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RNS
Amati VCT 2 plc  -  AT2   

Half-year Report

Released 17:05 28-Sep-2017

RNS Number : 1556S
Amati VCT 2 plc
28 September 2017
 

Amati VCT 2 plc

HALF-YEARLY REPORT

For the six months ended 31 July 2017

 

Amati VCT 2 plc announces that its 2017 Half-Yearly Report has been published. The full report will be made available on the National Storage Mechanism website: http://www.morningstar.co.uk/uk/NSM and can be accessed via the Company's website at www.amatiglobal.com/avct2_literature.php.  It will be circulated to shareholders shortly.

 

Page numbers and cross-references in this announcement below refer to page numbers and cross-references in the PDF of the Half-yearly Report.

 

CONTENTS

 



Overview

1

Chairman's Statement

3

Fund Manager's Review

6

Investment Portfolio

10

Principal Risks and Uncertainties

13

Statement of Directors' Responsibilities

13

Income Statement

14

Statement of Changes in Equity

16

Condensed Balance Sheet

18

Statement of Cash Flows

19

Notes to the Financial Statements

20

Shareholder Information

26

Corporate Information

29

 

 

OVERVIEW

 

Table of investor returns to 31 July 2017


 

 

 

 

Date

 

NAV Total Return with dividends reinvested

Numis Alternative Markets Total

Return

Index

Re-launch as Amati VCT 2 following merger

9 November 2011*

99.0%

40.3%

Appointment of Amati Global Investors ("Amati") as Manager of Amati VCT 2, which was known as ViCTory VCT at the time

 

 

25 March 2010

 

 

108.8%

 

 

44.2%

*Date of the share capital reconstruction when the NAV was re-based to approximately 100p per share.

 

Key data

 

6 months ended

31/07/17

(undaudited)

Year

ended

31/01/17

(audited)

6 months ended

31/07/16

(unaudited)

Net Asset Value ("NAV")

£50.4m

£40.4m

£36.7m

Shares in issue

34,585,493

32,643,069

32,004,570

NAV per share

145.8p

123.7p

114.7p

Bid price

134.5p

115.5p

109.0p

Mid price

134.8p

115.8p

109.3p

Market capitalisation

£46.6m

£37.8m

£35.0m

Share price discount to NAV

7.5%

6.4%

4.7%

NAV Total Return (assuming re-invested dividends)

21.5%

22.0%

10.6%

Numis Alternative Markets Total Return Index

13.5%

29.0%

10.2%

Ongoing charges*

2.4%

2.6%

2.7%

Dividends in respect of the period

3.25p

7.00p

2.75p

* Ongoing charges calculated in accordance with the Association of Investment Companies' ("AIC's") guidance.

 

Table of Historic Returns from launch to 31 July 2017 attributable to shares issued by VCTs which have been merged into Amati VCT 2


 

 

 

 

 

Launch date

 

 

 

 

 

Merger date

 

 

NAV Total Return with dividends re-invested

NAV Total Return with dividends not re-invested

Numis Alternative Markets Total Return Index

Singer & Friedlander AIM 3 VCT ('C' shares)

 

 

4 April 2005

 

 

8 December 2005

 

 

15.5%

 

 

2.9%

 

 

17.7%

Invesco Perpetual AiM VCT

 

30 July 2004

 

8 November 2011

 

2.2%

 

-18.4%

 

44.2%

Amati VCT 2 (originally Singer & Friedlander AIM 3 VCT*)

 

 

 

29 January 2001

 

 

 

n/a

 

 

 

5.3%

 

 

 

-6.1%

 

 

 

-15.5%

Singer & Friedlander AIM 2 VCT

 

29 February 2000

 

22 February 2006

 

-19.3%

 

-27.7%

 

-56.9%

Singer & Friedlander AIM VCT

 

28 September 1998

 

22 February 2006

 

-44.9%

 

-27.9%

 

31.3%

*Singer & Friedlander AIM 3 VCT changed its name to ViCTory VCT on 22 February 2006 and to Amati VCT 2 on 8 November 2011.

 

 

CHAIRMAN'S STATEMENT

 

Overview

 

Shareholders who attended the AGM and Investor Seminar on 28 June this year will have heard the Manager report on the progress that the Company has made in pursuance of the simplified and focused investment strategy which the Company has developed over the last few years.  The Manager seeks to identify the best of the next generation of AIM companies, to provide those companies with valuable early stage capital, and to support them as long-term shareholders.  It takes time to build up a portfolio of successful and dynamic businesses which have grown out of the seeds which the Amati VCTs have helped to nurture but, as our Manager reported at the AGM, the Company has now reached the point where the effect of our investment strategy is coming through in the make-up of the portfolio. 

 

As companies' earnings grow, and this is mirrored in their stock market valuations, the portfolio will evolve and become biased more towards the most successful companies, as those which have grown the fastest in value become the largest holdings.  It could be said that an inflection point has been crossed, as the portfolio is now dominated by such companies.  The ten largest qualifying investments are now all capitalised at more than £100m, with three capitalised at over £400m.  The unweighted average term of these investments is now around 7 years, and the unweighted average returns from these ten investments, based on our investment price (blended across more than one round where we made follow-on investments), is 856% as at the period end.  These companies represent over 50% of the value of the portfolio, and provide an exceptionally strong set of core holdings.  The top ten holdings have accounted for much of the strong performance seen over the past two years in particular.  Fortunately the VCT rules create no pressure to sell such holdings, which generally remain qualifying as long as they are on AIM, and it is to the benefit both of both our shareholders and the portfolio companies themselves that we are able to invest for the long term. 

 

The Manager continues to see new opportunities for qualifying investments, and expects to be able to make a steady stream of further investments, albeit at a slower rate than was the case before the rule changes last year.  During the period under review a total of £1.8m was invested in qualifying investments, three of which were in new holdings, details of which are given in the Manager's Review.

 

 

Investment Performance and Dividend 

 

The NAV Total Return for the six month period was 21.5%, which compares to a rise of 13.5% for the Numis Alternative Markets Total Return Index.  While this exceptionally strong performance was attributable to two holdings in particular, Keywords Studios and Frontier Developments, there were, encouragingly, strong contributions from a wide range of other holdings.  Further details are given in the Manager's report which follows.

 

The dividend policy of the Company continues to be to pay between five and six percent of year-end net asset value, subject to the availability of liquidity and sufficient distributable reserves. In line with this the Board is declaring an interim dividend of 3.25p per share, to be paid on 24 November 2017 to shareholders on the register on 20 October 2017.

 

Other Corporate Developments

 

A series of joint top up Share Issues with Amati VCT was launched in October 2016, and was fully subscribed before the closing date, raising a total of £8.3m of which £4.1m was subscribed for shares in Amati VCT 2. 

 

The Company was 88% invested in qualifying holdings at the period end, according to the tests required by the VCT legislation, and with cash available for new investments having become increasingly constrained, the Board  announced at the time of the AGM that it intends to launch a larger fund raising this year in the form of a Joint Prospectus Offer with Amati VCT, raising up to £10m for each company.  At the same time, the boards of both companies also announced that they believed that a merger of the two companies was in the best interests of shareholders.  The merger process has been held up by a particular aspect of the VCT legislation which could have proven detrimental to a subset of shareholders.  We have received assurances from HMRC that this was not an intended consequence of the legislation, and both boards expect to be able to proceed with a merger with the issue of a Supplementary Prospectus and Shareholder Circulars once this area of the legislation has been satisfactorily clarified.   Assuming the merger can proceed as planned, it will create a combined VCT capitalised at over £100m (at the time of writing) and the ongoing expenses ratio will be less than the two VCTs have as separate entities.

 

The External Environment

 

AIM has been coming of age over recent years, supported as it is by a number of tax incentivised elements, of which VCTs are but one.  There is debate about whether these and other tax incentives to support early stage businesses are good value for money for the tax payer.  Recently, a broad range of questions have been posed by the consultation paper "Financing Growth in Innovative Firms" published by HM Treasury in August.  We believe that AIM-focused VCTs play an important role in providing capital to some of the most innovative firms in the UK, and that the Company's portfolio bears this out. Taking a step back, these VCTs are part of a wider financing environment which has allowed AIM to become arguably the leading smaller company stock market in the world.  It has taken 22 years to achieve its current level of maturity and success.  A significant number of innovative UK firms are becoming global success stories as a result.  Those who understand the value of having this market in London are unlikely to have much difficulty seeing this use of the tax incentives as providing good value for money.  However, when markets are strong, as they are now it can be tempting for policy makers to take away key supports for a market, forgetting what happens when conditions become much tougher. The Board and the Manager seek to play an active role in this debate, which will be important for shaping both the future of the Company, and the wider environment for supporting innovative businesses in the UK.

 

Outlook

 

It is always important to remain realistic about expectations following periods of very strong performance. Markets have a tendency towards mean reversion, with periods of above average returns being followed by periods of below average returns. However, the tangible progress being made by many of our portfolio companies has been impressive and creates a strong platform for continued growth, even in tougher times. We fully expect that we will continue to see new investment opportunities and a successful fund raising will enable the Company to take advantage of these as and when they arise. Meantime, our increasingly mature portfolio is well placed to maintain strong returns to shareholders.

 

Julian Avery

Chairman

28 September 2017

 

For any matters relating to your shareholding in the Company, dividend payments, or the Dividend Reinvestment 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 5039115 or by email at vct-enquiries@amatiglobal.com.  Amati maintains an informative website for the Company - www.amatiglobal.com - on which monthly investment updates, performance information, and past Company reports can be found. 

 

 

FUND MANAGER'S REVIEW

 

Market Review

 

As is almost becoming the norm, a volatile political backdrop dominated the six months under review.  Whether it was the US administration's apparent floundering over policy objectives and chronic instability, combined with an increased military assertiveness overseas, or the astonishing scale of the potential for bad debts in the Chinese banking system, or the (as it turned out) ill-judged snap UK General Election causing UK market jitters, there was no shortage of talking points for those seeking to form a top down view. The tragic conflicts in Syria and the Yemen rumble on with no apparent end in sight, reminders of the dysfunctionality which has grown up in international relations with the return of proxy wars and battle for spheres of influence.  It would be reasonable to expect that such a backdrop would translate into elevated risk and volatility.  However, the market's main volatility gauge, the CBOE Volatility Index (the "VIX"), remained stubbornly low, only breaching the 15% level on four occasions.  For reference, the VIX surpassed 40% in January 2009, shortly before the global financial crisis reached its nadir, and again in January 2011 when the Eurozone debt crisis reached a peak and long-term interest rates spiked in Greece and other peripheral states.  There are various explanations for this benign volatility, the most plausible in our view being that continued accommodative monetary policies by the Federal Reserve and European Central Bank have thus far been more important for the direction of markets than the political dislocations which dominate the headlines.

 

In the UK, AIM, small- and mid-cap indices all outperformed the top 100 index during the period.  AIM was especially strong, with its fortunes dominated by superstar stocks such as Fever-Tree and Boohoo but increasingly by the next generation of AIM stars, of which a number are also held by the Company.

 

Performance

 

The VCT's NAV Total Return for the six month period was 21.5%.  This compares to the Numis Alternative Markets Total Return over the same period of 13.5%.  The only losing month during the period was June, when the surprise loss of the Conservative party's parliamentary majority spooked markets.  These losses were swiftly reversed in July.

 

The greatest contributor to performance over the six months under review was Keywords Studios ("Keywords"), the technical services provider to the video games industry, its shares rising 109%.  Keywords continued its acquisition strategy, acquiring five businesses, which all fit the template of expanding the group's geographical coverage and service lines.  The most eye-catching of these recent acquisitions were a software development business and a video games content management software provider, both giving Keywords entirely new services to offer their customer base.  Keywords finds itself in an enviable position: its market remains highly fragmented yet customers wish to deal with fewer vendors.  By continuing to consolidate its industry, it can present itself to video games publishers as a one-stop solution for all video games support services.  The market for outsourced video games services continues to demonstrate healthy levels of growth which, when combined with earnings enhancing acquisitions, provide a powerful catalyst for shareholder returns.  Another player in the video games industry, Frontier Developments ("Frontier"), was the second most significant contributor to performance, gaining 135% over the period.  Frontier is attracting a wider investor audience as it launches its own new video games franchises.  The period under review witnessed the release of Frontier's original title, Elite: Dangerous, on PlayStation 4; the news that Planet Coaster, its second title, had surpassed the sale of one million units; and the announcement that its third franchise will be Jurassic World Evolution, based on Universal Pictures' Jurassic World, one of the biggest blockbusters in cinema history.  The latter announcement is a major endorsement for a UK video games publisher and Frontier's appeal was recently recognised by Tencent, a leading Chinese internet and interactive entertainment company, which has acquired a 9.9% stake in the business through an investment of £17.7m in the company.  Tristel, the manufacturer of infection control and contamination control products, gained 60%.  There were two principal catalysts for this movement: the first was its move into the US and the submission for regulatory clearance by the Environmental Protection Agency of its Duo chlorine dioxide disinfectant foam; the second was a trading update announcing that revenues and profits for the year to June 2017 would be ahead of expectations.  Quixant, the designer of computer systems for casino gaming machines, continued its progress and this was rewarded by a 27% rise in its share price.  Quixant experienced stronger than anticipated trading in the first half of 2017 in both its core gaming division and Densitron, the acquisition that completed in 2015.  Other notable contributors included Faron Pharmaceuticals ("Faron"), a pharmaceutical company focused on the treatment of Acute Respiratory Distress Syndrome, which gained 119% over the period ahead of the announcement of Phase III trial data which is expected over the next few months; Hardide, the industrial surface coatings company; GB Group, the supplier of identity verification software; and Premier Technical Services Group, the provider of access and safety services.

 

The most notable negative contributor was Tasty, the operator of the Wildwood chain of Italian grill restaurants, which fell 66% over the period.  The management of Tasty had an excellent pedigree in the restaurant industry and ambitious roll-out plans for the brand and this was reflected in the valuation of the stock, which rewarded this quality and growth with a high rating.  Recently Tasty launched a new concept - Wildwood Kitchen - which incorporated delicatessens into restaurants to encourage all day trade.  These sites incurred extra costs and did not trade well, which coincided with increased competition and a general downturn in the casual dining restaurant sector.  The combination led to profit downgrades and a suspension of restaurant roll-outs in the short to medium term.  FreeAgent Holdings ("FreeAgent"), the accounting software provider, fell 31% over the period, reversing much of the gains made following its Initial Public Offering ("IPO") in November 2016.  There were no obvious reasons for this, except perhaps an over-exuberant share price following admission to AIM.  FreeAgent has some significant opportunities in the near term, such as the Government's Making Tax Digital initiative, which is expected to drive further adoption of FreeAgent's software amongst micro businesses; and a contract with The Royal Bank of Scotland to offer FreeAgent's software as part of the bank's client on-boarding process.  Other negative contributors included: SRT Marine Systems, the designer of maritime location technologies, which experienced a delay in a government contract; and Venn Life Sciences Holdings, the clinical research organisation.

 

 

Portfolio Activity

 

Qualifying portfolio

 

The Company made 5 significant qualifying investments during the period.

 

Faron, a company that we initially funded in September 2016, returned for follow-on finance in March.  The original fundraise was to continue the development of its lead product, Traumakine, which treats Acute Respiratory Distress Syndrome; the more recent raise allows the expansion of pre-clinical and early-stage clinical development of Clevegen, Faron's second product, as well as strengthening the balance sheet in advance of negotiations with potential partners for Traumakine.  We were encouraged to follow our investment in Faron by Traumakine's successful progress through its data monitoring stages as well as the potential of Clevegen which, although some way behind Traumakine in its development pipeline, is showing potential in an important area of cancer therapy (the prevention of inflammation and cancer spread).  Towards the end of the period we also took some profits from our holding, following a dramatic rise in the share price which had increased the position size significantly, as the risk profile on the drug trial remains unchanged until the results are announced later this year.  We also made a follow-on investment in Rosslyn Data Technologies ("Rosslyn").  The Company's initial position in Rosslyn was acquired shortly before its IPO in 2014.  Rosslyn has a technology platform that gives businesses the ability to ingest structured data from a wide variety of systems and sources then present this data in software where it can be used to inform management decisions.  Rosslyn failed to meet the expectations that were set at its IPO and could not capitalise on partnerships with key systems integrators, including two of the 'Big 4' global professional services firms.  The original investment performed poorly but we were persuaded to revisit the investment case due to the acquisition of a business called Integritie, which improves Rosslyn's technology proposition by enabling the analysis of unstructured, as well as structured, customer data.  The combined business should benefit from cross-selling opportunities across the enlarged customer base. 

 

The Company also acquired a new position in MaxCyte, a medical devices company with a proprietary technology known as 'flow electroporation', as well as its own pipeline of early stage drugs.  Flow electroporation is a technique which uses electrical charges to allow particular molecules to cross a cell membrane without causing damage.  MaxCyte owns the intellectual property to the only pharmaceutical grade machine for performing this technique, and it is becoming widely used in the burgeoning field of cell therapy.  Escape Hunt was the first of two IPOs in which the Company participated during the period.  Escape Hunt specialises in 'escape games', a leisure concept that is growing rapidly in popularity.  The concept involves a group of friends, family or work colleagues participating in a problem solving game in order to escape from a themed room.  The game is controlled remotely by a 'games master' who influences the cadence of the event by revealing clues.  Escape Hunt came to AIM to raise capital to evolve from a franchise only model to a site ownership model, building out its own locations to capture the attractive returns that are generated on these sites.  The incoming CEO has excellent 'roll-out' experience having been Global Head of Strategy at Pret A Manger and Managing Director at Harris + Hoole.  The Company also acquired a position in Velocity Composites ("Velocity") as part of its AIM IPO.  Velocity produces kits of composite materials for supply to aerospace component manufacturers such as BAE, Meggitt and GKN.  This is an element of the supply chain that the manufacturers are keen to outsource to reduce their capital spend and increase floor space at their facilities and to drive improved productivity, quality control and materials traceability.  Composite materials now account for over 50% of widebody (twin aisle) and 20% of narrow body (single aisle) aircraft and composite usage is expected to increase alongside a predicted doubling of aircraft numbers over the next twenty years. 

 

The residual holding in TLA Worldwide, the sports player representation and marketing business, was sold during the period.  Kalibrate Technologies, the provider of software, data and support services to the fuel retail industry, also left the portfolio, having been the subject of a successful takeover approach by a private equity buyer.

 

 

Non-qualifying portfolio

 

There were no transactions in the non-qualifying portfolio during the period.

 

Outlook

 

The strategy that has been adopted of concentrating the portfolio in our more mature, cash generative businesses by 'running our winners' has played out to the extent that, at the half year end date, the top 10 positions in the Company (including the TB Amati UK Smaller Companies Fund, the largest single position) accounted for 57.3% of the total net asset value.  Far from causing us any anxiety, we are reassured by the fact that we consider these businesses amongst the highest quality investments in the portfolio and we are optimistic about the future prospects for these companies.  Whilst some of these names have experienced extraordinary share price gains lately, our belief is that these are companies that can continue to deliver exceptional levels of revenue and profit growth.  This strong core to the portfolio also gives us the flexibility to invest in attractive new qualifying opportunities and we have been pleased to see a return of good quality 'dealflow', reflected in the accelerated rate of deals completed relative to the prior period.  Whilst we cannot predict the direction of the markets, and are aware that the UK in particular faces many challenges over the next few years arising from Brexit, we remain optimistic about the underlying prospects of the businesses in your Company's portfolio.

 

Dr Paul Jourdan, Douglas Lawson and David Stevenson

Amati Global Investors

28 September 2017

 

 

INVESTMENT PORTFOLIO

as at 31 July 2017

 


 

Cost

£'000

 

Valuation

£'000

Market Cap

£m

 

 

Sector

 

 

Status

Dividend YieldNTM

%

 

Fund

%

TB Amati UK Smaller Companies Fund@

2,837

4,549

-

Financials

OEIC

1.6

9.0

Keywords Studios plc†@

437

4,008

629.8

Industrials

AIM

0.1

7.9

Accesso Technology Group plc*@

221

3,615

430.6

Technology

AIM

-

7.2

Quixant plc†@

386

3,509

276.9

Technology

AIM

0.7

7.0

Frontier Developments plc†@

549

3,326

220.8

Consumer goods

AIM

-

6.6

Tristel plc†@

439

2,195

107.0

Health care

AIM

1.7

4.4

IDOX plc*@

239

2,075

265.4

Technology

AIM

1.9

4.1

GB Group plc†@

224

1,990

562.5

Technology

AIM

0.7

3.9

Brooks Macdonald Group plc†@

1,154

1,836

281.1

Financials

AIM

2.6

3.6

Ideagen plc†@

496

1,807

160.5

Technology

AIM

0.3

3.6

Top Ten

6,982

28,910





57.3

AB Dynamics plc†@

259

1,804

114.7

Industrials

AIM

0.6

3.6

Learning Technologies Group plc*@

746

1,688

270.2

Industrials

AIM

0.6

3.3

Science in Sport plc†@

710

1,276

41.5

Consumer goods

AIM

-

2.5

Anpario plc†@

272

1,079

80.5

Health care

AIM

1.8

2.1

Hardide plc*@

500

1,031

25.3

Basic materials

AIM

-

2.0

Premier Technical Services Group plc†@

403

982

132.1

Industrials

AIM

1.3

2.0

LoopUp Group plc*@

470

893

77.8

Technology

AIM

-

1.8

Faron Pharmaceuticals Oy*@

328

849

189.8

Health care

AIM

-

1.7

Universe Group plc*@

202

832

22.0

Industrials

AIM

-

1.7

SRT Marine Systems plc*@

579

637

42.8

Technology

AIM

-

1.3

Top Twenty

 

11,451

39,981





79.3

Bilby plc†@

574

594

23.9

Industrials

AIM

4.3

1.2

Fox Marble Holdings plc Ordinary shares & 8% Convertible Loan Note*@

665

574

14.1

Basic Materials

AIM/Unquoted

-

1.2

Rosslyn Data Technologies plc*@

777

512

9.4

Technology

AIM

-

1.0

Velocity Composites plc*@

492

480

29.7

Industrials

AIM

-

1.0

Solid State plc†@

243

476

40.2

Industrials

AIM

2.7

0.9

Water Intelligence plc†@

170

455

13.8

Industrials

AIM

-

0.9

Escape Hunt plc*@

402

428

29.2

Consumer services

AIM

-

0.9

Netcall plc†

110

401

91.2

Technology

AIM

3.3

0.8

FreeAgent Holdings plc*@

361

400

37.9

Technology

AIM

-

0.8

Belvoir Lettings plc*@

339

380

36.3

Financials

AIM

6.7

0.8

MaxCyte inc*@

425

371

17.5

Health care

AIM

-

0.7

Sportsweb.com*

352

317

2.8

Industrials

Unquoted

-

0.6

Synectics plc†

342

314

40.9

Industrials

AIM

2.2

0.6

MirriAd Advertising Limited*@

486

284

35.9

Technology

Unquoted

-

0.6

Dods (Group) plc*

596

260

44.3

Consumer services

AIM

-

0.5

EU Supply plc*@

330

234

10.8

Technology

AIM

-

0.5

Property Franchise Group plc (The)†@

141

218

40.0

Financials

AIM

5.1

0.4

Crawshaw Group plc†@

369

215

27.7

Consumer services

AIM

-

0.4

Tasty plc†

320

203

26.3

Consumer services

AIM

-

0.4

Brighton Pier Group plc (The) *@

292

173

30.2

Consumer services

AIM

-

0.3

MyCelx Technologies Corporation*@

425

165

7.2

Oil & Gas

AIM

-

0.3

FairFX Group plc*@

113

162

65.4

Financials

AIM

-

0.3

Venn Life Sciences Holdings plc*@

274

162

7.8

Health care

AIM

-

0.3

Genedrive plc*@

299

149

7.5

Health care

AIM

-

0.3

Antenova Limited Ordinary shares & A Preference Shares*

100

128

2.7

Telecommunications

Unquoted

-

0.3

Ilika plc*@

192

111

25.9

Oil & Gas

AIM

-

0.2

Allergy Therapeutics plc*

29

77

172.3

Health care

AIM

-

0.2

Sabien Technology Group plc†@

530

68

1.1

Industrials

AIM

-

0.1

Mirada plc*@

416

59

2.1

Consumer services

AIM

-

0.1

Microsaic Systems plc*@

419

30

2.7

Industrials

AIM

-

0.1

Nujira Limited*@

117

8

-

Technology

Unquoted

-

-

Investments held at nil value

3,048

-

-

-

-

-

-

Total investments

25,199

48,389





96.0

Net current assets


2,027





4.0

Net assets

25,199

50,416





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.

NTM

Next twelve months consensus estimate (Source: FactSet and Fidessa).


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 period 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 87.59%.

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Company's assets consist of equity and fixed interest investments and cash.  Its principal risks include market risk, interest rate risk, credit risk and liquidity risk.  Other risks faced by the Company include economic, investment and strategic, regulatory, reputational, operational and financial risks as well as the potential for loss of approval as a VCT.  These risks, and the way in which they are managed, are described in more detail in Notes 19 to 22 to the Financial Statements in the Company's Report and Financial Statements for the year ended 31 January 2017.  The Company's principal risks and uncertainties have not changed materially since the date of that report.

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

in respect of the half-yearly financial report

 

We confirm that to the best of our knowledge:

·     the condensed set of financial statements which has been prepared in accordance with FRS 104 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

·     the Chairman's Statement and Fund Manager's Review (constituting the interim management report) includes a true and fair review of the information required by DTR4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

·     the Statement of Principal Risks and Uncertainties on page 13 is a fair review of the information required by DTR4.2.7R, being a description of the principal risks and uncertainties for the remaining six months of the year; and

·     the financial statements include a fair review of the information required by DTR4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last annual report that could do so.

 

For and on behalf of the Board

 

Julian Avery

Chairman

28 September 2017

 


INCOME STATEMENT

for the six months ended 31 July 2017

 

The total column of this Income Statement represents the profit and loss account of the Company in accordance with Financial Reporting Standards ("FRS").  The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies' Statement of Recommended Practice ("AIC SORP").  There is no other comprehensive income other than the results for the period discussed above.  Accordingly a statement of total comprehensive income is not required.

All the items above derive from continuing operations of the Company. 

The accompanying notes are an integral part of the statement.

 

 

STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 July 2017 (unaudited)


Non-distributable reserves


Distributable reserves



Called up

share

capital

£'000

 

Share premium £'000

 

Merger reserve

£'000

Capital redemption reserve

£'000

Capital reserve (non-distributable)

£'000


 

Special reserve

£'000

 

Capital reserve (distributable)

£'000

 

Revenue reserve

£'000

 

Total

reserves

£'000

Opening balance as at 1 February 2017

1,633

13,044

425

364

16,487


14,477

(6,031)

(14)

40,385

Shares issued

119

3,049

-

-

-


-

-

-

3,168

Share issue expenses

-

(40)

-

-

-


-

-

-

(40)

Repurchase of shares

(22)

-

-

22

-


(559)

-

-

(559)

Dividends paid

-

-

-

-

-


(1,462)

-

-

(1,462)

Transfer of merger investment disposals

 

-

 

-

 

-

 

-

 

-


 

-

 

-

 

-

 

-

Profit for the period

-

-

-

-

8,732


-

216

(24)

8,924

Closing balance as at 31 July 2017

 

1,730

 

16,053

 

425

 

386

 

25,219


 

12,456

 

(5,815)

 

(38)

 

50,416

For the six months ended 31 July 2016 (unaudited)


Non-distributable reserves

Distributable reserves


 


Called up

share

capital

£'000

 

Share premium £'000

 

Merger reserve

£'000

Capital redemption reserve

£'000

Capital reserve (non-distributable)

£'000

 

Special reserve

£'000

 

Capital reserve (distributable)

£'000

 

Revenue reserve

£'000

 

Total

reserves

£'000

Opening balance as at 1 February 2016

1,513

9,771

425

332

8,476

17,150

(5,295)

28

32,400

Shares issued

103

2,192

-

-

-

-

-

-

2,295

Share issue expenses

-

(21)

-

-

-

-

-

-

(21)

Repurchase of shares

(16)

-

-

16

-

(338)

-

-

(338)

Dividends paid

-

-

-

-

-

(1,088)

-

(28)

(1,116)

Transfer of merger investment disposals

-

-

-

-

-

-

-

-

-

Profit for the period

-

-

-

-

3,493

-

(14)

20

3,499

Closing balance as at 31 July 2016

1,600

11,942

425

348

 

11,969

15,724

(5,309)

20

36,719

 

 

For the year ended 31 January 2017 (audited)



 












Non-distributable reserves

Distributable reserves


Audited

Called up

share

capital

£'000

 

Share premium £'000

 

Merger reserve

£'000

Capital redemption reserve

£'000

Capital reserve (non-distributable)

£'000

 

Special reserve

£'000

Capital reserve (distributable)

£'000

 

Revenue reserve

£'000

 

Total

reserves

£'000

Opening balance as at 1 February 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 and total comprehensive income for the period

 

-

 

-

 

-

 

-

 

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

 

The accompanying notes are an integral part of the statement.              

                               


CONDENSED BALANCE SHEET

as at 31 July 2017



31 July

31 July

31 January



2017

(unaudited)

2016

(unaudited)

2017 (audited)


Note

£'000

£'000

 £'000

Fixed assets





Investments held at fair value

11

48,389

35,219

38,878






Current assets





Debtors


47

99

659

Cash at bank


2,358

1,689

1,255

Total current assets


2,405

1,788

1,914






Current liabilities





Creditors: amounts falling due within one year


(378)

(288)

(407)






Net current assets


2,027

1,500

1,507

Total assets less current liabilities          


50,416

36,719

40,385






Capital and reserves





Called up share capital


1,730

1,600

1,633

Share premium account


16,053

11,942

13,044

Reserves


32,633

23,177

25,708

Equity shareholders' funds


50,416

36,719

40,385

Net asset value per share

7

145.77p

114.73p

123.72p

The accompanying notes are an integral part of the balance sheet.

 

 

STATEMENT OF CASH FLOWS

for the six months ended 31 July 2017



Six months

Six months

Year



ended

ended

ended



31 July

31 July

31 January



2017

(unaudited)

2016

(unaudited)

2017

(audited)



£'000

£'000

£'000

Operating activities





Investment income received


200

274

526

Investment management fees


(372)

(292)

(598)

Other operating costs


(160)

(172)

(293)

Net cash outflow from operating activities


(332)

(190)

(365)






Investing activities





Purchases of investments


(1,858)

(1,028)

(2,909)

Disposals of investments


1,703

334

2,508

Net cash outflow from investing activities


(155)

(694)

(401)






Net cash outflow before financing


(487)

(884)

(766)






Financing activities





Net proceeds of share issues and buybacks


3,052

1,998

2,323

Equity dividends paid


(1,462)

(1,117)

(1,994)

Net cash inflow from financing activities


1,590

881

329

 

Increase/(decrease) in cash


 

1,103

 

(3)

 

(437)






Reconciliation of net cash flow to movement in net cash



Net cash at start of period


1,255

1,692

1,692

Net cash at end of period


2,358

1,689

1,255

Increase/(decrease) in cash during the period


1,103

(3)

(437)

The accompanying notes are an integral part of the statement.

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31 July 2017

 

1.         The Half-yearly financial report covers the six months ended 31 July 2017. The Company applies FRS 102 and the AIC's Statement of Recommended Practice issued in November 2014 as adopted for its financial year ended 31 January 2017. The financial statements for this six month period have been prepared in accordance with FRS 104 and on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements for the year ended 31 January 2017.

 

The comparative figures for the financial year ended 31 January 2017 have been extracted from the latest published audited Annual Report and Financial Statements. Those accounts have been reported on by the Company's auditor and lodged with the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

2.         The financial information set out in this report has not been audited and does not comprise full financial statements within the meaning of Section 434 of the Companies Act 2006. No statutory accounts in respect of any period after 31 January 2017 have been reported on by the Company's auditors or delivered to the Registrar of Companies.

 

3.         Going concern

In accordance with FRC Guidance for directors on going concern and liquidity risk the directors are of the opinion that, at the time of approving the Half-yearly Report, the Company has adequate resources to continue in business for the foreseeable future. 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. Thus the directors believe it is appropriate to continue to apply the going concern basis in preparing the financial statements.

 

4.         Segmental reporting

The directors are of the opinion that the Company is engaged in a single segment of business, being investment business.

 

5.         Copies of the Half-yearly report are being made available all shareholders.  Further copies are available free of charge from Amati Global Investors by telephoning 0131 5039115 or email vct-enquiries@amatiglobal.com

 

6.         The earnings per share is based on the gain attributable to shareholders for the six months ended 31 July 2017 of £8,924,000 (six months ended 31 July 2016: £3,499,000, year ended 31 January 2017: £7,261,000) and the weighted average number of shares in issue during the period of 33,907,246 (31 July 2016: 31,506,740, 31 January 2017: 31,774,562).  There is no difference between basic and diluted earnings per share. 

 

7.         The net asset value per share at 31 July 2017 is based on net assets of £50,416,000 (31 July 2016: £36,719,000, 31 January 2017: £40,385,000) and the number of shares in issue of 34,585,493 (31 July 2016: 32,004,570, 31 January 2017: 32,643,069).  There is no difference between basic and diluted net asset value per share. 

 

8.         Income


Six months ended

Six months ended

Year ended


31 July 2017

(unaudited)

31 July 2016

(unaudited)

31 January 2017

(audited)


£'000

£'000

£'000

Income:




Dividends from UK companies

198

184

320

Dividends from overseas companies

-

27

23

UK loan stock interest

25

38

98

Interest from deposits

3

5

5


226

254

446



 

9.         Dividends paid

 

Six months

Six months

Year

 

ended

ended

ended

 

31 July 2017

(unaudited)

31 July 2016

(unaudited)

31 January 2017

(audited)

 

£'000

£'000

£'000

Final dividend for the year ended 31 January 2017 of 4.25p per share paid on 21 July 2017

1,462

-

Interim dividend for the year ended 31 January 2017 of 2.75p per ordinary share paid on 25 November 2016

-

-

Final dividend for the year ended 31 January 2016 of 3.5p per ordinary share paid on 22 July 2016

-

1,116


1,462

1,116

1,994

 

10.        The effective rate of tax for the six months ended 31 July 2017 is 0% (31 July 2016: 0%, 31 January 2017: 0%).

 

11.        Investments


Level 1

Level 3

 


Traded on

Unquoted



AIM

investments

Total


£'000

£'000

£'000

Cost as at 1 February 2017

19,902

4,518

24,420

Opening unrealised appreciation/(depreciation)

18,043

(1,556)

16,487

Opening unrealised loss recognised in realised reserve

(296)

(1,733)

(2,029)

Opening valuation as at 1 February 2017

37,649

1,229

38,878

Movements in the period:




Reclassification in period

-

-

-

Purchases

1,858

-

1,858

Sales - proceeds

(1,580)

(26)

(1,606)

Realised gain on sales

758

-

758

Unrealised gain in the period

8,461

40

8,501

Valuation as at 31 July 2017

47,146

1,243

48,389

Cost at 31 July 2017

20,707

4,492

25,199

Unrealised appreciation/ (depreciation) as at 31 January 2017

26,735

(1,516)

25,219

Closing unrealised loss recognised in realised reserve

(296)

(1,733)

(2,029)

Valuation as at 31 July 2017

47,146

1,243

48,389





Equity shares

47,146

691

47,837

Preference shares

-

47

47

Loan stock

-

505

505

Valuation as at 31 July 2017

47,146

1,243

48,389

 

In order to provide further information on the valuation techniques used to measure assets carried at fair value, the measurement basis has been categorised into a "fair value hierarchy" as follows:

 

- Quoted market prices in active markets - "Level 1"

Inputs to Level 1 fair values are quoted prices in active markets. An active market is one in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company's investments classified within this category are AIM traded companies and fully listed companies.

 

- Valued using models with significant observable market parameters - "Level 2"

Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.

 

- Valuation technique; - "Level 3" 

Fair value is measured using a valuation technique that is based on data which are not observable.

 

Following the update to FRS 102, for periods starting after 1 January 2017 the Company will disclose the fair value hierarchy based upon Levels 1, 2 and 3 rather than a, b, c i) and c ii).  Levels c i) and c ii) as disclosed in prior periods are now shown within Level 3.

 

12.        Related parties

The Company retains Amati Global Investors as its Manager.  The number of ordinary shares (all of which are held beneficially) by certain members of the management team of the Manager are:


31 July 2017 shares held

Paul Jourdan

256,266

Douglas Lawson

15,770

David Stevenson

9,120

 

Related party transaction

Save as disclosed in this paragraph there is no conflict of interest between the Company, the duties of the directors, the duties of the directors of the Manager and their private interests and other duties.

 

 

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 July 2017 was 145.8p.  The Company normally announces its net asset value on a weekly basis.  Net asset value per share information can be found on Amati Global Investor's website: http://www.amatiglobal.com/avct2.php.

 

 

Financial calendar

 

September 2017                        Half-yearly report for the six months to 31 July 2017 published

 

31 January 2018                        Year end

 

May 2018                                 Announcement of final results for the year ended 31 January 2018

 

June 2018                                 Annual General Meeting

 

 

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.

 

 

Corporate Information

 

Directors

Registrar

Julian Ralph Avery

Share Registrars Limited

Mike Sedley Killingley

The Courtyard

Susannah Nicklin

17 West Street


Farnham, Surrey


GU9 7DR

all of:


27/28 Eastcastle Street

Auditor

London

BDO LLP

W1W 8DH

55 Baker Street


London

Secretary

W1H 7EH

The City Partnership (UK) Limited


110 George Street

Solicitors

Edinburgh

Rooney Nimmo

EH2 4LH

8 Walker Street


Edinburgh


EH3 7LH



Fund Manager

Bankers

Amati Global Investors Limited

The Bank of New York Mellon SA/NV

18 Charlotte Square

London Branch

Edinburgh

160 Queen Victoria Street

EH2 4DF

London


EC4V 4LA

VCT Tax Adviser


Philip Hare & Associates LLP


Suite C, First Floor


4-6 Staple Inn 


Holborn, London


WC1V 7QH








 

For enquiries relating to share certificates, share holdings, dividends or the DRIS, please contact:

Share Registrars Limited

on +44 (0) 1252 821390

or email: enquiries@shareregistrars.uk.com

 

For enquiries relating to subscriptions and for general enquiries, please contact:

Amati Global Investors

on +44 (0) 131 503 9115

or email: vct-enquiries@amatiglobal.com

 

 

 

 


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The company news service from the London Stock Exchange
 
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Half-year Report - RNS