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MTU Montanaro Uk Smaller Companies Investment Trust Plc

101.00
0.25 (0.25%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Montanaro Uk Smaller Companies Investment Trust Plc LSE:MTU London Ordinary Share GB00BZ1H9L86 ORD 2P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.25 0.25% 101.00 100.50 102.00 893,679 16:35:13
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Finance Services -24.91M -27.23M -0.1627 -6.19 168.64M

Montanaro UK Smlr Cos Inv Tst PLC Half-year Report (9921P)

24/11/2016 7:00am

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RNS Number : 9921P

Montanaro UK Smlr Cos Inv Tst PLC

24 November 2016

Montanaro UK Smaller Companies Investment Trust PLC ("MUSCIT" or the "Company")

Half-Yearly Report for the six months to 30 September 2016

MUSCIT was launched in March 1995 and is a closed-ended investment trust with shares premium listed on the London Stock Exchange ("LSE").

Investment Objective

MUSCIT's investment objective is capital appreciation through investing in small quoted companies listed on the LSE or traded on the Alternative Investment Market ("AIM") and to achieve relative outperformance of its benchmark, the Numis Smaller Companies Index (excluding investment companies) ("NSCI").

No unquoted investments are permitted.

Investment Policy

The Company seeks to achieve its objective and to manage risk by investing in a diversified portfolio of quoted UK small companies. At the time of initial investment, the Manager focuses on the smaller end of the NSCI; a potential investee company must be profitable and no bigger than the largest constituent of the NSCI, which represents the smallest 10% of the UK Stock Market by value. At the start of 2016, this was any company below GBP1.3 billion in size.

In order to manage risk, the Manager limits any one holding to a maximum of 4% of the Company's investments at the time of initial investment. The portfolio weighting of each investment is closely monitored to reflect the underlying liquidity of the particular company. The Company's AIM exposure is also closely monitored by the Board and is limited to 30% of total investments, with Board approval required for exposure above 25%. The Company currently has a small exposure to investments in companies traded on AIM.

The Manager is focused on identifying high-quality, niche companies operating in growth markets. This typically leads the Manager to invest in companies that enjoy high barriers to entry, pricing power, a sustainable competitive advantage and strong management teams. The portfolio is therefore constructed on a "bottom-up" basis.

The Alternative Investment Fund Manager ("AIFM"), in consultation with the Board, is responsible for determining the gearing levels of the Company and has determined that the Company's borrowings should be limited to 25% of shareholders' funds. Gearing is used to enhance returns when the timing is considered appropriate. The Company currently has credit facilities of GBP30 million with ING Bank, of which GBP25 million was drawn down as at 30 September 2016 (amounting to net gearing of 10.5%).

Highlights

for the six months to 30 September 2016

Results

 
                                          As at       As at 
                                   30 September    31 March 
                                           2016        2016     % Change 
 Ordinary share price                    466.5p      461.0p          1.2 
 Net asset value ("NAV") per 
  Ordinary share                         598.0p      570.6p          4.8 
 NAV (excluding current period 
  revenue) per Ordinary share            591.2p      558.4p          5.9 
 Discount to NAV (excluding 
  current period revenue)                 21.1%       17.4% 
 NSCI*                                  7,039.1     6,674.2          5.5 
 

* Capital only.

 
                                  As at         As at 
                           30 September      31 March 
                                   2016          2016     % Change 
 Gross assets                 GBP225.6m     GBP219.6m          2.7 
 Net assets                   GBP200.2m     GBP191.0m          4.8 
 Market capitalisation        GBP156.2m     GBP154.3m          1.2 
 Net gearing employed*            10.5%          9.9% 
 Ongoing charges                   1.3%          1.2% 
 Portfolio turnover**             19.5%         16.5% 
 
   *   Borrowing net of cash. 

** Calculated using average transactions as a percentage of the average total investments at fair value during the period.

Performance

 
                                                                                           Since 
 Capital Return Percentage      6 months     1 year     3 year     5 year     10 year     launch 
 Share Price                         1.2       -7.1       -4.0       43.1        81.2      391.1 
 NAV (excluding current 
  period revenue)                    5.9        3.4        9.9       53.0        97.5      499.7 
 Benchmark*                          5.5        5.7       14.9       77.7        16.6      137.3 
 
                                                                                           Since 
   Total Return Percentage      6 months     1 year     3 year     5 year     10 year     launch 
 Share Price**                       3.4       -4.8        1.6       57.0       120.2      475.4 
 NAV**                               6.6        5.3       15.3       65.4       130.9      587.8 
 Benchmark*                          7.3        8.6       25.0      105.1        57.8      345.0 
 

* The Benchmark is a composite index comprising the FTSE SmallCap Index (excluding investment companies) until 31 March 2013 and the NSCI Index from 1 April 2013 onwards.

   **    Returns have been adjusted for dividends paid. 

Source: The Association of Investment Companies ("AIC").

Capital Structure

As at 30 September 2016 and the date of this report, the Company had 33,475,958 Ordinary shares of 10p each in issue (none of which were held in Treasury). Holders of Ordinary shares have unrestricted voting rights of one vote per share at all general meetings of the Company.

Change of Broker

On 17 October 2016, the Company appointed Cenkos Securities plc as its corporate broker and financial adviser.

Manager's Review

The last six months will undoubtedly be defined by the United Kingdom's historic decision to leave the European Union. The immediate impact on financial markets was dramatic: sterling fell to a 31 year low against the US dollar; UK Government bond yields established record lows; and in June, the NSCI recorded its worst monthly performance relative to the FTSE All-Share Index in more than 26 years. Not even the aftermath of 9/11 or Lehman Brothers was as bad. It was a truly remarkable period.

So what happened? The primary reason for these market moves was an aggressive rotation by investors wanting to capitalise on a weaker pound by shifting into the most globally exposed companies. This came at the expense of those businesses more reliant on the UK domestic economy. It was no surprise, therefore, that the NSCI's 5.5% return for the period under review was significantly lower than that of the FTSE All-Share Index, which returned 10.6%.

Over the same period, the Company's NAV (excluding current period revenue) increased by 5.9%, slightly ahead of the benchmark index.

These positive returns demonstrate the resilience of markets post the Brexit shock - the "Brexit Blues" were cast aside with a surprising swiftness. This caught many investors off guard, particularly those who had fled the SmallCap market altogether.

With politics stealing the headlines, the summer period was even quieter than usual in the City of London. Mixed macroeconomic data - the largest slide in UK consumer confidence for more than 26 years was offset by August's manufacturing activity, which recorded the largest month-on-month increase in 25 years - provided few clues to the long-term trajectory of the UK economy. We gleaned more from meeting company management teams who, by and large, saw no change in the business environment. In particular, our recent meetings with the house builders within the portfolio have been reassuring; after the initial post-Brexit lull, business has returned to normal.

Outlook

A fundamental shift appears to be taking place across the globe. With unorthodox monetary policies across the developed world under increased scrutiny, the spotlight is slowly shifting towards reinvigorated fiscal policies. Japan has led the way, with Prime Minister Shinzo Abe launching a $45 billion stimulus package to "invest in the future". Other countries are following suit. The UK is looking at ways to boost investment post-Brexit, while a fiscal response may be the antidote to rising Euroscepticism on the continent. The post Credit Crunch "Age of Austerity" - so championed by Messrs Cameron and Osborne - has seemingly been replaced by the fiscal pragmatism of Prime Minister May and Chancellor Hammond. This may be good news for domestically-focused UK SmallCap.

A further positive for the asset class is that UK SmallCap now trades on its widest discount to UK LargeCap since 2002. This suggests that the asset class has room to continue to perform well. A key indicator of how the market may fare over the near term will be the upcoming earnings season. If companies deliver reasonable earnings growth, then the last three months of the year could prove fruitful for investors. After all, UK SmallCap traditionally does well in the run-up to Christmas.

Montanaro Asset Management Limited

23 November 2016

Investment Portfolio

as at 30 September 2016

 
                                                                                                             % of 
                                                                                                % of    portfolio 
                                                                              Market       portfolio     31 March 
                                                                     Value       cap    30 September         2016 
  Holding                    Sector                                GBP'000      GBPm            2016 
-------------------------  ------------------------------------  ---------  --------  --------------  ----------- 
 NCC Group                  Software and Computer Services           9,466       968             4.3          3.7 
 Dechra Pharmaceuticals     Pharmaceuticals and Biotechnology        8,358     1,292             3.8          3.7 
 Dignity                    General Retailers                        7,708     1,391             3.5          3.6 
 Hilton Food Group          Food Producers                           7,095       451             3.2          2.7 
 Domino's Pizza Group       Travel and Leisure                       6,723     1,844             3.0          3.3 
                            Real Estate/Real Estate Investment 
 Big Yellow Group            Trusts                                  6,630     1,231             3.0          3.7 
                            Health Care, Equipment and 
 Consort Medical             Services                                6,498       532             2.9          4.2 
 Marshalls                  Construction and Materials               6,132       569             2.8          3.8 
 Cranswick                  Food Producers                           5,845     1,176             2.6          2.9 
                            Real Estate/Real Estate Investment 
 Shaftesbury                 Trusts                                  5,820     2,702             2.6          3.0 
 Cineworld Group            Travel and Leisure                       5,800     1,541             2.6          3.5 
 James Fisher and 
  Sons                      Industrial Transportation                5,702       817             2.6          2.2 
 Ricardo                    Support Services                         5,305       510             2.4          1.9 
 Mears Group                Support Services                         5,278       471             2.4          2.0 
 Diploma                    Support Services                         5,274       995             2.4          2.2 
                            Electronic and Electrical 
 Renishaw                    Equipment                               5,274     1,919             2.4          1.8 
                            Household Goods and Home 
 Bovis Homes Group           Construction                            5,250     1,177             2.4          3.0 
 Jupiter Fund Management    Financial Services                       4,892     1,947             2.2          2.4 
 Restaurant Group           Travel and Leisure                       4,804       773             2.2          1.8 
 Ascential                  Media                                    4,777     1,126             2.2          1.4 
 Twenty Largest Holdings                                           122,631                      55.5 
---------------------------------------------------------------  ---------  --------  --------------  ----------- 
 Arrow Global Group         Financial Services                       4,712       514             2.1          1.9 
 Rathbone Brothers          Financial Services                       4,575       885             2.1          2.8 
 4Imprint Group             Media                                    4,555       492             2.1            - 
 Entertainment One          Media                                    4,528       972             2.0          2.1 
                            Electronic and Electrical 
 Halma                       Equipment                               4,196     3,978             1.9          2.1 
 Clarkson                   Industrial Transportation                4,192       634             1.9          2.3 
                            Household Goods and Home 
 McCarthy and Stone          Construction                            4,173       897             1.9          2.8 
 Victrex                    Chemicals                                3,920     1,341             1.8          2.9 
                            Real Estate/Real Estate Investment 
 St. Modwen Properties       Trusts                                  3,749       652             1.7          1.8 
 AG Barr                    Beverages                                3,591       599             1.6          1.9 
 Polypipe Group             Construction and Materials               3,510       557             1.6            - 
 Ted Baker                  Personal Goods                           3,080     1,085             1.4          1.9 
                            Household Goods and Home 
 Galliford Try               Construction                            2,957     1,099             1.3          1.5 
 Eco Animal Health          Pharmaceuticals and Biotechnology        2,909       307             1.3            - 
 Sanne Group                Support Services                         2,855       529             1.3            - 
                            Electronic and Electrical 
 Dialight                    Equipment                               2,796       227             1.3          1.2 
                            Real Estate/Real Estate Investment 
 Savills                     Trusts                                  2,685     1,001             1.2            - 
 Restore                    Support Services                         2,588       387             1.2            - 
 Dunelm Group               General Retailers                        2,556     1,717             1.1          1.1 
 AVEVA Group                Software and Computer Services           2,495     1,277             1.1          1.7 
                            Real Estate/Real Estate Investment 
 Helical Bar                 Trusts                                  2,434       320             1.1          1.9 
 RPS Group                  Support Services                         2,422       386             1.1          1.6 
 Brewin Dolphin Holdings    Financial Services                       2,374       747             1.1          0.9 
 Senior                     Aerospace and Defence                    2,291       961             1.0          1.0 
 CVS Group                  General Retailers                        2,212       531             1.0            - 
 FDM Group                  Software and Computer Services           2,142       658             1.0            - 
                            Real Estate/Real Estate Investment 
 Workspace Group             Trusts                                  2,094     1,139             0.9          1.8 
                            Health Care, Equipment and 
 ADV Medical Solutions       Services                                2,052       480             0.9            - 
 GB Group                   Software and Computer Services           1,682       452             0.8            - 
 EMIS Group                 Software and Computer Services           1,503       595             0.7            - 
 Accesso Technology         Software and Computer Services           1,450       322             0.7            - 
 BCA Marketplace            Support Services                         1,440     1,404             0.7            - 
 Tracsis                    Software and Computer Services           1,288       143             0.6            - 
 Fevertree Drinks           Beverages                                1,213     1,118             0.5            - 
 Abcam                      Pharmaceuticals and Biotechnology        1,134     1,704             0.5            - 
 Total Portfolio                                                   220,984                     100.0 
---------------------------------------------------------------  ---------  --------  --------------  ----------- 
 

Breakdown by Index (Ex Cash)

 
                     % of portfolio   % of portfolio 
                              as at            as at 
   Classification      30 September    31 March 2016 
                               2016 
 FTSE 100                         -                - 
 FTSE 250*                      28%              33% 
 NSCI                           64%              67% 
 AIM                             8%                - 
 

* Represents those holdings that are in the FTSE 250 and are above the threshold for the NSCI.

Interim Management Report and Responsibility Statement

Interim Management Report

The important events that have occurred during the period under review and the key factors influencing the financial statements are set out in the Manager's Review.

The principal risks facing the Company are unchanged since the date of the Annual Report and Accounts for the year ended 31 March 2016 and continue to be as set out in that report on page 11 and pages 41 to 43. These include, but are not limited to, liquidity and discount management, corporate ownership and management structure of Montanaro, poor investment performance, risk oversight, key man risk, operational risk and breach of regulation. The principal financial risks include, but are not limited to, credit risk, market price risk, interest rate risk, liquidity risk, gearing and use of derivatives.

Responsibility Statement

The Directors confirm that to the best of their knowledge:

-- The condensed set of financial statements, which has been neither reviewed nor audited by the external Auditor, has been prepared in accordance with Financial Reporting Standard ("FRS") 104 'Interim Financial Reporting' and gives a true and fair view of the assets, liabilities, financial position and profit of the Company; and

   --      This Half-Yearly Report includes a fair review of the information required by: 

o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

This Half-Yearly Report was approved by the Board of Directors on 23 November 2016 and the above Responsibility Statement was signed on its behalf by Roger Cuming, Chairman.

Income Statement (unaudited)

for the six months to 30 September 2016

 
                          6 months to 30 September        6 months to 30 September          Year to 31 March 2016 
                                    2016                            2015 
                       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 
 Gains on 
  investments 
  at fair value              -     11,219     11,219          -      6,358      6,358          -      2,779      2,779 
 Dividends and 
  interest               2,858          -      2,858      2,849          -      2,849      5,249          -      5,249 
 Management fee          (237)      (711)      (948)      (238)      (715)      (953)      (480)    (1,439)    (1,919) 
 Other expenses          (250)          -      (250)      (252)          -      (252)      (515)          -      (515) 
 Movement in fair 
  value 
  of derivative 
  financial 
  instruments                -         69         69          -         63         63          -        123        123 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Return on ordinary 
  activities 
  before finance 
  costs 
  and taxation           2,371     10,577     12,948      2,359      5,706      8,065      4,254      1,463      5,717 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Interest payable 
  and 
  similar charges        (106)      (318)      (424)       (86)      (257)      (343)      (187)      (562)      (749) 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Return on ordinary 
  activities 
  before taxation        2,265     10,259     12,524      2,273      5,449      7,722      4,067        901      4,968 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Taxation (Note 3)         (4)          -        (4)        (3)          -        (3)        (3)          -        (3) 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Return for the 
  period, 
  being total 
  comprehensive 
  income for the 
  period                 2,261     10,259     12,520      2,270      5,449      7,719      4,064        901      4,965 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 
   Return per 
   Ordinary share         6.8p      30.6p      37.4p       6.8p      16.3p      23.1p      12.1p       2.7p      14.8p 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with FRS 102 and 104. The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the AIC ("AIC SORP").

All items in the above statement derive from continuing operations.

No Statement of Total Recognised Gains and Losses has been prepared as all such gains and losses are shown in the Income Statement.

No operations were acquired or discontinued in the period.

Statement of Changes in Equity (unaudited)

for the six months to 30 September 2016

 
 
                                                                                                                 Total 
                      Called-up      Share       Capital                                Distributable           equity 
                          share    premium    redemption     Special     Capital              revenue    shareholders' 
  6 months to 30        capital    account       reserve    reserve*    reserve*             reserve*            funds 
  September 2016        GBP'000    GBP'000       GBP'000     GBP'000     GBP'000              GBP'000          GBP'000 
 As at 1 April 2016       3,348     19,307         1,362       4,642     155,743                6,607          191,009 
 Fair value 
  movement of 
  investments                 -          -             -           -      11,219                    -           11,219 
 Costs allocated to 
  capital                     -          -             -           -     (1,029)                    -          (1,029) 
 Dividends paid in 
  the period 
  (note 4)                    -          -             -           -           -              (3,348)          (3,348) 
 Movement in fair 
  value of 
  derivative 
  financial 
  instruments                 -          -             -           -          69                    -               69 
 Net revenue for 
  the period                  -          -             -           -           -                2,261            2,261 
-------------------  ----------  ---------  ------------  ----------  ----------  -------------------  --------------- 
 As at 30 September 
  2016                    3,348     19,307         1,362       4,642     166,002                5,520          200,181 
-------------------  ----------  ---------  ------------  ----------  ----------  -------------------  --------------- 
 
 6 months to 30 
 September 2015 
-------------------  ----------  ---------  ------------  ----------  ----------  -------------------  --------------- 
 As at 1 April 2015       3,348     19,307         1,362       4,642     154,842                5,522          189,023 
 Fair value 
  movement of 
  investments                 -          -             -           -       6,358                    -            6,358 
 Costs allocated to 
  capital                     -          -             -           -       (972)                    -            (972) 
 Dividends paid in 
  the period                  -          -             -           -           -              (2,979)          (2,979) 
 Movement in fair 
  value of 
  derivative 
  financial 
  instruments                 -          -             -           -          63                    -               63 
 Net revenue for 
  the period                  -          -             -           -           -                2,270            2,270 
 As at 30 September 
  2015                    3,348     19,307         1,362       4,642     160,291                4,813          193,763 
-------------------  ----------  ---------  ------------  ----------  ----------  -------------------  --------------- 
 
 Year to 31 March 
 2016 
-------------------  ----------  ---------  ------------  ----------  ----------  -------------------  --------------- 
 As at 1 April 2015       3,348     19,307         1,362       4,642     154,842                5,522          189,023 
 Fair value 
  movement of 
  investments                 -          -             -           -       2,779                    -            2,779 
 Costs allocated to 
  capital                     -          -             -           -     (2,001)                    -          (2,001) 
 Dividends paid in 
  the year (note 4)           -          -             -           -           -              (2,979)          (2,979) 
 Movement in fair 
  value of 
  derivative 
  financial 
  instruments                 -          -             -           -         123                    -              123 
 Net revenue for 
  the year                    -          -             -           -           -                4,064            4,064 
 As at 31 March 
  2016                    3,348     19,307         1,362       4,642     155,743                6,607          191,009 
-------------------  ----------  ---------  ------------  ----------  ----------  -------------------  --------------- 
 

* These reserves are distributable, excluding any unrealised gains in unrealised capital reserve. The special reserve can be used for the repurchase of the Company's own shares.

Balance Sheet (unaudited)

as at 30 September 2016

 
                                                  As at           As at        As at 
                                           30 September    30 September     31 March 
                                                   2016            2015         2016 
                                                GBP'000         GBP'000      GBP'000 
 Fixed assets 
 Investments at fair value (note 
  5)                                            220,984         207,527      209,502 
---------------------------------------  --------------  --------------  ----------- 
 Current assets 
 Debtors                                            650           1,635          988 
 Cash at bank                                     4,009           5,145        9,061 
---------------------------------------  --------------  --------------  ----------- 
                                                  4,659           6,780       10,049 
---------------------------------------  --------------  --------------  ----------- 
 
 Creditors: amounts falling 
  due within one year 
 Other creditors                                  (390)           (343)        (401) 
 Revolving credit facility (note 
  5)                                           (25,000)        (20,000)     (28,000) 
 Interest rate swap (note 5)                       (72)               -        (141) 
---------------------------------------  --------------  --------------  ----------- 
                                               (25,462)        (20,343)     (28,542) 
---------------------------------------  --------------  --------------  ----------- 
 Net current liabilities                       (20,803)        (13,563)     (18,493) 
---------------------------------------  --------------  --------------  ----------- 
 Total assets less current liabilities          200,181         193,964      191,009 
---------------------------------------  --------------  --------------  ----------- 
 
 Creditors: amounts falling 
  due after more than one year 
 Interest rate swap                                   -           (201)            - 
---------------------------------------  --------------  --------------  ----------- 
 Net assets                                     200,181         193,763      191,009 
---------------------------------------  --------------  --------------  ----------- 
 
 Share capital and reserves 
 Called-up share capital                          3,348           3,348        3,348 
 Share premium account                           19,307          19,307       19,307 
 Capital redemption reserve                       1,362           1,362        1,362 
 Special reserve                                  4,642           4,642        4,642 
 Capital reserve                                166,002         160,291      155,743 
 Distributable revenue reserve                    5,520           4,813        6,607 
 Total equity shareholders' 
  funds                                         200,181         193,763      191,009 
 
 Net asset value per Ordinary 
  share                                          598.0p          578.8p       570.6p 
---------------------------------------  --------------  --------------  ----------- 
 
 Number of Ordinary shares in 
  issue                                      33,475,958      33,475,958   33,475,958 
---------------------------------------  --------------  --------------  ----------- 
 

Notes to the Financial Statements

as at 30 September 2016

1 Financial Information

The condensed financial statements for the six months ended 30 September 2016 comprise the statements together with the related notes. The Company applies FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' in its annual financial statements and the AIC SORP issued in November 2014. The condensed financial statements for the six months to 30 September 2016 have been prepared in accordance with FRS 104. The financial statements have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Accounts for the year ended 31 March 2016.

The Company has elected to remove its cash flow statement, as permitted by FRS 102 paragraph 7.1.A. As stated in the Annual Report, the Company has early adopted the amendments made to FRS 102 paragraph 34.22.

The financial information contained in this Half-Yearly Report does not constitute full statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the six months to 30 September 2016 and 30 September 2015 has not been audited or reviewed by the Company's Auditor pursuant to the Auditing Practices Board guidance on such reviews.

The information for the year ended 31 March 2016 has been extracted from the latest published Annual Report and Accounts, which have been filed with the Registrar of Companies. The Report of the Auditors on those financial statements was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2 Management Expenses and Finance Costs

Management fees and finance costs are allocated 75% to the capital reserve and 25% to the revenue account. Costs arising on early settlement of debt are allocated 100% to capital, in accordance with the requirements of the AIC SORP. All other expenses are allocated in full to the revenue account.

3 Tax Credit/Charge on Ordinary Activities

The tax charge for the six months to 30 September 2016 is GBP4,000 (six months to 30 September 2015: GBP3,000; year to 31 March 2016: GBP3,000). The tax charge comprises a corporation tax charge for the six months to 30 September 2016 of GBPnil (six months to 30 September 2015: GBPnil; year to 31 March 2016: GBPnil) and irrecoverable withholding tax suffered of GBP4,000 (six months to 30 September 2015: GBP3,000; year to 31 March 2016: GBP3,000).

The corporation tax charge is based on an estimated effective tax rate of 0% as investment gains are exempt from tax owing to the Company's status as an investment trust and there is expected to be an excess of management expenses over taxable income.

4 Dividends

 
                                                      6 months     Year to 
                                                            to    31 March 
                                                  30 September        2016 
                                                          2016     GBP'000 
                                                       GBP'000 
----------------------------------------------  --------------  ---------- 
 Paid 
  2016 Final dividend of 10.00p (2015: 8.90p) 
  per Ordinary share                                     3,348       2,979 
----------------------------------------------  --------------  ---------- 
 

5 Fair Value Hierarchy

In accordance with FRS 104, the Company must disclose the fair value hierarchy of financial instruments.

The fair value hierarchy consists of the following three levels:

 
 --   level   -   The unadjusted quoted price in an active market 
       1           for identical assets or liabilities that the entity 
                   can access at the measurement date; 
 --   level   -   Inputs other than quoted prices included within 
       2           level 1 that are observable (i.e. developed using 
                   market data) for the asset or liability, either 
                   directly (i.e. as prices) or indirectly (i.e. derived 
                   from prices); and 
 --   level   -   Inputs are unobservable (i.e. for which market data 
       3           is unavailable) for the asset or liability. 
 

For financial instruments (within the scope of FRS 102), which are measured at fair value in the Balance Sheet, an entity shall disclose the following for each class of financial instruments:

-- the level in the fair value hierarchy into which the fair value measurements are categorised in their entirety;

-- any significant transfers between level 1 and level 2 of the fair value hierarchy and the reasons for those transfers; and

-- for fair value measurements in level 3 of the hierarchy, transfers into or out of level 3 and the reasons for those transfers.

The table below sets out fair value measurements of financial assets in accordance with the FRS 102 fair value hierarchy:

 
                             30 September 2016                  31 March 2016 
                          Level      Level      Total      Level      Level      Total 
                              1          2    GBP'000          1          2    GBP'000 
                        GBP'000    GBP'000               GBP'000    GBP'000 
 Equity investments     220,984          -    220,984    209,502          -    209,502 
                        220,984          -    220,984    209,502          -    209,502 
--------------------  ---------  ---------  ---------  ---------  ---------  --------- 
 

The table below sets out fair value measurements of financial liabilities in accordance with the FRS 102 fair value hierarchy system:

 
                                 30 September 2016                  31 March 2016 
                              Level      Level      Total      Level      Level      Total 
                                  1          2    GBP'000          1          2    GBP'000 
                            GBP'000    GBP'000               GBP'000    GBP'000 
 Revolving Credit Loan 
  Facility                        -     25,000     25,000          -     28,000     28,000 
 Derivative financial 
  instruments                     -         72         72          -        141        141 
-----------------------  ----------  ---------  ---------  ---------  ---------  --------- 
                                  -     25,072     25,072          -     28,141     28,141 
 ----------------------------------  ---------  ---------  ---------  ---------  --------- 
 

There were no level 3 investments.

6 Going Concern

The Company has adequate financial resources to meet its investment commitments and as a consequence, the Directors believe that the Company is well placed to manage its business risks. After making appropriate enquiries and due consideration of the Company's cash balances, the liquidity of the Company's investment portfolio and the cost base of the Company, the Directors have a reasonable expectation that the Company has adequate available financial resources to continue in operational existence for the foreseeable future and accordingly have concluded that it is appropriate to continue to adopt the going concern basis in preparing the Half-Yearly Report, consistent with previous years.

7 Segmental Reporting

The Company has one reportable segment, investing in UK businesses.

8 Related Party Transactions

Under the Listing Rules, the Manager is regarded as a related party of the Company. However, the existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, in terms of FRS 102, the Manager is not considered a related party. The relationship between the Company, its Directors and the Manager is disclosed in the Directors' Report in the Annual Report and Accounts for the year ended 31 March 2016.

The amounts charged by the Manager during the period were GBP948,000 (six months to 30 September 2015: GBP953,000; year to 31 March 2016: GBP1,919,000). At 30 September 2016, the amount due to the Manager, included in creditors, was GBP164,000.

Directors

Roger Cuming (Chairman)

Kate Bolsover

Kathryn Matthews

James Robinson

Principal Advisers

 
 AIFM and Manager                        Depositary 
 Montanaro Asset Management Limited      BNY Mellon Trust & Depositary 
  53 Threadneedle Street                  (UK) Limited 
  London EC2R 8AR                         BNY Mellon Centre 
  Tel: 020 7448 8600                      160 Queen Victoria Street 
  Fax: 020 7448 8601                      London EC4V 4LA 
  www.montanaro.co.uk 
  enquiries@montanaro.co.uk 
                                         Custodian 
 
 Company Secretary, Administrator        Bank of New York Mellon SA/NV 
  and Registered Office                   London Branch 
                                          One Canada Square 
                                          London E14 5AL 
 
 Capita Sinclair Henderson Limited       Banker 
  Beaufort House 
  51 New North Road 
  Exeter EX4 4EP 
  Tel: 01392 477 500 
  Fax: 01392 253 282 
                                         ING Bank N.V. 
                                          London Branch 
                                          60 London Wall 
                                          London EC2M 5TQ 
 Registrar                               Broker 
 Capita Asset Services                   Cenkos Securities plc 
  Shareholder Services Department         6-8 Tokenhouse Yard 
  The Registry                            London EC2R 7AS 
  34 Beckenham Road 
  Beckenham 
  Kent BR3 4TU 
  Tel: 0871 664 0300 
  (calls will cost 12p per minute plus 
  network charges) 
  ssd@capitaregistrars.com 
  www.capitaregistrars.com 
                                         Auditor 
                                         Ernst & Young LLP 
                                          25 Churchill Place 
                                          Canary Wharf 
                                          London E14 5EY 
          Montanaro UK Smaller Companies Investment Trust PLC 
 
              Registered in England and Wales No. 3004101 
                 An investment company as defined under 
                 section 833 of the Companies Act 2006 
 

Sources of Further Information

Information on the Company, including this Half-Yearly Report is available on the Company's website: www.montanaro.co.uk/muscit.

Key Dates

 
 March      Company year end 
---------  ----------------------- 
 June       Annual results 
---------  ----------------------- 
 July       Annual General Meeting 
---------  ----------------------- 
 August     Dividend payable 
---------  ----------------------- 
 November   Half-yearly results 
---------  ----------------------- 
 

Frequency of NAV Publication

The Company's NAV is released to the LSE on a daily basis.

ISA Status

The Company is fully eligible for inclusion in ISAs.

AIC

The Company is a member of the AIC.

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

IR BRBDBBBDBGLX

(END) Dow Jones Newswires

November 24, 2016 02:00 ET (07:00 GMT)

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