funds raised after the end of the
financial year under the new offer the Company is well placed to
manage its business risks successfully and meet its liabilities as
they fall due. Thus the directors believe it is appropriate to
continue to apply the going concern basis in preparing the
financial statements.
Accountability and Audit
The independent auditor's report is set out on pages 28 to 30 of
the Annual Report. The directors who were in office on the date of
approval of these Annual Report and Financial Statements have
confirmed that, as far as they were aware, there is no relevant
audit information of which the auditor is unaware. Each of the
directors has taken all the steps they ought to have taken as
directors in order to make themselves aware of any relevant audit
information and to establish that it has been communicated to the
auditor.
Financial Instruments
The Company's financial instruments comprise equity and fixed
interest investments, cash balances and liquid resources including
debtors and creditors. Further details, including details about
risk management, are set out in the Strategic Report and in Notes
18 to 22 on pages 44 to 47 in the Annual Report.
Future Developments
Significant events which have occurred after the year end are
detailed in Note 15 on page 42 in the Annual Report. Future
developments which could affect the Company are discussed in the
outlook sections of the Chairman's Statement and Fund Manager's
Review.
On behalf of the Board
Julian Avery
Chairman
27 April 2017
STATEMENT OF CORPORATE GOVERNANCE
Background
The Board of Amati VCT 2 plc has considered the principles and
recommendations of the AIC Code of Corporate Governance ("AIC
Code") by reference to the AIC Corporate Governance Guide for
Investment Companies ("AIC Guide") available on the AIC website
www.theaic.co.uk. The AIC Code, as explained by the AIC Guide,
addresses all the principles set out in the UK Corporate Governance
Code (the "Code"), as well as setting out additional principles and
recommendations on issues which are of specific relevance to the
Company. The Board considers that reporting against the principles
and recommendations of the AIC Code, and by reference to the AIC
Guide (which incorporates the Code), will provide better
information to shareholders.
The Company has complied with the recommendations of the AIC
Code and the relevant provisions of the Code except as set out
below.
The Code includes provisions relating to:
-- the role of the chief executive
-- executive directors' remuneration
-- the need for an internal audit function
For the reasons set out in the AIC Guide, and in the preamble to
the Code, the Board considers these provisions are not relevant to
the position of the Company, being an investment company. The
Company has therefore not reported further in respect of these
provisions.
Board of Directors
The Company has a Board of three directors, all of whom are
considered independent non-executive directors under the AIC Code.
As all directors have acted in the interests of the Company
throughout the period of their appointment and demonstrated
commitment to their roles the Board recommends they be re-elected
at the AGM.
The Company may by ordinary resolution appoint any person who is
willing to act as a director, either to fill a vacancy or as an
additional director. No director has a contract of service with the
Company. All of the directors have been provided with letters of
appointment which are available for inspection by shareholders
immediately before and after the Company's annual general
meeting.
Directors are provided with key information on the Company's
activities including regulatory and statutory requirements and
internal controls by the Manager. The Manager, in the absence of
explicit instructions from the Board, is empowered to exercise
discretion in the use of the Company's voting rights. All
shareholdings are voted, where practical, in accordance with the
Manager's own corporate governance policy, which is to seek to
maximise shareholder value by constructive use of votes at company
meetings and by endeavouring to use its influence as an investor
with a principled approach to corporate governance.
The AIC Code states that the Board should have a formal schedule
of matters specifically reserved to it for decision, to ensure that
it has firm direction and control of the Company. This is achieved
by a management agreement between the Company and the Manager,
which sets out the matters over which the Manager has authority and
the limits above which Board approval must be sought. All other
matters including strategy, investment and dividend policies,
gearing and corporate governance proceedings are reserved for the
approval of the Board of directors. All the directors are equally
responsible for the proper conduct of the Company's affairs. In
addition, the directors are responsible for ensuring that the
policies and operations are in the best interests of all the
Company's shareholders and that the best interests of creditors and
suppliers to the Company are properly considered. The chairman and
the company secretary establish the agenda for each Board meeting.
The necessary papers for each meeting are distributed well in
advance of each meeting ensuring all directors receive
accurate, timely and clear information.
Independence of Directors
The Board regularly reviews the independence of each director
and of the Board as a whole in accordance with the guidelines in
the AIC Code. Directors' interests are noted at the start of each
Board meeting and any director would not participate in the
discussion concerning any investment in which he had an interest.
The Board does not consider that length of service will necessarily
compromise the independence or effectiveness of directors and no
limit has been placed on the overall length of service. The Board
consider that such continuity and experience can be of significant
benefit to the Company and its shareholders. The Board believes
that each director has demonstrated that they are independent in
character and judgment and there are no relationships or
circumstances which could affect their objectivity.
Board Performance
The Board carried out a performance evaluation of the Board,
committees and individual directors led by the senior independent
director in the year. Due to the size of the Company, the fact that
all directors are independent non-executive and the costs involved,
external facilitators are not used in evaluation of the Board. The
directors concluded that the balance of skills is appropriate and
all directors contribute fully to discussion in an open,
constructive and objective way. The composition of the Board and
its committees is considered adequate for the effective governance
of the Company. The biographies of the directors, set out on page
17 in the Annual Report demonstrate the wide range of investment,
commercial and professional experience that they contribute.
Board Committees
Copies of the terms of reference of the Company's audit
committee are available from the company secretary and can be found
on Amati's website: www.amatiglobal.com/avct2_the_board.php.
REPORT OF THE AUDIT COMMITTEE
The audit committee comprises Mike Killingley (chairman) and
Susannah Nicklin. Julian Avery is not a member of the audit
committee; however, he is invited to attend the audit committee
meetings by the chairman of the audit committee. In addition, the
board is satisfied that the committee as a whole has competence
relevant to the venture capital trust sector.
During the year ended 31 January 2017 the audit committee met
twice and:
-- reviewed all financial statements released by the Company
(including the annual and half-yearly report);
-- reviewed the Company's accounting policies;
-- monitored the effectiveness of the system of internal controls and risk management;
-- approved the external auditor's plan and fees;
-- received a report from the external auditors following their
detailed audit work, and discussed key issues arising from that
work; and
-- reviewed its own terms of reference.
The audit committee carried out a robust assessment of the
principal risks facing the Company and concluded that the key areas
of risk which threaten the business model, future performance,
solvency or liquidity of the Company are:
-- compliance with HM Revenue & Customs to maintain the Company's VCT status; and
-- valuation of unquoted investments.
These matters are monitored regularly by the Manager, and
reviewed by the Board at every Board meeting. They were also
discussed with the Manager and the auditor at the audit committee
meeting held to discuss the annual financial statements.
The committee concluded:
VCT status - the Manager confirmed to the audit committee that
the conditions for maintaining the Company's status had been
complied with throughout the year. The Company's VCT status is also
reviewed by the Company's tax adviser, Philip Hare &
Associates, as described on page 14 in the Annual Report.
Valuation of unquoted investments - the Manager confirmed to the
audit committee that the basis of valuation for unquoted companies
was consistent with the prior year and in accordance with published
industry guidelines, taking account of the latest available
information about investee companies and current market data. A
comprehensive report on the valuation of unquoted investments is
presented and discussed at every Board meeting; directors are also
consulted about material changes to those valuations between Board
meetings.
The Manager and auditor confirmed to the audit committee that
they were not aware of any material unadjusted misstatements.
Having reviewed the reports received from the Manager, the audit
committee is satisfied that the key areas of risk and judgement
have been properly addressed in the financial statements and that
the significant assumptions used in determining the value of assets
and liabilities have been properly appraised and are sufficiently
robust.
The audit committee has managed the relationship with the
external auditor and assessed the effectiveness of the audit
process. When assessing the effectiveness of the process for the
year under review the Committee considered the auditor's technical
knowledge and that they have a clear understanding of the business
of the Company; that the audit team is appropriately resourced;
that the auditor provided a clear explanation of the scope and
strategy of the audit and that the auditor maintained independence
and objectivity. As part of the review of auditor effectiveness and
independence, BDO LLP has confirmed that it is independent of the
Company and has complied with applicable auditing standards. BDO
LLP do not provide any non-audit services to the Company and the
audit committee must approve the appointment of the external
auditor for any non-audit services. BDO LLP and prior to their
merger PKF (UK) LLP has held office as auditor for a total of 5
years; in accordance with professional guidelines the engagement
partner is rotated after at most five years, and the current
partner started working with the Company for the 31 January 2016
audit.
Following the review as noted above the audit committee is
satisfied with the performance of BDO LLP and recommends the
services of BDO LLP to the shareholders in view both of that
performance and the firm's extensive experience in auditing Venture
Capital Trusts.
Nomination and Remuneration Committees
As the Board is small and consists wholly of non-executive
directors and in view of the nature of a Venture Capital Trust it
has been decided that a nomination committee does not need to be
formed. The remuneration of the directors is reviewed by the whole
Board although no director is involved in setting his own
remuneration.
The appointment of new directors is decided by the whole Board.
Any search for new Board candidates is conducted, and appointments
made, on merit, against objective selection criteria having due
regard, amongst other things, to the benefits of diversity on the
Board, including gender. When recommending new appointments to the
Board the directors draw on their extensive business experience and
range of contacts to identify suitable candidates; the use of
formal advertisements and external consultants is not considered
cost-effective given the Company's size.
During the year Christopher Moorsom indicated his intention to
retire at the Annual General Meeting on 23 June 2016 and the
directors, in accordance with the policy described above, commenced
their search for a new director and Susannah Nicklin was appointed
to the Board on 4 May 2016. Christopher Macdonald resigned as a
director on 31 December 2016.
The Board has considered the recommendations of the Code
concerning gender diversity and welcomes initiatives aimed at
increasing diversity generally. The Board believe, however, that
all appointments should be made on merit rather than positive
discrimination. The policy of the Board is that maintaining an
appropriate balance around the Board table through a diverse mix of
skills, experience, knowledge and background is of paramount
importance and gender diversity is a significant element of
this.
Board and Committee Meetings
The following table sets out the directors' attendance at full
Board and audit committee meetings held during the year ended 31
January 2017.
Audit committee
Board meetings meetings
Director held attended held attended
----------------------- ------ --------- ------ ----------
Julian Avery* 4 4 2 2
Mike Killingley 4 4 2 2
Christopher Macdonald 4 4 2 2
Christopher Moorsom 4 2 2 1
Susannah Nicklin 4 3 2 1
----------------------- ------ --------- ------ ----------
*Julian Avery is not a member of the audit committee but is
invited to attend audit committee meetings.
Christopher Macdonald retired from the Board on 31 December
2016, Christopher Moorsom retired from the Board on 23 June 2016
and Susannah Nicklin was appointed to the Board on 4 May 2016.
The Board is in regular contact with the Manager between Board
meetings.
Internal Control
The Board acknowledges that it is responsible for the Company's
internal control systems and for reviewing their effectiveness. In
accordance with the AIC Code and the Guidance on Risk Management
published by the Financial Reporting Council in 2014, the audit
committee has established an ongoing process for identifying,
evaluating and managing the significant risks faced by the Company.
Internal controls are designed to manage the particular needs of
the Company and the risks to which it is exposed. The internal
control systems aim to ensure the maintenance of proper accounting
records, the reliability of the financial information upon which
business decisions are made and which is used for publication, and
that the assets of the Company are safeguarded. They can by their
nature only provide reasonable and not absolute assurance against
material misstatement or loss. The financial controls operated by
the Board include the authorisation of the investment strategy and
regular reviews of the results and investment performance.
The Board has delegated contractually to third parties, as set
out on page 13 in the Annual Report, the management of the
investment portfolio, the custodial services, including the
safeguarding of the assets, the day-to-day accounting, company
secretarial and administration requirements and registration
services. Each of these contracts was entered into after full and
proper consideration by the Board of the quality and cost of
services offered. The Board receives and considers regular reports
from the Manager. Ad hoc reports and information are supplied to
the Board as required. It remains the role of the Board to keep
under review the terms of the management agreement with the
Manager.
A bi-annual review of the control systems is carried out which
covers consideration of the key risks in three major areas:
corporate strategy and compliance with laws and regulations;
financial management and company reporting and relationships with
service providers. Each risk is considered with regard to the
controls exercised at Board level, reporting by service providers
and controls relied upon by the Board. The company secretary
reviews the annual statutory accounts to ensure compliance with
Companies Acts and the AIC Code and the audit committee reviews
financial information prior to its publication. The principal
features of the internal control systems which the Company has in
place in respect of financial reporting include segregation of
duties between the review and approval of unquoted investment
valuations and the recording of these valuations in the accounting
records. Bank reconciliations, cash forecasts and investment
valuations are produced on a weekly basis for review by the
Manager. Quarterly management accounts are produced for review and
approval by the Manager and the Board.
Relations with Shareholders
The Company welcomes the views of shareholders and places great
importance on communication with its shareholders. Shareholders
have the opportunity to meet the Board at the annual general
meeting. All shareholders are welcome to attend the meeting and to
ask questions of the directors. The Board is also happy to respond
to any written queries made by shareholders during the course of
the year. All communication from shareholders is recorded and
reviewed by the Board to ensure that shareholder enquiries are
promptly and adequately resolved.
The notice of the AGM accompanies this annual report, which is
sent to shareholders. A separate resolution is proposed for each
substantive issue. The Board and representatives of the Manager are
available to answer any questions shareholders may have.
The Company also communicates with shareholders through annual
and half-yearly reports, which appear on the Company's website
(http://www.amatiglobal.com/avct2_literature.php). The Board as a
whole approves the terms of the Chairman's Statement and Fund
Manager's Review which form part of these reports in order to
ensure that they present a fair, balanced and understandable
assessment of the Company's position and performance, business
model and strategy.
On behalf of the Board
Julian Avery
Chairman
27 April 2017
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the company and of the profit or loss for the company
for that 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
applicable UK accounting standards, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business; and
-- prepare a Strategic Report, a Directors' Report and
Directors' Remuneration Report which comply with the requirements
of the Companies Act 2006.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the Companies Act 2006 and, as
regards the Company financial statements, Article 4 of the
International Accounting Standards Regulation. They are also
responsible for safeguarding the assets of the company and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The directors are responsible for ensuring that the Annual
Report and accounts, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company's position, performance,
business model and strategy.
Website Publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the company's website is the responsibility of the directors.
The directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' Responsibilities pursuant to DTR4
The directors confirm to the best of their knowledge:
-- The financial statements which have been prepared in
accordance with UK Generally Accepted Accounting Practice give a
true and fair view of the assets, liabilities, financial position
and profit of the company.
-- The annual report includes a fair review of the development
and performance of the business and the financial position of the
Company, together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board
Julian Avery
Chairman
27 April 2017
DIRECTORS' REMUNERATION REPORT
Introduction
This report has been prepared in accordance with the
requirements of the Companies Act 2006 and The Large and
Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (the "Regulations"). Ordinary
resolutions for the approval of the Directors' Remuneration Policy
and the Directors' Annual Report on Remuneration will be put to
members at the AGM on 28 June 2017.
The Company's auditors, BDO LLP, are required to give their
opinion on certain information included in this report. The
disclosures which have been audited are indicated as such. The
auditors opinion on these and other matters is included in the
Independent Auditor's Report on pages 28 to 30 in the Annual
Report.
Annual Statement from the Chairman of the Company
Directors' fees are reviewed annually and are set by the Board
to attract individuals with the appropriate range of skills and
experience. In determining the level of fees their duties and
responsibilities are considered, together with the level of time
commitment required in preparing for and attending meetings. The
Company has not appointed a remuneration committee and any
decisions on remuneration are taken by the Board as a whole. The
remit of the Board regarding remuneration is included in the
Statement of Corporate Governance on page 22 in the Annual Report.
The Board last agreed to increase annual fees with effect from 1
February 2015 by GBP1,500 per director.
Directors' Remuneration Policy
The Board's policy is that the remuneration of directors should
reflect the experience of the Board as a whole, be fair and
comparable with that of other companies that are similar in size
and nature to the Company and have similar objectives and
structures. Directors' fees are set with a view to attracting and
retaining the directors required to oversee the Company effectively
and to reflect the specific circumstances of the Company, the
duties and responsibilities of the directors and the value and
amount of time committed to the Company's affairs. It is the
intention of the Board that, unless any revision to this policy is
deemed necessary, this policy will continue to apply in the
forthcoming and subsequent financial years. The Board has not
received any views from the Company's shareholders in respect of
the levels of directors' remuneration.
The Company's Articles of Association provide for a maximum
level of total remuneration of GBP90,000 per annum in aggregate.
The directors are not eligible for bonuses, pension benefits, share
options, long-term incentive schemes or other benefits. No
arrangements have been entered into between the Company and the
directors to entitle any of the directors to compensation for loss
of office.
This policy was last approved by the members at the AGM in 2014,
and is included as a resolution to be voted on by the members at
the AGM to be held on 28 June 2017.
Directors' Annual Report on Remuneration
Terms of appointment
No director has a contract of service with the Company. All of
the directors have been provided with letters of appointment which
include details of fees payable. The letters of appointment provide
that directors are appointed for a period of up to three years and
are subject to re-election by shareholders at the first annual
general meeting after their appointment. In accordance with
corporate governance best practice, the Board have resolved that
all directors will stand for annual re-election. Their re-election
is subject to shareholder approval. The letters of appointment are
available for inspection on request from the company secretary.
There is no period of notice to be given to terminate the letters
of appointment and no provision for compensation upon early
termination of appointment.
The following table shows, for each director, the original
appointment date and the annual general meeting at which they may
stand for re-election.
Director Date of original Due date
appointment for re-election
----------------- ----------------- -----------------
Julian Avery 8 November 2011 2017 AGM
Mike Killingley 22 February 2017 AGM
2006
Susannah Nicklin 4 May 2016 2017 AGM
----------------- ----------------- -----------------
Directors' fees for the year (Audited)
The fees payable to individual directors in respect of the year
ended 31 January 2017 are shown in the table below.
Total fee for Total fee
Director year ended for year
31 January 2017 ended
GBP 31 January
2016
GBP
-------------------------- ----------------- ------------
Julian Avery 23,500 23,500
Mike Killingley 19,000 19,000
Christopher Macdonald
(retired 31 December
2016) 15,125 16,500
Christopher Moorsom
(retired 23 June 2016) 6,554 16,500
Susannah Nicklin
(appointed 4 May 2016)* 12,242 n/a
-------------------------- ----------------- ------------
76,421 75,500
-------------------------- ----------------- ------------
*Susannah Nicklin's total fee for a year is GBP16,500.
Directors are remunerated exclusively by fixed fees and do not
receive bonuses, share options, long term incentives, pension or
other benefits.
Relative importance of spend on pay
The table below shows the remuneration paid to directors and
shareholder distributions in the year to 31 January 2017 and the
prior year:
2017 2016 Percentage
GBP GBP increase/(decrease)
----------------------- ---------- ---------- ---------------------
Total dividend
paid to shareholders 1,994,648 1,879,105 6.15
Total repurchase
of own shares 706,557 940,166 (24.85)
Total directors'
fees 76,421 75,500 1.22
----------------------- ---------- ---------- ---------------------
Directors' shareholdings (Audited)
The directors who held office at 31 January 2017 and their
interests in the shares of the Company (including beneficial and
family interests) were:
31 January 2017 31 January 2016
% of % of
issued issued
Shares share Shares share
held capital held capital
------------------- -------- --------- ------- ---------
Julian Avery 97,865 0.30 92,684 0.31
Mike Killingley 49,833 0.15 45,271 0.15
Susannah Nicklin
(appointed 4 May
2016) 2,793 0.01 n/a n/a
------------------- -------- --------- ------- ---------
The Company confirms that it has not set out any formal
requirements or guidelines for a director to own shares in the
Company.
Company Performance
The Board is responsible for the Company's investment strategy
and performance, although the management of the Company's
investment portfolio is delegated to the Manager through the
management agreement. The graph on page 27 in the Annual Report
compares the Company's share price with dividends added back at the
ex-dividend date to the FTSE AIM All-Share Total Return Index for
the period from the launch of the Company. This index was chosen
for comparison purposes, as it is the benchmark used for investment
performance measurement purposes.
At the last AGM held on 23 June 2016, 89.5% of shareholders
voted for, 10.5% voted against and 57,408 shares were withheld in
respect of the resolution approving the Directors' Remuneration
Report. At the AGM held in 2014 98.25% of shareholders voted for
the Remuneration Policy with 1.75% voting against and 23,051 shares
withheld. Ordinary resolutions for the approval of the Directors'
Annual Report on Remuneration and the Directors' Remuneration
Policy will be put to shareholders at the forthcoming AGM.
On behalf of the Board
Julian Avery
Chairman
27 April 2017
INCOME STATEMENT
for the year ended 31 January 2017
Note 2017 2017 2017 2016 2016 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
Gain on investments 8 - 7,748 7,748 - 2,098 2,098
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
Income 2 446 - 446 654 - 654
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
Investment
management
fees 3 (158) (473) (631) (139) (416) (555)
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
Other expenses 4 (302) - (302) (294) - (294)
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
(Loss)/profit
on ordinary
activities
before taxation (14) 7,275 7,261 221 1,682 1,903
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
Taxation on 5 - - - - - -
ordinary activities
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
(Loss)/profit
and total comprehensive
income attributable
to shareholders (14) 7,275 7,261 221 1,682 1,903
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
Basic and diluted
(loss)/earnings
per Ordinary
share 7 (0.04)p 22.89p 22.85p 0.74p 5.63p 6.37p
-------------------------- ----- ---------- --------- --------- --------- --------- ---------
The total column of this Income Statement represents the profit
and loss account of the Company. The supplementary revenue and
capital columns have been prepared in accordance with The
Association of Investment Companies' Statement of Recommended
Practice. There is no other comprehensive income other than the
results for the year discussed above. Accordingly a Statement of
total comprehensive income is not required.
All the items above derive from continuing operations of the
Company.
The notes on pages 35 to 47 in the Annual Report form part of
these financial statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 January 2017
Non-distributable reserves Distributable reserves
Called Capital
up Share Merger redemption Capital Special Capital Revenue Total
share premium reserve reserve reserve reserve reserve reserve reserves
capital GBP'000 GBP'000 GBP'000 (non-distributable) GBP'000 (distributable) GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
--------------- -------- --------- --------- ----------- --------------------- --------- ----------------- ---------- ----------
Opening
balance
as at 1
February
2016 1,513 9,771 425 332 8,476 17,150 (5,295) 28 32,400
Shares issued 152 3,306 - - - - - - 3,458
Share issue
expenses - (33) - - - - - - (33)
Repurchase of
shares (32) - - 32 - (707) - - (707)
Dividends paid - - - - - (1,966) - (28) (1,994)
Transfer of - - - - - - - -
merger
investment
disposals
Profit/(loss)
and
total
comprehensive
income for
the
year - - - - 8,011 - (736) (14) 7,261
Closing
balance
as at 31
January
2017 1,633 13,044 425 364 16,487 14,477 (6,031) (14) 40,385
--------------- -------- --------- --------- ----------- --------------------- --------- ----------------- ---------- ----------
for the year ended 31 January 2016
Non-distributable reserves Distributable reserves
Called Capital
up Share Merger redemption Capital Special Capital Revenue Total
share premium reserve reserve reserve reserve reserve reserve reserves
capital GBP'000 GBP'000 GBP'000 (non-distributable) GBP'000 (distributable) GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
--------------- -------- --------- --------- ----------- --------------------- --------- ----------------- ---------- ----------
Opening
balance
as at 1
February
2015 1,434 7,205 1,088 287 5,605 19,969 (4,769) (193) 30,626
Shares issued 124 2,588 - - - - - - 2,712
Share issue
expenses - (22) - - - - - - (22)
Repurchase of
shares (45) - - 45 - (940) - - (940)
Dividends paid - - - - - (1,879) - - (1,879)
Transfer of
merger
investment
disposals - - (663) - - - 663 - -
Profit and
total
comprehensive
income
for the year - - - - 2,871 - (1,189) 221 1,903
Closing
balance
as at 31
January
2016 1,513 9,771 425 332 8,476 17,150 (5,295) 28 32,400
--------------- -------- --------- --------- ----------- --------------------- --------- ----------------- ---------- ----------
Distributable reserves comprise the special reserve, the revenue
reserve and the capital reserve excluding investment holding gains.
At 31 January 2017, the amount of reserves deemed distributable is
GBP8,432,000 (31 January 2016: GBP11,883,000).
BALANCE SHEET
as at 31 January 2017
Note 2017 2016
GBP'000 GBP'000
--------------------------------------- ----- --------- ---------
Fixed assets
--------------------------------------- ----- --------- ---------
Investments held at fair value 8 38,878 30,826
--------------------------------------- ----- --------- ---------
Current assets
--------------------------------------- ----- --------- ---------
Debtors 9 659 99
--------------------------------------- ----- --------- ---------
Cash at bank 1,255 1,692
--------------------------------------- ----- --------- ---------
Total current assets 1,914 1,791
--------------------------------------- ----- --------- ---------
Current liabilities
--------------------------------------- ----- --------- ---------
Creditors: amounts falling due
within one year 10 (407) (217)
--------------------------------------- ----- --------- ---------
Net current assets 1,507 1,574
--------------------------------------- ----- --------- ---------
Total assets less current liabilities 40,385 32,400
--------------------------------------- ----- --------- ---------
Capital and reserves
--------------------------------------- ----- --------- ---------
Called up share capital* 11 1,633 1,513
--------------------------------------- ----- --------- ---------
Share premium account* 13,044 9,771
--------------------------------------- ----- --------- ---------
Merger reserve* 425 425
--------------------------------------- ----- --------- ---------
Capital redemption reserve* 364 332
--------------------------------------- ----- --------- ---------
Capital reserve (non-distributable)* 16,487 8,476
--------------------------------------- ----- --------- ---------
Special reserve 14,477 17,150
--------------------------------------- ----- --------- ---------
Capital reserve (distributable) (6,031) (5,295)
--------------------------------------- ----- --------- ---------
Revenue reserve (14) 28
--------------------------------------- ----- --------- ---------
Equity shareholders' funds 40,385 32,400
--------------------------------------- ----- --------- ---------
Net asset value per share 12 123.72p 107.07p
--------------------------------------- ----- --------- ---------
* These reserves are not distributable.
The financial statements on pages 31 to 47 in the Annual Report
were approved and authorised for issue by the Board of directors on
27 April 2017 and were signed on its behalf by
Julian Avery
Chairman
Company Number 04138683
The accompanying notes on pages 35 to 47 in the Annual Report
are an integral part of the balance sheet.
STATEMENT OF CASH FLOWS
for the year ended 31 January 2017
2017 2016
GBP'000 GBP'000
-------------------------------------- -------- --------
Cash flows from operating activities
Investment income received 526 613
Investment management fees (598) (551)
Other operating costs (293) (291)
Net cash outflow from operating
activities (365) (229)
Cash flows from investing activities
Purchases of investments (2,909) (4,126)
Disposals of investments 2,508 3,526
Net cash outflow from investing
activities (401) (600)
Net cash outflow before financing (766) (829)
Cash flows from financing activities
Net proceeds of share issues 2,888 2,681
Payments for share buy-backs (565) (940)
Equity dividends paid (1,994) (1,879)
Net cash inflow/(outflow) from
financing activities 329 (138)
Decrease in cash (437) (967)
--------------------------------------- -------- --------
Reconciliation of net cash flow
to movement in net cash
Decrease in cash during the
year (437) (967)
Net cash at 1 February 1,692 2,659
Net cash at 31 January 1,255 1,692
--------------------------------------- -------- --------
Reconciliation of Profit on Ordinary Activities Before Taxation
to Net Cash Outflow from Operating Activities
Profit on ordinary activities before
taxation 7,261 1,903
Net gain on investments (7,748) (2,098)
Increase in creditors, excluding
corporation tax payable 43 5
Decrease/(increase) in debtors 79 (39)
-------------------------------------------- -------- --------
Net cash outflow from operating activities (365) (229)
The accompanying notes on pages 35 to 47 in the Annual Report
are an integral part of the statement.
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting Policies
Principal Activity
The Company is a public limited company incorporated and
domiciled in the United Kingdom. The address of the registered
office is 27/28 Eastcastle Street, London W1W 8DH. The principal
activity of the Company is to invest in a portfolio of companies
whose shares are primarily traded on AIM.
Basis of Accounting
The financial statements have been prepared under FRS 102 'The
Financial Reporting Standard applicable in the UK and Republic of
Ireland' and in accordance with the SORP issued by the Association
of Investment Companies ("AIC") in November 2014 and on the
assumption that the Company maintains VCT status.
Income
Dividends on quoted shares are recognised as income on the date
that the related investments are marked ex dividend and, where no
dividend date is quoted, when the Company's right to receive
payment is established.
Fixed returns on non-equity shares and debt securities are
recognised on a time apportionment basis so as to reflect the
effective yield, provided there is no reasonable doubt that payment
will be received in due course. Interest receivable is included in
the accounts on an accruals basis. Where interest is rolled up or
payable on redemption it is recognised as income unless there is
reasonable doubt as to its receipt.
Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the income statement, all expenses have been prescribed as revenue
items except as follows:
-- Expenses are split and presented partly as capital items
where a connection with the maintenance or enhancement of the value
of the investments held can be demonstrated, and accordingly the
investment management fee is currently allocated 25% to revenue and
75% to capital, which reflects the directors' expected long-term
view of the nature of the investment returns of the Company.
Issue Costs
Issue costs in respect of ordinary shares issued by the Company
are deducted from the share premium account.
Taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance
sheet date. Deferred tax assets are only recognised when they arise
from timing differences where recovery in the foreseeable future is
regarded as more likely than not. Timing differences are
differences arising between the Company's taxable profits and its
results as stated in the financial statements which are capable of
reversal in one or more subsequent periods. Deferred tax is not
discounted.
Current tax is expected tax payable on the taxable income for
the period, 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 period.
No tax liability arises on gains from sales of fixed asset
investments by the Company by virtue of its VCT status.
Investments
Investments are designated on initial recognition as Fair Value
through Profit or Loss and are measured at subsequent reporting
dates at fair value.
Those venture capital investments that may be termed associated
undertakings are carried at fair value as determined by the
directors in accordance with the Company's normal policy as these
investments are held as part of the Company's portfolio with a view
to the ultimate realisation of capital gains. Carrying investments
at fair value is specifically permitted under FRS 102, where
venture capital entities hold investments as part of a
portfolio.
In respect of investments that are traded on AIM, ISDX or are
fully listed, these are generally valued at bid prices at close of
business on the Balance Sheet date. Investments traded on SETS
(London Stock Exchange's electronic trading service) are valued at
closing price as this is considered to be a more accurate
indication of fair value.
Unquoted investments are shown at fair value as assessed by the
directors in accordance with International Private Equity Venture
Capital Valuation ("IPEV") guidelines. Valuations of unquoted
investments are reviewed quarterly:
-- the shares may be valued by using the most appropriate
methodology recommended by the IPEV guidelines, including earnings
multiples, net assets, discounted cashflows and industry valuation
benchmarks.
-- alternatively where a value is indicated by a material
arms-length transaction by a third party in the shares of the
company the valuation will normally be based on this.
Convertible loan stock instruments are valued using present
value of future payments discounted at a market value of interest
for a similar loan and valuing the option at fair value.
The valuation of the Company's investment in TB Amati UK Smaller
Companies Fund is based on the published fund mid price NAV. The
NAV is provided by the Authorised Corporate Director of the fund, T
Bailey Fund Managers Limited.
Realised and unrealised surpluses or deficits on the disposal of
investments, the revaluation of investments and permanent
impairments in the value of investments are taken to the capital
reserve.
Financial Instruments
The Company classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement. Financial instruments are
recognised on trade date when the Company becomes a party to the
contractual provisions of the instrument. Investments are held at
fair value through profit or loss with changes in the fair value
recognised in the Income Statement and allocated to capital.
Financial instruments are derecognised on the trade date when
the Company is no longer a party to the contractual provisions of
the instrument.
Foreign Currency
Foreign currency assets and liabilities are translated into
sterling at the exchange rates ruling at the balance sheet date.
Transactions during the year are converted into sterling at the
rates ruling at the time the transactions are executed. All
exchange differences are reflected in the income statement.
Short-term Debtors and Creditors
Debtors and creditors with no stated interest rate and
receivable within one year are recorded at transaction price. Any
losses arising from impairment are recognised in the income
statement in other operating expenses.
Judgements and Key Sources of Estimation Uncertainty
The preparation of the Financial Statements requires management
to make judgments and estimates that affect the application of
policies and reported amounts of assets, liabilities, income and
expenses. The nature of estimation means that the actual outcomes
could differ from those estimates, possibly significantly. The most
critical estimates and judgments relate to the determination of
carrying value of investments at fair value through profit or loss
(see notes 8 and 18 on pages 41 and 44 in the Annual Report
respectively). The Company values investments by following the IPEV
guidelines.
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.
Capital Redemption Reserve
The capital redemption reserve is a non-distributable reserve
which is created when shares are repurchased for cancellation
resulting in a reduction of share capital.
Special Reserve
The special reserve is a distributable reserve which is created
by the authorised reduction of the share premium account and can be
applied in any manner in which the Company's profits available for
distribution (as determined in accordance with the Companies Act
2006) are able to be applied.
Capital Reserve
The following are taken to the capital reserve:
-- gains and losses on the disposal of investments
-- increase and decrease in the value of investments held at the year end
-- expenses allocated to this reserve in accordance with the above policies.
Revenue Reserve
The revenue reserve represents accumulated profits and losses
and any surplus profit is distributable by way of dividends.
2 Income
Year to Year to
31 January 31 January
2017 2016
GBP'000 GBP'000
----------------------------------- ----------- -----------
Income:
----------------------------------- ----------- -----------
Dividends from UK companies 320 308
----------------------------------- ----------- -----------
Dividends from overseas companies 23 20
----------------------------------- ----------- -----------
UK loan stock interest 98 317
----------------------------------- ----------- -----------
Interest from deposits 5 9
----------------------------------- ----------- -----------
446 654
----------------------------------- ----------- -----------
3 Investment Management Fees
The Manager provides investment management and secretarial
services to the Company under an investment management agreement.
Details of this agreement are given on page 13 in the Annual
Report.
Under this agreement the Manager receives a fee of 1.75% of the
net asset value of the Company in arrears.
Investment management fees for the year were as follows:
Year Year
to to
31 January 31 January
2017 2016
GBP'000 GBP'000
------------------------------------ ----------- -----------
Due to the Manager by the Company
at 1 February 137 133
------------------------------------ ----------- -----------
Investment management fees charged
to revenue and capital for the
year 631 555
------------------------------------ ----------- -----------
Fees paid to the Manager during
the year (598) (551)
------------------------------------ ----------- -----------
Due to the Manager by the Company
at 31 January 170 137
------------------------------------ ----------- -----------
The Manager also receives a secretarial and administration fee
of GBP76,000 (subject to an annual increase in line with the retail
prices index) annually in arrears.
No performance fee is payable in respect of the year ended 31
January 2017 or the year ended 31 January 2016 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, 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, any performance fee payable to the
Manager, irrecoverable VAT and exceptional costs, including
winding-up costs).
4 Other Expenses
Year Year
to to
31 January 31 January
2017 2016
GBP'000 GBP'000
------------------------------------ ----------- -----------
Directors' remuneration 76 76
------------------------------------ ----------- -----------
Auditor's remuneration - audit
of statutory financial statements 22 22
------------------------------------ ----------- -----------
Administration and secretarial
services 76 75
------------------------------------ ----------- -----------
Other expenses 128 121
------------------------------------ ----------- -----------
302 294
------------------------------------ ----------- -----------
The Company has no employees other than directors, they are
therefore the only key management personnel.
Details of directors' remuneration are provided in the audited
section of the directors' remuneration report on page 26 in the
Annual Report.
5 Tax on Ordinary Activities
5a Analysis of charge for the year
Year to Year to
31 January 31 January
2017 2016
GBP'000 GBP'000
-------------------- ----------- -----------
Charge for the year - -
-------------------- ----------- -----------
5b Factors affecting the tax charge for the year
Year to Year to
31 January 31 January
2017 2016
GBP'000 GBP'000
---------------------------------- ----------- -----------
Profit on ordinary activities
before taxation 7,261 1,903
---------------------------------- ----------- -----------
Corporation tax at standard
rate of 20% (2016: 20.17%) 1,452 384
---------------------------------- ----------- -----------
Effect of:
---------------------------------- ----------- -----------
Non-taxable dividends (64) (66)
---------------------------------- ----------- -----------
Non-taxable gains on investments (1,550) (423)
---------------------------------- ----------- -----------
Movement in excess management
expenses 162 105
---------------------------------- ----------- -----------
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 net capital gains
arising on the disposal of investments as such gains are not
taxable.
No deferred tax asset has been recognised on surplus management
expenses carried forward as it is not envisaged that any such tax
will be recovered in the foreseeable future. The amount of
unrecognised deferred tax asset is GBP1,560,000 (31 January 2016:
GBP1,675,000). This is calculated using a corporation tax rate of
17% which is the rate at which it is deemed that any losses would
be utilised.
6 Dividends
Amounts recognised as distributions to equity holders during the
year:
2017 2017 2016 2016
Revenue Capital Revenue Capital
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------------------- --------- --------- --------- ---------
Final dividend for the year ended 31 January 2015 of 3.5p per ordinary
share paid on 24 July
2015 - - - 1,051
-------------------------------------------------------------------------- --------- --------- --------- ---------
Interim dividend for the year ended 31 January 2016 of 2.75p per ordinary
share paid on 13
November 2015 - - - 828
-------------------------------------------------------------------------- --------- --------- --------- ---------
Final dividend for the year ended 31 January 2016 of 3.5p per ordinary
share paid on 22 July
2016 28 1,088 - -
-------------------------------------------------------------------------- --------- --------- --------- ---------
Interim dividend for the year ended 31 January 2017 of 2.75p per ordinary
share paid on 25 - 878 - -
November 2016
-------------------------------------------------------------------------- --------- --------- --------- ---------
28 1,996 1,879
-------------------------------------------------------------------------- --------- --------- --------- ---------
Set out below are the interim and final dividends paid or
proposed on Ordinary Shares in respect of the financial year.
2017 2017 2016 2016
Revenue Capital Revenue Capital
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------- ---------- --------- --------- ---------
Interim dividend for the year ended 31 January 2017 of 2.75p per
ordinary share (2016: 2.75p) - 878 - 828
------------------------------------------------------------------------- ---------- --------- --------- ---------
Proposed final dividend for the year ended 31 January 2017 of 4.25p per
ordinary share (2016:
3.5p) - 1,457* 28 1,088
------------------------------------------------------------------------- ---------- --------- --------- ---------
- 2,335 28 1,916
------------------------------------------------------------------------------------ --------- --------- ---------
*Based on shares in issue on 27 April 2017.
7 Earnings per Share
2017 2017 2017 2016 2016 2016
Net Weighted Earnings Net Weighted Earnings
profit/(loss) average per profit average per
GBP'000 shares share GBP'000 shares share
pence pence
--------- --------------- ----------- --------- --------- ----------- ---------
Revenue (14) 31,774,562 (0.04)p 221 29,854,090 0.74p
Capital 7,275 31,774,562 22.89p 1,682 29,854,090 5.63p
Total 7,261 31,774,562 22.85p 1,903 29,854,090 6.37p
--------- --------------- ----------- --------- --------- ----------- ---------
8 Investments
Level Level c Level c Total
a* i)* ii)* GBP'000
GBP'000 GBP'000 GBP'000
------------------------ --------- --------- ---------- ----------
Cost as at 1 February
2016 18,411 787 4,110 23,308
------------------------ --------- --------- ---------- ----------
Opening unrealised
gain/(loss) 11,145 (355) (2,314) 8,476
------------------------ --------- --------- ---------- ----------
Opening unrealised
loss recognised
in realised reserve (296) (110) (552) (958)
------------------------ --------- --------- ---------- ----------
Opening valuation
as at 1 February
2016 29,260 322 1,244 30,826
------------------------ --------- --------- ---------- ----------
Movements in the
year:
------------------------ --------- --------- ---------- ----------
Reclassification
in the year - 137 (137) -
------------------------ --------- --------- ---------- ----------
Purchases 2,909 - - 2,909
------------------------ --------- --------- ---------- ----------
Sales - proceeds (2,598) (7) - (2,605)
------------------------ --------- --------- ---------- ----------
Realised gain on
sales 250 - - 250
------------------------ --------- --------- ---------- ----------
Unrealised gain/(loss)
in the year 7,828 158 (488) 7,498
------------------------ --------- --------- ---------- ----------
Valuation as at
31 January 2017 37,649 610 619 38,878
------------------------ --------- --------- ---------- ----------
Cost at 31 January
2017 19,902 955 3,563 24,420
------------------------ --------- --------- ---------- ----------
Unrealised gain/(loss)
as at 31 January
2017 18,043 (235) (1,321) 16,487
------------------------ --------- --------- ---------- ----------
Closing unrealised
loss recognised
in realised reserve (296) (110) (1,623) (2,029)
------------------------ --------- --------- ---------- ----------
Valuation as at
31 January 2017 37,649 610 619 38,878
------------------------ --------- --------- ---------- ----------
Equity shares 37,649 610 81 38,340
------------------------ --------- --------- ---------- ----------
Preference shares - - 47 47
------------------------ --------- --------- ---------- ----------
Loan stock - - 491 491
------------------------ --------- --------- ---------- ----------
Valuation as at
31 January 2017 37,649 610 619 38,878
------------------------ --------- --------- ---------- ----------
*Refer to note 18 for definitions
2017 2016
GBP'000 GBP'000
---------------------------------------- -------- --------
Realised gains/(losses) on disposal 250 (31)
---------------------------------------- -------- --------
Unrealised gains on investments during
the year 7,498 2,129
---------------------------------------- -------- --------
Net gain on investments 7,748 2,098
---------------------------------------- -------- --------
Transaction Costs
During the year the Company incurred transaction costs of GBPnil
(31 January 2016: GBP2,000) and GBP7,000 (31 January 2016:
GBP5,000) on purchases and sales of investments respectively. These
amounts are included in the gain on investments as disclosed in the
income statement.
9 Debtors
2017 2016
GBP'000 GBP'000
--------------------------------- -------- --------
Receivable for investments sold 96 -
--------------------------------- -------- --------
Prepayments and accrued income 563 99
--------------------------------- -------- --------
659 99
--------------------------------- -------- --------
10 Creditors: Amounts Falling due within One Year
2017 2016
GBP'000 GBP'000
-------------------------------- -------- --------
Payable for investments bought 142 -
-------------------------------- -------- --------
Other creditors 265 217
-------------------------------- -------- --------
407 217
-------------------------------- -------- --------
11 Called Up Share Capital
2017 2017 2016 2016
Ordinary shares Number GBP'000 Number GBP'000
(5p shares)
-------------------------- ----------- -------- ----------- --------
Allotted, issued
and fully paid
at 1 February 30,259,489 1,513 28,670,817 1,434
Issued during the
year 3,031,153 152 2,483,093 124
Repurchase of own
shares for cancellation (647,573) (32) (894,421) (45)
At 31 January 32,643,069 1,633 30,259,489 1,513
-------------------------- ----------- -------- ----------- --------
During the year a total of 647,573 ordinary shares of 5p each
were purchased by the Company at an average price of 109.11p per
share.
Further details of the Company's share capital and associated
rights are shown in the Directors' Report on page 18 in the Annual
Report.
12 Net Asset Value per Ordinary Share
2017 2017 2017 2016 2016 2016
Net Ordinary NAV Net Ordinary NAV
assets shares per assets shares per
GBP'000 share GBP'000 share
pence pence
---------- --------- ----------- ------- --------- ----------- -------
Ordinary
share 40,385 32,643,069 123.72 32,400 30,259,489 107.07
---------- --------- ----------- ------- --------- ----------- -------
13 Significant Interests
The Company has the following significant interests (amounting
to an investment of 3% or more of the equity capital of an
undertaking):
Nominal % held
----------------------------- ----------- -------
Sportsweb.com 58,688 11.4%
----------------------------- ----------- -------
Sabien Technology Group plc 3,862,169 6.2%
----------------------------- ----------- -------
Universe Group plc 10,600,183 4.6%
----------------------------- ----------- -------
Hardide plc 62,500,000 4.1%
----------------------------- ----------- -------
Water Intelligence plc 395,370 3.3%
----------------------------- ----------- -------
Science in Sport plc 1,402,049 3.1%
----------------------------- ----------- -------
14 Material Disposals of Unquoted Investments
There were no material disposals of unquoted investments during
the year.
15 Post Balance Sheet Events
The following transactions have taken place between 31 January
2017 and the date of this report: 1,884,298 shares were allotted
raising net proceeds of GBP2.5m.
16 Related Parties
The Company retains Amati Global Investors as its Manager.
Details of the agreement with the Manager are set out on page 13 in
the Annual Report. The number of ordinary shares (all of which are
held beneficially) by certain members of the management team
are:
31 January
2017 shares
held
----------------- -------------
Paul Jourdan 210,787
----------------- -------------
Douglas Lawson 15,310
----------------- -------------
David Stevenson 9,120
----------------- -------------
The remuneration of the Directors, who are key management
personnel of the Company, is disclosed in the Directors'
Remuneration Report on page 26 in the Annual Report.
17 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.
18 Financial Instruments
The Company's financial instruments comprise equity and fixed
interest investments, cash balances and liquid resources including
debtors and creditors. The Company holds financial assets in
accordance with its investment policy to invest in qualifying
investments predominantly in AIM traded companies or companies to
be traded on AIM.
Classification of financial instruments
The Company held the following categories of financial
instruments at 31 January:
2017 2017 2016 2016
--------------------------------- -------- -------- -------- --------
(Book (Fair (Book (Fair
value) value) value) value)
--------------------------------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- --------
Assets at fair value through
profit and loss
--------------------------------- -------- -------- -------- --------
Investment portfolio 38,878 38,878 30,826 30,826
--------------------------------- -------- -------- -------- --------
Assets measured at amortised
cost
--------------------------------- -------- -------- -------- --------
Receivable for investments
sold 96 96 - -
--------------------------------- -------- -------- -------- --------
Accrued income and other
debtors 553 553 99 99
--------------------------------- -------- -------- -------- --------
Cash at bank 1,255 1,255 1,692 1,692
--------------------------------- -------- -------- -------- --------
Liabilities measured at
amortised cost
--------------------------------- -------- -------- -------- --------
Payable for investments
bought (142) (142) - -
--------------------------------- -------- -------- -------- --------
Accrued expenses (265) (265) (217) (217)
--------------------------------- -------- -------- -------- --------
Total for financial instruments 40,375 40,375 32,400 32,400
--------------------------------- -------- -------- -------- --------
Fixed asset investments (see note 8) are measured at fair value.
For quoted securities this is generally the bid price or, in the
case of SETS securities, the closing price. As explained in note 1,
unquoted investments are valued in accordance with the IPEV
guidelines. Changing one or more inputs for level c assets would
not have a significant impact on the valuation. For example,
earnings multiple calculations are used to value some unquoted
equity holdings. These multiples are derived from a basket of
comparable quoted companies, with appropriate discounts applied.
These discounts are subjective and based on the Manager's
experience. In respect of unquoted investments, these are valued by
the directors using rules consistent with IPEV guidelines.
Investments in TB Amati UK Smaller Companies Fund are based on the
published fund mid price NAV. The fair value of all other financial
assets and liabilities is represented by their carrying value in
the balance sheet.
The Company's investing activities expose it to various types of
risk that are associated with the financial instruments and markets
in which it invests. The most important types of financial risk to
which the Company is exposed are market risk, credit risk and
liquidity risk. The nature and extent of the financial instruments
outstanding at the balance sheet date and the risk management
policies employed by the Company are discussed below.
In order to provide further information on the valuation
techniques used to measure assets carried at fair value, the
measurement basis has been categorised into a "fair value
hierarchy" as follows:
- Quoted market prices in active markets - "Level a"
Inputs to Level a fair values are quoted prices in active
markets. An active market is one in which transactions occur with
sufficient frequency and volume to provide pricing information on
an ongoing basis. The Company's investments classified within this
category are AIM traded companies and fully listed companies..
- Valued using models with significant observable market
parameters - "Level b"
Inputs to Level b fair values are inputs other than quoted
prices included within Level a that are observable for the asset,
either directly or indirectly.
- Valuation technique; - "Level c i) & ii)"
i) Fair value is measured using a valuation technique that is
based on data from an observable market; or
ii) Fair value is measured using a valuation technique that is
not based on data from an observable market.
Financial assets at fair value
Year ended 31 January Year ended 31 January
2017 2016
Level Level Level Total Level Level Level Total
a c i) c ii) a c i) c ii)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- -------- --------- -------- -------- --------
Equity shares 37,649 610 81 38,340 29,260 322 190 29,772
Preference
shares - - 47 47 - - 30 30
Loan stock - - 491 491 - - 1,024 1,024
---------------
37,649 610 619 38,878 29,260 322 1,244 30,826
--------------- -------- -------- -------- -------- --------- -------- -------- --------
Level c financial assets at fair value
Year ended 31 Year ended 31 January
January 2017 2016
Equity Preference Loan Equity Preference Loan
shares shares stock Total shares shares stock Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- ----------- -------- -------- -------- ----------- ---------- ----------
Opening balance
at 1 February 512 30 1,024 1,566 1,078 15 2,842 3,935
Purchases - - - - 133 - - 133
Disposal proceeds - - - - (485) - (337) (822)
Total net gains/(losses)
recognised in
the income statement 179 17 (533) (337) (214) 15 (1,481) (1,680)
-------------------------- -------- ----------- -------- -------- -------- ----------- ---------- ----------
Closing balance
at 31 January 691 47 491 1,229 512 30 1,024 1,566
-------------------------- -------- ----------- -------- -------- -------- ----------- ---------- ----------
19 Market Risk
Market risk arises from uncertainty about the future prices of
financial instruments held in accordance with the Company's
investment objectives. It represents the potential loss that the
Company might suffer through holding positions in the face of
market investments.
The Company's strategy on the management of investment risk is
driven by the Company's investment objective as outlined on page 11
in the Annual Report. The management of market risk is part of the
investment management process. The Board seeks to mitigate the
internal risks by setting policy, regular reviews of performance,
enforcement of contractual obligations and monitoring progress and
compliance with an awareness of the effects of adverse price
movements through detailed and continuing analysis, with an
objective of maximising overall returns to shareholders.
Investments in unquoted stocks and AIM traded companies, by their
nature, involve a higher degree of risk than investments in the
main market. Some of that risk can be mitigated by diversifying the
portfolio across business sectors and asset classes. The Company's
overall market positions are monitored by the Board on a quarterly
basis.
Details of the Company's investments at the balance sheet date
are disclosed in the Investment Portfolio on pages 9 and 10 in the
Annual Report. FRS 102 requires the directors to consider the
impact of changing one or more of the inputs used as part of the
valuation process to reasonable possible alternative
assumptions.
As at 31 January 2017 96.8% (31 January 2016: 94.9%) of the
Company's investments are traded. A 10% increase in stock prices as
at 31 January 2017 would have increased the net assets attributable
to the Company's shareholders and the total profit for the year by
GBP3,765,000 (31 January 2016: GBP2,926,000); an equal change in
the opposite direction would have decreased the net assets
attributable to the Company's shareholders and the total profit for
the year by an equal amount.
As at 31 January 2017 3.2% (31 January 2016: 5.1%) of the
Company's investments are in unquoted companies held at fair value.
A 10% increase in the valuations of unquoted investments at 31
January 2017 would have increased the net assets attributable to
the Company's shareholders and the total profit for the year by
GBP123,000 (31 January 2016: GBP157,000); an equal change in the
opposite direction would have decreased the net assets attributable
to the Company's shareholders and the total profit for the year by
an equal amount.
20 Interest Rate Risk
Fixed rate
Six of the Company's financial assets are interest bearing at a
fixed rate, no assets have a floating interest rate, all other
assets are non-interest bearing. As a result, the Company is
subject to exposure to fair value interest rate risk due to
fluctuations in the prevailing levels of market interest rates,
however the impact of a reasonable movement in interest rates would
not be significant to the net assets and profit for the year.
The total current market value of these stocks is GBP491,000 (31
January 2016: GBP1,024,000), the weighted average interest rate is
8.0% (31 January 2016: 13.6%) and the average period to maturity is
0.6 years (31 January 2016: 2.0 years).
Details of the Company's investments at the balance sheet date
are provided on pages 9 and 10 in the Annual Report.
21 Credit Risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The carrying amount of
financial assets best represents the maximum credit risk exposure
at the balance sheet date. At 31 January 2017, the financial assets
exposed to credit risk, representing convertible loan stock
instruments, amounts due from brokers, accrued income and cash
amounted to GBP1,849,000 (31 January 2016: GBP2,799,000). The
convertible loans in China Food Company plc and Sorbic
International plc are secured over the buildings and land use
rights of the companies.
Credit risk on the unquoted loan stock held within unlisted
investments is also considered to be part of market risk as the
value of the loan stock is influenced in part by the price of the
underlying equity.
The loan stock investments in the table below are considered
past due, but not individually impaired, because it is believed
that the loan is fully recoverable.
0-6 Total 0-6 Total
Months 2017 Months 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- -------- --------
Loan stock past due 491 491 508 508
--------------------- -------- -------- -------- --------
Interest of GBP7,000 was accrued at 31 January 2017 in relation
to Fox Marble Group plc, The interest is payable quarterly in
arrears and the amount due to the quarter ended 28 February 2017
was paid on 6 March 2017.
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 traded on AIM are held
by Bank of New York Nominees, the Company's custodian. Bankruptcy
or insolvency of the custodian may cause the Company's rights with
respect to securities held by the custodian to be delayed or
limited.
At 31 January 2017, cash held by the Company was held by The
Bank of New York and UBS. Bankruptcy or insolvency of the
institutions may cause the Company's rights with respect to the
cash held by it to be delayed or limited. Should the credit quality
or the financial position of the institutions deteriorate
significantly the Company has the ability to move the cash at short
notice.
There were no significant concentrations of credit risk to
counterparties at 31 January 2017 or 31 January 2016.
22 Liquidity Risk
The Company's financial instruments include investments in
unlisted equity investments which are not traded in an organised
public market and which generally may be illiquid. As a result, the
Company may not be able to liquidate quickly some of its
investments in these instruments at an amount close to their fair
value in order to meet its liquidity requirements, or to respond to
specific events such as deterioration in the creditworthiness of
any particular issuer. The proportion of the portfolio invested in
unlisted equity investments is not considered significant given the
amount of investments in readily realisable securities.
The Company's liquidity risk is managed on an ongoing basis by
the Manager in accordance with policies and procedures in place as
described in the Strategic Report on page 15 in the Annual Report.
The Company's overall liquidity risks are monitored on a quarterly
basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses.
At 31 January 2017, these investments were valued at GBP14,815,000
(31 January 2016: GBP5,270,000). The directors consider that
frequently traded AIM investments with a market capitalisation of
greater than GBP200m represent readily realisable securities.
23 Capital Management Policies and Procedures
The Company's capital management objectives are:
-- to ensure that it will be able to continue as a going concern;
-- to satisfy the relevant HMRC requirements; and
-- to maximise the income and capital return to its shareholders.
As a VCT, the Company must have, within 3 years of raising its
capital, at least 70% by value of its investments in VCT qualifying
holdings, which are relatively high risk UK smaller companies. In
satisfying this requirement, the Company's capital management scope
is restricted. The Company does have the option of maintaining or
adjusting its capital structure by varying dividends, returning
capital to shareholders, issuing new shares or selling assets to
maintain a certain level of liquidity. There has been no change in
the objectives, policies or processes for managing capital from the
previous year.
The structure of the Company's capital is described in note 11
and details of the Company's reserves are shown in the Statement of
Changes in Equity on page 32 in the Annual Report.
The Board, with the assistance of the Manager, monitors and
reviews the broad structure of the Company's capital on an ongoing
basis. This review includes:
-- the need to buy back equity shares for cancellation, which
takes account of the difference between the net asset value per
share and the share price (i.e. the premium or discount);
-- the need for new issues of shares; and
-- the extent to which revenue in excess of that which is to be distributed should be retained.
The Company is subject to externally imposed capital
requirements:
a. as a public limited company, the Company is required to have
a minimum share capital of GBP50,000; and
b. in accordance with the provisions of the Income Tax Act 2007,
the Company as a Venture Capital Trust:
i) is required to make a distribution each year such that it
does not retain more than 15% of income from shares and securities;
and
ii) is required to derive 70% of its income from shares and securities.
These requirements are unchanged since last year and the Company
has complied with them at all times.
SHAREHOLDER INFORMATION
Share Price
The Company's shares are listed on the London Stock Exchange.
The bid price of the Company's shares can be found on Amati Global
Investors' website: http://www.amatiglobal.com/avct2.php.
Net Asset Value per Share
The Company's net asset value per share as at 31 January 2017
was 123.72p. The Company normally announces its net asset value on
a weekly basis. Net asset value per share information can be found
on the Amati Global Investors' website:
http://www.amatiglobal.com/avct2.php
Dividends
Shareholders who wish to have future dividends reinvested in the
Company's shares or wish to have dividends paid directly into their
bank account rather than sent by cheque to their registered address
should contact Share Registrars Limited on 01252 821390 or email
enquiries@shareregistrars.uk.com.
Financial Calendar
May 2017 Annual report for the year ended 31 January 2017 to be
circulated to shareholders
June 2017 Annual General Meeting
September 2017 Half-yearly Report for the six months ending 31
July 2017 to be circulated to shareholders
31 January 2018 Year-end
Annual General Meeting
The Annual General Meeting of the Company will be held on
Wednesday 28 June 2017 at 2.00pm at Milton Court Theatre, The
Guildhall School of Music & Drama, Silk Street, Barbican,
London EC2Y 9BH. The notice of the meeting, together with the
enclosed proxy form, is included on pages 51 and 55 of the Annual
Report.
SUPPLEMENTARY INFORMATION FOR THE ANNUAL GENERAL MEETING
As explained on page 18 in the Annual Report the Company is
seeking shareholder authority to amend the Investment Policy of the
Company. Below is the proposed new Investment Policy.
A. Investment Policy
Unless specified otherwise, defined terms shall have the meaning
given to them in the FCA Handbook from time to time.
"ITA" means the Income Tax Act 2007 (as amended).
"Manager" means Amati Global Investors Limited.
"VCT" means a venture capital trust under section 842AA of the
Income and Corporation Taxes Act 1988.
"Qualifying Investment" means an investment in shares in, or
securities of a company or group carrying on a qualifying trade
wholly or mainly in the UK satisfying the conditions in Chapter 4
of Part 6 of ITA, and held by a VCT which meets the requirements
described in Part 6 of ITA.
Investment Objectives
The investment objectives of the Company are to generate tax
free capital gains and regular dividend income for its
shareholders, primarily through Qualifying Investments in
AIM-traded companies and through non-qualifying investments as
allowed by the VCT legislation. The Company will manage its
portfolio to comply with the requirements of the rules and
regulations applicable to VCTs from time to time. The Company's
policy is to hold a diversified portfolio across a broad range of
sectors to mitigate risk.
Investment Parameters
Whilst the objective is to make Qualifying Investments primarily
in companies traded on AIM or on NEX, the Company may also make
Qualifying Investments in companies likely to seek a quotation on
AIM or NEX. With regard to the non-qualifying portfolio the Company
makes investments which are permitted under the VCT regulations,
including shares or units in an Alternative Investment Fund (AIF)
or an Undertakings for Collective Investment in Transferable
Securities (UCITS) fund, and shares in other companies which are
listed on a regulated market such as the Main Market of the London
Stock Exchange. For continued approval as a VCT under the ITA the
Company must, within three years of raising funds, maintain at
least 70% of its value (based on cost price, or last price paid per
share if there is an addition to the holding) in qualifying
investments. Any investments by the Company in shares or securities
of another company must not represent more than 15% of the
Company's net asset value at the time of purchase.
B. Strategy for Achieving Objectives
The strategy for achieving the Investment Objectives which
follows is not part of the formal Investment Policy. Any material
amendment to the formal Investment Policy may only be made with
shareholder consent, but that consent applies only to the formal
Investment Policy above and not any part of the Strategy for
Achieving Objectives or Key Performance Indicators below.
Qualifying Investments Strategy
The Company is likely to be a long term investor in most
Qualifying Investments, with sales generally only being made where
an investment case has deteriorated or been found to be flawed, or
to realise profits, adjust portfolio weightings, fund new
investments or pay dividends. Construction of the portfolio of
Qualifying Investments is driven by the historic investments made
by the Company and by the availability of suitable new investment
opportunities. The Manager may co-invest in companies in which
other funds managed by Amati Global Investors invest.
Non-Qualifying Investments Strategy
The assets of the portfolio which are not in Qualifying
Investments will be invested by the Manager in investments which
are allowable under the rules applicable to VCTs. Currently cash
not needed in the short term is invested a combination of the
following (though ensuring that no more than 15% of the Company's
funds are invested in any one entity at the time of purchase):
(i) the TB Amati UK Smaller Companies Fund (which is a UCITS
fund), or other UCITS funds approved by the Board;
(ii) direct equity investments in small and mid-sized companies
and debt securities in each case listed on the Main Market of the
London Stock Exchange; and
(iii) cash or cash equivalents (including money market funds)
which are redeemable within 7 days.
The Company is also seeking shareholder authority to send or
supply documents or information to shareholders by making them
available on a website or other electronic means as explained on
page 19 in the Annual Report. Below is further information in
relation to Resolution 14.
Electronic Communications
The Company is seeking shareholders' consent to send or supply
documents and information ("Documents and Information") to them in
electronic form and via its website (www.amatiglobal.com).
Increased use of electronic communications will deliver savings to
the Company in terms of administration, printing and postage costs,
as well as speeding up the provision of information to
shareholders. The reduced use of paper will also have environmental
benefits. Under the proposal, when new Documents and Information
become available on the website, we will notify you by letter to
your normal address or, if you have consented to email notification
and provided an email address, by email.
Under the provisions of the Companies Act 2006, we are required
to ask you individually to confirm your agreement to the Company
sending or supplying the Documents and Information to you as a
member of the Company via www.amatiglobal.com (the "Website"). If
you do not opt out you are deemed to have consented. You may opt
out by choosing Option B on the enclosed Consent to Electronic
Communications form.
If the resolution to permit website communications (as set out
in the Notice on page 52 in the Annual Report) is passed by
shareholders on 28 June 2017, and if you do not opt out from
electronic communication within 28 days of the date of this notice,
then you will be taken to have agreed (under paragraph 10 of
Schedule 5 to the Companies Act 2006) that the Company may send or
supply the Documents and Information to you via the Website.
Irrespective of the outcome of the vote, you can indicate your
communication preferences as indicated on the electronic
communications form.
If the Company is required to restrict the sending of any
Documents and Information to any shareholders within or outside the
European Economic Area (EEA), for example due to the local laws of
the EEA country or outside in which the particular shareholders are
resident or otherwise located, we will not be permitted to use
electronic means to communicate with any shareholders holding
shares of the same class as those shareholders within the EEA or
outside. In any such case, we will send paper copies of the
Documents and Information.
Shareholders who wish to change their preferences about
electronic communications in the future or provide an updated email
address should contact Share Registrars by emailing
enquiries@shareregistrars.uk.com or by writing to Share Registrars
Limited, The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR.
For those shareholders who are registered with the web-based share
portal at www.shareregistrars.uk.com please log in and click on
"Personal Details" to update.
Electronic Communications Extra Information
In order to access the Documents and Information on the Website,
you will need access to the internet and to a program or app that
can display the documents. At this time, you will need a program or
app that can display documents in Portable Document Format ("PDF").
As at the date of this document, you can download the free version
of Adobe Acrobat from https://get.adobe.com/uk/reader/. Our
providing this link should not be interpreted as approval by us of
such linked website or information you may obtain from it, and we
accept no liability in respect of your access or use of third party
websites. We have no control over the contents of those sites or
resources.
NOTICE OF ANNUAL GENERAL MEETING
It is the Board's opinion that all resolutions are in the best
interests of shareholders as a whole and the Board recommends that
shareholders should vote in favour of all resolutions. Any
shareholder who is in any doubt as to what action to take should
consult an appropriate independent adviser authorised under the
Financial Services and Markets Act 2000.
If you have sold or transferred all your Shares in the Company,
please forward the Annual Report, together with the forms of proxy,
to the purchaser, transferee, stockbroker or other agent through
whom the sale or transfer was effected, for transmission to the
purchaser or transferee.
Notice is hereby given that the Annual General Meeting of Amati
VCT 2 plc (the "Company") will be held on Wednesday 28 June 2017 at
Milton Court Theatre, The Guildhall School of Music & Drama,
Silk Street, Barbican, London EC2Y 9BH at 2.00pm (the "Meeting")
for the transaction of the following business:
Ordinary Business
To consider, and if thought fit, to pass the following
Resolutions 1 to 11 as Ordinary Resolutions of the Company:
Ordinary Resolutions
1. To receive and adopt the Directors' Report and financial
statements of the Company for the financial year ended 31 January
2017 together with the Independent Auditor's Report thereon.
2. To approve the Directors' Annual Report on Remuneration for
the financial year ended 31 January 2017.
3. To approve the Directors' Remuneration Policy.
4. To approve a final dividend of 4.25p per share payable on 21
July 2017 to shareholders on the register at 16 June 2017.
5. To re-appoint BDO LLP of 55 Baker Street, London, W1U 7EU as
auditor of the Company from the conclusion of the Meeting until the
conclusion of the next annual general meeting of the Company to be
held in 2018 at which financial statements are laid before the
Company.
6. To authorise the directors to fix the remuneration of the auditor.
7. To re-elect Julian Avery as a director of the Company.
8. To re-elect Mike Killingley as a director of the Company.
9. To re-elect Susannah Nicklin as a director of the Company.
10. That, in substitution for any existing authorities, but
without prejudice to the exercise of any such authority prior to
the date of the passing of this resolution, the Directors be and
hereby are authorised in accordance with section 551 of the
Companies Act 2006 (the "2006 Act"), as amended, to exercise all
powers of the Company to allot shares of 5p each in the capital of
the Company and to grant rights to subscribe for or to convert any
security into shares up to an aggregate nominal amount of
GBP1,250,000, provided that the authority conferred by this
resolution shall expire on the fifth anniversary of the date of the
passing of this resolution unless renewed, varied or revoked by the
Company in general meeting, save that the Company may before such
expiry make an offer or agreement which would or might require
relevant securities to be allotted after such expiry and the board
may allot relevant securities in pursuance of such an offer or
agreement as if the authority conferred hereby had not expired.
11. That the proposed amendments to the Company's Investment
Policy be approved and the revised Investment Policy as detailed in
the Annual Report and Financial Statements, a copy of which is
initialled for the purpose of identification by the Chairman of the
Annual General Meeting and produced to the Annual General Meeting,
be and is hereby approved and adopted with effect from 28 June 2017
as the Company's Investment Policy in place of its existing
Investment Policy.
SPECIAL BUSINESS
To consider, and if thought fit, to pass the following
Resolutions as Special Resolutions of the Company:
Special Resolutions
12. THAT in substitution for any existing authorities, the
directors be and hereby are empowered pursuant to sections 570 and
573 of the Companies Act 2006 to allot or make offers or agreements
to allot equity securities (which expression shall have the meaning
ascribed to it in section 560 of the Act) for cash pursuant to the
authority given in accordance with section 551 of the Act by
resolution 10 above as if section 561(1) of the Act did not apply
to any such allotment, up to an aggregate nominal amount of
GBP1,250,000. The authority hereby conferred by this resolution
shall expire (unless previously renewed or revoked) on the earlier
of the date of the annual general meeting of the Company to be held
in 2018 and the date which is 15 months after the date on which
this resolution is passed.
13. THAT, in substitution for existing authorities, the Company
be and is hereby empowered to make one or more market purchases
within the meaning of Section 701 of the Act, of the Ordinary
Shares (either for cancellation or for the retention of treasury
shares for future re-issue or transfer) provided that:
(i) the maximum aggregate number of Ordinary Shares authorised
to be purchased is such number thereof being 14.99% of the issued
ordinary share capital of the Company as at the date of this
resolution;
(ii) the minimum price which may be paid per Ordinary Share is
5p per share, the nominal amount thereof;
(iii) the maximum price (exclusive of expenses) which may be
paid per Ordinary Share is an amount equal to 105% of the average
of the middle market quotation of such Ordinary Share taken from
the London Stock Exchange daily official list for the five business
days immediately preceding the day on which such Ordinary Share is
to be purchased;
(iv) the authority hereby conferred shall expire on the earlier
of the annual general meeting of the Company to be held in 2018 and
the date which is 15 months after the date on which this Resolution
is passed; and
(v) the Company may make a contract to purchase its own Ordinary
Shares under the authority conferred by this resolution prior to
the expiry of such authority which will or may be executed wholly
or partly after the expiration of such authority, and may make a
purchase of such Ordinary Shares pursuant to any such contract.
14. THAT the Company may send or supply documents or information
to shareholders by making them available on a website or other
electronic means.
By order of the Board Registered office:
The City Partnership (UK) Limited 27/28 Eastcastle Street
Secretary London W1W 8DH
27 April 2017
Notes
1. A member entitled to attend and vote at the Meeting convened
by the above Notice is entitled to appoint one or more proxies to
attend and, on a poll, to vote in his place. A proxy need not be a
member of the Company.
2. To appoint a proxy you may use the Form of Proxy enclosed
with the Notice of Annual General Meeting. To be valid, the Form of
Proxy, together with the power of attorney or other authority (if
any) under which it is signed or a notarially certified or office
copy of the same, must be deposited by 2.00pm on 26 June 2017 to
Share Registrars, The Courtyard, 17 West Street, Farnham GU9 7DR.
Completion of the Form of Proxy will not prevent you from attending
and voting in person.
3. Pursuant to regulation 41 of the Uncertificated Securities
Regulations 2001, only shareholders registered in the register of
members of the Company on 26 June 2017 (48 hours before the time
appointed for the Meeting) shall be entitled to attend and vote at
the Annual General Meeting in respect of the number of shares
registered in their name at such time. If the Meeting is adjourned,
the time by which a person must be entered on the register of
members of the Company in order to have the right to attend and
vote at the adjourned Meeting is 48 hours before the time appointed
for the adjourned Meeting. Changes to the register of members after
the relevant times shall be disregarded in determining the rights
of any person to attend and vote at the Meeting.
4. You may appoint more than one proxy provided each proxy is
appointed to exercise rights attached to different shares. You may
not appoint more than one proxy to exercise rights attached to any
one share. To appoint more than one proxy, you should photocopy the
proxy form. Please indicate in the box next to the proxy holder's
name the number of securities in relation to which they are
authorised to act as your proxy. Please also indicate by ticking
the box provided if the proxy instruction is one of multiple
instructions being given. All forms must be signed and returned
together in the same envelope.
A reply paid form of proxy is enclosed with members' copies of
the Annual Report. To be valid, it should be lodged with the
Company's registrars, Share Registrars, The Courtyard, 17 West
Street, Farnham GU9 7DR so as to be received not later than 48
hours before the time appointed for the Meeting or any adjourned
meeting or, in the case of a poll taken subsequent to the date of
the Meeting or adjourned meeting, so as to be received no later
than 24 hours before the time appointed for taking the poll.
5. Online voting: alternatively, you may register your votes
electronically by visiting the website of the Company's registrar.
You will need to register in order to be able to use this service.
To register, please visit www.shareregistrars.uk.com and click on
"Register" under the title Account Log In. If you have already
registered, log in and click on "My Meeting Votes".
6. As at 26 April 2017 (being the last business day prior to the
publication of this Notice) the Company's issued share capital
consists of 34,285,177 shares of 5p each, carrying one vote each at
an annual general meeting of the Company. Therefore, the total
voting rights in the Company as at 26 April 2017 are
34,285,177.
7. Appointment of a proxy will not preclude a member from
subsequently attending, voting and speaking at the Meeting should
he or she subsequently decide to do so. You can only appoint a
proxy using the procedures set out in these notes and the notes to
the proxy form.
8. Any person to whom this notice is sent who is a person
nominated under section 146 of the Companies Act 2006 to enjoy
information rights (a "Nominated Person") may, under an agreement
between the Nominated Person and the member by whom he/she was
nominated, have a right to be appointed (or to have someone else
appointed) as a proxy for the Meeting. If a Nominated Person has no
such proxy appointment right or does not wish to exercise it,
he/she may, under any such agreement, have a right to give
instructions to the shareholder as to the exercise of voting
rights.
9. The statement of the rights of members in relation to the
appointment of proxies in paragraphs 3 to 5 above does not apply to
Nominated Persons. The rights described in these paragraphs can
only be exercised by members of the Company.
10. The Register of Directors' Interests will be available for inspection at the Meeting.
11. Except as provided above, members who have general queries
about the Meeting should use the following means of communication
(no other methods of communication will be accepted):
-- Calling Doreen Nic on 0131 510 7465 or
-- Emailing vct-enquiries@amatiglobal.com
You may not use any electronic address provided either in this
notice of Meeting or any related documents (including the
chairman's letter and proxy form) to communicate with the Company
for any purpose other than those expressly stated.
CORPORATE INFORMATION
....................................................................................................................................
Directors Registrar
Julian Ralph Avery Share Registrars
Mike Sedley Killingley The Courtyard
Susannah Nicklin 17 West Street
Farnham
GU9 7DR
all of:
27/28 Eastcastle Street
London Auditor
W1W 8DH BDO LLP
55 Baker Street
Secretary London
The City Partnership (UK) W1U 7EU
Limited
110 George Street
Edinburgh
EH2 4LH Solicitors
Rooney Nimmo
8 Walker Street
Edinburgh
Fund Manager EH3 7LH
Amati Global Investors
Limited
18 Charlotte Square Bankers
Edinburgh The Bank of New York
Mellon SA/NV
EH2 4DF London Branch
160 Queen Victoria Street
VCT Tax Adviser London
Philip Hare & Associates EC4V 4LA
LLP
Suite C, First Floor
4-6 Staple Inn
Holborn London
WC1V 7QH
This information is provided by RNS
The company news service from the London Stock Exchange
END
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