REG-MIGO Opportunities Trust Plc: Annual Financial Report
03/08/2023 15:00
MIGO Opportunities Trust plc
Annual Report
for the year ended 30 April 2023
MIGO Opportunities Trust plc (“MIGO” or the “Company”) today announces
Results for the year ended 30 April 2023
The financial information set out below does not constitute the Company’s
statutory accounts for the years ended 30 April 2023 or 2022 but is derived
from those accounts. Statutory accounts for 2022 have been delivered to the
Registrar of Companies, and those for 2023 will be delivered in due
course. The Auditor has reported on those accounts; their reports were (1)
unqualified; (2) did not include any reference to any matters to which the
Auditor drew attention by way of emphasis without qualifying their report; and
(3) did not contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Financial Highlights
30 April 2023 30 April 2022 % change
Net asset value (“NAV”) per share 328.6p 362.6p (9.4)%
Share price 318.5p 355.5p (10.4)%
Share price discount* to NAV per share (3.1)% (2.0)%
Total net assets 79.8m 94.7m (15.8)%
NAV volatility* 8.2% 8.2%
Gearing* – –
Ongoing charges ratio* 1.4% 1.3%
* Alternative Performance Measure (“APM”), see Glossary.
For commentary in respect of the above figures and Company’s performance
during the year please see the Chairman’s Statement, the Manager’s Report
and the overview of the key performance indicators in the Business Review
Total Return Performance to 30 April 2023
1 Year 3 Years 5 Years Since launch**
Net asset value* (9.3)% 47.5% 19.7% 221.0%
Share price* (10.3)% 49.0% 16.8% 227.6%
SONIA plus 2% 4.6% 9.1% 14.9% 98.8%
* Alternative Performance Measure, see Glossary.
** 6 April 2004.
Source: Morningstar.
Chairman’s Statement
Introduction
I am pleased to present the Annual Report for MIGO Opportunities Trust plc
(“MIGO” or the “Company”) covering the year ended 30 April 2023.
Financial markets around the world were dominated throughout the period by the
continuing fight against inflation. Rising interest rates and changes in
expectations of when the interest rates would peak have been daily talking
points throughout the year, with ongoing impacts in stock, bond and property
markets. This market volatility, coupled with share prices falling to levels
significantly below their net asset values, favour our Investment Manager’s
style of searching for future themes at current discounts in the investment
trust universe.
Investment Manager
Aside from market events, MIGO’s year was dominated by the news in early
2023, that our portfolio manager, Nick Greenwood, had decided to leave Premier
Miton Investors (“PMI”). In spite of the uncertainty that this introduced,
it has been encouraging to see shareholders have been happy to stick with MIGO
and await further developments and accordingly, supported in part by the
Board’s proactive approach to buybacks, our share price and discount have
held at reasonably steady levels. I thank everyone for their patience.
As announced on 27 July 2023, the Board has appointed Asset Value Investors
Limited (“AVI”) to become the Company’s AIFM and investment manager to
implement MIGO’s existing investment objective and policy. The decision
follows detailed shareholder engagement and a rigorous selection process, as
part of the Board’s investment manager review announced in March, after
serving protective notice to PMI.
Established in 1985, AVI is an experienced manager of investment trusts, and
the Board expects MIGO to benefit from AVI’s deep sector expertise and
supportive analyst resource as well as its distribution and marketing
channels. Over the past five years, AVI has added significant resource to its
investment research team; this depth of knowledge will be available to support
MIGO’s portfolio managers. Further information on AVI can be found in the
Business Review as well as on their website, www.assetvalueinvestors.com
AVI’s appointment remains subject to regulatory approval and is expected to
commence in Q4 2023. The Board and I would like to thank PMI for its
cooperation in this transition and for their hard work and support over the
years.
The Board is particularly pleased that, alongside MIGO’s appointment of AVI,
AVI has committed to hiring additional, specialist investment management
resource with experience of managing a portfolio such as MIGO’s. This
recruitment has started with Charlotte Cuthbertson, a former co-portfolio
manager of MIGO, who joined AVI earlier in July. AVI has also informed the
Board that it expects to be able to announce a further senior level
appointment with relevant experience, to work alongside Charlotte, in the
coming months.
The Board has been mindful of shareholders’ views expressed during the
consultation exercise and looks forward to sharing full details of the AVI
appointment once regulatory approvals have been received. As previously
announced, PMI will continue to manage the MIGO portfolio until MIGO
transitions to AVI. There will be no change to MIGO’s robust discount
management policy or fee structure.
Performance
During the year under review, your Company’s net asset value (“NAV”) per
share fell to 328.6p (2022: 362.6p), a total return of -9.3% (2022: +4.8%).
The Company’s share price ended the year at 318.5p (2022: 355.5p), giving a
total share price return of -10.3% (2022: +2.7%). The total return performance
chart gives a longer-term picture, showing the NAV return per share over 5
years as +19.7% and the share price return over the same period as +16.8%. At
the end of the year under review, the Company traded at a discount of 3.1% to
NAV per share (2022: 2.0%).
We believe the strategy of the Company is best measured against a “cash
plus” benchmark, and accordingly the Company does not have a formal equity
benchmark against which the Board reviews long-term performance and our
Investment Manager does not invest by reference to an index. Over the year,
the Company’s formal cash benchmark, SONIA plus 2%, rose by 4.6% (2022:
+2.2%) and over five years by 14.9%. While any loss is disappointing, we have
confidence in the long-term outlook for MIGO and its strategy.
A comprehensive appraisal of the performance of, and developments within, your
portfolio during the year under review and since 30 April 2023 is provided in
the Investment Manager’s Report. During the year, the principal drivers of
positive performance were holdings in Georgia Capital, Amedeo Air Four Plus,
Macao Property Opportunities and Japanese activist trusts. The main detractors
were Mining trusts and Vietnam.
Dividend
The results attributable to shareholders for the year ended 30 April 2023 are
shown in the Financial Statements. In the year, the Company made a revenue
account profit and, as a result, under investment trust rules regarding
distributable income, a final dividend must be paid to comply with those
rules.
Subject to shareholders’ approval at the forthcoming Annual General Meeting
(“AGM”), a final dividend of 3.00p per share will be paid on 5 October
2023 to shareholders on the register as of 8 September 2023. The associated
ex-dividend date will be 7 September 2023.
This is the second dividend to be paid in the history of the Company, but
MIGO’s principal objective remains to provide shareholder returns through
capital growth in its investments and outperforming SONIA plus 2% over the
longer term. Therefore, the Board is maintaining its current policy to pay
only those dividends necessary to maintain UK investment trust status. Subject
to the investment trust rules, any dividends and distributions will continue
to be at the discretion of the Board from time to time.
Board Changes
The MIGO Board had been made up of three Directors since the resignation of
Michael Philips in March 2022. To return to the more normal complement of four
Directors, a search process was undertaken in Autumn 2022. Following a skills
analysis of the Board, a review of possible candidates by an independent
consultancy and interviews conducted by the Board, it was decided that both
Lucy Costa Duarte and Ian Henderson were exceptional candidates and had a lot
to offer to MIGO and that the appointment of both as independent non-executive
Directors of the Company would be in shareholders’ interests. Further
biographical details can be found below.
Both Lucy and Ian have already shown their dedication to MIGO during the
search for a new AIFM and Investment Manager in the course of numerous
meetings and assessments of possible candidates. Their input was invaluable
and showed both the willingness and ability to get up to speed with MIGO and
its requirements in order to provide the best solutions for shareholders. Both
Lucy and Ian will stand for election by shareholders at the forthcoming AGM.
In line with best Corporate Governance practice, an annual review of the
effectiveness of the whole Board and its Committees was again performed, also
taking into account the performance of the new Directors. The Board is
satisfied that each Director is fully engaged with the Company’s business
and that all Directors are working together as an effective team. In
accordance with our policy of all Directors standing for re-election annually,
you will find the appropriate resolutions in the Notice of the AGM.
The appointment of AVI as our new AIFM and Investment Manager means that Katya
Thomson will no longer be considered independent under the AIC’s Code of
Corporate Governance, as she also sits on the board of another AVI investment
trust. She has therefore taken the decision to step down from her role as
non-executive director and Chairman of the Audit Committee once a replacement
can be found. We will miss Katya’s insights but will keep shareholders
informed of developments as we find a new Chair of Audit.
Articles of Association
The Board of Directors is proposing to make an amendment to the Company’s
Articles of Association (the “Articles”) to increase the aggregate amount
paid to Directors by way of fees for their services as Directors under Article
97 from £150,000 to £250,000 in any financial year.
This proposed limit increase is not due to any unusual rises in Directors’
fees. Our ceiling had been in place for many years and is lower than many
other equivalent Investment Trust Boards. As our Board expanded from three to
five during the year under review, aggregate fees rose close to the £150,000
per annum level. It is the Board’s intention to return to four Directors as
a result of natural evolution in the future and, in the long term, four
Directors should be seen as the “norm” for MIGO. So, while to some degree,
being close to the limit should be temporary, we feel it is prudent to raise
the ceiling amount. Further details can be found in the Report of the
Directors and in the Directors’ Remuneration Report.
Share Issues and Share Buybacks
At the year-end, the Company’s shares traded at a discount of 3.1% to net
asset value per share, having traded at a discount of 2.0% at the 2022
year-end. In comparison, the unweighted average discount across the whole
investment companies universe* has expanded from 9.2% to 12.5% over the same
period. (source: Numis Securities Limited).
(* The full investment companies universe as defined by Numis Securities
Research including both equities and alternative asset investment companies. )
During the year ended 30 April 2023, 410,000 new shares were issued when the
Company was trading at a premium to NAV per share, between mid-September and
mid-November 2022. A total of 2,222,459 shares was repurchased in order to
restrict any undue widening in the Company’s share price discount to NAV per
share. This number includes 1,022,459 shares bought back in the month
following announcement that Nick Greenwood would leave Premier Miton. While
the Company does not target any particular share price or discount level for
buybacks, the buybacks conducted during the year were at discounts ranging
from 1.0% to 3.8%. As at the date of this report, the discount stands at 4.9%
and 550,000 further shares have been repurchased since the year-end. The Board
is unanimous in its support of the buyback policy to keep any discount
volatility to a minimum and is firmly of the view that buying in at a double
discount (MIGO shares’ discount to NAV and the unweighted average discount
to NAV of the underlying holdings, 29.2% as at 28 July 2023, being the latest
practical date prior to the publication of this report) is accretive to
shareholders.
Annual General Meeting
The AGM of the Company this year will be held on Wednesday, 20 September 2023
at 12 noon at 25 Southampton Buildings, London WC2A 1AL. The notice convening
the AGM can be found at the back of this document, together with an
explanation of all resolutions. The Directors look forward to meeting
shareholders.
Outlook
With a new AIFM and Investment Manager having been appointed, MIGO and its
shareholders have a lot to look forward to.
Our investment universe continues to offer a broad range of appealing
investment opportunities, and discounts across the sector have widened
materially to levels close to the widest they have ever been, thus offering
attractive valuations. Finally, rising interest rates have seen several
sectors, which had previously traded at a premium, de-rate and thereby
increase our opportunity set.
The Company is in a good position and your Board remains optimistic and thanks
shareholders for their continued support throughout the last 12 months and
going forward.
Richard Davidson
Chairman
3 August 2023
Investment Manager’s Report
Performance
The period under review proved particularly challenging for the investment
trust sector as well as our NAV which fell by 9.4%. The key driver was the
dramatic widening of investment trust discounts. By comparison, the Numis
All-Share Including Investment Companies Index rose by 4.7%, and the MSCI
World Index rose 3.78%, both on a total return basis.
Post our year end, conditions have remained extremely tough for the investment
trust industry. The continued collapse in demand for income generating funds
led to discounts becoming extreme at the beginning of April when the
sector’s average discount reached 17.5%. This compares with a figure of
around 1% at the beginning of last year. The “alternatives” sub sector,
which includes asset classes such as song rights, property, shipping and
renewable energy, saw its average discount widen to 25%. The largest twelve
positions in MIGO Opportunities Trust averaged over 31% discount at the end of
March. These figures are the widest for many years and represent a significant
general underperformance of trust share prices relative to their underlying
portfolios. A dominant factor behind this derating has been the persistent
rise in interest rates. A useful income can now be generated from conventional
sources such as gilts. Therefore, some investors may choose to switch out of,
say, an infrastructure trust yielding 5% into gilts in order to reduce risk
without having to give up income. It has become clear that many of these
trusts had originally been bought purely in response to negligible deposit
rates rather than for their fundamentals. The evaporation of this yield
premium triggered a universal sell off.
A further challenge facing the closed end world is the ongoing consolidation
of the wealth management industry, a major investor in the trust sector. The
latest merger will see the amalgamation of Investec and Rathbones which will
create a giant with £100 billion of assets under management. The fear is that
in the medium term this vast pot of money will become just too large to use
investment trusts efficiently. The number of shares available to buy in even
sizeable trusts would be insufficient for such a large investor to take a
meaningful position.
It is pleasing that we have avoided many of the year’s problem areas. This
is partly because these had traded on premiums in the recent past and were
neither overlooked or unloved at that point. We held large cash balances in
order to protect the portfolio. Nevertheless, it has inevitably suffered as
discounts have widened in many of the trusts that we own. Inevitably, it has
been a difficult period in performance terms.
Portfolio Strategy
Despite the headwinds, there were plenty of individual holdings which
generated positive returns. These were drawn from a wide variety of asset
classes including Georgia, aircraft leasing, private equity, activism in Japan
and smaller companies in the UK. This variety highlights how diversified our
investments are. This diversification is a key tool in limiting the impact on
the portfolio for a downturn in any specific area.
Counterintuitively, Georgia’s economy has been boosted as a result of
Russia’s invasion of Ukraine. A significant number of professionals, notably
within the information technology industry, have moved over the border.
Georgia Capital shares rose by nearly a third during the year. Nevertheless,
the shares usually trade at an eye-wateringly wide discount often in excess of
60%. The management team owns a significant stake. It seems inconceivable that
when the time eventually comes for them to extract their investment, they
would aim to achieve this by selling in the market at around 40p in the pound.
It would be more likely that the trust would move into orderly wind down
returning funds to shareholders at net asset value.
Despite being a relatively small position, our exposure to aircraft leasing
via Amedeo Air Four Plus made a useful contribution. Until recently, many of
this trust’s aircraft remained in storage in the Middle East. The rapid
recovery in air traffic has led to the majority of them being called back into
service. Furthermore, serious delays in the production of the next generation
of wide-bodied passenger jets means that Amedeo’s A380s will be generating
cash far longer than originally intended given most of the current leases have
been extended to 2035 or 2036. In late February the trust announced a
compulsory redemption of 1 share for every 8 held at 64.5p and an increase in
the quarterly dividend from 1.5p to 1.75p. Given some of our initial purchases
last summer were at 30p, our rewards have proven swifter and larger than
anticipated. Our expectation had been that the bulk of our returns would be
generated through the generous dividend flow over a number of years.
Macau Property Opportunities owns up-market apartments in the former
Portuguese colony. Whilst this trust has passed the end of its fixed life,
attempts to dispose of the assets were hampered by the pandemic. The natural
buyers of these apartments are based in Hong Kong and until recently were
unable to inspect the properties and unsurprisingly few have been sold. The
shares have risen modestly since the reopening of China but still trade at
around a 50% discount. Even if the assets are sold well below book value, this
would lead to a return of capital well above the level where the shares
currently trade.
It was pleasing to see trusts focusing on activism in Japan performing well.
After decades of being repeatedly told that Japanese corporate governance was
improving, only to be disappointed, we were cynical when these funds were
originally launched. In the event they have performed much better than
mainstream Japanese funds. We opportunistically acquired a holding in Nippon
Active Value on a wide discount when the shares were harshly treated during
last summer’s sell off when a committed seller appeared. Smaller companies
in Japan are often very lowly rated compared with other markets. Over half of
stocks listed on the Tokyo Stock Exchange trade below book and almost 700
companies’ market price is actually below half of book. Furthermore,
Japanese companies typically have 40% of their balance sheet in cash. The
Tokyo Stock Exchange recently introduced a number of reforms notably requiring
managements to explain their strategy should their shares trade below book.
Naming and shaming works in Japan. There has been a dramatic increase in
activism, which represents a catalyst for change. The number of unsolicited
takeover bids has doubled during the last three years and share buybacks have
risen to record levels. Whilst asset strippers will still be rebuffed,
activists with a pragmatic approach will get a hearing. This is because there
is generational change in Japan. Younger locals are often not interested in
taking over the reins, creating situations where a solution needs to be found.
The central bank has persisted with yield curve control, leaving it the last
bank offering “free money” and as a result the yen has languished.
Sterling-based investors will benefit from its eventual recovery. Inflation is
beginning to take hold for the first time in decades which should stoke demand
for equities.
Private equity trusts have been friendless for some time as investors had
feared significant mark downs in the valuations of these vehicles’
underlying portfolios. Therefore, it was pleasing to see Oakley Capital and
Dunedin Enterprise share prices make progress during the year. Oakley sold a
couple of businesses at attractive prices. We have owned Dunedin Enterprise
for many years. This trust has been in orderly wind down, steadily handing
cash back to shareholders, as assets have been liquidated. A significant
proportion of Dunedin’s portfolio was realised this year, notably
Incremental, an IT services platform, and RED, a supplier of SAP staff.
UK microcap specialist Rockwood Strategic share price surged almost 40%
highlighting how it is possible to profit from individual stocks despite the
current dire sentiment towards smaller companies which led to the AIM Index
declining by nearly 20% during the year ended 30 April 2023. This sector is
certainly unloved and overlooked, and as a result we started positions in
Rights & Issues and, since our year end, Schroder British Opportunities. They
have been added to our smaller companies basket, the rationale being that the
UK stock market trades at a discount to the rest of the world. Smaller
companies trade at a discount to their larger peers and on many occasions, it
has been possible to acquire investment trusts with smaller company mandates
at a wide discount. A true Russian doll of discounts. We have owned Rights &
Issues in the past; however, following the retirement of the long-term manager
and a change of management to Jupiter, the shares have derated. This is not a
situation that the fiercely independent board will allow to perpetuate.
Schroder British Opportunities failed to stimulate much interest when it was
launched in 2020 and now usually trades at discounts in excess of 30%.
Nevertheless, the team managing the trust is well regarded.
Conversely, our exposure to mining proved to be a laggard. Baker Steel
Resources Trust is a developer of mines and creates value from acquiring
promising deposits and gaining the required permissions. The trust then
typically sells to a multinational which will build the mine and take the
project into production. Baker Steel often retains a royalty. Capital
available to the mining industry is currently scarce so a number of the
trust’s developments are on hold. Nevertheless, given these projects are
vast compared to Baker Steel’s modest size, it only needs one or two to get
over the line for the trust to have a good year. The challenges appear to be
priced in as the shares languish on a wide discount. Weakness in Geiger
Counter is slightly surprising given the steady rise in the Uranium spot
price. A general lack of appetite for the sector and a rapid rise in mine
build out costs are likely to be factors.
Phoenix Spree Deutschland was another drag on our attribution. The trust owns
a portfolio of rental apartment blocks in Berlin. Whilst tenant demand remains
strong given a shortage of housing in the German capital, the private market
has frozen. Proceeds from selling rental properties into the open market had
been used by the trust to fund dividends. Lack of sales led to Phoenix Spree
failing to pay its dividend which surprised the market and as a result the
shares fell sharply.
Vietnam proved to be one of the worst performing markets during the period.
This was triggered by a scandal where inappropriate corporate bonds were sold
to inexperienced investors. The local stock market is dominated by retail
investors often trading on margin. This leads to volatility and sometimes a
complete detachment from fundamentals. Vietnamese equities trade on one of
lowest ratings in Asia despite the country enjoying one of the fastest
economic growth rates within the region. Multinationals are seeking to
diversify their manufacturing and supply lines away from China given the trade
war with the Unites States and the return to totalitarianism. Vietnam and
India will be the principal beneficiaries from this trend.
EPE Special Opportunities was another detractor. Its dominant portfolio
position Luceco saw its shares slump. The manufacturer and distributor of LED
lighting suffered as DIY retailers found themselves overstocked once the
Covid-19 home improvement boom petered out. This imbalance has since largely
been resolved.
We have reacted to recent market developments by seeking opportunities where a
trust’s share price has been harshly treated. In many cases these levels are
unsustainable as perfectly good assets are owned by trusts which have failed
to develop a following. Should there be no recovery, then these assets may be
seized via takeovers or mergers. The first example within our portfolio came
in early April when Industrials REIT, which owns a portfolio of mixed light
industrial parks across Britain, was bid for by Blackstone. The offer was at a
substantial premium to the latest closing price.
There is an opportunity to arbitrage the fact that in many cases it is a lack
of demand for the high yield structure that has led to the discount even when
the assets a trust owns are keenly sought after. An example is renewable power
where trusts have derated. We have built a position in Aquila European
Renewables at discounted prices, the widest of which represented a discount to
NAV of 22%, at which point the shares yielded 6% with dividend cover of 1.8x.
Aquila and its peer group's share registers are dominated by institutions and
wealth managers who are suffering outflows forcing them to sell into an
unwilling market.
There is a wide range of methodologies employed by the various renewable
trusts. Some are cheaper than they look. Aquila European Renewables operates
solar plants in Iberia and Greece as well as wind farms in Scandinavia. Its
shares stood out as its asset life assumptions were much shorter than rivals.
Just moving into line with the rest of the sector would increase the net asset
value, taking its discount sharply wider. The methodology used is made up of a
number of factors such as cost of capital, asset lives and inflation
assumptions. Inevitably such an approach will usually lead to a very different
value than could be achieved by simply selling the assets. At present wind
farms and solar plants are in demand and open market prices are believed to be
significantly higher than stated net asset values. This leaves the sector
vulnerable to opportunistic takeover bids. Some trusts, typically managed by
overseas managers, have failed to develop a following and are likely to be the
losers as investors migrate toward the biggest, most liquid trusts. Aquila is
managed from Hamburg and a move that might be considered could be a listing on
Euronext. Continental investors would better understand the attractions of
Aquila’s assets. Given that until recently renewable trusts traded at
premiums putting them outside our area of focus, we are less familiar with the
sector. Therefore, we are assessing a number of opportunities across the
alternative asset range where mispricings are likely to have developed. Small
toeholds have been taken in VPC Specialty Lending and EJF Investments.
Another new entrant is JP Morgan India. In the aftermath of a change in the
management team of an investment trust, often its discount continues to
reflect the track record of the vehicle rather than that of the new managers.
This is true of JP Morgan India which continues to languish on a wide discount
despite the recently appointed team significantly outperforming local large
cap indices. The trust has a structure which dictates that a quarter of the
shares are tendered at a price close to net asset value in the event of
underperformance. Unless the portfolio does well in the next couple of years,
shareholders will enjoy a useful uplift.
International Biotechnology Trust was added as a partial switch from Biotech
Growth Trust. This was part of a move to generally reduce our exposure to
China. Our concern is that investments made under a totalitarian regime are a
speculation rather than an investment. There is no certainty that the rules
will not change.
There were a couple of departures. We sold Strategic Equity Capital as part of
a shift in our focus towards the smallest of UK companies. Alpha Real had been
in our portfolio for many years. We had the opportunity to tender our entire
holding at a significant premium to the market price. Our investment in Alpha
Real proved to be an extremely profitable one.
Outlook
Looking forward we remain cautious. Investors had enjoyed “free” money
since the global financial crisis. Abundant liquidity supported a widespread
rise in asset prices during that period. This largesse has now come to an end
and the process will move into reverse suggesting mainstream indices will
drift. The tide will be against us although the authorities will be limited in
respect of how fast liquidity can be drained from the financial system given
the fragility of markets. Should the global economy prove resilient, this will
only increase the risk of further interest rate increases. Rate rises recently
put in place will take time to take effect. Notwithstanding these challenges,
there will be many opportunities for us to exploit in overlooked corners of
the closed end world. On past occasions when discounts within our portfolio
became as wide as they are presently, it proved to be the precursor of the
next explosive run up in the value of our portfolio, although there is no
guarantee that this pattern could be repeated.
The challenges facing investment trusts generated by oversupply and
consolidation of wealth managers won’t be resolved quickly but there are
self-help measures that can be taken. Buybacks reduce the oversupply.
Investment trusts that still have ambitions to appeal to the wealth management
industry can merge with likeminded vehicles to become large enough for the
major chains to support. Such initiatives should help narrow discounts
allowing share prices to outperform underlying portfolios. There are new
audiences such as self-directed individuals and smaller wealth managers which
are still investment-led. These remain attracted to investment trusts. Over
decades we have repeatedly been warned that the investment trust industry has
been under threat. Nevertheless, the sector has thrived. The law of natural
selection is alive and well within the trust world. We will lose funds that no
longer attract an audience, but the investment trust sector has constantly
evolved over the years and will continue to do so.
Nick Greenwood
Premier Fund Managers Limited
3 August 2023
10 Year Record
As at 30 April 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
NAV per share 328.6p 362.6p 345.9p 223.1p 275.6p 276.4p 248.7p 182.4p 181.6p 167.4p
Share price 318.5p 355.5p 346.0p 214.0p 276.5p 273.0p 242.3p 164.3p 162.8p 149.5p
Share price (discount)/premium to
NAV per share (3.1)% (2.0)% 0.0% (4.1)% 0.3% (1.2)% (2.6)% (9.9)% (10.4)% (10.7)%
Total net assets (£m) 79.8 94.7 93.1 62.6 77.2 75.2 62.9 46.1 45.9 42.3
Gearing – – 2.1% – – 6.7% 8.0% 10.8% 6.5% 7.1%
Portfolio Valuation
as at 30 April 2023
Valuation
Investment 2023 % of
Company Sector Region £'000 portfolio
VinaCapital Vietnam Opportunity Fund Private Equity Asia Pacific - Vietnam 4,510 6.6
Georgia Capital Equity Europe 3,462 5.1
Oakley Capital Investments Private Equity Global 3,412 5.0
Baker Steel Resources Trust Mining Global 3,264 4.8
Yellow Cake* Mining - Uranium Global 2,933 4.3
Geiger Counter# Mining - Uranium Global 2,519 3.7
NB Private Equity Partners Private Equity North America 2,438 3.6
New Star Investment Trust Equity Global 2,421 3.6
Phoenix Spree Deutschland Real Estate Europe 2,303 3.4
Aquila European Renewables Other - Renewables Europe 2,174 3.2
Top ten investments 29,436 43.4
International Biotechnology Trust Equity UK 2,065 3.0
Real Estate Investors* Real Estate UK 2,045 3.0
EPE Special Opportunities* Private Equity UK 1,986 2.9
Atlantis Japan Growth Fund Equity Japan 1,950 2.9
Biotech Growth Trust Equity UK 1,838 2.7
Nippon Active Value Fund Equity - Small Cap Japan 1,732 2.6
Duke Royalty* Other - Alternative Lender Global 1,705 2.5
CQS Natural Resources Growth And Income Mining Global 1,633 2.4
Industrials REIT Real Estate UK 1,582 2.3
India Capital Growth Fund* Equity India 1,575 2.3
Top twenty investments 47,546 70.1
River & Mercantile UK Micro Cap Investment Co Equity - Small Cap UK 1,550 2.3
Macau Property Opportunities Fund† Real Estate Asia Pacific - China 1,538 2.3
Downing Strategic Micro-Cap Investment Trust Equity - Small Cap UK 1,501 2.2
Dunedin Enterprise Investment Trust† Private Equity Global 1,404 2.1
Hansa Investment Co Equity Global 1,264 1.9
JPMorgan Indian Investment Trust Equity India 1,258 2.0
Life Settlement Assets Other - Life Policies North America 1,142 1.7
Rockwood Strategic* Equity - Small Cap UK 1,027 1.5
Schroder Capital Global Innovation Trust Equity Global 948 1.4
VPC Speciality Lending Investments Other - Alternative Lender Global 918 1.4
Top thirty investments 60,094 88.7
Henderson Opportunities Trust Equity UK 892 1.3
Rights & Issues Investment Trust Equity - Small Cap UK 883 1.3
Amedeo Air Four Plus Other - Specialist Fund UK 881 1.3
Ashoka India Equity Investment Trust Equity India 797 1.2
Marwyn Value Investors Equity UK 757 1.1
AVI Japan Opportunity Trust Equity Japan 595 0.9
Ground Rents Income Fund Real Estate UK 594 0.9
Grit Real Estate Income Real Estate Africa 525 0.8
EJF Investments Other - Specialist Fund Global 460 0.7
Vietnam Enterprise Investments Equity Asia Pacific - Vietnam 372 0.5
Chrysalis Investments Private Equity Europe 344 0.5
Chelverton Growth Trust Equity UK 168 0.2
Aseana Properties† Real Estate Asia Pacific 151 0.2
Reconstruction Capital II*† Equity Europe 86 0.1
Better Capital PCC†^ Private Equity UK 62 0.1
RENN Universal†^ Equity North America 50 0.1
Origo Partners†^ Private Equity Emerging Markets 39 0.1
Crystal Amber Fund* Equity - Small Cap UK 39 0.1
Schroder British Opportunities Trust Equity UK 35 0.1
Cambrium Global Timberland*† Other - Forestry Global 34 0.0
Total investments in the portfolio 67,855 100
Other current assets (including net cash) 11,993
Net asset value 79,848
* AIM/NEX Listed
† In liquidation, in a process of realisation or has a fixed life.
# Includes both Ordinary and Convertible Preference share holdings.
^ Unlisted or trading of shares currently suspended.
Portfolio Analysis
as at 30 April 2023
Portfolio by geographical exposure
Global 20.9% (2022: 36.2%)
UK 19.8% (2022: 21.0%
Cash 15.0% (2022: 11.9%)
Europe 14.3% (2022: 7.5%)
North America 11.1% (2022: 7.6%)
Asia Pacific (ex-Japan) 8.2% (2022: 9.5%)
Japan 5.4% (2022: 2.8%)
India 4.6% (2022: 3.5%)
Africa 0.7% (2022: 0.0%)
Portfolio asset allocation
Equity 37.6% (2022: 30.7%)
Cash 15.0% (2022: 11.9%)
Private Equity 13.8% (2022: 23.7%)
Mining 13.0% (2022: 15.2%)
Property 11.0% (2022: 14.7%)
Alternatives 9.6% (2022: 3.8%)
Business Review
The Strategic Report contains a review of the Company’s business model and
strategy, an analysis of its performance during the year ended 30 April 2023
and its future developments, and details of the principal risks and challenges
it faces. Its purpose is to inform the shareholders of the Company and help
them to assess how the Directors have performed their duty to promote the
success of the Company. In particular, the Chairman’s Statement and the
Investment Manager’s Report concentrate on the outlook for the current year
and the factors likely to affect the position of the business.
The Strategic Report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the information
available to them up to the time of their approval of this report and such
statements should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any such
forward-looking information.
Further information on how the Directors have discharged their duty under
section 172 of the Companies Act 2006 can be found below.
Business Model
The Company is an externally managed investment trust and its shares are
premium listed on the Official List of the FCA and traded on the main market
of the London Stock Exchange.
The Company has been approved by HM Revenue & Customs as an authorised
investment trust under sections 1158 and 1159 of the Corporation Taxes Act
2020, subject to there being no subsequent serious breaches of regulations. In
the opinion of the Directors, the Company is directing its affairs so as to
enable it to continue to qualify for such approval.
The purpose of the Company is to provide a vehicle for investors to gain
exposure to a portfolio of companies which have been undervalued by the
markets in which they are traded, through a single investment.
The Company’s strategy is to create value for shareholders by addressing its
investment objective, which is set out below.
As an externally managed investment trust, all of the Company’s day-to-day
management and administrative functions are outsourced to service providers.
As a result, the Company has no executive directors, employees or internal
operations.
The Company is an Alternative Investment Fund (“AIF”) under the UK
Alternative Investment Fund Managers Directive (“UK AIFMD”) and has
currently appointed Premier Portfolio Managers Limited as its Alternative
Investment Fund Manager (“AIFM”).
The Board has retained responsibility for risk management and has appointed
Premier Portfolio Managers Limited to manage its investment portfolio. Company
management, company secretarial and administrative services are outsourced to
Frostrow Capital LLP.
The Board remains responsible for all aspects of the Company’s affairs,
including setting the parameters for monitoring the investment strategy and
the review of investment performance and policy. It also has responsibility
for all strategic policy issues, including share issuance and buybacks, share
price and discount/premium monitoring, corporate governance matters, dividends
and gearing.
Further information on the Board’s role and the topics it discusses with the
Investment Managers is provided in the Corporate Governance Report.
As announced on 7 March 2023, the Board has served protective notice on
Premier Portfolio Managers Limited and was conducting a review to identify a
new AIFM and Investment Manager. As detailed in the Chairman’s Statement,
and announced on 27 July 2023, Asset Value Investors Limited (“AVI”) has
been appointed as the new AIFM and Investment Manager of MIGO subject to
regulatory approval.
Investment Objective
The objective of the Company is to outperform SONIA plus 2% (the
“Benchmark”) over the longer term, principally through exploiting
inefficiencies in the pricing of closed-end funds (SONIA being the Sterling
Overnight Index Average, the Sterling Risk-Free Reference Rate preferred by
the Bank of England for use in Sterling derivatives and relevant financial
contracts). This is intended to reflect the aim of providing a better return
to shareholders over the longer term than they would get by placing money on
deposit.
The Benchmark is a target only and should not be treated as a guarantee of the
performance of the Company or its portfolio.
Investment Policy
The Company invests in closed-end investment funds traded on the London Stock
Exchange’s main market, but has the flexibility to invest in investment
funds listed or dealt on other recognised stock exchanges, in unlisted
closed-end funds (including, but not limited to, funds traded on AIM) and in
open-ended investment funds. The funds in which the Company invests may
include all types of investment trusts, companies and funds established
onshore or offshore. The Company has the flexibility to invest in any class of
security issued by investment funds including, without limitation, equity,
debt, warrants or other convertible securities. In addition, the Company may
invest in other securities, such as non-investment fund debt, if deemed to be
appropriate to produce the desired returns to shareholders.
The Company is unrestricted in the number of funds it holds.
The Company invests in listed closed-end investment funds that themselves have
stated investment policies to invest no more than 15% of their gross assets in
other listed closed-end investment funds. However, the Company may invest up
to 10%, in aggregate, of the value of its gross assets at the time of
acquisition in closed-end investment funds that do not have such a stated
investment policy.
In addition, the Company will not invest more than 25%, in aggregate, of the
value of its gross assets at the time of acquisition in open-ended funds.
There are no prescriptive limits on allocation of assets in terms of asset
class or geography.
There are no limits imposed on the size of hedging contracts, save that their
aggregated value will not exceed 20% of the portfolio’s gross assets at the
time they are entered into.
The Board permits borrowings of up to 20% of the Company’s net asset value
(measured at the time new borrowings are incurred).
The Company’s investment objective may lead, on occasions, to a significant
amount of cash or near cash being held.
Dividend Policy
It is the Company’s policy to pursue capital growth for shareholders with
income being a secondary consideration. This means that the Company’s
Investment Manager is frequently drawn to companies whose future growth
profile is more important than the generation of dividend income for
shareholders.
The Company complies with the United Kingdom’s investment trust rules
regarding distributable income which require investment trusts to retain no
more than 15% of their income from shares and securities each year. The
Company’s dividend policy is that the Company will pay the minimum dividend
required to maintain investment trust status.
Results and Dividend
The results attributable to shareholders for the year ended 30 April 2023 are
shown in the Statement of Financial Position. In the year, the Company made a
revenue profit. Under investment trust rules regarding distributable income, a
final dividend must be paid to allow the Company to comply with those rules.
Subject to shareholders’ approval at the forthcoming Annual General Meeting,
a final dividend of 3.00p per share will be paid on 5 October 2023 to
shareholders on the register as of 8 September 2023. The associated
ex-dividend date will be 7 September 2023.
The Board
During the year, Lucy Costa Duarte and Ian Henderson were appointed as
Directors of the Company with effect from 1 November 2022. The Board is very
pleased to have appointed directors with extensive industry and investor
relations experience.
At the date of this report, the Board of the Company comprises Richard
Davidson (Chairman), Lucy Costa Duarte, Ian Henderson, Ekaterina (Katya)
Thomson and Hugh van Cutsem. All of these Directors are independent
non-executive Directors.
Richard Davidson, Katya Thomson and Hugh van Cutsem served throughout the
year, and Lucy Costa Duarte and Ian Henderson since their appointment date,
and up to the signing of this report. All Directors will stand for election or
re-election respectively at the forthcoming Annual General Meeting.
Although Katya Thomson will stand for re-election at the forthcoming AGM,
following AVI’s appointment as the Company’s AIFM and Investment Manager
as explained in the Chairman’s Statement, she will step down from her role
as non-executive director and Chairman of the Audit Committee once a
replacement can be found.
Further information on the Directors can be found below.
Board Diversity
The Board is fully supportive of all aspects of diversity and the importance
of having a range of skilled, experienced individuals with relevant knowledge
in order to allow it to fulfil its obligations. Further information on Board
diversity as well as the Board’s diversity policy can be found in the
Corporate Governance Report.
Board Focus and Responsibilities
With the day-to-day management of the Company outsourced to service providers,
the Board’s primary focus at each Board meeting is reviewing the investment
performance and associated matters such as, amongst other things, future
outlook and strategy, gearing, asset allocation, investor relations,
marketing, and industry issues.
In line with its primary focus, the Board retains responsibility for all the
key elements of the Company’s strategy and business model, including:
· investment objective and policy, incorporating the investment guidelines
and limits, and changes to these;
· whether the manager should be authorised to gear the portfolio up to a
pre-determined limit;
· review of performance against the Company’s Key Performance Indicators
(“KPIs”);
· consideration of share issuance and buybacks and premium/discount
management;
· review of the performance and continuing appointment of service providers;
and
· maintenance of an effective system of oversight, risk management and
corporate governance.
Details of the principal KPIs, along with details of the principal risks, and
how they are managed, follow within this business review.
Key Performance Indicators
The Company’s Board of Directors meets at least four times a year. At each
quarterly meeting it reviews performance against a number of key performance
measures, as below:
NAV and the movement of the NAV compared with the notional returns available for cash – defined as SONIA plus 2%, the Company’s Benchmark The Directors regard the Company’s net asset value (“NAV”) per share as being the overall measure of value delivered to shareholders over the long term, as opposed to returns available for cash holdings. A full description of performance during the year
under review and the investment portfolio are contained in the Investment Manager’s Review. The NAV total return per share for the year to 30 April 2023 was -9.3% (2022: +4.8%), compared with the Benchmark return of 4.6% (2022: 2.2%).
NAV volatility^ The Company aims to deliver its performance with a lower level of volatility in the NAV than equity markets. For the year to 30 April 2023, the Company’s NAV had a volatility of 8.2% (2022: 8.2%)*, compared with the volatility of the Numis All Share inc
Investment Companies Total Returns Index of 14.2% (2022: 14.2%).
The movement in the Company’s share price One of the most immediate measures of the value of the Company’s Ordinary shares is their price. The Board regularly considers the Company’s investment performance and other ways in which share price performance may be enhanced, including the effectiveness
of marketing. The Ordinary share price decreased by 10.4% (2022: increased by 2.7%) over the year. Further details are given in the Chairman’s Statement and the Investment Manager’s Review.
Share price in relation to the NAV per share The Board believes that an important driver of an investment trust’s discount or premium over the long term is investment performance together with a proactive marketing strategy. However, there can be volatility in the discount or premium during the year.
Therefore, the Board requests authority each year to buy back and issue shares with a view to limiting the volatility of the share price discount or premium. During the year under review, 410,000 new shares were issued by the Company (2022: 685,000). New
shares will only be issued at a premium to the Company’s cum-income net asset value at the time of issue. 2,222,459 shares were bought back during the year (2022: 1,504,729 including 149,729 shares bought back following the Realisation Opportunity in
September 2021), and 550,000 shares were bought back after the year-end (2022: 1,200,000). The Company’s Ordinary share price in relation to the NAV per share during the year has ranged from a premium of 4.8% (2022: 4.7%) to a discount of 5.7% (2022:
5.7%). At the year end, the shares traded at a discount of 3.0% to the NAV per share (2022: 2.0% discount). In comparison, the unweighted average discount across the whole investment companies universe was 12.1% (2022: 8.2%) # .
* Source: Frostrow Capital LLP.
^ See Glossary for definition and calculation methodology.
# Source: Numis Securities Limited.
Principal Risks, Emerging Risks and Risk Management
The Board considers that the risks detailed within this report are the
principal risks currently facing the Company to deliver its strategy.
The Board is responsible for the ongoing identification, evaluation and
management of the principal risks faced by the Company. The Audit Committee,
on behalf of the Board, has established a process for the regular review of
these risks and their mitigation. This process is in line with the UK
Governance Code and the FRC’s Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting.
During the year ended 30 April 2023, the Audit Committee has carried out a
robust assessment of the emerging and principal risks facing the Company,
including those that would threaten its business model, future performance,
solvency and liquidity. The Committee also considered the controls in place to
mitigate the inherent risks and whether additional controls or actions were
required to bring the residual risk down to an acceptable level. The Committee
was satisfied with the controls that are in place, although it is important to
note that the systems in place cannot eliminate the risk of failure to achieve
the Company’s investment objective.
Further details as well as a summary of the Company’s approach to risk and
how principal risks and uncertainties were dealt with during the year under
review, are set out below. In addition, information about the Company’s risk
assessment and internal control procedures is provided in the Audit Committee
Report.
The principal risks are categorised under the following broad headings:
· investment risks;
· strategic risks;
· operational risks; and
· macro risks.
Principal Risk Mitigation
Investment risks
Market and discount risk
The Company aims to capitalise on the opportunities that exist due to inefficiencies in the pricing of closed-end funds and is exposed to fluctuations in the market prices of those funds and their underlying assets. Additionally, the Company is exposed to To manage this risk the Board and the AIFM have appointed the Investment Manager to manage the portfolio within the remit of the investment objective and policy and borrowing limits. Compliance with the investment policy and borrowing limits is monitored on a daily basis by the AIFM and reported to the Board monthly. At the year-end the Company had no borrowings (2022: £nil). The Investment Manager monitors the volatility, discount, quality of underlying assets, and level of gearing within the portfolio holdings and potential investments. The results of this feed into the stock selection process and consideration of the portfolio constituents. In addition, the Investment Manager reports at each Board meeting on the performance of the portfolio, encompassing, inter alia , the rationale for stock selection decisions, the make-up of the portfolio, and
the risk that the market price of its investments differs from that of their NAV per share – purchasing funds whose market price is at a discount to NAV per share can result in significant gains on the upside, but can also lead to exposure to poorly portfolio company updates.
performing companies. The Company may use borrowing, the effect of which would be to amplify the gains or losses the Company experiences. Investors should be aware that by investing in the Company they are exposing themselves to the market risks associated
with owning publicly traded shares, and the additional discount risks specific to investing in closed-end funds.
Liquidity, cash and foreign exchange risk
The market in closed-end funds can often be illiquid. As such the Company is exposed to the risk that it will not be able to sell an investment at the current market value, or on a timely basis, when the Investment Manager chooses, or it is required to do The Investment Manager monitors volume and price-based trade measures and looks to ensure that a proportion of the portfolio is invested in readily realisable funds. The Board also receives an update on the liquidity of the portfolio and the current level of liquidity of the Company on a regular basis as well as the Company’s cash position and any foreign exchange valuations.
so to meet financial liabilities. A proportion of the Company’s investments might also be denominated in foreign currencies which might be subject to fluctuations in valuation and, at times, a proportion of the portfolio may be held in cash, preventing the
Company from benefiting from positive movements in the market.
Further details on market, liquidity and other financial risks can be found in
note 15 to the Financial Statements.
Interest rate risk
The Company finances its operations through existing reserves and a revolving credit facility and may be exposed to fluctuations in interest rates. The Board monitors the effect of interest rate movements on the Company’s finances and reviews the Company’s ongoing compliance with the loan covenants on a monthly basis.
Strategic risks
Shareholder relations and share price performance
The Company and its shareholders are exposed to the risk, particularly if the investment strategy and approach are unsuccessful, that the Company may be viewed unfavourably resulting in a widening of the share price discount to NAV per share. In managing this risk the Board reviews the Company’s investment objective in relation to market and economic conditions and the performance of its peers and discusses at each Board meeting the Company’s future development and strategy. The Board does not
seek to manage the discount on a day-to-day basis but does monitor the trend over longer periods and considers how share price performance may be enhanced, including the effectiveness of marketing and the possibility of share buybacks. Given the size of
the Company the Board is conscious of the impact of share buybacks on liquidity and the ongoing charges of the Company. During the year under review, the Company issued 410,000 new shares (2022: 685,000). During the year, the Company also bought back a
total of 2,222,459 ordinary shares (2022: 1,504,729) and since the year-end a further 550,000 shares (2022: 1,200,000) up to the time of writing, in order to keep the discount under control and prevent it from widening. As at the year end and since, the
shares have been trading at a discount to NAV. Going forward, share issuances or buybacks will continue to be undertaken when required to reduce price volatility and to ensure that the shares are trading close to par with their net asset value.
Key person risk
The loss of a key employee of the Investment Manager could result in the deterioration of the performance of the Company. The Board considers the make-up of the team supporting the lead investment manager as part of its annual review. During the year under review, Nick Greenwood decided to leave Premier Fund Managers Limited, leading the Board to serve protective notice on
Premier Fund Managers as Investment Manager of MIGO. Following a rigorous selection process, AVI has been appointed by the Board to take over from Premier Fund Managers with the effective date still to be announced. More information on this can be found in
the Chairman’s Statement.
Company duration risk
Every three years, the Company’s shareholders may be offered a realisation opportunity at the discretion of the Board. Depending on the structure of the realisation opportunity and the level of take-up, amounts available to shareholders will depend on the valuation of the portfolio and its liquidity and may be lower than expected, especially in adverse market conditions. The Board has implemented, with shareholder approval, a realisation opportunity which may be offered to shareholders every three years at the Board’s discretion. Further details are set out in the Report of the Directors. The Board formulates the
appropriate realisation opportunity based on feedback from the relevant service providers. In particular, the investor sentiment prior to the realisation opportunity in 2021 was monitored by the Investment Manager and the Company’s Brokers and only 0.55%
of MIGO’s issued share capital was realised and bought back by the Company. The next realisation opportunity may be offered to shareholders in 2024, and more details will follow nearer the time.
Operational risks
Service provider risk
The Board is reliant on the systems of the Company’s service providers and as such a disruption to, or a failure of, those systems could lead to a failure to comply with law and regulations leading to reputational damage to the Company – either directly or by association with the service provider in question – and/or financial loss. This encompasses disruption or failure caused by cyber crime or hybrid working practices and covers dealing, trade processing, administrative services, financial and other operational functions. To manage these risks the Board: receives reports from the AIFM and Frostrow Capital LLP on compliance with applicable laws and regulations; reviews internal control reports and key policies of the AIFM, Investment Manager, Custodian and Frostrow; reviews
reports from the Depositary; maintains a risk matrix which details the risks to which the Company is exposed and the controls relied upon to manage those risks; and receives updates on pending changes to the legal and regulatory environment and progress
towards the Company’s compliance with any relevant future changes. The service providers of the Company have again confirmed that they have all necessary business continuity procedures in place including enabling to work from home, increased IT and cyber
security awareness as well as team and client meetings via video conference calls as and when required. The Board continues to monitor the performance of all service providers given the ability of many employees to work remotely even post-lockdowns.
Macro risks
Global Risk
Significant political and economic change in the UK and abroad might lead to volatile markets impacting the Company’s performance and reduced investor appetite for the Company’s shares. Global events, such as another pandemic, acts of war or terrorist attacks, might affect the performance of portfolio companies or result in the Company’s service providers being unable to meet their contractual duties. During the year under review, the ongoing war in Ukraine and sanctions against Russia have led to supply emergencies, market volatility and increased inflation. Political and economic developments both in the UK and world-wide are being monitored and discussed, where relevant, between the Board and the Investment Manager as part of the portfolio review at every Board meeting. The Investment Manager maintains a
dialogue with the investee companies and monitors the impact of any material events on their business, and updates the Board accordingly.
ESG and Climate Change Risk
Risks related to the environment, social issues and governance (ESG) such as the impact of climate change or bad governance of portfolio companies, MIGO itself or its service providers could have an adverse impact on operational performance. At every Board meeting, the Board receives updates including information on governance-related issues, from the Portfolio Manager and the Company Secretary. Due to the nature of the Company and its investment policy, any investment decisions can only, at
best, have a limited impact on climate change and ESG issues. Details of the current Investment Manager’s ESG approach can be found in the “Responsible Investing” section on Premier Miton’s website www.premiermiton.com/responsibility. The governance of
MIGO and its service providers is reviewed regularly by the Company Secretary on behalf of the Board and is reported on in more detail in the Corporate Governance Report.
UK Regulatory Risk
The regulatory environment in which the Company operates might change materially, affecting the Company’s modus operandi. The Board monitors regulatory change with the assistance of Frostrow and external professional advisers to ensure that the Board is aware of any likely changes in the regulatory environment and will be able to adapt as required.
UK Legal Risk
The Company and/or the Directors might fail to comply with legal requirements in relation to FCA dealing rules and procedures, the UK AIFMD, the Listing Rules, the Companies Act 2006, relevant accounting standards, the Bribery Act 2010, the Criminal Finances Act 2017, the Association of Investment Companies (“AIC”) Statement of Recommended Practice (“SORP”), GDPR, tax regulations or any other applicable regulations. The Board monitors regulatory change with the assistance of its external professional advisers to ensure compliance with applicable laws and regulations including the Companies Act 2006, the AIFMD, the Corporation Tax Act 2010 (“Section 1158”), the Market
Abuse Regulation (“MAR”), the Disclosure Guidance and Transparency Rules (“DTRs”) and the FCA’s Listing Rules. The Board reviews compliance reports and internal control reports provided by its service providers, as well as the Company’s financial
statements and revenue forecasts. The Depositary reports twice yearly to the Audit Committee, confirming that the Company has been managed in accordance with the AIFMD, MIGO’s Articles of Association and with investment restrictions and leverage limits.
The Directors attend seminars and conferences to keep up to date on regulatory changes and receive industry updates from the Company Secretary. The Company Secretary also presents a quarterly report on changes in the regulatory environment, including AIC
updates, and how changes have been addressed.
Governance Risk
Poor adherence to corporate governance best practice or errors or irregularities in published information could lead to censure and/or result in reputational damage to the Company. The Board reviews all information supplied to shareholders and Frostrow’s marketing activity at each meeting. Details of the Company’s compliance with corporate governance best practice, including information on relationships with shareholders, are set out
in the Corporate Governance Report.
Emerging Risks
The Company has carried out a detailed assessment of its emerging and
principal risks. The International Risk Governance Council’s definition of
an “emerging” risk is one that is new or is a familiar risk in a new or
unfamiliar context or under new context conditions (re-emerging). Failure to
identify emerging risks may cause reactive actions rather than being proactive
and, in a worst-case scenario, could cause the Company to become unviable or
otherwise fail or force the Company to change its structure, objective or
strategy.
The Audit Committee reviews a risk register at its half-yearly meetings.
Emerging risks are discussed in detail as part of this process to try to
ensure that both emerging and well-known risks are identified and mitigated as
far as possible. Any emerging risks and mitigations are added to the risk
register.
During the year under review, the Board identified as an emerging risk the
deteriorating economic environment, which may impact portfolio investments
and, potentially, the Company’s service providers. This risk includes the
cost of living crisis, increased energy costs and food supply difficulties
from a country macro level down to every household and business.
Whilst it is not possible to mitigate the above emerging risks directly, the
Board regularly reviews the premium and discount levels and considers ways in
which share price performance may be enhanced to prevent MIGO becoming
unattractive to shareholders. The Investment Manager, Frostrow and Numis are
in regular contact with larger investors to ensure that MIGO’s objective is
still in line with shareholders’ objectives. There are also regular updates
for all shareholders by way of factsheets, annual and half-yearly reports and
other documentation on the Company’s website.
The experience and knowledge of the Directors is useful in these discussions,
as are update papers and advice received from the Board’s key service
providers such as the AIFM and Investment Manager and the Company’s brokers.
In addition, the Company is a member of the AIC, which provides regular
technical updates, draws members’ attention to forthcoming industry and
regulatory issues and advises on compliance obligations.
Going Concern
The content of the Company’s portfolio, trading activity, the Company’s
cash balances and revenue forecasts, and the trends and factors likely to
affect the Company’s performance are reviewed and discussed at each Board
meeting.
The Board has considered a detailed assessment of the Company’s ability to
meet its liabilities as they fall due, including tests which modelled the
effects of substantial falls in markets and significant reductions in market
liquidity, on the Company’s NAV, its cash flows and its expenses. Further
information is provided in the Audit Committee Report.
Based on the information available to the Directors at the date of this
report, including the results of these stress tests, the conclusions drawn in
the Long-Term Viability Statement, the Company’s cash balances, and the
liquidity of the Company’s listed investments, the Directors are satisfied
that the Company has adequate financial resources to continue in operation for
at least the next 12 months and that, accordingly, it is appropriate to
continue to adopt the going concern basis in preparing the financial
statements.
In reaching these conclusions and those in the Long-Term Viability Statement
below, the stress testing conducted also featured consideration of the
long-term effects of the continuing uncertainty created by the increase in
global inflation and rising interest rates, together with the consequences of
the war in Ukraine and the subsequent long-term effects on economies and
international relations.
Long-Term Viability Statement
In accordance with the UK Corporate Governance Code, the Directors have
carefully assessed the Company’s current position and prospects as described
in the Chairman’s Statement and the Investment Manager’s Report, as well
as the Principal Risks outlined above and have formed a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the next three financial years. The Board
has chosen a three-year horizon in view of the long-term nature and outlook
adopted by the Investment Manager when making decisions while recognising the
limitations and uncertainties inherent in predicting market conditions in
making this assessment.
To make the assessment and in reaching the conclusion of long-term viability,
the Audit Committee has considered the Company’s financial position and its
ability to liquidate its portfolio and meet its liabilities as they fall due:
· the portfolio is principally comprised of investments traded on major
international stock exchanges. Based on historic analysis, 77.3% of the
current portfolio could be liquidated within 30 trading days with 37.7% in
seven days under normal market conditions and there is no expectation that the
nature of the investments held within the portfolio will be materially
different in future;
· the expenses of the Company are predictable and modest in comparison with
the assets and there are no capital commitments foreseen which would alter
that position; and
· the Company has no employees, only its non-executive Directors.
Consequently, it does not have redundancy or other employment-related
liabilities or responsibilities.
The Directors have also considered the fact that following the realisation
opportunity in September 2021, the majority of shareholders have decided to
hold on to their shares and that the net asset value of the Ordinary shares
continued to be more than £30 million, allowing the Company to continue in
operation and allowing a positive outlook towards the next Realisation
Opportunity in 2024. For more details about the Company’s capital structure
and the Realisation Opportunity, please refer to the Report of the Directors
below.
Finally, the Board has appointed AVI to become the Company’s AIFM and
investment manager to implement MIGO’s existing investment objective and
policy. The decision follows detailed shareholder engagement and a rigorous
selection process, as part of the Board’s manager review announced in March.
Established in 1985, AVI is an experienced manager of investment trusts, and
the Board expects MIGO to benefit from AVI’s deep sector expertise and
supportive analyst resource as well as its distribution and marketing
channels. Further information can be found in the Chairman’s Statement. The
appointment of AVI is expected to commence in Q4 2023, with the exact date
still to be announced.
The Audit Committee considers the potential impact of the Company’s
principal risks and various severe, but plausible, downside scenarios, as well
as the following assumptions in considering the Company’s longer-term
viability:
· there will continue to be demand for investment trusts;
· investors will wish to continue to have exposure to the type of companies
that the Company invests in, namely closed-end investment funds;
· the Board and both the current and new Investment Manager will continue to
adopt a long-term view when making investments;
· the threats to the Company’s solvency or liquidity incorporated in the
Principal Risks will be managed or mitigated as outlined above;
· regulation will not increase to a level that makes running the Company
uneconomical; and
· the performance of the Company will continue to be satisfactory.
The continuing uncertainty in the global economy, the ongoing war in Ukraine
as well as more Covid-19 related lockdowns in some countries, have created
significant supply chain disruption and inflationary pressures world-wide.
These were factored into the key assumptions made by assessing their impact on
the Company’s key risks and whether the key risks had increased in their
potential to affect the normal, favourable and stressed market conditions. As
part of this review, the Board considered the impact of a significant and
prolonged decline in the Company’s performance and prospects. This included
a range of plausible downside scenarios such as reviewing the effects of
substantial falls in investment values and the impact of the Company’s
ongoing charges ratio, which were the subject of stress testing.
Furthermore, the Audit Committee considered the operational resilience of the
Company’s service providers, and thereby the operational viability of the
Company. During the year under review all key service providers have again
been contacted with regard to their business continuity systems as well as
their IT and cyber security systems to prevent fraudulent activity of any
kind. No issues were raised and the Audit Committee was reassured that all key
service providers were operating well and to their normal high service
standards while enabling their employees to work remotely, if necessary.
Based on the results of this review, the Directors have formed a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the next three financial years.
Management Arrangements
AIFM and Investment Manager
Premier Portfolio Managers Limited is currently the Alternative Investment
Fund Manager (“AIFM”) for the Company pursuant to an Investment Management
Agreement dated 22 July 2014 (the “IMA”), as amended on 9 September 2015,
10 September 2018, 24 April 2020 and 1 April 2022.
Under the terms of the IMA, the AIFM provides, inter alia, the following
services:
· risk management services;
· monitoring the Investment Manager’s compliance with the Company’s
investment objective and investment policy and reporting any non-compliance in
a timely manner to the Investment Manager and the Board;
· determining the net asset value per share on a daily basis;
· maintaining professional indemnity insurance at the level required under
the AIFM Rules;
· preparing the monthly factsheets for the Company; and
· upholding compliance with applicable tax, legal and regulatory
requirements.
The current AIFM has appointed Premier Fund Managers Limited as the Investment
Manager under a Delegation Agreement.
Under the terms of the Delegation Agreement, the Investment Manager provides,
inter alia, the following services:
· seeking out and evaluating investment opportunities;
· deciding the manner by which monies should be invested, divested, retained
or realised;
· deciding how rights conferred by the investments should be exercised;
· analysing the performance of investments made; and
· advising the Company in relation to trends, market movements and other
matters which may affect the investment objective and policy of the Company.
The management fee payable to the AIFM is calculated at an annual rate of
0.65% of the adjusted market capitalisation of the Ordinary Shares and 0.5% of
the adjusted market capitalisation of any Realisation Shares in issue at the
time. If the Company as a whole moves to a realisation basis then the AIFM
will be paid 0.5% of the adjusted market capitalisation of the Company as a
whole. Following the realisation opportunity in 2021, there are no Realisation
Shares in issue. The management fee accrues daily and is payable in arrears
monthly.
Details of the fees paid to the AIFM for their services during the year are
set out in note 3 to the Financial Statements.
The IMA and Delegation Agreement may be terminated by six months’ written
notice subject to the provisions for earlier termination as set out therein.
There are no specific provisions contained within the IMA relating to
compensation payable in the event of termination of the agreement other than
the entitlement to fees which would be payable within any notice period.
Appointment of a new AIFM and Investment Manager
During the year under review and to the date of this report, Premier Portfolio
Managers Limited was appointed as MIGO’s AIFM and Premier Fund Managers
Limited as MIGO’s Investment Manager (together: “Premier Miton” or
“PMI”). The Board thanks the team at Premier Miton for their hard work and
support over the years.
However, following Nick Greenwood’s decision to depart from Premier Miton,
the Board of MIGO served protective notice on Premier Miton and announced the
news on 7 March 2023. Detailed shareholder engagement and a rigorous selection
process, as part of the Board’s investment manager review, resulted in the
appointment of AVI to become the Company’s AIFM and Investment Manager to
implement MIGO’s existing investment objective and policy. The appointment
of AVI is expected to commence in Q4 2023, with the exact date still to be
announced.
AVI was established in 1985 to take over the management of one of the oldest
listed investment companies in London. AVI believes a concentrated,
contrarian, high-conviction portfolio of companies provides the opportunity
for long-term returns in excess of broader equity markets. It offers investors
a specialist research-driven approach which has proven to still be relevant 37
years later. Learn more about AVI at www.assetvalueinvestors.com
The Board expects MIGO to benefit from AVI’s deep sector expertise and
supportive analyst resource as well as its distribution and marketing
channels. AVI has also committed to hiring additional, specialist investment
management resource with experience of managing a portfolio such as MIGO’s.
This recruitment has started with Charlotte Cuthbertson, a former co-portfolio
manager of MIGO, who joined AVI earlier in July. AVI has also informed the
Board that it expects to be able to announce a further senior level
appointment with relevant experience, to work alongside Charlotte, in due
course.
The new Investment Management Agreement with AVI will mirror the agreement
that MIGO currently has with Premier Miton in all material aspects. Further
information can be found in the Chairman’s Statement.
Company Secretary, Marketing and Administration
Company secretarial, marketing, and administrative services are provided by
Frostrow Capital LLP (“Frostrow”) under an agreement dated 1 February 2016
and novated on 24 April 2020 and 27 July 2023. An annual management services
fee of 25 basis points of the market capitalisation of the Company, charged
quarterly in arrears, is payable, subject to a minimum annual fee of
£120,000. Frostrow’s fees will reduce from 25 basis points to 20 basis
points on market capitalisation of the Company in excess of £100 million. The
agreement may be terminated by either party on six months’ written notice.
Frostrow provides the following services, inter alia, under its agreement with
the Company:
· marketing and shareholder services;
· administrative and company secretarial services;
· advice and guidance in respect of corporate governance requirements;
· maintenance of the Company’s accounting records together with Link
Group, to which a number of accounting functions have been delegated;
· preparation of the annual and half yearly reports; and
· ensuring compliance with applicable legal and regulatory requirements.
In light of the high level of service provided by Frostrow in these areas, it
is the opinion of the Directors that the continuing appointment of Frostrow is
in the best interest of shareholders.
Details of the fees paid to Frostrow for their services during the year are
set out in note 4 to the Financial Statements.
Company Promotion
The Company has appointed Frostrow to promote the Company’s shares to
professional investors in the UK. As Investment Company Specialists, the
Frostrow team provides a continuous, pro-active marketing, distribution and
investor relations service that aims to promote the Company by encouraging
demand for the shares.
Frostrow actively engages with professional investors, typically discretionary
wealth managers, some institutions and a range of execution-only platforms.
Regular engagement helps to attract new investors and retain existing
shareholders, and over time results in a stable share register made up of
diverse, long-term holders.
Frostrow arranges and manages a continuous programme of one-to-one meetings
with professional investors around the UK. These include regular meetings with
“gate keepers”, the senior points of contact responsible for their
respective organisations’ research output and recommended lists. The
programme of regular meetings also includes autonomous decision makers within
large multi-office groups, as well as small independent organisations. Some of
these meetings involve the Investment Manager, but most of the meetings do
not, which means the Company is being actively promoted while the Investment
Manager concentrates on managing the portfolio.
The Company also benefits from involvement in the regular professional
investor seminars run by Frostrow in major centres, notably London and
Edinburgh, or webinars which are focused on buyers of investment companies.
Frostrow produces many key corporate documents, including annual and
half-yearly reports. All Company information and invitations to investor
events, including updates from the Investment Manager on portfolio and market
developments, are regularly emailed to a growing database, overseen by
Frostrow, consisting of professional investors across the UK.
Frostrow maintains close contact with all the relevant investment trust broker
analysts, particularly those from Numis Securities Limited, the Company’s
corporate broker, but also others who publish and distribute research on the
Company to their respective professional investor clients.
For the duration of the search for a new Investment Manager, a specialist PR
agency, Kaso Legg Communications Ltd, was also appointed to support the
Board’s engagement with stakeholders.
The Company continues to benefit from regular press coverage, with articles
appearing in respected publications that are widely read by both professional
and self-directed private investors. The latter typically buy their shares via
retail platforms, which account for a significant proportion of the
Company’s share register.
Depositary and Custodian
The Bank of New York Mellon (International) Limited (“BNYMIL”) was
appointed by the Board as Depositary and Custodian to the Company with effect
from 2 July 2018, taking over from BNY Mellon Trust & Depositary (UK) Limited
following an internal reorganisation within the Bank of New York Mellon Group.
The Depositary Agreement was novated on 24 April 2020.
Under the Depositary Agreement, an annual fee of 0.025% of the gross asset
value of the Company, subject to a minimum annual fee of £15,000, is payable
to the Depositary monthly in arrears. The Company and the Depositary may
terminate the Depositary Agreement with three months’ written notice.
The Depositary provides the following services, inter alia, under the
Depositary Agreement:
· safekeeping and custody of the Company’s custodial investments and cash;
· processing of transactions; and
· foreign exchange services.
As part of the transition of AIFM and Investment Manager to AVI, work has
commenced to transition the role of depositary and custodian as well. Further
information will follow in due course.
Stakeholder Interests and Board Decision-Making (Section 172 Statement)
The Directors’ overarching duty is to act in good faith and in a way that is
the most likely to promote the success of the Company as set out in Section
172 of the Companies Act 2006. In doing so, Directors must take into
consideration the interests of the various stakeholders of the Company, the
impact the Company has on the community and the environment, take a long-term
view on consequences of the decisions they make as well as aim to maintain a
reputation for high standards of business conduct and fair treatment between
the members of the Company.
Fulfilling this duty naturally supports the Company in achieving its
investment objective and helps to ensure that all decisions are made in a
responsible and sustainable way. In accordance with the requirements of the
Companies (Miscellaneous Reporting) Regulations 2018, the Company explains how
the Directors have discharged their duty under Section 172 below.
To ensure that the Directors are aware of, and understand, their duties they
are provided with the pertinent information when they first join the Board as
well as receive regular and ongoing updates and training on the relevant
matters. Induction and access to training is provided for new Directors. They
also have continued access to the advice and services of the Company Secretary
and, when deemed necessary, the Directors can seek independent professional
advice. The schedule of Matters Reserved for the Board, as well as the Terms
of Reference of its committees, are reviewed on an annual basis and further
describe Directors’ responsibilities and obligations and include any
statutory and regulatory duties. The Audit Committee has the responsibility
for the ongoing review of the Company’s risk management systems and internal
controls and, to the extent that they are applicable, risks related to the
matters set out in Section 172 are included in the Company’s risk register
and are subject to periodic and regular reviews and monitoring.
Stakeholders
A company’s stakeholders are normally considered to comprise its
shareholders, its employees, its customers, its suppliers as well as the wider
community in which the company operates and impacts. The Company is different
in that as an externally managed investment trust it has no employees and,
significantly, its customers are synonymous with its shareholders. In terms of
suppliers, the Company receives professional services from a number of
different service providers, principal among them being the Portfolio Manager.
The Directors believe that fostering constructive and collaborative
relationships with the Company’s service providers will assist in their
promotion of the success of the Company for the benefit of all shareholders.
The Board engages with representatives from its service providers throughout
the year. Representatives from the Investment Manager and Frostrow are in
attendance at each Board meeting. The services provided by the Investment
Manager and the Company Secretary and Administrator respectively, are
fundamental to the long-term success of the Company. Furthermore, the Board
believes that the wider community in which the Company operates encompasses
its portfolio of investee companies and the communities in which they operate.
Details of how the Board considers the needs and priorities of the Company’s
stakeholders and how these are taken into account during all its discussions
and as part of its decision-making are detailed below. All discussions involve
careful considerations of the longer- term consequences of any decisions and
their implications for stakeholders.
Further details are set out below:
Who? Why? How?
Stakeholder group The benefits of engaging with the company’s stakeholders How the board, the portfolio manager and administrator have engaged with the company’s stakeholders
Investors Continued shareholder support and engagement are critical to the continued existence of the Company and the delivery of its long-term strategy. Clear communication of the Company’s strategy and the performance against the Company’s objective can help the share price trade at a narrower discount or a wider premium to its net asset value per share which benefits shareholders. New shares can be issued to meet demand without diluting net asset value per share for existing shareholders. Increasing the size of the Company can benefit liquidity as well as spread costs. In an effort to control the discount at which shares trade to their net asset value per share, the Company can buy back shares if the Board considers this to be in the best interest of the Company and shareholders as a whole. Shares can either be held in “treasury” or cancelled. Any shares held in treasury can later be sold back to the market if conditions permit. The Company does not currently hold any shares in treasury. The Investment Manager, Frostrow and the Company’s broker, on behalf of the Board, complete a programme of investor relations throughout the year. An analysis of the Company’s shareholder register is provided to the Directors at each Board meeting along with marketing reports from Frostrow. The Board reviews and considers the marketing plans on a regular basis. Reports from the Company’s broker on investor sentiment and industry issues are submitted to the Board. Key mechanisms of engagement include: · the Annual and Interim Reports of the Company; · the Annual General Meeting; · the Company’s website which hosts reports, video interviews with the portfolio manager and monthly factsheets; · Stock Exchange announcements; ·
one-on-one investor meetings and online webinars; · should any significant votes* be cast against a resolution, proposed at the Annual General Meeting, the Board will engage with Shareholders in order to understand the reasons behind the votes against; and. · following the consultation, an update will be published no later than six months after the AGM and the Annual Report will detail the impact the Shareholder feedback has had on any decisions the Board has taken and any actions or resolutions proposed.
* Significant votes against a resolution would be at least 20% of votes cast (sources: The Investment Association and the UK Corporate Governance Code)
Investment Manager The relationship with the Investment Manager is fundamental to ensuring the Company meets its investment objective. Engagement with the Company’s Investment Manager is necessary to evaluate their performance against the Company’s stated strategy and to understand any risks or opportunities this may present. Engagement also helps ensure that Investment Management costs are closely monitored and remain competitive. The Board meets regularly with the Company’s Investment Manager throughout the year both formally at
the scheduled Board meetings and informally as needed. The Board also receives monthly performance and
compliance reporting. This is expected to continue once AVI has taken over as AIFM and Investment
Manager from Premier Miton. The Investment Manager’s attendance at each Board meeting provides the
opportunity for the Investment Manager and Board to further reinforce their mutual understanding of
what is expected from both parties.
Service Providers The Company contracts with third parties for other services including: depositary, investment accounting & administration as well as company secretarial and registrars. The Company ensures that the third parties to whom the services have been outsourced complete their roles in line with their service level agreements, thereby supporting the Company in its success and ensuring compliance with its obligations. The Board and Frostrow engage regularly with other service providers both in one-to-one meetings and
via regular written reporting. Representatives from service providers are asked to attend Board and
Audit Committee meetings when deemed appropriate. This regular interaction provides an environment
where topics, issues and business development needs can be dealt with efficiently and collegiately.
Portfolio Companies Gaining a deeper understanding of the portfolio companies and their strategies assists in understanding and mitigating risks of an investment as well as identifying future potential opportunities. Day-to-day engagement with portfolio companies is undertaken by the Investment Manager. Details of how
the Investment Manager carries out portfolio management as well as information on its investment
approach can be found in the Investment Manager’s Report. The Board receives updates at each scheduled
Board meeting from the Investment Managers on specific investments including regular valuation reports
and detailed portfolio and returns analyses. The Investment Manager’s engagement with portfolio
companies includes active voting at their annual general meetings, discussions with their stakeholders
and on-site visits where appropriate. All engagements with portfolio companies are expected to
continue under the new AIFM and Investment Manager, AVI.
What? Outcomes and actions
What were the key topics of engagement? What actions were taken, including principal decisions?
Key topics of engagement with investors
* Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio. * The Investment Manager, Frostrow and the broker meet regularly with shareholders and potential investors to discuss the Company’s strategy, performance, the portfolio and any other issues which might be raised.
* Shareholders are provided with performance updates via the Company’s website as well as the usual financial reports, monthly factsheets and podcasts.
Key topics of engagement with the Investment Manager on an ongoing basis
* Portfolio composition, performance, outlook and business updates as well as any particular issues of engagement with portfolio companies. * Updates are received by the Directors at every Board meeting and throughout the year in respect of economic and other factors which might impact on investment decision making.
* Team composition * The ongoing war in Ukraine and its impact on markets and the Company’s portfolio in particular, is also being kept under observation by the Board and the Investment Managers.
* The impact of Russia’s invasion of Ukraine on their business and the portfolio. * During the year under review, the Board of MIGO was informed that Nick Greenwood, the lead investment manager had decided to leave PMI. After serving protective notice on PMI on 6 March 2023, and following detailed shareholder engagement and a rigorous
selection process, as part of the Board’s manager review, the Board appointed AVI to become the Company’s AIFM and Investment Manager to implement MIGO’s existing investment objective and policy. Further information can be found in the Chairman’s
Statement.
Other Service Providers
* The Directors have frequent engagement with the Company’s other service providers through the annual cycle of reporting and due diligence meetings or discussions held by Frostrow on behalf of the Board. This engagement is completed with the aim of maintaining an effective working relationship and oversight of the services provided. * No specific action is currently required as the reviews of the Company’s other service providers have been positive and the Directors believe their continued appointment is in the best interests of the Company.
Portfolio Companies
The Investment Manager, on behalf of the Board, has engaged with a number of portfolio companies: * in order to create value for shareholders, mainly to tighten discounts or to provide liquidity. * In order to achieve better liquidity, the Investment Manager has lobbied a number of portfolio companies for increasing buybacks and changes in capital structure.
* in order to address ESG matters including climate change. Many trusts have to deal with increasing environmental legislation and are already working hard to improve their credentials. * The Investment Manager is aware that trusts perceived to be falling behind in ESG and climate change concerns will be downrated by investors. This issue therefore makes up an important part of the risk assessment when looking at possible investments.
* in order to achieve good governance overall, as good governance means that board and management of portfolio companies are aware and proactive in their approach to all environmental and social issues. * For the current Investment Manager good governance is the best way to ensure best value for shareholders. To this end, environmental and social factors as well as governance are discussed in meetings with managements. It is expected that this will
continue under the new Investment Manager.
Culture and Business Ethics
The Directors agree that establishing and maintaining a healthy corporate
culture among the Board and in its interaction with the Investment Manager,
other service providers and shareholders supports the delivery of the
Company’s goals. The Board seeks to promote a culture of openness, debate
and integrity through ongoing dialogue and engagement with all stakeholders.
The Company is committed to carrying out business in an honest and fair manner
with a zero-tolerance approach to bribery, tax evasion and corruption. As
such, policies and procedures are in place to prevent these. As detailed in
the Governance section, 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 and Directors’ conflicts of interest. The Board
assesses and monitors compliance with these policies as well as the general
culture of the Board through Board meetings and, in particular, the annual
evaluation process which is undertaken by each Director (for more information
please see the performance evaluation section in the Corporate Governance
Report).
The Board strives to ensure that its culture is in line with the Company’s
purpose, values and strategy. It also seeks to appoint the best possible
service providers, including the Investment Manager, and evaluates their
remit, performance and cost effectiveness on a regular basis. 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 the
performance and continuing appointment of all service providers through its
Management Engagement Committee.
Environmental, Human Rights and Social Issues
The Company has no employees and the Board consists entirely of non-executive
Directors. Day-to-day management of the Company’s business is delegated to
the Investment Manager. As an investment trust that invests in other funds,
the Company has very limited direct impact on the community or the environment
and therefore the Company itself has no environmental, human rights, social or
community policies. However, the Company acknowledges that it can have an
indirect impact on the community or the environment, based on the portfolio
companies that the Investment Manager invests in. Therefore, ESG matters
including climate change are frequently discussed in meetings with portfolio
companies, and are also part of the risk assessment when deciding on whether
an investment should be made. For further details please see the Investment
Manager’s Report and the Business Review.
As an investment company, the Company does not provide goods or services in
the normal course of business and does not have customers. All its operational
functions are outsourced to third-party service providers. Accordingly, the
Company falls outside the scope of the Modern Slavery Act 2015. The
Company’s suppliers are typically professional advisers and the Company’s
supply chains are considered low risk in this regard. In carrying out its
activities and in relationships with suppliers, the Company aims to conduct
itself responsibly, ethically and fairly.
The Board expects its principal service providers also to have appropriate
governance policies in place.
Taskforce for Climate-Related Financial Disclosures (“TCFD”)
The Company notes the TCFD recommendations on climate-related financial
disclosures. The Company is an investment trust with no employees, internal
operations or property and, as such, it is exempt from the Listing Rules
requirement to report against the TCFD framework.
The current Investment Manager reports on progress against its own climate
change objectives on its website at www.premiermiton.com/responsibility/.
There, the principles of responsible investing, UN sustainable development
goals and the aims of the Carbon Disclosure Programme (“CDP”) are set out.
Premier Miton is also a signatory to Climate Action 100+, an investor-led
initiative to ensure the world’s largest corporate greenhouse gas emitters
take necessary action on climate change.
The risks associated with climate change represent an increasingly important
issue and the Board of MIGO and the Investment Manager are aware that the
transition to a low-carbon economy will affect all businesses, irrespective of
their size, sector or geographic location. Therefore, no company’s revenues
are immune and the assessment of such risks must be considered within any
effective investment approach. This will also be a point for discussion with
the incoming Investment Manager.
Performance and Future Developments
The Board concentrates its attention on the Company’s investment
performance, the Investment Manager’s investment approach and on factors
that may have an effect on this approach.
The Board monitors the performance of the Company’s investment portfolio in
relation to the Investment Objective and also its peer group.
The Board is regularly updated by Frostrow on wider investment trust industry
issues and regular discussions are held concerning the Company’s future
development and strategy.
A review of the Company’s year ended 30 April 2023, its performance and the
outlook for the Company can be found in the Chairman’s Statement and in the
Investment Manager’s Review.
The transition from Premier Miton to a new Investment Manager is an ongoing
project which straddles the year under review and the current financial year
ending 30 April 2024. As announced on 27 July 2023, Asset Value Investors
Limited (“AVI”) has been appointed as AIFM and Investment Manager, and the
Board looks forward to the new working relationship with AVI. Further
information can be found in the Chairman’s Statement.
The Company’s overall strategy remains unchanged.
For and on behalf of the Board of Directors
Richard Davidson
Chairman
3 August 2023
Governance
Board of Directors
Richard Davidson
Independent Non-Executive Chairman
Joined the Board on 18 December 2017 and became Chairman on 5 October 2018
Richard is also the Chairman of the Management Engagement Committee
Shareholding in the Company:
70,000
Skills and Experience
Formerly, he was a partner and manager of the Macro Fund at Lansdowne
Partners. Prior to that, he was a managing director and No. 1 ranked
investment strategist at Morgan Stanley, where he worked for 15 years.
Other Appointments
Richard is currently chairman of Aberforth Smaller Companies Trust plc, and of
Foresight Sustainable Forestry Company PLC, and chair of the University of
Edinburgh’s Investment Committee.
Standing for re-election
Yes
Ekaterina (Katya) Thomson*
Independent Non-Executive Director
Joined the Board on 18 December 2017
Katya is the Chairman of the Audit Committee
Shareholding in the Company:
14,000
Skills and Experience
Katya is a corporate finance, strategy and business development professional
with over 30 years of experience with UK and European blue chip companies.
She is a member of the Institute of Chartered Accountants in England and
Wales.
Other Appointments
She is a non-executive director and chairman of the Audit and Risk Committee
of Allianz Technology Trust plc and also a non-executive director and chairman
of the Audit Committee of Henderson EuroTrust plc and AVI Japan Opportunity
Trust plc.
Standing for re-election
Yes
(*Following the appointment of AVI as MIGO’s new AIFM and Investment
Manager, Katya will no longer be considered independent under the AIC’s Code
of Corporate Governance, as she also sits on the board of another AVI
investment trust. For further information please see the Chairman’s
Statement.)
Hugh van Cutsem
Independent Non-Executive Director
Joined the Board on 31 March 2010
Shareholding in the Company:
12,348
Skills and Experience
Hugh has worked in the investment company sector for over 20 years, starting
his career at Cazenove.
He co-founded Kepler Partners LLP 14 years ago and continues to lead the
investment company business there. It specialises both in the marketing of
closed-end funds and the production of research on them.
Other Appointments
He is a founding partner of Kepler Partners LLP, and a director of the
Cotswold Brewing Company. He is also a trustee director of the British Deer
Society with responsibility for investments and a director of Bould
Investments Limited.
Standing for re-election
Yes
Lucy Costa Duarte
Independent Non-Executive Director
Joined the Board on 1 November 2022
Shareholding in the Company:
6,115
Skills and Experience
Lucy is a specialist in marketing strategy and investor relations in the
investment trust sector. Formerly a director at Citigroup heading the emerging
markets ECM team in London, she left Citigroup in 2007 and took a career break
to raise her children, before starting work at SV Health Investors in 2016.
Other Appointments
She is currently working part-time for SV Health Investors, the managers of
International Biotechnology Trust.
Standing for election
Yes
Ian Henderson
Independent Non-Executive Director
Joined the Board on 1 November 2022
Shareholding in the Company:
6,115
Skills and Experience
Ian is an advertising professional, formerly a creative director at Publicis
Groupe then CEO of subsidiary Masius. In 2008 he set up a new agency for
Engine Group before leading an MBI to start specialist agency AML in 2011
which works with many firms in the finance sector in the UK and
internationally.
Other Appointments
He is currently CEO of AML, which has recently been acquired by Selbey
Anderson, the UK’s fastest-growing marketing services group, of which Ian is
now also chief creative officer.
Standing for election
Yes
Report of the Directors
The Directors present this Annual Report on the affairs of the Company
together with the audited financial statements and the Independent Auditors’
Report for the year ended 30 April 2023.
In accordance with the requirement for the Directors to prepare a Strategic
Report and a Directors’ Remuneration Report for the year ended 30 April
2023, the following information is set out in the Strategic Report: a review
of the business of the Company including details of its objective, strategy
and business model, future developments, details of the principal risks and
uncertainties associated with the Company’s activities (including the
Company’s financial risk management objectives and policies), interaction
with stakeholders, information regarding community, social, employee and human
rights, and environmental issues.
Information about the Directors’ interests in the Company’s ordinary
shares is included within the Directors’ Remuneration Report.
The Corporate Governance Statement forms part of this Report of the Directors.
Business and Status of the Company
The Company is registered in England as a public limited company (registration
number 05020752) and is an investment company as defined under Section 833 of
the Companies Act 2006 (the “Act”). Its shares are premium listed on the
Official List of the UK Listing Authority and traded on the main market of the
London Stock Exchange, which is a regulated market as defined in Section 1173
of the Act.
The principal activity of the Company is to carry on business as an investment
trust. The Company has been granted approval from HM Revenue & Customs as an
investment trust under Section 1158 of the Corporation Tax Act 2010. The
Company will be treated as an investment trust company subject to the
Company’s continued compliance with applicable laws and regulations. The
Directors do not envisage any change in this activity in the future.
The Company is a member of the Association of Investment Companies
(“AIC”).
Alternative Performance Measures
The financial statements set out the required statutory reporting measures of
the Company’s financial performance. In addition, the Board assesses the
Company’s performance against a range of criteria which are viewed as
particularly relevant for the Company and investment trusts, which are
summarised under “Financial Highlights” at the beginning of this document
and explained in greater detail in the Strategic Report, under the heading
‘Key Performance Indicators’.
The Directors believe that these measures enhance the comparability of
information between reporting periods and aid investors in understanding the
Company’s performance. The measures used for the year under review have
remained consistent with the prior year.
Definitions of the terms used and the basis of calculation adopted are set out
in the Glossary.
Directors
The Directors in office during the year and up to the date of this report are
Richard Davidson, Katya Thomson and Hugh van Cutsem. Lucy Costa Duarte and Ian
Henderson joined the Board with effect from 1 November 2022 and have been in
office since then. All Directors’ biographical details as well as interests
in the Company can be found above.
None of the Directors nor any persons closely associated with them had a
material interest in the transactions, arrangements and agreements of the AIFM
or the Investment Manager during the year. For information on related parties
please see note 16 to the Financial Statements.
The Board has adopted a policy whereby all Directors are required to stand for
re-election annually, regardless of their length of tenure.
Hugh van Cutsem has been on the Board for over 13 years and is connected to
Kepler Partners LLP (“Kepler”), which provides research on the Company.
The Board has discussed this issue and is satisfied that Hugh’s long service
does not impact his independence and that his knowledge of the Company’s
history is extremely valuable. Furthermore, Hugh has no involvement in
Kepler’s work for the Company, he recuses himself from all Board discussions
in respect of Kepler Partners and he has no influence on their appointment on
behalf of the Company. Hugh is a knowledgeable and lively contributor to the
Board’s discussions with the Investment Manager and is an invaluable asset
to the Company.
The Board has concluded, following formal performance evaluation, that each of
the Directors continues to demonstrate effectiveness, a high level of
commitment to the Company, independence from the Investment Manager and a keen
desire to act in the best interests of the shareholders as a whole.
Furthermore, the Board considers that the experience, expertise and knowledge
contributed by each Director is of notable benefit to the Company.
Accordingly, the Board recommends the re-election or election, respectively,
of each of the Directors at the forthcoming Annual General Meeting
(“AGM”), details of which are set out at the back of this document.
Although Katya Thomson will stand for re-election at the forthcoming AGM,
following AVI’s appointment as the Company’s AIFM and Investment Manager
as explained in the Chairman’s Statement on page 4, she will step down from
her role as non-executive director and Chairman of the Audit Committee once a
replacement can be found.
Directors’ and Officers’ Liability Insurance Cover
Directors’ and Officers’ liability insurance cover was maintained by the
Board during the year ended 30 April 2023. It is intended that this policy
will continue for the year ending 30 April 2024 and subsequent years.
There are no qualifying third party indemnity provisions in place.
Substantial Interests in the Company’s Share Capital
The Directors have been informed of the following substantial interests in the
Company’s voting rights as at 30 April and 30 June 2023, the latter being
the latest practicable date before publication of the Annual Report:
Number
of ordinary % of
As at 30 April 2023 shares held voting rights
Hargreaves Lansdown,
stockbrokers (EO) 2,908,075 11.97
AJ Bell, stockbrokers (EO) 2,657,628 10.94
Interactive Investor (EO) 2,158,757 8.88
Quai Investment Services 1,332,978 5.49
Investec Wealth & Investment 1,247,832 5.13
Transact (EO) 1,245,630 5.13
Raymond James Investment Services 1,174,021 4.83
Charles Stanley 1,044,309 4.30
Seven Investment Management 937,222 3.86
Rathbones 857,040 3.52
Evelyn Partners (Retail) 770,936 3.18
(EO = Execution only)
Number
of ordinary % of
As at 30 June 2023 shares held voting rights
Hargreaves Lansdown,
stockbrokers (EO) 2,930,720 12.11
AJ Bell, stockbrokers (EO) 2,660,630 11.00
Interactive Investor (EO) 2,110,834 8.72
Quai Investment Services 1,335,134 5.52
Transact (EO) 1,241,098 5.13
Raymond James Investment
Services 1,200,271 4.96
Investec Wealth & Investment 1,199,349 4.95
Charles Stanley 1,011,613 4.18
Seven Investment Management 885,810 3.66
Rathbones 810,350 3.35
Evelyn Partners (Retail) 742,146 3.07
(EO = Execution only)
Beneficial Owners of Shares – Information Rights
The beneficial owners of shares who have been nominated by the registered
holder of those shares to receive information rights under Section 146 of the
Companies Act 2006 are required to direct all communications to the registered
holder of their shares rather than to the Company’s registrar, Computershare
Investor Services PLC, or to the Company directly.
Securities Carrying Voting Rights
There are no restrictions concerning the transfer of securities in the
Company; no special rights with regard to control attached to securities; no
arrangements known to the Company between holders of securities that may
restrict the transfer of securities; and no agreements to which the Company is
party that might affect its control following a successful takeover bid.
Capital Structure and Realisation Opportunity
As at the date of this report, the Company’s share capital comprises
23,747,797 Ordinary shares of 1p each with one vote per share. The Company’s
articles of association (“Articles”) contain provisions enabling
shareholders to elect at three-year intervals for the realisation of all or
part of their holdings of Ordinary Shares (“Realisation Opportunity”).
The Articles give the Company flexibility as to how it chooses to deliver each
Realisation Opportunity. The Articles provide that the Company may, at the
Board’s discretion, make available to shareholders the opportunity to make
an election to request that all or part of the Ordinary shares they hold be
placed, repurchased, or purchased out of the proceeds of an issue of new
Ordinary Shares, or purchased under a tender offer or by a market maker (a
“Realisation Sale Election”). However, if Realisation Sale Elections
cannot be satisfied in their entirety through the placing and/or repurchase
mechanism(s), all remaining elected shares will be converted into realisation
shares (“Realisation Shares”) instead. The Articles also provide that, if
the Company does not make available to shareholders an opportunity to make a
Realisation Sale Election, shareholders may instead serve an election
requesting that all or part of their Ordinary Shares be converted into
Realisation Shares.
If Realisation Shares are created, the Company’s portfolio of assets and
liabilities will be split into a continuation pool and a realisation pool pro
rata as between the continuing Ordinary Shares and the Realisation Shares
respectively. The continuation pool will be managed in accordance with the
Company’s existing investment objective and policy, whilst the realisation
pool will be managed in accordance with an orderly realisation programme with
the aim of making progressive returns of cash to holders of Realisation
Shares. The precise mechanism for any return of cash to holders of Realisation
Shares will depend upon the relevant factors prevailing at the time and will
be determined at the discretion of the directors, but may include a
combination of capital distributions, share repurchases and tender offers. The
creation of Realisation Shares and the splitting of the Company’s portfolio
into the continuation and realisation pools are, however, conditional upon the
aggregate net asset value attributable to the Company’s continuing Ordinary
Shares being at least £30 million (the “£30m NAV Threshold”). If the
£30m NAV Threshold is not met, no elected shares will convert into
Realisation Shares and the Company’s portfolio will not be split into two
pools. Instead, the Company’s investment objective and policy going forward
will be to realise the Company’s assets on a timely basis with the aim of
making progressive returns of cash to shareholders as soon as practicable.
There are currently no Realisation Shares in issue. The last Realisation
Opportunity was offered in 2021, when only 0.55% of issued share capital, or
149,729 shares, were realised and bought back by the Company. The next
Realisation Opportunity will be offered to shareholders in 2024. The Board
intends to put forward tailored proposals in relation to each Realisation
Opportunity to ensure that it can be delivered efficiently and in accordance
with the best interests of the Company, at the relevant point in time.
Share Issues and Buybacks
The Directors have the authority to issue shares up to an aggregate nominal
amount equal to one-third of the issued share capital of the Company. They
also have authority to issue shares, or sell Treasury shares, up to an
aggregate nominal amount equal to 10% of the issued share capital for cash,
without pre-emption rights applying. At the last Annual General Meeting held
on 29 September 2022, the Directors were also granted the authority to
repurchase up to 3,752,784 Ordinary shares, being 14.99% of the Company’s
issued share capital. These authorities will expire at the Annual General
Meeting to be held on 20 September 2023, when resolutions to renew them will
be proposed.
The Company makes use of share buybacks and share issuances with the objective
of achieving a sustainable low discount (or premium) to net asset value per
share. Shares are not bought back – either for holding in Treasury or for
cancellation – unless the result is an increase in the net asset value per
Ordinary share. Shares will only be re-sold from Treasury or issued as new
shares at a premium to the net asset value per Ordinary share.
At 30 April 2023, the number of Ordinary shares in issue was 24,297,797.
410,000 shares have been issued during the year, and none were issued after
the year-end. During the year, 2,222,459 shares were repurchased, and 550,000
after the year-end and up to the date of this report.
Treasury Shares
The Company may make market purchases of its own shares for cancellation or
for holding in Treasury where it is considered by the Board to be cost
effective and positive for the management of the Company’s capital base to
do so. During the year, and since the year end, no shares were purchased for,
or held in, Treasury. All shares bought back during the financial year and
since the year end were cancelled.
Global Greenhouse Gas Emissions for the Year ended 30 April 2023
The Company is an investment trust, with neither employees nor premises, nor
has it any financial or operational control of the assets which it owns. It
has no greenhouse gas emissions to report from its operations nor does it have
responsibility for any other emissions – producing sources as defined in the
Companies Act 2006 (Strategic Report and Directors’ Report) Regulations
2013, including those within the Company’s underlying investment portfolio.
Consequently, the Company consumed less than 40,000 kWh of energy during the
year in respect of which the Directors’ Report is prepared and therefore is
exempt from the disclosures required under the Streamlined Energy and Carbon
Reporting criteria.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include certain information, more
applicable to traditional trading companies, in a single identifiable section
of the Annual Report or a cross reference table indicating where the
information is set out. The Directors confirm that there are no disclosures to
be made in this regard.
Modern Slavery Act 2015
The Company does not provide goods or services in the normal course of
business, and as a financial investment vehicle, does not have customers.
Therefore, the Directors do not consider that the Company is required to make
a statement under the Modern Slavery Act 2015 in relation to slavery or human
trafficking. The Company’s suppliers are typically professional advisers and
the Company’s supply chains are considered to be low risk in this regard.
Anti-Bribery and Corruption Policy
The Board has adopted a zero tolerance approach to instances of bribery and
corruption. Accordingly, it expressly prohibits any Director or associated
persons when acting on behalf of the Company, from accepting, soliciting,
paying, offering or promising to pay or authorise any payment, public or
private, in the United Kingdom or abroad to secure any improper benefit for
themselves or for the Company.
The Board applies the same standards to its service providers in their
activities for the Company.
A copy of the Company’s Anti-Bribery and Corruption Policy can be found on
its website at www.migoplc.co.uk. This policy is reviewed annually by the
Audit Committee.
Prevention of the Facilitation of Tax Evasion
In response to the implementation of the Criminal Finances Act 2017, the Board
adopted a zero-tolerance approach to the criminal facilitation of tax evasion.
A copy of the Company’s policy on preventing the facilitation of tax evasion
can be found on the Company’s website at www.migoplc.co.uk. The policy is
reviewed annually by the Audit Committee.
Political Donations
The Company has not made and does not intend to make any political donations.
Corporate Governance
The Corporate Governance report, which includes the Company’s corporate
governance policies is set out below.
Common Reporting Standard (“CRS”)
CRS is a global standard for the automatic exchange of information
commissioned by the Organisation for Economic Cooperation and Development and
incorporated into UK law by the International Tax Compliance Regulations 2015.
CRS requires the Company to provide certain additional details to HMRC in
relation to certain shareholders. The reporting obligation began in 2016 and
is an annual requirement. The Company’s Registrars, Computershare Investor
Services PLC, have been engaged to collate such information and file the
reports with HMRC on behalf of the Company.
Articles of Association
Any amendment of the Company’s Articles of Association requires a special
resolution to be passed by shareholders.
Proposed Amendment to the Articles of Association
The Board of Directors is proposing to make an amendment to the Company’s
Articles of Association (the “Articles”) to increase the aggregate amount
paid to Directors by way of fees for their services as Directors under Article
97 from £150,000 to £250,000 in any financial year or any such greater sum
as may be determined from time to time by ordinary resolution of the Company.
Any fees payable pursuant to Article 97 shall be distinct from and shall not
include any salary, remuneration for an executive office or other amounts
payable to a Director pursuant to any other provisions of these Articles and
shall accrue from day to day.
The reason for the proposed increase in fees is the current number of
Directors which has increased from three to five during the year under review
and which caused aggregate fees to rise close to the maximum level of
£150,000 per annum for the time being. However, it is the Board’s intention
to go back to having four Directors as a result of natural evolution in the
future and, in the long term, four Directors should be seen as the “norm”
for MIGO.
In addition to the change relating to Directors’ fees, the Articles have
been brought up to date in respect of the Company’s name which was changed
to MIGO Opportunities Trust plc with effect from 7 December 2021.
The proposed new Articles (marked to show the proposed changes) will be
available for inspection on the Company’s website, www.migoplc.co.uk, and at
the Company’s registered office, from the date of this document until the
close of the Annual General Meeting, and will also be available for inspection
at the venue of the Annual General Meeting from fifteen minutes before and
during the Annual General Meeting. Should it be impossible to view the
proposed new Articles at the registered office, then an electronic copy can
also be requested from the Company Secretary by writing to info@frostrow.com.
Annual General Meeting
The full Notice of the Annual General Meeting together with explanatory notes
is set out at the end of this document. In addition to the ordinary business
of the meeting, the following resolutions will be proposed as special
business:
Resolution 12: Authority to allot shares up to approximately one-third of the
ordinary shares in issue;
Resolution 13: Authority to issue new shares or sell shares from Treasury for
cash, up to approximately 10% of the Company’s issued ordinary shares, at a
price per share not less than the net asset value per share, and to disapply
pre-emption rights in respect of those shares;
Resolution 14: Authority to buy back up to 14.99% of shares in issue at the
time of the AGM, either for cancellation or for placing into Treasury; and
Resolution 15: Authority to hold general meetings (other than AGMs) on at
least 14 days’ notice.
Resolution 16: To adopt the draft Articles of Association produced to the
meeting as the Articles of Association of the Company in substitution for, and
to the exclusion of, the Company’s existing Articles of Association. Please
see above for details of the changes.
Resolution 12 will be put to shareholders as an ordinary resolution and
Resolutions 13 to 16 will be proposed as special resolutions.
Ordinary resolutions require that more than 50% of the votes cast at the
relevant meeting must be in favour of the resolutions. Special resolutions
require that at least 75% of the votes cast must be in favour of the
resolutions to be passed.
Recommendation
The Directors consider that all the resolutions to be proposed at the AGM are
in the best interests of the Company and its members as a whole. The Directors
unanimously recommend that shareholders vote in favour of all the resolutions,
as they intend to do in respect of their own beneficial holdings.
AGM Arrangements
The AGM will be held on Wednesday, 20 September 2023 at 12.00 noon, and the
Board is looking forward to meeting investors.
Shareholders are encouraged to view the Company’s website, www.migoplc.co.uk
for further information nearer the time. Questions can be submitted to the
Company Secretary at info@frostrow.com.
Shareholders are also strongly encouraged to exercise their votes in respect
of the meeting in advance. Voting by proxy will ensure that all
shareholders’ votes are registered in the event that attendance at the AGM
is not possible or restricted or if the meeting is postponed. Further details
about the voting process can be found in the Notice of Meeting. The results
of the AGM will be made public via a regulatory announcement and posted on the
Company’s website at www.migoplc.co.uk after the meeting.
Audit Information
The Directors who held office at the date of this report confirm that, so far
as they are aware, there is no relevant audit information of which the
Company’s Auditors are unaware and each Director 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 Auditors
are aware of that information.
On behalf of the Board
Richard Davidson
Chairman
3 August 2023
Corporate Governance ReportThe Board and its Committees
Responsibility for effective governance lies with the Board whose role is to
promote the long-term success of the Company. The Governance framework of the
Company reflects the fact that as an externally-managed investment company it
has no employees and currently outsources portfolio management to Premier
Portfolio Managers Limited and company management, company secretarial,
administrative and marketing services to Frostrow Capital LLP. The Board
generates value for shareholders through its appointment and oversight of the
service providers and management of costs associated with running
the Company.
The Board
Chairman – Richard Davidson
Four additional non-executive Directors, all currently considered independent
(please see above).
Due to the small size of the Board, no Senior Independent Director has been
appointed.
Key responsibilities:
· to provide leadership and set strategy, values and standards within a
framework of prudent effective controls which enable risk to be assessed and
managed;
· to ensure that a robust corporate governance framework is implemented; and
· to challenge constructively and scrutinise performance of all outsourced
activities.
Audit Committee
Chairman: Katya Thomson
All independent Directors
(The Chairman of the Board is also a member of the Committee)
Key responsibilities:
· to monitor the integrity of the Company’s Annual Report and financial
statements and of the half-yearly report;
· to oversee the risk and control environment; and
· to have primary responsibility for the relationship with the Company’s
external auditor, to review their independence and performance, and to
determine their remuneration.
Meetings are held at least twice yearly and are arranged to coincide with the
publication of the Company’s financial statements.
The Audit Committee Report is set out below.
Management Engagement Committee
Chairman: Richard Davidson
All independent Directors
Key responsibilities:
· to review the performance of the AIFM and the Investment Manager’s
obligations under the IMA and Delegation Agreement and to consider any
variation to the terms of these agreements; and
· to review regularly the contracts, the performance and remuneration of the
Company’s other principal service providers.
Meetings are held at least once a year.
The work of the Management Engagement Committee is set out in the Business
Review.
Copies of the full terms of reference, which clearly define the
responsibilities of each committee, can be obtained from the Company Secretary
and can be found on the Company’s website at www.migoplc.co.uk. They will
also be available for inspection at the Annual General Meeting.
The Directors have decided that, given the size of the Board, it is not
necessary to form separate remuneration and nomination committees. The duties
that would normally fall to those committees are carried out by the Board as a
whole.
Corporate Governance Statement
The Company is committed to the highest standards of corporate governance and
the Board is accountable to shareholders for the governance of the Company’s
affairs.
The Board of MIGO Opportunities Trust plc has considered the principles and
recommendations of the AIC Code of Corporate Governance published in February
2019 (the “AIC Code”). The AIC Code addresses all the principles set out
in the UK Corporate Governance Code (the “UK Code”), as well as setting
out additional provisions on issues that are of specific relevance to the
Company.
The Board considers that reporting against the principles and provisions of
the AIC Code (which has been endorsed by the Financial Reporting Council) will
provide better information to shareholders. By reporting against the AIC Code,
the Company meets its obligations under the UK Code (and associated disclosure
requirements under paragraph 9.8.6 of the Listing Rules) and as such does not
need to report further on issues contained in the UK Code which are irrelevant
to the Company as an externally-managed investment company, including the
provisions relating to the role of the chief executive, executive directors’
remuneration and the internal audit function.
The AIC Code is available on the AIC’s website www.theaic.co.uk and the UK
Code can be viewed on the Financial Reporting Council website www.frc.org.uk.
The AIC Code includes an explanation of how the AIC Code adapts the principles
and provisions set out in the UK Code to make them relevant for investment
companies.
The Company has no Remuneration Committee and no Senior Independent Director,
but otherwise has complied with the principles and provisions of the AIC Code.
The Chairman of the Board is also a member of the Audit Committee, but this is
considered acceptable due to the small number of Directors. However, under the
terms of reference of the Audit Committee, the Chairman of the Board may not
act as the Chairman of the Audit Committee.
The Corporate Governance Statement forms part of the Report of the Directors.
The Board
The Board is responsible for the effective governance and the overall
management of the Company’s affairs. The governance framework of the Company
reflects the fact that as an investment company it outsources investment
management services currently to Premier Portfolio Managers Limited as AIFM
and company secretarial, administration and marketing services to Frostrow
Capital LLP.
The Board’s key responsibilities are to set the strategy, values and
standards; to provide leadership within a controls framework which enable
risks to be assessed and managed; to challenge constructively and scrutinise
performance of all outsourced activities; and to review regularly the
contracts, performance and remuneration of the Company’s principal service
providers and Investment Manager. The Board is responsible for all matters of
direction and control of the Company, including its investment policy, and no
one individual has unfettered powers of decision.
The Board currently consists of five non-executive Directors, who have
substantial recent and relevant experience of investment trusts and financial
and public company management. The Directors possess a wide range of business
and financial expertise relevant to the Company and consider that they commit
sufficient time to the Company’s affairs. Brief biographical details of the
Directors, including details of their significant commitments, can be found
above.
Other than their letters of appointment as Directors, none of the Directors
has a contract of service with the Company nor has there been any other
contract or arrangement between the Company and any Director at any time
during the year. Directors are not entitled to any compensation for loss of
office.
The role of the Board is to promote the long-term sustainable success of the
Company, generating value for shareholders and contributing to wider society.
Board Leadership and Purpose
Purpose and Strategy
The Board assesses the basis on which the Company generates and preserves
value over the long term. The Strategic Report describes how opportunities and
risks to the future success of the business have been considered and
addressed, the sustainability of the Company’s business model and how its
governance contributes to the delivery of its strategy.
The Company’s Objective and Investment Policy are set out in the Business
Review.
Strategy issues and all material operational matters are considered at Board
meetings.
Board Culture
The Board aims to enlist differences of opinion, unique vantage points and
areas of expertise. The Chairman encourages open debate to foster a supportive
and co-operative approach for all participants. Strategic decisions are
discussed openly and constructively.
The Board aims to be open and transparent with shareholders and other
stakeholders, and for the Company to conduct itself responsibly, ethically and
fairly in its relationships with service providers.
Diversity Policy
The Board supports the principle of boardroom diversity. The Company’s
policy is that the Board and its committees should be comprised of directors
who collectively display the necessary balance of professional skills,
experience, length of service and industry knowledge and that appointments to
the Board and its committees should be made on merit, against objective
criteria, including diversity in its broadest sense.
The objective of the policy is to have a broad range of approaches,
backgrounds, skills, knowledge and experience represented on the Board. The
Directors believe that this will make the Board and its committees more
effective at promoting the long-term sustainable success of the Company and
generating value for shareholders by ensuring there is a breadth of
perspective among the Directors and the challenge needed to support good
decision making. To this end, achieving a diversity of perspectives and
backgrounds on the Board and its committees will be a key consideration in any
director search process.
The Board is aware that gender representation objectives have been set for
FTSE 350 companies and that targets concerning ethnic diversity have been
recommended for each FTSE 100 board to have at least one director of colour by
2021 and for each FTSE 250 board to have the same by 2024.
When appointing new Board members, the Directors will consider gender and
ethnic diversity besides knowledge, skills and experience. However, the Board
does not feel that it would be appropriate to set targets as all appointments
are made on merit.
Board Diversity
The Board is supportive of the FCA’s recently updated Listing Rules (LR
9.8.6R(9)) to encourage greater diversity on listed company boards to the
effect that:
(i) at least 40% of the individuals on its board are women;
(ii) at least one of the senior board positions is held by a woman;
and
(iii) at least one individual on the board is from a minority ethnic
background.
The FCA’s disclosure requirements apply to financial years starting on or
after 1 April 2022 and will serve as guidelines when appointing new Directors.
The Company has chosen to align its diversity reporting reference date with
the Company’s financial year end and proposes to maintain this alignment for
future reporting periods. The Company has met two of the three targets on
board diversity as at its chosen reference date, 30 April 2023: 40% of
individuals on the Board are women and a senior position, that of Chairman of
the Audit Committee, is held by a woman.
The relatively small size of the Company’s Board, and therefore more
infrequent vacancies and opportunities for recruitment make achieving
diversity on the Board a more challenging, but ongoing, process. As succession
planning of the Board progresses over future years, the Company will continue
to strive for increased diversity on its Board through its Diversity Policy.
Further details on the Company’s appointment process can be found under
Appointments to the Board below.
As required under LR9.8.6R(10), further details in respect of the three
targets outlined above as at 30 April 2023 is disclosed as follows. Each
Director volunteered how they wished to be included in the tables.
(a)Table for reporting on gender identity or sex
Number of
No. of senior
Board positions on
As at 30 April 2023 members Percentage the Board*
Men 3 60% 1 (Chair of the Board)
Women 2 40% 1 (Audit Chair)
Not specified / prefer not to say – – –
(b)Table for reporting on ethnic background
Number of
No. of senior
Board positions on
members Percentage the Board*
White British or
other White
(including
minority-white
groups) 5 100% 2
Mixed/Multiple
ethnic groups – – –
Asian/Asian British – – –
Black/African/
Caribbean/Black
British – – –
Other ethnic group,
including Arab – – –
Not specified/
prefer not to say – – –
* As an externally managed investment company, the Company has no executive
directors, employees or internal operations. The Board has therefore excluded
the columns relating to executive management from the tables above. In
addition, the senior positions on the Company’s Board of the chief executive
and the chief financial officer are not applicable to the Company, nor has the
Company appointed a Senior Independent Director. In the absence of the
aforementioned roles, the Board considers the Chair of the Audit Committee
also to be a senior position on the Board. Katya Thomson serves as the Chair
of the Audit Committee.
Directors’ Independence
In accordance with the AIC Code, as part of the evaluation process, the Board
has reviewed the independence of each individual Director and the Board as a
whole.
The AIC Code requires that this report should identify each non-executive
Director the Board considers to be independent in character and judgement and
whether there are relationships or circumstances which are likely to affect,
or could appear to affect, a Director’s judgement, stating its reasons if it
determines that a Director is independent notwithstanding the existence of
relationships or circumstances which may appear to be relevant to its
determination.
Mr van Cutsem has held office for over 13 years, since 31 March 2010. However,
the Board considers that longevity of service does not impede a Director’s
ability to act independently (see Policy on Tenure below).
The appointment of AVI as MIGO’s new AIFM and Investment Manager means that
Ms Thomson will no longer be considered independent under the AIC’s Code of
Corporate Governance, as she also sits on the board of another AVI investment
trust. She has therefore taken the decision to step down from her role as
non-executive director and Chairman of the Audit Committee once a replacement
can be found.
Following formal performance evaluation, and having noted the willingness of
each Director to challenge and debate the activities of the AIFM and
Investment Manager, the Board has concluded that each Director is independent
in character and judgement. Furthermore, the Board is content that there are
no relationships or circumstances which are likely to affect the judgement of
any Director.
Policy on Tenure
The Board subscribes to the view that long-serving directors should not be
prevented from forming part of an independent majority. It does not consider
that a director’s tenure necessarily reduces his/her ability to act
independently and, following appropriate, formal performance evaluations,
believes that directors may be considered independent in character and
judgement. The Board’s policy on tenure is that continuity and experience
are considered to add significantly to the strength of the Board and, as such,
no limit has been imposed on the overall length of service of any of the
Company’s Directors, including the Chairman. In view of its non-executive
nature, the Board considers that it is not appropriate for directors to be
appointed for a specified term, although new directors will be appointed with
the expectation that they will serve for a minimum period of three years
subject to shareholder approval. The Board has adopted a policy whereby all
Directors will be required to stand for re-election annually, regardless of
their length of tenure.
Board Evaluation
An evaluation of the Board and its Committees as well as the Chairman and the
individual Directors is carried out annually. In addition to evaluations
carried out by the Board collectively, the Management Engagement Committee on
behalf of the Board considers annually whether an external evaluation should
be undertaken by an independent agency.
The Chairman acts on the results of the Board’s evaluation by recognising
the strengths and addressing the weaknesses of the Board and recommending any
areas for development. If appropriate, the Chairman will propose that new
members are appointed to the Board or will seek the resignation of Board
Directors.
During the year ended 30 April 2023, the performance of the Board, its
committees and individual Directors (including each Director’s independence)
was again evaluated through a formal assessment process led by the Chairman.
This involved the circulation of a Board and Committee evaluation checklist,
tailored to suit the nature of the Company, followed by discussions between
the Chairman and each of the Directors. The performance of the Chairman was
evaluated by the other Directors under the leadership of the Audit Committee
Chairman.
As part of the Board evaluation discussions, each of the Directors also
assessed the overall time commitment of their external appointments and it was
concluded that all Directors have sufficient time to discharge their duties.
All Directors have attended all scheduled Board and Committee meetings and
have made themselves available for ad hoc discussions where necessary.
In particular, Lucy Costa Duarte and Ian Henderson as new Directors of MIGO
have already shown their dedication to the Company during the search for a new
Investment Manager. Their input showed both the willingness and ability to
climb a steep learning curve in order to provide the best solutions for MIGO
and its shareholders.
The Chairman is satisfied that the structure and operation of the Board
continues to be effective and relevant and that there is a satisfactory mix of
skills, experience and knowledge of the Company. The Board has considered the
position of all the Directors including the Chairman as part of the evaluation
process and believes that it would be in the Company’s best interests to
recommend them for re-election and election respectively at the forthcoming
AGM.
However, it is noted that Katya Thomson will no longer be perceived
independent following the appointment of AVI, and that a search for a
replacement for her role as non-executive Director and Chairman of the Audit
Committee will commence in due course.
Board Composition and Succession
The Board has approved a composition and succession plan to ensure that the
Board members collectively (i) display the necessary balance of professional
skills, experience, length of service and industry/Company knowledge; and (ii)
are fit and proper to direct the Company’s business with prudence and
integrity. This plan is reviewed annually and at such other times as
circumstances may require.
To this end, the Board collectively reviews all appointments to the Board and
its Committees and, if necessary, following a skills review of the current
Directors, will seek to add persons with complementary skills or who possess
skills and experience which might fill any gaps in the Board’s knowledge or
experience and who can devote sufficient time to the Company to carry out
their duties effectively.
The Board will ensure that a robust recruitment process is undertaken for all
directors’ appointments to deliver fair and effective selection outcomes.
Independent advisors will be appointed to aid directors’ recruitment and to
help to mitigate the risk of self-selection from a narrow pool of candidates.
The Board will ensure that any search agency used has no connection with the
Company or any of the Board members and that the appropriate disclosure is
made in the next annual report.
Achieving a diversity and balance of skills and knowledge in the Board will be
a key determinant of any new appointments. Selecting the best candidate,
irrespective of background, is paramount. This will benefit the effectiveness
of the Board by creating a breadth of perspective among directors.
Where the Board appoints a new Director during the year or after the year-end
and before the notice of Annual General Meeting has been published, that
Director will stand for election by shareholders at the next Annual General
Meeting.
Appointments to the Board
During the year, two new Directors were appointed to the Board with effect
from 1 November 2022: Lucy Costa Duarte and Ian Henderson.
Their appointments followed the resignation of Michael Phillips on 4 March
2022 and an initial Board skills review during which a gap in marketing and
experience in communication with shareholders was identified. Directors and
advisers at Frostrow then suggested possible candidates with marketing and
communication experience whose names were forwarded to Stephenson Executive
Search, a small bespoke consultancy. Stephenson Executive Search reviewed
biographies and CVs, and held initial interviews, before producing a summary
of candidates for the Board, thereby providing an independent overview of the
whole recruitment process.
Following final interviews, the Board decided that both Lucy Costa Duarte and
Ian Henderson were exceptional candidates and had a lot to offer to MIGO so
that the appointment of both as Directors of the Company would be in
shareholders’ interests. Both Lucy and Ian will stand for election by
shareholders at the forthcoming AGM.
Induction/Development
A procedure for the induction of new Directors has been established, including
the provision of an induction pack containing relevant information about the
Company, its processes and procedures. New appointees will have the
opportunity of meeting with the Chairman and relevant persons at the AIFM,
Investment Manager and Company Secretary.
Directors are also given key information on the Company’s regulatory and
statutory requirements as they arise including information on the role of the
Board, matters reserved for its decision, the terms of reference for the Board
committees, the Company’s corporate governance practices and procedures and
the latest financial information. Directors are encouraged to participate in
training courses where appropriate.
Chairman and Senior Independent Director (“SID”)
The current Chairman, Mr Davidson, is deemed by his fellow independent Board
members to be independent and to have no conflicting relationships. He is
chair of the University of Edinburgh’s Investment Committee as well as the
chairman of Aberforth Smaller Companies Trust plc and of Foresight Sustainable
Forestry Company PLC. The Board considers that he has sufficient time to
commit to the Company’s affairs as necessary.
Due to the small size of the Board, it was decided that the appointment of a
SID would not be necessary.
Responsibilities of the Chairman and the SID
The Chairman’s primary role is to provide leadership to the Board, assuming
responsibility for its overall effectiveness in directing the Company. The
Chairman is responsible for:
· taking the chair at general meetings and Board meetings, conducting
meetings effectively and ensuring that all Directors are involved in
discussions and decision making;
· setting the agenda for Board meetings and ensuring the Directors receive
accurate, timely and clear information for decision-making;
· taking a leading role in determining the Board’s composition and
structure;
· overseeing the induction of new directors and the development of the Board
as a whole;
· leading the annual board evaluation process and assessing the contribution
of individual directors;
· supporting and also challenging the Investment Manager (and other
suppliers where necessary);
· ensuring effective communications with shareholders and, where
appropriate, stakeholders; and
· engaging with shareholders to ensure that the Board has a clear
understanding of shareholders’ views.
As noted above, due to the small size of the Board, the role of Senior
Independent Director, or SID, is performed by the whole Board. This includes
working closely with the Chairman and providing support. The Chairman of the
Audit Committee leads the annual assessment of the performance of the
Chairman.
Directors’ Other Commitments
During the year, save for the details set out above, none of the Directors
took on any significant new commitments or appointments. All of the Directors
consider that they have sufficient time to discharge their duties.
Conflicts of Interest
Company Directors have a statutory obligation to avoid a situation in which
they (and connected persons) have, or can have, a direct or indirect interest
that conflicts, or may possibly conflict, with the interests of the Company.
In line with the Companies Act 2006, the Board has the power to authorise any
potential conflicts of interest that may arise and impose such limits or
conditions as it thinks fit. A register of interests and potential conflicts
is maintained and is reviewed at every Board meeting to ensure all details are
kept up to date. It was resolved at each Board meeting during the year that
there were no direct or indirect interests of a Director that conflicted with
the interests of the Company, with the exception of the continued appointment
of Kepler Partners LLP (“Kepler”) as a service provider to the Company
when Mr van Cutsem, a founding partner of Kepler, abstained from the decision
made by the Board. More information about Kepler as a related party can be
found in note 16 in the Financial Statements. Furthermore, with the
appointment of AVI as new AIFM and Investment Manager of the Company, it is
expected that, going forward, Ms Thomson will abstain from any decision
involving AVI. Appropriate authorisation will be sought prior to the
appointment of any new director or if any new conflicts or potential conflicts
arise.
Board Meetings
The Board meets formally at least four times each year. Representatives of the
Investment Manager attend all meetings at which investment matters are
discussed; representatives from Frostrow are in attendance at each Board
meeting. The Chairman encourages open debate to foster a supportive and
co-operative approach for all participants. The primary focus at regular Board
meetings is the review of investment performance and associated matters,
including asset allocation, marketing and investor relations, peer group
information and industry issues. The Board reviews key investment and
financial data, revenue and expenses projections, analyses of asset
allocation, transactions, gearing policy, cash management, customised
performance metrics and performance comparisons, share price and net asset
value performance. The Board’s approach to addressing the Investment
Manager’s performance and the Company’s share price performance during the
year is described in the Chairman’s Statement.
The Board is responsible for setting the Company’s corporate strategy and
reviews the continued appropriateness of the Company’s investment objective,
investment strategy and investment restrictions at each meeting.
Meeting Attendance
The Directors meet at regular Board meetings, held at least once a quarter,
with additional meetings arranged as necessary. During the year to 30 April
2023, the number of scheduled Board and Committee meetings held and attended
by each Director was as below. There were also a considerable number of ad hoc
Board and Committee meetings to consider matters such as the approval of
regulatory announcements, the appointment of new Directors and the appointment
of a new AIFM and Investment Manager to the Company. With the exception of one
ad hoc meeting which could not be attended by one Director due to their being
away on business, all other meetings were attended by all Board members.
Management
Audit Engagement
Board Committee Committee
meetings meetings meetings
(4) (3) (1)
Richard Davidson 4 3 1
Katya Thomson 4 3 1
Hugh van Cutsem 4 2 1
Lucy Costa Duarte* 2 2 N/A
Ian Henderson* 2 2 N/A
* Appointed on 1 November 2022
Matters Reserved for Decision by the Board
The Board has adopted a schedule of matters reserved for its decision. This
includes, inter alia, the following:
· Decisions relating to the strategic objectives and overall management of
the Company, including the appointment or removal of the Investment Manager
and other service providers, establishing the investment objectives, strategy
and performance comparators, the permitted types or categories of investments
and the proportion of assets that may be invested in them.
· Requirements under the Companies Act 2006, including approval of the
half-year and annual financial statements, recommendation of the final
dividend (if any), the appointment or removal of the Company Secretary, and
determining the policy on share issuance and buybacks.
· Matters relating to certain Stock Exchange requirements and announcements,
the Company’s internal controls, and the Company’s corporate governance
structure, policies and procedures.
· Matters relating to the Board and its Committees, including the terms of
reference and membership of the committees, and the appointment of directors
(including the Chairman and the SID if applicable).
Day-to-day investment management is currently delegated to Premier Portfolio
Managers Limited and is expected to transfer to Asset Value Investors Limited
in Q4 2023, with the exact date still to be announced. Operational management
is delegated to Frostrow.
The Board takes responsibility for the content of communications regarding
major corporate issues although the Investment Manager or Frostrow may act as
spokesman. The Board is kept informed of relevant promotional material that is
issued by the Investment Manager.
Internal Controls Structure
An overview of the Internal Controls structure of the Company and its service
providers is shown in the full annual report.
[Graph in the annual report].
Risk Management and Internal Controls
The Board has overall responsibility for the Company’s risk management and
internal control systems and for reviewing their effectiveness. The Company
applies the guidance published by the Financial Reporting Council on internal
controls. Internal control systems are designed to manage, rather than
eliminate, the risk of failure to achieve the business objective and can
provide only reasonable and not absolute assurance against material
misstatement or loss. These controls aim to ensure that the assets of the
Company are safeguarded, that proper accounting records are maintained and
that the Company’s financial information is reliable. The Directors have a
robust process for identifying, evaluating and managing the significant risks
faced by the Company, which are recorded in a risk matrix. The Audit
Committee, on behalf of the Board, considers each risk as well as reviewing
the mitigating controls in place. Each risk is rated for its “likelihood”
and “impact” and the resultant numerical rating determines its ranking
into “Principal/Key”, “Significant” or “Minor”. This process was
in operation during the year and continues in place up to the date of this
report. The process also involves the Audit Committee receiving and examining
regular reports from the Company’s principal service providers. The Board
then receives a detailed report from the Audit Committee on its findings. The
Directors have not identified any significant failures or weaknesses in
respect of the Company’s internal control systems.
Information on the Company’s financial, strategic and operational risk
management can be found in the Strategic Report.
Relationship with the Investment Manager
At each Board meeting, representatives from the AIFM and the Investment
Manager are in attendance to present verbal and written reports covering their
activity, portfolio and investment performance over the preceding period, and
compliance with the applicable rules and guidance of the FCA and the UK
Stewardship Code. The Investment Managers also seek approval for specific
transactions which they are required to refer to the Board.
Ongoing communication with the Board is maintained between formal meetings.
The Board and the Investment Manager operate in a supportive, co-operative and
open environment.
The Management Engagement Committee evaluates the AIFM’s and Investment
Manager’s performance and reviews the terms of the Investment Management
Agreement at least annually.
Relationship with Other Service Providers
Representatives from Frostrow are in attendance at each Board meeting to
address questions on the Company’s operations, administration and governance
requirements.
The Management Engagement Committee monitors and evaluates all of the
Company’s other service providers, including Frostrow, and also the
Custodian, the Registrars and the Brokers. At the most recent review, in July
2023, the Committee concluded that all the service providers were performing
well.
Relations with Shareholders
A detailed analysis of the substantial shareholders in the Company is provided
to the Directors at each Board meeting. Representatives of the Investment
Manager and Frostrow Capital LLP regularly meet with institutional
shareholders and private client asset managers to discuss strategy and to
understand their issues and concerns and, if applicable, to discuss corporate
governance issues. The results of such meetings are reported at the following
Board meeting.
Regular reports from the Company’s corporate stockbroker are submitted to
the Board on investor sentiment, industry issues and trends.
The Company aims to provide shareholders with a full understanding of the
Company’s investment objective, policy and activities, its performance and
the principal investment risks by means of informative annual and half-yearly
reports. This is supplemented by the daily publication of the net asset value
of the Company’s shares through the London Stock Exchange. The Company’s
website, www.migoplc.co.uk is regularly updated and provides useful
information about the Company, including the Company’s financial reports,
monthly factsheets, Manager’s commentaries, podcasts and announcements. The
Company also held a number of webinars for investors.
Shareholders wishing to communicate with the Chairman, or any other member of
the Board, may do so by writing to the Company, for the attention of the
Company Secretary at the offices of Frostrow Capital LLP or by email at
info@frostrow.com. All shareholders are encouraged to attend the Annual
General Meeting, where they are given the opportunity to question the
Chairman, the Board and the Investment Managers. The Directors welcome the
views of all shareholders and place considerable importance on communications
with them.
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 of the Annual Report are dispatched to
shareholders by mail, where this form of communication is chosen. It is also
possible to download the Annual Report and other documents from the
Company’s website at www.migoplc.co.uk.
Socially Responsible Investment
The Company’s investment activities and day to day management is delegated
to the Investment Manager, the Manager and other third parties. As an
investment trust, the Company has no direct social, community, employee or
environmental responsibilities. Its principal responsibility to shareholders
is to ensure that the investment portfolio is properly managed and invested.
As detailed in the Business Review, the management of the portfolio has been
delegated to the Company’s Investment Manager.
In light of the nature of the Company’s business there are no relevant human
rights issues and the Company does not have a human rights policy.
Stewardship and the Exercise of Voting Powers
As an externally managed investment company, the Board delegates the majority
of its Stewardship and engagement responsibilities to the Company’s
Investment Manager. However, the Board retains oversight of this process by
receiving regular updates from the Investment Manager on its engagement
activities and by reviewing the Investment Manager’s engagement and voting
policies. The current Investment Manager has published a statement of
compliance with the UK Stewardship Code. Further details of the Investment
Manager’s approach to engaging with investee companies can be found on its
website at www.premiermiton.com.
Nominee Share Code
Where the Company’s shares are held via a nominee company name, the Company
undertakes:
· to provide the nominee company with multiple copies of shareholder
communications, so long as an indication of quantities has been provided in
advance; and
· to allow investors holding shares through a nominee company to attend
general meetings, provided the correct authority from the nominee company is
available.
Nominee companies are encouraged to provide the necessary authority to
underlying shareholders to attend the Company’s general meetings.
Significant Holdings and Voting Rights
Details of the shareholders with substantial interests in the Company’s
shares, the Directors’ authorities to issue and repurchase the Company’s
shares, and the voting rights of the shares are set out in the Report of the
Directors.
Independent Professional Advice
The Board has formalised arrangements under which the Directors, in the
furtherance of their duties, may seek independent professional advice at the
Company’s expense.
During the year, an independent review of possible Board candidates was
conducted by Stevenson Executive Search and legal advice was sought in respect
of the appointment letters for Lucy Costa Duarte and Ian Henderson.
Furthermore, Stephenson Harwood LLP provided advice during the search for a
new Investment Manager for MIGO.
Independent professional advice and support was also sought from Numis
Securities Limited, the Company’s brokers, during the search for a new
investment manager for MIGO. Kaso Legg Communications Limited facilitated
communication with shareholders and the market in general during that time.
Company Secretary
The Board has direct access to the advice and services of the Company
Secretary, Frostrow, which is responsible for ensuring that the Board and
Committee procedures are followed and that the Company complies with
applicable regulations. The Company Secretary is also responsible to the Board
for ensuring timely delivery of information and reports and that statutory
obligations of the Company are met.
Audit, Risk and Internal Control
The Statement of Directors’ Responsibilities describes the Directors’
responsibility for preparing this Annual Report.
The Audit Committee Report explains the work undertaken to allow the Directors
to make this statement and to apply the going concern basis of accounting. It
also sets out the main roles and responsibilities and the work of the Audit
Committee throughout the year, and describes the Directors’ review of the
Company’s risk management and internal control systems.
A description of the principal risks facing the Company and an explanation of
how they are being managed is provided in the Strategic Report.
The Board’s assessment of the Company’s longer-term viability is set out
in the Business Review.
Remuneration
The Directors’ Remuneration Report sets out the levels of remuneration for
each Director and explains how Directors’ remuneration is determined.
By order of the Board
Frostrow Capital LLP
Company Secretary
3 August 2023
I am pleased to present the Audit Committee (the “Committee”) Report for
the year ended 30 April 2023. The Committee met three times during the year
under review and once following the year end.
Composition
Due to the small size of the Board, the Audit Committee comprises all the
Directors, whose biographies are set out above, including the Chairman. In
accordance with the terms of reference of the Committee and the AIC Code, the
Chairman of the Board may be a member provided he or she was independent on
his/her appointment as chairman, but may not act as the Committee Chairman.
All Directors are non-executive and were considered independent during the
year, as discussed in the Report of the Directors. The Committee considers
that at least one member has recent and relevant experience in accounting or
auditing and that the Committee as a whole has experience relevant to the
investment trust industry.
The Company’s Auditors are invited to attend meetings as necessary.
Representatives of the AIFM and Investment Manager may also be invited. The
Company Secretary acts as the Secretary to the Audit Committee.
Responsibilities of the Committee
The Committee’s responsibilities are set out in formal terms of reference
which are available on the Company’s website www.migoplc.co.uk and which are
reviewed annually. The Committee’s primary responsibilities are:
· to monitor the integrity of the financial statements of the Company,
including its Annual and Half-Yearly Reports and any other formal
announcements of the Company relating to its financial performance, and to
review and report to the Board on significant financial reporting issues and
judgements in those statements having regard to matters communicated to it by
the Auditors;
· to review the effectiveness of the Company’s internal financial controls
and of the internal control and risk management systems of the company and its
third-party service providers;
· to receive and consider reports from the Compliance Officer of the
Investment Manager and AIFM;
· to consider the accounting policies of the Company;
· to monitor adherence to best practice in corporate governance;
· to make recommendations to the Board in relation to the re-appointment of
the Auditors, their terms of engagement and their remuneration;
· to review the scope, results, cost effectiveness, independence and
objectivity of the external Auditors;
· to review the policy on the engagement of the external Auditors to supply
non-audit services and considering relevant guidance regarding the provision
of non-audit services by the external audit firm; and
· to consider the need for an internal audit function.
Matters Considered in the Year
In the year under review, the main duties undertaken were:
· consideration of the appropriateness of the Company’s accounting
policies and of the quality and effectiveness of the accounting records and
management information maintained on behalf of the Company, relying on
meetings with and reports from Premier Miton Group and Frostrow Capital LLP;
· a review of the half-year results and the Annual Report, including the
disclosures made therein in relation to internal controls and risk management,
going concern, related parties and consideration of whether the report is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company’s position and performance, business
model, strategy and continued operation (including advising the Board on
whether the Company is able to meet its liabilities as they fall due) in order
to make recommendations to the Board. In assessing whether the report is fair,
balanced and understandable, each Director reviewed the disclosures made,
applying their respective knowledge and expertise. The internal controls over
financial reporting were also considered, together with feedback from the
Company’s Auditor, the Investment Manager and the Company Secretary;
· consideration of whether a dividend needed to be paid by the Company in
respect of the previous financial year;
· consideration of the internal controls in place at Premier Miton, the
Investment Manager, and the Company’s other principal third-party service
providers;
· consideration of Premier Miton’s policies in relation to information
security and business continuity, meeting with representatives of Premier
Miton’s IT and Compliance Departments periodically;
· consideration of the key risks, risk management systems in place and the
Company’s risk matrix;
· consideration of the Company’s Anti-Bribery Policy and the policies and
procedures in place to prevent tax evasion;
· consideration of the nature, scope and cost of the external audit and the
findings therefrom;
· annual consideration of whether there is a need for an internal audit
function;
· consideration of the appointment of the Auditors, the Auditor’s
independence, objectivity, effectiveness, provision of any non-audit services
and tenure of appointment;
· consideration of Premier Miton’s and Frostrow’s whistle blowing
policies for their staff to raise concerns about possible improprieties,
including in relation to the Company, in confidence; and
· consideration of the annual confirmation from the Company’s Depositary
in respect of the safekeeping of the Company’s assets.
Since the year-end, the Committee has also considered the appropriate level of
dividend to be paid by the Company in respect of the year under review, for
recommendation to the Board, as well as the audit findings for the 2023 audit.
Significant Reporting Matters
The significant reporting matter considered by the Committee during the year
was:
Verification of ownership and valuation of the Company’s holdings. The
valuation of investments is undertaken in accordance with the accounting
policies in note 1 to the Financial Statements. Controls are in place to
ensure that valuations are appropriate and existence is verified through
reconciliations with the Custodian. The Committee discussed the controls and
process with Frostrow and the AIFM. Having reviewed the process and controls,
the Committee confirmed it was satisfied that the investments had been valued
correctly and the Company’s ownership was appropriately documented.
The portfolio contains a significant number of holdings where the investee
company is in a process of realisation/liquidation. As at 30 April 2023, 8 out
of 50 holdings (2022: 8 out of 45 holdings) were in a process of realisation,
representing 5.0% (2022: 8.3%) of the portfolio. The Investment Manager
provides comprehensive updates on investee companies at each Board meeting and
the Directors have regular discussions with the Investment Manager about the
impact of this ‘tail’ on the Company and its performance.
Recognition of Revenue from Investments
The Committee took steps to gain an understanding of the processes in place to
record investment income and transactions. The Committee sought, and received,
confirmation that all dividends receivable have been accounted for correctly.
Other Reporting Matters
Accounting Policies
The current accounting policies, as set out in note 1 to the Financial
Statements, have been applied consistently throughout the year and the prior
period where applicable.
Going Concern
Having reviewed the Company’s financial position and liabilities, the
Committee is satisfied that it is appropriate for the Board to prepare the
financial statements on the going concern basis. Further detail is provided in
the Business Review.
Viability Statement
The Audit Committee also considered the Company’s financial position and
principal risks in connection with the Board’s statement on the longer-term
viability of the Company, which is set out in the Business Review.
The Committee reviewed the Company’s financial position (including its cash
flows and liquidity position), the principal risks and uncertainties and the
results of stress tests and scenarios which considered the impact of severe
stock market volatility on shareholders’ funds. This included modelling
further substantial market falls, and significantly reduced market liquidity,
to that experienced recently in connection with the coronavirus pandemic. The
scenarios assumed that there would be no recovery in asset prices and that
listed portfolio companies which have cut or cancelled their dividends since
the coronavirus outbreak would not reinstate them.
The results demonstrated the impact on the Company’s NAV, its expenses, its
cash flows and its ability to meet its liabilities. In even the most stressed
scenario, the Company was shown to have sufficient cash, or to be able to
liquidate a sufficient portion of its listed holdings, in order to be able to
meet its liabilities as they fall due. Based on the information available to
the Directors at the time, the Committee therefore concluded it was reasonable
for the Board to expect that the Company will be able to continue in operation
and meet its liabilities as they fall due over the next three financial years.
Financial Statements
The Board has asked the Committee to confirm that in its opinion the Board can
make the statement that the Annual Report taken as a whole is fair, balanced
and understandable and provides the information necessary for shareholders to
assess the Company’s position, performance, business model and strategy. The
Committee has given this confirmation on the basis of its review of the whole
document, underpinned by involvement in the planning for its preparation and
review of the processes to assure the accuracy of factual content.
The Committee is satisfied that it is appropriate for the Board to prepare the
financial statements on the going concern basis. The financial statements can
be found below.
Internal Controls and Risk Management
The Board has overall responsibility for the risk assessment and review of the
internal controls of the Company, undertaken in the context of its investment
objective.
The review covers the key business, operational, compliance and financial
risks facing the Company. In arriving at its judgement of what risks the
Company faces, the Board has considered the Company’s operations in light of
the following factors:
· the nature of the Company, with all management functions outsourced to
third-party service providers;
· the nature and extent of risk which it regards as acceptable for the
Company to bear within its overall investment objective;
· the threat of such risks becoming a reality; and
· the Company’s ability to reduce the incidence and impact of risk on its
performance.
Against this background, a risk matrix has been developed which covers key
risks that the Company faces, the likelihood of their occurrence and their
potential impact, how these risks are monitored and the mitigating controls
put in place. The Board has delegated to the Committee the responsibility for
the review and maintenance of the risk matrix. It reviews, in detail, the risk
matrix each time it meets, bearing in mind any changes to the Company, its
environment or service providers since the last review. The Committee
considers whether any new risks are emerging as a result of any such changes
and any significant changes to the risk matrix are discussed with the Board.
Over the past year, the cost of living crisis and inflation have emerged as
new risks, and the Company’s risk matrix has been amended to take account of
all these risks on various aspects on the Company’s operations and
investment management. The Audit Committee keeps all developments under close
review, but there were no fundamental changes to the Company’s risk
management processes during the year, and no significant failings or
weaknesses were identified from the Committee’s most recent risk review.
The Committee acknowledges that the Company is reliant on the systems utilised
by its service providers. The Committee receives internal controls reports
from, and reviews the internal controls in place at, the Investment Manager
and AIFM twice annually. The internal controls reports from its other
principal service providers – from Frostrow Capital LLP, the Company’s
Administrator and Company Secretary; from the Custodian, The Bank of New York
Mellon (International) Limited; and from Computershare Investor Services PLC,
the Registrars - are reviewed on an annual basis. Following this review, the
Committee concluded that there were no significant control weaknesses or other
issues that needed to be brought to the attention of the Board.
The Committee members confirm that they have carried out a review of the
effectiveness of the system of internal financial control and risk management
during the year, as set out above and that:
(a) an ongoing procedure for identifying, evaluating and managing
significant risks faced by the Company was in place for the year under review
and up to the date of this report. This procedure is regularly reviewed by the
Board; and
(b) they are responsible for the Company’s system of internal controls
and for reviewing its effectiveness and that it is designed to manage the risk
of failure to achieve business objectives. This can only provide reasonable,
but not absolute, assurance against material misstatement or loss.
Internal Audit
The Company does not have an internal audit function as all of its day-to-day
operations are delegated to third parties, all of whom have their own internal
control procedures. The Committee discussed whether it would be appropriate to
establish an internal audit function, and agreed that the existing system of
monitoring and reporting by third parties remains appropriate and sufficient.
External Auditors
The Audit
The nature and scope of the audit for the year under review, together with
PricewaterhouseCoopers LLP‘s (“PwC”) audit plan, were considered by the
Committee on 15 March 2023 and subsequently discussed with PwC by the Audit
Committee Chairman prior to the commencement of audit field work. The
Committee then met PwC on 18 July 2023 to formally review the outcome of the
audit and to discuss the limited issues that arose. The Committee also
discussed the presentation of the Annual Report with the Auditors and sought
their perspective.
Independence and Effectiveness
In order to fulfil the Committee’s responsibility regarding the independence
of the Auditors, the Committee reviewed:
· the senior audit personnel in the audit plan for the year;
· the Auditors’ arrangements concerning any conflicts of interest;
· the extent of any non-audit services;
· the statement by the Auditors that they remain independent within the
meaning of the regulations and their professional standards; and
· the Auditors’ independence.
In order to consider the effectiveness of the Audit process, the Committee
reviewed:
· the Auditors’ fulfilment of the agreed audit plan;
· the report arising from the audit itself; and
· feedback on the Auditors’ performance during the audit from Frostrow.
A summary of the Company’s policy on the provision by the Auditors of
non-audit services to the Company can be found below.
The Committee is satisfied with the Auditors’ independence and the
effectiveness of the audit process, together with the degree of diligence and
professional scepticism brought to bear.
The audit fee for the year ended 30 April 2023 was £53,600 (2022: £44,000).
Appointment and Tenure
PwC were appointed in September 2016 to audit the financial statements for the
year ended 30 April 2017 and subsequent financial periods. The period of total
uninterrupted engagement is seven years. Mr Kevin Rollo is the current
Engagement Leader, having been allocated to the Company by PwC in 2021.
In accordance with current legislation, the Company is required to conduct an
audit tender process at least every 10 years and will have to change its
auditor after a maximum of 20 years. In addition, the nominated Engagement
Leader will be required to rotate after serving a maximum of five years with
the Company; it is therefore anticipated that Mr Rollo will serve as
Engagement Leader until completion of the audit process in 2025. The Company
has complied throughout the year ended 30 April 2023 with the provisions of
the Statutory Audit Services Order 2014, issued by the Competition and Markets
Authority.
The re-appointment of PricewaterhouseCoopers LLP as Auditors to the Company
will be submitted for shareholder approval, together with a separate
resolution to authorise the Committee to reconfirm the remuneration of the
Auditors, at the AGM to be held on 20 September 2023.
Non-Audit Services
In accordance with the Company’s non-audit services policy, the Audit
Committee reviews the scope and nature of all proposed non-audit services
before engagement to ensure that auditor independence and objectivity are
safeguarded. The audit policy includes a list of non-audit services which may
be provided by the Auditors as long as there is no apparent threat to
independence, as well as a list of services which are prohibited. Non-audit
services are capped at 70% of the average of the statutory audit fees for the
preceding three years.
No non-audit services were provided by the Auditors during the year ended 30
April 2023 (2022: none).
Effectiveness of the Committee
A formal internal Board review which included reference to the Audit
Committee’s effectiveness was undertaken by the Chairman of the Company
during the year. As part of the evaluation, the Committee reviewed the
following:
· the composition of the Committee;
· the leadership of the Committee Chairman;
· the Committee’s monitoring of compliance with corporate governance
requirements;
· the Committee’s review of the quality and appropriateness of financial
accounting and reporting;
· the Committee’s review of significant risks and internal controls; and
· the Committee’s assessment of the independence, competence and
effectiveness of the Company’s external Auditors.
It was concluded that the Committee was performing satisfactorily and there
were no formal recommendations made to the Board.
Katya Thomson
Audit Committee Chairman
3 August 2023
Directors’ Remuneration Report
for the year ended 30 April 2023
Statement from the Chairman
I am pleased to present the Directors’ Remuneration Report for the year
ended 30 April 2023. An ordinary resolution for the approval of this report
will be put to shareholders at the forthcoming Annual General Meeting. The law
requires the Company’s Auditor, PricewaterhouseCoopers LLP, to audit the
Directors’ fees and beneficial interests. Where disclosures have been
audited, they are indicated as such. The Auditors’ opinion is included in
the Independent Auditors’ Report.
During the year under review, the Board consisted entirely of independent
non-executive Directors and the Company had no employees. We have not,
therefore, reported on those aspects of remuneration that relate to executive
directors. Due to the small size and nature of the Board, it is not considered
appropriate for the Company to establish a separate remuneration committee and
the remuneration of the Directors is therefore dealt with by the Board as a
whole.
The Board considers the framework for the remuneration of the Directors on an
annual basis. It reviews the ongoing appropriateness of the Company’s
remuneration policy and the individual remuneration of Directors by reference
to the activities of the Company and comparison with other companies of a
similar structure and size. This is in line with the AIC Code.
During the year ended 30 April 2023, the fees were set at the rate of £36,000
per annum for the Chairman, £26,000 per annum for other non-executive
Directors, and £31,000 per annum for the Chairman of the Audit Committee.
Ordinarily, in time for the new financial year, and in accordance with our
remuneration policy below which states that Directors’ remuneration is
determined with reference to comparable organisations and appointments, all
Directors’ fees would be reviewed with the aim to keep them in line with the
peer group and the market in general. All levels of remuneration should
reflect both the time commitment and responsibility of the role.
This year, however, with the appointment of two exceptional candidates as new
Directors in November 2022, the Board has almost reached the limit for
Directors’ fees of £150,000 per annum as set out in our Articles of
Association. Whilst in the course of the next few years it is expected that
the number of Directors is reduced again from five to four due to natural
evolution of the Board, we would in the interim need to raise the limit to
allow any review of Directors’ fees and also taking account of all extra
work performed during the search for a new investment manager and the
negotiations following on from there.
A resolution to change the limit for Directors’ fees in the Company’s
Articles of Association from £150,000 to £250,000 will be proposed at the
forthcoming AGM. This is in line with limits set out in the articles of peer
group companies and the Board hopes that shareholders agree that the
Company’s Directors should be paid in line with the market. A review of
Directors’ fees will not be held until after the Company’s AGM.
Directors’ Fees for the Year (audited)
The Directors who served during the year received the following emoluments:
Year to 30 April 2023 Year to 30 April 2022
2023 2022
Percentage Percentage
Fees Expenses* Total Fees Expenses* Total change change
£ £ £ £ £ £ (%) (%)
Richard Davidson
(Chairman) 36,000 – 36,000 29,800 603 30,403 18.4% -1.5%
Michael Phillips** n/a n/a n/a 18,926 1,772 20,698 n/a -10.3%
Katya Thomson
(Audit Committee
Chairman) 31,000 – 31,000 26,300 – 26,300 17.9% 1.4%
Hugh Van Cutsem 26,000 – 26,000 22,300 – 22,300 16.6% 1.4%
Lucy Costa Duarte*** 13,000 178 13,178 n/a n/a n/a n/a n/a
Ian Henderson*** 13,000 – 13,000 n/a n/a n/a n/a n/a
119,000 178 119,178 97,326 2,375 99,701 19.5% -2.2%
* Travel expenses for attendance at Board meetings, which under HMRC rules
are treated as taxable expenses. The amounts shown in the table are the
expenses plus the associated tax liability.
** Resigned as a Director on 4 March 2022.
*** Appointed to the Board on 1 November 2022.
The Directors’ fees set out in the table above exclude any employers’
national insurance contributions, if applicable. No other forms of
remuneration were received by the Directors and, therefore, the fees represent
the total remuneration of each Director.
No payments were made to former directors of the Company during the year other
than set out in the table above.
Other Benefits
The Company’s Articles of Association provide that Directors are entitled to
be reimbursed for reasonable expenses incurred by them in connection with the
performance of their duties and attendance at Board and General Meetings. The
claims for taxable expenses are set out in the table above.
No pension schemes or other similar arrangements have been established for the
Directors and no Director is entitled to any pension or similar benefits
pursuant to their Letters of Appointment.
Loss of Office
Directors do not have service contracts with the Company but are engaged under
Letters of Appointment. These specifically exclude any entitlement to
compensation upon leaving office for whatever reason.
Performance
The graph below compares the total return (assuming all dividends are sterling
reinvested) to Ordinary shareholders, compared with the Numis All Share inc
Investment Companies Total Returns Index and the Company’s benchmark of
SONIA plus 2%.
Relative Importance of Spend on Pay
The table below shows the comparative cost of Directors’ fees compared with
the level of dividend distribution and Company expenses for the years ended 30
April 2023 and 30 April 2022.
2023 2022 Change
£’000 £’000 %
Total Returns (8,694) 4,092 (412.5)%
Directors’ fees 119 100 19%
Dividend paid 100 – –
Total ongoing expenses 1,199 1,265 (5.2)%
Directors’ Beneficial Interests (audited)
The interests of the Directors and persons closely associated with them in the
Ordinary shares of the Company are set out below:
At 30 April 2023 At 30 April 2022
Number of shares Number of shares
Richard Davidson 70,000 70,000
Katya Thomson 14,000 14,000
Hugh van Cutsem 12,348 12,348
Lucy Costa Duarte* 6,115 –
Ian Henderson* 6,115 –
* Appointed on 1 November 2022.
There have been no changes to any of the above holdings between 30 April 2023
and the date of this report.
There is no requirement under the Company’s Articles of Association for
Directors to hold shares in the Company.
The interests of representatives of the Investment Manager in the Ordinary
shares of the Company are set out below:
At 30 April 2023 At 30 April 2022
Number of shares Number of shares
Nick Greenwood 170,500 170,500
Statement of Voting at Annual General Meeting
The Directors’ Remuneration Report for the year ended 30 April 2022 was
approved by shareholders at the Annual General Meeting held on 29 September
2022.
4,736,705 votes (99.35%) were in favour, with 31,074 votes (0.65%) against and
3,967 votes withheld. Any proxy votes which were at the discretion of the
Chairman were included in the “for” total.
Approval
The Directors’ Remuneration Report was approved by the Board of Directors on
3 August 2023 and signed on its behalf by:
Richard Davidson
Chairman
Directors’ Remuneration Policy
The Board’s policy is that the remuneration of the Directors should reflect
the experience of the Board as a whole, and be determined with reference to
comparable organisations and appointments. The level of remuneration has been
set in order to attract individuals of a calibre appropriate to the future
development of the Company. The remuneration of the Directors will take into
account the duties and responsibilities of the Directors and the expected time
commitment to the Company’s affairs.
The fees of the Directors are determined within the limits set out in the
Company’s Articles of Association, which currently stipulate that the
aggregate amount of Directors’ fees shall not exceed £150,000 in any
financial year or any greater sum that may be determined from time to time by
ordinary resolution of the Company. As explained in the Directors’
Remuneration Report, it is proposed to raise the aggregate amount of
Directors’ fees as set out in the Articles of Association from £150,000 to
£250,000 in any financial year. The Directors are not eligible for bonuses,
pension benefits, share options, long-term incentive schemes or other
benefits. There are no performance conditions attaching to the remuneration of
the Directors as the Board does not believe this to be appropriate for
non-executive Directors.
As set out in the Company’s Articles of Association, Directors are entitled
to be paid all reasonable travel, hotel or other expenses properly incurred in
or about the performance of their duties as Directors, including expenses
incurred in attending Board or shareholder meetings. In certain circumstances,
under HMRC rules, travel and other out of pocket expenses reimbursed to the
Directors may be considered as taxable benefits. Where expenses are classed as
taxable under HMRC guidance, they are shown in the expenses column of the
Directors’ remuneration table above along with the associated tax liability.
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. No communications have been received from shareholders regarding
Directors’ remuneration. The Board will consider any comments received from
shareholders on the Directors’ Remuneration Policy.
None of the Directors has a contract of service with the Company, but letters
of appointment setting out the terms of their appointment as non-executive
Directors are in place and are available on request from the Company Secretary
and will be available at the Company’s Annual General Meeting. All Directors
stand for re-election annually. Compensation will not be paid upon loss of
office.
This policy was last approved by shareholders at the Annual General Meeting
held in 2020. 5,787,050 votes (98.96%) were in favour, with 60,853 votes
(1.04%) against and no votes withheld.
In accordance with regulations, an ordinary resolution to approve the
Directors’ Remuneration Policy will be put to shareholders at least once
every three years, if there have been no proposed changes to the policy in the
meantime. Therefore, the Directors’ Remuneration Policy will be put to
shareholders at the forthcoming AGM on 20 September 2023.
Current fees
for year to Fees for year to
30 April 2024* 30 April 2023
£ £
Chairman 36,000 36,000
Audit Committee Chairman 31,000 31,000
Non-executive Director 26,000 26,000
Total aggregate annual fees that may be paid 150,000** 150,000
* Subject to review following the Annual General Meeting.
** Proposed to be increased to £ 250,000.
Statement of Directors’ Responsibilities in respect of the Financial
Statements
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102 “The
Financial Reporting Standard applicable in the UK and Republic of Ireland”,
and applicable law).
Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period. In preparing the financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· state whether applicable United Kingdom Accounting Standards, comprising
FRS 102 have been followed, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and accounting estimates that are reasonable and prudent;
and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for 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 also 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 and the
Directors’ Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ Confirmations
The Directors consider that 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 position and performance, business
model and strategy.
Each of the Directors, whose names and functions are listed in the ‘Board of
Directors’ above confirm that, to the best of their knowledge:
· the Company’s financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS 102, give
a true and fair view of the assets, liabilities, financial position and profit
of the Company; and
· the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Report of the Directors
is approved:
· so far as the Director is aware, there is no relevant audit information of
which the Company’s auditors are unaware; and
· they have taken all the steps that they ought to have taken as a Director
in order to make themselves aware of any relevant audit information and to
establish that the Company’s auditors are aware of that information.
Approved by the Board of Directors and signed on its behalf by
Richard Davidson
Chairman
3 August 2023
Independent Auditors’ Report
to the members of MIGO Opportunities Trust plc
Report on the audit of the financial statements
Opinion
In our opinion, MIGO Opportunities Trust plc’s 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 and cash flows for the year then ended;
· have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, including
FRS 102 “The Financial Reporting Standard applicable in the UK and Republic
of Ireland”, and applicable law); and
· have been prepared in accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements, included within the Annual Report,
which comprise: the Statement of Financial Position as at 30 April 2023; the
Income Statement, the Statement of Changes in Equity, the Statement of Cash
Flow for the year then ended; and the notes to the financial statements, which
include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs
(UK) are further described in the Auditors’ 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.
Independence
We remained independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed
public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services
prohibited by the FRC’s Ethical Standard were not provided.
We have provided no non-audit services to the company in the period under
audit.
Our audit approach
Overview
Audit scope * The company is a standalone Investment Trust company and engages Premier Fund Managers Limited (the “Investment Manager”) via Premier Portfolio Managers Limited (the “AIFM”) to manage its assets.
* We conducted our audit of the financial statements using information from the Investment Manager and Frostrow Capital LLP, whom the company has engaged to provide certain administrative functions. We also used information from Link Alternative Fund Administrators Limited, whom Frostrow Capital LLP has engaged to provide certain administrative functions.
* We tailored the scope of our audit taking into account the types of investments within the company, the involvement of the third parties referred to above, the accounting processes and controls and the industry in which the company operates.
Key Audit Matters * Valuation and existence of investments
* Income from investments
Materiality * Overall materiality: £797,494 (2022: £946,838) based on 1% of Net Asset Value.
* Performance materiality: £598,121 (2022: £710,129).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the 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) identified by the
auditors, 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, and any comments we make on the results
of our procedures thereon, 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.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Valuation and existence of investments
Refer to the Accounting Policies and Note 8 to the Financial Statements. Total investment value of £83,480,000 as at 30 April 2023 includes £83,267,000 of equities classified as level 1 assets, £40,000 as level 2, with the remaining £173,000 (0.2% of total investments) classified as level 3 in the FRS 102 fair value hierarchy (see note 8). We focussed on the valuation and existence of investments as the balance is the most significant financial reporting item within the Financial Statements. In order to address the key audit matter, we: – obtained an understanding of the company’s accounting policy. – agreed year end investment holdings to independent confirmation obtained from the Custodian. – performed 100% repricing of the level 1
investments within the portfolio using prices obtained from independent sources. – discussed and understood the basis of valuation used by management to value the level 3 assets. – reviewed the financial statements to ensure completeness and accuracy of
valuation disclosures. No material misstatements were identified as part of our work.
Income from Investments
Refer to the Accounting Policies and Note 2 to the Financial Statements. We focused on the accuracy, occurrence and completeness both of net capital gains on investments and of dividend income recognition. We assessed the presentation of income in the Statement of Comprehensive Income in accordance with the requirements of The Association of Investment Companies’ Statement of Recommended Practice (the “AIC SORP”). ISAs (UK) presume there is a risk of fraud in income recognition. We considered this risk to relate to the risk of overstating investment gains and the misclassification of dividend income as either capital or revenue due to the pressure management may feel to achieve a certain level of capital or income growth in line with the objective of the Company and in order to maintain the level of dividends paid to shareholders in line with the dividend policy. Recognition and its presentation in the Statement of Comprehensive Income as set out in the requirements of The Association of Investment Companies Statement of Recommended Practice (the “AIC SORP”) as incorrect application could indicate a misstatement in income recognition. – We assessed the accounting policy for income recognition for compliance with accounting standards and the AIC SORP, and that income from investments has been accounted for in accordance with the stated accounting policy. – We tested the accuracy of
dividend receipts by agreeing the dividend rates from investments to independent market data. – We tested occurrence by testing that all dividends recorded in the year had been declared in the market by investment holdings, and we traced a sample of
dividends received to bank statements. – To test for completeness, we tested that the appropriate dividends had been received in the year by reference to independent data of dividends declared for all holdings during the year. – We also tested the
allocation and presentation of dividend income between the revenue and capital return columns of the Income Statement in line with the requirements set out in the AIC SORP by determining reasons behind dividend distributions. – The gains/losses on
investments held at fair value comprise realised and unrealised gains/losses. For unrealised gains and losses, we tested the valuation of the portfolio at the year-end, together with testing the reconciliation of opening and closing investments. For
realised gains/losses, we tested a sample of disposals by agreeing the proceeds to bank statements and we re-performed the calculation of a sample of realised gains/losses. – No material misstatements were identified by our testing.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to
be able to give an opinion on the financial statements as a whole, taking into
account the structure of the company, the accounting processes and controls,
and the industry in which it operates.
The company is a standalone Investment Trust company and engages Premier
Portfolio Managers Limited (the “AIFM”) to manage its assets. We conducted
our audit of the Financial Statements using information from Frostrow Capital
LLP (the “Administrator”) whom the Directors have appointed to provide all
administrative functions as well as Link Alternative Fund Administrators
Limited to whom Frostrow Capital LLP has delegated the provision of certain
administrative services.
We tailored the scope of our audit taking into account the types of
investments within the company, the involvement of the third parties referred
to above, the accounting processes and controls, and the industry in which the
company operates.
The impact of climate risk on our audit
In planning our audit, we made enquiries of the Directors and Investment
Manager to understand the extent of the potential impact of climate change on
the Company’s financial statements.
The Directors and Investment Manager concluded that the impact on the
measurement and disclosures within the financial statements is not material
because the Company's investment portfolio is made up of almost wholly of
level 1 quoted securities which are valued at fair value based on market
prices. We found this to be consistent with our understanding of the Company's
investment activities.
We also considered the consistency of the climate change disclosures included
in the Strategic Report with the financial statements and our knowledge from
our audit.
Materiality
The scope of our audit was influenced by our application of materiality. We
set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and
the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements
as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole as follows:
Overall company materiality £797,494 (2022: £946,838).
How we determined it 1% of Net Asset Value.
Rationale for benchmark applied We believe that net assets are the primary measure used by shareholders in assessing the performance of the company and is a generally accepted auditing benchmark for investment trust audits.
We use performance materiality to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in
determining the scope of our audit and the nature and extent of our testing of
account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (2022: 75%) of
overall materiality, amounting to £598,121 (2022: £710,129) for the company
financial statements.
In determining the performance materiality, we considered a number of factors
- the history of misstatements, risk assessment and aggregation risk and the
effectiveness of controls - and concluded that an amount at the upper end of
our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements
identified during our audit above £39,875 (2022: £47,432) as well as
misstatements below that amount that, in our view, warranted reporting for
qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to
continue to adopt the going concern basis of accounting included:
· evaluating the Director's risk assessment and considering whether it
addressed relevant threats;
· evaluating the Directors' assessment of potential operational impacts,
considering their consistency with other available information and our
understanding of the business and assessed the potential impact on the
financial statements;
· reviewing the Directors' assessment of the company's financial position in
the context of its ability to meet future expected operating expenses and debt
repayments, their assessment of liquidity as well as their review of the
operational resilience of the company and oversight of key third-party service
providers; and
· assessing the implication of market performance on the ongoing ability of
the company to operate.
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.
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.
However, because not all future events or conditions can be predicted, this
conclusion is not a guarantee as to the company's ability to continue as a
going concern.
In relation to the directors’ reporting on how they have 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.
Reporting on other information
The other information comprises all of the information in the Annual Report
other than the financial statements and our auditors’ report thereon. The
directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we
do not express an audit opinion or, except to the extent otherwise explicitly
stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, 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 audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there
is a material misstatement of the financial statements or a material
misstatement of the other information. 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
based on these responsibilities.
With respect to the Strategic report and Report of the Directors, we also
considered whether the disclosures required by the UK Companies Act 2006 have
been included.
Based on our work undertaken in the course of the audit, the Companies Act
2006 requires us also to report certain opinions and matters as described
below.
Strategic report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the
information given in the Strategic report and Report of the Directors for the
year ended 30 April 2023 is consistent with the financial statements and has
been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment
obtained in the course of the audit, we did not identify any material
misstatements in the Strategic report and Report of the Directors.
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.
Corporate governance statement
The Listing Rules require us to review the directors’ statements 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. Our
additional responsibilities with respect to the corporate governance statement
as other information are described in the Reporting on other information
section of this report.
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 and our knowledge obtained during the
audit, and we have nothing material to add or draw attention to in
relation to:
· The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
· The disclosures in the Annual Report that describe those principal risks,
what procedures are in place to identify emerging risks and an explanation of
how these are being managed or mitigated;
· The directors’ statement in the financial statements about whether they
considered it appropriate to adopt the going concern basis of accounting in
preparing them, and their identification of any material uncertainties to the
company’s ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements;
· The directors’ explanation as to their assessment of the company’s
prospects, the period this assessment covers and why the period is
appropriate; and
· The directors’ statement as to whether they have a reasonable
expectation that the company will be able to continue in operation and meet
its liabilities as they fall due over the period of its assessment, including
any related disclosures drawing attention to any necessary qualifications or
assumptions.
Our review of the directors’ statement regarding the longer-term viability
of the company was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process
supporting their statement; checking that the statement is in alignment with
the relevant provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the financial statements and our
knowledge and understanding of the company and its environment obtained in the
course of the audit.
In addition, 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 and our
knowledge obtained during the audit:
· The directors’ statement that they consider the Annual Report, taken as
a whole, is fair, balanced and understandable, and provides the information
necessary for the members to assess the company's position, performance,
business model and strategy;
· The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems; and
· The section of the Annual Report describing the work of the Audit
Committee.
We have nothing to report in respect of our responsibility to report when the
directors’ statement relating to the company’s compliance with the Code
does not properly disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors' responsibilities in
respect of the financial statements, the directors are responsible for the
preparation of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair view. The
directors are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
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.
Auditors’ 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 auditors’ 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.
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.
Based on our understanding of the company and industry, we identified that the
principal risks of non-compliance with laws and regulations related to non
disclosure of non-compliance with the code of corporate governance as well as
breaches of section 1158 of the Corporation Tax Act 2010, and we considered
the extent to which non-compliance might have a material effect on the
financial statements. We also considered those laws and regulations that have
a direct impact on the financial statements such as the Companies Act 2006. We
evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of
controls), and determined that the principal risks were related to posting
inappropriate journal entries to increase revenue (investment income and
capital gains) or to increase net asset value. Audit procedures performed by
the engagement team included:
· discussions with the investment manager and the Audit Committee, including
consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
· reviewing relevant meeting minutes, including those of the Audit
Committee;
· assessment of the company’s compliance with the requirements of section
1158 of the Corporation Tax Act 2010, including recalculation of numerical
aspects of the eligibility conditions;
· identifying and testing manual year end journal entries posted during the
preparation of the financial statements; and
· designing audit procedures to incorporate unpredictability around the
nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also, 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 or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain
transactions and balances, possibly using data auditing techniques. However,
it typically involves selecting a limited number of items for testing, rather
than testing complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion about the
population from which the sample is selected.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the
company’s members as a body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
· we have not obtained all the information and explanations we require for
our audit; or
· adequate accounting records have not been kept by the company, or returns
adequate for our audit have not been received from branches not visited by us;
or
· certain disclosures of directors’ remuneration specified by law are not
made; 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.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the
members on 30 September 2016 to audit the financial statements for the year
ended 30 April 2017 and subsequent financial periods. The period of total
uninterrupted engagement is seven years, covering the years ended 30 April
2017 to 30 April 2023.
Kevin Rollo (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
3 August 2023
Financial Statements
Income Statement
for the year ended 30 April 2023
Year ended 30 April 2023 Year ended 30 April 2022
Revenue Capital Total Revenue Capital Total
Note £’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains on investments 8 – (9,676) (9,676) – 3,731 3,731
Income 2 2,284 – 2,284 1,823 – 1,823
Investment management fee 3 (540) – (540) (638) – (638)
Other expenses 4 (659) – (659) (751) – (751)
Profit/(loss) before finance costs and taxation 1,085 (9,676) (8,591) 434 3,731 4,165
Finance costs 5 (103) – (103) (73) – (73)
Profit/(loss) before taxation 982 (9,676) (8,694) 361 3,731 4,092
Taxation 6 – – – – – –
Profit/(loss) after taxation 982 (9,676) (8,694) 361 3,731 4,092
Basic and diluted earnings/(loss) per share (pence) 7 3.9 (38.6) (34.7) 1.3 13.9 15.2
The total column of this statement is the Income Statement of the Company. The
supplementary revenue and capital columns have been prepared in accordance
with guidance issued by the AIC.
All revenue and capital items in the above statement derive from continuing
operations. There is no other comprehensive income and therefore no Statement
of Total Comprehensive Income has been presented.
The notes form part of these financial statements.
Statement of Changes in Equity
for the year ended 30 April 2023
Called up Capital Share Total
share redemption premium Special Capital Revenue shareholders’
capital reserve account reserve reserve reserve funds
Note £’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 30 April 2021 269 74 25,105 6,406 61,303 (12) 93,145
Movement for the year
Net proceeds from share issuance 12 7 – 2,624 – – – 2,631
Buyback of shares for cancellation 12 (15) 15 – (5,184) – – (5,184)
Profit for the year – – – – 3,731 361 4,092
Balance at 30 April 2022 261 89 27,729 1,222 65,034 349 94,684
Movement for the year
Net proceeds from share issuance 12 4 – 1,359 – – – 1,363
Buyback of shares for cancellation 12 (22) 22 – (1,222) (6,183) – (7,405)
(Loss)/profit for the year – – – – (9,676) 982 (8,694)
Dividends paid – – – – – (100) (100)
Balance at 30 April 2023 243 111 29,088 – 49,175 1,231 79,848
The notes form part of these financial statements.
Statement of Financial Position
as at 30 April 2023
30 April 2023 30 April 2022
Note £’000 £’000
Fixed assets
Investments 8 67,855 83,480
Current assets
Debtors 10 361 567
Cash 13,139 10,891
13,500 11,458
Creditors: amounts falling due within one year
Creditors 11 (1,507) (254)
(1,507) (254)
Net current assets 11,993 11,204
Net assets 79,848 94,684
Share capital and reserves:
Called up share capital 12 243 261
Share premium account 29,088 27,729
Capital redemption reserve 111 89
Special reserve – 1,222
Capital reserve 49,175 65,034
Revenue reserve 1,231 349
Total shareholders’ funds 79,848 94,684
Net asset value per Ordinary share (pence) 13 328.6 362.6
Number of shares in issue 24,297,797 26,110,256
These financial statements were approved by the Board of Directors and
authorised for issue on 3 August 2023, and signed on its behalf by:
Richard Davidson
Chairman
Company No. 05020752
The notes form part of these financial statements.
Statement of Cash Flow
for the year ended 30 April 2023
Year ended Year ended
30 April 2023 30 April 2022
Note £’000 £’000
Net cash inflow from operating activities 14 982 387
Investing activities
Purchases of investments (15,504) (13,312)
Sales of investments 22,986 24,449
Net cash inflow from investing activities 7,482 11,137
Financing activities
Issuance of new shares 1,363 2,631
Buyback of shares for cancellation (7,404) (5,184)
Revolving credit facility repayment – (2,000)
Dividend paid (100) –
Finance costs paid (72) (114)
Net cash outflow from financing activities (6,213) (4,667)
Increase in cash 2,251 6,857
Reconciliation of net cash flow movement in funds:
Cash at beginning of year 10,891 4,035
Exchange rate movements (3) (1)
Increase in cash 2,251 6,857
Increase in net cash 2,248 6,856
Cash at end of year 13,139 10,891
The notes form part of these financial statements.
Notes to the Financial Statements
for the year ended 30 April 2023
1 Accounting policies
The Company is a public limited company (PLC) limited by shares, incorporated
in England and Wales, with its registered office at 6th Floor, Paternoster
House, 65 St Paul’s Churchyard, London, EC4M 8AB.
The principal accounting policies, all of which have been applied consistently
throughout the year and in the preparation of the financial statements, are
set out below:
Accounting convention
The financial statements are prepared on a going concern basis, under the
historical cost convention, modified by the valuation of investments at fair
value, in accordance with the Companies Act 2006, FRS102 ‘The Financial
Reporting Standard applicable in the UK and Ireland’ and the Statement of
Recommended Practice regarding the Financial Statements of Investment Trust
Companies and Venture Capital Trusts (“SORP”) updated in July 2022.
The Company’s financial statements are presented in sterling, being the
functional and presentational currency of the Company. All values are rounded
to the nearest thousand pounds (£’000) except where otherwise indicated.
Presentation of the Income Statement
In order to reflect better the activities of an investment trust company and
in accordance with the SORP, supplementary information which analyses the
Income Statement between items of a revenue and capital nature has been
presented alongside the Income Statement. The net revenue return is the
measure the Directors believe appropriate in assessing the Company’s
compliance with certain requirements set out in Sections 1158 and 1159 of the
Corporation Tax Act 2010.
Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements and key sources of estimation uncertainty used
in preparing the financial information are regularly evaluated and are based
on historical experience and other factors, including expectations of future
events that are believed to be reasonable. The resulting estimates will, by
definition, seldom equal the related actual results. There are no critical
accounting judgements made in preparing the financial statements.
The key sources of estimation and uncertainty that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities relate to the valuation of the Company’s unquoted investments;
0.3% (2022: 0.3%) of the Company’s portfolio is comprised of unquoted
investments. These are valued in line with the accounting policy for
investments starting below. Given the scale of the Company’s unquoted
portfolio, there are no material sources of estimation uncertainty.
Going concern
The Directors have made an assessment of the Company’s ability to continue
as a going concern and, having taken into account the liquidity of the
Company’s portfolio and the Company’s financial position in respect of its
cash flows and borrowing facilities, are satisfied that the Company has the
resources to continue in business for 12 months from the date of approval of
this report. The Company, therefore, continues to adopt the going concern
basis in preparing its financial statements. Further information on the
Company’s borrowing facility is given in note 11.
Income recognition
Dividends receivable are recognised when the investments concerned are quoted
‘ex-dividend’. Where no ex-dividend date is quoted, dividends are
recognised when the Company’s right to receive payment is established.
Special dividends of a revenue nature are recognised through the revenue
column of the Income Statement. Special dividends of a capital nature are
recognised through the capital column of the Income Statement.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue column of the Income Statement except for transaction
costs which are incidental to the acquisition or disposal of an investment,
which are included within gains/(losses) on investments and disclosed in note
8.
Foreign currency transactions
Transactions denominated in foreign currencies are translated into sterling at
the rates of exchange ruling at the date of the transaction.
Investments are converted to sterling at the rates of exchange ruling at the
Statement of Financial Position date. Any gains or losses on the
re-translation of assets or liabilities are taken to the revenue or capital
column of the Income Statement, depending on whether the gain or loss is of a
capital or revenue nature.
Investments
In accordance with FRS 102 Section 11: Basic Financial Investments and Section
12: Other Financial Investment Issues, investments are measured initially, and
at subsequent reporting dates, at fair value, and are recognised and
de-recognised at trade date where a purchase or sale is under a contract whose
terms require delivery within the time frame established by the market
concerned.
For quoted securities fair value is either bid price or the closing price
where the security is primarily traded via a trading service that provides an
end of day closing auction with guaranteed liquidity to investors.
The valuation of unquoted securities is carried out in accordance with the
International Private Equity and Venture Capital Association valuation
guidelines. Unquoted securities are valued using either:
· the last published net asset value of the security after adjustment for
factors that the AIFM and Board believe would affect the amount of cash that
the Company would receive if the security were realised as at the Statement of
Financial Position date; or
· the estimated, discounted cash distribution based on information provided
by the management or liquidators of the security. The discount applied will
take account of various factors, including expected timings of the cash flow
and the level of certainty on the estimate.
Changes in fair value and gains or losses on disposal are included in the
Income Statement as a capital item.
Cash
Cash comprises solely cash at bank.
Bank loans and finance costs
Bank loans are initially recognised at cost, being the fair value of the
consideration received less issue costs where applicable. After initial
recognition, bank loans are recognised at amortised cost using the effective
interest rate method, with the interest expense recognised on an effective
yield basis.
Taxation
The charge for taxation is based on net revenue for the year.
The tax effect of different items of income/gain and expenditure/loss is
allocated between capital and revenue as set out in note 6 to the financial
statements. The standard rate of corporation tax is applied to taxable net
revenue. Any adjustment resulting from relief for overseas tax is allocated to
the revenue reserve.
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the Statement of Financial Position date where
transactions or events that result in an obligation to pay more, or right to
pay less, tax in future have occurred at the Statement of Financial Position
date. This is subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits from which
the future reversal of the underlying timing differences can be deducted.
Timing differences are differences arising between the Company’s taxable
profits and its results as stated in the accounts which are capable of
reversal in one or more subsequent periods. Deferred tax is measured without
discounting and based on enacted tax rates. Due to the Company’s status as
an investment trust, and the intention to meet the conditions required to
obtain approval under Sections 1158 and 1159 of the Corporation Tax Act 2010,
the Company has not provided for deferred tax on any capital gains and losses
arising on the revaluation or disposal of investments.
Capital reserve
Gains or losses on disposal of investments and changes in fair values of
investments (investment holding gains) are charged to the capital column of
the Income Statement and taken to the Capital reserve.
Certain expenses net of any related taxation effects are charged to this
reserve in accordance with the expenses policy above. The amounts within the
Capital Reserve less unrealised gains are available for distribution.
Revenue reserve
The revenue reserve is distributable by way of dividends, when positive. While
the reserve is negative no dividends can be distributed by way of dividend
from this reserve.
Special reserve
The special reserve arose following court approval in 2004 to cancel the share
premium account. This reserve is distributable and is used to fund any share
buybacks by the Company.
Capital redemption reserve
This reserve arises when shares are bought back by the Company and
subsequently cancelled at which point an amount equal to the par value of the
shares is transferred from share capital to this reserve. This reserve is not
distributable.
Financial assets and liabilities
The only financial assets measured at fair value through profit or loss are
the investments held by the Company, refer to note 8. All other financial
assets (being Debtors and Cash) are measured at amortised cost. All financial
liabilities (being Borrowings and Creditors) are measured at amortised cost.
2 Income
Year ended Year ended
30 April 2023 30 April 2022
£’000 £’000
Income from investments:
UK dividends 898 667
Overseas dividends 991 905
Property income dividends 227 251
2,116 1,823
Other income
Interest income 168 –
Total income 2,284 1,823
3 Investment management fee
Year ended Year ended
30 April 2023 30 April 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 540 – 540 638 – 638
Further details on the investment management fee arrangements can be found in
the Strategic Report.
4 Other expenses
Year ended Year ended
30 April 2023 30 April 2022
£’000 £’000
Frostrow Capital administration fees 204 245
Auditors’ remuneration for:
Audit services (exclusive of VAT) 54 44
Directors’ remuneration* 119 100
Employers NIC on directors’ remuneration 6 5
Legal and professional fees** 51 154
Broker fees 42 42
Other expenses 183 161
659 751
* See Directors’ Remuneration Report for analysis.
** The amount in 2022 includes £133,000 of costs incurred on the Company's
realisation opportunity in September 2021. This is considered non-recurring in
nature.
5 Finance costs
Year ended Year ended
30 April 2023 30 April 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Finance costs payable 103 – 103 73 – 73
Relates to interest charged, commitment fees and arrangement fees on the
revolving loan facility, details of which are disclosed in note 11.
6 Taxation
Year ended Year ended
30 April 2023 30 April 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Corporation tax at 19.0% (2022: 19.0%) – – – – – –
Overseas taxation – – – – – –
The tax charge for the year is lower than (2022: lower than) the standard rate
of Corporation Tax in the UK. The differences are explained below:
Year ended Year ended
30 April 2023 30 April 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Profit/(loss) before taxation 982 (9,676) (8,694) 361 3,731 4,092
Theoretical tax at UK corporation tax rate of 19.5% (2022: 19.0%) 191 (1,887) (1,696) 69 709 778
Effects of:
– Non taxable dividends (368) – (368) (299) – (299)
– Losses/(gains) on investment and exchange losses on capital items – 1,887 1,887 – (709) (709)
– Unrelieved expenses 177 – 177 230 – 230
Total tax charge/(credit) for the year – – – – – –
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 has unrelieved losses of £12,461,253
(2022: £11,553,927) that are available to offset future taxable revenue. A
deferred tax asset of £3,115,313 (2022: £2,888,482) has not been recognised
because the Company is not expected to generate sufficient taxable income in
the near future periods in excess of the available deductible expenses and
accordingly, the Company is unlikely to be able to reduce future tax
liabilities through the use of existing surplus losses.
Deferred tax is not provided on capital gains and losses arising on the
revaluation or disposal of investments because the Company meets (and intends
to continue for the foreseeable future to meet) the conditions for approval as
an investment trust company.
7 Earnings/(loss) per share
The Capital, Revenue and Total Return per share are based on the net
profit/(loss) shown in the Income Statement and the weighted average number of
shares in issue 25,089,586 (2022: 26,829,324).
There are no dilutive instruments issued by the Company.
8 Investments
Year ended Year ended
30 April 2023 30 April 2022
£’000 £’000
Investment portfolio summary
Opening book cost 67,802 69,549
Opening investment holding gains 15,678 20,936
83,480 90,485
Analysis of investment portfolio movements
Opening valuation 83,480 90,485
Movements in the year:
Purchases at cost 16,766 13,253
Sales – proceeds (22,715) (23,989)
Net movement in investment holding gains (9,676) 3,731
Valuation at 30 April 67,855 83,480
Cost at 30 April 67,356 67,802
Investment holding gains at 30 April 499 15,678
67,855 83,480
A list of the portfolio holdings by their fair value is given in the Portfolio
Valuation.
Transaction costs incidental to the acquisitions of investments totalled
£61,000 (2022: £50,000) and disposals of investments totalled £8,000 (2022:
£14,000) for the year. These are included in gains on investments in the
Income Statement.
Fair value hierarchy
FRS 102 requires financial companies to disclose the fair value hierarchy that
classifies financial instruments measured at fair value at one of three levels
based on the degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value measurement in
its entirety, which are described as follows:
Classification Input
Level 1 Valued using quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 Valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1; and
Level 3 Valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Company are explained in the accounting
policies in Note 1. The table below sets out the Company’s fair value
hierarchy measurements as at 30 April 2023 and 30 April 2022.
30 April 2023 30 April 2022
£’000 £’000
Level 1
Quoted equities 67,672 83,267
Total Level 1 67,672 83,267
Level 2
Equities – 1
Preference shares – 39
Total Level 2 – 40
Level 3
Equities 144 173
Preference shares 39 –
Total Level 3 183 173
Total 67,855 83,480
Level 1 financial assets are valued at the closing prices quoted by Thomson
Reuters as at 30 April 2023 and the Company does not adjust the quoted prices
of Level 1 instruments.
Trading in Origo Partners plc was suspended on 26 April 2022 and the shares
were subsequently cancelled from trading on AIM on 30 May 2022, therefore, the
Company’s ordinary and preference share holdings were transferred from Level
1 to Level 3 for the purpose of the financial statements for the year ended 30
April 2023. On 31 May 2023, Origo Partners plc announced that it would be
placed into voluntary wind-up and no further distributions would be made to
shareholders. Following the announcement, the Company reduced the valuation of
its investment in Origo Partners plc to £nil.
Other Level 3 financial assets include Better Capital PCC Limited, RENN
Universal and Cambium Global (2022: RENN Universal and Better Capital PCC
Limited) both of which are valued on discounted NAV basis. The ordinary shares
in Cambium Global Timberland Limited (“Cambium”) were cancelled from
trading on the AIM on 4 August 2022 and the Company’s holdings in Cambium
were transferred from level 1 to level 3 assets following the cancellation. In
addition to the above level 3 investments shown in the portfolio, the Company
holds one investment (2022: three) that is valued at nil.
Analysis of movements in Level 3 investments
Year ended Year ended
30 April 2023 30 April 2022
Level 3 Level 3
£’000 £’000
Opening fair value of investments 173 173
Sale proceeds – (27)
Transfer from Level 1 33 –
Transfer from Level 2 40 –
Movement in investment holding gains (63) 27
Closing fair value of investments 183 173
A 5% increase on the NAV of Level 3 investments would increase gains on
investments in the Income Statement by £9,000 (2022: £9,000) and vice versa.
9 Significant interests
The Company had holdings of 3% or more of the voting rights attached to shares
that are material in the context of the financial statements in the following
investments:
30 April 2023
% of voting rights
Security
Chelverton Growth Trust PLC 11.0%
Baker Steel Resources Trust Limited 6.6%
Geiger Counter Limited (Ordinary Shares) 5.1%
Downing Strategic Micro-Cap Investment Trust plc 4.7%
Dunedin Enterprise Investment Trust PLC 4.7%
Cambium Global Timberland Limited 4.5%
EPE Special Opportunities Limited 4.2%
Real Estate Investors PLC 4.1%
Macau Property Opportunities Fund Limited 4.0%
River and Mercantile UK Micro Cap Investment Company Limited 3.1%
30 April 2022
% of voting rights
Security
Chelverton Growth Trust PLC 11.0%
Dunedin Enterprise Investment Trust PLC 7.6%
Baker Steel Resources Trust Limited 6.7%
Origo Partners (Suspended) 5.7%
Geiger Counter Limited (Ordinary Shares) 5.0%
Downing Strategic Micro Cap Investment Trust plc 4.7%
Cambium Global Timberland Limited 4.5%
Alpha Real Trust Limited 4.2%
EPE Special Opportunities Limited 4.1%
Real Estate Investors PLC 3.6%
Macau Property Opportunities Fund Limited 3.6%
New Star Investment Trust PLC 3.3%
10 Debtors
30 April 2023 30 April 2022
£’000 £’000
Amounts due from brokers – 268
Dividends and interest receivable 306 108
Prepayments and other debtors 55 191
361 567
11 Creditors: amounts falling due within one year
30 April 2023 30 April 2022
£’000 £’000
Amounts due to brokers 1,262 –
Other creditors 245 254
1,507 254
The Company has a £10,000,000 (2022: £10,000,000) revolving credit facility,
which was undrawn as at 30 April 2023 (2022: £nil).
A bank loan with the Royal Bank of Scotland International Limited, London
Branch (the “Bank”) was in place during the year, this being a
£10,000,000 revolving credit facility, bearing interest at the rate of 1.45%
over SONIA on any drawn balance and 0.72% on any undrawn balance. The loan
facility was agreed on 28 January 2022 and expires in January 2024.
The bank loan facility contains covenants which require that net borrowings
will not at any time exceed 25% of the adjusted net asset value, which shall
at all times be equal to or greater than £25,000,000. If the Company breaches
either covenant, then it is required to notify the Bank of any default and any
steps being taken to remedy it.
12 Called up share capital
30 April 2023 30 April 2022
£’000 £’000
Allotted, called-up and fully paid: 243 261
24,297,797 (2022: 26,110,256) Ordinary shares of 1p each
2,222,459 shares were bought back in the year for cancellation and no shares
were held in Treasury during the year or at the year end (2022: 1,504,729
bought back). During the year the Company issued 410,000 new (2022: 685,000)
shares.
Since the year end, 550,000 further shares were bought back for cancellation.
13 Net asset value per Ordinary share
The net asset value per Ordinary share is based on net assets at the year-end
as shown in the Statement of Financial Position of £79,848,000 (2022:
£94,684,000) and 24,297,797 (2022: 26,110,256) Ordinary shares, being the
number of Ordinary shares in issue at the year end.
14 Reconciliation of net return before finance costs and taxation to net cash
inflow from operating activities
Year ended Year ended
30 April 2023 30 April 2022
£’000 £’000
(Loss)/profit before finance costs and taxation (8,591) 4,165
Adjustments for:
Losses/(gains) on investments 9,676 (3,731)
(Decrease)/ increase in creditors (10) 73
Increase in debtors (93) (120)
Net cash inflow from operating activities 982 387
15 Analysis of financial assets and liabilities
The Company’s financial instruments comprise investments, cash balances and
debtors and creditors that arise from its operations.
The risk management policies and procedures outlined in this note have not
changed substantially from the previous year.
The principal risks the Company faces in its portfolio management activities
are:
· Market risk – arising from fluctuations in the fair value or future cash
flows of a financial instrument used by the Company because of changes in
market prices. Market risk comprises three types of risk: currency risk,
interest rate risk, and other price risk:
· Currency risk – arising from the value of future transactions, and
financial assets and liabilities denominated in foreign currencies fluctuating
due to changes in currency rates;
· Interest rate risk – arising from fluctuations in the fair value or
future cash flows of a financial instrument because of changes in interest
rates; and
· Other price risk – arising from fluctuations in the fair value of
investments due to changes in market prices.
· Liquidity risk – arising from any difficulties in meeting obligations
associated with financial liabilities.
· Credit risk – arising from financial loss for the Company where the
other party to a financial instrument fails to discharge an obligation.
The AIFM monitors the financial risks affecting the Company on a daily basis.
The Directors receive financial information on a quarterly basis which is used
to identify and monitor risk.
The AIFM’s policies for managing these risks are summarised below and have
been applied throughout the year:
Other Price Risk
Other price risk arises mainly from uncertainty about future prices of
financial instruments. The value of shares and the income from them may fall
as well as rise and shareholders may not get back the full amount invested.
The AIFM continues to monitor the prices of financial instruments held by the
Company on a real time basis. Adherence to the Company’s investment
objective and policy shown in the Business Review mitigates the risk of
excessive exposure to one issuer or sector.
The Board manages market risk inherent in the investment portfolio by ensuring
full and timely access to relevant information from the Investment Manager.
The Board meets regularly and at each meeting reviews the investment
performance, the investment portfolio and the rationale for the current
investment positioning to ensure consistency with the Company’s investment
objective and policy. The portfolio does not seek to reproduce any index,
investments are selected based upon the merit of individual companies and
therefore the portfolio’s performance may well diverge significantly from
the benchmark.
A list of investments held by the Company at 30 April 2023 is shown in the
Portfolio Valuation. All these investments are subject to price risk.
It is the Board’s policy to hold an appropriate spread of investments in the
portfolio in order to reduce the risk arising from factors specific to a
particular country or sector. The allocation of assets to international
markets and the stock selection process both act to reduce market risk. The
Investment Manager actively monitors market prices throughout the year and
reports to the Board, which meets regularly in order to review the investment
strategy. The investments held by the Company are listed on various stock
exchanges worldwide, but predominantly in the UK.
If the investment portfolio valuation fell by 10% from the amount detailed in
the financial statements as at 30 April 2023, it would have the effect, with
all other variables held constant, of reducing the net capital return before
taxation by £6,786,000 (2022: £8,348,000). An increase of 10% in the
investment portfolio valuation would have an equal and opposite effect on the
net capital return before taxation and equity reserves.
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 are in
investments with currency exposure. The Company was not exposed to material
direct foreign currency risk during the year. At the year end, the Company
held three (2022: three) US dollar denominated investments with the sterling
equivalent of £1,332,000 (2022: £2,077,000). The Company also held two
(2022: one) investment with the sterling equivalent of £2,261,000 denominated
in euro (2022: £82,000).
If sterling strengthens against the US dollar and euro 10%, it would have the
effect, with all other variables held constant, of reducing the net capital
return before taxation by £327,000 (2022: £196,000). If sterling weakens
against the US dollar and euro by 10%, it would have the effect of increasing
the net capital return before taxation by £399,000 (2022: £234,000).
An analysis of the indirect geographical exposure is shown above.
The Investment Manager reviews the risks of adverse currency movements and
where necessary may use derivatives to mitigate the risk of adverse currency
movements, although none has been used to date.
Interest Rate Risk
The Company finances its operations through existing reserves and a revolving
credit facility. The Company’s financial assets and liabilities, excluding
short-term debtors and creditors, may include investments in fixed interest
securities, whose fair value may be affected by movements in interest rates.
Details of such holdings can be found in the Portfolio Valuation.
At the end of the year, the Company had in place a revolving credit facility
of £10,000,000 with the Royal Bank of Scotland International (London Branch)
plc. The facility was renewed in January 2022 at an interest rate of 1.45%
over SONIA on any drawn balance and 0.72% on any undrawn balance. As at
30 April 2023, the facility is undrawn (2022: undrawn). The amount of
borrowings and approved levels are monitored and reviewed regularly by the
Board.
The Company’s cash earns interest at a variable rate which is subject to
fluctuations in interest rates. At the year end, the Company’s cash balances
were £13,139,000 (2022: £10,891,000). £70,000 in interest income was
received in the year (2022: £nil).
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in
meeting its financial liabilities as they fall due. The Investment Manager
does not invest in unquoted securities on behalf of the Company. However, the
investments held by the Company includes UK AIM quoted and NEX quoted
companies which can have limited liquidity. Short-term flexibility is achieved
through the use of bank borrowings. Liquidity risk is mitigated by the fact
that the Company has £13,139,000 (2022: £10,891,000) cash at bank which can
satisfy its creditors and that, as a closed-end fund, assets do not need to be
liquidated to meet redemptions, and sufficient liquid investments are held to
be able to meet any foreseeable liabilities.
Credit Risk
Credit risk is the risk of financial loss to the Company if a counterparty
fails to meet its obligations.
The risk is minimised by using only approved and reputable counterparties with
the main counterparty being the Company’s Depositary. Under the UK AIFMD,
the Depositary is liable for the loss of any financial asset held by it or its
delegates and, in accordance with its agreement with the Company, is required
to segregate such assets from its own assets.
As at 30 April 2023, the credit risk exposure on the Company’s financial
assets is £13,500,000 (2022: £11,458,000).
Capital Management
The Company does not have any externally imposed capital requirements, other
than those relating to the revolving credit facility. The main covenants
relating to the loan facility are:
· net borrowings will not at any time exceed 25% of the adjusted net asset
value; and
· adjusted net asset value shall at all times be equal to or greater than
£25,000,000.
The Board considers the capital of the Company to be its issued share capital,
reserves and debt. The capital of the Company is managed in accordance with
its investment policy in pursuit of its investment objective detailed in the
Business Review.
30 April 2023 30 April 2022
£’000 £’000
The Company’s capital at 30 April comprised:
Equity
Equity share capital 243 261
Retained earnings and other reserves 79,605 94,423
79,848 94,684
Debt as a percentage of net assets – –
Gearing
Gearing amplifies the impact of gains or losses on the net asset value of the
Company. It can be positive for a company’s performance, although it can
have negative effects on performance in falling markets. It is the Company’s
policy to determine the adequate level of gearing appropriate to its own risk
profile.
16 Related parties
The following are considered to be related parties:
· Key management personnel
Details of the remuneration of all Directors can be found in note 4 to the
Financial Statements and in the Directors’ Remuneration Report.
· Other related parties
Hugh van Cutsem is a founding partner of Kepler Partners LLP, a firm that
issues research on MIGO Opportunities Trust plc for a fee of £15,000 per
annum. No amounts were due to Kepler Partners LLP at the year-end (2022: nil).
17 Transactions with management
Premier Portfolio Managers Limited (the “AIFM”) and Premier Fund Managers
Limited (the “Investment Manager”) are considered related parties under
the Listing Rules.
Details of the IMA with the AIFM and the Delegation Agreement with the
Investment Manager are set out in the Business Review and also in note 3 to
the Financial Statements.
Further Information and Notice of AGM
Shareholder Information
Share Dealing
Shares can be traded through your usual stockbroker or other authorised
intermediary. The Company’s Ordinary shares are traded on the main market of
the London Stock Exchange. The Company’s shares are fully qualifying
investments for Individual Savings Accounts (“ISAs”).
Share Register Enquiries
The register for the Company’s ordinary shares is maintained by
Computershare Investor Services PLC. If you would like to notify a change of
name or address, please contact the registrar in writing to Computershare
Investor Services PLC, the Pavilions, Bridgwater Road, Bristol BS99 6ZZ.
With queries in respect of your shareholdings, please contact Computershare on
0370 889 3231 (lines are open from 8.30 am to 5.30 pm, UK time, Monday to
Friday). Alternatively, you can email WebCorres@computershare.co.uk or contact
the Registrar via www.investorcentre.co.uk.
Share Capital and Net Asset Value Information
Ordinary 1p shares 24,297,797 at 30 April 2023
SEDOL number 3436594
ISIN number GB0034365949
Bloomberg symbol MIGO
The Company releases its net asset value per Ordinary share to the London
Stock Exchange daily.
Financial Calendar
Company’s year end 30 April Final dividend paid 5 October
Annual results announced August Company’s half-year end 31 October
Annual General Meeting 20 September 2023 Half-Yearly results announced December
Annual and Half-Yearly Reports
Copies of the Annual Reports are available from the Company Secretary on 0203
008 4910 and on the Company’s website, www.migoplc.co.uk. Copies of the
Half-Yearly Reports are only available on the Company’s website.
AIFM: Premier Portfolio Managers Limited
The Company’s AIFM is currently Premier Portfolio Managers Limited, a wholly
owned subsidiary of Premier Miton Group plc. Premier Miton Group plc is listed
on the AIM market for smaller and growing companies.
Asset Value Investors Limited is expected to take over as AIFM of the Company
in Q4 2023, with the exact date still to be announced.
Investor updates in the form of monthly factsheets are available from the
Company’s website, www.migoplc.co.uk
Association of Investment Companies
The Company is a member of the Association of Investment Companies.
Legal Entity Identifier
21380075RRMI7D4NQS20
UK AIFMD Disclosures (unaudited)
Alternative Investment Fund Managers’ Directive (“UK AIFMD”) Disclosures
The Company is classified as an Alternative Investment Fund under UK AIFMD and
is therefore required to have an Alternative Investment Fund Manager
(“AIFM”). The UK AIFMD legislation requires the AIFM to establish and
maintain remuneration policies for its staff which are consistent with and
promote sound and effective risk management.
During the financial year ended 30 April 2023 and since, the Company’s
Alternative Investment Fund Manager (“AIFM”) was Premier Portfolio
Managers Limited.
Asset Value Investors Limited has been appointed to take over as AIFM of the
Company in Q4 2023, with the exact date still to be announced.
Pre-investment Disclosures of the current AIFM
The AIFM is required to make certain disclosures available to investors in
accordance with the UK AIFMD. Those disclosures that are required to be made
pre-investment are included within a Pre-Investor Information Document and can
be found on the Company’s website at www.migoplc.co.uk/documents/.
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 to each.
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 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.
Remuneration Policy of the current AIFM
Premier Portfolio Managers Limited (the “Firm”) is authorised and
regulated by the UK Financial Conduct Authority (“FCA”) as an Alternative
Investment Fund Manager (“AIFM”) and as such must comply with the rules
contained in the FCA’s AIFM Remuneration Code within SYSC 19B in a manner
that is appropriate to its size, internal organisation and the nature, scope
and complexities of its activities.
Staff included in the aggregated figures disclosed above are rewarded in line
with the Firm’s remuneration policy (the “Remuneration Policy”) which is
determined and implemented by the Remuneration Committee (comprising
non-executives of Premier Miton Group plc) and is subject to independent
review. The Remuneration Policy reflects the Firm’s ethos of good governance
and encapsulates the following principal objectives:
· to provide a clear link between remuneration and performance of the Firm
and to avoid rewarding for failure;
· to promote sound and effective risk management consistent with the risk
profiles of the Alternative Investment Funds (“Funds”) managed by the
Firm; and
· to remunerate staff in line with the business strategy, objectives, values
and interests of the Firm and the Funds managed by the Firm in a manner that
avoids conflicts of interest.
The Firm assesses performance for the purposes of determining payments in
respect of performance-related remuneration by reference to a broad range of
measures including (i) individual performance (using financial and
non-financial criteria), (ii) performance of the business unit or relevant
Fund for which the individual provides services and (iii) the overall
performance of the Firm. Assessment of performance is set within a multi-year
framework, reflecting the cycles of the relevant Fund, to ensure the process
is based on longer-term performance and spread over time.
The elements of remuneration are balanced between fixed and variable and the
management function sets fixed salaries at a level sufficient to ensure that
variable remuneration incentivises and rewards strong performance but does not
encourage excessive risk taking.
The Firm operates a discretionary bonus scheme. The Firm is entitled to
disapply the requirements of SYSC 19B in relation to deferral and payment of
remuneration in instruments. Notwithstanding this, given the Firm’s size,
internal organisation and the nature, scope and complexities of its activities
the Firm does still operate deferral of remuneration to ensure effective risk
management and proper functioning of malus and clawback arrangements.
Mechanisms are in place to ensure that remuneration does not reward failure,
whether on the early termination of a contract or otherwise.
No individual is involved in setting his or her own remuneration.
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%
Source: Premier Portfolio Managers Limited
Glossary
Adjusted Market Capitalisation
The average of the mid market prices for an Ordinary share as derived from the
Daily Official List of the London Stock Exchange on each business day in the
relevant calendar month multiplied by the number of Ordinary Shares in issue
on the last business day of the relevant calendar month, adjusted by adding
the amount per Ordinary Share of all dividends declared in respect of which
Ordinary Shares have gone “ex div” in the relevant calendar month,
excluding any Ordinary Shares held in treasury.
UK AIFMD
Agreed by the European Parliament and the Council of the European Union and
transposed into UK legislation, the UK AIFMD classifies certain investment
vehicles, including investment companies, as Alternative Investment Funds
(“AIFs”) and requires them to appoint an Alternative Investment Fund
Manager (“AIFM”) and depositary to manage and oversee the operations of
the investment vehicle. The Board of the Company retains responsibility for
strategy, operations and compliance and the Directors retain a fiduciary duty
to shareholders.
AIFM
The Alternative Investment Fund Manager of the Company is currently Premier
Portfolio Managers Limited.
Asset Value Investors Limited has been appointed to take over as AIFM of the
Company in Q4 2023, with the exact date still to be announced.
Premium/(Discount) (APM)
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. If the share price is higher than
the NAV per share, the shares are said to be trading at a premium. The size of
the discount or premium is calculated by subtracting the share price from the
NAV per share and then dividing by the NAV per share.
Year ended Year ended
30 April 2023 30 April 2022
Closing NAV per share (p) 328.6 362.6
Closing share price (p) 318.5 355.5
Discount (3.1)% (2.0)%
Gearing (APM)
Gearing amplifies the impact of gains or losses on the net asset value of the
Company. It can be positive for a company’s performance, although it can
have negative effects on performance when underlying assets fall in value. It
is the Company’s policy to determine the adequate level of gearing
appropriate to its own risk profile.
Gearing is calculated in accordance with guidance from the AIC as follows:
The amount of borrowings as a proportion of net assets, expressed as a
percentage.
Year ended Year ended
30 April 2023 30 April 2022
£’000 £’000
Total borrowings – –
Total net assets 79,750 94,684
Gearing – –
Leverage
Leverage is defined in the UK AIFMD as any method by which the AIFM increases
the exposure of an AIF. In addition to the gearing limit the Company also has
to comply with the UK AIFMD leverage requirements. This limit is expressed as
a % with 100% representing no leverage or gearing in the Company. There are
two methods of calculating leverage as follows:
The Gross Method is calculated as total exposure divided by shareholders’
funds. Total exposure is calculated as net assets, less cash and cash
equivalents, adding back cash borrowing.
The Commitment Method is calculated as total exposure divided by
Shareholders’ Funds. In this instance total exposure is calculated as net
assets, less cash and cash equivalents, adding back cash borrowing adjusted
for netting and hedging arrangements.
Net Asset Value (“NAV”)
The NAV is shareholders’ funds expressed as an amount per individual share.
Shareholders’ funds are the total value of all the Company’s assets, at
current market value, having deducted all liabilities and prior charges at
their par value (or at their asset value).
NAV Total Return (APM)
NAV total return is the closing NAV per share including any cumulative
dividends paid as a percentage over the opening NAV. NAV total return is an
alternative way of measuring investment management performance of investment
trusts which is not affected by movements in the share price.
6 April 2004
One year to Three years to Five years to (launch) to
30 April 2023 30 April 2023 30 April 2023 30 April 2023
Closing NAV per share (p) 328.6 328.6 328.6 328.6
Opening NAV per share (p) 362.6 223.1 274.9 102.5
Dividend reinvested (p) 0.4 0.4 0.4 0.4
NAV total (loss)/return (9.4)% 47.5% 19.7% 221.0%
Ongoing Charges (APM)
As recommended by the AIC, ongoing charges are defined as the Company’s
annualised revenue and capitalised 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.
Year ended Year ended
30 April 2023 30 April 2022
£’000 £’000
Total expenses from note 3 and note 4 1,199 1,389
Less non-recurring expenses – 124*
Total ongoing charges 1,199 1,265
Average net assets 83,660 98,701
Ongoing charges ratio 1.4% 1.3%
* Non-recurring expenses relate to costs incurred on the Company's
realisation opportunity in September 2021.
The ongoing charges percentage reflects the costs incurred directly by the
Company which are associated with the management of a static investment
portfolio. Consistent with the AIC guidance, the ongoing charges percentage
excludes non-recurring items. In addition, the NAV performance also includes
the costs incurred directly or indirectly in investments that are managed by
external fund managers. Many of these managers net these costs off within
their valuations, and therefore they form part of the Company’s investment
return, and it is not practical to calculate an ongoing charges percentage
from the information they provide.
Share Price Total Return (APM)
The combined effect of any dividends paid, together with the rise or fall in
the share price or NAV. Total return statistics enable the investor to make
performance comparisons between trusts with different dividend policies. Any
dividends (after tax) received by a shareholder are assumed to have been
reinvested in either additional shares of the trust at the time the shares go
ex-dividend (the share price total return) or in the assets of the trust at
its NAV per share (the NAV total return). As the Company does not normally pay
dividends the NAV and share price total return are calculated by taking the
increase in the NAV or share price during the relevant period and dividing by
the opening NAV or share price.
6 April 2004
One year to Three years to Five years to (launch) to
30 April 2023 30 April 2023 30 April 2023 30 April 2023
Closing share price (p) 318.5 318.5 318.5 318.5
Opening share price (p) 355.5 214.0 273.0 97.3
Dividend reinvested (p) 0.4 0.4 0.4 0.4
Share price total (loss)/return (10.3)% 49.0% 16.8% 227.6%
NAV Volatility (APM)
Volatility is related to the degree to which NAV or prices differ from their
mean (the standard deviation). Volatility is calculated by taking the daily
NAV or closing prices over the relevant year and calculating the standard
deviation of those prices. The daily standard deviation is then multiplied by
an annualisation factor being the square root of the number of the trading
days in the year.
Year ended Year ended
30 April 2023 30 April 2022
£’000 £’000
Standard deviation of daily NAV (A) 0.5% 0.5%
Number of trading days 250 252
Square root of the number of trading days (B) 15.8 15.9
Annualised volatility (A*B) 8.2% 8.2%
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the nineteenth ANNUAL GENERAL MEETING of MIGO
Opportunities Trust plc will be held on Wednesday, 20 September 2023 at 12.00
noon at the offices of Frostrow Capital LLP, 25 Southampton Buildings, London
WC2A 1AL for the following purposes:
Resolutions 1 to 12 (inclusive) are proposed as Ordinary Resolutions and
Resolutions 13 to 16 (inclusive) are proposed as Special Resolutions.
Ordinary business
1 To receive the Strategic Report, Report of the Directors and Auditor’s
Report 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 approve the Directors’ Remuneration Policy.
4 To approve a final dividend of 3.00p per share.
5 To re-elect Mr Davidson as a Director of the Company.
6 To re-elect Ms Thomson as a Director of the Company.
7 To re-elect Mr van Cutsem as a Director of the Company.
8 To elect Ms Lucy Costa Duarte as a Director of the Company.
9 To elect Mr Ian Henderson as a Director of the Company.
10 To re-appoint PricewaterhouseCoopers LLP as Auditor of the Company.
11 To authorise the Audit Committee to determine the Auditor’s
remuneration.
Special business
12 THAT the Directors of the Company be and are hereby generally and
unconditionally authorised (in substitution for any authorities previously
granted to the Directors to the extent unused) pursuant to Section 551 of the
Companies Act 2006 (the “Act”) to exercise all the powers of the Company
to allot shares in the Company and to grant rights to subscribe for or to
convert any security into shares in the Company (“Rights”) up to an
aggregate nominal amount of £79,159 (representing approximately one-third of
the issued share capital (excluding treasury shares) as at the date of the
notice of AGM or, if changed, the number representing one third of the issued
share capital of the Company at the date at which this resolution is passed)
during the period commencing on the passing of this Resolution and expiring
(unless previously revoked, varied, renewed or extended by the Company in
general meeting) at the conclusion of the Annual General Meeting of the
Company to be held in 2024 (the “Section 551 period”), but so that the
Directors may, at any time prior to the expiry of the Section 551 period, make
offers or agreements which would or might require shares to be allotted or
Rights to be granted after the expiry of the Section 551 period and the
Directors may allot shares or grant Rights in pursuance of such offers or
agreements as if the authority conferred by this Resolution had not expired.
13 THAT in substitution for any existing power under Section 570 of the
Companies Act 2006 (the “Act”), but without prejudice to the exercise of
any such power prior to the date of this Resolution, the Directors be and they
are hereby empowered, in accordance with Sections 570 and 573 of the Act, to
allot equity securities (as defined in Section 560(1) of the Act) for cash,
pursuant to the authority under Section 551 of the Act conferred on the
Directors by Resolution 12 above as if Section 561(1) of the Act did not apply
to any such allotment or sale, up to an aggregate nominal amount of £23,747,
(representing approximately 10% of the issued share capital excluding treasury
shares as at the date of the notice of AGM or, if changed, the number
representing 10% of the issued share capital of the Company at the date at
which this resolution is passed) at a price per share not less than the net
asset value per share, such power to expire at the conclusion of the Annual
General Meeting of the Company to be held in 2024, unless previously revoked,
varied or renewed by the Company in General Meeting, save that the Company
may, at any time prior to the expiry of such power, make an offer to enter
into an agreement which would or might require equity securities or relevant
shares to be allotted or sold after the expiry of such power and the Directors
may allot equity securities or sell relevant shares in pursuance of such an
offer or agreement as if such power had not expired.
14 THAT the Company is hereby generally and unconditionally authorised in
accordance with Section 701 of the Companies Act 2006 (the “Act”) to make
purchases (within the meaning of Section 693(4) of the Act) of Ordinary
shares of 1p each in the capital of the Company (‘Ordinary shares’) for
cancellation or for placing into Treasury provided that:
(a) the maximum number of Ordinary shares authorised to be acquired shall be
3,559,794 (or, if different, 14.99% of the Ordinary shares in issue
immediately following the passing of this Resolution);
(b) the minimum price (exclusive of expenses) which may be paid for each
Ordinary share is 1p;
(c) the maximum price (exclusive of expenses) 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 bid for the Ordinary shares on
the London Stock Exchange’s market for larger established companies;
(d) this authority will (unless renewed) expire at the conclusion of the next
Annual General Meeting of the Company held after the date on which this
Resolution is passed;
(e) 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
(f) 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.
15 THAT a general meeting other than an annual general meeting may be called
on not less than 14 clear days’ notice.
16 THAT with effect from the conclusion of the meeting the draft Articles of
Association produced to the meeting and, for the purposes of identification,
initialled by the Chairman of the meeting, be adopted as the Articles of
Association of the Company in substitution for, and to the exclusion of, the
Company’s existing Articles of Association.
All shareholders should look on the Company’s website, www.migoplc.co.uk,
for any last changes to the AGM arrangements and whether attendance will be
possible. In any case, all shareholders are strongly advised to exercise their
votes in advance of the meeting by proxy, by following the voting instructions
overleaf.
By order of the Board
Frostrow Capital LLP, Company Secretary
MIGO Opportunities Trust plc
Registered Office: Paternoster House, 65 St Paul’s Churchyard, London EC4M
8AB
3 August 2023
Notes
As a shareholder, you have the right to attend, speak and vote at the
forthcoming Annual General Meeting or at any adjournment(s) thereof. In order
to exercise all or any of these rights you should read the following
explanatory notes to the business of the Annual General Meeting.
Note 1: To be entitled to attend and vote at the meeting (and for the purpose
of the determination by the Company of the number of votes they may cast)
members must be entered on the Company’s register of members at the close of
business on 18 September 2023 (or in the event that the meeting is adjourned,
only those shareholders registered on the Register of Members of the Company
as at the close of business on the day which is 48 hours prior to the
adjourned meeting) and shall be entitled to attend in person or by proxy and
vote at the Annual General Meeting in respect of the number of shares
registered in their name at that time. Changes to entries on the Register of
Members after that time shall be disregarded in determining the rights of any
person to attend or vote at the meeting.
Note 2: A member entitled to attend and vote at this meeting may appoint one
or more persons as his/her proxy to attend, speak and vote on his/her behalf
at the meeting. A proxy need not be a member of the Company.
If multiple proxies are appointed they must not be appointed in respect of the
same shares. To appoint more than one proxy, shareholders will need to
complete a separate proxy form in relation to each appointment. Each proxy
appointment must state clearly the number of shares in relation to which the
proxy is appointed. A failure to specify the number of shares to which each
proxy appointment relates or specifying an aggregate number of shares in
excess of those held by the member will result in the proxy appointment being
invalid. Please indicate if the proxy instruction is one of multiple
instructions being given.
A proxy form for use in connection with the Annual General Meeting is
enclosed. To be valid, any proxy form 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 Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY no later than
48 hours (excluding non-working days) before the time of the Annual General
Meeting or any adjournment of that meeting.
If you do not have a proxy form and believe that you should have one, or you
require additional proxy forms, please contact the Registrar on 0370 889 3231.
Lines are open between 8.30am and 5.30pm, Monday to Friday. The Registrar’s
overseas helpline number is +44 370 889 3231.
The appointment of a proxy will not prevent a member from attending the
meeting and voting in person if he/she so wishes. 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 Ordinary share of
which he/she is the holder. The termination of the authority of a person to
act as proxy must be notified to the Registrar in writing.
In the case of joint holders of a share, the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
vote or votes of the other joint holder or holders, and seniority shall be
determined by the order in which the names of the holders stand in the
register.
Any question relevant to the business of the Annual General Meeting may be
asked at the meeting by anyone permitted to speak at the meeting. You may
alternatively submit your question in advance by letter addressed to the
Company Secretary at the registered office.
Note 3: A vote withheld is not a vote in law, which means that the vote will
not be counted in the calculation of votes for or against the resolutions. If
no voting indication is given, a proxy may vote or abstain from voting at
his/her discretion. A proxy may vote (or abstain from voting) as he or she
thinks fit in relation to any other matter which is put before the meeting.
Note 4: A person to whom this notice is sent who is a person nominated under
Section 146 of the Companies Act 2006 to enjoy information rights (a
“Nominated Person”) may, under an agreement between him/her and the
shareholder by whom he/she was 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, he/she may, under any such agreement, have a right to give
instructions to the shareholder as to the exercise of voting rights.
Note 5: The statements of the rights of members in relation to the
appointment of proxies in Notes 1 and 2 above do not apply to a Nominated
Person. The rights described in those Notes can only be exercised by
registered members of the Company.
Note 6: As at 3 August 2023 (being the date of publication of this notice)
the Company’s issued share capital and total voting rights amounted to
23,747,797 Ordinary shares carrying one vote each.
Note 7: A person authorised by a corporation is entitled to exercise (on
behalf of the corporation) the same powers as the corporation could exercise
if it were an individual member of the Company. On a vote on a resolution on a
show of hands, each authorised person has the same voting rights as the
corporation would be entitled to. On a vote on a resolution on a poll, if more
than one authorised person purports to exercise a power in respect of the same
shares:
a) if they purport to exercise the power in the same way as each other, the
power is treated as exercised in that way;
b) if they do not purport to exercise the power in the same way as each
other, the power is treated as not exercised.
Note 8: Shareholders should note that it is possible that, pursuant to
requests made by shareholders of the Company under Section 527 of the
Companies Act 2006, the Company may be required to publish on a website a
statement setting out any matter relating to: (i) the audit of the Company’s
financial statements (including the auditor’s report and the conduct of the
audit) that are to be laid before the Annual General Meeting; or (ii) any
circumstances connected with an auditor of the Company ceasing to hold office
since the previous meeting at which annual financial statements and reports
were laid in accordance with Section 437 of the Companies Act 2006. The
Company may not require the shareholders requesting any such website
publication to pay its expenses in complying with Sections 527 or 528 of the
Companies Act 2006. Where the Company is required to place a statement on a
website under Section 527 of the Companies Act 2006, it must forward the
statement to the Company’s auditor 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 Companies Act 2006 to publish on a website.
Note 9: In accordance with Section 319A of the Companies Act 2006, the
Company must cause any question relating to the business being dealt with at
the meeting put by a member attending the meeting to be answered. No such
answer need be given if:
a) to do so would:
(i) interfere unduly with the preparation for the meeting, or
(ii) involve the disclosure of confidential information;
b) the answer has already been given on a website in the form of an answer to
a question; or
c) it is undesirable in the interests of the Company or the good order of the
meeting that the question be answered.
Note 10: CREST members who wish to appoint a proxy or proxies by utilising
the CREST electronic proxy appointment service may do so for this meeting by
following the procedures described in the CREST Manual. 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.
In order for a proxy appointment or instruction made by means of CREST to be
valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be
properly authenticated in accordance with Euroclear’s specifications and
must contain the information required for such instructions, as described in
the CREST Manual. The message, in order to be valid, must be transmitted so as
to be received by the Company’s Registrar (ID 3RA50) by the latest time for
receipt of proxy appointments specified in Note 2 above. 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 Applications 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
providers should note that Euroclear does not make available special
procedures in CREST for any particular messages. 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 his 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 service 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.
Note 11: The Annual Report incorporating this Notice of Annual General
Meeting and, if applicable, any members’ statements, members’ resolutions
or members’ matters of business received by the Company after the date of
this Notice, will be available on the Company’s website: www.migoplc.co.uk
Note 12: None of the Directors has a contract of service with the Company. A
copy of the letters of appointment of the Directors will be available for
inspection at the registered office of the Company during usual business hours
on any weekday (except weekends and public holidays) until the date of the
meeting and at the place of the meeting for a period of fifteen minutes prior
to and during the meeting.
Explanatory Notes to the Resolutions
Resolutions 1 to 12 will be proposed as ordinary resolutions and Resolutions
13 to 16 will be proposed as special resolutions.
Resolution 1 – To receive the Annual Report and Financial Statements
The Annual Report and Financial Statements for the year ended 30 April 2023
will be presented to the AGM and shareholders will be given an opportunity at
the meeting to ask questions. The Annual Report and Financial Statements will
be mailed to shareholders and can also be found on the Company’s website at
www.migoplc.co.uk.
Resolutions 2 and 3 – To receive and approve the Directors’ Remuneration
Report and Directors’ Remuneration Policy
Resolution 2 relates to the Directors’ Remuneration Report which is set out
in the Annual Report. Resolution 3 relates to the Directors’ Remuneration
Policy which is set out in the Annual Report.
Resolution 4 – To approve a final dividend
The rationale for the payment of a final dividend is set out in the
Chairman’s Statement and in the Business Review.
Resolutions 5 to 9 – Re-election and election of Directors
Resolutions 5 to 9 deal with the re-election and election respectively of each
Director. Biographies of each of the Directors can be found in the Annual
Report.
The Board has confirmed, following a performance review, that the Directors
standing for re-election or election continue to perform effectively.
Resolutions 10 and 11 – Re-appointment of auditors
Resolution 10 relates to the re-appointment of PricewaterhouseCoopers LLP as
the Company’s independent auditors to hold office until the next Annual
General Meeting of the Company and Resolution 11 authorises the Audit
Committee to set their remuneration. Following the implementation of the
Competition and Markets Authority order on Statutory Audit Services only the
Audit Committee may negotiate and agree the terms of the auditors’ service
agreement.
Resolution 12 – Authority to allot ordinary shares
Resolution 12, an ordinary resolution as set out in the Notice of AGM, if
passed, will renew the Directors’ authority to allot shares in accordance
with statutory pre-emption rights. This resolution will authorise the Board to
allot ordinary shares generally and unconditionally in accordance with section
551 of Companies Act 2006 up to an aggregate nominal value of £79,159,
representing approximately one third of the Company’s issued share capital
as at the date of the Notice of AGM or, if changed, the number representing
one third of the issued share capital of the Company at the date at which this
resolution is passed.
The Company does not currently hold any shares in treasury.
The Board believes that the passing of Resolution 12 is in the shareholders’
interests as the authority is intended to be used for funding investment
opportunities sourced by the Investment Manager, thereby mitigating any
potential dilution of investment returns for existing shareholders, and the
Directors will only issue new ordinary shares at a price above the prevailing
NAV per Ordinary share. The authority, if given, will lapse at the conclusion
of the 2024 AGM of the Company.
The Directors do not currently intend to allot shares other than to take
advantage of opportunities in the market as they arise and only if they
believe it would be advantageous to the Company’s shareholders to do so.
Resolution 13 – Disapplication of pre-emption rights
Resolution 13, a special resolution, is being proposed to authorise the
Directors to disapply the statutory pre-emption rights of existing
shareholders in relation to the issue of shares under Resolution 12, for cash
or the sale of shares out of treasury up to an aggregate nominal amount of
£23,747, being approximately 10% of the Company’s issued share capital as
at the date of the Notice of AGM or, if changed, 10% of the issued share
capital immediately upon the passing of this resolution.
In respect of Resolution 13, shares would only be issued at a price above the
prevailing NAV per share. The Directors will only issue shares on a
non-pre-emptive basis if they believe it would be in the best interests of the
Company’s shareholders.
Resolution 14 – Purchase of own shares
Resolution 14, a special resolution, will renew the Company’s authority to
make market purchases of up to 3,559,794 ordinary shares (being 14.99% of the
issued share capital as at the date of the Notice of AGM), either for
cancellation or placing into treasury at the determination of the Directors.
Purchases of ordinary shares will be made within guidelines established from
time to time by the Board. Any purchase of ordinary shares would be made only
out of the available cash resources of the Company. The maximum price which
may be paid for an Ordinary share must not be more than the higher of (i) 5%
above the average of the mid-market value of the ordinary shares for the five
business days before the purchase is made, or (ii) the higher of the price of
the last independent trade and the highest current independent bid for the
Ordinary shares on the trading venue where the purchase is carried out. The
minimum price which may be paid is £0.01 per Ordinary share.
The Directors would only use this authority in order to address any
significant imbalance between the supply and demand for the ordinary shares
and to manage the discount to NAV at which the ordinary shares trade. Ordinary
shares will be repurchased only at prices below the NAV per Ordinary share,
which should have the effect of increasing the NAV per Ordinary share for
remaining shareholders.
This authority, if approved by shareholders, will expire at the AGM to be held
in 2024, when a resolution for its renewal will be proposed.
Resolution 15 – Notice period for general meetings
In terms of the Companies Act 2006, the notice period for general meetings
(other than an AGM) is 21 clear days’ notice unless the Company:
(i) has gained shareholder approval for the holding of general meetings
on 14 clear days’ notice by passing a special resolution at the most recent
AGM; and
(ii) offers the facility for all shareholders to vote by electronic means.
The Company would like to preserve its ability to call general meetings (other
than an annual general meeting) on less than 21 clear days’ notice. The
shorter notice period proposed by resolution 15, a special resolution, would
not be used as a matter of routine, but only where the flexibility is merited
by the business of the meeting and is thought to be in the interests of
shareholders as a whole. The approval will be effective until the date of the
AGM to be held in 2024, when it is intended that a similar resolution will be
proposed.
Resolution 16 – Amendment to Articles of Association
The Directors are proposing to make an amendment to the Company’s Articles
of Association (the “Articles”) to increase the aggregate amount paid to
Directors by way of fees for their services as Directors under Article 97 from
£150,000 to £250,000 in any financial year or any such greater sum as may be
determined from time to time by ordinary resolution of the Company. Any fees
payable pursuant to Article 97 shall be distinct from and shall not include
any salary, remuneration for an executive office or other amounts payable to a
Director pursuant to any other provisions of these Articles and shall accrue
from day to day.
The reason for the proposed increase in fees is the current number of
Directors which has gone from three to five during the year under review and
which makes fair payment for services in line with the market impossible if
the current limit in the Articles is retained. However, it is the Board’s
intention to go back to having four Directors as a result of natural evolution
in the future and, in the long term, four Directors should be seen as the
“norm” for MIGO.
In addition to the change relating to Directors’ fees, the Articles have
been brought up to date in respect of the Company’s name which was changed
to MIGO Opportunities Trust plc with effect from 7 December 2021.
The proposed new Articles (marked to show the proposed changes) will be
available for inspection on the Company’s website, www.migoplc.co.uk, and at
the Company’s registered office, from the date of this document until the
close of the Annual General Meeting, and will also be available for inspection
at the venue of the Annual General Meeting from fifteen minutes before and
during the Annual General Meeting. Should it be impossible to view the
proposed new Articles at the registered office, then an electronic copy can
also be requested from the Company Secretary by writing to info@frostrow.com.
Directors’ Recommendation
The Directors consider each resolution being proposed at the AGM to be in the
best interests of the Company and shareholders as a whole and they unanimously
recommend that all shareholders vote in favour of them, as they intend to do
in respect of their own beneficial shareholdings.
The Annual Report will be posted to shareholders around 15 August 2023
Further copies may be obtained from the Company Secretary, Frostrow Capital
LLP, 25 Southampton Buildings, London WC2A 1AL.
A copy of the Annual Report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report will also be available on the Company’s website at
www.migoplc.co.uk where up to date information on the Company can also be
found.
Ends
Neither the contents of the Company’s website nor the contents of any
website accessible from hyperlinks on the Company’s website (or any other
website) is incorporated into, or forms part of, this announcement.
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