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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| River And Mercantile Uk Micro Cap Investment Company Limited | LSE:RMMC | London | Ordinary Share | GG00BNDMJP11 | RED ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 156.00 | 152.00 | 160.00 | 156.00 | 156.00 | 156.00 | 4,874 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMRMMC
RNS Number : 6565U
River & Mercantile UK Micro Cap Inv
20 January 2017
20 January 2017
FOR IMMEDIATE RELEASE
RELEASED BY BNP PARIBAS SECURITIES SERVICES S.C.A., GUERNSEY BRANCH - ANNUAL FINANCIAL REPORT RESULTS ANNOUNCEMENT
THE BOARD OF DIRECTORS OF RIVER AND MERCANTILE UK MICRO CAP INVESTMENT COMPANY LIMITED ANNOUNCE ANNUAL FINANCIAL REPORT RESULTS FOR THE YEARED 30 SEPTEMBER 2016
STRATEGIC REPORT
financial highlights and performance summary
Financial highlights during the year ended 30 September 2016
On 29 October 2015, 16,679,405 Ordinary Shares were issued at a price of GBP1.1718, raising gross proceeds of GBP19,544,927.
On 11 November 2015, 1,185,000 Ordinary Shares were issued at a price of GBP1.1825, raising gross proceeds of GBP1,401,263.
Number of Ordinary Shares in issue as at 30 September 2016:
68,507,569 Ordinary Shares
Market capitalisation as at 30 September 2016:
Ordinary Share class: GBP78,098,629
Hot Features
Premium
Performance summary
As at As at
30 September 30 September
2016 2015
Net asset value GBP1.2624
per Ordinary Share GBP1.1036
Ordinary Share GBP1.1400
price (bid market)(1) GBP1.0650
Period highs and
lows
For the For the
period period
from 2 from 2
October October
Year ended Year ended 2014 to 2014 to
30 September 30 September 30 September 30 September
2016 2016 2015 2015
High Low High Low
Net asset value
per Ordinary Share 1.2698 1.0581 GBP1.1076 GBP0.9738
Ordinary Share
price (bid market)(1) 1.1900 1.0200 GBP1.0950 GBP1.0000
(1) - Source: Bloomberg
Ongoing charges
The ongoing charges reflects those expenses which are likely to recur in the foreseeable future and which relate to the operation of the Company. The ongoing charges are based on actual costs incurred in the year as being the best estimate of future costs excluding any non-recurring fees in accordance with the Association of Investment Companies ("AIC") methodology. The ongoing charges for the year ended 30 September 2016 was 1.36% (2015: 1.34%).
Dividend history
No dividend was declared or paid during the year.
Please refer to note 16 for further information subsequent to the reporting period.
Key Performance Indicators
Net Asset Value Total Return vs benchmark
Net Asset Value ("NAV") on a total return(2) basis increased by 28.82% from inception (net of issue cost).
(2) - Source: BNP Paribas Securities Services, Bloomberg
CHAIRMAN'S STATEMENT
The Challenges of Unexpected Turbulence
Peter Sellers was a renowned comic, actor, author and raconteur. He is known to many through the varied and magnificent characters he portrayed during his career. The Pink Panther series is one that resonates with my youth and I have very fond memories of these Blake Edwards classics, in particular the depth and subtlety of the characters that supported Clouseau. Who can forget Cato, who was, of course, the inspector's manservant. However, his main role was to provide a series of shocks for the complacent inspector returning home following a hard day's sleuthing to make sure that he was kept alert and skilled in the dubious form of martial arts to which he professed to be the master. Cato and Clouseau had a love-hate relationship, with their fights being sustained and ferocious as well as being pretty damaging to their very surroundings, and always interrupted by the ringing telephone, at which point both parties would become the model of civility once more. Cato would put a lot of effort into taking his employer by surprise, and Clouseau never felt entirely safe or at peace in his surroundings.
This year, during which we sadly lost Burt Kwok who played Cato, has been a year during which the stock market has had to deal with its own series of Cato-like shocks, from the huge slump in global markets that we saw in January of this year followed by a gradual return to normality, but with a very cautious and wary eye on the "attack" that could lead to another significant setback in world markets. The event that was most likely to cause this was the UK's vote on membership of the European Union and, although the markets reacted quite nervously to a series of early polls and odds from Ladbrokes, it appeared to settle into benign apathy that everyone else was wrong and it was going to be all right on the night. For the Remain camp it all seemed to be going so well and there was a real sense in markets that the status quo surrounding the UK's membership would be maintained. We woke, however, to a rather unexpected result. The markets initially fell very significantly as traders struggled to identify direction or leadership and an understanding of what this would ultimately mean for our economy. This shock rippled through world markets and the doomsayers confirmed that this was indeed the very catalyst that they had foreseen and a global recession was assured as clearly as night follows day and very significant and sustained falls in global markets would ensue. Well, they were of course right for a few days. However, with an immediate leg down in Sterling and a further fall in rates, the UK market, along with its global peers, recovered. These headline number's are impressive. However, they do hide a myriad of other statistics and hidden challenges that the British and indeed global economies will face over the coming years. We are now in unknown territory and whilst there is a nervous enthusiasm, fear of the "shock" is not far away. The FTSE 100, with its broad exposure to non-Sterling earnings did indeed recover. However, the smaller cap indices have fared less well as the impact on our domestic market was more keenly felt. This is, of course, the area of the market where our company operates and, as a result, the impact on the NAV was swift. We have seen the smaller capitalised markets regain ground late in our financial year. However, it has been frustrating to observe that the net result of this is that we have begun to trade at a discount for the first time in our company's short history. This is galling for all investors and we are working with our brokers to examine ways that we can look to control this going forward.
2016 has also seen another significant milestone with particular relevance to our company. The Alternative Investment Market (AIM), celebrated its 21st birthday. The market has evolved into a vibrant and healthy exchange, and has left behind those troublesome teenage years during which it struggled to find its place in the financial markets. However, the development of the nominated advisor structure (NOMADS) has meant that costs have been controlled, attracted new entrants and critically ensured a more disciplined approach to governance. AIM will always attract some illiquid and poorly managed businesses capable of providing their own individual "shocks", but as the market has matured, it is increasingly made up of exciting, fast growing and well governed businesses. This is not a market for the passive, naïve or inexperienced investor but does provide huge opportunity for the disciplined and experienced investor with a clear investment philosophy and process.
Performance
Our portfolio manager, Philip Rodrigs, has continued to perform exceptionally well given the circumstances over the last twelve months and I would like to take this opportunity to thank him for his endeavours on behalf of the Board and our shareholders. The NAV total return of the UK Micro Cap portfolio over the period was 14.40%, which compares with the total return of 10.02% posted by the benchmark index.
Andrew Chapman
Chairman
19 January 2017
executive sUMMARY
This Executive Summary is designed to provide information about the Company's operation and results for the year ended 30 September 2016. It should be read in conjunction with the Chairman's Statement and the Portfolio Manager's report which gives a detailed review of investment activities for the year and an outlook for the future.
Corporate summary
The Company was incorporated on 2 October 2014, with registered number 59106, as a non-cellular company with liability limited by shares. The Company has been registered by the Guernsey Financial Services Commission ("GFSC") as a registered closed-ended collective investment scheme pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and the Registered Collective Investment Scheme Rules ("RCIS Rules") 2008.
The Company's stated capital is denominated in Sterling and each share carries equal voting rights.
The Company's Ordinary Shares are listed on the Official List of the UK Listing Authority and admitted to trading on the Main Market of the London Stock Exchange. As at 30 September 2016, the Company's issued stated capital comprised 68,507,569 Ordinary Shares.
The Company has appointed Carne Global AIFM Solutions (C.I.) Limited (the "Manager") to act as the Company's Alternative Investment Fund Manager ("AIFM"). The Manager has delegated portfolio management of the Company's investment portfolio to River and Mercantile Asset Management LLP (the "Portfolio Manager"). The Board will actively and continuously supervise both the Manager and the Portfolio Manager in the performance of their respective functions.
The Company is a member of the AIC and is regulated by the GFSC.
Significant events during the year ended 30 September 2016
On 29 October 2015, the Company announced the successful placing of 16,679,405 Ordinary Shares, at an issue price of GBP1.1718 per Ordinary Share. The placing raised gross proceeds of GBP19,544,927 and 16,679,405 Ordinary Shares were admitted to the Official List and to trading on the Main Market with effect from 3 November 2015.
On 11 November 2015, the Company announced the successful placing of 1,185,000 Ordinary Shares, at an issue price of GBP1.1825 per Ordinary Share. The placing raised gross proceeds of GBP1,401,263 and 1,185,000 Ordinary Shares were admitted to the Official List and to trading on the Main Market with effect from 17 November 2015.
Company investment objective
The Company aims to achieve long term capital growth from investment in a diversified portfolio of UK Micro Cap Companies, typically comprising companies with a free float market capitalisation of less than GBP100 million at the time of purchase.
Company investment policy
The Company invests in a diversified portfolio of UK Micro Cap Companies. It is expected that the majority of the Company's investible universe will comprise companies whose securities are admitted to trading on AIM.
While it is intended that the Company will be fully invested in normal market conditions, the Company may hold cash on deposit or invest on a temporary basis in a range of high quality debt securities and cash equivalent instruments. There is no restriction on the amount of cash or cash equivalent instruments that the Company may hold and there may be times when it is appropriate for the Company to have a significant cash position instead of being fully or near fully invested.
The Company will not be benchmark-driven in its asset allocation.
Diversification
The number of holdings in the portfolio will usually range between 30 and 50.
The portfolio is expected to be broadly diversified across sectors and, while there are no specific limits placed on exposure to any sector, the Company will at all times invest and manage the portfolio in a manner consistent with spreading investment risk.
Investment restrictions
No exposure to any investee company will exceed 10% of NAV at the time of investment.
The Company may from time to time take sizeable positions in portfolio companies. However, in such circumstances, the Company would not normally intend to hold more than 25% of the capital of a single investee company at the time of investment.
Although the Company would not normally expect to hold investments in securities that are unquoted it may do so from time to time but such investments will be limited in aggregate to 10% of NAV.
The Company may invest in other investment funds, including listed closed-ended investment funds, to gain investment exposure to UK Micro Cap Companies but such exposure will be limited, in aggregate, to 10% of NAV at the time of investment.
Borrowing and gearing policy
The Company does not normally intend to employ gearing but at certain times it may be opportune to do so, for both investment and working capital purposes. Accordingly, the Company may employ gearing up to a maximum of 20% of NAV at the time of borrowing.
Derivatives
The Company may use derivatives (both long and short) for the purposes of efficient portfolio management only. The Company will not enter into uncovered short positions.
Further information can be found in the Portfolio Manager's report which is incorporated within this Annual Financial Report for informational purposes only.
Investment strategy and approach
The Company's investment strategy is to take advantage of the illiquid risk premium inherent in UK Micro Cap Companies and exploit fully the underlying investment opportunity in the UK Micro Cap market to deliver high and sustainable returns to Shareholders, principally in the form of capital gains in line with the Company investment objective and policy.
The Company pursues its investment strategy through the appointment of the Manager as AIFM, whereby the Manager has been given responsibility, subject to the supervision of the Board, for the management of the Company in accordance with the Company's investment objective and policy. The Manager has delegated portfolio management to the Portfolio Manager. The Company depends on the diligence, skill, judgment and business contacts of the Portfolio Manager's investment professionals, in particular Philip Rodrigs, in identifying investment opportunities which are in line with the investment objective and policy of the Company. The Portfolio Manager attends all Board meetings at which the investment strategy and performance of the Company is discussed. BNP Paribas Securities Services S.C.A., Guernsey Branch (the "Administrator") have been appointed to provide administration, custodian and company secretarial services.
Key Performance Indicators (KPIs)
The Company's Directors meet regularly to review performance and risk against a number of key measures.
Returns and Net Asset Value total return
The Board reviews and compares, at each meeting, the performance of the portfolio as well as the NAV, income and share price of the Company. The Directors regard the Company's NAV total return as being the overall measure of value delivered to Shareholders over the long term. Total return reflects NAV growth of the Company.
The Board is committed to achieving long term capital growth and, where possible, returning such growth to Shareholders throughout the life of the Company. Furthermore, the Portfolio Manager has advised the Board that it believes that a NAV of GBP100 million (at current market levels although this may change over time) would best position the Company to take advantage of a portfolio of Micro Cap Companies.
Accordingly, assuming that the NAV grows, the Directors intend to operate the redemption mechanism pursuant to which a portion of Shareholders' shareholdings may be redeemed compulsorily so as to return the NAV back to around GBP100 million.
NAV on a total return basis increased by 28.82% from inception. Please refer to the Financial Highlights and Performance Summary for NAV total return analysis and note 12 for further details regarding the redemption mechanism.
During the year ended 30 September 2016, the Company incurred a portfolio management performance fee of GBP797,751 (2015: GBP426,025), of which GBP1,223,776 (2015: GBP426,025) was payable at year end. The performance fee due will only be paid when the Company implements the Redemption Mechanism as detailed in the IPO Prospectus issued on 14 November 2014.
Concentration
The Board reviews the industry and asset diversification of the investment portfolio to ensure that holdings are in line with the investment restrictions and also to monitor the concentration risk of the investment portfolio.
Please refer to note 8 for further details regarding investment limits and risk diversification policies.
As at 30 September 2016, the Company held 45 (2015: 39) investment holdings of which no exposure in any investee company exceeded 10% of NAV at the time of investment.
Premium / Discount
The Board reviews the trading price of the Company's Ordinary Shares and compare it against the NAVs of the Ordinary Shares of the Company to assess volatility in the discount or premium to the share prices during the year.
Please refer to the Financial Highlights and Performance Summary for further analysis.
Principal risks and uncertainties
When considering the total return of the Company, the Board takes account of the risk which has been taken in order to achieve that return. The Board have carried out a robust assessment of the principal risks facing the Company and have looked at numerous risk factors, an overview of which is set out below:
Investment and liquidity
An inappropriate investment strategy may lead to under performance against the Company's benchmark and peer companies resulting in the Company's shares trading on a discount. The Board monitors the implementation and results of the investment process with the Portfolio Manager who attends all Board meetings and reviews data which shows measures of the Company's risk profile.
The Company invests in a diversified portfolio of UK Micro Cap Companies, typically comprising companies with a free float market capitalisation of less than GBP100 million at the time of purchase. These securities are likely to have higher volatility and liquidity risk than securities on the London Stock Exchange Official List. The relatively small market capitalisation of Micro Cap Companies could therefore have an adverse effect on the performance of these investments and can make the market in their shares illiquid. On this basis prices of Micro Cap Companies are often more volatile than prices of larger capitalisation stocks, and even small cap companies.
The Company may have difficulty in selling its investments which may lead to volatility in the market price of shares in the Company. The Company may not necessarily be able to realise its investments within a reasonable period, and any such realisations that may be achieved may be at a considerably lower price than prevailing indicative market prices. There can therefore be no guarantee that any realisation of an investment will be on a basis which necessarily reflects the valuation of that investment.
Risks are monitored by the Manager, which holds monthly AIFM Risk Committee meetings with the Portfolio Manager. The Manager provides an update of these AIFM Risk Committee meetings to the Board on a quarterly basis and the risks are discussed accordingly. The Board have placed investment restrictions and guidelines to limit these risks.
Portfolio concentration and macro-economic risks
The Company predominantly invests in securities in the UK and has no specific limits placed on its exposure to any industry sector. Changes in economic conditions in the UK, (for example, interest rates and rates of inflation, industry conditions, competition, political and diplomatic events and other factors), where the Company predominantly invests, could substantially and adversely affect the Company's prospects, as could changes in global economic conditions. This exposes the Company to concentration of geographical risk and may from time to time lead to the Company having significant exposure to portfolio companies from certain business sectors. Greater concentration of investments in any one geographical and / or industry sector may result in greater volatility in the value of the Company's investments, and consequently its NAV, and may materially and adversely affect the performance of the Company and returns to Shareholders.
While the Company does not include any specific limits placed on exposures to any industry sector, the Company does have investment limits and risk diversification policies in place to mitigate market and concentration risk. Please refer to note 8 for further details.
Environmental and social issues
The Company is a closed-ended investment company and so its own direct environment impact is minimal. The Board notes that the companies in which the Company invests will have a social and environmental impact over which the Company has no control. The Directors, the majority of whom are based in the Channel Islands, have held all of their meetings in Guernsey and therefore the Company's greenhouse gas emissions and environmental footprint are negligible.
Board diversity
The Board has due regard for the benefits of experience and diversity in its membership, including gender, and strives to meet the right balance of individuals who have the knowledge and skillset to maximise Shareholder return while mitigating the risk exposure of the Company. The Board is made up of three male Directors and one female Director. All have held the position of Directors since incorporation. Further information about the Board's policy on diversity is contained within the Directors and Corporate Governance Report.
The Company has no employees and therefore there is nothing further to report in respect of gender representation within the Company.
Life of the Company
The Company has no fixed life. The Directors shall propose one or more ordinary resolutions at the Annual General Meeting (the "AGM") to be held in 2019 and at every fifth AGM thereafter that the Company continues as a closed-ended investment company (the "Continuation Resolution"). In the event that a Continuation Resolution is not passed, the Directors shall formulate proposals to be put to the Shareholders as soon as is practicable but, in any event, by no later than six months after the Continuation Resolution is not passed, to reorganise or reconstruct the Company or for the Company to be wound up with the aim of enabling the Shareholders to realise their holdings in the Company.
Future Strategy
The Board continues to believe that the investment strategy and policy adopted is appropriate for and is capable of meeting the Company's objectives.
The overall strategy remains unchanged and it is the Board's assessment that the Manager and Portfolio Manager's resources are appropriate to properly manage the Company's investment portfolio in the current and anticipated investment environment.
Please refer to the Portfolio Manager's report for detail regarding performance to date of the investment portfolio and the main trends and factors likely to affect those investments.
Going Concern
Under the AIC Code of Corporate Governance ("AIC Code") and applicable regulations, the Directors are required to satisfy themselves that it is reasonable to assume that the Company is a going concern from date of approval of the financial statements.
The Directors are satisfied that, at the time of approving the financial statements, no material uncertainties exist that may cast significant doubt concerning the Company's ability to continue for the foreseeable future. The Directors consider it appropriate to adopt the going concern basis in preparing the financial statements.
Viability Statement
Under the AIC Code and LR 9.8.6R under the Listing Rules, the Board is required to make a "viability statement" which considers the Company's current position and principal risks and uncertainties combined with an assessment of the prospects of the Company in order to be able to state that they have a reasonable expectation that the Company will be able to continue in operation over the period of their assessment.
The Company's prospects are driven by its business model and strategy. The Company's aim is to achieve long term capital growth from investment in a diversified portfolio of UK Micro Cap Companies, typically comprising companies with a free float market capitalisation of less than GBP100 million at the time of purchase. At the launch of the Company the Directors stated "The Board, advised by the Portfolio Manager, believes that the impact on Micro Cap Companies of a return to economic growth is particularly high because of the knock-on effect of improved market confidence. Over the medium term, the Portfolio Manager expects that confidence and risk appetite amongst investors will grow with improving economic activity. Typically, it would expect that this will result in valuation metrics rising which will enhance returns for investors during this period."
The Directors have and continue to monitor the uncertainties in the political and economic environment as a result of the referendum vote for the UK to leave the EU.
In this context and considering the referendum vote, the Board's central case is that the prospects for economic activity in the UK will remain such that the investment objective, policy and strategy of the Company will be viable for the foreseeable future through a period of at least five years from the balance sheet date.
In making this judgement, the Board has assessed that the main risks to the long term viability of the Company are key global and market uncertainties driven by factors external to the Company which in turn can impact on the liquidity and NAV of the investment portfolio. A simulation has been designed to estimate the impact of these uncertainties on the NAV of the Company at times of stress based on historical performance data of the Company's benchmark, using techniques similar to the sensitivity analysis performed in note 8 - Financial Risk Management.
The Board is required to propose to the members an ordinary resolution that the Company continues its business as a closed-ended investment company (the "Continuation Vote") at the AGM in 2019. Although the outcome of such a Continuation Vote there remains uncertain, having assessed the principal risks to the business and investment model, the Directors' current view is that a Continuation Vote will pass.
Taking account of the Company's current position and principal risks, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of assessment.
The Strategic Report was approved by the Board of Directors on 19 January 2017 and signed on its behalf by:
Andrew Chapman Ian Burns
Chairman Audit Committee Chairman
BOARD MEMBERS
All directors are non-executive.
CHAIRMAN
Andrew Chapman, (independent). Appointed 2 October 2014.
Andrew holds both a BA and an MPhil in Economic & Social History. He began his career in 1978 as a UK equity fund manager.
In 1984, Andrew was appointed to the in-house investment management team at the British Aerospace Pension Fund, where he had responsibility for directly investing in a number of listed markets. In 1991, Andrew took the position of Investment Manager at United Assurance plc, where he was responsible for asset allocation and leading a team of in-house fund managers managing approximately GBP12 billion in assets. Andrew was subsequently a director of Teather & Greenwood Investment Management Limited, before joining Hewitt Associates as a Senior Consultant. From 1994 until 2003, Andrew was also a non-executive director of the Hambros Smaller Asian Companies Investment Trust plc (which subsequently became The Asian Technology Trust plc).
In 2003, Andrew was appointed as the first in-house Pension Investment Manager for the John Lewis Partnership Pension Fund, with responsibility for the overall investment strategy as well as the appointment and performance of 27 external fund managers across all asset classes. He retired from that role in 2012 and served as the CIO for The Health Foundation until September 2015.
Since 2012 Andrew has developed a portfolio of roles, including being a member of the investment committees of: Homerton College (Cambridge University); Coller Capital Partners; and the Property Charities Fund. He is also a non-executive director of Steadfast International Limited.
Andrew served for several years on the Investment Council of the National Association of Pension Funds and was Chair of the Advisory Board for the Pension Fund Investment Forum. He is currently Chair of the BUNAC Educational Scholarship Trust.
DIRECTORS
Ian Burns, (independent) - Chairman of the Audit Committee and Senior Independent Director. Appointed 2 October 2014.
Ian is a fellow of both the Institute of Chartered Accountants in England and Wales and the Chartered Institute for Securities & Investment.
He is the founder and an executive director of Via Executive Limited, a specialist management consulting company, and the Managing Director of Regent Mercantile Holdings Limited, a privately owned investment company.
Ian is currently a non-executive director and Audit Committee chairman of two LSE listed companies, Phaunos Timber Fund Limited, Twenty Four Income Fund Limited and is the Finance Director of Fast Forward Innovations Limited, a company listed on the AIM market. He is also a non-executive director of Montreux Capital Corp which is listed on the Toronto Stock Exchange, Darwin Property Investment Management (Guernsey) Limited, Curlew Capital Guernsey Limited, and Premier Asset Management (Guernsey) Limited. Previously, Ian was also the Finance Director of the AIM listed company, Polo Resources Limited.
Trudi Clark, (independent) - Chairman of the Remuneration and Nomination Committee and Management Engagement Committee. Appointed 2 October 2014.
Trudi graduated with a first class honours degree in business studies and is a qualified Chartered Accountant.
Trudi spent 10 years working in chartered accountancy practices in the UK and Guernsey. In 1991, she joined the Bank of Bermuda to head their European internal audit function before moving into private banking in 1993.
Between 1995 and 2005, Trudi worked for Schroders (C.I.) Limited, an offshore private bank and investment manager. She was appointed to the position of Banking Director in 2000 and Managing Director in 2003. In 2005, Trudi left Schroders to establish and run a private family office.
In July 2009, Trudi established the Guernsey practice of David Rubin & Partners LLP, an internationally known insolvency and liquidation specialist.
Trudi holds several non-executive directorships in funds which include F & C Commercial Property Trust Limited,
which is a UK listed fund and Sapphire (PCC) Limited - Sapphire IV Cell which is listed on the Channel Islands Securities Exchange.
Mark Hodgson. Appointed 2 October 2014.
Mark has over 25 years' financial services experience, with an extensive banking background having spent over 20 years with HSBC where he gained an in-depth knowledge of credit, financial markets and complex lending structures.
Prior to 2006, Mark was Regional Director for HSBC Invoice Finance (UK) Limited, where he was responsible for running the receivables finance business. In 2006, Mark moved to Jersey to head up HSBC's Commercial Centre, having full operational responsibility for credit and lending within the jurisdiction.
In 2008, Mark moved to Capita Fiduciary Group as Managing Director of Offshore Registration, a regulated role in which he had responsibility for Jersey, Guernsey and the Isle of Man. Mark also took on the regulated role of Managing Director of Capita Financial Administrators (Jersey) Limited, together with directorships of regulated and unregulated funds.
In April 2014, Mark joined Carne Global Financial Services (C.I.) Limited as Managing Director.
PORTFOLIO MANAGER'S REPORT
This Portfolio Manager Report is compiled with reference to the investment portfolio. Therefore all positions are calculated by reference to their official closing prices (as opposed to the closing bid prices basis within the Annual Financial Report). The estimated unaudited NAV referenced below is calculated on a daily basis utilising closing bid prices and is inclusive of all estimated charges and accruals.
Review of performance
The year to September 2016 has been an eventful, but ultimately a satisfactory one for the River and Mercantile UK Micro Cap Investment Company. The fully invested portfolio delivered a strong end to the last financial year, and this momentum carried through from the September reporting season into October, attracting significant investor interest in both the investments and also for the Company itself. Strong investor demand supported a fund raise by the Company which resulted in total proceeds of nearly GBP21m being raised from two tap issues in the year ended 30 September 2016, which helps take the Company a decisive step closer to the long term equilibrium target of GBP100m. This additional funding led to a busy period for investigating additional investment opportunities but, as ever, there are plenty of attractive options to choose from, including those already high up the leader board. The Company returned to a fully invested status (below 10% of uncommitted cash) swiftly, with the market volatility in the early part of 2016 assisting in presenting attractive investment opportunities.
That market volatility in January and February 2016 would normally be the most memorable of the year but was surpassed by the result of the United Kingdom's EU Referendum in June. The decision to leave the EU was an unexpected result for financial markets, with the shares of most cyclical domestically oriented firms falling sharply, whilst sterling also fell sharply and encouraged investors to upwardly value firms with significant foreign earnings. In the end the market performance in Calendar Q3 was the strongest of the year.
The NAV performance in the twelve months ended 30 September was strong at +14.4%, well ahead of the benchmark's return of +10%. As a result, the NAV per share closed at 126.24p, compared to 110.36p a year ago. It is noted that given that the benchmark was broadly unchanged during the period between the fund raising and the deployment, there has been no cash drag effect on performance arising from the two tap issues. Overall the NAV performance has accumulated to a total of +28.8% since IPO which was substantially ahead of the benchmark's +18.6% return over the same period.
As previously observed, it remains encouraging that the above performance is witnessing theory becoming apparent in practice. The investment objective is to deliver attractive returns from both accessing the beta of the Micro Cap segment of the UK market but also in applying a disciplined stock selection approach to produce attractive alpha generation. Turning to beta first, the volatility amongst global stock market indices has continued to be elevated over the period. The River and Mercantile UK Micro Cap Investment Company demonstrated that it is by no means a given that during heightened periods of overall market volatility shares of Micro Cap Companies should suffer proportionately more. By the middle of February, UK markets were down 10-11%, whereas the NAV fell less than 5%, and subsequently recovered to post gains in that quarter. Furthermore, it was not an inevitability that the NAV should suffer proportionately more during a UK domestic shock and so it proved with the NAV falling less than the wider benchmark's -6.2% return between 23 June and 30 June. Over the same period the NAV fell -5.9%, with around 1% of this due to a non-Brexit related stock-specific event.
It remains our belief that the contribution of stock-selection alpha is of primary importance over the long term, delivered from a high conviction, diversified, yet concentrated portfolio of typically between 30 and 50 holdings. This concentrated focus means it is easily possible to invest the Company's funds entirely in firms selling their products and services globally. This is because many of UK's most exciting and technologically advanced companies start small (or micro) and use the growth capital by listing on the UK stock market to build their global presence steadily. The focused portfolio allows the selection of the 'cream of the crop', roughly the top 10 percent of the available options in the universe of stocks with a sub GBP100m free float market cap. Within that top 10 percent there are of course some attractive UK domestic cyclical firms, mostly trading between a 50-75% discount to the wider market. However this component of the portfolio ended that financial year below 20%, compared to around 40% from global-leading technology and service companies. The latter group have delivered the greatest performance to the portfolio as observed below where stocks contributing more that 1% to the portfolio outnumber those that detracted more than 1% two to one:
Holdings Contribution
to return
--------------------------- -------------
Taptica 5.49%
--------------------------- -------------
Blue Prism 4.19%
--------------------------- -------------
Shanta Gold 3.17%
--------------------------- -------------
KBC Advanced Technologies 2.30%
--------------------------- -------------
Keywords Studios 2.14%
--------------------------- -------------
Berkeley Energia 1.66%
--------------------------- -------------
D4t4 Solutions 1.44%
--------------------------- -------------
dotDigital Group 1.28%
--------------------------- -------------
Microgen 1.13%
--------------------------- -------------
Quarto Group 1.10%
--------------------------- -------------
Allergy Therapeutics -1.08%
--------------------------- -------------
Providence Resources -1.22%
--------------------------- -------------
Genedrive -1.50%
--------------------------- -------------
Sprue Aegis -1.76%
--------------------------- -------------
Bonmarche Holdings -1.89%
--------------------------- -------------
Source: FactSet, held stocks contribution
The themes of Digitisation and Big Data powered the performance for the year. These technology shifts are driving a major structural change in the way many ordinary businesses conduct business, enabling transformational growth opportunities for those firms that enable practical use of these inventions. Accessing these themes is highly prized by investors globally, and yet investors are able to find discount opportunities at the micro end of the UK market. Big Data is the critical underpinning to top holding Taptica's stunning +141% return for the year. By analysing billions of interactions, Taptica is able to place mobile adverts to the most likely interested recipients, significantly enhancing the performance of an advertising campaign for its big-name clients. As a result it is growing extremely rapidly, and yet remains very attractively valued on traditional metrics. Microgen (+47%) has also been developing its own Big Data platform, applying this technology to the secure growth market of accountancy. D4T4 Solutions (+42%) (formerly IS Solutions) also utilises Big Data to improve website design globally.
Digitisation of laborious manual data processing tasks is the crux of Blue Prism's offering. Shares rocketed an incredible +267% as this uncompeted leader in Robotic Process Automation enjoys accelerating adoption by major firms. Artificial Intelligence allows the software robot to access IT systems as if it were a human, removing the need to invest billions to join up complex IT systems. Digitisation is also key for DotDigital as this modest Croydon-based email-marketing software firm expands beyond email and goes global. Shares rose +43%. Digitisation can also be fun. Keywords Studios, up +122%, is by far the leader in providing audio, art and other services to digital mobile and computer game makers.
The AIM segment of the UK stock market is often associated with a high exposure to the commodities sector. This has been a very challenging area until the nadir seen in February 2016 but a highly selective approach proved very rewarding for the portfolio. In January, KBC Advanced Technologies attracted not one but two suitors. This confirmed the original investment proposition that despite providing software to the beleaguered oil and gas industry, it was the focus on the refining segment which defined the company. The rival bids resulted in a 79% rise in the share price in the period and therefore a contribution to the overall portfolio of over 2%. One of the earliest purchases by the Company, the 156% uplift in value of this high conviction investment has added 4% to the Company by itself. It is also very satisfying to see the stock suffering the ignominy of being the worst contributor in last year's annual report more than redeem itself. Tanzanian gold miner Shanta Gold rose +125% and twice covered last year's negative contribution by applying an improved mining plan to boost production at very keen costs into a rising gold price. Finally Berkeley Energia exploded +102% as the market digested the implications of the firm's world class Spanish uranium discovery and rapid move to production.
As part of a diversified portfolio, not all goes to plan. Within the commodities sector Irish oil explorer Providence Resources (-26%) required recapitalisation in order to self-drill an enormous prospect in a very highly sought after oil province. Genedrive (formerly Epistem) also needed recapitalisation, although it is testament to the unique technology that the firm attracted new management talent as well as supportive shareholders. Unfortunately, this came at the cost of a -65% return for the period.
Finally the weak share price performances of Sprue Aegis and Bonmarche could easily be attributed to the consequences of the EU Referendum. However this would not reflect the full story. In Sprue Aegis's case the -61% return until the exit of the position is primarily due to the firm's very poor management of currency risk. Ironically, this designer of fire alarms exported into Europe should have been benefiting from foreign currency moves ahead of Brexit, but delivering the opposite result led to a loss in confidence in the firm. Meanwhile Bonmarche (-67%) has ample opportunity to recover under the stewardship of a new CEO. Being a clothing retailer to older women, it is the case that performance is prone to adverse weather conditions. Being the most prompt to disclose this compared to other retailers hasn't proved helpful to perception. Meanwhile, a longer than average hedged currency position has not improved perception, nor has the bankruptcy of its primary competitor BHS. Shares have been retained as this latter may prove a significant positive in time.
Portfolio Statistics
Top 10 Holdings(1)
Holdings Weight
(%)
------------------ -------
Taptica 7.6
------------------ -------
Shanta Gold 5.3
------------------ -------
Blue Prism 4.9
------------------ -------
D4t4 Solutions 3.9
------------------ -------
Keywords Studios 3.7
------------------ -------
Microgen 3.5
------------------ -------
Quarto Group 3.1
------------------ -------
Nasstar 3.1
------------------ -------
Lekoil 3.0
------------------ -------
dotDigital Group 2.8
------------------ -------
(1) : Source: River and Mercantile Asset Management LLP
Outlook
Volatility is the friend of the active investor and, as the past year has shown, not necessarily the foe of the Micro Cap section of the market. The resilience seen is in part due to the ongoing discount valuation experienced by many UK Micro Cap Companies. These low starting valuations entering into a volatile period naturally provide an element of protection for share price performance compared to stocks that enter such a period with over-inflated valuations. Meanwhile the underlying economic conditions remain relatively stable, thereby allowing individual companies to continually further their growth or recovery trajectories. As such we continue to look forward to delivering attractive long term returns into the future.
I would like to thank all of the investors who supported the founding of the River and Mercantile UK Micro Cap Investment Company and those who supported the fund raise activities during this period.
Philip Rodrigs
Portfolio Manager
19 January 2017
DIRECTORS' AND CORPORATE GOVERNANCE REPORT
The Directors present the Annual Financial Report of the Company for the year ended 30 September 2016. The results for the year are set out in these accounts.
Disclosure of Information to the Auditor
Each of the Directors who were members of the Board at the time of approving this Report confirms that:
-- to the best of his or her knowledge and belief, there is no information relevant to the preparation of their report of which the Auditor was unaware; and
-- he or she has taken all steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Auditor was aware of that information.
Directors interests
Information for each Director is shown in the Board Members section and details of Directors' remuneration and interests in shares can be found within the Directors' Remuneration Report.
Financial risk management objectives and policies
The Board is responsible for the Company's system of risk management and internal control and meets regularly in the form of Board meetings to assess the effectiveness of such controls in managing and mitigating risk.
The key financial risks that the Directors believe the Company is exposed to include credit risk, liquidity risk, market risk (including price risk and interest rate risk). Please refer to note 8 for reference to financial risk management disclosure, which explains in further detail the above risk exposures and policies and procedures in place to monitor and mitigate these risks.
The Administrator has established an internal control framework to provide reasonable but not absolute assurance on the effectiveness of the internal controls operated on behalf of its clients. The effectiveness of these controls is assessed by the Administrator's compliance and risk departments on an on-going basis and by periodic review by external parties. The administrators compliance team present an assessment of their review to the Board in line with the compliance monitoring program on a quarterly basis.
The Board has reviewed the effectiveness of the Company's system of risk management and internal control for the year ended 30 September 2016 and to the date of approval of this Annual Financial Report.
Fair, balanced and understandable
In assessing the overall fairness, balance and understandability of the Annual Financial Report the Board has performed a comprehensive review to ensure consistency and overall balance.
Borrowing limits
The Company does not have any external borrowings. The Directors may, if they feel it is in the best interests of the Company, borrow funds up to a maximum of 20% of NAV at the time of borrowing.
Greenhouse gas emissions
Please refer to "Environmental and social issues" for disclosure regarding greenhouse gas emissions.
Acquisition of own shares
To assist the Company in addressing any imbalance between the supply of and demand for Ordinary Shares and thereby assist in controlling the discount to NAV at which the Ordinary Shares may be trading, on 4 March 2016 the Company was granted general authority to purchase in the market up to 14.99% of the Ordinary Shares in issue immediately following admission. This authority expires on the date of the 2017 AGM. During the year the Company did not purchase any shares in the market.
The Directors will seek a renewal of this authority from Shareholders at the Company's AGM on 21 March 2017.
Shareholders' interests
As at 30 September 2016, the Company had been notified in accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules (which covers the acquisition and disposal of major shareholdings and voting rights), of the following Shareholders that had an interest of greater than 5% in the Company's issued stated capital.
Number of Percentage
Ordinary Shares of total voting
rights (%)
Investec Wealth & Investment
Limited 11,641,448 16.99
City of Bradford Metropolitan
District Council 6,525,000 9.52
F&C Management Limited 6,500,000 9.49
Bank of Montreal 6,500,000 9.49
River and Mercantile
Asset Management LLP 5,000,000 7.30
Derbyshire Country Council 4,000,000 5.84
Between 30 September 2016 and 19 January 2017, no additional notifications were received.
Independent Auditor
PricewaterhouseCoopers CI LLP, have indicated their willingness to continue in office as auditor and a resolution proposing their re-appointment and to authorise the Directors to determine their remuneration will be proposed at the forthcoming AGM.
Events after the Reporting Date
The Directors are not aware of any developments that might have a significant effect on the operations of the Company in subsequent financial periods not already disclosed in this report or note 16 of the attached financial statements.
Going concern
Under the AIC Code and applicable regulations, the Directors are required to satisfy themselves that it is reasonable to assume that the Company is a going concern from date of approval of the financial statements.
The Directors are satisfied that, at the time of approving the financial statements, no material uncertainties exist that may cast significant doubt concerning the Company's ability to continue for the foreseeable future. The Directors consider it appropriate to adopt the going concern basis in preparing the financial statements.
Corporate Governance Statement
a) Corporate Governance Codes
The Listing Rules and the Disclosure Guidance and Transparency Rules ("DTR") of the UK Listing Authority, require listed companies to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code ("UK Code") as issued by the Financial Reporting Council ("FRC").
The AIC Code provides specific corporate governance guidelines to investment companies.
The Board considers that reporting against the principles and recommendations of the AIC Code and by reference to the AIC Guide (which incorporates the UK Code), will enable Shareholders to make a comprehensive assessment of the Company's governance principles.
The FRC has confirmed that AIC member companies who report against the AIC Code and who follow the AIC Guide will be meeting obligations in relation to the UK Code, paragraph 9.8.6 of the Listing Rules and associated disclosure requirements of the DTR.
The Company has delegated to third parties certain administrative and other functions, thus not all of the provisions of the AIC Code are directly applicable to the Company. The Company has no employees.
Copies of the AIC Code, the AIC Guide and the UK Code can be found on the respective organisations' websites www.theaic.co.uk and www.frc.org.uk.
b) Statement of compliance
The AIC Code comprises 21 principles and the Directors believe that during the year under review they have complied with the all the recommendations of the AIC Code and the relevant provisions of the UK Code insofar as they apply to the Company's business except as set out below:
-- The role of the Chief Executive; -- Executive Directors' remuneration; and -- The need for an internal audit function.
For the reasons set out in the AIC Guide, and as explained in the UK Code, the Board considers these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, direct employees or internal operations. The Company has therefore not reported further in respect of these provisions.
The Company complies with the corporate governance statement requirements pursuant to the DTRs by virtue of the information included in the Corporate Governance section of the Annual Financial Report.
c) The Board
Directors
The Board currently consists of four non-executive directors all of whom were appointed on 2 October 2014 (date of incorporation). The Directors are:
-- Andrew Chapman (Independent non-executive Chairman) -- Ian Burns (Senior independent non-executive Director) -- Trudi Clark (Independent non-executive Director) -- Mark Hodgson (Non-executive Director)
Please refer to Board Members section for biographies of each Director which demonstrates their professional knowledge and breadth of investment, accounting, banking and professional experience.
The Board is chaired by Andrew Chapman, who is independent of the Manager and Portfolio Manager at the time of his appointment and remains so. The Chairman is responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role.
Ian Burns has been appointed as the Senior Independent Director and provides assistance to the Chairman and serves as an intermediary for the other Directors where necessary.
Directors' Duties and Responsibilities
The Directors have adopted a set of reserved powers, which establish the key purpose of the Board and detail its major duties. These duties cover the following areas of responsibility:
-- statutory obligations and public disclosure; -- approval of key investment decisions; -- strategic matters and financial reporting; -- Board composition and accountability to Shareholders;
-- risk assessment and management, including reporting, compliance, monitoring, governance and control;
-- responsible for financial statements; and -- other matters having material effects on the Company.
These reserved powers of the Board have been adopted by the Directors to demonstrate clearly the importance with which the Board takes its fiduciary responsibilities and as an ongoing means of measuring and monitoring the effectiveness of its actions.
The Board meets at least four times each year and monitors the Company's share price and NAV and regularly considers ways in which future share price and overall performance can be enhanced. The Board is responsible for the safeguarding of the assets of the Company and taking reasonable steps for the prevention and detection of fraud and other irregularities. The Portfolio Manager and Manager together with the Company Secretary also ensure that all Directors receive, in a timely manner, all relevant management, regulatory and financial information relating to the Company and its portfolio of investments. Directors unable to attend a Board meeting are provided with the Board papers and can discuss issues arising in the meeting with the Chairman or another non-executive Director.
Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties.
Board and Committees
The Board has established three committees, the Audit Committee, the Management Engagement Committee and the Remuneration and Nomination Committee. All the independent directors, namely Andrew Chapman, Ian Burns and Trudi Clark have been appointed to all Committees.
Each committee operates within clearly defined terms of reference and duties. The terms of reference for each Committee have been approved by the Board and are available in full on the Company's website.
Audit Committee
The Audit Committee membership comprises all of the Directors with the exception of Mark Hodgson. The Chairman is a member of the Committee but he does not chair it. His membership of the Audit Committee is considered appropriate given his extensive knowledge of the financial services industry.
Ian Burns is the Chairman of the Audit Committee.
The report on the role and activities of this Committee and its relationship with the external auditors is set out in the Report of the Audit Committee Report.
Management Engagement Committee
Trudi Clark is the Chair of the Management Engagement Committee. The Management Engagement Committee membership comprises all of the Directors with the exception of Mark Hodgson.
The Management Engagement Committee carries out its review of the Company's advisers through consideration of a number of objective and subjective criteria and through a review of the terms and conditions of the advisers' appointments with the aim of evaluating performance, identifying any weaknesses and ensuring value for money for the Company's Shareholders. In September 2016, the Management Engagement Committee formally reviewed the performance of the Portfolio Manager and other key service providers to the Company. During this review, no material weaknesses were identified. Overall the Management Engagement Committee confirmed its satisfaction with the services and advice received.
Remuneration and Nomination Committee
Trudi Clark is the Chair of the Remuneration and Nomination Committee.
The Remuneration and Nomination Committee undertake an evaluation of the Board on an annual basis. The performance of each Director is considered as part of a formal review by the Remuneration and Nomination Committee.
The performance of the Board, its Committees and the Directors was reviewed by the Remuneration and Nomination Committee in September 2016. It was concluded that all Directors were independent of the Portfolio Manager, and that Andrew Chapman, Ian Burns and Trudi Clark were independent of the Manager. Mark Hodgson is not regarded as independent.
The Chair of the Committee reviewed and discussed various areas, including investment matters, strategy, Shareholder value, governance, and the process and style of meetings. In addition, the Board reviewed the performance of the Chairman in his role and evaluated all their personal contributions. It was concluded that all Directors had a good understanding of the investments and markets and felt well prepared and able to participate fully at Board meetings. It was agreed that Board meetings were effective and all relevant topics were fully discussed, with the Board having a good range of skills and competency. The Directors confirm that they have devoted sufficient time, as considered necessary, to the matters of the Company.
Attendance at scheduled meetings of the Board and its committees
Board Audit Management Remuneration
Committee Engagement and Nomination
Committee Committee
--------------------- ------ ----------- ------------ ----------------
Number of meetings
during the year
ended 30 September
2016 4 3 1 1
--------------------- ------ ----------- ------------ ----------------
Andrew Chapman 4 3 1 1
--------------------- ------ ----------- ------------ ----------------
Ian Burns 4 3 1 1
--------------------- ------ ----------- ------------ ----------------
Trudi Clark 4 3 1 1
--------------------- ------ ----------- ------------ ----------------
Mark Hodgson 4 3(1) 1(1) 1
--------------------- ------ ----------- ------------ ----------------
(1) - attended with invitation from the Audit Committee and Management Engagement Committee, however did not actively participate in the meeting.
Meetings of the Committees generally take place prior to a Board meeting. The Committee reports to the Board as part of a separate agenda item, on the activity of the Committee and matters of particular relevance to the Board in the conduct of their work.
Directors retirement and rotation
The AIC Guide states that all non-executive Directors should be submitted for re-election by Shareholders at the first AGM after their appointment and to re-election thereafter at intervals no more than three years. Non-executive directors serving more than nine years should be subject to annual re-election. Nomination for re-election should not be assumed but be based on disclosed procedures and continued satisfactory performance. The Articles of Association state that at each AGM of the Company, any Director who has been appointed by the Board since the last AGM shall retire from office and may offer himself for election or re-election by the members.
In accordance with best practice under the AIC Code, all Directors will stand for reappointment at the forthcoming AGM to be held on 21 March 2017.
The Board considers that there is a balance of skills and experience within the Board and each of the Directors contributes effectively.
Board Independence, Composition and Tenure
The Chairman and all Directors, with the exception of Mark Hodgson, are considered independent of the Manager and the Portfolio Manager. Mark Hodgson is the Managing Director of the Manager and is therefore not regarded as independent.
The Directors consider that there are no factors, as set out in principle 1 or 2 of the AIC Code, which compromise the Chairman's or other Directors' independence, other than stated above, and that they all contribute to the affairs of the Company in an adequate manner. The Board reviews the independence of all Directors annually. The Company Secretary, BNP Paribas Securities Services S.C.A., Guernsey Branch through its representative acts as Secretary to the Board and Committees and in doing so it: assists the Chairman in ensuring that all Directors have full and timely access to all relevant documentation; organises induction of new Directors; and is responsible for ensuring that the correct Board procedures are followed and advises the Board on corporate governance matters.
The Board is made up of three male Directors and one female Director. The Board supports the recommendations of the Davies Report (available at www.gov.uk) and believes in and values the importance of diversity, including gender, to the effective functioning of the Board. The Board, however, does not consider it appropriate or in the interest of the Company and its Shareholders to set prescriptive targets for gender or other diversity on the Board.
The Board has adopted a policy on tenure that is considered appropriate for an investment company. The Board does not believe that length of service, by itself, leads to a closer relationship with the Manager and the Portfolio Manager or necessarily affects a Director's independence and effectiveness.
The Board considers that boards of investment companies are more likely to benefit from a long association with a company in that they will experience a number of investment cycles.
The Board's tenure and succession policy seeks to ensure that the Board is well balanced and will be refreshed from time to time by the appointment of new Directors with the skills and experience necessary to replace those lost by Directors' retirements and meet future requirements. The Remuneration and Nomination Committee is committed to ensuring that any vacancies arising are filled by the most qualified candidates who have complementary skills or who possess the skills and experience which fill any gaps in the Board's knowledge or experience. Directors must be able to demonstrate their commitment and fiduciary responsibility to the Company. The Board seeks to encompass relevant past and current experience of various areas relevant to the Company's business.
Directors' remuneration and annual evaluation of the Board and that of its Audit Committee, Management Engagement Committee and Remuneration and Nomination Committee and individual Directors
The Remuneration and Nomination Committee periodically reviews the fees paid to the Directors and compares these with the fees paid by listed companies generally.
The Board shall, at least once every three years, engage a third party to perform an external review of the Board's performance, consultation and terms of reference to ensure that it is operating effectively and to recommend any changes it considers necessary.
An annual evaluation of the Chairman and each individual Director, Audit Committee, Management Engagement Committee and Remuneration and Nomination Committee and Directors is undertaken considering the balance of skills, experience, independence and knowledge, its diversity, including gender, how the Board works together as a unit, and other factors relevant to its effectiveness. This was conducted by the Chairman having a private discussion with each Director. The Directors also met without the Chairman present in order to review the Chairman's performance. It was concluded that each were satisfactory and the Board and Committees had a good balance of skills and experience with each Director making significant contributions in their roles and the Chairman continuing to display effective leadership.
Details of the remuneration arrangements for the Board and Audit Committee can be found in the Directors' Remuneration Report and in note 5 of the financial statements.
Directors' professional development
The Board believes that keeping up-to-date with key investment industry developments is essential for the Directors to maintain and enhance their effectiveness.
Current Directors and newly appointed Directors, if applicable, are given the opportunity to discuss training and development needs and are expected to take responsibility for identifying their training needs and to take steps to ensure that they are adequately informed about the Company and their responsibilities as a Director. The Chairman of the Remuneration and Nomination Committee is responsible for agreeing and reviewing with each Director their training and development needs.
When a new Director is appointed to the Board, they will be provided with all relevant information regarding the Company and their duties and responsibilities as a Director. In addition, a new Director will also spend time with representatives of the Manager and the Portfolio Manager in order to learn more about their processes and procedures. No Directors (other than those appointed at inception) were appointed during the year.
The Board is confident that all its members have the knowledge, ability and experience to perform the functions required of a director of the Company.
d) Board meetings and relationship with the Manager and Portfolio Manager
Relationship with the Manager and Portfolio Manager
The Board has delegated various duties to external parties including the management of the investment portfolio, the custodial services (including the safeguarding of assets), the registration services and the day-to-day company secretarial, administration and accounting services. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered, including the control systems in operation in so far as they relate to the affairs of the Company.
The Board receives and considers reports regularly from both the Portfolio Manager and the Manager, with ad hoc reports and information supplied to the Board as required. The Portfolio Manager complies with the Company investment limits and risk diversification policies and has systems in place to monitor cash flow and the liquidity risk of the Company. The Manager, Portfolio Manager and the Administrator also ensure that all Directors receive, in a timely manner, all relevant management, regulatory and financial information. Representatives of the Manager, Portfolio Manager and Administrator attend each Board meeting as required, enabling the Directors to probe further on matters of concern.
The Directors have access to the advice and service of the corporate Company Secretary through its appointed representative who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Board, the Manager, Portfolio Manager and the Administrator operate in a supportive, co-operative and open environment and the Board will actively and continuously supervise both the Manager, Portfolio Manager and Administrator in the performance of their respective functions.
Primary focus
The Board meets regularly throughout the year and a representative of the Manager and the Portfolio Manager is in attendance at all times when the Board meets to review the performance of the Company's investments.
The Chairman with assistance from the Manager and the Portfolio Manager is responsible for ensuring that relevant financial information, including investment portfolio analysis and financial plans, including budgets and forecasts, are available to the Board and discussed at Board meetings. The Chairman encourages open debate to foster a supportive and co-operative approach for all participants.
The Board applies its primary focus on the following:
- investment performance, ensuring that investment objectives and strategy of the Company are met;
- ensuring investment holdings are in line with the Company's investment restrictions;
- review and monitoring financial risk management and operating cash flows, including cash flow forecasts and budgets of the Company; and
- review and monitoring of the key risks to which the Company is exposed as set out in the Strategic Report.
At each relevant meeting the Board undertakes reviews of key investment and financial data, transactions and performance comparisons, share price and NAV performance, marketing and Shareholder communication strategies, peer group information and industry issues.
Overall strategy
The Board meets regularly to discuss the investment objective, policy and approach of the Company to ensure sufficient attention is given to overall strategy of the Company.
The Board considers the Company's investment objectives, their continuing relevance and whether the investment policy continues to meet those Company's investment objectives.
The Board believes that the overall strategy of the Company remains appropriate.
Monitoring and evaluation of performance of and contractual arrangements with service providers
The Management Engagement Committee is responsible for reviewing on a regular basis the performance of the Manager, Portfolio Manager and the Company's other third party service providers together with their anti-bribery and corruption policies to ensure that they comply with the Bribery Act 2010 and the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003 and ensure their continued competitiveness and effectiveness and ensure that performance is satisfactory and in accordance with the terms and conditions of the respective appointments.
As part of the Committees' evaluation it will also review on an annual basis the contractual arrangements with the Manager, Portfolio Manager and major service suppliers.
Please refer to the Corporate Governance Statement for findings of review performed in September 2016. During this review, no material weaknesses were identified and overall the Management Engagement Committee confirmed its satisfaction with the services and advice received.
The Directors have adopted a procedure whereby they are required to report any potential acts of bribery and corruption in respect of the Company to BNP Paribas Securities Services S.C.A., Guernsey Branch as the designated manager for Guernsey Financial Services Commission purposes.
Review of NAV and share price of Ordinary Share class
The Directors review the trading price of the Company's Ordinary Shares and compare them against the NAV of the Company's shares to assess volatility in the discount or premium to the share prices during the year.
e) Shareholder communications
Shareholder profile and communication
The Board views Shareholder relations and communications as high priority which ensures that the Directors have an understanding of the views of Shareholders about the Company.
The Board believes that the maintenance of good relations with Shareholders is important for the long-term prospects of the Company. It has, since admission, sought engagement with investors. Where appropriate the Chairman or Senior Independent Director, and other Directors are available for discussion about governance and strategy with major Shareholders and the Chairman ensures communication of Shareholders' views to the Board. The Board receives feedback on the views of Shareholders from its Corporate Broker and the Portfolio Manager, and Shareholders are welcome to contact the Directors. Shareholders wishing to communicate with the Chairman, or any Director, may do so by writing to the Company, for the attention of the Company Secretary, at the Registered Office.
The main method of communication with Shareholders is through the Half-Year and Annual Financial Report which aims to give Shareholders a clear and transparent understanding of the Company's objectives, strategy and results. This information is supplemented by the publication of the daily NAVs of the Company's Ordinary Shares on the London Stock Exchange Regulatory Information Service.
The Company's website - microcap.riverandmercantile.com, is regularly updated with quarterly factsheets and provides further information about the Company, including the Company's Financial Reports and announcements. The maintenance and integrity of the Company website is the responsibility of the Directors. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Uncertainty regarding legal requirements is compounded as information published on the internet is accessible in many countries with different legal requirements relating to the preparation and dissemination of financial statements.
The Board believes that the AGM provides an appropriate forum for investors to communicate with the Board, and encourages participation. The AGM will be attended by at least the Chairman of the Audit Committee. There is an opportunity for individual Shareholders to question the Directors at the AGM. It is the intention of the Board that the Notice of the AGM and related papers will be sent to Shareholders at least 20 working days before that meeting.
The Directors welcome the views of all Shareholders and place considerable importance upon them.
Other communications
All substantive communications regarding any major corporate issues are discussed by the Board taking into account representations from the Manager, Portfolio Manager, the Auditor, legal advisers, Corporate Brokers and the Company Secretary.
Alternative Investment Fund Manager Directive ("AIFMD")
The Company (which is a non-EU AIF for the purposes of the AIFMD and related regimes in EEA member states) has appointed the Manager to act as its Alternative Investment Fund Manager ("AIFM"). The Manager is authorised by the Jersey Financial Services Commission to act as an AIFM on behalf of alternative investment funds ("AIFs") in accordance with the Financial Services (Jersey) Law 1998.
During 2014, the Company registered with the Guernsey Financial Services Commission, being the Company's competent regulatory authority, as a non-EU Alternative Investment Fund ("AIF"), and the AIFM has registered with the UK Financial Conduct Authority, under their relevant national private placement regime ("NPPRs").
The Manager has delegated portfolio management to the Portfolio Manager and the Board actively and continuously supervises both the Manager and the Portfolio Manager in the performance of their respective functions.
As the Company and the AIFM are Non-EU domiciled, no depositary has been appointed in line with the AIFM Directive, however BNP Paribas Securities Services S.C.A., Guernsey Branch has been appointed to act as custodian.
Information relating to the current risk profile of the Company and the risk management systems employed by the Manager and Portfolio Manager to manage those risks, as required under paragraph 4(c) of Article 23 of the AIFMD, is set out in note 8 - Financial Risk Management. Please refer to the Executive Summary report for the Board's assessment of the principal risks and uncertainties facing the Company.
AIFM Remuneration
The total fee paid to the AIFM by the Company for the year ended 30 September 2016 is disclosed in note 4.
The AIFM is not subject to the provisions of Article 13 of the AIFM Directive, which require the AIFM to adopt remuneration policies and practices in line with the principles detailed in Annex II of the Directive. However, in accordance with Article 22 of the AIFM Directive and Article 107 of the AIFM Regulations, the AIFM must make certain disclosures in respect of the remuneration paid to its staff.
The AIFM has identified 8 staff as falling within the scope of the disclosure requirements (the "Identified Staff"). These Identified Staff are senior management, named as Designated Persons of the AIFM's managerial functions, members of the Board of Directors, and a risk officer as control function. With the exception of 2 individuals, one acting as a non-executive Director and the other as compliance officer, both of whom are external to the Carne group of companies, all Identified Staff of the AIFM are part of the Carne Group and as such receive no separate remuneration for their role within the AIFM. Instead they are remunerated as employees of other Carne group companies with a combination of fixed and variable discretionary remuneration where the latter is assessed on the basis of their overall individual contribution to the group with reference to both financial and non-financial criteria and not directly linked to the performance of the staff of specific business units or targets reached. The annualised remuneration amount paid to all of the Identified Staff of the AIFM in respect of their work with the AIFM for the 12 month period to 31 March 2016 was GBP108,280. There was no variable component to this remuneration and none of the AIFM's Identified Staff are in a position to materially impact the risk profile of the Company. The AIFM manages other AIFs. The AIFM has no staff other than the Identified Staff.
This Directors' and Corporate Governance Report was approved by the Board of Directors on 19 January 2017 and signed on its behalf by:
Andrew Chapman Ian Burns
Chairman Audit Committee Chairman
REPORT OF THE AUDIT COMMITTEE
Report of the Audit Committee
The Board has appointed an Audit Committee which operates within clearly defined Terms of Reference.
The Audit Committee includes all of the Directors with the exception of Mark Hodgson. Ian Burns is the Chairman of the Audit Committee and is independent as are all the other Directors that comprise the committee. All of the Audit Committee's members have recent and relevant financial experience. Biographical information pertaining to the members of the Audit Committee can be found in the section of this Annual Financial Report entitled, "Board Members".
Role of the Committee
The Audit Committee assists the Board in carrying out its responsibilities in relation to financial reporting requirements, risk management and the assessment of internal financial and operating controls. It also manages the Company's relationship with the external Auditor.
The Audit Committee's main functions are:
- to consider and make recommendations to the Board, to be put to Shareholders for approval at the AGM, in relation to the appointment, re-appointment and removal and the provisions of non-audit services of the external Auditors and to negotiate their remuneration and terms of engagement on audit and non-audit work;
- to meet regularly with the external Auditor in order to review their proposed audit programme and remit of work and the subsequent Audit Report and to assess the effectiveness of the audit process; any issues arising from the audit with respect to accounting or internal controls systems and the level of fees paid in respect of audit and non-audit work;
- to annually assess the external Auditor's independence, objectivity, effectiveness, resources and expertise;
- to review and monitor the integrity, fairness and balance of the financial statements of the Company including its Half-Yearly Report and Annual Financial Report to Shareholders;
- advising the Board on whether the Committee believes the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, position, business model and strategy; and
- to review the adequacy and effectiveness of the Company's financial reporting and internal control policies and procedures with respect to the Company's record keeping, asset management and operations for the identification, assessment and reporting of risks.
The Audit Committee's Terms of Reference are published on the Company's website.
Internal controls
The Board is responsible for ensuring that suitable systems of risk management and internal control are implemented by the third-party service providers to the Company. The Directors have reviewed the BNP Paribas Securities Services ISAE 3402 report (on the description of controls placed in operation, their design and operating effectiveness for the period from 1 October 2015 to 30 September 2016) on Fund Administration and Middle Office Outsourcing dated 16 December 2016, and are pleased to note that no significant issues were identified.
In accordance with the FRC's Internal Control: Guidance to Directors, and the FRC's Guidance on Audit Committees, the Board confirms that there is an on-going process for identifying, evaluating and managing the significant internal control risks faced by the Company.
As the Company does not have any employees it does not have a "whistle blowing" policy in place, however the Audit Committee has reviewed the whistleblowing procedures of the Administrator and Portfolio Manager with no issues noted. The Company delegates its main administrative functions to third-party providers who report on their policies and procedures to the Board.
The Board believes that as the Company delegates its day-to-day administrative operations to third-parties (which are monitored by the Board), it does not require an internal audit function.
The Audit Committee met on three occasions and the members' attendance record can be found in the Corporate Governance Statement of this Annual Report.
Significant risks in relation to the financial statements
The Audit Committee views the valuation of the Company investments as significant risks.
There is a risk that the AIM listed investments are not valued appropriately in accordance with the requirements set out in IFRS 13 due to the nature of the AIM market and the listed stocks not being highly liquid, or heavily traded.
The Committee reviews the regular reports from the Portfolio Manager and Administrator regarding the valuation of the investments and the Board reviews the NAV of the Company, together with the value and trading volumes of investments on a regular basis.
In addition to the above, Mark Hodgson chairs monthly AIFM Risk Committee meetings where the Company risk measurement framework is discussed, including market risk, credit risk, counterparty risk, operational risk and liquidity risk, in reference to the investment portfolio and the Company performance therefore. On a monthly basis, Mark Hodgson will report findings to the Board and is also asked to attend Audit Committee meetings by the Audit Committee Chairman to assist the Committee to gain assurance as to the appropriateness and robustness of the valuation methodology applied to the investment portfolio.
External audit process
The Company's external auditor is PricewaterhouseCoopers CI LLP (the "Auditor") who were reappointed on the 4 March 2016.
The Audit Committee met with the Auditor prior to the commencement of the audit and agreed an audit plan that would adopt a risk based approach. The Audit Committee and the Auditor agreed that a portion of the audit effort would include an examination of the title to and the existence of the Company investments and an examination of the procedures in place at the Administrator and the Portfolio Manager in respect of the valuation of the Company investments portfolio.
Upon completion of the audit, the Audit Committee discussed with the Auditor the effectiveness of the audit and considered the Auditor's independence from the Company since their appointment and throughout the audit process.
The significant risks regarding both fraud risk - management override of controls and valuation of investment portfolio was tracked through the period and the Audit Committee challenged the work performed by the Auditor to test management override of controls and in addition the audit work undertaken in respect of valuations of investments held.
For the year ended 30 September 2016, the Audit Committee was satisfied that there had been appropriate focus and challenge on the significant and other key areas of audit risk and assessed the quality of the audit process to be good.
During the year ended 30 September 2016, in addition to the audit services in respect to the audit of the Company's Annual Financial Report, the Auditor provided non-audit services in respect of the review of the Company's Half-Yearly Report for the period ended 31 March 2016. No other non-audit services were provided during the year ended 30 September 2016.
To safeguard the objectivity and independence of the external Auditor from becoming compromised, the Committee has a formal policy governing the engagement of the external Auditor to provide non-audit services. The external Auditor and the Directors have agreed that all non-audit services require the pre-approval of the Audit Committee prior to commencing any work. Fees for non-audit services will be tabled annually so that the Audit Committee can consider the impact on the Auditor's objectivity.
The fees for the audit services were: GBP35,300 (year-end audit) and the fees for non-audit services were GBP17,000 for review of the Company's Half-Yearly Report for the period ended 31 March 2016.
The Audit Committee has discussed the report provided by the Auditor and the Audit Committee is satisfied as to the independence of the Auditor.
The Committee has reviewed the Auditor's independence policies and procedures and considers that they are fit for purpose.
Appointment and independence
The Audit Committee considers the reappointment of the external Auditor, including the rotation of the audit engagement leader, and assesses their independence on an annual basis. The external Auditor is required to rotate the engagement leader responsible for the Company's audit every five years. The current engagement leader has been in place since inception (two years).
The Committee reviews the objectivity and effectiveness of the audit process on an annual basis and considers whether the Company should put the audit engagement out to tender. Having considered the need to tender the position for the current year, the Committee has provided the Board with its recommendation to the Shareholders on the reappointment PricewaterhouseCoopers CI LLP as external auditor for the year ending 30 September 2017.
Accordingly, a resolution proposing the reappointment of PricewaterhouseCoopers CI LLP as our auditor will be put to the Shareholders at the AGM. There are no contractual obligations restricting the Committee's choice of external auditor and we do not indemnify our external auditor.
The Committee continues to consider the audit tendering provisions outlined in the revised UK Code.
This Report of the Audit Committee was approved by the Board of Directors on 19 January 2017 and signed on its behalf by:
For and on behalf of the Audit Committee
Ian Burns
Audit Committee Chairman
DIRECTORS' STATEMENT OF RESPONSIBILITIES
The Directors are responsible for preparing Annual Financial Report and Financial Statements in accordance with applicable Guernsey law and International Financial Reporting Standards ("IFRS's").
Guernsey law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss for the year.
In preparing those financial statements, the Directors are required to:
-- select suitable accounting policies and apply them consistently; -- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008, as amended ("Companies Law"). The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm to the best of their knowledge that:
-- the financial statements, which have been prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit of the Company;
-- the Strategic Report and the Portfolio Manager's Report include a fair review of the information required by DTR 4.1.8 (indication of important events up to 30 September 2016 and a description of principal risks and uncertainties);
-- the Strategic Report and the Portfolio Manager's Report include a fair review of the information required by DTR 4.1.9 and 4.1.10 (analysis of the development and performance of the Company and position at year end aided by the use of key performance indicators; and where appropriate information relating to environmental factors);
-- the Strategic Report, the Portfolio Manager's Report and the notes to the financial statements include a fair review of the information required by DTR 4.1.11 (disclosure of important events that have occurred post year end; future developments; financial risk management objectives and policies and the Company's exposure to price, credit, liquidly and cash flow risk); and
-- the Annual Financial 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 performance, position, business model and strategy.
Andrew Chapman Ian Burns
Chairman Audit Committee Chairman
DIRECTORS' REMUNERATION REPORT
Annual Remuneration Statement
Dear Shareholders
This report meets the relevant rules of the Listing Rules of the Financial Conduct Authority and the AIC Code and describes how the Board has applied the principles relating to Directors' remuneration.
An ordinary resolution to ratify this report will be proposed at the AGM on 21 March 2017.
Changes to the Board
There were no changes to the Board during the year. In accordance with best practice under the AIC Code, all Directors will stand for reappointment at the forthcoming AGM to be held on 21 March 2017.
Table of Directors Remuneration
Component Director Annual Purpose of reward
Rate(1)
(GBP)
----------- ------------------------- ------------ ---------------------
Annual All Directors For commitments
fee Andrew Chapman GBP20,000 as non-executive
(Chairman) GBP20,000 Directors
Ian Burns GBP20,000
Trudi Clark GBP20,000
Mark Hodgson
----------- ------------------------- ------------ ---------------------
Additional Andrew Chapman GBP10,000 For additional
fee (Chairman of the responsibilities
Board) GBP5,000 and time commitment
Ian Burns (Chairman
of the Audit Committee)
----------- ------------------------- ------------ ---------------------
Expenses Ad hoc Reimbursement of
expenses paid
----------- ------------------------- ------------ ---------------------
(1) - With effect from 1 October 2016 the Board resolved to increase the fee payable to non-executive Directors from GBP20,000 to GBP25,000 per annum. It further resolved to increase the Chairman's increment from GBP10,000 to GBP15,000 per annum. The increment for the Chairman of the Audit Committee remains at GBP5,000.
No other remuneration or compensation was paid or is payable by the Company during the year to any of the Directors. There has been no change to the Company's remuneration policy as detailed below.
The Company has no employees. Accordingly, there are no differences in policy on the remuneration of Directors and the remuneration of employees.
No Director is entitled to receive any remuneration which is performance-related.
Remuneration policy
The determination of the Directors' fees is a matter for the Remuneration and Nomination Committee. The Remuneration and Nomination Committee considers the remuneration policy annually to ensure that it remains appropriately positioned. Members of the Committee will review the fees paid to the boards of directors of similar companies. No Director is to be involved in decisions relating to his or her own remuneration.
The Company's policy is for the Directors to be remunerated in the form of fees, payable quarterly in arrears. No Director has any entitlement to a pension, and the Company has not awarded any share options or long-term performance incentives to any of the Directors.
Directors are authorised to claim reasonable expenses from the Company in relation to the performance of their duties.
The Company's policy is that the fees payable to the Directors should reflect the time spent by the Board on the Company's affairs and the responsibilities borne by the Directors and should be sufficient to enable high calibre candidates to be recruited. The policy is for the Chairman of the Board and Chairman of the Audit Committee to be paid a higher fee than the other Directors in recognition of their more onerous roles and more time spent. The Board may amend the level of remuneration paid within the limits of the Company's Articles of Association.
The Company's Articles of Incorporation limits the aggregate fees payable to the Board of Directors to a total of GBP150,000 per annum.
Service Contracts and Policy on Payment of Loss of Office
Directors are appointed with the expectation that they are initially appointed until the following AGM when it is required that they be re-elected by Shareholders. All Directors have served since incorporation of the Company.
Directors have agreed letters of appointment with the Company. No Director has a service contract with the Company and Directors' appointments may be terminated at any time by one month's written notice with no compensation payable at termination upon leaving office for whatever reason. Directors' appointments are reviewed during the annual board evaluation, which took place in September 2016.
In accordance with best practice and the AIC Code, all Directors will stand for reappointment at the forthcoming AGM to be held on 21 March 2017. The names and biographies of the Directors holding office at the date of this report are listed on 10 and 11.
Copies of the Directors' letters of appointment are available for inspection by Shareholders at the Company's Registered Office, and will be available at the AGM. The dates of their letters of appointments are shown below.
Dates of letters of appointment
Director Date of letter Date of reappointment
of appointment
------------- ---------------- ----------------------
Andrew 21 October 2014 4 March 2016
Chapman
------------- ---------------- ----------------------
Ian Burns 21 October 2014 4 March 2016
------------- ---------------- ----------------------
Trudi Clark 21 October 2014 4 March 2016
------------- ---------------- ----------------------
Mark Hodgson 21 October 2014 4 March 2016
------------- ---------------- ----------------------
Director Interests
As at the date of approval of the financial statements, Directors held the following number of Ordinary Shares in the Company:
Director Ordinary Shares
held
-------------- ----------------
Andrew
Chapman 20,000
-------------- ----------------
Ian Burns Nil
-------------- ----------------
Trudi Clark 16,885
-------------- ----------------
Mark Hodgson Nil
-------------- ----------------
No Director has any other interest in any contract to which the Company is a party with the exception of Mark Hodgson who acts as the Managing Director of the Manager.
Advisers to the Remuneration and Nomination Committee
The Board has not sought the advice or services by any outside person, at this time, in respect of its consideration of the Directors' remuneration.
Statement of consideration of Shareholder views
An ordinary resolution to ratify the Directors' remuneration report will be proposed at the AGM on 21 March 2017.
Trudi Clark
Remuneration and Nomination Committee Chair
19 January 2017
independent auditors' report to THE MEMBERS OF RIVER AND MERCANTILE UK MICRO CAP INVESTMENT COMPANY LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of River and Mercantile UK Micro Cap Investment Company Limited ("the Company") which comprise the Statement of Financial Position as of 30 September 2016 and the Statement of Comprehensive Income, the Statement of Changes in Shareholders' Equity and the Statement of Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information.
Directors' Responsibility for the Financial Statements
The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and with the requirements of Guernsey law. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 30 September 2016, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.
Report on other Legal and Regulatory Requirements
We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises only the Strategic Report, Board Members, Portfolio Manager's Report, Directors' and Corporate Governance Report, Report of the Audit Committee, Directors' Statement of Responsibilities, Directors' Remuneration Report and Company Information.
In our opinion the information given in the Directors' and Corporate Governance Report is consistent with the financial statements.
This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters which we are required to review under the Listing Rules:
-- the directors' statement set out in the Directors' and Corporate Governance Report in relation to going concern. As noted in the directors' statement, the directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the Company has adequate resources to remain in operation, and that the directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the directors' use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Company's ability to continue as a going concern;
-- the directors' statement that they have carried out a robust assessment of the principal risks facing the Company and the directors' statement in relation to the longer-term viability of the Company. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit;
-- the part of the Corporate Governance Statement relating to the Company's compliance with the ten further provisions of the UK Corporate Governance Code specified for our review; and
-- certain elements of the report to shareholders by the Board on directors' remuneration.
John Luff
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
19 January 2017
STATEMENT OF COMPREHENSIVE INCOME
For the year from 1 October 2015 to 30 September 2016
For the
Year ended period
30 September from 2
2016 October
2014 to
30 September
2015
Notes GBP GBP
------------------------------ ------ --------------- --------------
Income
Investment income 3 1,428,098 489,040
Net gain on financial assets
designated at fair value
through profit or loss 7 10,401,026 6,983,977
-------------------------------- ------ --------------- --------------
11,829,124 7,473,017
------------------------------ ------ --------------- --------------
Expenses
Operating expenses 4 (1,948,405) (1,212,365)
-------------------------------- ------ --------------- --------------
Profit before taxation 9,880,719 6,260,652
-------------------------------- ------ --------------- --------------
Taxation - -
------------------------------ ------ --------------- --------------
Profit after taxation and
total comprehensive income 9,880,719 6,260,652
Basic and diluted earnings
per Ordinary Share 13 0.1473 0.1461
The Company has no items of other comprehensive income, and therefore the profit for the year is also the total comprehensive income.
All items in the above statement are derived from continuing operations. No operations were acquired or discontinued during the year.
The notes form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 30 September 2016
30 September 30 September
2016 2015
Notes GBP GBP
-------------------------------- ------ ------------- -------------
Non-current assets
Financial assets designated
at fair value through profit
or loss 7 85,978,933 54,053,643
Current assets
Cash and cash equivalents 9 1,635,861 1,268,358
Trade receivables - securities
sold awaiting settlement 11,533 1,138,260
Other receivables 6 248,385 28,497
Total current assets 1,895,779 2,435,115
-------------------------------- ------ ------------- -------------
Total assets 87,874,712 56,488,758
-------------------------------- ------ ------------- -------------
Current liabilities
Other payables 10 (1,390,860) (597,805)
-------------------------------- ------ ------------- -------------
Total current liabilities (1,390,860) (597,805)
-------------------------------- ------ ------------- -------------
Total liabilities (1,390,860) (597,805)
-------------------------------- ------ ------------- -------------
Net assets 86,483,852 55,890,953
-------------------------------- ------ ------------- -------------
Capital and reserves
Stated capital 12 - -
Share premium 12 70,342,481 49,630,301
Retained earnings 16,141,371 6,260,652
-------------------------------- ------ ------------- -------------
Equity Shareholders' funds 86,483,852 55,890,953
-------------------------------- ------ ------------- -------------
The financial statements were approved and authorised for issue by the Board of Directors on 19 January 2017 and signed on its behalf by:
Andrew Chapman Ian Burns
Chairman Audit Committee Chairman
The notes form an integral part of these financial statements.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 30 September 2016
Stated Share Retained
capital Premium earnings Total
Note GBP GBP GBP GBP
------------------------------ ----- ---------- ----------- ----------- -----------
Opening equity Shareholders'
funds at 1 October
2015 - 49,630,301 6,260,652 55,890,953
------------------------------ ----- ---------- ----------- ----------- -----------
Total comprehensive
income for the year - - 9,880,719 9,880,719
Transactions with
owners, recorded
directly to equity
Proceeds from issuance
of Ordinary Shares 12 - 20,946,190 - 20,946,190
Share issue costs 12 - (234,010) - (234,010)
------------------------------ ----- ---------- ----------- ----------- -----------
Closing equity Shareholders'
funds at 30 September
2016 - 70,342,481 16,141,371 86,483,852
------------------------------ ----- ---------- ----------- ----------- -----------
For the period from 2 October 2014 (incorporation) to 30 September 2015
Stated Share Retained
capital premium earnings Total
Note GBP GBP GBP GBP
------------------------------ ----- --------- ------------ ---------- ------------
Opening equity Shareholders' - - - -
funds at 2 October
2014
------------------------------ ----- --------- ------------ ---------- ------------
Total comprehensive
income for the period - - 6,260,652 6,260,652
Transactions with
owners, recorded
directly to equity
Proceeds from issuance
of Ordinary Shares 12 - 50,643,164 - 50,643,164
Share issue costs 12 - (1,012,863) - (1,012,863)
------------------------------ ----- --------- ------------ ---------- ------------
Closing equity Shareholders'
funds at 30 September
2015 - 49,630,301 6,260,652 55,890,953
------------------------------ ----- --------- ------------ ---------- ------------
The notes form an integral part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 30 September 2016
For the
period
from 2
October
2014 to
Year ended 30
30 September September
2016 2015
Notes GBP
------------------------------------------------------------- ------ -------------- -------------
Cash inflow from operating
activities
Profit after taxation and
total comprehensive income
for the year / period 9,880,719 6,260,652
Adjustments to reconcile
profit after tax to net cash
flows:
* Realised gain on financial assets designated at fair
value through profit or loss 7 (4,545,264) (2,835,275)
* Unrealised gain on financial assets designated at
fair value through profit or loss 7 (5,855,762) (4,148,702)
Purchase of financial assets
designated at fair value
through profit or loss 7 (43,497,573) (58,630,422)
Proceeds from sale of financial
assets designated at fair
value through profit or loss 7 21,973,309 11,560,756
Changes in working capital
Decrease / (increase) in
trade receivables 1,126,727 (1,138,260)
Increase in other receivables 6 (219,888) (28,497)
Increase in other payables 10 793,055 597,805
Net cash used in operating
activities (20,344,677) (48,361,943)
------------------------------------------------------------- ------ -------------- -------------
Cash inflow from financing
activities
Proceeds from issuance of
Ordinary Shares 12 20,946,190 50,643,164
Ordinary Share issue costs
paid 12 (234,010) (1,012,863)
Net cash from financing activities 20,712,180 49,630,301
------------------------------------------------------------- ------ -------------- -------------
Net increase in cash and
cash equivalents in the year
/ period 367,503 1,268,358
------------------------------------------------------------- ------ -------------- -------------
Cash and cash equivalents
at the beginning of the year
/ period 9 1,268,358 -
Cash and cash equivalents
at the end of the year /
period 9 1,635,861 1,268,358
------------------------------------------------------------- ------ -------------- -------------
The notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The Company was incorporated as a non-cellular company with liability limited by shares in Guernsey under The Companies (Guernsey) Law 2008 on 2 October 2014. It listed its Ordinary Shares on the Premium Segment of the Official List of the UK Listing Authority and was admitted to trading on the Main Market of the London Stock Exchange on 2 December 2014.
The Company has been registered by the GFSC as a registered closed-ended collective investment scheme pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and the RCIS Rules 2008. The Company registered number is 59106.
The Company's registered address is BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA.
2. Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied throughout the year presented.
2.1 Basis of preparation
(a) Statement of Compliance
The financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the FCA and with International Financial Reporting Standards ("IFRS") which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and interpretations issued by the International Financial Reporting Standards Interpretations Committee ("IFRIC") as approved by the International Accounting Standards Committee ("IASC") which remain in effect. The financial statements give a true and fair view of the Company's affairs and comply with the requirements of The Company (Guernsey) Law 2008, as amended.
The financial statements have been prepared under a going concern basis. The Directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.
(b) Basis of measurement
These financial statements have been prepared on a historical cost basis adjusted to take account of the revaluation of financial assets designated at fair value through profit or loss.
(c) Functional and presentation currency
The Company's functional currency is Pounds Sterling, which is the currency of the primary economic environment in which it operates. The Company's performance is evaluated and its liquidity is managed in Pounds Sterling. Pounds Sterling is therefore considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in Pounds Sterling.
(d) Critical accounting assumptions, estimates and judgments
The preparation of the financial statements in conformity with IFRS, requires the Company to make judgements, estimates and assumptions that affect items reported in the Statement of Financial Position and Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial statements. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
As outlined in above in Note 2.1(c) the Directors have used their judgement to determine that the Company's presentational and functional currency is Pounds Sterling.
(e) New standards, amendments and interpretations
New standards, amendments and interpretations to existing standards that become effective in future accounting periods and have not been adopted by the Company;
Effective
for annual
International Financial Reporting Standards periods beginning
(IFRS) on or after
------------------------------------------------------------- -------------------
1 January
* IFRS 9 - Financial Instruments: Classification and 2018
Measurement
1 January
* IFRS 15 - Revenue from Contracts with Customers 2018
1 January
* Amendment to IAS 7 - Statement of Cash Flows - 2017
amendments as a result of the Disclosure initiative
1 January
* Amendment to IAS 1 - Presentation of Financial 2016
Statements - amendments as a result of the Disclosure
initiative
The Directors have not yet fully assessed the impact these new standards will have on the financial statements but their initial opinion is that it will not be significant.
2.2 Foreign currency translations
Foreign exchange gains and losses resulting from the settlement of transactions in foreign currencies and from the translation of monetary assets and liabilities at period end exchange rates to Pounds Sterling are recognised in the Statement of Comprehensive Income as foreign exchange translation gains/losses.
Non-monetary items such as financial assets designated at fair value through profit or loss measured at fair value in a foreign currency, are translated using exchange rates at the balance sheet date when the fair value was determined. Effects of exchange rate changes on non-monetary items measured at fair value on a foreign currency are recorded as part of the fair value gain or loss.
As at 30 September 2016 all financial assets designated at fair value through profit and loss are held in Pounds Sterling.
2.3 Financial instruments
Financial assets
a) Classification
The Company classifies its investments in equity securities as financial assets designated at fair value through profit or loss. These financial instruments are held for investment purposes. Financial assets also include cash and cash equivalents as well as other receivables which are measured at amortised cost using the effective interest rate method.
Financial assets designated at fair value through profit or loss at inception
Financial assets designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Company's documented investment strategy.
The Company's policy requires the Portfolio Manager and the Board of Directors to evaluate the information about these financial assets on a fair value basis together with other related financial information.
b) Recognition, measurement and derecognition
Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investment. Financial assets designated at fair value through profit or loss are measured initially at fair value. Transaction costs are expensed as incurred and movements in fair value are recorded in the Statement of Comprehensive Income. Subsequent to initial recognition, all financial assets designated at fair value through profit or loss are measured at fair value.
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.
c) Fair value estimation
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
As at 30 September 2016, the Company held investments in a diversified portfolio of UK Micro Cap Companies, typically comprising companies with a free float market capitalisation of less than GBP100 million at the time of purchase, whose securities are admitted to trading on AIM.
Investments are valued at fair value, which are quoted bid prices for investments traded in active markets.
For investments which are not traded in active markets, unlisted and restricted investments, the Board in determining its assessment of fair value takes into account the latest traded prices, other observable market data and
asset values based on the latest available and relevant information for that investment.
As all the Company's financial assets are quoted securities which are traded in active markets, in the opinion of the Directors, the fair value of the financial assets is not subject to significant judgments, estimates or assumptions.
d) Valuation process
The Directors are in ongoing communications with the Portfolio Manager and hold meetings on a timely basis to discuss performance of the investment portfolio and the valuation methodology and in addition review monthly investment performance reports.
The Directors analyse the investment portfolio in terms of both investment mix and fair value hierarchy and consider the impact of general credit conditions and/or events that occur in the global corporate environments which may impact the economic conditions in the UK and ultimately on the valuation of the investment portfolio.
Financial liabilities
e) Classification
Amounts due to brokers represent payables for investments that have been contracted for but not yet settled or delivered on 30 September 2016. Financial liabilities include trade payables and other payables which are held at amortised cost using the effective interest rate method.
f) Recognition, measurement and derecognition
Financial liabilities are recognised initially at fair value, net of transaction costs incurred and are subsequently carried at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.
2.4 Investment income, interest income and expenses
Dividends receivable on equity shares are recognised as revenue for the period on an ex-dividend basis. Interest income and expenses are recognised in the Statement of Comprehensive Income on an accruals basis using the effective interest rate method.
2.5 Operating expenses
Operating expenses are recognised on an accruals basis and are recognised in the Statement of Comprehensive Income.
2.6 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks. Cash equivalents are short term, highly liquid investments with original maturities of three month or less that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
2.7 Trade receivables and payables
Amounts due from and to brokers represent trade receivables for securities sold and trade payables for securities purchased that have been contracted for but not yet settled or delivered on the Statement of Financial Position date respectively.
These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment for amounts due from brokers. A provision for impairment of trade receivables due from brokers is established when there is objective evidence that the Company will not be able to collect all amounts due from the relevant broker.
Significant financial difficulties of the broker, probability that the broker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from brokers is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
2.8 Segmental reporting
In accordance with IFRS 8, the Board as a whole has been determined as constituting "the chief operating decision maker" of the Company. The Directors view the operations of the Company as one operating segment, being investment in UK Micro Cap Companies. All significant operating decisions are based upon analysis of the Company's investments as one segment. The financial results from this segment are equivalent to the financial results of the Company as a whole, which are evaluated regularly by the chief operating decision-maker (the Board with insight from the Portfolio Manager).
2.9 Contingent liabilities and provisions
A contingent liability is a possible obligation depending on whether some uncertain future event occurs; or a present obligation but payment is not probable or the amount cannot be measured reliably. A provision is recognised when:
- the Company has a present legal or constructive obligation as a result of past events; - it is probable that an outflow of resources will be required to settle the obligation; and - the amount has been reliably estimated.
2.10 Taxation
The Company has applied for and been granted exemption from liability to income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 as amended by the Director of Income Tax in Guernsey for the current period. Exemption must be applied for annually and will be granted, subject to the payment of an annual fee, which is currently fixed at GBP1,200 per applicant, provided the Company qualifies under the applicable legislation for exemption.
It is the intention of the Directors to conduct the affairs of the Company so as to ensure that it continues to qualify for exempt company status for the purposes of Guernsey taxation.
2.11 Stated capital
Ordinary Shares are classified as equity in accordance with IAS 32 - "Financial Instruments: Presentation" as these instruments include no contractual obligation to deliver cash and the redemption mechanism is not mandatory.
Costs directly attributable to the issue of new Ordinary Shares are shown in equity as a deduction from the proceeds.
Please refer to note 12 for details regarding the redemption mechanism of Ordinary Shares.
2.12 Capital risk management
The Board defines capital as financial resources available to the Company. The Company's capital as at 30 September 2016 comprises its stated capital and share premium at a total of GBP70,342,481 (2015: GBP49,630,301).
The Company's objectives when managing capital are to:
- safeguard the Company's ability to continue as a going concern; - provide returns for Shareholders; and - maintain an optimal capital structure to minimise the cost of capital.
The Board monitors the capital adequacy of the Company on an on-going basis and both the Company's objectives regarding capital management have been met. The Company has no imposed capital requirements.
3. Investment income
For the
period from
2 October
Year ended 2014 to
30 September 30 September
2016 2015
GBP GBP
Investment income 1,410,875 441,704
Other income - 17,843
Bank interest 17,223 29,493
Total income 1,428,098 489,040
-------------------- -------------- --------------
4. Operating expenses
For the
period
from 2
October
Year ended 2014 to
30 September 30 September
2016 2015
GBP GBP
Portfolio management fees 588,322 331,036
Portfolio management performance
fees 797,751 426,025
Directors' fees 94,935 90,184
AIFM fees 54,036 52,839
Audit fees 35,300 35,000
Non-audit fees - interim
review services 17,000 16,000
Administration fees 93,027 72,500
Broker fees 51,246 41,507
Custody fees 13,859 7,371
Company secretariat fees 35,000 29,807
Registrar fees 21,893 7,833
Transaction fees 96,967 66,336
Legal and professional
fees 9,360 -
Sundry expenses 39,709 35,927
Total 1,948,405 1,212,365
------------------------------------ -------------- --------------
On 21 October 2014, the Company signed an AIFM agreement with the Manager to act as the Company's AIFM. Under the agreement, the Manager is entitled to an upfront set up fee of GBP20,000 and annual fixed fee of GBP54,000. The annual fixed fee is paid quarterly in arrears. Please note that the upfront set up fee is included as part of initial placing of Ordinary Shares share issue costs. Please refer to note 12 for further detail. AIFM fees payable as at 30 September 2016 were GBP13,647 (2015: GBP13,611).
On 21 October 2014, the Company signed an agreement with the Administrator to provide administrative, compliance oversight and company secretarial services to the Company. Under the administration agreement, the Administrator will be entitled to a minimum annual fixed fee of GBP85,000 with a cap of GBP115,000 for fund administration services and GBP35,000 annual fixed fee for company secretarial and compliance services. These fees are paid monthly in arrears. Ad hoc other administration services are chargeable on a time cost basis. In addition, the Company will reimburse the Administrator for any out of pocket expenses.
On 21 October 2014, the Company signed a Global Custody Agreement with the Manager and the Administrator, whereby the Company appointed the Administrator to carry out custodian services. In its role as custodian, the Administrator is entitled to a fee payable by the Company on a transaction by transaction and ad-valorem fee basis.
On 3 November 2014, the Company signed an Investment Management agreement with the Manager and the Portfolio Manager, whereby the Manager delegated to the Portfolio Manager overall responsibility for the discretionary management of the Company assets in accordance with the Company's investment objective and policy.
Under the agreement, the Portfolio Manager is entitled to receive a base fee and performance fee. The portfolio manager base fee is payable monthly in arrears at a rate of one-twelfth of 0.75% of NAV. A performance fee equal to 15% of the amount by which the Company's NAV outperforms the total return on the benchmark, (being Numis Smaller companies plus AIM (excluding investment companies) total return index), will be payable to the Portfolio Manager over a performance period.
The performance period is the period between two redemptions, being the first business day after the calculation date, (referable to the earlier redemption (opening date)), and the end day of the calculation date (referable to the later redemption (closing date)). The first opening date is the date of admission and in circumstances in which a performance fee may be payable upon termination of this Agreement, the final closing date shall be the date in which the agreement is terminated. The calculation date is the date determined by the Board for the calculation of the price to be paid on any particular exercise of the redemption mechanism. Please refer to note 12 for further detail regarding the redemption mechanism. During the year ended 30 September 2016, the Company incurred a performance fee of GBP797,751 (2015: GBP426,025), of which GBP1,223,776 (2015: GBP426,025) was payable at year end. The performance fee due will only be paid when the Company implements the Redemption Mechanism as detailed in the IPO Prospectus issued on 14 November 2014.
On 20 January 2015, the Company signed a Corporate Stockbroker and Financial Adviser agreement with Winterflood Investment Trusts (a division of Winterflood Securities Limited) (the "Corporate Broker"), to provide corporate stockbroker and financial adviser services to the Company. Under the agreement, the Corporate Broker will be entitled to a fee payable by the Company of GBP50,000 per annum payable half yearly in arrears. Broker fees payable as at 30 September 2016 were GBP16,667 (2015: GBP41,507).
5. Directors' fees and interests
The Directors of the Company are remunerated for their services at a fee of GBP20,000 per annum (GBP30,000 for the Chairman). The Chairman of the Audit Committee receives an additional GBP5,000 for his services in this role.
With effect from 1 October 2016, the Director fees were increased to GBP25,000 per annum (GBP40,000 for the Chairman). The Chairman of the Audit Committee continues to receive an additional GBP5,000 for his service in this role as stated above.
The Company has no employees other than the Directors. Directors' fees payable as at 30 September 2016 were GBP23,880 (2015: GBP23,944).
As at the date of approval of these financial statements, Andrew Chapman and Trudi Clark held 20,000 and 16,885 Ordinary Shares in the Company respectively. No other Director holds shares in the Company.
No pension contributions were payable in respect of any of the Directors.
6. Other receivables
30 September 30 September
2016 2015
GBP GBP
Dividend receivable 242,716 27,250
Prepayments 5,665 1,238
Interest receivable 3 8
Ordinary Share receivable 1 1
----------------------------- ------------- -------------
Total other receivables 248,385 28,497
----------------------------- ------------- -------------
The Directors believe that these balances are fully recoverable.
7. Financial assets designated at fair value through profit or loss
30 September 30 September
2016 2015
GBP GBP
Financial assets designated
at fair value through profit
or loss 85,978,933 54,053,643
--------------------------------- ------------- -------------
The Company has invested the proceeds raised from the initial Ordinary Share issue and subsequent Ordinary Share tap issues in a portfolio of UK Micro Cap Companies in line with its investment strategy. These investments are predominantly comprised of companies whose securities are admitted to trading on the AIM, with a free float market capitalisation of less than GBP100 million at the time of purchase.
Fair value hierarchy
IFRS 13 'Fair Value Measurement' requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value.
The Company categorises its financial assets according to the following fair value hierarchy detailed in IFRS 13, that reflects the significance of the inputs used in determining their fair values;
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable variable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
30 September
Level Level Level 2016
1 2 3 Total
GBP GBP GBP GBP
Financial assets
----------------------------- ----------- ------ ------ -------------
Financial assets designated
at fair value through
profit and loss 85,978,933 - - 85,978,933
----------------------------- ----------- ------ ------ -------------
30 September
Level Level Level 2015
1 2 3 Total
GBP GBP GBP GBP
Financial assets
----------------------------- ----------- ------ ------ -------------
Financial assets designated
at fair value through
profit and loss 54,053,643 - - 54,053,643
----------------------------- ----------- ------ ------ -------------
Financial assets designated at fair value through profit or loss reconciliation
The following table shows a reconciliation of all movements in the fair value of financial assets categorised within Level 1 to 3 between the beginning and the end of the reporting year.
30 September
Level Level Level 2016
1 2 3 Total
GBP GBP GBP GBP
------------------------------ ------------- ------ ------ -------------
Opening valuation 54,053,643 - - 54,053,643
------------------------------ ------------- ------ ------ -------------
Movements in the year: -
Purchases during the
year 43,497,573 - - 43,497,573
Sales - proceeds during
the year (21,973,309) - - (21,973,309)
Realised gain on financial
assets designated
at fair value through
profit or loss(1) 4,545,264 - - 4,545,264
Unrealised gain on
financial assets designated
at fair value through
profit or loss(2) 5,855,762 - - 5,855,762
Closing valuation 85,978,933 85,978,933
Total gains on financial
assets for the year
ended 30 September
2016 10,401,026 - - 10,401,026
------------------------------ ------------- ------ ------ -------------
(1) Realised gain on financial assets designated at fair value through profit and loss is made up of GBP6,470,008 gain and GBP(1,924,744) loss.
(2) Unrealised gain on financial assets designated at fair value through profit and loss is made up of GBP18,977,876 gain and GBP(13,122,114) loss.
During the year ended 30 September 2016, there were no reclassifications between levels of the fair value hierarchy.
30 September
Level Level Level 2015
1 2 3 Total
GBP GBP GBP GBP
------------------------------ ------------- ------ ------ -------------
Opening valuation - - - -
------------------------------ ------------- ------ ------ -------------
Movements in the period: -
Purchases during the
period 58,630,422 - - 58,630,422
Sales - proceeds during
the period (11,560,756) - - (11,560,756)
Realised gain on financial
assets designated
at fair value through
profit or loss(3) 2,835,275 - - 2,835,275
Unrealised gain on
financial assets designated
at fair value through
profit or loss(4) 4,148,702 - - 4,148,702
Closing valuation 54,053,643 54,053,643
Total gains on financial
assets for the period
ended 30 September
2015 6,983,977 - - 6,983,977 ------------------------------ ------------- ------ ------ -------------
(3) Realised gain on financial assets designated at fair value through profit and loss is made up of GBP2,847,351 gain and GBP(12,076) loss.
(4) Unrealised gain on financial assets designated at fair value through profit and loss is made up of GBP7,706,875 gain and GBP(3,558,173) loss.
During the period ended 30 September 2015, there were no reclassifications between levels of the fair value hierarchy.
Please refer to note 2.3 for valuation methodology of financial assets designated at fair value through profit or loss. As at 30 September 2016, none of the investments held are deemed to be illiquid in nature and on this basis are not subject to any special arrangements.
8. Financial risk management
The Company's activities expose it to a variety of financial risks; market risk (including price risk, interest rate risk and foreign exchange risk), credit risk and liquidity risk.
8.1a Price risk
Price risk is the risk that the Company's performance will be adversely affected by changes in the markets in which it invests.
As at 30 September 2016, the Company held investments in a diversified portfolio of UK Micro Cap Companies, comprising companies with a free float market capitalisation of less than GBP100 million at the time of purchase.
The relatively small market capitalisation of Micro Cap Companies can make the market in their shares illiquid. Therefore prices of UK Micro Cap Companies are often more volatile than prices of larger capitalisation stocks, and even small cap companies.
While the Company does not include any specific limits placed on exposures to any industry sector, the Company does have investment limits and risk diversification policies in place to mitigate market and concentration risk. Investments limits in place include:
-- the number of holdings in the investment portfolio will usually range from 30 to 50. -- no exposure in any investee company will exceed 10% of NAV at the time of the investment.
However, any significant event which affects a specific industry sector in which the investment portfolio has a significant holding could materially and adversely affect the performance of the Company. To mitigate market risk, the Board and Portfolio Manager actively monitor market prices throughout the financial period and meet regularly in order to consider investment strategy.
Please refer below for sensitivity analysis on the impact on the Statement of Comprehensive Income and NAV of the Company, if the fair value of the investments designated at fair value through profit or loss at the year end increased or decreased by 15%:
Current value 30 September Increase Decrease
2016 by 15% by 15%
GBP
----------------------------- ------------- ----------- -------------
Financial assets designated
at fair value through
profit or loss 85,978,933 12,896,840 (12,896,840)
------------------------------ ------------- ----------- -------------
Current value 30 September Increase Decrease
2015 by 5% by 5%
GBP
----------------------------- ------------- ---------- ------------
Financial assets designated
at fair value through
profit or loss 54,053,643 2,702,682 (2,702,682)
------------------------------ ------------- ---------- ------------
The Directors consider a 15% movement to be reasonable given their assessment of the volatility of the AIM market during the year ended 30 September 2016. The above calculations are based on the investment valuation at the Statement of Financial Position date and are not representative of the period as a whole, and may not be reflective of future market conditions.
8.1b Interest rate risk
Interest rate risk is the risk that the fair value of financial instruments and related income from cash and cash equivalents will fluctuate due to changes in market interest rates.
The majority of the Company's interest rate exposure arises on the level of income receivable on cash deposits. Financial assets designated at fair value through profit and loss are equity investments and therefore the valuation of these investments and income receivable is not directly exposed to interest rate risk.
The following table details the Company's exposure to interest rate risks:
30 September 30 September 30 September
2016 2016 2016
Interest Non-interest Total
Bearing bearing
(*)
GBP GBP GBP
------------------------------ ------------- ------------- -------------
Assets
Financial assets designated
at fair value through
profit or loss - 85,978,933 85,978,933
Cash and cash
equivalents 1,635,861 - 1,635,861
Trade receivable
- securities
sold awaiting
settlement - 11,533 11,533
Other receivables (excluding
prepayments) - 242,720 242,720
------------------------------- ------------- ------------- -------------
Total assets 1,635,861 86,233,186 87,869,047
------------------------------- ------------- ------------- -------------
Liabilities
Other payables - (1,390,860) (1,390,860)
Total liabilities - (1,390,860) (1,390,860)
----------------------------- ---------- ------------ ------------
Total interest sensitivity
gap 1,635,861 84,842,326 86,478,187
----------------------------- ---------- ------------ ------------
* - floating rate and due within 1 month
30 September 30 September 30 September
2015 2015 2015
Interest Non-interest Total
Bearing bearing
(*)
GBP GBP GBP
------------------------------ ------------- ------------- -------------
Assets
Financial assets designated
at fair value through
profit or loss - 54,053,643 54,053,643
Cash and cash
equivalents 1,268,358 - 1,268,358
Trade receivable
- securities
sold awaiting
settlement - 1,138,260 1,138,260
Other receivables (excluding
prepayments) - 27,259 27,259
------------------------------- ------------- ------------- -------------
Total assets 1,268,358 55,219,162 56,487,520
------------------------------- ------------- ------------- -------------
Liabilities
Other payables - (597,805) (597,805)
Total liabilities - (597,805) (597,805)
----------------------------- ---------- ----------- -----------
Total interest sensitivity
gap 1,268,358 54,621,357 55,889,715
----------------------------- ---------- ----------- -----------
* - floating rate and due within 1 month
Interest rate sensitivity analysis
If interest rates had changed by 50 basis points, (considered to be a reasonable illustration based on observation of current market conditions), with all other variables remaining constant, the effect on the net profit for the year / period would be as detailed below:
30 September 30 September
2016 2015
GBP GBP
----------------------------- ------------- -------------
Increase of 50 basis points 8,179 6,342
Decrease of 50 basis points (8,179) (6,342)
----------------------------- ------------- -------------
8.1c Foreign currency risk
Foreign currency risk is the risk that the values of the Company's assets and liabilities are adversely affected by changes in the values of foreign currencies by reference to the Company's base currency. The functional currency of the Company is Pounds Sterling.
Throughout the year ended 30 September 2016, all transactions were in Pounds Sterling, with the exception of two transactions which were in USD. As at 30 September 2016, income receivable of $243,811 was held.
The following analysis demonstrates the impact of a 15% movement in the exchange rate against USD on the net assets, with all other variables held constant.
Effect on net
Change in assets attributable
exchange to ordinary
rate shareholders
30 September Increase/(decrease) Increase/(decrease)
2016
EUR
-------------- -------------------- ---------------------
(24,780) /
USD 15% / (15%)(4) 33,519
--------------- -------------------- ---------------------
(4) 15% has been assessed at 30 September 2016 as a reasonably possible movement in currency rate sensitivity over the year. It is not intended to illustrate a remote, worst case or stress test scenario.
The Company has not been exposed to any material foreign currency risk during the year.
8.2 Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Board of Directors has in place monitoring procedures in respect of counterparty risk which is reviewed on an ongoing basis.
The Company's credit risk is attributable to its financial assets designated at fair value through profit or loss, cash and cash equivalents and interest and other receivables.
In the opinion of the Board of Directors, the carrying amounts of financial assets best represent the maximum credit risk exposure at the Statement of Financial Position date. At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:
30 September 30 September
2016 2015
GBP GBP
Financial assets designated
at fair value through profit
or loss 85,978,933 54,053,643
Cash and cash equivalents 1,635,861 1,268,358
Trade receivable -
securities sold awaiting
settlement 11,533 1,138,260
Other receivables
(excluding prepayments) 242,720 27,259
--------------------------------- ------------- -------------
Total assets 87,869,047 56,487,520
--------------------------------- ------------- -------------
The Company's main credit risk exposure is in its investment in UK Micro Cap Companies shown as financial assets designated at fair value through profit or loss. All investments held are admitted to trading on AIM.
The financial assets designated at fair value through profit or loss are held by BNP Paribas Securities Services S.C.A, Guernsey branch, the Company's custodian, in a segregated account. In the event of bankruptcy or insolvency of the Administrator, the Company's rights with respect to the securities held by the custodian may be delayed or limited.
All cash is placed with BNP Paribas Securities Services S.C.A., Guernsey Branch.
BNP Paribas Securities Services S.C.A, is a wholly owned subsidiary of BNP Paribas Securities Services S.A. which is publicly traded and a constituent of the S&P 500 Index with a long standing credit rating of A-1 from Standard & Poor's.
Credit risk of cash and custodian is mitigated by the Company's policy to only undertake significant transactions with leading commercial counterparties.
8.3 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in realising assets or otherwise raising funds to meet financial commitments as and when these fall due for payment.
Liquidity risk is monitored on an ongoing basis by the Board of Directors and Portfolio Manager so as to ensure that the Company maintains sufficient working capital in cash or near cash form so as to be able to meet the Company's ongoing requirements to pay accounts payable and accrued expenses.
In addition, the Company's liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to ensure the Company remains as a going concern. The Company's investments are considered readily realisable, as they all comprise of investments in companies whose securities are admitted to trading on AIM. The Company would expect to be able to liquidate investments within 7 days or less in the event cash was required to cover expenses.
The table below shows the residual contractual maturity of the financial liabilities as at 30 September 2016:
Maturity analysis of financial liabilities
Less than 3 to 12 More than
3 months months 1 year Total
GBP GBP GBP GBP
Financial liabilities
Other payables(5) (167,084) (1,223,776) - (1,390,860)
Total undiscounted
financial liabilities (167,084) (1,223,776) - (1,390,860)
------------------------ ---------- ------------ ---------- ------------
The table below shows the residual contractual maturity of the financial liabilities as at 30 September 2015:
Less than 3 to 12 More than
3 months months 1 year Total
GBP GBP GBP GBP
Financial liabilities
Other payables(5) (171,780) (426,025) - (597,805)
Total undiscounted
financial liabilities (171,780) (426,025) - (597,805)
------------------------ ---------- ---------- ---------- ----------
(5) - Included in other payables is a performance fee payable of GBP1,223,776 (2015: GBP426,025). Please refer to note 4 for further details regarding calculation of performance fee and when this sum will be payable.
In accordance with Article 23(4)(a) and (b) of AIFMD Directive, the AIFM has assessed that the financial assets designated at fair value through profit or loss held by the Company are not deemed to be illiquid in nature, and as such, are not subject to any special liquidity arrangements and that the AIF has no new arrangements in place for managing liquidity.
9. Cash and cash equivalents
30 September 30 September
2016 2015
GBP GBP
Total cash and cash
equivalents 1,635,861 1,268,358
----------------------- ------------- -------------
10. Other payables
30 September 30 September
2016 2015
GBP GBP
Portfolio management
fees 53,952 34,737
Portfolio management
performance fees 1,223,776 426,025
Administration fees 7,150 7,083
AIFM fees 13,647 13,611
Audit fees 35,300 33,000
Broker fees 16,667 41,507
Company Secretariat
fees 2,917 2,917
Custody fees 988 642
Directors' fees 23,880 23,944
Registrar fees 625 625
Sundry expenses 11,958 13,714
Total other payables 1,390,860 597,805
------------------------ ------------- -------------
11. Contingent liabilities and commitments
As at 30 September 2016, the Company had no contingent liabilities or commitments (2015: GBPnil).
12. Stated capital and share premium
Authorised
The authorised stated capital of the Company is represented by an unlimited number of redeemable Ordinary Shares at no par value.
Allotted, called up and fully-paid
Ordinary Shares Number Stated Share
of shares capital premium
GBP GBP
--------------------- ----------- --------- -----------
Total issued stated
capital as at 1
October 2015 50,643,164 - 50,643,164
----------------------- ----------- --------- -----------
Ordinary Shares
issued during the
year 17,864,405 - 20,946,190
----------------------- ----------- --------- -----------
Total issued stated
capital as at 30
September 2016 68,507,569 - 71,589,354
----------------------- ----------- --------- -----------
Ordinary Shares Number Stated Share
of shares capital premium
GBP GBP
--------------------- ----------- --------- -----------
Total issued stated - - -
capital as at 2
October 2014
--------------------- ----------- --------- -----------
Ordinary Shares
issued during the
period 50,643,164 - 50,643,164
----------------------- ----------- --------- -----------
Total issued stated
capital as at 30
September 2015 50,643,164 - 50,643,164
----------------------- ----------- --------- -----------
Ordinary Shares
On incorporation, the Company issued one Ordinary Share at a price of GBP1.
On 27 November 2014, the Company issued a further 50,643,163 Ordinary Shares at a price of GBP1 per Ordinary Share, raising gross proceeds of GBP50,643,163 (net proceeds of GBP49,630,301). The costs and expenses of the initial placing of Ordinary Shares attributable to the Company amounted to a total of GBP1,012,863.
On 29 October 2015, 16,679,405 Ordinary Shares were issued at a price of GBP1.1718, raising gross proceeds of GBP19,544,927 (net proceeds of GBP19,328,692). The newly issued 16,679,405 Ordinary Shares were admitted to the Official List and to trading on the Main Market with effect from 3 November 2015. The costs and expenses of the placing of 16,679,405 Ordinary Shares attributable to the Company amounted to a total of GBP216,235.
On 11 November 2015, 1,185,000 Ordinary Shares were issued at a price of GBP1.1825, raising gross proceeds of GBP1,401,263 (net proceeds of GBP1,383,488). The newly issued 1,185,000 Ordinary Shares were admitted to the Official List and to trading on the Main Market with effect from 17 November 2015. The costs and expenses of the placing of 1,185,000 Ordinary Shares attributable to the Company amounted to a total of GBP17,775.
As at 30 September 2016, the Company had 68,507,569 Ordinary Shares (2015: 50,643,164).
Each holder of Ordinary Shares is entitled to attend and vote at all general meetings that are held by the Company.
Each holder is also entitled to receive payment of a dividend should the Company declare such a dividend payment. Any dividends payable by the Company will be distributed to the holders of the Company Ordinary Shares, and on the winding-up of the Company or other return of capital (other than by way of a repurchase or redemption of shares in accordance with the provisions of the Articles and the Companies Law), the Company's surplus assets, after payment of all creditors, will be distributed among the holders of the Company Ordinary Shares.
The Board does not expect income from the investment portfolio to significantly exceed the anticipated annual running costs of the Company and therefore does not expect that the Company will pay significant, or any, dividends, although it reserves the right to do so.
No dividends have been declared or paid during the year.
Redemption mechanism
As the Company has been established as a closed-ended collective investment scheme, there is no right or entitlement attaching to the Ordinary Shares that allows them to be redeemed or repurchased by the Company at the option of the Shareholder.
The redemption mechanism allows the Board to redeem any number of shares at the prevailing NAV per share at the calculation date, (being the date determined by the Board for the calculation of the price to be paid on any particular exercise of the redemption mechanism), less the cost of redemption. This right will only be exercised in specific circumstances and for the purpose of returning capital growth.
Accordingly, assuming that the NAV exceeds GBP100 million, the Directors intend to operate the redemption mechanism to return the NAV back to around GBP100 million in order to:
-- enable the Company to exploit fully the underlying investment opportunity and to deliver high and sustainable returns to Shareholders, principally in the form of capital gains;
-- enable portfolio holdings to have a meaningful impact on the Company's performance, which might otherwise be marginal within the context of a larger fund; and
-- ensure that the Company can continually take advantage of the illiquidity risk premium inherent in Micro Cap Companies.
The Directors are not obliged to operate the redemption mechanism and will not do so if:
-- calculation and publication of the NAV has been suspended; or -- the Directors are unable to make the solvency statement required by Guernsey law; or
-- other circumstances exist that the Board believes make the operation of the redemption mechanism undesirable or impracticable.
Redemptions will, subject to compliance with all applicable law and regulation, be carried out pro rata to a Shareholder's holding of Ordinary Shares, but all redemptions will normally be subject to a de minimis value to be returned of approximately GBP10 million (before costs). The Company will not redeem fractions of shares.
The price at which any Ordinary Shares are redeemed under the redemption mechanism will be calculated by reference to unaudited NAV calculations. To the extent that any redemption takes place at a time when the Ordinary Shares are trading at a significant premium to the prevailing unaudited NAV, Shareholders may receive an amount in respect of their redeemed Ordinary Shares that is materially below the market value of those shares prior to redemption.
In order to facilitate any redemption, the Company may be required to dispose of assets within the investment portfolio. There is no certainty of the price that can be achieved on such sales and any sale price could be materially different from the carrying value of those assets. Consequently, the value received in respect of redeemed Ordinary Shares may be adversely affected where the Company is not able to realise assets at their carrying values. In addition, during any period when the Company is undertaking investment portfolio realisations, it may hold the sale proceeds (which could, in aggregate, be a material amount) in cash, which could impact the Company's returns, until the redemption is implemented and the cash is distributed to Shareholders.
Investors should note that the redemption mechanism has a specific and limited purpose, and no expectation or reliance should be placed on the redemption mechanism being operated on any one or more occasions or as to the proportion of Ordinary Shares that may be redeemed or as to the price at which they will be redeemed. The redemption mechanism may also lead to a more concentrated and less liquid portfolio, which may adversely affect the Company's performance and value.
In the absence of the availability of the redemption mechanism, Shareholders wishing to realise their investment in the Company will be required to dispose of their shares on the stock market. Accordingly, Shareholders' ability to realise their investment at any particular price and/or time may be dependent on the existence of a liquid market in the shares.
13. Basic and diluted earnings per Ordinary Share
For the
period
from 2
October
Year ended 2014 to
30 September 30 September
2016 2015
GBP GBP
Total comprehensive income
for the year / period 9,880,719 6,260,652
Weighted average number
of shares during the year
/ period 67,098,803 42,851,908
Basic and diluted
earnings per share 0.1473 0.1461
14. Net asset value per share
30 September 30 September
2016 2015
GBP GBP
Net asset
value 86,483,852 55,890,953
Number of shares
at year / period
end 68,507,569 50,643,164
Net asset value
per share 1.2624 1.1036
15. Related party disclosure
The Manager and Portfolio Manager are deemed related parties and all transactions between these related parties were conducted on terms equivalent to those prevailing in an arm's length transaction. Please refer to note 4 for further detail.
Philip Rodrigs is deemed to be a related party as he is the Fund Manager of the Portfolio Manager. As at the date of approval of the Annual Financial Report, he held 280,338 Ordinary Shares in the Company.
The Directors are entitled to remuneration for their services. Please refer to note 5 for further detail. Mark Hodgson is the Managing Director of the Manager.
For Director fees, portfolio management fees and AIFM fees payable as at 30 September 2016, please refer to note 10.
16. Material events after the Statement of Financial Position date
On the 9 December 2016, the Company entered into a Sterling Facility Agreement for GBP2,000,000 committed revolving credit facility (the "bank loan") with BNP Paribas Securities Services S.C.A. (the "Lender") and BNP Paribas Securities Services S.C.A., Guernsey Branch (the "Custodian").
There were no other events which occurred subsequent to the year-end until the date of approval of the financial statements, which would have a material impact on the financial statements of the Company as at 30 September 2016.
17. Controlling party
In the Directors' opinion, the Company has no ultimate controlling party.
Company information
Board members Advocates to the Company
Andrew Chapman (Chairman) (as to Guernsey law)
Ian Burns (Chairman Carey Olsen
of the Audit Committee P.O. Box 98
and Senior Independent Carey House
Director) Les Banques
Trudi Clark (Chairman St Peter Port
of the Remuneration Guernsey
and Nomination Committee GY1 4BZ
and Management Engagement
Committee)
Mark Hodgson
All Directors were appointed
on the 2 October 2014.
Registered Office Custodian
BNP Paribas Securities
BNP Paribas House Services S.C.A., Guernsey
St Julian's Avenue Branch
BNP Paribas House
St Julian's Avenue
St Peter Port St Peter Port
Guernsey Guernsey
GY1 1WA GY1 1WA
Portfolio Manager Independent Auditor
PricewaterhouseCoopers
CI LLP
PO Box 321
River and Mercantile Royal Bank Place
Asset Management LLP 1 Glategny Esplanade
30 Coleman Street St Peter Port
London Guernsey
EC2R 5AL GY1 4ND
Administrator and Company
Manager Secretary
Carne Global AIFM Solutions BNP Paribas Securities
(C.I.) Limited Services S.C.A., Guernsey
8th Floor Branch
Union House BNP Paribas House
Union Street St Julian's Avenue
St Helier St Peter Port
Jersey Guernsey
JE2 3RF GY1 1WA
BNP Paribas Securities
Services S.C.A. Guernsey
Branch is regulated
by the Guernsey Financial
Services Commission.
Corporate Broker Registrar
Winterflood Securities Capita Registrars (Guernsey)
Limited Limited
The Atrium Building Longue Hougue House
Cannon Bridge House St Sampson
25 Dowgate Hill Guernsey
London GY2 4JN
EC4R 2GA
Solicitors to the Company Receiving Agent
(as to English law) Capita Registrars Limited
CMS Cameron McKenna (trading as Capita
LLP Asset Services)
Mitre House The Registry, 34 Beckenham
160 Aldersgate Street Road
London Beckenham, Kent
EC1A 4DD BR3 4TU
- ENDS -
Enquiries:
River and Mercantile UK Micro Cap Investment Company Limited
Andrew Chapman
Tel: +44 (0) 1481 750855
River and Mercantile Asset Management LLP
Mark Thomas
James Barham
Andrew Bollon
Tel: +44 (0) 20 7601 6262
BNP Paribas Securities Services S.C.A., Guernsey Branch, Company Secretary
Jasper Cross
Tel: +44 (0) 1481 750859
A copy of the Company's Annual Financial Report will be available shortly from the Company Secretary, (BNP Paribas Securities Services S.C.A., Guernsey Branch, BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA), or will be circulated on the Company's website (microcap.riverandmercantile.com)
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
River and Mercantile UK Micro Cap Investment Company Limited is regulated by the Guernsey Financial Services Commission
A copy of this announcement is and will be available, subject to certain restrictions relating to persons resident in restricted jurisdictions for inspection on the Company's website at microcap.riverandmercantile.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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(END) Dow Jones Newswires
January 20, 2017 02:00 ET (07:00 GMT)
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