Company Announcements

RNS Number : 2945Q
Montanaro European Smaller C.TstPLC
18 June 2020
 

Montanaro European Smaller Companies Trust plc (the "Company'')

LEI: 213800CWSC5B8BG3RS21

 

Financial Results

 

RESULTS FOR THE YEAR ENDED 31 MARCH 2020

 

The Directors are pleased to present the Annual Financial Results of the Company for the year ended 31 March 2020.

 

The information set out below does not constitute the Company's full statutory accounts for the year ended 31 March 2020 in terms of Section 434 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for the year ended 31 March 2020 will be posted to Shareholders and delivered to the Registrar of Companies, in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors 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 Auditors' report can be found in the Company's full Annual Report and Accounts Audited statutory accounts for the year to 31 March 2019, which were unqualified, have been lodged with the Registrars of Companies.

 

Investment objective

The investment objective of Montanaro European Smaller Companies Trust plc is to achieve capital growth by investing principally in Continental European quoted smaller companies.

 

Highlights

 

Capital Returns%(1)

1 Year

3 Year

5 Year

10 Year

MAM*

Ordinary share price

(1.1)

26.6

70.9

135.9

173.3

Net Asset Value ('NAV')**

(5.3)

17.6

67.4

124.1

178.1

Benchmark (Composite)(2)**

(15.1)

(12.5)

18.3

63.7

84.9

 

Total Returns%(1)

1 Year

3 Year

5 Year

10 Year

MAM*

Ordinary share price

(0.3)

30.3

80.7

164.5

229.2

NAV**

(4.5)

20.2

75.4

144.5

216.9

Benchmark (Composite)(2)**

(13.4)

(7.5)

29.6

97.3

138.6

 

Sources: Morningstar Direct, Association of investment Companies ('AIC'), MAM.

 

 

As at

31 March

2020

As at

31 March

2019

 

12 month

% change

Ordinary share price

880.0p

890.0p

(1.1)

NAV per Ordinary share**

956.9p

1,010.8p

(5.3)

Discount to NAV(1)

8.0%

12.0%

 

Gross assets** (£'000s)

168,932

177,713

(4.4)

Net assets** (£'000s)

160,123

169,141

(5.3)

Market capitalisation** (£'000s)

147,253

148,926

(1.1)

Net gearing employed(1)

5.8%

0.7%

 

           

 

Year
ended

31 March

2020

Year
ended

31 March

2019

 

 

12 month

% change

Revenue return per Ordinary share

11.9p

9.5p

25.3

Divided per Ordinary share

9.25p

9.0p

2.8

Ongoing charges(1)

1.2%

1.2%

 

Portfolio turnover**

14%

15%

 

 

* From 5 September 2006, when Montanaro Asset Management ('MAM') were appointed as Investment Manager.
** Details provided in the glossary
in the full Annual Report and Accounts.

(1) Refer to Alternative Performance Measures in the full Annual Report and Accounts.
(2) From 5 September 2006, the benchmark was the MSCI Europe SmallCap Index. The benchmark was changed on 1 June 2009 to the MSCI Europe ex-UK SmallCap Index (in sterling terms).

 

Chairman's Statement

for the year ended 31 March 2020

 

Results

In a difficult and volatile year for investors in European smaller companies, the MSCI Europe (ex UK) Small Cap Index (in Sterling terms) declined by 15.1% for the financial year ended 31 March 2020. In comparison, the Net Asset Value ("NAV") of your Company declined by 5.3% to 956.9p per share. Shareholders benefitted from a narrowing of the discount from 12% to 8%. As a result the share price of the Company provided a return of (1.1)%.

 

Although it is always disappointing to lose money I am nevertheless please with the investment performance, relative not only to our benchmark but also to other European smaller company funds, delivered by our manager over the year. Subsequent to the year end, the Company's NAV recovered from the sharp decline experienced in the final quarter of the financial year as the global Covid-19 crisis unfolded. Between 31 March 2020 and 15 June 2020 (being the latest practicable date), the NAV rose from 956.9p to 1,216.6p, an increase of 27.1%. As a result, the NAV was 10.7% higher than 12 months earlier.

 

Over the medium and longer term performance has also been exceptional with your Trust being ranked 1st over 3 years and 5 years amongst all European Investment Trusts. Since the appointment of Montanaro Asset Management Limited ("Montanaro") in September 2006, the NAV per share has provided a total return of 216.9%, compared with 138.6% for the benchmark index.

 

A review of the investment philosophy, process, and a further analysis of performance is set out in the Manager's Report together with more detail on some of the businesses in which the Company is invested.

 

Earnings and Dividends 

Revenue earnings per share for the year were 11.9p (2019: 9.5p).

 

The Company's primary aim is to deliver capital growth to its shareholders. However, our substantial revenue reserve combined with the long-term growth in dividends of the companies in which we invest, have allowed us to maintain a consistent and robust dividend payout.

 

An interim dividend of 2p per share was paid on 3 January 2020. The Board recommends the payment of a final dividend of 7.25p per share payable on 15 September 2020 to shareholders on the register on 14 August 2020. Subject to shareholder approval, this would bring the total dividends for the year to 9.25p per share, an increase of 2.8% compared to the previous year.

 

In the fiscal year to March 2021 it is very likely that income from your investee companies will decline from the high levels seen this year. Companies throughout Europe are reducing or postponing their dividends in the face of global economic uncertainty and political pressure to limit such distributions given the government support schemes that have been put in place. We remain confident in the long-term prospects of your investee companies and, as mentioned above, have a substantial revenue reserve.

 

Borrowings

The Board, in discussion with the Manager, regularly reviews the gearing strategy of the Company and approves the arrangement of any gearing facility. Gearing increases or decreases the returns from underlying profits or losses generated by the investment portfolio. This is a key feature of investment trusts that we believe offers a strong competitive advantage over alternative open-ended investment funds. Therefore, the Board encourages the active use of gearing by the Manager.

 

The Board has set a maximum limit on borrowing, net of cash, of 30% of shareholders' funds at the time of borrowing. At the end of the fiscal year, the Company had borrowings, net of cash, of 5.8% compared to 0.7% at the beginning of the year. The low level of gearing gives the Manager plenty of flexibility to invest more as and when they consider the conditions are right.

 

The Company currently has borrowings in the form of a €10 million fixed rate loan and a €15 million revolving credit facility, both of which are due to mature on 13 September 2023.

 

Directors

As part of the normal process of Board refreshment, the Nomination Committee has been involved for some time in the recruitment process for a replacement for Mrs Somerset Webb, who has served on the Board since 2011. However, in light of the lockdown due to Covid-19, this process remains ongoing at the date of this report. Merryn has kindly agreed to remain on the Board until her replacement is found to ensure that the Board retains a sufficient balance of skills during this transition period. An announcement will be made to the market once a replacement has been identified.

 

Treasury Shares

During the year, the Company did not buy back shares into or sell shares from Treasury. The Board's stated Treasury shares policy is included in the Annual Report and Accounts. The Board will seek to renew the Company's share buyback and share issuance authorities at the forthcoming Annual General Meeting.

 

Coronavirus Pandemic

Since the end of February 2020, global financial markets have seen considerable disruption due to the rapid spread of the Coronavirus (Covid-19). All the Company's service providers have enacted their respective business continuity plans and continue to operate normally. At times of stock market volatility, the benefits of a closed end structure become evident.

 

Annual General Meeting

The Annual General Meeting will be held behind closed doors on 10 September 2020 at 12.30pm. At the time of publication of this document, the UK Government has prohibited large public gatherings, save in certain limited circumstances. In light of these measures and in order to protect the health and safety of the Company's shareholders and Directors, the AGM will be conducted as a closed meeting and will be held to complete the formal business only. A separate event to allow shareholders the chance to ask questions to the Board or the Manager will be arranged prior to the AGM and details of this will be announced to the Stock Exchange in due course.

 

The Board recognises that the situation is fluid and any changes to our planned approach will be communicated to shareholders via a Stock Exchange announcement and by an update on the Company's website.

 

Outlook

The final quarter of the financial year will undoubtedly enter the history books: the bull market came to an abrupt end as the Covid-19 virus spread across the globe.

 

During these unprecedented times, the Montanaro team have been busy speaking to your investee companies to understand how they are being impacted by the collapse in global economic activity. In particular, they have been looking closely at balance sheet risk and companies' access to credit. It is in times like these that we are reminded of the importance of the Manager's unwavering emphasis on investing in high quality businesses with strong balance sheets. These are the companies that will survive and should emerge stronger from the storm.

 

We should also expect the global health crisis to result in greater investor focus on the Environmental, Social and Governance ("ESG") credentials of investment funds in the years to come. This has long been one of the strengths of the Montanaro investment process in which ESG has been integrated for many years. Our shareholders may have noticed that Montanaro have recently started to report on the carbon footprint of the Company's investments. Together with the Company's aggregate ESG score, this additional disclosure will allow our investors to gauge the results of Montanaro's constructive engagement with your investee companies.

 

In last year's report I noted that your portfolio consists of some of the highest quality, quoted companies in Europe. Their strong management teams, sound balance sheets, cash generative business models and good growth prospects have never been more important, and it is these attributes that give us confidence that long-term returns will remain attractive for investors. 

 

I would also like to congratulate the whole team at Montanaro for the awards that our Trust has won over the past year - Best European Trust at the Money Observer Investment Trust Awards 2020, Winner of the European Equity category in the 2019 FTAdviser Investment 100 Club and Winner of the CityWire European Equities Investment Trust Award 2019.

 

I would like to thank our investors for their support and finally, on behalf of the Board and Montanaro, I would like to wish all of our investors and their loved ones well.

 

R M CURLING

Chairman

17 June 2020

 

Manager's Report

 

The Attractions of Quoted European Smaller Companies ('SmallCap')

The key attraction of investing in smaller companies is their long-term record of delivering higher returns to investors than large companies. In the UK, over the last 65 years, this has amounted to an average of 3.3% per annum ("the SmallCap Effect"). £1 invested in UK large companies in 1954 would now be worth £1,176 whereas the same £1 invested in smaller companies would now be worth over £7,800 - more than 6 times more.

 

We have less comprehensive data on Europe - it only goes back to 2000. But this suggests that the SmallCap Effect is even more pronounced on the Continent: European "small" companies have outperformed by over 5.2% per annum.

 

The market for European smaller companies is inefficient. While some large companies are analysed by more than 50 brokers, many smaller companies in Europe have little or no such coverage. We believe that this makes it easier for those with a high level of internal resources to identify attractive, undervalued and unrecognised investment opportunities. This in turn makes it possible to deliver long-term performance over and above that of the benchmark.

 

Montanaro

Montanaro was established in 1991. We have one of the largest and most experienced specialist teams in the UK dedicated exclusively to researching and investing in quoted small companies. Our team of 31 includes 10 nationalities, which gives us the breadth and scope to conduct thorough in-house research.

 

At 31 March 2020, we were looking after over £2 billion of assets.

 

Investment Philosophy and Approach

We specialise in researching and investing in quoted small companies. 

 

We have a disciplined, two-stage investment process. Firstly, we identify "good businesses" within our investable universe. In the second stage, we determine the intrinsic value of each company to ensure they will make a "good investment" (the two are not always the same). When we consider that we have identified a good company, it must pass our stringent quality and ESG checklists and be approved by our Investment Committee before it can be added to the "approved list". ESG has been integrated in our disciplined investment process for many years. Only the most attractive companies make it on to the approved list and it is from these that we construct your portfolio.

 

We have an in-house team of eleven analysts who are sector specialists. This is one of the largest such specialist teams in the country. Utilising their industry knowledge and a range of proprietary screens, they are continually searching for new ideas. With around 4,000 companies to choose from, we arespoiled for choice.

 

We look for high quality companies in markets that are growing. They must be profitable; have good and experienced management; deliver sustainably high returns on capital employed; enjoy high and ideally growing profit margins reflecting pricing power and a strong market position; and provide goods and services that are in demand and likely to remain so.

 

We prefer companies that can deliver self-funded organic growth and remain focused on their core areas of expertise, rather than businesses that spend a lot of time on acquisitions. Conversely, we avoid those with stretched balance sheets; poor free cash flow generation; incomprehensible or heavily adjusted accounts; unproven or unreliable management; or that face structurally challenged business models with stiff competition.

 

We believe that a deep understanding of a company's business model and the way it is managed are essential. Therefore, we visit our investee companies on a regular basis. These visits are important: we meet employees who have not met investors before; gain a better insight into the products and services provided; and observe and come to appreciate the culture of the company that is hard to glean from reading an annual report. Few of our peers have the in-house resources to conduct such thorough due diligence. Although hard work, these site visits are a way for us to add value and they help us to predict where a company will be in 5 - 10 years. We are long-term investors.

 

Management's past track record is examined in detail as we seek to understand their goals and aspirations. In smaller companies, the decisions of the entrepreneurial management can make or break a company (which is why meeting them is so important). We look closely at the board structure; the level of insider ownership; and examine remuneration and corporate governance policies.

 

Once a company has been added to the portfolio, our team conduct ongoing analysis. We will sell a holding if we believe that the company's underlying quality is deteriorating or if there has been a fundamental change to the investment case or management. We will get things wrong.

 

In summary, we invest in well managed, high quality, growing companies bought at sensible valuations. We keep turnover and transaction costs low and follow our companies closely over many years. We would rather pay more for a higher quality, more predictable company that can be valued with greater certainty. Finally, we align ourselves with our investors by investing meaningful amounts of our own money alongside yours. We are significant shareholders in the Trust.

 

Environmental, Social & Governance

Montanaro became a B Corporation in June 2019. "B Corps" are businesses that meet the highest standard of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose.

 

As part of our due diligence work, we place a great deal of emphasis on ethical and ESG factors. We work closely with our companies to encourage sustainable business practices, which we believe play an integral part in the creation of long-term shareholder value. 

 

Montanaro believes there is a clear correlation between how well a business fares on Environmental, Social and Corporate Governance grounds and the value it creates for its shareholders. Therefore, ESG considerations form an integral part of our assessment of a company's "quality" and are fully integrated into our investment process. All the ESG research is done in-house by our analysts.

 

In addition, we engage with companies in an effort to improve corporate behaviour. As responsible shareholders, we believe that it is our duty to engage with our investee companies. In our experience, active and constructive engagement can help to foster positive long-term change in the way businesses are run.

 

We do not invest in companies that generate a significant proportion of sales from products with negative societal impact such as tobacco, gambling, armaments, alcohol, high-interest-rate lending and fossil fuels. Similarly, we do not invest in companies that conduct animal testing, unless it is required by law for healthcare purposes. With the "sustainability" trend a growing feature of the investment landscape, we believe that we are ahead of the curve. In SmallCap, it is particularly important to engage with companies to influence the impact they have on the world. Our high level of in-house resources makes this possible.

 

How to invest

We have invested a great deal of time to make the Trust readily available to all investors. We have continued to grow our presence across the UK's investment platforms and are delighted to see a steady increase, year after year, in the Trust's retail following.

 

Together with the Board, we have appointed Marten & Co to provide sponsored research - you can find the initiation report published in March 2019 here:

https://www.montanaro.co.uk/mesct-quality-business/ 

 

And an update report published in September 2019 here: 

https://www.montanaro.co.uk/focus-on-the-small-picture/ 

 

For further details about how to invest, please refer to the website:

https://www.montanaro.co.uk/trust/mesct

 

The Portfolio

At 31 March 2020, the portfolio consisted of 56 companies of which the top ten holdings represented 34%.

 

Sector distribution within the portfolio is driven by stock selection. Although weightings relative to the market are monitored, overweight and underweight positions are held based on where the greatest value and upside are perceived to be.

 

Performance Attribution

The year to 31 March 2020 saw some strong performance from our largest contributors.

 

Sartorius Stedim the developer of equipment used to manufacture biologic drugs, again delivered excellent financial results. As a supplier of critical components to develop and manufacture vaccines, we believe the company has a significant role to play in the global response against Covid-19. 

 

Fortnox provides cloud bases accounting systems to companies in Sweden. The company's market leading product and the inherent scalability of its distribution ensured another year of rapid growth and expanding profitability.

 

MIPS sells a patented insert for recreational helmets which protects against rotational motion. More and more helmet brands have been adopting the technology in their ranges and some are now even using it every helmet model they produce. The higher adoption drove a strong period of growth.

 

Our largest detractor was MTU Aero Engines which develops, manufactures and repairs aircraft engines. The company was the largest contributor to performance last year and continued to perform well through 2019. However, the Covid-19 crisis has led to unprecedented declines in global air traffic, from which it is not immune.

 

Merlin Properties, the Spanish commercial Real Estate Investment Trust, also saw its share price drop significantly as a result of the severe lockdowns in its core markets. These lockdowns limit the ability of some of Merlin's tenants to operate and in turn pay rent to the company in the short term.

 

Atea is the market leading supplier of IT infrastructure for businesses and public sector organisations in the Nordic and Baltic regions. The company's share price suffered as the traditional end-of-year budget flush by their customers was weaker than expected and as the Danish subsidiary underperformed. We believe these issues are temporary and that the company is well positioned for the future, hence we added to our position.

 

Portfolio Changes

We try to keep portfolio turnover as low as possible. Nevertheless, we typically make a few changes each year as we find new ideas that we believe will provide stronger long-term returns than existing holdings. Companies that become too large, get acquired or whose investment case deteriorates are also replaced with new stocks from our approved list.

 

In the year to 31 March 2020 we exited positions in companies including Hufvudstaden, which owns prime property in major Swedish cities. The business is high quality and well managed but after a strong share price performance we felt there were better investment opportunities elsewhere. Nilorn, which designs labels and packaging products was sold because we disagreed with the management's capital allocation priorities and had concerns with the deteriorating quality of their reporting. Chr. Hansen, which develops ingredients such as cultures, enzymes, probiotics and natural colours, was sold as its market capitalisation became large and because we felt future growth and returns would likely decelerate - concerns which we did not feel were reflected in the company's valuation. 

 

New additions to the portfolio included Medistim, which makes intraoperative quality control equipment for cardiac and vascular surgery; Marel, the provider of food processing technology; and Atoss Software, which develops software used for the optimisation of workforce management.

 

Gearing

The Alternative Investment Fund Manager ("AIFM"), in consultation with the Board, is responsible for determining the net gearing level of the Company. The Company ended the fiscal year with the gearing of 5.8% (31 March 2019: 0.7%)

 

Covid-19

The bleak economic outlook sparked by the global response to Covid-19 most threatens businesses with structural weaknesses - poor management, a weak balance sheet, a lack of recurring revenue or pricing power. However, despite our steadfast commitment to investing in high quality businesses, we are taking nothing for granted.

 

From the very first day of lockdown, our analysts have been working remotely. Aside from this change it has been business as normal. We have learned how each company is coping in this new reality and checked that management and staff are safe and well.

 

Opportunities are already emerging from the darkness of the pandemic - some of our companies are seeing their competitors struggle while others are even seeing demand for their products and services increase. As always, the strong will emerge stronger from the ashes of the world economy.

 

Montanaro has always retained high levels of cash precisely for times like these. In past bear markets we have grown the team. This time is no exception and we have recruited a healthcare analyst and made two further additions to our back office team. 

 

MONTANARO ASSET MANAGEMENT LIMITED

17 June 2020

 

EXTRACTS FROM STRATEGIC REPORT

 

Principal and Emerging Risks and Uncertainties and Risk Mitigation

In accordance with the UK Corporate Governance Code, the Board has an established process for identifying, evaluating and managing the significant risks faced by the Company. The Board carefully considers the Company's principal and emerging risks and seeks to mitigate these risks through continued and regular review, policy setting, compliance with and enforcement of contractual obligations and active communication with the Manager, the Administrator and shareholders.

 

Most of the principal and emerging risks that could threaten the Company's objective, strategy, future returns and solvency are market related and comparable to those of other investment trusts investing primarily in quoted securities.

 

The Report of the Audit Committee in the full Annual Report and Accounts summarises the Company's internal control and risk management arrangements. By means of the procedures set out in that summary, and in accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, issued by the Financial Reporting Council, the Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. It has also regularly reviewed the effectiveness of the Company's risk management and internal control systems for the period. During the year, the Audit Committee have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

 

The principal risks and uncertainties faced by the Company, and the Board's mitigation approach are described below.

 

Notes 16 to 20 to the accounts below provide detailed explanations of the risks associated with the Company' financial instruments and their management.

 

Principal Risks

Mitigation

Investment and strategic risk:

Inappropriate strategy, including country and sector allocation and stock selection could lead to poor returns for shareholders.

 

No material change in overall risk in year

 

At each Board Meeting, the Manager discusses portfolio performance and strategy with the Directors and performance against the benchmark and the peer group is reviewed. The Manager also provides the Board with monthly reports. The portfolio is well diversified with typically 45-55 holdings, thereby reducing stock-specific risk. The Board formally reviews the performance of the Manager and its terms of appointment annually.

 

Gearing:

One of the benefits of an investment trust is its ability to use borrowings, which can enhance returns to shareholders in a rising stock market. However, gearing exacerbates movements in the NAV both positively and negatively and will exaggerate declines in NAV when share prices of investee companies are falling.

 

No change in overall risk in year

 

The Board is responsible for setting the gearing range within which the Manager may operate and has set a maximum limit on borrowing, net of cash, of 30% of shareholders' funds at the time of borrowing. The Company currently has borrowing facilities of €25 million that mature in September 2023. As at 31 March 2020, €11 million was drawn down from these facilities.

 

The Board receives recommendations on gearing levels from the Manager, and monitors and discusses with the Manager the appropriate level of gearing at each Board Meeting.

 

Other financial risks:

The Company invests principally in Continental European quoted smaller companies and its principal risks are therefore market related with short term risk arising from the volatility in the prices of the Company's investments and foreign exchange. Events such as terrorism, disease (such as a global pandemic), protectionism, inflation or deflation, changes in regulation and taxation, excessive stock market speculation, economic recessions, political instability and movements in interest rates and exchange rates could affect share prices in particular markets.

 

As with all small company investment trusts, there is liquidity risk at times when the liquidity of the underlying portfolio is poor, such as when smaller companies are out of favour or during periods of adverse financial conditions. The portfolio is focused on investments in smaller European companies where the opportunities may be more attractive than in larger companies but where overall portfolio liquidity may be more challenging. This may result in difficulties in buying or selling  individual holdings in difficult markets. In addition, illiquid stock markets may impact the discount of the Company's share price to the NAV per share.

 

Increased due to potential impacts from global pandemic

 

 

Portfolio diversification, both geographical and sectoral, can mitigate the consequences of such risky events and the Board reviews the portfolio with the Manager on a regular basis. It is not the Company's policy to hedge currency risk. The Board has also set investment restrictions and guidelines which are adhered to and reported on by the Manager. If required, it is also possible to raise the level of cash held, thereby reducing the risk of declining share prices and the effect of gearing on lower portfolio valuations. The portfolio's liquidity is not managed on the basis of timing short-term market fluctuations.

 

One of the benefits of an investment trust is that the Manager is rarely forced to buy or sell individual holdings at inopportune times. The Manager constantly reviews the underlying liquidity of the portfolio, which is well diversified, and deals with a wide range of brokers to enhance its ability to execute and minimise liquidity risk.

 

The liquidity of the portfolio is monitored by the Manager and reported to the Board, and market conditions and their impacts are considered.

 

Further details on the financial risks arising from the Company's financial instruments, together with the policies for managing these risks are included in notes 16 to 20 to the accounts.

 

Discount volatility:

As with all small company investment trusts, discounts can fluctuate significantly both in absolute terms and relative to their peer group.

 

No material change in overall risk in year

 

The Board and Manager actively monitor the discount of share price to NAV per share and seek to influence this through liaising closely with the Company's Broker, share buybacks and effective marketing. The Board has stated its commitment to an active discount management policy, such that it will consider a buyback of shares where the discount of the share price to the NAV per share is greater than 10% for a sustained period of time and is significantly wider than the average for similar trusts. Any such transaction must be value enhancing for shareholders and the Board will take into consideration the effect of the buyback on the liquidity of the Company's shares. The Board encourages the Manager to market the Company to new investors to increase demand for the Company's shares, which may help to reduce the discount.

 

Regulatory:

The Company carries on business as an investment trust and has been approved as such by HM Revenue & Customs subject to it continuing to meet eligibility conditions and ongoing requirements. As a result, it is not liable to corporation tax on capital gains. Breach of Section 1158 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on chargeable gains.

 

Breach of regulatory rules could also lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.

 

No change in overall risk in year

 

 

The Administrator monitors the Company's compliance with Section 1158 of the Corporation Tax Act 2010 including revenue forecasts and the amount of proposed dividends to ensure the rules are not breached. The results are reported to the Board at each meeting.

 

The Administrator monitors compliance with the Listing Rules of the UK Listing Authority and compliance with the principal rules is reviewed by the Directors at each Board Meeting.

 

The Board and AIFM also monitor changes in legislation which may have an impact on the Company.

Operational:

In common with most other investment trust companies, the Company has no employees. The Company is therefore reliant on the services provided by third parties such as the Manager, the Administrator and the Custodian (as a delegate of the Depositary). Disruption or failure of the Manager's or Administrator's systems, or those of other third-party service providers could lead to an inability to provide accurate reporting and monitoring of the Company's financial position or a breach of regulatory and legal regulations.

 

Cyber security risks and their impact on data security are inherent in the operations undertaken by the company's third-party suppliers and risk disruption to business operations or financial loss.

 

Increased risk due to the appointment of a new administrator, with effect from 1 April 2019 and due to impact of global pandemic on business as usual operations across all third party service providers and the Manager.

 

 

The Board and the Audit Committee receive regular reports on the operation of internal controls to mitigate against the risk of failure, including those at the Manager, the Administrator and the Custodian as explained in more detail within the Risk Management and Internal Control section of the full Annual Report and Accounts. These reports include controls over risks of cyber security. These have been tested and monitored throughout the year which is evidenced from their control reports regarding their internal controls which are reported on by their reporting accountants. Quarterly reports are also received from the Depositary which is responsible for the safekeeping of all custodial assets of the Company.

 

Business continuity plans at all service providers have been implemented and services have continued with no disruption. The Manager has been in regular contact with the Board and has reported no matters of concern in continuity of operations.

Manager:

Should the Manager not be in a position to continue to manage the Company, performance may be impacted

 

Increased risk due to impact of global pandemic on business as usual operations across all third party service providers and the Manager.

 

Montanaro has one of the largest specialist teams in the UK focusing on quoted European smaller companies. Montanaro operates a team approach in the management of the investment portfolio which mitigates against the impact of the departure of any one member of the investment team. The Manager keeps the Board informed of developments within its business.

 

Viability Assessment and Statement

In accordance with the UK Corporate Governance Code, the Directors have assessed the prospects of the Company over the coming three years in order to assess the viability of the Company, the Board is required to assess its future prospects and has considered that a number of characteristics of its business model and strategy were relevant to this assessment:

 

·       The Company's objective is to achieve capital growth.

 

·      The Company's investment policy, which is subject to regular Board monitoring, means that the Company is invested principally in the securities of Continental European quoted smaller companies.

 

·       The Company is a closed-end investment trust, whose shares are not subject to redemptions by shareholders.

 

·       The Company's business model and strategy is not time limited.

 

Also relevant were a number of aspects of the Company's operational arrangements:

 

·     The Company retains title to all assets held by the Custodian under the terms of a formal agreement with the Depositary and Custodian.

 

·       The borrowing facilities, which remain available until September 2023, are also subject to formal agreements, including financial covenants with which the Company complied in full during the year.

 

·       Revenue and expenditure forecasts are reviewed by the Directors at each Board Meeting.

 

In considering the viability of the Company, the Directors carried out a robust assessment of the principal risks and uncertainties which could threaten the Company's objective and strategy, future performance, liquidity and solvency, including the impact of a significant fall in equity markets or adverse currency movements on the Company's investment portfolio. They also considered the impact of the COVID-19 pandemic on the quality and continuity of the Manager's operations and those of third-party service providers. These risks, their mitigations and the processes for monitoring them are set out above in Principal Risks and Uncertainties and Risk Mitigation, in the Report of the Audit Committee in the full Annual Report and Accounts and in the notes to the accounts below.

 

The Directors have also considered:

 

·      The level of ongoing charges incurred by the Company which are modest and predictable and that these were covered approximately 1.6 times by investment income and total 1.2% of average net assets;

 

·       Future revenue and expenditure projections and the potential impact of reduced dividend income in the short term as a result of market conditions;

 

·     The Company's borrowing in the form of a fixed rate loan facility of €10 million, which is due to mature in September 2023, noting that the Company has a large margin of safety over the covenants on this debt. This loan was covered 16 times by the Company's total assets at 31 March 2020. The Company also has a €15 million revolving credit facility which also matures on 13 September 2023;

 

·     Its ability to meet liquidity requirements given the Company's investment portfolio consists principally of Continental European quoted smaller companies which can be realised if required. It is estimated that approximately 89% of the portfolio could be liquidated under normal conditions within seven trading days;

 

·      The ability to undertake share buybacks if required;

 

·      That the Company's objective and investment policy continue to be relevant to investors; and

 

·      The Company has no employees, having only non-executive Directors and consequently does not have redundancy or other employment related liabilities (including pensions) or responsibilities.

 

These matters were assessed over a three year period to June 2023, and the Board will continue to assess viability over three year rolling periods, taking account of severe but plausible scenarios. In the absence of any adverse change to the regulatory environment and to the treatment of UK investment trusts a rolling three year period represents the horizon over which the Directors do not expect there to be any significant change to the Company's principal risks or their mitigation and they believe they can form a reasonable expectation of the Company's prospects.

 

Based on their assessment, and in the context of the Company's business model, strategy and operational arrangements set out above, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to June 2023. For this reason, the Board also considers it appropriate to continue adopting the going concern basis in preparing the Report and Accounts.

 

LINK COMPANY MATTERS LIMITED

Company Secretary

65 Gresham Street

London EC2V 7NQ

17 June 2020

 

Related Party Transactions

The following are considered related parties: the Board of Directors. The Directors of the Company received fees for their services and dividends from their shareholdings in the Company. None of the Directors has a service contract with the Company.  For the year ended 31 March 2020, the Chairman received an annual fee of £32,000, the Chairman of the Audit Committee received an annual fee of £27,000 and the other Directors received an annual fee of £23,000. 

 

The related party transactions with the Directors are set out in the Directors' Remuneration Report contained within the Company's full Annual Report and Accounts for the year ended 31 March 2020. 

 

As at 31 March 2020 and 2019, the Directors' interests in the Company's Ordinary shares were as follows:

 

 

 

2020

2019

 

 

Ordinary Shares

Ordinary Shares

R M Curling

Beneficial

10,000

5,000

C A Roxburgh

Beneficial

6,182

3,314

M R Somerset Webb

Beneficial

4,095

4,095

 

Directors' Responsibilities Statement in Relation to the Financial Statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union. The Directors are also required to prepare a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement.

 

Under company law, the Directors must not approve the financial statements unless they are satisfied that they present a fair, balanced and understandable report and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. In preparing the 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 the 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;

 

·      make judgements and estimates that are reasonable and prudent; and

 

·      prepare the financial statements on a going concern basis unless it is inappropriate to assume that the Company will continue in business.

 

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 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.

 

Responsibility Statements under the Disclosure Guidance and Transparency Rules

Each of the Directors confirms that to the best of his or her knowledge:

 

·      the 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 or loss of the Company;

 

·      the Strategic Report (comprising the Chairman's Statement, Manager's Report, Twenty Largest Holdings, Analysis of Investment Portfolio by Sector and Business Model and Strategy) and the Report of the Directors include 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;

 

·       taken as a whole, the Annual Report and financial statements are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy;

 

·       the financial statements include details on related party transactions; and

 

·    having assessed the principal risks and other matters discussed in connection with the Viability Statement, it is appropriate to adopt the going concern basis in preparing the financial statements.

 

The Annual Report and Accounts were approved by the Board and the above responsibility statement was signed on its behalf by:

 

R M CURLING
Director

17 June 2020

 

Statement of Comprehensive Income (audited)

for the year ended 31 March 2020

 

 

Notes

2020

Revenue

£'000

2020

Capital

£'000

2020

Total

£'000

2019

Revenue

£'000

2019

Capital

£'000

2019

Total

£'000

Capital (losses)/gains on investments

 

 

 

 

 

 

 

(Losses)/gains on investments held at fair value

 

9

 

-

 

(8,126)

 

(8,126)

 

-

 

19,215

 

19,215

Exchange (losses)/gains

 

-

(211)

(211)

-

67

67

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

Investment income

2

3,497

-

3,497

3,082

-

3,082

Total income

 

3,497

(8,337)

(4,840)

3,082

19,282

22,364

Expenditure

 

 

 

 

 

 

 

Management expenses

3

(644)

(1,047)

(1,611)

(481)

(892)

(1,373)

Other expenses

4

(595)

-

(595)

(676)

-

(676)

Total expenditure

 

(1,159)

(1,047)

(2,206)

(1,157)

(892)

(2,049)

Return before finance costs and taxation

 

2.338

(9,384)

(7,046)

1,925

18,390

20,315

Finance costs

5

(48)

(85)

(133)

(105)

(196)

(301)

Return before taxation

 

2,290

(9,469)

(7,179)

1,820

18,194

20,014

Taxation

6

(291)

-

(291)

(227)

-

(227)

Return after taxation

 

1,999

(9,469)

(7,470)

1,593

18,194

19,787

Return per share

8

11.9p

(56.6p)

(44.7p)

9.5p

108.7p

118.2p

 

The total column of this statement represents the Company's Income Statement and Statement of Comprehensive Income, prepared in accordance with IFRS.

 

The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.

 

All revenue and capital items in the above statement derive from continuing operations.

 

No operations were acquired or discontinued in the year.

 

The accompanying notes are an integral part of the financial statements.

 

Balance Sheet

as at 31 March 2020

 

 

31 March 2020

31 March 2019

 

Notes

£'000

£'000

£'000

£'000

Non-current assets

 

 

 

 

 

Investment held at fair value through profit and loss

9

 

169,018

 

169,828

Current assets

 

 

 

 

 

Trade and other receivables

10

615

 

646

 

Cash and cash equivalents

10

405

 

7,443

 

 

 

1,020

 

8,089

 

Total assets

 

170,038

 

177,917

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

11

(222)

 

(204)

 

Revolving credit facility

11

(884)

 

-

 

 

 

(1,106)

 

(204)

 

Non-current liabilities

 

 

 

 

 

Interest-bearing bank loan

12

(8,809)

 

(8,572)

 

Total liabilities

 

(9,915)

 

(8,776)

 

Net assets

 

 

160,123

 

169,141

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

Called-up share capital

13

 

8,724

 

8,724

Share premium account

 

 

5,283

 

5,283

Capital redemption reserve

 

 

2,212

 

2,212

Capital reserve

 

 

139,641

 

149,110

Revenue reserve

 

 

4,263

 

3,812

Shareholders' funds

 

 

160,123

 

169,141

Net asset value per share

 

 

956.9p

 

1,010.8p

 

The financial statements above and below were approved and authorised for issue by the Board of Directors on 17 June 2020 and signed on its behalf by:

 

R Curling

Director

 

Company Registered Number: SC074677

 

Statement of Changes in Equity

for the year ended 31 March 2020

 

 

 

 

Year to 31 March 2020

 

 

 

Notes

 

Share capital

£'000

Share premium account

£'000

Capital

redemption reserve

£'000

 

Capital reserve

£'000

 

Revenue reserve

£'000

 

 

Total

£'000

As at 1 April 2019

 

8,724

5,283

2,212

149,110

3,812

169,141

Return after taxation

 

-

-

-

(9,469)

1,999

(7,470)

Dividends paid

7

-

-

-

-

(1,548)

(1,548)

As at 31 March 2020

 

8,724

5,283

139,641

4,263

160,123

 

 

 

 

 

Year to 31 March 2019

 

 

 

Notes

 

Share capital

£'000

Share premium account

£'000

Capital

redemption reserve

£'000

 

Capital reserve

£'000

 

Revenue reserve

£'000

 

 

Total

£'000

As at 1 April 2018

 

8,724

5,283

2,212

130,916

3,641

150,776

Return after taxation

 

-

-

-

(18,194)

1,593

19,787

Dividends paid

7

-

-

-

-

(1,422)

(1,422)

As at 31 March 2019

 

8,724

5,283

149,110

3,812

169,141

 

The accompanying notes are an integral part of the financial statements.

 

Cash Flow Statement

for the year ended 31 March 2020

 

 

 

Notes

31 March 2020

£'000

31 March 2019

£'000

Cash flows from operating activities

 

 

 

(Loss)/profit before finance costs and taxation

 

(7,046)

20,315

Investment losses/(gains)

 

8,126

(19,215)

Exchange losses/(gains)

 

211

(67)

Withholding tax

 

(291)

(204)

Investment income

 

(3,497)

(3,082)

Dividends received

 

3,502

3,015

Decrease/(increase) in receivables

 

99

(23)

Increase/(decrease) in payables

 

15

23

Purchases of investments

 

(33,739)

(35,690)

Sales of investments

 

26,361

36,805

Net cash (outflow)/inflow from operating activities

 

(6,259)

1,877

 

 

 

 

Cash flows from financing activities

 

 

 

Drawdown/(repayment) of loans

 

844

(13,393)

Dividends paid

7

(1,548)

(1,422)

Interest paid

 

(131)

(351)

Net cash outflow from financing activities

 

(835)

(15,166)

Net (decrease) in cash and cash equivalents

 

(7,094)

(13,289)

Exchange gains

 

56

158

(Decrease)/increase in cash and cash equivalents

 

(7,038)

(13,131)

Cash and cash equivalents at beginning of year

 

7,443

20,574

Cash and cash equivalents at end of year

10

405

7,443

 

The accompanying notes are an integral part of the financial statements.

 

 Notes:


1. Accounting Policies

A summary of the principal accounting policies is set out below.

 

BASIS OF ACCOUNTING

The financial statements of the Company have been prepared in accordance 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 been prepared in accordance with the AIC SORP for the financial statements of investment trust and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS.

 

The functional and presentational currency of the Company is Pounds Sterling and has been determined on the basis of the currency of the Company's share capital and the currency in which dividends and expenses are paid.

 

The valuation of financial assets held by the Company at the year end have been derived from active, liquid markets. Risks relating to the valuations are disclosed in note 16.

 

The financial statements have been prepared on a going concern 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. The Directors noted that the Company holds a portfolio of highly liquid listed investments and has undrawn banking facilities. The Company is a closed end fund, where assets are not required to be liquidated to meet redemptions. Whilst the economic impact from the pandemic is uncertain, and the Directors believe it is possible that the Company could experience reductions in income and/or market value that this should not be to a level which would threaten the Company's ability to continue as a going concern. The Directors, the Manager and other service providers have put in place contingency plans to minimise disruption. Furthermore, the Directors are not aware of any material uncertainties that may cast doubt upon the Company's ability to continue as a going concern. Therefore, the financial statements have been prepared on a going concern basis. Further detail is included in the Report of the Directors in the full Annual Report and Accounts. In addition to the Going Concern assessment the Directors have assessed the longer term viability of the company as set out in the viability assessment and statement above.

 

ACCOUNTING DEVELOPMENTS

In the current year, the Company has applied a number of amendments to IFRS, issued by the IASB. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements. The Company has also applied, with associated amendments, for the first time the following standards:

 

IFRS 16 Leases sets out the principles for the recognition, measurement, presentation and disclosure of leases by lessors and lessees.

 

The adoption of the changes to accounting standards has had no material impact on the current or prior years' financial statements.

 

Standards issued but not yet effective

There are no standards or amendments to standards not yet effective that are relevant to the Company and should be disclosed.

 

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 areas requiring the most significant judgement and estimation in the preparation of the financial statements are: recognising and classifying unusual or special dividends received as either revenue or capital in nature; and setting the levels of dividends paid and proposed in satisfaction of both the Company's long-term objective and its obligations to adhere to investment trust status rules under Section 1158 of the Corporation Tax Act 2010.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Any 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 are significant judgements or estimates in these financial statements.

 

SEGMENTAL REPORTING

The Board is of the view that the Company is engaged in a single segment of business, of investing in European quoted smaller companies, and that therefore the Company has only a single operating segment.

 

PRESENTATION OF STATEMENT OF COMPREHENSIVE INCOME

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 Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. The net revenue return is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 1158 of the Corporation Tax Act 2010.

 

INCOME

Dividends are recognised as income on the date that the related investments are marked ex-dividend.

 

Dividends receivable on equity shares where no ex-dividend date is quoted are recognised when the Company's right to receive payment is established.

 

Special dividends are taken to the 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.

 

Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend foregone is recognised as income.

 

All other income is accounted for on a time apportioned basis.

 

EXPENSES AND FINANCE COSTS

All expenses and finance costs are accounted for on an accruals basis and are charged against revenue, except where incurred in connection with the maintenance or enhancement of the value of the Company's assets and taking account of the expected long term returns as follows:

 

-     finance costs payable are allocated 35% to revenue and 65% to capital.

-     management expenses payable are allocated 35% to revenue and 65% to capital.

 

TAXATION

The tax expense represents the sum of the tax currently payable and movements in deferred tax. Tax payable is based on the taxable profit for the year and withholding tax payable. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have

been enacted or substantively enacted by the balance sheet date.

 

In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the 'marginal basis'. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary

differences can be utilised.

 

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable to taxation on capital gains.

 

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 the documented investment strategy and information is provided internally on that basis to the Company's Board of Directors and other key management personnel.

 

The investments held by the Company are designated by the Company as 'at fair value through profit or loss'.

 

All gains and losses are allocated to the capital return within the Statement of Comprehensive Income as 'Gains or losses on investments held at fair value through profit or loss'. Also included within this heading are transaction costs in relation to the purchase or sale of investments. When a sale or purchase is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. 

 

All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is the bid price or the last traded price depending on the convention of the exchange on which the investment is listed. The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of consideration received and receivable and the cumulative gain or loss that had been accumulated is recognised in profit or loss.

 

All investments for which a fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy levels set out in note 15.

 

CASH AND CASH EQUIVALENTS

Cash comprises bank balances and cash held by the Company. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

LOANS

The loans are valued at amortised cost. Costs in relation to arranging the debt finance have been capitalised and are amortised over the term of the finance. Hence, amortised cost is the par value less the amortised cost of issue.

 

The Euro loan is shown at amortised cost with the exchange difference on the principal amounts to be repaid reflected. Any gains or losses arising from changes in exchange rate between Euro and Sterling is included in the capital reserves and shown in the capital column of the Statement of Comprehensive Income.

 

RESERVES

Share Premium Account

The following are included in this reserve:

 

·      premium on the issue of shares.

·      surplus arising on the sale of Ordinary Shares from treasury.

·      costs associated with the issue of equity.

 

Capital Redemption Reserve

The nominal value of Ordinary Shares bought back for cancellation is added to this reserve. This reserve is non-distributable.

 

Capital Reserve

The following are included in this reserve:

 

·    gains and losses on the realisation of investments.

·    increases and decreases in the valuation of investments held at the year end.

·    exchange differences of a capital nature.

·    special dividends of a capital nature.

·    expenses and finance costs, together with the related taxation effect, charged in accordance with the above policies.

·    cost of purchasing Ordinary Shares to be held in treasury or cancelled.

·    proceeds from the issue of Ordinary Shares held in treasury equivalent to the original cost of the repurchase.

 

In addition, the Company's Articles of Association permit it to distribute from the Capital Reserve any surplus arising from the realisation of its investments.

 

Revenue Reserve

The net profit arising in the revenue column of the Statement of Comprehensive Income is added to this reserve. Dividends paid during the year may be deducted from this reserve.

 

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised on the Balance Sheet of the Company when the Company becomes a party to the contractual provisions of the instrument. The Company shall offset financial assets and financial liabilities if it has a legally enforceable right to set off the recognised amounts and intends to settle on a net basis. As at 31 March 2020, no financial assets or financial liabilities had been offset (31 March 2019: nil).

 

FOREIGN CURRENCIES

Monetary assets and liabilities expressed in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date. Non-monetary items expressed in foreign currencies held at fair value are translated into sterling at rates of exchange ruling at the date the fair value is measured. Transactions in foreign currencies are converted to sterling at the rate ruling at the date of the transaction. Exchange gains and losses are taken to the Statement of Comprehensive Income as a capital or revenue

item depending on the nature of the underlying item. 

 

Exchange gains and losses on investments are included within 'Gains on investments held at fair value' and are taken to the Capital Reserve. Exchange differences on other financial instruments are included in the Statement of Comprehensive Income as 'Exchange gains'.

 

 

Rates of exchange (per Pound Sterling)

31 March

2020

31 March

2019

Change

%

Danish Krone

8.44

8.66

(2.5)

Euro

1.13

1.16

(2.6)

Norwegian Krone

13.02

11.22

16.0

Swedish Krone

12.28

12.09

1.6

Swiss Franc

1.20

1.30

(7.7)

 

USE OF JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The presentation of the financial statements in accordance with accounting standards requires the Board to make judgements, estimates and assumptions that affect the accounting policies and reported amounts of assets, liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on perceived risks, historical experience, expectations of plausible future events and other factors. Actual results may differ from these estimates.

 

The areas requiring the most significant judgement in the preparation of the financial statements are: recognising and classifying unusual or special dividends received as either revenue or capital in nature.

 

Dividends received which appear to be unusual in size or circumstance are assessed on a case-by-case basis, based on interpretation of the investee companies' relevant statements, to determine their allocation in accordance with the SORP to either the revenue account or capital reserves. Dividends which have clearly arisen out of the investee company's reconstruction or reorganisation are usually considered to be capital in nature and allocated to capital reserves. Investee company dividends which appear to be paid in excess of current year profits will still be considered as revenue in nature unless evidence suggests otherwise.

 

2. Income

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Investment income

 

 

Overseas dividend income

3,472

3,082

Other income

25

-

Total

3,497

3,082

 

3. Management fee

 

                                                  Year to 31 March 2020

                          Year to 31 March 2019

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Investment Management

546

1,015

1,561

463

860

1,323

AIFM fee

18

32

50

18

32

50

 

564

1,047

1,611

481

892

1,373

 

Details of the management fee arrangements during the year are contained within the Report of the Directors in the full Annual Report and Accounts and details of fees owed to the Manager at the balance sheet date are included in note 11.

 

4. Other Expenses

                                                                Year to 31 March 2020

                     Year to 31 March 2019

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Directors' fee

85

-

85

111

-

111

Auditor's remuneration for:

 

 

 

 

 

 

- Statutory audit1

30

-

30

22

-

22

Secretarial and administration fees

149

-

149

133

-

133

Legal, professional and advisory fees

23

-

23

17

-

17

Custody and depositary fees

74

-

74

101

-

101

Bank charges - negative interest

34

-

34

103

-

103

Credit facility commitment fee

59

-

59

33

-

33

Other

141

-

141

156

-

156

 

595

-

595

676

-

676

 

1Auditors remuneration paid excludes VAT.

 

5. Finance Costs

                                                                Year to 31 March 2020

             Year to 31 March 2019

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Interest payable on bank borrowings

48

85

133

105

196

301

 

6. Taxation

                                                                Year to 31 March 2020

                  Year to 31 March 2019

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Overseas Tax

291

-

291

227

-

227

 

FACTORS AFFECTING TAX CHARGE FOR THE YEAR

The tax charge for the year is lower than the standard rate of corporation tax in the UK for an investment company. The differences are explained below:

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

(Loss)/profit on ordinary activities before taxation

(7,179)

20,014

Corporation tax at standard rate of 19% (2019: 19%)

(1,364)

3,803

Effects of:

 

 

Non-taxable losses/(gains) on investments

1,544

(3,651)

Movement in unutilised expenses

419

445

Non-taxable overseas income

(604)

(585)

Exchange (gains)/losses

5

(13)

Overseas tax

297

242

Overseas tax expensed

(6)

(10)

Adjustment to provision for prior years

-

(4)

Total

291

227

 

As at 31 March 2020, the Company had unutilised management expenses for taxation purposes of £(29,220,000) (2019: £27,015,000). A deferred tax asset of £5,552,000 (2019: £5,133,000) has not been recognised on the unutilised expenses as it is unlikely that there will be suitable taxable profits from which the future reversal of the deferred tax could be deducted.

 

7. Dividends

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Final dividend for the year ended 31 March 2018 of 6.75p per share

-

1,129

Interim dividend for the year ended 31 March 2019 of 1.75p per share

-

293

Final dividend for the year ended 31 March 2019 of 7.25p per share

1,213

-

Interim dividend for the year ended 31 March 2020 of 2.00p per share

335

-

 

1,548

1,422

 

 

 

Amount relating to the year but not paid at the year end:

 

 

Final dividend for the year ended 31 March 2019 of 7.25p per share

-

1,213

Final dividend for the year ended 31 March 2020 of 7.25p per share

1,213

-

 

1,213

1,213

 

The Directors have proposed a final dividend in respect of the year ended 31 March 2020 of 7.25p per share, payable on 15 September 2020 to all shareholders on the register on 14 August 2020. The final dividend is subject to approval by shareholders at the Annual General Meeting.

 

The attributable revenue and the dividends paid and proposed for the purposes of the income retention test for section 1159 of the Income and Corporation Tax Act 2010, are set out below:

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Revenue attributable to equity shareholders

1,999

1,593

Interim dividend for the year ended 31 March 2019 of 1.75p per share

-

(293)

Final dividend for the year ended 31 March 2019 of 7.25p per share

-

(1,213)

Interim dividend for the year ended 31 March 2020 of 2p per share

(335)

-

Proposed final dividend for the year ended 31 March 2020 of 7.25p per share

(1,213)

-

Revenue reserve transfer

451

87

 

8. Return per Share

 

                                                  Year to 31 March 2020

                           Year to 31 March 2019

 

Revenue

Capital

Total

Revenue

Capital

Total

Basic

11.9p

(56.6)p

(44.7)p

9.5p

108.7p

118.2p

 

Basic total return per Ordinary Share is based on the total comprehensive loss for the financial year of £7,470,000 (2019: gain £19,787,000) and on 16,733,260 (2019: 16,733,260) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year, excluding those shares bought back and held in treasury.

 

Basic revenue return per Ordinary Share is based on the net revenue return on ordinary activities after taxation of £1,999,000 (2019: £1,593,000), and on 16,733,260 (2019: 16,733,260) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year, excluding those shares bought back and held in treasury.

 

Basic capital return per Ordinary Share is based on the net capital loss for the financial year of £9,469,000 (2019: net capital return £18,194,000), and on 16,733,260 (2019: 16,733,260) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year, excluding those shares bought back and held in treasury.

 

9. Investments at Fair Value Through Profit and loss

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Opening cost

107,172

93,523

Holding gains

62,656

58,205

Opening fair value

169,828

151,728

Purchases at cost

33,739

35,690

Sales - proceeds

(26,423)

(36,805)

          - gains on sales

7,224

14,764

Holding (losses)/gains

(15,350)

4,451

Closing fair value

169,018

169,828

 

 

 

Closing cost

121,712

107,172

Holding gains

47,306

62,656

Closing valuation

169,018

169,828

 

Net gains on the realisation of investments during the year represents the difference between the net proceeds of sale and the book cost of investment sold.

 

Movement in fair value represents the decrease in the difference between book cost of investments held and their market value at 31 March 2020 compared with the difference between the book cost of investments held and their market value at 31 March 2019.

 

TRANSACTION COSTS

The Company incurred transaction costs on the purchase of investments of £23,000 and sale of investments of £13,000 (2019: £20,000 on purchases and £17,000 on sales).

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Gains on sales

7,224

14,764

(Decrease)/increase in holding gains

(15,350)

4,451

(Losses)/gains on investments held at fair value

(8,126)

19,125

 

10. Current Assets

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Due from brokers

62

-

Prepayments and accrued income

81

97

Overseas tax recoverable

472

549

 

615

646

 

The carrying value of the balances above approximates to fair value. There are no amounts which are past due at the year end (2019: £nil).

 

CASH AND CASH EQUIVALENTS

These comprise bank balances and cash held by the Company. The carrying amount of these assets approximates to their fair value.

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Cash at bank and on hand

405

7,443

 

11. Current Liabilities

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Trade and other payables

 

 

Investment management and AIFM fee

115

116

Other creditors

107

88

 

222

204

 

The Company has a €15 million five year secured revolving credit facility with ING which will mature on 13 September 2023. Drawdowns from the facility are charged at margin over the relevant EUROBOR rate. As at 31 March 2020, €1 million (£884,000) of the facility was drawn (2019: €/£nil), at a rate of 1.2%, with €14 million available to be drawn (31 March 2019: £nil).

 

The facility is shown at amortised costs and revalued for exchange rate movements. Any gain or loss arising from changes in exchange rates is included in the capital reserve and shown in the capital column of the Statement of Comprehensive Income. Interest costs are charged to capital and revenue in accordance with the Company's accounting policies.

 

The carrying value of the balances above approximates to fair value.

 

12. Interest-Bearing Bank Loans

 

 

Year to
31 March 2020

£'000

Year to

31 March 2019

£'000

Opening balance

8,572

21,903

Loan repaid during the year

-

(13,393)

Amortisation of set-up costs

10

45

Non-cash foreign currency movements

227

17

Closing balance

8,809

8,572

 

The Company has a €10 million five year secured loan with ING Bank N.V. at a fixed rate of 1.33% per annum. This loan will mature on 13 September 2023.

 

The Company also has a €15 million five year secured revolving credit facility with ING which will also mature on 13 September 2023. As at 31 March 2020, €1 million of the facility was drawn, at a rate of 1.2%, with €14 million available to be drawn (31 March 2019: £nil).

 

Under the bank covenants relating to the loans, the Company is to ensure that at all times the total borrowings of the Company do not exceed 40% of the Adjusted Net Asset Value (as defined in the loan agreements) and that the Adjusted Net Asset Value does not fall below £45 million (2019: £45 million). The Company met all covenant conditions during the year. The carrying value of the balances above approximates to fair value.

 

The carrying value of the balances above approximates to fair value.

 

13. Share Capital

 

                                                            Listed

                  Held in treasury                         In issue

 

Number

£'000

Number

£'000

Number

£'000

Allotted, issued and fully paid:

 

 

 

 

 

 

Ordinary shares of 50p each

 

 

 

 

 

 

Balance at 1 April 2019

17,448,260

8,724

(715,000)

(357)

(16,733,260)

8,367

Balance at 31 March 2020

17,448,260

8,724

(715,000)

(357)

(16,733,260)

8,367

 

During the year, the Company did not sell any Ordinary Shares (2019: nil) and there were no share issues or share buybacks (2019: nil).

 

CAPITAL MANAGEMENT

The Company's capital is represented by the issued Share Capital, Share Premium Account, Capital Redemption Reserve, Capital Reserve, Revenue Reserve and external debt financing. Details of the movement through each reserve are shown in the Statement of Changes in Equity. The Company is not subject to any externally imposed capital requirements other than those associated with the loan finance.

 

The Company's capital is managed in accordance with its investment policy, in pursuit of its investment objective, both of which are detailed in the Business Model and Strategy. The Company's capital structure is also explained in the Report of the Directors in the full Annual Report and Accounts.

 

14. Net Asset Value per Ordinary Share

 

                                                                     Net Asset value per share                Net asset value

 

2020

P

2019

P

2020

£'000

2019

£'000

Net asset value per Ordinary Share

956.9

1,010.8

160,123

169,141

 

The net asset value per share is based on net assets at the year end and on 16,733,260 (2019: 16,733,260) Ordinary Shares, being the number of Ordinary Shares in issue at the year end, excluding those shares bought back and held in treasury.

 

15. Financial Instruments

The Company's financial instruments comprise its investment portfolio, cash balances, bank loans, and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective. The Company makes use of borrowings, as detailed in note 12 and the Chairman's Statement, to achieve improved performance in rising markets.

 

The Company's principal risks are described in the Business Model and Strategy above.

 

Financial risks arising from the Company's financial instruments are:

 

(i)   market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movements;

(ii)   interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates;

(iii)  foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales, bank loans and accrued income will fluctuate because of movements in currency rates;

(iv)  credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and

(v)  liquidity risk, being the risk that the Company may not be able to liquidate quickly its investments to meet obligations associated with its financial liabilities.

 

FAIR VALUE HIERARCHY

The Company measures fair values using the following fair value 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 assets as follows:

 

·      Level 1 - valued using quoted prices unadjusted in active markets for identical assets or liabilities

·     Level 2 - valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included within Level 1.

·     Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability.

 

The tables below set out fair value measurements of financial instruments as at the year end, by the level in the fair value hierarchy into which the fair value measurement is categorised.

 

The Company held the following categories of financial instruments as at 31 March 2020:

 

 

Level 1

£'000

 

Level 2

£'000

 

Level 3

£'000

 

2020

Total

£'000

Level 1

£'000

 

Level 2

£'000

 

Level 3

£'000

 

2019

Total

£'000

Financial Instruments

 

 

 

 

 

 

 

 

Investments

169,018

-

-

169,018

169,828

-

-

169,828

Loan

-

(8,809)

-

(8,809)

-

(8,596)

-

(8,596)

 

There were no transfers between levels in the fair value hierarchy in the year ended 31 March 2020 (2019: none).

 

The investments held are valued at fair value through profit or loss. The loans are recognised by their carrying value being the approximate fair value.

 

16. 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 o relevant information from the Manager. Investment performance and exposure are reviewed at each Board meeting.

 

The maximum exposure to market price risk is the fair value of investments of £169,018,000 (2019 £169,828,000).

 

If the investment portfolio valuation fell by 10% from the amount detailed in the financial statements as at 31 March 2020, it would have the effect, with all other variables held constant, of reducing the net capital return before taxation by £16,900,000 (2019: £16,980,000). An increase of 10% in the investment portfolio valuation would have an equal and opposite effect on the net capital return before taxation. The analysis is based on closing balances only and is not representative of the year as a whole.

 

17. Interest Rate Risk

 

FIXED RATE

The Company has a €10 million fully drawn fixed rate term loan with ING Bank N.V., with a Sterling equivalent of £8.9 million as at 31 March 2020, at a rate of interest of 1.33% per annum. An interest rate sensitivity analysis has not been performed as the Company has borrowed at a fixed rate of interest.

 

FLOATING RATE

When the Company retains cash balances, the cash is primarily held in accounts at the custodian. Interest received or paid on cash balances and bank overdrafts is at market rates and is monitored and reviewed by the Investment Manager and the Board. As at 31 March 2020, the cash position of the Company was £0.4 million (2019: £7.4 million).

 

If interest rates had increased by 1.0%, the impact on the profit or loss and the net asset value would have been positive £4,000 (2019: positive £74,000). If interest rates had decreased by 1.0%, the impact on the profit or loss and the net asset value would have been negative £4,000 (2019: negative £74,000). The calculations are based on the floating rate balances as at the respective balance sheet dates.

 

18. Foreign Currency Risk

The Company invests in overseas securities and holds foreign currency cash balances and foreign currency borrowings which give rise to currency risks. It is not the Company's policy to hedge this risk.

 

 

 

 

2020

 

 

Investments

£'000

Trade

and other

receivables

£'000

 

 

Cash

£'000

Trade

and other

payables
£'000

 

 

Loans*
£'000

 

Net
exposure
£'000

Danish Krone

6,111

96

-

-

-

6,207

Euro

93,820

144

372

-

(9,693)

83,643

Norwegian Krone

13,276

45

-

-

-

13,321

Swedish Krona

37,391

62

-

-

-

37,453

Swiss Franc

18,420

187

-

-

-

18,607

Total

169,018

534

372

-

(9,693)

160,231

 

 

 

 

2019

 

 

Investments

£'000

Trade

and other

receivables

£'000

 

 

Cash

£'000

Trade

and other

payables
£'000

 

 

Loans*
£'000

 

Net
exposure
£'000

Danish Krone

8,709

120

-

-

-

8,829

Euro

99,769

209

7,721

(6)

(8,617)

98,626

Norwegian Krone

9,579

32

-

-

-

9,611

Swedish Krona

37,151

15

73

-

-

37,239

Swiss Franc

14,620

240

-

-

-

14,860

Total

169,828

616

7,344

(6)

(8,617)

169,165

 

*Par value excluding amortised Costs

 

If the value of Sterling had weakened by 5% (2019: 5%) against each of the currencies in the portfolio, the impact on the profit or loss and the net asset value would have been positive £8,496,000 (2019: positive  £8,938,000). If the value of Sterling had strengthened by 5% (2019: 5%) against each of the currencies in the  portfolio, the impact on the profit or loss and the net asset value would have been negative £8,012,000 (2019: negative £8,087,000). These calculations are based on the foreign currency exposure balances as at the respective balance sheet dates.

 

19. Credit Risk

 

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date.

 

The Company had the following categories of financial assets exposed to credit risk as at 31 March 2020:

 

 

Year to

31 March 2020

£'000

Year to

31 March 2019

£'000

Cash and cash equivalents

405

7,443

Prepayments, accrued income and overseas tax recoverable

650

646

 

1,055

8,089

 

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the financial stability and credit quality of the brokers used, which are monitored on an ongoing basis by the Manager. The Manager also monitors the quality of service provided by the brokers used to further mitigate this risk.

 

There were no significant concentrations of credit risk to counterparties at 31 March 2020 or 31 March 2019. No individual investment exceeded 4.3% of the investment portfolio at 31 March 2020 (2019: 3.6%).

 

A significant majority of the assets of the Company, including those that are traded on a recognised exchange, are held in segregated accounts on behalf of the Company by The Bank of New York Mellon SA/NV (London Branch), the Company's custodian. Bankruptcy or insolvency of this or other custodians may cause the Company's rights with respect to securities held by the custodians to be delayed. The Board monitors the Company's risk by reviewing the custodian's internal control reports.

 

20. Liquidity Risk

 

The Company does not hold unlisted securities (2019: £nil). The Company's listed securities are considered to be readily realisable.

 

However, as with all smaller company investment trusts, there are times when the liquidity of the underlying portfolio is poor, such as when smaller companies are out of favour or during periods of adverse economic conditions. The Manager focuses on smaller companies where the opportunities may be more attractive, but this can decrease overall underlying liquidity. This may result in the Manager being unable to buy or sell individual holdings within the portfolio. The Manager constantly reviews the underlying liquidity of the portfolio and deals with a wide range of brokers to enhance its ability to execute transaction and minimise liquidity risk. The Company's overall exposure to liquidity risks is monitored on a regular basis by the Board.

 

Liquidity risk is mitigated as the Company maintains sufficient cash to pay accounts payable and accrued expenses. As at 31 March 2020, the cash position of the Company was £0.4 million (2019: £7.4 million) and the Company has undrawn bank facilities of £12.4 million (2019: £12.9 million).

 

CONTRACTUAL MATURITY ANALYSIS FOR FINANCIAL LIABILITIES

 

 

 

 

As at 31 March 2020

 

Within

One month

£'000

Between

One and

three months

£'000

Between

 three and twelve months £'000

 

Between one and five years

£'000

 

 

   Total

£'000

Current liabilities:

 

 

 

 

 

Other creditors

129

52

41

-

222

Revolving credit facility

884

-

-

-

884

Loan and loan interest

-

-

120

9,142

9,262

Total liabilities

1,013

52

161

9,142

10,368

 

 

 

 

As at 31 March 2019

 

Within

One month

£'000

Between

One and

three months

£'000

Between

 three and twelve months £'000

 

Between one and five years

£'000

 

 

   Total

£'000

Current liabilities:

 

 

 

 

 

Other creditors

122

63

19

-

204

Loan and loan interest

-

-

116

8,947

9,063

Total liabilities

122

63

135

8,947

9,267

 

21. Related Parties and transactions with the Manger

The following are considered related parties: the Board of Directors. The Directors of the Company received fees for their services and dividends from their shareholdings in the Company. Further details are provided above and in the Directors' Remuneration Report in the full Annual Report and Accounts.

 

Transactions between the Company and the Manager are detailed in note 3 on management fees and note 11 on fees owed to the Manager at the balance sheet date. The existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under the AIC SORP, the Manager is not considered to be a related party.

 

22. Securities financing transactions ("SFT")

The Company has not, in the year to 31 March 2020 (2019: same), participated in any: repurchase transactions; securities lending or borrowing; buy-sell back transactions; margin lending transactions; or total return swap transactions (collectively called SFT). As such, it has no disclosure to make in satisfaction of the EU regulations on transparency of SFT, issued in November 2015.

 

23. Post Balance Sheet Events

Subsequent to the year end, the Company's NAV recovered from the sharp decline experienced in the final quarter of the Financial Year as the global Covid-19 crisis unfolded. Between 31 March 2020 and 15 June 2020 (being the latest practicable date), the NAV rose from 956.9p to 1,216.6p, an increase of 27.1%. As a result, the NAV was 10.7% higher than 12 months earlier.

 

Advisers

 

Investment Manager and Alternative Investment Fund

Manager ('AIFM')

MONTANARO ASSET MANAGEMENT LIMITED

53 Threadneedle Street

London EC2R 8AR

Tel: 020 7448 8600

Fax: 020 7448 8601

enquiries@montanaro.co.uk

www.montanaro.co.uk

 

Stockbroker

CENKOS SECURITIES PLC

6-8 Tokenhouse Yard

London EC2R 7AS

Administrator

LINK ALTERNATIVE FUND ADMINISTRATORS LIMITED

Beaufort House

51 New North Road

Exeter EX4 4EP

 

Depositary

THE BANK OF NEW YORK MELLON

(INTERNATIONAL) LIMITED

One Canada Square

London E14 5AL

Company Secretary

LINK COMPANY MATTERS LIMITED

65 Gresham Street

London EC2V 7NQ

Tel: 020 7954 9547

Contact: mesct@linkgroup.co.uk

 

Custodian

BANK OF NEW YORK MELLON SA/NV

One Canada Square

London E14 5AL

Registered Office

16 Charlotte Square

Edinburgh EH2 4DF

 

Bankers

ING BANK N.V., LONDON BRANCH

60 London Wall

London EC2M 5TQ

 

Registrar

EQUINITI LIMITED

Aspect House

Spencer Road

Lancing

West Sussex BN99 6DA

 

Registrar's Shareholder Helpline

Tel: 0371 384 2461*

 

Registrar's Broker Helpline

Tel: 0906 559 6025

 

* Lines are open 9.00am to 5.00pm, Monday to Friday.

Auditor

ERNST & YOUNG LLP

Atria One

144 Morrison Street

Edinburgh EH3 8EX

 

 

 

 

 

Solicitor

DICKSON MINTO W.S.

16 Charlotte Square

Edinburgh EH2 4DF

 

The audited Annual report and Accounts for the year ended 31 March 2020 will shortly be available on the Company's website https://montanaro.co.uk/trust/montanaro-european-smaller-companies-trust/. It will also be submitted to the National Storage Mechanism ("NSM") shortly and will be available for inspection there, situated at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

 

A copy of the Annual Report and Accounts, which includes the Notice of Annual General Meeting, will be posted to shareholders shortly.

 

For further information, please contact:

 

Montanaro Asset Management Limited

Tel: 020 7448 8600


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