The directors present the strategic report for Amati Global Investors Limited ("AGI" or "the Company") for the year ended 31 December 2023.
The principal activity of the company continued to be that of the provision of investment management services.
The company is authorised and regulated by the Financial Conduct Authority (FCA).
The company continues to have a strong balance sheet with net assets of £4,474,727 (2022: £4,856,185).
The year to 31 December 2023 saw a decline in funds under management (“FUM”) from £986m to £731m. This decline was due to the knock on impacts on financial markets of significant events around the world such as war in Palestine, the ongoing war in Ukraine, high energy prices, inflation and increased interest rates. Additional issues facing the United Kingdom such as an upcoming UK general election with a likely change of government and cost of living impacts particularly affect UK companies where some of our funds have significant investments.
The Directors consider that the biggest risks to the Company are operational and business risks. These include: major falls in the UK stock market leading to contraction of our assets under management; poor investment performance or poor client servicing leading to outflows; failing to maintain compliance with all applicable regulations; loss of an investment management mandate; Amati AIM VCT failing to maintain its VCT status; and operational errors. The company makes use of external consultants for monitoring and maintaining compliance with the UK legislation applicable to fund management businesses and the VCT legislation as it applies to Amati AIM VCT. The Company maintains a level of capital to protect against scenarios that would lead to reduced performance and future income flows.
It is the directors' intention to grow the funds while maximising investment performance, and consider opportunities as and when they arise.
In addition to monitoring funds under management which saw a 26% decrease in 2023, and the investment performance of all of our funds which is published monthly on our website, the company monitors profit and its capital resources against its regulatory minimum requirement. Profit before tax decreased in 2023 by 35% from the previous year. The Company is comfortable that it continues to maintain a significant buffer to its minimum capital requirement.
The AGI shareholders’ agreement sets aside 10% of profit after tax to be paid to UK registered charities. During the year payments that totalled £275,932 (2022: £366,749) were paid to 137 charities.
The Directors have a duty to promote the success of the Company for the benefit of Shareholders as a whole and to describe how they have performed this duty having regard to matters set out in section 172(1) of the Companies Act 2006.
The likely consequences of long term decisions
The Company holds board meetings four times per annum. Its remuneration committee meets once per annum and its operational management team meets monthly. Shareholder representation is strong at all these meetings and the ongoing performance and future direction of the business is at the heart of discussions. Additionally, staff wellbeing and practical matters regarding the operational aspects of the business are considered and issues addressed.
The interests of the Company’s employees
The Company's business relies completely on its staff so the calibre of employees and their wellbeing is extremely important. A performance appraisal process is in place to encourage conversation and the raising of concerns, and to consider training and support requirements. Meetings of all staff take place weekly and there are all employee events from time to time to foster team spirit and to celebrate success.
The need to foster good business relationships with suppliers, customers and others
The Company puts a great deal of effort into communications with investors in, and interested parties to, its funds. Factsheets are prepared and issued monthly and regular communication events such as seminars, webinars and podcasts are run.
The Company places great importance in its ongoing relationship with the Authorised Corporate Director of the WS Amati Investment Funds, the Board of Amati AIM VCT, and the other parties who provide support in many different ways to the running of the funds it manages.
The desirability of the Company maintaining a reputation for high standards of business conduct
The Board is committed to maintaining high standards of corporate governance in relation to business conduct. It monitors and expects good standards of companies in which its funds invest. Environmental, social and governmental considerations are part of the investment management decision making process and the managers take seriously their voting in investee companies.
The impact of the Company’s operations on the community and the environment
As well as understanding the importance of being a good corporate citizen, the Company has a core value of sharing its profitability within the community. The AGI shareholders' agreement specifies that 10% of profits after tax are donated to UK registered charities to support charitable work in the UK and abroad.
The need to act fairly between members of the Company
Members of the Company are encouraged to contribute ideas and thoughts as to future strategy. The Board believes that consistent delivery of investor expectations in terms of returns and client servicing is the best way to grow funds under management and that new opportunities provide a platform for step change to the business, which benefits all and ensures the long term success of the business.
On behalf of the board
The directors present their annual report and financial statements for the Company for the year ended 31 December 2023.
The results for the year are set out on page 12.
Ordinary dividends were paid amounting to £2,000,000 (2022: £3,000,000).
The directors who held office during the year and up to the date of signature of the financial statements are shown below.
The company has chosen in accordance with Companies Act 2006, s.414C(11) to set out in the company's strategic report information required by Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has been done so in respect of future developments.
In accordance with the company's articles, a resolution proposing that Johnston Carmichael LLP be reappointed as auditor of the company will be put forward at a General Meeting.
The Company recognises that managing investments on behalf of clients necessarily involves taking into account a wide set of non-financial factors in seeking to maximise long-term returns for investors. The analysis of these factors will sometimes involve making complex ethical judgements and forming views about how legal frameworks are likely to evolve. AGI aims to be well-informed in making any such judgements and to be transparent about the positions it takes.
Industry practice in this area has been evolving rapidly and AGI has been an active participant in seeking to define and strengthen its principles accordingly, whilst engaging in the wider industry discussion. This has involved integrating Environmental, Social and Governance (“ESG”) considerations (to which we also add Human Rights as a separate category) more explicitly into the investment managers’ decision-making process, and also signing up to major external bodies who are leading influencers in the formation of industry best practice.
Our engagements with investee companies are based on relationships with them. The results of these engagements are not necessarily measurable. Our interactions are led by fund managers and are focused on aspects we believe will make companies better investments, always encouraging company managers to set high standards for their businesses. We almost always engage directly with the company itself and our views are rarely mediated by a broker and never by an institutional proxy voting adviser.
Streamline Energy and Carbon Reporting (“SECR”)
The Company is 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. AGI completed the 2023 PRI assessment and successfully retained our PRI signatory status having been awarded a 5-star rating in the category 'Direct - Listed Equity - Active Fundamental' which is the category specific to AGI's investment activities and is a measure of the incorporation of Environmental, Social and Governance factors into the investment process. AGI also achieved 4 out of 5 stars for the 'Public Governance and Strategy' and 'Confidence Building Measures' modules. Our full PRI Transparency Report 2023 is on our website https://www.amatiglobal.com/our-values .
We have followed the 2019 HM Government Environmental Reporting Guidelines. We have also used the GHG Reporting Protocol – Corporate Standard and have used the 2023 UK Government’s Conversion Factors for Company Reporting.
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per person employed, the recommended ratio for the sector.
AGI has a target of net zero greenhouse gas Scope 1 and 2 emissions for its operational business by 2030, whilst looking for actions that can be taken to limit areas of Scope 3 emissions too. The company has a working group which considers how the company achieves decarbonisation through a mixture of reduced consumption and offsetting, assuming that genuine offsetting becomes possible over the next few years in the form of carbon capture and sequestration.
The directors have no reason to believe that a material uncertainty exists that may cast significant doubt on the ability of the company to continue as a going concern.
On the basis of their assessment of the company's financial position, the directors have a reasonable expectation that the company will be able to continue in operational existence for a period of at least 12 months from the date of approval of the financial statements.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
The information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement set out on page 7, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Extent to which the audit is considered capable of detecting irregularities, including fraud (continued)
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and the sector in which it operates, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
UK Generally Accepted Accounting Practice;
Companies Act 2006;
UK tax legislation; and
Financial Services legislation.
We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of submitted returns, external inspections, relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur, by meeting with management to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management oversee the implementation and operation of controls. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk. We identified a heightened fraud risk in relation to:
Management override of controls
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;
Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Completion of appropriate checklists and use of our experience to assess the Company's compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
Amati Global Investors Limited is a private company limited by shares incorporated in Scotland. The registered office is Amati Global Investors Ltd, 8 Coates Crescent, Edinburgh, EH3 7AL.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements, where applicable:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
From the requirements of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; loan defaults or breaches, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Amati Global Holdings Limited. These consolidated financial statements are available from Companies House, 4th Floor, Edinburgh Quay 2, 139 Fountainbridge, Edinburgh EH3 9FF.
The carrying values of the tangible fixed assets are reviewed at each reporting date or when events or changes in circumstances indicate the carrying values may not be recoverable.
Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Basic financial liabilities, including trade and other payables. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Investments comprise investments in quoted equity instruments and open-ended investments funds, which are measured at fair value. Changes in fair value are recognised in the statement of comprehensive income. Fair value is based on quoted market prices and published prices which are readily available.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Management consider that there are no significant judgements, estimates or assumptions made which would have a material impact on these financial statements.
The total turnover of the company for the year has been derived from its principal activity wholly undertaken in the United Kingdom.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
During the year two directors accrued retirement benefits under a defined contribution pension scheme (2022: two).
Included above is £13,002 (2022: £11,820) in relation to remuneration paid to non-executive directors for services provided to the company.
Employer social security costs in respect of directors' remuneration are not included within the above.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
The company had pension contributions of £Nil (2022: £66,462) outstanding at the reporting date and included within creditors falling due within one year.
Profit and loss reserves represent accumulated comprehensive income or expenditure for the year and prior periods less dividends paid.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
During the year the company entered into the following transactions with related parties:
During the year Amati Global Investors Limited was charged £2,468 (2022: £8,856) by its parent company Amati Global Holdings Limited and £40,000 (2022: £40,000) by its associate company Mattioli Woods plc in relation to management charges.
The company rents its office space from Mattioli Woods plc. It was charged £67,256 in rental costs during the year (2022: £64,931).
The company pays a service charge and other charges to Mattioli Woods plc. The service charge is a recharge of costs in relation to the office space. It incurred expenses of £11,135 in service and other charges during the year (2022: £12,976).
The company paid dividends of £1,020,000 (2022: £1,530,000) to Amati Global Holdings Limited, and £980,000 (2022: £1,470,000) to Mattioli Woods plc.
The following amounts were outstanding at the reporting end date:
At the year-end the company owed Amati Global Holdings Limited £2,468 (2022: £4,292) and £3,333 (2022: £6,666) to Mattioli Woods plc in relation to management charges.
The company owed Mattioli Woods plc £16,519 in relation to rent at year end (2022: £16,519).
The company owed Mattioli Woods plc £1,298 in relation to service and other charges (2022: £11,685).
The immediate and ultimate parent is Amati Global Holdings Limited, a company whose registered address is 8 Coates Crescent, Edinburgh, Scotland, EH3 7AL. Amati Global Holdings Limited owns 51% of the share capital of Amati Global Investors Limited and is the smallest and largest entity which prepares consolidated financial statements including the company.