REG-Miton UK Microcap Trust Plc: Half-year Report
10/01/2025 07:15
Miton UK MicroCap Trust plc
(the "Company" or the "Trust")
REPORT AND ACCOUNTS FOR THE HALF YEAR ENDED 31 OCTOBER 2024
The Directors present the Half-year Report of the Company for the six months
ended 31 October 2024.
Results for the Half Year to 31 October 2024
• Over the half year, the Adjusted Net Asset Value
(“Adjusted NAV”) fell from 55.79p on 30 April 2024 to 51.44p on 31 October
2024, a fall of 7.6% (including dividends re-invested)*.
• The Ordinary Share price moved from 50.50p at 30 April
2024 to 44.40p at 31 October 2024, a decrease of 11.9% (including dividends
re-invested)*.
• A profit of £48,000 in the half year to October 2024
has been credited to revenue reserves.
• Redemption requests of 40.4% of the Company’s issued
share capital amounting to 31,083,534 Ordinary Shares, were received and
accepted, with the redeemed shares cancelled on 5 November 2024, after the
period end. The issued share capital now comprises 45,840,069 Ordinary Shares.
Summary of Results
Half year to Year ended
31 October 2024 30 April 2024
Total net assets attributable to equity shareholders including fair value of warrants (£000) 39,841 43,297
NAV including fair value of warrants per Ordinary Share* 51.79p 56.29p
Adjusted NAV per Ordinary Share* 51.44p 55.79p
Share price 44.40p 50.50p
Discount to NAV* (14.27)% (10.29)%
Discount to Adjusted NAV* (13.69)% (9.48)%
Investment income £0.4m £0.9m
Revenue return per Ordinary Share 0.06p 0.09p
Total return per Ordinary Share including value of warrants (4.41)p (9.17)
Ongoing charges#* 1.97% 1.99%
Ordinary Shares in issue 76,923,603 76,923,603
* Alternative Performance Measure (“APM”). Details are provided in the Glossary on page 26.
# The ongoing charges are calculated in accordance with AIC guidelines.
Chairman’s Statement
This is my valedictory Chairman’s statement, as your Directors have
reluctantly decided that MINI is too small, at around £20 million market
capitalisation post the redemption, to remain viable. Following a
disappointingly large redemption of 40.4%, fuelled by a number of
arbitrageurs, I waited until the UK Budget was out of the way before I
consulted with a large number of the remaining shareholders in early November.
As a group, they were supportive of our manager. However, the Company is now
at a size which some investors consider to be too small from a liquidity
perspective, particularly given the increasing demand from investors for
larger listed funds. The Board also acknowledges that the Company continues to
trade at a persistent, material discount to its Net Asset Value (“NAV”),
with limited options to grow and achieve greater scale. As a result, the Board
has concluded that it is in the best interests of shareholders to put forward
proposals for a voluntary winding up of the Company. The Company has received
a proposal from Premier Miton regarding a scheme of reconstruction under
section 110 of the Insolvency Act 1986 and voluntary winding-up of the Company
(the “Scheme”) through a rollover into one of Premier Miton’s open-ended
funds, which the Board is evaluating. It is expected that a cash exit
alternative will also be offered as part of the Scheme. The winding up of the
Company will be subject to shareholder approval and further announcements will
be made in the coming weeks.
Change to Investment Manager’s fee arrangements
The Company has had an arrangement with Premier Miton to rebate management
fees, so that the Company could maintain an ongoing charges ratio of 2% or
lower. However, the substantial redemption of the Trust's shares in November
has had the effect of reducing the ongoing management fee to nil for November
and December 2024. In light of the results of the shareholder consultation and
the Board’s subsequent decision to put forward proposals to wind up the
Company, the Board has decided to terminate the rebate arrangement and resume
payment of the ongoing management fee to Premier Miton, to support the work
required in the short term in connection with the Scheme.
The reinstatement of Premier Portfolio Managers Limited’s ongoing management
fee, of 0.9% per annum where the average market capitalisation of the
Company is at or below £100m and 0.8% per annum thereafter, calculated on a
monthly basis, is considered to be a relevant related party transaction under
UKLR 11.5.4R(1) and this announcement is being made in accordance with UKLR
8.2.1R. The Board, which has been so advised by Peel Hunt LLP, considers that
the terms of the management fee are fair and reasonable as far as shareholders
are concerned. In giving its advice, Peel Hunt LLP has taken into account the
Board's commercial assessment of the management fee.
For the purposes of Chapter 8 of the UK Listing Rules, the aggregate of the
Company’s ongoing management fee and the management fee payable on the
redemption pool will be capped at 4.99% of the Company’s average net asset
value per annum. This cap is a technical requirement under the UK Listing
Rules and the Board expects the aggregate fees to be substantially lower than
the cap.
Market review
Over the last nine and half years, since the trust was set up, a global
self-feeding indexation behemoth has gathered ever larger sums of global
capital. It is a fact that, in the United States, the Magnificent Seven have
risen by 2,491%, an extraordinary 40.8% annualised figure, since April 2015
(in Sterling). By way of comparison, the UK market is only up 17% since then,
and its total return by 67%. Over the last three and a half years, UK
investors have increasingly participated in US Equities trade to the detriment
of returns on UK quoted companies, and most especially UK quoted small and
microcaps. I saw a statistic recently which showed that there had been 41
consecutive months of outflows from UK open ended equity funds. Even prior to
the recent six-month period, there was a vast gap between UK-quoted microcap
valuations and those of international stocks. The differential has recently
become even more substantial. I would suggest that there is only so far that
the elastic can be stretched – mean reversion is one of the immutable tenets
of finance. The rise in inflationary pressures was initially thought to be a
one-off, but many investors are now worrying that it may start to become more
persistent. Certainly, the recent UK budget is already proving to be
inflationary with Employer National Insurance contributions rising
substantially, forcing companies to raise prices or lay off employees to
maintain their margins. Incidentally, I struggle to see how the budget could
be described as ‘pro-growth’, as it proposes the wholesale removal of
capital from the wealth generating private sector to feed the unreformed
public sector.
MINI returns
Over the half year, AIM listed microcap share prices continued to fall as
investors worried about the implications of Inheritance Tax starting to be
levied on these assets in the Budget on 30th October. They were right to be
concerned since the Chancellor abolished Business Property Relief on
qualifying AIM shares and determined that they would be subject to 20%
Inheritance Tax on the death of the holder, with no mitigating minimum
allowance. The Trust’s Adjusted NAV fell from 55.79p to 51.44p over the half
year to 31 October 2024. Taking dividends into account, the total return over
the period was a fall of 7.6%.
Since our launch in April 2015 there have been numerous market headwinds, and
the trust’s NAV has only risen from 49.00p to 51.79p, a rise of 8.4% when
dividends are included. The Deutsche Numis 1000 Index ex ICs has risen by
68.1% in total return terms over the same period. For reference, the total
return on Deutsche Numis Large Cap Index is 66.5% and the total return on
Deutsche Numis Smallcap plus AIM Index (ex ICs) is 50.3%.
Dividends
Most of your Company’s portfolio holdings comprise immature businesses
concluding a period of heavy investment, and hence few are in a position to
pay dividends. When they do succeed, they often generate a significant cash
surplus, with some starting to pay dividends or buying back shares. Their
valuations have normally risen by this point, to such an extent that the
manager takes profits, and then reinvests the capital into other immature
microcaps that are standing on overlooked valuations. Generally, the trust’s
portfolio was never anticipated to generate a substantial revenue surplus.
2024 Redemption Point
The liquidation of the redemption pool arising from the 2024 Redemption Point
continues apace and a separate RNS will be issued in the near future.
Outlook
Financial assets have a history of generating exceptional returns in trends
that can extend for long periods, before abruptly changing without warning,
when those same assets then deliver sub-normal returns, sometimes for an
equally long time. A particularly good example was the outperformance of the
Japanese stock market up until the last day of 1989, at which point the market
suddenly reversed and its returns then disappointed for the following three
decades. With this in mind, investors in US large cap equities will need
returns from other assets at some point. Many commentators anticipate that the
UK stock market with its capital-intensive bias, and its culture of delivering
a major part of its return via good and growing income, will be one such means
of diversification. In spite of large scale selling of UK equities by
investors over the last three years, the UK stock market itself has already
started keeping pace with the mainstream US indices, despite its lack of a
megacap technology stock tailwind. This may mark the start of a new long-term
trend of UK stock market outperformance. If this occurs, UK-quoted microcaps
appear to have the greatest upside potential, in part because they are
starting from such extraordinarily low valuations after their recent period of
underperformance. If UK microcaps outperform the UK majors, as they have done
historically, and UK majors are set to outperform international comparatives,
then a small and microcap strategy should have strong potential. For this
reason, your Board is exploring the potential to provide investors with a
choice to roll-over their holdings into one of Premier Miton’s open-ended
funds or to receive cash on a winding-up.
Conclusion
In closing, I would like to thank our remaining shareholders for keeping the
faith thus far and I am sorry that your Company has now become too small to
remain viable. For all the reasons stated above, the UK microcap universe has
been an extremely demanding area to invest in over the past three years with
multiple headwinds, the UK budget being the final nail in the coffin. I would
like to thank our manager, our advisors and my fellow Directors for all their
professionalism and help over the years, with particular thanks from the Board
to Peter Dicks, who retired on 31 December 2024, for his service, support and
sage advice to the Company since its inception in 2015.
Ashe Windham
Chairman
9 January 2025
Investment Manager’s Report
Which fund managers have day-to-day responsibility for the Trust’s
portfolio?
Since the launch of the Trust in April 2015, the day-to-day management of the
Trust’s portfolio has consistently been carried out by Gervais Williams and
Martin Turner.
Gervais Williams
Gervais joined Miton in March 2011 and is Head of Equities at Premier Miton.
He has been an equity fund manager since 1985, including 17 years at Gartmore.
He was named Fund Manager of the Year by What Investment? in 2014. Gervais is
President of the Quoted Companies Alliance and a member of the AIM Advisory
Council.
Martin Turner
Martin joined Miton in May 2011. He and Gervais have had a close working
relationship since 2004, with complementary expertise that led them to back a
series of successful companies. Martin qualified as a Chartered Accountant
with Arthur Anderson and had senior roles and extensive experience at Merrill
Lynch and Collins Stewart.
What were the principal stock contributors and detractors in portfolio returns
over the half year to October 2024?
Over recent years, UK institutions have reallocated capital away from UK
quoted companies, depressing their share prices. In the case of the UK majors,
many corporates have offset the ongoing stock market sales by buying back
their own shares, and hence their valuations have not been greatly affected.
Few UK-quoted microcaps have the surplus cash to buy back their shares,
however; the capital in most young businesses is already committed to building
up their operations. So in the case of UK quoted microcaps, ongoing
institutional selling has greatly depressed share prices, sometimes even
whilst the underlying businesses have reported improved profitability.
Given the general appreciation of global stock markets, there was some modest
recovery in LSE-listed mid and smallcap share prices over the six-month period
to October 2024. Unfortunately, numerous AIM listed microcaps failed to
participate in this recovery and many of their share prices continued to
decline. There were also fears that the new government’s Budget would remove
the inheritance tax free status of AIM-listed stocks. On 30th October, the
budget did indeed confirm that AIM stocks would be subject to inheritance tax,
albeit at a rate of 20% rather than the 40% imposed on personal pension
assets. As many of the portfolio’s holdings are listed on the AIM exchange,
their share prices drifted lower even when they continued to report
satisfactory progress.
Given this unfavourable background, microcaps that have raised additional
capital have often done so at low valuations. Xeros Technology is an example.
Its novel laundry technology has already won a number of major customers, but
one was slower to implement than expected, and left the company short of
capital. Whilst Xeros succeeded in raising additional capital, it did so at a
share price down 60%.
Some AIM-listed microcap share prices that had bucked the general market trend
in prior periods suffered a share price setback ahead of the Budget. Zephyr
Energy for example was one of the best performing portfolio holdings last
year. During this six-month period however, its share price retreated. Both
Xeros and Zephyr each detracted 0.7% from the trust’s return over the half
year.
In contrast, CyanConnode, the greatest portfolio detractor last year when it
raised capital, reported a series of contract wins, and its share price rise
defied the general trend of the market, adding 1.0% alone to trust returns
over the half year. Beeks Financial Cloud and Ondo InsureTech also announced
very major contracts, and each added a little over 0.7% each in portfolio
returns.
Overall, the general weakness of AIM-listed microcap share prices, however,
meant that the Adjusted NAV of the Trust fell by 7.6% in total return terms
over the half year.
In light of the substantial decline in UK quoted microcaps over the last three
years, why might their prospects nonetheless remain strong?
The era of globalisation can be characterised as a long period that has
favoured stock market ‘bigness’. The US stock market, being the largest in
the world, has greatly outperformed, a pattern that has become more pronounced
over recent years. Recently, the share prices of the largest US listed stocks
have greatly outpaced all others.
Meanwhile, as investors have increased their participation in US listed
stocks, they have reduced their holdings in other exchanges such as the UK.
Over the last three years, this position has become extreme, especially within
UK-quoted microcaps, where valuations have fallen to what we consider to be
absurdly low levels.
We believe the pattern is set to reverse. The electorate has progressively
come to distrust the compromises that come with globalisation. As long ago as
2016 there was early evidence of a change of heart, with majority votes for
Brexit and the Trump Presidency. Logistical nightmares during the pandemic
have made these compromises all the more prominent, and voter pressure against
globalisation has become even more evident.
We anticipate a future comprising a much more challenging economic outlook.
Local reshored manufacturing is typically more costly, and protectionism can
spark a period of deflation within exporting countries. Overall, we anticipate
the abundant surplus of credit present during globalisation will be displaced
by a shortage in future. This change will favour companies funded with risk
capital, especially those listed on stock markets, over those principally
funded by debt, such as private businesses.
Quoted companies generating cash surpluses (for example those that dominate
the UK mainstream stock market) now have great potential to outperform. In
this context, according to market surveys, the UK exchange has already started
to attract renewed support from overseas investors. Given that UK stocks
currently stand on relatively low valuations, as the new UK outperformance
trend becomes persistent, local selling will moderate and ultimately cease.
Furthermore, there is scope for the global flux in politics to lead to the
return of the ‘smallcap effect’. The UK exchange is better represented in
terms of genuine smallcaps than others. The turnaround in politics could drive
abnormally strong returns from a UK-quoted microcap strategy, and if anything
the upside potential may be greater than usual. UK-quoted microcaps stand on
absurdly low valuations after recent institutional selling. In part, we also
anticipate the current political and geopolitical trends will persistently
favour UK-quoted equities, which will boost the demand for UK-quoted microcaps
in future.
As most institutional investors have consolidated capital into ever larger
pools over recent years, does this not make it impossible for them to allocate
meaningful sums to smallcaps, undermining the future viability of quoted
microcaps?
With institutional capital consolidated in ‘megafunds’, does this not
imply that they are now too large to have holdings in quoted microcaps in
future? Have public equity markets gone through a period of permanent change,
where the cost of capital is too high to justify being a quoted microcap?
We think not. One of the key features of stock markets is that whilst they can
deliver extraordinarily strong returns over long periods, at other times they
can disappoint, sometimes for decades. When the pattern of return moves from
one to the other, the shape of institutional portfolios reflects this change
in pattern. What is the evidence that such a change might be imminent?
First, it is worth reflecting on the remarkable outperformance of US
technology megacap stocks. Global stock markets have not only delivered
returns that have greatly exceed inflation over recent decades, but the
returns on the largest seven US technology stocks, collectively known as the
“Magnificent Seven”, have also been truly exceptional. Whilst the
Magnificent Seven were not linked together as a group in April 2015 when the
trust was launched, it is still possible to look back and assess their
performance. Between April 2015 and October 2024 these stocks have delivered a
total return of 2,073%. In Sterling terms, the return has been even higher, at
2,491%. This equates to an annualised return of 41% per year, over a nine- and
half-year period! Extraordinary. Returns of this magnitude, especially within
a group of stocks with such large market capitalisations, tend to gather
amplified investor support. Gradually at first, but with an accelerating
trend, global capital has flooded into the Magnificent Seven and other similar
stocks.
During this period, the growing abundance of cheap credit made it ever easier
to compete within capital intensive industry sectors, at moments when their
profitability was unusually strong. Hence, every time these stocks started to
generate premium earnings growth, their momentum was constrained by additional
competition. The UK stock market is relatively unusual in that it is dominated
by capital intensive stocks. Overall, its earnings growth was weaker than
usual during globalisation. Furthermore, it should come as no surprise that
when investors selected the portions of their portfolios from which to
withdraw capital, it was the UK stock market that lost out. This combination
of relatively weak earnings growth, and the progressive withdrawal of capital
from the UK led to a decline in valuations in comparison with other markets.
Overall, the UK stock market has delivered very little return since April
2015. The Deutsche Numis All Share Index has only risen by 15% since April
2015, and even when taking out the dividends its total return over this period
is only 64%. Meanwhile, with microcap valuations being heavily depressed by
the progressive withdrawal of capital, the total return on the Deutsche Numis
Alternative Market Index was only 12%.
Meanwhile, as we have outlined, the attitude of the global electorate has
radically changed. In contrast to earlier decades, going forward, corporates
generating surplus cash will have all the advantages. Not only will they be at
lesser risk of becoming insolvent during a recession, but some will also be
able to accelerate their growth by expanding into vacated markets. For others,
acceleration in earnings growth will be greater as they acquire overleveraged
but solvent businesses from the receiver, crucially at nominal cost and
debt-free. While such acquisitions will favour all quoted companies, the
greatest potential uplifts will be amongst quoted smallcaps.
Given this change of pattern within markets, the UK stock market appears well
placed. It is differentiated from most others in that that most of its
mainstream stocks are capital-intensive business and hence typically generate
surplus cash. It is also differentiated by virtue of a much deeper universe of
quoted smallcaps, and quoted microcaps, where the potential acceleration of
earnings from distressed acquisitions will be greatest.
We fully acknowledge that institutions with very large pools of capital may
not participate in the recovery of quoted smallcaps, but this constraint will
not apply to those with less substantial pools. As small and microcap earning
growth accelerates, we believe that even marginal buying will drive up their
share prices. As they start to outperform, we believe that most professional
smallcap managers will then start to reallocate their portfolio capital away
from the midcaps towards microcaps. Even the smallest change in allocation
will be self-reinforcing because microcaps are, by their nature, tiny. In due
course, if the largest pools of capital fail to deliver attractive returns,
then in time they will lose market share to others that are fully
participating in quoted small and microcaps. Overall, we believe that UK
quoted microcaps will therefore remain a viable option for corporates, and
that they are now set to deliver some of the very best returns, as might be
expected given the well-established nature of the ‘smaller
company effect’.
Gervais Williams and Martin Turner
9 January 2025
Portfolio Information as at 31 October 2024
Rank Company Sector & main activity Valuation £000 % of net assets Dividend yield* %
1 Yu Group Utilities 3,195 8.0 2.2
2 MTI Wireless Edge Telecommunications 1,391 3.5 5.4
3 CyanConnode Holdings (including warrants) Telecommunications 1,286 3.2 —
4 Beeks Financial Cloud Technology 988 2.5 —
5 TruFin Financial Services 919 2.3 —
6 Concurrent Technologies Technology 910 2.3 0.8
7 Ondo Insurtech Technology 865 2.2 —
8 STM Group Financial Services 737 1.8 —
9 Zoo Digital Group Technology 736 1.8 —
10 Amaroq Minerals Basic Materials 679 1.7 —
Top 10 investments 11,706 29.3
11 Savannah Resources Basic Materials 678 1.7 —
12 Van Elle Holdings Industrials 625 1.6 1.9
13 Mercia Asset Management Financial Services 612 1.5 1.9
14 Marwyn Value Investors Financial Services 577 1.4 5.0
15 Frontier IP Group Industrials 575 1.4 —
16 UP Global Sourcing Holdings Consumer Discretionary 569 1.4 1.8
17 Record Financial Group Financial Services 551 1.4 4.0
18 Zephyr Energy (including warrants) Energy 541 1.4 —
19 Invinity Energy Systems Industrials 533 1.3 —
20 Elemental Altus Royalties Basic Materials 517 1.3 —
Top 20 investments 17,484 43.7
21 Zinc Media Group Consumer Discretionary 516 1.3 —
22 Capital Basic Materials 508 1.3 6.0
23 Intercede Group Technology 502 1.3 —
24 Smiths News Consumer Discretionary 472 1.2 3.1
25 CT Automotive Group Consumer Discretionary 461 1.2 —
26 Zotefoams Basic Materials 437 1.1 2.0
27 Kefi Gold and Copper Basic Materials 431 1.1 —
28 TPXimpact Holdings Technology 423 1.1 —
29 Pennant International Group Industrials 393 1.0 —
30 Ingenta Technology 378 0.9 5.1
Top 30 investments 22,005 55.2
Balance held in 96 equity instruments (including warrants) 15,479 38.9
Total equity investments 37,484 94.1
Listed Put Option
UKX – December 2025 6,800 Put 239 0.6
Other net current assets 2,118 5.3
Net assets 39,841 100.0
*Source: Refinitiv. Based on historical yields and therefore not
representative of future yields. Includes special dividends where known.
Half Year Management Report
The Company’s investment manager is Premier Portfolio Managers Limited (the
“Investment Manager”). The Investment Manager is responsible for the
management of the Company’s portfolio in accordance with the Company’s
investment policy and the terms of the Management Agreement dated 8 April 2015
and restated 20 October 2020.
The Board has appointed Premier Portfolio Managers Limited as the alternative
investment fund manager (“AIFM”) of the Company.
The important events that have occurred during the period under review, the
key factors influencing the financial statements and any updates to the
principal risks and uncertainties for the remaining six months of the
financial year are set out in the Chairman’s Statement.
While the principal risks of the Company, remain largely unchanged, following
the annual redemption event, the liquidity/marketability risk has been
realised and the Company has become too small to be attractive to a wide
audience. This has resulted in the Board taking further action in this respect
(set out in the Chairman’s Statement).
The risks faced by the Company include, but are not limited to: the scale of
the annual redemption and also the outcome of the proposed Members Voluntary
liquidation vote; availability of suitable investments to execute its
investment strategy; reliance on third-party service providers; reliance on
key personnel/individuals employed by the Investment Manager; share price
volatility and liquidity risk; operational costs which are unrelated to the
size of the fund; adverse regulatory or law changes; cyber security risk;
legal action by others and major market event, climate change or geo-political
risk. The risks arising from the Company’s financial instruments are market
risk; liquidity risk; and credit and counterparty risk.
Directors’ Responsibility Statement
Responsibility Statement
The Directors acknowledge responsibility for the Half Year Financial Report
and confirm that to the best of their knowledge:
In addition to considering the principal risks and the financial position of
the Company as described above, the Board has also considered the following
further factors:
* the condensed set of financial statements has been prepared in accordance
with International Accounting Standard (“IAS”) 34, as contained in
UK-adopted IFRS; and gives a true and fair view of the assets, liabilities,
financial position and profit of the Company as required by the Disclosure
Guidance and Transparency Rules (DTR) 4.2.4R; and
* this Half Year Report (including the Chairman’s Statement and the
Investment Manager’s Report) includes a fair review of the information
required by:
1. DTR 4.2.7R, 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
1. DTR 4.2.8R, being related party transactions that have taken place in the
first six months of the current financial year and that have materially
affected the financial position or performance of the Company during that
period; and any changes in the related party transactions described in the
last Annual Report that could do so.
This Half Year Report was approved by the Board of Directors on 9 January 2025
and the above responsibility statement was signed on its behalf by:
Ashe Windham
Chairman
9 January 2025
Income Statement of the Company for the half year to 31 October 2024
Half year to 31 October 2024 Half year to 31 October 2024 Half year to 31 October 2024 Half year to 31 October 2023 Half year to 31 October 2023 Half year to 31 October 2023 Year ended 30 April 2024 Year ended 30 April 2024 Year ended 30 April 2024
Revenue return Capital return Total Revenue return Capital return Total Revenue return Capital return Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Losses on investments held at fair value through profit or loss — (3,191) (3,191) — (9,096) (9,096) — (7,272) (7,272)
Losses on derivatives held at fair value through profit or loss — (114) (114) — (163) (163) — (351) (351)
Losses on foreign exchange — (15) (15) — — — — (11) (11)
Income 361 — 361 422 — 422 855 — 855
Management fee (42) (126) (168) (59) (177) (236) (97) (295) (392)
Other expenses (266) 11 (255) (320) — (320) (672) — (672)
Return/(loss) on ordinary activities before finance costs and taxation 53 (3,435) (3,382) 43 (9,436) (9,393) 86 (7,929) (7,843)
Finance costs — — — — (21) (21) — (21) (21)
Return/(loss) on ordinary activities before taxation 53 (3,435) (3,382) 43 (9,457) (9,414) 86 (7,950) (7,864)
Taxation (5) — (5) 4 — 4 (12) — (12)
Return/(loss) on ordinary activities after taxation 48 (3,435) (3,387) 47 (9,457) (9,410) 74 (7,950) (7,876)
Return/(loss) per Ordinary Share – basic and diluted (pence) 0.06 (4.47) (4.41) 0.05 (9.99) (9.94) 0.09 (9.26) (9.17)
The total column of this statement is the Income Statement of the Company
prepared in accordance with UK International Accounting Standards in
conformity with the requirements of UK IFRS. The supplementary revenue return
and capital return columns are presented in accordance with the Statement of
Recommended Practice issued by the Association of Investment Companies (“AIC
SORP”).
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period.
There is no other comprehensive income and, therefore, the return/(loss) on
ordinary activities after taxation is both the profit and the total
comprehensive income.
Statement of Changes in Equity of the Company for the half year to 31 October
2024
For the half year to 31 October 2024 Share Capital redemption reserve Share premium account Special reserve Capital reserve Revenue reserve Total
capital
£000 £000 £000 £000 £000 £000 £000
As at 30 April 2024 127 97 672 41,580 747 74 43,297
Total comprehensive income:
(Loss)/return on ordinary activities after taxation — — — — (3,435) 48 (3,387)
Transactions with shareholders recorded directly to equity
Equity dividends paid — — — — — (69) (69)
As at 31 October 2024 127 97 672 41,580 (2,688) 53 39,841
For the half year to 31 October 2023 Share Capital redemption reserve Share premium account Special reserve Capital reserve Revenue reserve Total
capital
£000 £000 £000 £000 £000 £000 £000
As at 30 April 2023 145 79 672 51,039 8,697 122 60,754
Total comprehensive income:
(Loss)/return on ordinary activities after taxation — — — — (9,457) 47 (9,410)
Transactions with shareholders recorded directly to equity
Equity dividends paid — — — (20) — (122) (142)
As at 31 October 2023 145 79 672 51,019 (760) 47 51,202
For the year ended 30 April 2024 Share Capital redemption reserve Share premium account Special reserve Capital reserve Revenue reserve Total
capital
£000 £000 £000 £000 £000 £000 £000
As at 30 April 2023 145 79 672 51,039 8,697 122 60,754
Total comprehensive income:
(Loss)/return on ordinary activities after taxation — — — — (7,950) 74 (7,876)
Transactions with shareholders recorded directly to equity
Redemption of Ordinary Shares — — — (9,439) — — (9,439)
Cancellation of shares (18) 18 — — — — —
Equity dividends paid — — — (20) — (122) (142)
As at 30 April 2024 127 97 672 41,580 747 74 43,297
Balance Sheet of the Company as at 31 October 2024
Half year to Half year to Year ended
31 October 31 October 30 April
2024 2023 2024
£000 £000 £000
Non-current assets:
Investments held at fair value through profit or loss 37,484 44,912 41,292
Current assets:
Derivative instruments 239 201 2
Trade and other receivables 199 304 77
Cash at bank and cash equivalents 2,049 5,945 2,099
2,487 6,450 2,178
Liabilities:
Trade and other payables (130) (160) 173
Net current assets 2,357 6,290 2,005
Net assets 39,841 51,202 43,297
Capital and reserves
Share capital 127 145 127
Capital redemption reserve 97 79 97
Share premium account 672 672 672
Special reserve 41,580 51,019 41,580
Capital reserve (2,688) (760) 747
Revenue reserve 53 47 74
Shareholders’ funds 39,841 51,202 43,297
pence pence pence
Net asset value per Ordinary Share – basic and diluted 51.79 54.10 56.29
Approved by the Board of Directors and authorised for issue on 9 January 2025
and signed on its behalf by:
Ashe Windham
Chairman
Statement of Cash Flows of the Company for the six months ended 31 October
2024
Half year to Half year to Year ended
31 October 31 October 30 April
2024 2023 2024
£000 £000 £000
Operating activities:
Net loss before taxation (3,382) (9,414) (7,864)
Loss on investments and derivatives held at fair value through profit or loss 3,305 9,259 7,623
Amortisation of finance costs — 21 21
(Increase)/decrease in trade and other receivables (16) 11 23
(Decrease)/increase in trade and other payables (43) (2) 11
Withholding tax (paid)/received (5) 4 (12)
Net cash outflow from operating activities (141) (121) (198)
Investing activities:
Purchase of investments (5,582) (6,990) (16,464)
Sale of investments 6,093 8,824 23,957
Purchase of derivative investments (351) (195) (195)
Sale of derivative instruments — — 11
Net cash inflow from investing activities 160 1,639 7,309
Financing activities:
Redemption/repurchase of Ordinary Shares — — (9,439)
Equity dividends paid (69) (142) (142)
Finance costs paid — (21) (21)
Net cash outflow from financing activities (69) (163) (9,602)
(Decrease)/increase in cash and cash equivalents (50) 1,355 (2,491)
Reconciliation of net cash flow movement in funds:
Cash and cash equivalents at the start of the period/year 2,099 4,590 4,590
Net cash (outflow)/inflow from cash and cash equivalents (50) 1,355 (2,491)
Cash at the end of the year 2,049 5,945 2,099
Cash and cash equivalents
Comprise the following:
Cash at bank 2,049 5,945 2,099
2,049 5,945 2,099
The accompanying notes are an integral part of these financial statements.
Notes to the Condensed Financial Statements
1. Significant Accounting Policies
Basis of Preparation
The condensed financial statements of the Company have been prepared in
accordance with UK adopted International Accounting Standards (“IAS”) 34
– Interim Financial Reporting.
The financial information contained in this Half Year Report does not
constitute statutory accounts as defined in Section 435(1) of the Companies
Act 2006. The financial information for the periods ended 31 October 2024 and
31 October 2023 have not been audited or reviewed by the Company’s
Auditor. The figures and financial information for the year ended 30 April
2024 are an extract from the latest published audited financial statements,
which have been filed with the Registrar of Companies. The report of the
Auditor on those financial statements was unqualified and did not contain a
statement under either Section 498(2) or 498(3) of the Companies Act 2006.
In the current period, the Company has applied amendments to IFRS. These
include annual improvements to IFRS, changes in standards, legislative and
regulatory amendments, changes in disclosure and presentation requirements.
The adoption of these has not had any material impact on these financial
statements and the accounting policies used by the Company followed in these
half-year financial statements are consistent with the most recent Annual
Report for the year ended 30 April 2024.
Going Concern
The Board announced on 18 November 2024 that it believes it is in the best
interests of shareholders to put forward proposals for a voluntary winding-up
of the Company. The winding-up of the Company will be subject to shareholder
approval and further announcements will be made when appropriate.
Notwithstanding the material uncertainty in relation to the potential
winding-up of the Company, the Board has considered the appropriateness of
continuing to prepare the Financial Statements on a going concern basis and,
having made an assessment of the Company’s ability to continue as a going
concern, including consideration of the cash balance as at 31 October 2024 of
£2m, are satisfied the Company has adequate resources to continue in
operational existence for a period of at least twelve months from the date
when these financial statements were approved. The Board also believes that
all requirements for approval as an investment trust company will continue to
be met and has, therefore, concluded it remained appropriate to continue to
prepare the financial statements on a going concern basis.
In making the assessment, the Directors of the Company have considered the
likely impacts of international and economic uncertainties on the Company,
operations and the investment portfolio. These include, but are not limited
to, geopolitical events, the war in Ukraine, the ongoing Israel/Palestine
conflict and the recent events in Syria.
The Directors have assessed the impact of changes in market value and income
with associated cash flows. In making this assessment, they have considered
plausible downside scenarios including the impact of inflation and simulated a
50% reduction in NAV. The conclusion was that in a plausible downside scenario
the Company could continue to meet its liabilities. The economic future
remains uncertain, and while the Directors believe that it is possible the
Company could experience further reductions in income and/or market value,
that in their opinion this should not be to a level which would threaten the
Company’s ability to continue as a going concern.
2. Income
Half year to Half year to Year ended
31 October 31 October 30 April
2024 2023 2024
£000 £000 £000
Income from investments:
UK Dividends 275 222 412
UK REIT Dividend income 10 16 29
Non-UK Dividends 52 73 199
337 311 640
Other income:
Bank deposit interest 24 111 214
Other income — — 1
Total 361 422 855
3. Return per Ordinary Share
Returns per share are based on the weighted average number of shares in issue
during the period. Normal and diluted return per share are the same as there
are no dilutive elements on share capital.
Half year to 31 October 2024 Half year to 31 October 2024 Half year to 31 October 2024 Half year to 31 October 2023 Half year to 31 October 2023 Half year to 31 October 2023 Year ended 30 April Year ended 30 April Year ended 30 April
2024 2024 2024
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Net profit (£000)
Continuation shareholders (£000) 48 (3,164) (3,116) 47 (9,457) (9,410) 69 (2,993) (2,924)
Redemption shareholders (£000) — — — — — — 5 (4,957) (4,952)
48 (3,164) (3,116) 47 (9,457) (9,410) 74 (7,950) (7,876)
Weighted average number of shares in issue 76,923,603 94,638,561 85,902,417
Return per Ordinary Share (pence) 0.06 (4.11) (4.05) 0.05 (9.99) (9.94) 0.09 (9.26) (9.17)
The 50,000 Management shares do not participate in the returns of the Company.
4. Dividends per Ordinary Share
Half year to Half year to Half year to Half year to Year ended Year ended
31 October 31 October 31 October 31 October 30 April 30 April
2024 2024 2023 2023 2024 2024
£000 pence £000 pence £000 pence
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 30 April 2023 — — 142 0.15 142 0.15
Final dividend for the year ended 30 April 2024 69 0.09 — — — —
69 0.09 142 0.15 142 0.15
5. Called-up Share Capital
Half year to Half year to Half year to Half year to Year ended Year ended
31 October 31 October 31 October 31 October 30 April 30 April
2024 2024 2023 2023 2024 2024
Number £000 Number £000 Number £000
Ordinary Shares of £0.001 each
Opening balance 76,923,603 77 94,638,561 95 94,638,561 95
Redemptions — — — — (17,714,958) (18)
76,923,603 77 94,638,561 95 76,923,603 77
Half year to Half year to Half year to Half year to Year ended Year ended
31 October 31 October 31 October 31 October 30 April 30 April
2024 2024 2023 2023 2024 2024
Number £000 Number £000 Number £000
Management shares of £1 each 50,000 50 50,000 50 50,000 50
Redemption of Ordinary Shares
The Company has a redemption facility through which shareholders are entitled
to request the redemption of all or part of their holding of Ordinary Shares
on an annual basis. As set out in the Articles of Association, the Board may,
at its absolute discretion, elect not to operate the annual redemption
facility in whole or in part. Accordingly, the Ordinary Shares have been
classified as equity.
2024 Redemption
The total number of Ordinary Shares in respect of which valid redemption
requests were received for the 5 November 2024 Redemption Point was 31,083,534
Ordinary Shares (representing 40.4% of the issued share capital at the
Redemption Point). The Directors elected to operate a redemption pool and
cancel the redeemed shares.
Following the period end, on 5 November 2024 the 31,083,534 Ordinary Shares
over which valid redemption requests were received were cancelled at the
Redemption Point. The current issued share capital as at signing of this
report is 45,840,069 Ordinary Shares and 50,000 Management Shares.
6. Net Asset Values
Ordinary Shares
The NAV per Ordinary Share and the net assets attributable at the period end
were as follows:
Half year to Half year to Half year to Half year to Year ended Year ended
31 October 31 October 31 October 31 October 30 April 30 April
2024 2024 2023 2023 2024 2024
NAV per share price Net assets attributable NAV per share price Net assets attributable NAV per share price Net assets attributable
pence £000 pence £000 pence £000
Basic and diluted 51.79 40,112 54.10 51,202 56.29 43,297
NAV per Ordinary Share is based on net assets at the period end and 76,923,603
Ordinary Shares, being the number of Ordinary Shares in issue at the period
end (31 October 2023: 94,638,561 Ordinary Shares; 30 April 2024: 76,923,603
Ordinary Shares).
Management Shares
Net assets of £1.00 per Management Share is based on net assets at the period
end of £50,000 and attributable to 50,000 Management Shares at the period
end. The holders of Management Shares have no right to any surplus capital or
assets of the Company.
7. Management Fee
Half year to 31 October 2024 Half year to 31 October 2024 Half year to 31 October 2024 Half year to 31 October 2023 Half year to 31 October 2023 Half year to 31 October 2023 Year ended 30 April 2024 Year ended 30 April 2024 Year ended 30 April 2024
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Management fee 42 126 168 59 177 236 97 295 392
At 31 October 2024, an amount of £27,000 (31 October 2023: £75,000; 30 April
2024: £63,000) was outstanding and due to Premier Portfolio Managers
(‘’PPM’’) in respect of management fees.
The basic ongoing management fee payable to the AIFM is calculated at the rate
of one-twelfth of 0.9% of the average market capitalisation of the Company up
to £100m, 0.8% per annum on the average market capitalisation above £100m,
on the last business day of each calendar month. The basic ongoing management
fee accrues daily and is payable in arrears in respect of each calendar month.
For the purpose of calculating the basic fee, the ‘adjusted market
capitalisation’ of the Company is defined as the average daily midmarket
price for an Ordinary share (and C share when in issue), multiplied by the
number of relevant shares in issue, excluding those held by the Company in
treasury, on the last business day of the relevant month. In addition to the
basic ongoing management fee, and when a Redemption Pool is in existence, the
AIFM is entitled to receive from the Company a fee calculated at the rate of
0.9% of the net asset value of the Redemption Pool on the last Business Day of
the relevant calendar month.
For the period under review, the AIFM has not charged such part of the basic
ongoing management fee payable to it so that the Company can maintain an
ongoing charges ratio of 2% or lower.
In accordance with the Directors’ policy on the allocation of expenses
between income and capital, in each financial year 75% of the basic ongoing
management fee payable is expected to be charged to capital and the remaining
25% to income.
8. Finance Costs
Half year to 31 October 2024 Half year to 31 October 2024 Half year to 31 October 2024 Half year to 31 October 2023 Half year to 31 October 2023 Half year to 31 October 2023 Year ended 30 April 2024 Year ended 30 April 2024 Year ended 30 April 2024
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Revolving credit facility
£5m revolving loan facility arrangement fee — — — — 5 5 — 5 5
£5m revolving loan facility
non-utilisation fee — — — — 16 16 — 16 16
— — — — 21 21 — 21 21
The Company entered into a revolving credit facility (the “facility”) on
25 February 2021 for £5m for three years arranged by NatWest Markets Plc
(previously known as The Royal Bank of Scotland plc), and the lender The Royal
Bank of Scotland International Limited, London branch.
The Company cancelled the facility on 23 October 2023 without penalty. No
amounts had been drawn on the facility. A commitment fee of 0.65% on undrawn
balances was previously chargeable.
9. Fair Value Hierarchy
The Company measures fair values using the following hierarchy that reflects
the significance of the inputs used in making the measurements. The fair value
is the amount at which the asset could be sold in an ordinary transaction
between market participants, at the measurement date, other than a forced or
liquidation sale.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1 – Valued using quoted prices, unadjusted in active markets.
Level 2 – Valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included in Level 1.
Level 3 – Valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability.
The tables below set out fair value measurement of financial assets and
financial liabilities in accordance with the fair value hierarchy into which
the fair value measurement is categorised.
Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
Financial assets at fair value through profit or loss at 31 October 2024
Equity investments 37,485 — 271 37,756
Derivative contracts — 239 — 239
37,485 239 271 37,995
Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
Financial assets at fair value through profit or loss at 31 October 2023
Equity investments 43,694 1,218 — 44,912
Derivative contracts — 201 — 201
43,694 1,419 — 45,113
Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
Financial assets at fair value through profit or loss at 30 April 2024
Equity investments 40,911 — 381 41,292
Derivative contracts — 2 — 2
40,911 2 381 41,294
Fair value of Level 3 movements – financial assets
As at As at As at
31 October 2024 31 October 2023 30 April 2024
Level 3 Level 3 Level 3
£000 £000 £000
Opening fair value investments 381 139 139
Transfer from Level 1 to Level 3 203 — 90
Transfer from Level 2 to Level 3 — — —
Transfer from Level 3 to Level 1 — (139) (94)
Movement in unrealised (313) — 246
Closing fair value of Level 3 investments 271 — 381
Investments classified within Level 3 consist of equities and warrants. As
observable prices are not available for these investments, the Manager has
used valuation techniques to derive the fair value. The Level 3 valuations are
reviewed on a regular basis by the Manager. The Manager considers the
appropriateness of the valuation model inputs, as well as the valuation result
using various valuation methods and techniques generally recognised as
standard. In selecting the most appropriate valuation model the Manager
performs back testing and considers which model’s results have historically
aligned most closely to actual market transactions. The fair value of level 3
investments are based on discounted anticipated future cash returns, taking
account of available information, the consideration of liquidity, credit and
market risk factors, and adjusts the valuation model as deemed necessary.
The transfers between Level 3 and Level 1 consist of equities that have been
suspended and/or readmitted after suspension on the relevant stock exchange.
Where the stock is readmitted, it is fair valued using quoted prices,
unadjusted in an active market and transferred to Level 1. Where it is
suspended, it is transferred to Level 3 with the appropriate valuation
technique applied with consideration of the rationale for suspension and other
relevant information.
10. Transactions with the Investment Manager and Related Parties
The amounts paid and payable to the Investment Manager pursuant to the
management agreement are disclosed in note 7. On 12 September 2024, Mr Dicks
purchased 200,000 Ordinary Shares at a price of £0.51 per share. There were
no other identified related party transactions during the period.
11. Post balance sheet events
Since the end of the period, the Company cancelled 31,083,534 Ordinary
Shares (representing 40.4% of the issued share capital) on 5 November 2024,
the Redemption Point, having received valid redemption requests in this
respect. The Board accepted all valid redemption requests and resolved to
effect the Redemption using the redemption pool method set out in the
Company’s Articles, pursuant to which the Company notionally divided its
assets and liabilities into two pools, the Redemption Pool and the Continuing
Pool, with the returns attributable to the respective Redemption and
Continuing shareholders.
As a result of the annual redemption outcome and the significant reduction in
market capital, the Board engaged with shareholders and on the 18 November
2024, issued an announcement stating that the Board has concluded that it is
in the best interests of shareholders to put forward proposals for a voluntary
winding-up of the Company, while also giving consideration to a rollover into
one of Premier Miton’s open-ended funds or a return of cash to shareholders.
The winding-up of the Company will be subject to shareholder approval and
further announcements will be made when appropriate.
The Company has had an arrangement with Premier Miton to rebate management
fees, so that the Company could maintain an ongoing charges ratio of 2% or
lower. However, the substantial redemption of the Trust’s shares in November
2024 has had the effect of reducing the ongoing management fee to nil for
November and December 2024. In light of the results of the shareholder
consultation and the Board’s subsequent decision to put forward proposals to
wind up the Company, on 9 January 2025 the Board decided to terminate the
rebate arrangement and resume payment of the ongoing management fee to Premier
Miton, to support the work required in the short term in connection with the
Scheme. The reinstatement of the AIFM’s management fee is considered to be a
relevant related party transaction under the UK Listing Rules and further
details are set out in the Chairman’s Statement.
FURTHER INFORMATION
Miton UK MicroCap Trust plc's report and accounts for the half year ended 31
October 2024 will be available shortly
on https://www.mitonukmicrocaptrust.com/documents/.
It will also be submitted shortly in full unedited text to the Financial
Conduct Authority's National Storage Mechanism and will be available for
inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) in accordance with
DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules.
Enquiries:
Miton UK MicroCap Trust plc
Gervais Williams, Martin Turner, Claire Long Tel: 020 3714 1500
Peel Hunt LLP (Sponsor and Broker)
Liz Yong, Huw Jeremy Tel: 020 7418 8900
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