Annual Financial Report

RNS Number : 2201V

Miton UK MicroCap Trust plc

19 July 2018

 

MITON UK MICROCAP TRUST PLC
REPORT AND ACCOUNTS FOR THE YEAR ENDED 30 APRIL 2018
The Directors present the Report and Accounts of Miton UK MicroCap Trust plc ("the Company") for the year ended 30 April 2018. The full Report and Accounts can be accessed shortly via the Company's website, www.mitongroup.com/micro, or by contacting the Company Secretary on 01392 477500. Miton UK MicroCap Trust plc is an investment trust quoted on the London Stock Exchange under the ticker code MINI. It is referred to as the Company or as MINI in the text of this Report. The Company has a Board that is independent of the Investment Manager. This Report covers the year ended 30 April 2018. The net asset value ("NAV") of the Ordinary shares has risen by 7.9% over the year, and increased by 41.5% since the Company was launched on 30 April 2015.
STRATEGIC REPORT
RESULTS FOR THE YEAR TO 30 APRIL 2018
§ Over the year, the Ordinary share NAV rose from 64.27p on 30 April 2017 to 69.33p on 30 April 2018, an appreciation of 7.9%. As at close of business on 18 July 2018 the closest date to this report, the Ordinary share NAV was 71.64p. § The Ordinary share price moved from 62.25p at 30 April 2017 to 65.80p at 30 April 2018, an appreciation of 5.7%. § Revenue after costs was £464,000 over the year to 30 April 2018, which compares with £822,000 last year. As outlined in the previous annual report, a number of holdings with higher dividend yields were taken over prior to this year and the proceeds reinvested into companies on lower initial dividend yields, but with strong total return potential. An unchanged final dividend of 0.36p has been recommended. § The Company offers all investors the redemption of their shareholding each year, which clears overhanging sellers and hence ensures the market price of the Company does not deviate too far from the underlying NAV. Redemptions of 18.5m, or 10.8% of the Company's shares, were made this year just after the year end and are not reflected in the summary below. This process did not affect the NAV per share of the remaining shareholders. The redemption mechanism is explained further below under the key performance indicators.
SUMMARY OF RESULTS
30 April       30 April    2018       2017    Total net assets attributable to equity shareholders (£'000) 118,665       111,246    NAV per Ordinary share 69.33p     64.27p   Share price (mid) 65.80p     62.25p   Discount to NAV* (5.09)%   (3.14)% Revenue return per Ordinary share 0.27p     0.53p   Total return per Ordinary share* 5.42p     11.77p   Ongoing charges#* 1.41%    1.47%  Ordinary shares in issue 171,151,514       173,086,001
* Alternative Performance Measure ('APM'). Details provided in the Glossary. # The ongoing charges are calculated in accordance with AIC guidelines.
CHAIRMAN'S STATEMENT
This Annual Report covers the third year of Miton UK Microcap Trust plc ending on 30 April 2018. Capital Appreciation Over the year, the Company's NAV appreciated by 7.9%. This compares with the FTSE AIM All-Share Index, which rose 9.2% over the same period. This performance is somewhat higher than the returns on other smaller company indices, with the FTSE SmallCap (excluding Investment Trusts) Index up 3.1% and the FTSE All-Share Index up 4.2%. Although the momentum of growth stocks was notable in the first half of the year, this was replaced by the appreciation of microcaps in the second half of the year. This recent trend is beneficial for the Company, as its investments are generally in smaller market cap companies. Company income Over the year to April 2018, revenue was £464,000, which compares with £822,000 last year. Two high yield companies that contributed significantly to portfolio income last year were taken over, and generated very positive capital gains, but thus did not contribute to the Company's dividend income this year. It has always been anticipated, however, that the bulk of the Company's returns would come from capital appreciation. A dividend of 0.36p has been recommended to shareholders, which compares to 0.36p last year. Returns since issue The Company was launched at the end of April 2015, and since that time the NAV has risen by 41.5%. This compares with a return of 34.7% on the FTSE SmallCap (excluding Investment Trusts) Index and 45.8% on the FTSE AIM All-Share Index over the same period. Many of the larger growth stocks listed on the AIM exchange have boosted the return of the FTSE AIM All-Share Index over the period. In comparison, the FTSE All-Share Index has only returned 22.5% over the last three years. Share redemption Disappointingly, 10.8% of the Company's shares elected for redemption this year. This mechanism is in the interests of ongoing shareholders, since it helps to ensure that the share price of the Company trades close to the underlying NAV, although it comes at the cost of the largely fixed expenses being levied over a smaller number of shares, which increases the ongoing charges per share. We are confident that, as the outperformance of microcaps becomes better established, the Company will raise more funds through share issuance in the future. Borrowing In February 2018, the Company entered into a £7.5m unsecured revolving loan facility agreement with the Royal Bank of Scotland. This facility is available for three years with further details below. In general, it is envisaged that the Company will not draw upon this loan during normal market conditions. However, should the equity market suffer a setback, then the facility would be ready to fund additional holdings that would generate enhanced returns for shareholders in any subsequent market recovery. Outlook The Company was launched three years ago with the expectation that microcaps were set for a renewed period of outperformance, as market trends evolved beyond globalisation. Over this period, the Company's NAV has outperformed the FTSE All-Share Index by 19.0%. Although mainstream asset appreciation has continued to be good over the three-year period, there is growing evidence that market trends are changing. The political agenda is in a period of flux, as a growing proportion of the electorate vote against the prior status quo, in part because wage growth has disappointed over recent years. Indeed, the recent imposition of tariffs in pursuit of domestic political goals suggests that the days of increasing globalisation may be drawing to a close. The MINI portfolio invests in a universe of companies with greater vibrancy that are better positioned to adapt to the changing economic climate. Specifically, many of the Company's holdings have been selected for their ability to sustain growth even at a time of commercial challenge. Therefore, despite recent more unsettled equity market conditions, and the prospect of slower UK growth, we continue to believe that MINI's strategy remains well placed to generate premium returns. Andy Pomfret Chairman 19 July 2017
INVESTMENT MANAGER'S REPORT
Who are Miton? Miton Group plc is an independent fund management company listed on the AIM exchange. The day-to-day management of the Company's portfolio is carried out by Gervais Williams and Martin Turner, who have decades of experience researching many of the smallest UK quoted stocks. Gervais Williams Gervais joined Miton in March 2011 and is Senior Executive Director of the group. He has been an equity portfolio manager since 1985, including 17 years as Head of UK Smaller Companies and Irish Equities at Gartmore. He was Fund Manager of the Year 2014 according to What Investment? He is chairman of the Quoted Companies Alliance, a director of The Investment Association and also a member of the AIM Advisory Council. Martin Turner Martin joined Miton in May 2011. Martin and Gervais have had a close working relationship since 2004, and their complementary expertise and skills led to their backing a series of successful companies. Martin qualified as a Chartered Accountant with Arthur Anderson, and has extensive experience at Rothschild, Merrill Lynch and Collins Stewart, where as Head of Small/Mid Cap Equities his role covered their research, sales and trading activities. We are part of a close knit team of four Miton fund managers principally researching UK quoted stocks, with each manager having a record of delivering premium returns. This is important at all times, but at the current time of changing political and economic dynamics, this aspect is likely to be particularly relevant. How should progress be measured? During globalisation, equity market returns have been so good for so long that it has become customary for funds to measure their progress compared to the performance of the mainstream indices. One side effect has been that most of the popular UK equity portfolios are overly dominated by the largest 350 stocks listed on the London Stock Exchange. However, with the changing political and economic agenda, we at Miton believe that it is in clients' interests to widen the opportunity set going forward. Therefore, most Miton strategies in the UK are relatively wide ranging. Although it is conventional for the returns of MINI to be set in the context of the returns of comparative indices, we believe the ultimate source of sustained return will be the ability of the portfolio holdings to sustain productivity improvements and growth in their aggregate cashflow. How is the investment strategy implemented? We believe that companies generating productivity improvements with attractive risk/reward ratios are well-placed to deliver premium returns. Turnover growth - Although some companies can succeed in growing their profits without turnover growth, in general, sustainable long-term growth comes from those that grow their revenues. This can be via an innovative new service or through introducing a superior product. Even in times of economic stagnation, this type of improvement can generate ongoing turnover growth. Sustained margins - Extra turnover growth may not lead to additional corporate cashflow if profit margins decline. The best kinds of productivity improvement should reduce the cost of goods, as well as justifying a better market price. Alongside this, we are looking for companies that have the potential to sustain their profit margins through outstanding customer service. This may be especially important should corporate profit margins in general come under sustained pressure in the future. Management of risk - All investment carries risks, but often companies managing the fastest growth are obliged to take the greatest risks. In general, we find that many companies can generate attractive returns for investors through growing at a less hectic pace, and therefore do so with less downside risk. Better balance sheets - Given the exceptionally low interest rates over the last decade, many corporates have taken on extra debt. However, these liabilities can constrain the opportunities of the company, particularly at a time of economic setback. We prefer to invest in companies with net cash balances or those with modest debt relative to the headroom on the facility. Those with under-geared balance sheets can take greater advantage of any economic setback to improve their market position disproportionately, whereas those fully drawn on their facilities tend to have fewer options. Low entry valuations - The upside potential on an investment is often greater when the valuation on entry is modest. In general, we favour stocks where the overall market capitalisation reflects some of the problems of the past in preference to those that are already reflecting some of the excitement about the future. With few institutional investors, or indeed sell side analysts, actively researching the smallest quoted companies in the UK, there are plenty of quoted companies with what we believe are low entry valuations. MiFID II and Key Information Document The vast majority of stockbroker notes detailing the anticipated profits of microcaps are funded by the quoted business itself. Therefore, the cost of independent external research for the Company tends to be modest. MiFID II is a new regulation introduced on 3 January 2018 that separates the cost of external research from the portfolio transaction costs. The detail of the external research costs now need to be highlighted in greater detail and approved by the Board ahead of their expenditure. The Company's budget for the whole of 2018 remains very modest, with the cost marginally below that expended during 2017. The Key Information Document ("KID") is a new schedule that projects the Company's costs and returns over the coming years. The KID is available on the Company's website at www.mitongroup.com/micro. However, many commentators consider that KIDs are potentially misleading and there is currently much debate regarding the methodologies and disclosures required. How has the Company performed over the year? Many assume that smaller companies quoted in the UK, are dominated by high street retailers, and others with a consumer presence. However, the microcap investment universe extends across a large number of industry sectors, with many companies holding a significant market position in a niche sector. Therefore returns over the recent quarters have continued to be reasonable, even at a time when UK consumer demand has been relatively weak. Over the year to April 2018, the FTSE SmallCap (excluding Investment Trusts) Index generated a return of 6.1% when both capital gain and dividend income is included, whereas the FTSE AIM All-Share Index returned 10.7%. In contrast, the return of the FTSE All-Share Index was only 8.2%. The Company's NAV rose 7.9% over the twelve months to April 2018, and when dividend income is included the total return on the Company was 8.4%. During the first half of the year, the Company's portfolio lagged the market rise because growth stocks performed strongly and other stocks remained overlooked. In the second half of the year, the equity markets were more unsettled and, interestingly, microcaps then enjoyed a period of outperformance. In particular, many of the Company's holdings tended to perform well in this period, and hence the Company outperformed. Over the year as a whole, a number of holdings performed very strongly. For example, the share prices of Kape Technologies (formerly Crossrider), Frontier IP, Zotefoams and Wey Education all rose so much that they each returned more than 1%  to the return of the Company alone and, in the case of Yu Group and Versarien, more than 2%. In contrast, two stocks, Fishing Republic and Totally, that had performed strongly in the prior year, peaked out and detracted returns by more than 1% each. At the end of April, the largest industry sector represented in the portfolio was Software & Services at 13.5%. This included Kape Technologies at 3.7% and Cerillion, a vibrant mobile phone software company, (not to be confused with Carillion which became bankrupt recently) at 2.2%. The second largest industry sector is Materials at 12.3% with Zotefoams comprising 2.3% and Versarien at 1.4%. The third largest sector is Diversified Financials at 8.6%, which includes Frontier IP at 2.9% and Alpha FX at 1.6%. In addition, the portfolio held significant cash balances during the period of unsettled markets in February, and the Company was therefore in a comfortable position to fund the redemptions at the year end without detracting from the long-term returns. How has the Company performed since issue in April 2015? The three-year period since issue has been relatively eventful in political terms, with two UK General Elections and the UK's decision to withdraw from the EU. If anything, equity market returns have been more benign than might have been expected, with the FTSE All-Share Index rising 22.5%. Most mainstream funds have looked to increase their Active Share (a measure of how much their portfolios differ from the mainstream benchmarks) over the last three years. In general, most have achieved this by taking profits on some holdings within the largest 350 stocks listed on the London Stock Exchange (that are part of most mainstream equity benchmarks), and reinvesting the new capital in some of the larger companies on the AIM exchange (which are typically outside most mainstream benchmark indices). For this reason, the AIM All-Share Index has greatly outperformed the FTSE All-Share Index and risen by 45.8% in the period. In particular, many of the best performers on the AIM exchange have been growth stocks and larger than those targeted by the MINI strategy. Even so, the NAV of the Company has appreciated by 41.5% over the three-year period. This return compares favourably with the FTSE SmallCap (excluding Investment Trusts) Index, which has only appreciated by 34.7% over the same period. A more wide-ranging assessment of the different aspects of Company's return since issue is also set out above. With Brexit imminent, what impact might it have on the holdings in the Company? At this stage, it seems probable that the Brexit/EU agreement will be effected via a transitional arrangement where the UK border with the EU continues with customs arrangements largely unchanged until the end of 2020. If this assumption is correct, we believe there would be very little adverse impact on the MINI portfolio prior to the end of 2020. Over the longer term, a KPMG report on the non-tariff barriers in the EU estimated that wider border checks may cost between 0.4% and 1.9% of the value of traded goods. HMRC expects the longer-term EU border costs to be about 1%, although some others estimate it could be higher. Overall, it is assumed that there will be some additional cost for some of the stocks in the portfolio at the time of an orderly withdrawal from the EU, but these are not expected to greatly reduce the overall returns of the Company. There is a chance that the current political process becomes derailed prior to the end of March 2019, and the UK exits the EU without a transitional arrangement. The abrupt imposition of a national border between the UK and the EU countries would add much greater costs to cross border trade if this were to occur immediately. In addition, it is likely that the passage of goods could be delayed, possibly for weeks. Both of these factors would significantly adversely affect the profitability of a number of the holdings within the portfolio. Ultimately, the new border will operate in the same way that UK businesses trade with countries outside the EU, with costs eventually around those cited above. It is worth noting that a number of companies in the portfolio have little or no EU trade and thus will be largely unaffected. Others have subsidiaries that will still be in the ongoing EU, so they may find ways of delivering their EU goods and services through these operations. We will continue to monitor events and adjust the portfolio holdings to mitigate any potential downside, as well as remaining alert to the possibility that a few businesses may have some added advantages when the EU border changes are introduced. How does the Company manage the limited market liquidity of microcap stocks? Terminology can be misleading. Although the term microcap companies suggests that these businesses are very small, this is in fact a comparative term in relation to multi national giants such as Shell and HSBC. Most listed companies in the portfolio are sizeable commercial operations, often with millions of pounds of turnover. It is just that they are relatively small when compared with the majors. Given their lesser scale, however, their shares do trade less frequently on the exchanges than the majors, and therefore it is often more difficult to buy or sell microcap shares easily when compared with the mainstream stocks. The share prices of the smallest quoted companies can move more abruptly as well. For this reason, funds investing in microcaps are often much smaller than funds investing in mainstream stocks. Therefore each holding is proportionately smaller, in part commensurate with the more limited market liquidity of microcap companies. The wide-ranging nature of the industries and sectors' representation within the portfolio addresses the problem of abrupt share price moves, since the volatility of different stocks often occurs on different days. Interestingly, the volatility of the Company's portfolio as a whole has been markedly lower than that of the FTSE100 Index over the three years since issue. This is covered above. What about the future? Over the last three decades, many of the most popular funds sought to outperform the mainstream benchmarks. Generally, most narrowed their investment universe to mid and larger companies to better meet this objective and institutional interest in small and microcaps therefore died away. In this context, it is noteworthy that microcap stocks showed a degree of resilience during February when equity markets became more volatile. This was not because their share prices were ignored during a busy period - many microcap share prices were marked down with others during the early part of that month. Rather, it was because many of the smallest stocks attracted renewed market interest after their share prices fell back, and hence tended to recover quicker than others! Interestingly, this renewed interest in microcaps occurred during a period when monetary conditions were tightened. The EU has commenced a scaling back of its policy of Quantitative Easing ("QE") over the last few quarters, whilst the US is progressively increasing interest rates and has initiated Quantitative Tightening ("QT"), a reversal of QE. Their combined effect has reduced financial liquidity within the international exchanges and led to extra market volatility. The changing market trends are now leading to additional interest in the microcap stocks, given their vibrant and agile nature, and returns that are often not closely correlated with that of the mainstream equity benchmarks. Importantly, this new preference resembles the pattern that existed prior to globalisation, and contrasts with that of the last three decades. When we launched the MINI microcap strategy, we anticipated that there would be a renewed interest in microcaps. At this stage, the renewed outperformance of UK microcaps is still nascent, but its occurrence does add to our conviction that the Company remains well-placed to deliver premium returns. Gervais Williams and Martin Turner 19 July 2018
PORTFOLIO INFORMATION AS AT 30 APRIL 2018
Rank Company Sector & main activity Valuation £'000 % of net assets Yield1% 1 YU Group Utilities 5,180 4.4 0.4 2 Kape Technologies Technology 4,379 3.7 0.0 3 Frontier IP Group Industrials 3,373 2.9 0.0 4 Zotefoams Basic Materials 2,771 2.3 1.1 5 Nanoco Group Technology 2,711 2.3 0.0 6 Cerillion Technology 2,654 2.2 3.0 7 Scientific Digital Health Care 1,985 1.7 0.0 8 Science in Sport Consumer Goods 1,935 1.6 0.0 9 Alpha FX Group Financials 1,916 1.6 0.0 10 Bilby Industrials 1,900 1.6 2.2 Top 10 investments 28,804 24.3 11 Kromek Group Health Care 1,880 1.6 0.0 12 Amino Technologies Technology 1,818 1.5 3.2 13 Wey Education Industrials 1,754 1.5 0.0 14 Conygar Investment Company Financials 1,727 1.5 0.0 15 CML Microsystems Technology 1,701 1.4 1.7 16 Avesoro Resources Basic Materials 1,655 1.4 0.0 17 Versarien Basic Materials 1,649 1.4 0.0 18 Game Digital Consumer Services 1,629 1.4 0.0 19 Corero Network Security Technology 1,596 1.3 0.0 20 Atlantis Resources Oil & Gas 1,477 1.3 0.0 Top 20 investments 45,690 38.6 21 Brighton Pier Group Consumer Services 1,458 1.2 0.0 22 Caledonia Mining Corporation Basic Materials 1,453 1.2 4.1 23 Seeing Machines Limited Technology 1,423 1.2 0.0 24 Bushveld Minerals Basic Materials 1,386 1.2 0.0 25 Eland Oil & Gas Oil & Gas 1,283 1.1 0.0 26 BATM Advanced Communications Technology 1,231 1.0 0.0 27 STM Group Financials 1,227 1.0 3.1 28 MTI Wireless Edge Technology 1,225 1.0 5.1 29 Fulcrum Utility Services Utilities 1,175 1.0 3.1 30 Cloudcall Group Technology 1,171 1.0 0.0 Top 30 investments 58,722 49.5 31 Petro Matad Oil & Gas 1,169 1.0 0.0 32 Finsbury Food Group Consumer Goods 1,157 1.0 2.4 33 Autins Group Consumer Goods 1,157 1.0 1.4 34 Inspired Energy Industrials 1,125 0.9 3.1 35 Rainbow Rare Earths Basic Materials 1,100 0.9 0.0 36 Charles Taylor Industrials 1,061 0.9 4.2 37 7Digital Group Consumer Services 1,037 0.9 0.0 38 Cropper (James) Basic Materials 1,022 0.9 0.9 39 Oxford Biodynamics Health Care 1,020 0.8 0.0 40 Oxford Metrics Technology 1,013 0.8 1.6 Top 40 investments 69,583 58.6 Balance held in 77 equity instruments 33,420 28.2 Total investment portfolio 103,003 86.8 Other net current assets 15,662 13.2 Net assets 118,665 100.0
1. Source: Thomson Reuters. Based on historic dividends and therefore not representative of future yield.
A copy of the full portfolio of investments as at 30 April 2018 is available on the Company's website, www.mitongroup.com/micro
Portfolio exposure by sector at 30 April 2018 1 Technology 27.1% 2 Industrials 15.8% 3 Basic Materials 12.9% 4 Financial Services 10.8% 5 Consumer Goods 7.8% 6 Health Care 6.8% 7 Oil & Gas 6.7% 8 Utilities 6.2% 9 Consumer Services 5.9% Portfolio by asset allocation at 30 April 2018 1 AIM 82.8% 2 FTSE SmallCap Index 6.8% 3 Other UK Equities 6.3% 4 FTSE Fledgling Index 4.1% 5 International Equities* 0.0% * The international equities held during the year had been sold by 30 April 2018. Portfolio by spread of investment income to 30 April 2018 1 AIM 75.1% 2 FTSE SmallCap Index 11.1% 3 FTSE Fledgling Index 7.1% 4 International Equities 4.0% 5 Other UK Equities 2.7% Actual annual income to 30 April 2018 by sector 1 Industrials 25.0% 2 Technology 23.8% 3 Financials Services 22.3% 4 Consumer Goods 9.5% 5 Consumer Services 7.1% 6 Basic Materials 6.3% 7 Utilities 5.4% 8 Oil & Gas 0.5% 9 Health Care 0.1%
BUSINESS MODEL
Business and Status of the Company
MINI was incorporated on 26 March 2015 and its Ordinary shares were listed on the London Stock Exchange on 30 April 2015. It is registered in England as a public limited company and is an investment company in accordance with the provisions of Sections 832 and 833 of the Companies Act 2006. The principal activity of the Company is to carry on business as an investment trust. The Company intends at all times to conduct its affairs so as to enable it to qualify as an investment trust for the purposes of Sections 1158/1159 of the Corporation Tax Act 2010 ("S1158/1159"). The Directors do not envisage any change in this activity in the foreseeable future. The Company has been granted approval from HM Revenue & Customs ("HMRC") as an investment trust under S1158/1159 and will continue to be treated as an investment trust company, subject to there being no serious breaches of the conditions for approval. The principal conditions that must be met for continuing approval by HMRC as an investment trust are that the Company's business should consist of "investing in shares, land or other assets with the aim of spreading investment risk and giving members of the company the benefit of the results" and the Company may only retain 15% of its investment income. The Company must also not be a close company. The Directors are of the opinion that the Company has conducted its affairs for the year ended 30 April 2018 so as to be able to continue to qualify as an investment trust. The Company's status as an investment trust allows it to obtain an exemption from paying taxes on the profits made from the sale of its investments and all other net capital gains. Investment trusts offer a number of advantages for investors, including access to investment opportunities that might not be open to private investors and to professional stock selection skills at lower cost, and the ability to hold illiquid positions in uncertain market conditions.
Investment Policy
The Company's full investment policy contains information on the policies which the Company follows relating to asset allocation, risk diversification and gearing, and includes maximum exposures, where relevant. The Company invests in a portfolio of UK quoted companies with the objective of achieving capital growth by investing in a portfolio of stocks that are well placed to generate an attractive cash payback from productivity improvements.
PERFORMANCE AND RISKS
Key Performance Indicators
The Board reviews the Company's performance by reference to a number of key performance indicators ("KPIs") and considers that the most relevant KPIs are those that communicate the financial performance and strength of the Company as a whole. The Board and the Investment Manager monitor the following KPIs:
§ NAV performance, relative to the AIM All-Share Index and other comparable investment trusts and open-ended funds The Ordinary share NAV at 30 April 2018 was 69.33p per share (30 April 2017: 64.27p), giving a total return of 8.4% (30 April 2017: 17.3%) over the year. This compares with the UK Investment Trust Smaller Companies sector, where the average was a 6.1% increase in total return terms over the same period. By comparison, the total return on the FTSE AIM All-Share Index was 10.7% over the year.
§ NAV correlation to mainstream indices The Company has an objective to deliver a low NAV correlation with the FTSE 100 and FTSE All-Share Indices.
§ Movements in the Company's share price The Company's Ordinary share price increased by 5.7% (30 April 2017: 9.7%) over the year on a capital return basis.
§ The discount/premium of the share price in relation to the NAV At times, the number of shareholders looking to transact in the Company's shares exceeds the market's daily liquidity. Imbalances like this are normally cleared through stock market transactions over a few weeks, but on occasion these imbalances can become persistent and the Company's share price diverges from the daily NAV. The Company has an objective to keep this divergence to a minimum. When buyers have become persistent over recent years and the share price has traded consistently above the daily NAV, the Company has issued additional stock through placing new shares with investors. In contrast, during the year to 30 April 2018, the share price discount has ranged between 0.8% and 8.5% to the daily NAV. In order to address this, the Company was set up with an annual redemption mechanism so shareholders can redeem their unsold holdings each year on 30 April. This year, 10.8% of the Company's shares requested a redemption and these were redeemed at NAV and cancelled on 15 May 2018. It is believed that, after the overhanging sellers are cleared, then the daily matching of stock market seller and buyer will gradually lead the share price to normalise once again. Generally, this mechanism has worked well over the last three years, with the Company's average share price very close to the daily NAV, albeit that at times it did move both above and below the daily NAV.
§ Ongoing charges The ongoing charges on the Ordinary shares for the year to 30 April 2018 amounted to 1.41% (30 April 2017: 1.47%) of total assets.
Principal Risks and Uncertainties
The Company is exposed to a variety of risks and uncertainties that could cause its asset price or the income from the investment portfolio to reduce, possibly by a sizeable percentage in the most adverse circumstances. The principal financial risks and the Company's policies for managing these risks and the policy and practice with regard to the portfolio are summarised in note 18 to the financial statements. The Board, through delegation to the Audit and Management Engagement Committee, undertakes a robust annual assessment and review of the principal risks facing the Company, together with a review of any new risks which may have arisen during the year, including those that would threaten its business model, future performance, solvency or liquidity. These risks are formalised within the Company's risk matrix. Information regarding the Company's internal control and risk management procedures can be found in the Corporate Governance Statement. Listed below is a summary of the principal risks identified by the Board and actions taken to mitigate those risks.
Risk Mitigation Investment and strategy There can be no guarantee that the investment objective of the Company will be achieved. The Company will invest primarily in small UK quoted or traded companies by market capitalisation. Smaller companies can be expected, in comparison to larger companies, to have less mature businesses, a more restricted depth of management and a higher risk profile. These companies may be less liquid and, when aggregated with holdings in other client funds of the Investment Manager, the combined funds may have a significant percentage ownership of investee companies. The Company is reliant on its Investment Manager's investment process. The Board reviews and discusses the investment approach at each Board meeting. The Investment Manager has long experience of managing portfolios of this nature, including dealing in smaller capitalisation companies, and deploying an approach that is designed to maximise the chances of the investment objective being achieved over longer-term time horizons. The Board looks to mitigate the higher risk profile of individual smaller companies by ensuring the Company holds a well-diversified portfolio, both by number of companies and areas of operation. This is monitored at each Board meeting. The Company is structured as a closed-ended fund, which means that it is not subject to daily inflows and outflows. Reliance on third parties The Company has no employees and is reliant on the performance of third party service providers. Failure by the Investment Manager or any other third party service provider to perform in accordance with the terms of its appointment could have a material detrimental impact on the operation of the Company. This could include failure of a counterparty on whom the Company is reliant. The Board monitors and receives reports, where appropriate, on the performance of its key service providers. In relation to the risk of counterparty failure, the Board reviews the controls report of the Depositary. The Board may in any event terminate all key contracts on normal market terms. Loss of key personnel/fund managers The Company depends on the diligence, skill, judgement and business contacts of the Manager's investment professionals and its future success could depend on the continued service of these individuals, particularly Gervais Williams and Martin Turner. The Company may decide to terminate the Management Agreement should both Gervais Williams and Martin Turner cease to be employees of the Manager's group and if they are not replaced by a person/s who the Company considers to be of equal or satisfactory standing within three months of one or both of their departures. Cyber risk/IT security Errors, fraud or control failures by the Company's key service providers or loss of data through increasing cyber threats or business continuity failure could damage the Company's reputation or investors' interests or result in losses. The Board receives regular control reports and cyber/IT policies from all service providers to ensure that controls are in place including business continuity and disaster recovery arrangements. Share price volatility and liquidity/marketability risk The market price of the Ordinary shares, as with shares in all investment trusts, may fluctuate independently of their underlying NAV and may trade at a discount or premium at different times, depending on factors such as supply and demand for the Ordinary shares, market conditions and general investor sentiment. The Company becomes too small to be attractive to a wide audience and liquidity decreases and the discount widens. The Company has in place an annual redemption facility whereby shareholders can voluntarily tender their shares. The Board monitors the relationship between the share price and the NAV. The Company has powers to repurchase shares should there be an imbalance in the supply and demand leading to a persistent and excessive discount. The Investment Manager maintains regular dialogue with shareholders through monthly factsheets and regular face-to-face meetings. Costs of operation As stated, the Company relies on external service providers. Many of these are paid on a basis where their fees are related to the size of the Company (an "ad valorem" basis). Others are for fixed monetary amounts. Therefore, if the Company were to shrink, through redemptions, buybacks or asset performance, the cost per share of running the Company would increase. This could make it harder to achieve the investment objective. The Board monitors the costs of all service providers. The Board is also committed to the controlled growth of the Company which would spread the fixed costs over a larger asset base. In the event that the Company were to decrease in size from its current level, the Board has capped the total costs at no more than 2% of the aggregate market capitalisation. The ongoing charges for the year to 30 April 2018 amounted to 1.41% (30 April 2017: 1.47%). Regulatory risk/change in tax status The Company is subject to laws and regulations enacted by national and local governments. Any change in the law and regulation affecting the Company may have a material adverse effect on the ability of the Company to carry on its business and successfully pursue its investment policy. The Board receives regular updates from its Secretary, Broker, industry representatives and its Investment Manager on significant regulatory changes that may impact the Company. The Company's ability to determine the shape of regulatory or tax changes is limited and therefore the Board aims to ensure that it is well informed and prepared to respond to changes as required.
SHARE CAPITAL
Share Issues At the Annual General Meeting held on 14 September 2017, the Directors were granted the authority to allot Ordinary shares up to an aggregate nominal amount of £34,230 (representing 34,230,000 Ordinary shares) on a non pre-emptive basis. No shares have been issued under this authority. This authority is due to expire at the Company's Annual General Meeting to be held on 12 September 2018. Share Redemptions Valid redemption requests were received under the Company's redemption facility for the 30 April 2018 Redemption Point in relation to 18,497,692 Ordinary shares, representing 10.8% of the issued share capital. All of these shares were redeemed and cancelled by the Company following the year end on 15 May 2018. All shareholders who validly applied to have shares redeemed received a calculated Redemption Price of 68.98p per share. Purchase of Own Shares At the Annual General Meeting of the Company held on 14 September 2017, the Directors were granted the authority to buy back up to 25,655,611 Ordinary shares. No Ordinary shares have been bought back under this authority. The authority will expire at the forthcoming Annual General Meeting, when a resolution for its renewal will be proposed. Treasury Shares Shares bought back by the Company may, at the Board's discretion, be held in treasury, from where they could be re-issued at a premium to NAV quickly and cost effectively. This provides the Company with additional flexibility in the management of its capital base. No shares were purchased for, or held in, treasury during the year or since the year end. Current Share Capital As at the year end, there were 171,151,514 Ordinary shares and 50,000 Management shares (see note 4 to the financial statements) in issue. Subsequent to the year end, 18,497,692 Ordinary shares were redeemed and cancelled in respect of the 30 April 2018 Redemption Point. As at the date of this Report, there were 152,653,822 Ordinary shares and 50,000 Management shares in issue. There are no restrictions concerning the transfer of securities in the Company or on voting rights; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a successful takeover bid.
MANAGEMENT, SOCIAL, ENVIRONMENTAL AND DIVERSITY MATTERS
Management Arrangements The Company's investment manager is Miton Trust Managers Limited (the ''Investment Manager''). The Investment Manager is responsible for the management of the Company's portfolio in accordance with the Company's investment policy and the terms of the Management Agreement dated 8 April 2015. The Investment Manager has delegated investment management to Miton Asset Management Limited. Both the Investment Manager and Miton Asset Management Limited are authorised and regulated by the FCA. The Board has appointed Miton Trust Managers Limited as the alternative investment fund manager ("AIFM") of the Company. Under the terms of the Management Agreement, the Investment Manager is entitled to a management fee together with reimbursement of reasonable expenses incurred by it in the performance of its duties. The management fee is payable monthly in arrears and is at the rate of 1% per annum, calculated in respect of each calendar month, of the market capitalisation at the relevant calculation date. In addition to the basic management fee, and for so long as a Redemption Pool is in existence, the Investment Manager is entitled to receive from the Company a fee calculated at the rate of 1% per annum of the net asset value of the Redemption Pool on the last Business Day of the relevant calendar month. The Investment Manager has agreed that, for so long as it remains the Company's investment manager, it will rebate such part of any management fee payable to it so as to help the Company maintain an ongoing charges ratio of 2% or lower. In accordance with the Directors' policy on the allocation of expenses between income and capital, in each financial year 75% of the management fee payable is expected to be charged to capital and the remaining 25% to income. The Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than 12 months' written notice. The Management Agreement may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including the insolvency or in the event of a material breach by the Investment Manager of the Management Agreement which is not remedied within thirty days of the receipt of notice. The Company has given certain market standard indemnities in favour of the Investment Manager in respect of the Investment Manager's potential losses in carrying on its responsibilities under the Management Agreement. The Board appointed Bank of New York Mellon as its Depositary and Custodian under an agreement dated 8 April 2015. The annual fee for depositary services due to Bank of New York Mellon is 0.025% per annum of gross assets, subject to a minimum fee of £15,000. The Company and the Depositary may terminate the Depositary Agreement with three months' written notice. Company secretarial services are provided by Link Company Matters Limited, under an agreement dated 8 April 2015 between the Company and Link Market Services Limited. The Company Secretarial Services Agreement was for an initial period of 12 months and thereafter automatically renews for successive periods of six months unless or until terminated by either party on at least six months' written notice. Administrative Services are provided by Link Alternative Fund Administrators Limited under an agreement dated 8 April 2015. The Administration Agreement may be terminated by either party on at least six months' prior written notice. Continuing Appointment of the Investment Manager The Board, through the Audit and Management Engagement Committee, keeps the performance of the Investment Manager under continual review, and the Audit and Management Engagement Committee conducts an annual appraisal of the Investment Manager's performance, and makes a recommendation to the Board about the continuing appointment of the Investment Manager. It is the opinion of the Board that the continuing appointment of the Investment Manager is in the interests of shareholders as a whole. The Board believes that the Investment Manager has executed the investment strategy in line with the Prospectus. The Directors also believe that by paying the management fee calculated on a market capitalisation basis, rather than a percentage of assets basis, the interests of the Investment Manager are more closely aligned with those of shareholders. Environmental, Human Rights, Employee, Social and Community Issues The Company does not have any employees and the Board consists entirely of non-executive Directors. The day-to-day management of the business is delegated to the Investment Manager. As an investment trust, the Company has no direct impact on the community or the environment, and as such has no environmental, human rights, social or community policies. In carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly and ethically. The Company has a zero-tolerance policy towards bribery and corruption and as such is committed to carrying out its business fairly, honestly and openly. Gender Diversity The Board of Directors of the Company comprises one female and three male Directors. The Company's Diversity Policy acknowledges the benefits of greater diversity, including gender diversity, and remains committed to ensuring that the Company's Directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives. The Board will always appoint the best person for the job and will not discriminate on any grounds including gender, race, ethnicity, religion, sexual orientation, age or physical ability. On behalf of the Board Andy Pomfret Chairman 19 July 2018
GOING CONCERN
The Directors consider that it is appropriate to adopt the going concern basis. Cashflow projections have been reviewed and show that the Company has sufficient funds to meet its contracted expenditure. On the basis of the review and as the majority of net assets are securities which are traded on recognised stock exchanges, after making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the liquidity of the portfolio and the Company's ability to meet obligations as they fall due for a period of at least 12 months from the date that these financial statements were approved.
VIABILITY STATEMENT
In accordance with the AIC Code of Corporate Governance, the Board has considered the prospects for the Company. The period assessed is the three years to April 2021. The Company is intended to be a long-term investment vehicle. It was launched three years ago, and due to the limitations and uncertainties inherent in predicting market and political conditions, the Directors have determined that three years is the appropriate period over which to make this assessment. As part of its assessment of the viability of the Company, the Board has considered the principal risks and uncertainties and the impact on the Company's portfolio of a significant fall in UK markets. To provide this assessment, the Board has considered the Company's financial position and its ability to liquidate its portfolio to meet its expenses or other liabilities as they fall due: § The Company invests largely in companies listed and traded on stock exchanges. These are actively traded and, whilst perhaps less liquid than larger quoted companies, the portfolio is well diversified by both number of holdings and industry sector; § The expenses of the Company are predictable and modest in comparison with the assets in the portfolio. There are no commitments that would change that position; § The Company has no employees; and § The Company has an annual redemption facility whereby shareholders may request that their shares are redeemed at NAV. The Board has considered the possibility that shareholders holding a significant percentage of the Company's shares request redemption. Firstly, the Board has flexibility over the method and date of redemption so can avoid disruption to the overall operation of the Company in this situation. Secondly, the Company has an arrangement with the Manager to rebate fees should total costs exceed 2% of aggregate market capitalisation, such that were there to be significant redemption, or a significant fall in the value of the portfolio, the expenses of operation would be manageable. In addition, many of the expenses vary in line with the size of the Company. In addition to considering the principal risks and the financial position of the Company as described above, the Board has also considered the following further factors: § the continuing relevance of the Company's investment objective in the current environment and the continued satisfactory performance of the Company; § the level of demand for the Company's shares and that since launch the Company has been able to issue further shares; § the gearing policy of the Company; and § that regulation will not increase to such an extent that the costs of running the Company become uneconomical. Accordingly, the Directors have formed the reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three years.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Company's financial statements in accordance with applicable United Kingdom law and International Financial Reporting Standards ("IFRS") as adopted by the European Union. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with IFRS. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the Company's financial statements, the Directors are required to: § select suitable accounting policies in accordance with IAS 8: 'Accounting Policies, Changes in Accounting Estimates and Errors' and then apply them consistently; § present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; § provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance; § state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and § make judgements and estimates that are reasonable and prudent. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Company's financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and for ensuring that the Annual Report includes the information required by the Listing Rules of the Financial Conduct Authority. The financial statements are published on the Company's website, www.mitongroup.com/micro, which is maintained on behalf of the Company by the Investment Manager. Under the Management Agreement, the Investment Manager has agreed to maintain, host, manage and operate the Company's website and to ensure that it is accurate and up-to-date and operated in accordance with applicable law. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom covering the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction. We confirm that to the best of our knowledge: § the Company's financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and § this 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 Directors consider that the Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy. On behalf of the Board Andy Pomfret Chairman 19 July 2018
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's statutory accounts for the year ended 30 April 2018 but is derived from those accounts. Statutory accounts for the year ended 30 April 2018 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report at: www.mitongroup.com/micro.
INCOME STATEMENT
of the Company for the year ended 30 April 2018
Year ended 30 April 2018 Year ended 30 April 2017 Revenue Capital Revenue   Capital return return Total  return    return Total Note £'000 £'000 £'000  £'000  £'000  £'000  Gains on investments held at fair value through profit or loss 12 -  9,644  9,644  -  16,113  16,113  Foreign exchange (losses)/gains -  (14) (14) -  20  20  Income 2 1,270  -  1,270  1,531  -  1,531  Management fee 7 (270) (811) (1,081) (235) (705) (940) Other expenses 8 (511) -  (511) (471) -  (471) Return on ordinary activities before finance costs and taxation 489  8,819  9,308  825  15,428 16,253  Finance costs 9 (3) (7) (10) -  1,969 1,969  Return on ordinary activities before taxation 486  8,812  9,298  825  17,397 18,222  Taxation 10 (22) -  (22) (3) -  (3) Return on ordinary activities after taxation 464  8,812  9,276  822  17,397 18,219  Return per Ordinary share (pence) 3 0.27  5.15  5.42  0.53  11.24 11.77
The total column of this statement is the Income Statement of the Company prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union. The supplementary revenue return and capital return columns are presented in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ("AIC SORP"). All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. There is no other comprehensive income and, therefore, the return on ordinary activities after taxation is both the profit and the total comprehensive income.
STATEMENT OF CHANGES IN EQUITY
of the Company for the year ended 30 April 2018
Share Capital Share premium redemption Capital Revenue capital account reserve reserve reserve Total  For the year ended 30 April 2018 Note £'000 £'000  £'000 £'000  £'000 £'000  As at 30 April 2017 223  86,986  -  23,099  938  111,246  Total comprehensive income:      Return on ordinary activities after taxation - -  - 8,812  464  9,276  Transactions with shareholders recorded directly to equity:      Redemption of Ordinary shares 4 (2) -  2  (1,241) - (1,241)      Equity dividends paid 11 -  -  -  -  (616) (616) As at 30 April 2018 221  86,986  2 30,670  786  118,665
Share  Capital Share premium  redemption Capital Revenue  capital account  reserve reserve reserve  Total   For the year ended 30 April 2017 £'000 £'000  £'000 £'000 £'000  £'000  As at 30 April 2016 160 54,183  - 5,702 347  60,392  Total comprehensive Income:      Return on ordinary activities after taxation - -  - 17,397 822 18,219  Transactions with shareholders recorded directly to equity: Issue of Ordinary shares 9 5,448  - - - 5,457  Expenses of share issue* - (75) - - - (75) Conversion of C shares 54 27,430  - - - 27,484  Equity dividends paid - -  - - (231) (231) As at 30 April 2017 223 86,986  - 23,099 938 111,246  * Costs directly attributable to issue of Ordinary shares.
BALANCE SHEET
of the Company as at 30 April 2018
Note 2018 £'000 2017 £'000 Non-current assets:         Investments held at fair value through profit or loss 12 103,003 107,979 Current assets: Trade and other receivables 14 1,241 178 Cash at bank and cash equivalents 14,595 3,245 Total assets 118,839 111,402 Liabilities and equity Liabilities Trade and other payables 15 174 156 Total liabilities 174 156 Equity Share capital 4 221 223 Share premium account 86,986 86,986 Capital reserve 30,670 23,099 Capital redemption reserve 2 - Revenue reserve 786 938 Total equity 118,665 111,246 Total liabilities and equity 118,839 111,402 pence pence Net asset value attributable per Ordinary share 5 69.33 64.27
These financial statements were approved and authorised for issue by the Board of Miton UK MicroCap Trust plc on 19 July 2018 and were signed on its behalf by: Andy Pomfret Chairman Company No: 09511015 The notes below form part of these financial statements.
STATEMENT OF CASH FLOWS
for the Company for the year ended 30 April 2018
30 April  2018  £'000  30 April 2017  £'000  Operating activities: Net return before taxation 9,298  18,222  Gain on investments held at fair value through profit or loss (9,644) (16,113) Decrease/(increase) in trade and other receivables 46  (12) Increase/(decrease) in trade and other payables 9  (78) Exclude finance costs 10  (1,969) Witholding tax paid (22) (3) Net cash (outflows)/inflow from operating activities (303) 47  Investing activities: Purchase of investments (24,235) (39,339) Sales of Investments 37,764  22,694  Net cash inflow/(outflow) from investing activities 13,529  (16,645) Financing activities: Ordinary shares issued -  5,457  Expenses of ordinary share issue -  (72) Redemption of ordinary shares (1,241) -  Equity dividends paid (616) (231) Finance costs paid (19) -  Expenses of C share issue -  (19) Net cash (outflow)/inflow from financing activities (1,876) 5,135  Increase/(decrease) in cash and cash equivalents 11,350  (11,463) Reconciliation of net cash flow movement in funds: Cash and cash equivalents at the start of the year 3,245  14,708  Net cash inflow/(outflow) from cash and cash equivalents 11,350  (11,463) Cash at the end of the year 14,595  3,245  30 April 30 April 2018  2017  £'000  £'000  Cash received during the period includes: Dividends received 1,293  1,511  Interest received 3  -
The notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting Policies
Miton UK MicroCap Trust plc is a company incorporated and registered in England and Wales. The principal activity of the Company is that of an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010. The Company's financial statements for the year ended 30 April 2018 have been prepared in conformity with IFRS as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and as applied in accordance with the provisions of the Companies Act 2006. The annual financial statements have also been prepared in accordance with the AIC SORP for the financial statements of investment trust companies and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS. Basis of Preparation In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement. The financial statements are presented in Sterling, which is the Company's functional currency as the UK is the primary environment in which it operates, rounded to the nearest £'000, except where otherwise indicated. Going Concern The financial statements have been prepared on a going concern basis and on the basis that approval as an investment trust company will continue to be met. The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has the resources to continue in business for the foreseeable future, being a period of at least 12 months from the date these financial statements were approved. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company's financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on the going concern basis. Segmental Reporting The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company primarily invests in companies listed in the UK. Accounting Developments In the current year, the Company has applied a number of amendments to IFRS issued by the International Accounting Standards Board (IASB) mandatorily effective for an accounting period that begins on or after 1 January 2017. These are annual improvements to IFRS, changes in IAS 7 Statement of Cash Flows, legislative and regulatory amendments to changes in disclosure and presentation requirements. Their adoption has not had any material impact on these financial statements. The Company has not early adopted new and revised IFRS that were in issue at the year end but will not be in effect until after this financial year end. The Directors have considered the impact of the standards upon the Financial Statements. At the date of authorising these financial statements the following standards and interpretations which had not been applied in these financial statements were in issue and have now become effective. The impact of IFRS 9 in future periods will increase disclosure requirements and change the presentation of investments and current assets. IFRS 15 specifies how and when revenue is recognised and enhances disclosures. There should be no material impact on the overall returns of the Company. It is not envisaged that the other standard listed below effective in later financial periods will have a material effect on the financial statements. International Financial Reporting Standards Effective date IFRS 2 Share-based payments (amendments) 1 January 2018 IFRS 9 Financial Instruments (IFRS 7 Disclosures) 1 January 2018 IFRS 9 Financial Instruments 1 January 2018 IFRS 15 Revenue from contracts with customer 1 January 2018 IFRS 16 Leases 1 January 2019 Critical Accounting Judgements and Key Sources of Estimation Uncertainty The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts in the Balance Sheet, the Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period if the revision affects both current and future periods. There were no significant accounting estimates or judgements in the current period. Share Capital The Company is a closed-ended investment company with an unlimited life. As defined in the Articles of Association, redemption of Ordinary shares is at the sole discretion of the Directors, therefore the Ordinary shares have been classified as equity. The issuance, acquisition and resale of Ordinary shares are accounted for as equity transactions and no gain or loss is recognised in the Income Statement. In accordance with paragraph 11 of IAS 32 (Financial Instruments: Presentation), when the Company has C shares in issue, these C shares are required to be classified as a financial liability prior to conversion due to the inherent variability of the number of Ordinary shares attributable to C shareholders on conversion. The income, expenses and capital gains or losses generated by the C share pool of assets during the period they are in existence, are included in the Income Statement in their respective categories and the total is charged or credited back within finance costs in the capital column of the Income Statement. The issue costs of the C shares are also recognised as a finance cost and charged to the capital column of the Income Statement. Investments The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Company's Board of Directors. Upon initial recognition the Company designates the investments 'at fair value through profit or loss'. They are included initially at fair value, which is taken to be their cost (excluding expenses incidental to the acquisition which are written off in the Income Statement, and allocated to 'capital' at the time of acquisition). When a purchase or sale is made under a contract, the terms of which require delivery within the time-frame of the relevant market, the investments concerned are recognised or derecognised on the trade date. Subsequent to initial recognition, investments are valued at fair value through profit or loss. For listed investments this is deemed to be bid market prices or closing prices for Stock Exchange Electronic Trading Service - quotes and crosses ('SETSqx'). Changes in fair value of investments are recognised in the Income Statement as a capital item. On disposal, realised gains and losses are also recognised in the Income Statement as capital items. All investments for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy in note 13. Foreign currency Transactions denominated in foreign currencies are converted to Sterling at the actual exchange rate as at the date of the transaction. Monetary assets and liabilities and assets carried at fair value denominated in foreign currencies at the year end are reported at the rate of exchange at the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature. Cash and Cash Equivalents For the purposes of the Balance Sheet, cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly-liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable. Trade receivables, trade payables and short term borrowings Trade receivables and payables are measured at amortised cost. Income Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time-apportioned basis. Dividends from overseas companies are shown gross of any non-recoverable withholding taxes, which are presented separately in the Income Statement. Special dividends are taken to revenue or capital account depending on their nature. In deciding whether a dividend should be regarded as a capital or revenue receipt, the Board reviews all relevant information as to the reasons for the sources of the dividend on a case by case basis. When the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend forgone is recognised as income. Any excess in the value of the cash dividend is recognised in the capital column. Expenses and Finance Costs All expenses and finance costs are accounted for on an accruals basis. On the basis of the Board's expected long-term split of total returns the Company charges 75% of its management fee to capital. Expenses directly incurred in relation to arranging debt and loan facilities have been capitalised and amortised over the term of the finance. Expenses incurred directly in relation to issue or redemption of shares are deducted from equity and charged to the share premium account. Taxation Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date based on tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with the recommendations of the AIC SORP, the allocation method used to calculate the tax relief on expenses charged to capital is the "marginal" basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account. The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or accelerated because of temporary differences between the treatment of certain items for accounting and taxation purposes. The actual charge for taxation in the Income Statement relates to irrecoverable withholding tax on overseas dividends received during the year. Dividends Payable to Shareholders Dividends to shareholders are recognised as a liability in the period in which they are paid or approved in general meetings and are taken to the Statement of Changes in Equity. Dividends declared and approved by the Company after the Balance Sheet date have not been recognised as a liability of the Company at the Balance Sheet date. Share Premium The share premium account represents the accumulated premium paid for shares issued in previous periods above their nominal value less issue expenses. This is a reserve forming part of the non-distributable reserves. The following items are taken to this reserve: § costs associated with the issue of shares; and § premium on the issue of shares. Capital Reserve The following are taken to the capital reserve through the capital column in the Statement of Comprehensive Income: gains and losses on the disposal of investments and derivatives; increase and decrease in the valuation of investments held at the year end; costs of share buybacks; cancellation of shares; costs relating to the capital structure of the Company; exchange differences of a capital nature; and expenses, together with the related taxation effect, allocated to this reserve in accordance with the above accounting policies. Capital redemption reserve The capital redemption reserve represents non-distributable reserves that arise from the purchase and cancellation of shares. Revenue Reserves The revenue reserve represents the surplus of accumulated profits and is distributable by the way of dividends.
2 Income
Year ended 30 April 2018 Total £'000 Year ended 30 April 2017 Total £'000 Income from investments UK dividends 950 1,244 Unfranked dividend income 317 283 Bank interest 3 - Underwriting commission - 4 Total income 1,270 1,531
3 Return per Share
Returns per Ordinary share are based on the weighted average number of shares in issue during the year. Basic and diluted return per share are the same as there are no dilutive elements on share capital.
Year ended 30 April 2018 Ordinary shares  Revenue Capital Total £'000 £'000 £'000 Net profit 464 8,812 9,276 Weighted average number of shares in issue 171,225,713 Return per share (pence) 0.27 5.15 5.42
Year ended 30 April 2017 Ordinary shares Revenue Capital Total £'000 £'000 £'000 Net profit 822 17,397 18,219 Weighted average number of shares in issue 154,839,150 Return per share (pence) 0.53 11.24 11.77 The Management shares have no right to income.
4 Share Capital
30 April 2018 30 April 2017 Number of  Ordinary  shares  £'000  Number of Ordinary shares £'000 Ordinary shares of £0.001 each Opening balance 173,086,001  173  109,990,000 110 C share conversion -  -  53,927,917 54 Subscriptions -  -  9,168,084 9 Redemptions (1,934,487) (2) -   -    At year end 171,151514  171  173,086,001 173
30 April 2018 30 April 2017 Number of Ordinary shares £'000 Number of Ordinary shares £'000 Management shares of £1 each 50,000 50 50,000 50 The rights attaching to each share class are set out below. Redemption of Ordinary Shares The Company has a redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of Ordinary shares on an annual basis on 30 April in each year. As set out in the Articles of Association, the Board may, at its absolute discretion, elect not to operate the annual redemption facility in whole or in part. Accordingly, the Ordinary shares have been classified as equity. In the year to 30 April 2018, valid redemption representing 18,497,692 (2017: 1,934,487) Ordinary shares, representing 10.8% (2017: 1.12%) of the issued share capital, were made. All of the 18,497,692 shares were cancelled on 15 May 2018 (2017: 1,934,487 shares were cancelled on 15 May 2017). All shareholders who validly applied to have shares redeemed received a calculated Redemption Price of 68.98p (2017: 64.13p) per share being the NAV per Ordinary share at the Redemption Point. Therefore, as at the date of this Report, there are 152,653,822 Ordinary shares and 50,000 management shares in issue. Management Shares 50,000 Management shares with a nominal value of £1 each were allotted to Miton Trust Managers Limited on the date of incorporation. These shares have been fully paid up. The Management shares are non-voting and non-redeemable and, upon a winding-up or on a return of capital of the Company, shall only receive the fixed amount of capital paid up on such shares and shall confer no right to any surplus capital or assets of the Company.
5 Net Asset Value
The NAVs per Ordinary share and the net assets attributable at the year end were as follows:
30 April 2018 30 April 2017 Ordinary share Ordinary share Net asset value per share pence Net assets attributable £'000 Net asset value per share pence Net assets attributable £'000 Basic and diluted 69.33 118,665 64.27 111,246
NAV per Ordinary share is based on net assets at the year end and 171,151,514 Ordinary shares (2017: 173,086,001), being the number of Ordinary shares in issue at the year end. NAV of £1.00 per Management share is based on net assets at the year end of £50,000 (2017: £50,000) and attributable to 50,000 Management shares at the year end. The shareholders have no right to any surplus capital or assets of the Company.
6 Transaction Costs
During the year, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:
30 April 30 April 2017 2017  £'000 £'000 Costs on acquisitions 23 38 Costs on disposals 64 28 87 66
These transaction costs are dealing commissions paid to stockbrokers and stamp duty, a government tax paid on transactions (which is zero when dealing on the AIM/ISDX exchanges). A breakdown of these costs is set out below:
30 April 2018 30April 2017 Ordinary share £'000 % of average monthly net assets in the year Ordinary share £'000 % of average monthly net assets in the year Costs paid in dealing commissions 78 0.07 56 0.06 Costs of stamp duty 9 0.01 10 0.01 87 0.08 66 0.07
The average monthly net assets of the Ordinary shares for the year to 30 April 2018 was £113,142,399 (2017: £95,965,401).
7 Management Fee
The AIFM is entitled to receive from the Company in respect of its services provided under the Management Agreement a management fee for both the Ordinary share and C share classes (when in issue), payable monthly in arrears and calculated at the rate of 1% per annum of the market capitalisation of each share class as at the relevant calculation date. In addition to the basic management fee, and when a Redemption Pool is in existence, the AIFM is entitled to receive from the Company a fee calculated at the rate of 1% per annum of the net asset value of the Redemption Pool on the last Business Day of the relevant calendar month. The AIFM has agreed that, for so long as it remains the Company's investment manager, it will not charge such part of any management fee payable to it so that the Company can maintain an ongoing charges ratio of 2% or lower. The ongoing charges ratio for the period is 1.41% (2017: 1.47%) for the Ordinary shares, and as such is below 2%. In accordance with the Directors' policy on the allocation of expenses between income and capital, in each financial year 75% of the management fee payable is expected to be charged to capital and the remaining 25% to income.
30 April 2018 30 April 2017 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Management fee 270 811 1,081 235 705 940
At 30 April 2018, an amount of £91,000 was outstanding and due to Miton Trust Managers Limited in respect of management fees (30 April 2017: £87,000).
8 Other Expenses
30 April 2018 30 April 2017 £'000 £'000 Company Secretarial and Administrative services 162 142 Auditor's remuneration for: Audit of the Company's financial statements 24 23 Half-year review - 8 Directors' fees 115 114 Other expenses 210 184 511 471
During the year ended 30 April 2018, the Auditor's remuneration related to audit services only. During the year ended 30 April 2017, in addition to the Auditor’s remuneration shown above, £10,000 was charged on the C share conversion. This cost was charged to capital in line with the prospectus. Therefore audit remuneration for audit services was £23,000 and non-audit services was £18,000 excluding VAT.
9 Finance Costs
30 April 2018 30 April 2017 Revenue Capital Total Revenue Capital  Total  £'000 £'000 £'000 £'000 £'000  £'000  Finance costs: RBS £7.5m revolving loan facility - arrangement fee 1 1 2 - -  -  RBS £7.5m revolving loan facility - non-utilisation fee 2 6 8 - -  -  Net loss allocated to C shares - - - - (1,969) (1,969) 3 7 10 - (1,969) (1,969)
On 12 February 2018, the Company entered into a £7.5m revolving loan facility (the ‘facility’) with The Royal Bank of Scotland plc (‘RBS’). The above charges relate to arrangement and commitment fees on this facility which remains undrawn as at the year end. The loan bears interest at 1.10% above LIBOR on any drawn down balance. During the year the facility has not been drawn down. The loan also bears a commitment fee of 0.55% on any undrawn balance where less than 25 per cent of the facility is drawn down or 0.45% on any undrawn balance where more than 25 per cent of the facility is drawn down. An arrangement fee of £18,750 has been paid to RBS and is being amortised over the 3 year period of the facility. The loan facility contains covenants which require that borrowings will not at any time exceed 15% of the adjusted portfolio value, being the total portfolio value less the gross market value of each investment which is not a quoted equity freely traded on a recognised investment exchange, and that the net asset value shall at all times be greater than £70m. If the Company breaches any covenant it is required to notify RBS of any default and the steps being taken to remedy it. There were no prior loan facility agreements in place.
10 Taxation
30 April 2018 30 April 2017 Total Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Overseas withholding tax suffered 22 - 22 3 - 3
The current tax charge is explained below:
30 April 2018 Total 30 April 2017 Total Revenue  Capital  Total  Revenue  Capital  Total  £'000  £'000  £'000  £'000  £'000  £'000  Return on ordinary activities before taxation 486  8,812  9,298  825  17,397  18,222  Theoretical tax at UK corporation tax rate of 19.00% (2017: 19.92%) 92  1,674  1,766  164  3,465  3,629  Effects of:  - UK dividends that are not taxable (180) -  (180) (248) -  (248)  - Overseas dividends that are not taxable (49) -  (49) (53) -  (53)  - Non-taxable investment gains -  (1,830) (1,830) -  (3,606) (3,606)  - Overseas taxation not recoverable 13  -  13  3  -  3   - Double taxation relief 9  -  9  -  -  -   - Unrelieved expenses 137  156  293  137  141  278  Actual current tax charge 22  -  22  3  - 3
Factors that may affect future tax charges
At 30 April 2018, the Company had no unprovided deferred tax liabilities (2017: nil). At that date, based on current estimates and including the accumulation of net allowable losses, the Company had unrelieved losses of £4,007,000 (2017: £2,458,000), that are available to offset future taxable revenue. A deferred tax asset of £682,000 (2017: £418,000) has not been recognised because the Company is not expected to generate sufficient taxable income in future periods in excess of the available deductible expenses and, accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus losses. Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investment because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an Investment Trust Company.
11 Dividends
	30 April 2018		30 April 2017
	£'000	pence	£'000	pence
Amounts recognised as distributions to equity holders in the year:
Final dividend for the period ended 30 April 2017	616	0.36	-	-
Final dividend for the period ended 30 April 2016	-	-	231	0.14
	616	0.36	231	0.14
The Directors have recommended a final dividend in respect of the year ended 30 April 2018 of 0.36p per Ordinary share payable on 21 September 2018 to all shareholders on the register at close of business on 24 August 2018. The ex-dividend date will be 23 August 2018.
12 Investments
30 April 2018  30 April 2017 Ordinary  share  Ordinary share  C share £'000  £'000  £'000 £'000  Investment portfolio summary: Opening book cost 87,862  52,010  14,536  66,546  Opening unrealised gains 20,117  7,185  1,969  9,154  Total investments designated at fair value 107,979  59,195  16,505  75,700  Analysis of investment portfolio movements Opening valuation 107,979  59,195  16,505  75,700  Movements in the year: C share transfer -  25,591  (25,591) -  Purchases at cost 24,235  27,671  11,123  38,794  Sales - proceeds (38,855) (22,560) (68) (22,628)           - gains on sales 9,281  5,150  -  5,150  Increase/(decrease) in unrealised gains 363  12,932  (1,969) 10,963  Closing valuation 103,003  107,979  -  107,979  Closing book cost 82,523  87,862  -  87,862  Closing unrealised gains 20,480  20,117  -  20,117  103,003  107,979  -  107,979  30 April 2017 30 April 2018 Ordinary share C share £'000 £'000 £'000 £'000  Analysis of capital gains Gains on sales of investments 9,281 5,150 - 5,150 Movement in unrealised gains 363 10,963 - 10,963 9,644 16,113 - 16,113
A list of the largest portfolio holdings by their fair value is shown above.
13 Fair Value Hierarchy
Financial assets of the Company are carried in the Balance Sheet at their fair value or approximation of fair value. The fair value is the amount at which the asset could be sold in an ordinary transaction between market participants, at the measurement date, other than a forced or liquidation sale. The Company measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows: Level 1 - Valued using quoted prices, unadjusted in active markets for identical assets and liabilities. Level 2 - Valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included in level 1. Level 3 - Valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability. Assessing the significance of a particular input requires judgement, considering factors specific to the asset or liability.. The table below sets out the fair value measurement of financial assets and liabilities in accordance with the fair value hierarchy.
Financial assets at fair value through profit or loss at 30 April 2018 Level 1 £'000 Level 2 £'000 Level 3 £'000 Total £'000 Equity investments 100,463 136 2,404 103,003 The fair value of the Level 2 investment is based on discounted cash flow analysis using valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs. The fair value of Level 3 investments are based on discounted anticipated future cash returns. Reconciliation of level 3 movements - financial assets 30 April  2018  Level 3  £'000  30 April  2017  Level 3  £'000  Opening fair value investments 29  -  Transfer from Level 1 2,007  -  Transfer from Level 2 375  62  Sale proceeds -  (33) Movement in investment holdings gains movement in unrealised (7) -  Closing fair value of investments 2,404  29
During the year, following the delisting of Specialist Investment Properties, the Fund’s investment totalling £375,000 was reclassified from Level 2 to Level 3. As at 30 April 2018, Atlantis Resources and Centralnic Group were both temporarily suspended from AIM and the Fund’s investments of £1,477,000 and £530,000 have also been reclassified from Level 1 to Level 3. Atlantis Resources was readmitted to AIM on 22 May 2018. Pure Wafer is considered a level 3 investment at 30 April 2018 as Company is in liquidation.
Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss at 30 April 2017 £'000 £'000 £'000 £'000 Equity investments 107,618 332 29 107,979
Other financial assets and liabilities For all other financial assets and liabilities, the carrying value is an approximation of fair value, including: trade and other receivables; cash and cash equivalents and trade and other payables.
14 Trade and Other Receivables
30 April 2018 £'000 30 April 2017 £'000 Amount due from brokers 1,091 - Dividends receivable 128 154 Prepayment and other debtors 21 23 Taxation recoverable 1 1 1,241 178
15 Trade and Other Payables
30 April 2018 £'000 30 April 2017 £'000 Other creditors 174 156 174 156
16 Capital Management Policies
The Company's capital management objectives are: § to ensure that it will be able to continue as a going concern; and § to maximise the income and capital return over the long term to its equity shareholders through an appropriate balance of equity capital and debt. As stated in the investment policy, the Company has authority to borrow up to 15% of net asset value through a mixture of bank facilities and certain derivative instruments. There were no borrowings as at 30 April 2018 or throughout the year (2017: nil). Also, as a public company, the minimum share capital is £50,000. The Company's capital at 30 April 2018 comprised:
30 April    2018    £'000    30 April    2017    £'000    Current liabilities: Trade and other payables 174    156    Equity: Equity share capital 221    223    Retained earnings and other reserves 118,444    111,023    Total shareholders' funds 118,839    111,402    Debt as a % of net assets 0.00% 0.00%
The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes: § the planned level of gearing, which takes into account the Investment Manager's view of the market; § the buy back of shares for cancellation or treasury, which takes account of the difference between the NAV per share and the share price (i.e. the level of share price discount or premium); § new issues of equity shares; and § the extent to which revenue in excess of that which is required to be distributed should be retained. The Company's objectives, policies and processes for managing capital have remained unchanged since its launch.
17 Reserves
Share  Capital Capital  Capital  premium  redemption reserve  reserve  Revenue  account  reserve realised  unrealised  reserve  Ordinary shares to 30 April 2018   £'000  £'000 £'000  £'000  £'000  Opening balance 86,986  - 2,962  20,137  938  Redemption of Ordinary shares -  2 (1,241) -  -  Net gain on realisation of investments -  - 9,281  -  -  Unrealised net increase in value of investments -  - -  363  -  Management fee charged to capital -  - (811) -  -  Finance costs charged to capital -  - (7) -  -  Equity dividends paid -  - -  -  (616) Foreign currency gains/(losses) -  - 13  (27) -  Revenue return on ordinary activities after tax -  - -  -  464  Closing balance 86,986  2 10,197  20,473  786  Ordinary shares to 30 April 2017 Share  Premium  Account   £'000  Capital redemption reserve £'000 Capital  reserve  realised    £'000  Capital  reserve  unrealised  £'000  Revenue  reserve  £'000  Opening balance 54,183  - (1,483) 7,185  347  Issue of Ordinary share (tap Issue) 5,448  - -  -  -  Expenses of Ordinary share issue (tap Issue) (75) - -  -  -  Conversion of C shares 27,430  - -  -  -  Net loss allocated to C shares -  - -  1,969  -  Net gains on realisation of investments -  - 5,150  -  -  Unrealised net increase in value of investments -  - -  10,963  -  Management fee charged to capital -  - (705) -  -  Equity dividends paid -  - -  -  (231) Foreign currency gains -  - -  20  -  Revenue return on ordinary activities after tax -  - -  -  822  Closing balance 86,986  - 2,962  20,137  938  At 30 April 2018, the distributable reserves of the Company are £10,983,000 (2017: £3,900,000).
18 Analysis of Financial Assets and Liabilities
Investment Objective and Policy The Company's investment objective and policy are detailed above. The Company's investing activities in pursuit of its investment objective involve certain inherent risks. The Company's financial instruments can comprise: § shares and debt securities held in accordance with the Company's investment objective and policies; § derivative instruments for efficient portfolio management, gearing and investment purposes; and § cash, liquid resources and short-term debtors and creditors that arise from its operations. The risks identified arising from the Company's financial instruments are market risk (which comprises market price risk, interest rate risk and foreign currency exposure risk), liquidity risk and credit and counterparty risk. The Company may enter into derivative contracts to manage risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below. These policies have remained unchanged since the beginning of the accounting period. Market Risk Market risk arises mainly from uncertainty about future prices of financial instruments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions by way of price movements, interest rate movements and exchange rate movements. The Investment Manager assesses the exposure to market risk when making each investment decision and these risks are monitored by the Investment Manager on a regular basis and the Board at quarterly meetings with the Investment Manager. Market price risk Market price risk (i.e. changes in market prices other than those arising from currency risk or interest rate risk) may affect the value of investments. The Board manages the risks inherent in the investment portfolio by ensuring full and timely reporting of relevant information from the Investment Manager. Investment performance and exposure are reviewed at each Board meeting. The Company's exposure to changes in market prices as at 30 April 2018 on its equity investments held at fair value through profit or loss was £103,003,000 (2017: £107,979,000). A 10% increase in the fair value of its investments at 30 April 2018 would have increased net assets attributable to shareholders by £10,300,000 (2017: £10,798,000). An equal change in the opposite direction would have decreased the net assets and net profit available to shareholders by an equal and opposite amount. The analysis is based on closing balances only and is not representative of the year as a whole. Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits. The Company's financial assets and liabilities, excluding short-term debtors and creditors, may include investment in fixed interest securities, such as UK corporate debt stock, whose fair value may be affected by movements in interest rates. The majority of the Company's financial assets and liabilities, however, are non-interest bearing. As a result, the Company's financial assets and liabilities are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. There was no exposure to interest bearing liabilities during the year ended 30 April 2018 (2017: nil). During the year the Company entered into a £7.5m revolving loan facility with RBS at an interest rate of 1.10% above LIBOR on any drawn down balance and 0.55% on any undrawn balance where less than 25 per cent of the facility is drawn down or 0.45% on any undrawn balance where more than 25 per cent of the facility is drawn down. During the year the facility has not been drawn down. The possible effects on the fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions. The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions.
The interest rate profile of the Company (excluding short-term debtors and creditors) was as follows:
30 April 2018 Floating rate £'000 30 April 2017 Floating rate £'000 Assets and Liabilities: Cash and cash equivalents 14,595 3,245 14,595 3,245
If the above level of cash was maintained for a year, a 1% increase in LIBOR would increase the revenue return and net assets by £146,000 (2017: £32,000). If there was a fall by 1% in LIBOR it would potentially impact the Company by a revenue reduction of £146,000 (2017: £32,000). Foreign currency risk Although the Company's performance is measured in Sterling, a proportion of the Company's assets may be either denominated in other currencies or in investments with currency exposure. Any income denominated in a foreign currency is converted into Sterling upon receipt. At the Balance Sheet date, all the Company's assets were denominated in Sterling and accordingly the only currency exposure the Company has is through the trading activities of its investee companies. Liquidity Risk Liquidity risk is not significant as the Company is a closed-ended investment trust and the majority of the Company's assets are investments in quoted equities and other quoted securities that are readily realisable. The Company's liquidity risk is managed on a daily basis by the Investment Manager in accordance with established policies and procedures in place. The Investment Manager reviews daily forward-looking cash reports which project cash obligations. These reports allow it to manage its obligations. A maturity analysis is not presented as the Investment Manager does not consider this to be a material risk. Credit and Counterparty Risk Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to meet its contractual obligations. The maximum exposure to credit risk as at 30 April 2018 was £15,836,000 (2017: £3,423,000). The calculation is based on the Company’s credit risk exposure as at 30 April 2018 and this may not be representative for the whole year. This exposure was reduced by £12,759,508 on 15 May 2018 as a result of the share redemption detailed in note 20 below. The Company's quoted investments are held on its behalf by Bank of New York Mellon acting as the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed. The Board monitors the Company's risk by reviewing the custodian's internal controls report. Where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default. Investment transactions are carried out with a number of brokers whose creditworthiness is reviewed by the Investment Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company's custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the Company is completed. Cash is only held at banks that have been identified by the Board as reputable and of high credit quality. None of the Company's assets are past due or impaired.
19 Related Parties
The Directors who served in the year were entitled to the following emoluments in the form of fees:
Directors Fees Directors  Fees per Annum £'000 Directors Fees paid for the period £'000 Outstanding as at 30 April 2018 £'000 Directors  Fees per Annum £'000 Directors Fees paid for the period £'000 Outstanding as at 30 April 2017 £'000 Andrew Pomfret (Chairman) 35 35 - 35 35 - Peter Dicks 30 30 - 29 29 - Jan Etherden 25 25 - 25 25 - Ashe Windham 25 25 - 25 25 -
Details of the management fee payable to Miton Trust Managers Limited pursuant to the Investment Management Agreement are set out in the Strategic Report above. Amounts paid and payable are set out in Note 7. There were no other identifiable related parties at the year end.
20 Post Balance Sheet Events
On 15 May 2018, 18,497,692 Ordinary shares were redeemed and cancelled at a price of 68.98 pence per share, amounting to £12,759,708, in respect of the April 2018 redemption. As a result of this, there are 152,653,822 Ordinary shares in issue.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held on 12 September 2018 at 11.00am at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London, EC2M 7SH.
NATIONAL STORAGE MECHANISM
A copy of the Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/nsm
ENDS
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

 

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