Amati Aim Vct Regulatory News (AMAT)

Amati AIM VCT plc (the "Company")

Legal Entity Identifier: 213800HAEDBBK9RWCD25

Annual Report & Financial Statements

For the year ended 31 January 2024

The Directors are pleased to present the Annual Financial Results of the Company for the year ended 31 January 2024.

The information set out below does not constitute the Company's full statutory accounts for the year ended 31 January 2024 in terms of Section 434 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for the year ended 31 January 2024 will be posted to Shareholders and delivered to the Registrar of Companies, in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts. Audited statutory accounts for the year to 31 January 2023, which were unqualified, have been lodged with the Registrars of Companies.

OUR STRATEGY

The investment objective of the Company is to generate tax free capital gains and income on investors' funds through investments primarily in AIM-traded companies.

DIVIDEND POLICY

The Board aims to pay annual dividends of around 5% of the Company's Net Asset Value at its immediately preceding financial year end, subject to distributable reserves and cash resources, and with the authority to increase or decrease this level at the Directors' discretion.

Highlights

For the year ended 31 January 2024

NAV Total return

for the year†

-22.6%

(2023: -22.2%)

£13.3m

invested in qualifying

holdings during the year

(2023: £12.4m)

2.0%

Ongoing charges**†

(2023: 1.9%)

Year end

Net Asset Value per share†

94.7p

(2023: 132.8p)

6.6%

Discount to NAV†

(2023: 7.0%)

5.3%

Dividend yield***†

(2023: 5.3%)

Key data

* Deutsche Numis Alternative Markets Index is included as a comparator benchmark for performance as this index includes all companies listed on qualifying UK alternative markets.

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

*** Dividend yield based on year end NAV.

† See Alternative Performance Measures on pages 78 and 79 of the full Annual Report and Accounts.

Table of investor returns

to 31 January 2024

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

A table of historic returns is included on page 77 of the full Annual Report and Accounts.

Dividends paid and declared

-28.6%

2024 total dividends per share

5.0p

5.3% of NAV

Cumulative dividends per share

97.74p

Dividend history

Since the re-launch of the VCT under the management of Amati Global Investors*

*On 25 March 2010 Amati Global Investors was appointed as Manager of ViCTory VCT. On 8 November 2011 Invesco Perpetual AIM VCT merged with ViCTory VCT and the name was changed to Amati VCT 2. On 4 May 2018 the Company merged with Amati VCT and the name was changed to Amati AIM VCT.

*\* Total dividends per share are the declared dividends of the financial year.

Fund performance

A graph depicting the Amati AIM VCT NAV Total Return and Deutsche Numis Alternative Markets Total Return Index from change of Manager on 19 March 2010 (first Net Asset Value calculated on 25 March 2010) to 31 January 2023 can be found on page 3 of the full Annual Report and Accounts.

Historic performance

A graph depicting the Amati AIM VCT NAV Total Return and Deutsche Numis Alternative Markets Total Return Index from inception of fund to 31 January 2024 can be found on page 3 of the full Annual Report and Accounts.

Extracts from Strategic Report

Chairman's Statement

This report has been prepared by the Directors in accordance with the requirements of Section 414A of the Companies Act 2006.

Overview and Investment Performance

This felt like a year of ongoing risk-aversion, with 2023 undoubtedly one of the most hostile markets for junior AIM companies since the financial crisis of 2008. This was most notable for companies which were relying on raising additional funds and in some cases were unable to access further VCT monies due to an evolving debate around the application of the VCT Regulations. In addition, some of our long-standing investments in companies which have matured into medium-sized businesses were impacted by cyclical downturns and negative sentiment. The NAV total return for the period was -22.6%, which compares to a return of -12.1% for the Deutsche Numis Alternative Markets Index. With the market having turned negative in late 2021, this has resulted in over two years of decline in the value of the portfolio and inevitably raises some questions about the health of the AIM market overall. The more mature businesses in the portfolio, which have taken many years to reach this point, should provide good exposure to any recovery in the market. The fortunes of early-stage companies are more fragile, and it is likely to take longer for this part of AIM to recover. This is discussed in more detail in the Manager's Review which follows below.

The number of VCT qualifying deals on AIM remained relatively low this year and only a handful were of sufficient quality to be of interest. A total of £13.3m was invested in qualifying holdings, slightly more than in the prior year, but still well down on the 2021 level. At the same time some profits were taken in a few of the longer standing holdings, and some were sold outright, with total sales amounting to £12.9m that resulted in net losses realised of £8.9m. Further details are again provided in the Manager's Review below. As a result, cash and current asset investments levels remained high at the end of the period at £45.6m. Cash and current asset investments are held mainly in a combination of interest bearing overnight bank deposits and money market funds.

Dividends

The Board aims to pay annual dividends of around 5% of the Company's Net Asset Value at its immediately preceding financial year end, subject to the Company's distributable reserves and cash resources, and with the authority to increase or decrease this level at the Directors' discretion.

At the end of November, the Board took the decision to pay a second interim dividend. This meant that the payment was made around six months earlier than would have been the case had this been a final dividend. This reflected the scarcity of qualifying investment opportunities on AIM of an acceptable quality and a lack of visibility over the timing of further qualifying investments. When combined with significant realisations of qualifying holdings the Board felt it prudent to accelerate the timing of the dividend payment so as to have a bigger margin of comfort against the VCT qualifying tests.

As at 31 January 2024 the net asset value was 94.7p. The Board paid an interim dividend of 2.5p per share in November and the second interim dividend of 2.5p per share in January, making a total for the year of 5.0p per share, which is 5.3% of year end NAV.

The Board would like to remind shareholders that the company has moved to paying all cash dividends by bank transfer, rather than by cheque and details are provided in Shareholder Information on page 77 of the full Annual Report and Accounts. Please check that you have received your dividends and contact the registrar if you have not. Unpaid dividends are kept by the registrar for a period of 10 years after the payment date and we make every effort to ensure that dividends are received correctly by shareholders.

With cash levels still remaining high and the rate of new investments still running at relatively low levels, the Board is not planning to raise further funds in the near term.

Strategic Review

In March, the Board announced that it was considering the Company's strategic options in the light of the ongoing challenges in the AIM market and the resultant impact on the company's performance. As part of this review, the Board had been working with the Manager on a proposal that would have addressed the Board's concerns and enabled the Company to widen its investment strategy to facilitate investments in a broader range of securities. As this opportunity did not conclude, the Board and the Manager are continuing to review the strategic direction of the VCT and evaluating other alternatives available to the Company.

VCT Legislation

The VCT legislation contains a "sunset clause" which would have brought income tax relief to an end on 5 April 2025. Following confirmation by the Chancellor in his Autumn statement that the scheme will continue, the Finance Act has now been passed which allows VCT income tax relief to be available for subscriptions for VCT shares until 5 April 2035. This however can only come into force when the EU gives approval. The Board understands that HM Treasury officials expect approval to be given, but the timescale for this is not yet known.

Annual General Meeting ("AGM")

The AGM this year will be held at Barber-Surgeons' Hall, Monkwell Square, Wood Street, London EC2Y 5BL starting at 2pm on Thursday 13 June 2024. This will be followed by presentations from the Manager and investee companies. Details are being sent to you with this report.

The Notice of AGM is set out on pages 80 to 85 of the full Annual Report.

The Board recognises that the Company's AGM represents an important forum for shareholders to put questions to the Directors, to express their views on governance and to become fully informed about matters relating to the AGM resolutions. We understand that attending in person may not be possible for all shareholders who wish to attend. Therefore, the Company intends to also make available a live stream facility to allow shareholders to watch and listen to the AGM and the Investor Event which follows. If shareholders wish to use this facility, please register your interest by emailing info@amatiglobal.com and shortly ahead of the event the Company's Manager will post a link and instructions on how to join the event on its homepage at www.amatiglobal.com. Shareholders watching the AGM will not be counted towards the quorum of the meeting and will not be able to participate in the formal business of the meeting, including asking questions and voting on the day. The Board encourages shareholders to engage with the Board and the Company's Manager. In addition to asking questions at the AGM, shareholders can email any questions they may have on the business of the AGM to info@amatiglobal.com by 7 June 2024. The Company's Manager will publish questions together with answers on the page dedicated to the AGM on the Manager's website prior to the AGM being held. The Company's Manager will reply to any individual shareholder questions submitted by the deadline of 7 June 2024, before the AGM.

Outlook

The AIM market remains in a fragile state, especially for companies capitalised at less than £100m and pre-profit early-stage companies. The bright spots we had hoped for last year were few and far between. We have noted a growing trend towards companies opting for a private sale or fundraising rather than an AIM listing. Shareholders frequently ask why the Manager does not buy more shares in existing portfolio holdings whose share prices have been pounded. Unfortunately, the changes to the VCT legislation in 2016-17 specifically prevent VCTs from making non-qualifying investments in AIM or unquoted companies. This means the VCT can only acquire more shares in portfolio companies if they raise further funds and are still qualifying under the rules, which in many cases they are not. The problems for investments made under post 2017 VCT rule changes are discussed in further detail in the Manager's review below.

Historically there is evidence that companies that come through this kind of a market crisis tend to emerge a good deal stronger. In a falling interest rate environment, it would not take much for market dynamics to become a good deal more positive and this should benefit our existing portfolio.

There are still many headwinds for the economy to navigate which may, directly or indirectly, affect the AIM market in an election year. We can only hope that the building blocks will be put in place to maximise the potential for young and growing UK companies to thrive once again in public markets.

Contact us

The Board is always keen to hear from shareholders. You can contact me at: AmatiAIMVCTChair@amatiglobal.com.

You can also find regularly updated information on the Company, including a factsheet and performance data on the Company's website: www.amatiglobal.com

Fiona Wollocombe

Chairman

11 April 2024

For any matters relating to your shareholding in the Company, dividend payments, or the Dividend Re-investment Scheme, please contact The City Partnership on 01484 240 910, or by email at registrars@city.uk.com.

For any other matters please contact Amati Global Investors ("Amati") on 0131 503 9115 or by email at info@amatiglobal.com.

Amati maintains an informative website for the Company - www.amatiglobal.com - on which monthly investment updates, performance information, and past company reports can be found.

Fund Manager's Review

Market Review

In what was another poor year for AIM companies, especially those at an early stage of growth, global markets recovered their poise during the period under review, in large part thanks to a boom in US technology companies poised to lead the way in the deployment of artificial intelligence. Japanese and European markets also saw meaningful recoveries. By contrast, the UK equity market as a whole remained in the doldrums with the Deutsche Numis All Share Total Return Index returning only 1.6% over the period and the Deutsche Numis Alternative Markets Total Return Index falling by 12.1%, reflecting ongoing risk-aversion and weak liquidity at the lower end of the UK market. 2023 was probably the toughest market for junior AIM companies since 2008.

The gains in the large global technology companies were achieved despite a deteriorating and fragile geo-political environment. Russia's invasion of Ukraine appears to have reached something of a stalemate and the outcome remains dependent on ongoing Western support for Ukraine being maintained. A new and significant conflict emerged in October, as war erupted in Palestine in response to Hamas attacks on Israel. This brought considerable instability into the region, which shows no signs of abating. Investors also remain concerned about the ongoing potential for China to become more bellicose in a year where elections are taking place in a number of major economies. Despite these concerning developments, commodity prices remained subdued with oil prices down during the period and gas prices falling materially from their post-Ukraine highs of the previous year.

The dominant economic theme during the year was the global fight against inflation, with the Fed, the European Central Bank and the Bank of England simultaneously increasing interest rates rapidly from historically low levels. This in turn led to rises in bond yields in most G7 markets as central banks sought to normalise policy. Despite this more uncertain environment there was evidence that the global financial system remained robust, with the collapse of SVB Bank, First Republic and Signature in the US and the unravelling of Credit Suisse in Europe all seeing bailouts by larger, better capitalised institutions. As the year progressed, we saw evidence that inflation was being brought under control with headline numbers falling sharply in the US, UK and Europe, albeit from elevated levels. This was consistent with a deterioration in global growth prospects as both Europe and the UK began flirting with recession and Chinese growth prospects faded meaningfully.

In the final months of the period under review both large and midcap equity and bond markets enjoyed strong recoveries from depressed levels, taking heart from the expectation that an end to the period of monetary tightening is now in sight. We have seen rate expectations fall in the US, EU and UK and there is now a firm belief that 2024 will be a year of monetary easing. However, this path will not necessarily be a straight one and inflation data in early 2024 has been more elevated than markets would have hoped, leading to bond yields rising again. The direction of travel may be clear but the speed less so.

Returning to UK markets we have seen ongoing material outflows from open-ended UK equity funds, continuing the weak trend of recent years, and there are considerable challenges in re-establishing the UK market as an attractive place for companies to list and raise capital. However, we do detect a greater commitment from the Chancellor, the FCA and politicians across the political spectrum to address these increasingly urgent problems. This is particularly pressing with regards to AIM, where a lack of Initial Public Offerings (IPOs) and concerns about changes to taxation regimes have contributed to an ongoing shrinkage of the market.

Performance Review

The VCT's NAV Total Return for the period was -22.6%. This was substantially behind the benchmark, the Deutsche Numis Alternative Markets Total Return Index, which fell -12.1%. Data compiled by Deutsche Numis, which analyses the performance of UK smaller companies from 1955 onwards, shows that 2023 was a particularly outlying year. For nearly seventy years, the smallest market capitalisation companies in the UK market (defined as the bottom 70%) have cumulatively outperformed their larger peers - the so-called small company "premium". However, in 2023, "smaller" significantly underperformed "larger" as a factor in the UK market. This was caused by the smallest AIM stocks generally being by far the worst performers in the period covered by this review, as investors shied away from taking the liquidity risk inherent at this end of the market. Since this segment of AIM is the target universe for VCT qualifying companies, incorporating very early-stage businesses, this represented a particularly difficult environment for the portfolio.

A significant portion of the portfolio saw share price falls during the year. The largest falls related to companies requiring further financing in a market which was increasingly reluctant to finance early-stage companies. For these companies being quoted on AIM in this environment tended to prove detrimental, as tightened disclosure regulations can force companies to make announcements about funding requirements before they are able to optimise a plan to address them.

The biggest negative contributor to performance was Polarean Imaging, a lung medical imaging company, which fell 82% in the period. The company had a poor start to the year announcing its cash reserves would last until May 2024, and that it would move to a dual strategy of self-commercialisation while seeking a partner. It also indicated that it would require further funding, at a time when both private and public equity markets had turned their back on earlier stage healthcare companies. On the positive side, a new CEO was recruited, more suited to taking the company through its next stage of development, and the company established a US reimbursement code while it continued to build a pipeline of sales opportunities and trimmed costs to extend the cash runway. Education of hospitals about the technology and the benefits it can bring, is a multi-faceted task involving clinicians as well as hospital administrators. Articulating the value and revenue it can generate and converting this into purchase orders is a lengthy process.

Another significant underperformer was the outsourced services specialist to the global video games industry, Keywords Studios, which fell 42% in the period. This was despite the company reporting full year revenue growth of 13%, with around 6% of this organic augmented by five completed acquisitions, and an operating margin of over 15%. Whilst this performance was behind previous levels, the company had significant trading headwinds to mitigate, including the US entertainment strikes and a slowdown across the global industry. Nevertheless, Keywords still managed to outpace organic market growth, thus taking market share. Sentiment also played a part in the share weakness, with expectations that Artificial Intelligence (AI) machine-created technology will present games publishers with in-house alternatives to outsourced services. However, such spend on AI will likely be beyond the reach of some customers, and Keywords was already investing in this area to improve its competitiveness, service quality and product offering.

e-learning specialist, Learning Technologies, also impacted the portfolio's performance, falling 42%. In its full year results, the company reported an organic revenue decline of 2%. This reflected a slowdown in transactional and project-based work from its key financial services and technology clients, plus difficulties with the integration of a recent acquisition. Cost-cutting, however, protected operating margins at more than 17%, and also significantly reduced debt. Learning Technologies' share price was also impacted by AI concerns about machine-created education, but again, the company is examining its own investment into this and the potential productivity gains which could be generated.

One of the few successful flotations on AIM within the last couple of years has been high-end semiconductor chip designer and manufacturer, Ensilica, which specialises in Application Specific Integrated Circuits (ASICs). Since its listing in late 2022, the company has broadened its customer base from the automotive market into industrial, healthcare and satellite communication applications. Revenues grew 34% year-on-year to May 2023, with significantly higher margins and operating profits. Last November it sought to raise up to £5m equity to support the execution of a growing pipeline of new business opportunities. By this stage of its growth, however, the company had ceased to be VCT-qualifying, and so, frustratingly, the Company was unable to support the fund raise. The difficult environment for risk appetite meant that only c£1.5m was eventually raised at a substantial discount. This impacted the shares, which fell 58% in the period.

Velocys, which developed catalytic reactor technology for use in the production of Sustainable Aviation Fuel (SAF) from wood chips or waste sources, and which was developing large scale projects in both the UK and US, struggled during the period to refinance its currently loss-making operations. This was despite receiving c£30m of government grants in late-2022 and having significant SAF offtake agreements with customers. Negotiations continued for much of the second half of the period under review, and during this time the decision was taken to reduce, and ultimately exit, the position in view of the funding risks involved. The shares fell 95% in the period, and in February 2024 the company was eventually taken private.

Video gaming developer and publisher, Frontier Developments, had a challenging year in keeping with the slowdown in consumer demand across the industry. In November, the company announced a strategic review, to move away from third-party publishing and re-focus on its own, core, creative management simulation games. This has involved a major cost cutting programme, targeting a return to profitability in financial year ending May 2025. The company retains significant cash resources. The shares fell 70%.

​

Other negative contributors included Saietta, the developer of eDrive systems for electric vehicles. Similar to Ensilica, Saietta also no longer qualified for VCT investment. The company raised £7m of highly dilutive funding in November, as part of a larger fund raise intended to complete in March 2024. Unfortunately when the company lost a cash flow boosting contract in February, and one of its customers in India failed to deliver on a promised contract, the March fund raise became too difficult to complete with the result that the company appointed an administrator. This was a sad end to what had seemed a highly promising business. Energy and water efficiency solutions provider, Eneraqua, and IT training business, Northcoders, experienced difficult trading conditions during the period after achieving successful listings in 2021. Both were hit by demand downturns involving key customers. Eneraqua's local authority social housing base has been impacted by budgetary constraints, alongside priority spending on insulation, fire cladding, and damp and mould renovations. Accordingly, funding in these areas has pushed back investment in new utility systems. Northcoder's corporate business, where training programmes are developed for specific employers, was hit by a general environment of cutbacks in staff spending. The already partially written down unquoted convertible loan holding in electronics company eleXsys was written down to zero during the period, as long expected investment in the company to commercialise the company's grid management technology failed to materialise.

Offsetting these negatives were good performances in the period from some of the longer held investments within the portfolio. Healthcare software specialist, Craneware, which has been a holding for almost 20 years, gained 51%. This followed an improving market backdrop, whereby US hospitals and pharmacy providers re-focused on future growth and operational efficiency following a prolonged period of spending slowdown and shifted priorities, due to an overhang from the pandemic. First half revenue growth accelerated to 8%, and earnings also grew reversing the decline seen in the previous year.

Franchised property services operator, Belvoir, which has been a holding since 2012, gained 43%. Whilst franchisee fees from estate agencies declined in 2023, this was more than offset by growth from lettings agencies and also financial services such as mortgage advice. Overall, the company achieved growth progress in a difficult trading environment as interest rates climbed, and this reflects the robustness of the franchise business structure. More importantly it was announced in January of this year that Belvoir was the subject of a nil premium merger with another portfolio holding, Property Franchise (held since 2013) whose shares gained 40%. This welcome development creates a company with a combined market capitalisation of almost £200m, which will broaden the investor audience for the shares. There is scope for the larger group to generate meaningful revenue and cost synergies in due course.

Glantus, the accounts payable analytics software provider, which had a difficult time since listing in 2021 as it restructured and missed revenue forecasts, received an industry buyer approach as trading improved. The shares rose nearly four-fold in the period.

Property services group, Kinovo, a holding since 2015, announced strong interim results with operating profit growth significantly ahead of revenue growth due to a favourable mix of high margin business. This was principally within electrical services, where new legislation, such as the Building Safety Acts, is driving non-discretionary landlord spend following the Grenfell Tower disaster. The shares gained 97%.

Other positive contributors were Equals, Creo Medical and Eden Research. Equals, the FX payment services specialist held since 2014, continues to trade strongly as it shifts its focus from consumers to corporates, generating stronger growth and profit margins. In November, the company announced it was exploring a potential sale with interested parties, discussions with which are ongoing. Creo Medical, an endoscopy medical device company, gained after announcing an oversubscribed fundraise. This cleared a material overhang in the stock and gave it a very comfortable runway to breakeven and beyond. In the period, the company continued to generate positive news flow about the regulatory approval of its advanced energy devices and their use in surgical procedures globally. Most impressively, the company highlighted the progression of its partnership with Intuitive Surgical, the global leader in robotic assisted surgery, as the companies move towards integrating their technologies. Eden Research, a sustainable biopesticide company, also rose following an oversubscribed fundraise and news of a major partnering for its products. Corteva, a global agriculture company, partnered with Eden Research on the development and commercialisation of Ecovelex in the UK and EU. Ecovelex is a bird deterrent seed treatment. The product is derived from plant based chemistry which works by creating an unpleasant odour and taste which repels birds.

Portfolio Activity

Over the course of the period under review, the Company made five new investments and seven follow-on investments. A total of £9.8m was invested in the five new investments and £4.5m in the seven follow-on investments (of which one, the follow-on investment of £1m in Verici DX, settled out of the reporting period).

The new investments comprised two IPOs and two secondary placings on AIM, as well as one unquoted investment.

In the first half of the period, the Company participated in the flotation of Fadel Partners, a developer of cloud-based software for royalties' management, digital asset management and brand compliance. Fadel's customers are licensors and licensees across a range of markets covering media, entertainment, publishing, consumer brands and technology. The products incorporate sophisticated image and video recognition powered by AI search tools. The business reported revenue of $14.5m for 2023. In the second half of the year the Company participated in the IPO of Tan Delta, a developer and supplier of sensors and systems which uses innovative real time oil analysis technology to allow operators of engineering equipment to cut maintenance costs, improve reliability, and reduce carbon footprint.

Traditionally, oil monitoring is managed in compliance with preset service intervals, which results in lubrication oil being discarded when it can still have 30-50% of its useful life left. With limited sales resource prior to its IPO, Tan Delta has built a customer list with major names such as Shell, Schlumberger and Aggreko, and its technological edge lies in it being able to test many types of installed equipment and oil types. The addressable market is significant and global. A key positive is that the Non-Executive Chairman is already known to us as CEO of another portfolio holding, SRT Marine Systems.

In March, an unquoted investment was made in 2 Degrees, alongside Maven Capital Partners. The company provides large corporates and their suppliers with an online Software as a Service platform to measure, manage and reduce carbon within supply chains, thereby helping to achieve the Green House Gas Protocol Scope 3 emissions standard. The platform includes a planning tool and AI-driven recommendations for best practices to reduce carbon. Current markets are in food retail and automotive, with scope to grow beyond this.

Investments through secondary placings in existing AIM companies involved Itaconix and Cordel. Both were completed in the first half. The former is a US developer of a plant-based polymer used to decarbonise everyday consumer products. The company has been on AIM since 2012, but only achieved commercial breakthrough in 2020 with a bio-polymer ingredient for dishwasher detergent. Close to 150 consumer products now use Itaconix ingredients, involving major retailers such as Amazon, Walmart, Aldi and Tesco. With opportunities to grow into personal hygiene and beauty products, the company is forecast to breakeven in its current financial year. Cordel floated on AIM in 2018, and a year later acquired its current business activity, an AI analytical software platform to automate inspection and management of rail infrastructure. Using highly accurate Light Detection and Ranging sensors mounted onto train rolling stock, the technology replaces human surveying of vegetation infringements, infrastructure clearances, crossings, drainage and ballast, in order to meet regulatory requirements and prevent accidents. Commercial success to date includes contracts with Network Rail, Angel Trains and Amtrak. The company is forecast to breakeven in the current financial year.

Three of the seven follow- on investments took place in the first half of the period and involved antibody developer Fusion Antibodies; fire safety product specialist Zenova; and sustainable biopesticides formulator Eden Research. A small placing participation with Fusion Antibodies was limited to our equity percentage, to avoid dilution. Fusion Antibodies has had to broaden its customer offering to provide an end-to-end therapeutic antibody service, which captures earlier stage customers and generates repeat business. Alongside the raise there was a management commitment to significant cost cuts being made through to 2024. Zenova was also a modest investment, within an overall placing to get the company to breakeven after a slow start to revenue growth from its range of fire prevention products with mass market potential. Despite difficulties caused by Covid delays, Eden Research (reported on above) is continuing to develop a global portfolio of biopesticide products with international approvals. The company has made excellent strides in reorganising its distributor base to bring in higher quality companies, and further product submissions are ongoing.

In the second half of the period, follow-on investments were made in composite aircraft component manufacturer, Velocity Composites; autonomous vehicle developer, Aurrigo; automotive wiring connector specialist, Strip Tinning; and organ transplant diagnostics developer, Verici DX. Velocity Composites is seeing a significant pick-up in its European and US business in line with the recovery in the commercial aerospace market, driven by Middle Eastern airline demand and a global transition to more fuel-efficient aircraft. In December 2022, the company announced a five year $100m contract with GKN Aerospace involving a diverse range of high-performance composite structures across military, civil, and business jet programmes. The significant fundraise was used to provide working capital and further investment into the company's US facility. Aurrigo has made progress on a number of fronts since its IPO in 2022. Luggage tug trials are continuing at Changhi airport in Singapore, a project has been won for a cargo version for UPS, and further work is being done on a passenger shuttle vehicle. Airport development clients now include Changhi, Stuttgart, Schiphol and Cincinnati, with the latter involving carrier IAG. We participated pro rata to our equity percentage in the fundraise. Strip Tinning raised significant working capital, partly in the form of convertible loan in which the Company participated, to fund a pipeline of glazing and EV nominations from large automotive original equipment manufacturers. Having cut costs in a tough post-Covid environment for the industry, the company has now returned to breakeven. After securing a licensing agreement in November with global major Thermo Fisher Scientific for an early rejection, pre-kidney transplant test, Verici DX raised significant funding to take it through to 2025 when it hopes to reach profitability on the back of similar deals.

In addition to the exits from Glantus and Velocys noted above, there were a number of other disposals from the portfolio during the period. Rare disease biopharmaceutical company Amryt Pharmaceuticals was sold following the recommended offer in January by Chiesi Farmaceutici S.p.A. This has been a successful investment for the Company. Angle, the liquid biopsy developer, was sold on concerns that its technology could be superseded by alternative circulating tumour DNA diagnostics. Anpario, the animal feeds additive specialist, was exited as it had been a holding for around fifteen years and had reached a stage of maturity in terms of its prospects. Allergy Therapeutics, Bonhill, Falanx and Itsarm (formerly In the Style) were also exited as they had become sub-scale positions.

After strong performance from the shares in the first half of the period, the opportunity was taken to reduce our large holding in AB Dynamics, the designer and supplier of testing and simulation technology to the automotive industry. This crystallised £2.2m in realised gains from original cost. Profits were also taken in the portfolio's largest holding, Keywords Studios, crystallising gains of £1.4m from original cost. With Aurrigo's shares reaching a peak of more than three times the listing price, a small trim was made to the weighting which subsequently provided portfolio flexibility to participate in the placing. In the period, we also reduced our position in Polarean. Recognising that it was likely that the VCT Rules would not allow the Company to make further investments in Polarean, the decision was taken to sell part of our holding to Nukem, a long term strategic investor in Polarean. A decision was also taken to reduce our position in Frontier Developments, following a sequence of disappointing game launches plus a step-back to monitor how the strategic review is executed.

Treasury Management

With the rise in the Bank of England base interest rate that began in February 2022 with an increase to 0.5%, quickly increasing incrementally to 5.25% by August 2023 at which level it has remained, opportunities to earn a good return on cash became available. Following consultation with the Company's VCT status adviser the decision was taken to allocate a proportion of cash held to overnight or up to 7-day term deposit accounts offering interest rates at or close to central bank base rates with A+ rated financial institutions. We placed the majority of the remainder with short term money market funds. Such deployment of cash provides an attractive means of generating additional, low-risk income for the Company while awaiting suitable VCT qualifying opportunities.

Outlook

The junior end of the UK stock market has been through a traumatic period over the last two years, since it peaked in September 2021. In the past a rally in the leading tech stocks in the US tended to filter through to venture capital stage companies in the UK, whether quoted or unquoted. This time, however, the dramatic rise in the leading US tech stocks has exacerbated flows of money away from the UK stock market as savers have sought to reallocate capital to these already giant companies.

As at the end of March, the VCT qualifying portfolio is roughly split 50/50 in value between a group of 18 relatively mature small and medium sized businesses originally purchased between 2005 and 2015. These have been highly profitable investments, even with some of the big share price falls they have seen over the last two years.

In managing the VCT we have had a strong tendency to want to preserve these holdings as much as possible, because it will take a long time for investments made under post 2017 VCT rule changes to match them in maturity, scale and quality.

The outlook for this group of companies has improved significantly from a year ago, with growth coming through in many cases and a sense that ratings are now bottoming out. This sets up the conditions for a rebound if UK interest rates fall towards the end of the year, as expected. In general we were too slow to take profits from this part of the portfolio in 2021, having cultivated a strategy of running winners that was highly effective for the prior ten years. The VCT rules are much easier to negotiate with this policy of running winners. However, we failed to anticipate exactly how far the deratings could run, and how much some of these companies suffered from downgrades. In general, we are increasing our propensity to take profits from this part of the portfolio where we see significant valuation risk. But as things stand, we think the risks are now more biased towards an upwards re-rating and for better growth metrics returning.

The other half of the portfolio by value are holdings in around 40 companies which are still at the venture capital stage, loss making or break even, undertaking the long and difficult journey to sustainable profitability. One of these, Maxcyte, is now NASDAQ listed, having raised sufficient cash to aim for demanding growth targets and to maximise the commercial opportunity it has. In most cases, however, the share prices of this group of companies are distressed. They are more fragile, and their fortunes will depend substantially on hitting corporate targets and de-risking business plans. Where they can do this, the upside from current depressed prices will be significant. For those that don't deliver on expectations then this end of the market is a friendless place.

We recognise that we have had too much of a tendency to stick with investee companies that fail to meet expectations in the hope that over time they will find their way through to profitable growth, in part because this makes negotiating the severe constraints of the VCT legislation more manageable, especially whilst new investment opportunities have been fewer. In other cases, low levels of liquidity can make it difficult to sell stakes in a meaningful way, but the ability to do so remains one of the attractions of investing in quoted companies. This said, in this part of the portfolio, 59% of the holdings by value is in companies that are expected to turn profitable or return to profitability in 2024, and another 31% where this is expected during 2025. Once profitable, these companies have an opportunity to gain a wider investor base on AIM and should see more positive share price dynamics. Our experience from previous market downturns is that companies that survive this far tend to come through in better shape than they went in, having had to really hone strategy and cut out non-essential costs.

Looking at the impact on the portfolio of the VCT rule changes in 2016-17 shows that satisfactory returns have been difficult to achieve in the period since then, albeit this is looking back from the point of view of a low point. In some cases the rules and their interpretation (such as the revised implementation of the financial distress rules and the restrictions on making non-qualifying investments into existing qualifying investments where the rules don't allow qualifying investments to be made) create senseless restrictions on Managers which damage the value that can be delivered to shareholders for no apparent policy benefit. Some changes could be made that would cost nothing and improve the ways in which VCTs can support venture capital stage companies in the UK. VCTs also play a key role in replenishing the AIM exchange by supporting companies at IPO and through their early phases being quoted, something which is all too easily forgotten when times are good. Most policy makers understand the importance of this junior market, and it is to be hoped that whoever forms the next Government will take the time necessary to understand how to rejuvenate it. In the meantime we continue to review with the Board, possible ways of expanding the range of qualifying investments we can encompass.

Dr Paul Jourdan, David Stevenson and Scott McKenzie

Amati Global Investors

11 April 2024

Investment Portfolio

as at 31 January 2024

1 Qualifying holdings.

2 Part qualifying holdings.

3 These investments are also held by other funds managed by Amati.

4 The investments of Ordinary Shares and Convertible loan notes: Flylogix Limited ("Flylogix") consists of 392 Ordinary Shares in Flylogix at fair value of nil and 10% Convertible Loan Notes ("CLNs") at £610,000. The company was put into administration on 2 March 2023. The Convertible Loan Note agreement prescribes that if Flylogix is not listed on AIM, interest is payable at 10% per annum for a term of 5 years. The fair value of the CLNs is that amount which the administrator has indicated should be payable including interest.

Elexsys Energy plc ("Elexsys") consists of 202,737 Ordinary Shares in Elexsys at fair value of nil and 8% Convertible Loan Notes at nil.

Chorus Intelligence Limited ("Chorus") consists of 232 Ordinary Shares in Chorus at fair value of £151,000 and 10% Convertible Loan Notes at £2,699,000.

Byotrol plc ("Byotrol") consists of 25,000,001 Ordinary Shares in Byotrol at fair value of £138,000 and 9% Convertible Loan Notes at £350,000. Interest is being received quarterly on the Byotrol CLNs.

Strip Tinning consists of 569,699 ordinary shares at fair value of £228,000 and 10% Convertible Loan Notes at £500,000. Interest is payable upon redemption of the CLNs.

# This column shows the original book cost of the investments acquired from Amati VCT plc on 4 May 2018.

* This column shows the bookcost to the Company as a result of market trades and events.

** This column shows the aggregate book cost to the Company either as a result of trades and events or asset acquisition from Amati VCT plc on 4 May 2018.

*** This column shows the movement in fair value, the unrealised gains/(losses) on investments during the year, see notes 1 and 8 on pages 61 and 68 for further details.

NTM Next twelve months consensus estimate (Source: Refinitiv, Fidessa and Amati Global Investors))

The Manager rebates the management fee of 0.75% on the WS Amati UK Listed Smaller Companies Fund and this is included in the yield.

All holdings are in ordinary shares unless otherwise stated.

Investments held at nil value: Celoxica Holdings plc1, Elexsys Energy plc, Leisurejobs.com Limited1 (previously The Sportweb.com Limited), Rated People Limited1, Sorbic International plc, TCOM Limited1, VITEC Global Limited1.

As at the year end the percentage of the Company's portfolio held in qualifying holdings for the purposes of Section 274 of the Income and Corporation Taxes Act is 100%.

Analysis as at 31 January 2024

Qualifying portfolio

The portfolio of qualifying investments in the Company as at 31 January 2024 is analysed in the graph which can be found on page 18 of the full Annual Report and Accounts, by date of initial investment and market capitalisation. The size of the circles represents the relative size of the holdings in the portfolio by value.

The top ten qualifying portfolio companies are labelled. The dates of investments in securities held solely by Amati VCT plc prior to the merger with Amati VCT 2 plc in May 2018, are given as the dates those securities were originally acquired by Amati VCT plc.

Sector split

The portfolio of investments in the Company as at 31 January 2024 is analysed in the graph by sector which can be found on page 18 of the full Annual Report and Accounts. This includes a sector split of the investments within the WS Amati UK Listed Smaller Companies Fund which in the Investment Portfolio table above is classed as Financials.

Investment Policy, Investment Objectives and Investment Strategy

Investment Objectives

The investment objectives of the Company are to generate tax free capital gains and regular dividend income for its shareholders while complying with the requirements of the rules and regulations applicable to Venture Capital Trusts ("VCTs").

Investment Policy

The Company's investment policy is to hold a diversified portfolio across a broad range of sectors to mitigate risk. It makes Qualifying Investments (as defined in the Income Tax Act 2007 (as amended)) primarily in companies traded on AIM or on the Aquis stock exchange ("Aquis") and non-Qualifying Investments as allowed by the VCT legislation. The Company manages its portfolio to comply with the requirements of the rules and regulations applicable to VCTs.

Investment Parameters

Whilst the investment policy is to make Qualifying Investments primarily in companies traded on AIM or Aquis, the Company may also make Qualifying Investments in companies likely to seek a quotation on AIM or Aquis. With regard to the non-Qualifying portfolio the Company makes investments which are permitted under the VCT legislation, including shares or units in an Alternative Investment Fund (AIF) or an Undertaking for Collective Investment in Transferable Securities (UCITS) fund, and shares in other companies which are listed on a regulated market such as the Main Market of the London Stock Exchange. Any investments by the Company in shares or securities of another company must not represent more than 15% of the Company's net asset value at the time of purchase.

Borrowing

The Company has the flexibility to borrow money up to an amount equal to its adjusted capital and reserves but the Board's policy is not to enter into borrowings.

Investment Strategy for Achieving Objectives

The investment strategy for achieving the Company Objectives which follows is not part of the formal Investment Policy. Any material amendment to the formal Investment Policy may only be made with shareholder consent, but that consent applies only to the formal Investment Policy above and not to any part of the Strategy for Achieving Objectives or Key Performance Indicators below.

(a) Qualifying Investments Strategy

The Company is likely to be a long-term investor in most Qualifying Investments, with sales generally only being made where an investment case has deteriorated or been found to be flawed, or to realise profits, adjust portfolio weightings, fund new investments or pay dividends. Construction of the portfolio of Qualifying Investments is driven by the historic investments made by the Company and by the availability of suitable new investment opportunities. The Manager may co-invest in companies in which other funds managed by Amati Global Investors invest.

(b) Non-Qualifying Investments Strategy

The assets of the portfolio which are not in Qualifying Investments will be invested by the Manager on behalf of the Company in investments which are allowable under the rules applicable to VCTs. Currently, cash not needed in the short term is invested in a combination of the following (though ensuring that no more than 15% of the Company's funds are invested in any one entity at the time of purchase):

(i) the WS Amati UK Listed Smaller Companies Fund (which is a UCITS fund), or other UCITS funds approved by the Board;

(ii) direct equity investments in small and mid-sized companies and debt securities in each case listed on the Main Market of the London Stock Exchange; and

(iii) cash or cash equivalents (including money market funds) which are redeemable within 7 days.

Environmental, Social and Governance ("ESG") Policies

The Investment Manager recognises that managing investments on behalf of clients involves taking into account a wide set of responsibilities in addition to seeking to maximise financial returns for investors. Industry practice in this area has been evolving rapidly and Amati has been an active participant in seeking to define and strengthen its principles accordingly. This involves both integrating ESG considerations into the Investment Manager's investment decision-making process as a matter of course, and also signing up to major external bodies who are leading influencers in the formation of industry best practice. The following is an outline of the kinds of ESG factors that the Investment Manager will consider and question as part of its investment process, reflecting the specific inputs and outputs of a business.

· Environmental - climate change; use of natural resources; pollution; waste and impact on bio-diversity; and taking into account any positive environmental impacts.

· Social - use of human capital; potential product or service liabilities; stakeholder opposition; and taking into account any positive social considerations.

· Governance - ownership and control; management structure and quality; pay and alignment; accounting issues; business ethics; and tax transparency.

· Human rights - weighing up the risks of activities in countries with Freedom House Scores below 33 and based on Clean Trade principles; not investing in companies extracting natural resources in countries which score below 15; risk of exposure to corruption and unreliable legal frameworks; risk of benefiting from slave labour; risk from adverse political developments impacting a business negatively.

The Board is conscious of the potential impact of its investments on the environment as well as its social and governance responsibilities. The Board and the Manager believe that sustainable investment involves the integration of ESG factors within the investment appraisal process and that these factors should be considered alongside strategic, commercial and financial issues. Further details can be found on page 28 of the full Annual Report.

Board Diversity of Investee Companies

The Board, through the Manager, considers board diversity to be an important consideration in its investment decision on investee companies.

Key Performance Indicators

The Board expects the Manager to deliver a performance which meets the objectives of the Company. A review of the Company's performance during the financial year, the position of the Company at the year end and the outlook for the coming year is contained in the Chairman's Statement and Fund Manager's Review. The Board monitors on a regular basis a number of key performance indicators which are typical for VCTs, the main ones being:

· Compliance with HMRC VCT regulations to maintain the Company's VCT Status. See below;

· Net asset value and total return to shareholders (the aggregate of net asset value and cumulative dividends paid to shareholders, assuming dividends re-invested at ex-dividend date). See graphs on page 3 of the full Annual Report and Accounts;

· Comparison against the Deutsche Numis Alternative Markets Total Return Index. See graph on page 3 of the full Annual Report and Accounts;

· Dividend distributions. See table of investor returns above;

· Share price. See key data above; and

· Ongoing charges ratio. See key data above.

Fund Management and Key Contracts

Management Agreement

Amati Global Investors was appointed as Manager to the Company on 19 March 2010. Under an Investment Management and Administration Agreement dated 19 March 2010, and subsequently revised and updated in two separate agreements, an Investment Management Deed ("IMA") and a Fund Administration, Secretarial Services and Fund Accounting Agreement ("FASSFAA"), on 30 September 2019, the Manager agreed to manage the investments and other assets of the Company on a discretionary basis subject to the overall policy of the Directors. The Company will pay to the Manager under the terms of the IMA a fee of 1.75% of the net asset value of the Company quarterly in arrears. In November 2014, with shareholder consent, the Company amended its non-qualifying investment policy to permit investment in the WS Amati UK Listed Smaller Companies Fund, a small and mid-cap fund managed by the Manager. The Company receives a full rebate on the fees payable by the Company to the Manager within this fund either through a reduction of fees payable by the Company or a direct payment by the Manager.

Annual running costs are capped at 3.5% of the Company's net assets, any excess being met by the Manager by way of a reduction in future management fees. The annual running costs include the Directors' and Manager's fees, professional fees and the costs incurred by the Company in the ordinary course of its business (but excluding any commissions paid by the Company in relation to any offers for subscription, irrecoverable VAT and exceptional costs, including winding-up costs). No performance fee is payable as the Manager waived all performance fees from 31 July 2014 onwards.

Administration Arrangements

Under the terms of the FASSFAA, the Investment Manager also agreed to provide certain fund administration, company secretarial and accounting services to the Company. As disclosed in last year's annual report, the Manager and Board agreed that a new Company Secretary would be sought and that the Board would contract directly with the new Company Secretary. The Board appointed Law Debenture as Company Secretary of the Company with effect from 1 February 2022.

Under the FASSFAA, the Investment Manager has the right to appoint suitable representatives to provide fund accounting and administration services to the Company. The Manager engages Link Alternative Fund Administrators Limited to act as fund accountant and administrator.

For the year ending 31 January 2024 the Company agreed to pay to the Investment Manager a fee of £78,336 (2023: £72,000) quarterly in arrears in respect of the provision of fund accounting and administration services. This fee is subject to an annual increase in line with the consumer prices index. The appointment of the Investment Manager as investment manager and/or fund accountant and administrator may be terminated with twelve months' notice.

Where the Investment Manager negotiates and structures an investment directly with a company, most commonly as a convertible loan, the Investment Manager retains the right to charge the investee company a fee. Any legal expenses incurred by the Investment Manager will be paid out of this fee.

Fund Manager's Engagement

The Board regularly appraises the performance and effectiveness of the managerial, administration and secretarial arrangements of the Company. As part of this process, the Board will consider the arrangements for the provision of investment management and other services to the Company on an ongoing basis and a formal review is conducted annually. In the opinion of the Board, the continuing appointment of the Manager, on the terms agreed, is in the interests of the shareholders. The Directors are satisfied that the Manager will continue to manage the Company in a way which will enable the Company to achieve its objectives.

VCT Status Adviser

Philip Hare & Associates LLP ("Philip Hare & Associates") is engaged to advise the Company on compliance with VCT requirements. Philip Hare & Associates review new investment opportunities, as appropriate, and review regularly the investment portfolio of the Company. Philip Hare & Associates work closely with the Manager but report directly to the Board.

Principal and Emerging Risks

The Audit Committee regularly reviews the Company's risk register, which assesses each risk and classifies the likelihood of the risk and the potential impact of each risk on the Company. The Board considers that the Company faces the following major risks and uncertainties:

Section 172 Statement

Directors' Duty to Promote the Success of the Company

This section sets out the Company's Section 172 Statement and should be read in conjunction with the other contents of the Strategic Report. The Directors have a duty to promote the success of the Company for the benefit of its members as a whole and in doing so to have regard to a number of matters including:

· the likely consequences of any decision in the long term;

· the interests of the Company's employees;

· the need to foster business relationships with suppliers, customers and others;

· the impact of the company's operations on the community and the environment;

· the desirability of the Company maintaining a reputation for high standards of business conduct; and

· the need to act fairly between members of the Company.

As an externally managed investment company, the Company does not have employees. Its main stakeholders therefore comprise the shareholders, the Investment Manager, other service providers and investee companies.

To ensure that the Directors are aware of, and understand, their duties they are provided with a tailored induction, including details of all relevant regulatory and legal duties as a Director of a UK public limited company when they first join the Board, and continue to receive regular and ongoing updates and training on relevant legislative and regulatory developments.

They also have continued access to the advice and services of the Company Secretary, and when deemed necessary, the Directors can seek independent professional advice. The Terms of Reference of the Board's committees are reviewed annually and describe the Directors' responsibilities and obligations and include any statutory and regulatory duties.

Key decision making

The mechanisms for engaging with stakeholders are kept under review by the Directors and discussed at Board meetings to ensure they remain effective. The Board has policies for dividends, share buybacks and the dividend re-investment scheme, all of which it is considered are for the benefit of shareholders.

During the year the Directors discussed these and reaffirmed their commitment to the policies. An example of a principal decision made during the year, and how the Board fulfilled its duties under Section 172, is set out below:

Environmental, Social and Governance ("ESG") Policies, and Responsible Ownership

The Company has no employees and no premises and the Board has decided that the direct impact of its activities is minimal; therefore it has no policies relating to social, community and human rights issues. However, the Board does consider the impact of its operations on the environment and over the past couple of years the Board made the decision to no longer pay all cash dividends via cheque and to no longer provide printed copies of the Company's Half-Yearly report in order to reduce the use of paper. The Company engaged with its shareholders on the matter.

The Company's indirect impact occurs through the range of organisations in which it invests and for this it follows a policy of Responsible Ownership.

In terms of external validation and support, Amati Global Investors, the Manager, is signatory to the UK Stewardship Code which aims to enhance the quality of engagement between investors and companies to help improve long-term risk adjusted returns to shareholders. Amati's approach to Stewardship and Shareholder Engagement can be found at https://www.amatiglobal.com/storage/644/Stewardship _and_Shareholder_Engagement-v2.pdf.

Amati is also a signatory to the UN-supported Principles for Responsible Investment (PRI), which works to support its international network of signatories in incorporating ESG factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.

Voting on portfolio investments

In 2023, the Manager voted in respect of 59 Amati AIM VCT holdings at 78 company meetings on a range of ESG issues.

Business Conduct

The Board takes its responsibility to prevent bribery very seriously and has a zero-tolerance policy towards bribery. It has committed to carry out all business in an honest and ethical manner and to act professionally, fairly and with integrity in all its business dealings and relationships. The Manager has its own anti-bribery and corruption policy.

Global Greenhouse Gas Emissions

The Company is a low energy user and is therefore exempt from the reporting obligations under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 or the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, implementing the UK Government's policy on Streamlined Energy and Carbon Reporting. The Company has no greenhouse gas emissions or energy consumption to report from the operations of the Company, nor does it have responsibility for any other emission producing sources. Under listing rule 15.4.29(R), the Company, as a closed ended investment fund, is currently exempt from complying with the Task Force on Climate related Financial Disclosures.

Other Matters

VCT Regulations

The Company's investment policy is designed to ensure that it meets the requirements of HM Revenue & Customs to qualify and to maintain approval as a VCT:

(i) The Company must, within three years of raising funds, maintain at least 80% of its investments by VCT value (cost, or the last price paid per share, if there is an addition to the holding) in shares or securities comprised in qualifying holdings (this percentage rose from 70% to 80% for accounting periods beginning on or after 6 April 2019 which for the Company was from 1 February 2020). At least 70% by VCT value must be ordinary shares which carry no preferential rights. A further condition requires that 30% of new funds raised in accounting periods beginning after 5 April 2018 are to be invested in qualifying holdings within 12 months of the accounting period following the issuance of shares;

(ii) The Company may not invest more than 15% of its investments in a single company and it must have at least 10% by VCT value of its total investments in any qualifying company in qualifying shares approved by HM Revenue & Customs;

(iii) To be classed as a VCT qualifying holding, companies in which investments are made must have no more than £15 million of gross assets at the time of investment and £16 million after investment; they must be carrying on a qualifying trade and satisfy a number of other tests including those outlined below; the investment must also be made for the purpose of promoting growth or development;

(iv) VCTs may not invest new capital in a company which has raised in excess of £5 million (£10 million from 6 April 2018 if the company is deemed to be a Knowledge Intensive Company) from all sources of state-aided capital within the 12 months prior to and including the date of investment;

(v) No investment may be made by a VCT in a company that causes that company to receive more than £12 million (£20 million if the company is deemed to be a Knowledge Intensive Company) of state-aid investment (including from VCTs) over the company's lifetime. A subsequent acquisition by the investee company of another company that has previously received State-Aid Risk Finance can cause the lifetime limit to be exceeded;

(vi) No investment can be made by a VCT in a company whose first commercial sale was more than 7 years prior to date of investment, except where previous State-Aid Risk Finance was received by the company within 7 years (10 years in each case for a Knowledge Intensive Company) or where both a turnover test is satisfied and the money is being used to enter a new product or geographical market;

(vii) No funds received from an investment into a company can be used to acquire another existing business or trade;

(viii) Since 6 April 2016 a VCT must not make "nonqualifying" investments except for certain specified investments held for liquidity purposes and redeemable within seven days. These include investments in UCITS (Undertakings for Collective Investments in Transferable Securities) funds, AIF (Alternative Investment Funds) and in shares and securities purchased on a Regulated Market. In each of these cases the restrictions in (iii) - (vii) above are not applied; and

(ix) Non-qualifying investments in AIM-quoted shares are not permitted as AIM is not a Regulated Market.

During 2018, HMRC stopped issuing pre-clearance letters for VCT investments. They are encouraging VCTs not to use the advance assurance service for investments and have stated that where a VCT has taken reasonable steps to ensure an investment is qualifying, the VCT status will not be withdrawn where an investment is ultimately found to be non-qualifying.

The Manager and the Board rely on advice from Philip Hare & Associates regarding the qualifying status of new investments. The Manager monitors compliance with VCT qualifying rules on a day-to-day basis through a combination of automated and manual compliance checks in place within the business. Philip Hare & Associates also review the portfolio bi-annually to ensure the Manager has complied with regulations and has reported to the Board that the VCT has met the necessary requirements during the year.

PRIIPs Regulations

The Company is required to publish a Key Information Document (KID), which sets out the key features, risks, potential future performance and costs of PRIIPs (Packaged Retail and Insurance-based Investment Products). This document is available at the website of Amati Global Investors: www.amatiglobal.com.

Statement on Long-term Viability

In accordance with the UK Corporate Governance Code published in July 2018 (the "Code"), the Directors have carried out a robust assessment of the prospects of the Company for the period to January 2029, taking into account the Company's performance and emerging and principal risks, and are of the opinion that, at the time of approving the financial statements there is a reasonable expectation that the Company will be able to continue in operation and meet liabilities as they fall due over that period.

To come to this conclusion the Manager prepares and the Directors consider an income statement and cash flow forecast for the next five years, which is considered to be an appropriate time period due to its consistency with the UK Government's tax relief minimum holding period for an investment in a VCT. This time frame allows for forecasts to be made to allow the Board to provide shareholders with reasonable assurance over the viability of the Company. In making their assessment the Directors have taken into account the nature of the Company's business and Investment Policy, its risk management policies, the diversification of its portfolio, the cash holdings and the liquidity of non-qualifying investments.

The Directors have considered in particular the likely economic effects and the impacts on the Company's operations of the war taking place in Ukraine, rising inflation and interest rates.

The longer-term economic outlook is very difficult to predict but in considering preparing the long term viability of the Company the Directors noted the Company holds a portfolio of liquid investments and cash balances whose value is a multiple of liabilities.

Other Disclosures

The Company had no employees during the year and has three non-executive directors, two of whom are female and one is male.

On behalf of the Board

Fiona Wollocombe

Chairman

11 April 2024

Extracts from the Directors' Remuneration Report

Directors' fees for the year (Audited)

The fees payable to individual Directors in respect of the year ended 31 January 2024 are shown in the table below.

† Reimbursement of travel expenses

* retired at the end of the AGM on 16 June 2022

** resigned on 19 September 2022

Directors are remunerated exclusively by fixed fees and do not receive bonuses, share options, long-term incentives, pension or other benefits. There have been no payments to past Directors during the financial year ended 31 January 2024, whether for loss of office or otherwise.

Directors' shareholdings (Audited)

The Directors who held office at 31 January 2024 and their interests in the shares of the Company (including beneficial and family interests) were:

The Company confirms that it has not set out any formal requirements or guidelines for a Director to own shares in the Company.

On behalf of the Board

Julia Henderson

Chairman of the Remuneration Committee

11 April 2024

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report and the financial statements in accordance with UK Financial Reporting Standards and applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the company's financial statements and have elected to prepare the company financial statements in accordance with UK Financial Reporting Standards. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss for the company for that period.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with UK Financial Reporting Standards, subject to any material departures disclosed and explained in the financial statements;

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the company will continue in business;

· prepare a directors' report, a strategic report and directors' remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. 

They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the group's performance, business model and strategy.

Website Publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' responsibilities pursuant to DTR4

The Directors confirm to the best of their knowledge:

· The financial statements have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the company.

· The annual report includes a fair review of the development and performance of the business and the financial position of the company, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

Fiona Wollocombe

Chairman

11 April 2024

Income Statement

for the year ended 31 January 2024

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

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

The notes below form part of these financial statements.

Statement of Changes in Equity

for the year ended 31 January 2024

*Following Court approval and the subsequent registration of the Court order with the Registrar of Companies on 14 September 2022, the cancellation of the Company's share premium account became effective and an amount of £134,824,000 was transferred from the Share Premium account to the Special Reserve. The Special Reserve is available for distribution as determined in accordance with the Companies Act 2006 and HMRC rules specific to venture capital trusts.

The accompanying notes below are an integral part of these financial statements.

Balance Sheet

as at 31 January 2024

* These reserves are not distributable.

The financial statements above and below were approved and authorised for issue by the Board of Directors on 11 April 2024 and were signed on its behalf by

Fiona Wollocombe

Chairman

Company Number 04138683

The accompanying notes below are an integral part of these financial statements.

Statement of Cash Flows

for the year ended 31 January 2024

*Adjusted to exclude non-cash dividends re-invested under the Dividend Re-investment Scheme.

The accompanying notes below are an integral part of these financial statements.

Notes to the Financial Statements

1 Accounting Policies

Basis of Accounting

The financial statements have been prepared under FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and in accordance with the AIC SORP.

Basis of Preparation

The functional currency of the Company is Pounds Sterling because this is the currency of the primary economic environment in which the Company operates. The financial statements are presented in Pounds Sterling rounded to the nearest thousand, except where otherwise indicated.

Going Concern

The financial statements have been prepared on a going concern basis and on the basis that the Company maintains its VCT Status.

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for a period of 12 months from the date these financial statements were approved.

In making this assessment, the Directors have considered in particular the likely impacts of international and economic uncertainties on the Company, operations and investment portfolio.

The Directors noted that the Company, with the current cash balance and holding a portfolio of liquid listed investments, is able to meet the obligations of the Company as they fall due. The cash available enables the Company to meet any funding requirements and finance future additional investments. The Company is a closed-end fund, where assets are not required to be liquidated to meet day-to-day redemptions.

The Directors have reviewed stress testing and scenario analysis prepared by the Investment Manager to assist them in assessing the impact of changes in market value and income with associated cash flows. In making this assessment, the Investment Manager has considered plausible downside scenarios. These tests included the modelling of a reduction in income of 50%, increase in costs of 50% and a reduction in net asset value of 50%, any or all of which could apply to any set of circumstances in which asset value and income are significantly impaired. It was concluded that in a plausible downside scenario, the Company could continue to meet its liabilities. Whilst the economic future is uncertain, and the Directors believe that it is possible the Company could experience further reductions in income and/or market value, the opinion of the Directors is that this should not be to a level which would threaten the Company's ability to continue as a going concern.

The Directors, the Investment Manager and the Company's other service providers have put in place contingency plans to minimise disruption. The Board was satisfied that there has been minimal impact to the services provided during the year and is confident that this will continue. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company's financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on the going concern basis.

Segmental Reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company primarily invests in companies listed in the UK.

Judgements and Key Sources of Estimation Uncertainty

The preparation of the Financial Statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts in the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities and the allocation of income and expenses that are not apparent from other sources. The nature of estimation means that the actual outcomes could differ from those estimates, possibly significantly.

The most critical estimates and judgments relate to the determination of carrying value of unquoted investments at fair value through profit or loss. The policies for these are set out in the notes to the financial statements below. The Company values unquoted investments by following the International Private Equity Venture Capital Valuation ("IPEV") guidelines. Further areas requiring judgement and estimation are recognising and classifying unusual or special dividends received as either capital or revenue in nature. The estimates and underlying assumptions are reviewed on an ongoing basis. There are no further significant judgements or estimates in these financial statements.

Income

Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis except where, in the opinion of the Directors, their nature indicates they should be recognised in the Capital Account. Where no ex-dividend date is quoted, dividends are brought into account when the Company's right to receive payment is established.

Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis, provided there is no reasonable doubt that payment will be received in due course.

Interest receivable is included in the accounts on an accruals basis. Where interest is rolled up or payable on redemption it is recognised as income unless there is reasonable doubt as to its receipt.

All other income is accounted for on a time-apportioned accrual basis and is recognised in the Income Statement.

Costs in relation to the purchase or sale of investments are recognised as a capital expense.

Expenses

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the income statement, all expenses have been prescribed as revenue items except as follows:

Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated, and accordingly the investment management fee is currently allocated 25% to revenue and 75% to capital, which reflects the Directors' expected long-term view of the nature of the investment returns of the Company.

Issue costs in respect of ordinary shares issued by the Company are deducted from the share premium account.

Transaction costs in relation to the purchase and sale of investments are allocated to capital. Prior to 1 February 2023 these were included within the cost and/or disposal of investment.

Taxation

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. Deferred tax assets are only recognised when they arise from timing differences where recovery in the foreseeable future is regarded as more likely than not. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods. Deferred tax is not discounted.

Current tax is expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years. The tax effect of different items of expenditure is allocated between revenue and capital on the same basis as a particular item to which it relates, using the Company's effective rate of tax, as applied to those items allocated to revenue, for the accounting year.

No tax liability arises on gains from sales of fixed asset investments by the Company by virtue of its VCT status.

Investments

In accordance with FRS 102, Sections 11 and 12, all investments held by the Company are designated as held at fair value upon initial recognition and are measured at fair value through profit or loss in subsequent accounting periods. Investments are initially recognised at cost, being the fair value of the consideration given. After initial recognition, investments are measured at fair value, with changes in the fair value of investments recognised in the Income Statement and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost. Until 31 January 2023, included within this heading were transaction costs in relation to the purchase and sale of investments. However, from 1 February 2023 transaction costs in relation to the purchase or sale of investments have been recognised as a capital expense.

In respect of investments that are traded on AIM or are fully listed, these are valued at bid prices at close of business on the Balance Sheet date. Investments traded on SETS (London Stock Exchange's electronic trading service) are valued at the last traded price as this is considered to be a more accurate indication of fair value.

Fair values for unquoted investments, or for investments for which the market is inactive, are established by using various valuation techniques in accordance with IPEV guidelines. These are constantly monitored for value and impairment. The fair values are approved by the Board. The shares may be valued by using the most appropriate methodology recommended by the IPEV guidelines, including revenue multiples, net assets, discounted cashflows and industry valuation benchmarks.

Convertible loan stock instruments are valued using present value of future payments discounted at a market value of interest for a similar loan and valuing the option at fair value.

The valuation of the Company's investment in WS Amati UK Listed Smaller Companies Fund is based on the published share price. The valuation is provided by the Authorised Corporate Director of the fund, Waystone Fund Managers Limited.

Foreign Currency

Foreign currency assets and liabilities are translated into sterling at the exchange rates ruling at the balance sheet date. Transactions during the year are converted into sterling at the rates ruling at the time the transactions are executed. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature.

Financial Instruments

The Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on trade date when the Company becomes a party to the contractual provisions of the instrument. All financial instruments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, with changes in the fair value recognised in the Income Statement and allocated to capital.

Financial instruments are derecognised on the trade date when the Company is no longer a party to the contractual provisions of the instrument.

Cash at Bank

For the purposes of the Balance Sheet, cash comprises cash in hand and demand deposits.

Demand deposits are short term deposits with deposit taking banks readily realisable at the Company's discretion.

For the purposes of the Statement of Cash Flows, cash consist of cash at bank and demand deposits as defined above, net of outstanding bank overdrafts when applicable.

Current Asset Investments

Current asset investments comprise of investments in money market funds and are designated as Fair Value through Profit or Loss. Gains and losses arising from changes in fair value of current investments are recognised as part of the capital return within the income statement and allocated to the capital reserve.

The current asset investments are readily convertible into cash at the choice of the Company within seven days. The money market funds are used to enhance returns on surplus cash awaiting investment. These are actively managed and the performance evaluated by the Investment Manager.

Debtors

Trade receivables, prepayments and other debtors are measured at amortised cost or estimated fair value, with balances revalued for exchange rate movements. Any losses arising from impairment are recognised in the income statement in other operating expenses upon notification.

Creditors

Trade payables and accruals are measured at amortised cost and revalued for exchange rate movements.

Dividends Payable

Final dividends are included in the financial statements when they are approved by shareholders. Interim dividends payable are included in the financial statements on the date on which they are paid.

Share Premium

The share premium account is a non-distributable reserve which represents the accumulated premium paid on the issue of shares in previous periods over the nominal value, net of any expenses.

Merger Reserve

The merger reserve is a non-distributable reserve which originally represented the share premium on shares issued when the Company merged with Singer & Friedlander AIM VCT and Singer & Friedlander AIM 2 VCT in February 2006. The merger reserve is released to the realised capital reserve as the assets acquired as a consequence of the merger are subsequently disposed of or permanently impaired. There have been no disposals of these assets during the year.

Capital Redemption Reserve

The capital redemption reserve represents non-distributable reserves that arise from the purchase and cancellation of shares.

Special Reserve

The special reserve was created by the cancellation of the share premium account by order of the Court and forms part of the distributable reserves. Distributions may be restricted as determined in accordance with the Companies Act 2006 and HMRC rules specific to venture capital trusts. The following items are taken to this reserve:

• costs of share buybacks; and

• dividends payable to shareholders.

Capital Reserve

The following are taken to the capital reserve through the capital column in the Income Statement:

Capital reserve - other, forming part of the distributable reserves:

· gains and losses on the disposal of current investments;

· realised exchange gains and losses of a capital nature;

· expenses allocated to this reserve in accordance with the above policies; and

· capital expenses.

Capital reserve - investment holding gains, not distributable:

· increase and decrease in the value of investments held at the year end; and

· unrealised exchange gains of a capital nature.

Revenue Reserve

The revenue reserve represents accumulated profits and losses and any surplus profit is distributable by way of dividends.

2 Income

3 Management Fees

The Manager provides investment management and fund accounting and administration services to the Company under an Investment Management Agreement ("IMA") and a Fund Administration, Secretarial and Fund Accounting Agreement ("FASSFAA"). Details of these agreements are given above.

Under the IMA the Manager receives an investment management fee of 1.75% of the net asset value of the Company quarterly in arrears.

The Company received a rebate of its management fee for the investment in the WS Amati UK Listed Smaller Companies Fund.

The investment management fee for the year was as follows:

In addition to the investment management fee the Manager also received a fund accounting and administration fee of £78,000 (2023: £72,000) paid quarterly in arrears. See note 4.

No performance fee is payable in respect of the year ended 31 January 2024, as the Manager has waived all performance fees from 31 July 2014 onwards.

Annual running costs are capped at 3.5% of the Company's net assets. If the annual running costs of the Company in any year are greater than 3.5% of the Company's average net assets over the period, the excess is met by the Manager by way of a reduction in future management fees. The annual running costs include the Directors' and Manager's fees, professional fees and the costs incurred by the Company in the ordinary course of its business (but excluding any commissions paid by the Company in relation to any offers for subscription, any performance fee payable to the Manager, irrecoverable VAT and exceptional costs, including winding-up costs). Annual running costs as a percentage of net assets are 1.8%.

There was no excess of expenses for the year ended 31 January 2024 nor for the prior year.

4 Other Expenses

The Company has no employees. The Directors are therefore the only key management personnel.

Details of Directors' remuneration are provided in the audited section of the directors' remuneration report on page 44 of the full Annual Report and Accounts.

5 Tax on Ordinary Activities

5a Analysis of charge for the year

5b Factors affecting the tax charge for the year