The board of the small Miton UK MicroCap (MINI ) investment trust believes it is showing ‘restraint’ by awarding itself a 4.5% pay rise after the portfolio, managed by smaller company stock pickers Gervais Williams and Martin Turner, slumped 13.1% in the year to 30 April. 

The four non-executive directors of the £64m investment trust could have taken a 9% rise from May as their fees are linked to inflation as measured by the consumer prices index (CPI), but said in this week’s annual report: ‘Recognising the need to show restraint, the directors have unanimously agreed to apply a 4.5% uplift to their fees this year.’

Ashe Wyndham, who took over as chair from Andy Pomfret in December, will see his salary rise £1,660 to £38,400, while senior independent director Peter Dicks, who chairs the audit and management engagement committee, will get £1,515 more to £33,000. In their roles they attend seven meetings a year.

Jan Etherden and Davina Walter, the former US equities fund manager who joined the board last August, will get £1,260 extra to put them on £27,500. They attend five board meetings a year.

They will hope their self-administered award will get a better response from shareholders than the government’s 4.5% offer to NHS staff, which unions this week denounced as a ‘betrayal’ and a ‘kick in the teeth’.

For MINI investors wondering whether they are getting value for money, the good news is the £126,400 the four directors will receive in the current financial year is less than the £137,626 they shelled out for the board in 2021/22, which included payments to Pomfret and former non-exec Bridget Guerin.

Moreover, all four are shareholders and with ‘skin in the game’ will have shared in the pain of the trust’s recent decline. This has seen the shares slide 26% this year as investors have fled the smallest end of the UK stock market, fearful of getting stuck in illiquid stocks as recession looms. 

Walter, as the new-joiner, holds the smallest stake of 33,228 shares and Dicks the largest, at 368,150.

Also, the proportion of trust assets paid in ongoing charges fell last year from 1.6% to 1.41%. This includes the component paid to directors, auditor, registrar, custodian and stockbroker which reduced to 0.26% from 0.31%.

‘Resilient’ in face of downturn

The last financial year’s disappointing performance reverses some of the exceptional gains made in the previous year. Williams (above) and Turner, both Citywire AA-rated for their record on Premier Miton’s open-ended smaller company funds, delivered a stunning 104% total investment return from MINI in 2020/21 as markets rebounded from pandemic lows.

Over three years the 38% total shareholder return including the annual dividend beats the 11.5% from the Numis Smaller Companies index (including AIM stocks but excluding investment companies).

The managers told investors the trust’s portfolio was well positioned as most of their companies generated profits, had pricing power in their markets with strong balance sheets to tide them through the recession. 

As ‘relatively young businesses operating in immature market sectors with structural growth drivers’ they are less affected by a cyclical downturn, they said.

Top holdings include antenna developer MTI Wireless Edge (MWE), healthcare services provider Totally (TLY) and IP commercialisation specialists Frontier IP Group (FIPP), which made up 9% of the trust at 30 June. 

The biggest detractor to performance was tissue and loo roll developer Accrol Group (ACRL), whose shares fell 65% after their deliveries became unreliable due to staff being off work with Covid. Biotech company Avacta (AVCT) dived 59.4% after suspending the manufacturing of lateral flow tests.

The duo bought another FTSE 100 put option last autumn, at a cost of 1.2% of assets, to insure the portfolio against a severe stock market crash. The option would soar in value if the UK blue-chip index, currently at 7,231, falls to 6,200 this year, offsetting some of what would be big losses in MINI’s investments.

At 67.5p today, the shares stand about 8% below their net asset value. MINI attempts to control the discount with a policy of giving investors every April the chance to sell their shares back to the company at a price close to NAV. Over 13% of shares were redeemed this way last month. Next year’s exit will be moved from June to September.