Miton Global Opportunities plc
Audited Results for the Year Ended 30 April 2017
The Company’s annual report for the year ended 30 April 2017 (the “Annual Report”) will be posted to shareholders on 7 July 2017. Copies may be obtained from the Company Secretary: Frostrow Capital LLP at 25 Southampton Buildings, London WC2A 1AL or from the Company’s website at:
A copy of the Annual Report has been submitted to the UK Listing Authority, and will shortly be available for inspection on the National Storage Mechanism (NSM):
Frostrow Capital LLP, Company Secretary – 0203 709 8734
28 June 2017
|30 April 2017||30 April 2016||% change|
|Net asset value per Ordinary share||248.7p||182.4p||36.3|
|Discount to net asset value||2.6%||9.9%|
|Net asset value volatility*||5.9%||6.4%|
* See Glossary.
Total Return Performance to 30 April 2017
|1 Year||3 Years||5 Years||Since launch*|
|Net asset value||36.3||48.6||75.5||155.6|
|Sterling 3 month LIBOR +2%||2.4||7.8||13.4||77.7|
* 6 April 2004.
The Miton Global Opportunities Strategy
Key developments over the year
- Three-pronged strategy incorporating new capital structure plus broking and marketing arrangements has been in place for more than a year and has been reaping rewards
- Strong progress in net asset value
- Discount narrowed sharply
- Sterling’s devaluation in response to Brexit positive for a global portfolio
- Closed-ended fund industry continues to evolve, creating opportunities for the Company’s mandate
Overview of strategy
- A unique investment proposition which exposes investors to the opportunities that can be presented by under-researched and increasingly illiquid investment companies
- Unconstrained fully diversified mandate with ability to uncover and exploit fund specific anomalies and pricing inefficiencies
- Highly experienced portfolio manager with the proven ability to identify embedded value across a diversified range of sectors and stocks
- Provides exposure to the global macro and market movements that give rise to these opportunities
- Closed-end structure protects portfolio from inflows and outflows and allows us to be patient
Why invest now?
- Consolidation of the traditional private client brokers into the major wealth management chains has triggered significant change for the closed-end fund sector. Demand from this traditional source has rapidly declined. Given that the share prices of closed-end funds are decided by the balance of supply and demand, many perfectly competent trusts can be acquired at deep discounts
- New launches in the sector are increasingly by funds specialising in alternative asset classes such as property, infrastructure, forestry and peer to peer lending. The methodology for calculating stated net asset values in alternatives is more subjective than that for equities. Therefore pricing anomalies are more prevalent
- Reduced capital behind market making in investment trusts may mean greater volatility and opportunity at times of market stress
- President Trump’s inability to deliver on election promises likely to lead to a return to an environment where low interest rates continue to squeeze asset prices higher through lack of alternatives
- Three long-standing macro themes; Private Equity, India and residential property in Berlin, continue to make progress
This is the thirteenth annual report for Miton Global Opportunities plc and covers the year ended 30 April 2017.
I am delighted to report that during the year under review, your Company’s net asset value per share rose to 248.7p (2016: 182.4p), a total return of 36.3% (2016: 0.4%). The share price ended on an all-time high of 242.3p (2016: 164.3p), a total return of 47.5% (2016: 0.9%).
The Company does not have a formal equity benchmark against which the Board reviews long-term performance and our Investment Manager does not invest by reference to an index. However, your Board has noted that your portfolio has outperformed a number of other comparators such as the FTSE All-Share Index, measured on a total return basis, which rose by 15.4% over the same period (2016: -5.7%), the MSCI World Index, which rose by 27.0% and the FTSE Investment Companies Index, which rose by 26.8% (2016: –0.5%). Our formal cash benchmark, sterling 3 Month LIBOR +2%, rose by 2.4% (2016: +2.6%).
Our portfolio manager provides a comprehensive review of the performance of and developments within your portfolio during the year under review in his report later in this announcement. His report also includes an analysis of the macro-economic conditions affecting the portfolio, recent developments in the investment trust sector and the outlook for the year ahead.
I am very pleased to report that the discount to net asset value per share at which the Company’s shares trade, having remained around 10% for the last three years, narrowed to 2.6% as at the year-end. As at the date of this report, the discount stands at 4.0%. This improvement is thanks to both the excellent performance of the portfolio over the course of the year, and the steps taken by the Board last year to improve the liquidity of, and increase demand for, the Company’s shares which included the appointment of Frostrow Capital LLP (“Frostrow”) to provide a range of operational services, including marketing, and Numis Securities Limited (“Numis”) as the Company’s corporate stockbroker. Shareholders also approved the removal of the requirement to hold continuation votes every three years and replace it with an unconditional realisation opportunity, the first of which will be provided at the Annual General Meeting to be held in 2018. A full description of this opportunity is set out in the Report of the Directors.
The Board has not recommended a dividend this year, and does not expect to do so in the future as the portfolio continues to generate a modest yield, most of which is absorbed by running expenses. The Company will comply with the investment trust rules regarding distributable income but the Company’s objective is to provide capital growth rather than income. Any dividends and distributions will be at the discretion of the Board from time to time.
There have been no changes to the composition of the Board during the year and in accordance with our policy of all Directors standing for re-election annually, you will find the appropriate resolutions in the Notice of the Annual General Meeting. The Board is conscious that three of the Directors have served since the Company was launched and that some refreshment is probably due. They will be addressing this over the next few months with a view to having news for shareholders by the time of the AGM.
The Company’s level of borrowing remained unchanged during the year under review, with £5.0 million drawn down from the £7.0 million loan facility with the Royal Bank of Scotland.
Against a backdrop of uncertainty as a weakened UK government begins Brexit negotiations and President Trump struggles to deliver on his election promises, our Investment Manager believes we can expect a period of increased volatility in the investment company sector. This volatility should create opportunities for the Company as inefficiencies across the market may become more pronounced. Accordingly, the Board believes that the investment thesis of the Company remains valid and strongly supports our Investment Manager’s strategy, which is summarised above.
Annual General Meeting
The Annual General Meeting of the Company will this year be held at the offices of our legal advisers Eversheds Sutherland LLP, One Wood St, London EC2V 7WS on Tuesday, 19 September 2017 at 12 noon. This will be an opportunity to meet the Board and to receive a presentation from our Investment Manager, and we hope as many shareholders as possible will attend.
The notice convening the Annual General Meeting can be found below and an explanation of the proposed special business resolutions can be found in the Report of the Directors.
28 June 2017
Investment Manager’s Report
The past 12 months have marked a period of transition for Miton Global Opportunities plc. The changes to the capital structure, marketing and the trust’s brokership have all been in place for more than a year and are already reaping rewards. There has been a significant refreshing of the share register with self-directed investors appearing more prominently via platforms such as AJ Bell, Hargreaves Lansdowne and Alliance Trust Savings. This type of buyer may well prove to be the natural owner of investment trusts going forward.
During the year under review, the net asset value rose from 182.4p to 248.7p, this represents a gain of 36.3%. In comparison, the FTSE 100 index appreciated 15.4% and the MSCI World (in sterling) rose 27.0% in capital terms. This performance was encouraging as our investment style has traditionally lagged rapidly rising markets. Our discount narrowed during the year allowing our shares to generate a total return of 47.5%.
The closed-end fund industry continues to undergo significant structural change. Private client stockbrokers who were for many decades the major user of trusts have largely been subsumed into the major wealth management chains. Commercial and regulatory demands have led these organisations to aggressively standardise their client portfolios. Given the vast funds under management now concentrated into relatively few houses, they cannot be confident that they can buy enough shares in most trusts in a short period of time to allocate across their client accounts. Therefore they have largely ceased to increase their holdings in all but the most sizeable investment trusts.
This structural change continues to throw up opportunities for the Company. Once there are few natural buyers for a closed-end fund, it then needs only modest selling to leave its shares languishing at a significant discount. This can happen irrespective of the quality of the trust’s underlying portfolio and management. The Company being a closed-end fund itself has a competitive advantage when accessing trusts that have limited trading in their shares. Not having to cope with daily inflows and outflows means that we can wait until a natural exit point before disposing of a holding. This may come when a fund attracts a new audience however often it coincides with an orderly wind down of that trust’s affairs. This year departures of this type from our portfolio have included; Alternative Asset Opportunities, New City Energy, Juridica, Tau and Private Equity Investor.
Whilst the bulk of the portfolio remained focussed on individual opportunities there were three global trends to which we maintained a significant exposure. These were Private Equity, India and residential property in Berlin.
There remains a substantial amount of cash which has been committed globally to private equity funds which has yet to be invested in unlisted companies. This has created a competitive environment for transactions. Investment trusts which specialise in this sector find themselves in a sweet spot. They own the very companies which are in demand and in such conditions should be able to sell swathes of their portfolios at premiums to carrying value. Our longer term concern is that these trusts will struggle to reinvest the proceeds profitably given where we are in the cycle. Therefore our exposure is focussed on trusts such as Better Capital and Dunedin Enterprise which have already moved into orderly wind down and will not be forced to reinvest paying demanding multiples. Pride of place goes to EPE Special Opportunities which gained over 137% during the year. The principal driver behind this success was Luceco, a LED lighting manufacturer and distributer which was controlled by EPE and floated on the London Stock Exchange in October. Luceco shares have appreciated further since their float.
In India, Prime Minister Modi has continued with his reforms. The recent election result in Uttar Pradesh highlights that voters are buying into these reforms despite the associated short term hardships they can bring. The withdrawal of the majority of bank notes overnight last November left many with limited legal tender within a predominantly cash based society. The move to a national goods and services tax is another reform aimed at making the existing framework more efficient by removing layers of bureaucracy and removing opportunities for corruption.
Our principal holding, India Capital Growth, significantly outperformed the Sensex index. Unlike many emerging markets, genuine stockpicking funds such as India Capital Growth prosper as the local market offers a vast array of companies in which to invest. The Bombay Stock Exchange was founded in 1875. Many emerging markets offer limited opportunities often confined to sectors such as banking, utilities and telecommunications. Donald Trump’s election to the White House after a protectionist election campaign triggered a general sell-off across emerging markets. This provided us with the opportunity to acquire a position in Vietnam Opportunities which proved to be a timely decision. The subsequent recovery in these markets also helped Asian specialist Establishment Trust to post a healthy gain.
We retain significant exposure to residential property in Berlin via our holdings in Taliesin and Phoenix Spree. The city is reverting to its previous role as a major European capital. Apartment prices continue to recover from a very low base. There has been a backlash against the gentrification of Berlin which has counter-intuitively boosted the value of our holdings. This is because they have permission to convert properties from rental in order to sell into the private market. Such permissions would be difficult to obtain in the current environment. Therefore we indirectly own what have become scarce assets which if sold would achieve a premium to carrying value.
Encouragingly there are signs that other investors are beginning to seek value opportunities within deeply overlooked closed-end funds. This has helped reverse the recent trend of widening discounts in this area. Until recently this proved to be a major headwind for the Company. An example is the property specialist Alpha Real. Whilst the trust’s net asset value posted a respectable gain rising from 137.9p to 151.9p, the shares generated a return of over 32% largely due to the powerful combination of a narrowing discount and a higher net asset value. The catalyst was a recommendation in the Investors Chronicle, a magazine popular with private investors. Despite this attention and a positive outlook, Alpha shares remain on a discount approaching 20%.
Artemis Alpha remains on course to turn its fortunes around. This is another example where modest progress at portfolio level and some discount narrowing combined to generate a useful return for the Company during the year. Artemis Alpha historically suffered problems with a number of unlisted investments and as a result the board directed the managers to reduce involvement in this area. The fund is becoming more mainstream in its approach however the wide discount suggests that the perception of it in the market remains behind the times.
Shares in Macau Property Opportunities posted a gain approaching 50% during the year. The extremely wide discount at the start of the year reflected concerns over the Chinese crackdown on corruption. The former Portuguese colony’s heritage was as a gambling and money laundering den. In practice Macau’s business model has evolved along the lines of Las Vegas. A new generation of casinos are focussed on tourism, conventions and entertainment. These new properties will require tens of thousands of staff to operate whereas the working population of the province is a mere 360,000. This will put the local housing market under pressure as Macau is already one of the most densely populated places on the planet. Furthermore property values will benefit further when the road and rail bridge to Hong Kong is opened next year.
Phaunos Timber generated a return only slightly lower than that of Macau Property Opportunities. Historically this trust suffered from both poor governance and management at the portfolio level. A new chairman brought in Stafford Timber to run the assets with encouraging results. The plantations are largely mature and Phaunos has now reached the stage where it is generating cash and as a result has started paying dividends. The rerating of the shares is the result of the markets belated recognition that Phaunos would have been a high yielder distributing to shareholders from genuine cash flow in a world where income remains scarce. Unfortunately this trust failed to win its recent continuation vote and will now be wound down. This is an example of what happens if a closed end fund allows its shares to trade on a wide discount. The share register fills with short-term speculative activists and at that point survival is far from assured, irrespective of how good performance is. Within our portfolio, the end of the trust remains the most common type of exit.
Rights and Issues generated a 50% return during the year. For some time this UK smaller companies specialist was overlooked by virtue of its opaque split capital structure. Despite excellent performance the shares often traded at discounts approaching 30%. The simplification of the capital structure combined with the introduction of a buyback programme led to a rapid narrowing of the discount during a period of continued strong performance at portfolio level. The track record of this vehicle can now easily be compared with its peer group and Rights and Issues has comfortably been the best performer over many periods.
The unexpected decision by the UK electorate to depart the European Union proved to be a major boost to our net asset value. We invest on a global basis and report in sterling. Therefore, the pound’s decline against the dollar, euro and yen of between 12% and 16% proved material. We have subsequently reduced our exposure to both the yen and the US dollar given the very attractive sterling prices at which we could dispose of those assets.
A disappointment has been Sanditon Investment Trust. It owns a significant stake in the eponymous fund management group which employs a number of high profile fund managers who previously worked together at Cazenove. Unfortunately their cautious management style has proved out of step with current market conditions. As a result they have not been able to attract business and therefore we exited the position.
Looking forward there is a sense of déjà vu. Markets enjoyed a rally in the aftermath of the US election however more recently the Trump administration has struggled to deliver on its election promises. Bond yields have fallen as investors have lost belief in the Trump trade. Therefore we have returned to an environment which has existed since the global financial crisis. We should expect that very low interest rates will continue to squeeze asset prices higher through a lack of alternatives. Nevertheless, the closed-ended industry faces some challenges which will provide opportunities for the portfolio. A reduction in the capital committed to making markets in investment trusts is likely to increase volatility at times of stress. Further into the future any normalisation of interest rates will undermine the demand structure for alternative income funds which currently command substantial premiums to stated asset value. More imminently the negotiations over Brexit may bring some unexpected surprises. Investors seem complacent about the continental reality that the political imperative for a united Europe outweighs economic and financial concerns.
Miton Asset Management Limited
28 June 2017
10 Year Record
|Year ended 30 April||2017||2016||2015||2014||2013||2012||2011||2010||2009||2008|
|Net asset value per Ordinary share||248.7p||182.4p||181.6p||167.4p||157.8p||141.8p||153.2p||136.5p||95.8p||142.1p|
|Discount to net asset value||2.6%||9.9%||10.4%||10.7%||9.2%||10.1%||8.9%||13.0%||12.0%||6.2%|
as at 30 April 2017
|1||2||India Capital Growth Fund*||5,505||8.6|
|2||1||Taliesin Property Fund*||4,469||7.0|
|3||5||Pantheon International Participations||4,108||6.4|
|4||17||EPE Special Opportunities*||3,306||5.2|
|5||3||Establishment Investment Trust (The)||3,205||5.0|
|6||6||Alpha Real Trust||2,800||4.4|
|7||8||Phoenix Spree Deutschland||2,742||4.3|
|8||10||Better Capital (2009)†||2,675||4.2|
|9||24||Artemis Alpha Trust||2,671||4.2|
|10||11||Phaunos Timber Fund (The)||2,588||4.0|
|Top 10 investments||34,069||53.3|
|11||20||Macau Property Opportunities Fund†||2,550||4.0|
|12||12||New Star Investment Trust||2,272||3.5|
|13||7||Rights & Issues Investment Trust||2,215||3.5|
|14||13||Prospect Japan Fund||2,082||3.2|
|15||36||Baker Steel Resources Trust||2,058||3.2|
|16||15||Real Estate Investors*||1,800||2.8|
|17||14||Aurora Investment Trust||1,665||2.6|
|19||(–)||Marwyn Value Investors||1,478||2.3|
|20||26||Dunedin Enterprise Investment Trust†||1,429||2.2|
|Top 20 investments||53,243||83.1|
|21||(–)||JPMorgan Indian Investment Trust||1,396||2.2|
|22||16||Standard Life European Private Equity Trust||1,360||2.1|
|23||19||Boussard & Gavaudan Holding||1,246||1.9|
|24||(–)||VinaCapital Vietnam Opportunity Fund||1,185||1.8|
|25||25||Terra Catalyst Fund*†||869||1.4|
|27||31||Invesco Perpetual Japan Fund||699||1.1|
|29||34||RENN Universal Growth Investment Trust†||429||0.7|
|30||(–)||SQN Secured Income Fund||407||0.6|
|Top 30 investments||62,168||97.0|
|31||32||Chelverton Growth Trust||385||0.6|
|32||(–)||Origo Partners Convertible Preference*†||368||0.6|
|33||40||Cambium Global Timberland*†||282||0.4|
|34||38||Global Fixed Income Realisation†||277||0.4|
|35||39||Reconstruction Capital II*†||210||0.3|
|36||41||Camper & Nicholsons Marina Investments*||138||0.2|
|38||42||St Peter Port Capital*†||83||0.1|
|41||4||Alternative Asset Opportunities†||27||–|
|42||47||Global Resources Investment Trust||24||–|
|Total investments in the portfolio||64,155||100.00|
* AIM/NEX listed.
† In liquidation or in a process of realisation.
as at 30 April 2017
- Global 19.9%
- India 10.9%
- Continental Europe 16.1%
- Japan 4.1%
- UK 24.3%
- Emerging Markets 0.6%
- Asia Pacific (ex-Japan) 11.3%
- Fixed Interest 1.1%
- North America 6.2%
- Cash 5.5%
Portfolio by asset type*
- Equity 35.6%
- Hedge Funds 1.8%
- Property 23.9%
- Fixed Interest 1.1%
- Private Equity 21.4%
- Other 0.8%
- Mining 5.7%
- Cash 5.5%
- Forestry 4.2%
* Calculated on a ‘look through’ basis based on the mandates of the investments held by the Company.
Source: Miton Asset Management Limited
The Strategic Report contains a review of the Company’s business model and strategy, an analysis of its performance during the year and its future developments, and details of the principal risks and challenges it faces. Its purpose is to inform the shareholders of the Company and help them to assess how the Directors have performed their duty to promote the success of the Company.
The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
The Company is an externally managed investment trust and its shares are premium listed on the Official List and traded on the main market of the London Stock Exchange.
The Company is an Alternative Investment Fund (“AIF”) under the European Union’s Alternative Investment Fund Manager’s Directive (“AIFMD”) and has appointed Miton Trust Managers Limited as its Alternative Investment Fund Manager (“AIFM”).
As an externally managed investment trust, all of the Company’s day to day management and administrative functions are outsourced to service providers. As a result, the Company has no executive directors, employees or internal operations.
The objective of the Company is to outperform sterling 3 month LIBOR plus 2% (the ‘Benchmark’) over the longer term, principally through exploiting inefficiencies in the pricing of closed-end funds. 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.
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. However, at the time of acquisition, no investment will have an aggregated value totalling more than 15% of the gross assets of the Company. Furthermore, the Company will not invest more than 10%, in aggregate, of the value of its gross assets at the time of acquisition in other listed closed-end investment funds, although this restriction does not apply to investments in any such funds which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed-end investment funds. 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.
Key Performance Indicators
The key performance indicators (“KPIs”) used to measure the progress of the Company during the year under review are as follows:
|NAV and the movement of the NAV compared to the notional returns available for cash – defined as sterling 3 month LIBOR plus 2%, the Company’s Benchmark||The NAV total return per Ordinary share for the year was 36.3%, compared to the Benchmark return of 2.4%.|
|NAV volatility^||The Company aims to deliver its performance with a lower level of volatility in the NAV than equity markets. For the year to 30 April 2017, the Company’s NAV had a volatility of 5.9% (2016: 6.4%)*, compared to the volatility of the FTSE All Share of 12.8% (2016: 18.1%)*.|
|The movement in the Company’s share price||The Ordinary share price has increased by 47.5% over the year.|
|Discount of the share price in relation to the NAV per share||Over the year, the discount of the Ordinary share price in relation to the NAV per share has ranged from 2.6% to 11.3%. At the year end, it stood at 2.6% (2016: 10.0%).|
* Source: Frostrow Capital LLP.
^ See glossary for definition and calculation methodology.
Principal Risks and Uncertainties
The Board has undertaken a robust assessment of the principal risks and uncertainties facing the Company including those that would threaten its business model, future performance, solvency and liquidity. Mitigation of these risks is sought and achieved in a number of ways, although it is important to note that the systems in place cannot eliminate the risk of failure to achieve the Company’s investment objective. Information regarding the Company’s risk assessment and internal control procedures is provided in the Audit Committee Report.
The principal risks are categorised under the following broad headings:
- investment risks (including borrowing risks);
- strategic risks (including shareholder relations and share price performance risks); and
- operational risks (including financial, corporate governance, accounting, legal and regulatory risks).
|Market and discount risk|
|The Company aims to capitalise on the opportunities that exist due to inefficiencies in the pricing of closed-end funds and is exposed to fluctuations in the market prices of those funds and their underlying assets. Additionally the Company is exposed to the risk that the market price of its investments differs from that of their NAV – purchasing funds whose market price is at a discount to NAV can result in significant gains on the upside, but can also lead to exposure to poor performing companies.
The Company also uses borrowing, the effect of which is to amplify the gains or losses the Company experiences.
Investors should be aware that by investing in the Company they are exposing themselves to the market risks associated with owning publicly traded shares, and the additional discount risk specific to investing in closed-end funds.
|To manage this risk the Board and the AIFM have appointed the Investment Manager to manage the portfolio within the remit of the investment objective and policy and borrowing limits. Compliance with the investment policy and borrowing limits is monitored on a daily basis by the AIFM and reported to the Board at each Board meeting.
The Investment Manager monitors the volatility, discount, quality of underlying assets, and level of gearing within the portfolio holdings and potential investments. The results of this feed into the stock selection process and consideration of the portfolio constituents. In addition, the Investment Manager reports at each Board meeting on the performance of the portfolio, encompassing,inter alia, rationale for stock selection decisions, the make-up of the portfolio, and portfolio company updates.
|The market in closed-end funds can often be illiquid. As such the Company is exposed to the risk that it will not be able to sell its investment at the current market value, or on a timely basis, when the Investment Manager chooses or it is required to do so to meet financial liabilities.||The Investment Manager monitors volume and price based trade measures and looks to ensure that a proportion of the portfolio is invested in readily realisable funds.
The Board also receives an update on the liquidity of the portfolio and the current level of liquidity of the Company on a regular basis.
|Interest rate risk|
|The Company finances its operations through existing reserves and a revolving credit facility and may be exposed to fluctuations in interest rates. The Company’s financial assets and liabilities may include investments in fixed interest securities, whose fair value may be affected by movements in interest rates.||The Board monitors the effect of interest rate movements on the Company’s finances and reviews the Company’s ongoing compliance with the loan covenants on a monthly basis.|
|Further details on market, liquidity and other financial risks can be found in note 15.|
|Shareholder relations and share price performance|
|The Company and its shareholders are exposed to the risk, particularly if the investment strategy and approach are unsuccessful, that the Company may be viewed unfavourably resulting in a widening of the share price discount to NAV.||In managing this risk the Board reviews the Company’s investment objective in relation to market and economic conditions and the performance of its peers and discusses at each Board meeting the Company’s future development and strategy.
The Board does not seek to manage the discount on a day to day basis but does monitor the trend over longer periods and considers how share price performance may be enhanced, including the effectiveness of marketing and the possibility of share buybacks. Given the size of the Company the Board is conscious of the impact of share buybacks on liquidity and the ongoing charges of the Company.
The Board has implemented, with shareholder approval, a realisation opportunity which will be offered to shareholders every three years. Further details are set out in the Report of the Directors.
|Service provider risk|
|The Board is reliant on the systems of the Company’s service providers and as such a disruption to, or a failure of, those systems could lead to a failure to comply with law and regulations leading to reputational damage to the Company and/or financial loss.||To manage these risks the Board: receives reports from the AIFM and Frostrow on compliance with applicable laws and regulations; reviews internal control reports and key policies of the AIFM, Investment Manager and Frostrow; maintains a risk matrix which details the risks to which the Company is exposed and the controls relied upon to manage those risks; and receives updates on pending changes to the legal and regulatory environment and progress towards the Company’s compliance with any relevant future changes.|
AIFM and Investment Manager
Miton Trust Managers Limited is the appointed AIFM for the Company pursuant to an Investment Management Agreement dated 22 July 2014 (the “IMA”), as amended on 9 September 2015.
Under the terms of the IMA, the AIFM provides, inter alia, the following services:
- risk management services;
- monitoring the Investment Manager’s compliance with the Company’s investment objective and investment policy and reporting any non-compliance in a timely manner to the Investment Manager and the Board;
- determining the net asset value per share on a daily basis;
- maintaining professional indemnity insurance at the level required under the AIFM Rules;
- preparing the monthly factsheets for the Company; and
- upholding compliance with applicable tax, legal and regulatory requirements.
The AIFM has appointed Miton Asset Management Limited as the Investment Manager pursuant to a Delegation Agreement. The Delegation Agreement replaced the previously existing investment management agreement between the Company and the Investment Manager, which had been in place since 9 March 2004, and was put in place to ensure that the relationship between the Investment Manager and the Company is compliant with the requirements of the AIFMD.
Under the terms of the Delegation Agreement, the Investment Manager provides, inter alia, the following services:
- seeking out and evaluating investment opportunities;
- deciding the manner by which monies should be invested, divested, retained or realised;
- deciding how rights conferred by the investments should be exercised;
- analysing the performance of investments made; and
- advising the Company in relation to trends, market movements and other matters which may affect the investment objective and policy of the Company.
The management fee payable to the AIFM is calculated at an annual rate of 0.65% of the adjusted market capitalisation of the Ordinary Shares and 0.5% of the adjusted market capitalisation of any Realisation Shares in issue at the time. If the Company as a whole moves to a realisation basis then the AIFM will be paid 0.5% of the adjusted market capitalisation of the Company as a whole. The management fee accrues daily and is payable in arrears in respect of each calendar month.
The performance fee that was previously payable to the AIFM was removed on 9 September 2015. No performance fee was payable for the year ended 30 April 2016.
A performance fee is only payable in future by the Company in respect of the realisation of assets in the Realisation Pool or the realisation of assets where the Company as a whole moves to a realisation basis. In such cases the performance fee will be 15% of all cash realised and returned to shareholders in excess of a hurdle of sterling 3 month LIBOR plus 5%.
The IMA and Delegation Agreement may be terminated by six months’ written notice subject to the provisions for earlier termination as provided therein.
There are no specific provisions contained within the IMA relating to compensation payable in the event of termination of the agreement other than the entitlement to fees which would have been payable within any notice period.
Continuing Appointment of the AIFM
The Board, through the Management Engagement Committee, keeps the performance of the AIFM under review. It is the opinion of the Directors that the continuing appointment of the AIFM is in the interests of shareholders as a whole. In coming to this decision, the Board took into consideration, inter alia, the following: that Nick Greenwood has been the Company’s lead portfolio manager since launch; the investment performance of the Company is satisfactory relative to that of the markets in which the Company invests; and the remuneration of the AIFM is reasonable both in absolute terms and evaluated against managers of comparable investment companies. The Directors continue to believe that by paying the management fee calculated on a market capitalisation basis, rather than a percentage of assets basis, the interests of the AIFM are more closely aligned with those of shareholders.
Depositary and Custodian
The Board appointed BNY Mellon Trust & Depositary (UK) Limited as its Depositary and Custodian on the terms and subject to the conditions of an agreement dated 22 July 2014 (the “Depositary Agreement”). An annual fee of 0.025% of the gross asset value of the Company, subject to a minimum annual fee of £15,000, is payable to the Depositary monthly in arrears. The Company and the Depositary may terminate the Depositary Agreement with three months’ written notice.
The Depositary provides the following services, inter alia, under the Depositary Agreement:
- safekeeping and custody of the Company’s custodial investments and cash;
- processing of transactions; and
- foreign exchange services.
Company Secretary, Marketing and Administration
Company secretarial, marketing, and administrative services are provided by Frostrow under an agreement dated 1 February 2016. An annual management services fee of 25 basis points of the market capitalisation of the Company, charged quarterly in arrears, is payable, subject to a minimum annual fee of £120,000. The agreement may be terminated by either party on six months’ written notice.
Frostrow provides the following services, inter alia, under its agreement with the Company:
- marketing and shareholder services;
- administrative and company secretarial services;
- advice and guidance in respect of corporate governance requirements;
- maintenance of the Company’s accounting records;
- preparation and dispatch of the annual and half yearly reports; and
- ensuring compliance with applicable legal and regulatory requirements.
Details of the fees paid to Frostrow for their services during the year are set out in note 4 to the Financial Statements.
Environmental, Human Rights and Social Issues
The Company has no employees and the Board consists entirely of non-executive Directors. Day-to-day management of the Company’s business is delegated to the Investment Manager. As an investment trust the Company has no direct impact on the community or the environment and therefore the Company itself has no environmental, human rights, social or community policies. In carrying out its activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.
As an investment company, the Company does not provide goods or services in the normal course of business and does not have customers. Accordingly, the Company falls outside the scope of the Modern Slavery Act 2015. The Company’s suppliers are typically professional advisers and the Company’s supply chains are considered low risk in this regard.
The Directors, through the Investment Manager, encourage companies in which investments are made to adhere to best practice with regard to corporate governance.
The Board of Directors of the Company comprises four male Directors. The Board supports the principle of boardroom diversity, of which gender is one important aspect, and the recommendations of Lord Davies’ review. The Board’s aim is to have a broad range of backgrounds, skills and experience represented on the Board and to make appointments on merit against objective criteria, including diversity. To this end, the Board will dedicate time to considering diversity during any director search process.
On behalf of the Board
28 June 2017
Board of Directors
The Board of Directors all of whom are non-executive, supervise the management of the Company and look after the interests of shareholders. The Board considers that all the Directors are independent and there are no relationships or circumstances which are likely to affect or could appear to affect their judgement.
Anthony Townsend, Chairman
Anthony Townsend has spent over 40 years working in the City and was chairman of the Association of Investment Companies from 2001 to 2003. He is chairman of British & American Investment Trust plc, F&C Global Smaller Companies plc, Baronsmead Second Venture Trust plc, Gresham House plc and Finsbury Growth & Income Trust PLC.
James Fox, Chairman of the Audit Committee
James Fox has over 40 years’ experience in investment management and the investment trust industry. He is a past deputy chairman of the Association of Investment Companies and a past chairman of the Association of Investment Companies’ Tax Committee.
Michael Phillips founded iimia Investment Group plc in 2001 (which became MAM Funds plc in 2010 and is now Miton Group plc) and in a period of seven years built it into a group with funds under management and advice of over £2.8 billion. As chief executive he was responsible for the day to day operations of the Group until September 2008 when he left to pursue other interests. He is a Fellow of the Chartered Institute for Securities & Investment.
Hugh van Cutsem
Hugh van Cutsem has worked in the investment company sector for a number of years. He started his career at Cazenove on the sell side, specialising in investment companies. He left in 2003 to start up a funds business for a boutique corporate advisory business and specialised in marketing listed funds to the UK wealth management sector. In 2008, he co-founded Kepler Partners LLP which focuses on marketing both listed and open-ended funds to the UK fund management industry and also advises on the structuring of both listed and UCITS funds.
Report of the Directors
The Directors present their report and the audited financial statements for the year ended 30 April 2017. Disclosures relating to performance, future developments and risk management can be found within the Strategic Report. The Corporate Governance Report forms part of this report.
The Company was launched on 6 April 2004 as iimia Investment Trust PLC, changing its name on 11 October 2010 to Miton Worldwide Growth Investment Trust PLC and to Miton Global Opportunities plc on 5 January 2016. It is registered in England as a public limited company (registration number 5020752) and is an investment company as defined under Section 833 of the Companies Act 2006.
Activity and Status
The principal activity of the Company is to carry on business as an investment trust. The Company has been granted approval from HM Revenue & Customs as an investment trust under Section 1158 of the Corporation Tax Act 2010. The Company will be treated as an investment trust company subject to the Company’s continued compliance with applicable laws and regulations. The Directors do not envisage any change in this activity in the future.
The Company’s status as an investment trust allows it to obtain an exemption from paying taxes on the profits made from the sale of its investments. Investment trusts offer a number of advantages for investors, including access to investment opportunities that might not be open to private investors and to professional stock selection skills at low cost.
Results and Dividends
The results attributable to shareholders for the year are shown in the Income Statement. No dividends were declared during the year and the Directors have not recommended a final dividend for the year (2016: no dividends declared or recommended). Information on the Company’s dividend policy is given in the Chairman’s Statement.
Alternative Performance Measures
The financial statements set out the required statutory reporting measures of the Company’s financial performance. In addition, the Board assesses the Company’s performance against a range of criteria which are viewed as particularly relevant for investment trusts and for the Company, which are summarised above and explained in greater detail in the Strategic Report, under the heading ‘Key Performance Indicators’.
Definitions of the terms used and the basis of calculation adopted are set out in the Glossary.
The Directors in office during the year and up to the date of this report are:
|Date of appointment|
|Anthony Townsend||23 February 2004|
|James Fox||23 February 2004|
|Michael Phillips||23 February 2004|
|Hugh van Cutsem||31 March 2010|
None of the Directors nor any persons connected with them had a material interest in the transactions, arrangements and agreements of the AIFM or the Investment Manager during the year.
The Board has adopted a policy whereby all Directors are required to stand for re-election annually, regardless of their length of tenure.
The Board has concluded, following formal performance evaluation, that each of the Directors continues to demonstrate effectiveness, a high level of commitment to the Company, independence from the Investment Manager and a keen desire to act in the best interests of the shareholders as a whole. Furthermore, the Board considers that the experience, expertise and knowledge contributed by each Director is of notable benefit to the Company.
Accordingly, the Board recommends the re-election of each of the Directors at the forthcoming Annual General Meeting.
The Directors have been informed of the following substantial interests in the Company’s voting rights as at 30 April 2017:
|Premier Asset Management||1,605,000||6.35|
|M&G Investment Management||1,233,378||4.88|
|Investec Wealth & Investment||1,153,539||4.56|
|Schroder Investment Management||1,100,000||4.35|
|Smith & Williamson||1,071,290||4.24|
|Seven Investment Management||1,012,169||4.00|
|Philip J Milton||860,060||3.40|
|Alliance Trust Savings||836,034||3.31|
The Company has been informed of the following changes between 30 April 2017 and the date of this Report:
|Premier Asset Management||1,490,000||5.89|
|M&G Investment Management||1,288,378||5.10|
|Seven Investment Management||1,014,582||3.92|
Capital Structure and Continuation of the Company
At a General Meeting of the Company held on 9 September 2015, shareholders approved proposals to remove the requirement for continuation votes set out in the Company’s Articles of Association and instead to include provisions enabling shareholders to elect, in 2018 and then at three year intervals, for the realisation of all or part of their shareholding. The Company’s share capital therefore comprises Ordinary shares of 1p each with one vote per share and, when in issue, Realisation shares of 1p each with one vote per share.
The rights of holders of Ordinary shares (being shares in respect of which no election for realisation has been made) and of Realisation shares (being shares in respect of which an election for realisation has been made), when in issue, will be as follows: the portfolio will be split into two separate and distinct pools, namely a continuation pool comprising assets attributable to the continuing Ordinary shares (the “Continuation Pool”) and a realisation pool comprising the assets attributable to the Realisation shares (the “Realisation Pool”). The assets in the Realisation Pool will be managed in accordance with an orderly realisation programme with the aim of making progressive returns of cash to holders of Realisation shares as soon as practicable. The precise mechanism for any return of cash to holders of Realisation shares will depend upon the relevant factors prevailing at the time and will be at the discretion of the Board.
At 30 April 2017 and the date of this report, the number of Ordinary shares in issue was 25,279,985. No shares have been issued during the year. The shares carry one vote each.
The Directors have the authority to issue shares up to an aggregate nominal amount equal to one-third of the issued share capital of the Company. They also have authority to issue shares, or sell Treasury shares, up to an aggregate nominal amount equal to 10% of the issued share capital for cash, without pre-emption rights applying. These authorities will expire at the Annual General Meeting to be held in September 2017, when resolutions to renew them will be proposed.
At the Annual General Meeting held on 30 September 2016, the Directors were granted the authority to repurchase up to 3,789,469 Ordinary shares, being 14.99% of the Company’s Ordinary share capital. No Ordinary shares were re-purchased during the year. This authority will expire at the Annual General Meeting to be held in September 2017, when a resolution to renew the authority will be proposed.
The Company may make market purchases of its own shares for cancellation or for holding in Treasury where it is considered by the Board to be cost effective and positive for the management of the Company’s capital base to do so. During the year, and since the year end, no shares were purchased for, or held in, Treasury.
The Directors have carefully assessed the Company’s current position and prospects as described in the Chairman’s Statement and the Investment Manager’s Report, as well as the Principal Risks and Uncertainties outlined above and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three financial years.
The particular factors the Directors have considered in assessing the prospects of the Company, its ability to liquidate its portfolio, and in selecting a suitable period for this assessment are as follows:
- the Board and the Investment Manager will continue to adopt a long-term view when making investments;
- the majority of the portfolio consists of investments actively traded on major international stock exchanges;
- the Company’s expenses are predictable and modest in comparison with the assets and there are no capital commitments foreseen which would alter that position;
- the Company has no employees, only non-executive Directors, and consequently does not have employment related liabilities or responsibilities; and
- shareholders will have the opportunity to elect to receive Realisation Shares at the Company’s AGM to be held in 2018. In this situation, two portfolios will be created and assets in the Realisation Portfolio will be sold. As part of these proposals, if the net asset value of the Ordinary Shares is less than £30 million after the re-organisation, the Directors would follow provisions in the Articles of Association relating to the winding-up of the Company and the realisation of its assets.
The Company is intended to operate over the long-term, however due to the limitations and uncertainties inherent in predicting market conditions the Directors have determined that three years is the longest period for which it is reasonable to make this assessment.
In carrying out their assessment, the Directors made the following assumptions:
- investors will wish to continue to have exposure to the type of companies that the Company invests in, namely closed-end investment funds;
- the performance of the Company will continue to be satisfactory;
- the threats to the Company’s solvency or liquidity incorporated in the Principal Risks will be managed or mitigated as outlined above; and
- following the realisation opportunity in 2018, as described above, the net asset value of the Ordinary Shares will be more than £30 million, allowing the Company to continue in operation.
Based on the results of this review, the Directors have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three financial years.
Securities Carrying Voting Rights
There are no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements known to the Company between holders of securities that may restrict the transfer of securities; and no agreements to which the Company is party that might affect its control following a successful takeover bid.
Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, including those within the underlying investment portfolio.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or a cross reference table indicating where the information is set out. The Directors confirm that there are no disclosures to be made in this regard.
Annual General Meeting
The Notice of the Annual General Meeting is set out below. In addition to the ordinary business of the meeting, the following resolutions will be proposed as special business:
An Ordinary Resolution to renew the Directors’ authority to allot shares up to an aggregate nominal amount of £84,266 representing approximately one-third of the Company’s issued share capital will be proposed as Resolution 9.
A Special Resolution to authorise the Directors to issue new shares or sell shares from Treasury for cash, up to an aggregate nominal amount of £25,280, which is equivalent to approximately 10% of the Company’s issued share capital, at a price per share not less than the net asset value per share, and to disapply pre-emption rights in respect of such shares, will be proposed as Resolution 10.
A Special Resolution to renew for a further year the Company’s authority to purchase (either for cancellation or for placing into Treasury, at the discretion of the Directors) up to 14.99% of the Ordinary shares in circulation will be put to shareholders as Resolution 11. Purchases will be made on the open market and prices will be in accordance with the terms set out in Resolution 11.
The Directors will exercise the authorities granted to them by the passing of Resolutions 9 to 11 only if, in their opinion, it would be in the best interests of the shareholders as a whole. If passed, these authorities will expire at the Annual General Meeting to be held in 2018, when resolutions for their renewal will be proposed.
A Special Resolution that will allow the Directors to convene general meetings, other than Annual General Meetings, on a minimum of 14 clear days’ notice, will be proposed as Resolution 12. The minimum notice period for Annual General Meetings will remain at 21 clear days. This approval would be effective until the Company’s Annual General Meeting to be held in 2018, at which it is intended that renewal will be sought. The Company will have to offer facilities for all shareholders to vote by electronic means for any general meeting convened on 14 days’ notice. The Directors will only call a general meeting on 14 days’ notice where they consider it to be in the interests of shareholders to do so and the relevant matter is required to be dealt with expediently.
Full details of the above resolutions are contained in the Notice of Annual General Meeting. Ordinary resolutions require that more than 50% of the votes cast at the relevant meeting must be in favour of the resolutions. Special resolutions require that at least 75% of the votes cast must be in favour of the resolution to be passed.
The Directors consider that all the resolutions to be proposed at the Meeting are in the best interests of the Company and its members as a whole. The Directors unanimously recommend that shareholders vote in favour of all the resolutions, as they intend to do in respect of their own beneficial holdings.
The Directors who held office at the date of this report confirm that, so far as they are aware, there is no relevant audit information of which the Company’s Auditor is unaware and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information. This information should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
On behalf of the Board
28 June 2017
Audit Committee Report
I am pleased to present the Audit Committee (the “Committee”) Report for the year ended 30 April 2017. The Committee met twice during the year under review.
The Committee comprises all the Directors whose biographies are set out above. The Committee considers that each member has recent and relevant experience in accounting or auditing and that the Committee as a whole has experience relevant to the investment trust industry.
Role of the Audit Committee
The Committee provides a forum through which the Company’s Auditor reports to the Board. The Committee is responsible for monitoring the process of production and ensuring the integrity of the Company’s financial statements. The other primary responsibilities of the Committee are:
- to review the Company’s half year and annual reports;
- to review the effectiveness of the internal control and risk management environment of the Company;
- to receive and consider reports from the Compliance Officer of the Investment Manager;
- to consider the accounting policies of the Company;
- to monitor adherence to best practice in corporate governance;
- to make recommendations to the Board in relation to the re-appointment of the Auditor;
- to approve the Auditor’s remuneration and terms of engagement; and
- to review and monitor the Auditor’s independence and objectivity and the effectiveness of the audit process.
Matters Considered in the Year
The Committee met twice during the financial year. It has:
- reviewed the internal controls and risk management systems of the Company and its third party service providers;
- received and discussed with Grant Thornton UK LLP their report on the results of the 2016 audit;
- agreed the audit plan and fee for the 2017 audit with PricewaterhouseCoopers LLP, including the principal areas of focus; and
- reviewed the Company’s financial statements and advised the Board accordingly.
Subsequent to the year end, the Committee received and discussed with PricewaterhouseCoopers LLP their report on the results of the 2017 audit.
The significant reporting matters considered by the Committee during the year were:
1. Verification of ownership and valuation of the Company’s holdings. The valuation of investments is undertaken in accordance with the accounting policies in note 1 to the financial statements. Controls are in place to ensure that valuations are appropriate and existence is verified through reconciliations with the Depositary. The Committee discussed with Frostrow and the Investment Manager the process by which the investments are valued and ownership documented, including the reconciliation process with the Depositary. Having reviewed the valuations, the Committee confirmed that they were satisfied that the investments had been valued correctly.
The portfolio contains a significant number of holdings where the investee company is in a process of realisation/liquidation. As at 30 April 2017, 23 out of 51 holdings were in a process of realisation, representing 16.5% of the portfolio. The Investment Manager provides comprehensive updates on investee companies at each Board meeting and the Directors have regular discussions with the Investment Manager about the impact of this ‘tail’ on the Company and its performance.
2. Risk of revenue being misstated due to the improper recognition of revenue. The Committee took steps to gain an understanding of the processes in place to record investment income and transactions.
The Board has asked the Committee to confirm that in its opinion the Board can make the statement that the Annual Report taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy. The Committee has given this confirmation on the basis of its review of the whole document, underpinned by involvement in the planning for its preparation and review of the processes to assure the accuracy of factual content.
The Committee is satisfied that it is appropriate for the Board to prepare the financial statements on the going concern basis.
The Committee also reviewed the financial position and principal risks of the Company in connection with the Board’s statement on the long-term viability of the Company, which is set out in the Report of the Directors.
Internal Controls and Risk Management
The Board is responsible for the risk assessment and review of the internal controls of the Company, undertaken in the context of its investment objective.
The review covers the key business, operational, compliance and financial risks facing the Company. In arriving at its judgement of what risks the Company faces, the Board has considered the Company’s operations in light of the following factors:
- the nature of the Company, with all management functions outsourced to third party service providers;
- the nature and extent of risk which it regards as acceptable for the Company to bear within its overall investment objective;
- the threat of such risks becoming a reality; and
- the Company’s ability to reduce the incidence and impact of risk on its performance.
Against this background, a risk matrix has been developed which covers all key risks that the Company faces, the likelihood of their occurrence and their potential impact, how these risks are monitored and the mitigating controls in place. The Board has delegated to the Committee the responsibility for the review and maintenance of the risk matrix and it reviews, in detail, the risk matrix each time it meets, bearing in mind any changes to the Company, its environment or service providers since the last review.
The Committee receives an internal controls report and reviews the internal controls in place at the Investment Manager and AIFM, as well as other major service providers, and is satisfied that they are sufficiently robust and appropriate.
The Committee members confirm that they have carried out a review of the effectiveness of the system of internal financial control and risk management during the year, as set out above and that:
- an ongoing procedure for identifying, evaluating and managing significant risks faced by the Company was in place for the year under review and up to the date of this report. This procedure is regularly reviewed by the Board; and
- they are responsible for the Company’s system of internal controls and for reviewing its effectiveness and that it is designed to manage the risk of failure to achieve business objectives. This can only provide reasonable not absolute assurance against material misstatement or loss.
The Company does not have an internal audit function as all of its day-to-day operations are delegated to third parties, all of whom have their own internal control procedures. The Committee discussed whether it would be appropriate to establish an internal audit function, and agreed that the existing system of monitoring and reporting by third parties remains appropriate and sufficient.
The Committee monitors and reviews the effectiveness of the external audit process and makes decisions on the re-appointment, remuneration and terms of engagement of the Auditor.
Ahead of each audit, the Committee considers the appropriateness of the scope of the audit plan, the terms under which the audit is to be conducted as well as the matter of remuneration, with a view to ensuring the best interests of the Company are promoted.
PricewaterhouseCoopers LLP (“PwC”) carried out the audit for the year under review and were considered by the Audit Committee to be independent. The audit fee for the year ended 30 April 2017 was £22,000 (2016: £23,175).
The Company operates on the basis whereby the provision of non-audit services by the Auditor is permissible where no conflicts of interest arises, the service is not expressly prohibited by audit legislation, the independence of the Auditor is not likely to be impinged by undertaking the work and the quality and the objectivity of both the non-audit work and audit work will not be compromised. In particular, non-audit services may be provided by the Auditor if they are inconsequential or would have no direct effect on the Company’s financial statements and the audit firm would not place significant reliance on the work for the purposes of statutory audit.
PwC did not provide any non-audit services to the Company during the year.
Audit Committee Chairman
28 June 2017
Directors’ Remuneration Report
for the year ended 30 April 2017
Statement from the Chairman
I am pleased to present the Directors’ Remuneration Report for the year ended 30 April 2017. An ordinary resolution for the approval of this report will be put to shareholders at the forthcoming Annual General Meeting. The law requires the Company’s Auditor, PwC, to audit certain of the disclosures provided. Where disclosures have been audited, they are indicated as such. The Auditor’s opinion is included in the Independent Auditor’s Report.
The Board consists entirely of independent non-executive Directors and the Company has no employees. We have not, therefore, reported on those aspects of remuneration that relate to executive directors. Due to the small size and nature of the Board, it is not considered appropriate for the Company to establish a separate remuneration committee and the remuneration of the Directors is therefore dealt with by the Board as a whole.
During the year ended 30 April 2017, the fees were set at the rate of £27,500 per annum for the Chairman, £20,000 per annum for other non-executive Directors, and an additional £4,000 per annum for the Chairman of the Audit Committee.
The Directors’ fees were last increased with effect from 1 May 2015 to bring them more in line with the market. At the most recent review, held on 21 June 2017, it was agreed that the Directors’ fees would remain unchanged for 2018. All levels of remuneration reflect both the time commitment and responsibility of the role.
Directors’ Fees for the Year (audited)
The Directors who served during the year received the following emoluments:
|Year to||Year to||Year to||Year to||Year to||Year to|
|30 April||30 April||30 April||30 April||30 April||30 April|
|Anthony Townsend (Chairman)||27,500||27,500||–||–||27,500||27,500|
|Hugh van Cutsem||20,000||20,000||–||–||20,000||20,000|
* travel expenses for attendance at Board meetings.
The graph below compares the total return (assuming all dividends are sterling reinvested) to Ordinary shareholders, compared to the FTSE All-Share Index and the Company’s Benchmark of sterling 3 month LIBOR plus 2%.
Relative Importance of Spend on Pay
This report is required to include a table showing actual expenditure by the Company on remuneration and distributions to shareholders for the current and prior year. However, as the Company has not declared any dividends, there is no such analysis to present.
Directors’ Beneficial Interests (audited)
The interests of the Directors and their families in the Ordinary shares of the Company are set out below:
|At 30 April 2017||At 30 April 2016|
|Number of shares||Number of shares|
|Hugh van Cutsem||6,234||6,234|
There have been no changes to any of the above holdings between 30 April 2017 and the date of this Report.
There is no requirement under the Company’s Articles of Association for Directors to hold shares in the Company.
Statement of Voting at Annual General Meeting
The Directors’ Remuneration Report for the year ended 30 April 2016 was approved by shareholders at the Annual General Meeting held on 30 September 2016.
The votes cast by proxy were as follows:
|Number of votes||% of votes cast|
|Total votes cast||11,940,579||100|
|Number of votes withheld||0|
* Any proxy votes which were at the discretion of the Chairman have been included in the “for” total.
The Directors’ Remuneration Report was approved by the Board of Directors on 28 June 2017 and signed on its behalf by:
Directors’ Remuneration Policy
The Board’s policy is that the remuneration of the Directors should reflect the experience of the Board as a whole, and is determined with reference to comparable organisations and appointments.
The level of remuneration has been set in order to attract individuals of a calibre appropriate to the future development of the Company. The remuneration of the Directors will take into account the duties and responsibilities of the Directors and the expected time commitment to the Company’s affairs.
The fees of the Directors are determined within the limits set out in the Company’s Articles of Association, which stipulate that the aggregate amount of Directors’ fees shall not exceed £150,000 in any financial year or any greater sum that may be determined from time to time by ordinary resolution of the Company. The Directors are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits. There are no performance conditions attaching to the remuneration of the Directors as the Board does not believe this to be appropriate for non-executive Directors.
As set out in the Company’s Articles of Association, Directors are entitled to be paid all reasonable travel, hotel or other expenses properly incurred in or about the performance of their duties as Directors, including expenses incurred in attending Board or shareholder meetings.
In certain circumstances, under HMRC rules, travel and other out of pocket expenses reimbursed to the Directors may be considered as taxable benefits. Where expenses are classed as taxable under HMRC guidance, they are shown in the taxable expenses column of the Directors’ remuneration table along with the associated tax liability.
|for year to||Fees for year to|
|30 April 2018||30 April 2017|
|Audit Committee Chairman||24,000||24,000|
|Total aggregate annual fees that may be paid||150,000||150,000|
Fees for any new Director appointed will be on the above basis. Fees payable in respect of subsequent periods will be determined following an annual review. Any views expressed by shareholders on the fees being paid to Directors will be taken into consideration by the Board.
None of the Directors has a contract of service with the Company, but letters of appointment setting out the terms of their appointment as non-executive Directors are in place and are available on request from the Company Secretary and will be available at the Company’s Annual General Meeting. The Company’s Articles of Association provide that a Director shall retire and be subject to election at the first Annual General Meeting after appointment, and that one-third of the Directors retire by rotation at subsequent Annual General Meetings, with each Director retiring at least every third year. In addition to these requirements, the Board has agreed that all Directors will stand for re-election annually. Compensation will not be paid upon loss of office.
This policy was approved by shareholders at the Annual General Meeting held in 2015. 16,706,253 (99.9%) of votes were received in favour, 14,767 (0.1%) were against and 179,200 were withheld. The percentage of votes excludes votes withheld.
No communications have been received from shareholders regarding Directors’ remuneration. The Board will consider any comments received from shareholders on the remuneration policy.
In accordance with the regulations, an ordinary resolution to approve the Directors’ Remuneration Policy will be put to shareholders at least once every three years and therefore it is expected that it will next be put to shareholders in 2018.
Corporate Governance Report
This Corporate Governance Statement forms part of the Report of the Directors.
The Company is committed to the highest standards of corporate governance and the Board is accountable to shareholders for the governance of the Company’s affairs.
Statement of Compliance with the AIC Code of Corporate Governance
The Board of Miton Global Opportunities plc has considered the principles and recommendations of the Code of Corporate Governance published by the Association of Investment Companies in July 2016 (“AIC Code”) by reference to the AIC Corporate Governance Guide for Investment Companies (“AIC Guide”). The AIC Code, as explained by the AIC Guide, addresses all the applicable principles set out in the UK Corporate Governance Code (the “UK Code”), as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.
Copies of the AIC Code, the AIC Guide and the UK Code can be found on the respective organisations’ websites: www.theaic.co.uk and www.frc.org.uk.
The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders.
The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.
The UK Code includes provisions relating to:
- the role of the chief executive;
- executive directors’ remuneration; and
- the need for an internal audit function.
For the reasons set out in the AIC Guide, and as explained in the UK Code, the Board considers these provisions are not relevant to the position of the Company as it is an externally managed investment company. In particular, all of the Company’s day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. Therefore the Company has not reported further in respect of these provisions.
Board of Directors
The Board consists entirely of non-executive Directors.
The Directors meet at regular Board meetings, held at least once a quarter, with additional meetings arranged as necessary. During the year to 30 April 2017, the number of scheduled Board and Committee meetings attended by each Director was as follows:
|Hugh van Cutsem||4(4)||2(2)||1(1)|
Figures in brackets indicate maximum number of meetings held in the year in respect of which the individual was a Board/Committee member.
The Board is responsible for all matters of direction and control of the Company, including its investment policy, and no one individual has unfettered powers of decision. The Directors possess a wide range of business and financial expertise relevant to the Company and consider that they commit sufficient time to the Company’s affairs. Brief biographical details of the Directors, including details of their significant commitments, can be found above. There are no qualifying third party indemnity provisions in place.
A procedure for the induction of new Directors has been established, including the provision of an induction pack containing relevant information about the Company, its processes and procedures. New appointees will also have the opportunity of meeting with the Chairman and relevant persons at the AIFM, Investment Manager and Company Secretary.
Policy on Tenure
The Board subscribes to the view expressed within the AIC Code that long-serving directors should not be prevented from forming part of an independent majority. It does not consider that a director’s tenure necessarily reduces his/her ability to act independently and, following appropriate, formal performance evaluations, believes that directors may be considered independent in character and judgement. The Board’s policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no limit has been imposed. In view of its non-executive nature, the Board considers that it is not appropriate for directors to be appointed for a specified term, although new directors will be appointed with the expectation that they will serve for a minimum period of three years subject to shareholder approval. The Board has adopted a policy whereby all Directors will be required to stand for re-election annually, regardless of their length of tenure.
The Board has established a formal process, led by the Chairman, for the annual evaluation of the performance of the Board, its Committees and the individual Directors. The annual appraisal process was conducted by interview. The appraisal of the Chairman followed the same process and was conducted by the Chairman of the Audit Committee, Mr Fox. Having considered and discussed the points raised by Directors during the evaluation, the Chairman concluded that the Board had the appropriate balance of skills, experience, length of service and knowledge, and that the Directors worked well together.
Chairman and Senior Independent Director
The Chairman, Mr Townsend, is deemed by his fellow independent Board members to be independent and to have no conflicting relationships. Mr Townsend is chairman of five other investment companies but the Board considers that he has sufficient time to commit to the Company’s affairs as necessary. Given the size and nature of the Board, the Board has not considered it appropriate to appoint a Senior Independent Director.
In accordance with the AIC Code, as part of the evaluation process, the Board has reviewed the independence of each individual Director and the Board as a whole.
The AIC Code requires that this report should identify each non-executive Director the Board considers to be independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, a Director’s judgement, stating its reasons if it determines that a Director is independent notwithstanding the existence of relationships or circumstances which may appear to be relevant to its determination.
Mr Townsend, Mr Fox and Mr Phillips have each held office for 13 years, since the launch of the Company in 2004. The Board considers, however, that longevity of service does not impede a Director’s ability to act independently. Following formal performance evaluation, and having noted the willingness of each Director to challenge and debate the activities of the AIFM and Investment Manager, the Board has concluded that each Director is independent in character and judgement and that there are no relationships or circumstances which are likely to affect the judgement of any Director.
Conflicts of Interest
In line with the Companies Act 2006, the Board has the power to authorise any potential conflicts of interest that may arise and impose such limits or conditions as it thinks fit. A register of interests and potential conflicts is maintained and is reviewed at every Board meeting to ensure all details are kept up to date. It was resolved at each Board meeting during the year that there were no direct or indirect interests of a Director that conflicted with the interests of the Company. Appropriate authorisation will be sought prior to the appointment of any new director or if any new conflicts or potential conflicts arise.
Board Responsibilities and Relationship with the AIFM and the Investment Manager
The Board is responsible for the determination and implementation of the Company’s investment policy and for monitoring compliance with the Company’s investment objective. At each Board meeting, the Directors follow a formal agenda, which is circulated in advance by the Company Secretary. The Board’s main roles are to create value for shareholders, to provide leadership to the Company and to set the Company’s strategic objectives. Specific responsibilities of the Board include: reviewing the Company’s investments, asset allocation, gearing policy, cash management, peer group performance, investment outlook and revenue forecasts and outlook.
In order to discharge these responsibilities, the Board requires that Frostrow, the AIFM and the Investment Manager provide financial information, together with briefing notes and papers in relation to changes in the Company’s economic and financial environment, statutory and regulatory changes and corporate governance best practice.
The Board has a schedule of matters reserved for decision by the full Board, which is regularly reviewed.
The Board has delegated certain of its responsibilities to the Audit Committee and the Management Engagement Committee, the terms of reference for which are available on the Company’s website, www.mitongroup.com/migo.
At each Board meeting, representatives from the AIFM and Investment Manager are in attendance to present verbal and written reports covering its activity, portfolio and investment performance over the preceding period, and compliance with the applicable rules and guidance of the FCA and the UK Stewardship Code. Ongoing communication with the Board is maintained between formal meetings. The Board and the Investment Manager operate in a supportive, co-operative and open environment.
Engagement with Investee Companies
As an externally managed investment company, the Board delegates the majority of its Stewardship and engagement responsibilities to the Company’s Investment Manager. However, the Board retains oversight of this process by receiving regular updates from the Investment Manager on its engagement activities and by reviewing the Investment Manager’s engagement and voting policies. The Investment Manager has published a statement of compliance with the UK Stewardship Code. Further details of the Investment Manager’s approach to engaging with investee companies can be found on its website at www.mitongroup.com/index.php/corporate/shareholder-information.
The Directors have decided that, given the size of the Board, it is unnecessary to form separate Remuneration and Nomination Committees; the duties that would ordinarily fall to those Committees are carried out by the Board as a whole.
The Board has established an Audit Committee, which comprises all the Directors and is chaired by Mr Fox. With such a small Board, it is deemed both proportionate and practical to involve all Directors.
The Audit Committee meets at least twice yearly, and meetings are arranged to coincide with the publication of the Company’s financial statements.
Management Engagement Committee
The Management Engagement Committee comprises all the Directors and is chaired by Mr Townsend. The Committee meets at least once a year to review the performance of the AIFM and Investment Manager’s obligations under the IMA and Delegation Agreement and to consider any variation to the terms of these agreements. The Management Engagement Committee then makes a recommendation to the Board about the continuing appointment of the AIFM and Investment Manager under the terms of the IMA and Delegation Agreement. The Management Engagement Committee also reviews the performance of Frostrow, the Depositary, the Custodian, the Registrar and any matters concerning their respective agreements with the Company.
Independent Professional Advice
The Board has formalised arrangements under which the Directors, in the furtherance of their duties, may seek independent professional advice at the Company’s expense.
The Company has also arranged Directors’ and Officers’ Liability Insurance which provides cover for legal expenses under certain circumstances. This was in force for the entire year under review and up to the date of this report.
The Board has direct access to the advice and services of the Company Secretary, Frostrow, which is responsible for ensuring that the Board and Committee procedures are followed and that the Company complies with applicable regulations. The Company Secretary is also responsible to the Board for ensuring timely delivery of the information and reports and that statutory obligations of the Company are met.
Dialogue with Shareholders
Communication with shareholders is given a high priority by the Board, the AIFM and the Investment Manager and the Directors are available to enter into dialogue with shareholders. Major shareholders of the Company are offered the opportunity to meet with the Investment Manager and the Directors to ensure that their views are understood. All shareholders are encouraged to attend and vote at the Annual General Meeting, during which the Board and the Investment Manager are available to discuss issues affecting the Company and shareholders have the opportunity to address questions to the Investment Manager and the Board.
Any shareholder who would like to lodge questions in advance of the Annual General Meeting is invited to do so, either on the reverse side of the proxy card or in writing to the Company Secretary. The Company always responds to letters from individual shareholders.
The Annual and Half-Yearly Reports of the Company are prepared by the Board and its advisers to present a full and readily understandable review of the Company’s performance. Copies of the Annual Report are dispatched to shareholders by mail and are also available from Frostrow or by downloading from the Company’s website: www.mitongroup.com/migo.
Nominee Share Code
Where the Company’s shares are held via a nominee company name, the Company undertakes:
- to provide the nominee company with multiple copies of shareholder communications, so long as an indication of quantities has been provided in advance; and
- to allow investors holding shares through a nominee company to attend general meetings, provided the correct authority from the nominee company is available.
Nominee companies are encouraged to provide the necessary authority to underlying shareholders to attend the Company’s general meeting.
By order of the Board
Frostrow Capital LLP
28 June 2017
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial period. Under that law, the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Company for that period. In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
- prepare the financial statements on a going concern basis unless it is inappropriate to assume that the Company will continue in business; and
- prepare annual reports and financial statements that, taken as a whole, are fair, balanced and understandable and provide the necessary information for shareholders to assess the Company’s position and performance, business model and strategy.
The Directors confirm that the financial statements for the year ended 30 April 2017, which have been prepared in accordance with UK Generally Accepted Accounting Practice, comply with the above requirements.
The Directors are responsible for ensuring that the Strategic Report, Report of the Directors and other information included in the Annual Report are prepared in accordance with company law in the UK. They are responsible for ensuring that the Annual Report includes information required by the Listing Rules of the UKLA.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy, at any time, the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for the Company’s system of internal financial control, for safeguarding the assets of the Company and hence taking reasonable steps for the prevention and detection of fraud and other irregularities.
Miton Trust Managers Limited is responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Visitors to the website should be aware that legislation in the UK governing the preparation of the financial statements may differ from legislation in other jurisdictions.
The Directors confirm that to the best of their knowledge:
- the financial statements have been prepared in accordance with UK accounting standards, give a true and fair view of the assets, liabilities, financial position and the profit for the year ended 30 April 2017; and
- the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
The Annual Report and financial statements, taken as a whole, are considered by the Board to be fair, balanced and understandable and provide the necessary information for shareholders to assess the Company’s performance, position, business model and strategy.
On behalf of the Board
28 June 2017
Independent Auditor’s Report to the Members of Miton Global Opportunities plc
Report on the financial statements
In our opinion, Miton Global Opportunities plc’s financial statements (the “financial statements”):
- give a true and fair view of the state of the Company’s affairs as at 30 April 2017 and of its return and cash flows for the year then ended;
- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
- have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report, comprise:
- the Statement of Financial Position as at 30 April 2017;
- the Income Statement for the year then ended;
- the Statement of Cash Flow for the year then ended;
- the Statement of Changes in Equity for the year then ended; and
- the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law (United Kingdom Generally Accepted Accounting Practice).
Our audit approach
- Overall materiality: £628,773 which represents 1% of net assets.
- The Company is a standalone Investment Trust Company and engages Miton Asset Management Limited (the “Investment Manager”) via Miton Trust Managers Limited (the “AIFM”) to manage its assets.
- We conducted our audit of the financial statements using information from the Investment Manager and Frostrow Capital LLP, whom the AIFM has engaged to provide certain administrative functions.
- We tailored the scope of our audit taking into account the types of investments within the Company, the involvement of the third parties referred to above, the accounting processes and controls, the industry in which the Company operates, and also with reference to the review undertaken of the predecessor auditor’s working papers to identify further areas of focus.
- Recognition of Income.
- Valuation and existence of assets.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identified by our audit.
|Area of focus||How our audit addressed the area of focus|
|Recognition of Income|
|Refer to notes 2 and 8 to the financial statements.
Incomplete or inaccurate income (for both the revenue and capital return columns of the Income Statement) could have a material impact on the Company’s net asset value. With respect to the Company’s income derived from dividends of £675,000, we focused our audit work on the accuracy and completeness of income and its presentation in the Income Statement as revenue or capital returns, as set out in the requirements of The Association of Investment Companies Statement of Recommended Practice (the “AIC SORP”) and the Company’s Income Recognition accounting policy in note 1.
We also focused on the calculation of realised and unrealised gains and losses on investments amounting to a gain of £16,943,000 for the year.
|We understood and assessed the design and implementation of relevant controls surrounding dividend income recognition.
We tested dividend receipts by agreeing the dividend rates from investments to independent third party sources and traced a sample through to cash receipts. No misstatements were identified by our testing which required reporting to those charged with governance.
To test for completeness, we tested that the appropriate dividends had been received in the year by reference to independent data of dividends declared for investment holdings in the portfolio. Our testing did not identify any unrecorded dividends.
We then tested the validity of special dividends by checking the allocation and presentation of special dividend income between the revenue and capital return columns of the Income Statement. We did not find any material special dividends that were not treated in accordance with the accounting policies and the AIC SORP.
We also tested the gains or losses on investments held at fair value comprising realised and unrealised gains or losses. For realised gains and losses, we traced a sample of disposal proceeds to bank statements and recalculated the gain/loss recognized. Our testing of the unrealised gains and losses was conducted as part of our testing of the valuation of investments. No misstatements were identified by our testing which required reporting to those charged with governance.
|Valuation and existence of assets|
|Refer to Accounting Policies and note 8 to the financial statements.
Non-current investment assets at 30 April 2017 comprised £63,143,000 of investments for which a market price can be obtained, and unquoted investments totaling £1,012,000. We focused on the valuation and existence of investments because investments represent the principal element of the net asset value disclosed on the Statement of Financial Position in the financial statements.
|We agreed the holdings for all investments to an independent custodian confirmation from Bank of New York Mellon.
For investments where a market price can be obtained, we agreed the prices used in valuing them to third party sources.
For the unquoted investments, where audited financial information showing the valuation of the underlying investments at the year-end was not available, we:
No misstatements were identified which required reporting to those charged with governance.
|How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the types of investments within the Company, the involvement of third parties (including the Investment Manager and Frostrow Capital LLP who are engaged to provide certain administrative functions), the accounting processes and controls, and the industry in which the company operates. As this is the first year we have issued an audit opinion on the Company’s financial statements, we reviewed the predecessor auditor’s working papers to gain evidence over the opening balances for the year ended 30 April 2017, and to identify any areas of increased risk in combination with our own assessment.
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
|How we determined it||1% of net assets.|
|Rationale for benchmark applied||We believe that net assets are the primary measure used by the shareholders in assessing the performance of the Company, and is a generally accepted auditing benchmark.|
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £31,439 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Under the Listing Rules we are required to review the Directors’ statement in relation to going concern. We have nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the Directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements. We have nothing material to add or to draw attention to.
As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the Company has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Company’s ability to continue as a going concern.
Other required reporting
Consistency of other information and compliance with applicable requirements
Companies Act 2006 reporting
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and
- the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.
In addition, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified any material misstatements in the Strategic Report and the Report of the Directors. We have nothing to report in this respect.
|ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
||We have no exceptions to report.|
||We have no exceptions to report.|
||We have no exceptions to report.|
|The Directors’ assessment of the prospects of the Company and of the principal risks that would threaten the solvency or liquidity of the Company
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:
||We have nothing material to add or to draw attention to.|
||We have nothing material to add or to draw attention to.|
||We have nothing material to add or to draw attention to.|
Under the Listing Rules we are required to review the Directors’ statement that they have carried out a robust assessment of the principal risks facing the Company and the Directors’ statement in relation to the longer-term viability of the company. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review.
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
- we have not received all the information and explanations we require for our audit; or
- adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
- the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors’ Remuneration Report – Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.
Corporate Governance Statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to ten further provisions of the Code. We have nothing to report having performed our review.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
- whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed;
- the reasonableness of significant accounting estimates made by the Directors; and
- the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. With respect to the Strategic Report and Report of the Directors, we consider whether those reports include the disclosures required by applicable legal requirements.
Felicity Rees (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
28 June 2017
- The maintenance and integrity of the Miton Global Opportunities plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
- Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
for the year ended 30 April 2017
30 April 2017
30 April 2016
|Gains on investments||8||–||16,943||16,943||–||524||524|
|Investment management fee||3||(331)||–||(331)||(238)||–||(238)|
|Exchange losses on capital items||–||(7)||(7)||–||(3)||(3)|
|Return before finance costs and taxation||(103)||16,936||16,833||(231)||521||290|
|Return before taxation||(180)||16,936||16,756||(317)||521||204|
|Return after taxation||(180)||16,936||16,756||(317)||521||204|
|Return per Ordinary share||7||(0.7)||67.0||66.3||(1.3)||2.1||0.8|
The total column of this statement is the Income Statement of the Company. The supplementary revenue and capital columns have been prepared in accordance with guidance issued by the AIC.
All revenue and capital items in the above statement derive from continuing operations. There is no other comprehensive income other than that passing through the Income Statement and therefore no Statement of Total Comprehensive Income has been presented.
Statement of Changes in Equity
for the year ended 30 April 2017
|Capital redemption reserve||Share premium account||Special reserve||Capital reserve||Revenue reserve||Total Shareholders’ funds|
|Balance at 1 May 2015||252||60||16,727||10,008||19,027||(157)||45,917|
|Movement for the year|
|Return/(loss) for the year||–||–||–||–||521||(317)||204|
|Balance at 30 April 2016||252||60||16,727||10,008||19,548||(474)||46,121|
|Movement for the year|
|Return/(loss) for the year||–||–||–||–||16,936||(180)||16,756|
|Balance at 30 April 2017||252||60||16,727||10,008||36,484||(654)||62,877|
Statement of Financial Position
as at 30 April 2017
|30 April 2017||30 April 2016|
|Creditors: amounts falling due within one year||11|
|Net current liabilities||(1,278)||(3,294)|
|Share capital and reserves:|
|Capital redemption reserve||60||60|
|Share premium account||16,727||16,727|
|Total shareholders’ funds||62,877||46,121|
|Net asset value per Ordinary share||13||248.7||182.4|
These financial statements were approved by the Board of Directors and authorised for issue on 28 June 2017, and signed on its behalf by:
Company No. 5020752
Statement of Cash Flow
for the year ended 30 April 2017
|Year ended||Year ended|
|30 April 2017||30 April 2016|
|Net cash outflow from operating activities||14||(86)||(243)|
|Purchases of investments||(13,289)||(14,403)|
|Sales of investments||15,755||12,370|
|Net cash inflow/(outflow) from investing activities||2,466||(2,033)|
|Revolving credit facility drawdown||–||2,000|
|Net cash (outflow)/inflow from financing activities||(77)||1,911|
|Increase/(decrease) in cash||2,303||(365)|
|Cash at beginning of the year||1,503||1,868|
|Cash at end of the year||3,806||1,503|
Notes to the Financial Statements
for the year ended 30 April 2017
1 Accounting policies
The Company is a public limited company (PLC) incorporated in England and Wales, with registered office of 6th Floor, Paternoster House, 65 St Paul’s Churchyard, London, EC4M 8AB.
The financial statements are prepared on a going concern basis, under the historical cost convention, modified by the valuation of investments at fair value, in accordance with the Companies Act 2006, FRS102 ‘The Financial Reporting Standard applicable in the UK and Ireland’ and the Statement of Recommended Practice regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts (“SORP”) issued November 2014 and updated in January 2017.
The Company’s financial statements are presented in sterling, being the functional and presentational currency of the Company. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.
Presentation of the Income Statement
In order to reflect better the activities of an investment trust company and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The net revenue return is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Sections 1158 and 1159 of the Corporation Tax Act 2010.
The Directors have made an assessment of the Company’s ability to continue as a going concern and having taken into account the liquidity of the Company’s portfolio and the Company’s financial position in respect of its cash flows and borrowing facilities, are satisfied that the Company has the resources to continue in business for 12 months from the date of approval of this report. The Company, therefore, continues to adopt the going concern basis in preparing its financial statements. Further information on the Company’s borrowings is given in note 11.
Dividends receivable are recognised when the investments concerned are quoted ‘ex-dividend’. Where no ex-dividend date is quoted dividends are recognised when the Company’s right to receive payment is established.
Special dividends of a revenue nature are recognised through the revenue column of the Income Statement. Special dividends of a capital nature are recognised through the capital column of the Income Statement.
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except for transaction costs which are incidental to the acquisition or disposal of an investment, which are included within gains/ (losses) on investments and disclosed in note 8.
Foreign currency transactions
Transactions denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the date of the transaction.
Investments are converted to sterling at the rates of exchange ruling at the Statement of Financial Position date. Any gains or losses on the re-translation of assets or liabilities are taken to the revenue or capital column of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature.
Investments are measured initially, and at subsequent reporting dates, at fair value, and are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned.
For quoted securities fair value is either bid price or the closing price where the security is primarily traded via a trading service that provides an end of day closing auction with guaranteed liquidity to investors.
The valuation of unquoted securities is carried out in accordance with the International Private Equity and Venture Capital Association valuation guidelines. Unquoted securities are ordinarily valued using the last published net asset value of the security after adjustment for proceeds received between the date of valuation and date of measurement, and after adjustment for factors that the AIFM and Board believe would affect the amount of cash that the Company would receive if the security were realised as at the Statement of Financial Position date. Changes in fair value and gains or losses on disposal are included in the Income Statement as a capital item.
Cash comprises solely of cash at bank.
Bank Borrowing and Finance Costs
Bank borrowings are initially recognised at cost, being the fair value of the consideration received less issue costs where applicable. After initial recognition, bank borrowings are recognised at amortised cost using the effective interest rate method, with the interest expense recognised on an effective yield basis.
The charge for taxation is based on net revenue for the year.
The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue as set out in note 6 to the financial statements. The standard rate of corporation tax is applied to taxable net revenue. Any adjustment resulting from relief for overseas tax is allocated to the revenue reserve.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position date where transactions or events that result in an obligation to pay more, or right to pay less, tax in future have occurred at the Statement of Financial Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company’s taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Deferred tax is measured without discounting and based on enacted tax rates. Due to the Company’s status as an investment trust, and the intention to meet the conditions required to obtain approval under Sections 1158 and 1159 of the Corporation Tax Act 2010 the Company has not provided for deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
Gains or losses on disposal of investments and changes in fair values of investments (investment holding gains) are charged to the capital column of the Income Statement and taken to the capital reserve.
Certain expenses net of any related taxation effects are charged to this reserve in accordance with the expenses policy. The amounts within the Capital Reserve less unrealised gains (those on investments not readily convertible to cash) are available for distribution.
The revenue reserve is distributable by way of dividends.
The special reserve arose following court approval in 2004 to cancel the share premium account. This reserve is distributable and has historically been used to fund any share buy-backs by the Company.
Capital Redemption Reserve
This reserve arose when shares were bought back by the Company and subsequently cancelled at which point an amount equal to the par value of the shares was transferred from share capital to this reserve. This reserve is not distributable.
|Year ended||Year ended|
|30 April 2017||30 April 2016|
|Income from investments|
|Unfranked dividend income||229||209|
|UK fixed interest||–||10|
3 Investment management fee
30 April 2017
30 April 2016
|Investment Management fee||331||–||331||238||–||238|
Further details on the management and performance fee arrangements can be found in the Strategic Report.
4 Other expenses
|Year ended||Year ended|
|30 April 2017||30 April 2016|
|Auditor’s remuneration for:|
|Employers NIC on directors’ remuneration||5||5|
|Legal and professional fees**||1||133|
^ Management services are provided by Frostrow Capital LLP from 1 February 2016.
† Secretarial and Administration services were provided by Capita until 31 January 2016.
- See Directors’ Remuneration Report for analysis.
- Legal and professional fees of £115,000 were incurred in 2016 in relation to the realisation proposals put to shareholders.
5 Finance costs
30 April 2017
30 April 2016
Relates to interest charged and commitment fees on the revolving loan facility, details of which are disclosed in note 11.
30 April 2017
30 April 2016
|Corporation tax at 19.9% (2016: 20%)||–||–||–||–||–||–|
The current taxation charge for the year is lower than the standard rate of corporation tax in the UK of 20%. The differences are explained below:
30 April 2017
30 April 2016
|(Loss)/return on ordinary activities before taxation||(180)||16,936||16,756||(317)||521||204|
|Theoretical tax at UK corporation tax rate of 19.9% (2016: 20%)||(36)||3,374||3,338||(63)||104||41|
|– Non taxable dividends||(134)||–||(134)||(102)||–||(102)|
|– Gains on investment and exchange losses on capital items||–||(3,374)||(3,374)||–||(104)||(104)|
|– Expenses not deductible for tax||–||–||–||23||–||23|
|– Unrelieved expenses||170||–||170||142||–||142|
|Total tax charge for the year||–||–||–||–||–||–|
Factors that may affect future tax charges
Based on current estimates and including the accumulation of net allowable losses, the Company has unrelieved losses of £6,729,000 (2016: £5,874,000) that are available to offset future taxable revenue. A deferred tax asset of £1,144,000 (2016: £1,057,000) has not been recognised because the Company is not expected to generate sufficient taxable income in the near future periods in excess of the available deductible expenses and accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus losses.
Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an investment trust company.
7 Return per Ordinary share
The Capital, Revenue and Total Return per Ordinary Share are based on the net (loss)/return shown in the Income Statement and the weighted average number of Ordinary shares in issue 25,279,985 (2016: 25,279,985).
|30 April 2017||30 April 2016|
|Opening book cost||47,263||45,242|
|Opening investment holding gains||2,152||1,698|
|Movements in the year:|
|Purchases at cost||13,282||14,212|
|Sales – proceeds||(15,485)||(12,261)|
|– gains on sales||3,892||70|
|Increase in investment holding gains||13,051||454|
|Valuation at 30 April||64,155||49,415|
|Cost at 30 April||48,952||47,263|
|Investment holding gains at 30 April||15,203||2,152|
A list of the portfolio holdings by their fair value is given in the Portfolio Valuation.
Transaction costs incidental to the acquisitions of investments totalled £53,000 (2016: £63,000) and disposals of investments totalled £19,000 (2016: £15,000) for the year. These are included in gains on investments in the Income Statement.
|Year ended||Year ended|
|30 April 2017||30 April 2016|
|Gains on disposal||3,892||70|
|Movement in investment holding gains||13,051||454|
|Gains on investments||16,943||524|
Fair value hierarchy
FRS 102 requires financial companies to disclose the fair value hierarchy that classifies financial instruments measured at fair value at one of three levels based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
|Level 1||Valued using quoted prices (unadjusted) in active markets for identical assets or liabilities;|
|Level 2||Valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1; and|
|Level 3||Valued by reference to valuation techniques using inputs that are not based on observable market data.|
In preparing these disclosures, the Company has early adopted the provisions of FRS102: Fair value hierarchy disclosures (March 2016) published by the FRC.
The valuation techniques used by the Company are explained in the accounting policies above. The table below sets out the Company’s fair value hierarchy measurements as at 30 April 2017 and 30 April 2016.
|30 April 2017||30 April 2016|
|Total Level 1||62,444||47,879|
* Open-ended investment companies
Level 2 financial assets include Invesco Perpetual Japan Fund (2016: Invesco Perpetual Japan Fund).
Level 3 financial assets include Alternative Asset Opportunites, Eredene Capital and RENN Universal Growth Investment Trust. (2016: Aurora Russia, Eredene Capital, Jupiter Second Split Trust and RENN Universal Growth Investment Trust). In addition to the above level 3 investments shown in the portfolio, the Company holds a number of other investments that are valued at nil.
9 Significant interests
The Company had holdings of 3% or more of the voting rights attached to shares that is material in the context of the financial statements in the following investments:
|30 April 2017
% of voting rights
|Chelverton Growth Trust||8.6%|
|Establishment Investment Trust (The)||7.9%|
|Terra Catalyst Fund||5.9%|
|Global Fixed Income Realisation||5.8%|
|India Capital Growth Fund||5.3%|
|Baker Steel Resources Trust||4.8%|
|EPE Special Opportunities||4.1%|
|Cambium Global Timberland||4.0%|
|Alpha Real Trust||4.0%|
|New Star Investment Trust||3.2%|
|30 April 2017
|30 April 2016
|Amounts due from brokers||–||270|
|Dividends and interest receivable||70||40|
|Prepayments and other debtors||20||16|
11 Creditors: amounts falling due within one year
|30 April 2017
|30 April 2016
The bank loan with The Royal Bank of Scotland is a £7,000,000 revolving credit facility and bears interest at the rate of 0.9% over LIBOR on any drawn balance and 0.45% on any undrawn balance. The facility may be drawn in sterling or other currencies as approved by the lender.
The bank loan facility contains covenants which require that net borrowings will not at any time exceed 25% of the adjusted net asset value, which shall at all times be equal to or greater than £20,000,000. If the Company breaches either covenant, then it is required to notify the Bank of any default and the steps being taken to remedy it.
At 30 April 2017, the Company had drawn down £5,000,000 (2016: £5,000,000) under the facility. The facility is due for renewal on 31 January 2018.
12 Share capital
|30 April 2017
|30 April 2016
|Allotted, called-up and fully paid:
25,279,985 (2016: 25,279,985) Ordinary shares of 1p each
No shares were bought back in the year and no shares were held in Treasury during the year or at the year end (2016: same).
13 Net asset value per Ordinary share
The net asset value per Ordinary share is based on net assets at the year end as shown in the Statement of Financial Position of £62,877,000 (2016: £46,121,000) and 25,279,985 (2016: 25,279,985) Ordinary shares, being the number of Ordinary shares in issue at the year end.
14 Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
|30 April 2017
|30 April 2016
|Return before finance costs and taxation||16,833||290|
|Gains on investments||(16,943)||(524)|
|Exchange losses on capital items||7||2|
|Increase in creditors||51||13|
|Increase in debtors||(34)||(24)|
|Net cash outflow from operating activities||(86)||(243)|
15 Analysis of financial assets and liabilities
The Company’s financial instruments comprise investments, cash balances and debtors and creditors that arise from its operations.
The risk management policies and procedures outlined in this note have not changed substantially from the previous year.
The principal risks the Company faces in its portfolio management activities are:
- Market risk – arising from fluctuations in the fair value or future cash flows of a financial instrument used by the Company because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk:
- Currency risk – arising from the value of future transactions, and financial assets and liabilities denominated in foreign currencies fluctuating due to changes in currency rates;
- Interest rate risk – arising from fluctuations in the fair value or future cash flows of a financial instrument because of changes in interest rates; and
- Other price risk – arising from fluctuations in the fair value of investments due to changes in market prices.
- Liquidity risk – arising from any difficulties in meeting obligations associated with financial liabilities.
- Credit risk – arising from financial loss for the Company where the other party to a financial instrument fails to discharge an obligation.
The AIFM monitors the financial risks affecting the Company on a daily basis. The Directors receive financial information on a quarterly basis which is used to identify and monitor risk.
The AIFM’s policies for managing these risks are summarised below and have been applied throughout the year:
Credit risk is the risk of financial loss to the Company if a counterparty fails to meet its obligations.
The risk is minimised by using only approved and reputable counterparties with the main counterparty being the Company’s Depositary. Under the AIFMD the Depositary is liable for the loss of any financial asset held by it or its delegates and in accordance within its agreement with the Company is required to segregate such assets from its own assets.
Other Price Risk
Other price risk arises mainly from uncertainty about future prices of financial instruments. The value of shares and the income from them may fall as well as rise and shareholders may not get back the full amount invested. The AIFM continues to monitor the prices of financial instruments held by the Company on a real time basis. Adherence to the Company’s investment objective and policy mitigates the risk of excessive exposure to one issuer or sector.
The Board manages market risk inherent in the investment portfolio by ensuring full and timely access to relevant information from the Investment Manager. The Board meets regularly and at each meeting reviews the investment performance, the investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company’s investment objective and policy. The portfolio does not seek to reproduce any index, investments are selected based upon the merit of individual companies and therefore the portfolio may well diverge from the short-term fluctuations of the benchmark.
A list of the investments held by the Company at 30 April 2017 is shown in the Portfolio Valuation.
It is the Board’s policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process both act to reduce market risk. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review the investment strategy. The investments held by the Company are listed on various stock exchanges worldwide, but predominantly in the UK.
If the investment portfolio valuation fell by 10% from the amount detailed in the financial statements as at 30 April 2017, it would have the effect, with all other variables held constant, of reducing the net capital return before taxation by £6,412,000 (2016: £4,942,000). An increase of 10% in the investment portfolio valuation would have an equal and opposite effect on the net capital return before taxation and equity reserves.
Although the Company’s performance is measured in sterling, a proportion of the Company’s assets may be either denominated in other currencies or are in investments with currency exposure. The Company was not exposed to material direct foreign currency risk during the year. At the year end, the Company held four (2016: four) US dollar denominated investments with the sterling equivalent of £5,816,000 (2016: £3,837,000). The Company also held two (2016: two) euro denominated equity investments with the sterling equivalent of £1,456,000 (2016: £1,384,000).
An analysis of the indirect geographical exposure is shown above.
The Investment Manager reviews the risks of adverse currency movements and where necessary may use derivatives to mitigate the risk of adverse currency movements, although none have been used to date.
Interest Rate Risk
The Company finances its operations through existing reserves and a revolving credit facility. The Company’s financial assets and liabilities, excluding short-term debtors and creditors, may include investments in fixed interest securities, whose fair value may be affected by movements in interest rates. Details of such holdings can be found in the Portfolio Valuation.
During the year, the Company had in place a revolving credit facility of £7,000,000 with The Royal Bank of Scotland. The facility matured and was renewed in January 2016 at revised interest rates of 0.9% over LIBOR on any drawn down balance and 0.45% on any undrawn balance. At 30 April 2017, the Company had drawn down £5,000,000 (2016: £5,000,000) under the facility. The effect of a movement of +/–100 basis points in the interest rate would result in a decrease/increase to the Company’s Income Statement of £50,000 (2016: £50,000). The amount of such borrowings and the approved levels are monitored and reviewed regularly by the Board.
The Company’s short-term bank deposits earn interest at a variable rate which is subject to fluctuations in interest rates. At the year end, the Company’s bank deposits were £3,806,000 (2016: £1,503,000). The interest received in the year amounted to £nil (2016: nil).
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial liabilities as they fall due. The Investment Manager does not invest in unquoted securities on behalf of the Company. However, the investments held by the Company may include UK AIM quoted and NEX quoted companies which can have limited liquidity. Short-term flexibility is achieved through the use of bank borrowings. Liquidity risk is mitigated by the fact that the Company has £3,806,000 (2016: £1,503,000) cash at bank which can satisfy its creditors and that, as a closed-end fund, assets do not need to be liquidated to meet redemptions, and sufficient liquid investments are held to be able to meet any foreseeable liabilities.
The Company does not have any externally imposed capital requirements, other than those relating to the revolving credit facility. The main covenants relating to the loan facility are:
- net borrowings will not at any time exceed 25% of the adjusted net asset value; and
- adjusted net asset value shall at all times be equal to or greater than £20,000,000.
The Board considers the capital of the Company to be its issued share capital, reserves and debt. The capital of the Company is managed in accordance with its investment policy in pursuit of its investment objective.
|30 April 2017
|30 April 2016
|The Company’s capital at 30 April comprised:|
|Revolving bank credit facility drawndown||5,000||5,000|
|Equity share capital||252||252|
|Retained earnings and other reserves||62,625||45,869|
|Debt as a percentage of net assets||8.0%||10.8%|
Gearing amplifies the impact of gains or losses on the net asset value of the Company. It can be positive for a company’s performance, although it can have negative effects on performance in falling markets. It is the Company’s policy to determine the adequate level of gearing appropriate to its own risk profile.
16 Related Parties
The following are considered to be related parties:
- The Directors of the Company
Details of the remuneration of all Directors can be found in note 4 and in the Directors Remuneration Report.
17 Transactions with Management
- Miton Trust Managers Limited (the ‘AIFM’) and Miton Asset Management Limited (the ‘Investment Manager’) are considered related parties under the Listing Rules.
Details of the IMA with the AIFM and the Delegation Agreement with the Investment Manager are set out in note 3.
AIFMD Disclosures (unaudited)
The Company’s AIFM is Miton Trust Managers Limited.
The AIFMD requires certain information to be made available to investors in Alternative Investment Funds (“AIFs”) before they invest and requires that material changes to this information be disclosed in the annual report of each AIF. Those disclosures that are required to be made pre-investment are included within a Pre-Investor Information Document (“PIID”) which can be found on the Company’s website www.mitongroup.com/migo.
All authorised AIFMs are required to comply with the AIFMD Remuneration Code.
Miton Trust Managers Limited (the “Firm”) is required in this Annual Report to make certain disclosures in respect of remuneration paid to its staff. The following disclosures are made in line with the Firm’s interpretation of currently available regulatory guidance on remuneration disclosures.
The total amount of remuneration paid (or to be paid) by the Firm to its staff in respect of the financial year ended 31 December 2016 has been attributed (using an objective apportionment methodology) to Miton Global Opportunities plc for which the Firm acts as the alternative investment fund manager. The amount of the total remuneration paid (or to be paid) by the Firm to its staff which has been attributed to Miton Global Opportunities plc in respect of the financial year ended 31 December 2016 is £152,000. This figure is comprised of fixed remuneration of £112,000 and variable remuneration of £40,000.
There were a total of six beneficiaries of the remuneration described above.
The amount of the aggregate remuneration paid (or to be paid) by the Firm to its senior management which has been attributed to Miton Global Opportunities plc in respect of the financial year ended 31 December 2016 was £152,000. The Firm delegates investment management activity to Miton Asset Management Limited and therefore there are no members of staff whose actions have a material impact on the risk profile of Miton Global Opportunities plc.
Remuneration Policy of the Firm
The Firm is authorised and regulated by the UK Financial Conduct Authority (“FCA”) as an Alternative Investment Fund Manager (“AIFM”) and as such must comply with the rules contained in the FCA’s AIFM Remuneration Code within SYSC 19B in a manner that is appropriate to its size, internal organisation and the nature, scope and complexities of its activities.
Staff included in the aggregated figures disclosed above are rewarded in line with the Firm’s remuneration policy (the “Remuneration Policy”) which is determined and implemented by the Remuneration Committee (comprising senior executives and non-executives of Miton Group plc) and is subject to independent review. The Remuneration Policy reflects the Firm’s ethos of good governance and encapsulates the following principal objectives:
? to provide a clear link between remuneration and performance of the Firm and to avoid rewarding for failure;
? to promote sound and effective risk management consistent with the risk profiles of the Alternative Investment Funds (“Funds”) managed by the Firm; and
? to remunerate staff in line with the business strategy, objectives, values and interests of the Firm and the Funds managed by the Firm in a manner that avoids conflicts of interest.
The Firm assesses performance for the purposes of determining payments in respect of performance-related remuneration by reference to a broad range of measures including (i) individual performance (using financial and non-financial criteria), (ii) performance of the business unit or relevant Fund for which the individual provides services and (iii) the overall performance of the Firm. Assessment of performance is set within a multi-year framework, reflecting the cycles of the relevant Fund, to ensure the process is based on longer-term performance and spread over time.
The elements of remuneration are balanced between fixed and variable and the management function sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong performance but does not encourage excessive risk taking.
The Firm operates a discretionary bonus scheme. The Firm is entitled to disapply the requirements of SYSC 19B in relation to deferral and payment of remuneration in instruments, therefore, due to the Firm’s size, internal organisation and the nature, scope and complexities of its activities the Firm does not currently operate deferral of remuneration.
Mechanisms are in place to ensure that remuneration does not reward failure, whether on the early termination of a contract or otherwise.
No individual is involved in setting his or her own remuneration.
For the purposes of the AIFMD, leverage is any method which increases the Company’s exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company’s exposure and its net asset value and is calculated under the Gross and Commitment Methods, in accordance with AIFMD. Under the Gross Method, exposure represents the sum of the Company’s positions without taking account of any netting or hedging arrangements. Under the Commitment Method, exposure is calculated after certain hedging and netting positions are offset against each other. Under both methods, 100% would equate to no leverage.
The Company is required to state its maximum and actual leverage levels, calculated as prescribed by the AIFMD as at 30 April 2017. This gives the following figures:
|Leverage exposure||Gross Method||Commitment Method|
Source: Miton Trust Managers Limited
Adjusted Market Capitalisation
The average of the mid market prices for an Ordinary Share as derived from the Daily Official List of the London Stock Exchange on each business day in the relevant calendar month multiplied by the number of Ordinary Shares in issue on the last business day of the relevant calendar month, adjusted by adding the amount per Ordinary Share of all dividends declared in respect of which Ordinary Shares have gone “ex div” in the relevant calendar month, excluding any Ordinary Shares held in treasury.
The Alternative Investment Fund Managers Directive (the ‘Directive’) is a European Union Directive that came into force on 22 July 2013. The Directive regulates EU fund managers that manage alternative investment funds (this includes investment trusts).
The Alternative Investment Fund Manager of the Company is Miton Trust Managers Limited.
If the share price of an investment trust is lower than the NAV per share, the shares are said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, the shares are said to be trading at a premium.
Gearing amplifies the impact of gains or losses on the net asset value of the Company. It can be positive for a company’s performance, although it can have negative effects on performance in falling markets. It is the Company’s policy to determine the adequate level of gearing appropriate to its own risk profile.
Gearing is calculated in accordance with guidance from the AIC as follows:
The amount of borrowings as a proportion of net assets, expressed as a percentage.
Leverage is defined in the AIFMD as any method by which the AIFM increases the exposure of an AIF. In addition to the gearing limit the Company also has to comply with the AIFMD leverage requirements. This limit is expressed as a % with 100% representing no leverage or gearing in the Company. There are two methods of calculating leverage as follows:
The Gross Method is calculated as total exposure divided by Shareholders’ Funds. Total exposure is calculated as net assets, less cash and cash equivalents, adding back cash borrowing.
The Commitment Method is calculated as total exposure divided by Shareholders Funds. In this instance total exposure is calculated as net assets, less cash and cash equivalents, adding back cash borrowing adjusted for netting and hedging arrangements.
Net Asset Value (“NAV”)
The NAV is shareholders’ funds expressed as an amount per individual share. Shareholders’ funds are the total value of all the Company’s assets, at current market value, having deducted all liabilities and prior charges at their par value (or at their asset value).
As recommended by the AIC in its guidance updated in October 2015, Ongoing Charges are 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.
The Ongoing Charges % reflects the costs incurred directly by the Company which are associated with the management of a static investment portfolio. Consistent with the AIC guidance, the Ongoing Charges % 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 form part of the Company’s investment return, and it is not practical to calculate an Ongoing Charges % from the information they provide.
The combined effect of any dividends paid, together with the rise or fall in the share price or NAV. Total return statistics enable the investor to make performance comparisons between trusts with different dividend policies. Any dividends (after tax) received by a shareholder are assumed to have been reinvested in either additional shares of the trust at the time the shares go ex-dividend (the share price total return) or in the assets of the trust at its NAV per share (the NAV total return).
Volatility is related to the degree to which prices differ from their mean (the standard deviation). Volatility is calculated by taking the daily 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.
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the thirteenth ANNUAL GENERAL MEETING of Miton Global Opportunities plc will be held on Tuesday, 19 September 2017 at 12.00 noon at the offices of Eversheds Sutherland LLP, 1 Wood Street, London EC2V 7WS for the following purposes:
Resolutions 1 to 9 (inclusive) are proposed as Ordinary Resolutions and Resolutions 10 to 12 (inclusive) are proposed as Special Resolutions.
|Form of Proxy|
|1||To receive and accept the Strategic Report, Report of the Directors and Auditor’s Report and the audited financial statements for the year ended 30 April 2017.||Resolution 1|
|2||To receive and approve the Directors’ Remuneration Report for the year ended 30 April 2017.||Resolution 2|
|3||To re-elect Mr Townsend as a Director of the Company.||Resolution 3|
|4||To re-elect Mr Fox as a Director of the Company.||Resolution 4|
|5||To re-elect Mr Phillips as a Director of the Company.||Resolution 5|
|6||To re-elect Mr van Cutsem as a Director of the Company.||Resolution 6|
|7||To re-appoint PricewaterhouseCoopers LLP as Auditor of the Company.||Resolution 7|
|8||To authorise the Audit Committee to determine the Auditor’s remuneration.||Resolution 8|
|9||THAT the Directors of the Company be and are hereby generally and unconditionally authorised (in substitution for any authorities previously granted to the Directors to the extent unused) pursuant to Section 551 of the Companies Act 2006 (the “Act”) to exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company (“Rights”) up to an aggregate nominal amount of £84,266 (representing approximately one-third of the issued share capital (excluding treasury shares) as at the date of this notice) during the period commencing on the passing of this Resolution and expiring (unless previously revoked, varied, renewed or extended by the Company in general meeting) at the conclusion of the Annual General Meeting of the Company to be held in 2018 (the “Section 551 period”), but so that the Directors may, at any time prior to the expiry of the Section 551 period, make offers or agreements which would or might require shares to be allotted or Rights to be granted after the expiry of the Section 551 period and the Directors may allot shares or grant Rights in pursuance of such offers or agreements as if the authority conferred by this Resolution had not expired.||Resolution 9|
|10||THAT in substitution for any existing power under Section 570 of the Companies Act 2006 (the “Act”), but without prejudice to the exercise of any such power prior to the date of this Resolution, the Directors be and they are hereby empowered, in accordance with Sections 570 and 573 of the Act, to allot equity securities (as defined in Section 560(1) of the Act) for cash, pursuant to the authority under Section 551 of the Act conferred on the Directors by Resolution 9 above as if Section 561(1) of the Act did not apply to any such allotment or sale, up to an aggregate nominal amount of £25,280, at a price per share not less than the net asset value per share, such power to expire at the conclusion of the Annual General Meeting of the Company to be held in 2018, unless previously revoked, varied or renewed by the Company in General Meeting, save that the Company may, at any time prior to the expiry of such power, make an offer to enter into an agreement which would or might require equity securities or relevant shares to be allotted or sold after the expiry of such power and the Directors may allot equity securities or sell relevant shares in pursuance of such an offer or agreement as if such power had not expired.||Resolution 10|
|11||THAT the Company is hereby generally and unconditionally authorised in accordance with Section 701 of the Companies Act 2006 (the “Act”) to make purchases (within the meaning of Section 693(4) of the Act) of Ordinary shares of 1p each in the capital of the Company (‘Ordinary shares’) for cancellation or for placing into Treasury provided that:||Resolution 11|
|(a)||the maximum number of Ordinary shares authorised to be acquired shall be 3,789,469 (or, if less, 14.99% of the Ordinary shares in issue immediately following the passing of this Resolution);|
|(b)||the minimum price (exclusive of expenses) which may be paid for each Ordinary share is 1p;|
|(c)||the maximum price (exclusive of expenses) which may be paid for each Ordinary share, shall not be more than the higher of: (i) an amount equal to 105% of the average of the middle market quotations of Ordinary shares taken from the Daily Official List of the London Stock Exchange for the five business days immediately preceding the day on which the contract of purchase is made; and (ii) the higher of the price of the last independent trade in the Ordinary shares and the highest then current bid for the Ordinary shares on the London Stock Exchange’s market for larger established companies;|
|(d)||this authority will (unless renewed) expire at the conclusion of the next Annual General Meeting of the Company held after the date on which this Resolution is passed;|
|(e)||the Company may make a contract of purchase for Ordinary shares under this authority before this authority expires which will or may be executed wholly or partly after its expiration; and|
|(f)||any Ordinary shares bought back under the authority hereby granted may, at the discretion of the Directors, be cancelled or held in Treasury and if held in Treasury may be resold from Treasury or cancelled at the discretion of the Directors.|
|12||THAT a general meeting other than an annual general meeting may be called on not less than 14 clear days’ notice.||Resolution 12|
By order of the Board
Frostrow Capital LLP, Company Secretary
Miton Global Opportunities plc
Registered Office: Paternoster House, 65 St Paul’s Churchyard, London EC4M 8AB
28 June 2017
Explanatory notes to the Notice of Meeting
As a shareholder, you have the right to attend, speak and vote at the forthcoming Annual General Meeting or at any adjournment(s) thereof. In order to exercise all or any of these rights you should read the following explanatory notes to the business of the Annual General Meeting.
Note 1: To be entitled to attend and vote at the meeting (and for the purpose of the determination by the Company of the number of votes they may cast) members must be entered on the Company’s register of members at the close of business on 15 September 2017 (or in the event that the meeting is adjourned, only those shareholders registered on the Register of Members of the Company as at the close of business on the day which is 48 hours prior to the adjourned meeting) shall be entitled to attend in person or by proxy and vote at the Annual General Meeting in respect of the number of shares registered in their name at that time. Changes to entries on the Register of Members after that time shall be disregarded in determining the rights of any person to attend or vote at the meeting.
Note 2: A member entitled to attend and vote at this meeting may appoint one or more persons as his/her proxy to attend, speak and vote on his/her behalf at the meeting. A proxy need not be a member of the Company.
If multiple proxies are appointed they must not be appointed in respect of the same shares. To appoint more than one proxy, shareholders will need to complete a separate proxy form in relation to each appointment. You may photocopy the proxy form. Each proxy form must state clearly the number of shares in relation to which the proxy is appointed. A failure to specify the number of shares to which each proxy appointment relates or specifying an aggregate number of shares in excess of those held by the member will result in the proxy appointment being invalid. Please indicate if the proxy instruction is one of multiple instructions being given. All proxy forms must be signed and should be returned together in the same envelope.
To be effective, the enclosed personalised form of proxy, together with any power of attorney or other authority under which it is signed or a certified copy thereof, should be lodged at the office of the Company’s Registrar, Capita Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not later than 48 hours before the time of the meeting, 12 noon on 15 September 2017.
The appointment of a proxy will not prevent a member from attending the meeting and voting in person if he/she so wishes. A member present in person or by proxy shall have one vote on a show of hands and on a poll every member present in person or by proxy shall have one vote for every Ordinary share of which he/she is the holder. The termination of the authority of a person to act as proxy must be notified to the Company in writing.
In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote or votes of the other joint holder or holders, and seniority shall be determined by the order in which the names of the holders stand in the register.
Any question relevant to the business of the Annual General Meeting may be asked at the meeting by anyone permitted to speak at the meeting. You may alternatively submit your question in advance by letter addressed to the Company Secretary at the registered office.
Note 3: A person to whom this notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
Note 4: The statements of the rights of members in relation to the appointment of proxies in Notes 1 and 2 above do not apply to a Nominated Person. The rights described in those Notes can only be exercised by registered members of the Company.
Note 5: As at 27 June 2017 (being the last business day prior to the publication of this notice) the Company’s issued share capital and total voting rights amounted to 25,279,985 Ordinary shares carrying one vote each.
Note 6: A person authorised by a corporation is entitled to exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual member of the Company. On a vote on a resolution on a show of hands, each authorised person has the same voting rights as the corporation would be entitled to. On a vote on a resolution on a poll, if more than one authorised person purports to exercise a power in respect of the same shares:
a) if they purport to exercise the power in the same way as each other, the power is treated as exercised in that way;
b) if they do not purport to exercise the power in the same way as each other, the power is treated as not exercised.
Note 7: Shareholders should note that it is possible that, pursuant to requests made by shareholders of the Company under Section 527 of the Companies Act 2006, the Company may be required to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s financial statements (including the auditor’s report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstances connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual financial statements and reports were laid in accordance with Section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with Sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under Section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under Section 527 of the Companies Act 2006 to publish on a website.
Note 8: In accordance with Section 319A of the Companies Act 2006, the Company must cause any question relating to the business being dealt with at the meeting put by a member attending the meeting to be answered. No such answer need be given if:
a) to do so would:
- interfere unduly with the preparation for the meeting, or
- involve the disclosure of confidential information;
b) the answer has already been given on a website in the form of an answer to a question; or
c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
Note 9: CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for this meeting by following the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, in order to be valid, must be transmitted so as to be received by the Company’s agent ID RA10 by the latest time for receipt of proxy appointments specified in Note 2 above. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Note 10: The Annual Report incorporating this Notice of Annual General Meeting and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received by the Company after the date of this Notice, will be available on the Company’s website: www.mitongroup.com/migo.
Note 11: None of the Directors has a contract of service with the Company. A copy of the letters of appointment of the Directors will be available for inspection at the registered office of the Company during usual business hours on any weekday (except weekends and public holidays) until the date of the meeting and at the place of the meeting for a period of fifteen minutes prior to and during the meeting.
Frostrow Capital LLP
28 June 2017