Miton UK MicroCap Trust plc
Report and Accounts for the
year ended 30 April 2023
A Trust accessing the inherent
vibrancy of the UK’s quoted
microcaps
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Miton UK MicroCap Trust plc
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Annual Report 2023Miton UK MicroCap Trust plc
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Annual Report 2023
Contents
Strategic Report
1 Results for the Year to 30 April 2023
7 Financial Performance Indicators
8 Chairman’s Statement
13 Investment Manager’s Report
18 Business Model
19 Costs of Managing the Trust
20 Portfolio Information
22 Performance and Risks
27 Share Capital
28 S172 statement
31 Management and other Matters
Governance
33 Directors
34 Report of the Directors
37 Corporate Governance Statement
44 Audit Committee Report
47 Directors’ Remuneration Report
51 Statement of Directors’
Responsibilities
52 Independent Auditor’s Report
Company Accounts
59 Income Statement
60 Statement of Changes in Equity
61 Balance Sheet
62 Statement of Cash Flows
63 Notes to the Financial Statements
Shareholder Information
84
Redemption of Ordinary Shares
85
Shareholder Information
88
AIFMD Disclosures
89
Notice of Annual General Meeting
96
Glossary
99
Contact Details of the Advisers
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01
The
Company
Strategic
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Company
Accounts
Shareholder
Information
Our objective
The Company invests principally in a portfolio of smaller UK quoted companies, generally with market
capitalisations of less than £150m. The primary objective is to generate capital growth through selecting
stocks that are expected to generate plentiful surplus cash in the short to medium-term. As this comes
through and their share prices appreciate sharply, the Investment Manager tends to take profits, with the
capital reinvested in other promising microcaps standing on overlooked valuations. Given that a major part
of the Company’s return is expected to comprise capital appreciation, the Trust’s annual dividend (if any) will
be a modest contributor to long-term returns.
Miton UK MicroCap Trust plc is an investment trust listed on the London Stock Exchange under the ticker
code MINI. The Board, which consists of four independent directors, appoints the Investment Manager and
oversees all aspects of the Trust.
The Board sets the Trust’s objective which is to deliver an attractive investment return for shareholders
over the longer term. Miton UK Microcap Trust’s portfolio is distinctive as it invests in UK-quoted
microcap companies, which are defined as those with market capitalisations of less than £150m. It
is envisaged that the strategy has the potential to deliver attractive longer term returns, even during
inflationary periods, when the returns on the mainstream stock market may be less buoyant.
Over the year to April 2023, global stock markets fell back and then staged a modest recovery towards the
end of the period. Specifically, the recovery was generally most apparent amongst the mainstream stocks,
with the share prices of microcaps remaining at low levels. A time lag in the recovery of microcap share
prices is not unusual.
Over the year, the Trust’s NAV total return (including dividend income) fell by 29.3% which compares with
a total return on the Numis 1000 Index (the aggregate return of the smallest 2% of the UK stock market) of
minus 11.2%. Between April 2015 when the Trust was launched and April 2023, its NAV total return was 33.7%
which compares with a Numis 1000 total return of 44.8%.
Miton UK MicroCap Trust plc
Reportand Accounts for the year ended 30 April 2023
Source: Morningstar
-10
0
-40
10
20
40
60
-20
-30
30
50
Numis All-Share Numis Smaller
Companies
ex ICs + AIM
Numis 1000 IndexMINI NAV
Percent
-29.3
4.7
-9.4
-11.2
-10
0
-40
10
20
40
60
-20
-30
30
50
Numis All-Share Numis Smaller
Companies
ex ICs + AIM
Numis 1000 IndexMINI NAV
Percent
33.7
49.6
42.5
44.8
Total returns 12 months to 30 April 2023 Total returns since launch in April 2015
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Annual Report 2023
Counterintuitively, UK quoted microcaps
prospects often become stronger…
The mainstream UK stock market has started outperforming.
During globalisation, the best performing stocks are often those scaling up their growth rate by drawing
upon the abundance of cash.
When interest rates increase, however, this suppresses demand and ushers in a scarcity of risk capital. UK
majors have a real advantage when risk capital is scarce because they typically generate surplus cash. After
a long period of underperformance during globalisation, the UK stock market has started outperforming
other mainstream global indices over the last two and half years.
If UK microcaps start to outperform the UK major indices as they have in the past, then they may be set to
outperform international stock markets in future.
When risk capital is scarce, quoted companies have the advantage.
Daily transactions on the stock exchange provide insight. The live interface between willing buyers and
sellers helps management teams to keep aware of their cost of capital. When they are contemplating
transactions, they can use this metric to determine those with the greatest commercial upside in the
context of the cost of any additional capital.
When market conditions are benign, the returns on corporate transactions are hampered by
wide-ranging competition. But when capital is restricted, ongoing access for quoted companies to
institutional capital is particularly valuable. In short, when risk capital is scarce, quoted companies often get
much higher returns from acquisitions because most private companies are unable to participate for lack of
risk capital.
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Shareholder
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When acquisition costs are low, microcaps’ prospects are enhanced compared with the
mainstreamstocks.
During economic recessions, the prospects for quoted companies can sometimes be further improved by
acquiring overleveraged but otherwise viable businesses from the receiver debt-free at very low prices.
The scale of the improvement tends to be incremental when the acquiring business is large relative to the
scale of the acquisition. If the acquirer is a quoted microcap, however, exactly the same acquisition offers
much greater upside potential, as the upside is spread over a much smaller market capitalisation.
In short, during recessions, when access to additional debt and risk capital is scarce, the upside potential for
quoted microcaps is often enhanced.
Note that UK microcaps have a long history of delivering premium returns.
Since 1955, UK-listed companies in the bottom two per cent by market capitalisation (typically known as
microcaps) have generated much higher returns than those in all other size bands. Furthermore, if this factor
is combined with those that stand on overlooked valuations (as in the Trust’s strategy), then their returns have
been even greater. If the returns on the mainstream indices become more limited when interest rates are
elevated, the potential for ongoing microcap outperformance should become all the more distinctive.
In summary, the prospect for a strategy dedicated to UK quoted microcaps, such as that of the Miton UK
MicroCap Trust, is often enhanced when access to debt and capital becomes scarcer.
…when access to debt and
risk capital becomes scarcer.
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Annual Report 2023
Any organisation that knowingly operates contrary
to the interests of the wider public would, in time,
find that its social licence to operate suffered.
Hence, well managed investment portfolios
need to invest in companies with an authentic
sense of purpose, as well as those employing a
successful commercialstrategy.
Mainstream stocks have vast numbers of
shareholders, so typically their managers only meet
a small proportion. Alongside, with their long list
of shareholders, they are offered an extraordinarily
wide range of advice regarding their stance on
environmental, social and governance issues. The
bottom line is that institutional investors have
little opportunity to gauge the authenticity of the
management team’s sense of purpose or influence
their corporate agenda significantly.
In contrast, there are fewer institutional microcap
investors. So, most microcap management teams
are keen to meet them, even if they are not
shareholders. Microcap investors, therefore, have a
much greater opportunity to gauge a Company’s
culture, even prior to investing.
In addition, institutional holdings typically account
for a substantial proportion of their equity, so their
views often have a meaningful impact on how the
management teams address environmental, social
and governance issues.
Furthermore, when addressing
the environmental, social and
governanceagenda…
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AIM-listed companies do issue formal reports
covering non-financial metrics such as sustainability,
although these are typically less comprehensive
than the majors. Your Manager does not find this a
major handicap as many microcaps operate across
a relatively specialist business area. In addition,
your Manager can compare the content of the
sustainability reports with the detail of the senior
management’s actions. When variance is identified,
it can imply potential problems.
For example, your Manager meets many mining
management teams who say they start every
meeting with safety.
And yet, in far too many cases, their safety data
is not covered by the first slide in their corporate
presentation, nor is safety the first matter of
substance in their annual report.
Generally, microcap leadership teams are smaller,
and often more agile than the majors. Typically,
this is reflected in a somewhat stronger sense of
corporate purpose and motivation than in some
larger companies.
Overall, when addressing the environmental, social
and governance agenda the Manager of a portfolio
of microcaps stands at an advantage.
…a UK microcap portfolio has
numerous advantages
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Annual Report 2023
•
Over the year, the Ordinary Share NAV
fell from 91.05p on 30 April 2022 to 64.20p
on 30 April 2023, a negative total return,
including dividends reinvested, of 29.3%.
•
The Ordinary Share price fell from 86.50p
at 30 April 2022 to 59.50p at 30 April 2023,
a negative return of 31.1%. As at close of
business on 7 July 2023, the closest date to
this Report, the Ordinary Share NAV was
57.48p and the share price was 52.50p.
•
The net Revenue return was a positive
return of £32,000 this year, or 0.03p per
share. This compares to a positive return of
£159,000 last year, or 0.15p per share.
•
The Company does not have a formal
benchmark but, for comparison, it is
intended that the return on the Numis 1000
Index and the Morningstar Investment
Trust UK Smaller Companies sector will be
published on the monthly factsheet and in
the Company’s annual and interim reports.
Returns, however, may diverge from any of
these indices for a significant period.
Results for the Year
to 30 April 2023
Summary of Results
Year to
30 April
2023
Year to
30 April
2022
Total net assets attributable to equity shareholders (£’000) 60,754 99,475
NAV per Ordinary Share* 64.20p 91.05p
Share price (last close) 59.50p 86.50p
Discount to NAV* (7.32)% (5.00)%
Investment income £0.8m £1.0m
Revenue return per Ordinary Share* 0.03p 0.15p
Total return per Ordinary Share (28.93)p (13.77)p
Ongoing charges
#
* 1.72% 1.41%
Ordinary Shares in issue 94,638,561 109,253,560
* Alternative Performance Measure (‘APM’). Details provided in the Glossary on pages 96 to 98.
# The ongoing charges are calculated in accordance with AIC guidelines.
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Financial Performance Indicators
Three charts that help set the full year returns in the context of the longer term returns of the Trust.
NAV v share price v Numis 1000 Index
0
50
100
150
200
250
Percent
MINI NAV
MINI Share
Price
Numis SC
1000 Ex Invt
Cos TR
Apr 2015
Oct 2015
Apr 2016
Oct 2016
Apr 2017
Oct 2017
Apr 2018
Oct 2018
Apr 2019
Oct 2019
Apr 2020
Oct 2020
Apr 2021
Oct 2022
Apr 2023
Oct 2021
Apr 2022
Source: Morningstar
This chart details the NAV and the daily closing share price
of the Company. Prior to the Brexit referendum, the share
prices of microcaps generally appreciated and the NAV
of the Trust rose. During the Brexit negotiations, many
asset allocators scaled back their UK weightings, given
the uncertainties over the detail of the exit arrangements,
and this led to fewer buyers of small cap stocks. This
trend was often more pronounced amongst microcap
stocks, although the prospects for quoted microcaps
are often less dependent on global growth than larger
quoted companies.
Revenue and dividend per share
Year to
30 April
2018
Period from
26 March 2015
to 30 April 2016
Year to
30 April
2017
Year to
30 April
2019
Year to
30 April
2020
-0.2
0.3
0.6
0.5
0.4
0.2
0.0
0.1
-0.1
Revenue per share (H1)
Revenue per share (H2)
Year to
30 April
2022
Year to
30 April
2023
Year to
30 April
2021
Final dividend per share
Source: Company from 30/04/2015 to 30/04/2023.
The revenue per share of the Trust was relatively strong in
the early years due to some higher yielding holdings. After
these companies were taken over, and reflecting portfolio
changes, the underlying dividend income of the portfolio
has been at a lower level and often similar to the revenue
costs each year.
Overall, it has always been anticipated that the major part
of the Trust’s longer term returns would come via capital
gain rather than through dividend income.
Average unweighted market capitalisation comparison: MINI v Numis Large Cap Index, Numis Smaller
Companies ex Investment Companies Index and Numis 1000 ex Investment Companies Index
£1m
£100m
£10bn
£10m
£1bn
£100bn
MINI (£56m)
Numis 1000
ex ICs (£185m)
Numis Large Cap
Index (£23.5bn)
Numis Smaller
Companies
ex ICs (£412m)
Source: Premier Miton, Numis, based on a logarithmic scale.
The Trust pursues a clearly differentiated strategy,
illustrated by the fact that the average unweighted market
capitalisation of the holdings within its portfolio is £56m,
which compares to an average of £23.5bn for the Numis
Large Cap index, £412m for the Numis Smaller Companies
ex Investment Companies Index and £185m for the Numis
1000 Index ex Investment Companies. The Trust’s portfolio
may therefore produce different returns from those of the
mainstream stock market indices.
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Annual Report 2023
“ At this stage most microcap
share prices remain deeply
depressed and almost
wholly underappreciated.”
Ashe Windham
Chairman
The report covers the full year to 30 April 2023,
a period which has proved to be very testing
for equities, and especially for the smallest UK
quoted companies. The UK Bank rate moved from
0.75% in April to 5.0% in June 2023, a scenario which
has seldom proved advantageous to small cap stock
prices. In the aftermath of the ill-fated Liz Truss
administration’s Mini-Budget in September 2022,
Sterling fell to a forty year low against the Dollar,
hitting $1.07. Global equities had already suffered a
significant decline since the unwarranted Russian
invasion of Ukraine on 24 February 2022. This
adverse trend persisted into the year under review,
although stock markets generally staged a modest
recovery in the second half of the year to April 2023.
Usually, during unsettled markets the most resilient
equities are often equity income or ‘value’ stocks.
Given the large weightings of these stocks in
the main UK market, it was amongst the better
performing indices globally, both during the period
of market weakness up to September 2022, and
subsequently. In total return terms the Numis Large
Cap Index is up 8.3% (April 2022 to April 2023).
Over the past few years, investment managers have
substantially reduced their holdings in UK equities. I
was astonished to learn from New Financial, a think
tank, that in 1997 53% of British pension funds’ total
assets were invested in UK stocks: the figure 25 years
later is 6%. Looking at it another way, since 2000, the
share of the UK stock market owned by UK pensions
and insurance companies has fallen from 39% to
just 4%. Against these headwinds it is unsurprising
that many UK equities continue to languish
on low valuations. In your Manager’s view, the
outperformance of the Numis Large Cap Index over
the last two years highlights the scale of UK inflows
from overseas investors as they start unwinding
their underweight positions in low-betaequities.
In marked contrast to the UK mainstream stocks,
whilst the share prices of AIM-listed small and
microcaps had already declined severely in the first
four months of 2022, they have fallen quite a lot
further during the period. It is disappointing that
they did not recover during the second half of the
year. It appears that the ongoing OEIC redemptions
from domestic investors have not yet been offset
by inflows from global investors into UK small and
microcaps. Over the year to April 2023, the Numis
1000 Index was down 11.2%.
Chairman’s Statement
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The vast majority of UK microcaps were already
standing on unusually low valuations even prior
to their share price weakness over this past year.
The low average price-to-book of holdings in the
portfolio highlights the value to be found in owning
the Trust.
Earnings and Dividends
Earnings for the year were 0.03p per share (2022:
0.15p per share) on the revenue account. Earnings
on the capital account consisted of a loss of 28.96p
per share (2022: a loss of 13.91p per share). Earnings
on the revenue account reflect both portfolio
changes and microcap companies seeking to
retain cash to invest. As far as setting the dividend
is concerned, the Directors have always given the
Manager maximum flexibility to follow the course
that will lead to the best results for shareholders. As
Directors, we regard the dividend as a useful by-
product of the investment process but not a target
in itself. This year, your Board is recommending to
maintain the prior year final dividend of 0.15p per
ordinary share, subject to approval by shareholders
at the AGM; this will be paid on 26 October 2023 to
shareholders on the register on 29 September 2023.
Performance
With the dearth of buying interest in UK microcaps
over the last two years, marginal sellers have
dominated the direction of share prices. In light
of current market trends, even microcaps which
reported results better than expectations continue
to languish in terms of share price appreciation.
The largest holding in the fund, Yu Group, was easily
the best contributor over the year, adding 2.5%
toreturns.
Regrettably, there have been precious few other
microcap winners this year. Your Manager invested
in a secondary issue by Petro Matad mid-year, a
Mongolian oil business with some high impact wells.
If it performed strongly, the Manager anticipated
not even having to wait for the drilling results,
and so it has proved. To date it is the second-best
contributor to returns and the Manager has been
selling some shares at more than double the
placing price.
Meanwhile, small and microcaps that have, even
modestly, missed their targets have typically been
subject to dramatic weakness in their share prices.
For example, the share prices of HeiQ fell 74%,
Aferian dropped 73%, and Saietta dived 71% over the
year to April 2023, even though all three companies
appear to retain strong balance sheets, attractive
corporate prospects, and the potential to generate
significant cash surpluses, albeit after slight delays.
They were the second, third and fourth worst
detractors during the year. Your Manager retains
all three as they continue to have strong balance
sheets, and anticipates that they will generate
substantial cash surpluses.
Live Company Group was the biggest detractor
during the year, given that its share price had risen
well during March and April 2022, ahead of a K-POP
concert it was organising. Although the Trust took
some profits at 6.2p, and modestly supported a fund
raising in July at 4p, Live Company has not ended
up generating the paybacks that were anticipated.
Hence, the Trust has subsequently sold down the
holding later in the year at lower prices, at a cost to
returns of 1.8%.
In addition, with the ongoing strength of large
UK companies, the FTSE Put Option cost the Trust
0.9% over the year to April 2023. Unfortunately, there
is no ‘over the counter’ Put Option which more
closely correlates with our microcap universe.
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Chairman’s Statement continued
Overall, the Trust’s NAV has fallen by 29.3%, from
91.05p at the end of the April 2022 to 64.20p as of
30 April 2023. Generally, the share prices of some
small caps further up the market capitalisation
range did pick up a little during the second half
of the year, but at this stage most microcap share
prices remain deeply depressed and almost wholly
underappreciated.
Portfolio activity
Your Manager has become more cautious about
UK-quoted microcaps operating in economies
where there is an increasing risk of them running
out of hard currency as the Federal Reserve and
other central banks seek to control inflation.
Profits were taken in microcap holdings that had
performed strongly to enable reinvestment in
others that remain on unusually low valuations. Your
Manager continues to avoid stocks that risk running
out of cash, as distressed fund raisings by microcaps
are not only destructively dilutive, but can suck
capital from successful holdings to fund companies
with more uncertain prospects.
Numerous portfolio holdings reported resilient
trading despite their weak share prices. Some of
these were added to using the capital released
from sales. When global markets bottomed
out during September and October last year,
your Manager also reduced the portfolio’s
cashweighting.
Additionally, opportunities remain to invest in
stocks that appear to have disproportionate upside
potential. Your Manager is most interested in
those companies with prospects that are not closely
correlated with others in the portfolio. Improved
diversification enhances portfolio returns, especially
when unexpected geopolitical events occur.
Over the year, the largest new portfolio holding was
Shield Therapeutics, a lowly valued FDA-approved
iron-supplement pill business with rapidly growing
sales. Shield’s management plans to accelerate the
Company’s future cash surpluses greatly by sharing
the upside with a business that has a much larger
sales force. The Trust also invested in two maturing
resource stocks: Cleantech Lithium, a company
that can bring low-cost lithium-infused brine into
production relatively quickly, and Petro Matad as
noted earlier. Both share prices appreciated rapidly
after the placings, and the Trust has already taken
some profits.
Given the weak valuation comparatives, there were
very few microcap IPOs. Only those that are really
lowly valued, with prospects that are uncorrelated
with the rest of the portfolio, have been considered.
SmartTech247, a cybersecurity company that
appears to be taking market share rapidly, has
performed well since issue, although Lifesafe
Holdings, a manufacturer of a universal fire
suppressant that actively cools fires, has suffered
share price weakness despite exceeding market
forecasts since issue.
Finally, the Trust supported a number of secondary
placings to fund acquisitions and growth. The most
significant this year was Journeo, which provides
train and bus information systems, and made an
acquisition that it is anticipated will greatly enhance
the Company’s prospective surplus cashbalances.
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Prospects
Underlying stock market trends often persist for
many years.
Over the decades of globalisation, large cap
strategies with the prospect of enhanced capital
appreciation outperformed. In your Manager’s
view, the Nifty Fifty of the 1960s have parallels to
today’s “FAANG” megacaps (Facebook, Amazon,
Apple, Netflix and Google). The Nifty Fifty also had
a very strong period of outperformance in the early
1970s when inflationary pressures first became
an issue. Later in the decade, when central banks
made combating inflation their highest priority,
market valuations normalised, and later corporate
profit margins collapsed, so the Nifty Fifty in the US
underperformed badly for many years. If the FAANG
megacaps were to mimic this outcome, there would
be a degree of institutional urgency to identify asset
classes that can generate attractive returns in a
genuinely less correlatedmanner.
Your Manager believes that companies generating
decent cash surpluses will become sought after.
The returns of corporates generating a stream of
good and growing cash surpluses should prove
independent of the fluctuations of the market.
Given that most institutional investors are heavily
weighted in megacaps, we believe their most
pressing issue in the future will be to identify
different investment pools that can deliver attractive
returns and that are less reliant on the appreciation
of markets.
In this regard, I remain reassured that the Trust has
a greater investment universe and opportunity to
add value through stock selection than mainstream
funds as the number of companies with a market
capitalisation of less than £150m remains greater
than those that are larger. Furthermore, the
upside potential for microcaps should be greater
than that of the largest UK stocks, for as the old
Stock Exchange maxim goes: ‘Elephants don’t
gallop!’. After all, the Numis Small Cap Plus AIM
Index has underperformed the Numis Large Cap
Index by 36.1% over the last two years. It is not
just that AIM-listed valuations are starting from
much lower levels than those of larger company
equivalents, but also that the large UK company
valuations themselves are also cheap relative to
international comparatives.
In short, your Directors believe that Miton UK
MicroCap Trust has the potential to have bursts
of strong returns (as it did between March 2000
and May 2021). And when quoted microcaps start
at what we consider to be extraordinarily low
valuations, combined with such modest institutional
allocations, favourable trends such as these can
easily be sustained over the coming decade or two.
As I wrote in my last report, the Directors are grateful
for your forbearance in holding the Trust’s shares
over what has been a dismal period and we are
hopeful that your patience will be rewarded in the
not-too-distant future.
Share Issuance
As the shares did not trade at a sufficient premium
to the prevailing Net Asset Value (NAV) during the
year under report, there were no opportunities to
issue shares. We will be seeking approval at the
AGM in September 2023 to renew this useful facility.
Issuing shares at a premium to NAV is to the benefit
of all shareholders as it dilutes the fixed charges
which the company bears.
Share Redemption
Each year your Directors offer the facility for
shareholders to redeem their holdings, in part or
whole, at or close to the prevailing net asset value.
The Directors are offering this facility again this
year and the timetable is laid out on page 84 of
this report. Should the redemption be substantial
then the Directors may take the decision to form
a separate redemption pool and it may take a
number of weeks/months to liquidate the pool
appropriately. As has previously been reported, the
Directors moved the 2023 redemption point from
30 June 2023 to 2 November 2023, to align with the
interimreport.
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Annual Report 2023
Chairman’s Statement continued
Board Refreshment
I am delighted to report that, following the
engagement of a full service executive search
consultant, Mrs Louise Bonham joined the Board on
15 December 2022. Louise replaces Ms Jan Etherden,
who stepped down on the same date. We will miss
Jan’s wise counsel, her legendary ability to put her
finger on any emerging problems and we wish
her well. Louise, whose background is mostly in
property, is a chartered accountant by training and
is a Fellow of the Institute of Chartered Accountants
of England and Wales. Louise cut her teeth with
Deloitte and Deutsche Bank and has held a wide
range of senior appointments, including at CBRE
and Cushman & Wakefield. Louise will take over
from Peter Dicks by the end of 2024 as Chair of the
Audit Committee.
Directors’ Remuneration
The Directors are entitled to an increase in their fees
by the percentage uplift in CPI each Spring, in line
with the Directors’ Remuneration Policy. The figure
which applies to fees from 1 May 2023 is just over
10%. Cognisant of the disappointing performance of
the Company’s net asset value and share price, the
Directors have unanimously agreed not to take any
increase in their fees this year.
Environmental, Social and Governance (ESG) issues
Your Company’s Manager follows Premier Miton’s
responsible investing policy, which is to integrate
responsibility for ESG into the investment process.
It also actively engages with investee companies
in order to deliver improved outcomes for all
stakeholders whilst taking an active approach to
voting on company resolutions at annual general
meetings of investee companies. Premier Miton
has been a signatory of the UN Principles for
Responsible Investment since January 2020, an
organisation which encourages and supports
its signatories to incorporate ESG factors into
investment and ownership decisions. Premier Miton
has adopted a banned weapons exclusion policy
and utilises third party data to maintain a list of
such companies.
Whilst Premier Miton does not exclude any
other companies or sectors for ESG reasons,
its active investment approach ensures that
exposure to so called ‘controversial companies’ is
generallylow.
Annual General Meeting
The Annual General Meeting of the company will
be held at 11.00 am on Tuesday 26 September 2023
at the offices of Stephenson Harwood, 1 Finsbury
Circus, London EC2M 7SH. Your Directors look
forward to this opportunity to meet shareholders
and especially retail investors, as there are few other
opportunities to engage with the latter. Aside from
the formal business of the AGM, Gervais Williams
and Martin Turner will give a presentation on the
Company’s prospects and at the end of proceedings
we will be offering a sandwich lunch. We hope that
a number of shareholders will be able to attend, and
would encourage those wishing to do so to register
their interest via a link that will be available on the
Company website, www.mitonukmicrocaptrust.com,
in the preceding six weeks. There you will also find
an option to sign up to receive details of future
investment trust events organised by Premier Miton.
Ashe Windham
Chairman
10 July 2023
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Which fund managers have day-to-day
responsibility for the make up of the
Trust’sportfolio?
Since the launch of the Trust in April 2015, the day-
to-day management of the Trust’s portfolio has
consistently been carried out by Gervais Williams
and Martin Turner.
Gervais Williams
Gervais joined Miton in March 2011 and is Head of
Equities at Premier Miton. He has been an equity
fund manager since 1985, including 17 years at
Gartmore. He was named Fund Manager of the Year
by What Investment? in 2014. Gervais is also a board
member of the Quoted Companies Alliance and a
member of the AIM Advisory Council.
Martin Turner
Martin joined Miton in May 2011. He and Gervais
have had a close working relationship since 2004,
with complementary expertise that led them
to back a series of successful companies. Martin
qualified as a Chartered Accountant with Arthur
Anderson and had senior roles and extensive
experience at Merrill Lynch and Collins Stewart.
What were the principal stock contributors and
detractors in the portfolio over the year to April
2023?
In general, the Trust’s portfolio is invested in stocks
that have relatively strong balance sheets, and
hence, even if there is a delay in meeting their
current targets, they are unlikely to carry the risk of
requiring additional risk capital when their share
prices are weak. Over the year to April 2023 however,
sellers of microcap shares were persistent and
tended to outnumber microcap buyers, so the share
prices of most microcap stocks fell, even if their
prospects remained unchanged. This is the principal
reason why the NAV of the Trust fell 29.3% this year.
Given the unfavourable background, when the
prospects of portfolio holdings did deteriorate
somewhat, their share prices often fell precipitously.
For example, the share prices of Saietta, HeiQ and
Aferian all fell by between 70% and 75% because
they announced certain contracts were delayed in
the current year. These holdings have been retained
in the portfolio because we believe their very
substantial longer term upside potential remains
in place. They collectively reduced the Trust’s return
by 4.1% over the year under review. Interestingly,
Accrol which was the most adverse detractor to
the Trust’s return last year, was retained in the
portfolio for the same reasons and became one of
the best contributors to the Trust’s return this year
adding0.5%.
As is usual even in a year when the Trust’s return
is strong, there are some stocks where prospects
deteriorated, and the upside originally envisaged
now appears to be compromised. These stocks
have been sold, and this year included Pressure
Technology, IOG and Lamprell. Collectively they
reduced the Trust’s return in the year by 2.9%.
Even when stocks exceeded forecasts the
unfavourable background meant that their share
prices did not necessarily rise as much as might
have been expected. There were a few exceptions
– a new holding in Zoo Digital, purchased early in
the year, appreciated significantly and given that
the capital could be reinvested in other portfolio
holdings at even lower valuations, it was sold for a
profit later. The share price of a new holding in Petro
Matad, also appreciated so rapidly that a portion was
sold later in the year. Yu Group, a utility that supplies
energy to corporates, was the most significant
contributor to return as its share price appreciated
by 176% after a series of above expectation
statements. Yu Group alone added 2.5% to the
Trust’s return in the year, and yet, given its prospects
it is still standing on a very overlooked valuation
in our view even after its appreciation. Overall, this
Investment Manager’s Report
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example underlines why a microcap portfolio can
deliver such strong returns over the longer term.
The Trust’s individual holdings have the potential
to appreciate by a multiple of their initial purchase
price. There were a few examples this year, but in a
normal year these would be more numerous.
In the light of the substantial decline in the Trust’s
NAV over the last two years, to what degree have its
longer-term prospects deteriorated?
After the global pandemic, and the giant financial
stimulus, global assets valuations rose to very
elevated levels in early 2021. Subsequently, over the
two years to April 2023, global asset valuations have
retreated somewhat, back towards prior norms, due
to inflationary pressures and interest rate rises.
Interestingly, although the UK stock market
underperformed most international exchanges
during the globalisation decades, over the last
two years it has now started outperforming all
the international major indices. Specifically, the
recent outperformance is all the more impressive
given that UK open ended investment companies
(“OEICs”) have been redeemed at a near-record pace
for several quarters. In our view, this underlines just
how undervalued the UK stock market had become
over the globalisation decades when assets paying
good and growing dividends were outpaced by
those with ambitious growth targets.
During the globalisation decades, UK-quoted
microcaps were also overlooked. Whilst they did
outperform during the year to April 2021, as few
pay significant dividends, their share prices have
been vulnerable to the global decline in asset
valuations and the ongoing selling of UK equities
over the last two years. The share prices of quoted
microcaps have underperformed those of the UK
majors by a very wide margin. Since many were
undervalued relative to the UK majors even prior
this underperformance, microcaps are in many
cases now standing on low valuations in our view.
Clearly, the rise in interest rates and the economic
slowdown will have reduced the longer-term
prospects for some. But when their prospects
are considered in absolute terms, it should be
remembered that corporate sales tend to rise with
inflation. In addition, those with strong balance
sheets stand at an advantage compared to those
which are capital constrained. Furthermore, if there
is a major rise in corporate insolvencies, then those
that are well financed can expand into the vacated
markets, or acquire the overindebted but otherwise
viable businesses, debt-free from the receiver at
very low prices.
The bottom line is that despite the current
economic slowdown and weak microcap share
prices, we believe the prospects for most of the
Trust’s holdings are actively improving. Their
relatively unleveraged balance sheets, and ongoing
access to external risk capital (albeit at weak share
prices) become all the more valuable when most
private competitors are facing increasingly binding
debt and capital constraints.
What are the main factors that have driven the
Trust’s returns since it first listed in April 2015?
As noted earlier in the report, the best performing
group of stocks in the UK stock market since 1955
(the start of the data series) have been quoted
microcaps. When the investment universe is
narrowed further, to include solely microcaps
standing on undemanding valuations (this is
typically determined by a low Price/Book ratio),
the scale of microcap outperformance is even
more marked. With this background in mind, the
Trust’s portfolio is principally invested in UK quoted
microcaps standing on what we consider to be
cheap valuations at the time of purchase. When
these microcaps succeed, their share prices can rise
by a multiple of the purchase price whereas this is
less usual amongst the mainstream stocks.
Investment Manager’s Report continued
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After the Trust was set up in April 2015, initially
globalisation continued to enhance the returns
of global stock markets, with the UK stock market
being outpaced by other international exchanges.
With the global pandemic and Ukrainian war, the
vulnerabilities of globalisation were highlighted,
and inflationary pressures returned. Interestingly,
whilst most global stock markets have declined
over the last two years, the largest UK stocks have
outperformed.
This change of pattern is all the more remarkable,
as over the period of Brexit negotiations, most UK
institutional investors have become more cautious
about investing in the UK stock market. Alongside,
UK institutions have further redeemed UK equities
to increase weightings in other assets over the
last two years. Crucially, in our view, international
investors have become more interested in dividend
income strategies over recent years, and hence the
UK mainstream stocks have outperformed, even
through a period of heavy OEIC redemptions. In
contrast, UK microcaps missed out on international
interest, so for them the local selling of UK equities
have further depressed their share prices.
The net effect is that microcap share prices that had
already fallen to unusually low valuations a couple
of years ago, have suffered additional share price
weakness. If anything, these adverse effects have
been particularly concentrated at the bottom end
of the market capitalisation range where the Trust
invests, and hence the Trust’s returns are lower than
the comparative indices at present.
Total returns since launch in April 2015
As outlined elsewhere in this report, we are
greatly encouraged to see the UK stock market
outperforming most international peers again.
In time, we anticipate the new pattern will
spread down the market capitalisation bands,
enhancing the returns of the Trust’s strategy. In
our view, we saw a glimpse of the Trust’s potential
between March 2020 and April 2021 when its NAV
rose by over 150%.
Will institutional investors ever return to the UK
quoted microcap investment universe?
Typically, over multi-decade periods, the returns on
global stock markets are principally driven by the
initial dividend yield at the time of purchase and
how much it grows over time. In contrast, during
globalisation periods, stock market returns are
typically less closely correlated to dividend yields.
Specifically, during globalisation, the deflation on
imported goods offsets local inflation so inflationary
pressures become subnormal. During these periods,
asset valuations and corporate profit margins
both rise to exceptional levels. Typically, stock
exchanges related to growth companies are the
bestperformers.
Source: Morningstar
0
10
20
30
40
Percent
Numis
All-Share
Numis Smaller
Companies ex ICs + AIM
Numis 1000
Index
MINI
NAV
60
50
49.6
42.5
44.8
33.7
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The bottom line is that substantial capital gains
have been abundant during globalisation.
Stock markets with returns principally related
to compounding good and growing dividends, such
as the UK, have been outpaced. Over three decades,
institutional interest in the UK stock market has
deteriorated, so it has become undervalued and
underrepresented compared with others. More
recently, Brexit and the ongoing OEIC liquidations
have led to UK microcaps falling to valuations that
are even more overlooked than the majors, coupled
with little institutional participation at present.
We believe the new pattern will also be associated
with an ongoing depreciation of asset valuations
and corporate profit margins that will generally
undermine the returns for international stock
markets. In contrast to the period of globalisation,
the net effect could be that most international
stock markets deliver disappointing returns.
Meanwhile, we anticipate that the UK stock market
will continue to outperform, as it did between
1965 and 1985, with UK microcaps being the best
element, like a rich seam within a world of relatively
disappointingreturns.
In time, as UK institutions skew their portfolios back
into cash compounding dividend stocks, we expect
them to rebuild their UK holdings. As the best UK
returns are likely to be found within microcaps,
we anticipate that institutional capital will start to
waterfall down the market capitalisation range.
It is important to note that more than half of all
quoted companies listed in London are microcaps
with market capitalisations of below £150m!
Number of quoted companies in the UK below and
above £150m market capitalisation
Overall, as the recent lag in microcap performance
begins to unwind, we believe there are excellent
opportunities for a specialist trust like Miton
UK Microcap Trust to gather very significant
institutional interest.
What are the prospects for the Trust?
As noted above, we believe that the Miton UK
MicroCap Trust strategy differs from most others, in
having the potential to deliver an attractive return even
at times when the mainstream stock market indices
may not be rising. Given that it has underperformed
so considerably over recent years, why do we retain
such strong confidence in its prospects?
1. Specifically, UK quoted microcaps tend to
operate in industry sectors where demand
is often growing on a structural basis, rather
than in line with the cyclical fluctuations of
the global economy. Whilst this feature was
easy to ignore when the global economy was
growing rapidly, it becomes more obvious
when global demand is constrained by interest
rate rises. Clearly, as globalisation fades, this
feature is a major advantage for the Trust’s
quoted microcap investment universe.
Alongside it was worth noting that the historic
data is reassuring, as when global growth was
challenged in the past, UK quoted microcaps
tended to outperform.
Source: Premier Miton
0
100
200
300
400
Number of companies
600
500
Below £150m Above £150m
£15.9bn
combined
market
capitalisation
£2,039bn
combined
market
capitalisation
Investment Manager’s Report continued
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2. When the cost of labour is rising and corporate
profit margins are under pressure, it is not
uncommon for numerous businesses to run
out of cash. Over-indebted businesses in
particular often find they are obliged to sell
parts of their company, even at disappointing
valuations, to repay debt. Others end up in
insolvency. At these times, quoted companies
specifically have the advantage, as they
can raise additional capital to acquire
these operations at low valuations, with the
prospect of rapid cash paybacks. Whilst such
transactions enhance the returns of large
mainstream quoted companies, the same
deal for a quoted microcap has proportionally
a much greater impact. Hence during periods
when mainstream stock market indices might
be unsettled, quoted microcaps sometimes
have the potential to step up their returns.
To summarise, whilst global share prices have
steadily appreciated during globalisation, institutions
have been disinterested in UK microcaps because
they were withdrawing capital from the UK. In
contrast, now that the UK stock market is starting to
outperform again, we anticipate that UK institutional
capital will also return. Hence, whilst Miton UK
MicroCap Trust may have delivered modest returns
since issue, we believe its strategy is ready to deliver
premium returns in the post globalisation era.
The distinctive features of the Miton UK MicroCap
Trust strategy are, in our view, superbly crafted for
the changing global dynamics. Importantly, since
the scale of the UK quoted microcap investment
universe is, by definition, tiny even marginal
changes in institutional interest can quickly become
self-reinforcing, further enhancing their prospective
returns, justifying even greater allocations. Prospects
for quoted microcaps are the best they have been
for thirtyyears.
Gervais Williams and Martin Turner
10 July 2023
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Business Model
Business and status the Company
MINI was incorporated on 26 March 2015 and
its Ordinary Shares were listed at 50p on the
London Stock Exchange on 30 April 2015. It is
registered in England as a public limited company
and is an investment company in accordance
with the provisions of Sections 832 and 833 of the
Companies Act 2006.
The principal activity of the Company is to carry
on business as an investment trust. The Company
intends at all times to conduct its affairs so as to
enable it to qualify as an investment trust for the
purposes of Sections 1158/1159 of the Corporation Tax
Act 2010 (“S1158/1159”). The Directors do not envisage
any change in this activity for the foreseeable future.
The Company has been granted approval from
HM Revenue & Customs (“HMRC”) as an investment
trust under S1158/1159 and will continue to be treated
as an investment trust company, subject to there
being no serious breaches of the conditions for
approval.
The principal conditions that must be met for
continuing approval by HMRC as an investment
trust are that the Company’s business should
consist of “investing in shares, land or other assets
with the aim of spreading investment risk and
giving members of the company the benefit of the
results” and the Company may only retain 15% of its
investment income. The Company must also not be
a close company. The Directors are of the opinion
that the Company has conducted its affairs for the
year ended 30 April 2023 so as to be able to continue
to qualify as an investment trust.
The Company’s status as an investment trust allows
it to obtain an exemption from paying taxes on the
profits made from the sale of its investments and
all other net capital gains. Investment trusts offer
a number of advantages for investors, including
access to investment opportunities that might not
be open to private investors and to professional
stock selection skills at lower cost, and the ability
to hold illiquid positions in uncertain market
conditions.
Investment Policy
The Company’s full investment policy is set out on
page 85 and contains information on the policies
which the Company follows relating to asset
allocation, risk diversification and gearing, and
includes maximum exposures, where relevant.
The Company invests in a portfolio of UK
quoted companies with the objective of achieving
capital growth by investing in a portfolio of stocks
that are well placed to generate an attractive cash
payback from productivity improvements.
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A Summary of the Total Costs Involved in Managing the Trust
Investment trusts differ from some other forms of
collective funds in that they are set up as independent
corporations with their operations overseen by the
Board which is separate from and independent of the
fund management group that manages the capital.
In addition, they are listed, with their shares traded
on regulated exchanges – which, in our case, is the
London Stock Exchange including the Alternative
Investment Market.
The Company is a closed-ended company with no
day-to-day redemptions impacting the size of the
fund (excluding the annual redemption). Shareholders
are able to invest or exit the Company through their
broker/platform provider.
Running costs are deducted from the total assets
of the Company on a pro-forma basis so the NAV
published each day is expressed after costs. The
figures below are the costs paid by the Company
over the year under review and are expressed as
a percentage of the average asset value of the
Company over the year to 30 April 2023 of £69,083,000
(2022: £104,901.000).
2023
%
2022
%
Fund management fees
1
0.86 0.85
Administration costs, including
Company Secretarial fees 0.30 0.17
Directors/Auditor/Depositary/
Registrar/Custodian and
Stockbroker fees 0.38 0.26
All other direct costs, including
VAT on the fees above, plus
marketing, legal 0.18 0.13
Ongoing charges 1.72 1.41
In addition, the Company also pays transaction
charges
2
that are levied when shares are bought or
sold in the portfolio. These are dealing commissions
paid to stockbrokers and stamp duty, a Government
tax paid on transactions (which is zero when dealing
on the AIM/Aquis exchanges).
2023
%
2022
%
Costs paid in
dealing commissions 0.05 0.03
Stamp duty, a Government tax
on transactions 0.01 0.01
Overall costs including
transaction charges 1.78 1.45
The overall costs of the Company for the period were
1.78%. This compares with the Company’s average
NAV total return since issue of 33.7% (after deduction
of costs).
1
The basic management fee payable to the AIFM is calculated at the rate of one-twelfth of 0.9% (1% prior to 1 September 2020) of the average market
capitalisation of the Company up to £100m, 0.8% per annum on the average market capitalisation above £100m, on the last business day of each calendar
month. The basic management fee accrues daily and is payable in arrears in respect of each calendar month. For the purpose of calculating the basic fee, the
‘adjusted market capitalisation’ of the Company is defined as the average daily mid-market price for an Ordinary Share and C share (when in issue), multiplied
by the number of relevant shares in issue, excluding those held by the Company in treasury, on the last business day of the relevant month.
In addition to the basic management fee, and when the Redemption Pool is in existence, the AIFM is entitled to receive from the Company a fee calculated at
the rate of 0.9% (1% prior to 1 September 2020) of the NAV of the Redemption Pool on the last business day of the relevant calendar month.
2
Transactions conducted by the Company also involve some loss of value due to the dealing spread in stock exchange prices. Spreads range from less than 1%
in the most actively traded large cap stocks to more than 10% in the smallest, most infrequently traded stocks. The exact loss of value is difficult to determine
precisely, but is normally less than half of the dealing spread at the time of the transaction. In a large percentage of the transactions, especially in the smallest
stocks, the stock is passed through from sizeable seller to sizeable buyer on a ‘put through’ basis with potentially no loss of value through the spread. During the
year under review, this cost is believed to be very modest in comparison to the NAV.
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Portfolio Information
as at 30 April 2023
Rank Company
Sector &
main activity
Valuation
£000
% of
net assets
Dividend Yield*
%
1 Yu Group Utilities 2,830 4.6 0.5
2 MTI Wireless Edge Telecommunications 1,938 3.2 4.7
3 Cyanconnode Holdings Telecommunications 1,721 2.8 –
4 Andrada Mining Basic Materials 1,580 2.6 –
5 Frontier IP Group Industrials 1,438 2.4 –
6 TruFin Financials 1,400 2.3 –
7 Accrol Group Consumer Staples 1,226 2.0 –
8 Shield Therapeutics Health Care 1,026 1.7 –
9 Braemar Industrials 973 1.6 3.9
10 Petro Matad Energy 945 1.6 –
Top 10 investments 15,077 24.8
11 Eneraqua Technologies Industrials 929 1.5 0.4
12 Kistos Energy 928 1.5 –
13 Feedback Health Care 909 1.5 –
14 Sureserve Group Industrials 891 1.5 –
15 Van Elle Holdings Industrials 863 1.4 3.3
16 Totally Health Care 860 1.4 4.7
17 Kinovo Industrials 840 1.4 –
18 Supreme Consumer Staples 805 1.3 4.5
19 SmartTech247 Technology 785 1.3 –
20 Elemental Altus Royalties Basic Materials 727 1.3 –
Top 20 investments 23,614 38.9
21 UP Global Sourcing Holdings Consumer Discretionary 715 1.2 5.2
22 Kefi Gold and Copper Basic Materials 708 1.1 –
23 Savannah Resources Basic Materials 698 1.1 –
24 Zinc Media Group Consumer Discretionary 686 1.1 –
25 Marwyn Value Investors Financials 675 1.1 10.1
26 Conygar Investment Company Real Estate 668 1.1 –
27 Atlantic Lithium Basic Materials 664 1.1 –
28 Tirupati Graphite Basic Materials 656 1.1 –
29 CML Microsystems Technology 649 1.1 2.0
30 Journeo Industrials 647 1.1 –
Top 30 investments 30,380 50.0
Balance held in equity instruments 25,688 42.3
Total equity investments 56,068 92.3
Listed Put Option
FTSE 100 – December 2023 169 0.3
Other net current assets 4,517 7.4
Net assets 60,754 100.0
* Source: Refinitiv. Based on historical yields and therefore not representative of future yields. Includes special dividends where known.
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The tables above set out how the portfolio’s capital
was deployed as at 30 April 2023. The data is shown
in terms of the classifications or the stock markets
on which the holdings are listed. UK smaller
quoted companies that are not listed on the Main
Market of the London Stock Exchange are normally
quoted on AIM. The AIM market is set up to meet
the requirements of smaller listed companies
providing the ability to raise funds. This also provides
liquidity in acquisition and disposal of shares. The
Company additionally holds certain shares on the
Aquis Exchange, a regulated exchange.
The cash position and the available revolving
credit facility (which may be drawn upon demand)
together provide the Company with £9.6m of
cash resources. This enables the Company to take
advantage of investments at opportune times.
The warrants give the right, but not the obligation,
to buy or sell a security at a certain price before
expiration. The current value of the holdings
above are valued at the exercise price where
these are ‘in the money’. The investment income
above comprises the income from the portfolio
as included in the Income Statement for the
year ended 30 April 2023 attributable to the
various sectors. The returns of the Company are
from Capital and Revenue. Investments for the
Company’s portfolio are principally selected on
their individual merits. As the portfolio evolves,
the Manager continuously reviews the portfolio’s
overall sector and index balance to ensure that it
remains in line with the underlying conviction of the
Investment Manager. The Investment Policy is set
out on page 85, and details regarding risk factors
and diversification and other policies are set out
each year in the Annual Report.
Portfolio exposure by sector (%)
16.2
10.010.1
7.67.7
1
.
9
7.6 7. 5 4.0
4.77.4
15.3
Actual annual income by sector (%)
£60.75 million
£0.80 million
Net asset by asset allocation (%)
AIM/AQUIS
Exchanges
Main Market
Cash and
cash equivalents
International
Equities
FTSE 100 Option
79.7 7.4
11.4
1.2
0.3
Basic Materials
Industrials
Energy
Financial Services
Health Care
Telecommu-
nications
Consumer
Discretionary
Technology
Cash and
cash equivalents
Utilities
Consumer Staples
Real Estate
15.0 12.831.2 11.2 9.2 5.3 4.5 4.2
4.1
2.5
Financial Services
Industrials
Telecommu-
nications
Consumer
Discretionary
Basic Materials
Health Care
Consumer
Staples
Technology
Real Estate
Energy
£60.75 million
Source: Refinitiv.
Portfolio as at 30 April 2023
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Performance and Risks
Key Performance Indicators
The Board reviews the Company’s performance by reference to a number of key performance indicators
(“KPIs”) and considers that the most relevant KPIs are those that communicate the financial performance and
strength of the Company as a whole. The Board and the Investment Manager monitor the following KPIs:
•
NAV performance
Whilst the Trust does not have a formal
benchmark, its returns are routinely compared
with the performance of the peer group and
the Numis 1000 Index to provide context. Over
the year, the NAV total return of the Trust was
-29.3%, which compares to -7.2% for the peer
group and -11.2% for the Numis 1000 Index.
Since the Company’s listing in April 2015,
the NAV total return was 33.7%, which compares
to 68.6% for the peer group and 44.9% for the
Numis 1000 Index. The Board believes that a UK
investment strategy that delivers returns that
are not especially closely correlated with the
mainstream UK indices offers diversification
benefits to shareholders.
•
Daily stock market trading volumes of
the Trust
Over the year, the average daily volume of
the Company’s shares traded each day was
approximately 94,000 and, since IPO, an
average of approximately 234,000 shares have
been traded daily. This indicator tends to be
elevated when the Trust is outperforming,
although it may be assisted by clearing all the
overhanging sellers in the Trust each year at
the time of the redemption. Generally, new
buyers like to know there aren’t any major
sellers that are potentially overhanging, waiting
to exit.
•
The discount/premium of the share price in
relation to the NAV
At times, the number of shareholders looking
to transact in the Company’s shares exceeds
the market’s daily liquidity. Imbalances like this
are normally cleared through stock market
transactions over a few weeks, but on occasion
these imbalances can become persistent and
the Company’s share price diverges from the
daily NAV. The Company has an objective to
keep this divergence to a minimum. Over
the year under review, the Company’s share
price has traded on average 6.97% below its
dailyNAV.
•
Ongoing charges
The ongoing charges on the Ordinary Shares
for the year to 30 April 2023 amounted to 1.72%
(30 April 2022: 1.41%) of total assets. Further
details are set out on page 97.
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Principal Risks and Uncertainties
The Company is exposed to a variety of risks and uncertainties that could cause its asset price or the income
from the investment portfolio to reduce, possibly by a sizeable percentage in the most adverse circumstances.
The principal financial risks and the Company’s policies for managing these risks and the policy and practice
with regard to the portfolio are summarised in note 18 to the financial statements.
The Board, through delegation to the Audit and Management Engagement Committee, undertakes a robust
annual assessment and review of the principal risks facing the Company, together with a review of any new
and emerging risks which may have arisen during the year, including those that would threaten its business
model, future performance, solvency or liquidity. These risks are formalised within the Company’s risk matrix.
Information regarding the Company’s internal control and risk management procedures can be found in the
Corporate Governance Statement on pages 37 and 43.
Listed below is a summary of the principal and emerging risks identified by the Board and actions taken to
mitigate those risks.
Risk Mitigation
Investment and strategy
There can be no guarantee that the investment
objective of the Company will be achieved.
The Company will invest primarily in small
UK quoted or traded companies by market
capitalisation. Smaller companies can be expected,
in comparison to larger companies, to have less
mature businesses, a more restricted depth of
management and a higher risk profile.
These companies are normally traded less
frequently on the stock exchanges and, when
aggregated with holdings in other client funds
of the Investment Manager, the combined funds
may have a significant percentage ownership of
investee companies.
Many businesses are facing additional financial
challenges due to demand fluctuations, and/ or
additional cost of supply currently, due to the effects
of the Ukrainian war.
The Investment Manager has long experience of
managing portfolios of this nature, including dealing
in smaller capitalisation companies, and deploying an
approach that is designed to maximise the chances
of the investment objective being achieved over
longer-term time horizons. The Company is reliant
on its Investment Manager’s investment process. The
Board reviews and discusses the investment approach
at each Board meeting, and if it isn’t satisfied, in
extremis, it can appoint another Investment Manager.
The Board looks to mitigate the higher risk profile of
individual quoted smaller companies by ensuring that
the Company holds a well-diversified portfolio, both
by number of companies and areas of operation. The
Company’s diversified portfolio holds some stocks
where prospects have improved that offset some
others where they have deteriorated.
The Company is structured as a closed-ended fund,
which means that it is not subject to daily inflows
andoutflows of capital.
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Annual Report 2023
Risk Mitigation
Reliance on third parties
The Company has no employees and is reliant on
the performance of third-party service providers.
Failure by the Investment Manager or any
other third-party service provider to perform in
accordance with the terms of their appointment
could have a material detrimental impact on the
operation of the Company. This could include failure
of a counterparty on whom the Company is reliant.
The Board monitors and receives reports on the
performance of its key service providers. In relation
to the risk of counterparty failure, the Board reviews
the controls report of the Depositary.
The Board may, in any event, terminate all key
contracts on normal commercial terms.
Loss of key personnel/fund managers
The Company depends on the diligence, skill,
judgement and business contacts of the Investment
Manager’s investment professionals and its future
success could depend on the continued service of
these individuals, particularly GervaisWilliams and
Martin Turner.
The Company may decide to terminate the
Management Agreement should both Gervais
Williams and Martin Turner cease to be employees
of the Management group and if they are not
replaced by a person/s who the Company considers
to be of equal or satisfactory standing within three
months of one or both of their departures.
Share price volatility and liquidity/marketability risk
The market price of the Ordinary Shares, as with
shares in all investment trusts, may fluctuate
independently of their underlying NAV and may
trade at a discount or premium at different times,
depending on factors such as supply and demand
for the Ordinary Shares, market conditions and
general investor sentiment.
The Company may become too small to be
attractive to a wide audience, with lesser stock
market liquidity and a wider share price discount.
The UK’s vote to leave the EU and its
implementation introduced new uncertainties
and instability into the financial markets; likewise
COVID-19 and the Russia-Ukraine war have also had
an impact, which is ongoing.
The Company has in place an annual redemption
facility whereby shareholders can voluntarily tender
their shares. The Board monitors the relationship
between the share price and the NAV. The Company
has powers to repurchase shares should there be an
imbalance in the supply and demand leading to a
persistent and excessive discount. The Investment
Manager and, on occasion, the Directors maintain
dialogue with shareholders through regular
face-to-face meetings.
Performance and Risks continued
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25
The
Company
Strategic
Report Governance
Company
Accounts
Shareholder
Information
Risk Mitigation
Costs of operation
As stated, the Company relies on external service
providers. Many of these are paid on a basis where
their fees are related to the size of the Company (an
“ad valorem” basis). Others are for fixed monetary
amounts. Therefore, if the Company were to
shrink, through redemptions, buybacks or asset
performance, the cost per share of running the
Company would increase. This could make it harder
to achieve the investment objective.
The Board monitors the costs of all service providers.
The Board is also committed to the controlled
growth of the Company which would spread the
fixed costs over a larger asset base. In the event
that the Company were to decrease in size from
its current level, the Board has capped the total
costs at no more than 2% of the aggregate market
capitalisation. The ongoing charges for the year to
30 April 2023 amounted to 1.72% (30 April 2022: 1.41%).
Regulatory risk/change in tax status
The Company is subject to laws and regulations
enacted by national and local governments. Any
change in the law and regulation affecting the
Company may have a material adverse effect on the
ability of the Company to carry on its business and
successfully pursue its investment policy.
The Board receives regular updates from its
Secretary, Broker, industry representatives and
its Investment Manager on significant regulatory
changes that may impact the Company. The
Company’s ability to determine the shape of
regulatory or tax changes is limited and therefore
the Board aims to ensure that it is well informed and
prepared to respond to changes as they emerge.
Cyber Risk/IT Security
Errors, fraud or control failures by the Company’s
key service providers or loss of data through
increasing cyber threats or business continuity
failure could damage the Company’s reputation or
investors’ interests or result in losses.
The Board receives regular control reports
and cyber/IT policies from all material service
providers to ensure that controls are in place
including business continuity and disaster
recoveryarrangements.
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Risk Mitigation
The Trust may be subject to legal action by others
The investment portfolio comprises the principal
assets of the Trust, and is valued on their market
bid price along with its cash balances. One way to
realise a return for investors is to accept a takeover
offer, often at a premium to the market price. When
these transactions occur, the Trust may be in receipt
of cash proceeds, that are then reinvested in other
equities. When the acquirers are US companies,
the Trust is at risk that an acquirer subsequently
discovers that the commercial value of the business
acquired is not as anticipated, and may try to
reclaim some or all of the proceeds paid for the
acquisition from the vendors – which in our case is
the Trust.
The Trust would normally expect acquirers to
carry out their own due diligence on the assets
being acquired, and if there is subsequent
disappointment then to seek redress from
theiradvisers.
Major market event, climate change or geo-political risk
The Company is exposed to stock market volatility
or illiquidity as a result of a major market shock
due to a national or global crisis, geo-political
developments or the effects of climate change.
The impact of such risks, associated with the
portfolio or the Company itself, could result in
disruption to the operations of the Company
andlosses.
External risks over which the Company has no
control are always a risk. The Board is cognisant
of its reliance on the operations of the third-party
suppliers, including the Manager, to mitigate
risks arising from market events, climate change
and geo-political developments, such as a global
pandemic and Russia’s invasion of Ukraine.
The impact of climate change is not considered
to be material to the financial statements as the
entire investment portfolio consists of listed equities
and the quoted market price is expected to reflect
market participants’ view of climate change risk.
Performance and Risks continued
Annual Report 2023
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27
The
Company
Strategic
Report Governance
Company
Accounts
Shareholder
Information
Share Capital
Share Issues
At the Annual General Meeting held on 27 September
2022, the Directors were granted the authority
to allot up to 9,464,000 Ordinary Shares (up to
an aggregate nominal amount of £9,464) on a
non pre-emptive basis. The Company put a new
blocklisting facility into place towards the end of
the financial year ended 30 April 2020 and, during
the year, issued no Ordinary Shares under this
blocklistingfacility.
The Directors’ current authority to allot Ordinary
Shares is due to expire at the Company’s Annual
General Meeting to be held on 26 September
2023. Proposals for the renewal of the authority are
included within the Notice of AGM on page 89. Any
Ordinary Shares allotted under this authority will not
be issued at less than NAV.
Share Redemptions
Valid redemption requests were received under the
Company’s redemption facility for the 30 June 2022
Redemption Point in relation to 14,614,999 Ordinary
Shares, representing 13.38% of the Company’s issued
share capital.
Purchase of Own Shares
At the Annual General Meeting of the Company
held on 27 September 2022, the Directors were
granted the authority to buy back up to 14,186,320
Ordinary Shares. No Ordinary Shares have been
bought back under this authority during the
year under report. The authority will expire at the
forthcoming Annual General Meeting, when a
resolution for its renewal will be proposed.
Treasury Shares
Shares bought back by the Company may, at the
Board’s discretion, be held in treasury, from where
they could be re-issued at a premium to NAV quickly
and cost effectively. This provides the Company
with additional flexibility in the management of its
capital base. No shares were purchased for, or held
in, treasury during the year or since the year end.
Issued Share Capital
As at the year end, there were 94,638,561 Ordinary
Shares and 50,000 Management shares (see note 4
to the financial statements) in issue. Further details
of the Company’s share capital are set out in note 4
to the financial statements on page 69.
The rights attached to each share class are set out
on page 85.
There are no restrictions concerning the transfer
of securities in the Company or on voting rights;
no special rights with regard to control attached
to securities; no agreements between holders of
securities regarding their transfer known to the
Company; and no agreements which the Company
is party to that might affect its control following a
successful takeover bid.
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S.172(1) Statement
Background
Directors have a duty (under section 172 of the
Companies Act 2006) to promote the success of
a company for the benefit of shareholders as a
whole. In doing so, a company must have regard
to other broader matters including the likely long
term consequences of any decision, and the need to
foster a company’s relationships with its employees,
suppliers, customers and others and to have
regard to their interests, the impact of a company
on the community and the environment, and the
desirability of maintaining a reputation for high
standards of business conduct.
Stakeholders
The Board seeks to understand the needs and
priorities of the Company’s stakeholders and these
are taken into account during all its discussions and
as part of its decision-making. In considering the
Company's stakeholders, the Board has concluded
that, as the Company is an externally managed
investment trust and does not have any employees
or customers in the traditional sense, its key
stakeholders comprise its shareholders, suppliers
(comprising mainly its Investment Manager, third
party service providers and advisers), but they also
take account of the Company’s responsibilities
to regulators and to the environment and the
wider community. The section below discusses the
actions taken by the Company to ensure that the
interests of stakeholders are taken into account.
Shareholders
The Board is committed to maintaining open
channels of communication and to engage with
shareholders in a manner which they find most
meaningful, in order to gain an understanding of
the views of shareholders. These include:
Annual General Meeting – The Company
encourages the attendance of shareholders at
the Annual General Meeting. Shareholders have
the opportunity to meet the Directors and the
Investment Manager and to address questions to
them directly. There is typically a presentation on
the Company’s performance and on the future
outlook by the Investment Manager.
Publications – The Annual Report and Half-Year
results are made available on the Company’s
website and are circulated to those shareholders
requesting hard copies. These reports provide
shareholders with a clear understanding of the
Company’s portfolio and financial position. This
information is supplemented by a monthly
factsheet which is available on the website.
Feedback and/or questions which the Company
receives from shareholders help the Company
evolve its reporting, aiming to render the reports
and updates transparent and understandable.
Shareholder concerns – In the event that
shareholders wish to raise issues or concerns
with the Directors, they are welcome to do
so at any time by writing to the Chairman
at the registered office or by emailing at
mitonukmicrocap@linkgroup.co.uk. The Senior
Independent Director and other members of the
Board are also available to shareholders if they have
concerns that have not been addressed through the
normal channels.
Investor relations updates – At every Board meeting,
the Directors receive updates from the Broker, Peel
Hunt LLP, and from the Company Secretary on the
share trading activity, share price performance, the
Company’s share register and investor relations.
Annual Report 2023
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29
The
Company
Strategic
Report Governance
Company
Accounts
Shareholder
Information
Other stakeholders
Investment Manager
Maintaining a close and constructive working
relationship with the Investment Manager
(Premier Miton) is crucial to the Board. The
Investment Manager’s performance is critical for
the Company to successfully achieve consistent,
long-term returns in line with its investment
objective. The Board meets with the Investment
Manager on a regular basis, both within and outside
formal Board meetings, and receives and discusses
monthly reports and updates with the Investment
Manager when appropriate.
Further details on the relationship with the
Investment Manager can be found on page 38.
Suppliers
The Company relies on a diverse range of reputable
advisors for support in meeting its obligations.
The Board maintains regular contact with its key
external providers, namely the Administrator, the
Company Secretary, the Registrar, the Custodian
and the Broker, and receives regular reporting from
them, both through the Board and committee
meetings, as well as outside the regular meeting
cycle. Their advice, as well as their needs and views,
are regularly taken into account. The Management
Engagement Committee formally assesses the
performance of third party suppliers, their fees and
continuing appointment on an annual basis to
ensure that the key service providers continue to
function at an acceptable level and are appropriately
remunerated to deliver the expected level of service.
The Management Engagement Committee also
receives reports on the financial reporting control
environments in place at each service provider.
Regulators
The Company can only operate with the approval
of its regulators, who have a legitimate interest
in how the Company operates in the market and
treats its investors and shareholders. The Company
regularly considers the control environment in
place to ensure that it meets various regulatory and
statutory obligations.
Environment and Community
In light of the out-sourced nature of the Company’s
operations, the Company has very little direct
impact on the community or the environment.
However, the Investment Manager recognises
that it can influence an investee company’s
approach to Environmental, Social and Governance
(“ESG”) matters and discusses ESG matters with
investee companies on a regular basis. Further
information about the Company’s approach to
environmental, human rights, social and community
issues are set out on page 32.
The above mechanisms for engaging with
stakeholders are kept under review by the Directors
and are discussed on a regular basis at Board
meetings to ensure that they remain effective.
Should shareholders or other stakeholders of the
Company wish to contact the Chairman, they can
do so by contacting the registered office of the
Company or by sending an email for the attention of
the Chairman at mitonukmicrocap@linkgroup.co.uk.
Decision-making
The Board considers the impact that any material
decision will have on all relevant stakeholders to
ensure that it is making a decision that promotes
the long-term success of the Company. By way of
illustration, decisions taken during the course of
the financial year related to the recommendation
of payment of a final dividend, the renewal of the
annual redemption facility and the recruitment of
an additional Non-executive Director.
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Culture
The Company’s defined purpose is relatively
simple: it is to deliver our investment objective. The
culture of the Board promotes a desire for strong
governance and long-term investment, mindful of
the interests of all stakeholders. The Board believes
that, as an investment company with no employees,
this is best achieved by working in partnership with
its appointed Investment Manager.
The Directors agree that establishing and
maintaining a healthy corporate culture among the
Board and in its interaction with the Investment
Manager, shareholders and other stakeholders
will support the delivery of its purpose, values and
strategy. The Board seeks to promote a culture of
openness, debate and integrity through on-going
dialogue and engagement with its service providers,
principally the Investment Manager.
The Board strives to ensure that its culture is in
line with the Company’s purpose, values and
strategy. The Company has a number of policies
and procedures in place to assist with maintaining
a culture of good governance including those
relating to Diversity, Directors’ conflicts of interest
and Directors’ dealings in the Company’s shares. The
Board assesses and monitors compliance with these
policies as well as the general culture of the Board
through Board meetings and in particular during
the annual evaluation process which is undertaken
by each Director (for more information see the
performance evaluation section on page 40).
The Board seeks to appoint the appropriate service
providers and evaluates their remit, performance
and cost effectiveness on a regular basis as
described on page 29. The Board considers the
culture of the Investment Manager and other
service providers, including their policies, practices
and behaviour, through regular reporting from
these stakeholders and in particular during the
annual review of performance and the continuing
appointment of all service providers.
S.172(1) Statement continued
Annual Report 2023
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31
The
Company
Strategic
Report Governance
Company
Accounts
Shareholder
Information
Management, Social, Environmental
and Diversity Matters
Management Arrangements
The Company’s investment manager is Premier
Portfolio Managers Limited (the “Investment
Manager”). The Investment Manager is responsible
for the management of the Company’s portfolio in
accordance with the Company’s investment policy
and the terms of the Management Agreement
dated 8 April 2015 and restated 20 October 2020..
The Board has appointed Premier Portfolio
Managers Limited as the alternative investment
fund manager (“AIFM”) of the Company.
Under the terms of the Management Agreement,
the Investment Manager is entitled to a
management fee together with reimbursement
of reasonable expenses incurred by it in the
performance of its duties. The management fee is
payable monthly in arrears and is at the rate of 0.9%
per annum where the market capitalisation is at or
below £100,000,000 and 0.8% thereafter, calculated
in respect of each calendar month, of the market
capitalisation at the relevant calculation date. In
addition to the basic management fee, and for so
long as a Redemption Pool (see page 84 for details)
is in existence, the Investment Manager is entitled
to receive from the Company a fee calculated at the
rate of 0.9% per annum of the net asset value of the
Redemption Pool on the last Business Day of the
relevant calendar month.
The Investment Manager has agreed that, for
so long as it remains the Company’s investment
manager, it will rebate such part of any
management fee payable to it so as to help the
Company maintain an ongoing charges ratio of 2%
or lower.
In accordance with the Directors’ policy on the
allocation of expenses between income and capital,
in each financial year 75% of the management fee
payable is expected to be charged to capital and the
remaining 25% to income.
The Management Agreement is terminable by
either the Investment Manager or the Company
giving to the other not less than 12 months’ written
notice. The Management Agreement may be
terminated earlier by the Company with immediate
effect on the occurrence of certain events, including
insolvency or in the event of a material breach
by the Investment Manager of the Management
Agreement which is not remedied within thirty days
of the receipt of notice. The Company has given
certain market standard indemnities in favour of the
Investment Manager in respect of the Investment
Manager’s potential losses in carrying on its
responsibilities under the Management Agreement.
The Board appointed Bank of New York Mellon
(International) Limited (“Bank of New York
Mellon”) as its Depositary and Custodian under an
agreement dated 8 April 2015. The annual fee for
depositary services due to Bank of New York Mellon
is 0.025% per annum of gross assets, subject to a
minimum fee of £15,000.
Administrative Services are provided by Link
Alternative Fund Administrators Limited under an
agreement dated 8 April 2015. The Administration
Agreement may be terminated by either party on at
least six months’ prior written notice.
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Continuing Appointment of the
InvestmentManager
The Board, through the Management
Engagement Committee, keeps the performance
of the Investment Manager under continual
review and the Management Engagement
Committee conducts an annual appraisal of
the Investment Manager’s performance, and
makes a recommendation to the Board about
the continuing appointment of the Investment
Manager. It is the opinion of the Board that the
continuing appointment of the Investment
Manager is in the interests of shareholders as a
whole. The Board believes that the Investment
Manager has executed the investment strategy in
line with the Prospectus. The Directors also believe
that by paying the management fee calculated
on a market capitalisation basis, rather than
a percentage of assets basis, the interests of the
Investment Manager are more closely aligned with
those of shareholders.
Environmental, Human Rights, Employee, Social
and Community Issues
The Company does not have any employees
and the Board consists entirely of non-executive
Directors. The day-to-day management of the
business is delegated to the Investment Manager.
As an investment trust, the Company has no direct
impact on the community or the environment, and
as such has no environmental, human rights, social
or community policies. In carrying out its investment
activities and in relationships with suppliers,
the Company aims to conduct itself responsibly
and ethically. The Company has a zero tolerance
policy towards bribery and corruption and as such
is committed to carrying out its business fairly,
honestly and openly. Further information about the
Company’s relationships with its stakeholders is set
out in the s.172 Statement on pages 28 to 30.
Diversity
The Board of Directors of the Company comprises
two female and two male Directors. The Company’s
Diversity Policy acknowledges the benefits of all
aspects of increased diversity, including gender
and ethnic diversity, as well as diversity of thought
and perspective. The Board remains committed
to ensuring that the Company’s Directors bring a
wide range of skills, knowledge, experience and
backgrounds. The Board will always appoint the best
person for the job and will not discriminate on any
grounds including gender, race, ethnicity, religion,
sexual orientation, age or physical ability.
Approval
The Strategic Report has been approved by the
Board of Directors.
On behalf of the Board
Ashe Windham
Chairman
10 July 2023
Management, Social, Environmental
and Diversity Matters continued
The
Company
Strategic
Report Governance
Company
Accounts
Shareholder
Information
Annual Report 2023
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33
Directors
All the Directors are non-executive and are independent of the Investment Manager.
Ashe Windham, CVO – Chairman appointed 31 March 2015
Following 11 years’ service in the British Army, Ashe joined Barclays de Zoete Wedd (“BZW”) in 1987
as an institutional equities salesman and was appointed a Director of BZW’s Equities Division in
1991. He joined Credit Suisse First Boston in 1997 when they acquired BZW’s equities business. In
2004, he joined Man Investments as Head of Internal Communications and in 2007 became Man
Group’s Global Head of Internal Communications. In June 2009 he resigned from Man Group plc
to set up a private family office, which he continues to run. Ashe is the chairman of the Cancer &
Pisces Trust and of The Kyle of Sutherland Fisheries Trust, whilst he is also a non-executive director
of EFG Asset Management (UK) Limited and Chair of the Remuneration Committee.
Peter Dicks – Chairman of the
Audit Committee
appointed 26 March 2015
Peter was a founder director of
Abingworth plc in 1973, a venture capital
investment company, mainly investing
in the USA but also in the UK, where he
worked from 1973 to 1991. Since then he
has been a non-executive director or
chairman of a number of companies. He
is on the Board of Mercia Fund 1 General
Partnership Limited and Averon Park
Limited and currently the chairman of
SVM Emerging Fund.
Louise Bonham – Chairman of
the Management Engagement
Committee
appointed 15 December 2022
Louise has considerable experience in
the property, banking and professional
services industries. Louise has held a
wide range of senior appointments
including at CBRE and Cushman &
Wakefield where she was a member of
the UK & Ireland Executive Committee
and co-headed the EMEA Asset Services
business. Previously, Louise held positions
at Deloitte and as an equities analyst at
Deutsche Bank. Louise is a Chartered
Accountant and a Fellow of the Institute
of Chartered Accountants in England
and Wales.
Davina Walter
appointed 10 August 2021
Davina Walter is an experienced
investment professional. She started
her career at Cazenove & Co where
she spent more than 11 years, ending
up as the Head of US equity research.
She then spent over 16 years as an
investment manager of both large and
small cap US equities, most recently as
a Managing Director at Deutsche Asset
Management. She has been actively
involved with investment trusts since
1985 and is Chairman of abrdn Diversified
Income and Growth plc and CT Property
TrustLimited.
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Annual Report 2023
Report of the Directors
The Directors present their report and the financial statements for the year ended 30 April 2023.
Directors
The Directors in office at the date of this Report and
the dates of their appointment are shown on page 33.
In accordance with the policy adopted by the Board,
all the Directors will retire and stand for re-election
at the Company’s forthcoming Annual General
Meeting (“AGM”). Jan Etherden resigned as a Director
on 15 December 2022 and Louise Bonham was
appointed by the Board in her place on 15 December
2022. Louise Bonham will seek election at the
forthcoming AGM.
Following consideration of the results of the
performance evaluation, the Board was assured
that the performance of all Directors continues to
be effective, that they bring extensive knowledge
and commercial experience to the Board,
demonstrate a range of valuable business, financial
and investment trust skills, that they continue to
be effective and their contribution supports the
long-term sustainable success of the company and
that they remain wholly independent. The Board
therefore recommends that shareholders vote in
favour of each Director’s proposed election.
None of the Directors or any persons connected
with them had a material interest in the transactions
and arrangements of, or the agreement with, the
Investment Manager during the year.
Substantial Shareholdings
So far as is known to the Company by virtue of
notifications made to it pursuant to the Disclosure
Guidance and Transparency Rules, the following
persons held notifiable interests in the Company’s
voting rights as at 30 April 2023:
Number of
Ordinary Shares
% of
voting rights
Rathbone Investment
Management Limited 12,844,409 13.57
Investec Wealth &
Investment Limited 10,221,244 10.80
Charles Stanley Group Plc 4,727,450 4.99
Premier Miton Group plc 4,715,000 4.98
Almitas Capital LLC 3,094,345 3.27
The Company has been informed of the following
notifiable interests between 30 April 2023 and the
date of this report.
Number of
Ordinary Shares
% of
voting rights
Rathbone investment
Management Limited 9,772,409 10.33
Investec Wealth &
InvestmentLimited 9,380,474 9.91
Almitas Capital LLC 4,846,826 5.12
It should be noted that these holdings may have
changed since notified to the Company and may
not therefore be wholly accurate statements
of actual holdings as at 30 April 2023. However,
notification of any change is not required until the
next applicable threshold is crossed.
Dividends
The Directors have recommended the payment of
a final dividend in respect of the year of 0.15pence
per Ordinary Share, payable on 26 October 2023
to shareholders who appear on the register on
29 September 2023. The ex-dividend date will be
28 September 2023.
Future Developments
A review of the year and the outlook for the next
year are set out in the Investment Manager’s Report
on pages 13 to 17.
Financial Risk Management
The principal financial risks and the Company’s
policies for managing these risks are set out in note
18 to the financial statements.
Revolving Credit Facility
The Company has a revolving credit facility (the
“facility”) of £5m with Royal Bank of Scotland
International. As at the year end, no amounts have
been drawn down under the facility.
Corporate Governance
The Corporate Governance Statement on pages
37 to 43 forms part of the Report of the Directors.
It includes details of the qualifying third party
indemnity provisions and Directors’ and Officers’
liability insurance on page 39.
The
Company
Strategic
Report Governance
Company
Accounts
Shareholder
Information
Annual Report 2023
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35
Post Balance Sheet Events
Disclosures relating to post balance sheet events
can be found in the notes on page 83.
Going Concern
The Directors consider that it is appropriate to adopt
the going concern basis. Cashflow projections have
been reviewed and show that the Company has
sufficient funds to meet its contracted expenditure.
On the basis of the review and, as the majority
of net assets are securities which are traded on
recognised stock exchanges, after making enquiries,
and bearing in mind the nature of the Company’s
business and assets, the Directors consider that
the Company has adequate resources to continue
in operational existence for the foreseeable future.
In arriving at this conclusion, the Directors have
carried out a robust assessment of the principal
and emerging risks set out on pages 22 to 26 of
this report, including the risks arising from market
volatility and the Russia-Ukraine war and their
impact on the liquidity of the portfolio and resultant
cashflow, along with the Company’s ability to meet
obligations as they fall due, its ability to raise finance
in the short and longer term and future prospects
and results. The Company has a revolving credit
facility of £5m, which remains undrawn at the date
of signing these financial statements (2022: £5m).
In addition, the Directors will assess the impact
of the Company's annual redemption facility on
its cash reserves. Accordingly, the Directors have
a reasonable expectation that the Company has
adequate resources to continue in operational
existence for a period of at least 12 months from the
date that these financial statements were approved.
Viability Statement
In accordance with the AIC Code of Corporate
Governance, the Board has considered the
prospects for the Company.
The period assessed is the three years to April
2026. The Company is intended to be a long-term
investment vehicle. It was launched in 2015, and
due to the limitations and uncertainties inherent
in predicting market and political conditions,
the Directors have determined that three years
is the appropriate period over which to make
thisassessment.
As part of its assessment of the viability of the
Company, the Board has considered the principal
risks and uncertainties and the impact on
the Company’s portfolio of a significant fall in
UK markets.
To provide this assessment, the Board has
considered the Company’s financial position and its
ability to liquidate its portfolio to meet its expenses
or other liabilities as they fall due:
•
The Company invests largely in companies
listed and traded on stock exchanges. These are
actively traded and, whilst perhaps less liquid
than larger quoted companies, the portfolio is
well diversified by both number of holdings and
industry sector;
•
The expenses of the Company are predictable
and modest in comparison with the assets in the
portfolio. There are no commitments that would
change that position;
•
The Company has no employees; and
•
the Company has an annual redemption facility
whereby shareholders may request that their
shares are redeemed at NAV. The Board has
considered the possibility that shareholders
holding a significant percentage of the
Company’s shares request redemption. Firstly,
the Board has flexibility over the method and
date of redemption so can avoid disruption
to the overall operation of the Company in
this situation. Secondly, the Company has an
arrangement with the Investment Manager
to rebate fees should total costs exceed 2%
of aggregate market capitalisation, such that
were there to be significant redemption, or a
significant fall in the value of the portfolio, the
expenses of operation would be manageable. In
addition, some of the expenses vary in line with
the size of the Company.
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In addition to considering the principal risks on
pages 22 to 26 and the financial position of the
Company as described above, the Board has also
considered the following further factors:
•
the continuing relevance of the Company’s
investment objective in the current
environment and the continued satisfactory
performance of the Company;
•
the level of demand for the Company’s shares
and that since launch the Company has been
able to issue further shares;
•
the gearing policy of the Company; and
•
that regulation will not increase to such an
extent that the costs of running the Company
become uneconomic.
Accordingly, the Directors have formed the
reasonable expectation that the Company will be
able to continue in operation and meet its liabilities
as they fall due over the next three years, from the
balance sheet date.
Greenhouse Gas Emissions and Task Force on
Climate-related Financial Disclosures (TCFD)
The Company has no greenhouse gas emissions
to report from its operations, nor does it have
responsibility for any other emissions producing
sources under the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013,
including those within its underlying investment
portfolio. There is no requirement for disclosures
under The Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018, implementing the UK
government’s policy on Streamlined Energy and
Carbon Reporting. Under Listing Rule 15.4.29(R), the
Company, as a closed-ended investment fund, is
currently exempt from complying with the TCFD.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include
specified information in a single identifiable section
of the Annual Report or a cross reference table
indicating where the information is set out. There
are no disclosures required in relation to Listing
Rule 9.8.4.
Audit Information
Each of the Directors who held office at the date
of approval of the Report of the Directors confirms
that, so far as he/she is aware, there is no relevant
audit information of which the Company’s Auditor
is unaware; and that he/she has taken all the steps
that he/she ought to have taken as a Director to
make himself/herself aware of any relevant audit
information and to establish that the Company’s
Auditor is aware of that information.
Auditor
The Company’s auditor is BDO LLP. BDO LLP
has confirmed its willingness to continue to act
as the Company’s Auditor and resolutions for its
re-appointment and for the Audit Committee to
determine its remuneration will be proposed at the
forthcoming Annual General Meeting.
Annual General Meeting
The Company’s Annual General Meeting will be held
on 26 September 2023 and the formal Notice of the
AGM can be found on page 89.
Assessment and Approval
The Board is of the opinion that this Annual
Report, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model
andstrategy.
The Report of the Directors has been approved by
the Board.
By order of the Board.
Link Company Matters Limited
Secretary
10 July 2023
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Corporate Governance Statement
This Corporate Governance Statement forms part of the Report of the Directors.
Statement of Compliance
The Company is committed to maintaining high
standards of corporate governance. The Board of
the Company has considered the principles and
recommendations of the AIC Code of Corporate
Governance for Investment Companies (“AIC Code”)
by reference to the AIC Corporate Governance
Guide for Investment Companies (“AIC Guide”),
both as published in February 2019. The AIC Code,
as explained by the AIC Guide, addresses all the
principles set out in the UK Corporate Governance
Code (“UK Code”), as well as setting out additional
principles and recommendations on issues that
are of specific relevance to the Company as an
investment company.
The Financial Reporting Council (“FRC”), the UK’s
independent regulator for corporate reporting
and governance responsible for the UK Code, has
endorsed the AIC Code and the AIC Guide. The
terms of the FRC’s endorsement mean that AIC
members who report against the AIC Code and the
AIC Guide meet fully their obligations under the
UK Code and the related disclosure requirements
contained in the Listing Rules.
The Company complies with the recommendations
of the AIC Code and the relevant provisions of the
UK Code, except as set out below.
The UK Code includes provisions relating to: 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. The Company does
not therefore comply with these provisions and has
not reported further in respect of them.
A copy of the AIC Code and the AIC Guide can be
obtained via the AIC website, www.theaic.co.uk.
A copy of the UK Code can be obtained at
www.frc.org.uk.
The Board of Directors
The Board consists entirely of non-executive
Directors, who are independent of the Investment
Manager. The Board has no employees. No one
individual has unfettered powers of decisions made
by the Board.
The Board is accountable to shareholders for
the direction and control of all aspects of the
Company’s affairs, notwithstanding any delegation
of responsibilities to third parties. A detailed
description of the role of the Board and its
relationship with the Investment Manager are set
out further below.
The names and responsibilities of the Directors,
together with their biographies and details of their
significant commitments, are set out on page 33.
The Directors possess a wide range of business and
financial expertise relevant to the leadership of
the Company, including the ability and willingness
to provide robust and objective challenge to the
views and assumptions of the Investment Manager
and other Directors. All of the Directors consider
that they have sufficient time to devote to the
Company’s affairs and that they carry out their
duties effectively.
No Director has a service contract with the
Company, nor are any such contracts proposed,
each Director having been appointed pursuant
to a letter of appointment entered into with the
Company. The Directors have chosen to follow
the practice of annual re-election by shareholders
at the AGM. The Directors’ appointments can be
terminated in accordance with the Articles and
without compensation. The Directors’ letters of
appointment are available for inspection at the
Company’s registered office and will be available at
the Annual General Meeting.
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The appointment of any new Director will be
made on the basis of assessing the candidate’s
merits, measuring his or her skills and experience
against the criteria identified by the Board as being
desirable to complement the composition and
qualification of the Board. In accordance with the
Board’s Diversity Policy, the Board will consider all
elements of diversity when evaluating the skills,
knowledge and experience necessary to fill any
Board vacancy. The Board has established the
following measurable objectives for achieving
diversity on the Board:
•
all Board appointments will be made on merit,
in the context of the skills, knowledge and
experience that are needed for the Board to
beeffective;
•
long lists of potential non-executive directors
should include diverse candidates of
appropriate merit; and
•
only executive search firms who have signed
up to the voluntary Code of Conduct on gender
diversity and best practice will be engaged.
The policy is reviewed on an annual basis.
The Board, or the Investment Manager upon
request of the Board, shall offer induction training
to new Directors about the Company, its key service
providers, the Director’s duties and obligations and
other matters as may be relevant from time to time.
Board Responsibilities and Relationship with the
Investment Manager
The main roles of the Board are to create value for
shareholders, provide leadership to the Company
and approve the Company’s strategic objectives.
Specific responsibilities in relation to investments
and the Investment Manager include:
Determining the Company’s investment policy
and strategy, promoting the long-term sustainable
success of the Company, generating value for
shareholders and contributing to wider society;
determining the Company’s gearing policy;
monitoring the controls of the Investment Manager,
and reviewing the investment activity, performance
and contractual arrangements with the
Investment Manager. The Board is also responsible
for maintaining proper internal controls and
monitoring shareholders’ opinions and engaging
with them effectively. The Board has adopted a
schedule of matters reserved for decision by the
Board reflecting the above responsibilities and
reviews this schedule regularly.
The Company’s day-to-day functions have been
sub-contracted to a number of service providers,
each engaged under a separate legal agreement.
The management of the Company’s assets has
been delegated to the Investment Manager,
Premier Portfolio Managers Limited. The Investment
Manager has discretion to manage the Company’s
assets in accordance with the Company’s
investment policy, subject to the overall control and
supervision of the Directors.
Premier Portfolio Managers Limited is appointed
as the Company’s AIFM for the purposes of the
Alternative Investment Fund Manager Directive
(“AIFMD”).
Chairman and Senior Independent Director
The Chairman, Ashe Windham, is responsible for
leadership of the Board and ensuring its effectiveness.
The Chairman sets the Board’s agenda, ensuring
a particular focus on the overall strategy of the
Company, and allows adequate time for discussion of
all agenda items. Ashe Windham was considered to
be independent on appointment and is deemed by
his fellow Board members (all who are independent
themselves) to continue to be independent and to
have no conflicting relationships, in accordance with
the criteria set out in the AIC Code.
Peter Dicks, Chairman of the Audit Committee,
acts as the Senior Independent Director of the
Company. He provides a channel for any shareholder
concerns regarding the Chairman and takes the
lead in the annual evaluation of the Chairman by the
independent Directors.
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The full responsibility of the Chairman and Senior
Independent Director as agreed by the Board is set
out on the Company’s website.
Board Operation
The Board holds regular Board meetings at
least four times a year, with additional meetings
arranged as necessary. The table below sets out
the attendance record of individual Directors at the
scheduled Board and Committee meetings held
during the year ended 30 April 2023.
Scheduled Board
meetings
Scheduled Audit
and Management
Engagement
Committee meetings
Number
entitled
to attend
Number
attended
Number
entitled
to attend
Number
attended
Peter Dicks 4 4 2 2
Louise Bonham* 1 1 – –
Jan Etherden
#
3 3 2 2
Davina Walter 4 4 2 2
Ashe Windham 4 4 2 2
* appointed 15 December 2022
#
resigned 15 December 2022
This table provides details of scheduled meetings
held in the financial year and the attendance at
each meeting of each Director. From time to time,
the Board is required to hold meetings outside of
its planned schedule to consider topics that require
immediate attention or to approve ad-hoc matters
and transactions. There were a number of additional
ad-hoc Board meetings held during the financial
year, and these were related to Louise Bonham's
appointment and approval of the half year report
andaccounts.
At each scheduled Board meeting, the Chairman
follows a formal agenda, circulated to the Directors
in advance by the Secretary. The Secretary and
Investment Manager regularly provide the Board
with relevant financial information, briefing notes
and papers in relation to changes in the Company’s
economic and financial environment, statutory
and regulatory changes and corporate governance
best practice. At each Board meeting, one or more
representatives from the Investment Manager
are in attendance to present verbal and written
reports covering the Company’s activity, portfolio
and investment performance over the preceding
period. Communication between the Board and the
Investment Manager and other service providers is
maintained between formal meetings.
The Board endeavours to provide support, robust
and objective challenge and a different perspective
to the Investment Manager, to help optimise the
performance of the Company. The Board and the
Investment Manager operate in a fully co-operative
and open environment. The Board has formalised
arrangements under which the Directors, in the
furtherance of their duties, may take independent
professional advice at the Company’s expense.
As permitted by its Articles of Association and
subject to the provisions of UK legislation, the
Company has granted a third-party indemnity to
each Director in respect of liabilities which they may
sustain or incur in connection with the discharge
of their duties as a Director. The indemnity also
covers reasonable legal and other defence expenses,
although these would have to be repaid in the event
of a conviction. Deeds of indemnity in favour of each
of the Directors were executed on behalf of the
Company on their appointment and remain in force
as at the date of signing of this Report. There are no
other qualifying third party indemnity provisions in
place. In addition, Directors are covered by Directors
and Officers’ liability insurance.
Board Committees
The Board reviewed its committee structure during
the financial year. The Board concluded that the
tasks delegated by the Board to the Audit and
Management Engagement Committee would
be better managed by two separate committees,
an Audit Committee chaired by Peter Dicks and a
Management Engagement Committee chaired by
Louise Bonham.
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A combined Nomination and Remuneration
Committee chaired by the Chairman, Ashe
Windham, was also established during the year.
Given the size of the Board, the Directors do not
consider it appropriate to establish a separate
nomination committee.
The Terms of Reference of each committee
are available on the Company’s website at
www.mitonukmicrocaptrust.com/documents/.
Further details on the composition and role of
the Audit Committee and its activities during the
financial year can be found on pages 44 to 46.
Board Evaluation
The Directors recognise the value of continually
monitoring and enhancing the performance of
the Board and view the regular evaluation of the
Board, its Committees and individual Directors as
a means of obtaining valuable feedback on areas
fordevelopment.
In the year ended 30 April 2023, the Board opted
to undertake an internal performance evaluation
by way of questionnaires, which addressed the
areas indicated by the AIC Code. In particular,
the questionnaires were designed to assess the
qualifications, independence, composition, diversity,
and performance of the Board, and the performance
of the Board’s Committee, the Chairman and
individual Directors. The questionnaires were
also intended to assess whether the focus of
Board meetings and the information provided
were appropriate and to identify any training and
development needs for individual Directors.
The evaluation process and analysis of the results
were carried out post year end and conducted
by the Chairman. Peter Dicks, as the Senior
Independent Director, led the appraisal of the
Chairman. The results of the exercise revealed no
significant concerns amongst the Directors about
the effectiveness of the Board.
Independence of Directors
In accordance with the AIC Code, the Board
evaluation included a review of the independence of
each individual Director and the Board as a whole.
Mr Dicks holds less than 0.5% of the issued
share capital of Premier Miton Group Plc, the
parent company of the Investment Manager. The
Board considers the holding to be immaterial and of
no impact to his independence.
None of the Directors have any significant
shareholdings in companies where the Company
has a notifiable stake or a holding which amounts to
more than 1% of the Company’s portfolio.
The Board is of the view that, having reviewed all
required factors, all Directors met, and continue
to meet, the independence criteria set out in the
AIC Code.
The Board’s policy on diversity is to ensure that
the Directors on the Board have a broad range of
experience, skills and knowledge, with diversity
of thinking, background and perspective.
Appointments to the Board are made on merit
against objective criteria, having regard to the
benefits of diversity and the current and future
needs of the business and the other factors set out
in the AIC Code.
Diversity, including, but not limited to, gender,
social background, ethnicity, age, sexual orientation,
disability and professional and industry specific
knowledge, is an important consideration in
ensuring that the Board and its committees have
the right balance of skills, experience, independence
and knowledge necessary to discharge their
responsibilities. The Board notes the new FCA rules
on diversity and inclusion on company boards,
namely, that from accounting periods starting on or
after 1 April 2022:
a) At least 40% of individuals on the Board to
bewomen;
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b) At least one senior Board position to be held
by a woman; and
c) At least one individual on the Board to be from
a minority ethnic background.
In accordance with Listing Rule 9 Annex 2.1, the
below tables, in prescribed format, show the gender
and ethnic background of the Directors at the date
of this Report.
Diversity Table
Number
Board
members
Percentage
on the Board
Number
senior
positions on
the Board
Men 2 50% 100%
Women 2 50% –
Not specified/prefer
not to say – – –
Ethnic background
Number
Board
members
Percentage
on the Board
Number
senior
positions on
the Board
White British
or other White
(including minority
white groups) 4 100% 50%
Mixed/Multiple
Ethnic Groups – – –
Asian/Asian British – – –
Black/African/
Caribbean/Black
British – – –
Other ethnic group,
including Arab – – –
Not specified/prefer
not to say – – –
The data in the above tables was collected through
self-reporting by the Directors.
As at 30 April 2023 the Board comprised of four
members. The gender breakdown is as follows:
2(50% female); 2 (50% male). The ethnic diversity
target (that at least one individual on the Board is
from a minority ethnic background) has not been
met. Whilst the Board does not feel that it would
be appropriate to set targets as all appointments
must be made on merit, the Board supports the
recommendations for senior positions to be held
by female directors and ethnic representation
on the Board, and both of these factors are key
considerations in successionplanning.
Election/Re-election of Directors
Under the Company’s Articles of Association, Directors
are required to retire at the first Annual General
Meeting following their appointment and offer
themselves for election.
Thereafter, Directors are required to retire from
office and stand for re-election at intervals of not
more than three years. The AIC Code and UK Code
recommend that all Directors should be subject to
annual re-election by shareholders. The Company
recognises this to be good corporate governance
and has therefore chosen to follow this practice. The
maximum length of service for any Director, excluding
the Chairman, will be nine years from first election.
Exceptions could be made in unusual circumstances,
for example if the Company were in the middle of a
corporate action.
Conflicts of Interest
Under the Articles of Association of the Company,
the Board must consider and, if it sees fit, may
authorise situations where a Director has an interest
that conflicts, or may possibly conflict, with the
interests of the Company.
In line with the AIC code 2019, the Board has
established a formal system to consider authorising
such conflicts, whereby the Directors who have no
interest in the matter decide whether to authorise
the conflict and any conditions to be attached to
such authorisations.
Stewardship Responsibilities and the use of
VotingRights
As an externally-managed investment company,
the majority of the responsibilities of the Board in
relation to engagement with investee companies
are delegated to the Investment Manager.
The Board retains oversight of the investor
stewardship exercised on its behalf by reviewing
the Investment Manager’s stewardship and
voting policies, considering the regular updates
on engagement provided by the Investment
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Manager and holding the Investment Manager
to account. The Investment Manager has
published a statement of compliance with the UK
Stewardship Code, which is available on its website
at www.premiermiton.com. The Board reviews this
statement of compliance annually.
Company Secretary
The Board has direct access to the advice and
services of the Secretary, Link Company Matters
Limited. The Secretary is responsible for ensuring
that Board and Committee procedures are followed
and that information and reports are delivered to
the Board on a timely basis. The Secretary is also
responsible for ensuring that applicable regulations
are complied with and the statutory obligations of
the Company are met.
Internal Controls and Risk Management Systems
The Board has overall responsibility for establishing
and maintaining the Company’s systems of internal
controls and risk management and the reliability
of the financial reporting process and for reviewing
their effectiveness.
The Directors have reviewed and considered
the guidance supplied by the FRC on Risk
Management, Internal Control, and Related Finance
and Business Reporting and an ongoing process
has been established for identifying, evaluating
and managing the risks faced by the Company.
The Board maintains a risk matrix, which consists
of a detailed risk and internal control assessment
and provides the basis for the Committee and the
Board to regularly monitor the effective operation
of the controls and to update the risk matrix when
new risks are identified. This process, together with
key procedures established with a view to providing
effective financial control, was in place during the
year under review and was in place at the date of
the signing of this Report. The risk management
process and Company’s systems of internal control
are designed to assist the Board in making better,
more informed decisions with a view to creating and
protecting shareholder value.
The internal control systems are designed to ensure
that proper accounting records are maintained,
that the financial information on which business
decisions are made and which are issued for
publication is reliable and that the assets of the
Company are safeguarded. The purpose of risk
management is to manage rather than eliminate
the risk of failure in achieving the Company’s
objectives and involves Directors exercising
judgement. It should be recognised that such
systems can only provide reasonable, not absolute,
assurance against material misstatement or loss.
Internal Controls Assessment
Regular risk assessments and reviews of internal
controls will be undertaken in the context of the
Company’s overall investment objective. The
Board, through the Committee, has identified risk
management controls in four key areas: corporate
strategy; compliance with laws and regulations and
disclosure; relationships with service providers; and
investment and business activities. In arriving at
its judgment of what risks the Company faces, the
Board has considered the Company’s operations in
the light of the following factors:
•
the nature and extent of risks which it regards
as acceptable for the Company to bear within
its overall business objective;
•
the threat of such risks becoming reality;
•
the Company’s ability to reduce the incidence
and impact of risk on its performance; and
•
the cost to the Company and benefits related
to the Company and third parties operating
the relevant controls.
The risk matrix, established and maintained by the
Company, is structured so as to allow the Board
to assess the risks against how those risks are
managed. The risks are assessed on the basis of the
likelihood of occurrence, the impact on the business
if they were to occur and the effectiveness of the
controls in place to mitigate them. The risk register
is reviewed at meetings of the Audit Committee and
at other times as necessary.
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The Board also reviews information provided by
the Investment Manager and the Secretary on a
regularbasis.
Most functions for the day-to-day management of
the Company are sub-contracted to appropriately
qualified third parties, and the Board therefore
obtains regular assurances and information
from key third party suppliers, including the
Investment Manager, the Administrator and
the Depositary, regarding the internal systems
and controls operated in their organisations. In
addition, each of the third parties is requested to
provide a copy of its report on internal controls
each year, which is reviewed by the Management
EngagementCommittee.
The Board has carried out a review of the
effectiveness of the risk management and systems
of internal control as they have operated over the
year under review and up to the date of approval of
this Report. No significant failings or weaknesses
were identified from that review and there were no
matters arising which required further investigation.
Shareholder Relations
The Board is committed to ensuring there is open
and effective communication with the Company’s
shareholders and in order that the Directors
understand the views of major shareholders
on matters such as governance, strategy and
performance. Accordingly, both the Board and
the Investment Manager give a high priority to
shareholder engagement and the Chairman and
other Directors are available to enter into dialogue
with shareholders. The Investment Manager and the
Company’s Stockbroker, Peel Hunt LLP, maintain a
regular dialogue with major investors and provide
the Board with regular reports on feedback from
shareholders.
All shareholders are encouraged to attend, ask
questions and vote at the Company’s AGM to be
held on 26 September 2023. A presentation by
the fund managers of the Trust will be delivered
following the formal business of the AGM and
will also be available on the Company’s website
following the meeting.
The Annual and Half-Yearly Reports of the Company
are prepared by the Board and its advisers
to present a full and readily understandable
review of the Company’s performance. Copies
are released to the London Stock Exchange,
and the Annual Report is dispatched to
shareholders by mail. They are also available
from the Secretary or on the Company’s website,
www.mitonukmicrocaptrust.com/documents/.
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I am pleased to present the Audit Committee (the ‘Committee’) Report for the financial year ended 30 April 2023.
Composition and Operation of the Committee
Given the small size of the Board, it is deemed both
proportionate and practical for all Directors to be
on the Committee, including the Chairman of the
Company. The Board considers that the members
of the Committee have the requisite skills and
experience, relevant to the sector, as a result of
their involvement in financial services, to fulfil the
responsibilities of the Committee.
Under its terms of reference, the Committee
is required to meet twice a year to discuss the
publication of the Company’s financial statements.
Additional meetings are convened as necessary,
however no additional meetings of the Committee
were required during the year.
Role of the Committee
The primary responsibilities of the Committee are:
•
to monitor the integrity of the financial
statements of the Company and review the
content of the Company’s half-year and annual
reports and any formal announcements
regarding its financial reporting issues and
areas of judgement contained within them;
•
to advise the Board on whether the content
of 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, business model and strategy;
•
to monitor and keep under review
the adequacy and effectiveness of the
Company’s internal financial controls and risk
management and internal control systems;
•
to make recommendations to the Board
in relation to the selection, appointment,
re-appointment or removal of the external
auditor, following a review of their
independence, objectivity, qualifications,
expertise and resources;
•
to approve the remuneration and terms of
engagement of the external auditor for audit
and non-audit services; and
•
to review the scope, findings and effectiveness
of the external audit process.
The Committee has direct access to the Company’s
external auditor, BDO LLP, and provides a forum
through which the external auditor reports to the
Board. Representatives of the external auditor
attend meetings of the Committee at least annually.
Principal Activities of the Committee during the Year
The Committee met twice during the year under
review and during those meetings it has:
•
reviewed the Company’s Annual Report for
the financial year ended 30 April 2022 and
the related results announcements and the
Half-Yearly Report to 31 October 2022;
•
received and discussed with the Auditor their
findings from the audit of the financial year
ended 30 April 2022 and the effectiveness of
the external audit process;
•
reviewed the effectiveness of the risk
management systems and internal controls
of the Company and related reports from the
Investment Manager and other third party
providers;
•
agreed the Auditor’s fees; and
•
undertook an annual assessment of the
requirement for an internal audit function for
the Company and concluded that no changes
were required.
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The Committee also met once post the year end to
review the Company’s Annual Report for the year
ended 30 April 2023.
Other matters reviewed by the Committees include:
•
The Committee’s terms of reference;
•
The Company’s risk matrix;
•
The Company’s policy on the supply of
non-audit services by external auditor; and
•
The whistleblowing policy of Premier Portfolio
Managers Limited.
The Committee receives a report on internal control
and compliance from the Investment Manager’s
Compliance officer on a six-monthly basis and
discusses this with the Investment Manager. The
Investment Manager has in place a compliance
monitoring plan for testing of controls as an
alternative to establishing a separate internal
auditfunction.
The Committee monitors and reviews the
effectiveness of the external audit process for
the Annual Report, including a detailed review
of the audit plan and the audit results report,
and makes recommendations to the Board on
the re-appointment, remuneration and terms of
engagement of the Auditor. Any concerns with the
effectiveness of the external audit process would be
reported to the Board. No concerns were raised in
respect of the year ended 30 April 2023.
Audit Fees and Non-Audit Services
An audit fee of £53,500 (exclusive of VAT) has been
agreed in respect of the audit for the financial year
ended 30 April 2023 (2022: £45,000 exclusive of VAT).
No non-audit services were provided in the financial
year ended 30 April 2023 (2022: £nil). The Committee
has a policy on the engagement of the Auditor to
supply non-audit services. All requests for services to
be provided by the external auditor are submitted
to the Committee in order to ensure that the scope
and nature of the proposed work does not affect the
Auditor’s independence or objectivity.
Independence and Objectivity of the Auditor
Following its review of the independence and
objectivity of the Auditor, the Committee has been
reassured that no conflicts have arisen during the
year. The Committee will, however, continue to
monitor the position.
Re-appointment of the Auditor
BDO LLP was appointed as Auditor in April 2020.
Following consideration of the performance of BDO
LLP, the service provided during the year and a
review of their value for money, the Committee has
recommended to the Board their re-appointment
as Auditor to the Company at the Company's
forthcoming AGM.
BDO LLP has been Auditor to the Company
since April 2020 and Vanessa-Jayne Bradley has
been the audit partner since that time. Rotation of
the audit partner will take place every five years in
accordance with the FRC revised Ethical Standard
2016. Under the FRC transitional arrangements,
the Company is required to re-tender, at the latest,
by 2030. The Company intends to re-tender within
the timeframe set by the FRC. Due to the short
period of time since the Auditor was appointed, it is
not considered appropriate to review the Auditor’s
succession at this point in time. The Committee
will regularly consider the level of fees and the
independence and objectivity of the Auditor.
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Significant Audit Issues considered by theCommittee
Following discussion with the Investment Manager and Auditor, the Committee determined that the key
risks in relation to the Company’s financial statements and how they were addressed were:
Risk Mitigation
Incomplete or inaccurate revenue recognition
The recognition of income is undertaken
in accordance with the stated accounting
policies of the Company.
The Directors review the Company’s income, revenue
forecasts and the sensitivity of the revenue account to
falls in income. Particular attention is paid to any special
dividends that the Company may receive.
The valuation and ownership of the investment portfolio
The Company’s investments have been
valued in accordance with the accounting
policies, as disclosed in note 11 to the financial
statements. The great majority of investments
are in quoted securities in active markets,
are considered to be liquid and have been
categorised as Level 1 and 2 within the IFRS13
fair value hierarchy. These are disclosed in
note 12 to the financial statements.
The portfolio holdings and their pricing is reviewed and
verified by the Investment Manager on a regular basis and
management accounts, including a full portfolio listing,
are prepared for each Board meeting. The Company uses
the services of an independent Depositary (The Bank of
New York Mellon (International) Limited) to hold the assets
of the Company. The Depositary checks the consistency
of its records with those of the Investment Manager on a
monthly basis and reports to the Board on an annual basis.
Maintenance of investment trust status
There is a risk of failure to maintain
investment trust status in accordance with
s1158/1159 which would have a significant
impact on the Company as a result of the
potential capital gains tax payable.
The Investment Manager and Administrator have reported
to the Audit Committee to confirm continuing compliance
with the requirements for maintaining investment
truststatus.
Peter Dicks
Audit Committee Chairman
10 July 2023
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The Board has prepared this report in
accordance with the requirements of the Large
and Medium-Sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations
2013. An ordinary resolution for the approval of
the Directors’ Remuneration Report will be put
to shareholders at the forthcoming AGM. The law
requires the Company’s Auditor to audit certain
of the disclosures provided. Where disclosures
have been audited, they are indicated as such. The
Auditor’s opinion is included in the Independent
Auditor’s Report on pages 52 to 58.
Statement from the Chairman
Given the size of the Board, it is not considered
appropriate for the Company to have a separate
remuneration committee and the functions
of this committee are therefore delegated to a
newly established Nomination and Remuneration
Committee which combines the functions of a
Nomination Committee with a Remuneration
Committee. All Directors are members of this
Committee which is chaired by the Chairman,
Ashe Windham. The Board consists entirely of
independent non-executive Directors and the
Company has no employees. We have not, therefore,
reported on those aspects of remuneration that
relate to executive Directors.
Directors’ fees for the year ended 30 April 2023 are
set out on page 48.
Directors’ Remuneration Policy
This Remuneration policy was last approved
by shareholders at the Company’s AGM held
in September 2022. As a binding vote on the policy
is necessary every three years, an ordinary resolution
to approve the policy will be put to shareholders at
the AGM in 2025. The Remuneration policy is set
outbelow.
The level of remuneration has been set in order to
attract individuals of a calibre appropriate to the
future development of the Company and to reflect
the specific circumstances of the Company, the
duties and responsibilities of the Directors and
the value and amount of time committed to the
Company’s affairs.
The fees for the Directors are determined within
the limits (not to exceed £500,000 per year in
aggregate) set out in the Company’s Articles
of Association, or any greater sum that may be
determined by an ordinary resolution of the
Company. The Chairman does not participate in
any discussions relating to his own fee, which is
determined by the independent Directors. Directors
are not eligible for bonuses, share options or
long-term incentive schemes or other performance
related benefits as the Board does not believe that
this is appropriate for non-executive Directors.
The fees for the Directors will be increased annually,
effective from the first day of the Company’s
financial year, by the rate of the Consumer Price
Index prevailing at that time.* Under the Company’s
Articles of Association, if any Director is called upon
to perform extra or special services of any kind,
he/she shall be entitled to receive such sum as the
Board may think fit for expenses, and also such
remuneration as the Board may think fit, either as a
fixed sum or as a percentage of profits or otherwise,
and such remuneration may, as the Board shall
determine, be either in addition to or in substitution
for any other remuneration he may be entitled
toreceive.
Directors are entitled to be paid all reasonable
expenses properly incurred in attending Board,
Committee or shareholder meetings or otherwise
in or with a view to the performance of their duties.
There are no amounts set aside or accrued by the
Company to provide pension, retirement or similar
benefits to the Directors.
* The Board has determined that Directors' fees should be maintained at their
current level for this financial year.
Directors’ Remuneration Report
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Component Director
Rate as at
1 May 2023
5
Rate as at
1 May 2022
5
Purpose of
Remuneration
Annual Fee Chairman £38,400 £38,400 Commitment as Chairman1
Annual Fee Non-executive Directors £27,500 £27,500 Commitment as a non-executive
Director2
Additional Fee Senior Independent Director and
AuditCommittee Chairman
£5,500 £5,500 For additional responsibilities and
time commitment3
Additional Fee All Directors N/A N/A For extra or special services performed in
their role as a Director4
Expenses All Directors N/A N/A No fixed rate. Reimbursement of
expenses incurred in the performance of
duties as a Director
1 The Company’s policy is for the Chairman of the Board to be paid a higher fee than the other Directors to reflect the more onerous role
2 The Company’s Articles of Association limit the total aggregate annual fees that can be paid to £500,000
3 The Company’s policy is for the Senior Independent Director and Chairman of the Audit Committee to be paid a higher fee than other Directors to reflect the
more onerous role
4 Additional fees would only be paid in exceptional circumstances in relation to the performance of extra or special services
5 Fees were due to be increased by the rate of the Consumer Price Index prevailing 1 May 2023, being 10%, however recognising the need to show restraint, and in
recognition of very disappointing NAV performance the Directors elected to forgo the CPI increase for this financial year
Fees for any new Director appointed will be on the above basis. Fees payable in respect of subsequent
periods will be determined following an annual review. Any views expressed by shareholders on the fees
being paid to Directors will be taken into consideration by the Board.
It is the Board’s policy that Directors do not have service contracts, but Directors are provided with a letter of
appointment as a non-executive Director. The terms of their appointment provide that Directors shall retire
and be subject to election at the first Annual General Meeting after their appointment. Compensation will
not be made upon early termination of appointment.
Directors’ Fees for the Year (audited)
The remuneration paid to the Directors for the years ending 30 April 2023 and 30 April 2022 is set out in the
single total figure table below:
Year ended
30 April 2023
Year ended
30 April 2022
Fixed fees
£
Expenses
£
Total
£
Fixed fees
£
Expenses
£
Total
£
Louise Bonham
1
10,436 – 10,436 – – –
Peter Dicks 33,000 – 33,000 31,485 – 31,485
Jan Etherden
2
17,205 – 17,205 26,240 – 26,240
Bridget Guerin
3
– – – 6,560 – 6,560
Andrew Pomfret
4
– – – 24,493 – 24,493
Davina Walter
5
27,500 – 27,500 19,108 – 19,108
Ashe Windham
6
38,400 – 38,400 29,740 – 29,740
126,541 – 126,541 137,626 – 137,626
1 Appointed on 15 December 2022
2 Resigned on 15 December 2022
3 Resigned on 31 July 2021
4 Resigned as Chairman on 31 December 2021
5 Appointed on 10 August 2021
6 Appointed as Chairman from 1 January 2022
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Company Performance
The Company does not have a specific benchmark
against which performance is measured. The
graph opposite compares the total return
(assuming all dividends are reinvested) to holders
of Ordinary Shares since they were first admitted
to the Official List of the Financial Conduct
Authority, compared to the total shareholder return
of the Numis Smaller Companies 1000 (excluding
Investment Companies) Index, which is the
closest broad index against which to measure the
Company’sperformance.
It is noteworthy that some of the best performing
stocks on AIM have been growth stocks, often
with market capitalisations much larger than the
investment universe of this Company. This trend
may continue, but in the distant past it has been the
smallest stocks that have outperformed, especially
those with undemanding valuations at purchase.
Further explanation of the recent market trends is
outlined in the Investment Manager’s section of this
Report on pages 13 to 17.
NAV v share price v Numis 1000 Index
0.0
50.0
100.0
150.0
200.0
250.0
Percent
MINI NAV
MINI Share
Price
Numis SC
1000 Ex
Invt Cos TR
Apr
2016
Apr
2015
Apr
2017
Apr
2018
Apr
2023
Apr
2022
Apr
2021
Apr
2020
Apr
2019
Annual Percentage Change in Directors’ Remuneration
The following table sets out the annual percentage change in Directors’ fees for the previous three years to
30 April 2023.
Percentage
change from
2022 to 2023
Percentage
change from
2021 to 2022
Percentage
change from
2020 to 2021
Louise Bonham
1
n/a n/a n/a
Peter Dicks 4.6% 1.5% 1.5%
Jan Etherden
2
(75.9%) 1.5% 1.5%
Bridget Guerin
3
n/a (64.3%) n/a
Andrew Pomfret
4
n/a (48.4%) 1.5%
Davina Walter
5
30.5% 100% n/a
Ashe Windham
6
22.6% 13.1% 1.5%
1 Appointed on 15 December 2022
2 Resigned on 15 December 2022
3 Appointed 1 December 2020, resigned 31 July 2021
4 Resigned as Chairman on 31 December 2021
5 Appointed on 10 August 2021
6 Appointed as Chairman from 1 January 2022
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Relative Importance of Spend on Pay
The table below shows the proportion of the
Company’s income spent on pay.
30 April
2023
£000
30 April
2022
£000
Change
%
Total remuneration paid
toDirectors 127 138 (8.0)
Investment Management fee 597 892 (33.1)
Distribution to shareholders:
– dividends 142 11 1190.9
– share buyback/
redemption 10,507 2,735 284.2
Note: the items listed in the table above are as required by the Large
and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2073 ss.20 with the exception of the
investment management fee, which has been included because
the Directors believe it will help shareholders' understanding of the
relative importance of the spend on pay The figures for this measure
are the same as those shown in note 6 to the financial statements.
The amounts spent on the redemption of shares are included in line
with the GC700 and Investor Group guidance, as this is considered a
significant payment. The figures for this measure are the same as those
shown in the Statement of Changes in Equity and CashFlow Statement.
Directors’ Beneficial and Family Interests (audited)
There is no requirement under the Company’s Articles
of Association or the terms of their appointment for
Directors to hold shares in the Company. The interests
of the Directors and their families in the Ordinary
Shares of the Company as at 30 April 2023 are set
outbelow:
Number of
Ordinary
shares as at
30 April 2023
Number of
Ordinary
shares as at
30 April 2022
Peter Dicks 468,150 368,150
Louise Bonham 48,800 –
Jan Etherden 146,300 146,300
Ashe Windham 225,000 225,000
Davina Walter 33,228 33,228
On 30 May 2023, Peter Dicks acquired 100,000
shares in the Company. There have been no further
changes to the Directors’ share interests between
30 April 2023 and the date of this Report.
Voting at the Annual General Meeting
The Directors’ Remuneration Report for the year
ended 30 April 2022 and the Directors’ Remuneration
Policy were approved by shareholders at the AGM
held on 27 September 2022. The votes cast were
asfollows:
Directors’
Remuneration Report
(2022 AGM results)
Directors’
Remuneration Policy
(2022 AGM results)
Number
of votes
% of
votes cast
Number
of votes
% of
votes cast
For 38,324,504 99.61 38,324,504 99.61
Against 150,778 0.39 150,778 0.39
Total votes cast 38,475,282 38,475,282
Number of votes
withheld 78,354 78,354
Approval
The Directors’ Remuneration Report was approved
by the Board on 10 July 2023.
On behalf of the Board
Ashe Windham
Chairman
10 July 2023
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Statement of Directors’ Responsibilities
The Directors are responsible for preparing the
annual report and the financial statements in
accordance with applicable law and regulations.
Company law and UK adopted international
accounting standards require the Directors to
prepare financial statements for each financial year.
Under that law the Directors have elected to prepare
the Company’s financial statements in accordance
with UK adopted international accounting standards.
Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the group and company and of the profit or loss for
the company for that period.
In preparing these financial statements, the
Directors are required to:
•
Select suitable accounting policies and then
apply them consistently;
•
Make judgments and accounting estimates
that are reasonable and prudent;
•
State whether they have been prepared in
accordance with UK adopted international
accounting standards, subject to any material
departures disclosed and explained in the
financial statements;
•
Prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the company will continue in
business;
•
Prepare a Director’s report, a Strategic
report and a Director’s remuneration report
which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the Company and enable them to ensure
that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for ensuring that the
annual report and accounts, taken as a whole, are
fair, balanced, and understandable and provide the
information necessary for shareholders to assess the
group’s performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the
annual report and the financial statements are
made available on its website. Financial statements
are published on the Company’s website in
accordance with legislation in the United Kingdom
governing the preparation and dissemination
of financial statements, which may vary from
legislation in other jurisdictions. The maintenance
and integrity of the Company’s website is the
responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity
of the financial statements contained therein.
The Directors confirm to the best of their knowledge:
•
The financial statements have been prepared
in accordance with UK adopted international
accounting standards in conformity with the
requirements of the Companies Act 2006 and
give a true and fair view of the assets, liabilities,
financial position and profit and loss of the
group.
•
The annual report includes a fair review of the
development and performance of the business
and the financial position of the Company,
together with a description of the principal
risks and uncertainties that they face.
On behalf of the Board
Ashe Windham
Chairman
10 July 2023
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Independent Auditor’s Report to the members
of Miton UK Microcap Trust plc
Opinion on the financial statements
In our opinion the financial statements:
•
give a true and fair view of the state of the
Company’s affairs as at 30 April 2023 and of its
loss for the year then ended;
•
have been properly prepared in accordance
with UK adopted international accounting
standards; and
•
have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of Miton
UK MicroCap Trust plc (the ‘Company’) for the year
ended 30 April 2023 which comprise the Income
Statement, the Statement of Changes in Equity, the
Balance Sheet, the Statement of Cash Flows and
the notes to the financial statements, including
a summary of significant accounting policies.
The financial reporting framework that has been
applied in their preparation is applicable law and UK
adopted international accounting standards.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the Auditor’s
responsibilities for the audit of the financial
statements section of our report. We believe that
the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Our audit opinion is consistent with the additional
report to the audit committee.
Independence
Following the recommendation of the Audit
Committee, we were appointed by the Board
of Directors on 22 September 2020 to audit the
financial statements for the year ending 30 April
2020 and subsequent financial periods. The period
of total uninterrupted engagement including
retenders and reappointments is 4 years, covering
the years ending 30 April 2020 to 30 April 2023. We
remain independent of the Company in accordance
with the ethical requirements that are relevant to
our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to
listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance
with these requirements. The non-audit services
prohibited by that standard were not provided to
the Company.
Conclusions relating to going concern
In auditing the financial statements, we have
concluded that the Directors’ use of the going
concern basis of accounting in the preparation
of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the
Company’s ability to continue to adopt the going
concern basis of accounting included:
•
Evaluating the appropriateness of the Directors’
method of assessing the going concern in
light of market volatility and the present
uncertainties by reviewing the information used
by the Directors in completing their assessment;
•
Assessing the appropriateness of the Directors’
assumptions and judgements made in
their base case and stress tested forecasts
including consideration of the available cash
resources relative to forecast expenditure
and commitments and the sufficiency of the
liquidity of the portfolio;
•
Checking the accuracy of historical forecasting
by agreeing to actual results; and
•
Reviewing the loan agreements to identify
the covenants and assessing the likelihood of
them being breached based on the Directors’
forecasts and our sensitivity analyses.
Based on the work we have performed, we have
not identified any material uncertainties relating to
events or conditions that, individually or collectively,
may cast significant doubt on the Company’s
ability to continue as a going concern for a period
of at least twelve months from when the financial
statements are authorised for issue.
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In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we
have nothing material to add or draw attention to in relation to the Directors’ statement in the financial
statements about whether the Directors considered it appropriate to adopt the going concern basis of
accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in
the relevant sections of this report.
Overview
Key audit matters
Valuation and ownership of investments
2023
2022
Materiality Company financial statements as a whole
£0.6m (2022: £1m) based on 1% (2022: 1%) of net assets
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including
the Company’s system of internal control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have represented a risk of material
misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
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Key audit matter
How the scope of our audit addressed the key
auditmatter
Valuation and ownership of investments
(Notes 1, 11 and 12)
The investment portfolio comprises quoted
investments and a small number of unquoted
investments (warrants).
The valuation of the unquoted investments
(warrants) includes an element of subjectivity.
There is also a risk that the prices used for the listed
investments held by the Company are not reflective
of fair value and the risk that errors made in the
recording of investment holdings result in the
incorrect reflection of investments owned by the
Company.
Therefore, we considered the valuation and
ownership of investments to be the most significant
audit area as the investments also represent the
most significant balance in the financial statements
and underpin the principal activity of the entity.
For these reasons and the materiality of the balance
in relation to the financial statements as a whole, we
considered this to be a key audit matter.
We responded to this matter by testing the valuation
and ownership of the whole portfolio of quoted
investments. We performed the following procedures:
•
Confirmed the year-end bid price was used
by agreeing to externally quoted prices and
assessed if there were contra indicators, such
as liquidity considerations, to suggest a bid
price is not the most appropriate indication of
fair value.
•
Obtained direct confirmation of the number
of shares held per equity investment from the
custodian regarding all investments held at
the balance sheet date.
For all warrants held at the year end, we performed
the following procedures:
•
Considered the appropriateness of the
valuation methodology against the
International Private Equity and Venture
Capital Valuation (‘IPEV’) Guidelines and
applicable accounting standards.
•
Re-performed the calculation of the
investment valuation using a valuation model
and compared to the Investment Managers
and valuation.
•
Where appropriate, performed sensitivity
analysis where reasonable alternative
assumptions could exist.
•
Obtained direct confirmation of the number of
warrants held from the custodian.
Key observations:
Based on our procedures performed we did not
identify any matters to suggest the valuation or
ownership of the investments was not appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the
effect of misstatements. We consider materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users that are taken on the basis of the
financial statements.
Independent Auditor’s Report to the members
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In order to reduce to an appropriately low level the probability that any misstatements exceed materiality,
we use a lower materiality level, performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we
also take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
and performance materiality as follows:
Company financial statements
2023
£’000
2022
£’000
Materiality
607 1,000
Basis for determining materiality
1% of net assets
Rationale for the benchmark applied
As an investment trust, the net asset value is the
key measure of performance for users of the
financial statements.
Performance materiality
455 750
Basis for determining performance materiality
75% of materiality
Rationale for the percentage applied for
performance materiality
The level of performance materiality applied was set after
having considered a number of factors including the
expected total value of known and likely misstatements
and the level of transactions in the year.
Lower testing threshold
We have set a lower testing threshold for those
items impacting revenue return at £108,000 which
is based on 10% of total expenditure (2022: £129,000
which is based on 10% of total expenditure).
Reporting threshold
We agreed with the Audit Committee that we would
report to them all individual audit differences in
excess of £30,000 (2022: £50,000). We also agreed to
report differences below this threshold that, in our
view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other
information. The other information comprises the
information included in the report and accounts
other than the financial statements and our
auditor’s report thereon. Our opinion on the
financial statements does not cover the other
information and, except to the extent otherwise
explicitly stated in our report, we do not express
any form of assurance conclusion thereon. Our
responsibility is to read the other information
and, in doing so, consider whether the other
information is materially inconsistent with the
financial statements or our knowledge obtained in
the course of the audit, or otherwise appears to be
materially misstated. If we identify such material
inconsistencies or apparent material misstatements,
we are required to determine whether this gives
rise to a material misstatement in the financial
statements themselves. If, based on the work
we have performed, we conclude that there is a
material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
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Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term
viability and that part of the Corporate Governance Statement relating to the Company’s compliance with
the provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the Corporate Governance Statement is materially consistent with the financial statements or our
knowledge obtained during the audit.
Going concern and
longer-term viability
•
The Directors' statement with regards to the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identified; and
•
The Directors’ explanation as to their assessment of the Company’s prospects, the
period this assessment covers and why the period is appropriate.
Other Code provisions
•
Directors' statement on fair, balanced and understandable;
•
Board’s confirmation that it has carried out a robust assessment of the emerging
and principal risks;
•
The section of the annual report that describes the review of effectiveness of risk
management and internal control systems; and
•
The section describing the work of the Audit Committee.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit,
we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as
described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic report and the Directors’ report for the
financial year for which the financial statements are prepared is consistent with the
financial statements; and
•
the Strategic report and the Directors’ report have been prepared in accordance
with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its
environment obtained in the course of the audit, we have not identified material
misstatements in the strategic report or the Directors’ report.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Matters on which we are
required to report by
exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
•
the financial statements and the part of the Directors’ remuneration report to be
audited are not in agreement with the accounting records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Independent Auditor’s Report to the members
of Miton UK Microcap Trust plc continued
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57
Responsibilities of Directors
As explained more fully in the statement of
Directors’ responsibilities, the Directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a
true and fair view, and for such internal control as
the Directors determine is necessary to enable the
preparation of financial statements that are free
from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Directors
are responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as
applicable, matters related to going concern and
using the going concern basis of accounting unless
the Directors either intend to liquidate the Company
or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the
aggregate, they could reasonably be expected to
influence the economic decisions of users taken on
the basis of these financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of
non-compliance with laws and regulations. We
design procedures in line with our responsibilities,
outlined above, to detect material misstatements in
respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
We gained an understanding of the legal and
regulatory framework applicable to the Company
and the industry in which it operates, and
considered the risk of acts by the Company which
were contrary to applicable laws and regulations,
including fraud. We considered the significant laws
and regulations to be the Companies Act 2006, the
FCA listing and DTR rules, the principles of the AIC
Code of Corporate Governance, industry practice
represented by the AIC SORP, the applicable
accounting framework, and the Company’s
qualification as an Investment Trust under UK tax
legislation as any non-compliance of this would
lead to the Company losing various deductions and
exemptions from corporation tax.
We focused on laws and regulations that could give
rise to a material misstatement in the Company
financial statements. Our tests included:
•
agreement of the financial statement
disclosures to underlying supporting
documentation;
•
enquiries of management and those charged
with governance relating to the existence of
any non-compliance with laws and regulations;
•
review of minutes of board meetings
throughout the period to identify any instance
of non-compliance with laws and regulations;
•
obtaining an understanding of the control
environment in monitoring compliance with
laws and regulations; and
•
reviewing the calculation in relation to
Investment Trust compliance to check that
the Company was meeting its requirements to
retain its Investment Trust Status.
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Fraud
We assessed the susceptibility of the financial
statement to material misstatement including
fraud.
Our risk assessment procedures included:
•
Enquiry with management and those charged
with governance regarding any known or
suspected instances of fraud;
•
Obtaining an understanding of the Company’s
policies and procedures relating to:
•
Detecting and responding to the risks of
fraud; and
•
Internal controls established to mitigate
risks related to fraud.
•
Review of minutes of meeting of those charged
with governance for any known or suspected
instances of fraud; and
•
Discussion amongst the engagement team
as to how and where fraud might occur in the
financial statements.
Based on our risk assessment, we considered the
areas most susceptible to be management override
of controls.
Our procedures in respect of the above included:
•
Testing journals which met a defined
risk criteria by agreeing to supporting
documentation and evaluating whether
there was evidence of bias by the Investment
Manager and Directors that represented a risk
of material misstatement due to fraud.
We also communicated relevant identified laws
and regulations and potential fraud risks to all
engagement team members who were all deemed
to have appropriate competence and capabilities
and remained alert to any indications of fraud
or non-compliance with laws and regulations
throughout the audit.
Our audit procedures were designed to
respond to risks of material misstatement in the
financial statements, recognising that the risk
of not detecting a material misstatement due
to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery,
misrepresentations or through collusion.
There are inherent limitations in the audit
procedures performed and the further removed
non-compliance with laws and regulations is from
the events and transactions reflected in the financial
statements, the less likely we are to become aware
of it.
A further description of our responsibilities is
available on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state
to the Company’s members those matters we are
required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility
to anyone other than the Company and the
Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Vanessa-Jayne Bradley
Senior Statutory Auditor
For and on behalf of BDO LLP, Statutory Auditor
London, UK
10 July 2023
BDO LLP is a limited liability partnership registered
in England and Wales (with registered number
OC305127).
Independent Auditor’s Report to the members
of Miton UK Microcap Trust plc continued
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59
Income Statement
of the Company for the year ended 30 April 2023
Year ended
30 April 2023
Year ended
30 April 2022
Notes
Revenue
return
£000
Capital
return
£000
Total
£000
Revenue
return
£000
Capital
return
£000
Total
£000
Losses on investments held at fair value through profit or loss 11 – (26,765) (26,765) – (13,284) (13,284)
Losses on derivatives held at fair value through profit or loss 13 – (852) (852) – (1,268) (1,268)
Income 2 875 – 875 983 – 983
Management fee 6 (149) (448) (597) (223) (669) (892)
Other expenses 7 (676) – (676) (587) – (587)
Return/(loss) on ordinary activities before finance costs and
taxation 50 (28,065) (28,015) 173 (15,221) (15,048)
Finance costs 8 – (39) (39) – (39) (39)
Return/(loss) on ordinary activities before taxation 50 (28,104) (28,054) 173 (15,260) (15,087)
Taxation 9 (18) – (18) (14) – (14)
Return/(loss) on ordinary activities after taxation 32 (28,104) (28,072) 159 (15,260) (15,101)
Return per Ordinary Share – basic and diluted (pence) 3 0.03 (28.96) (28.93) 0.15 (13.91) (13.76)
The total column of this statement is the Income Statement of the Company prepared in accordance
with UK International Accounting Standards in conformity with the requirements of UK IFRS. The
supplementary revenue return and capital return columns are presented in accordance with the Statement
of Recommended Practice issued by the Association of Investment Companies (“AIC SORP”).
All revenue and capital items in the above statement derive from continuing operations. No operations were
acquired or discontinued during the year.
There is no other comprehensive income and, therefore, the return on ordinary activities after taxation is
both the profit and the total comprehensive income.
The notes on pages 63 to 83 form part of these financial statements.
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Statement of Changes in Equity
of the Company for the year ended 30 April 2023
For the year ended 30 April 2023 Notes
Share
capital
£000
Capital
redemption
reserve
£000
Share
premium
account
£000
Special
reserve
£000
Capital
reserve
£000
Revenue
reserve
£000
Total
£000
As at 30 April 2022 160 64 672 61,546 36,801 232 99,475
Total comprehensive income:
Return on ordinary activities after taxation – – – – (28,104) 32 (28,072)
Transactions with shareholders recorded
directly to equity:
Redemption of Ordinary Shares – – – (10,507) – – (10,507)
Cancellation of shares 4 (15) 15 – – – – –
Equity dividends paid 10 – – – – – (142) (142)
As at 30 April 2023 145 79 672 51,039 8,697 122 60,754
For the year ended 30 April 2022 Notes
Share
capital
£000
Capital
redemption
reserve
£000
Share
premium
account
£000
Special
reserve
£000
Capital
reserve
£000
Revenue
reserve
£000
Total
£000
As at 30 April 2021 162 61 – 64,283 52,061 84 116,651
Total comprehensive income:
Return on ordinary activities after taxation – – – – (15,260) 159 (15,101)
Transactions with shareholders recorded
directly to equity:
Redemption of Ordinary Shares – – – (2,737) – – (2,737)
Shares issued 1 – 672 – – – 673
Cancellation of shares 4 (3) 3 – – – – –
Equity dividends paid 10 – – – – – (11) (11)
As at 30 April 2022 160 64 672 61,546 36,801 232 99,475
The notes on pages 63 to 83 form part of these financial statements.
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Balance Sheet
of the Company as at 30 April 2023
Notes
30 April
2023
£000
30 April
2022
£000
Non-current assets:
Investments held at fair value through profit or loss 12 56,068 94,822
Current assets:
Derivative instruments 13 169 802
Trade and other receivables 14 217 232
Cash at bank and cash equivalents 4,590 3,794
4,976 4,828
Liabilities:
Trade and other payables 15 290 175
Net current assets 4,686 4,653
Net assets 60,754 99,475
Capital and reserves
Share capital 4 145 160
Capital redemption reserve 79 64
Share premium account 672 672
Special reserve 51,039 61,546
Capital reserve 8,697 36,801
Revenue reserve 122 232
Shareholders’ funds 60,754 99,475
pence pence
Net asset value per Ordinary Share – basic and diluted 5 64.20 91.05
These financial statements were approved and authorised for issue by the Board of Miton UK MicroCap
Trust plc on 10 July 2023 and were signed on its behalf by:
Ashe Windham
Chairman
10 July 2023
Company No: 09511015
The notes on pages 63 to 83 form part of these financial statements.
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Statement of Cash Flows
for the Company for the year ended 30 April 2023
30 April
2023
£000
30 April
2022
£000
Operating activities:
Net loss before taxation (28,054) (15,087)
Loss on investments and derivatives held at fair value through profit or loss 27,617 14,552
Decrease in trade and other receivables 39 12
Decrease in trade and other payables (13) (18)
Exchange gains on capital items – 1
Amortisation of finance costs 33 39
Withholding tax paid (18) (14)
Net cash outflow from operating activities (396) (515)
Investing activities:
Purchase of investments (15,404) (26,813)
Purchase of derivative investments (911) (2,070)
Sale of investments 27,498 29,012
Sale of derivative instruments 691 –
Net cash inflow from investing activities 11,874 129
Financing activities:
Proceeds of Ordinary Share issue – 688
Redemption/repurchase of Ordinary Shares (10,507) (2,737)
Equity dividends paid (142) (11)
Finance costs paid (33) (32)
Net cash outflow from financing activities (10,682) (2,092)
Increase/(Decrease) in cash and cash equivalents 796 (2,478)
Reconciliation of net cash flow movement in funds:
Cash and cash equivalents at the start of the year 3,794 6,272
Net cash inflow/(outflow) from cash and cash equivalents 796 (2,478)
Cash at the end of the year 4,590 3,794
Cash and cash equivalents
Comprise the following:
Cash at bank 4,590 3,794
4,590 3,794
The notes on pages 63 to 83 form part of these financial statements.
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63
Notes to the Financial Statements
1. Accounting Policies
Miton UK MicroCap Trust plc is a company
incorporated and registered in England and Wales.
The principal activity of the Company is that of an
investment trust company within the meaning of
Sections 1158/1159 of the Corporation Tax Act 2010.
The financial statements of the Company have
been prepared in accordance with UK International
Accounting Standards. The financial statements
have also been prepared in accordance with the AIC
SORP for the financial statements of investment
trust companies and venture capital trusts.
Basis of Preparation
In order to better reflect the activities of an
investment trust company and in accordance
with guidance issued by the AIC, supplementary
information which analyses the Income Statement
between items of a revenue and capital nature has
been prepared alongside the Income Statement.
The financial statements are presented in Sterling,
which is the Company’s functional currency as the
UK is the primary environment in which it operates,
rounded to the nearest £1,000, except where
otherwise indicated.
Going Concern
The financial statements have been prepared on a
going concern basis and on the basis that approval
as an investment trust company will continue to be
met. The Directors have made an assessment of the
Company's ability to continue as a going concern
based on detailed profit & loss and cash flow forecasts.
These forecasts have been 'stressed' for inflation, as
well as a severe but plausible and sudden downturn
in market conditions under which it is assumed that
the investment portfolio will lose 50% of its value. Even
under this extreme 'stress' scenario, the Company
has adequate resources to continue in operational
existence for a period of at least 12 months from the
date when these financial statements were approved.
The Directors also regularly assess the resilience
of key third-party service providers, most notably
the Investment Manager and Fund Administrator.
The Directors do not have any concerns about
the financial viability of the Company's third-party
service providers. In making their assessment, the
Directors have considered the likely impacts of
international and economic uncertainties on the
Company, operations and the investment portfolio.
These include, but are not limited to, another global
event similar to the COVID-19 pandemic, the war
in Ukraine, political and economic instability in the
UK, supply shortages and inflationary pressures. The
Directors noted that the Company, with the current
cash balance and holding a portfolio of liquid listed
investments, is able to meet the obligations of the
Company as they fall due.
The Investment Manager assesses the exposure to
risk when making each investment decision and the
performance of the portfolio on a daily basis.
The current cash balance plus available additional
borrowing, through the revolving credit facility,
enables the Company to meet any funding
requirements and finance future additional
investments. The Company is a closed-ended fund,
where assets are not required to be liquidated to
meet day-to-day redemptions. Furthermore, the
Directors are not aware of any material uncertainties
that may cast significant doubt on the Company's
ability to continue as a going concern, having
taken into account the liquidity of the Company's
investment portfolio and the Company's financial
position in respect of its cash flows, borrowing
facilities and investment commitments (of which
there are none of significance). Therefore, the
financial statements have been prepared on the
going concern basis.
Segmental Reporting
The Directors are of the opinion that the Company
is engaged in a single segment of business, being
investment business. The Company primarily invests
in companies listed in the UK.
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Accounting Developments
In the year under review, the Company has applied
amendments to IFRS issued by the IASB adopted
in conformity with UK IFRS. These include annual
improvements to IFRS, changes in standards,
legislative and regulatory amendments, changes
in disclosure and presentation requirements. This
incorporated:
•
Onerous contracts — Cost of Fulfilling a
Contract (Amendments to IAS 37);
•
Reference to the Conceptual Framework
(Amendments to IFRS 3); and
•
Annual improvements to IFRS Standards.
The adoption of the changes to accounting
standards has had no material impact on these
or prior years' financial statements. There are
amendments to IAS/IFRS that will apply from
1 May 2023 as follows:
•
Disclosure of Accounting Policies (Amendments
to IAS 1 and IFRS Practice Statement 2);
•
Initial application of IFRS 17 and IFRS 9 –
Comparative Information (Amendments to
IFRS17);
•
Definition of Accounting Estimates
(Amendments to IAS 8); and
•
Deferred Tax Related to Assets and
Liabilities Arising from a Single Transaction –
Amendments to IAS 12 Income Taxes.
Amendments to IAS/IFRS applicable from 1 May
2024 are:
•
Classification of liabilities as current or
non-current (Amendments to IAS 1); and
•
Non-current liabilities with Covenants
(Amendments to IAS 1).
The Directors do not anticipate the adoption of
these will have a material impact on the financial
statements in current or future years.
Critical Accounting Judgments and Key Sources of
Estimation Uncertainty
The preparation of financial statements in
conformity with UK International Accounting
Standards requires management to make
judgements, estimates and assumptions that
affect the application of policies and the reported
amounts in the Balance Sheet, the Income
Statement and the disclosure of contingent assets
and liabilities at the date of the financial statements.
The estimates and associated assumptions are
based on historical experience and various other
factors that are believed to be reasonable under the
circumstances, the results of which form the basis of
making judgements about carrying values of assets
and liabilities that are not readily apparent from
other sources. Actual results may differ from these
estimates.
The areas requiring judgement and estimation in
the preparation of the financial statements are:
recognising and classifying unusual or special
dividends received as either revenue or capital in
nature; the valuation of warrants; and allocation of
expenses between capital and income and setting
of the level of dividends paid and proposed.
The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period
in which the estimate is revised if the revision affects
only that period, or in the period of the revision and
future period if the revision affects both current and
future periods.
Investments
The Company’s business is investing in financial
assets with a view to profiting from their total
return in the form of income and capital growth.
This portfolio of investments is managed and
its performance evaluated on a fair value basis,
in accordance with a documented investment
strategy, and information about the portfolio is
provided internally on that basis to the Company’s
Board of Directors.
Notes to the Financial Statements continued
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Upon initial recognition the Company designates
the investments ‘at fair value through profit or
loss’. They are included initially at fair value, which
is taken to be their cost (excluding expenses
incidental to the acquisition which are written off
in the Income Statement, and allocated to ‘capital’
at the time of acquisition). When a purchase or
sale is made under a contract, the terms of which
require delivery within the time-frame of the
relevant market, the investments concerned are
recognised or derecognised on the trade date.
Subsequent to initial recognition, investments are
valued at fair value through profit or loss. For listed
and quoted investments this is deemed to be bid
market prices or closing prices for Stock Exchange
Electronic Trading Service – quotes and crosses
(“SETSqx”). Changes in fair value of investments
are recognised in the income Statement as a
capital item. On disposal, realised gains and losses
are also recognised in the income Statement as
capitalitems.
Warrants give the Company the right, but not
the obligation, to buy common ordinary shares
in an investee company at a fixed price for a pre-
defined time period. The fair value is determined
by the Manager through use of models including
Black and Scholes and discounted cashflows, using
available observable inputs of the warrant: the
exercise share price of the investee company, the
expiration period plus other factors including the
prevailing interest rate and associated risks.
All investments for which fair value is measured or
disclosed in the financial statements are categorised
within the fair value hierarchy in note 12.
Foreign Currency
Transactions denominated in foreign currencies are
converted to Sterling at the actual exchange rate as
at the date of the transaction. Monetary assets and
liabilities and assets carried at fair value denominated
in foreign currencies at the year end are reported at
the rate of exchange at the Balance Sheet date. Any
gain or loss arising from a change in exchange rate
subsequent to the date of the transaction is included
as an exchange gain or loss in the capital reserve or
the revenue account depending on whether the gain
or loss is of a capital or revenue nature.
Derivatives
Derivatives, including Index Put Options, which
are listed investments, are classified as financial
instruments at fair value through profit or loss.
Derivatives are initially recorded at cost (being
premium paid to purchase the option) and
subsequently valued at fair value and included
in current assets/liabilities. Derivatives are
derecognised when the contract expires or on the
trade date when the contract is sold.
Changes in the fair value of derivative instruments
are recognised as they arise in the capital column of
the Income Statement. The fair value is calculated
by a broker using models with inputs from market
prices. On disposal or expiration, realised gains and
losses are also recognised in the income statement
as capital items.
Cash and Cash Equivalents
For the purposes of the Balance Sheet,
cash comprises cash in hand. Cash equivalents are
short-term, highly liquid investments that are readily
convertible to known amounts of cash and which
are subject to insignificant risk of changes in value.
For the purpose of the Statement of Cash Flows,
cash and cash equivalents consist of cash and cash
equivalents as defined above.
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Trade and Other Receivables
Trade and other receivables are measured, where
applicable, at amortised cost and as reduced by
appropriate allowance for expected irrecoverable
amounts.
Trade Payables and Short-term Borrowings
Trade payables and short-term borrowings are
measured at amortised costs.
Income
Dividends receivable on quoted equity shares are
taken to revenue on an ex-dividend basis. Dividends
receivable on equity shares where no ex-dividend
date is quoted are brought into account when the
Company’s right to receive payment is established.
Fixed returns on non-equity shares are recognised
on a time-apportioned basis.
Dividends from overseas companies are shown
gross of any non-recoverable withholding taxes,
which are presented separately in the Income
Statement.
Special dividends are taken to revenue or capital
account depending on their nature.
When the Company has elected to receive scrip
dividends in the form of additional shares rather
than in cash, the amount of the cash dividend
forgone is recognised as income. Any excess in
the value of the cash dividend is recognised in the
capital column.
All other income is allocated on a time-apportioned
accruals basis.
Expenses and Finance Costs
All expenses and finance costs are accounted
for on an accruals basis. On the basis of the
Board’s expected long-term split of total returns
the Company charges 75% (2022: 75%) of its
management fee and 100% (2022: 100%) of finance
costs to capital.
Expenses incurred directly in relation to arranging
debt finance are amortised over the term of the
finance. Finance charges incurred and amortised
are charged to capital (2022: 100%) and included in
the capital column of the Income Statement.
Expenses incurred directly in relation to issue of
shares are charged to share premium.
Expenses incurred in the maintenance of capital,
redemption and cancellation of shares are charged
to the special reserve through the Statement of
Changes in Equity.
Taxation
Deferred tax is provided using the liability method on
temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes at the reporting date based on tax
rates that are expected to apply in the period when
the liability is settled or the asset is realised. Deferred
tax assets are only recognised if it is considered more
likely than not that there will be suitable profits from
which the future reversal of temporary differences can
be deducted. In line with the recommendations of the
AIC SORP, the allocation method used to calculate
the tax relief on expenses charged to capital is the
“marginal” basis. Under this basis, if taxable income is
capable of being offset entirely by expenses charged
through the revenue account, then no tax relief is
transferred to the capital account.
The charge for taxation is based on the net revenue
for the year and takes into account taxation deferred
or accelerated because of temporary differences
between the treatment of certain items for
accounting and taxation purposes. The actual charge
for taxation in the Income Statement relates to
irrecoverable withholding tax on overseas dividends
received during the year.
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Dividends Payable to Shareholders
Dividends to shareholders are recognised as a
liability in the period in which they are paid or
approved in general meetings and are taken to the
Statement of Changes in Equity. Dividends declared
and approved by the Company after the Balance
Sheet date have not been recognised as a liability of
the Company at the Balance Sheet date.
Share Capital
The Company is a closed-ended investment company
with an unlimited life. As defined in the Articles of
Association, redemption of Ordinary Shares is at the
sole discretion of the Directors, therefore the Ordinary
Shares have been classified as equity.
The issuance, acquisition and resale of Ordinary
Shares are accounted for as equity transactions and
no gain or loss is recognised in the Income Statement.
This is a reserve forming part of the non-distributable
reserves.
Share Premium
The share premium account represents the
accumulated premium paid for shares issued in
previous periods above their nominal value less
issue expenses. This is a reserve forming part of the
non-distributable reserves. The following items are
taken to this reserve:
•
Costs associated with the issue of shares; and
•
Premium on the issue of shares.
Special reserve
The special reserve was created by the cancellation
of the share premium account and is distributable.
This reserve may be used for:
•
Redemption of shares by way of the annual
redemption facility;
•
Costs relating to the capital structure of
the company;
•
Cancellation of shares;
•
Share buy backs and dividends.
Capital Reserve
The following are taken to the capital reserve
through the capital column in the statement
of comprehensive income:
•
Gains and losses on the disposal of investments
and derivatives;
•
Increase and decrease in the valuation of
investments held at the year end;
•
Exchange differences of a capital nature; and
•
Expenses, together with the related taxation
effect, allocated to this reserve in accordance
with the above accounting policies.
Capital Redemption Reserve
The capital redemption reserve represents non
distributable reserves that arise from the purchase
and cancellation of shares.
Revenue Reserve
The revenue reserve represents the surplus of
accumulated profits and is distributable by the way
of dividends.
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2. Income
Year ended
30 April
2023
£000
Year ended
30 April
2022
£000
Income from investments:
UK Dividends 490 604
Non-UK dividend income 281 348
UK REIT dividends 33 31
804 983
Other income:
Bank deposit interest 66 –
Exchange gains 2 –
Other income 3 –
Total 875 –
3. Return per Ordinary Share
Returns per Ordinary Share are based on the weighted average number of shares in issue during the year.
Basic and diluted return per share are the same as there are no dilutive elements on share capital.
Year ended
30 April 2023
Year ended
30 April 2022
Net profit (£000) Revenue Capital Total Revenue Capital Total
Continuation shareholders (£'000) 54 (27,365) (27,311) 159 (15,260) (15,101)
Redemption shareholders (£'000) (22) (739) (761) – – –
32 (28,104) (28,072) 159 (15,260) (15,101)
Weighted average number of shares
in issue 97,041,026 109,671,976
Return per share (pence) 0.03 (28.96) (28.93) 0.15 (13.91) (13.76)
During the prior year the allocation of the return per Ordinary Share is allocated as follows:
Return per Ordinary Share Weighted average
pence pence pence
Continuation shareholders 0.09 (27.22) (27.13) 97,041,026
Redemption shareholders (0.06) (1.74) (1.80) 14,614,999
The 50,000 Management shares do not participate in the returns of the Company.
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4. Share Capital
Year ended
30 April 2023
Year ended
30 April 2022
Number £000 Number £000
Ordinary Shares of £0.001 each
Opening balance 109,253,560 110 111,274,758 112
Shares issued – – 650,000 1
Redemptions (14,614,999) (15) (2,671,198) (3)
94,638,561 95 109,253,560 110
Year ended
30 April 2023
Year ended
30 April 2022
Number £000 Number £000
Management shares of £1 each 50,000 50 50,000 50
The rights attaching to each share class are set out on page 85 of this report.
Shares Issued
There were no shares issued during the year (2022: 650,000 Ordinary Shares were issued at an average price
per share of 106.6p raising £673,000 (Gross consideration £688,000)).
Redemption of Ordinary Shares
The Company has a redemption facility through which shareholders are entitled to request the redemption
of all or part of their holding of Ordinary Shares on an annual basis. As set out in the Articles of Association,
the Board may, at its absolute discretion, elect not to operate the annual redemption facility in whole or in
part. It is anticipated that the next redemption point for shareholders will be in November 2023. The Board
retains the discretion to further amend this timetable. Accordingly, the Ordinary Shares have been classified
as equity.
2022 Redemption
The total number of Ordinary Shares in respect of which valid redemption requests were received for the
30 June 2022 Redemption Point was 14,614,999 Ordinary Shares (representing 13.3771% of the issued share
capital (the “Redemption”)). The Board resolved to effect the Redemption using the redemption pool
method set out in the Company’s Articles, pursuant to which the Company notionally divided its assets and
liabilities into two pools, the Redemption Pool and the Continuing Pool, with the returns attributable to
the respective Redemption and Continuing shareholders. The 14,614,999 Ordinary Shares over which valid
redemption requests were made have been cancelled with effect from 30 June 2022; former holders of the
Redemption Shares are now creditors of the Company.
The assets of the Redemption Pool have been realised. The Redemption Price per Ordinary Share equals the
aggregate cash received by the Company upon the realisation of the Redemption Pool, after deducting the
costs of the redemption, and a pro‐rata share of the costs and expenses of the Company not attributable
to a particular pool, divided by the number of Redemption Shares. On that basis, the Redemption Price for
the 30 June 2022 Redemption Point is 71.89 pence per redeemed Ordinary Share with a total payment of
£10,507,000. The capital losses and expenses associated with the operation of the Redemption Pool (the
“redemption loss”) are a component of the Return of the Company as stated in the Income Statement. The
Redemption shareholders received the value of the Redemption Pool upon liquidation. The redemption loss
to Redemption shareholders from the performance of the Redemption Pool amounted to £761,000.
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Management Shares
50,000 Management shares with a nominal value of £1 each were allotted to Miton Trust Managers Limited
on the date of incorporation. These shares have been fully paid up. The Management shares are non-voting
and non-redeemable and, upon a winding-up or on a return of capital of the Company, shall only receive the
fixed amount of capital paid up on such shares and shall confer no right to any surplus capital or assets of
the Company.
5. Net Asset Values
The NAVs per Ordinary Share and the net assets attributable at the year end were as follows:
30 April 2023
Ordinary Share
30 April 2022
Ordinary Share
NAV per
share
pence
Net assets
attributable
£’000
NAV per
share
pence
Net assets
attributable
£’000
Basic and diluted 64.20 60,754 91.05 99,475
NAV per Ordinary Share is based on net assets at the year end and 94,638,561 Ordinary Shares (2022:
109,253,560), being the number of Ordinary Shares in issue at the year end.
NAV of £1.00 per Management share is based on net assets at the year end of £50,000 (2022: £50,000) and
attributable to 50,000 Management shares at the year end. The shareholders have no right to any surplus
capital or assets of the Company.
6. Management Fee
The basic management fee payable to the AIFM is calculated at the rate of one-twelfth of 0.9% (2022:
0.9%) of the average market capitalisation of the Company up to £100m, 0.8% per annum on the average
market capitalisation above £100m (2022: 0.8%), on the last business day of each calendar month. The basic
management fee accrues daily and is payable in arrears in respect of each calendar month. For the purpose
of calculating the basic fee, the ‘adjusted market capitalisation’ of the Company is defined as the average daily
midmarket price for an Ordinary Share and C share (when in issue), multiplied by the number of relevant shares
in issue, excluding those held by the Company in treasury, on the last business day of the relevant month.
In addition to the basic management fee, and when the Redemption Pool is in existence, the AIFM is entitled
to receive from the Company a fee calculated at the rate of 0.9% (1% prior to 1 September 2020) of the net asset
value of the Redemption Pool on the last Business Day of the relevant calendar month.
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The AIFM has agreed that, for so long as it remains the Company’s investment manager, it will not charge such
part of any management fee payable to it so that the Company can maintain an ongoing charges ratio of 2% or
lower. The ongoing charges ratio for the year is 1.72% (2022: 1.41%) for the Ordinary Shares, and as such is below
2%. In accordance with the Directors’ policy on the allocation of expenses between income and capital, in each
financial year 75% of the management fee payable is expected to be charged to capital and the remaining 25%
to income.
Year ended
30 April 2023
Year ended
30 April 2022
Revenue
£000
Capital
£000
Total
£000
Revenue
£000
Capital
£000
Total
£000
Management fee 149 448 597 223 669 892
At 30 April 2023, an amount of £41,000 (30 April 2022: £68,000) was outstanding and due to
Premier Portfolio Managers Limited in respect of management fees.
7. Other Expenses
Year ended
30 April
2023
£000
Year ended
30 April
2022
£000
Directors’ fees 127 138
Audit remuneration 56 45
Secretarial services 69 –
Administrator services 136 181
Registrar’s fees 17 17
Custodian fees 19 13
Depository fees 18 27
Advisory and professional fees
1
115 67
Printing and postage 10 7
Research fee
1
11 11
Directors’ insurance 15 15
Other expenses 14 9
Irrecoverable VAT 56 45
Miscellaneous 13 12
Total 676 587
1
Contribution to Investment Manager's research budget
During the years ended 30 April 2023 and 30 April 2022, the Auditor’s remuneration related to audit services
only.
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8. Finance Costs
Year ended
30 April 2023
Year ended
30 April 2022
Revenue
£000
Capital
£000
Total
£000
Revenue
£000
Capital
£000
Total
£000
Revolving credit facility
£5m revolving loan facility arrangement fee – 6 6 – 6 6
£5m revolving loan facility non-utilisation fee – 33 33 – 33 33
– 39 39 – 39 39
Revolving credit facility
The Company entered into a revolving credit facility (the “facility”) on 25 February 2021 for £5m (together with
an uncommitted accordion facility of up to £7.5m) with The Royal Bank of Scotland International Limited,
London Branch. The terms consist of interest rate of 1.35% above SONIA on any drawn down balance and
0.65% on any undrawn balance where less than 25% of the facility is drawn down or 0.55% on any undrawn
balance where more than 25% of the facility is drawn down. The term of the facility is for three years with any
drawndown balances repayable at the discretion of the Company.
The arrangement fee of £18,000 was paid in 2021 and amortised over the 3-year period of the facility.
The Company did not draw on the facility during the year (2022: nil) and no amounts have been drawn down
at the date of signing this report.
9. Taxation
a. Analysis of tax charge in the year:
Year to 30 April 2023 Year to 30 April 2022
Revenue
£000
Capital
£000
Total
£000
Revenue
£000
Capital
£000
Total
£000
UK corporation tax – – – – – –
Overseas tax not recoverable* 18 – 18 14 – 14
18 – 18 14 – 14
* Tax deducted on payment of overseas dividends by local tax authorities.
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b. The tax assessed for the year is the standard rate of corporation tax in the United Kingdom aggregated
for the financial year of 19.5%. (2022: 19%). The differences are explained below:
Year to 30 April 2023 Year to 30 April 2022
Revenue
£000
Capital
£000
Total
£000
Revenue
£000
Capital
£000
Total
£000
Net return before taxation 50 (28,104) (28,054) 174 (15,262) (15,088)
Theoretical tax at UK corporation tax rate of 19.5% (2022: 19%) 10 (5,480) (5,470) 33 (2,900) (2,867)
Effects of:
UK dividends that are not taxable (96) – (96) (115) – (115)
Overseas dividends that are not taxable (55) – (55) (66) – (66)
Non-taxable investment losses – 5,385 5,385 – 2,900 2,900
Overseas taxation suffered 18 – 18 14 – 14
Unrelieved excess expenses 141 95 236 148 – 148
Actual current tax charge 18 – 18 14 – 14
Factors that may affect future tax charges
As at 30 April 2023, based on current estimates and including the accumulation of net allowable losses, the
Company had unrelieved losses of £10,648,712 (2022: £9,439,302) that are available to offset future taxable
revenue. A deferred tax asset of £2,662,178 (2022: £2,359,826), based on the effective tax rate of 25%, has not
been recognised because the Company is not expected to generate sufficient taxable income in future
periods in excess of the available deductible expenses and accordingly, the Company is unlikely to be able to
reduce future tax liabilities through the use of existing surplus losses.
10. Dividends
30 April 2023 30 April 2022
Amounts recognised as distributions to equity holders in the year. £000 pence £000 pence
In respect of the previous year:
Final dividend 142 0.15 11 0.01
142 0.15 11 0.01
The Directors have recommended a final dividend in respect of the year ended 30 April 2023 of 0.15p (2022:
0.15p) per Ordinary Share payable on 26 October 2023 to all shareholders on the register at close of business
on 29 September 2023. The ex-dividend date will be 28 September 2023.
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11. Investments
30 April
2023
£000
30 April
2022
£000
Investment portfolio summary:
Opening book cost 91,876 80,008
Opening unrealised gains 2,946 28,498
Analysis of transactions made in the year
Opening fair value 94,822 108,506
Movements in the year:
Purchases at cost 15,532 26,083
Sales – proceeds (27,521) (26,483)
Movement in investment holding losses (26,765) (13,284)
Closing fair value 56,068 94,822
Closing book cost 75,539 91,876
Closing unrealised (losses)/gains (19,471) 2,946
Closing fair value 56,068 94,822
Transaction costs:
Costs on acquisitions 10 18
Costs on disposals 30 22
40 40
The Company received £27,521,000 (2022: £26,483,000) from investments sold in the year. The book cost of
these investments when they were purchased was £31,869,000 (2022: £14,215,000). These investments have
been revalued over time and until they were sold any unrealised gains or losses were included in the fair
value of the investments.
A list of the largest portfolio holdings by their fair value is shown on page 20.
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12. Fair Value Hierarchy
Financial assets of the Company are carried in the Balance Sheet at their fair value or approximation of
fair value. The fair value is the amount at which the asset could be sold in an ordinary transaction between
market participants, at the measurement date, other than a forced or liquidation sale. The Company
measures fair values using the following hierarchy that reflects the significance of the inputs used in making
the measurements.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is
significant to the fair value measurement of the relevant asset as follows:
Level 1 – valued using quoted prices, unadjusted in active markets for identical assets and liabilities
Level 2 – valued by reference to valuation techniques using observable inputs for the asset or liability other
than quoted prices included in level 1
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market
data for the asset or liability
Assessing the significance of a particular input requires judgement, considering factors specific to the asset
or liability. Financial assets are transferred at the point in which a change of circumstances occur.
The table below sets out the fair value measurement of financial assets and liabilities in accordance with the
fair value hierarchy.
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Financial assets at fair value through profit or loss at 30 April 2023
Equity investments 55,801 128 139 56,068
Derivative contracts – 169 – 169
55,801 297 139 56,237
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Financial assets at fair value through profit or loss at 30 April 2022
Equity investments 93,190 1,153 479 94,822
Derivative contracts – 802 – 802
93,190 1,955 479 95,624
The Level 2 investments are at values calculated using observable inputs. The fair value of warrants is
determined by the Manager through use of models using available observable inputs of the warrant:
the exercise share price of the investee company, the expiration period plus other factors including the
prevailing interest rate and associated risks.
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Fair value of level 3 movements – financial assets
As at
30 April
2023
Level 3
£000
As at
30 April
2022
Level 3
£000
Opening fair value investments 479 64
Transfer from Level 1 to Level 3 58 479
Transfer from Level 2 to Level 3 86 –
Transfer from Level 3 to Level 1 (557) –
Movement in unrealised 73 (64)
Closing fair value of Level 3 investments 139 479
Investments classified within Level 3 consist of equities, warrants and options. As observable prices are
not available for these investments, the Manager has used valuation techniques to derive the fair value.
The Level 3 valuations are reviewed on a regular basis by the Manager. The Manager considers the
appropriateness of the valuation model inputs, as well as the valuation result using various valuation
methods and techniques generally recognised as standard. In selecting the most appropriate valuation
model the Manager performs back testing and considers which model’s results have historically aligned
most closely to actual market transactions. The fair value of level 3 investments are based on discounted
anticipated future cash returns, taking account of available information, the consideration of liquidity, credit
and market risk factors, and adjusts the valuation model as deemed necessary.
The transfers between Level 3 and Level 1 consist of equities that have been suspended and/or readmitted
after suspension on the relevant stock exchange. Where the stock is re admitted, it is fair valued using
quoted prices, unadjusted in an active market and transferred to Level 1. Where it is suspended, it is
transferred to Level 3 with the appropriate valuation technique applied with consideration of the rationale
for suspension and other relevant information.
Other Financial Assets and Liabilities
For all other financial assets and liabilities, the carrying value is an approximation of fair value, including:
trade and other receivables; cash and cash equivalents and trade and other payables.
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13. Derivative Contracts
Listed Put Options at fair value through profit or loss at 30 April 2023
As at
30 April
2023
£000
As at
30 April
2022
£000
Opening book cost 2,070 –
Opening option holding losses (1,269) –
Total options designated at fair value 801 –
Listed Put Options at fair value through profit or loss at 30 April 2023
30 April
2023
£000
30 April
2022
£000
Analysis of option movements
Opening fair value 801 –
Movements in the period:
Purchases at cost 911 2,070
Sales – proceeds (691) –
Movement in holding losses (852) (1,269)
Closing fair value 169 801
Closing book cost 911 2,070
Closing unrealised losses (742) (1,269)
Closing fair value 169 801
Year ended
30 April
2023
£000
Year ended
30 April
2022
£000
Transaction costs:
Costs on acquisitions 1 1
Costs on disposals 2 –
3 1
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Derivative contracts serve as components of the Company's investment strategy and are utilised primarily to
structure and hedge investments to enhance performance and reduce risk of the Company (the Company
does not designate any derivative as hedging instrument for hedge accounting purposes). The derivative
contracts that the Company may hold from time to time or issue include: index-linked notes, contracts for
differences, covered options and other equity-related instruments.
The Company's investment objective set limits on investments in derivatives. The Investment Manager
closely monitors the company's exposure under derivative contracts and any use of derivatives for
investment purposes will be made on the basis of the same principles of risk spreading and diversification
that apply to the Company's direct investments. The Company will not enter into uncovered short positions.
14. Trade and Other Receivables
30 April
2023
£000
30 April
2022
£000
Amount due from brokers 117 93
Dividends receivable 48 84
Prepayment and other debtors 50 53
Taxation recoverable 2 2
217 232
15. Trade and Other Payables
30 April
2023
£000
30 April
2022
£000
Amount due to brokers 128 –
Other creditors 162 175
290 175
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16. Capital Management Policies
The Company’s capital management objectives are:
•
To ensure that it will be able to continue as a going concern; and
•
To maximise the income and capital return over the long term to its equity shareholders though an
appropriate balance of equity capital and debt
As stated in the investment policy, the Company has authority to borrow up to 15% of net asset value through
a mixture of bank facilities and certain derivative instruments. There were no borrowings as at 30 April 2023
or throughout the year (2022: nil). Also, as a public company, the minimum share capital is £50,000.
The Company’s capital at 30 April 2023 comprised:
30 April
2023
£000
30 April
2022
£000
Current liabilities:
Trade and other payables 290 175
Equity:
Equity share capital 145 160
Retained earnings and other reserves 60,609 99,315
Total shareholders’ funds 60,754 99,475
Debt as a % of net assets 0.00% 0.00%
The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the
Company’s capital on an ongoing basis. This review includes:
•
the planned level of gearing, which takes into account the Investment Manager’s view of the market;
•
the buy back of shares for cancellations or treasury, which takes account of the difference between the
NAV per share and the share price (i.e the level of share price discount or premium);
•
new issues of equity shares; and
•
the extent to which revenue in excess of that which is required to be distributed should be retained.
The Company’s objectives, policies and processes for managing capital have remained unchanged since
itslaunch.
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17. Reserves
Ordinary Shares to 30 April 2023
Capital
redemption
reserve
£000
Share
premium
account
£000
Special
reserve*
£000
Capital
reserve
realised*
£000
Capital
reserve
unrealised*
£000
Revenue
reserve*
£000
Opening balance 64 672 61,546 35,121 1,680 232
Redemption of Ordinary Shares – – (10,507) – – –
Cancellation of shares 15 – – – – –
Net loss on realisation of investments and derivatives – – – (5,727) – –
Unrealised losses realised in the year – – – – (21,890) –
Management fee charged to capital – – – (448) – –
Finance costs charged to capital – – – (39) – –
Equity dividends paid – – – – – (142)
Revenue return on ordinary activities after tax – – – – – 32
Closing balance 79 672 51,039 28.907 (20,210) 122
* At 30 April 2023, the distributable reserves of the Company comprised of £59,858,000 (2022: £96,899,000).
Ordinary Shares to 30 April 2022
Capital
redemption
reserve
£000
Share
premium
account
£000
Special
reserve*
£000
Capital
reserve
realised*
£000
Capital
reserve
unrealised
£000
Revenue
reserve*
£000
Opening balance 61 – 64,283 23,562 28,499 84
Shares issued – 688 – – – –
Cost of share issues – (16) – – – –
Redemption of Ordinary Shares – – (2,736) – – –
Cost of redemption – – (1) – – –
Cancellation of shares 3 – – – – –
Net gain on realisation of investments and derivatives – – – 12,268 – –
Unrealised losses realised in the year – – – – (26,819) –
Exchange losses on foreign bank accounts – – – (1) – –
Management fee charged to capital – – – (669) – –
Finance costs charged to capital – – – (39) – –
Equity dividends paid – – – – – (11)
Revenue return on ordinary activities after tax – – – – – 159
Closing balance 64 672 61,546 35,121 1,680 232
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18. Analysis of Financial Assets and Liabilities
Investment Objective and Policy
The Company’s investment objective and policy are detailed on pages 13 and 17.
The Company’s financial instruments can comprise:
•
Shares and debt securities held in accordance with the Company’s investment objective and policies;
•
Derivative instruments for efficient portfolio management, gearing and investment purposes; and
•
Cash, liquid resources and short-term debtors and creditors that arise from its operations.
The risks identified arising from the Company’s financial instruments are market risk (which comprises
market price risk, interest rate risk and foreign currency exposure risk), liquidity risk and credit and
counterparty risk. The Company may enter into derivative contracts to manage risk. The Board reviews and
agrees policies for managing each of these risks, which are summarised below.
These policies have remained unchanged since the beginning of the accounting period.
Market Risk
Market risk arises mainly from uncertainty about future prices of financial instruments used in the
Company’s business. It represents the potential loss the Company might suffer through holding market
positions by way of price movements, interest rate movements and exchange rate movements. The
Investment Manager assesses the exposure to market risk when making each investment decision and
these risks are monitored by the Investment Manager on a regular basis and the Board at quarterly
meetings with the Investment Manager.
Market price risk
Market price risk (i.e. changes in market prices other than those arising from currency risk or interest rate
risk) may affect the value of investments.
The Board manages the risks inherent in the investment portfolio by ensuring full and timely reporting of
relevant information from the Investment Manager. Investment performance and exposure are reviewed at
each Board meeting.
The Company’s exposure to changes in market prices as at 30 April 2023 on its equity and listed Put index
option investments held at fair value through profit or loss was £ £56,237,000 (2022: £95,624,000).
The Company entered into a revolving credit facility (the “facility”) on 25 February 2021 for £5m (together
with an uncommitted accordion facility of up to £7.5m) with The Royal Bank of Scotland International
Limited, London Branch. The terms consist of interest rate of 1.35% above SONIA on any drawn down balance
and 0.65% on any undrawn balance where less than 25% of the facility is drawn down or 0.55% on any
undrawn balance where more than 25% of the facility is drawn down.
The portfolio is managed with an awareness of the effects of adverse price movements through detailed
and continuing analysis with the objective of maximising overall returns to Shareholders. If the fair value
of the Company’s investments at the year end increased or decreased by 10%, then it would have had an
impact on the Company’s capital return through (losses)/gains on investments held at fair value, impacting
profit/(loss) and the NAV, by £5,624,000 (2022: £956,000).
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Notes to the Financial Statements continued
Interest rate risk
Interest rate movements may affect the level of income receivable on cash deposits. The Company’s
financial assets and liabilities, excluding short-term debtors and creditors, may include investment in
fixed interest securities, such as UK corporate debt stock, whose fair value may be affected by movements
in interest rates. The majority of the Company’s financial assets and liabilities, however, are non-interest
bearing. As a result, the Company’s financial assets and liabilities are not subject to significant amounts of
risk due to fluctuations in the prevailing levels of market interest rates. There was no exposure to interest
bearing liabilities during the year ended 30 April 2023 (2022: nil).
The Company has a revolving credit facility at an interest rate of 1.35% above SONIA, on any drawn down
balance. The Company, subject to the terms of the agreement is able to be drawdown and repay at the
discretion of the Company. During the year and at the date of signing this report the facility has not been
drawn down.
The possible effects on the fair value and cash flows that could arise as a result of changes in interest rates
are taken into account when making investment decisions. The Board imposes borrowing limits to ensure
gearing levels are appropriate to market conditions.
The interest rate profile of the Company (excluding short-term debtors and creditors) was as follows:
30 April 2023
Floating
rate
£000
30 April 2022
Floating
rate
£000
Assets and liabilities:
Cash and cash equivalents 4,590 3,794
4,590 3,794
If the above level of cash was maintained for a year, a 1% increase in interest rates would increase the revenue
return and net assets by £46,000 (2022: £38,000). If there was a fall of 1% in interest rates, it would potentially
impact the Company by reduced interest and turning positive interest to negative interest. The total effect
would be a revenue reduction/cost increase and decrease in net assets of £46,000 (2022: £38,000).
Foreign currency risk
Although the Company’s performance is measured in Sterling, a proportion of the Company’s assets
may be either denominated in other currencies or in investments with currency exposure. Any income
denominated in a foreign currency is converted into Sterling upon receipt. At the Balance Sheet date, all the
Company’s assets were denominated in Sterling and accordingly the only currency exposure the Company
has is through the trading activities of its investee companies.
Liquidity Risk
Liquidity risk is not significant as the Company is a closed-ended investment trust and the majority of the
Company’s assets are investments in quoted equities and other quoted securities that are readily realisable.
The Company’s liquidity risk is managed on a daily basis by the Investment Manager in accordance with
established policies and procedures in place. The Investment Manager reviews daily forward-looking cash
reports which project cash obligations. These reports allow it to manage its obligations. A maturity analysis is
not presented as the Investment Manager does not consider this to be a material risk.
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Credit and Counterparty Risk
Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to
meet its contractual obligations.
The maximum exposure to credit risk as at 30 April 2023 was £4,976,000 (2022: £4,828,000). The calculation is
based on the Company’s credit risk exposure as at 30 April 2023 and this may not be representative for the
whole year.
The Company’s quoted investments are held on its behalf by The Bank of New York Mellon (“BNYM”), acting
as the Company’s custodian. Bankruptcy or insolvency of the custodian may cause the Company’s rights
with respect to securities held by the custodian to be delayed. The Board monitors the Company’s risk by
reviewing the custodian’s internal controls report.
Where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of
the issuer is taken into account so as to minimise the risk to the Company of default.
The Company’s cash balances are held on its behalf by BNYM. The Board monitor the credit worthiness of
BNYM, currently rated at Aa1 (Moody’s). The exposure of cash held at BNYM as at 30 April 2023 £4,590,000
(2022: £3,794,000). The cash balances will fluctuate throughout the year and the Board will monitor
theexposure.
Investment transactions are carried out with a number of brokers whose creditworthiness is reviewed by the
Investment Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby
the Company’s custodian bank ensures that the counterparty to any transaction entered into by the
Company has delivered on its obligations before any transfer of cash or securities away from the Company
is completed.
Cash is only held at banks that have been identified by the Board as reputable and of high credit quality.
None of the Company’s assets are past due or impaired.
19. Related Parties
Fees paid to the Company’s Directors are disclosed in the Report on Directors Remuneration on page 48. At
the year end, £nil was outstanding due to Directors (2022: £nil).
Details of the Management fee payable to Premier Portfolio Managers Limited pursuant to the Investment
Management Agreement are set out in the Strategic Report on page 70. Amounts paid and payable are set
out in Note 6.
20. Post Balance Sheet Events
There were no Post Balance Sheet Events.
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Redemption of Ordinary Shares
The Company has a voluntary redemption facility
through which shareholders are entitled to request
the redemption of all or part of their holding of
Ordinary Shares on an annual basis. For the year
ended 30 April 2023 the Redemption Point for
Ordinary Shares will be in accordance with the
timetable below.
Shareholders submitting valid requests for the
redemption of Ordinary Shares will have their shares
redeemed at the Redemption Price. The Directors
may elect, at their absolute discretion, to calculate
the Redemption Price applying on any redemption
point by reference to the Dealing Value per Ordinary
Share or by reference to a separate Redemption
Pool*.
The Board may, at its absolute discretion, elect not
to operate the annual redemption facility on any
given Redemption Point, or to decline in whole or
part any redemption request, although the Board
does not generally expect to exercise this discretion,
save in the interests of shareholders as a whole.
A redemption of Ordinary Shares may be subject
to either income tax and/or capital gains tax. In
particular, private shareholders that sell their shares
via the redemption mechanism could find they
are subject to income tax on the gains made on
the redeemed shares rather than the more usual
capital gains tax on the sale of their shares in the
market. However, individual circumstances do
vary, so shareholders who are in any doubt about
the redemption or the action that should be taken
should consult their stockbroker, accountant, tax
adviser or other independent financial adviser.
The relevant dates for the November 2023
Redemption Point are:
3 October 2023 Latest date for receipt of
redemption requests and
certificates for certificated shares
3.00pm on
3 October 2023
Latest date and time for receipt
of redemption requests and
settled TFE (Transfer to Escrow)
instructions for uncertificated
shares via CREST
5.00pm on
2 November 2023
Redemption Point
By 16 November
2023
Company to notify Redemption
Price and dispatch redemption
monies; or
If the redemption is funded
by way of a Redemption Pool,
the Company will notify the
Redemption Price and dispatch
of redemption monies as soon as
practicable.
Full details of the redemption facility are set out
in the Company’s Articles of Association or are
available from the Secretary.
* the pool of cash, assets and liabilities to be created by the Directors in
respect of a particular redemption point and allocated to the Ordinary
Shares which are the subject of redemption requests for that redemption
point. The assets of the Redemption Pool will be liquidated and the
Redemption Price per Ordinary Share will equal the aggregate cash
received by the Company upon the realisation of the Redemption Pool, after
deducting the costs of the redemption, which will be borne by the relevant
pool, an adjustment for any attributable unsettled liabilities and a pro-rata
share of the costs and expenses of the Company not attributable to a
particular pool, divided by the number of Redemption Shares, as set out in
the Articles.
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Shareholder Information
Miton UK MicroCap Trust plc was incorporated
on 26 March 2015 and its Ordinary Shares were
admitted to the premium segment of the Official
List and to trading on the London Stock Exchange’s
main market for listed securities on 30 April 2015.
Capital Structure
At the year end, the Company’s share capital consisted
of Ordinary Shares of £0.001 each (“Ordinary Shares”)
and non-voting management shares of £1 each
(“Management shares”). From time to time, the
Company may issue C shares of £0.01 each (“C shares”).
The Company’s shares have the following rights:
Voting: Ordinary Shares and C shares have equal
voting rights. At shareholder meetings, members
present in person or by proxy have one vote on a
show of hands and on a poll have one vote for each
share held.
Management shares are non-voting unless no other
shares are in issue at that time.
Dividends: the assets of the Ordinary Shares and
C shares are separate and each class is entitled to
dividends declared on their respective asset pool.
The management shares are entitled to receive, in
priority to the holders of any other class of shares, a
fixed cumulative dividend equal to 0.01% per annum
on the nominal value.
Capital: if there are any C shares in issue, the
surplus capital and assets of the Company shall on
a winding-up or on a return of capital, be applied
amongst the existing Ordinary Shareholders and
the Management shareholders pro rata according
to the nominal capital paid up on their holdings,
having first deducted therefrom an amount
equivalent to the assets and liabilities relating
to the C shares, which amount shall be applied
amongst the C shareholders pro rata according to
the nominal capital paid up on their holdings of
Cshares.
When there are no C shares in issue, any surplus
shall be divided amongst the Ordinary Shareholders
and Management shareholders pro rata according
to the nominal capital paid up on their holdings of
Ordinary Shares and Management shares.
In each instance, the holders of the Management
shares shall only receive an amount up to the
capital paid up on such Management shares and
the Management shares shall not confer the right
to participate in any surplus remaining following
payment of such amount.
As at the date of this Report, there are 94,638,561
Ordinary Shares in issue, none of which are held in
treasury, and 50,000 Management shares.
The Company has a redemption facility through
which shareholders are entitled to request the
redemption of all or part of their holding of Ordinary
Shares on an annual basis. The Board may, at its
absolute discretion, elect not to operate the annual
redemption facility in whole or in part, although
it has indicated that it is minded to approve
allrequests.
Details of the redemption facility are set out on
page 84.
Investment Objective
The investment objective of the Company is to
provide shareholders with capital growth over the
long-term.
Investment Policy
The Company invests primarily in the
smallest companies, measured by their market
capitalisation, quoted or traded on an exchange in
the United Kingdom at the time of investment. It is
likely that the majority of the microcap companies
held in the Company’s portfolio will be quoted on
AIM and will typically have a market capitalisation
of less than £150 million at the time of investment.
The Company may also invest in debt, warrants or
convertible instruments issued by such companies
and may invest in, or underwrite, future equity
issues by such companies.
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Shareholder Information continued
The Company may utilise derivative instruments
including index-linked notes, contracts for
differences, covered options and other equity
related derivative instruments for efficient portfolio
management, gearing and investment purposes.
Any use of derivatives for investment purposes
will be made on the basis of the same principles
of risk spreading and diversification that apply to
the Company’s direct investments, as described
below. The Company will not enter into uncovered
shortpositions.
If companies in the portfolio achieve organic
growth or grow through corporate activity such
as acquisitions, and consequently have a market
capitalisation that would place them outside the
investable universe, the Investment Manager
will not be obliged to sell those holdings, but the
proportion of the portfolio in such companies will be
carefully monitored by the Investment Manager and
the Board so that the overall investment policy to
invest in the smallest quoted or traded companies is
not materially altered.
The Company’s portfolio is expected to be diversified
by industry and market of activity. No single holding
will represent more than 15% of Gross Assets at
the time of investment and, when fully invested,
the portfolio is expected to have over 120 holding
although there is no guarantee that will be the case
and it may contain a lesser number of holdings at
any time.
The Company will have the flexibility to invest up
to 10% of its Gross Assets at the time of investment
in unquoted or untraded companies, or in any one
unquoted or untraded company.
The Company will invest no more than 10% of
Gross Assets at the time of investment in other
investment funds.
Borrowing
The Company may deploy borrowing to enhance
long-term capital growth. Gearing will be deployed
flexibly up to 15% of the Net Asset Value, at the time
of borrowing. In the event this limit is breached
as a result of market movements, and the Board
considers that borrowing should be reduced, the
Investment Manager shall be permitted to realise
investments in an orderly manner so as not to
prejudice shareholders.
No material change will be made to the investment
policy without the approval of shareholders by
ordinary resolution.
Share Dealing
Shares can be traded through a stockbroker or
share trading platform.
Share Prices
The Company’s shares are listed on the London
Stock Exchange.
Share Register Enquiries
The register for the Ordinary Shares is maintained
by Link Group. In the event of queries regarding
your holding, please contact the Registrar on
0371 664 0300. Calls are charged at the standard
geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at
the applicable international rate. Email Link at
enquiries@linkgroup.co.uk. Changes of name
and/or address must be notified in writing to the
Registrar: Link Group, 10
th
Floor, Central Square,
29WellingtonStreet, Leeds LS1 4D
Current Share Capital and Net Asset Value
Information
Ordinary £0.001 shares: 94,638,561
SEDOL Number: BWFGQ08
ISIN Number: GB00BWFGQ085
The Company releases its net asset value per share
to the London Stock Exchange daily.
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Annual and Half-Yearly Reports
Copies of the Annual and Half-Yearly Reports are
available from the Secretary on telephone number
01392 477 500 and are available on the Company’s
website, www.mitonukmicrocaptrust.com
Investment Manager: Premier Portfolio
ManagersLimited
The Company’s Investment Manager is Premier
Portfolio Managers Limited, a wholly-owned
subsidiary of Premier Miton Group plc (“Premier
Miton”). Premier Miton is quoted on the AIM market
for smaller and growing companies.
As at 31 March 2023, Premier Miton had total funds
under management of approximately £11.0 billion.
Members of the fund management team
invest in their own funds and are significant
shareholders in Premier Miton. Investor
updates in the form of monthly factsheets
are available from the Company’s website,
www.premiermiton.com/corporate/.
Association of Investment Companies
The Company is a member of the Association of
Investment Companies.
Financial Calendar
July 2023 Announcement of 2023
annual results
26 September 2023 Annual General Meeting
31 October 2023 Half-year end
December 2023 Announcement of 2023
half-yearly results
30 April 2024 Year end
Retail Investors advised by IFAs
The Company currently conducts its affairs so
that the shares issued by the Company can be
recommended by IFAs to ordinary retail investors in
accordance with the Financial Conduct Authority
(“FCA”) rules in relation to non-mainstream
investment products and intends to continue to
do so for the foreseeable future. The shares are
excluded from the FCA’s restrictions which apply to
non-mainstream investment products because they
are shares in an investment trust.
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Alternative Investment Fund Managers’ Directive Disclosures
Alternative Investment Fund Managers’ Directive
Disclosures
The provisions of the Alternative Investment Fund
Managers Directive (‘AIFMD’) took effect on 22 July
2014. That legislation requires the AIFM to establish
and maintain remuneration policies for its staff
which are consistent with and promote sound and
effective risk management.
Pre-Investment Disclosures
The AIFM is required to make certain disclosures
available to investors in accordance with the
AIFMD. Those disclosures that are required
to be made pre-investment can be found at
www.mitonukmicrocaptrust.com/documents.
AIFMD Leverage Limits
The maximum level of leverage which the
Investment Manager may employ on behalf of the
Company and the levels as at 30 April 2023 are set
out below. A figure of 100% means that the exposure
is equal to the net asset value and the AIF has no
leverage.
Leverage exposure
Maximum
gross leverage
Maximum
commitment
Maximum level 200% 200%
Actual level 100% 100%
Remuneration Disclosure
Premier Portfolio Managers Limited (the ‘AIFM’) is
part of a larger group of companies within which
remuneration policies are the responsibility of a
Remuneration Committee comprised entirely
of non-executive directors. That committee has
established a remuneration policy which sets out
a framework for determining the level of fixed and
variable remuneration of staff, including maintaining
an appropriate balance between the two.
Arrangements for variable remuneration within the
group are calculated primarily by reference to the
performance of each individual and the profitability
of the relevant business unit. The policies are
designed to reward long-term performance and long
term profitability.
Within the group, all staff are employed by the
parent company with none employed directly by
the AIFM. The costs of a number of individuals are
allocated between the entities within the group
based on the expected amount of time devoted
toeach.
The total remuneration of those individuals who are
fully or partly involved in the activities of the AIFM in
relation to Alternative Investment Funds, including
the Company (‘AIFs’), including those whose time is
allocated between group entities, for the financial
year ending 30 September 2022, is analysed below:
Fixed Remuneration £4,265,246
Variable Remuneration £1,840,851
Total £6,106,097
Weighted FTE Headcount 50
The table below provides an alternative analysis of
the remuneration data.
Aggregate remuneration of:
Significant Influence Functions £1,767,151
Senior Management Functions £83,970
Other staff £4,254,976
Total £6,106,097
The staff members included in the above analysis
support all the funds managed by the AIFM. It is
not considered feasible or useful to attempt to
apportion these figures to individual AIFs.
The Nomination and Remuneration Committee has
reviewed the general principles of the remuneration
policy and its application in the last year and has
amended and updated the policy in line with recent
regulatory changes with effect from 1 October 2022.
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Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the eighth ANNUAL GENERAL MEETING of Miton UK MicroCap Trust plc
(the “Company”) will be held on 26 September 2023 at 11.00 am at the offices of Stephenson Harwood LLP,
1 Finsbury Circus, London EC2M 7SH to consider and vote on the Resolutions below.
Resolutions 1 to 10 (inclusive) will be proposed as Ordinary Resolutions and Resolutions 11 to 13 (inclusive) will
be proposed as Special Resolutions.
Ordinary Resolutions
1. To receive and adopt the Strategic Report, Reports of the Directors and Auditor and the audited financial
statements for the year ended 30 April 2023.
2. To receive and approve the Directors’ Remuneration Report for the year ended 30 April 2023.
3. To elect Louise Bonham as a Director of the Company.
4. To re-elect Peter Dicks as a Director of the Company.
5. To re-elect Davina Walter as a Director of the Company.
6. To re-elect Ashe Windham as a Director of the Company.
7. To re-appoint BDO LLP as Auditor of the Company to hold office from the conclusion of the meeting
until the conclusion of the next meeting at which financial statements are laid before the Company.
8. To authorise the Audit Committee to determine the remuneration of the Auditor of the Company.
9. To declare a final dividend of 0.15 pence per Ordinary Share for the year ended 30 April 2023.
10. THAT: The Directors be and are hereby generally and unconditionally authorised in accordance with
Section 551 of the Companies Act 2006 (“the Act”) to exercise all the powers of the Company to allot
Ordinary Shares in the capital of the Company up to an aggregate nominal value of £9,464 (being
approximately 10% of the issued Ordinary Share capital of the Company at the date of this Notice), such
authority to expire at the conclusion of the Annual General Meeting of the Company to be held in 2024
(unless previously renewed, varied or revoked by the Company in general meeting) (the “Section 551
period”), but so that the Company may, at any time prior to the expiry of the Section 551 period, make
offers or agreements which would or might require the allotment of shares in pursuance of such offers
or agreements as if the authority had not expired.
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Notice of Annual General Meeting continued
Special Resolutions
11. THAT: Subject to the passing of Resolution 10, the Directors be and they are hereby empowered, in
accordance with Sections 570 and 573 of the Act, to allot Ordinary Shares and to sell Ordinary Shares
from treasury for cash pursuant to the authority referred to in Resolution 10 as if Section 561(1) of the
Act did not apply to any such allotment or sale, such power to expire at the conclusion of the Annual
General Meeting of the Company to be held in 2024 (unless previously renewed, varied or revoked by the
Company in general meeting) save that the Company may, at any time prior to the expiry of such power,
make an offer or enter into an agreement which would or might require Ordinary Shares to be allotted
or sold from treasury equity securities in pursuance of such an offer or agreement as if such power had
not expired.
12. THAT: The Company is hereby generally and unconditionally authorised in accordance with Section
701 of the Act to make market purchases (within the meaning of Section 693(4) of the Act) of Ordinary
Shares of £0.001 each in the capital of the Company (“Ordinary Shares”) provided that:
(i) the maximum number of Ordinary Shares hereby authorised to be purchased is 14,186,320
(representing 14.99% of the Ordinary Shares in issue at the date of this Notice);
(ii) the minimum price which may be paid for each Ordinary Share is £0.001;
(iii) the maximum price which may be paid for each Ordinary Share shall not be more than the
higher of: (i) an amount equal to 105% of the average of the middle market quotations of Ordinary
Shares taken from the Daily Official List of the London Stock Exchange for the five business days
immediately preceding the day on which the contract of purchase is made; and (ii) the higher
of the price of the last independent trade in the Ordinary Shares and the highest then current
independent bid for the Ordinary Shares on the London Stock Exchange;
(iv) this authority will (unless previously renewed, varied or revoked by the Company in general
meeting) expire at the conclusion of the Annual General Meeting of the Company to be held in
2024;
(v) the Company may make a contract of purchase for Ordinary Shares under this authority before
this authority expires which will or may be executed wholly or partly after its expiration; and
(vi) any Ordinary Shares bought back under the authority hereby granted may, at the discretion of
the Directors, be cancelled or held in treasury and if held in treasury may be resold from treasury
or cancelled at the discretion of the Directors.
13. THAT: A general meeting other than an annual general meeting may be called on not less than 14 clear
days’ notice.
By order of the Board
Link Company Matters Limited
Registered Office: 6
th
Floor, 65 Gresham Street, London EC2V 7NQ
10 July 2023
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Administrative Notes in Connection with the Annual General Meeting
1. Attending the Annual General Meeting in person
If you wish to attend the Annual General Meeting in person, you should arrive at the venue for the Annual
General Meeting in good time to allow your attendance to be registered. It is advisable to have some form of
identification with you as you may be asked to provide evidence of your identity to the Company’s registrar,
Link Group (the “Registrar”), prior to being admitted to the Annual General Meeting.
2. Appointment of proxies
Members are entitled to appoint one or more proxies to exercise all or any of their rights to attend, speak
and vote at the Annual General Meeting. A proxy need not be a member of the Company but must attend
the Annual General Meeting to represent a member. To be validly appointed, a proxy must be appointed
using the procedures set out in these notes. If members wish their proxy to speak on their behalf at the
meeting, members will need to appoint their own choice of proxy (not the Chairman of the Annual General
Meeting) and give their instructions directly to them.
Members can only appoint more than one proxy where each proxy is appointed to exercise rights
attached to different shares. Members cannot appoint more than one proxy to exercise the rights
attached to the same share(s). If a member wishes to appoint more than one proxy, they should log on to
www.signalshares.com or contact the Registrar by email at shareholderenquiries@linkgroup.co.uk or by
telephone on 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider.
Calls outside the United Kingdom will be charged at the applicable international rate. We are open between
09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales.
A member may instruct their proxy to abstain from voting on any resolution to be considered at the Annual
General Meeting by marking the ‘Vote Withheld’ option when appointing their proxy. It should be noted that
a vote withheld is not a vote in law and will not be counted in the calculation of the proportion of votes ‘For’
or ‘Against’ the resolution.
The appointment of a proxy will not prevent a member from attending the Annual General Meeting and
voting in person if they wish. A member present in person or by proxy shall have one vote on a show of
hands and on a poll every member present in person or by proxy shall have one vote for every share of which
he/she is the holder.
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Notice of Annual General Meeting continued
A person who is not a member of the Company but who has been nominated by a member to enjoy
information rights does not have a right to appoint any proxies under the procedures set out in these notes
and should read note 9 below.
3. Appointment of a proxy online
Members can appoint a proxy online at: www.signalshares.com. In order to appoint a proxy using this
website, members will need their Investor Code, which they can find on their share certificate. If you
need help with voting online, please contact our Registrar, Link Group, on 0371 664 0300, or email Link at
shareholderenquiries@linkgroup.co.uk. Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the applicable international rate. We are open
between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales. Members must
appoint a proxy using the website no later than 48 hours before the time of the Annual General Meeting or
any adjournment of that meeting.
4. Appointment of proxy using Proxymity
if you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity
platform, a process which has been agreed by the Company and approved by the Registrar. For further
information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 11:00am
on 22 September 2023 in order to be considered valid or, if the meeting is adjourned, by the time which is
48hours before the time of the adjourned meeting. Before you can appoint a proxy via this process you
will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these
carefully as you will be bound by them and they will govern the electronic appointment of your proxy.
An electronic proxy appointment via the Proxymity platform may be revoked completely by sending an
authenticated message via the platform instructing the removal of your proxy vote.
5. Appointment of a proxy using a Form of Proxy
You may request a hard copy form of proxy directly from the Registrar by emailing at
shareholderenquiries@linkgroup.co.uk or by telephone on 0371 664 0300. To be valid, a Form of Proxy or
other instrument appointing a proxy, together with any power of attorney or other authority under which
it is signed or a certified copy thereof, must be received by post or (during normal business hours only) by
hand by the Registrar at Link Group, PXS 1, Central Square, 29 Wellington Street, Leeds, LS1 4DL no later than
48hours before the time of the Annual General Meeting or any adjournment of thatmeeting.
6. Appointment of a proxy through CREST
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment
service may do so by using the procedures described in the CREST Manual and by logging on to the following
website: www.euroclear.com. CREST personal members or other CREST sponsored members, and those
CREST members who have appointed (a) voting service provider(s), should refer to their CREST sponsor or
voting service provider(s) who will be able to take the appropriate action on their behalf.
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In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate
CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear
UK & International Limited’s specifications and must contain the information required for such instruction,
as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of
a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be
valid, be transmitted so as to be received by the Registrar Link Group (ID RA10) no later than 48 hours before
the time of the Annual General Meeting or any adjournment of that meeting. For this purpose, the time
of receipt will be taken to be the time (as determined by the timestamp applied to the message by the
CREST Application Host) from which the Registrar is able to retrieve the message by enquiry to CREST in
the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that
Euroclear UK & International Limited does not make available special procedures in CREST for any particular
message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy
instructions.
It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed (a) voting service provider(s), to procure that their CREST
sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular time. In this connection, CREST members
and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)
(a) of the Uncertificated Securities Regulations 2001 (as amended).
7. Appointment of proxy by joint holders
In the case of joint holders, where more than one of the joint holders purports to appoint one or more
proxies, only the purported appointment submitted by the most senior holder will be accepted. Seniority
shall be determined by the order in which the names of the joint holders stand in the Company’s register of
members in respect of the joint holding.
8. Corporate representatives
Any corporation which is a member can appoint one or more corporate representatives. Members can
only appoint more than one corporate representative where each corporate representative is appointed
to exercise rights attached to different shares. Members cannot appoint more than one corporate
representative to exercise the rights attached to the same share(s).
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Notice of Annual General Meeting continued
9. Entitlement to attend and vote
To be entitled to attend and vote at the Annual General Meeting (and for the purpose of determining
the votes they may cast), members must be registered in the Company’s register of members at close of
business on 22 September 2023 (or, if the Annual General Meeting is adjourned, at close of business on
the day two days prior to the adjourned meeting). Changes to the register of members after the relevant
deadline will be disregarded in determining the rights of any person to attend and vote at the Annual
General Meeting.
10. Nominated persons
Any person to whom this notice is sent who is a person nominated under section 146 of the Companies
Act 2006 (the “Act”) to enjoy information rights (a “Nominated Person”) may, under an agreement between
them and the member by whom they were nominated, have a right to be appointed (or to have someone
else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, they may, under any such agreement, have a right to give
instructions to the member as to the exercise of voting rights.
11. Website giving information regarding the Annual General Meeting
Information regarding the Annual General Meeting, including information required by section 311A of
the Act, and a copy of this Notice of Annual General Meeting is available from the Company’s website at
www.mitonukmicrocaptrust.com/
12. Audit concerns
Members should note that it is possible that, pursuant to requests made by members of the Company
under section 527 of the Act, the Company may be required to publish on a website a statement setting
out any matter relating to: (a) the audit of the Company’s accounts (including the auditors’ report and
the conduct of the audit) that are to be laid before the Annual General Meeting; or (b) any circumstance
connected with the auditors of the Company ceasing to hold office since the previous meeting at which
annual accounts and reports were laid in accordance with section 437 of the Act. The Company may not
require the members requesting any such website publication to pay its expenses in complying with
sections 527 or 528 of the Act. Where the Company is required to place a statement on a website under
section 527 of the Act, it must forward the statement to the Company’s auditors not later than the time
when it makes the statement available on the website. The business which may be dealt with at the Annual
General Meeting includes any statement that the Company has been required under section 527 of the Act
to publish on a website.
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13. Voting rights
As at 7 July 2023 (being the latest practicable date prior to the publication of this Notice) the Company’s
issued share capital consisted of 94,638,561 Ordinary Shares, carrying one vote each, and 50,000
management shares of £1 each. The total number of voting rights in the Company is 94,638,561.
14. Notification of shareholdings
Any person holding 3% or more of the total voting rights of the Company who appoints a person other
than the Chairman of the Annual General Meeting as their proxy will need to ensure that both they,
and their proxy, comply with their respective disclosure obligations under the Disclosure Guidance and
TransparencyRules.
15. Members’ right to require circulation of resolution
To be proposed at the Annual General Meeting Members meeting the threshold requirements set out in the
Act have the right to: (a) require the Company to give notice of any resolution which can properly be, and is
to be, moved at the Annual General Meeting pursuant to section 338 of the Act; and/or (b) include a matter
in the business to be dealt with at the Annual General Meeting, pursuant to section 338A of the Act.
16. Further questions and communication
Under section 319A of the Act, the Company must cause to be answered any question relating to the
business being dealt with at the Annual General Meeting put by a member attending the meeting
unless answering the question would interfere unduly with the preparation for the meeting or involve the
disclosure of confidential information, or the answer has already been given on a website in the form of an
answer to a question, or it is undesirable in the interests of the Company or the good order of the meeting
that the question be answered.
Members may not use any electronic address or fax number provided in this Notice or in any related
documents to communicate with the Company for any purpose other than those expressly stated.
17. Documents available for inspection
Copies of the Letters of Appointment of the Non-Executive Directors of the Company will be available
for inspection at the registered office of the Company during normal business hours on any weekday
(Saturdays, Sundays and English public holidays excepted) from the date of this Notice until the conclusion
of the Annual General Meeting and on the date of the Annual General Meeting at the location of the
meeting from 10:45am until the conclusion of the Annual General Meeting.
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Alternative Investment Market (“AIM”)
MINI’s shares are traded on the London Stock
Exchange, although most the stocks held in
the Company’s portfolio are quoted on the AIM
exchange. AIM is owned by the London Stock
Exchange and was principally set up to meet the
funding needs of smaller, growing companies.
Alternative Performance Measure (“APM”)
An APM is a numerical measure of the Company’s
current, historical or future financial performance,
financial position or cash flows, other than a
financial measure defined or specified in the
applicable financial framework.
Annual General Meeting (“AGM”)
All public companies have an AGM every year,
and this is the opportunity for the shareholders
to confirm their approval of the annual accounts,
the annual dividend and the appointment of the
Directors and Auditors. It is also a good time for
shareholders to meet the non-executive directors.
The Company’s AGM is on 26 September 2023. The
Notice of Meeting can be found on pages 89 to 95.
Discount/Premium
If the share price of an investment trust is lower than
the NAV per share, the shares are said to be trading
at a discount. The size of the discount is calculated
by subtracting the share price from the NAV per
share and is usually expressed as a percentage
of the NAV per share. If the share price is higher
than the NAV per share, this situation is called
apremium.
Discount Calculation Page
30 April
2023
30 April
2022
Closing NAV per share (p) 6 64.20 91.05 (a)
Closing share price (p) 6 59.50 86.50 (b)
Discount (c=((a-b)/a)*100) (7.32%) (5.00%) (c)
Dividend Yield
The annual dividend expressed as a percentage of
the mid-market share price.
Financial Conduct Authority (“FCA”)
This regulator oversees the fund management
industry, including the operation of the Company.
Financial Reporting Council (“FRC”)
The FRC regulates UK auditors and provides
guidance to accountants with the aim of promoting
better transparency and integrity in the annual
reports of quoted businesses.
FTSE 100 Put Option
A FTSE 100 Put Option is a type of derivative
contract in which the underlying value is based on
the level of the FTSE 100 index.
Gearing
Gearing refers to the ratio of the Company’s debt to
its equity capital. The Company may borrow money
to invest in additional investments for its portfolio. If
the Company’s assets grow, the shareholders’ assets
grow proportionately because the debt remains the
same. If the value of the Company’s assets falls, the
situation is reversed. Gearing can therefore enhance
performance in rising markets but can adversely
impact performance in falling markets.
Growth Stock
A stock where the earnings are expected to grow
at an above-average rate, leading to a faster than
average growing share price. Growth stocks do not
usually pay a significant dividend.
Key Performance Indicators (“KPIs”)
KPIs are a short list of corporate attributes that are
used to assess to general progress of the business
and are outlined in this Report on page 22.
Investment Association (“IA”)
The IA is the trade body that represents UK
investment managers. Premier Miton Group plc is
amember.
Glossary
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Link Company Matters Limited (“Link”)
Link is the Company Secretary for the Company.
Net Asset Value per Ordinary Share (“NAV”)
The NAV is shareholders’ funds expressed as an
amount per individual share. Shareholders’ funds
are the total value of all of the Company’s assets,
at their current market value, having deducted all
liabilities and prior charges at their par value, or at
their asset value as appropriate. The NAV per share
is calculated by dividing the shareholders’ funds by
the number of Ordinary Shares in issue excluding
treasury shares.
Ongoing Charges
As recommended by the AIC in its guidance,
ongoing charges are the Company’s annualised
revenue and capital expenses (excluding finance
costs and certain non-recurring items) expressed as
a percentage of the average monthly net assets of
the Company during the year.
Ongoing Charges
Calculation Page
30 April
2023
30 April
2022
Management fee 68 597 892
Other Administrative
expenses 69 676 587
Less non recurring fees (86) –
Total management fee
and other administrative
expenses (annualised) 1,187 1,479 (a)
Average net assets in the
year 69,083 104,901 (b)
Ongoing charges (c=a/b)*100 1.72% 1.41% (c)
Peer Group
The Company is part of the AIC’s UK Smaller
Companies sector whose members invest at least
80% of their assets in UK Smaller Companies.
As at 30 June 2023, the following were constituents
of this peer group:
•
Aberforth Smaller Companies Ord
•
Aberforth Split Level Income Ord
•
abrdn Smaller Companies Inc Ord
•
abrdn UK Smaller Companies Growth Ord
•
Athelney Trust Ord
•
BlackRock Smaller Companies Ord
•
BlackRock Throgmorton Trust Ord
•
Chelverton Growth Trust Ord
•
Crystal Amber Ord
•
Downing Strategic Micro-Cap Inv. Ord
•
Henderson Smaller Companies Ord
•
Invesco Perpetual UK Smaller Ord
•
JPMorgan UK Smaller Companies Ord
•
Marwyn Value Investors Ord
•
Miton UK Microcap Ord
•
Montanaro UK Smaller Companies Ord
•
Odyssean Investment Trust Ord
•
Onward Opportunities Ord
•
Oryx International Growth Ord
•
Rights & Issues Investment Trust Ord
•
River and Mercantile UK Micro Cap Ord
•
Rockwood Strategic Ord
•
Strategic Equity Capital Ord
•
SVM UK Emerging Ord
•
Worsley Investors Ord
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Redemption Pool
In the event that the Board elects to calculate the
Redemption Price through the use of a Redemption
Pool, the pool of cash, assets and liabilities to be
created by the Directors in respect of a particular
Redemption Point and allocated to the Ordinary
Shares which are the subject of Redemption
Requests for that Redemption Point.
Senior Independent Director (“SID”)
The SID is a non-executive director who can be
contacted by investors to discuss a matter of
governance when it concerns the Chairman and the
normal practice cannot be followed. The Company’s
SID is Peter Dicks.
SONIA (Interest Rate)
Sterling Overnight Index Average
Tap Issue
A tap issue is a procedure that allows the Company
to issue new shares at the current market value
when the share price is at a premium to NAV. The
Company is authorised to issue up to 10% of its
share capital without the need for an open offer.
This enables the Company to invest in attractive
investment opportunities and to issue new shares
on a flexible and cost-effective basis.
Total Assets
Total assets include investments, cash, current
assets and all other assets. An asset is an economic
resource, being anything tangible or intangible that
can be owned or controlled to produce value and to
produce positive economic value. Assets represent
the value of ownership that can be converted
into cash. The total assets less all liabilities will be
equivalent to total shareholders’ funds.
Total Return – NAV and Share Price Returns
Total return statistics enable the investor to make
performance comparisons between investment
trusts with different dividend policies. The Total
Return measures the combined effect of any
dividends paid, together with the rise or fall in the
share price or NAV.
This is calculated by the movement in the share
price or NAV plus the dividends paid by the
Company assuming these are re-invested in the
Company at the prevailing NAV.
NAV Total Return Page
30 April
2023
30 April
2022
Closing NAV per share (p) 6 64.20 91.05
Add back final dividend
for the year ended
30 April 2022 (2021) (p) 71 0.15 0.01
Adjusted closing NAV (p) 64.35 91.06 (a)
Opening NAV per share (p) 6 91.05 104.83 (b)
NAV total return
(c = ((a-b)/b)) (%) (29.3%) (13.1%) (c)
Share Price Total Return Page
30 April
2023
30 April
2022
Closing share price (p) 6 59.50 86.50
Add back final dividend
for the year ended
30 April 2022 (2021) (p) 71 0.15 0.01
Adjusted closing
share price (p) 59.65 86.51 (a)
Opening share price (p) 6 86.50 104.50 (b)
Share price total
return unadjusted
(c = (a(a-b)/b)) (%) (31.0%) (17.2)% (c)
Share price total return
adjusted (%) (31.1%)* (18.0%)*
* Based on NAV/share price movements and dividends being reinvested at
the relevant cum dividend NAV/share price during the period. Where the
dividend is invested and the NAV/share price falls, this will further reduce the
return or, if it rises, any increase will be greater. The source is Morningstar
who have calculated the return on an industry comparative basis.
Yield Stock
Yield stocks pay above-average dividends to
shareholders. If the dividend grows, and the yield
on the share remains constant, the share price will
increase. Companies which grow their dividends
faster than average are capable of delivering faster
share price growth.
Glossary continued
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Secretary and Registered Office
Link Company Matters Limited
6
th
Floor
65 Gresham Street
London EC2V 7NQ
Telephone: +44 (0) 333 300 1950
Investment Manager and
Alternative Investment Fund Manager
Premier Portfolio Managers Limited
Eastgate Court
High Street
Guildford
Surrey GU1 3DE
Company website
www.mitonukmicrocaptrust.com/
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Company Administrator
Link Alternative Fund Administrators Limited
Broadwalk House
Southernhay West
Exeter EX1 1TS
Depositary and Custodian
The Bank of New York Mellon (International) Limited
One Canada Square
London E14 5AL
Registrar and Transfer Office
Link Group
Central Square
29 Wellington Street
Leeds LS1 4DL
Telephone: 0371 664 0300
( Calls are charged at the standard geographic
rate and will vary by provider. Calls outside the
United Kingdom will be charged at the applicable
international rate)
Email: enquiries@linkgroup.co.uk
Website: www.linkassetservices.com
Solicitor
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Stockbroker
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
Contact Details of Advisers
Shareholder warning
Many companies are aware that their shareholders have received unsolicited phone calls or
correspondence concerning investment matters. These calls typically come from fraudsters operating
in ‘boiler rooms’ offering investors shares that often turn out to be worthless or non-existent, or an
inflated price for shares they own. While high profits are promised, those who buy or sell shares in
this way usually lose their money. These fraudsters can be very persistent and extremely persuasive.
Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a
discount or offers of free company reports.
It is very unlikely that either the Company or the Company’s Registrar would make unsolicited
telephone calls to shareholders and that any such calls would relate only to official documentation
already circulated to shareholders and never in respect of investment ‘advice’.
If you have been contacted by an unauthorised firm regarding your shares, you can report this using the
FCA helpline on 0800 111 6768 or by using the share fraud reporting form at www.fca.org.uk/consumers/scams.
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Notes
Paternoster House
65 St Paul’s Churchyard
London EC4M 8AB
Eastgate Court
High St
Guildford GU1 3DE
Source: Morningstar from 30/04/2015 to 30/04/2023.
Company performance since launch on 30 April 2015
MINI NAV
MINI Price TR
Numis SC
1000 Ex Invt
Cos TR
0.0
100.0
150.0
50.0
200.0
250.0
Percent
Apr 2015
Oct 2015
Apr 2016
Oct 2016
Apr 2017
Oct 2017
Apr 2018
Oct 2018
Apr 2019
Oct 2019
Apr 2020
Oct 2020
Apr 2021
Oct 2021
Apr 2023
Apr 2022