Annual Financial Report

THE DIVERSE INCOME TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MAY 2019

The Directors present the Annual Financial Report of The Diverse Income Trust plc (the “Company” or “Diverse”) for the year ended 31 May 2019. The full Annual Report and Accounts can be accessed via the Company’s website, www.mitongroup.com/dit, or by contacting the Company Secretary on 01392 477500.

STRATEGIC REPORT

RESULTS FOR THE YEAR TO 31 MAY 2019

• Over the year to 31 May 2019, the movement in the Company’s NAV was -9.4% This compares with the FTSE All-Share Index that fell 7.1%, the FTSE SmallCap Index (excluding Investment Companies) that fell 10.7% and the FTSE AIM All-Share Index that fell 11.3% over the same period on a capital return basis.

• 3.65p of ordinary dividends for the year The three interim dividends and the proposed final dividend for the year amount to 3.65p, compared with 3.40p in the previous year, an increase of 7.4%. The Company has also recommended a special dividend of 0.16p per share (2018: 0.23p).

• Revenue reserves increased to £17.5m The Company distributed £14.3m during the year in dividends to shareholders whilst increasing revenue reserves by a further £0.8m. The revenue reserves are available to provide dividend distributions to shareholders in future years. 

• NAV total return to shareholders of -5.9% This includes the decrease in NAV, plus the dividends paid during the year and compares with a decrease in the FTSE All-Share Index of 3.2% on a total return basis over the year to 31 May 2019.

• Share price total return to shareholders of -13.6% The share price of the Company fell back further than the NAV reduction over the year, so the share price total return, which includes the share price setback offset by the dividends declared, was more adverse than the NAV total return.

SUMMARY OF RESULTS

	At 31 May 2019	At 31 May 2018	Change
NAV per ordinary share	95.17p	105.09p	(9.4)%
Ordinary share price (mid)	89.00p	107.00p	(16.8)%
(Discount)/premium to NAV*	(6.48)%	1.82%
Revenue return per ordinary share	3.95p	3.84p
Ordinary dividends per ordinary share paid/declared	3.65p	3.40p	7.4%
Special dividend per ordinary share declared	0.16p	0.23p
Total dividends per ordinary share paid/declared	3.81p	3.63p
Ongoing charges (further details below)	1.16%	1.13%
Ordinary shares in issue	383,787,239	383,487,239

* Alternative performance measure. Details provided in the Glossary below.

CHAIRMAN’S STATEMENT

This annual report reviews the twelve months to 31 May 2019.

Capital returns

Stock markets were volatile over the year under review, with a general pullback in share prices offset by the appreciation of some higher growth stocks. The FTSE All-Share Index fell by 7.1%, with the FTSE SmallCap Index (excluding Investment Trusts) down 10.7%, and the FTSE AIM All-Share Index was down 11.3%. The Company’s NAV was down 9.4%.

Anxiety about the terms of the UK’s imminent withdrawal from the EU became increasingly pressing during the year. The absence of specific detail and slippage to the exit program weighed particularly heavily on the share prices of UK smallcaps later in the period. Many drifted lower, even as the mainstream markets staged a recovery.

Revenue returns

The revenue return per share was 3.95p per share over the year, compared to 3.84p per share last year. Revenue from ordinary dividends grew as usual, but there were fewer special one-off dividends in contrast to the previous year. The three interim dividends paid over the year amounted to 2.55p, which compares with 2.40p last year. The Board is recommending a final dividend of 1.10p, in comparison with a final dividend of 1.00p last year, and a special dividend of 0.16p. The overall dividend for the year will amount to 3.65p (3.81p including the special dividend). Last year, the four ordinary dividends amounted to 3.40p and the Company also paid a special dividend of 0.23p.

Total return since the Company was listed in April 2011

The Company has been listed for just over eight years and, despite the recent lacklustre period, the NAV of the Company has overall appreciated much in line with the underlying dividend growth at circa 8.8%. In addition, the Company’s initial dividend yield was 4.0% at issue, hence the annualised return since issue has been around 11.6% per annum. This compares with a total return of 6.6% per annum from the FTSE All-Share Index, 10.1% per annum from the FTSE SmallCap Index (excluding Investment Trusts) and 1.8% per annum from the FTSE AIM All-Share Index.

Share Redemptions

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

5,498,192 shares were offered for redemption in relation to the 31 May 2019 Redemption Point, which represented 1.43% of the issued share capital at that time. These shares were all redeemed for cash and cancelled on 14 June 2019 at the prevailing NAV.

The Board notes that, for the first time since launch, the Company’s shares have traded below the NAV for a period of some months. The Board has the authority to buy back shares and is prepared to do so if it considers it to be in the best interests of the shareholders. The annual redemption facility will remain in place. The Company has an objective to keep the discount to NAV at a sustained, low level, subject to market conditions.

Board refreshment

The Board has been refreshed during the year. Lucinda Riches retired on 1 January 2019, with Andrew Bell and Caroline Kemsley-Pein being appointedas non-executive Directors on the same date. As part of the ongoing Board succession programme, Jane Tufnell has announced that she will retire from the Board following the conclusion of the Annual General Meeting on 9 October 2019. Both Lucinda and Jane have served from the Company’s inception and I am grateful for their valued contributions. The Board wishes to thank them for their wise counsel, experience and commitment to the Company.

The Board has commenced a search for an additional non-executive Director, giving due consideration to the AIC Code of Corporate Governance and the diversity of the Board.

Strategy

The Company invests across a portfolio of both larger and smaller quoted companies with the principal objective of generating a sound and growing stream of dividend income. One of the great advantages of a multicap approach is the broader investment universe it can access. A larger opportunity set offers the Manager greater scope to identify a portfolio of holdings with scope for superior dividend growth. Furthermore, there is better scope to be risk sensitive, for example through minimising the need to hold stocks with significant corporate debt.

Given the current press attention on the risks associated with unlisted securities, I can report that the Company’s entire portfolio is invested in publicly listed stocks. Whilst some smaller capitalisation stocks will have less liquidity than their larger counterparts, the Board believes that they offer the potential for greater returns and that shareholders are protected by the closed-ended structure of our Company. The Board monitors such risks on a regular basis.

Management Fee

I am pleased to report that the Board has agreed a reduction in the fee for the Manager, Miton Trust Managers Limited, of up to 10% depending on the size of the Company. With effect from 1 August 2019, the Manager will receive a management fee of 0.9% per annum on the average market capitalisation of the Company up to £300m, 0.8% per annum on the average market capitalisation between £300m and £600m and 0.7% per annum on the average market capitalisation above £600m. The Board continues to believe that by paying the management fee calculated on a market capitalisation basis, rather than a percentage of assets basis, the interests of the Manager are more closely aligned with those of shareholders.

Prospects

In past decades, there was a broad political consensus favouring globalisation. However, over recent years, the absence of productivity improvement and wage growth has hardened the attitude of electorates and they are increasingly voting for change. Nationalistic policies are displacing the prior trend of globalisation and past market norms are evolving.

In the shifting market environment, we believe that the agile and well capitalised will have greater opportunities. The Board believes that the Company’s multicap approach is well suited for this. Furthermore, uncertainty about the detail of Brexit has led to a degree of caution amongst asset allocators regarding their UK weightings. This has left the valuations of many UK quoted companies, and most particularly UK smallcaps, standing at undemanding levels. Already this has been reflected in a significant uptick in takeovers in the Company’s portfolio and the Manager anticipates that this trend could become much broader once the detail of Brexit is determined. In summary, we believe the Company continues to be well placed to deliver premium returns, in spite of the current unsettled geopolitical background.

Annual General Meeting

I look forward to seeing shareholders at the AGM, which will be held on Wednesday, 9 October 2019 at 11.30am at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH.

Michael Wrobel

Chairman

1 August 2019

INVESTMENT MANAGER’S REPORT

Questions posed by globalisation and nationalism

Over the last decade, stock markets have risen as bond yields have fallen to ultra-low levels and as market liquidity has been plentiful, possibly as a result of many years of quantitative easing. Economic growth may have been patchy, but fortunately the Chinese economy has bucked the wider trend and this has provided some positive impetus.

Over recent years, global equity markets appear to have become more unsettled. Note the correlated setback of nearly all stock markets during the second and fourth quarter of 2018. Furthermore, government borrowing costs in some territories, such as Europe, have fallen into negative territory recently. Ultra-low or negative bond yields have been a feature of Japanese markets for decades and experience implies that these can be a sign of corporate stagnation. They imply an absence of the vibrancy needed to generate future growth. Ultimately, negative bond yields may sap their economies of an ability to put capital to work productively.

The big question is whether the recent wide-ranging reduction of bond yields into negative territory necessarily implies that the decades of supernormal growth of China are now past. The prior trend of easy market liquidity could be becoming more sporadic as well. If either, or both, of these conclusions are correct, then stocks carrying elevated risk metrics could get caught out. During downturns, those with too much debt or those that are persistently loss-making can suffer disproportionately. Interest in high-profile, loss-making growth stocks can work both ways. For example, the share prices of “dot.coms” fell back precipitously after  investor interest peaked out.

Meanwhile, a large percentage of stock market dividend income in the UK has become more reliant on a relatively limited number of mainstream companies that operate in an even more narrowly based range of sectors. After years of squeezing dividend cover lower, some mainstream UK stocks have now reached the point where the only way forward involves a dividend cut. Vodafone and Centrica have both cut their dividend recently, and Marks and Spencer cut their dividend when they raised additional capital to fund the Ocado home delivery service.

The nature of the problem is that the past virtuous spiral of globalisation could turn a little vicious.

• As noted above, the risks are often most acute for those with substantial debt, especially should it become due for repayment during a geo-political crisis. In such cases, excessive debt can precipitate additional emergency fund raisings, dividend cuts, or even a rise in corporate bond defaults.

• Furthermore, many mainstream quoted businesses still have major pension liabilities from the past. These have been tolerable at times when asset prices are rising, but additional corporate bond defaults or prospective dividend cuts could destabilise the delicate balance that currently exists. Even a minor mismatch in the projected returns on pension fund assets would lead to much greater pension deficits. Since the Pension Regulator is not likely to take a soft line on this, it too could lead to yet more emergency fund raisings and dividend cuts.

• Lastly, one of the adverse side effects of three decades globalisation is that it has happened everywhere. For example, whilst the UK stock market dividend income is dominated by several very successful oil and pharmaceutical majors, these types of companies have also been successful elsewhere. This suggests it may be harder to diversify sector specific risk after globalisation.

We believe that investors may need to adjust the mix of assets within their portfolios. It appears that investing in a number of stock market index funds might generate lesser capital gains than in the past and, at times of market setbacks, many mainstream stock market indices could prove to be uncomfortably correlated. This logic implies that there may be real advantages in considering more selective strategies in future.

In the light of these arguments, Diverse’s strategy already has the advantage of selecting across a wide-ranging investment universe. The Company’s preference for quoted companies with lesser debt balances or net cash could diversify risk, which might be helpful were markets to suffer a correlated setback. Genuine diversification is valuable at all times, but all the more so if globalisation were to evolve into nationalism and geo-political risk to become more significant.

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. Miton is listed on the AIM exchange. Miton Trust Managers Limited is a wholly-owned subsidiary of Miton Group plc.

The day-to-day management of the Company’s portfolio is carried out by Gervais Williams and Martin Turner, who have worked together on this Company since it first listed in April 2011.

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 of 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, open-minded 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 is the Company’s investment strategy?

The principal objective of the Company is to invest in a portfolio of UK quoted companies that have attractive prospects to deliver good and growing dividend income. Overall, it is anticipated that, if the Company succeeds at delivering superior dividend growth, then over the longer term this will be accompanied with superior capital gain. The Company invests in businesses with market capitalisations that extend over the full range of listed companies, including both larger and smaller companies. This broad investment universe means that the Company has greater scope to select companies that have the most attractive dividend growth prospects. It also offers the prospect of moderating Diverse’s participation in companies and sectors where the Manager is concerned that they may carry greater downside risk. For example, many of the stocks in the portfolio have been selected on the basis that they tend to have stronger balance sheets, as those with excessive debts often suffer disproportionately during downturns. Alongside this, the wide-ranging opportunity set means that it is easier for the Manager to exclude any industry sectors where the sustainability of the dividend income is perceived to be at risk.

In the first year after the Company was listed in April 2011, it paid an annualised 4% yield to shareholders. If the valuation of the Company’s portfolio were to remain at similar levels, then it is anticipated that the capital gain delivered by the Company will equate approximately with the underlying growth of the dividends from the portfolio. The annualised total return on the Company generally equates to the initial 4% yield on the Company, plus the underlying dividend growth of around 8.8% to date, summing to approximately 12.8% or so.

Clearly, it is important to remember that market valuations swing up and down along the way, and sometimes numerous quoted companies cut their dividends to shareholders, so it would be unwise for shareholders to make the assumption that this rate of return will necessarily be achieved over any specific period in future.

Where is the best dividend growth found in the investment universe?

Most funds that have an objective of delivering an attractive level of dividend income invest in the largest quoted companies principally, as these are the largest sources of dividend income. However, the largest quoted companies tend to operate in a limited range of industry sectors, which means that their dividend income is closely linked to the prosperity or otherwise of the relevant industries. Diverse invests across a much wider investment universe and its portfolio income is therefore derived from a much broader range of sectors. Importantly, the wider opportunity set means that it is easy for the Company to avoid participating in some mainstream industry sectors if their dividend prospects are anticipated to be less certain.

Certain smaller companies operating in niche markets can sometimes generate a substantial cash payback on their investment. In addition, fewer professional investors research smaller quoted companies and hence sometimes their valuations can under-anticipate their prospects. For both of these reasons, there is scope for smallcap income stocks to be purchased when they are standing at premium dividends yields, and yet still grow their dividends at a faster rate than the largest quoted companies.

The current anxiety about the final details of Brexit means that many smaller company share prices appear to be particularly overlooked. This comes at a time when many holdings in the portfolio have agreed to premium takeovers, so the Company does have capital available to participate in these opportunities.

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

Prior to the decades of globalisation, economic growth tended to be intermittent. During these years, the vibrancy of smaller quoted companies, along with their plc-type access to risk capital when it was scarce, meant they tended to outperform in aggregate. However, over recent decades, the reduction of trade barriers has greatly boosted world growth and made it easier for all companies to grow. Therefore, during the period of globalisation, when most larger companies were growing well, a vast majority of investment strategies became aligned with the mid and largecap stocks and the mainstream indices. Plentiful economic growth and market liquidity have meant that the extra vibrancy of smallcaps has seemed irrelevant.

For these reasons, institutional interest in quoted small and microcaps has died away during the period of globalisation. In this context, the fact that the UK has retained a vibrant stock exchange for listed small and microcaps is almost unique. Interestingly, a number of overseas small and microcap stocks are now choosing to list in the UK for these reasons. Alongside this, although majors are defined by their giant scale, it is easy to overlook that some smaller quoted UK companies have international market positions as well, albeit in certain niche sectors.

In summary, it would be difficult to invest across such a broad opportunity set including many small and microcaps stocks in any exchange outside of the UK. Moreover, if world growth were to become more intermittent again, the natural advantages of vibrant plc’s may once again be of great relevance. This reasoning implies that the principal drivers of the Company’s returns are not necessarily related to the success, or otherwise, of the UK economy.

Why did the NAV of the Company fall back over the year to 31 May 2019?

There are three reasons why the Company’s returns over the year to May 2019 were adverse:

1. Firstly, the growth of the Chinese economy, which has been the main driver of global growth over recent years, slowed considerably. This slowdown occurred in the context of a period when US interest rates were increasing and market liquidity was reduced by a policy of quantitative tightening in the US. Over the year to 31 May 2019, stock markets around the world have been volatile, with most of the mainstream indices recording adverse returns and the Company’s portfolio reflected this general trend.
2. Alongside this, over the year under review, the date for the UK’s withdrawal from the EU has become increasingly imminent. As the final details of Brexit remained unknown, it became harder to determine which UK stocks had the best prospects. 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 staged a recovery later in the period under review.
3. Lastly, whilst stocks standing on undemanding valuations tend to outperform over the long term, there are periods when stocks with highergrowth expectations 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 stock share prices revived thereafter. Overall, this was a year when growth stocks outperformed, and hence income stocks tended to lag a little.

In summary, the Company’s returns over the year to 31 May 2019 were held back by a mix of Brexit anxiety in the context of stock markets that generally fell back over the year. The Company’s NAV was down 9.4% over the year to May 2019.

Over the same period, the FTSE All-Share Index fell by 7.1%, whilst the smaller company indices fell a little further. The FTSE SmallCap Index (excluding Investment Trusts) fell 10.7% and the FTSE AIM All-Share Index fell by 11.3%.

Which were portfolio outliers over the year to May 2019?

As outlined above, in general this was a year when share prices tended to drift lower. Clearly, some portfolio holdings fell more abruptly than others and detracted from the Company’s NAV return. The most adverse detractor over the year to 31 May 2019 was Amino. Its share price halved over the year after it announced that some customers were slower to agree new contracts than originally anticipated. Alongside this, the company also decided to close its set top box business and become a software services operation exclusively. In spite of these costs, Amino’s strong balance sheet meant that it was able to commit to maintain its current  dividend in future. Stobart Group also disappointed as the company stepped up its capital investment in London Southend airport, funded by halving their dividend. Both of these holdings have been retained as it is anticipated that their additional investment will deliver enhanced returns in future. In contrast, Kier Group and McColls both announced adverse trading results and these holdings were both sold down over the year.

Although the year was marked by a good number of takeovers of portfolio holdings, as it happens, the greatest contributors to the Company’s return this year were principally regular holdings. After most of the profits had been taken on the remaining holding in Burford, two other litigation funding stocks came to market via IPOs. Even though they have only been in the portfolio since December, the share prices of Manolete and Litigation Finance appreciated rapidly. In addition, Diversified Gas & Oil made a series of acquisitions and these helped the company boost its dividend growth considerably, which led to significant share price appreciation. Finally, the exit premiums on the 11 holdings that agreed take-overs during the year meant these left on modest yields. The good news is that this capital can be reallocated to new holdings at a time when many UK quoted companies appear to stand on undemanding valuations given the current Brexit uncertainty.

How has the Company performed since it first listed just over eight years ago?

The last eight years since the Company was first listed have been a period of some economic expansion. If anything, the more significant trend has been the ongoing reduction in government bond yields, to the extent that those in Japan and various European countries are now negative.

Over this period, many mainstream UK companies have grown their dividend income in part by reducing their dividend cover. The accumulated dividends paid out over this period account for more than half of the 67.3% total return of the FTSE All-Share Index. Interestingly, whilst the return on the FTSE AIM All-Share Index has been strong over recent years, it was remarkably weak in the early part of the Company’s life. Therefore, the FTSE AIM All-Share Index has only delivered a total return of 14.5% since the Company’s first listing. The best performing area of the market over this period has been the regular small and midcaps, and hence the FTSE SmallCap Index (excluding Investment Trusts) has appreciated by 115.4% over the period since the Company’s first listing.

Diverse invests in companies that comprise parts of all of these stock market indices, and hence it has generated a total return of 149.7%. It is believed that the strong underlying dividend growth from the Company’s portfolio has tended to boost their share prices, which is the main driver of its return since launch.

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

Prior to the referendum, the free cash flow yield after the debt costs were very similar. Subsequently, enthusiasm for US stocks has driven up their share prices further, so the market now offers less corporate cashflow per share than previously. In contrast, anxiety about the detail of the UKs exit from the EU has meant that UK share prices have not kept up with their growth of their aggregate corporate cashflow. After the Brexit referendum announcement, the exchange rate of sterling fell back. Subsequently, many investors have been warier of allocating capital to the UK, and hence there has been less support for UK listed stocks. As outlined elsewhere, it appears that the lack of interest in UK quoted companies has been most acute in small and microcaps.

Overall, it appears that 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. Either way, we expect the UK stock market to outperform others and anticipate that the greatest upside potential often lies in small and microcaps.

What are the prospects for the Company?

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 well capitalised will generate disproportionate returns. The Company’s multicap approach is anticipated to be well suited to the changing market trends.

On top of this, there is scope for three past headwinds to reverse, and hopefully boost the Company’s returns a little further:

1. Firstly, 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, helping the UK stock market to outperform others.
2. Secondly, anxiety ahead of Brexit has been particularly acute amongst 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 that UK microcaps have greater upside potential than the UK stock market itself.
3. Thirdly, we look forward to the time when regular companies, generating good and growing dividends, especially those standing on undemanding valuations, resume their prior long-term trend of outperformance.

Therefore, despite the currently unsettled nature of markets, we continue to take the view that the Company’s strategy remains well placed for the future.

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

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

A FTSE 100 Put Option

Diverse has invested in a Put option as part of the diversification of the portfolio. This option is exercisable by the Company if the FTSE 100 Index falls below 6,300. This works a bit like portfolio insurance, with the value of the FTSE 100 Put option rising as the FTSE 100 falls below 6,300.

Options come with a cost – a bit like an insurance premium. 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 6,300.

Naturally, the Company aims to minimise the initial cash cost of the Put option. With this in mind, the strategy has been to wait for buoyant periods in the market before purchasing a Put option, since its initial purchase cost tends to less at such times. In addition, we have been cautious about the scale of the Put options purchased. The Put option only covers severe market setbacks (i.e. only periods when the FTSE 100 Index falls significantly below 6,300) and it only covers 40% of the total assets of the Company. This means that the cost of the option is around 1% of the NAV per annum on average, were the option to expire worthless at the end of its term.

The key advantage of having the Put option in the portfolio is that its resale value would be expected to rise during a market selloff. 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 Company would benefit from the extra income from the new holdings added during this period.

In summary, the Put option strategy puts Diverse in a position where it has scope to take advantage of any major market setback, at a relatively modest running cost if markets do drop back significantly in the period prior to December 2020.

The Company’s Debt Facility

Generally, as outlined above, we believe the Company has plenty of scope to generate an attractive long-term return without relying on debt. Therefore, the Company does not usually use borrowing at all, since it would detract from returns at time when markets fall back. However, the Company has an unused debt facility ready so that it can purchase additional lowly-valued income shares and hold them when markets are believed to be well placed to recover after a severe setback.

It is anticipated that the ability to purchase additional investments funded by borrowing ahead of a potential recovery of stock markets would scale up the recovery potential of the Company and enhance the long-term returns to shareholders.

Summary

Diverse’s objective is to offer shareholders a good dividend with the prospect of superior dividend growth through investing in a wide-ranging multicap portfolio of quoted companies. A holding in a FTSE 100 Put option, along with the pre-arranged access to a pre-agreed debt facility, puts the Company in a position to purchase additional holdings were equity markets to suffer a significant setback. This gives the Company an opportunity to participate in greater scale in any market recovery after a setback, therefore enhancing overall shareholder returns over periods when markets are highly volatile.

Gervais Williams and Martin Turner

Miton Asset Management Limited

1 August 2019

PORTFOLIO INFORMATION

AS AT 31 MAY 2019

Rank	Company	Sector & main activity	Valuation £’000	% of net assets	Yield¹ %
1	SafeCharge International2	Industrials	9,027	2.5	3.3
2	Diversified Gas & Oil2	Oil & Gas	7,677	2.1	6.8
3	Mucklow (A&J)	Financials	6,608	1.8	3.6
4	Randall & Quilter2	Financials	6,073	1.7	4.3
5	Charles Taylor	Industrials	5,918	1.6	5.1
6	Phoenix	Financials	5,374	1.5	6.9
7	Zotefoams	Basic Materials	5,182	1.4	1.0
8	Manolete Partners2	Financials	4,857	1.3	-
9	Morses Club2	Financials	4,714	1.3	5.0
10	4lmprint	Consumer Services	4,497	1.2	2.0
Top 10 investments			59,927	16.4
11	Legal & General	Financials	4,463	1.2	6.4
12	Strix2	Industrials	4,345	1.2	4.4
13	Amigo	Financials	4,250	1.2	3.8
14	Personal2	Financials	4,196	1.1	5.0
15	Jadestone Energy2	Oil & Gas	4,151	1.1	-
16	Highland Gold Mining2	Basic Materials	4,123	1.1	4.5
17	Kenmare Resources	Basic Materials	4,021	1.1	-
18	Hilton Food	Consumer Goods	3,884	1.1	2.3
19	Stobart	Industrials	3,852	1.1	11.3
20	KCOM	Telecommunications	3,827	1.1	5.2
Top 20 investments			101,039	27.7
21	Paypoint	Industrials	3,762	1.0	4.5
22	Lloyds Banking	Financials	3,662	1.0	5.6
23	IG Design2	Consumer Goods	3,631	1.0	1.1
24	Sabre Insurance	Financials	3,596	1.0	7.8
25	Rosenblatt2	Industrials	3,569	1.0	-
26	Tesco	Consumer Services	3,553	1.0	2.6
27	National Grid	Utilities	3,553	1.0	5.9
28	Direct Line Insurance	Financials	3,552	1.0	9.3
29	BP	Oil & Gas	3,446	0.9	6.0
30	Park2	Financials	3,436	0.9	4.5
Top 30 investments			136,799	37.5
31	Royal Dutch Shell ‘A’	Oil & Gas	3,409	0.9	6.1
32	DWF	Consumer Services	3,393	0.9	-
33	Arion Banki	Financials	3,383	0.9	6.3
34	Aviva	Financials	3,369	0.9	7.4
35	Admiral	Financials	3,358	0.9	4.4
36	Concurrent Technologies2	Technology	3,324	0.9	3.1
37	Centamin	Basic Materials	3,190	0.9	4.9
38	Jersey Electricity	Utilities	3,189	0.9	3.4
39	Smith (DS)	Industrials	3,176	0.9	4.8
40	Savannah Petrolum2	Oil & Gas	3,165	0.9	-
Top 40 investments			169,755	46.5
Balance held in 93 equity investments			149,185	40.8
Total equity investments			318,940	87.3
	600 Group 8% Convertible Loan Notes 14/02/20203		2,506	0.7
	Intercede Group 8% Secured Convertible Loan Notes 29/12/20214		1,550	0.4
	Active Energy 8% Loan Notes 20224		1,483	0.4
	Hurricane Energy 7.5% Convertible SNR 24/07/2022 (USD)		1,629	0.4
	Sirius Minerals Finance 8.5% Convertible Loan Notes 28/11/2023 (USD)		140	-
Fixed interest investments			7,308	2.0
Total investment portfolio			326,248	89.3
Listed Put option
FTSE 100 – December 2020 6,300 Put			6,313	1.7
Other net current assets			32,679	9.0
Net assets			365,240	100.0

^¹ Source: Thomson Reuters. Based on trailing 12 month dividend payments and not representative of future dividend payments. Includes special dividends.

^² AIM/NEX listed.

³ Bermuda Stock Exchange Listed.

⁴ TISE listed.

A copy of the full portfolio of investments as at 31 May 2019 is available on the Company’s website, www.mitongroup.com/dit.

Portfolio exposure by sector

	%
Financials	32.4
Industrials	16.6
Consumer Services	11.1
Basic Materials	10.1
Oil & Gas	8.7
Consumer Goods	7.3
Technology	2.9
Telecommunications	2.7
Cash and Fixed Interest	2.2
Utilities	2.2
Health Care	1.9
Other	1.9
	£332.6m

Actual income from investments by sector to 31 May 2019

	%
Financials	32.3
Industrials	17.3
Consumer Services	10.9
Basic Materials	8.6
Consumer Goods	8.3
Oil & Gas	7.5
Telecommunications	4.5
Cash and Fixed Interest	3.8
Utilities	3.4
Technology	2.3
Health Care	1.1
	£16.9m

Portfolio by asset allocation

	%
AIM/NEX Exchanges	35.4
FTSE 100 Index	22.5
FTSE SmallCap Index	15.1
FTSE 250 Index	9.8
Other	9.0
International Equities	3.9
Cash and Fixed Interest	2.2
FTSE Fledging Index	2.1
	£332.6m

Portfolio by spread of investment income to 31 May 2019

	%
FTSE 100 Index	29.5
AIM/NEX Exchanges	26.5
FTSE 250 Index	13.6
FTSE SmallCap Index	11.9
Other	6.7
International Equities	6.4
Cash and Fixed Interest	3.8
FTSE Fledging Index	1.6
	£16.9m

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 31 May 2019 is set out in some detail above, in line with that included in the Balance Sheet. The income from investments above comprises all of the income from the portfolio as included in the Income Statement for the year. The AIM and NEX market are both UK exchanges specifically set up to meet the requirements of smaller listed companies.

The first two tables 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 tables determines the LSE stock market index within which portfolio companies sit, and the indices that derive 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 Manager. The Investment Policy is set out below, and details regarding risk diversification and other policies are set out below.

A Summary of the Total Costs Involved in Managing Diverse

Investment trusts differ from some other forms of collective funds in that they are set up as independent corporations with their operations overseen by a board that is separate from and independent of the fund management group that manages the capital. In addition, they are listed, with their shares traded on an approved exchange – which, in our case, is the LSE.

Running costs are deducted from the total assets of the Company on a pro-forma basis so the NAV published each day is expressed after costs. The figures below are the costs paid by the Company over the year under review and are expressed as a percentage of the average asset value of the Company over the year to 31 May 2019 of £374,922,000 (year to 31 May 2018: £392,926,000).

	2019	2018
	%	%
Fund management fees1	0.96	0.95
Administration costs, including Company Secretarial fees	0.03	0.03
Directors/Auditor/Depositary/Registrar/Custodian and Stockbroker fees	0.11	0.10
All other direct costs, including VAT on the fees above, plus marketing, legal, printing, insurance and bank charges	0.06	0.05
Ongoing charges	1.16	1.13

In addition, the Company also pays transaction charges that are levied when shares are bought or sold in the portfolio. These are dealing commissions paid to stockbrokers and stamp duty, a Government tax paid on transactions (which is zero when dealing on the AIM/NEX exchanges).

	2019	2018
	%	%
Costs paid in dealing commissions	0.05	0.06
Stamp duty, a Government tax on transactions	0.08	0.04
Overall costs including charges on transactions2	1.29	1.23

The overall costs of the Company for the period were 1.29%. Despite a loss during the year, this compares with the Company’saverage NAV total return since issue of 13.0% per annum (after the deduction of costs)

¹ Fund management fees are tiered and calculated based on the share price, so may vary in each year. With effect from 1 August 2019, the Manager will receive a management fee of 0.9% per annum on the adjusted market capitalisation of the Company up to £300m, 0.8% per annum on the average market capitalisation between £300m and £600m and 0.7% per annum on the average market capitalisation above £600m.

² Transactions conducted by the Company also involve some loss of value due to the dealing spread in stock exchange prices. Spreads range from less than 1% in the most actively traded large cap stocks to more than 3% in the smallest, most infrequently traded stocks. The exact loss of value is difficult to determine precisely, but is normally less than half of the dealing spread at the time of the transaction. In a large percentage of the transactions, especially in the smallest stocks, the stock is passed through from sizeable seller to sizeable buyer on a ‘put through’ basis with potentially no loss of value through the spread. During the year under review, this cost is believed to be very modest in comparison to the NAV.

Investment Objective

The Company’s investment objective is to provide shareholders with an attractive and growing level of dividends coupled with capital growth over the long term.

Investment Policy

The Company invests primarily in UK quoted or traded companies with a wide range of market capitalisations, but a long-term bias toward small and mid cap equities with a view to achieving the Company’s investment objective. Currently, the Company’s entire portfolio is invested in publicly listed stocks.

The Manager adopts a stock specific approach in managing the Company’s portfolio and therefore sector weightings are of secondary consideration. As a result of this approach, the Company’s portfolio does not track any benchmark index.

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.

Risk Diversification

Portfolio risk is mitigated by investing in a diversified spread of investments. Investments in any one company shall not, at the time of acquisition, exceed 15% of the value of the Company’s investment portfolio. Typically it is expected that the Company will hold a portfolio of between 100 and 180 securities, predominantly most of which will represent no more than 1.5% of the value of the Company’s investment portfolio as at the time of acquisition.

The Company will not invest more than 10% of its gross assets, at the time of acquisition, in other listed closed-ended investment funds, whether managed by the Manager or not, except that this restriction shall not apply to investments in listed closed-ended investment funds which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed-ended investment funds. In addition to this restriction, the Directors have further determined that no more than 15% of the Company’s gross assets will, at the time of acquisition, be invested in other listed closed-ended investment funds (including investment trusts) notwithstanding whether or not such funds have stated policies to invest no more than 15% of their gross assets in other listed closed-ended investment funds.

Unquoted Investments

The Company may invest in unquoted companies from time to time subject to prior Board approval. Investments in unquoted companies in aggregate will not exceed 5% of the value of the Company’s investment portfolio as at the time of investment.

Borrowing and Gearing Policy

The Board considers that long-term capital growth can be enhanced by the use of gearing which may be through bank borrowings and the use of derivative instruments such as contracts for differences. The Company may borrow (through bank facilities and derivative instruments) up to 15% of NAV (calculated at the time of borrowing).

The Board oversees the level of gearing in the Company, and reviews the position with the Manager on a regular basis.

In the event of a breach of the investment policy set out above and the investment and gearing restrictions set out therein, the Manager shall inform the Board upon becoming aware of the same and if the Board considers the breach to be material, notification will be made to the LSE.

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

BUSINESS MODEL

Diverse was launched on 28 April 2011. 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 without distributing it as dividend payments. 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 31 May 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.

The Company has a wholly-owned subsidiary, DIT Income Services Limited. The purpose of the subsidiary is to invest in shorter-term holdings, where the gains after corporation tax can be passed up to the parent company by way of dividends, thus improving the position of the Company’s revenue account.

Investment Policy

The Company’s full investment policy set out above 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 primarily in quoted or traded UK companies with a wide range of market capitalisations but a long-term bias toward small and mid cap equities with a view to achieving the Company’s investment objective.

The Manager adopts a stock-specific approach in managing the Company’s portfolio and therefore sector weightings will be of secondary consideration. As a result of this approach, the Company’s portfolio will not track any benchmark index.

At the Annual General Meeting (“AGM”) held on 10 October 2018, shareholders approved a change to the Company’s investment policy to increase the minimum and maximum number of securities that may be held in the portfolio.

PERFORMANCE AND RISKS

Key Performance Indicators

The Board reviews the Company’s performance by reference to a number of 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 Manager monitor the following KPIs:

NAV performance, relative to the UK Equity Income sector and other comparable investment trusts and open-ended funds and to various UK stock market indices.

The NAV at 31 May 2019 was 95.17p per share (2018: 105.09p). The total return of the Company over the year, including the dividend income from the portfolio, was -5.9%. This compares with its Peer Group, the UK Equity Income sector, where the average was a 2.6% decrease in total return terms. By comparison, the total return on the FTSE All-Share Index was -3.2% over the year, on the FTSE SmallCap Index (excluding Investment Companies) was -7.7% and on the FTSE AIM All-Share Index was -10.1%.

NAV volatility

The Company has an objective to deliver attractive returns whilst having an eye to constraining volatility relative to other similar investment trusts. For the year to 31 May 2019, the Company’s NAV had a volatility of 6.1%¹. This compares to the Peer Group, where the average was 10.3%.

Movements in the Company’s share price

The Company’s share price decreased by 13.6% over the year on a total return basis, including the 3.73p dividends paid/declared. This compares with its Peer Group, where the average move was an increase of 2.6%.

The discount of the share price in relation to the NAV

The Company has an objective to keep the discount to NAV at a minimum. Over the year to 31 May 2019, the Company has maintained an average discount to NAV of 0.3%.

The Company’s dividend growth rate

The Company has an objective to deliver an attractive and growing dividend. The Company has paid/declared four ordinary dividends totalling 3.65p for the year, representing a yield of 3.7% (based on an average share price of 97.8p). In addition, the Company has also declared a special dividend of 0.16p, which, when added to the ordinary dividends, amounts to a yield of 3.9%. The underlying growth rate of the ordinary dividends over the year was 5.0%, which is in line with the previous years. In comparison, over the last year the Peer Group have grown their dividend at a rate of 7.3%².

Ongoing charges

The ongoing charges for the year to 31 May 2019 amounted to 1.16% (2018: 1.13%) of total assets. A summary of the total costs involved in managing the Company can be found above.

¹ Source: Datastream

² Average of the other UK Equity Income Trusts that have reported over the previous twelve months.

Dividends

Ordinary dividends totalling 3.65p and a special dividend of 0.16p per ordinary share have been paid, declared or proposed in respect of the year ended 31 May 2019.

First interim dividend:	0.80p paid on 28 February 2019 (28 February 2017: 0.75p)
Second interim dividend:	0.85p paid on 31 May 2019 (31 May 2018: 0.80p)
Third interim dividend:	0.90p payable on 30 August 2019 (31 August 2018: 0.85p)
Final dividend:	1.10p payable on 29 November 2019 (30 November 2018: 1.00p)
Special dividend:	0.16p payable on 29 November 2019 (30 November 2018: 0.23p)

A final dividend of 1.10p per ordinary share and a special dividend of 0.16p per ordinary share have been recommended by the Board. Subject to shareholder approval at the forthcoming AGM, these dividends will be paid together on 29 November 2019 to shareholders on the register at the close of business on 27 September 2019. The ex-dividend date will be 26 September 2019.

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 Board, through delegation to the Audit Committee, has undertaken a robust 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 in the full Annual Report. The principal financial risks and the Company’s policies for managing these risks and the policy and practice with regard to financial instruments are summarised in note 19 to the financial statements.

The Board has also identified the following additional risks and uncertainties:

Investment and strategy

Risk: There can be no guarantee that the investment objective of the Company will be achieved. The Company does not follow any benchmark. Accordingly, the portfolio of investments held by the Company will not mirror the stocks and weightings that constitute any particular index or indices, which may lead to the Company’s shares failing to follow either the direction or extent of any moves in the financial markets generally (which may or may not be to the advantage of shareholders).

Mitigation: The Manager has in place a dedicated investment management process which is designed to maximise the chances of the investment objective being achieved. The Board reviews regular investment and financial reports from the Manager to monitor this.

Smaller companies

Risk: The Company will invest primarily in quoted UK companies with a wide range of market capitalisations but a long-term bias toward small and mid cap equities. Smaller companies can be expected, in comparison to larger companies, to operate over a narrower range of products, have more restricted depth of management and a higher risk profile. In addition, the relatively small market capitalisation of such companies can make the market in their shares less liquid. Prices of individual smaller capitalisation stocks could be more volatile than prices of larger capitalisation stocks and the risk of insolvency of many smaller companies (with the attendant losses to investors) is higher.

Mitigation: The Board looks to mitigate this risk by ensuring the Company holds a spread of investments, achieved through limiting the size of new holdings at the time of investment to typically between 1% and 1.5% of the portfolio. All potential investee companies are researched by the Manager prior to investment.

Sectoral diversification

Risk: The Company is not constrained from weighting to any sector. This may lead to the Company having significant exposure to portfolio companies from certain business sectors from time to time. Greater concentration of investments in any one sector may result in greater volatility in the value of the Company’s investments and consequently its NAV.

Mitigation: The Company seeks to achieve attractive returns by investing in weightings that are different from the overall market, yet also seeks to ensure that individual variances are not so extreme as to leave shareholders at risk of portfolio volatility that is unreasonably poor. Even though there may be significant exposures to a single sector, this will be achieved by holding a number of different stocks in the portfolio.

Dividends

Risk: The Company’s investment objective includes the aim of providing shareholders with an attractive and growing dividend. There is no guarantee that any dividends will be paid in respect of any financial year or period. The ability to pay dividends is dependent on a number of factors, including the level of dividends earned from the portfolio and the net revenue profits available for that purpose. The redemption of shares pursuant to the redemption facility may also reduce distributable reserves to the extent that the Company is unable to pay dividends.

Mitigation: The Company maintains accounting records and produces forecasts that are designed to reduce the likelihood that the Company will not have sufficient distributable resources to meet its dividend objective.

Share price volatility and liquidity/marketability risk

Risk: The market price of the Company’s shares, like shares in all investment companies, may fluctuate independently of the NAV and thus may not reflect the underlying NAV of the shares. The shares could trade at a discount or premium to NAV at different times, depending on factors such as supply and demand for the shares, market conditions and general investor sentiment.

Mitigation: 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 taken powers to re-purchase shares should there be an imbalance in the supply and demand leading to a discount. The Company has powers to issue shares (only at a premium to NAV) should there be good investment opportunities and the size of the Company had not become too large to continue to meet its objectives.

Gearing

Risk: The Company’s investment strategy may involve the use of gearing to enhance investment returns, which exposes the Company to risks associated with borrowings. Gearing may be generated through the use of options, futures, options on futures, swaps and other synthetic or derivative financial instruments. Such financial instruments inherently contain much greater leverage than a non-margined purchase of the underlying security or instrument. While the use of borrowings should enhance the total return on the shares where the return on the Company’s underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the return on the Company’s underlying assets is rising at a lower rate than the cost of borrowing or falling, further reducing the total return on the shares. As a result, the use of borrowings by the Company may increase the volatility of the NAV per share.

Mitigation: The Company has a revolving credit facility in place, as detailed in note 5 to the financial statements. At 31 May 2019, the facility was undrawn. The Company is limited to a maximum gearing of 15% of the net assets. There was no gearing at 31 May 2019 (2018: nil).

Key man risk

Risk: 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, in particular Gervais Williams.

Mitigation: The Company is managed by a team of two at Miton, Gervais Williams and Martin Turner, and this moderates the key man risk were one or the other were to leave Miton’s employment. Furthermore, the Company may terminate the Management Agreement should Gervais Williams cease to be an employee of the Manager’s group and is not replaced by a person whom the Company considers to be of equal or satisfactory standing within three months of his departure.

Engagement of third party service providers

Risk: The Company has no employees and the Directors have all been appointed on a non-executive basis. Whilst the Company has taken all reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with is obligations, the Company is reliant upon the performance of third party service providers for its executive function.

Mitigation: The Company operates through a series of contractual relationships with its service providers. These contracts, supported by service level agreements where appropriate, set out the terms on which a service is to be provided to the Company. The Board reviews performance of all the service providers both in the Board meetings and in the Management Engagement Committee meetings, where the terms on which the service providers are engaged are also reviewed. The Board also receives assurance or internal controls reports from key service providers. In addition, the contracts provide the Company with protection in the event of failure to perform by a service provider.

SHARE CAPITAL

Share Issues

At the AGM held on 10 October 2018, the Directors were granted authority to allot ordinary shares up to an aggregate nominal amount of £38,348 (being 10% of the issued ordinary share capital). This authority is due to expire at the Company’s AGM on 9 October 2019.

The Company has a block listing of ordinary shares to be listed to the premium segment of the Official List of the FCA and admitted to trading on the premium segment of the LSE’s main market. During the year ended 31 May 2019, 300,000 ordinary shares (with a nominal value of £300) were issued under this block listing for a total consideration of £318,000. These shares were issued to satisfy market demand for the shares and to manage the premium to NAV at which the shares were trading at the time of issuance.

As at the year end and the date of this Report, a further 9,699,999 shares remain under the block listing.

Proposals for renewal of the Directors’ authority to issue shares are set out in the full Annual Report.

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.

Purchase of Own Shares

At the AGM held on 10 October 2018, the Directors were granted the authority to buy back up to 57,484,737 ordinary shares. No ordinary shares have been bought back under this authority. The authority will expire at the next AGM when a resolution for its renewal will be proposed (see the Directors’ Report in the full Annual Report for further information).

Treasury Shares

Shares bought back by the Company may 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.

Share Redemptions

Valid redemption requests were received under the Company’s redemption facility for the 31 May 2019 Redemption Point in relation to 5,498,192 ordinary shares, representing 1.43% of the issued share capital. These shares were redeemed and cancelled by the Company with effect from 14 June 2019. All shareholders who validly applied to have shares redeemed received a calculated Redemption Price of 95.39p per share.

Current Share Capital

As at the year end, there were 383,787,239 ordinary shares and 50,000 management shares (see note 9 to the financial statements) in issue.

Subsequent to the year end, 5,498,192 ordinary shares were redeemed and cancelled in respect of the 31 May 2019 Redemption Point. As at the date of this Report, there were therefore 378,289,047 ordinary shares in issue.

MANAGEMENT, SOCIAL, ENVIRONMENTAL AND DIVERSITY MATTERS

Management Arrangements

The Company appointed Miton Trust Managers Limited (“MTM” or “Manager”) as its Alternative Investment Fund Manager (“AIFM”) with effect from 22 July 2014. MTM has been approved as an AIFM by the UK’s Financial Conduct Authority. Miton Asset Management Limited has been appointed by MTM as Investment Manager to the Company pursuant to a delegation agreement.

The Manager receives a management fee of 1.0% per annum on the average market capitalisation of the Company up to £300m and 0.8% per annum on the average market capitalisation above £300m. The management fee is calculated and payable monthly in arrears. Following negotiation with the Manager, the Board has agreed a revised management fee structure with effect from 1 August 2019. From this date, the Manager will receive a management fee of 0.9% per annum on the average market capitalisation of the Company up to £300m, 0.8% per annum on the average market capitalisation between £300m and £600m and 0.7% per annum on the average market capitalisation above £600m.

In addition to the basic management fee, and for so long as a Redemption Pool is in existence, the Manager is entitled to receive from the Company a fee calculated at the rate of one-twelfth of 1.0% per calendar month of the NAV of the Redemption Pool on the last business day of the relevant calendar month.

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 charged to capital and the remaining 25% to revenue.

The management agreement is terminable by either the Manager or the Company giving to the other not less than 12 months’ written notice. The management agreement may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including the liquidation of the Manager or appointment of a receiver or administrative receiver over the whole or any substantial part of the assets or undertaking of the Manager or a material breach by the Manager of the management agreement which is not remedied. The Company may also terminate the management agreement should Gervais Williams cease to be an employee of the Manager’s group and is not replaced by a person whom the Company considers to be of equal or satisfactory standing within three months of his departure.

The Company has given certain market standard indemnities in favour of the Manager in respect of the 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 22 July 2014. The annual fee for depositary services due to Bank of New York Mellon is 0.02% of gross assets, subject to a minimum fee of £15,000 per annum. The Company and the Depositary may terminate the Depositary Agreement with three months’ written notice.

Company secretarial and administrative services are provided by Link Alternative Fund Administrators Limited under an agreement dated 7 April 2011. This agreement may be terminated by 12 months’ written notice subject to provisions for earlier termination as provided therein.

Continuing Appointment of the Manager

The Board keeps the performance of the Manager under continual review, and the Management Engagement Committee conducts an annual appraisal of the Manager’s performance and makes a recommendation to the Board about the continuing appointment of the Manager. As the Manager has delegated the investment management function to the Investment Manager, the performance of the Investment Manager is also regularly reviewed. It is the opinion of the Directors that the continuing appointment of the Manager is in the interests of shareholders as a whole. The reasons for this view are that the Manager has executed the investment strategy according to the Board’s expectations and has demonstrated superior risk-adjusted returns relative to the broader market and the peer group.

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 Manager are more closely aligned with those of shareholders.

Environmental, Human Rights, Employee, Social and Community Issues

Since the Company does not have any employees, the day-to-day management of these areas is delegated to the 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.

Environmental, Social and Governance (“ESG”) factors are central to the investment process as misjudgements on these matters can incur major additional costs to the portfolio holdings, as well as undermining their equity return through reputational damage. In company meetings, the Manager routinely questions the corporate management on a variety of topics, such as safety records and the make-up of their board papers, to ensure companies are adhering to best practice. These questions can be quite wide ranging. For example, the Manager has raised issues ranging from the use of antibiotics in livestock, to how individual companies police the working conditions in the overseas plants of their suppliers.

Gender Diversity

The Board of Directors of the Company comprises two female and four male Directors.

The Company’s Diversity Policy acknowledges the benefits of greater diversity, including gender diversity, and the Board remains committed to ensuring that the Company’s Directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives. Details of the Company’s Diversity Policy are set out in the Corporate Governance Statement in the full Annual Report.

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

On behalf of the Board

Michael Wrobel

Chairman

1 August 2019

Directors

Michael Wrobel – Chairman of the Board
Andrew Bell – Chairman of the Management Engagement Committee
Paul Craig
Caroline Kemsley-Pein
Calum Thomson – Chairman of the Audit Committee
Jane Tufnell – Senior Independent Director

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

Going Concern

The Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements. After making enquiries, and bearing in mind the nature of the Group’s business and assets, the Directors consider that the Group 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 Group’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.

Cash flow projections have been reviewed and show that the Group has sufficient funds to meet both its contracted expenditure and its discretionary cash outflows in the form of the dividend policy.

Viability Statement

The Directors have assessed the viability of the Company over a three-year period, taking account of the Company’s position and the risks as set out in the Strategic Report. The period assessed balances the long-term aims of the Company, the Board’s view that the success of the Company is best assessed over a longer time period and the inherent uncertainty of looking out for too long a period.

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. The Directors do not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place over the period of this assessment.

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 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 of redemption so as to avoid disruption to the overall operation of the Company in this situation. Secondly, the Company’s investments comprise readily realisable securities which can be sold to meet funding requirements if necessary. The most significant of the Company’s expenses vary in proportion to the size of the Company.

In addition to considering the principal risks set out above 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;

• 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 extent that the costs of running the Company become uneconomical.

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

The full Annual Report contains the following statements regarding responsibility for the financial statements.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and International Financial Reporting Standards (“IFRS”) as adopted by the European Union.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with IFRS. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that year.

In preparing the Group 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 Group’s financial position and financial performance;

• state that the Group 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 Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group 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 information required by the Listing Rules of the Financial Conduct Authority.

The financial statements are published on the Company’s website, www.mitongroup.com/dit, which is maintained on behalf of the Company by the Manager. Under the Management Agreement, the 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 Group 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 return of the Company (and the Group as a whole); and

• this Annual Report includes a fair review of the development and performance of the business and the position of the Group 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

Michael Wrobel

Chairman

1 August 2019

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company’s statutory accounts for the years ended 31 May 2019 and 31 May 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies, and those for 2019 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor’s report can be found in the Company’s full Annual Report at: www.mitongroup.com/dit.

CONSOLIDATED INCOME STATEMENT

		Year ended           31 May 2019			Year ended     31 May 2018
	Note	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000
(Losses)/gains on investments held at fair value through profit or loss	12	-	(33,171)	(33,171)	-	14,122	14,122
Foreign exchange (losses)/gains		-	(48)	(48)	-	19	19
Losses on derivatives held at fair value through profit or loss	13	-	(2,914)	(2,914)	-	(5,983)	(5,983)
Income	2	17,100	-	17,100	16,510	-	16,510
Management fee	3	(900)	(2,700)	(3,600)	(930)	(2,788)	(3,718)
Other expenses	4	(781)	-	(781)	(723)	-	(723)
Return on ordinary activities before finance costs and taxation		15,419	(38,833)	(23,414)	14,857	5,370	20,227
Finance costs	5	(30)	(91)	(121)	(30)	(91)	(121)
Return on ordinary activities before taxation		15,389	(38,924)	(23,535)	14,827	5,279	20,106
Taxation	6	(245)	-	(245)	(110)	-	(110)
Return on ordinary activities after taxation	7	15,144	(38,924)	(23,780)	14,717	5,279	19,996
		pence	pence	pence	pence	pence	pence
Return per ordinary share	7	3.95	(10.14)	(6.19)	3.84	1.38	5.22

The total column of this statement is the Income Statement of the Group prepared in accordance with IFRS, as adopted by the European Union. The supplementary revenue and capital 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 tax is also the total comprehensive income.

The notes form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Group	Notes	Share  capital  £’000	Share  premium  account  £’000	Special  reserve  £’000	Capital  reserve  £’000	Revenue     reserve   £’000	Total  £’000
As at 1 June 2018		434	192,244	45,775	147,923	16,639	403,015
Total comprehensive income:
Net return for the year		-	-	-	(38,924)	15,144	(23,780)
Transactions with shareholders recorded directly to equity:
Issue of ordinary shares		-	318	-	-	-	318
Equity dividends paid	8	-	-	-	-	(14,313)	(14,313)
As at 31 May 2019		434	192,562	45,775	108,999	17,470	365,240

Group	Notes	Share  capital  £’000	Share premium account £’000	Special reserve £’000	Capital reserve £’000	Revenue  reserve  £’000	Total  £’000
As at 1 June 2017		434	192,244	45,775	142,644	15,536	396,633
Total comprehensive income:
Net return for the year		-	-	-	5,279	14,717	19,996
Transactions with shareholders recorded directly to equity:
Equity dividends paid	8	-	-	-	-	(13,614)	(13,614)
As at 31 May 2018		434	192,244	45,775	147,923	16,639	403,015

The notes form part of these financial statements.

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

Company	Notes	Share capital £’000	Share premium account £’000	Special reserve £’000	Capital  reserve  £’000	Revenue   reserve   £’000	Total   £’000
As at 1 June 2018		434	192,244	45,775	147,923	15,795	402,171
Total comprehensive income:
Net return for the year		-	-	-	(38,924)	15,088	(23,836)
Transactions with shareholders recorded directly to equity:
Issue of ordinary shares		-	318	-	-	-	318
Equity dividends paid	8	-	-	-	-	(14,313)	(14,313)
As at 31 May 2019		434	192,562	45,775	108,999	16,570	364,340

Company	Notes	Share  capital  £’000	Share premium account £’000	Special reserve £’000	Capital reserve £’000	Revenue   reserve   £’000	Total   £’000
As at 1 June 2017		434	192,244	45,775	142,644	14,828	395,925
Total comprehensive income:
Net return for the year		-	-	-	5,279	14,581	19,860
Transactions with shareholders recorded directly to equity:
Equity dividends paid	8	-	-	-	-	(13,614)	(13,614)
As at 31 May 2018		434	192,244	45,775	147,923	15,795	402,171

The notes form part of these financial statements.

CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS

	Notes	Group  31 May 2019  £’000	Group  31 May 2018  £’000	Company  31 May 2019  £’000	Company  31 May 2018  £’000
Non-current assets:
Investments held at fair value through profit or loss	12	326,248	382,667	326,248	382,667
Current assets:
Derivative instruments	13	6,313	4,378	6,313	4,378
Trade and other receivables	16	5,587	2,331	5,587	2,331
Cash and cash equivalents		27,495	16,708	27,495	16,707
		39,395	23,417	39,395	23,416
Current liabilities:
Trade and other payables	17	(403)	(3,069)	(1,303)	(3,912)
		(403)	(3,069)	(1,303)	(3,912)
Net current assets		38,992	20,348	38,092	19,504
Total net assets		365,240	403,015	364,340	402,171
Capital and reserves:
Share capital – ordinary shares	9	384	384	384	384
Share capital – management shares	9	50	50	50	50
Share premium account	10	192,562	192,244	192,562	192,244
Special reserve	10	45,775	45,775	45,775	45,775
Capital reserve	10	108,999	147,923	108,999	147,923
Revenue reserve	10	17,470	16,639	16,570	15,795
Shareholders’ funds		365,240	403,015	364,340	402,171
		pence	pence
Net asset value per ordinary share	11	95.17	105.09

The amount of the Company's return for the financial year is a loss after tax of £23,836,000 (2018: profit of £19,860,000).

These financial statements were approved by the Board of The Diverse Income Trust plc on 1 August 2019 and were signed on its behalf by:

Michael Wrobel

Chairman

Company no.: 7584303

The notes form part of these financial statements.

CONSOLIDATED AND PARENT COMPANY CASH FLOW STATEMENTS

	Group  31 May 2019  £’000	Group  31 May 2018  £’000	Company  31 May 2019  £’000	Company  31 May 2018  £’000
Operating activities:
Net return before taxation	(23,535)	20,106	(23,591)	19,970
Losses/(gains) on investments and derivatives held at fair value through profit or loss	36,085	(8,139)	36,085	(8,139)
Non operating activities to financing activities	100	89	100	89
(Increase)/decrease in trade and other receivables	(3,256)	1,006	(3,256)	1,006
(Decrease)/increase in trade and other payables	(2,666)	2,642	(2,609)	2,780
Withholding tax paid	(245)	(110)	(245)	(110)
Net cash inflow from operating activities	6,483	15,594	6,484	15,596
Investing activities:
Purchase of investments	(99,709)	(103,583)	(99,709)	(103,583)
Sale of investments	122,957	119,748	122,957	119,748
Purchase of derivative instruments	(6,753)	(16,450)	(6,753)	(16,450)
Sale of derivative instruments	1,904	7,474	1,904	7,474
Net cash inflow from investing activities	18,399	7,189	18,399	7,189
Financing activities:
Issue of ordinary shares	318	-	318	-
Revolving loan facility non-utilisation fee paid	(100)	(89)	(100)	(89)
Equity dividends paid	(14,313)	(13,614)	(14,313)	(13,614)
Net cash outflow from financing activities	(14,095)	(13,703)	(14,095)	(13,703)
Increase in cash and cash equivalents	10,787	9,080	10,788	9,082
Reconciliation of net cash flow movements in funds:
Cash and cash equivalents at the start of the year	16,708	7,628	16,707	7,625
Net cash inflow from cash and cash equivalents	10,787	9,080	10,788	9,082
Cash at the end of the year	27,495	16,708	27,495	16,707
Cash and cash equivalents comprise the following:
Cash at bank	27,495	16,708	27,495	16,707
	27,495	16,708	27,495	16,707
Cash and cash equivalents received/(paid) during the period includes:
Dividends received	11,593	11,025	11,593	11,025
Investment income and interest received	5,278	5,345	5,222	5,209
Interest paid	-	-	-	-

The notes form part of these financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 General Information and Significant Accounting Policies

Diverse 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 Group’s annual financial statements for the year ended 31 May 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 Group’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 as the Directors believe that the Group will remain a going concern for the foreseeable future, being a period of at least 12 months from the date that these financial statements were approved, and on the basis that approval as an investment trust company will continue to be met.

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

Basis of Consolidation

IFRS 10 sets out the principles for the presentation and preparation of consolidated financial statements and establishes a single control model that applies to all entities.

The Company has made the significant accounting judgement that the Company meets the definition of an investment entity. However, the Company’s wholly-owned subsidiary, DIT Income Services Limited, is an extension of the Company through which it provides services that relate to the investment entity’s investment activities and the subsidiary is not itself an investment entity.  The Group financial statements therefore consolidate the financial statements of the Company and its subsidiary, drawn up to 31 May 2019. The subsidiary is consolidated from the date of acquisition, being the date on which control was obtained, and will continue to be consolidated until the date that such control ceases. Control comprises being exposed, or having rights, to variable returns through its power over the investee. The financial statements of the subsidiary are prepared for the same reporting year as the parent Company, using consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from them, are eliminated.

As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own Income Statement. The amount of the Company’s return for the financial year dealt with in the financial statements of the Group is a loss after tax of £23,836,000 (2018: profit of £19,860,000).

Segmental Reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being investment business. The Group 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.

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 financial instruments 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 IAS39 applicable to all financial assets.

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 the above and other updates 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 accounting standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts in the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The areas requiring the most significant judgement and estimation in the preparation of the financial statements are: accounting for the value of unquoted investments; valuation of derivatives; recognising and classifying unusual or special dividends received as either revenue or capital in nature; and setting the level of dividends paid and proposed in satisfaction of both the Company’s long-term objective and its obligations to adhere to investment trust status rules under Section 1158 of the Corporation Tax Act 2010. The policies for these are set out in the notes to the financial statements below.

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 Group’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Group’s Board of Directors.

Upon initial recognition, the investments held by the Company, except for the investment in the subsidiary, are classified 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 timeframe 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.

The investment in the subsidiary company, DIT Income Services Limited, is held at cost (£1) (2018: £1). Investments held as current assets by the subsidiary undertaking are classified as ‘held for trading’ and are at fair value. Dealing profits or losses on these investments are taken to revenue in the Income Statement. There were no investments held by the subsidiary at the year end (2018: none).

All investments for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy in note 12.

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 non-monetary assets held 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 the 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 purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable.

Trade Receivables, Prepayments and Other Debtors

Trade receivables, prepayments and other debtors are recognised at amortised cost or estimated fair value.

Trade Payables and Short-term Borrowings

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

Income

Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company’s right to receive payment is established. Fixed returns on non-equity shares are recognised on a time-apportioned basis. Dividends from overseas companies are shown gross of any non-recoverable withholding taxes, which are disclosed separately in the Income Statement.

Special dividends are taken to the revenue or capital account depending on their nature. In deciding whether a dividend should be regarded as a capital or revenue receipt, the Board reviews all relevant information as to the reasons for the sources of the dividend on a case-by-case basis.

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 accounted for on a time-apportioned accruals basis and is recognised in the Income Statement.

Expenses and Finance Costs

All expenses are accounted for on an accruals basis. On the basis of the Board’s expected long-term split of total returns in the form of capital and revenue returns of 75% and 25% respectively, the Company charges 75% of its management fee and finance costs to capital. All other administrative expenses are charged through the revenue column in the Income Statement.

Expenses incurred directly in relation to arranging debt and loan facilities have been capitalised and amortised over the term of the finance.

Expenses incurred directly in relation to placings and offers for subscription 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 amount for financial reporting purposes at the reporting date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with the recommendations of the AIC SORP, the allocation method used to calculate the tax relief on expenses charged to capital is the “marginal” basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.

No taxation liability arises on gains from sales of fixed asset investments by the Company by virtue of its investment trust status. However, the net revenue (excluding UK dividend income) accruing to the Company is liable to corporation tax at the prevailing rates.

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.

Special Reserve

The special reserve was created by a cancellation of the share premium account by order of the High Court in February 2012. Its main purpose is to allow the Company to meet annual redemption requests for ordinary shares. The costs of repurchasing ordinary shares and meeting annual redemption requests, including related stamp duty and transaction costs, are also charged to the special reserve.

Share Capital

The Company classifies financial instruments issued as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instruments. The share capital of the Company comprises redeemable ordinary shares (“ordinary shares”), C shares, when in issue, and management shares.

The Company is a closed-ended investment company with an unlimited life. The ordinary shares are not puttable instruments because redemption is conditional upon certain market conditions and/or Board approval. As such, they are not required to be classified as debt under IAS 32 ‘Financial Instruments: Disclosure and Presentation’.

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 normal 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 equity; and
• premium on the issue of shares.

Capital Reserve

The following are taken to this reserve:

• gains and losses on the disposal of investments;
• exchange difference of a capital nature;
• expenses, together with the related taxation effect, allocated to this reserve in accordance with the above policies; and
• increase and decrease in the valuation of investments held at the year end.

Revenue Reserve

The revenue reserve represents the surplus accumulated revenue profits and is distributable.

2 Income

	Year ended  31 May 2019  £’000	Year ended 31 May 2018 £’000
Income from investments:
UK dividends	11,839	11,133
UK REIT dividend income	396	270
Unfranked dividend income	4,063	4,202
UK fixed interest	648	706
	16,946	16,311
Other income:
Bank deposit interest	9	17
Exchange (losses)/gains	(14)	13
Net dealing profit of subsidiary*	56	136
Underwriting income	100	33
Other income	3	-
Total income	17,100	16,510

* Represents realised trading gains and losses from trading transactions. There are no other expenses/income in respect of the subsidiary.

3 Management Fee

	Year ended 31 May 2019			Year ended 31 May 2018
	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000
Management fee	900	2,700	3,600	930	2,788	3,718

The basic management fee payable to the Manager is calculated at the rate of one-twelfth of 1.0% of the average market capitalisation of the Company up to £300m and one-twelfth of 0.8% on the market capitalisation in excess of £300m on the last business day of each calendar month. The basic management fee accrues daily and is payable in arrears in respect of each calendar month. For the purpose of calculating the basic fee, the ‘adjusted market capitalisation’ of the Company is defined as the average daily mid-market price for an ordinary share and C share (when in issue), multiplied by the number of relevant shares in issue, excluding those held by the Company in treasury, on the last business day of the relevant month. In addition, the AIFM is entitled to receive a management fee on any Redemption Pool, as detailed in the Strategic Report above.

At 31 May 2019, an amount of £292,000 (2018: £329,000) was outstanding and due to Miton Trust Managers Limited in respect of management fees.

With effect from 1 August 2019, the Manager will receive a management fee of 0.9% per annum on the average market capitalisation of the Company up to £300m, 0.8% per annum on the average market capitalisation between £300m and £600m and 0.7% per annum on the average market capitalisation above £600m.

4 Other Expenses

	Year ended 31 May 2019 £’000	Year ended 31 May 2018 £’000
Secretarial services	122	117
Auditor’s remuneration for:
Audit of the Group’s financial statements (payable by the Company only)	34	33
Directors’ fees (see the Directors’ Remuneration Report in the full Annual Report)	152	135
Other expenses	473	438
	781	723

The audit of the Group's financial statements includes the cost of the audit of DIT Income Services Limited of £2,000 (2018: £2,000), which is paid by the parent Company.

5 Finance Costs

	Year ended 31 May 2019			Year ended 31 May 2018
	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000
RBS £25m revolving loan facility arrangement fee	5	16	21	5	16	21
RBS £25m revolving loan facility non-utilisation fee	25	75	100	25	75	100
RBS £25m revolving loan facility interest	-	-	-	-	-	-
	30	91	121	30	91	121

The Company entered into a £25m revolving loan facility with The Royal Bank of Scotland (“RBS”) in September 2016. The facility provides the scope in certain circumstances to raise the level of borrowing to £50m. The facility bears interest at the rate of 1.35% over LIBOR on any drawn down balance and a non-utilisation fee of 0.4% on any undrawn balance. The facility may be drawn in sterling or other currencies as approved by the lender. The facility is due for renewal in September 2019.

An arrangement fee of £62,500 has been paid to RBS in the year ended 31 May 2017 and is being amortised over the 3-year period of the facility.

The facility contains covenants which require that net borrowings will not, at any time, exceed 25% of the adjusted net asset value, and the net asset value shall, at all times, be equal to or greater than £210m. If the Company breaches either covenant, then it is required to notify the Bank of any default and the steps being taken to remedy it.

As at 31 May 2019, the facility was undrawn (2018: undrawn).

6 Taxation

	Year ended 31 May 2019			Year ended 31 May 2018
	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000
Overseas tax not recoverable	228	-	228	110	-	110
Overseas tax – prior year’s recoverable tax written off	17	-	17	-	-	-
Tax cost for the year	245	-	245	110	-	110

	Year ended 31 May 2019			Year ended 31 May 2018
	Revenue  £’000	Capital  £’000	Total   £’000	Revenue  £’000	Capital  £’000	Total  £’000
Return on ordinary activities before taxation	15,389	(38,924)	(23,535)	14,827	5,279	20,106
Theoretical tax at UK corporation tax rate of 19% (2018: 19%)	2,924	(7,396)	(4,472)	2,817	1,003	3,820
Effects of:
- UK dividends that are not taxable	(2,249)	-	(2,249)	(2,115)	-	(2,115)
- Overseas dividends that are not taxable	(703)	-	(703)	(784)	-	(784)
- Non-taxable investment losses/(gains)	-	6,865	6,865	-	(1,550)	(1,550)
- Overseas taxation suffered	228	-	228	110	-	110
- Overseas tax – prior year’s recoverable tax written off	17	-	17	-	-	-
- Double tax relief expensed in current period	13	-	13	2	-	2
- Unrelieved expenses	15	531	546	80	547	627
Tax charge for the year	245	-	245	110	-	110

Factors That May Affect Future Tax Charges

At 31 May 2019, the Company had no unprovided deferred tax liabilities (2018: £nil). At that date, based on current estimates and including the accumulation of net allowable losses, the Company had unrelieved losses of £20,091,000 (2018: £17,083,000) that are available to offset future taxable revenue. A deferred tax asset of £3,415,000 (2018: £2,904,000) 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.

The income from the subsidiary subject to taxation was £56,000 (2018: £136,000) and was offset against excess management expenses held by the Company using group relief.

In addition, 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 under HMRC rules.

7 Return per Share

Ordinary Shares

The return per ordinary share is based on the net profit after taxation of £23,780,000 (2018: profit £19,996,000) and on 383,732,171 (2018: 383,487,239) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

The return per ordinary share detailed above can be further analysed between revenue and capital as follows:

	Year ended 31 May 2019			Year ended 31 May 2018
	Revenue	Capital	Total	Revenue	Capital	Total
Basic & diluted
Net (loss)/profit (£’000)	15,144	(38,924)	(23,780)	14,717	5,279	19,996
Weighted average number of ordinary shares in issue			383,732,171			383,487,239
Return per ordinary share (pence)	3.95	(10.14)	(6.19)	3.84	1.38	5.22

8 Dividends per Ordinary Share

Amounts recognised as distributions to equity holders in the year:

	Year ended 31 May 2019		Year ended 31 May 2018
	£’000	pence per share	£’000	pence per share
In respect of the previous year:
Third interim dividend	3,260	0.85	3,068	0.80
Final dividend	3,838	1.00	3,068	0.80
Special dividend	883	0.23	1,534	0.40
In respect of the year under review:
First interim dividend	3,070	0.80	2,876	0.75
Second interim dividend	3,262	0.85	3,068	0.80
Dividends distributed during the year	14,313	3.73	13,614	3.55

The Directors have declared a third interim dividend in respect of the year ended 31 May 2019 of 0.90p per ordinary share payable on 30 August 2019 to all shareholders on the register at close of business on 28 June 2019. A final dividend of 1.10p per ordinary share and a special dividend of 0.16p per ordinary share have also been recommended by the Board. Subject to shareholder approval at the forthcoming AGM, these dividends will be payable on 29 November 2019 to shareholders on the register at close of business on 27 September 2019. The ex-dividend date will be 26 September 2019.

The total dividends payable in respect of the financial year for the purposes of the income retention test for Section 1158 of the Corporation Tax Act 2010 are set out below.

	Year ended  31 May 2019  £’000	Year ended  31 May 2018  £’000
Revenue available for distribution by way of dividends for the year	15,088	14,582
First interim dividend 0.80p (2018: 0.75p) per ordinary share	(3,070)	(2,876)
Second interim dividend 0.85p (2018: 0.80p) per ordinary share	(3,262)	(3,068)
Declared third interim dividend 0.90p (2018: 0.85p) per ordinary share	(3,405)	(3,260)
Proposed final dividend of 1.10p (2018: 1.00p) per ordinary share	(4,161)	(3,835)
Proposed special dividend of 0.16p (2018: 0.23p) per ordinary share	(605)	(882)
Estimated revenue reserve retained for the year	585	661

9 Called-Up Share Capital

	31 May 2019		31 May 2018
	number	£’000	number	£’000
Ordinary shares of 0.1p each
Opening balance	383,487,239	384	383,487,239	384
Issue of ordinary shares	300,000	-	-	-
	383,787,239	384	383,487,239	384

The rights and restrictions attached to shares, together with the capital structure of the Company, are set out in the full Annual Report.

Redemption of Ordinary Shares

The Company, which is a closed-ended investment company with an unlimited life, has a redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of ordinary shares on an annual basis on 31 May. 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.

The Company had received redemption requests for 5,498,192 ordinary shares in respect of the 31 May 2019 Redemption Point. These shares were redeemed and cancelled by the Company with effect from 14 June 2019. All shareholders who validly applied to have shares redeemed received a calculated Redemption Price of 95.39 pence per share.

Details of the redemption facility are set out in the full Annual Report.

Management Shares

The 50,000 management shares with a nominal value of £1 each were allotted to Miton Group plc on 30 March 2011, the parent company of the Manager. 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.

As at 31 May 2019, £12,500 had been paid up (2018: £12,500). The balance is payable on demand.

10 Reserves

2019	Share premium  account     £’000	Special reserve £’000	Capital     reserve   realised        £’000	Capital  reserve  unrealised           £’000	Revenue   reserve        £’000
Opening balance	192,244	45,775	74,812	73,111	16,639
Issue of ordinary shares	318	-	-	-	-
Net gain on realisation of investments	-	-	17,411	-	-
Exchange (losses)/gains on settlements and currency accounts	-	-	(48)	-	-
Unrealised net decrease in value of investments	-	-	-	(50,582)	-
Movement in value of derivative instruments	-	-	(5,350)	2,436	-
Management fees/finance costs charged to capital	-	-	(2,791)	-	-
Equity dividends paid	-	-	-	-	(14,313)
Revenue return on ordinary activities after tax	-	-	-	-	15,144
Closing balance	192,562	45,775	84,034	24,965	17,470

2018	Share premium account £’000	Special reserve £’000	Capital    reserve  realised  £’000	Capital  reserve  unrealised  £’000	Revenue  reserve  £’000
Opening balance	192,244	45,775	45,891	96,753	15,536
Net gain on realisation of investments	-	-	40,948	-	-
Exchange gains on settlements and currency accounts	-	-	19	-	-
Unrealised net decrease in value of investments	-	-	-	(26,826)	-
Movement in value of derivative instruments	-	-	(9,167)	3,184	-
Management fees/finance costs charged to capital	-	-	(2,879)	-	-
Equity dividends paid	-	-	-	-	(13,614)
Revenue return on ordinary activities after tax	-	-	-	-	14,717
Closing balance	192,244	45,775	74,812	73,111	16,639

The distributable reserves of the Company are £146,379,000 (2018: £136,383,000).

At a General Meeting of the Company held on 6 April 2011, a resolution was passed approving the cancellation of the Company’s share premium account.

The Court subsequently confirmed this cancellation on 22 February 2012 and an amount of £48,558,000 was transferred from the Company’s share premium account to its special reserve. This amount can be treated as a distributable reserve for all purposes permitted by the Companies Act 2006 (as amended), and will enhance substantially the ability of the Company to meet annual redemption requests and to buy-back its own shares either into treasury or for cancellation.

11 Net Asset Value per Ordinary Share

The net asset value per ordinary share and the net asset values attributable at the year end were as follows:

	Net asset value per share 31 May 2019 pence	Net assets attributable 31 May 2019 £’000	Net asset value per share 31 May 2018 pence	Net assets attributable 31 May 2018 £’000
Opening balance - Basic and diluted	95.17	365,240	105.09	403,015

Net asset value per ordinary share is based on net assets at the year end and 383,787,239 ordinary shares (2018: 383,487,239), being the number of ordinary shares in issue at the year end.

The net asset value of £1 (2018: £1) per management share is based on net assets at the year end of £50,000 (2018: £50,000) and 50,000 (2018: 50,000) management shares. The shareholders have no right to any surplus capital or assets of the Company.

12 Investments

Group and Company	31 May 2019 £’000	31 May 2018 £’000
Investment portfolio summary:
Opening book cost	306,680	281,897
Opening investment holding gains	75,987	102,813
Total investments designated at fair value	382,667	384,710

Analysis of investment portfolio movements

Group and Company	31 May 2019  £’000	31 May 2018  £’000
Opening valuation	382,667	384,710
Movements in the period:
Purchases at cost	99,709	103,583
Sales - proceeds	(122,957)	(119,748)
- gains on sales	17,411	40,948
Movement in investment holding gains	(50,582)	(26,826)
Closing valuation	326,248	382,667
Closing book cost	300,843	306,680
Closing investment holding gains	25,405	75,987
Total closing investments designated at fair value	326,248	382,667

	Year ended 31 May 2019 £’000	Year ended 31 May 2018 £’000
Transaction costs:
Costs on acquisitions	352	243
Costs on disposals	119	146
	471	389

	Year ended  31 May 2019  £’000	Year ended  31 May 2018  £’000
Analysis of capital gains/(losses)
Realised gains on sales	17,411	40,948
Movement in unrealised gains/(losses)	(50,582)	(26,826)
	(33,171)	14,122

Fair Value Hierarchy

Financial assets of the Group 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 Group measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements.

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

Level 1 – Valued using quoted prices, unadjusted in active markets for identical assets and liabilities.

Level 2 – Valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included in level 1.

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

Assessing the significance of a particular input requires judgement, considering factors specific to the asset or liability.

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

Financial assets at fair value through profit or loss at 31 May 2019	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Equity Investments	318,940	-	-	318,940
Derivative contracts	6,313	-	-	6,313
Fixed interest bearing securities	1,769	5,539	-	7,308
	327,022	5,539	-	232,561
Financial assets at fair value through profit or loss at 31 May 2018	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Equity investments	372,077	127	27	372,231
Derivative contracts	4,378	-	-	4,378
Fixed interest bearing securities	3,749	2,310	4,377	10,436
	380,204	2,437	4,404	387,045

At 31 May 2019, all the Company’s financial assets at fair value though profit or loss (including the Put option) are included in Level 1 with the exception of the Loan Notes in 600 Group, Active Energy, Intercede and warrants in 600 Group, which are all classified as Level 2 investments (2018: Accrol Group placing shares, Active Energy 8% and Aggregated MicroPower 8%).

In the year, transfers to Level 2 from Level 3 were made to best reflect the fact that the 600 Group 8% Loan Notes are listed on the Bermudan Stock Exchange and the Intercede 8% Loan Notes are listed on The International Stock Exchange.

The remaining Level 3 investments are all valued at nil.

The 4 Level 2 investments as at 31 May 2019 (2018: 3) are at values calculated using observable inputs. This valuation takes account of:

• the observable value on an inactive market;
• an intrinsic value above cost, allowing for the conversion value of the underlying, actively traded bid price where applicable;
• where the unlisted convertible debt conversion value was not greater than par value (being ‘out of the money’) then held at par value being an approximation of fair value.
• warrants are valued at the exercise price or £nil.

Valuation Process for Level 3 Investments

Investments classified within Level 3 have significant unobservable inputs. Level 3 investments can typically include unlisted equity and corporate debt securities and over the (“OTC”) derivative instruments. As observable prices are not available for these securities, the Group has used valuation techniques to derive the fair value using recognised valuation methodologies including discounted cash flow modelling where relevant.

The Level 3 investments held by the Group are valued by the Manager with valuation confirmations provided to the Board on a regular basis. The equity securities of the Level 3 investment held are or have been publicly listed and, therefore, detailed public information is available to substantiate the future prospects of the issuing company. This information includes reported results, commentary on current trading and third party research.

Reviewing these cash flows will take account of the exchange rate where applicable and the timeframe. There are no other significant unobservable inputs with the measurement of its fair value at year end and there have been no changes in valuation techniques during the year. The investments are valued by the valuation techniques using inputs as set out above. Given the nature of inputs described above it is not possible to complete a meaningful sensitivity analysis of the Level 3 investment portfolio.

	Year ended  31 May 2019  Level 3  £’000	Year ended  31 May 2018  Level 3  £’000
Opening fair value investments	4,404	6,416
Purchase at cost	-	27
Sale proceeds	(364)	-
Realised gains on sales	16	(2,039)
Transfer from Level 3 to Level 2	(4,056)	-
Movement in investment holding gains movement in unrealised	-	-
Closing fair value of investments	-	4,404

Trading Income

The Company’s subsidiary completes trading transactions. The value of assets held by the subsidiary as at 31 May 2019 was £nil (2018: £nil). The difference between the sale and purchase of assets is trading income recognised in the Income Statement.

13 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 Group (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 difference, 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 Group.

The Company’s investment objective sets limits on investments in derivatives with a high risk profile. The 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.

As at 31 May 2019, the Group has positions in the following type of derivative:

Options

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.

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.

During the year, the Company sold the FTSE 100 – September 2019 6,500 Put option and purchased the FTSE 100 – December 2020 6,300 Put option. At the Balance Sheet date, the Put option had a fair value of £6,313,000 and a notional portfolio exposure of £145,383,000. Unrealised holding losses of £440,000 are detailed in the table below.

During the prior year, the Company sold the FTSE 100 – March 2018 6,000 Put option, purchased and sold a FTSE 100 – March 2018 6,500 Put option, purchased and sold a FTSE 100 – March 2019 6,500 Put option and purchased a FTSE 100 – September 2019 6,500 Put option. At the Balance Sheet date, the Put option had a fair value of £4,378,000 and a notional portfolio exposure of £162,778,000. Unrealised holding losses of £2,876,000 are detailed in the table below.

Listed Put options at fair value through profit or loss at 31 May 2018		Year ended  31 May 2019  £’000	Year ended  31 May 2018  £’000
Opening book cost		7,254	7,445
Opening investment holding loss		(2,876)	(6,060)
Total investments designated at fair value		4,378	1,385
Analysis of investment portfolio movements
Opening valuation		4,378	1,385
Movements in the period:
Purchases at cost		6,753	16,450
Sales	– proceeds	(1,904)	(7,474)
	– losses on sales	(5,350)	(9,167)
Movement in unrealised loss		2,436	3,184
Closing fair valuation		6,313	4,378
Closing book cost		6,753	7,254
Closing unrealised loss		(440)	(2,876)
Closing fair value		5,313	4,378

	At 31 May 2019 £000	At 31 May 2018 £000
Transaction costs:
Cost on acquisitions	4	11
Costs on disposals	4	11
	8	22

	At  31 May 2019  £’000	At  31 May 2018  £’000
Analysis of capital losses on options
Realised losses on sales	(5,350)	(9,167)
Movement in unrealised losses	2,436	3,184
	(2,914)	(5,983)

14 Substantial Share Interests

The Company has notified interests in 3% or more of the voting rights of 14 (2018:22) investee companies (none of which are closed-end investment funds). The Board does not consider any of the Company’s other equity investments to be individually material in the context of the financial statements.

15 Investment in Subsidiary

The Company owns the whole of the issued ordinary share capital (£1) of DIT Income Services Limited, an investment dealing company registered in England and Wales. The registered office of the subsidiary is Beaufort House, 51 New North Road, Exeter, Devon EX4 4EP. The subsidiary is held at cost of £1 and has provided loans to the Company amounting to £900,000 at 31 May 2019 (2018: £843,000).

16 Trade and Other Receivables

	Group		Company
	31 May 2019 £’000	31 May 2018 £’000	31 May 2019 £’000	31 May 2018 £’000
Amounts due from brokers	3,193	240	3,193	240
Dividends receivable	1,730	1,484	1,730	1,484
Accrued income	83	100	83	100
Taxation recoverable	499	396	499	396
Prepayments and other debtors	82	111	82	111
	5,587	2,331	5,587	2,331

17 Trade and Other Payables

	Group		Company
	31 May 2019 £’000	31 May 2018 £’000	31 May 2019 £’000	31 May 2018 £’000
Amounts due to brokers	-	2,638	-	2,638
Amounts due to subsidiary	-	-	900	843
Other creditors	403	431	403	431
	403	3,069	1,303	3,912

18 Capital Commitments and Contingent Liabilities

At 31 May 2019, there were no outstanding commitments (2018: £40,000), or contingent liabilities (2018: £nil).

19 Analysis of Financial Assets and Liabilities

Investment Objective and Policy

The Group’s investment objective and policy are detailed above.

The Group’s investing activities in pursuit of its investment objective involve certain inherent risks.

The Group’s financial instruments comprise:

• shares and debt securities held in accordance with the Group’s investment objective and policies;

• derivative instruments for efficient portfolio management, gearing and investment purposes;

• cash, liquid resources and short-term debtors and creditors that arise from its operations; and

• current asset investments held by its subsidiary.

The risks identified arising from the Group’s financial instruments are market risk (which comprises market price risk, interest rate risk and foreign currency risk), liquidity risk and credit and counterparty risk. The Group may enter into derivative contracts to manage risk. The Group has held, sold and taken out listed Put options against the FTSE 100 Index during the year. 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 year.

Market Risk

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

The Group’s exposure to other changes in market prices as at 31 May 2019 on its equity and debt investments and listed Put option held at fair value through profit or loss was £332,561,000 (2018: £387,045,000).

A 10% increase in the market value of its investments at 31 May 2019 would have increased net assets attributable to shareholders by £33,256,000 (2018: £38,705,000). 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 and payable on its revolving credit facility. The Group’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 Group’s financial assets and liabilities, however, are non-interest bearing. As a result, the Group’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 limited exposure to interest bearing liabilities during the year ended 31 May 2019 (2018: same).

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.

As detailed above, at 31 May 2019 the Company held five (2018: eight) fixed income securities representing 2.0% of the total investment portfolio (2018: 2.6%).

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

As at 31 May 2019	Weighted average interest rate %	Floating rate £’000	Fixed rate £’000
Assets and liabilities
Fixed interest securities	7.90	-	7,308
Cash at bank	-	27,495	-
		27,495	7,308

As at 31 May 2018	Weighted average interest rate	Floating  rate  £’000	Fixed rate £’000
Assets and liabilities
Fixed interest securities	7.81	-	10,436
Cash at bank	-	16,708	-
		16,708	10,436

The weighted average interest rate is based on the current yield of each asset, weighted by its market value.

The weighted average fixed interest rate is based on the current yield of each asset, weighted by its current market value. The maturity dates and nominal interest rates on these investments held at fair value through profit or loss are shown in the portfolio information above. The weighted average years to maturity are 2.16 years (2018: 3.32 years).

The floating rate assets and liabilities consist of cash deposits on call earning interest at the prevailing market rates.

The interest rate risk sensitivity of the Group on its floating rate assets and liabilities is given below:

If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s net assets and profit for the year ended 31 May 2019 would increase/decrease by £137,000 (2018: increase/decrease by £84,000). This is attributable to the Group’s exposure to interest rates on its floating rate cash balances and bank overdraft as at the year ended 31 May 2019, and is not considered by the Directors to be representative for the year as a whole. If there was a fall in interest rates it would potentially impact the Company as above, by turning positive interest to negative interest.

Foreign currency risk

Although the Company’s performance is measured in sterling, a proportion of the Group’s assets may be either denominated in other currencies or are 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 Group’s assets were denominated in sterling and accordingly the only currency exposure the Group has is through the trading activities of its investee companies.

Liquidity Risk

Liquidity risk is not considered to be significant as the Group’s assets primarily comprise cash and readily realisable securities, which can under normal conditions be sold to meet funding commitments if necessary. They may, however, be difficult to realise in adverse market conditions. The Group can achieve short-term flexibility by the use of its overdraft facility.

The maturity profile of the Group’s financial liabilities of £403,000 (2018: £3,069,000) are all due in one year or less.

Credit and Counterparty Risk

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

The maximum exposure to credit risk as at 31 May 2019 was £39,395,000 (2018: £23,417,000). The calculation is based on the Group’s credit risk exposure as at 31 May 2019 and this may not be representative for the whole year.

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

Where the 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 Group of default.

Investment transactions are carried out with a number of brokers whose creditworthiness is reviewed by the Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Group’s custodian bank ensures that the counterparty to any transaction entered into by the Group has delivered on its obligations before any transfer of cash or securities away from the Group 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 Group’s assets are past due and the adoption of the expected credit loss model for impairment under IFRS 9 has not had a material impact on the Company.

Derivatives

The Manager may use derivative instruments in order to ‘hedge’ the market risk of part of the portfolio. The Manager reviews the risks associated with individual investments and, where they believe it appropriate, may use derivatives to mitigate the risk of adverse market (or currency) movements. The Manager discusses regularly the hedging strategy with the Board.

At the year end, there was one derivative contract open (2018: one). The FTSE 100 Put option aims to provide a limited degree of protection from a fall in the value of the FTSE 100 Index and has a strike price of 6,300, and would not materially impact the portfolio returns if a large market movement did occur. No other contacts were entered into during the year (2018: the Group also entered and exited March 2018 6,500 and March 2019 6,500 Put options and entered a September 2019 6,500 Put option).

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 31 May 2019 (2018: £nil). Also, as a public company the minimum share capital is £50,000.

	2019    £’000	2018    £’000
The Company’s capital at 31 May comprised:
Debt:
Bank loan facility	-	-
Equity:
Equity share capital	343	434
Retained earnings and other reserves	364,806	402,581
Total shareholders’ funds	365,240	403,015
Debt as a % of net assets	0.00%	0.00%

The Board, with the assistance of the 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 Manager’s view of the market;

• the need to buy back shares for cancellation or treasury, which takes account of the difference between the net asset value per share and the share price (i.e. the level of share price discount or premium);

• the need for 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.

20 Transactions with the Manager and Related Parties

The amounts paid to the Manager pursuant to the management agreement are disclosed in note 3. Management fees for the year amounted to £3,600,000 (2018: £3,718,000).

As at the year end, the following amounts were outstanding in respect of management fees: £292,000 (2018: £329,000).

Fees paid to the Company’s Directors are disclosed in the Directors' Remuneration Report in the full Annual Report. At the year end, there were no outstanding fees payable to Directors (2018: £nil).

There were no other identifiable related parties at the year end.

21 Post Balance Sheet Events

As detailed in note 9, the Company received redemption requests for 5,498,192 ordinary shares in respect of the 31 May 2019 Redemption Point. These shares were redeemed and cancelled by the Company with effect from 14 June 2019.

GLOSSARY

AIC

The Association of Investment Companies.

AIM

The Alternative Investment Market is a sub-market of the London Stock Exchange. It allows smaller companies to float shares with a more flexible regulatory system than applicable to the main market.

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.

The Company uses a number of APMs to provide information in order to assist the Board and Investment Manager in monitoring the Company in order for them to meet the objectives of the Company including the management of risk. These consist of, but are not limited to, key performance and financial performance indicators set out in the various relevant parts of the Report.

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 report and financial statements, the annual dividend and the appointment of the Directors and Auditor. It is also a good time for shareholders to meet the non-executive Directors. The Company’s AGM will be held on 9 October 2019 at 11.30 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.

Premium/(Discount) Calculation	31 May    2019  £’000	31 May 2018 £’000
Closing NAV per share (p)	95.17	105.09	(a)
Closing share price (p)	89.00	107.00	(b)
(Discount)/Premium (c = ((b - a) / a) x 100 (%)	(6.48)	1.82	(c)

The discount/premium and performance is calculated in accordance with guidelines issued by the AIC. The discount/premium is calculated using the NAV 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.

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.

International Financial Reporting Standards (“IFRS”)

Generally Accepted Accounting Principles (“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. 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.

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.

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 the Strategic Report above.

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 total NAV per share is calculated by dividing the NAV 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	31 May     2019   £’000	31 May  2018  £’000
Management fee	3,600	3,718
Other administrative expenses	781	723
Less one time costs	(42)	(3)
Total management fee and other administrative expenses	4,339	4,438	(a)
Average net assets in the year	374,922	392,925	(b)
Ongoing charges (c = a/b x 100) (%)	1.16	1.13	(c)

Peer Group

Diverse is part of the AIC’s UK Equity Income Investment Trust sector. The trusts in this universe are defined as trusts whose investment objective is to achieve a total return for shareholders through both capital and dividend growth. Typically, the funds will have a yield on the underlying portfolio ranging between 110% and 175% of that of the FTSE All-Share Index. They will also have at least 80% of their assets in UK listed securities.

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. The Company's SID is currently Jane Tufnell.

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 dividend income reinvested by the Company at the prevailing NAV.

NAV Total Return	31 May    2019  £’000	31 May 2018 £’000
Closing NAV per share (p)	95.17	105.09
Add back total dividends paid in the year ended 31 May 2019 (2018) (p)	3.73	3.55
Adjusted closing NAV (p)	98.90	108.64	(a)
Opening NAV per share (p)	105.09	103.43	(b)
NAV total return unadjusted (c = ((a-b)/b) x 100) (%)	(5.9)	5.0	(c)
NAV total return adjusted %*	(5.9)	5.2

Share Price Total Return	31 May   2019 £’000	31 May  2018 £’000
Closing share price (p)	89.00	107.00
Add back total dividends paid in the year ended 31 May 2019 (2018) (p)	3.73	3.55
Adjusted closing share price (p)	92.73	110.55	(a)
Opening share price (p)	107.00	102.50	(b)
Share price total return unadjusted (c = ((a-b)/b) x 100) (%)	(13.3)	7.9	(c)
Share price total return adjusted %*	(13.6)	8.1

* Based on NAV/share price movements and dividends being reinvested at the relevant cum dividend NAV/share price during the year. 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.

Volatility

The term volatility describes how much and how quickly the share price or net asset value of an investment has tended to change in the past. Those investments with the greatest movement in their share prices are known as having high volatility, whereas those with a narrow range of change are known as having low volatility.

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.

ANNUAL GENERAL MEETING

The Company’s Annual General Meeting will be held on Wednesday, 9 October 2019 at 11.30am, at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London EC2M 7SH.

NATIONAL STORAGE MECHANISM

A copy of the Annual Report and Accounts will be submitted shortly to the National Storage  Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/nsm 

ENDS

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

LEI: 2138005QFXYHJM551U45