MITON UK MICROCAP TRUST PLC — Annual Report 2019

Apr 30, 2019

Miton UK MicroCap Trust plc

Report and Accounts

For the year ended 30 April 2019

...accessing the inherent vibrancy of the smallest quoted stocks to generate attractive potential returns

Miton UK MicroCap Trust plc is an investment trust quoted on the London Stock Exchange ("LSE") under the ticker code MINI. It is referred to as the Company, MINI or the Trust in the text of this Report. The Company's Board (which consists of four independent Directors) appoints the Investment Manager and is responsible for monitoring its performance.

This Report covers the year ended 30 April 2019, a difficult year for the Trust when the stock markets were unsettled and, disappointingly, the net asset value ("NAV") of the Ordinary shares fell by 19.0%. The NAV of the Company had appreciated in earlier years and has therefore increased by 14.5% over the period since launch on 30 April 2015.

NAV movement per share in the year

Dividend recommended for the year

Our objective

The Company principally invests in a portfolio of UK quoted companies, generally with market capitalisations of less than £150m. The primary objective is to generate capital growth, through a portfolio of stocks that are themselves investing capital in anticipation of an attractive cash payback, as the underlying businesses become larger and more productive. Most of these types of stocks do not pay dividends, but it is anticipated that those that succeed in growing their cashflow may be in a position to use this cashflow to invest further and/or to pay dividends over the coming years. As the share prices of these quoted companies appreciate, the capital from maturing investments in the Company can be reinvested in other less mature businesses with attractive prospects. For this reason, it is anticipated that a major part of the Company's return will comprise capital appreciation, and that the annual dividend from the Company may vary from year to year.

Kromek Group plc is developing a world leading market position in the design and production of radiation detection and X-ray imaging products. For a number of years, Kromek has invested in its business and, over the coming quarters, we anticipate this will lead to a number of large radiation detection orders, along with further X-ray imaging contracts. As these orders are delivered, we anticipate the build up of a substantial cashflow in

the group, which could drive up the share price. We believe the Trust has many holdings similar to Kromek, which are greatly overlooked at present, and hence well-positioned to appreciate significantly as they mature.

NAV movement per share since launch

Contents The Company 1 Investment Background 2 Microcap Trends Strategic Report 6 Results for the Year to 30 April 2019 7 Financial Performance Indicators 8 Chairman's Statement 10 Investment Manager's Report 15 Business Model 16 Portfolio Information 18 Performance and Risks 21 Share Capital

22 Management and other Matters Governance

24 Directors

• 25 Report of the Directors
• 29 Corporate Governance Statement
• 35 Audit and Management Engagement Committee Report
• 38 Directors' Remuneration Report
• 42 Statement of Directors' Responsibilities
• 43 Independent Auditor's Report
  • Company Accounts
• 49 Income Statement
• 50 Statement of Changes in Equity
• 51 Balance Sheet
• 52 Statement of Cash Flows
• 53 Notes to the Financial Statements Shareholder Information
• 72 Redemption of Ordinary Shares
• 73 Shareholder Information
• 76 AIFMD Disclosures
• 78 Notice of Annual General Meeting
• 84 Glossary
• 87 Contact Details of the Advisers

For more information go to www.mitongroup.com/micro

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Investment Background

After a decade of productivity and wage stagnation…

• Normally, credit booms do not last for decades the extra inflationary pressure they engender usually drives up interest rates, which prevents ongoing expansion of leverage.
• But this one has been different. During globalisation, low-cost imports have offset the inflationary price rises of local services. Plentiful growth and the easy availability of debt became regarded as normal.
• However, since 2008, productivity and wages have stagnated, and the electorates are now voting against the prior status quo. Ultra-low bond yields imply that mainstream asset returns going forward may be more modest than previously.
• At a time of less buoyant growth, larger companies find it difficult to buck the trend. Microcaps face challenges too, but as in the past their agility and ability to put capital to work, has generated disproportionate returns.
• This Annual Report outlines the reasons why we believe that Miton UK MicroCap Trust can deliver premium returns going forward.

…the electorates are now insisting on change to the political and economic agenda

The image on the front cover is a D-Matrix, using the CTZ detection module that can be incorporated with diagnostic imaging scanners, such a SPECT scanners, where the patient is injected with a radiopharmaceutical that concentrates at sites indicating diseases like cancer, Alzheimer's and Parkinson's.

The Trust's strategy

Most UK funds invest in larger quoted companies – stocks that have market capitalisations that vary from £120bn down to say £0.5bn.

The strategy of MINI differs from this in that it principally invests in UK listed companies known as microcaps which have market capitalisations that are below £150m and can be as small as £1m. For the avoidance of doubt, the Company does not hold any unquoted companies.

• Since microcaps are small in comparison to the very largest UK quoted stocks, it is easy to overlook the fact that they are often sizeable businesses in their own right. For example, sales of Zotefoams products exceed £80m each year, and its ambition is to be the world market leader in certain cellular material and technical foams. Importantly, it is already a multinational business with 83% of its sales outside the UK.

• One characteristic of microcaps is that their share prices usually have scope to appreciate more significantly than larger companies. Whilst some appreciate by 30%, there are also a number that go on to appreciate by three-fold or more. Over recent years the Trust's holdings in Scientific Digital Imaging, Versarien, IQE and Frontier IP have all achieved this level of performance, and several others appear to be progressing in that direction.

"Quoted microcaps differ from larger businesses in terms of their ability to grow and adapt to changing circumstances."

• Furthermore, some microcaps can buck the wider trend because their individual characteristics are the principal determinant of their prospects. This contrasts with larger companies where their prospects are typically more closely interlinked with that of the wider economic trends. For example, over recent years, the share prices of companies that help universities commercialise their research have fallen back, as the cost of the developments has overwhelmed their resources. In contrast, Frontier IP, for example, operates in the same sector but with a different business model, and hence it has resisted the wider trend and continued to succeed.
• Many assume that the best returns are made from those that have the best growth prospects. However, over the long term, the best returns are often made by investing in stocks where their prospects are overlooked. After Crossrider plc floated in September 2014, their market did not develop as they expected, and over time their share price collapsed by around two-thirds. This turned out to be an opportunity, illustrating the flexibility inherent in smaller companies, as under new leadership the rebranded Kape business was able to reinvigorate its operations and improve returns. As this came through, their share price appreciated more than three-fold.

Source: FE Analytics, 12 November 2015 to 30 April 2019.

For all four of these reasons, it was anticipated that the Trust would generate premium returns for investors over the longer term.

Recent headwinds

Whilst the NAV of the Trust did appreciate well over its first three years of its life, it has subsequently suffered a setback. Equity markets have been rather volatile over the year to 30 April 2019. At the same time, a number of high-profile growth stocks have risen substantially over recent years. These facts raise the question as to whether the Trust's strategy of selecting overlooked, rather than high-profile, stocks within microcaps rather than larger businesses, still has the prospect of delivering premium returns in the future.

Below we set out our consideration of recent market trends and how we see potential for these in the future, along with the longer-term prospects for the Trust.

We believe that periods of plentiful market liquidity, along with the persistence of ultra-low interest rates, tend to favour the appreciation of growth stocks, as the value of their future success appears to be increasingly valuable. At times when this pattern becomes persistent, there is a growing willingness for investors to participate in their growth momentum. We believe that this helps explain the recent enthusiasm for large, loss-making, 'moonshot' type stocks.

Going forward, a review of the past and analogies such as the dot.com era suggest that, when market liquidity normalises, many of these stocks turn out to deliver poor returns. We note that a glimpse of this pattern was evident in the last quarter of 2018.

In summary, whilst we cannot predict timing, we continue to believe a policy of selecting overlooked stocks, rather than growth stocks, will generate premium returns in future.

Prior to the UK's decision to withdraw from the EU, the valuation of UK stocks was similar to that of US comparators. Initially, the Brexit decision itself led to significant weakness in the exchange rate of the UK pound. Thereafter, the uncertainty about the UK's future relationship with the EU has led investors to pare back their allocation to UK equities. There is evidence that UK stocks are now standing on less demanding valuations than those in other markets.

This trend has been even more adverse within UK microcaps. As prospects of Brexit has become more likely in 2019, investors have been particularly reluctant to increase their UK microcap holdings. The 'buyer's strike' has led to the share price of many smaller companies falling, at a time when the mainstream indices have been rising.

Going forward, once the outcome of Brexit is known, we believe there will be renewed capital allocation given the UK valuation differential. If this is accompanied by an appreciation of Sterling, then companies with significant domestic exposure will be better placed. For both these reasons, we believe that UK microcaps will generate premium returns in future, as they did in the past, particularly in the period prior to Globalisation as shown alongside.

Performance of the mainstream, smallcap and microcap indices over the decades prior to Globalisation

Source: Numis Smaller Companies Index Q3 Review 2012 (formerly Hoare Govett Smaller Companies Index).

Note the vertical axis is on a logarithmic scale.

• Over the year, the Ordinary share NAV moved from 69.33p on 30 April 2018 to 56.13p on 30 April 2019, a depreciation of 19.0%. As at close of business on 18 July 2019, the closest date to this Report, the Ordinary share NAV was 52.92p and the share price was 49.00p.
• The Ordinary share price moved from 65.80p at 30 April 2018 to 54.40p at 30 April 2019, a depreciation of 17.3%.
• Revenue after costs was £307,000 for the year to 30 April 2019, which compares with £464,000 last year. As outlined in the previous report, a number of holdings that paid high dividend yields were either sold or acquired prior to the year under review, and the proceeds have been reinvested into stocks that are more overlooked, in anticipation that they will deliver better returns over time.
• The Company offers all investors the redemption of their shareholding each year, which clears any overhanging sellers and hence ensures the market price of the Company does not deviate too far from the underlying NAV. Redemption requests in relation to 14,317,907 Ordinary shares, or 9.4% of the Company's share capital, were received for the 28 June 2019 Redemption Point and are not reflected in the summary below. These will be redeemed in full, subject to the creation of additional distributable reserves following a General Meeting and Court hearings, as announced on 26 June 2019. The redemption mechanism is explained further on page 72.

Summary of Results

	30 April 2019	30 April 2018
Total net assets attributable to equity shareholders (£'000)†	85,679	118,665
NAV per Ordinary share	56.13p	69.33p
Share price (mid)	54.40p	65.80p
Discount to NAV*	(3.08)%	(5.09)%
Revenue return per Ordinary share	0.20p	0.27p
Total return per Ordinary share*	(12.83)p	5.42p
Ongoing charges#*	1.52%	1.41%
Ordinary shares in issue	152,653,822	171,151,514

* Alternative Performance Measure ('APM'). Details provided in the Glossary on pages 84 to 86.

The ongoing charges are calculated in accordance with AIC guidelines.

† After payment of redemption proceeds and cancellation of shares June 2018: £12,761,000 (June 2017: £1,241,000).

to 30 April 2019

Financial Performance Indicators

The data provided below relates to the Ordinary share price, NAV or portfolio

The Trust's NAV and share price relative to the FTSE AIM All-Share Index

Source: Morningstar and Miton, 30 April 2015 to 30 April 2019 for Trust data. Bloomberg, 30 April 2015 to 30 April 2019 for Index data.

The cross correlations between the Trust's NAV, and the FTSE 100 and MSCI Europe (excluding the UK) Indices

Source: Bloomberg, 30 April 2015 to 30 April 2019 (based on R – the correlation coefficient).

The chart alongside details the return of the FTSE AIM All-Share Index, along with the Company's NAV and daily closing share price. The return of the FTSE AIM All-Share Index tends to be dominated by the returns of larger constituents, and hence often differs from that of the Company's portfolio, which mainly comprises microcap stocks. This return differential has been further exacerbated over recent years, because many of the larger AIM listed stocks are high-profile growth stocks, whereas the Company's portfolio mainly holds microcap stocks that are standing on less demanding valuations where the scale of their prospects are overlooked. Overall, the FTSE AIM All-Share Index may not be a good proxy for the investment universe of the Company, but we do not have a better one. More importantly, there is an expectation that the Company's strategy will generate a better return than that of the FTSE AIM All-Share Index over the longer term.

Many of the mainstream international indices comprise multinational companies in a narrow range of sectors that are fairly uniform across each geography. For example, a major oil company in the US or Europe tends to perform in a similar way to a major oil company in the UK, so the daily movements of the FTSE 100 and the MSCI Europe (ex UK) Indices are relatively correlated. Although the holdings in MINI are listed in the UK, microcaps tend to operate in a wider range of industry sectors so the daily movements of the Company's NAV are relatively lowly correlated with the daily movements of the FTSE 100 Index. Diversification can be advantageous for investors.

Revenue and dividend per share One of the reasons that revenue per share was so much stronger in the year to April 2017 was that two companies in the Company's portfolio paid dividend yields close to 10%. Both of these companies were subsequently taken over, and without these the revenue per share in the year to April 2018 was much lower, even though many other stocks in the portfolio paid higher dividends in the year compared to the previous period. As various microcap holdings mature, many start to pay dividends and this comes through in additional revenue per share. However, the valuations of more established companies tend to rise, and hence over time these are sold with the proceeds reinvested in less mature microcaps where their valuations appear more undemanding. Through this process, holdings paying dividends are sold in favour of new holdings that are often not paying dividends, in anticipation that they will generate better capital appreciation in future.

Chairman's Statement

"In this changing market environment, we believe that agile and wellcapitalised microcaps ultimately will generate disproportionate returns."

Andy Pomfret | Chairman

This Annual Report reviews the twelve months to 30 April 2019, a period dominated by changeable stock markets, offset, in part, by the periods of positive momentum in high growth stocks.

Returns

Most smallcap stocks fell in the year under review, although the decline of the stock market indices was moderated by the appreciation of some high growth stocks. Over the year, the FTSE AIM All-Share Index fell by 6.7% and the FTSE SmallCap Index (excluding Investment Trusts) Index fell 5.3%.

Concern about the terms of the UK's imminent withdrawal from the EU became increasingly pressing over the year. The absence of specific detail, and slippage to the exit program, weighed particularly heavily on the share prices of UK microcaps later in the period, with many persistently falling even as the mainstream markets staged a recovery. Therefore, over the year to April 2019, the Trust's NAV was down 19.0%.

The revenue return per share was 0.20p per share over the year, which compares with 0.27p per share last year. The Board is recommending a final dividend of 0.20p, which compares with a dividend of 0.36p last year. It has always been anticipated that capital appreciation would be the principal contributor of the Trust's return.

Over the four years since the Trust was first listed, the long-term appreciation of UK microcaps has been impeded by the ongoing uncertainty ahead of Brexit. The Trust has offset this headwind through adding value via stock selection, with its NAV up by 14.5% over the four year period. Meanwhile, momentum within growth stocks, especially larger growth stocks, has been strong. Since these form a major proportion of the FTSE AIM All-Share Index, it has appreciated by 36.0% over this period. However, the FTSE SmallCap Index (excluding Investment Trusts) has greater weightings in smallcaps, and fewer growth stocks, so it was up 27.6%.

Share Redemptions

The Trust's share price reflects the balance of buyers and sellers on the exchange. Hence, when there is an imbalance, the share price can diverge from the NAV. In order to ensure any imbalances do not persist, the Trust offers all shareholders the option to redeem their shares each year.

In March 2018, 18,497,692 shares were offered for redemption, which represented around 10.8% of the share capital. These were all redeemed for cash at the end of April 2018.

This year, the redemption notice coincided with the UK's then planned date for EU exit, so the period for redemption was moved to the end of June 2019, with a redemption point at 28 June 2019. A total of 14,317,907 shares were offered for redemption this year, amounting to 9.4% of the Company's share capital. These will be redeemed in full, subject to the creation of additional distributable reserves following a general meeting and Court hearings, as announced on 26 June 2019. Given the size of the redemption and the impact on distributable reserves of the portfolio valuations at the year end, the Company did not have sufficient reserves at the redemption point.

Strategy

The Trust principally invests in small quoted companies with market capitalisations below £150m. These kinds of businesses typically have real corporate agility and, importantly, the means to put it to work via access to external capital. Over time, as they identify promising projects and raise new capital, they can go on to generate a transformational difference in their returns. Importantly, we believe this explains why quoted microcaps over the long term have a history of outperforming the mainstream indices.

The Trust also selects companies with overlooked prospects, which tend to stand on undemanding valuations. In the past, UK quoted companies that are also microcaps and stand on overlooked valuations, have outperformed the comparative indices by a wide margin. Currently growth stocks are standing on demanding valuations, but as markets move on, we believe that microcaps will resume their prior trend of outperformance, thus re-establishing the longer-term pattern.

At the end of the year under review, share prices of growth stocks appeared to reach a peak. Several very large, loss-making US stocks with high growth expectations came to market in the early part of

2019, and this appears to have marked something of a high-water mark. At this stage, we do not know if growth stocks are now starting a long period of underperformance, but if this happens, we anticipate the Miton UK MicroCap Trust's strategy of focusing on UK listed microcaps, especially those that have overlooked valuations, will come into its own.

Prospects

The Trust has a wide-ranging investment universe. Its opportunity set extends over an unusually wide range of industry sectors. Furthermore, the balance sheets of many microcap stocks are often prudently positioned, with net cash balances and pension liabilities that are fixed. In contrast, many of the UK largest listed stocks have geared balance sheets and pension fund liabilities that are often more open-ended. Finally, anxiety about the UK's withdrawal from the EU means many microcaps are currently standing on undemanding valuations at present.

We believe these features will be especially helpful in the context of the current seismic change in the global economy. In past decades, there was a broad political consensus favouring globalisation. Over recent years, the absence of productivity improvement and wage growth has hardened the attitude of the electorate, and they are increasingly demanding change. Nationalistic policies, trade wars and the slowdown in world growth imply many of the past norms are vulnerable. In this changing market environment, we believe that agile and well-capitalised microcaps ultimately will generate disproportionate returns. Hence, despite the unsettled nature of markets, we continue to believe the Trust's microcap strategy remains well-placed for the future.

Andy Pomfret

Chairman 19 July 2019

Investment Manager's Report

Who are Miton?

Miton Group plc is an independent company that focuses entirely on generating premium returns through genuinely actively selecting stocks for investment portfolios. It is listed on the AIM exchange, in common with most of the stocks in the Miton UK MicroCap Trust plc portfolio.

The day-to-day management of the Trust's portfolio is carried out by Gervais Williams and Martin Turner, who have worked together on this Trust since it first listed in April 2015.

Gervais Williams

Gervais joined Miton in March 2011 and is Senior Executive Director of the group. He has been an equity portfolio manager since 1985, including 17 years as Head of UK Smaller Companies and Irish Equities at Gartmore. He was Fund Manager of the Year 2014 according to What Investment? He is a board member of the Investment Association, Chairman of the Quoted Companies Alliance and also a member of the AIM Advisory Council.

Martin Turner

Martin joined Miton in May 2011. Martin and Gervais have had a close working relationship since 2004, and their complementary expertise and skills led to their backing a series of successful companies. Martin qualified as a Chartered Accountant with Arthur Anderson, and has extensive experience at Rothschild, Merrill Lynch and Collins Stewart, where as Head of Small/Mid Cap Equities his role covered their research, sales and trading activities.

Gervais and Martin are part of a team of four Miton fund managers principally researching UK-quoted stocks, with each manager having a record of delivering premium returns. They are a close-knit and agile team, openminded in their thinking. This is important at all times, but at the current time of changing political and economic dynamics, this aspect is likely to be particularly relevant.

What's the Trust's investment strategy?

The returns of stock markets around the world are generally dominated by the share price changes of a limited number of very large stocks. Whilst these will

always have a place in investment portfolios, we at Miton believe that diversifying across a wider range of stocks is advantageous. For this reason, the Miton UK MicroCap Trust plc was formed.

Quoted microcaps differ from larger businesses in terms of their greater ability to grow and adapt to changing circumstances. Furthermore, they can put this advantage to work by raising additional capital from external shareholders when they spot an attractive opportunity. So, whilst the prospects of larger companies tend to be intertwined with that of the general economy, it is the individual circumstances of microcaps that tend to have a bigger influence on their prospects. In short, at times when the world economy stagnates, quoted microcaps have a better chance of sustaining growth. We believe this is one reason why, regardless of the wider economic circumstances, quoted microcaps have a long history of outperforming the mainstream indices. For the avoidance of doubt, the Company does not hold any unquoted companies.

Where are the best returns to be found in the microcap universe?

Generally there is an assumption that those with the best share price growth prospects will end up generating the best long-term returns. However, this is not always the case, since investors can get over enthused with a good growth story. Remember, in the late 1990s, the dot.com prospects were so good that investors cheerfully paid inflated valuations for them. In the end, many delivered very poor investment returns.

In aggregate, listed companies standing on low valuations relative to their prospects usually end up delivering the best investment returns. Whilst some disappoint, and others may collapse, there are more than enough that deliver on the upside. For this reason, the Trust principally selects stocks standing on undemanding valuations, where their prospects are overlooked.

Overall, it is anticipated that mixing the long-term outperformance of microcaps with the selection of those with overlooked potential, will generate premium returns.

What if the UK economy is not especially successful in future?

Even though majors are defined by their giant scale, microcaps often have international market positions as well, albeit they often operate in certain niche sectors. Furthermore, given the well-developed nature of the UK AIM market, some overseas microcaps choose to list here. For both reasons, the principal drivers of the returns of UK listed microcaps are not especially related to the success or otherwise of the UK economy.

Even without globalisation, there would have been some periods of good economic growth over recent decades. However, the reduction of trade barriers has greatly boosted world growth and made it easier for all companies to grow. Hence, during the period of globalisation, when most larger companies were growing well, most investment strategies have become aligned with them. Meanwhile, interest in quoted microcaps has tended to die away. The UK is almost unique in retaining a vibrant stock exchange of listed microcaps over this period.

MINI principally invests in UK-listed microcaps for two reasons. First, the UK-listed stocks operate both in the UK and internationally, and second, there just are not many opportunities elsewhere to access the advantages of a microcap strategy.

Why were the Trust's returns so disappointing over the year to April 2019?

There are two reasons why the Trust's returns over the year to April 2019 were particularly disappointing.

• First, over the year under review, the date for Brexit has become increasingly imminent and, as the final details of Brexit remained unknown, it became harder to determine which UK stocks had the better prospects. Mainstream investors, for example, were able to participate in the general recovery of markets, via index instruments. However, Index ETFs are not available for those investing in smallcaps. So as the year has progressed, there has been an increasing absence of smallcap buyers, which weighed particularly heavily on microcap share prices. In the end, most drifted lower, even at a time when international markets were staging a recovery.

• Second, whilst stocks standing on undemanding valuations tend to outperform over the long term, there are periods when growth stocks have a period of catch-up. Over recent years there has been plenty of enthusiasm for growth stocks, and this was apparent again early in the year under review. Although markets fell back during the final quarter of 2018, growth stocks revived thereafter. Overall, this was a year when growth stocks strongly outperformed.

Overall, the Trust's return was held back by a mix of Brexit anxiety and its strategy of investing in holdings that have less demanding valuations at a time when growth stocks performed strongly.

Which were portfolio outliers over the year to April 2019?

In spite of the ongoing uncertainty, the overall stance of the portfolio continues to be managed to maximise its potential scope for appreciation in the future. For example, there are always a number of stocks in the portfolio where their market does not develop as anticipated. Whilst their share prices may have fallen, we nonetheless exited these holdings to invest in others where the prospects are better. During the year, the Trust's shareholdings in 7 Digital, Rainbow Rare Earths, Petro Metad, WYG and Cloudcall were all sold for this reason.

However, as highlighted in the Half-year Report, Yu Group was by far the greatest detractor over this year, after appreciating by a multiple of its initial purchase price in earlier years. It announced that it had under-recorded bad debts, and also over-estimated the volumes of its new customers. Whilst the company revised its figures, it did not allow its advisers to issue market forecasts ahead of its finally resolving the scale of its misstatement. This explains why its share price fell by 90% to a position where it was valued solely on the cash balances within the group. As this stock had appreciated so much prior to this year, it had become one of the largest holdings in the Trust's portfolio, and this setback detracted 4.5% from the Trust's return over the period under review.

A small position in Yu Group has been retained for now, since we believe its share price overlooks the fact that it remains as a substantial group generating revenues of

Investment Manager's Report continued

approximately £80m. We expect its share price could recover substantially once the details of its future become clearer.

One of the key drivers of the Trust's long-term return is the substantial appreciation of a number of individual stocks, as the payback on their capex drives improved cashflow. Although market conditions were unsettled, some of the Trust's holdings still managed to appreciate well. For example, the share prices of Hydrogen, Aquis Exchange and Block Energy rose more than two-fold. The share price of Earthport rose three-fold as both Visa and Mastercard tussled over a bid for their international payment network. Whilst all these stocks helped to boost the return of the Trust, this year they were overwhelmed by the general tide of falling microcap share prices.

How has the Trust performed since listing four years ago?

Overall, Brexit anxiety has gradually come to dominate the UK stock market, especially microcaps. Meanwhile, the outperformance of high expectation stocks has also been a recent trend. In spite of these headwinds, over the four years since the Trust was first listed, its NAV has appreciated by 16.3%.

The enthusiasm for high growth stocks has enhanced the returns of the AIM-listed universe of stocks, and helped it offset the headwinds of Brexit. Thus, the return of the FTSE AIM All-Share Index is up 36.0% over the last four years. There are fewer high growth stocks within the FTSE SmallCap Index (excluding Investment Trusts) so it has only appreciated by 27.6% over the same period.

Over the four year period, the Trust has also paid dividends to shareholders, but it was always anticipated that the overall return of the Trust would be dominated by its scope for capital appreciation.

When will regular stocks on less demanding valuations resume their prior trend of outperformance?

Market enthusiasm for higher growth stocks has been a major feature of most stock markets for some years. A number of these trade at lofty multiples of sales and make large losses. However, this is ultimately

unsustainable, as most need access to additional capital to keep up the momentum, and there are periods when there is not sufficient market liquidity.

Interestingly, the positive momentum of growth stocks has become more intermittent over recent quarters. We believe this is related to a combination of their high valuations, and the growing supply of speculative new listings, that together are sapping market liquidity. This is most evident in the US recently, where a number of very large, loss-making growth stocks have listed, and then immediately fallen to sizeable discounts.

This pattern is reminiscent of the peaking out of the dot.com bubble. Following the dot.com boom, other regular, profitable companies that generated their own cashflow went on to outperform by a wide margin for several years. It is not possible to accurately predict when the period of over-enthusiasm for high growth stocks will end, but it appears that market liquidity may already be somewhat problematic.

What should investors expect when the details of Brexit are concluded?

When the result of the EU referendum was first announced, the exchange rate of Sterling fell. And subsequently, many investors have been wary of allocating capital to the UK, so there has been less support for UK-listed stocks.

Most commentators assume that if the UK's departure from the EU is not chaotic, then prior trends will be reversed.

• Sterling has weakened considerably since the referendum, but once Brexit is resolved, it may be that the exchange rate of Sterling rises. If this were the case, then the fact that a number of the larger quoted stocks in the UK pay their dividends in overseas currencies would be at a disadvantage. For this reason, it is anticipated that some mid-sized, small and microcap stocks might perform better over this period.

Source: FactSet, Bloomberg, Jefferies, 3 January 2007 to 24 May 2019. Note: FCFY Spread measures against 10-Year Government Bond Yield respectively.

The surplus corporate cashflow of various indices for every £100 invested at different dates

• The graph above reflects the surplus corporate cashflow generated by a notional £100 invested in the UK and US stock markets, which is a valuation measure of the attractiveness or otherwise of investing. In the past, this valuation metric has tended to move in tandem. Over recent years, enthusiasm for US stocks has driven up the S&P 500 Index in line with the growth of its surplus corporate cashflow, leaving the US stock market much unchanged on this valuation metric. In contrast, after the EU referendum, anxiety about the detail of the Brexit terms has held back investor enthusiasm, so the FTSE 100 Index is now rather more attractive on this valuation metric than it was previously.

In short, a major valuation gap has opened up between UK and US-listed companies, which we expect to narrow once the detail of Brexit is known. In part, this may be due to renewed capital allocations to UK quoted companies. We also anticipate that there will be more takeovers of UK quoted companies. Therefore, we expect that the UK stock market at some point should begin to outperform others.

What are the prospects for the Trust?

In general, we believe there are three trends that will drive the performance of the Trust going forward.

• First, when the uncertainty over the detail of the UK's withdrawal from the EU is known, it is expected that investors will step up their allocation to UK-listed companies generally.
• Second, anxiety ahead of Brexit has been especially acute for the share prices of UK microcap stocks, and hence their valuations have fallen well behind those of the mainstream UK-listed stocks. Therefore, we believe UK microcaps look inexpensive and may have more upside potential than the UK stock market overall.
• Third, we look forward to the time when regular companies, standing on undemanding valuations, resume their prior long-term trend of outperformance.

We believe these trends will add to the ongoing longterm advantages of a microcap strategy. In recent years, the absence of productivity improvement and wage growth has led to a seismic change in the political and economic agenda. With the substantial change in the market environment, we believe that the agile and wellcapitalised will generate disproportionate returns. Hence, despite the currently unsettled nature of markets, we continue to take the view that the Trust's strategy is wellplaced for the future.

Investment Manager's Report continued

How does the Trust add value when markets are very volatile?

Stock markets can suffer higher periods of volatility at times, that sometimes involve larger setbacks. The Trust has two strategies specifically ready to enhance shareholders' return through such a period when it occurs.

A FTSE 100 Put Option

MINI is currently holding a Put option. This option means the Company can sell the FTSE 100 Index at a certain level (6,100 in our case) after the stock market has sold off. This is similar to portfolio insurance, with the value of the FTSE 100 Put option rising as the FTSE 100 falls.

Options come with a cost, specifically, the cost of the Put option will gradually decay over the insured period (to December 2020 in our case), irrespective of whether the markets suffer any fluctuations or not. It is therefore important to minimise the initial cash cost of Put options, since its resale value generally falls over time (assuming markets are relatively flat) and ultimately becomes worthless if the FTSE 100 Index does not fall significantly below 6,100.

With this in mind, we tend to wait for buoyant periods in the market before purchasing Put options. In addition, we have been cautious about the scale of the Put options purchased. Therefore, the Put options only cover severe market setbacks (in our case when the FTSE 100 Index falls below 6,100) and only covers one-quarter of the total assets in the Trust. This means that the cost of the option is rather less than 0.5% of the NAV per year on average, were the option to expire worthless at the end of its term.

The key advantage of having Put options in the portfolio is that their resale value would be expected to rise proportionate to a market sell-off. The full level of that appreciation would be related to the duration of the remaining term of the option as well as the scale of the

market setback. If the Put option were to be sold when markets were low, then the cash proceeds could be used to purchase additional equities for the portfolio at a time when their share prices were depressed. The added holdings in the portfolio would then enhance its recovery potential thereafter. Alongside this, the Trust would benefit from the extra income from the new holdings added during this period.

In summary, the Put option strategy puts MINI in a position where it has scope to take advantage of any major market setback, at a relatively modest running cost, if markets do not drop back significantly in the period prior to December 2020.

The Trust's Debt Facility

Generally, as outlined above, we believe the Trust has plenty of scope to generate an attractive long-term return without relying on debt. The Trust has an unused debt facility ready, so it can purchase additional lower-priced shares and hold them when markets appear well placed to recover after a setback. The Trust has not drawn on the facility to date, since it would detract from returns at times when markets fall back.

Summary

MINI's objective is to offer shareholders the prospect of premium long-term returns, through investing in overlooked microcap stocks. Furthermore, a FTSE 100 Put option holding and access to a pre-agreed debt facility, puts the Trust in a position to purchase additional holdings were equity markets to suffer a significant setback. Together, we believe these strategies put the Company in a position to participate in greater scale in any market recovery after a major setback.

Gervais Williams and Martin Turner

19 July 2019

Business Model

Business and Status of the Company

MINI was incorporated on 26 March 2015 and its Ordinary shares were listed on the London Stock Exchange on 30 April 2015. It is registered in England as a public limited company and is an investment company in accordance with the provisions of Sections 832 and 833 of the Companies Act 2006.

The principal activity of the Company is to carry on business as an investment trust. The Company intends at all times to conduct its affairs so as to enable it to qualify as an investment trust for the purposes of Sections 1158/1159 of the Corporation Tax Act 2010 ("S1158/1159"). The Directors do not envisage any change in this activity in the foreseeable future.

The Company has been granted approval from HM Revenue & Customs ("HMRC") as an investment trust under S1158/1159 and will continue to be treated as an investment trust company, subject to there being no serious breaches of the conditions for approval.

The principal conditions that must be met for continuing approval by HMRC as an investment trust are that the Company's business should consist of "investing in shares, land or other assets with the aim of spreading investment risk and giving members of the company the benefit of the results" and the Company may only retain 15% of its investment income. The Company must also not be a close company. The Directors are of the opinion that the Company has conducted its affairs for the year ended 30 April 2019 so as to be able to continue to qualify as an investment trust.

The Company's status as an investment trust allows it to obtain an exemption from paying taxes on the profits made from the sale of its investments and all other net capital gains. Investment trusts offer a number of advantages for investors, including access to investment opportunities that might not be open to private investors and to professional stock selection skills at lower cost, and the ability to hold illiquid positions in uncertain market conditions.

Investment Policy

The Company's full investment policy is set out on page 74 and contains information on the policies which the Company follows relating to asset allocation, risk diversification and gearing, and includes maximum exposures, where relevant.

The Company invests in a portfolio of UK quoted companies with the objective of achieving capital growth by investing in a portfolio of stocks that are well placed to generate an attractive cash payback from productivity improvements.

Portfolio Information

as at 30 April 2019

			Valuation	% of	Yield*
Rank	Company	Sector & main activity	£000	net assets	%
1	Frontier IP Group	Industrials	3,256	3.8	–
2	Aquis Exchange	Financials	3,053	3.6	–
3	Cerillion	Technology	3,049	3.5	2.8
4	Kape Technologies	Technology	2,525	2.9	–
5	Zotefoams	Basic Materials	2,387	2.8	1.0
6	Nanoco Group	Technology	2,333	2.7	–
7	Kromek Group	Health Care	2,272	2.7	–
8	Corero Network Security	Technology	1,915	2.2	–
9 10	Rockrose Energy Diversified Gas Oil	Oil & Gas Oil & Gas	1,630 1,605	1.9 1.9	– 7.0
	Top 10 investments		24,025	28.0
11	MTI Wireless Edge	Technology	1,471	1.7	4.6
12	Eland Oil & Gas	Oil & Gas	1,463	1.7	–
13	Hydrogen Group	Industrials	1,433	1.7	2.1
14	Mercantile Ports & Logistics	Industrials	1,372	1.6	–
15	Conygar Investment Company	Financials	1,281	1.5	–
16	Mind Gym	Industrials	1,273	1.5	–
17	Game Digital	Consumer Services	1,263	1.5	–
18	Science in Sport	Consumer Goods	1,249	1.5	–
19 20	SIMEC Atlantis Energy BATM Advanced Communications	Utilities Technology	1,240 1,235	1.4 1.4	– –
	Top 20 investments		37,305	43.5
21	Oxford Metrics	Technology	1,175	1.4	1.6
22	I3 Energy	Oil & Gas	1,161	1.4	–
23	Scientific Digital Imaging	Health Care	1,156	1.3	–
24	Jubilee Metals Group	Basic Materials	1,136	1.3	–
25	Block Energy	Oil & Gas	1,115	1.3	–
26	STM Group	Financials	1,037	1.2	4.1
27	Anglo & African Oil & Gas	Oil & Gas	1,037	1.2	–
28 29	Inspired Energy CentralNic	Industrials Technology	1,000 996	1.2 1.2	4.1 –
30	Van Elle Holdings	Industrials	940	1.1	3.6
	Top 30 investments		48,058	56.1
31	Palace Capital	Financials	919	1.1	6.3
32	Caledonian Mining	Basic Materials	900	1.1	6.6
33	Falanx Group	Industrials	867	1.0	–
34	Hydrodec Group	Oil & Gas	867	1.0	–
35	Inspiration Healthcare Group	Health Care	843	1.0	–
36 37	Bilby Tungsten	Industrials Financials	827 789	1.0 0.9	– –
38	Reabold Resources	Financials	780	0.9	–
39	Trackwise Designs	Industrials	765	0.9	–
40	Galantas Gold	Basic Materials	760	0.8	–
	Top 40 investments		56,375	65.8
	Balance held in 65 equity instruments		23,933	27.9
	Total equity investments		80,308	93.7
Listed Put option
	FTSE 100 – December 2020 6,100 put		690	0.8
	Other net current assets		4,681	5.5
Net assets			85,679	100.0

* Source: Thomson Reuters. Based on historic dividends and therefore not representative of future yield.

A copy of the full portfolio of investments as at 30 April 2019 is available on the Company's website, www.mitongroup.com/micro

The Company Strategic Report Governance Company Accounts Shareholder Information

Portfolio as at 30 April 2019

Source: Thomson Reuters.

The LSE assigns all UK quoted companies to an industrial sector and frequently to a stock market index. The LSE also assigns industrial sectors to many international quoted equities as well, and those that have not been classified by the LSE have been assigned as though they had. The portfolio as at 30 April 2019 is set out in some detail on page 16, in line with that included in the Balance Sheet. The investment income above comprises all of the income from the portfolio as included in the Income Statement for the year ended 30 April 2019. The AIM and NEX market are both UK exchanges specifically set up to meet the requirements of smaller listed companies.

The first two bars above determine the overall sector weightings of the Company's capital at the end of the year, and with regard to the income received by the Company over the year. The second pair of bars determines the LSE stock market index within which portfolio companies sit, and the income received by the Company over the year.

Investments for the Company's portfolio are principally selected on their individual merits. As the portfolio evolves, the Manager continuously reviews the portfolio's overall sector and index balance to ensure that it remains in line with the underlying conviction of the Investment Manager. The Investment Policy is set out on page 74, and details regarding risk diversification and other policies are set out each year in the Annual Report.

Performance and Risks

Key Performance Indicators

The Board reviews the Company's performance by reference to a number of key performance indicators ("KPIs") and considers that the most relevant KPIs are those that communicate the financial performance and strength of the Company as a whole.

The Board and the Investment Manager monitor the following KPIs:

• NAV performance, relative to the AIM All-Share Index and other comparable investment trusts and open-ended funds

The Ordinary share NAV at 30 April 2019 was 56.13p per share (30 April 2018: 69.33p), giving a total return of (18.6)% (30 April 2018: 8.4%) over the year. This compares with the UK Investment Trust Smaller Companies sector, where the average was a (1.0)% decrease in total return terms over the same period. By comparison, the total return on the FTSE AIM All-Share Index was (6.7)% over the year.

• NAV correlation to mainstream indices The Company has an objective to deliver a low NAV correlation with the FTSE 100 and FTSE All-Share Indices. Correlation data is presented on page 7 of the Report.

• Movements in the Company's share price The Company's Ordinary share price decreased by 17.3% (30 April 2018: increased by 5.7%) over the year on a capital return basis.

• The discount/premium of the share price in relation to the NAV

At times, the number of shareholders looking to transact in the Company's shares exceeds the market's daily liquidity. Imbalances like this are normally cleared through stock market transactions over a few weeks, but on occasion these imbalances can become persistent and the Company's share price diverges from the daily NAV. The Company has an objective to keep this divergence to a minimum.

When buyers have become persistent over recent years and the share price has traded consistently above the daily NAV, the Company has issued additional stock through placing new shares with investors. In contrast, during the year to 30 April 2019, the share price discount has ranged between 0.8% and 8.5% to the daily NAV. In order to address this, the Company was set up with an annual redemption mechanism so shareholders can redeem their holdings. This usually takes place each year on 30 April, however, as explained in the Chairman's statement on page 8, due to uncertainties surrounding Brexit, this year's redemption point was moved to 28 June.

This year, redemption requests were received for 9.4% of the Company's shares and these will be redeemed at the redemption price of 53.92p per share and will be cancelled on or around 15 August 2019, subject to a General Meeting and Court hearings as announced on 26 June 2019.

• Ongoing charges

The ongoing charges on the Ordinary shares for the year to 30 April 2019 amounted to 1.5% (30 April 2018: 1.4%) of total assets.

Principal Risks and Uncertainties

The Company is exposed to a variety of risks and uncertainties that could cause its asset price or the income from the investment portfolio to reduce, possibly by a sizeable percentage in the most adverse circumstances. The principal financial risks and the Company's policies for managing these risks and the policy and practice with regard to the portfolio are summarised in note 19 to the financial statements.

The Board, through delegation to the Audit and Management Engagement Committee, undertakes a robust annual assessment and review of the principal risks facing the Company, together with a review of any new risks which may have arisen during the year, including those that would threaten its business model, future performance, solvency or liquidity. These risks are formalised within the Company's risk matrix. Information regarding the Company's internal control and risk management procedures can be found in the Corporate Governance Statement on pages 29 to 34.

Listed below is a summary of the principal risks identified by the Board and actions taken to mitigate those risks.

Risk	Mitigation
Investment and strategy
There can be no guarantee that the investment objective of the Company will be achieved. The Company will invest primarily in small UK quoted or traded companies by market capitalisation. Smaller companies can be expected, in comparison to larger companies, to have less mature businesses, a more restricted depth of management and a higher risk profile. These companies may be less liquid and, when aggregated with holdings in other client funds of the Investment Manager, the combined funds may have a significant percentage ownership of investee companies.	The Company is reliant on its Investment Manager's investment process. The Board reviews and discusses the investment approach at each Board meeting. The Investment Manager has long experience of managing portfolios of this nature, including dealing in smaller capitalisation companies, and deploying an approach that is designed to maximise the chances of the investment objective being achieved over longer-term time horizons. The Board looks to mitigate the higher risk profile of individual smaller companies by ensuring the Company holds a well-diversified portfolio, both by number of companies and areas of operation. This is monitored at each Board meeting. The Company is structured as a closed-ended fund, which means that it is not subject to daily inflows and outflows.
Reliance on third parties
The Company has no employees and is reliant on the performance of third party service providers. Failure by the Investment Manager or any other third party service provider to perform in accordance with the terms of its appointment could have a material detrimental impact on the operation of the Company. This could include failure of a counterparty on whom the Company is reliant.	The Board monitors and receives reports on the performance of its key service providers. In relation to the risk of counterparty failure, the Board reviews the controls report of the Depositary. The Board may in any event terminate all key contracts on normal market terms.

Performance and Risks continued

Risk	Mitigation
Loss of key personnel/fund managers
The Company depends on the diligence, skill, judgement and business contacts of the Manager's investment professionals and its future success could depend on the continued service of these individuals, particularly Gervais Williams and Martin Turner.	The Company may decide to terminate the Management Agreement should both Gervais Williams and Martin Turner cease to be employees of the Manager's group and if they are not replaced by a person/s who the Company considers to be of equal or satisfactory standing within three months of one or both of their departures.
Share price volatility and liquidity/marketability risk
The market price of the Ordinary shares, as with shares in all investment trusts, may fluctuate independently of their underlying NAV and may trade at a discount or premium at different times, depending on factors such as supply and demand for the Ordinary shares, market conditions and general investor sentiment. The Company becomes too small to be attractive to a wide audience and liquidity decreases and the discount widens.	The Company has in place an annual redemption facility whereby shareholders can voluntarily tender their shares. The Board monitors the relationship between the share price and the NAV. The Company has powers to repurchase shares should there be an imbalance in the supply and demand leading to a persistent and excessive discount. The Investment Manager maintains regular dialogue with shareholders through monthly factsheets and regular face-to-face meetings.
Costs of operation
As stated, the Company relies on external service providers. Many of these are paid on a basis where their fees are related to the size of the Company (an "ad valorem" basis). Others are for fixed monetary amounts. Therefore, if the Company were to shrink, through redemptions, buybacks or asset performance, the cost per share of running the Company would increase. This could make it harder to achieve the investment objective.	The Board monitors the costs of all service providers. The Board is also committed to the controlled growth of the Company which would spread the fixed costs over a larger asset base. In the event that the Company were to decrease in size from its current level, the Board has capped the total costs at no more than 2% of the aggregate market capitalisation. The ongoing charges for the year to 30 April 2019 amounted to 1.52% (30 April 2018: 1.41%).
Regulatory risk/change in tax status
The Company is subject to laws and regulations enacted by national and local governments. Any change in the law and regulation affecting the Company may have a material adverse effect on the ability of the Company to carry on its business and successfully pursue its investment policy.	The Board receives regular updates from its Secretary, Broker, industry representatives and its Investment Manager on significant regulatory changes that may impact the Company. The Company's ability to determine the shape of regulatory or tax changes is limited and therefore the Board aims to ensure that it is well informed and prepared to respond to changes as required.
Cyber Risk/IT Security
Errors, fraud or control failures by the Company's key service providers or loss of data through increasing cyber threats or business continuity failure could damage the Company's reputation or investors' interests or result in losses.	The Board receives regular control reports and cyber/IT policies from all service providers to ensure that controls are in place including business continuity and disaster recovery arrangements.

Share Capital

Share Issues

At the Annual General Meeting held on 12 September 2018, the Directors were granted the authority to allot Ordinary shares up to an aggregate nominal amount of £15,265 (representing 15,265,000 Ordinary shares) on a non pre-emptive basis. No shares have been issued under this authority.

This authority is due to expire at the Company's Annual General Meeting to be held on 11 September 2019. Proposals for the renewal of the authority are set out on page 27.

Share Redemptions

Valid redemption requests were received under the Company's redemption facility for the 28 June 2019 Redemption Point in relation to 14,317,907 Ordinary shares, representing 9.4% of the issued share capital. The Company announced on 26 June 2019 that the Board is proposing to cancel the Company's share premium account to create distributable reserves in order to satisfy such redemption requests in full. The cancellation of the Ordinary shares is therefore subject to receipt of the requisite shareholder and Court approvals. Subject to these approvals, all shareholders who validly applied to have shares redeemed will receive a Redemption Price of 53.92 pence per Ordinary share.

Purchase of Own Shares

At the Annual General Meeting of the Company held on 12 September 2018, the Directors were granted the authority to buy back up to 22,882,807 Ordinary shares. No Ordinary shares have been bought back under this authority. The authority will expire at the forthcoming Annual General Meeting, when a resolution for its renewal will be proposed (see page 27 for further information).

Treasury Shares

Shares bought back by the Company may, at the Board's discretion, be held in treasury, from where they could be re-issued at a premium to NAV quickly and cost effectively. This provides the Company with additional flexibility in the management of its capital base. No shares were purchased for, or held in, treasury during the year or since the year end.

Current Share Capital

As at the year end, there were 152,653,822 Ordinary shares and 50,000 Management shares (see note 4 to the financial statements) in issue. Further details of the Company's share capital are set out in note 4 to the financial statements on pages 58 to 59. This includes details of the 2019 redemption of Ordinary shares.

The rights attached to each share class are set out on page 73.

There are no restrictions concerning the transfer of securities in the Company or on voting rights; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a successful takeover bid.

Management, Social, Environmental and Diversity Matters

Management Arrangements

The Company's investment manager is Miton Trust Managers Limited (the ''Investment Manager''). The Investment Manager is responsible for the management of the Company's portfolio in accordance with the Company's investment policy and the terms of the Management Agreement dated 8 April 2015. The Investment Manager has delegated investment management to Miton Asset Management Limited. Both the Investment Manager and Miton Asset Management Limited are authorised and regulated by the FCA.

The Board has appointed Miton Trust Managers Limited as the alternative investment fund manager ("AIFM") of the Company.

Under the terms of the Management Agreement, the Investment Manager is entitled to a management fee together with reimbursement of reasonable expenses incurred by it in the performance of its duties. The management fee is payable monthly in arrears and is at the rate of 1% per annum, calculated in respect of each calendar month, of the market capitalisation at the relevant calculation date.

In addition to the basic management fee, and for so long as a Redemption Pool (see page 72 for details) is in existence, the Investment Manager is entitled to receive from the Company a fee calculated at the rate of 1% per annum of the net asset value of the Redemption Pool on the last Business Day of the relevant calendar month.

The Investment Manager has agreed that, for so long as it remains the Company's investment manager, it will rebate such part of any management fee payable to it so as to help the Company maintain an ongoing charges ratio of 2% or lower.

In accordance with the Directors' policy on the allocation of expenses between income and capital, in each financial year 75% of the management fee payable is expected to be charged to capital and the remaining 25% to income.

The Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than 12 months' written notice. The Management Agreement may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including insolvency or in the event of a material breach by the Investment Manager of the Management Agreement which is not remedied within thirty days of the receipt of notice.

The Company has given certain market standard indemnities in favour of the Investment Manager in respect of the Investment Manager's potential losses in carrying on its responsibilities under the Management Agreement.

The Board appointed Bank of New York Mellon as its Depositary and Custodian under an agreement dated 8 April 2015. The annual fee for depositary services due to Bank of New York Mellon is 0.025% per annum of gross assets, subject to a minimum fee of £15,000. The Company and the Depositary may terminate the Depositary Agreement with three months' written notice.

Company secretarial services are provided by Link Company Matters Limited, under an agreement dated 8 April 2015 between the Company and Link Market Services Limited. The Company Secretarial Services Agreement was for an initial period of 12 months and thereafter automatically renews for successive periods of six months unless or until terminated by either party on at least six months' written notice.

Administrative Services are provided by Link Alternative Fund Administrators Limited under an agreement dated 8 April 2015. The Administration Agreement may be terminated by either party on at least six months' prior written notice.

Continuing Appointment of the Investment Manager

The Board, through the Audit and Management Engagement Committee, keeps the performance of the Investment Manager under continual review, and the Audit and Management Engagement Committee conducts an annual appraisal of the Investment Manager's performance, and makes a recommendation to the Board about the continuing appointment of the Investment Manager. It is the opinion of the Board that the continuing appointment of the Investment Manager is in the interests of shareholders as a whole. The Board believes that the Investment Manager has executed the investment strategy in line with the Prospectus.

The Directors also believe that by paying the management fee calculated on a market capitalisation basis, rather than a percentage of assets basis, the interests of the Investment Manager are more closely aligned with those of shareholders.

Environmental, Human Rights, Employee, Social and Community Issues

The Company does not have any employees and the Board consists entirely of non-executive Directors. The day-to-day management of the business is delegated to the Investment Manager. As an investment trust, the Company has no direct impact on the community or the environment, and as such has no environmental, human rights, social or community policies.

In carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly and ethically. The Company has a zero-tolerance policy towards bribery and corruption and as such is committed to carrying out its business fairly, honestly and openly.

Gender Diversity

The Board of Directors of the Company comprises one female and three male Directors.

The Company's Diversity Policy acknowledges the benefits of greater diversity, including gender diversity, and remains committed to ensuring that the Company's Directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives. The Board will always appoint the best person for the job and will not discriminate on any grounds including gender, race, ethnicity, religion, sexual orientation, age or physical ability.

Approval

The Strategic Report has been approved by the Board of Directors.

On behalf of the Board

Andy Pomfret

Chairman 19 July 2019

Directors

All the Directors are non-executive and are independent of the Investment Manager.

Andrew (Andy) Pomfret – Chairman appointed 31 March 2015

Andy spent over 13 years with Kleinwort Benson as a corporate financier, venture capitalist and finance director of the investment management and private banking division. In 1999, he joined Rathbone Brothers Plc as finance director, and served as chief executive from 2004 until February 2014. He is currently a non-executive director of Aberdeen New Thai Investment Trust plc, Sabre Insurance Group plc and Sanne Group plc.

Jeannette (Jan) Etherden appointed 31 March 2015 Jan has over 35 years' experience in the investment industry as an analyst, fund manager and a nonexecutive director. Previously head of UK equities for Confederation Life/Sun Life of Canada, she joined Newton Investment Management Limited in 1996 as a director specialising in multi-asset portfolios, and was also their Investment Chief Operating Officer from 1999 to 2001. Subsequently, she worked with Olympus Capital Management as development manager for specialist hedge fund products. Currently, she is a non-executive director of LXI REIT Plc.

Peter Dicks – Chairman of the Audit and Management Engagement Committee and Senior Independent Director appointed 26 March 2015 Peter was a founder director of Abingworth plc in 1973, a venture capital investment company, mainly investing in the USA but also in the UK, where he worked from 1973 to 1991. Since then he has been a non-executive director or chairman of a number of companies. He is currently chairman of Unicorn AIM VCT plc and SVM Emerging Fund plc and a non-executive director of Foresight Solar Fund Limited.

Ashe Windham, CVO appointed 31 March 2015 Following 11 years service in the British Army, Ashe joined Barclays de Zoete Wedd ("BZW") in 1987 as an institutional equities salesman and was appointed a Director of BZW's Equities Division in 1991. He joined Credit Suisse First Boston in 1997 when they acquired BZW's equities business. In 2004, he joined Man Investments as Head of Internal Communications and in 2007 became Man Group's Global Head of Internal Communications. In June 2009 he resigned from Man Group plc to set up a private family office, which he continues to run. Ashe is the chairman and a non-executive director of Ruffer Investment Company Limited and a non-executive director and chairman of the Remuneration Committee of EFG Asset Management (UK) Limited.

Report of the Directors

The Directors present their report and the financial statements for the year ended 30 April 2019.

Directors

The Directors in office at the date of this Report and the dates of their appointment are shown on page 24.

In accordance with the policy adopted by the Board, all the Directors will retire and stand for re-election at the Company's forthcoming Annual General Meeting ("AGM").

The Board considers that, following a recent formal evaluation of the performance of the Board, Audit and Management Engagement Committee and individual Directors, each of the current Directors makes an effective contribution and has the knowledge, skills and experience required to provide effective and independent challenge, leadership and direction to the Company. The Board therefore believes that it is in the best interests of shareholders that each of the Directors be re-elected at the forthcoming AGM.

None of the Directors or any persons connected with them had a material interest in the transactions and arrangements of, or the agreement with, the Investment Manager during the year.

Substantial Shareholdings

So far as is known to the Company by virtue of notifications made to it pursuant to the Disclosure Guidance and Transparency Rules, the following persons held notifiable interests in the Company's voting rights as at 30 April 2019:

	Number of Ordinary shares	% of voting rights
Rathbone Investment Management Limited	9,229,309	5.39
Miton Group plc	7,000,000	4.09
Brewin Dolphin Limited	6,057,250	3.54
Investec Wealth & Investment Limited*	5,329,420	3.11
City of Bradford Metropolitan District Council	4,000,000	2.34
Brooks Macdonald Asset Management Limited	2,113,855	1.24

* The Company has been informed that Investec Wealth & Investment Limited held

16,853,687 Ordinary shares as at 16 July 2019 representing 11.04% of the total voting rights.

Dividends

The Directors have recommended the payment of a final dividend in respect of the year of 0.20 pence per Ordinary share, payable on 27 September 2019 to shareholders who appear on the register on 23 August 2019. The ex-dividend date will be 22 August 2019.

Future Developments

A review of the year and the outlook for the next year are set out on pages 8 to 14.

Financial Risk Management

The principal financial risks and the Company's policies for managing these risks are set out in note 19 to the financial statements.

Corporate Governance

The Corporate Governance Statement on pages 29 to 34 forms part of the Report of the Directors. It includes details of the qualifying third party indemnity provisions and Directors' and officers liability insurance on page 31.

Going Concern

The Directors consider that it is appropriate to adopt the going concern basis. Cashflow projections have been reviewed and show that the Company has sufficient funds to meet its contracted expenditure. On the basis of the review and as the majority of net assets are securities which are traded on recognised stock exchanges, after making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the liquidity of the portfolio and the Company's ability to meet obligations as they fall due for a period of at least 12 months from the date that these financial statements were approved.

Viability Statement

In accordance with the AIC Code of Corporate Governance, the Board has considered the prospects for the Company.

Report of the Directors continued

The period assessed is the three years to June 2022. The Company is intended to be a long-term investment vehicle. It was launched four years ago, and due to the limitations and uncertainties inherent in predicting market and political conditions, the Directors have determined that three years is the appropriate period over which to make this assessment.

As part of its assessment of the viability of the Company, the Board has considered the principal risks and uncertainties and the impact on the Company's portfolio of a significant fall in UK markets.

To provide this assessment, the Board has considered the Company's financial position and its ability to liquidate its portfolio to meet its expenses or other liabilities as they fall due:

• the Company invests largely in companies listed and traded on stock exchanges. These are actively traded and, whilst perhaps less liquid than larger quoted companies, the portfolio is well diversified by both number of holdings and industry sector;
• the expenses of the Company are predictable and modest in comparison with the assets in the portfolio. There are no commitments that would change that position;
• the Company has no employees; and
• the Company has an annual redemption facility whereby shareholders may request that their shares are redeemed at NAV. The Board has considered the possibility that shareholders holding a significant percentage of the Company's shares request redemption. Firstly, the Board has flexibility over the method and date of redemption so can avoid disruption to the overall operation of the Company in this situation. Secondly, the Company has an arrangement with the Manager to rebate fees should total costs exceed 2% of aggregate market capitalisation, such that were there to be significant redemption, or a significant fall in the value of the portfolio, the expenses of operation would be manageable. In addition, many of the expenses vary in line with the size of the Company.

In addition to considering the principal risks on pages 19 and 20 and the financial position of the Company as described above, the Board has also considered the following further factors:

• the continuing relevance of the Company's investment objective in the current environment and the continued satisfactory performance of the Company;
• the level of demand for the Company's shares and that since launch the Company has been able to issue further shares;
• the gearing policy of the Company; and
• that regulation will not increase to such an extent that the costs of running the Company become uneconomic.

Accordingly, the Directors have formed the reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three years, from the balance sheet date.

Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, including those within its underlying investment portfolio.

Requirements of the Listing Rules

Listing Rule 9.8.4 requires the Company to include specified information in a single identifiable section of the Annual Report or a cross reference table indicating where the information is set out. There are no disclosures required in relation to Listing Rule 9.8.4.

Audit Information

Each of the Directors who held office at the date of approval of the Report of the Directors confirms that, so far as he/she is aware, there is no relevant audit information of which the Company's Auditor is unaware; and that he/she has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

Auditor

Ernst & Young LLP has confirmed its willingness to continue in office as Auditor of the Company and resolutions for its re-appointment and for the Audit and Management Engagement Committee to determine its remuneration will be proposed at the forthcoming Annual General Meeting.

Annual General Meeting

The Notice of the Annual General Meeting to be held on 11 September 2019 (the "Notice") is set out on pages 78 to 83. Shareholders are being asked to vote on various items of business, being:

• (i) the receipt of the Strategic Report, the Reports of the Directors and Auditor and the financial statements for the financial year ended 30 April 2019;
• (ii) the receipt and approval of the Directors' Remuneration Report;
• (iii) the approval of the Director's remuneration policy;
• (iv) the re-election of the Directors;
• (v) the re-appointment of Ernst & Young LLP as Auditor;
• (vi) the authorisation of the Audit and Management Engagement Committee to determine the remuneration of the Auditor;
• (vii) the approval of a final dividend;
• (viii) the granting of authorities in relation to the allotment of shares;
• (ix) the disapplication of pre-emption rights for certain issues of shares;
• (x) the purchase by the Company of its own shares; and
• (xi) the holding of general meetings on not less than 14 clear days' notice.

Authority to Issue Shares and Disapplication of Pre-Emption Rights

An ordinary resolution to authorise the Directors to allot Ordinary shares up to an aggregate nominal amount of £15,265, equal to approximately 10% of the Company's issued Ordinary share capital (representing 15,265,000 Ordinary shares), will be proposed as Resolution 11. Resolution 12, a special resolution, is being proposed

to authorise the Directors to issue Ordinary shares for cash and to disapply the pre-emption rights of existing shareholders in relation to issues of Ordinary shares under Resolution 11 (being in respect of up to 10% of the Company's issued share capital as at the date of the Notice).

Where statutory pre-emption rights are disapplied, any subsequent issues of shares will be dilutive to those shareholders who cannot, or choose not to, participate in such fundraising. No Ordinary shares will be issued at a price which is less than the aggregate of the NAV per Ordinary share.

The Directors will only issue new shares if they believe it would be in the best interests of the Company's shareholders.

As at the date of the Notice, the Company holds no shares in treasury.

These authorities, if approved by shareholders, will expire at the Annual General Meeting to be held in 2020, when resolutions for their renewal will be proposed with the limit of authority adjusted as appropriate.

Purchase of Own Shares

Resolution 13, a special resolution, will renew the Company's authority to make market purchases of up to 14.99% of the Company's Ordinary shares, either for cancellation or placing into treasury at the determination of the Directors. Purchases of Ordinary shares will be made within guidelines established from time to time by the Board. Any purchase of Ordinary shares would be made only out of the available cash resources of the Company. The maximum price which may be paid for an Ordinary share must not be more than the higher of (i) 5% above the average of the mid-market values of the Ordinary shares for the five business days before the purchase is made, or (ii) the higher of the price of the last independent trade and the highest current independent bid for the Ordinary shares. The minimum price which may be paid is £0.001 per Ordinary share.

Report of the Directors continued

The Directors would use this authority to address any significant imbalance between the supply and demand for the Company's Ordinary shares and to manage the discount to NAV at which the Ordinary shares trade. Ordinary shares will be repurchased only at prices below the NAV per Ordinary share, which should have the effect of increasing the NAV per Ordinary share for remaining shareholders. Shares bought back by the Company may be held in treasury from where they could by re-issued at a premium to NAV quickly and cost effectively. This authority will expire at the Annual General Meeting to be held in 2020 when a resolution to renew the authority will be proposed.

Notice Period for General Meetings

Resolution 14 is a special resolution that will give the Directors the ability to convene general meetings, other than annual general meetings, on a minimum of 14 clear days' notice. The minimum notice period for annual general meetings will remain at 21 clear days. The approval will be effective until the Company's Annual General Meeting to be held in 2020, at which it is intended that renewal will be sought. The Company will have to offer facilities for all shareholders to vote by electronic means for any general meeting convened on 14 days' notice. The Directors will only call a general meeting on 14 days' notice where they consider it to be in the interests of shareholders to do so and the relevant matter is required to be dealt with expediently.

Recommendation

Full details of the above resolutions are contained in the Notice.

The Directors consider that all the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and its members as a whole. The Directors unanimously recommend that shareholders vote in favour of all the resolutions, as they intend to do in respect of their own beneficial holdings.

Approval

The Report of the Directors has been approved by the Board.

By order of the Board

Link Company Matters Limited

Secretary 19 July 2019

This Corporate Governance Statement forms part of the Report of the Directors.

Corporate Governance Statement

Statement of Compliance

The Company is committed to maintaining high standards of corporate governance. The Board of the Company has considered the principles and recommendations of the AIC Code of Corporate Governance for Investment Companies ("AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide"), both as published in July 2016. The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code ("UK Code"), as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company as an investment company.

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders.

The Financial Reporting Council ("FRC"), the UK's independent regulator for corporate reporting and governance responsible for the UK Code, has endorsed the AIC Code and the AIC Guide. The terms of the FRC's endorsement mean that AIC members who report against the AIC Code and the AIC Guide meet fully their obligations under the UK Code and the related disclosure requirements contained in the Listing Rules.

The Company complies with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.

The UK Code includes provisions relating to: the role of the chief executive; executive directors' remuneration; and the need for an internal audit function. For the reasons set out in the AIC Guide and as explained in the UK Code, the Board considers these provisions are not relevant to the position of the Company, being an externally-managed investment company. The Company does not therefore comply with these provisions and has not reported further in respect of them.

A copy of the AIC Code and the AIC Guide can be obtained via the AIC website, www.theaic.co.uk. A copy of the UK Code can be obtained at www.frc.org.uk.

The AIC published its updated Code of Corporate Governance in February 2019 (the "2019 Code"). The 2019 Code is applicable to the Company's accounting period beginning on 1 May 2019. The Company will report fully on its compliance with the 2019 Code in its 2020 Annual Report.

The Board of Directors

The Board consists entirely of non-executive Directors, who are independent of the Investment Manager. The Board has no employees. No one individual has unfettered powers of decisions made by the Board.

The Board is accountable to shareholders for the direction and control of all aspects of the Company's affairs, notwithstanding any delegation of responsibilities to third parties. A detailed description of the role of the Board and its relationship with the Investment Manager are set out further below.

The names and responsibilities of the Directors, together with their biographies and details of their significant commitments, are set out on page 24. The Directors possess a wide range of business and financial expertise relevant to the leadership of the Company, including the ability and willingness to provide robust and objective challenge to the views and assumptions of the Investment Manager and other Directors. All of the Directors consider that they have sufficient time to devote to the Company's affairs and that they carry out their duties effectively.

No Director has a service contract with the Company, nor are any such contracts proposed, each Director having been appointed pursuant to a letter of appointment entered into with the Company. The Directors have chosen to follow the practice of annual re-election by shareholders at the AGM. The Directors' appointments can be terminated in accordance with the Articles and without compensation. The Directors' letters of appointment are available for inspection at the Company's registered office and will be available at the Annual General Meeting.

The appointment of any new Director will be made on the basis of assessing the candidate's merits, measuring his or her skills and experience against the criteria identified by the Board as being desirable to complement

Corporate Governance Statement continued

the composition and qualification of the Board. The Board will take gender and other diversity elements into consideration when evaluating the skills, knowledge and experience necessary to fill any Board vacancy, in accordance with the Board's Diversity Policy. The Board has established the following measurable objectives for achieving diversity on the Board:

• all Board appointments will be made on merit, in the context of the skills, knowledge and experience that are needed for the Board to be effective;
• long lists of potential non-executive directors should include diverse candidates of appropriate merit; and
• only executive search firms who have signed up to the voluntary Code of Conduct on gender diversity and best practice will be engaged.

The policy is reviewed on an annual basis.

The Board, or the Investment Manager upon request of the Board, shall offer induction training to new Directors about the Company, its key service providers, the Director's duties and obligations and other matters as may be relevant from time to time.

Board Responsibilities and Relationship with the Investment Manager

The main roles of the Board are to create value for shareholders, provide leadership to the Company and approve the Company's strategic objectives. Specific responsibilities in relation to investments and the Investment Manager include: determining the Company's investment policy and strategy; determining the Company's gearing policy; monitoring the controls of the Investment Manager, and reviewing the investment activity, performance and contractual arrangements with the Investment Manager. The Board is also responsible for maintaining proper internal controls and monitoring shareholders' opinions and engaging with them effectively. The Board has adopted a schedule of matters reserved for decision by the Board reflecting the above responsibilities and reviews this schedule regularly.

The Company's day-to-day functions have been sub-contracted to a number of service providers, each engaged under separate legal agreements. The management of the Company's assets has been delegated to the Investment Manager, Miton Trust Managers Limited. The Investment Manager has discretion to manage the Company's assets in accordance with the Company's investment policy, subject to the overall control and supervision of the Directors. The Investment Manager has also been appointed as the Company's AIFM for the purposes of the Alternative Investment Fund Manager Directive ("AIFMD").

With the Company's agreement, the Investment Manager has delegated the investment management activities to Miton Asset Management Limited. Both the Investment Manager and Miton Asset Management Limited are subsidiaries of Miton Group plc, an AIM-quoted asset management firm.

Chairman and Senior Independent Director

The Chairman, Andy Pomfret, is responsible for leadership of the Board and ensuring its effectiveness. The Chairman sets the Board's agenda, ensuring a particular focus on the overall strategy of the Company, and allows adequate time for discussion of all agenda items. Andy Pomfret is deemed by his fellow Board members (who are all independent themselves) to be independent and to have no conflicting relationships, in accordance with the criteria set out in the AIC Code.

Peter Dicks, Chairman of the Audit and Management Engagement Committee, has been appointed by the Board as the Senior Independent Director of the Company. He provides a channel for any shareholder concerns regarding the Chairman and takes the lead in the annual evaluation of the Chairman by the independent Directors.

Board Operation

The Board holds regular Board meetings at least four times a year, with additional meetings arranged as necessary. The table below sets out the attendance record of individual Directors at the scheduled Board and Committee meetings held during the year ended 30 April 2019.

		Scheduled Board meetings		Scheduled Audit and Management Engagement Committee meetings
	Number entitled to attend	Number attended	Number entitled to attend	Number attended
Andy Pomfret	4	4	2	2
Peter Dicks	4	4	2	2
Jan Etherden	4	4	2	2
Ashe Windham	4	4	2	2

At each scheduled Board meeting, the Chairman follows a formal agenda, circulated to the Directors in advance by the Secretary. The Secretary and Investment Manager regularly provide the Board with relevant financial information, briefing notes and papers in relation to changes in the Company's economic and financial environment, statutory and regulatory changes and corporate governance best practice. At each Board meeting, one or more representatives from the Investment Manager are in attendance to present verbal and written reports covering the Company's activity, portfolio and investment performance over the preceding period. Communication between the Board and the Investment Manager and other service providers is maintained between formal meetings.

The Board endeavours to provide support, robust and objective challenge and a different perspective to the Investment Manager, to help optimise the performance of the Company. The Board and the Investment Manager operate in a fully co-operative and open environment. The Board has formalised arrangements under which the Directors, in the furtherance of their duties, may take independent professional advice at the Company's expense.

As permitted by its Articles of Association and subject to the provisions of UK legislation, the Company has granted a third-party indemnity to each Director in respect of liabilities which they may sustain or incur in connection with the discharge of their duties as a Director. The indemnity also covers reasonable legal and other defence expenses, although these would have to be repaid in the event of a conviction. Deeds of Indemnity in favour of each of the Directors were executed on behalf of the Company on their appointment and remain in force as at the date of signing of this Report. There are no other qualifying third party indemnity provisions in place. In addition, Directors are covered by Directors' and Officers' liability insurance.

Board Committee

The Board has established an Audit and Management Engagement Committee the Terms of Reference (the "Committee") of which are available on the Company's website at www.mitongroup.com/micro.

Given the size of the Board, the Directors do not consider it appropriate to establish a nomination committee or remuneration committee. The functions that would normally be carried out by these committees are dealt with by the full Board.

The report of the Committee is set out on pages 35 to 37.

Board Evaluation

The Directors recognise the value of continually monitoring and enhancing the performance of the Board and view the regular evaluation of the Board, its Committee and individual Directors as a means of obtaining valuable feedback on areas for development.

In the year ended 30 April 2019, the Board opted to undertake an internal performance evaluation by way of questionnaires, which addressed the areas indicated by the AIC Code. In particular, the questionnaires were designed to assess the qualifications, independence, composition, and performance of the Board, and the performance of the Board's Committee, the Chairman and individual Directors. The questionnaires were also intended to assess whether the focus of Board meetings and the information provided were appropriate and identify any training and development needs for individual Directors.

Corporate Governance Statement continued

The evaluation process and analysis of the results were carried out post year end and conducted by the Chairman. Peter Dicks, as the Senior Independent Director, led the appraisal of the Chairman. The results of the exercise revealed no significant concerns amongst the Directors about the effectiveness of the Board.

Independence of Directors

In accordance with the AIC Code, the Board evaluation included a review of the independence of each individual Director and the Board as a whole.

Mr Dicks holds less than 0.5% of the issued share capital of Miton Group plc, the parent company of the Investment Manager. The Board considers the holding to be immaterial and of no impact to his independence.

None of the Directors have any significant shareholdings in companies where the Company has a notifiable stake or a holding which amounts to more than 1% of the Company's portfolio.

Up until 18 June 2018, Mr Pomfret and Mr Dicks shared a common directorship in ICG Enterprise Trust plc. The Directors outside of this cross directorship considered the impact of the relationship and were satisfied that each Director took an impartial and objective approach in undertaking their duties as a Director of the Company.

After consideration of the above factors, the Board is of the view that all the Directors met, and continue to meet, the independence criteria set out in the AIC Code.

Election/Re-election of Directors

Under the Company's Articles of Association and in accordance with the AIC Code, Directors are required to retire at the first Annual General Meeting following their appointment and offer themselves for election. Thereafter, Directors are required to retire from office and stand for re-election at intervals of not more than three years.

The AIC Code and UK Code recommend that Directors of FTSE 350 companies should be subject to annual re-election by shareholders. The Company recognises this to be good corporate governance and has therefore chosen to follow this practice, despite not being a FTSE 350 company.

The maximum length of service for any Director will be nine years from first election.

Conflicts of Interest

Under the Articles of Association of the Company, the Board must consider and, if it sees fit, may authorise situations where a Director has an interest that conflicts, or may possibly conflict, with the interests of the Company. The Board has established a formal system to consider authorising such conflicts, whereby the Directors who have no interest in the matter decide whether to authorise the conflict and any conditions to be attached to such authorisations.

Stewardship Responsibilities and the use of Voting Rights

As an externally-managed investment company, the majority of the responsibilities of the Board in relation to engagement with investee companies are delegated to the Investment Manager. The Board retains oversight of the investor stewardship exercised on its behalf by reviewing the Investment Manager's stewardship and voting policies, considering the regular updates on engagement provided by the Investment Manager and holding the Investment Manager to account. The Investment Manager has published a statement of compliance with the UK Stewardship Code, which is available on its website at www.mitongroup.com. The Board reviews this statement of compliance annually.

Company Secretary

The Board has direct access to the advice and services of the Secretary, Link Company Matters Limited. The Secretary is responsible for ensuring that Board and Committee procedures are followed and that information and reports are delivered to the Board on a timely basis. The Secretary is also responsible for ensuring that applicable regulations are complied with and the statutory obligations of the Company are met.

Internal Controls and Risk Management Systems

The Board has overall responsibility for establishing and maintaining the Company's systems of internal controls and risk management and the reliability of the financial reporting process and for reviewing their effectiveness.

32

The Directors have reviewed and considered the guidance supplied by the FRC on Risk Management, Internal Control, and Related Finance and Business Reporting and an ongoing process has been established for identifying, evaluating and managing the risks faced by the Company. The Board maintains a risk matrix, which consists of a detailed risk and internal control assessment and provides the basis for the Committee and the Board to regularly monitor the effective operation of the controls and to update the risk matrix when new risks are identified. This process, together with key procedures established with a view to providing effective financial control, was in place during the year under review and was in place at the date of the signing of this Report. The risk management process and Company's systems of internal control are designed to assist the Board in making better, more informed decisions with a view to creating and protecting shareholder value.

The internal control systems are designed to ensure that proper accounting records are maintained, that the financial information on which business decisions are made and which are issued for publication is reliable and that the assets of the Company are safeguarded. The purpose of risk management is to manage rather than eliminate the risk of failure in achieving the Company's objectives and involves Directors exercising judgement. It should be recognised that such systems can only provide reasonable, not absolute, assurance against material misstatement or loss.

Internal Controls Assessment

Regular risk assessments and reviews of internal controls will be undertaken in the context of the Company's overall investment objective. The Board, through the Committee, has identified risk management controls in four key areas: corporate strategy; compliance with laws and regulations and disclosure; relationships with service providers; and investment and business activities. In arriving at its judgement of what risks the Company faces, the Board has considered the Company's operations in the light of the following factors:

• the nature and extent of risks which it regards as acceptable for the Company to bear within its overall business objective;
• the threat of such risks becoming reality;
• the Company's ability to reduce the incidence and impact of risk on its performance; and
• the cost to the Company and benefits related to the Company and third parties operating the relevant controls.

The risk matrix, established and maintained by the Company, is structured so as to allow the Board to assess the risks against how those risks are managed. The risks are assessed on the basis of the likelihood of occurrence, the impact on the business if they were to occur and the effectiveness of the controls in place to mitigate them. The risk register is reviewed at meetings of the Committee and at other times as necessary.

The Board also reviews information provided by the Investment Manager and the Secretary on a regular basis.

Most functions for the day-to-day management of the Company are sub-contracted, and the Board therefore obtains regular assurances and information from key third party suppliers, including the Investment Manager, the Administrator and the Depositary, regarding the internal systems and controls operated in their organisations. In addition, each of the third parties is requested to provide a copy of its report on internal controls each year, which is reviewed by the Committee.

The Board has carried out a review of the effectiveness of the risk management and systems of internal control as they have operated over the year under review and up to the date of approval of this Report. No significant failings or weaknesses were identified from that review and there were no matters arising which required further investigation.

Shareholder Relations

The Board is committed to ensuring there is open and effective communication with the Company's shareholders and that the Directors understand the views of major shareholders on matters such as governance, strategy and performance. Accordingly, both the Board and the Investment Manager give a high priority to shareholder engagement and the Chairman and other Directors are available to enter into dialogue with shareholders. The Investment Manager and the Company's Stockbroker,

Corporate Governance Statement continued

Peel Hunt LLP, maintain a regular dialogue with major investors and provide the Board with regular reports on feedback from shareholders.

All shareholders are encouraged to attend and vote at the Company's AGM, to be held on 11 September 2019 at 11.00am. The Board and the Investment Manager will be available during the meeting to discuss issues affecting the Company and answer any questions. Shareholders wishing to communicate directly with the Board or to lodge a question in advance of the AGM should contact the Secretary at the address on page 87. The Company always responds to letters from shareholders.

If you would like to vote on the resolutions to be proposed at the AGM but will not be attending the AGM in person and you hold your shares in certificated form, you may appoint a proxy electronically at www.signalshares.com by following the instructions on that website or, if you hold your shares in CREST, you may appoint a proxy via the CREST system. Notice of your appointment of a proxy should reach the Company's registrar, Link Asset Services (the "Registrar") by no later than 11.00am on 9 September 2019. If you hold your shares through a nominee service, please contact the nominee service provider regarding the process for appointing a proxy. Further details and instructions regarding the appointment of a proxy are set out in the "Administrative Notes in connection with the Annual General Meeting" on pages 80 to 83.

The Annual and Half-Yearly Reports of the Company are prepared by the Board and its advisers to present a full and readily understandable review of the Company's performance. Copies are released to the London Stock Exchange, and the Annual Report is despatched to shareholders by mail. They are also available from the Secretary or on the Company's website, www.mitongroup.com/micro.

Audit and Management Engagement Committee Report

I am pleased to present the Audit and Management Engagement Committee (the "Committee") Report for the financial year ended 30 April 2019.

Composition and Operation of the Committee

Given the small size of the Board, it is deemed both proportionate and practical for all Directors to be on the Committee, including the Chairman of the Company. The Board considers that the members of the Committee have the requisite skills and experience, relevant to the sector, as a result of their involvement in financial services to fulfil the responsibilities of the Committee.

Under its terms of reference, the Committee is required to meet twice a year to discuss the publication of the Company's financial statements. Additional meetings will be convened as necessary.

Role of the Committee

The primary responsibilities of the Committee are:

• to monitor the integrity of the financial statements of the Company and review the content of the Company's half-year and annual reports and any formal announcements regarding its financial performance, and report to the Board on any significant financial reporting issues and areas of judgement contained within them;
• to advise the Board on whether the content of the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy;
• to monitor and keep under review the adequacy and effectiveness of the Company's internal financial controls and risk management and internal control systems;
• to make recommendations to the Board in relation to the selection, appointment, re-appointment or removal of the external auditor, following a review of their independence, objectivity, qualifications, expertise and resources;
• to approve the remuneration and terms of engagement of the external auditor for audit and non-audit services;
• to review the scope, findings and effectiveness of the external audit process;
• to consider the terms of appointment of the Investment Manager, to annually review the performance of the Investment Manager's obligations under the Investment Management Agreement and to consider any variation to the terms of that agreement, and report its findings to the Board; and
• to review annually the performance of other key third party service providers.

The Committee has direct access to the Company's external auditor, Ernst & Young LLP, and provides a forum through which the external auditor reports to the Board. Representatives of the external auditor attend meetings of the Committee at least annually.

Principal Activities of the Committee during the Year

The Committee met twice during the year under review and during those meetings it has:

• reviewed the Company's Annual Report for the financial year ended 30 April 2018 and the related results announcements and the Half-Yearly Report to 31 October 2018;
• received and discussed with the Auditor their findings from the audit of the financial year ended 30 April 2018 and the effectiveness of the external audit process;
• reviewed the effectiveness of the risk management systems and internal controls of the Company and related reports from the Investment Manager and other third party providers;
• agreed the Auditor's fees;
• conducted an annual appraisal of the Investment Manager's performance against the Investment Management Agreement, and made a recommendation to the Board about the continuing appointment of the Investment Manager;
• monitored compliance by providers of other services to the Company with the terms of their respective agreements; and
• conducted a legal review of all service provider agreements during the year following a review by the Company's Legal Advisers.

Audit and Management Engagement Committee Report continued

The Committee also met once post the year end to review the Company's Annual Report for the year ended 30 April 2019.

Other matters reviewed by the Committee include:

• the Committee's terms of reference;
• the Company's risk matrix;
• the Company's policy on the supply of non-audit services by the external auditor; and
• the whistleblowing policy of Miton Asset Management Limited.

The Committee receives a report on internal control and compliance from the Investment Manager's Compliance Officer on a six-monthly basis and discusses this with the Investment Manager. The Investment Manager has in place a compliance monitoring plan for testing of controls as an alternative to establishing a separate internal audit function.

The Committee monitors and reviews the effectiveness of the external audit process for the Annual Report, including a detailed review of the audit plan and the audit results report, and makes recommendations to the Board on the re-appointment, remuneration and terms of engagement of the Auditor. Any concerns with the effectiveness of the external audit process would be reported to the Board. No concerns were raised in respect of the year ended 30 April 2019.

Audit Fees and Non-Audit Services

An audit fee of £24,000 (exclusive of VAT) has been agreed in respect of the audit for the financial year ended 30 April 2019 (2018: £23,500).

No non-audit services were provided in the financial year ended 30 April 2019 (2018: £nil).

The Committee has a policy on the engagement of the Auditor to supply non-audit services. All requests for services to be provided by the external auditor are submitted to the Committee in order to ensure that the scope and nature of the proposed work does not affect the Auditor's independence or objectivity.

Independence and Objectivity of the Auditor

The Committee has acknowledged that Ernst & Young LLP is also auditor to the Investment Manager and another investment company managed by the Investment Manager. The Committee is satisfied that by assigning different audit partners and audit teams to each of the Company and the Investment Manager, Ernst & Young LLP remains independent and objective. Following its review of the independence and objectivity of the Auditor, the Committee has been reassured that no conflicts have arisen during the year. However, the Committee will continue to monitor the position.

Appointment of the Auditor

Following consideration of the performance of the Auditor, the service provided during the year and a review of their independence and objectivity, the Committee has recommended to the Board the re-appointment of Ernst & Young LLP as Auditor to the Company at the Company's forthcoming AGM.

Ernst & Young LLP has been Auditor to the Company and Ashley Coups has been the audit partner since the Company's launch in April 2015. Rotation of the audit partner will take place every five years in accordance with the FRC revised Ethical Standard 2016. Under the FRC transitional arrangements, the Company is required to re-tender, at the latest, by 2025. The Company intends to re-tender within the timeframe set by the FRC. Due to the short period of time since the Auditor was appointed, it is not considered appropriate to review the Auditor's succession at this point in time. The Committee will regularly consider the level of fees and the independence and objectivity of the Auditor.

Significant Audit Issues considered by the Committee

Following discussion with the Investment Manager and Auditor, the Committee determined that the key risks in relation to the Company's financial statements and how they were addressed were:

Risk	Mitigation
Incomplete or inaccurate revenue recognition
The recognition of income is undertaken in accordance with the stated accounting policies of the Company.	The Directors review the Company's income, revenue forecasts and the sensitivity of the revenue account to falls in income. Particular attention is paid to any special dividends that the Company may receive.
The valuation and ownership of the investment portfolio
The Company's investments have been valued in accordance with the accounting policies, as disclosed in note 1 to the financial statements. The majority of investments are in quoted securities in active markets, are considered to be liquid and have been categorised as Level 1 and 2 within the IFRS 13 fair value hierarchy. These are disclosed in note 13 to the financial statements.	The portfolio holdings and their pricing is reviewed and verified by the Investment Manager on a regular basis and management accounts, including a full portfolio listing, are prepared for each Board meeting. The Company uses the services of an independent Depositary (The Bank of New York Mellon (International) Limited) to hold the assets of the Company. The Depositary checks the consistency of its records with those of the Manager on a monthly basis and reports to the Board on an annual basis.
Maintenance of investment trust status
There is a risk of failure to maintain investment trust status in accordance with s1158/1159 which would have a significant impact on the Company as a result of the potential capital gains tax payable.	The Investment Manager and Administrator have reported to the Committee to confirm continuing compliance with the requirements for maintaining investment trust status.

Following consideration of the above matters and its detailed review of this Report, the Committee is of the opinion that the Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Peter Dicks

Audit and Management Engagement Committee Chairman 19 July 2019

Directors' Remuneration Report

The Board has prepared this report in accordance with the requirements of the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Ordinary resolutions for the approval of the Directors' Remuneration Report and the Directors' Remuneration Policy will be put to shareholders at the forthcoming AGM.

The law requires the Company's Auditor to audit certain of the disclosures provided. Where disclosures have been audited, they are indicated as such. The Auditor's opinion is included in the Independent Auditor's Report on pages 43 to 48.

Statement from the Chairman

Given the size of the Board, it is not considered appropriate for the Company to have a separate remuneration committee and the functions of this committee are carried out by the Board as a whole. The Board consists entirely of independent non-executive Directors and the Company has no employees. We have not, therefore, reported on those aspects of remuneration that relate to executive Directors.

Directors' fees for the year ended 30 April 2019 were at a level of £35,000 per annum for the Chairman, £30,000 per annum for the Senior Independent Director and Audit and Management Engagement Committee Chairman and £25,000 per annum for the other Directors. Following a review of Director's fees, it is proposed that the Directors' Remuneration Policy is amended to allow for annual increases in line with the Consumer Price Index.

Directors' Remuneration Policy

A resolution to approve this Remuneration Policy, which was last approved by shareholders at the Company's first AGM held on 29 September 2016, will be proposed at the forthcoming AGM. If passed, the policy provisions set out below will remain in place until they are next put to shareholders for renewal of that approval, which must be at intervals of not more than three years, or the Remuneration Policy is varied, in which event shareholder approval for the new Remuneration Policy will be sought.

The level of remuneration has been set in order to attract individuals of a calibre appropriate to the future development of the Company and to reflect the specific circumstances of the Company, the duties and responsibilities of the Directors and the value and amount of time committed to the Company's affairs.

The fees for the Directors are determined within the limits (not to exceed £500,000 per year in aggregate) set out in the Company's Articles of Association, or any greater sum that may be determined by an ordinary resolution of the Company. The Chairman does not participate in any discussions relating to his own fee, which is determined by the independent Directors. Directors are not eligible for bonuses, share options or long-term incentive schemes or other performance-related benefits as the Board does not believe that this is appropriate for non-executive Directors.

The fees for the Directors will be increased annually, effective from the first day of the Company's financial year, by the rate of the Consumer Price Index prevailing at that time.

Under the Company's Articles of Association, if any Director is called upon to perform extra or special services of any kind, he shall be entitled to receive such sum as the Board may think fit for expenses, and also such remuneration as the Board may think fit, either as a fixed sum or as a percentage of profits or otherwise, and such remuneration may, as the Board shall determine, be either in addition to or in substitution for any other remuneration he may be entitled to receive.

Directors are entitled to be paid all reasonable expenses properly incurred in attending Board, Committee or shareholder meetings or otherwise in or with a view to the performance of their duties. There are no amounts set aside or accrued by the Company to provide pension, retirement or similar benefits to the Directors.

38

Component	Director	Rate as at 1 May 2018	Rate as at 1 May 20195	Purpose of Remuneration
Annual Fee	Chairman	£35,000	£35,665	Commitment as Chairman1
Annual Fee	Non-executive Directors	£25,000	£25,475	Commitment as a non-executive Director2
Additional Fee	Senior Independent Director and Audit and Management Engagement Committee Chairman	£5,000	£5,095	For additional responsibilities and time commitment3
Additional Fee	All Directors	N/A	N/A	For extra or special services performed in their role as a Director4
Expenses	All Directors	N/A	N/A	Reimbursement of expenses incurred in the performance of duties as a Director

1 The Company's policy is for the Chairman of the Board to be paid a higher fee that the other Directors to reflect the more onerous role

2 The Company's Articles of Association limit the total aggregate annual fees that can be paid to £500,000

3 The Company's policy is for the Senior Independent Director and Chairman of the Audit Management Engagement Committee to be paid a higher fee that other Directors to reflect the more onerous role

4 Additional fees would only be paid in exceptional circumstances in relation to the performance of extra or special services

5 Fees were increased by the rate of the Consumer Price Index prevailing on 1 May 2019, being 1.9%

Fees for any new Director appointed will be on the above basis. Fees payable in respect of subsequent periods will be determined following an annual review. Any views expressed by shareholders on the fees being paid to Directors would be taken into consideration by the Board.

It is the Board's policy that Directors do not have service contracts, but Directors are provided with a letter of appointment as a non-executive Director. The terms of their appointment provide that Directors shall retire and be subject to election at the first Annual General Meeting after their appointment. Compensation will not be made upon early termination of appointment.

Directors' Remuneration Report

Directors' Fees for the Year (audited)

The Directors who served in the year received the following emoluments:

	Year ended 30 April 2019			Year ended 30 April 2018
	Fees £	Expenses £	Total £	Fees £	Expenses £	Total £
Andrew Pomfret (Chairman)	35,000	–	35,000	35,000	200	35,200
Peter Dicks	30,000	–	30,000	30,000	–	30,000
Jan Etherden	25,000	–	25,000	25,000	–	25,000
Ashe Windham	25,000	–	25,000	25,000	–	25,000
	115,000	–	115,000	115,000	200	115,200

Directors' Remuneration Report continued

Company Performance

The Company does not have a specific benchmark against which performance is measured. The graph below compares the total return (assuming all dividends are reinvested) to holders of Ordinary shares since they were first admitted to the Official List of the UK Listing Authority, compared to the total shareholder return of the FTSE AIM All-Share Index, which is the closest broad index against which to measure the Company's performance.

It is noteworthy that some of the best performing stocks on the AIM exchange have been growth stocks, often with market capitalisations much larger than the investment universe of this Company. This trend may continue for now, but in the past it has been the smallest stocks that have outperformed, especially those with undemanding valuations at purchase. Further explanation of the recent market trends is outlined in the Shareholders' Questions and Answers section of this Report on pages 10 to 14.

Relative Importance of Spend on Pay

The table below shows the proportion of the Company's income spent on pay.

	2019 £'000	2018 £'000
Dividends paid to Ordinary shareholders in the year	550	616
Management fees paid in the year	931	1,081
Total remuneration paid to Directors	115	115

Directors' Beneficial and Family Interests (audited)

There is no requirement under the Company's Articles of Association or the terms of their appointment for Directors to hold shares in the Company.

The interests of the Directors and their families in the Ordinary shares of the Company as at 30 April 2019 are set out below:

	Number of Ordinary shares	Number of Ordinary shares
	as at 30 April 2019	as at 30 April 2018
Andrew Pomfret (Chairman)	148,150	148,150
Peter Dicks	278,150	278,150
Jan Etherden	146,300	146,300
Ashe Windham	140,000	140,000

There have been no changes to the Directors' share interests between 30 April 2019 and the date of this Report.

Voting at the Annual General Meeting

The Directors' Remuneration Report for the year ended 30 April 2018 and the Directors' Remuneration Policy were approved by shareholders at the AGMs held on 12 September 2018 and 29 September 2016 respectively. The votes cast by proxy were as follows:

		Directors' Remuneration Report		Directors' Remuneration Policy
	Number of votes	% of votes cast	Number of votes	% of votes cast
For	41,599,357	99.75	43,024,890	99.99
Against	102,232	0.25	3,926	0.01
Total votes cast	41,701,589	100.00	43,028,816	100.00
Number of votes withheld	8,000		6,003,926

Approval

The Directors' Remuneration Report was approved by the Board on 19 July 2019.

On behalf of the Board

Andy Pomfret

Chairman 19 July 2019

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the Company's financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Company's financial statements, the Directors are required to:

• select suitable accounting policies in accordance with IAS 8: 'Accounting Policies, Changes in Accounting Estimates and Errors' and then apply them consistently;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance;
• state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and
• make judgements and estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Company's financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and for ensuring that the Annual Report includes the information required by the Listing Rules of the Financial Conduct Authority.

The financial statements are published on the Company's website, www.mitongroup.com/micro, which is maintained on behalf of the Company by the Investment Manager. Under the Management Agreement, the Investment Manager has agreed to maintain, host, manage and operate the Company's website and to ensure that it is accurate and up-to-date and operated in accordance with applicable law. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom covering the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

We confirm that to the best of our knowledge:

• the Company's financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.

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

On behalf of the Board

Andy Pomfret Chairman 19 July 2019

Independent Auditor's Report

to the members of Miton UK Microcap Trust plc

Opinion

We have audited the financial statements of Miton UK MicroCap Trust plc (the "Company") for the year ended 30 April 2019 which comprise the Income Statement, the Statement of Changes in Equity, Balance Sheet, the Statement of Cash Flows and the related notes 1 to 21, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ("IFRS") as adopted by the European Union.

In our opinion, the financial statements:

• give a true and fair view of the Company's affairs as at 30 April 2019 and of its loss for the year then ended;
• have been properly prepared in accordance with IFRS as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under those standards are further described in the 'Auditor's responsibilities for the audit of the financial statements' section of our report below. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to principal risks, going concern and viability statement

We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to:

• the disclosures in the annual report set out on pages 19 and 20 that describe the principal risks and explain how they are being managed or mitigated;
• the directors' confirmation set out on page 19 in the annual report that they have carried out a robust assessment of the principal risks facing the entity,

including those that would threaten its business model, future performance, solvency or liquidity;

• the directors' statement set out on page 25 in the annual report about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
• whether the directors' statement in relation to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
• the directors' explanation set out on pages 25 and 26 in the annual report as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Overview of our audit approach

Key audit matters	Incomplete or inaccurate revenue recognition, including classification of items as revenue or capital in the income statement
	Incorrect valuation and defective title to the investment portfolio
Materiality	Overall materiality of £0.85m which represents 1% of equity shareholders' funds

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Independent Auditor's Report continued

Risk Our response to the risk

Incomplete or inaccurate revenue recognition, including classification of items as revenue or capital in the income statement (per the Audit and Management Engagement Committee Report set out on page 37 and the accounting policy set out on page 56).

The income received for the year to 30 April 2019 was £1.09m (2018: £1.27m), consisting primarily of dividend income from listed investments.

The income receivable by the Company during the year directly affects the Company's revenue return. There is a risk of incomplete or inaccurate recognition of income through the failure to recognise proper income entitlements or applying appropriate accounting treatment.

In addition to the above, the Directors are required to exercise judgment in determining whether income receivable in the form of special dividends should be classified as 'revenue' or 'capital'.

Two special dividends amounting to £154k were received (2018: nil), both of which were treated as revenue.

We have performed the following procedures:

We obtained an understanding of the Investment Manager's and Administrator's processes and controls surrounding revenue recognition and classification of special dividends by reviewing their internal controls reports and performing our walkthrough procedures to evaluate the design and implementation of controls.

We agreed a sample of dividends received from the income report to the corresponding announcement made by the investee company. We recalculated the dividend amount receivable using exchange rates obtained from an independent data vendor and confirmed that the cash received as shown on bank statements was consistent with the recalculated amount.

We agreed a sample of investee company dividend announcements from an independent data vendor to the income recorded by the Company to test completeness of the income recorded.

For all dividends accrued at the year end, we reviewed the investee company announcements to assess whether the obligation arose prior to 30 April 2019. We agreed the dividend rate to corresponding announcements made by the investee company. We recalculated the dividend amount receivable and confirmed this was consistent with cash received as shown on post year end bank statements, where paid. We reviewed the income report and the acquisition and disposal report produced by the Administrator to identify special dividends received or accrued in excess of our revenue testing threshold.

For the two special dividends received, we reviewed the underlying circumstances and motives for the payments to verify the classification of both special dividends as revenue.

We tested for the risk of management override by agreeing all manual journal entries posted to the income account to the income report and corroborating their business purpose and rationale.

Key observations communicated to the Audit and Management Engagement Committee

The results of our procedures are:

Based on the work performed we had no matters to report to the Audit and Management Engagement Committee.

Risk Our response to the risk

Incorrect valuation and defective title to the investment portfolio (as described on page 37 in the Report of the Audit and Management Engagement Committee and as per the accounting policy set out on pages 54 and 55).

The valuation of the investment portfolio at 30 April 2019 was £81.00m (2018: £103.00m) consisting primarily of listed equities with an aggregate value of £78.50m (2018: £100.46m) and one listed put option with a value of £0.69m (2018: nil). The Company also held ten unlisted investments ('level 3 securities') with an aggregate value of £1.81m (2018: £2.04m).

The valuation of the assets held in the investment portfolio is the key driver of the Company's net asset value and total return. Incorrect investment pricing, or a failure to maintain proper legal title of the investments held by the Company could have a significant impact on the portfolio valuation and the return generated for shareholders.

The fair value of listed investments is determined by reference to stock exchange quoted market bid prices at the close of business on the year-end date.

The fair value of unlisted investments is determined by the directors following a detailed review and appropriate challenge of the valuations proposed by the Investment Manager.

We performed the following procedures: For all listed investments in the portfolio, we compared the market values and exchange rates applied to an independent pricing vendor.

For level 3 securities, we assessed the appropriateness of data inputs and assumptions used to support the valuations.

We agreed the Company's investments to the independent confirmation received from the Company's Custodian and Depositary as at 30 April 2019.

We agreed a sample of key transaction details (e.g. units, trade date, cost and proceeds) of purchases and sales recorded by the administrator to bank statements.

Key observations communicated to the Audit and Management Engagement Committee

The results of our procedures are:

We have no issues to communicate with respect to our procedures performed over the risk of incorrect valuation and defective title to the investment portfolio.

There have been no changes to the areas of key focus raised in the above risk table from the prior year.

Independent Auditor's Report continued

An overview of the scope of our audit Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the Company. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of the Company and effectiveness of controls, including controls and changes in the business environment when assessing the level of work to be performed.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Company to be £0.85m (2018: £1.18m) which is 1% of equity shareholders' funds. We believe that equity shareholders' funds provides us with materiality aligned to the key measurement of the Company's performance.

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Company's overall control environment, our judgement was that performance materiality was 75% of our planning materiality, namely £0.64m (2018: £0.88m). We have set performance materiality at this percentage due to our past experience of the audit that indicates a lower risk of misstatements, both corrected and uncorrected.

Given the importance of the distinction between revenue and capital for the Company, we have also applied a separate testing threshold for the revenue column of the

Income Statement of £42.8k (2018: £24.3k), being the greater of 5% of net revenue return on ordinary activities before taxation and our reporting threshold which is set at 5% of planning materiality.

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit and Management Engagement Committee that we would report to them all uncorrected audit differences in excess of £42.8k (2018: £59.3k) which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

• Fair, balanced and understandable set out on page 42 – the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
• Audit and Management Engagement Committee reporting set out on pages 35 to 37 – the section describing the work of the audit and management engagement committee does not appropriately address matters communicated by us to the audit and management engagement committee; or
• Directors' statement of compliance with the UK Corporate Governance Code set out on page 29 – the parts of the directors' statement required under the Listing Rules relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and report of the directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and report of the directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
• the financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 42, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

Independent Auditor's Report continued

with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.

Our approach was as follows:

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant are IFRS, the Companies Act 2006, AIC SORP, the Listing Rules, the UK Corporate Governance Code and Section 1158 of the Corporation Tax Act 2010.
• We understood how the Company is complying with those frameworks through discussions with the Audit and Management Engagement Committee and Company Secretary and review of the Company's documented policies and procedures.
• We assessed the susceptibility of the Company's financial statements to material misstatement, including how fraud might occur by considering the key risks impacting the financial statements. We identified a fraud risk with respect to the incomplete or inaccurate income recognition through incorrect classification of special dividends. Further discussion of our approach is set out in the section on key audit matters above.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved review of the reporting to the directors with respect to the application

of the documented policies and procedures and review of the financial statements to ensure compliance with the reporting requirements of the Company.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Other matters we are required to address

Following the recommendation of the Audit and Management Engagement Committee, we were appointed by the Company with effect from 30 April 2015 to audit the financial statements of the Company for the year ended 30 April 2016 and subsequent financial periods.

• The period of total uninterrupted engagement is four years, covering the years ended 30 April 2016 to 30 April 2019.
• Non-audit services prohibited by the FRC's Ethical Standard were not provided to the Company and we remain independent of the Company in conducting the audit.
• The audit opinion is consistent with the additional report to the Audit and Management Engagement Committee.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Ashley Coups

Senior statutory auditor for and on behalf of Ernst & Young LLP Statutory Auditor London 19 July 2019

Notes:

^1. The maintenance and integrity of the Miton UK MicroCap Investment Trust plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.

^2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Income Statement

of the Company for the year ended 30 April 2019

		Year ended 30 April 2019			Year ended 30 April 2018
	Notes	Revenue return £000	Capital return £000	Total £000	Revenue return £000	Capital return £000	Total £000
(Losses)/gains on investments held at fair value through profit or loss	12	–	(18,995)	(18,995)	–	9,644	9,644
Foreign exchange losses		–	(1)	(1)	–	(14)	(14)
Losses on derivatives held at fair value through profit or loss	14	–	(241)	(241)	–	–	–
Income	2	1,087	–	1,087	1,270	–	1,270
Management fee	7	(233)	(698)	(931)	(270)	(811)	(1,081)
Other expenses	8	(533)	–	(533)	(511)	–	(511)
Return on ordinary activities before finance costs and taxation		321	(19,935)	(19,614)	489	8,819	9,308
Finance costs	9	–	(47)	(47)	(3)	(7)	(10)
Return on ordinary activities before taxation		321	(19,982)	(19,661)	486	8,812	9,298
Taxation	10	(14)	–	(14)	(22)	–	(22)
Return on ordinary activities after taxation		307	(19,982)	(19,675)	464	8,812	9,276

Return on ordinary activities for the year analysed as follows:
Attributable to Ordinary shares		307	(19,982)	(19,675)	464	8,812	9,276
Return per Ordinary share (pence)	3	0.20	(13.03)	(12.83)	0.27	5.15	5.42

The total column of this statement is the Income Statement of the Company prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union. The supplementary revenue return and capital return columns are presented in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ("AIC SORP").

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.

There is no other comprehensive income and, therefore, the return on ordinary activities after taxation is both the profit and the total comprehensive income.

Statement of Changes in Equity

of the Company for the year ended 30 April 2019

For the year ended 30 April 2019	Notes	Share capital £000	Share premium account £000	Capital redemption reserve £000	Capital reserve £000	Retained earnings £000	Total £000
As at 30 April 2018		221	86,986	2	30,670	786	118,665
Total comprehensive income:
Return on ordinary activities after taxation		–	–	–	(19,982)	307	(19,675)
Transactions with shareholders recorded directly to equity:
Redemption of Ordinary shares	4	(18)	–	18	(12,761)	–	(12,761)
Equity dividends paid	11	–	–	–	–	(550)	(550)
As at 30 April 2019		203	86,986	20	(2,073)	543	85,679

For the year ended 30 April 2018	Notes	Share capital £000	Share premium account £000	Capital redemption reserve £000	Capital reserve £000	Retained earnings £000	Total £000
As at 30 April 2017		223	86,986	–	23,099	938	111,246
Total comprehensive income:
Return on ordinary activities after taxation		–	–	–	8,812	464	9,276
Transactions with shareholders recorded directly to equity:
Redemption of Ordinary shares	4	(2)	–	2	(1,241)	–	(1,241)
Equity dividends paid	11	–	–	–	–	(616)	(616)
As at 30 April 2018		221	86,986	2	30,670	786	118,665

The notes on pages 53 to 71 form part of these financial statements.

50

of the Company as at 30 April 2019

	Notes	2019 £000	2018 £000
Non-current assets:
Investments held at fair value through profit or loss	12	80,308	103,003
Current assets:
Derivative instruments	14	690	–
Trade and other receivables	15	108	1,241
Cash at bank and cash equivalents		4,784	14,595
		5,582	15,836
Liabilities:
Trade and other payables	16	211	174
Net current assets		5,371	15,662
Net assets		85,679	118,665
Capital and reserves
Share capital	4	203	221
Share premium account		86,986	86,986
Capital reserve		(2,073)	30,670
Capital redemption reserve		20	2
Revenue reserve		543	786
Shareholders' funds		85,679	118,665

		pence	pence
Net asset value per Ordinary share – basic and diluted	5	56.13	69.33

These financial statements were approved and authorised for issue by the Board of Miton UK MicroCap Trust plc on 19 July 2019 and were signed on its behalf by:

Andy Pomfret

Chairman 19 July 2019

Company No: 09511015

The notes on pages 53 to 71 form part of these financial statements.

Statement of Cash Flows

for the Company for the year ended 30 April 2019

	30 April 2019 £000	30 April 2018 £000
Operating activities:
Net (loss)/return before taxation	(19,661)	9,298
Loss/(gain) on investments held at fair value through profit or loss	19,236	(9,644)
Decrease in trade and other receivables	38	46
(Decrease)/increase in trade and other payables	(34)	9
Exchange losses on capital items	1	14
Exclude finance costs	47	10
Withholding tax paid	(14)	(22)
Net cash outflow from operating activities	(387)	(289)
Investing activities:
Purchase of investments	(27,511)	(24,235)
Sale of investments	32,371	37,764
Purchase of derivative instruments	(931)	–
Exchange loss on settlements	–	(7)
Net cash inflow from investing activities	3,929	13,522
Financing activities:
Redemption/repurchase of Ordinary shares	(12,761)	(1,241)
Equity dividends paid	(550)	(616)
Finance costs paid	(41)	(19)
Net cash outflow from financing activities	(13,352)	(1,876)
(Decrease)/increase in cash and cash equivalents	(9,810)	11,357
Reconciliation of net cash flow movement in funds:
Cash and cash equivalents at the start of the year	14,595	3,245
Net cash (outflow)/inflow from cash and cash equivalents	(9,810)	11,357
Exchange rate movements	(1)	(7)
Cash at the end of the year	4,784	14,595
	30 April 2019 £000	30 April 2018 £000
Cash (paid)/received during the year includes:
Dividends received	1,142	1,293
Interest received	–	3

The notes on pages 53 to 71 form part of these financial statements.

Notes to the Financial Statements

1. Accounting Policies

Miton UK MicroCap Trust plc is a company incorporated and registered in England and Wales. The principal activity of the Company is that of an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010.

The Company's financial statements for the year ended 30 April 2019 have been prepared in conformity with IFRS as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and as applied in accordance with the provisions of the Companies Act 2006. The annual financial statements have also been prepared in accordance with the AIC SORP for the financial statements of investment trust companies and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS.

Basis of Preparation

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement.

The financial statements are presented in Sterling, which is the Company's functional currency as the UK is the primary environment in which it operates, rounded to the nearest £'000, except where otherwise indicated.

Going Concern

The financial statements have been prepared on a going concern basis and on the basis that approval as an investment trust company will continue to be met.

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has the resources to continue in business for the foreseeable future, being a period of at least 12 months from the date these financial statements were approved. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company's financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on the going concern basis.

Segmental Reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company primarily invests in companies listed in the UK.

Accounting Developments

In the current year, the Company has applied a number of amendments to IFRS, issued by the IASB mandatorily effective for an accounting period that begins on or after 1 January 2018. 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 9 Financial Instruments;
• IFRS 15 Revenue from Contracts with Customers.

Notes to the Financial Statements continued

The assessment of the impact of the adoption of these standards is set out below:

IFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets, and replaces the multiple classification and measurement models in IAS 39. The investments are managed and have their performance evaluated on a fair value basis, in accordance with the risk management and investment strategies of the Company consistent with prior periods.

The other receivables and prepayment are accounted for at amortised cost meeting the criteria for classification in IFRS 9, hence there has been no change in the accounting for these assets. The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than incurred credit losses as in the case of IAS 39 applicable to financial assets carried at amortised cost.

IFRS 15 specifies how and when revenue is recognised and enhances disclosures. Given the nature of the Company's revenue streams from financial instruments, the provisions of this standard will not have a material impact. There are no changes in the methodology of accounting for investment income and other income is recognised when the amounts fall due, both consistent with prior periods.

The adoption of these has not had any material impact on these financial statements.

Critical Accounting Judgements and Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts in the Balance Sheet, the Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period if the revision affects both current and future periods. There were no accounting estimates or judgements that had a significant impact on the financial statements in the current period.

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 investments is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Company's Board of Directors.

Upon initial recognition the Company designates the investments 'at fair value through profit or loss'. They are included initially at fair value, which is taken to be their cost (excluding expenses incidental to the acquisition which are written off in the Income Statement, and allocated to 'capital' at the time of acquisition). When a purchase or sale is made under a contract, the terms of which require delivery within the time-frame of the relevant market, the investments concerned are recognised or derecognised on the trade date. Subsequent to initial recognition, investments are valued at fair value through profit or loss. For listed investments this is deemed to be bid market prices or closing prices for Stock Exchange Electronic Trading Service – quotes and crosses ("SETSqx"). Changes in fair value of investments are recognised in the Income Statement as a capital item. On disposal, realised gains and losses are also recognised in the Income Statement as capital items.

All investments for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy in note 13.

Foreign Currency

Transactions denominated in foreign currencies are converted to Sterling at the actual exchange rate as at the date of the transaction. Monetary assets and liabilities and assets carried at fair value denominated in foreign currencies at the year end are reported at the rate of exchange at the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature.

Financial Instruments

Derivatives, including Index Put options, which are listed investments, are classified as financial instruments at fair value through profit or loss held for trading. They are initially recorded at cost (being premium paid to purchase the option) and are subsequently valued at fair value at the close of business at the year end and included in current assets/liabilities.

Changes in the fair value of derivative instruments are recognised as they arise in the capital column of the Income Statement.

Cash and Cash Equivalents

For the purposes of the Balance Sheet, cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly-liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable.

Trade and Other Receivables

Trade and other receivables are measured, where applicable, at amortised cost and as reduced by appropriate allowance for expected irrecoverable amounts.

Trade Payables and Short-term Borrowings

Trade payables and short term borrowings are measured at amortised cost.

Notes to the Financial Statements continued

Income

Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time-apportioned basis.

Dividends from overseas companies are shown gross of any non-recoverable withholding taxes, which are presented separately in the Income Statement.

Special dividends are taken to revenue or capital account depending on their nature.

When the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend forgone is recognised as income. Any excess in the value of the cash dividend is recognised in the capital column.

All other income is allocated on a time-apportioned accruals basis.

Expenses and Finance Costs

All expenses and finance costs are accounted for on an accruals basis. On the basis of the Board's expected longterm split of total returns the Company charges 75% of its management fee to capital.

Expenses directly incurred in relation to arranging debt and loan facilities have been capitalised and amortised over the term of the finance (2018: 75% to capital).

Expenses incurred directly in relation to issue or redemption of shares are deducted from equity and charged to the share premium account.

Taxation

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date based on tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of temporary differences can be deducted. In line with the recommendations of the AIC SORP, the allocation method used to calculate the tax relief on expenses charged to capital is the "marginal" basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.

The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or accelerated because of temporary differences between the treatment of certain items for accounting and taxation purposes.

The actual charge for taxation in the Income Statement relates to irrecoverable withholding tax on overseas dividends received during the year.

Dividends Payable to Shareholders

Dividends to shareholders are recognised as a liability in the period in which they are paid or approved in general meetings and are taken to the Statement of Changes in Equity. Dividends declared and approved by the Company after the Balance Sheet date have not been recognised as a liability of the Company at the Balance Sheet date.

Share Capital

The Company is a closed-ended investment company with an unlimited life. As defined in the Articles of Association, redemption of Ordinary shares is at the sole discretion of the Directors, therefore the Ordinary shares have been classified as equity.

The issuance, acquisition and resale of Ordinary shares are accounted for as equity transactions and no gain or loss is recognised in the Income Statement.

Share Premium

The share premium account represents the accumulated premium paid for shares issued in previous periods above their nominal value less issue expenses. This is a reserve forming part of the non-distributable reserves. The following items are taken to this reserve:

• costs associated with the issue of shares; and
• premium on the issue of shares.

Capital Reserve

The following are taken to the capital reserve through the capital column in the Statement of Comprehensive Income:

• gains and losses on the disposal of investments and derivatives;
• increase and decrease in the valuation of investments held at the year end;
• costs of share buybacks;
• cancellation of shares;
• costs relating to the capital structure of the Company;
• exchange differences of a capital nature; and
• expenses, together with the related taxation effect, allocated to this reserve in accordance with the above accounting policies.

Capital Redemption Reserve

The capital redemption reserve represents non-distributable reserves that arise from the purchase and cancellation of shares.

Revenue Reserve

The revenue reserve represents the surplus of accumulated profits and is distributable by the way of dividends.

Notes to the Financial Statements continued

2. Income

	Year ended 30 April 2019 Total £000	Year ended 30 April 2018 Total £000
Income from investments
UK dividends	705	950
Unfranked dividend income	382	317
Bank interest	–	3
Total income	1,087	1,270

3. Return per Share

Returns per Ordinary share are based on the weighted average number of shares in issue during the year. Basic and diluted return per share are the same as there are no dilutive elements on share capital.

	Year ended 30 April 2019 Ordinary shares		Year ended 30 April 2018 Ordinary shares
	Revenue	Capital	Total	Revenue	Capital	Total
Net profit (£000)	307	(19,982)	(19,675)	464	8,812	9,276
Weighted average number of shares in issue			153,363,323			171,225,713
Return per share (pence)	0.20	(13.03)	(12.83)	0.27	5.15	5.42

The Management shares have no right to income.

4. Share Capital

	30 April 2019		30 April 2018
	Number	£000	Number	£000
Ordinary shares of £0.001 each
Opening balance	171,151,514	171	173,086,001	173
Redemptions	(18,497,692)	(18)	(1,934,487)	(2)
At end of year	152,653,822	153	171,151,514	171
	30 April 2019			30 April 2018
	Number of Ordinary shares	£000	Number of Ordinary shares	£000
Management shares of £1 each	50,000	50	50,000	50

The rights attaching to each share class are set out on page 73 of this Report.

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Redemption of Ordinary Shares

The Company has a redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of Ordinary shares on an annual basis. As set out in the Articles of Association, the Board may, at its absolute discretion, elect not to operate the annual redemption facility in whole or in part. Accordingly, the Ordinary shares have been classified as equity.

Post year end, valid redemption requests representing 14,317,907 (2018: 18,497,692) Ordinary shares, representing 9.4% (2018: 10.8%) of the issued share capital, were made. The Company proposes that all of these shares will be redeemed at the redemption price of 53.92p (2018: 68.98p) per share and will be cancelled on or around 15 August 2019, subject to receipt of the requisite shareholder and Court approvals, as announced by the Company on 26 June 2019. At the date of this Report, there are 152,653,822 Ordinary shares and 50,000 Management shares in issue.

Management Shares

50,000 Management shares with a nominal value of £1 each were allotted to Miton Trust Managers Limited on the date of incorporation. These shares have been fully paid up.

The Management shares are non-voting and non-redeemable and, upon a winding-up or on a return of capital of the Company, shall only receive the fixed amount of capital paid up on such shares and shall confer no right to any surplus capital or assets of the Company.

5. Net Asset Values

The NAVs per Ordinary share and the net assets attributable at the year end were as follows:

	30 April 2019 Ordinary share			30 April 2018 Ordinary share
	Net asset value per share pence	Net assets attributable £000	Net asset value per share pence	Net assets attributable £000
Basic and diluted	56.13	85,679	69.33	118,665

NAV per Ordinary share is based on net assets at the year end and 152,653,822 Ordinary shares (2018: 171,151,514), being the number of Ordinary shares in issue at the year end.

NAV of £1.00 per Management share is based on net assets at the year end of £50,000 (2018: £50,000) and attributable to 50,000 Management shares at the year end. The shareholders have no right to any surplus capital or assets of the Company.

Notes to the Financial Statements continued

6. Transaction Costs

During the year, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:

	30 April 2019 £000	30 April 2018 £000
Costs on acquisitions	21	23
Costs on disposals	50	64
	71	87

These transaction costs are dealing commissions paid to stockbrokers and stamp duty, a government tax paid on transactions (which is zero when dealing on the AIM/ISDX exchanges). A breakdown of these costs is set out below:

	30 April 2019			30 April 2018
	Ordinary share £000	% of average monthly net assets in the year	Ordinary share £000	% of average monthly net assets in the year
Costs paid in dealing commissions	59	0.06	78	0.07
Costs of stamp duty	12	0.01	9	0.01
	71	0.07	87	0.08

The average monthly net assets of the Ordinary shares for the year to 30 April 2019 was £96,533,871 (2018: £113,142,399).

7. Management Fee

The AIFM is entitled to receive from the Company in respect of its services provided under the Management Agreement a management fee for both the Ordinary share and C share classes (when in issue), payable monthly in arrears and calculated at the rate of 1% per annum of the market capitalisation of each share class as at the relevant calculation date.

In addition to the basic management fee, and when a Redemption Pool is in existence, the AIFM is entitled to receive from the Company a fee calculated at the rate of 1% per annum of the net asset value of the Redemption Pool on the last Business Day of the relevant calendar month.

The AIFM has agreed that, for so long as it remains the Company's investment manager, it will not charge such part of any management fee payable to it so that the Company can maintain an ongoing charges ratio of 2% or lower. The ongoing charges ratio for the year is 1.52% (2018: 1.41%) for the Ordinary shares, and as such is below 2%. In accordance with the Directors' policy on the allocation of expenses between income and capital, in each financial year 75% of the management fee payable is expected to be charged to capital and the remaining 25% to income.

	30 April 2019			30 April 2018
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Management fee	233	698	931	270	811	1,081

At 30 April 2019, an amount of £67,000 was outstanding and due to Miton Trust Managers Limited in respect of management fees (30 April 2018: £91,000).

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8. Other Expenses

	30 April 2019 £000	30 April 2018 £000
Company Secretarial and Administrative services	168	162
Auditor's remuneration for:
Audit of the Company's financial statements	24	24
Directors' fees	115	115
Other expenses	226	210
	533	511

During the years ended 30 April 2019 and 30 April 2018, the Auditor's remuneration related to audit services only.

9. Finance Costs

	30 April 2019			30 April 2018
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
RBS £7.5m revolving loan facility – arrangement fee	–	6	6	1	1	2
RBS £7.5m revolving loan facility – non-utilisation fee	–	41	41	2	6	8
	–	47	47	3	7	10

On 12 February 2018 the Company entered into a £7.5m revolving loan facility (the "facility") with The Royal Bank of Scotland plc ("RBS"). The above charges relate to arrangement and commitment fees on this facility which remains undrawn as at the year end.

The loan bears interest at 1.10% above LIBOR on any drawn down balance. During the year the facility has not been drawn down.

The loan also bears a commitment fee of 0.55% on any undrawn balance where less than 25% of the facility is drawn down or 0.45% on any undrawn balance where more than 25% of the facility is drawn down.

An arrangement fee of £18,750 has been paid to RBS and is being amortised over the 3-year period of the facility.

The loan facility contains covenants which require that borrowings will not at any time exceed 15% of the adjusted portfolio value, being the total portfolio value less the gross market value of each investment which is not a quoted equity freely traded on a recognised investment exchange, and that the net asset value shall at all times be greater than £70m. If the Company breaches any covenant it is required to notify RBS of any default and the steps being taken to remedy it.

There were no prior loan facility agreements in place.

Notes to the Financial Statements continued

10. Taxation

	30 April 2019			30 April 2018
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Overseas withholding tax suffered	14	–	14	22	–	22

The current tax charge is explained below:

	30 April 2019			30 April 2018
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Return on ordinary activities before taxation	309	(19,970)	(19,661)	486	8,812	9,298
Theoretical tax at UK corporation tax rate of 19.00% (2018: 19.00%)	59	(3,794)	(3,735)	92	1,674	1,766
Effects of:
UK dividends that are not taxable	(134)	–	(134)	(180)	–	(180)
Overseas dividends that are not taxable	(59)	–	(59)	(49)	–	(49)
Non-taxable investment and derivatives losses/(gains)	–	3,655	3,655	–	(1,830)	(1,830)
Overseas taxation and derivatives not recoverable	4	–	4	13	–	13
Double taxation relief expensed in current period	10	–	10	9	–	9
Unrelieved expenses	134	139	273	137	156	293
Total current tax charge	14	–	14	22	–	22

Factors that may affect future tax charges

The Company has excess management expenses of £5,460,000 (2018: £4,007,000), that are available to offset against future taxable revenue. A deferred tax asset of £928,000 (2018: £682,000) has not been recognised because the Company is not expected to generate sufficient taxable income in future periods in excess of the available deductible expenses and, accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus losses.

Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an Investment Trust Company.

11. Dividends

	30 April 2019			30 April 2018
	£000	pence	£000	pence
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 30 April 2018	550	0.36	–	–
Final dividend for the year ended 30 April 2017	–	–	616	0.36
	550	0.36	616	0.36

The Directors have recommended a final dividend in respect of the year ended 30 April 2019 of 0.20p per Ordinary share payable on 27 September 2019 to all shareholders on the register at close of business on 23 August 2019. The ex-dividend date will be 22 August 2019.

12. Investments

	30 April 2019 £000	30 April 2018 £000
Investment portfolio summary:
Opening book cost	82,523	87,862
Opening unrealised gains	20,480	20,117
Total investments designated at fair value	103,003	107,979
Analysis of investment portfolio movements
Opening valuation	103,003	107,979
Movements in the year:
Purchases at cost	27,582	24,235
Sales – proceeds	(31,282)	(38,855)
– gains on sales	5,497	9,281
(Decrease)/increase in unrealised gains	(24,492)	363
Closing valuation	80,308	103,003
Closing book cost	84,320	82,523
Closing unrealised (losses)/gains	(4,012)	20,480
	80,308	103,003
Analysis of capital gains/(losses)

Gains on sales of investments	5,497	9,281
Movement in unrealised gains	(24,492)	363
	(18,995)	9,644

A list of the largest portfolio holdings by their fair value is shown on page 16.

Notes to the Financial Statements continued

13. Fair Value Hierarchy

Financial assets of the Company are carried in the Balance Sheet at their fair value or approximation of fair value. The fair value is the amount at which the asset could be sold in an ordinary transaction between market participants, at the measurement date, other than a forced or liquidation sale. The Company measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:

• Level 1 Valued using quoted prices, unadjusted in active markets for identical assets and liabilities.
• Level 2 Valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included in Level 1.
• Level 3 Valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability.

Assessing the significance of a particular input requires judgement, considering factors specific to the asset or liability. Financial assets are transferred at the point in which a change of circumstances occur.

The table below sets out the fair value measurement of financial assets and liabilities in accordance with the fair value hierarchy.

	Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Financial assets at fair value through profit or loss at 30 April 2019
Equity investments	78,501	–	1,807	80,308
Derivative contracts	690	–	–	690
	79,191	–	1,807	80,998
	Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Financial assets at fair value through profit or loss at 30 April 2018
Equity investments	100,463	136	2,404	103,003
	100,463	136	2,404	103,003

The fair value of the Level 2 investment is based on discounted cash flow analysis using valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.

The fair value of Level 3 investments are based on discounted anticipated future cash returns.

Reconciliation of Level 3 Movements – Financial Assets

	30 April 2019 Level 3 £000	30 April 2018 Level 3 £000
Opening fair value investments	2,404	29
Transfer (to)/from Level 1	(200)	2,007
Transfer from Level 2	–	375
Sale proceeds	(579)	–
Movement in unrealised gains	182	(7)
Closing fair value of investments	1,807	2,404

During the year liquidation proceeds of £36,000 and £543,000 were received from the Company's investments in Pure Wafer and Specialist Investment Properties.

As at 30 April 2018, Atlantis Resources and CentralNic Group were both temporarily suspended from AIM. On 22 May 2018 Atlantis Resources was readmitted to AIM and was reclassified from Level 3 to Level 1. The company's name changed to SIMEC Atlantis Energy Ltd on 15 June 2018. On 16 July 2018, CentralNic Group was readmitted to AIM and was reclassified from Level 3 to Level 1.

As at 30 April 2019, Rockrose Energy and Wheelsure Group were both temporarily suspended from AIM and the Company's investments of £1,630,000 and £177,000 were reclassified from Level 1 to Level 3.

As at 30 April 2019, the Company has holdings in Atlas African Industries, Constellation Healthcare, Fairpoint Group, Fishing Republic and Patisserie Holdings which are all held at nil value.

Other Financial Assets and Liabilities

For all other financial assets and liabilities, the carrying value is an approximation of fair value, including: trade and other receivables; cash and cash equivalents and trade and other payables.

14. Derivative Contracts

Typically, derivative contracts serve as components of the Company's investment strategy and are utilised primarily to structure and hedge investments, to enhance performance and reduce risk to the Company (the Company does not designate any derivative as a hedging instrument for hedge accounting purposes). The derivative contracts that the Company may hold from time to time or issue include: index-linked notes, contracts for differences, covered options and other equity-related derivative instruments.

Derivatives often reflect, at their inception, only a mutual exchange of promises with little or no transfer of tangible consideration. However, these instruments can involve a high degree of leverage and are very volatile. A relatively small movement in the underlying value of a derivative contract may have a significant impact on the profit and loss and net assets of the Company.

The Company's investment objective sets limits on investments in derivatives with a high risk profile. The Investment Manager is instructed to closely monitor the Company's exposure under derivative contracts and any use of the derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments. The Company will not enter into uncovered short positions.

Notes to the Financial Statements continued

The Company has positions in the following type of derivative:

The Company purchases either Put or Call options through regulated exchanges and OTC markets. Options purchased by the Company provide the Company with the opportunity to purchase (Call options) or sell (Put options) the underlying asset at an agreed-upon value either on or before the expiration of the option. The Company is exposed to credit risk on purchased options only to the extent of their carrying value, which is their fair value.

Options are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specific amount of a financial instrument at a fixed price, either at a fixed future date or at any time within a specified period.

During the year the Company purchased a FTSE 100 – December 2020 6,100 Put option. At the Balance Sheet date, the Put option has a fair value of £690,000 with a notional portfolio exposure of £22,996,000 and unrealised holding losses of £241,000.

15. Trade and Other Receivables

	30 April 2019 £000	30 April 2018 £000
Amount due from brokers	2	1,091
Dividends receivable	73	128
Prepayment and other debtors	32	21
Taxation recoverable	1	1
	108	1,241

16. Trade and Other Payables

	30 April 2019 £000	30 April 2018 £000
Amount due to brokers	71	–
Other creditors	140	174
	211	174

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17. Capital Management Policies

The Company's capital management objectives are:

• to ensure that it will be able to continue as a going concern; and
• to maximise the income and capital return over the long term to its equity shareholders through an appropriate balance of equity capital and debt.

As stated in the investment policy, the Company has authority to borrow up to 15% of net asset value through a mixture of bank facilities and certain derivative instruments. There were no borrowings as at 30 April 2019 or throughout the year (2018: nil). Also, as a public company, the minimum share capital is £50,000.

The Company's capital at 30 April 2019 comprised:

	30 April 2019 £000	30 April 2018 £000
Current liabilities:
Trade and other payables	211	174
Equity:
Equity share capital	203	221
Retained earnings and other reserves	85,476	118,444
Total shareholders' funds	85,890	118,839
Debt as a % of net assets	0.00%	0.00%

The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:

• the planned level of gearing, which takes into account the Investment Manager's view of the market;
• the buy back of shares for cancellation or treasury, which takes account of the difference between the NAV per share and the share price (i.e. the level of share price discount or premium);
• new issues of equity shares; and
• the extent to which revenue in excess of that which is required to be distributed should be retained.

The Company's objectives, policies and processes for managing capital have remained unchanged since its launch.

Notes to the Financial Statements continued

18. Reserves

Ordinary shares to 30 April 2019	Share premium account £000	Capital redemption reserve £000	Capital reserve realised £000	Capital reserve unrealised £000	Revenue reserve £000
Opening balance	86,986	2	10,197	20,473	786
Redemption of Ordinary shares	–	18	(12,761)	-	–
Net gain on realisation of investments	–	–	5,497	-	–
Unrealised net increase in value of investments and derivatives	–	–	–	(24,733)	–
Management fee charged to capital	–	–	(698)	–	–
Finance costs charged to capital	–	–	(47)	–	–
Equity dividends paid	–	–	-	–	(550)
Foreign currency gains/(losses)	–	–	(7)	6	–
Revenue return on ordinary activities after tax	–	–	–	–	295
Closing balance	86,986	20	2,181	(4,254)	531

Ordinary shares to 30 April 2018	Share premium account £000	Capital redemption reserve £000	Capital reserve realised £000	Capital reserve unrealised £000	Revenue reserve £000
Opening balance	86,986	–	2,962	20,137	938
Redemption of Ordinary shares	–	2	(1,241)	–	–
Net gain on realisation of investments	–	–	9,281	–	–
Unrealised net increase in value of investments	–	–	–	363	–
Management fee charged to capital	–	–	(811)	–	–
Finance costs charged to capital	–	–	(7)	–	–
Equity dividends paid	–	–	–	–	(616)
Foreign currency gains/(losses)	–	–	13	(27)	–
Revenue return on ordinary activities after tax	–	–	–	–	464
Closing balance	86,986	2	10,197	20,473	786

At 30 April 2019, the distributable reserves of the Company comprised of the revenue reserve £786,000 (2018: £10,983,000 comprised of the revenue reserve and capital reserve realised).

19. Analysis of Financial Assets and Liabilities Investment Objective and Policy

The Company's investment objective and policy are detailed on pages 73 and 74.

The Company's investing activities in pursuit of its investment objective involve certain inherent risks.

The Company's financial instruments can comprise:

• shares and debt securities held in accordance with the Company's investment objective and policies;
• derivative instruments for efficient portfolio management, gearing and investment purposes; and
• cash, liquid resources and short-term debtors and creditors that arise from its operations.

The risks identified arising from the Company's financial instruments are market risk (which comprises market price risk, interest rate risk and foreign currency exposure risk), liquidity risk and credit and counterparty risk. The Company may enter into derivative contracts to manage risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below.

These policies have remained unchanged since the beginning of the accounting period.

Market Risk

Market risk arises mainly from uncertainty about future prices of financial instruments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions by way of price movements, interest rate movements and exchange rate movements. The Investment Manager assesses the exposure to market risk when making each investment decision and these risks are monitored by the Investment Manager on a regular basis and the Board at quarterly meetings with the Investment Manager.

Market price risk

Market price risk (i.e. changes in market prices other than those arising from currency risk or interest rate risk) may affect the value of investments.

The Board manages the risks inherent in the investment portfolio by ensuring full and timely reporting of relevant information from the Investment Manager. Investment performance and exposure are reviewed at each Board meeting.

The Company's exposure to changes in market prices as at 30 April 2019 on its equity and listed Put index option investments held at fair value through profit or loss was £80,998,000 (2018: £103,003,000).

A 10% increase in the fair value of its investments at 30 April 2019 would have increased net assets attributable to shareholders by £8,099,800 (2018: £10,300,000). An equal change in the opposite direction would have decreased the net assets and net profit available to shareholders by an equal and opposite amount. The analysis is based on closing balances only and is not representative of the year as a whole.

Interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits. The Company's financial assets and liabilities, excluding short-term debtors and creditors, may include investment in fixed interest securities, such as UK corporate debt stock, whose fair value may be affected by movements in interest rates. The majority of the Company's financial assets and liabilities, however, are non-interest bearing. As a result, the Company's financial assets and liabilities are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. There was no exposure to interest bearing liabilities during the year ended 30 April 2019 (2018: nil).

The Company has a £7.5m revolving loan facility with RBS at an interest rate of 1.10% above LIBOR on any drawn down balance and 0.55% on any undrawn balance where less than 25% of the facility is drawn down or 0.45% on any undrawn balance where more than 25% of the facility is drawn down. During the year the facility has not been drawn down.

The possible effects on the fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions. The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions.

Notes to the Financial Statements continued

The interest rate profile of the Company (excluding short-term debtors and creditors) was as follows:

	30 April 2019 Floating rate £000	30 April 2018 Floating rate £000
Assets and liabilities:
Cash and cash equivalents	4,784	14,595
	4,784	14,595

If the above level of cash was maintained for a year, a 1% increase in LIBOR would increase the revenue return and net assets by £48,000 (2018: £146,000). If there was a fall by 1% in LIBOR it would potentially impact the Company by a revenue reduction of £48,000 (2018: £146,000).

Foreign currency risk

Although the Company's performance is measured in Sterling, a proportion of the Company's assets may be either denominated in other currencies or in investments with currency exposure. Any income denominated in a foreign currency is converted into Sterling upon receipt. At the Balance Sheet date, all the Company's assets were denominated in Sterling and accordingly the only currency exposure the Company has is through the trading activities of its investee companies.

Liquidity Risk

Liquidity risk is not significant as the Company is a closed-ended investment trust and the majority of the Company's assets are investments in quoted equities and other quoted securities that are readily realisable.

The Company's liquidity risk is managed on a daily basis by the Investment Manager in accordance with established policies and procedures in place. The Investment Manager reviews daily forward-looking cash reports which project cash obligations. These reports allow it to manage its obligations. A maturity analysis is not presented as the Investment Manager does not consider this to be a material risk.

Credit and Counterparty Risk

Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to meet its contractual obligations.

The maximum exposure to credit risk as at 30 April 2019 was £4,892,000 (2018: £15,836,000). The calculation is based on the Company's credit risk exposure as at 30 April 2019 and this may not be representative for the whole year.

The Company's quoted investments are held on its behalf by The Bank of New York Mellon, acting as the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed. The Board monitors the Company's risk by reviewing the custodian's internal controls report.

Where the Investment Manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default.

Investment transactions are carried out with a number of brokers whose creditworthiness is reviewed by the Investment Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company's custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the Company is completed.

Cash is only held at banks that have been identified by the Board as reputable and of high credit quality.

None of the Company's assets are past due or impaired.

20. Related Parties

The Directors who served in the year were entitled to the following emoluments in the form of fees:

Directors Fees	Directors' fees per annum £000	Directors' fees paid for the year £000	Outstanding as at 30 April 2019 £000	Directors' fees per annum £000	Directors' fees paid for the year £000	Outstanding as at 30 April 2018 £000
Andrew Pomfret (Chairman)	35	35	–	35	35	–
Peter Dicks	30	30	–	30	30	–
Jan Etherden	25	25	–	25	25	–
Ashe Windham	25	25	–	25	25	–

Details of the Management fee payable to Miton Trust Managers Limited pursuant to the Investment Management Agreement are set out in the Strategic Report on page 22. Amounts paid and payable are set out in Note 7.

The Board is proposing to cancel the amount standing to the credit of the share premium account of £86,986,000 (2018: £86,986,000), subject to approval by shareholders. The distributable reserves will thereby increase by the balance of the share premium account.

21. Post Balance Sheet Events

At the signing of these financial statements, there was £86,900,000 standing to the credit of the Company's share premium account. As announced by the Company on 26 June 2019, the Board is proposing to cancel the Company's share premium account to create distributable reserves in order to satisfy redemption requests in full and satisfy reserve requirements. The intended timetable for dispatch of redemption monies, subject to receipt of the requisite shareholder and Court approvals, will be mid-August 2019.

The cancellation of the share premium account requires the passing of a special resolution of the Company at a general meeting and the subsequent approval of the Court. On 1 July 2019, the Company published a circular to convene this general meeting which contained details on the timing of the Court hearings.

Redemption of Ordinary Shares

The Company has a voluntary redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of Ordinary shares on an annual basis. For the year ended 30 April 2020 the Redemption Point for Ordinary shares will be in accordance with the timetable below. Redemption Request forms are available upon request from the Company's Registrar.

Shareholders submitting valid requests for the redemption of Ordinary shares will have their shares redeemed at the Redemption Price. The Directors may elect, at their absolute discretion, to calculate the Redemption Price applying on any redemption point by reference to the Dealing Value per Ordinary share or by reference to a separate Redemption Pool*.

The Board may, at its absolute discretion, elect not to operate the annual redemption facility on any given Redemption Point, or to decline in whole or part any redemption request, although the Board does not generally expect to exercise this discretion, save in the interests of shareholders as a whole.

A redemption of Ordinary shares may be subject to either income tax and/or capital gains tax. In particular, private shareholders that sell their shares via the redemption mechanism could find they are subject to income tax on the gains made on the redeemed shares rather than the more usual capital gains tax on the sale of their shares in the market. However, individual circumstances do vary, so shareholders who are in any doubt about the redemption or the action that should be taken should consult their stockbroker, accountant, tax adviser or other independent financial adviser.

The relevant dates for the June 2020 Redemption Point are:

2 June 2020	Latest date for receipt of Redemption Requests and certificates for certificated shares
3.00pm on 2 June 2020	Latest date and time for receipt of Redemption Requests and settled TTE (Transfer to Escrow) instructions for uncertificated shares via CREST
5.00pm on 30 June 2020	Redemption Point
By 14 July 2020	Company to notify Redemption Price and dispatch redemption monies; or If the redemption is to be funded by way of a Redemption Pool, Company to notify the number of shares being redeemed. Notification of Redemption Price and dispatch of redemption monies to take place as soon as practicable thereafter
By 28 July 2020	Balance certificates to be sent to shareholders

Full details of the redemption facility are set out in the Company's Articles of Association or are available from the Secretary.

* The pool of cash, assets and liabilities to be created by the Directors in respect of a particular Redemption Point and allocated to the Ordinary shares which are the subject of Redemption Requests for that Redemption Point.

Shareholder Information

Miton UK MicroCap Trust plc was incorporated on 26 March 2015 and its Ordinary shares were admitted to the premium segment of the Official List and to trading on the London Stock Exchange's main market for listed securities on 30 April 2015.

Capital Structure

At the year end, the Company's share capital consisted of Ordinary shares of £0.001 each ("Ordinary shares") and non-voting management shares of £1 each ("Management shares"). From time to time, the Company may issue C shares of £0.01 each ("C shares").

The Company's shares have the following rights:

Voting: Ordinary shares and C shares have equal voting rights. At shareholder meetings, members present in person or by proxy have one vote on a show of hands and on a poll have one vote for each share held.

Management shares are non-voting unless no other shares are in issue at that time.

Dividends: the assets of the Ordinary shares and C shares are separate and each class is entitled to dividends declared on their respective asset pool. The Management shares are entitled to receive, in priority to the holders of any other class of shares, a fixed cumulative dividend equal to 0.01% per annum on the nominal value.

Capital: if there are any C shares in issue, the surplus capital and assets of the Company shall on a winding-up or on a return of capital, be applied amongst the existing Ordinary shareholders and the Management shareholders pro rata according to the nominal capital paid up on their holdings, having first deducted therefrom an amount equivalent to the assets and liabilities relating to the C shares, which amount shall be applied amongst the C shareholders pro rata according to the nominal capital paid up on their holdings of C shares.

When there are no C shares in issue, any surplus shall be divided amongst the Ordinary shareholders and Management shareholders pro rata according to the nominal capital paid up on their holdings of Ordinary shares and Management shares.

In each instance, the holders of the Management shares shall only receive an amount up to the capital paid up on such Management shares and the Management shares shall not confer the right to participate in any surplus remaining following payment of such amount.

As at the date of this Report, there are 152,653,822 Ordinary shares in issue, none of which are held in treasury, and 50,000 Management shares.

The Company has a redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of Ordinary shares on an annual basis. The Board may, at its absolute discretion, elect not to operate the annual redemption facility in whole or in part, although it has indicated that it is minded to approve all requests.

Further details of the capital structure can be found in note 17 to the financial statements. Details of the redemption facility are set out on page 72.

Shareholder Information continued

Investment Objective

The investment objective of the Company is to provide shareholders with capital growth over the long-term.

Investment Policy

The Company invests primarily in the smallest companies, measured by their market capitalisation, quoted or traded on an exchange in the United Kingdom at the time of investment. It is likely that the majority of the microcap companies held in the Company's portfolio will be quoted on AIM and will typically have a market capitalisation of less than £150 million at the time of investment. The Company may also invest in debt, warrants or convertible instruments issued by such companies and may invest in, or underwrite, future equity issues by such companies.

The Company may utilise derivative instruments including index-linked notes, contracts for differences, covered options and other equity-related derivative instruments for efficient portfolio management, gearing and investment purposes. Any use of derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments, as described below. The Company will not enter into uncovered short positions.

If companies in the portfolio achieve organic growth or grow through corporate activity such as acquisitions, and consequently have a market capitalisation that would place them outside the investable universe, the Investment Manager will not be obliged to sell those holdings, but the proportion of the portfolio in such companies will be carefully monitored by the Investment Manager and the Board so that the overall investment policy to invest in the smallest quoted or traded companies is not materially altered.

The Company's portfolio is expected to be diversified by industry and market of activity. No single holding will represent more than 15% of Gross Assets at the time of investment and, when fully invested, the portfolio is expected to have over 120 holdings although there is no guarantee that will be the case and it may contain a lesser number of holdings at any time.

The Company will have the flexibility to invest up to 10% of its Gross Assets at the time of investment in unquoted or untraded companies, or in any one unquoted or untraded company.

The Company will invest no more than 10% of Gross Assets at the time of investment in other investment funds.

Borrowing

The Company may deploy borrowing to enhance long-term capital growth. Gearing will be deployed flexibly up to 15% of the Net Asset Value, at the time of borrowing. In the event this limit is breached as a result of market movements, and the Board considers that borrowing should be reduced, the Investment Manager shall be permitted to realise investments in an orderly manner so as not to prejudice shareholders.

No material change will be made to the investment policy without the approval of shareholders by ordinary resolution.

Share Dealing

Shares can be traded through a stockbroker or share trading platform.

Share Prices

The Company's shares are listed on the London Stock Exchange.

Share Register Enquiries

The register for the Ordinary shares is maintained by Link Asset Services. In the event of queries regarding your holding, please contact the Registrar on 0871 664 0300 (calls cost 12p per minute plus your phone company's access charge) or email enquiries@linkgroup.co.uk. Changes of name and/or address must be notified in writing to the Registrar: Link Asset Services, Shareholder Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.

Current Share Capital and Net Asset Value Information

Ordinary £0.001 shares	152,653,822
SEDOL Number	BWFGQ08
ISIN Number	GB00BWFGQ085

The Company releases its net asset value per share to the London Stock Exchange daily.

Annual and Half-Yearly Reports

Copies of the Annual and Half-Yearly Reports are available from the Secretary on telephone number 01392 477 500 and are available on the Company's website, www.mitongroup.com/micro.

Investment Manager: Miton Trust Managers Limited

The Company's Investment Manager is Miton Trust Managers Limited, a wholly-owned subsidiary of Miton Group plc ("Miton Group"). Miton Group is listed on the AIM market for smaller and growing companies.

As at 30 June 2019, the Miton Group had total funds under management of approximately £4.7 billion.

Members of the fund management team invest in their own funds and are significant shareholders in the Miton Group. Investor updates in the form of monthly factsheets are available from the Company's website, www.mitongroup.com/micro.

Association of Investment Companies

The Company is a member of the Association of Investment Companies.

Announcement of 2019 annual results
Annual General Meeting
Half-year end
Announcement of 2019 half-yearly results
Year end
Redemption Point

Retail Investors advised by IFAs

The Company currently conducts its affairs so that the shares issued by the Company can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority ("FCA") rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

Alternative Investment Fund Managers' Directive Disclosures

Remuneration

Miton Trust Managers Limited (the "Firm") is required in this Report to make certain disclosures in respect of remuneration paid to its staff. The following disclosures are made in line with the Firm's interpretation of currently available regulatory guidance on remuneration disclosures. These disclosures are not audited.

The total amount of remuneration paid (or to be paid) by the Firm to its staff in respect of the financial year ended 31 December 2018 has been attributed (using an objective apportionment methodology) to Miton UK MicroCap Trust plc, for which the Firm acts as the alternative investment fund manager.

The amount of the total remuneration paid (or to be paid) by the Firm to its staff which has been attributed to Miton UK MicroCap Trust plc in respect of the financial year ended 31 December 2018 is £399,042. This figure is comprised of fixed remuneration of £199,143 and variable remuneration of £199,899.

There were a total of five beneficiaries of the remuneration described above.

The amount of the aggregate remuneration paid (or to be paid) by the Firm to its senior management which has been attributed to Miton UK MicroCap Trust plc in respect of the financial year ended 31 December 2018 was £52,149. The Firm delegates investment management activity to Miton Asset Management Limited and therefore there are no members of staff whose actions have a material impact on the risk profile of Miton UK MicroCap Trust plc.

Remuneration Policy of the Firm

The Firm is authorised and regulated by the UK Financial Conduct Authority ("FCA") as an Alternative Investment Fund Manager ("AIFM") and as such must comply with the rules contained in the FCA's AIFM Remuneration Code within SYSC 19B in a manner that is appropriate to its size, internal organisation and the nature, scope and complexities of its activities.

Staff included in the aggregated figures disclosed above are rewarded in line with the Firm's remuneration policy (the "Remuneration Policy") which is determined and implemented by the Remuneration Committee (comprising senior executives and non-executives of Miton Group plc) and is subject to independent review. The Remuneration Policy reflects the Firm's ethos of good governance and encapsulates the following principal objectives:

• (i) to provide a clear link between remuneration and performance of the Firm and to avoid rewarding for failure;
• (ii) to promote sound and effective risk management consistent with the risk profiles of the Alternative Investment Funds ("Funds") managed by the Firm; and
• (iii) to remunerate staff in line with the business strategy, objectives, values and interests of the Firm and the Funds managed by the Firm in a manner that avoids conflicts of interest.

The Firm assesses performance for the purposes of determining payments in respect of performance-related remuneration by reference to a broad range of measures including (i) individual performance (using financial and nonfinancial criteria), (ii) performance of the business unit or relevant Fund for which the individual provides services and (iii) the overall performance of the Firm. Assessment of performance is set within a multi-year framework, reflecting the cycles of the relevant Fund, to ensure the process is based on longer-term performance and spread over time.

The elements of remuneration are balanced between fixed and variable and the management function sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong performance but does not encourage excessive risk taking.

The Firm operates a discretionary bonus scheme.

The Firm is entitled to disapply the requirements of SYSC 19B in relation to deferral and payment of remuneration in instruments, therefore, due to the Firm's size, internal organisation and the nature, scope and complexities of its activities the Firm does not currently operate deferral of remuneration.

Mechanisms are in place to ensure that remuneration does not reward failure, whether on the early termination of a contract or otherwise.

No individual is involved in setting his or her own remuneration.

Leverage

For the purposes of the AIFMD, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its net asset value and is calculated under the Gross and Commitment Methods, in accordance with AIFMD. Under the Gross Method, exposure represents the sum of the Company's positions without taking account of any netting or hedging arrangements. Under the Commitment Method, exposure is calculated after certain hedging and netting positions are offset against each other.

Leverage is any method by which by which the AIFM increases the exposure of an AIF it manages whether through borrowings of cash or securities, or leverage embedded in derivative positions or by any other means.

Leverage exposure	Gross Method	Commitment Method
Maximum Level	200%	200%
Actual Level	100%	100%

A figure of 100% means that the exposure is equal to the net asset value and the AIF has no leverage.

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the fourth ANNUAL GENERAL MEETING of Miton UK MicroCap Trust plc (the "Company") will be held on Wednesday, 11 September 2019 at 11.00am at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH to consider and vote on the Resolutions below.

Resolutions 1 to 11 (inclusive) will be proposed as Ordinary Resolutions and Resolutions 12 to 14 (inclusive) will be proposed as Special Resolutions.

Ordinary Resolutions

• 1 To receive and adopt the Strategic Report, Reports of the Directors and Auditor and the audited financial statements for the year ended 30 April 2019.
• 2 To receive and approve the Directors' Remuneration Report for the year ended 30 April 2019.
• 3 To approve the Directors' Remuneration Policy.
• 4 To re-elect Andy Pomfret as a Director of the Company.
• 5 To re-elect Peter Dicks as a Director of the Company.
• 6 To re-elect Jan Etherden as a Director of the Company.
• 7 To re-elect Ashe Windham as a Director of the Company.
• 8 To re-appoint Ernst & Young LLP as Auditor of the Company to hold office from the conclusion of the meeting until the conclusion of the next meeting at which financial statements are laid before the Company.
• 9 To authorise the Audit and Management Engagement Committee to determine the remuneration of the Auditor of the Company.
• 10 To declare a final dividend of 0.2p per Ordinary share for the year ended 30 April 2019.
• 11 That:

The Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies Act 2006 ("the Act") to exercise all the powers of the Company to allot Ordinary shares in the capital of the Company up to an aggregate nominal value of £15,265 (being approximately 10% of the issued Ordinary share capital of the Company at the date of this Notice), such authority to expire at the conclusion of the Annual General Meeting of the Company to be held in 2020 (unless previously renewed, varied or revoked by the Company in general meeting) (the "Section 551 period"), but so that the Company may, at any time prior to the expiry of the Section 551 period, make offers or agreements which would or might require the allotment of shares in pursuance of such offers or agreements as if the authority had not expired.

Special Resolutions

12 THAT:

Subject to the passing of Resolution 11, the Directors be and they are hereby empowered, in accordance with Sections 570 and 573 of the Act, to allot Ordinary shares and to sell Ordinary shares from treasury for cash pursuant to the authority referred to in Resolution 11 as if Section 561(1) of the Act did not apply to any such allotment or sale, such power to expire at the conclusion of the Annual General Meeting of the Company to be held in 2020 (unless previously renewed, varied or revoked by the Company in general meeting) save that the Company may, at any time prior to the expiry of such power, make an offer or enter into an agreement which would or might require Ordinary shares to be allotted or sold from treasury equity securities in pursuance of such an offer or agreement as if such power had not expired.

The Company Strategic Report Governance Company Accounts Shareholder Information

13 THAT:

The Company is hereby generally and unconditionally authorised in accordance with Section 701 of the Act to make market purchases (within the meaning of Section 693(4) of the Act) of Ordinary shares of £0.001 each in the capital of the Company ("Ordinary shares") provided that:

• (a) the maximum number of Ordinary shares hereby authorised to be purchased is 22,882,807 (representing 14.99% of the Ordinary shares in issue at the date of this Notice);
• (b) the minimum price which may be paid for each Ordinary share is £0.001;
• (c) the maximum price which may be paid for each Ordinary share shall not be more than the higher of: (i) an amount equal to 105% of the average of the middle market quotations of Ordinary shares taken from the Daily Official List of the London Stock Exchange for the five business days immediately preceding the day on which the contract of purchase is made; and (ii) the higher of the price of the last independent trade in the Ordinary shares and the highest then current independent bid for the Ordinary shares on the London Stock Exchange;
• (d) this authority will (unless previously renewed, varied or revoked by the Company in general meeting) expire at the conclusion of the Annual General Meeting of the Company to be held in 2020;
• (e) the Company may make a contract of purchase for Ordinary shares under this authority before this authority expires which will or may be executed wholly or partly after its expiration; and
• (f) any Ordinary shares bought back under the authority hereby granted may, at the discretion of the Directors, be cancelled or held in treasury and if held in treasury may be resold from treasury or cancelled at the discretion of the Directors.

THAT:

14 A general meeting other than an annual general meeting may be called on not less than 14 clear days' notice.

By order of the Board

Link Company Matters Limited

Registered Office: Beaufort House, 51 New North Road, Exeter EX4 4EP

19 July 2019

Notice of Annual General Meeting continued

Administrative Notes in Connection with the Annual General Meeting

1. Attending the Annual General Meeting in person

If you wish to attend the Annual General Meeting in person, you should arrive at the venue for the Annual General Meeting in good time to allow your attendance to be registered. It is advisable to have some form of identification with you as you may be asked to provide evidence of your identity to the Company's registrar, Link Asset Services (the "Registrar"), prior to being admitted to the Annual General Meeting.

2. Appointment of proxies

Members are entitled to appoint one or more proxies to exercise all or any of their rights to attend, speak and vote at the Annual General Meeting. A proxy need not be a member of the Company but must attend the Annual General Meeting to represent a member. To be validly appointed, a proxy must be appointed using the procedures set out in these notes. If members wish their proxy to speak on their behalf at the meeting, members will need to appoint their own choice of proxy (not the Chairman of the Annual General Meeting) and give their instructions directly to them.

Members can only appoint more than one proxy where each proxy is appointed to exercise rights attached to different shares. Members cannot appoint more than one proxy to exercise the rights attached to the same share(s). If a member wishes to appoint more than one proxy, they should log on to www.signalshares.com or contact the Registrar by telephone on 0871 664 0300 (calls cost 12p per minute plus your phone company's access charge). If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 9.00 am – 5.30 pm Monday to Friday, excluding public holidays in England and Wales.

A member may instruct their proxy to abstain from voting on any resolution to be considered at the Annual General Meeting by marking the 'Vote Withheld' option when appointing their proxy. It should be noted that a vote withheld is not a vote in law and will not be counted in the calculation of the proportion of votes 'For' or 'Against' the resolution.

The appointment of a proxy will not prevent a member from attending the Annual General Meeting and voting in person if they wish. A member present in person or by proxy shall have one vote on a show of hands and on a poll every member present in person or by proxy shall have one vote for every share of which he/she is the holder.

A person who is not a member of the Company but who has been nominated by a member to enjoy information rights does not have a right to appoint any proxies under the procedures set out in these notes and should read note 9 below.

3. Appointment of a proxy online

Members can appoint a proxy online at: www.signalshares.com. In order to appoint a proxy using this website, members will need their Investor Code, which they can find on their share certificate. If you need help with voting online, please contact our Registrar, Link Asset Services, on 0871 664 0391 if calling from the UK, or +44 (0) 371 664 0391 if calling from outside of the UK, or email Link at enquiries@linkgroup.co.uk. Calls cost 12p per minute plus your phone company's access charge. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales. Members must appoint a proxy using the website no later than 48 hours before the time of the Annual General Meeting or any adjournment of that meeting.

4. Appointment of a proxy using a Form of Proxy

You may request a hard copy form of proxy directly from the Registrar by telephone on 0871 664 0300. To be valid, a Form of Proxy or other instrument appointing a proxy, together with any power of attorney or other authority under which it is signed or a certified copy thereof, must be received by post or (during normal business hours only) by hand by the Registrar at Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU no later than 48 hours before the time of the Annual General Meeting or any adjournment of that meeting.

5. Appointment of a proxy through CREST

CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual and by logging on to the following website: www.euroclear.com/CREST. CREST personal members or other CREST sponsored members, and those CREST members who have appointed (a) voting service provider(s), should refer to their CREST sponsor or voting service provider(s) who will be able to take the appropriate action on their behalf.

In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications and must contain the information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the Registrar Link Asset Services (ID RA10) no later than 48 hours before the time of the Annual General Meeting or any adjournment of that meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the Registrar is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy instructions.

It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed (a) voting service provider(s), to procure that their CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended).

6. Appointment of proxy by joint holders

In the case of joint holders, where more than one of the joint holders purports to appoint one or more proxies, only the purported appointment submitted by the most senior holder will be accepted. Seniority shall be determined by the order in which the names of the joint holders stand in the Company's register of members in respect of the joint holding.

Notice of Annual General Meeting continued

7. Corporate representatives

Any corporation which is a member can appoint one or more corporate representatives. Members can only appoint more than one corporate representative where each corporate representative is appointed to exercise rights attached to different shares. Members cannot appoint more than one corporate representative to exercise the rights attached to the same share(s).

8. Entitlement to attend and vote

To be entitled to attend and vote at the Annual General Meeting (and for the purpose of determining the votes they may cast), members must be registered in the Company's register of members at close of business on 9 September 2019 (or, if the Annual General Meeting is adjourned, at close of business on the day two days prior to the adjourned meeting). Changes to the register of members after the relevant deadline will be disregarded in determining the rights of any person to attend and vote at the Annual General Meeting.

9. Nominated persons

Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 (the "Act") to enjoy information rights (a "Nominated Person") may, under an agreement between them and the member by whom they were nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, they may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights.

10. Website giving information regarding the Annual General Meeting

Information regarding the Annual General Meeting, including information required by section 311A of the Act, and a copy of this Notice of Annual General Meeting is available from the Company's website at www.mitongroup.com/micro

11. Audit concerns

Members should note that it is possible that, pursuant to requests made by members of the Company under section 527 of the Act, the Company may be required to publish on a website a statement setting out any matter relating to: (a) the audit of the Company's accounts (including the auditors' report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (b) any circumstance connected with the auditors of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Act. The Company may not require the members requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Act. Where the Company is required to place a statement on a website under section 527 of the Act, it must forward the statement to the Company's auditors not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Act to publish on a website.

12. Voting rights

As at 18 July 2019 (being the latest practicable date prior to the publication of this Notice) the Company's issued share capital consisted of 152,653,822 ordinary shares, carrying one vote each.

13. Notification of shareholdings

Any person holding 3% or more of the total voting rights of the Company who appoints a person other than the Chairman of the Annual General Meeting as their proxy will need to ensure that both they, and their proxy, comply with their respective disclosure obligations under the Disclosure Guidance and Transparency Rules.

14. Members' right to require circulation of resolution to be proposed at the Annual General Meeting

Members meeting the threshold requirements set out in the Act have the right to: (a) require the Company to give notice of any resolution which can properly be, and is to be, moved at the Annual General Meeting pursuant to section 338 of the Act; and/or (b) include a matter in the business to be dealt with at the Annual General Meeting, pursuant to section 338A of the Act.

15. Further questions and communication

Under section 319A of the Act, the Company must cause to be answered any question relating to the business being dealt with at the Annual General Meeting put by a member attending the meeting unless answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, or the answer has already been given on a website in the form of an answer to a question, or it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.

Members may not use any electronic address or fax number provided in this Notice or in any related documents to communicate with the Company for any purpose other than those expressly stated.

16. Documents available for inspection

The following documents will be available for inspection at the registered office of the Company during normal business hours on any weekday (Saturdays, Sundays and English public holidays excepted) from the date of this Notice until the conclusion of the Annual General Meeting and on the date of the Annual General Meeting at the location of the meeting from 10:45pm until the conclusion of the Annual General Meeting:

16.1. copies of the Letters of Appointment of the Non-Executive Directors of the Company.

Glossary

Alternative Investment Market ("AIM")

MINI's shares are traded on the London Stock Exchange, although most the stocks held in the Company's portfolio are quoted on the AIM exchange. AIM is owned by the London Stock Exchange and was principally set up to meet the funding needs of smaller, growing companies.

Alternative Performance Measure ("APM")

An APM is a numerical measure of the Company's current, historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial framework.

Annual General Meeting ("AGM")

All public companies have an AGM every year, and this is the opportunity for the shareholders to confirm their approval of the annual accounts, the annual dividend and the appointment of the Directors and Auditors. It is also a good time for shareholders to meet the non-executive directors. The Company's AGM is on 11 September 2019 at 11.00 am at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH. One of the fund managers will give shareholders a presentation on the current position of the Company's portfolio and some thoughts on the market outlook.

Discount/Premium

If the share price of an investment trust is lower than the NAV per share, the shares are said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.

Discount Calculation	Page	30 April 2019	30 April 2018
Closing NAV per share (p)	6	56.13	69.33	(a)
Closing share price (p)	6	54.40	65.80	(b)
Discount (c = ((a - b)/a))	6	3.08%	5.09% (c)

The discount and performance is calculated in accordance with guidelines issued by the AIC. The discount is calculated using the NAVs per share inclusive of accrued income with debt at market value.

Dividend Yield

The annual dividend expressed as a percentage of the mid-market share price.

Financial Conduct Authority ("FCA")

This regulator oversees the fund management industry, including the operation of the Company.

Financial Reporting Council ("FRC")

The FRC regulates UK auditors and provides guidance to accountants with the aim of promoting better transparency and integrity in the annual reports of quoted businesses.

Gearing

Gearing refers to the ratio of the Company's debt to its equity capital. The Company may borrow money to invest in additional investments for its portfolio. If the Company's assets grow, the shareholders' assets grow proportionately because the debt remains the same. If the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.

Generally Accepted Accounting Principles ("GAAP")

GAAP are a common set of accounting principles, standards and procedures that companies follow when they compile their financial statements. GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information. This enables the financial results of companies to be determined on a common basis so they are able to be compared. In the UK, company accounts must be prepared in accordance with applicable company law, this being the Companies Act 2006, which recognises GAAP.

International Financial Reporting Standards ("IFRS") are standards issued by the International Accounting Standards Board ("IASB"), approved for implementation by the European Union to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. These were previously International Accounting Standards ("IAS") maintained by the IASB. The Company adopted IFRS with the accounting policies of the Company set out in the financial statements.

Growth Stock

A stock where the earnings are expected to grow at an above-average rate, leading to a faster than average growing share price. Growth stocks do not usually pay a significant dividend.

Key Performance Indicators ("KPIs")

KPIs are a short list of corporate attributes that are used to assess to general progress of the business and are outlined in this Report on page 18.

Investment Association ("IA")

The IA is the trade body that represents UK investment managers. Miton Group plc is a member, and Gervais Williams is on the board.

Link Company Matters Limited ("Link")

Link is the Company Secretary for the Company.

Markets in Financial Instruments Directive II ("MiFID II")

This directive came into effect on 3 January 2018. In the case of Miton Group plc clients, the principal change has been the unbundling of transaction and external research charges paid by the Company, when stock market transactions are carried out.

Net Asset Value per Ordinary share ("NAV")

The NAV is shareholders' funds expressed as an amount per individual share. Shareholders' funds are the total value of all of the Company's assets, at their current market value, having deducted all liabilities and prior charges at their par value, or at their asset value as appropriate. The NAV per share is calculated by dividing the shareholders' funds by the number of Ordinary shares in issue excluding treasury shares.

Ongoing Charges

As recommended by the AIC in its guidance, ongoing charges are the Company's annualised revenue and capital expenses (excluding finance costs and certain non-recurring items) expressed as a percentage of the average monthly net assets of the Company during the year.

Ongoing Charges Calculation	Page	30 April 2019	30 April 2018
Management fee	60	931	1,081
Other administrative expenses	61	533	511
Total management fee and other administrative expenses		1,464	1,592	(a)
Average net assets in the year		96,534	113,142	(b)
Ongoing charges (c = a/b)		1.52%	1.41% (c)

Peer Group

The Company is part of the AIC's UK Smaller Companies sector whose members invest at least 80% of their assets in UK Smaller Companies.

Put Option

Put options are most commonly used in the stock market to protect against the decline of the price of a stock below a specified price likened to purchasing a form of financial insurance. An owner of a Put option can collect a financial benefit after an adverse event, with the scale of the benefit proportionate to the setback in the market and the remaining term of the cover. The Company Put option will become more valuable should the market decline.

Senior Independent Director ("SID")

The SID is a non-executive director who can be contacted by investors to discuss a matter of governance when it concerns the Chairman and the normal practice cannot be followed. MINI's SID is Peter Dicks.

Glossary continued

Tap Issue

A tap issue is a procedure that allows the Company to issue new shares at the current market value when the share price is at a premium to NAV. The Company is authorised to issue up to 10% of its share capital without the need for an open offer. This enables the Company to invest in attractive investment opportunities and to issue new shares on a flexible and cost-effective basis.

Total Assets

Total assets include investments, cash, current assets and all other assets. An asset is an economic resource, being anything tangible or intangible that can be owned or controlled to produce value and to produce positive economic value. Assets represent the value of ownership that can be converted into cash. The total assets less all liabilities will be equivalent to total shareholders' funds.

Total Return – NAV and Share Price Returns

Total return statistics enable the investor to make performance comparisons between investment trusts with different dividend policies. The Total Return measures the combined effect of any dividends paid, together with the rise or fall in the share price or NAV. This is calculated by the movement in the share price or NAV plus the dividends paid by the Company assuming these are re-invested in the Company at the prevailing NAV.

NAV Total Return	Page	30 April 2019	30 April 2018
Closing NAV per share (p)	6	56.13	69.33
Add back final dividend for the year ended 30 April 2018 (2017) (p)	63	0.36	0.36
Adjusted closing NAV (p)		56.49	69.69	(a)
Opening NAV per share (p)	6	69.33	64.27	(b)
NAV total return unadjusted (c = ((a - b)/b)) (%)		(18.5)%	8.4%	(c)
NAV total return adjusted (%)		(18.6)%*	8.4%

Page	30 April 2019	30 April 2018
6	54.40	65.80
63	0.36	0.36
	54.76	66.16	(a)
6	65.80	62.25	(b)
	(16.8)%	6.3%	(c)
	(16.9)%*	6.3%

* Based on NAV/share price movements and dividends being reinvested at the relevant cum dividend NAV/share price during the period. Where the dividend is invested and the NAV/ share price falls, this will further reduce the return or, if it rises, any increase will be greater. The source is Morningstar who have calculated the return on an industry comparative basis.

Yield Stock

Yield stocks pay above-average dividends to shareholders. If the dividend grows, and the yield on the share remains constant, the share price will increase. Companies which grow their dividends faster than average are capable of delivering faster share price growth.

Contact Details of the Advisers

Secretary and Registered Office

Link Company Matters Limited Beaufort House 51 New North Road Exeter EX4 4EP

Telephone: 01392 477 500

Investment Manager and Alternative Investment Fund Manager

Miton Trust Managers Limited Paternoster House 65 St Paul's Churchyard London EC4M 8AB

Company website www.mitongroup.com/micro

Auditor

Ernst & Young LLP 25 Churchill Place Canary Wharf London E14 5EY

Company Administrator

Link Alternative Fund Administrators Limited Beaufort House 51 New North Road Exeter EX4 4EP

Depositary and Custodian

The Bank of New York Mellon (International) Limited One Canada Square London E14 5AL

Registrar and Transfer Office

Link Asset Services Shareholder Services Department The Registry 34 Beckenham Road Beckenham Kent BR3 4TU

Telephone: 0871 664 0300 (calls will cost 12p per minute plus network charges)

Email: enquiries@linkgroup.co.uk Website: www.linkassetservices.com

Solicitor

Stephenson Harwood LLP 1 Finsbury Circus London EC2M 7SH

Stockbroker

Peel Hunt LLP Moor House 120 London Wall London EC2Y 5ET

Shareholder warning

Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These calls typically come from fraudsters operating in 'boiler rooms' offering investors shares that often turn out to be worthless or non-existent, or an inflated price for shares they own. While high profits are promised, those who buy or sell shares in this way usually lose their money. These fraudsters can be very persistent and extremely persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.

It is very unlikely that either the Company or the Company's Registrar would make unsolicited telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders and never in respect of investment 'advice'.

If you have been contacted by an unauthorised firm regarding your shares, you can report this using the FCA helpline on 0800 111 6768 or by using the share fraud reporting form at www.fca.org.uk/consumers/scams.

Notes

Source: Morningstar 30 April 2015 to 30 April 2019 including dividend income reinvested.

www.mitongroup.com

Paternoster House 65 St Paul's Churchyard London EC4M 8AB

Use the QR app on your phone to go to Miton UK MicroCap Trust plc website.