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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Miton Uk Microcap Trust Plc | LSE:MINI | London | Ordinary Share | GB00BWFGQ085 | ORD GBP0.001 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 49.35 | 48.20 | 50.50 | 49.35 | 48.85 | 48.85 | 143,499 | 08:00:05 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | -25.89M | -28.07M | -0.3649 | -1.35 | 37.96M |
TIDMMINI
RNS Number : 4384L
Miton UK MicroCap Trust plc
19 July 2017
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MITON UK MICROCAP TRUST PLC
REPORT AND ACCOUNTS FOR THE YEARED 30 APRIL 2017
The Directors present the Report and Accounts of Miton UK MicroCap Trust
plc ("the Company") for the year ended 30 April 2017. The full Report
and Accounts can be accessed shortly via the Company's website, www.mitongroup.com/micro,
or by contacting the Company Secretary on 01392 477500.
Miton UK MicroCap Trust plc is an investment trust quoted on the London
Stock Exchange under the ticker code MINI. It is referred to as the Company
or as MINI in the text of this Report. The Company has a Board that is
independent of the Investment Manager. The Company was first listed on
30 April 2015 with GBP50m of capital raised, and additional equity was
issued during the initial period to 30 April 2016, including by way of
a C share issue.
This Report covers the year ended 30 April 2017, a period when market
moves were dominated by the UK's decision to withdraw from the EU. The
net asset value ("NAV") of the Ordinary shares has risen by 17.0% over
the year. An additional GBP5.5m of new capital was raised over the year
via its share issuance programme, whilst GBP1.2m of shareholders' capital
was redeemed under the annual redemption facility following the year
end. As at 30 April 2017, the total assets of the Company were GBP111.4m.
STRATEGIC REPORT
RESULTS FOR THE YEAR TO 30 APRIL 2017
* Over the year under review, the Ordinary share NAV
rose from 54.91p on 30 April 2016 to 64.27p on 30
April 2017, an appreciation of 17.0%. The Ordinary
share price moved from 56.75p at the end of April
2016 to 62.25p at the end of April 2017, an increase
of 9.7%.
* The Company announced a C share issue towards the end
of the previous year and these C shares were
converted into 53,927,917 Ordinary shares on 19 July
2016 with the merger of the two fully-invested
portfolios.
* During the year, a further 9,168,084 Ordinary shares
were also issued, raising GBP5.5m. Full details of
the individual share issues can be found below.
* Investors requested the redemption of 1.9m Ordinary
shares in respect of the 28 April 2017 Redemption
Point, with 64.13p per share, a total of GBP1.2m,
being returned to these investors following the year
end on 15 May 2017.
* The total assets of the Company amounted to GBP111.4m
at the end of April 2017.
* Revenue after costs over the year amounted to GBP0.8m
or 0.53p pence per share. The Board has recommended a
final dividend of 0.36p per Ordinary share or
GBP0.6m. The balance, GBP0.2m, has been credited to
revenue reserves and remains available to distribute
to shareholders in the future should there be a
shortfall of revenue for dividend payments.
SUMMARY OF RESULTS
30 April 30 April
2017 2016
----------------------------------- ------------ ------------
Total Net Assets attributable
to equity shareholders (GBP'000) 111,246 60,392
NAV per Ordinary share* 64.27p 54.91p
Share price (mid) 62.25p 56.75p
(Discount)/premium to NAV* (3.14)% 3.35%
Revenue return per Ordinary
share 0.53p 0.32p
Total return per Ordinary share* 11.77p 5.64p
Ongoing charges#* 1.47% 1.76%
Ordinary shares in issue 173,086,001 109,990,000
------------------------------------ ------------ ------------
For the period from 26 March 2015 to 30 April 2016.
# The ongoing charges are calculated in accordance with AIC guidelines.
* Details provided in the Glossary of Terms in the full Annual Report.
CHAIRMAN'S STATEMENT
This is the second Annual Report for Miton UK Microcap Trust plc and
covers the year ended 30 April 2017.
Equity markets and performance
Over the year, stock market returns were dominated by the initial setback
and subsequent recovery of the UK equity market after the UK Referendum
result. In the period, some of the top performing shares included a number
of the larger quoted companies, since after the fall in Sterling, their
US Dollar or Euro earnings rose in value. In fact, many of the larger
AIM-listed companies also performed strongly, as increased investor interest
in these relatively well-known growth stocks has become more intense
given the subdued background for world growth. These factors led the
FTSE All-Share Index to rise 20.1% and the FTSE AIM All-Share Index to
appreciate by 34.5% over the year to April 2017.
Given the changing dynamics of the markets, the underlying attractions
of many of the smaller stocks were largely overlooked, and the NAV of
the Company only appreciated by 17.3% over the year. However, the Company
had a strong period of NAV returns in the previous year. Therefore, the
NAV has risen by 31.5% over the two-year period, which compares with
a return of only 13.3% on the FTSE All-Share Index and 31.7% on the FTSE
AIM All-Share Index over the same period.
There was a strong uplift in dividend income over the year. After deducting
the Company's running costs, the revenue per share was 0.53p per share.
The Board has recommended a dividend of 0.36p for the year, up from 0.14p
last year.
Share capital
A total of GBP5.5m of new capital was raised under the Company's share
issuance programme during the year. However, redemption requests for
1,934,487 shares were received at the end of March, and these were redeemed
at 64.13p each, amounting to GBP1.24m. This redemption mechanism is in
place to ensure that any unsatisfied sellers of the Company's shares
are cleared each year, which helps ensure the Company's share price trades
close to its NAV. The assets of the Company amounted to GBP111.4m at
the year end.
Outlook
Growth was plentiful during the period of globalisation. However, as
bond yields have moved down to ultra-low levels, many mainstream corporates
have prioritised increasing buy-backs and dividends over long-term capex,
while world productivity has stagnated.
Miton UK Microcap Trust plc was set up with changing market conditions
in mind. The recent election and many unanswered questions arising from
the Brexit process have increased levels of uncertainty. In past similarly
challenging periods, it has been the greater vibrancy of the smallest
quoted companies, with their ability to quickly adapt to changing circumstances
and opportunities, that has driven premium returns. Specifically, it
is their ability to find more capex opportunities with attractive cash
paybacks that will drive the outperformance of these stocks in future.
The largest companies may have been at the centre of attention during
the year under review as investors digested recent momentous events.
But, at a time when dividend growth across the markets is more uncertain,
we believe that ongoing earnings and dividend growth of microcaps could
lead many of the companies in the portfolio to generate premium returns
for an extended period.
Andy Pomfret
Chairman
18 July 2017
INVESTMENT MANAGER'S REPORT
Details of the Investment Manager
The Company's Investment Manager is Miton Trust Managers Limited, a wholly-owned
subsidiary of Miton Group plc ("Miton").
Miton is itself a smaller quoted company, listed on AIM. The Miton fund
managers are a close knit team with an aim to be more agile than others
in its thinking. This is important at all times, but following the major
changes in economic prospects after Brexit, or political dynamics after
the recent general election, market trends could change more significantly
over the coming three years than they have for decades. Miton has a team
of four fund managers researching UK-quoted stocks. The day-to-day management
of the Company's portfolio is carried out by Gervais Williams and Martin
Turner, who have a particular focus on researching many of the smaller
quoted stocks.
Gervais Williams
Gervais joined Miton in March 2011 and is Senior Executive Director of
the group. He has been an equity portfolio manager since 1985, including
17 years as Head of UK Smaller Companies and Irish Equities at Gartmore.
He won the Grant Thornton Investor of the Year Award in 2009 and 2010,
and was awarded Fund Manager of the Year 2014 by What Investment?
Martin Turner
Martin joined Miton in May 2011. Martin and Gervais have had a close
working relationship since 2004, and their complementary expertise and
skills led to their backing a series of successful companies. Martin
qualified as a Chartered Accountant with Arthur Andersen, and also has
extensive experience at Rothschild, Merrill Lynch and Collins Stewart,
where as Head of Small/Mid Cap Equities his role covered their research,
sales and trading activities.
Implementation of the overall objective of the Company
During the period of globalisation, many funds adopted the approach of
seeking to match the returns of the mainstream indices, or a degree of
outperformance of these indices, as their benchmark of success. A very
large number of equity funds therefore have sizeable holdings in a relatively
limited number of the largest stocks.
Miton is distinctive in that many of our funds do not use traditional
benchmarks. In particular, we advocate that market participants should
be very attentive to the prospect of a change in market trends. For this
reason, we often propose investment strategies that anticipate forthcoming
investment trends, rather than slavishly following the consensus. Overall,
this offers the prospect of attractive returns albeit that the timing
of these returns may be less correlated with other strategies. We believe
that this is a feature that has been evident over the year under review.
Although the dividend yield on the Company is modest at present, we also
seek to invest the portfolio so that it generates superior dividend growth
over the longer term. In some ways the strategy can be described as that
of an early stage income fund.
Implementing the investment strategy
In general, we believe that companies with promising productivity improvements
are likely to deliver attractive returns. As set out in our investment
thesis earlier in the Report, we believe it is productivity improvement
that principally funds the growing cashflow and dividend growth. In addition,
businesses with strong cashflow can go on to fund yet more productivity
improvements, often alongside a stream of growing dividends.
We find the following five factors particularly helpful when selecting
productive investments with attractive risk/ reward ratios for the Company.
Turnover growth - Although some companies can succeed in growing their
profits without turnover growth, in general the greatest long-term growth
comes from those that expand their turnover.
Companies investing in productivity improvement can often increase sales
via an innovative new service, or through introducing a superior or improved
product. Even in times of economic stagnation, this type of improvement
can generate decent turnover growth.
Sustained margins - A company that generates extra turnover growth may
find it does not grow its cashflow much if its profit margins fall back.
The best kinds of productivity improvement should reduce the cost of
goods and some can also justify a better market price. Ideally, we are
looking for companies that have the potential to sustain or improve their
profit margins through outstanding customer service. This may be especially
important in the current competitive environment when even sustaining
margins could be a good result.
Management of risk - All investment carries risks, but often those going
for the fastest growth are obliged to take the greatest risks. In general,
we aim to moderate portfolio risk by investing in companies where the
management team are happy to grow at a steady rate without taking sizeable
risks. Such companies still carry plenty of potential to deliver an attractive
return for their shareholders over time.
Better balance sheets - Many corporates have taken on extra debt over
the past decade given the exceptionally low interest rates. However,
we prefer investments with net cash balances or those with modest debt
relative to the headroom on the facility. In a world that is uncertain,
those with under-geared balance sheets can take more advantage of any
economic setbacks to disproportionately improve their market position,
whereas those fully drawn on their facilities tend to have fewer options.
Low entry valuations - The upside potential on an investment is often
greater when the valuation on entry is modest. In general, we favour
stocks where the overall market capitalisation reflects some of the problems
of the past, in preference to those which are already reflecting some
of the excitement about the future.
With few institutional investors actively researching the smallest quoted
companies, there are plenty of UK quoted companies with what we believe
are low entry valuations.
Progress over the year to April 2017
The major drivers of market return during the period were the UK's decision
to withdraw from the EU and strong price appreciation amongst some growth
stocks quoted on the AIM exchange.
The setback in the Sterling exchange rate boosted the share prices of
UK-quoted multinational companies. Those that pay their dividends from
income received in overseas currencies or those well positioned for the
apparent strong recovery of commodity prices such as UK majors Shell
and BP, performed particularly strongly. The FTSE All-Share Index appreciated
by 20.1% in the year to 30 April 2017.
Meanwhile, the extra uncertainty after Brexit led investors to adopt
a more cautious stance to domestically focused stocks. This, alongside
a slowdown in world growth, has increased investor enthusiasm for the
growth stocks including many of those listed on the AIM exchange, with
several moving onto relatively high forward looking valuations. Over
the year, the share price appreciation of just 20 of the largest AIM
stocks accounted for more than half of the 34.5% return on the AIM All-Share
Index in the year.
As the Sterling exchange rate bottomed out and it staged a recovery from
January onwards, this has led to many domestic companies enjoying a degree
of performance catch-up. The NAV of the Company therefore rose by 17.3%
over the year, albeit that was still rather less than the return on the
mainstream indices.
The stock that added most to the portfolio return in the year was IQE,
which tripled in the year. Towards the end of the year, a part of the
IQE holding was sold, given the market capitalisation of the company
is now above most others in the portfolio. Other notable outperformers
were Fulcrum Utility Services, Fishing Republic and IG Design Group (formerly
known as International Greetings), which each contributed more than 1%
to the overall return of the Company over the year to April 2017.
Inevitably, there were some setbacks as well. Bilby fell sharply after
the loss of their largest customer and a change to their method of accounting
for their forward orders. We have retained the holding in the portfolio
as the Company continues to offer outstanding service levels and reported
new contract wins towards the end of the year. Sepura, also fell back
sharply as their recovery plan did not come through as expected. This
prompted a bidder, and the management team gave its support to its sale
to another business.
As previously, the portfolio remains principally invested in less developed
income microcap stocks. At the end of April, the Company had 128 holdings.
This ensures that stock specific risk is well diversified, and even some
of the very smallest quoted companies can be included. We believe that
the smallest stocks should not be excluded on account of their size,
as sometimes they have particularly attractive risk/reward ratios.
Current market trends and outlook
Whilst the recent general election returned a minority government, the
prior policies of working towards a stable, business-friendly environment
remain in place. However, the election has added a further degree of
uncertainty as the UK negotiates its withdrawal from the EU.
The Company's strategy was put together with changing market dynamics
in mind. Economic momentum was already more temperate compared with the
plentiful growth during the period of globalisation. However, world productivity
has stagnated over the last ten years, so it will become all the more
important to continue to identify those companies investing in attractive
capex opportunities for the Company. Ultimately, we continue to identify
plenty of microcap stocks with the prospect of an attractive cashflow
from these kinds of investments going forward. These companies should
be well positioned to generate a truly sustained rise in earnings and
cashflow, from which we expect to deliver ongoing premium returns over
time.
Gervais Williams and Martin Turner
18 July 2017
PORTFOLIO INFORMATION
AS AT 30 APRIL 2017
% of Yield(1)
Sector & main Valuation
Rank Company activity GBP'000 net assets %
----- ---------------------- ------------------- ----------- ------------ ---------
Fulcrum Utility
1 Services Utilities 3,082 2.8 2.1
2 IQE Technology 2,824 2.5 0.0
3 Kromek Group Health Care 2,663 2.4 0.0
4 Cerillion Technology 2,654 2.4 2.8
5 Crossrider Consumer Services 2,349 2.1 0.0
6 Atlantis Resources Oil & Gas 2,141 1.9 0.0
7 YU Group Utilities 2,113 1.9 0.5
8 Fishing Republic Consumer Goods 2,042 1.9 0.0
9 Science in Sport Consumer Goods 1,971 1.8 0.0
10 Totally Health Care 1,929 1.7 0.0
Top 10 investments 23,768 21.4
----------------------------- ------------------- ----------- ------------
11 IG Design Group Consumer Goods 1,911 1.7 1.0
12 Cello Group Consumer Services 1,850 1.7 2.7
13 Amino Technologies Technology 1,826 1.6 2.9
14 Scientific Digital Health Care 1,763 1.6 0.0
15 Ingenta Technology 1,749 1.6 0.5
Conygar Investment
16 Company Financial Services 1,717 1.5 0.0
17 Anglo African Oil Oil & Gas 1,668 1.5 0.0
18 Autins Group Consumer Goods 1,643 1.5 0.0
19 Swallowfield Consumer Goods 1,630 1.5 1.2
20 Frontier IP Group Industrials 1,603 1.4 0.0
Top 20 investments 41,128 37.0
----------------------------- ------------------- ----------- ------------
21 Distil Consumer Goods 1,498 1.3 0.0
22 WYG Industrials 1,488 1.3 1.7
23 Zotefoams Basic Materials 1,422 1.3 2.0
24 Dekeloil Public Consumer Goods 1,393 1.2 0.0
25 7Digital Group Consumer Services 1,359 1.2 0.0
26 Brighton Pier Group Consumer Services 1,356 1.2 0.0
27 Alpha FX Group Financial Services 1,316 1.2 0.0
28 CML Microsystems Technology 1,306 1.2 1.6
29 Wey Education Industrials 1,300 1.2 0.0
Corero Network
30 Security Technology 1,289 1.2 0.0
Top 30 investments 54,855 49.3
----------------------------- ------------------- ----------- ------------
31 Ideagen Technology 1,234 1.1 0.2
32 Jaywing Consumer Services 1,175 1.0 0.0
33 Proactis Holdings Technology 1,150 1.0 0.7
34 Marlowe Industrials 1,135 1.0 0.0
35 Park Group Financial Services 1,118 1.0 3.5
Caledonia Mining
36 Corporation Basic Materials 1,098 1.0 5.4
37 Inspired Energy Industrials 1,084 1.0 2.7
Seeing Machines
38 Limited Technology 1,067 1.0 0.0
39 Churchill China Consumer Goods 1,060 1.0 2.0
40 Versarien Basic Materials 1,057 1.0 0.0
----- ---------------------- ------------------- ----------- ------------
Top 40 investments 66,033 59.4
Balance held in 88 equity
instruments 41,946 37.7
----------------------------- ------------------- ----------- ------------
Total investment portfolio 107,979 97.1
Other net current assets 3,267 2.9
------------
Net assets 111,246(2) 100.0
----------------------------- ------------------- ----------- ------------
1. Source: Interactive Data. Based on historic dividends and therefore
not representative of future yield.
2. As detailed in note 5 to the financial statements.
A copy of the full portfolio of investments as at 30 April 2017 is available
on the Company's website, www.mitongroup.com/micro
Portfolio exposure by sector %
1 Technology 20.1%
2 Industrials 18.5%
3 Consumer Goods 15.6%
4 Consumer Services 10.9%
5 Financial Services 10.2%
6 Health Care 8.8%
7 Basic Materials 6.1%
8 Utilities 4.9%
9 Oil and Gas 4.9%
100.0%
-------
Portfolio by asset allocation %
1 AIM 89.6%
2 FTSE SmallCap Index 4.3%
3 Other UK Equities 3.6%
4 FTSE Fledgling Index 2.5%
100.0%
-------
Portfolio by spread of investment income to 30 April 2017
1 AIM 79.8%
2 FTSE SmallCap Index 10.8%
3 FTSE Fledgling Index 5.7%
4 Other UK Equities 3.7%
100.0%
-------
Estimated annual income by sector(1) %
1 Industrials 31.4%
2 Financial Services 22.9%
3 Technology 15.2%
4 Consumer Goods 9.0%
5 Consumer Services 8.3%
6 Basic Materials 7.1%
7 Utilities 5.8%
8 Health Care 0.3%
9 Oil & Gas 0.0%
100.0%
-------
1 Projected income based on portfolio as at 30 April 2017.
Source: Interactive Data.
BUSINESS MODEL
Business and Status of the Company
MINI was incorporated on 26 March 2015 and its Ordinary shares were listed
on the London Stock Exchange on 30 April 2015. It is registered in England
as a public limited company and is an investment company in accordance
with the provisions of Sections 832 and 833 of the Companies Act 2006.
The principal activity of the Company is to carry on business as an investment
trust. The Company intends at all times to conduct its affairs so as
to enable it to qualify as an investment trust for the purposes of Sections
1158/1159 of the Corporation Tax Act 2010 ("S1158/1159"). The Directors
do not envisage any change in this activity in the foreseeable future.
The Company has been granted approval from HM Revenue & Customs ("HMRC")
as an investment trust under S1158/1159 and will continue to be treated
as an investment trust company, subject to there being no serious breaches
of the conditions for approval.
The principal conditions that must be met for continuing approval by
HMRC as an investment trust are that the Company's business should consist
of "investing in shares, land or other assets with the aim of spreading
investment risk and giving members of the company the benefit of the
results" and the Company may only retain 15% of its investment income
without distributing it as dividend payments. The Company must also not
be a close company. The Directors are of the opinion that the Company
has conducted its affairs for the year ended 30 April 2017 so as to be
able to continue to qualify as an investment trust.
The Company's status as an investment trust allows it to obtain an exemption
from paying taxes on the profits made from the sale of its investments
and all other net capital gains. Investment trusts offer a number of
advantages for investors, including access to investment opportunities
that might not be open to private investors and to professional stock
selection skills at lower cost and the ability to hold illiquid positions
in uncertain market conditions.
Investment Objective
The investment objective of the Company is to provide shareholders with
capital growth over the long term.
Investment Policy
The Company invests primarily in the smallest companies, measured by
their market capitalisation, quoted or traded on an exchange in the United
Kingdom at the time of investment. It is likely that the majority of
the microcap companies held in the Company's portfolio will be quoted
on AIM and will typically have a market capitalisation of less than GBP150
million at the time of investment. The Company may also invest in debt,
warrants or convertible instruments issued by such companies and may
invest in, or underwrite, future equity issues by such companies.
The Company may utilise derivative instruments including index-linked
notes, contracts for differences, covered options and other equity-related
derivative instruments for efficient portfolio management, gearing and
investment purposes. Any use of derivatives for investment purposes will
be made on the basis of the same principles of risk spreading and diversification
that apply to the Company's direct investments, as described below. The
Company will not enter into uncovered short positions.
If companies in the portfolio achieve organic growth or grow through
corporate activity such as acquisitions, and consequently have a market
capitalisation that would place them outside the investable universe,
the Investment Manager will not be obliged to sell those holdings, but
the proportion of the portfolio in such companies will be carefully monitored
by the Investment Manager and the Board so that the overall investment
policy to invest in the smallest quoted or traded companies is not materially
altered.
The Company's portfolio is expected to be diversified by industry and
market of activity. No single holding will represent more than 15% of
Gross Assets at the time of investment and, when fully invested, the
portfolio is expected to have over 120 holdings although there is no
guarantee that will be the case and it may contain a lesser number of
holdings at any time.
The Company will have the flexibility to invest up to 10% of its Gross
Assets at the time of investment in unquoted or untraded companies, or
in any one unquoted or untraded company.
The Company will invest no more than 10% of Gross Assets at the time
of investment in other investment funds.
Borrowing
The Company may deploy borrowing to enhance long-term capital growth.
Gearing will be deployed flexibly up to 15% of the Net Asset Value, at
the time of borrowing. In the event this limit is breached as a result
of market movements, and the Board considers that borrowing should be
reduced, the Investment Manager shall be permitted to realise investments
in an orderly manner so as not to prejudice shareholders.
No material change will be made to the investment policy without the
approval of shareholders by ordinary resolution.
PERFORMANCE AND RISKS
Key Performance Indicators
The Board reviews the Company's performance by reference to a number
of key performance indicators ("KPIs") and considers that the most relevant
KPIs are those that communicate the financial performance and strength
of the Company as a whole.
The Board and the Investment Manager monitor the following KPIs:
* NAV performance, relative to the AIM All-Share Index
and other comparable investment trusts and open-ended
funds
The Ordinary share NAV at 30 April 2017 was 64.27p per share (30 April
2016: 54.91p), giving a total return of 17.3% (30 April 2016: 12.1%)
over the year. This compares with the UK Investment Trust Smaller Companies
sector, where the average was a 27.9% increase in total return terms
over the same period. By comparison, the total return on the FTSE AIM
All-Share Index was 34.5% over the year.
* NAV correlation to mainstream indices
The Company has an objective to deliver a low NAV correlation with the
FTSE 100 and FTSE All-Share Indices. Correlation data is presented in
the full Annual Report.
* Movements in the Company's share price
The Company's Ordinary share price increased by 9.7% (30 April 2016:
13.5%) over the year on a capital return basis.
* The discount/premium of the share price in relation
to the NAV
The Company has an objective to keep the discount to NAV at a minimum.
Over the year to 30 April 2017, the Company has maintained an average
discount to Ordinary share NAV of 1.4%. The share price has ranged from
a premium of 4.9% to a discount of 8.0% to the Ordinary share NAV during
the period.
* Ongoing charges
The ongoing charges on the Ordinary shares for the period to 30 April
2017 amounted to 1.47% (30 April 2016: 1.76%) of total assets.
Principal Risks and Uncertainties
The Company is exposed to a variety of risks and uncertainties that could
cause its asset price or the income from the investment portfolio to
reduce, possibly by a sizeable percentage in the most adverse circumstances.
The principal financial risks and the Company's policies for managing
these risks and the policy and practice with regard to the portfolio
are summarised in note 18 to the financial statements.
The Board, through delegation to the Audit Committee, undertakes a robust
annual assessment and review of the principal risks facing the Company,
together with a review of any new risks which may have arisen during
the year, including those that would threaten its business model, future
performance, solvency or liquidity. These risks are formalised within
the Company's risk matrix. Information regarding the Company's internal
control and risk management procedures can be found in the Corporate
Governance Statement in the full Annual Report.
Listed below is a summary of the principal risks identified by the Board
and actions taken to mitigate those risks.
Risk Mitigation
------------------------------------------- -------------------------------------------
Investment and strategy
----------------------------------------------------------------------------------------
There can be no guarantee that the The Company is reliant on its Investment
investment objective of the Company Manager's investment process. The
will be achieved. Board reviews and discusses the investment
approach at each Board meeting. The
The Company will invest primarily Investment Manager has long experience
in the smallest UK quoted or traded of managing portfolios of this nature,
companies by market capitalisation. including dealing in smaller
Smaller companies can be expected, capitalisation
in comparison to larger companies, companies, and deploying an approach
to have less mature businesses, a that is designed to maximise the
more restricted depth of management chances of the investment objective
and a higher risk profile. being achieved over longer-term time
horizons.
These companies may be less liquid
and, when aggregated with holdings The Board looks to mitigate the higher
in other client funds of the Investment risk profile of individual smaller
Manager, the combined funds may have companies by ensuring the Company
a significant percentage ownership holds a well-diversified portfolio,
of investee companies. both by number of companies and areas
of operation. This is monitored at
each Board meeting.
The Company is structured as a closed
ended fund, which means that it is
not subject to daily inflows and
outflows.
------------------------------------------- -------------------------------------------
Reliance on third parties
----------------------------------------------------------------------------------------
The Company has no employees and The Board monitors and receives reports,
is reliant on the performance of where appropriate, on the performance
third party service providers. Failure of its key service providers. In
by the Investment Manager or any relation to the risk of counterparty
other third party service provider failure, the Board undertakes regular
to perform in accordance with the reviews of the controls applied by
terms of its appointment could have the Depositary.
a material detrimental impact on
the operation of the Company. This The Board may in any event terminate
could include failure of a counterparty all key contracts on normal market
on whom the Company is reliant. terms.
------------------------------------------- -------------------------------------------
Share price volatility and liquidity/marketability risk
----------------------------------------------------------------------------------------
The market price of the Ordinary The Company has in place an annual
shares, as with shares in all investment redemption facility whereby shareholders
trusts, may fluctuate independently can voluntarily tender their shares.
of their underlying NAV and may trade The Board monitors the relationship
at a discount or premium at different between the share price and the NAV.
times, depending on factors such The Company has powers to repurchase
as supply and demand for the Ordinary shares should there be an imbalance
shares, market conditions and general in the supply and demand leading
investor sentiment. The Company becomes to a persistent and excessive discount.
too small to be attractive to a wide The Investment Manager maintains
audience and liquidity decreases regular dialogue with shareholders
and the discount widens. through monthly factsheets and regular
face-to-face meetings.
------------------------------------------- -------------------------------------------
Costs of operation
------------------------------------------- -------------------------------------------
As stated, the Company relies on The Board monitors the costs of all
external service providers. Many service providers. The Board is also
of these are paid on a basis where committed to the controlled growth
their fees are related to the size of the Company which would spread
of the Company (an "ad valorem" basis). the fixed costs over a larger asset
Others are for fixed monetary amounts. base. In the event that the Company
Therefore, if the Company were to were to decrease in size from its
shrink, through redemptions, buybacks current level, the Board has capped
or asset performance, the cost per the total costs at no more than 2%
share of running the Company would of the aggregate market capitalisation.
increase. This could make it harder
to achieve the investment objective.
------------------------------------------- -------------------------------------------
Regulatory risk/change in tax status
------------------------------------------- -------------------------------------------
The Company is subject to laws and The Board receives regular updates
regulations enacted by national and from its Secretary, industry
local governments. Any change in representatives
the law and regulation affecting and its Investment Manager on significant
the Company may have a material adverse regulatory changes that may impact
effect on the ability of the Company the Company. The Company's ability
to carry on its business and successfully to determine the shape of regulatory
pursue its investment policy. or tax changes is limited and therefore
the Board aims to ensure that it
is well informed and prepared to
respond to changes as required.
------------------------------------------- -------------------------------------------
SHARE CAPITAL
Share Issues
At the Annual General Meeting held on 29 September 2016, the Directors
were granted the authority to allot up to 250 million Ordinary shares
of GBP0.001 each and/or C shares of GBP0.01 each, to an aggregate nominal
amount of GBP250,000 in Ordinary shares or GBP2,500,000 in C shares on
a non pre-emptive basis. This authority is due to expire at the Company's
Annual General Meeting to be held on 14 September 2017. Proposals for
the renewal of the authority are set out in the Report of the Directors
in the full Annual Report. The allotments made by the Directors under
this authority are detailed below.
C share issue and conversion
On 19 July 2016, the 56,000,000 C shares of GBP0.01 issued on 19 February
2016 converted into Ordinary shares at the ratio of 0.9630 Ordinary shares
for every C share, calculated in line with the Prospectus dated 4 February
2016. This resulted in the issue of 53,927,917 new Ordinary shares on
20 July 2016. The Ordinary shares were allotted to the holders of C shares,
which comprised institutional investors, discretionary private wealth
managers and UK retail investors.
Ordinary share issues
On 28 July 2016, the Company announced it had made an application for
a block listing of 15,000,000 Ordinary shares. Any Ordinary shares issued
pursuant to the block listing facility would be issued subject to the
terms and conditions of the Company's share issuance programme set out
in the Prospectus dated 4 February 2016. On 2 August 2016, the Company
issued 850,000 Ordinary shares pursuant to its block listing. The Ordinary
shares were issued at a price of 53.75 pence per Ordinary share, raising
GBP0.46 million before expenses.
On 31 January 2017, the Company announced its intention to raise funds
through the issue of Ordinary shares of GBP0.001 each in the Company
on a non pre-emptive basis pursuant to the share issuance programme set
out in the Company's prospectus dated 4 February 2016, as updated by
the supplementary prospectus dated 30 September 2016. Applications were
received under the issue for 8,318,084 Ordinary shares at a price of
60.11 pence per Ordinary share and these shares commenced trading on
the London Stock Exchange on 3 February 2017. The Ordinary shares were
allotted to institutional investors, discretionary private wealth managers
and UK retail investors.
Share Redemptions
Valid redemption requests were received under the Company's redemption
facility for the 28 April 2017 Redemption Point in relation to 1,934,487
Ordinary shares, representing 1.12% of the issued share capital. All
of these shares were redeemed and cancelled by the Company following
the year end on 15 May 2017. All shareholders who validly applied to
have shares redeemed received a calculated Redemption Price of 64.13p
per share.
Purchase of Own Shares
At the Annual General Meeting of the Company held on 29 September 2016,
the Directors were granted the authority to buy back up to 24,698,710
Ordinary shares. No Ordinary shares have been bought back under this
authority. The authority will expire at the forthcoming Annual General
Meeting, when a resolution for its renewal will be proposed (see the
Report of the Directors in the full Annual Report for further information).
Treasury Shares
Shares bought back by the Company may, at the Board's discretion, be
held in treasury, from where they could be re-issued at a premium to
NAV quickly and cost effectively. This provides the Company with additional
flexibility in the management of its capital base. No shares were purchased
for, or held in, treasury during the year or since the year end.
Current Share Capital
As at the year end, there were 173,086,001 Ordinary shares and 50,000
Management shares (see note 4 to the financial statements) in issue.
Subsequent to the year end, 1,934,487 Ordinary shares were redeemed and
cancelled in respect of the 28 April 2017 Redemption Point. As at the
date of this Report, there were 171,151,514 Ordinary shares and 50,000
Management shares in issue.
The rights attached to each share class are set out in the full Annual
Report.
There are no restrictions concerning the transfer of securities in the
Company or on voting rights; no special rights with regard to control
attached to securities; no agreements between holders of securities regarding
their transfer known to the Company; and no agreements which the Company
is party to that might affect its control following a successful takeover
bid.
MANAGEMENT, SOCIAL, ENVIRONMENTAL AND DIVERSITY MATTERS
Management Arrangements
The Company's investment manager is Miton Trust Managers Limited (the
"Investment Manager"). The Investment Manager is responsible for the
management of the Company's portfolio in accordance with the Company's
investment policy and the terms of the Management Agreement dated 8 April
2015. The Investment Manager has delegated investment management to Miton
Asset Management Limited. Both the Investment Manager and Miton Asset
Management Limited are authorised and regulated by the FCA.
The Board has appointed Miton Trust Managers Limited as the alternative
investment fund manager ("AIFM") of the Company.
Under the terms of the Management Agreement, the Investment Manager is
entitled to a management fee together with reimbursement of reasonable
expenses incurred by it in the performance of its duties. The management
fee is payable monthly in arrears and is at the rate of 1% per annum,
calculated in respect of each calendar month, of the market capitalisation
at the relevant calculation date.
In addition to the basic management fee, and for so long as a Redemption
Pool (see full Annual Report for details) is in existence, the Investment
Manager is entitled to receive from the Company a fee calculated at the
rate of 1% per annum of the net asset value of the Redemption Pool on
the last Business Day of the relevant calendar month.
The Investment Manager has agreed that, for so long as it remains the
Company's investment manager, it will rebate such part of any management
fee payable to it so as to help the Company maintain an ongoing charges
ratio of 2% or lower.
In accordance with the Directors' policy on the allocation of expenses
between income and capital, in each financial year 75% of the management
fee payable is expected to be charged to capital and the remaining 25%
to income.
The Management Agreement is terminable by either the Investment Manager
or the Company giving to the other not less than 12 months' written notice.
The Management Agreement may be terminated earlier by the Company with
immediate effect on the occurrence of certain events, including the insolvency
or in the event of a material breach by the Investment Manager of the
Management Agreement which is not remedied within thirty days of the
receipt of notice.
The Company has given certain market standard indemnities in favour of
the Investment Manager in respect of the Investment Manager's potential
losses in carrying on its responsibilities under the Management Agreement.
The Board appointed Bank of New York Mellon as its Depositary and Custodian
under an agreement dated 8 April 2015. The annual fee for depositary
services due to Bank of New York Mellon is 0.025% per annum of gross
assets, subject to a minimum fee of GBP15,000. The Company and the Depositary
may terminate the Depositary Agreement with three months' written notice.
Company secretarial services are provided by Capita Company Secretarial
Services Limited, under an agreement dated 8 April 2015 between the Company
and Capita Registrars Limited, for a current annual fee of GBP57,276
per annum, increasing annually in line with the UK Retail Prices Index.
The Company Secretarial Services Agreement was for an initial period
of 12 months and thereafter automatically renews for successive periods
of six months unless or until terminated by either party on at least
six months' written notice.
Administrative Services are provided by Capita Sinclair Henderson Limited
under an agreement dated 8 April 2015 for a fee of GBP87,000 for the
second year of the agreement. The Administration Agreement may be terminated
by either party on at least six months' prior written notice.
Continuing Appointment of the Investment Manager
The Board, through the Management Engagement Committee, keeps the performance
of the Investment Manager under continual review, and the Management
Engagement Committee conducts an annual appraisal of the Investment Manager's
performance, and makes a recommendation to the Board about the continuing
appointment of the Investment Manager. It is the opinion of the Directors
that the continuing appointment of the Investment Manager is in the interests
of shareholders as a whole. The Board believes that the Investment Manager
has executed the investment strategy in line with the Prospectus.
The Directors also believe that by paying the management fee calculated
on a market capitalisation basis, rather than a percentage of assets
basis, the interests of the Investment Manager are more closely aligned
with those of shareholders.
Environmental, Human Rights, Employee, Social and Community Issues
The Company does not have any employees and the Board consists entirely
of non-executive Directors. Day-to-day management of the business is
delegated to the Investment Manager. As an investment trust, the Company
has no direct impact on the community or the environment, and as such
has no environmental, human rights, social or community policies. In
carrying out its investment activities and in relationships with suppliers,
the Company aims to conduct itself responsibly, ethically and fairly.
Modern Slavery Act
The Company is not within the scope of the Modern Slavery Act 2015 because
it has insufficient turnover and is therefore not obliged to make a human
trafficking statement.
Gender Diversity
The Board of Directors of the Company comprises one female and three
male Directors.
The Board adopted a Diversity Policy in March 2017 and acknowledges the
benefits of greater diversity, including gender diversity, and remains
committed to ensuring that the Company's Directors bring a wide range
of skills, knowledge, experience, backgrounds and perspectives.
On behalf of the Board
Andy Pomfret
Chairman
18 July 2017
GOING CONCERN
The Directors consider that it is appropriate to adopt the going concern
basis. Cashflow projections have been reviewed and show that the Company
has sufficient funds to meet its contracted expenditure. On the basis
of the review and as the majority of net assets are securities which
are traded on recognised stock exchanges, after making enquiries, and
bearing in mind the nature of the Company's business and assets, the
Directors consider that the Company has adequate resources to continue
in operational existence for the foreseeable future. In arriving at this
conclusion, the Directors have considered the liquidity of the portfolio
and the Company's ability to meet obligations as they fall due for a
period of at least 12 months from the date that these financial statements
were approved.
VIABILITY STATEMENT
In accordance with the AIC Code of Corporate Governance, the Board has
considered the prospects for the Company.
The period assessed is the three years to July 2020. The Company is intended
to be a long-term investment vehicle. It was launched two years ago,
and due to the limitations and uncertainties inherent in predicting market
and political conditions, the Directors have determined that three years
is the appropriate period over which to make this assessment.
As part of its assessment of the viability of the Company, the Board
has considered the principal risks and uncertainties and the impact on
the Company's portfolio of a significant fall in UK markets.
To provide this assessment, the Board has considered the Company's financial
position and its ability to liquidate its portfolio to meet its expenses
or other liabilities as they fall due:
* The Company invests largely in companies listed and
traded on stock exchanges. These are actively traded
and, whilst perhaps less liquid than larger quoted
companies, the portfolio is well diversified by both
number of holdings and industry sector;
* The expenses of the Company are predictable and
modest in comparison with the assets in the
portfolio. There are no commitments that would change
that position;
* The Company has no employees; and
* The Company has an annual redemption facility whereby
shareholders may request that their shares are
redeemed at NAV. The Board has considered the
possibility that shareholders holding a significant
percentage of the Company's shares request
redemption. Firstly, the Board has flexibility over
the method and date of redemption so can avoid
disruption to the overall operation of the Company in
this situation. Secondly, the Company has an
arrangement with the Manager to rebate fees should
total costs exceed 2% of aggregate market
capitalisation, such that were there to be
significant redemption, or a significant fall in the
value of the portfolio, the expenses of operation
would be manageable. In addition, many of the
expenses vary in line with the size of the Company.
In addition to considering the principal risks above and the financial
position of the Company as described above, the Board has also considered
the following further factors:
* the continuing relevance of the Company's investment
objective in the current environment and the
continued satisfactory performance of the Company;
* the level of demand for the Company's shares and that
since launch the Company has been able to issue
further shares;
* the gearing policy of the Company; and
* that regulation will not increase to such an extent
that the costs of running the Company become
uneconomical.
Accordingly, the Directors have formed the reasonable expectation that
the Company will be able to continue in operation and meet its liabilities
as they fall due over the next three years.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
Company's financial statements in accordance with applicable United Kingdom
law and International Financial Reporting Standards ("IFRS") as adopted
by the European Union.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law, the Directors have elected to prepare
the financial statements in accordance with IFRS. 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 of the Company for that period.
In preparing the Company's financial statements, the Directors are required
to:
* select suitable accounting policies in accordance
with IAS 8: 'Accounting Policies, Changes in
Accounting Estimates and Errors' and then apply them
consistently;
* present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
* provide additional disclosures when compliance with
specific requirements in IFRS is insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the
Company's financial position and financial
performance;
* state that the Company has complied with IFRS,
subject to any material departures disclosed and
explained in the financial statements; and
* make judgements and estimates that are reasonable and
prudent.
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 Company's 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.
Under applicable law and regulations, the Directors are also responsible
for preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that comply with that law and
those regulations, and for ensuring that the Annual Report includes the
information required by the Listing Rules of the Financial Conduct Authority.
The financial statements are published on the Company's website, www.mitongroup.com/micro,
which is maintained on behalf of the Company by the Investment Manager.
Under the Management Agreement, the Investment Manager has agreed to
maintain, host, manage and operate the Company's website and to ensure
that it is accurate and up-to-date and operated in accordance with applicable
law. The work carried out by the Auditor does not involve consideration
of the maintenance and integrity of this website and, accordingly, the
Auditor accepts no responsibility for any changes that have occurred
to the financial statements since they were initially presented on the
website. Visitors to the website need to be aware that legislation in
the United Kingdom covering the preparation and dissemination of the
financial statements may differ from legislation in their jurisdiction.
We confirm that to the best of our knowledge:
* the Company's financial statements, prepared in
accordance with IFRS as adopted by the European Union,
give a true and fair view of the assets, liabilities,
financial position and profit of the Company; and
* this Report includes a fair review of the development
and performance of the business and the position of
the Company together with a description of the
principal risks and uncertainties that it faces.
The Directors consider that the Report and financial statements, taken
as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
On behalf of the Board
Andy Pomfret
Chairman
18 July 2017
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's
statutory accounts for the year ended 30 April 2017 but is derived from
those accounts. Statutory accounts for the year ended 30 April 2017 will
be delivered in due course. The Auditor has reported on those accounts;
their report was (i) unqualified, (ii) did not include a reference to
any matters to which the Auditor 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 Auditor's report
can be found in the Company's full Annual Report at: www.mitongroup.com/micro.
INCOME STATEMENT
of the Company for the year ended 30 April 2017
For the period
Year ended 26 March 2015
30 April 2017 to 30 April 2016
Revenue Capital Revenue Capital
return return Total return return Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ----- -------- -------- -------- -------- -------- --------
Gains on investments
held at
fair value through
profit or
loss 12 - 16,113 16,113 - 8,174 8,174
Foreign exchange
gains - 20 20 - - -
Income 2 1,531 - 1,531 955 - 955
Management fee 7 (235) (705) (940) (161) (484) (645)
Other expenses 8 (471) - (471) (428) - (428)
Return on ordinary
activities
before finance
costs and taxation 825 15,428 16,253 366 7,690 8,056
--------------------- ----- -------- -------- -------- -------- -------- --------
Finance costs 9 - 1,969 1,969 (15) (1,988) (2,003)
Return on ordinary
activities
before taxation 825 17,397 18,222 351 5,702 6,053
--------------------- ----- -------- -------- -------- -------- -------- --------
Taxation 10 (3) - (3) (4) - (4)
Return on ordinary
activities
after taxation 822 17,397 18,219 347 5,702 6,049
--------------------- ----- -------- -------- -------- -------- -------- --------
Return on ordinary
activities
for the period
analysed as follows:
--------------------- ----- -------- -------- -------- -------- -------- --------
Attributable to
Ordinary shares 822 17,397 18,219 347 5,702 6,049
Return per Ordinary
share (pence) 3 0.53 11.24 11.77 0.32 5.32 5.64
--------------------- ----- -------- -------- -------- -------- -------- --------
For information
Attributable to C
shares N/A N/A N/A 15 1,460 1,475
Return per C share
(pence) 3 N/A N/A N/A 0.03 2.61 2.63
--------------------- ----- -------- -------- -------- -------- -------- --------
The total column of this statement is the Income Statement of the Company
prepared in accordance with International Financial Reporting Standards
("IFRS"), as adopted by the European Union. The supplementary revenue
return and capital return columns are presented in accordance with the
Statement of Recommended Practice issued by the Association of Investment
Companies ("AIC SORP").
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
There is no other comprehensive income and, therefore, the profit for
the year after tax is also the total comprehensive income.
STATEMENT OF CHANGES IN EQUITY
of the Company for the year ended 30 April 2017
Share
Share premium Capital Revenue
capital account reserve reserve Total
For the year ended 30
April
2017 Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----- -------- -------- -------- -------- --------
As at 30 April 2016 160 54,183 5,702 347 60,392
Total comprehensive
income:
Net return for the period - - 17,397 822 18,219
Transactions with
shareholders
recorded directly to
equity:
Issue of Ordinary shares 4 9 5,448 - - 5,457
Expenses of share issues* - (75) - - (75)
Conversion of C shares 4 54 27,430 - - 27,484
Equity dividends paid 11 - - - (231) (231)
-------------------------- ----- --------
As at 30 April 2017 223 86,986 23,099 938 111,246
--------------------------- ----- -------- -------- -------- -------- --------
*Costs directly attributable to issue of Ordinary shares.
Share
Share premium Capital Revenue
capital account reserve reserve Total
---------
For the period 26 March 2015
to 30 April 2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- --------- -------- -------- -------- --------
As at 26 March 2015 - - - - -
Total comprehensive income:
Net return for the period - - 5,702 347 6,049
Transactions with shareholders
recorded directly to equity:
Issue of Ordinary shares 110 55,240 - - 55,350
Expenses of share issue - (1,057) - - (1,057)
Issue of Management shares 50 - - - 50
--------
As at 30 April 2016 160 54,183 5,702 347 60,392
--------------------------------- -------- -------- -------- -------- --------
BALANCE SHEET
of the Company as at 30 April 2017
26 March
2015
to 30 April
2017 2016
Note GBP'000 GBP'000
----------------------------------- ----- --------- -------------
Non-current assets:
Investments held at fair value
through profit or loss 12 107,979 75,700
Current assets:
Trade and other receivables 14 178 232
Cash at bank and cash equivalents 3,245 14,708
----------------------------------- ----- --------- -------------
Total assets 111,402 90,640
------------------------------------ ----- --------- -------------
Liabilities and equity
Liabilities
Trade and other payables 15 156 773
Financial liabilities (C shares) 13 - 29,475
----------------------------------- ----- --------- -------------
Total liabilities 156 30,248
------------------------------------ ----- --------- -------------
Equity
Share capital 4 223 160
Share premium account 86,986 54,183
Capital reserve 23,099 5,702
Revenue reserve 938 347
----------------------------------- ----- --------- -------------
Total equity 111,246 60,392
------------------------------------ ----- --------- -------------
Total liabilities and equity 111,402 90,640
------------------------------------ ----- --------- -------------
pence pence
------------------------------------ ----- --------- -------------
Net asset value attributable
per Ordinary share 5 64.27 54.91
------------------------------------ ----- --------- -------------
Net asset value attributable
per C share 5 52.63
------------------------------------ ----- --------- -------------
These financial statements were approved by the Board of Miton UK MicroCap
Trust plc on 18 July 2017 and were signed on its behalf by:
Andy Pomfret
Chairman
Company No: 09511015
The notes below form part of these financial statements.
STATEMENT OF CASH FLOWS
for the Company for the year ended 30 April 2017
26 March
2015
to 30 April
2017 2016
GBP'000 GBP'000
---------------------------------- --------- -------------
Operating activities:
Net return before taxation 18,222 6,053
Gain on investments held
at fair value through profit
or loss (16,113) (8,174)
Purchase of investments (39,339) (71,973)
Sale of investments 22,694 4,447
Increase in trade and other
receivables (12) (232)
(Decrease)/increase in trade
and other payables (78) 773
Add back finance costs (1,969) 2,003
Witholding tax paid (3) (4)
----------------------------------- --------- -------------
Net cash outflows from operating
activities (16,598) (67,107)
------------------------------------ --------- -------------
Financing activities
Ordinary shares issued 5,457 55,350
Expenses of Ordinary share
issues (72) (1,057)
Equity dividends paid (231) -
C shares issued - 28,000
Expenses of C share issue (19) (528)
Management shares issued - 50
----------------------------------- --------- -------------
Net cash inflows from financing
activities 5,135 81,815
------------------------------------ --------- -------------
(Decrease)/increase in cash
and cash equivalents (11,463) 14,708
------------------------------------ --------- -------------
Reconciliation of net cash
flow movement in funds:
Cash and cash equivalents 14,708 -
at the start of the period
Net cash (outflow)/inflow
from cash and cash equivalents (11,463) 14,708
----------------------------------- --------- -------------
Cash at the end of the period 3,245 14,708
------------------------------------ --------- -------------
2017 2016
GBP'000 GBP'000
---------------------------------- --------- -------------
Cash received during the period
includes:
Dividends received 1,511 817
----------------------------------- --------- -------------
*For the period 26 March 2015 to 30 April 2016.
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting Policies
Miton UK MicroCap Trust plc is a company incorporated and registered
in England and Wales. The principal activity of the Company is that of
an investment trust company within the meaning of Sections 1158/1159
of the Corporation Tax Act 2010.
The Company's financial statements for the year ended 30 April 2017 have
been prepared in conformity with IFRS as adopted by the European Union,
which comprise standards and interpretations approved by the International
Accounting Standards Board ("IASB"), and as applied in accordance with
the provisions of the Companies Act 2006. The annual financial statements
have also been prepared in accordance with the AIC SORP for the financial
statements of investment trust companies and venture capital trusts,
except to any extent where it is not consistent with the requirements
of IFRS.
Basis of Preparation
In order to better reflect the activities of an investment trust company
and in accordance with guidance issued by the AIC, supplementary information
which analyses the Income Statement between items of a revenue and capital
nature has been prepared alongside the Income Statement.
The financial statements are presented in Sterling, which is the Company's
functional currency as the UK is the primary environment in which it
operates, rounded to the nearest GBP'000, except where otherwise indicated.
Going Concern
The financial statements have been prepared on a going concern basis
and on the basis that approval as an investment trust company will continue
to be met.
The Directors have made an assessment of the Company's ability to continue
as a going concern and are satisfied that the Company has the resources
to continue in business for the foreseeable future, being a period of
12 months from the date these financial statements were approved. Furthermore,
the Directors are not aware of any material uncertainties that may cast
significant doubt upon 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.
Accounting Developments
The accounting policies are consistent with those of the previous financial
year. The following accounting standards and their amendments were in
issue at the period end but will not be in effect until after this financial
year end. The Directors are considering the impact these accounting standards
will have on the financial statements.
International Financial Reporting Effective date
Standards
----------------------------------- ---------------
IAS 7 Statement of Cash Flows 1 January 2017
IFRS 7 Financial Instruments (IFRS 1 January 2018
9 Disclosures)
IFRS 9 Financial Instruments 1 January 2018
IFRS 15 Revenue from Contracts 1 January 2018
with Customer
IFRS 16 Leases 1 January 2019
----------------------------------- ---------------
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect
the application of policies and the reported amounts in the Balance Sheet
the Income Statement and the disclosure of contingent assets and liabilities
at the date of 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 that are not readily apparent from other sources.
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 if the revision affects only that period, or
in the period of the revision and future period if the revision affects
both current and future periods. There were no significant accounting
estimates or judgements in the current period.
Share Capital
The Company is a closed-ended investment company with an unlimited life.
As defined in the Articles of Association, redemption of Ordinary shares
is at the sole discretion of the Directors, therefore the Ordinary shares
have been classified as equity.
The issuance, acquisition and resale of Ordinary shares are accounted
for as equity transactions and no gain or loss is recognised in the Income
Statement.
In accordance with paragraph 11 of IAS 32 (Financial Instruments: Presentation),
when the Company has C shares in issue, these C shares are required to
be classified as a financial liability prior to conversion due to the
inherent variability of the number of Ordinary shares attributable to
C shareholders on conversion. The income, expenses and capital gains
or losses generated by the C share pool of assets during the period they
are in existence, are included in the Income Statement in their respective
categories and the total is charged or credited back within finance costs
in the capital column of the Income Statement. The issue costs of the
C shares are also recognised as a finance cost and charged to the capital
column of the Income Statement.
Investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth.
This portfolio of financial assets is managed and its performance evaluated
on a fair value basis, in accordance with a documented investment strategy,
and information about the portfolio is provided internally on that basis
to the Company's Board of Directors.
Upon initial recognition the Company designates the investments 'at fair
value through profit or loss'. They are included initially at fair value,
which is taken to be their cost (excluding expenses incidental to the
acquisition which are written off in the Income Statement, and allocated
to 'capital' at the time of acquisition). When a purchase or sale is
made under a contract, the terms of which require delivery within the
time-frame of the relevant market, the investments concerned are recognised
or derecognised on the trade date. Subsequent to initial recognition,
investments are valued at fair value through profit or loss. For listed
investments this is deemed to be bid market prices or closing prices
for Stock Exchange Electronic Trading Service - quotes and crosses ('SETSqx').
Changes in fair value of investments are recognised in the Income Statement
as a capital item. On disposal, realised gains and losses are also recognised
in the Income Statement as capital items.
All investments for which fair value is measured or disclosed in the
financial statements are categorised within the fair value hierarchy
in note 13.
Financial liabilities
In accordance with IAS 32, at 30 April 2016, any financial assets attributable
to the Company's C shares were designated as a financial liability, due
to the obligation to convert the C shares to Ordinary shares and the
inherent variability of the number of Ordinary shares that was attributable
to the C shareholders on conversion.
The liability to the C shareholders was recognised at amortised costs,
being the net value of assets and liabilities attributable to the C class
shareholders at the Balance Sheet date of the C shares.
The C Shares were converted to Ordinary Shares on 19 July 2016.
Foreign currency
The Financial Statements have been prepared in Sterling, rounded to the
nearest GBP'000, which is the functional and reporting currency of the
Company.
Transactions denominated in foreign currencies are converted to Sterling
at the actual exchange rate as at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the year
end are reported at the rate of exchange at the Balance Sheet date. 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.
Cash and Cash Equivalents
For the purposes of the Balance Sheet, cash comprises cash in hand and
demand deposits. Cash equivalents are short-term, highly-liquid investments
that are readily convertible to known amounts of cash and which are subject
to insignificant risk of changes in value.
For the purpose of the Statement of Cash Flows, cash and cash equivalents
consist of cash and cash equivalents as defined above, net of outstanding
bank overdrafts when applicable.
Trade receivables, trade payables and short term borrowings
Trade receivables and payables are measured at amortised cost.
Income
Dividends received from UK-registered companies are accounted for net
of imputed tax credits. Dividends from overseas companies are shown gross
of any non-recoverable withholding taxes, which are presented separately
in the Income Statement.
Dividends receivable on quoted equity shares are taken to revenue on
an ex-dividend basis. Dividends receivable on equity shares where no
ex-dividend date is quoted are brought into account when the Company's
right to receive payment is established. Fixed returns on non-equity
shares are recognised on a time-apportioned basis.
Special dividends are taken to revenue or capital account depending on
their nature. In deciding whether a dividend should be regarded as a
capital or revenue receipt, the Board reviews all relevant information
as to the reasons for the sources of the dividend on a case by case basis.
When the Company has elected to receive scrip dividends in the form of
additional shares rather than in cash, the amount of the cash dividend
forgone is recognised as income. Any excess in the value of the cash
dividend is recognised in the capital column.
Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals basis.
On the basis of the Board's expected long-term split of total returns
the Company charges 75% of its management fee to capital.
Expenses incurred directly in relation to placings and offers for subscription
of shares are deducted from equity and charged to the share premium account.
Finance costs of any C shares issued by the Company during the period,
(which were classified as a liability) would be recognised as an expense
and shown in the capital column of the Income Statement.
Taxation
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes at the reporting date based on tax rates
that are expected to apply in the period when the liability is settled
or the asset is realised. Deferred tax assets are only recognised if
it is considered more likely than not that there will be suitable profits
from which the future reversal of timing differences can be deducted.
In line with the recommendations of the AIC SORP, the allocation method
used to calculate the tax relief on expenses charged to capital is the
"marginal" basis. Under this basis, if taxable income is capable of being
offset entirely by expenses charged through the revenue account, then
no tax relief is transferred to the capital account.
The charge for taxation is based on the net revenue for the year and
takes into account taxation deferred or accelerated because of temporary
differences between the treatment of certain items for accounting and
taxation purposes.
The actual charge for taxation in the Income Statement relates to irrecoverable
withholding tax on overseas dividends received during the year.
Dividends Payable to Shareholders
Dividends to shareholders are recognised as a liability in the period
in which they are paid or approved in general meetings and are taken
to the Statement of Changes in Equity. Dividends declared and approved
by the Company after the Balance Sheet date have not been recognised
as a liability of the Company at the Balance Sheet date.
Revenue Reserves
The revenue reserve represents the surplus of accumulated profits and
can be distributed.
Capital Reserve
Capital Reserve - other
The following are taken to this reserve:
* gains and losses on the disposal of investments;
* exchange difference of a capital nature; and
* expenses together with the related taxation effect,
allocated to this reserve in accordance with the
above policies.
Capital Reserve - investment holding gains
The following are taken to this reserve:
* increase and decrease in the valuation of investments
held at the year end.
Share Premium
The share premium account represents the accumulated premium paid for
shares issued in current and previous periods above their nominal value
less issue expenses. This is a reserve forming part of the non-distributable
reserves. The following items are taken to this reserve:
* costs associated with the issue of equity; and
* premium on the issue of shares.
2 Income
Period to 30 April
2016
Year ended
30 April 2017 Ordinary C
Total share share Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------------- ---------- --------- ---------
Income from investments
UK dividends 1,244 723 55 778
Unfranked dividend income 283 177 - 177
Underwriting commission 4 - - -
Total income 1,531 900 55 955
---------------------------- --------------- ---------- --------- ---------
3 Return per Share
Returns per share are based on the weighted average number of shares
in issue during the period. Basic and diluted return per share are the
same as there are no dilutive elements on share capital. There was no
dilutive effect as a result of the conversion of the C shares on 19 July
2016.
Year ended 30 April 2017
Ordinary shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- ------------
Net profit 822 17,397 18,219
Weighted average number of shares
in issue 154,839,150
Return per share (pence) 0.53 11.24 11.77
----------------------------------- -------- -------- ------------
Period ended 30 April 2016
Ordinary Shares C Shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- ------------ -------- -------- -----------
Net profit 347 5,702 6,049 15 1,460 1,475
Weighted average
number
of shares in issue 107,273,065 56,000,000
Return per share
(pence) 0.32 5.32 5.64 0.03 2.61 2.63
--------------------- -------- -------- ------------ -------- -------- -----------
The C shares were classified as a financial liability prior to conversion
and, as such, the return on ordinary activities of the C shares was charged
back within finance costs (see note 9).
4 Share Capital
Number of
Ordinary
shares GBP'000
---------------------------------- ------------ ---------
Ordinary shares of GBP0.001 each
At beginning of period 109,990,000 110
C share conversion 53,927,917 54
Subscriptions 9,168,084 9
Redemptions - -
---------------------------------- ------------ ---------
At end of period 173,086,001 173
----------------------------------- ------------ ---------
The Company was incorporated on 26 March 2015 with an issued share capital
of GBP50,000 represented by 50,000 Management shares of GBP1.00 each.
On 28 July 2016, the Company announced it had made an application for
a block listing of 15,000,000 Ordinary shares. Any Ordinary shares issued
pursuant to the block listing facility would be issued subject to the
terms and conditions of the Company's share issuance programme set out
in the Prospectus dated 4 February 2016.
On 2 August 2016, the Company issued 850,000 Ordinary shares pursuant
to its block listing. The Ordinary shares were issued at a price of 53.75
pence per Ordinary share, raising GBP0.46 million before expenses.
On 3 February 2017, the Company issued 8,318,084 Ordinary shares at a
price of 60.11 pence per Ordinary Share raising GBP5 million before expenses.
These shares were issued under the Company's share issuance programme
as described by the supplementary prospectus published on 30 September
2016.
The rights attaching to each share class are set out in the full Annual
Report.
Redemption of Ordinary Shares
The Company has a redemption facility through which shareholders are
entitled to request the redemption of all or part of their holding of
Ordinary shares on an annual basis on 30 April in each year. As set out
in the Articles of Association, the Board may, at its absolute discretion,
elect not to operate the annual redemption facility in whole or in part.
Accordingly, the Ordinary shares have been classified as equity.
In the year to 30 April 2017, valid redemption requests for 1,934,487
(2016: 337,231) Ordinary shares, representing 1.12% (2016: 0.20%) of
the issued share capital, were made. All of the 1,934,487 shares were
cancelled on 15 May 2017 (2016: 337,231 shares were matched with buyers
and sold on the main market). All shareholders who validly applied to
have shares redeemed received a calculated Redemption Price of 64.13p
(2016: 55.10p) per share being the NAV per Ordinary share at the Redemption
Point.
C Shares
On 2 February 2016, the Board announced the proposed issue of up to 250
million new Ordinary and/or C shares resulting in the issue of 56,000,000
C shares on 19 February 2016.
On 19 July 2016, the C shares were converted into Ordinary shares at
the ratio of 0.9630 Ordinary shares for every C share resulting in the
issue of 53,927,917 new Ordinary shares.
As the rates at which the C shares were convertible to Ordinary shares
was variable per the terms of the prospectus the C shares were required
to be classified as a financial liability in the Balance Sheet as at
30 April 2016. This is in line with the provisions of IAS 32.
Management Shares
50,000 Management shares with a nominal value of GBP1 each were allotted
to Miton Trust Managers Limited on the date of incorporation. These shares
have been fully paid up.
The Management shares are non-voting and non-redeemable and, upon a winding-up
or on a return of capital of the Company, shall only receive the fixed
amount of capital paid up on such shares and shall confer no right to
any surplus capital or assets of the Company.
5 Net Asset Value
The NAVs per Ordinary share and C share and the NAVs attributable at
the period end were as follows:
30 April 2017 30 April 2016
Ordinary share Ordinary share C share
Net Net Net
asset asset asset
value value value
per Net assets per Net assets per Net assets
share attributable share attributable share attributable
pence GBP'000 pence GBP'000 pence GBP'000
---------- -------- ------------- -------- ------------- -------- -------------
Basic and
diluted 64.27 111,246 54.91 60,392 52.63 29,475
----------- -------- ------------- -------- ------------- -------- -------------
NAV per Ordinary share is based on net assets at the year end and 173,086,001
Ordinary shares (2016: 109,990,000), being the number of Ordinary shares
in issue at the year end.
NAV per C share is based on net assets at the year end and on nil C shares
(2016: 56,000,000), being the number of C shares in issue at the year
end.
Net assets of GBP1.00 per Management share is based on net assets at
the year end of GBP50,000 (2016: GBP50,000) and attributable to 50,000
Management shares at the year end. The shareholders have no right to
any surplus capital or assets of the Company.
6 Transaction Costs
During the year, expenses were incurred in acquiring or disposing of
investments classified as fair value through profit or loss. These have
been expensed through capital and are included within gains on investments
in the Income Statement. The total costs were as follows:
30 April 2016
30 April Ordinary C share
2017 share
GBP'000 GBP'000 GBP'000
----------------------- --------- --------- --------
Costs on acquisitions 38 107 18
Costs on disposals 28 5 -
66 112 18
----------------------- --------- --------- --------
These transaction costs are dealing commissions paid to stockbrokers
and stamp duty, a government tax paid on transactions (which is zero
when dealing on the AIM/ISDX exchanges). A breakdown of these costs is
set out below:
30 April 2017 30 April 2016
% of % of % of
average average average
Ordinary monthly Ordinary monthly monthly
share net share net C share net
GBP'000 assets GBP'000 assets GBP'000 assets
in the in the in the
year year year
Costs paid in
dealing
commissions 56 0.06 75 0.13 13 0.05
Costs of
stamp
duty 10 0.01 37 0.07 5 0.02
-------------- ---------- ---------- ---------- ---------- --------- ----------
66 0.07 112 0.20 18 0.07
------------- ---------- ---------- ---------- ---------- --------- ----------
The average monthly net assets of the Ordinary shares for the year to
30 April 2017 was GBP95,965,401 (2016: GBP56,282,312).
The average monthly net assets of the C shares from their launch in February
2016 to 30 April 2016 was GBP28,351,661.
Investments are valued at fair value which is bid value for listed securities.
7 Management Fee
The AIFM is entitled to receive from the Company in respect of its services
provided under the Management Agreement a management fee for both the
Ordinary share and C share classes (when in issue), payable monthly in
arrears and calculated at the rate of 1% per annum of the market capitalisation
of each share class as at the relevant calculation date.
In addition to the basic management fee, and when a Redemption Pool is
in existence, the AIFM is entitled to receive from the Company a fee
calculated at the rate of 1% per annum of the net asset value of the
Redemption Pool on the last Business Day of the relevant calendar month.
The AIFM has agreed that, for so long as it remains the Company's investment
manager, it will not charge such part of any management fee payable to
it so that the Company can maintain an ongoing charges ratio of 2% or
lower. The ongoing charges ratio for the period is 1.47% (2016: 1.76%)
for the Ordinary shares, and as such is below 2%. In accordance with
the Directors' policy on the allocation of expenses between income and
capital, in each financial year 75% of the management fee payable is
expected to be charged to capital and the remaining 25% to income.
30 April 2017 30 April 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Management
fee 235 705 940 161 484 645
------------------- -------- -------- -------- -------- -------- --------
At 30 April 2017, an amount of GBP87,000 was outstanding and due to Miton
Trust Managers Limited in respect of management fees (30 April 2016:
GBP104,000 for the Ordinary share pool and GBP49,000 for the C share
pool).
8 Other Expenses
30 April 30 April 2016
2017
Ordinary Ordinary C
share share share Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- -------- -------------
Secretarial services 142 122 - 122
Auditor's remuneration
for:
Audit of the Company's
financial statements 23 25 - 25
Half year review 8 - - -
Directors' fees 114 119 - 119
Other expenses 184 136 26 162
471 402 26 428
------------------------ --------- --------- -------- -------------
During the year ended 30 April 2017, in addition to the Auditor's remuneration
shown above, GBP10,000 was charged on the C share conversion. This cost
was charged to capital in line with the prospectus. Therefore audit remuneration
for audit services was GBP23,000 and non audit services was GBP18,000
excluding VAT.
In the year ended 30 April 2016 in addition to the Auditor's remuneration
shown above GBP25,000 was charged on the Ordinary share issue and GBP34,000
was charged on the C share issue. These costs were charged to capital
in line with the prospectus. In respect of the C shares issue, a GBP34,000
fee was incurred and was charged through finance costs. Therefore, audit
remuneration for audit services was GBP25,000 and non audit services
was GBP59,000 excluding VAT.
9 Finance Costs
30 April 2017
Ordinary share
Revenue Capital Total
GBP'000 GBP'000 GBP'000
------------------- ------------------------------- ----------------------------- -------- -------- --------
Finance costs: - (1,969) (1,969)
Net loss allocated
to C shares - (1,969) (1,969)
--------------------------------------------------------------- ------------------ -------- -------- --------
30 April 2016
Ordinary share C share Consolidated
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- --------- --------- --------- -------- -------- -------- -------- --------
Finance costs:
Net Gain
allocated
to C shares - - - - - - 15 1,460 1,475
Expenses of C
share
issue - - - - 528 528 - 528 528
------------------- --------- --------- --------- --------- -------- -------- -------- -------- --------
- - - - 528 528 15 1,988 2,003
--------- --------- --------- ----------------------------- -------- -------- -------- -------- --------
10 Taxation
30 April 2017 30 April 2016
Total Total
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- -------- -------- -------- -------- -------- --------
Overseas
withholding
tax
suffered 3 - 3 4 - 4
-------------- -------- -------- -------- -------- -------- --------
The current taxation charge for the year differs from the standard rate
of corporation tax in the UK of 19%. The differences are explained below:
30 April 2017 30 April 2016
Total Total
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- -------- -------- -------- --------
Return on
ordinary
activities
before taxation 825 17,397 18,222 366 7,162 7,528
------------------ --- -------- -------- -------- -------- -------- --------
Theoretical tax at
UK corporation
tax rate of
19.92%
(2016: 20%) 164 3,465 3,629 73 1,432 1,505
Effects of:
- UK dividends
that are
not taxable (248) - (248) (156) - (156)
- Overseas
dividends that
are not taxable (53) - (53) (35) - (35)
- Realised
dealing gains - - - - - -
- Non-taxable
capital gains - (3,606) (3,606) - (1,530) (1,530)
- Overseas
taxation
suffered 3 - 3 4 - 4
- Disallowed
expenses - - - 2 - 2
- Unrelieved
expenses 137 141 278 116 98 214
------------------ -------- -------- -------- -------- -------- --------
Actual current tax
charge 3 - 3 4 - 4
------------------- -------- -------- -------- -------- -------- --------
Factors that may affect future tax charges
At 30 April 2017, the Company had no unprovided deferred tax liabilities
(2016: nil). At that date, based on current estimates and including the
accumulation of net allowable losses, the Company had unrelieved losses
of GBP2,458,000 (2016: GBP1,062,000), that are available to offset future
taxable revenue. A deferred tax asset of GBP418,000 (2016: GBP212,000)
has not been recognised because the Company is not expected to generate
sufficient taxable income in future periods in excess of the available
deductible expenses and, accordingly, the Company is unlikely to be able
to reduce future tax liabilities through the use of existing surplus
losses.
Deferred tax is not provided on capital gains and losses arising on the
revaluation or disposal of investments.
11 Dividends
30 April 2017 30 April
2016
GBP'000 pence GBP'000 pence
----------------------------------------------------------- ---------------- ------------ --------------- ---------------
Amounts recognised as distributions
to equity holders in the year:
Final dividend for the period
ended 30 April 2016 231 0.14 - -
----------------------------------------------------------- ---------------- ------------ --------------- ---------------
231 0.14 - -
----------------------------------------------------------- ---------------- ------------ --------------- ---------------
The Directors have recommended a final dividend in respect of the year
ended 30 April 2017 of 0.36p per Ordinary share payable on 22 September
2017 to all shareholders on the register at close of business on 25 August
2017. The ex-dividend date will be 24 August 2017.
12 Investments
30 April 30 April
2017 2016
Ordinary C Ordinary C
share share share share
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- --------- --------- --------- --------
Investment portfolio
summary:
Opening book cost 52,010 14,536 66,546 - - -
Opening unrealised
gains 7,185 1,969 9,154 - - -
Total investments
designated
at fair value 59,195 16,505 75,700 - - -
---------------------- --------- --------- --------- --------- --------- --------
Analysis of
investment
portfolio movements
Opening valuation 59,195 16,505 75,700 - - -
Movements in the
period:
C share transfer 25,591 (25,591) - - - -
Purchases at cost 27,671 11,123 38,794 57,269 14,704 71,973
Sales - proceeds (22,560) (68) (22,628) (4,217) (230) (4,447)
- gains/(losses) on
sales 5,150 - 5,150 (1,042) 62 (980)
Increase/(decrease)
in
unrealised gains 12,932 (1,969) 10,963 7,185 1,969 9,154
Closing valuation 107,979 - 107,979 59,195 16,505 75,700
---------------------- --------- --------- --------- --------- --------- --------
Closing book cost 87,862 - 87,862 52,010 14,536 66,546
Closing unrealised
gains 20,117 - 20,117 7,185 1,969 9,154
---------------------- --------- --------- --------- --------- --------- --------
107,979 - 107,979 59,195 16,505 75,700
--------------------- --------- --------- --------- --------- --------- --------
30 April 30 April
2016
2017 Ordinary C share
share
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- --------- --------- --------- --------
Analysis of capital
gains
Gains/(losses) on
sales
of investments 5,150 (1,042) 62 (980)
Movement in
unrealised
gains 10,963 7,185 1,969 9,154
16,113 6,143 2,031 8,174
--------------------- --------- --------- --------- --------- --------- --------
A list of the largest portfolio holdings by their fair value is shown
above.
13 Fair Value Hierarchy
Financial assets of the Company are carried in the Balance Sheet at their
fair value or approximation of fair value. The fair value is the amount
at which the asset could be sold in an ordinary transaction between market
participants, at the measurement date, other than a forced or liquidation
sale. The Company measures fair values using the following hierarchy
that reflects the significance of the inputs used in making the measurements.
Categorisation within the hierarchy has been determined on the basis
of the lowest level input that is significant to the fair value measurement
of the relevant asset as follows:
Level 1 - Valued using quoted prices, unadjusted in active markets for
identical assets and liabilities.
Level 2 - Valued by reference to valuation techniques using observable
inputs for the asset or liability other than quoted prices included in
level 1.
Level 3 - Valued by reference to valuation techniques using inputs that
are not based on observable market data for the asset or liability.
The table below sets out the fair value measurement of financial assets
and liabilities in accordance with the fair value hierarchy.
Financial assets at fair value through Level 1 Level 2 Level 3 Total
profit or loss at 30 April 2017 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------- --------- ----------
Equity investments 107,618 332 29 107,979
--------------------------------------- --------- --------- --------- ----------
As at
30 April
2017
Reconciliation of level 3 movements Level 3
- financial assets GBP'000
--------------------------------------- --------- --------- --------- ----------
Opening fair value investments -
Purchase at cost -
Transfer from level 2* 62
Sale proceeds (33)
Movement in investment holdings
gains movement in unrealised -
-------------------------------------- --------- --------- --------- ----------
Closing fair value of investments 29
-------------------------------------- --------- --------- --------- ----------
* Pure Wafer is considered a Level 3 investment at 30 April 2017 as the
fair value of this investment is based on anticipated future cash returns.
Level Level Level Total
1 2 3
Financial assets at fair value through GBP'000 GBP'000 GBP'000 GBP'000
profit or loss at 30 April 2016
---------------------------------------- -------- -------- -------- --------
Equity investments
Ordinary share portfolio 59,133 62* - 59,195
C share portfolio 16,505 - - 16,505
75,638 62 - 75,700
----------------------------------------- -------- -------- -------- --------
* Pure Wafer was considered a Level 2 investment at 30 April 2016 as
the fair value of this investment was based on the latest observable
price.
Financial liabilities as at 30 April
2016
-------------------------------------- --- --- ------- -------
C shares - - 29,475 29,475
--------------------------------------- --- ------- -------
- - 29,475 29,475
--------------------------------------- --- --- ------- -------
As at 30 April 2017, there were no financial liabilities.
14 Trade and Other Receivables
30 April 30 April
2017 Ordinary 2016
GBP'000 share C share Total
GBP'000 GBP'000 GBP'000
---------------------- --------- --------- --------- ---------
Amount due from
brokers - 67 - 67
Dividends receivable 154 105 33 138
Prepayment and other
debtors 23 27 - 27
Taxation recoverable 1 - - -
C share class fee -
rebate 22 - -
178 221 33 232
---------------------- --------- --------- --------- ---------
As at 30 April 2016 GBP22,000 was due from the C share class to the Ordinary
share class in respect of expenses recharged (2017: GBPnil).
15 Trade and Other Payables
30 April 30 April
2017 Ordinary 2016
GBP'000 share C share
GBP'000 GBP'000 GBP'000
----------------------- --------- --------- --------- --------
----------------------- --------- --------- --------- --------
Amount due to brokers - - 546 546
Other creditors 156 176 51 227
C share class fee -
rebate - 22 -
156 176 619 773
----------------------- --------- --------- --------- --------
As at 30 April 2016, GBP22,000 was payable by the C share class to the
Ordinary share class in respect of expenses recharged (2017: nil). This
has been excluded from the Company's Balance Sheet as at 30 April 2016.
16 Capital Management Policies
The Company's capital management objectives are:
* to ensure that it will be able to continue as a going
concern; and
* to maximise the income and capital return over the
long term to its equity shareholders through an
appropriate balance of equity capital and debt.
As stated in the investment policy, the Company has authority to borrow
up to 15% of net asset value through a mixture of bank facilities and
certain derivative instruments. There were no borrowings as at 30 April
2017 or throughout the year (2016: nil). Also, as a public company, the
minimum share capital is GBP50,000.
The Company's capital at 30 April comprised:
30 April 30 April
2017 2016
GBP'000 GBP'000
------------------------------ --------- ---------
Current liabilities:
Trade and other payables 156 773
C shares - 29,475
Equity:
Equity share capital 223 160
Retained earnings and other
reserves 111,023 60,232
----------------------------- --------- ---------
Total shareholders' funds 111,402 90,640
------------------------------ --------- ---------
Debt as a % of net assets 0.00% 0.00%
------------------------------ --------- ---------
The Board, with the assistance of the Investment Manager, monitors and
reviews the broad structure of the Company's capital on an ongoing basis.
This review includes:
* the planned level of gearing, which takes into
account the Investment Manager's view of the market;
* the buy back of shares for cancellation or treasury,
which takes account of the difference between the NAV
per share and the share price (i.e. the level of
share price discount or premium);
* new issues of equity shares; and
* the extent to which revenue in excess of that which
is required to be distributed should be retained.
The Company's objectives, policies and processes for managing capital
have remained unchanged since its launch.
17 Reserves
Share Capital Capital
premium reserve reserve Revenue
account realised unrealised reserve
Ordinary shares to 30
April 2017 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- ---------- ------------ ---------
Opening balance 54,183 (1,483) 7,185 347
Issue of Ordinary shares 5,448 - - -
(tap Issue)
Expenses of Ordinary share (75) - - -
issue (tap Issue)
Conversion of C shares 27,430 - - -
Net loss allocated to - - 1,969 -
C shares
Net gain on realisation - 5,150 - -
of investments
Unrealised net increase - - 10,963 -
in value of investments
Management fee charged - (705) - -
to capital
Equity dividends paid - - - (231)
Foreign currency gains - - 20 -
Revenue return on ordinary
activities after tax - - - 822
---------------------------- --------- ---------- ------------ ---------
Closing balance 86,986 2,962 20,137 938
---------------------------- --------- ---------- ------------ ---------
Share Capital Capital Revenue
Premium reserve reserve reserve
Ordinary shares to 30 Account realised unrealised GBP'000
April 2016 GBP'000 GBP'000 GBP'000
---------------------------- --------- ---------- ------------ ---------
Opening balance - - - -
Issue of Ordinary share 49,900 - - -
at launch
Expenses of Ordinary share (1,000) - - -
issue at launch
Issue of Ordinary share 5,340 - - -
(tap Issue)
Expenses of Ordinary share (57) - - -
issue (tap Issue)
Net loss on realisation - (1,042) - -
of investments
Unrealised net increase - - 7,185 -
in value of investments
Management fee charged - (441) - -
to capital
Revenue return on ordinary
activities after tax - - - 347
---------------------------- --------- ---------- ------------ ---------
Closing balance 54,183 (1,483) 7,185 347
The distributable reserves of the Company are GBP3,900,000 (2016: GBP347,000).
18 Analysis of Financial Assets and Liabilities
Investment Objective and Policy
The Company's investment objective and policy are detailed above.
The Company's investing activities in pursuit of its investment objective
involve certain inherent risks.
The Company's financial instruments can comprise:
* shares and debt securities held in accordance with
the Company's investment objective and policies;
* derivative instruments for efficient portfolio
management, gearing and investment purposes; and
* cash, liquid resources and short-term debtors and
creditors that arise from its operations.
The risks identified arising from the Company's financial instruments
are market risk (which comprises market price risk, interest rate risk
and foreign currency exposure risk), liquidity risk and credit and counterparty
risk. The Company may enter into derivative contracts to manage risk.
The Board reviews and agrees policies for managing each of these risks,
which are summarised below.
These policies have remained unchanged since the beginning of the accounting
period.
Market Risk
Market risk arises mainly from uncertainty about future prices of financial
instruments used in the Company's business. It represents the potential
loss the Company might suffer through holding market positions by way
of price movements, interest rate movements and exchange rate movements.
The Investment Manager assesses the exposure to market risk when making
each investment decision and these risks are monitored by the Investment
Manager on a regular basis and the Board at quarterly meetings with the
Investment Manager.
Market price risk
Market price risk (i.e. changes in market prices other than those arising
from currency risk or interest rate risk) may affect the value of investments.
The Board manages the risks inherent in the investment portfolio by ensuring
full and timely reporting of relevant information from the Investment
Manager. Investment performance and exposure are reviewed at each Board
meeting.
The Company's exposure to changes in market prices as at 30 April 2017
on its equity investments held at fair value through profit or loss was
GBP107,979,000 (2016: GBP75,700,000).
A 10% increase in the fair value of its investments at 30 April 2017
would have increased net assets attributable to shareholders by GBP10,798,000
(2016: GBP7,570,000). An equal change in the opposite direction would
have decreased the net assets and net profit available to shareholders
by an equal and opposite amount. The analysis is based on closing balances
only and is not representative of the year as a whole.
Interest rate risk
Interest rate movements may affect the level of income receivable on
cash deposits. The Company's financial assets and liabilities, excluding
short-term debtors and creditors, may include investment in fixed interest
securities, such as UK corporate debt stock, whose fair value may be
affected by movements in interest rates. The majority of the Company's
financial assets and liabilities, however, are non-interest bearing.
As a result, the Company's financial assets and liabilities are not subject
to significant amounts of risk due to fluctuations in the prevailing
levels of market interest rates. There was no exposure to interest bearing
liabilities during the year ended 30 April 2017 (2016: nil).
The possible effects on the fair value and cash flows that could arise
as a result of changes in interest rates are taken into account when
making investment decisions. The Board imposes borrowing limits to ensure
gearing levels are appropriate to market conditions.
The interest rate profile of the Company (excluding short-term debtors
and creditors) was as follows:
30 April 30 April
2017 2016
Floating Floating
rate rate
GBP'000 GBP'000
---------------------------- ---------- ----------
Assets and Liabilities:
Cash and cash equivalents 3,245 14,708
---------------------------- ---------- ----------
3,245 14,708
---------------------------- ---------- ----------
If the above level of cash was maintained for a year, a 1% increase in
LIBOR would increase the revenue return and net assets by GBP32,000 (2016:
GBP147,000). If there was a fall by 1% in LIBOR it would potentially
impact the Company by a revenue reduction of GBP32,000 (2016: GBP147,000).
Foreign currency risk
Although the Company's performance is measured in Sterling, a proportion
of the Company's assets may be either denominated in other currencies
or in investments with currency exposure. Any income denominated in a
foreign currency is converted into Sterling upon receipt. At the Balance
Sheet date, all the Company's assets were denominated in Sterling and
accordingly the only currency exposure the Company has is through the
trading activities of its investee companies.
Liquidity Risk
Liquidity risk is not significant as the Company is a closed ended investment
trust and the majority of the Company's assets are investments in quoted
equities and other quoted securities that are readily realisable.
The Company's liquidity risk is managed on a daily basis by the Investment
Manager in accordance with established policies and procedures in place.
The Investment Manager reviews daily forward-looking cash reports which
project cash obligations. These reports allow it to manage its obligations.
A maturity analysis is not presented as the Investment Manager does not
consider this to be a material risk.
Credit and Counterparty Risk
Credit risk is the risk of financial loss to the Company if the contractual
party to a financial instrument fails to meet its contractual obligations.
The maximum exposure to credit risk as at 30 April 2017 was GBP3,423,000
(2016:GBP14,940,000). The calculation is based on the Company's credit
risk exposure as at 30 April 2017 and this may not be representative
for the whole period.
The Company's quoted investments are held on its behalf by Bank of New
York Mellon acting as the Company's custodian. Bankruptcy or insolvency
of the custodian may cause the Company's rights with respect to securities
held by the custodian to be delayed. The Board monitors the Company's
risk by reviewing the custodian's internal controls report.
Where the Investment Manager makes an investment in a bond, corporate
or otherwise, the credit rating of the issuer is taken into account so
as to minimise the risk to the Company of default.
Investment transactions are carried out with a number of brokers whose
creditworthiness is reviewed by the Investment Manager. Transactions
are ordinarily undertaken on a delivery versus payment basis whereby
the Company's custodian bank ensures that the counterparty to any transaction
entered into by the Company has delivered on its obligations before any
transfer of cash or securities away from the Company is completed.
Cash is only held at banks that have been identified by the Board as
reputable and of high credit quality.
None of the Company's assets are past due or impaired.
19 Related Parties
The Directors who served in the year were entitled to the following emoluments
in the form of fees:
Directors Outstanding Directors
Directors Fees as at Directors Fees paid Outstanding
Fees paid 30 April Fees for the as at
per for the 2017 per period 30 April
Directors Annum period GBP'000 Annum GBP'000 2016
Fees GBP'000 GBP'000 GBP'000 GBP'000
------------ ---------- ---------- ------------ ---------- ---------- ------------
Andrew
Pomfret
(Chairman) 35 35 - 35 38 -
Peter Dicks 30 30 - 25 27 -
Jan
Etherden 25 25 - 25 27 -
Ashe
Windham 25 25 - 25 27 -
------------ ---------- ---------- ------------ ---------- ---------- ------------
The related party transaction pursuant to the Investment Management Agreement
with Miton Trust Managers Limited is set out in the Strategic Report
above. Details of the Management fee are set out in Note 7.
20 Post Balance Sheet Events
On 15 May 2017, 1,934,487 Ordinary shares were redeemed and cancelled
at a price of 64.13 pence per share, amounting to GBP1,241,000, in respect
of the April 2017 redemption. As a result of this, there are 171,151,514
Ordinary shares in issue.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held on 14 September 2017
at 11.00am at the offices of Stephenson Harwood LLP, 1 Finsbury Circus,
London, EC2M 7SH.
NATIONAL STORAGE MECHANISM
A copy of the Annual Report and Accounts will be submitted shortly to
the National Storage Mechanism ("NSM") and will be available for inspection
at the NSM, which is situated at: www.morningstar.co.uk/uk/nsm
ENDS
Neither the contents of the Company's website nor the contents of any
website accessible from hyperlinks on this announcement (or any other
website) is incorporated into, or forms part of, this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UWSWRBUABAAR
(END) Dow Jones Newswires
July 19, 2017 02:00 ET (06:00 GMT)
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