Issue of Equity

RNS Number : 7198N

Miton UK MicroCap Trust plc

02 February 2016

 

2 February 2016

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, TO THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY MEMBER STATE OF THE EEA (OTHER THAN THE UNITED KINGDOM) OR TO ANY NATIONAL, RESIDENT OR CITIZEN OF THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY MEMBER STATE OF THE EEA (OTHER THAN THE UNITED KINGDOM OR TO PROFESSIONAL INVESTORS IN IRELAND)

This announcement is an advertisement and does not constitute a prospectus and investors must only subscribe for or purchase any shares referred to in this announcement on the basis of information contained in a prospectus to be published by Miton UK MicroCap Trust plc in due course (the "Prospectus") and not in reliance on this announcement. When made generally available, copies of the Prospectus may, subject to any applicable law, be obtained from the registered office of the Company. This announcement does not constitute and may not be construed as, an offer to sell or an invitation to purchase, investments of any description, or a recommendation regarding the issue or the provision of investment advice by any party. No information set out in this announcement or referred to in other written or oral form is intended to form the basis of any contract of sale, investment decision or any decision to purchase shares in the Company.

Miton UK MicroCap Trust plc

Announcement of Issue of C Shares via a Placing, Offer for Subscription and Intermediaries Offer 
(and Share Issuance Programme)

Further to their announcement on 10 December 2015, the Board of Directors (the "Directors") of Miton UK MicroCap Trust plc (the "Company") today announce the proposed issue of up to 250 million new ordinary and/or C shares in aggregate through a share issuance programme (the "Share Issuance Programme") over the next 12 months, commencing with an initial issue of C shares ("C Shares") through a placing, offer for subscription and intermediaries offer at a price of 50 pence per C Share (the "Issue"), targeting gross proceeds of  £30 million¹.

Following the IPO of the Company in April 2015, Miton Trust Managers Limited ("Miton" or "the Investment Manager") deployed substantially all of the net proceeds of the IPO in accordance with the Company's investment objective and investment policy within 4 months of admission. The Company issued a further 9.99% of its issued share capital during August and September 2015.

The Company has performed strongly since IPO, with its net asset value ("NAV") per ordinary share (cum income) increasing by 5.8 per cent. from an initial reported NAV of 49 pence per ordinary share to 51.82 pence (at 29 January 2016) and the Company's shares have traded at an average premium of approximately 4.9 per cent to NAV over this period. Over the same period the FTSE All Share Index declined by 11.3%. 

In order to retain the flexibility to issue further shares pursuant to the Share Issuance Programme in the 12 month period from publication of the Prospectus, and following the Issue detailed above, the Directors are proposing to implement the new Share Issuance Programme for up to 250 million ordinary and/or C shares in aggregate. Assuming an initial issue of 60 million C Shares, the Company would have the flexibility to issue up to a further 190 million shares in aggregate over the course of the Share Issuance Programme, subject to renewing and extending its existing authority to issue ordinary and/or c shares on a non pre-emptive basis at its first annual general meeting, expected to be held in September 2016. This existing authority allows the issue of a further 190,010,000 ordinary and/or c shares on a non pre-emptive basis and the Directors' intention will be to seek authority at the first annual general meeting to cover the balance of shares that can be issued under the Share Issuance Programme following the Issue.

Benefits of the Issue

The Investment Manager continues to see a strong pipeline of investment opportunities within the universe of smaller companies, quoted or traded on an exchange in the United Kingdom, with the potential for further investment in both existing portfolio companies and in companies that are not currently held by the Company. As a result, the Directors believe that the Share Issuance Programme offers the following principal benefits for shareholders:

·     the net proceeds will be used to take advantage of near to medium term opportunities to make further investments in smaller companies in accordance with the Company's investment policy and investment objective;

·     it will allow the Company to tailor future equity issues to both its shareholders' interests and to its immediate pipeline of investments, providing flexibility and minimising cash drag;

·     it will provide the Company with the option to issue C Shares which will avoid dilution of existing holdings until at least 90 per cent. of the proceeds of any C Share issue are deployed; existing holders would therefore not be participating in a portfolio containing a substantial amount of un-invested cash before the conversion of any C Shares in issue;

·     it will enable the Company to issue new shares tactically so as to better manage the premium to net asset value per share at which the shares may trade;

·     an increase in the size of the Company should improve liquidity and enhance the marketability of the Company, resulting in a broader investor base over the longer term; and

·     it should enable the Company to grow, thereby spreading fixed costs over a larger capital base which should reduce on-going expenses per share.

Outlook for the Company

The period since the Company's launch has turned out to be a difficult one for dividend growth for UK listed companies. Eight FTSE100 constituents announced dividend cuts during 2015. In addition, some other FTSE100 companies that paid higher than average dividend yields, such as Amlin and Friends Life, have been acquired since the Company's launch, further diminishing the number of FTSE100 companies generating relatively high and growing dividend income. In aggregate, the FTSE100 stocks generating dividend growth are now largely matched by those cutting their dividends. The net effect is that dividend growth across the mainstream UK market has generally stagnated.

In the Investment Manager's opinion, many smaller companies appear to have better total return prospects than larger companies. In part, this reflects the fact that smaller quoted companies, in general, have not been under pressure to pay such generous dividends in the past, so they often have better dividend cover. In addition, many smaller companies have less debt on their balance sheets, and so have less need of retaining their cash flow to repay debt. Finally, many smaller quoted companies have greater prospects for expansion in their underlying markets given, in part, their relatively small market positions versus larger companies and therefore have scope to generate some growth in their operations even at times when the world economy is more constrained.

Although the dividends paid by the companies held in the portfolio are still overall relatively modest, it is anticipated that many of the companies in the Company's portfolio will go on to generate growth in their cash flow over the medium-term, and, in part, this has the potential to result in more sizeable dividend payments over time.

Further, the Investment Manager believes the valuation differential between large and smaller companies continues to suggest many micro cap companies are standing on sub-normal valuations, providing excellent opportunities for investment managers focussed on stock-specific selection to add value to their underlying investment portfolios.

Commenting on the Share Issuance Programme, Miton fund manager, Gervais Williams, said:

"With world growth stalling there is a renewed interest in assets that can generate ongoing growth with the prospect of attractive dividends in the coming three to five years. The smallest quoted stocks often have the greatest vibrancy and despite the unsettled markets our investment strategy continues to identify new holdings with attractive risk/reward ratios. 

"Investors seeking a different investment proposition in a group of assets that are less correlated with markets are indicating they have an interest in supporting the C Share issue."

Prospectus

Further details of the Share Issuance Programme are set out in the Prospectus, which is expected to be published soon, when it will be available on the Company's website (via www.mitongroup.com), subject to certain access restrictions, and will be available for inspection at the Company's registered office at Beaufort House, 51 New North Road, Exeter EX4 4EP.

When published, a copy of the Prospectus will be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM.

Expected timetable

Publication of the Prospectus	Early February 2016
Publication of the results of the Issue	Mid February 2016
Admission of and dealings in C Shares	Mid February 2016

Peel Hunt LLP is acting as sole sponsor, broker, placing agent and intermediaries offer adviser to the Company.

¹ The Company's existing authority to issue shares on a non pre-emptive basis, which expires at the Company's first annual general meeting in 2016, allows it to issue a further 190,010,000 ordinary and/or c shares as at the date of this announcement.

For further information please contact:

Miton Trust Managers Limited Gervais Williams Martin Turner David Barron Telephone: [phone] Peel Hunt LLP Luke Simpson (Corporate Broking) Mark Thompson, Eddie Nissen (Sales) Kathy Boate (Intermediaries) Telephone: [phone] Broadgate Mainland - Financial PR Roland Cross (07831 401309) Anouchka Burton (07769 145124)

About Miton Trust Managers Limited

Miton Trust Managers Limited is authorised and regulated by the Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS. It is registered in England under No 04569694 and its registered office is at 51 Moorgate, London EC2R 6BH.

Disclaimer

The content of this announcement which has been prepared by and is the sole responsibility of the Company, has been approved by Miton Trust Managers Limited solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 (as amended).

This announcement is an advertisement and does not constitute a prospectus and investors must only subscribe for or purchase any shares referred to in this announcement on the basis of information contained in the Prospectus to be published by Miton UK MicroCap Trust plc in due course and not in reliance on this announcement. When made generally available, copies of the Prospectus may, subject to any applicable law, be obtained from the registered office of the Company. This announcement does not constitute and may not be construed as, an offer to sell or an invitation to purchase, investments of any description, a recommendation regarding the issue or the provision of investment advice by any party. No information set out in this announcement or referred to in other written or oral form is intended to form the basis of any contract of sale, investment decision or any decision to purchase shares in the Company.

The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment when the Prospectus is published.

Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated by the Financial Conduct Authority, is acting only for the Company in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of Peel Hunt or advice to any other person in relation to the matters contained herein.

The shares of the Company will be offered only outside of the United States, pursuant to the provisions of Regulation S of the U.S. Securities Act of 1933, as amended (the "Securities Act"). These shares will not be registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. Moreover, the shares of the Company have not been, nor will they be, registered under the applicable securities laws of Australia, Canada, the Republic of South Africa, Japan or any member state of the EEA (other than the United Kingdom). Further, the Company will not be registered under the US Investment Company Act of 1940, as amended. Subject to certain exceptions, the shares of the Company may not be offered or sold in the United States, Australia, Canada, the Republic of South Africa, Japan or any member state of the EEA (other than the United Kingdom) or to, or for the account or benefit of, any national, resident or citizen of the United States, Australia, Canada, the Republic of South Africa, Japan or any member state of the EEA (other than the United Kingdom). The issue, and the distribution of this announcement, in other jurisdictions may be restricted by law and the persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, proposed acquisitions and objectives, are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties and, accordingly, the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These factors include but are not limited to those described in the Prospectus. These forward-looking statements speak only as at the date of this announcement and cannot be relied upon as a guide to future performance. The Company, the Investment Manager and Peel Hunt expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.

None of the Company, the Investment Manager or Peel Hunt, or any of their respective affiliates, accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. The Company, the Investment Manager and Peel Hunt, and their respective affiliates, accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.

 

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