REG-MIGO Opportunities Trust Plc: Half-year Report
19/12/2023 09:45
MIGO Opportunities Trust plc
Half-Yearly Report for the six months ended 31 October 2023
MIGO Opportunities Trust plc (the “Company” or “MIGO”) has today
released its Half-Yearly Report for the six months ended 31 October 2023.
The Half-Yearly Report and other information will be available via
www.migoplc.co.uk
A copy of the half-yearly report will also be submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Enquiries:
Frostrow Capital LLP
Company Secretary
DDI: +44 (0)203 709 8732
Email: info@frostrow.com
Financial Highlights
Six months ended Year ended
31 October 2023 30 April 2023 % change
Net asset value (“NAV”) per share 319.2p 328.6p (2.9)%
Share price 310.5p 318.5p (2.5)%
Share price discount to NAV per share (2.7)% (3.1)%
Total net assets £74.0m £79.8m (7.4)%
Net asset value volatility* 4.1% 8.2%
Gearing* – –
Ongoing charges* 1.6% 1.4%
* 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 and the Manager’s
Report.
Total Return Performance to 31 October 2023
6 months 1 year 5 years
% % %
Net asset value (dividend adjusted)* (1.9) (1.2) 19.3
Share price (dividend adjusted)* (1.6) (3.6) 15.8
SONIA plus 2% 3.5 6.4 17.5
* Alternative Performance Measure, see Glossary.
Source: Morningstar
Investment Objective
The objective of MIGO Opportunities Trust plc (the “Company” or
“MIGO”) 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 objective is
intended to reflect the Company’s 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.
Chairman’s Statement
Introduction
In the six months to 31 October 2023, financial markets around the world
continued to be impacted by rising interest rates aimed at squeezing inflation
back to central bank target levels. These higher rates and the fears they
could hurt profit growth and lead to credit defaults have weighed heavily on
share prices across the globe, with the notable exception of a few highly
rated US stocks deemed to be beneficiaries of emerging AI technologies.
Domestically, UK consumers have struggled with higher interest rates and a
cost of living crisis made worse by high inflation and energy prices. As these
consumers are, ultimately, the source of much demand for UK investment
products of all kinds, we have seen a material reduction in demand for
investment trusts over the period. Coupled with other demand effects such as
the consolidation of the wealth management sector and increasing moves to
global benchmarks, discounts to net asset value across the sector have been
pushed to levels not seen since the global financial crisis.
Despite these trends and a slightly weaker share price, MIGO has continued to
trade at a tight discount as supportive regular buybacks and our Investment
Manager’s cash balance and value approach of buying at wide discounts has
retained investor confidence.
Investment Manager, Registered Office, Depositary and Custodian
Aside from market events, 2023 has been dominated by the search for a new AIFM
and Investment Manager for MIGO following the news early in the year, that our
portfolio manager, Nick Greenwood, had decided to leave Premier Miton
Investors (“PMI”).
Between March and June the Board of MIGO – after consultation with our
lawyers and brokers – performed a full manager review including detailed
shareholder engagement. Feedback from shareholders made it clear that MIGO’s
investors wanted MIGO to retain its existing investment objective and policy,
ideally with the established investment team in place. Close to a dozen
possible investment management houses, ranging from large multi-national
groups to small boutique managers, were reviewed in a rigorous selection
process. The result of this exercise was a unanimous decision by the Board to
appoint Asset Value Investors Limited (“AVI”) as the Company’s future
AIFM and Investment Manager, subject to regulatory approval, which was
announced on 27 July.
Since then, and as announced on 16 October, it has been agreed that Nick
Greenwood would join AVI to co-manage MIGO along with Charlotte Cuthbertson,
both of whom are well known to our longer-term investors as the Company’s
lead portfolio managers for a number of years. AVI’s appointment commenced
from close of business on Friday 15 December, concurrent with PMI completing
its role as investment manager. Nick Greenwood joined AVI the following
business day, Monday 18 December. Also, with effect from 18 December 2023,
the registered office moved to the offices of Frostrow Capital LLP, our
Company Secretary, Marketing and Administration Manager. The new address can
be found at the end of this document.
The Board would like to thank Premier Miton for its cooperation in this
transition and for their hard work and support over the years.
We also look forward to working with AVI, an experienced manager of investment
trusts and of funds investing in the investment trust sector, 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 can be found at: www.assetvalueinvestors.com.
Together with a new AIFM and Investment Manager, MIGO also has a new
Depositary and Custodian, JP Morgan Europe Limited and JP Morgan Chase Bank
respectively. AVI and its client funds have well established working
relationships with JP Morgan. We thank the team at BNYM for their support over
the years and for their help in transitioning the Company’s business over to
JP Morgan. We look forward to working with JP Morgan’s excellent team who
have contributed to making the transition an easy one.
In spite of all the uncertainty over the past months, it has been encouraging
to see that shareholders have been happy to stand by MIGO and await further
developments. 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.
Board Changes
As already noted in the annual report, the appointment of AVI as our new AIFM
and Investment Manager meant that Katya Thomson could no longer be considered
independent under the AIC’s Code of Corporate Governance, as she also sits
on the board of another AVI managed investment trust. She had therefore taken
the decision to step down from her role as non-executive director and Chairman
of the Audit Committee once a replacement could be found.
Consequently, the Board undertook a search for a new independent,
non-executive Director with the necessary qualifications to take over from
Katya as Chairman of the Audit Committee. As already announced on 12 December
2023, I am happy to report that the Directors have appointed Ms Caroline
Gulliver to join the Board and as our new Chairman of the Audit Committee with
effect from the close of business on 29 December 2023. Katya will step down
from her role on the same day, but will continue to be available to support
Caroline and the Board of MIGO for as long as needed.
Having graduated in Accountancy from the University of Dundee in 1987,
Caroline joined EY as graduate trainee in Edinburgh where she spent a 25 year
career, latterly as an Executive Director in London, acting as Senior
Statutory Auditor for many investment trusts and open-ended investment
companies. She also worked on a large number of investment trust Stock
Exchange transactions including new fund launches, both onshore and offshore,
and fund reconstructions and mergers. Caroline left EY in September 2012 to
pursue other interests including non-executive directorship positions. She
currently has three active closed-end fund Board appointments – JP Morgan
Global Emerging Markets Income Trust plc, International Biotechnology Trust
plc and abrdn European Logistics Income plc. She is a member of the Institute
of Chartered Accountants of Scotland (CA).
The Board warmly welcomes Caroline and looks forward to working with her. At
the same time, we will miss Katya’s insights and wish her well for the
future, thanking her for many years of support and advocacy of MIGO.
Performance
Over the six months to 31 October 2023 the Company’s NAV per share total
return (dividend adjusted) fell by 1.9% and the share price total return
(dividend adjusted) fell by 1.6%. In comparison, the Company’s Benchmark,
sterling SONIA +2%, delivered a total return of 3.5%.
A comprehensive review of the factors affecting the Company’s performance
during the period, and developments in the portfolio, can be found in the
Investment Manager’s Review. We continue to believe that the current
environment is ideal for the value driven style of our Investment Manager to
find new attractively priced investments over the next year. Net cash at the
period-end was £6.9 million or 9.5% of NAV, which is ready to be deployed
when value opportunities arise.
Dividend
On 5 October 2023, a final dividend of 3.0p per share in relation to the year
ended 30 April 2023 was paid to shareholders on the register as of 8 September
2023.
The Company’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.
Share Price, Share Issuances and Buybacks
MIGO’s share price decreased over the period from 318.5p to 310.5p and the
shares traded at a small discount to NAV per share of 2.7% at the end of the
period, up from trading at a 3.1% discount to NAV per share at the last year
end at 30 April 2023.
From May to October 2023, the Company undertook buybacks of 1,125,000 shares
in order to manage the share price discount and protect liquidity in the
market. This support for the shares was particularly important given the
ongoing new manager search and wait for regulatory approval as well as
weakness in the investment trust sector at that time. As at 31 October 2023,
the Company had 23,172,797 (30 April 2023: 24,297,797) shares in issue. Since
the period-end, a further 100,000 shares were bought back.
The Board’s policy is to be proactive in managing the share price premium or
discount. Issuing new shares at a premium to NAV per share creates value for
existing shareholders and any share issuance also improves the liquidity of
the Company’s shares, controls the premium to NAV per share at which the
shares trade and spreads the operating costs over a larger capital base,
reducing the ongoing charges ratio. Share buybacks reduce the overhang of
shares in the market and correct imbalances of supply and demand. The Board,
PMI as the Investment Manager and the Company’s broker were in regular
contact in order to be able to react swiftly to any disproportionate premiums
or discounts the Company’s shares were trading at. This is expected to
continue with AVI as the new AIFM and Investment Manager.
At the Annual General Meeting (“AGM”) held on 20 September 2023,
shareholders gave the Board authority to issue shares of up to 10% of issued
share capital at the time, whilst disapplying pre emption rights, amounting to
a total of 2,354,779 shares in total. At the AGM the Board also received
shareholders’ authority to buy back up to 3,529,814 shares, or 14.99% of
issued share capital. These authorities will expire at the next AGM when the
Board will ask for renewed authorities.
Ongoing Charges Issues
Investors will be aware of the ongoing charges figure (“OCF”) which is the
charge paid over a year quoted on the 'Key Investor Information' (“KID”)
document. The Board, our advisers and many investment trust specialists have
long considered the figure misleading as we believe it double counts the cost
of investing in other investment trusts. A significant portion of MIGO’s OCF
(1.29% out of a total OCF of 2.81% as per 16 October 2023 KID) is due to costs
incurred by the underlying investments and is not an additional cost to MIGO
– and is therefore not represented under Financial Highlights. Whether
actual and underlying costs are presented in one single figure or in a layered
approach, many platforms and readers will add them up, and in an industry
where low fee levels are sometimes misunderstood as the simplest way to
evaluate how value is delivered, this can become a problem.
The Board of MIGO, together with many other industry participants, has lobbied
the Association of Investment Companies and HM Treasury to intervene to
confirm that costs associated with listed investment companies should be
excluded from the ‘single figure’ OCF across all retail product and
service categories. This, together with amended legislation, should show
companies like ours as competitive as they really are. The first results of
this lobbying activity have been in the news recently, as responsibility for
this issue has been passed to the FCA. We await clarity and a common sense
solution.
Outlook
2023 has been a year of significant change for MIGO and for the investment
trust sector. Discounts across the investment trust sector have widened
materially, presenting numerous attractive investment opportunities for the
Company, both within sectors we have long followed and invested in, and in
sectors which have historically traded at tight discounts or, indeed, premiums
to net asset value where tight ratings have previously precluded our
investment. With a new AIFM and Investment Manager in place we feel MIGO is
ready for what 2024 will bring.
As a result we believe the portfolio is well positioned both for future growth
in net asset values within portfolio companies and for the tightening of
discounts across the sector.
The Board is optimistic for the future of MIGO and thanks shareholders for
their continued support.
Richard Davidson
Chairman
19 December 2023
Investment Manager’s Report
for the six months ended 31 October 2023
Performance
During the six months to 31 October 2023, our net asset value fell from
328.25p to 319.13p. This represents a fall of 1.86% in capital terms once the
payment of a 3p dividend is taken into account. In comparison, the Numis
All-Share Index* declined 11.7% in capital terms. Our shares also declined
2.51% and ended the half year trading on a 2.7% discount
* The full investment companies universe as defined by Numis Securities
Research including both equities and alternative asset investment companies.
The period under review was one of the toughest in recent years for the
investment trust sector. It faced a perfect storm. This reflected a
combination of four factors: rising UK interest rate expectations, kneejerk
selling in the face of weak share prices, the rapid consolidation of the
wealth management industry and, most importantly, the methodology used to
disclose costs which makes closed end funds appear expensive when compared to
their open ended peers. Given these torrid conditions during which the FTSE
All Share Closed End Index slumped 8.47%, our portfolio held up well. This was
partially due to the cash balances we held entering the period.
Expectations as to where UK interest rates would peak steadily rose. At one
point, forecasts approached 6.5%. During the summer it was possible to buy a
two-year gilt on a redemption yield of 5.4%. Bearing in mind the vast majority
of this return is effectively tax free for many investors, the ability to get
a decent income from conventional sources undermined demand for many trusts.
These were created to find a solution to the lack of income at a time when
deposit rates were close to zero. In the new environment they needed to yield
a premium to gilts which meant that share prices needed to fall. The sharp
declines reflected a lack of demand rather than concerns about the quality of
these trusts’ underlying investments. This provided an arbitrage opportunity
given that in many cases demand for what the trusts owned remained steady. It
was simply the structure in which they were held which was out of favour. This
is certainly true for our existing position in Aquila European Renewables
which has invested in solar assets in Iberia and wind farms in Scandinavia. It
is in the alternatives sector where the bulk of our research efforts are
currently focused seeking portfolios which have the scope to grow both net
asset value and dividends.
In recent decades the wealth management industry has been a significant owner
of trusts. Investec’s recent merger with Rathbones highlights the extent of
the last decade’s consolidation from hundreds of small independent private
client stockbrokers into a small number of major national chains. Given the
newly combined organisation will have assets under management of £100
billion, it is difficult to see how these organisations will be able use
closed ended funds in the longer term. In order to move the needle investors
would want potential investments to represent at least 1% of their portfolio.
In the case of a £100 billion pound pot this means buying a billion pounds’
worth of shares. Even in the case of the very largest trusts, this would be
challenging. In the shorter term any unwinding of exposure is likely to be
felt in trusts with market capitalisations between £500 million and £1
billion in size which until recently were big enough for the mega chains to
include within portfolios.
The most serious threat comes from the unintended consequences of regulation
which threatens the sector’s very existence. The methodology behind the
calculation of underlying costs continues to drive capital from the sector.
Investment trusts now appear very expensive especially in alternative asset
classes such as shipping, private equity and second-hand life polices, where
these calculations throw up some very strange results and, as a result, many
trusts are uninvestable for some types of investors whose products are
marketed on grounds of low cost. Whilst there has been some encouragement
lately with HM Treasury acknowledging the problem and the issue being debated
in the Houses of Parliament, we may have to wait some time for reform.
Furthermore, it is clear that advisers have reacted to weak trust share prices
associated with widening discounts by selling.
These challenges have supressed demand and left the market oversupplied. Given
that trusts trade wherever the balance of supply and demand lies, it is not
surprising that discounts across the sector stand close to widest ever levels.
Previous occasions when share prices fell this far below the value of
underlying portfolios were times of extreme stress in markets such as the
global financial crisis.
We have heard the death knell sounded for investment trusts many times before.
The sector has always evolved and progressed. There are self help measures
which can be adopted. Oversupply can be dealt with via buy backs. The law of
natural selection is alive and well in the world of closed end funds and we
expect to see the recent trend of mergers and wind downs to continue. There
are new audiences to focus on, such as self-directed investors and newer
wealth management businesses often staffed by individuals who have departed
the vast chains. Despite experimental capital structures being mooted, the
closed end fund is the best structure for accessing illiquid asset classes.
The travails of open ended property funds sum up the challenges and explain
why investment trusts will continue to exist.
Contributors
Within our portfolio, uranium proved to be our greatest contributor as the
metal’s spot price crept up steadily. A severe shortfall in supply is
developing. This has been exacerbated by energy security concerns given Russia
and Kazakhstan’s roles in the supply chain. Turmoil in Niger is disrupting
supplies of Uranium to the French power industry. The decision to extend the
lives of many power stations in an effort to achieve net zero is leading to
demand being much greater than expected in the short term. Longer term demand
will be driven by the build out of the nuclear industry in the Middle East and
Asia. Whilst uranium is not a rare metal, it will be impossible to boost
supply meaningfully given the long lead times , often a decade, in turning a
promising deposit into a working mine.
Shares in Georgia Capital have continued their steady appreciation yet still
trade at an extreme discount. The country stands at the traditional economic
sweet spot where wealth has just reached the point where the population can
afford to visit pharmacies, get their cars serviced and insured and pay to get
their children educated. In the short term the local economy has been boosted
by the arrival of much of Russia’s IT Industry who prefer Tbilisi to the
risk of being called up at home. Despite recent successes we doubt whether the
trust has a long-term future. In current conditions It is difficult enough for
any investment trust to generate a following, let alone an eastern European
single country fund. At some point this will be recognised and an alternative
structure sought. Should the team who are significant shareholders seek an
exit, they will achieve this by handing back assets to shareholders at market
value. Georgia Capital is exactly the sort of situation we seek. It offers
returns from an attractive macro view as well as a special situation element.
We have benefitted from the three-way merger between Nippon Active Value,
Atlantis Japan and Aberdeen Japan. We were able to exit from some of our
Atlantis shares at a modest discount. This transaction has removed what has
proved to be one of our more disappointing holdings and move the focus towards
activist investing in Japan, one of our current themes. We already owned
shares in Nippon Active Value which has become one of our largest holdings
post-merger.
Other useful contributions came from exposure to India and Vietnam. Both
countries have benefited from multinationals seeking to diversify their supply
chains and manufacturing operations away from China, given the deterioration
in relations with the United States.
Detractors
Disappointments include Baker Steel Resources, Phoenix Spree Deutschland and
Macau Property Opportunities. In the case of Baker Steel there is currently
little interest in lending to develop new mines and many of the trust’s
projects have been delayed in the absence of financing. It is noticeable that
the carrying value of these assets are now only a fraction of what they would
be worth as an operational mine. Baker Steel shares trade at a significant
discount to the already depressed carrying value. It would only need a couple
of successes to drive the share price significantly higher. It is a bit of a
mystery as to why Phoenix Spree is so depressed given that locally listed peer
Vonovia has been moving steadily higher in recent months. There remains a
shortage of residential property available to rent in Berlin. The most likely
reason is a lack of interest and knowledge about the asset class amongst UK
Investors. After a burst of excitement about the reopening of China
post-Covid, recent newsflow has been depressing and taken its toll on the
Macau Opportunities share price.
Despite solid progress within its portfolio, Oakley Capital’s share price
struggled during the period. Private equity trusts have been particularly
hard-hit by the cost disclosure issues discussed earlier.
Additions
We have added to the unloved biotechnology sector by introducing a holding in
RTW Biotech Opportunities. The biotech sector is suffering from a hangover as
the result of the excesses of 2021. The sector tends to be categorised as
early stage and its share prices move inversely to Treasuries. Therefore,
Biotechs have been punished as interest rate expectations have increased and
the sector now trades at a twenty year low, leaving market prices out of synch
with fundamentals. Retail investors and investment tourists have long departed
share registers. The inverse correlation with Treasuries explains why
counterintuitively the sector acts defensively heading into a recession.
Increased innovation has led to significantly more drugs reaching the market
with a record number of approvals expected in 2023. Fifty per cent of new
products are developed by smaller companies so the long term winners are
unlikely to be the big index stocks. A significant number of blockbuster drugs
are coming off patent so big pharma has an urgent need and the necessary cash
to buy Biotechs in order to restock product lines. The Inflation Reduction Act
ensures that drug pricing is off the agenda in the run up to the forthcoming
US election. We have adopted a package approach owning Biotech Growth and
International Biotechnology in addition to RTW Biotech. Discount controls mean
that the value lies in underlying portfolios rather than these trusts trading
below stated NAV.
We bought a position in Ecofin US Renewables after its Texan wind farm was
damaged by a tornado. The utility substation which connects the site to the
grid was destroyed. A new connection is being made via another substation. In
the meantime, the trust will pay a reduced dividend. We believe that the
reaction in the share price was out of proportion to the challenges.
Departures
Industrials REIT was acquired by Blackstone at the beginning of the period and
Atlantis Japan was taken over by Nippon Active Value as noted earlier. Vietnam
Enterprise was sold into strength leaving our Vietnam exposure focussed on
VinaCapital Vietnam Opportunities.
Outlook
In recent weeks the outlook has brightened as expectations of further interest
rate rises have petered out. Investors will now anticipate their eventual
decline. Many investment trust share prices are languishing at levels which
generate attractive yields for investors buying today. Should interest rates
actually fall, this attraction will grow further. In the medium term such wide
discounts are unsustainable as, if the market fails to properly value closed
ended funds for structural reasons, then the real world will claim the
underlying assets on the cheap albeit at higher levels than today.
Furthermore, should there prove to be a sensible reform of the cost disclosure
regime, we should expect trust share prices to rally sharply as investors who
have been forced onto the sidelines are allowed to return to the market.
Generally speaking, when discounts have become very wide trust investors have
then benefitted from the powerful combination of rising net asset values and
narrowing discounts. Given the widespread opportunities to exploit
mispricings, our cash position steadily declined during the period under
review and has continued to decline since.
Nick Greenwood
Asset Value Investors Limited
19 December 2023
Average underlying discount*
Top 12 stocks Weight (%) Discount (%)
VinaCapital Vietnam Opportunity Fund 6.4% (19.6)
Georgia Capital 5.4% (59.2)
Yellow Cake 4.9% (16.6)
Geiger Counter 4.8% (26.0)
Oakley Capital Investments 4.2% (38.3)
Nippon Active Value Fund 4.0% (8.9)
JPMorgan Indian Investment Trust 3.8% (19.8)
Baker Steel Resources Trust 3.2% (48.7)
NB Private Equity Partners 3.2% (30.1)
Aquila European Renewables 3.1% (26.4)
Phoenix Spree Deutschland 2.7% (61.4)
New Star Investment Trust 2.7% (38.0)
Average discount 48.4% (32.8) 1
Source: Bloomberg, 31.10.2023.
1 Please note that the average discount figure only takes into account the
top 12 holdings in the portfolio.
Portfolio Valuation
as at 31 October 2023
Security Investment Sector Region Valuation £’000 % of NAV
VinaCapital Vietnam Opportunity Fund Private Equity Asia Pacific – Vietnam 4,730 6.4%
Georgia Capital Equity Europe 3,965 5.4%
Yellow Cake* Mining – Uranium Global 3,588 4.9%
Geiger Counter# Mining – Uranium Global 3,515 4.8%
Oakley Capital Investments Private Equity Global 3,135 4.2%
Nippon Active Value Fund Equity – Small Cap Japan 2,988 4.0%
JPMorgan Indian Investment Trust Equity India 2,815 3.8%
Baker Steel Resources Trust Mining Global 2,397 3.2%
NB Private Equity Partners Private Equity North America 2,382 3.2%
Aquila European Renewables Other – Renewables Europe 2,295 3.1%
31,809 43.0%
Phoenix Spree Deutschland Real Estate Europe 2,028 2.7%
New Star Investment Trust Equity Global 2,026 2.7%
Real Estate Investors* Real Estate UK 1,994 2.7%
Duke Royalty* Other – Alternative Lender Global 1,985 2.7%
EPE Special Opportunities* Private Equity UK 1,899 2.6%
International Biotechnology Trust Equity UK 1,540 2.1%
River & Mercantile UK Micro Cap Investment Co Equity – Small Cap UK 1,502 2.0%
CQS Natural Resources Growth And Income Mining Global 1,499 2.0%
Hansa Investment Co Equity Global 1,373 1.9%
Biotech Growth Trust Equity UK 1,364 1.8%
49,016 66.3%
Downing Strategic Micro-Cap Investment Trust Equity – Small Cap UK 1,328 1.8%
Dunedin Enterprise Investment Trust † Private Equity Global 1,269 1.7%
Ground Rents Income Fund Real Estate UK 1,240 1.7%
Life Settlement Assets Other – Life Policies North America 1,183 1.6%
Macau Property Opportunities Fund † Real Estate Asia Pacific – China 1,120 1.5%
India Capital Growth Fund* Equity India 1,029 1.4%
Amedeo Air Four Plus Other – Specialist Fund UK 1,013 1.4%
Ecofin US Renewables Infrastructure Trust Private Equity North America 995 1.3%
Schroder Capital Global Innovation Trust Equity Global 961 1.3%
Rockwood Strategic* Equity – Small Cap UK 889 1.2%
60,042 81.2%
Rights & Issues Investment Trust Equity – Small Cap UK 817 1.1%
VPC Speciality Lending Investments Other – Alternative Lender Global 787 1.1%
Henderson Opportunities Trust Equity UK 735 1.0%
AVI Japan Opportunity Trust Equity Japan 733 1.0%
Schroder British Opportunities Trust Equity UK 701 0.9%
Chrysalis Investments Private Equity Europe 685 0.9%
RTW Biotech Opportunities Equity Global 675 0.9%
Marwyn Value Investors Equity UK 647 0.9%
EJF Investments Other – Specialist Fund Global 432 0.6%
Grit Real Estate Income Real Estate Africa 385 0.5%
66,639 90.1%
Chelverton Growth Trust Equity UK 177 0.2%
Aseana Properties † Real Estate Asia Pacific 110 0.1%
Reconstruction Capital II* † Equity Europe 67 0.1%
Better Capital PCC † ^ Private Equity UK 62 0.1%
RENN Universal † ^ Equity North America 50 0.1%
Cambrium Global Timberland* † Other – Forestry Global 33 0.0%
Crystal Amber Fund* Equity – Small Cap UK 30 0.0%
Total investments 67,166 90.8%
Other current assets (including net cash) 6,790 9.2%
Net asset value 73,956 100.0%
* 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.
Capital Structure
As at the date of this report, the Company’s share capital comprises
23,072,797 Ordinary shares of 1p each with one vote per share. The Company’s
Articles of Association contain provisions enabling shareholders to elect at
three-year intervals for the realisation of all or part of their shareholding
(the “Realisation Opportunity”). At the discretion of the Company,
shareholders may 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. If
realisation elections cannot be satisfied in their entirety through the
placing and/or repurchase mechanism, all remaining Elected shares shall be
converted into Realisation shares.
Also in the event that the Company does not make available to members an
opportunity to effect such a realisation at the appointed time, shareholders
may serve a realisation election requesting that all or part of their Ordinary
shares be converted into Realisation shares.
The portfolio would then be split into two separate and distinct pools pro
rata as between the Continuing Ordinary shares (the “Continuation Pool”)
and the Realisation shares (the “Realisation Pool”). The Continuation Pool
would be managed in accordance with the Company’s investment objective and
policy, while the assets comprising the Realisation Pool would be managed in
accordance with an orderly realisation programme with the aim of making
progressive returns of cash to holders of Realisation shares as soon as
practicable. The precise mechanism for any return of cash to holders of
Realisation shares would depend on the relevant factors prevailing at the time
and would be at the discretion of the Board. If the net asset value of the
Company’s Continuing Ordinary shares is more than £30 million, then the
Company would continue in operation.
In September 2021, the Company offered a Realisation Opportunity, giving
shareholders the option either to retain or to realise their investment in the
Company. Realisation elections were received in respect of 0.55% of shares in
issue at the time, and these shares were subsequently repurchased by the
Company. There are currently no Realisation shares in issue. 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 it can be delivered efficiently and in accordance with
the best interests of the Company, at the relevant point in time.
Interim Management Report
Principal Risks and Uncertainties
A review of the half year and the outlook for the Company can be found in the
Chairman’s Statement and in the Investment Manager’s Review. The principal
risks and uncertainties facing the Company fall into the following broad
categories: investment risks (including market and discount risk; liquidity,
cash and foreign exchange risk and interest rate risk), strategic risks
(including shareholder relations and share price performance risk; key person
risk and company duration risk), operational risks (in particular service
provider risk) and macro risks (including global risk, ESG and climate change
risk, UK regulatory risk, UK legal risk and governance risk). These risks were
explained in detail on pages 17 to 22 in the Annual Report for the year ended
30 April 2023.
In addition, a deterioration in economic environment is recognised as a
principal risk and uncertainty, which may impact portfolio investments and,
potentially, the Company’s service providers.
Related Parties Transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected the
financial position or the performance of the Company.
Going Concern
The Directors believe, having considered the Company’s investment objective,
risk management policies, capital management policies and procedures, the
nature of the portfolio and expenditure projections, that the Company has
adequate resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future and, more specifically, that there are no material uncertainties
pertaining to the Company that would prevent its ability to continue in such
operational existence for at least twelve months from the date of the approval
of this Half-Yearly Report. For these reasons, the Directors consider there is
reasonable evidence to continue to adopt the going concern basis in preparing
the Half-Yearly Report.
Directors Responsibility Statement
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements
contained within the Half-Yearly Report has been prepared in accordance with
Financial Reporting Standard 104 (Interim Financial Reporting);
(ii) The Half-Yearly Report and condensed financial
statements give a true and fair view of the assets, liabilities, financial
position and return of the Company; and
(iii) The Interim Management Report includes a fair review
of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed set
of financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in the first six
months of the current financial year and that have materially affected the
financial position or performance of the entity during that period; and any
changes in the related party transactions described in the last annual report
that could do so.
The Half-Yearly Report has not been reviewed or audited by the Company’s
auditor.
This Half-Yearly 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 date 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.
For and on behalf of the Board
Richard Davidson
Chairman
19 December 2023
Condensed Income Statement
Six months to 31 October 2023 (unaudited) Six months to 31 October 2022 (unaudited)
Revenue Capital Total Revenue Capital Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Losses on investments – (1,697) (1,697) – (9,492) (9,492)
Income 4 936 – 936 754 – 754
Investment management fee (250) – (250) (273) – (273)
Other expenses (525) – (525) (286) – (286)
Return/(loss) before finance costs and taxation 161 (1,697) (1,536) 195 (9,492) (9,297)
Finance costs (52) – (52) (53) – (53)
Return/(loss) before taxation 109 (1,697) (1,588) 142 (9,492) (9,350)
Taxation – – – – – –
Return/(loss) after taxation 109 (1,697) (1,588) 142 (9,492) (9,350)
Return/(loss) per ordinary share (pence) 0.5 (7.1) (6.7) 0.6 (37.8) (37.2)
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 are no recognised gains or losses other than those passing
through the Income Statement and therefore no Statement of Total Comprehensive
Income has been presented.
The notes form an integral part of these financial statements.
Condensed Statement of Changes in Equity
Capital Share
Share redemption premium Special Capital Revenue
capital reserve account reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Six months to 31 October 2023 (Unaudited)
Balance at 30 April 2023 243 111 29,088 – 49,175 1,231 79,848
Buyback of shares for cancellation (11) 11 – – (3,597) – (3,597)
Dividends paid – – – – – (707) (707)
Loss for the period – – – – (1,697) 109 (1,588)
Balance at 31 October 2023 232 122 29,088 – 43,881 633 73,956
Six months to 31 October 2022 (Unaudited)
Balance at 30 April 2022 261 89 27,729 1,222 65,034 349 94,684
Buyback of shares for cancellation (12) 12 – (1,222) (2,787) – (4,009)
Share issuance 2 – 675 – – – 677
Dividends paid – – – – – (100) (100)
Return for the period – – – – (9,492) 142 (9,350)
Balance at 31 October 2022 251 101 28,404 – 52,755 391 81,902
The notes form an integral part of these financial statements.
Condensed Statement of Financial Position
As at As at
31 October 2023 30 April 2023
(unaudited) (audited)
Note £’000 £’000
Non-current assets
Investments 5 67,166 67,855
Current assets
Debtors 55 361
Cash 6,995 13,139
7,050 13,500
Creditors: amounts falling due within one year
Creditors (260) (1,507)
(260) (1,507)
Net current assets 6,790 11,993
Net assets 73,956 79,848
Share capital and reserves:
Share capital 232 243
Share premium account 29,088 29,088
Capital redemption reserve 122 111
Capital reserve 43,881 49,175
Revenue reserve 633 1,231
Total shareholders’ funds 73,956 79,848
Net asset value per ordinary share (pence) 319.2 328.6
The net asset value per ordinary share is based on 23,172,797 shares, being
the shares in issue as at 31 October 2023 (30 April 2023: 24,297,797).
The notes form an integral part of these financial statements.
Condensed Statement of Cash Flow
Six months to Six months to
31 October 2023 31 October 2022
(unaudited) (unaudited)
£’000 £’000
Net cash inflow from operating activities 441 311
Investing activities
Purchases of investments (11,286) (5,546)
Sales of investments 9,043 10,107
Net cash (outflow)/inflow from investing activities (2,243) 4,561
Financing activities
Share issuance – 677
Buyback of shares for cancellation (3,597) (4,009)
Dividends paid (706) (100)
Finance costs paid (35) (35)
Net cash outflow from financing activities (4,338) (3,467)
(Decrease)/increase in cash (6,140) 1,405
Reconciliation of net cash flow movement in funds:
Cash at beginning of period 13,139 10,891
Exchange rate movements (4) (4)
(Decrease)/increase in cash (6,140) 1,405
(Decrease)/increase in net cash (6,144) 1,401
Cash at end of period 6,995 12,292
The notes form an integral part of these financial statements.
Notes to the Condensed Interim Financial Statements
1 Accounting policies
These condensed financial statements have been prepared on a going concern
basis in accordance with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority, FRS 104 ‘Interim Financial Reporting’, the
Statement of Recommended Practice ‘Financial Statements of Investment Trust
Companies and Venture Capital Trusts’ updated in July 2022 and using the
same accounting policies as set out in the Company’s Annual Report for the
year ended 30 April 2023.
2 Financial statements
The condensed financial statements contained in this interim financial report
do not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The financial information for the six months to 31 October
2023 and 31 October 2022 has not been audited or reviewed by the Company’s
external auditors.
The information for the year ended 30 April 2023 has been extracted from the
latest published audited financial statements. Those statutory financial
statements have been filed with the Registrar of Companies and included the
report of the auditors, which was unqualified and did not contain a statement
under Sections 498(2) or (3) of the Companies Act 2006.
3 Going concern
After making enquiries, and having reviewed the investments, Statement of
Financial Position and projected income and expenditure for the next 12
months, the Directors have a reasonable expectation that the Company has
adequate resources to continue in operation for the foreseeable future. The
Directors have therefore adopted the going concern basis in preparing these
financial statements.
4 Income
Six months to Six months to
31 October 2023 31 October 2022
£’000 £’000
Income from investments:
UK dividend income 328 175
Non UK dividend income 373 453
Property income dividends – 110
Total income from investments 701 738
Bank interest 235 16
Total income 936 754
5 Fair value hierarchy
The methods of fair value measurement are classified into a hierarchy based on
reliability of the information used to determine the valuation.
Level 1 – Quoted prices in an active market.
Level 2 – Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data), either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is
unavailable).
The table below sets out the Company’s fair value hierarchy investments.
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
As at 31 October 2023
Investment – Equities 67,022 – 144 67,166
Total 67,022 – 144 67,166
As at 30 April 2023
Investment – Equities 67,672 – 183 67,855
Total 67,672 – 183 67,855
Glossary of Terms and Alternative Performance Measures (“APMs”)
Discount or Premium (APM)
A description of the difference between the share price and the net asset
value per share. The size of the discount or premium is calculated by
subtracting the share price from the net asset value per share and is usually
expressed as a percentage (%) of the net asset value per share. If the share
price is higher than the net asset value per share, the result is a premium.
If the share price is lower than the net asset value per share, the shares are
trading at a discount.
As at As at
31 October 2023 30 April 2023
Closing NAV per share (p) 319.2 328.6
Closing share price (p) 310.5 318.5
(Discount) (2.7)% (3.1)%
Net 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.
Six months to One year to Five years to
31 October 2023 31 October 2023 31 October 2023
Closing NAV per share (p) 319.2 319.2 319.2
Dividends reinvested (p) 3.0 3.4 3.4
Dividend adjusted closing NAV per share (p) 322.2 322.6 322.6
Opening NAV per share (p) 328.6 326.2 270.4
Dividend adjusted NAV per share returns (1.9)% (1.2)% 19.3%
Ongoing Charges (APM)
Ongoing charges are calculated by taking 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.
Six months to Year to
31 October 2023 30 April 2023
£’000 £’000
Total expenses per Income Statement 827 1,199
Less non-recurring expenses (198) –
Total expenses – annualised 1,258 1,199
Average net assets 78,125 83,660
Ongoing charges 1.6% 1.4%
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 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 the rise and fall in the share price, together with any
dividend paid/reinvested. 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).
Six months to One year to Five years to
31 October 2023 31 October 2023 31 October 2023
Closing share price (p) 310.5 310.5 310.5
Dividends reinvested (p) 3.0 3.4 3.4
Dividend adjusted closing share price (p) 313.5 313.9 313.9
Opening share price (p) 318.5 325.5 271.0
Dividend adjusted share returns (1.6)% (3.6)% 15.8%
NAV Volatility (APM)
Volatility is related to the degree to which NAVs 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.
Six months to Year ended
31 October 2023 30 April 2023
Standard deviation of daily NAV (A) 0.4% 0.5%
Number of trading days 128 250
Square root of the number of trading days (B) 11.3 15.8
Annualised volatility (A*B) 4.5% 8.2%
Shareholder Information
Share dealing
Shares can be traded through a stockbroker or other authorised intermediary.
The Company’s Ordinary shares are traded on 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
SEDOL number 3436594
ISIN number GB0034365949
Bloomberg symbol MIGO
The Company releases its net asset value per Ordinary share to the London
Stock Exchange on a daily basis.
Website: www.migoplc.co.uk
Annual and Half-Yearly Reports
Copies of the Annual Reports are available from the Company Secretary and on
the Company’s website. Copies of the Half-Yearly Reports are only available
on the Company’s website.
AIFM and Investment Manager: Asset Value Investors Limited
The Company’s Alternative Investment Fund Manager (“AIFM”) and
Investment Manager is Asset Value Investors Limited (“AVI”) which was
appointed with effect from close of business on 15 December 2023. AVI is an
experienced manager of investment trusts with assets under management of £1.4
billion as at 31 October 2023, deep sector expertise and supportive analyst
resource.
Previously, MIGO’s Investment Manager was Premier Fund Managers Limited.
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.
Directors and Advisers
Directors (all non-executive)
Richard Davidson (Chairman)
Katya Thomson (Audit Committee Chairman)*
Hugh van Cutsem
Lucy Costa Duarte
Ian Henderson
* Katya Thomson will resign from her role as independent non-executive
Director and Audit Committee Chairman with effect from the close of business
on 29 December 2023.
Caroline Gulliver has been appointed as independent non-executive Director and
Audit Committee Chairman with effect from the same day.
Registered Office
25 Southampton Buildings
London WC2A 1AL
Company Secretary, Marketing & Administration
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Website: www.frostrow.com
Email: info@frostrow.com
Alternative Investment Fund Manager and Investment Manager
Asset Value Investors Limited
2 Cavendish Square
London W1G 0PU
Website: www.assetvalueinvestors.com
Asset Value Investors Limited was appointed as AIFM and Investment Manager
with effect from close of business on 15 December 2023, taking over from
Premier Portfolio Managers Limited and Premier Fund Managers Limited
respectively.
Stockbroker and Financial Adviser
Deutsche Numis
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol BS99 6ZZ
United Kingdom
Telephone: (0) 370 889 3231**
Email: WebCorres@computershare.co.uk
Website: www.investorcentre.co.uk
Please contact the Registrars if you have a query about a certificated holding
in the Company’s shares.
** Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the applicable
international rate. Lines are open between 8.30am to 5.30pm, Monday to Friday
excluding public holidays in England and Wales.
Depositary***
JP Morgan Europe Limited
25 Bank Street
London E14 5JP
Custodian***
JP Morgan Chase Bank, N.A., London Branch
25 Bank Street
London E14 5JP
*** Up until the close of business on 15 December 2023, The Bank of New York
Mellon (International) Limited served as Depositary and Custodian.
Independent Auditors
PricewaterhouseCoopers LLP
7 More London
Riverside
London SE1 2RT
A member of the Association of Investment Companies
MIGO Opportunities Trust plc
An investment company as defined under Section 833 of the Companies Act 2006
Registered in England and Wales No. 5020752
END
Neither the contents of the Company’s website nor the contents of any
website accessible from hyperlinks on this announcement (or any other website)
is incorporated into, or forms part of, this announcement.
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