Half Yearly Report

RNS Number : 0492R

Liontrust Asset Management PLC

14 November 2012

 

Embargoed until 0700 hours, Wednesday 14 November 2012

LIONTRUST ASSET MANAGEMENT PLC

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED

30 SEPTEMBER 2012

Liontrust Asset Management PLC ("Liontrust", the "Company", or the "Group"), the independent fund management group, today announces its Half Yearly Report for the six months ended 30 September 2012.

Results:

·     Revenues from Continuing Operations up 59% compared to the same period last year

·     Adjusted profit before tax of £0.9 million (2011: £22,000)

·     Loss before tax from Continuing Operations of £4.0 million (2011: £0.2 million), includes costs of £4.9 million relating to the acquisition of Walker Crips Asset Managers Limited, amortisation of the related intangible asset, and other non-cash and non-recurring costs (see note 6 below)

Assets under management:

·     On 30 September 2012, assets under management were £2.36 billion (2011: £1.19 billion)

·     Close of business on 12 November 2012, assets under management were £2.38 billion

Fund flows:

·     Net inflows for the six months to 30 September 2012 of £189 million (2011: £59 million)

Commenting on the results, John Ions, Chief Executive, said:

"Liontrust has enjoyed a very strong first six months of the financial year, continuing the substantial progress the business has made over the past couple of years. We have generated net inflows of £189 million in the period, making it nine successive quarters of positive net sales and taking our assets under management to £2.4 billion. 

"Fund performance and distribution capability are key to this trend continuing. Since the funds were launched or the current fund managers were appointed, all bar one of our nine unit trust funds have outperformed their benchmark and the average fund performance in their respective sectors. While there has been much focus recently on the cost of fund management, we continue to believe that investors will be prepared to pay for active managers who can deliver outperformance and in our case this has been achieved across our fund management teams.

"Fund management companies face many challenges ahead which I believe will create excellent opportunities for groups with clear focus and strategy. We will continue to recruit high quality fund management talent to enhance and diversify further our current capability when the opportunity arises whilst building on our strong organic momentum.

"We have also maintained our focus on broadening and deepening our relationships with institutional and intermediary clients. This will take on even greater importance in the post-RDR (Retail Distribution Review) world as fewer and more powerful distributors emerge who will control ever increasing amounts of fund flows. The distinct, clear and robust investment processes applied by our fund management teams allied to our excellent long-term fund performance will offer us tremendous opportunities following the implementation of RDR.

"These developments give me great confidence that we can continue to grow our assets under management and therefore increase revenues and profitability."

For further information please contact:

Liontrust Asset Management                                                     020 7412 1700

John Ions                                                                                             www.liontrust.co.uk

Vinay Abrol

Simon Hildrey - Head of Marketing & Communications

N+1 Singer                                                                                          020 7496 3000

Jonny Franklin-Adams

Jenny Wyllie

Chairman's Statement

Introduction

Liontrust has continued its expansion in the first six months of the financial year in spite of the headwinds facing the asset management industry in the form of continued economic uncertainty, volatile stock markets and investor nervousness. We have again delivered net positive sales over the past two quarters and an adjusted profit before tax.

A key driver behind the growth has been our strong fund performance. We benefit from excellent long-term track records across our fund management teams, which bodes well for continued sales in the future. We have launched the appropriate share classes for the post-RDR world and believe the experience and expertise of our fund management teams, our distinct investment processes and performance will ensure we flourish next year and beyond.

Our fund management capability has been enhanced further by the successful completion and integration of the acquisition of Walker Crips Asset Managers Limited. A great deal of our sales activity is currently focused on this team and we have received very positive feedback from the market.

I am optimistic about the future prospects for growing our assets under management ("AuM") while keeping a focus on managing costs. This will benefit the business and shareholders alike. 

Results

Adjusted profit before tax was £0.902 million (2011: £22,000). Adjusted profit (or loss) before tax is disclosed in order to give shareholders an indication of the profitability of the Group excluding the gain on the sale of the credit business, non-cash (depreciation, intangible asset amortisation and share incentivisation related) expenses and non-recurring (acquisition, cost reduction, restructuring, share incentivisation and severance compensation related) expenses ("Adjustments"), see note 6 below for a reconciliation of adjusted profit (or loss) before tax.  

Loss before tax from Continuing Operations of £3.678 million for the six months ended 30 September 2011 (2011: £0.352 million) includes a loss of £4.854 million (2011: gain of £1.680 million) of Adjustments.

AuM

AuM as at close of business on 30 September 2012 stood at £2,364 million, an increase of 55% since 31 March 2012.

AuM as at close of business on 30 September 2012 were broken down by type and process as follows:-

Process	Total	Institutional	Retail	Offshore Funds
	£m	£m	£m	£m
Cashflow Solution	826	404	395	27
Economic Advantage	918	-	918	-
Macro Thematic	554	166	388	-
Asia	15	-	4	11
Indexed	51	-	51	-
Total	2,364	570	1,756	38

AuM as at close of business on 12 November 2012 were £2,380 million.

Fund Flows

Net inflows of £189 million were achieved for the six months ended 30 September 2012 (2011: £59 million).

A reconciliation of fund flows and AuM over the six month period to 30 September 2012 is as follows:-

	Total	Institutional	UK Retail	Offshore Funds
	£m	£m	£m	£m
Opening AuM - 1 April 2012	1,529	388	1,088	53
Inflows	427	39	388	0
Outflows	(238)	(24)	(202)	(12)
Net flows	189	15	186	(12)
Acquisition of Walker Crips Asset Managers Ltd *	581	160	421	0
Market movement	65	7	61	(3)
Closing AuM - 30 September 2012	2,364	570	1,756	38

Performance fees

Performance fees of £20,000 were earned in the six months to 30 September 2012 (2011: £576,000, of which £119,000 related to the credit business, the disposal of which completed on 30 June 2011).

Awards

We are proud to announce a hat-trick of awards for Liontrust in the six months to 30 September 2012:

·     The Liontrust Special Situations Fund won the "Best UK Growth Fund" at the Investment Week Fund Manager of the Year Awards in July for the second year running.

·     Liontrust has been named the "Best UK Equity Group" by Money Observer magazine.

·     Liontrust Special Situations Fund won the "Best UK Equity Growth Fund" Award from What Investment magazine.

Fund Performance (Quartile ranking)

The strength of Liontrust's fund management capability is shown by the fact that all bar one of nine unit trust funds have out-performed their respective IMA sector average since launch or since the fund managers were appointed to 31 October 2012. Liontrust Special Situations Fund was ranked second out of 216 funds in the IMA UK All Companies sector over this period while another five of the funds were in the first quartile of their respective sectors. 

	Quartile ranking - 1 year	Quartile ranking - 3 year	Quartile ranking - 5 year	Quartile ranking - Since Manager tenure	Launch / Manager appointed
Liontrust Income Fund	2	2	-	1	25/03/2009
Liontrust UK Growth Fund	1	1	-	1	25/03/2009
Liontrust Special Situations Fund	1	1	1	1	10/11/2005
Liontrust UK Smaller Companies Fund	1	1	1	1	08/01/1998
Liontrust European Absolute Return Fund	4	4	-	4	08/07/2009
Liontrust European Growth Fund	4	1	1	1	15/11/2006
Liontrust Asia Income Fund	-	-	-	2	05/03/2012
Liontrust Macro Equity Income Fund	4	3	1	2	31/10/2003
Liontrust Macro UK Growth Fund	4	3	2	2	01/08/2002

Source: Financial Express, total return, bid to bid, to 31 October 2012 unless otherwise stated.  The above funds are all UK authorised unit trusts (retail share class).  Liontrust FTSE 100 Tracker Fund (index fund) and Liontrust Macro UK High Alpha Fund (proposed to, subject to appropriate approvals, merge into Liontrust Macro UK Growth Fund) not included. Past performance is not a guide to the future; the value of investments and the income from them can fall as well as rise. Investors may not get back the amount originally subscribed.

Outlook

Net positive sales in the first half of the financial year and the acquisition of Walker Crips Asset Managers Limited has continued the growth momentum that Liontrust has built up over the past couple of years. With excellent long-term fund performance spread across different fund management teams, the broadening of our client base and a significantly higher level of assets under management than 12 months ago, we have strong foundations in place from which to continue to expand the business.  

Adrian Collins

Chairman

Consolidated Statement of Comprehensive Income

Six months ended 30 September 2012

			Six	Six	Year
			months to	months to	ended
			30-Sep-12	30-Sep-11	31-Mar-12
			(unaudited)	(unaudited)	(audited)
		Notes	£'000	£'000	£'000
Continuing Operations
Revenue		3	8,227	5,185	13,714
Cost of sales			(53)	(44)	(76)
Gross profit			8,174	5,141	13,638
Realised (loss)/gain on sale of financial assets			(8)	212	212
Administration expenses		5	(12,009)	(5,518)	(15,445)
Operating loss from Continuing Operations			(3,843)	(165)	(1,595)
Interest payable			(113)	-	-
Interest receivable			4	10	22
Loss before tax from Continuing Operations			(3,952)	(155)	(1,573)
Taxation		7	274	(197)	(250)
Loss for the period from Continuing Operations			(3,678)	(352)	(1,823)
Discontinued Operations
Realised gain on sale of credit business		4	-	1,834	1,569
Profit after tax for the period from Discontinued Operations (attributable to equity holders of the Company)		4	-	17	17
(Loss)/profit for the period			(3,678)	1,499	(237)
Other comprehensive income:
Net (losses)/gains on available-for-sale financial assets net of tax			(8)	61	61
Amounts recycled through the Consolidated Statement of Comprehensive Income			8	(212)	(212)
Other Comprehensive income for the period, net of tax			-	(151)	(151)
Total comprehensive income			(3,678)	1,348	(388)
			Pence	Pence	Pence
Basic earnings per share		8	(10.46)	4.92	(0.73)
Diluted earnings per share		8	(10.37)	4.89	(0.73)
The notes 1 to 15 form an integral part of this condensed consolidated interim financial information.

Consolidated Balance Sheet

As at 30 September 2012

			30-Sep-12	30-Sep-11	31-Mar-12
			(unaudited)	(unaudited)	(audited)
		Notes	£'000	£'000	£'000
Assets
Non current assets
Intangible assets		10	12,002	-	1,100
Property, plant and equipment			113	134	121
Deferred tax assets			1,912	1,985	1,638
Total Non current assets			14,027	2,119	2,859
Current assets
Trade and other receivables			15,394	10,800	18,462
Financial assets		11	111	369	295
Cash and cash equivalents			6,034	12,639	12,388
Total current assets			21,539	23,808	31,145
Liabilities
Non current liabilities
Convertible unsecured loan stock - Loan component		12	(3,521)	-	-
Total Non current liabilities			(3,521)	-	-
Current liabilities
Trade and other payables			(15,567)	(8,809)	(16,932)
Accruals			(288)	(153)	(233)
Total current liabilities			(15,855)	(8,962)	(17,165)
Net current assets			5,684	14,846	13,980
Net assets			16,190	16,965	16,839
Shareholders' equity
Ordinary shares			389	353	371
Share premium			13,801	10,272	11,552
Capital redemption reserve			15	15	15
Convertible unsecured loan stock - Equity component		12	479	-	-
Retained earnings			13,678	18,497	17,073
Own shares held			(12,172)	(12,172)	(12,172)
Total equity			16,190	16,965	16,839

The notes 1 to 15 form an integral part of this condensed consolidated interim financial information.

Consolidated Cash Flow Statement

Six months ended 30 September 2012

				Six	Six	Year
				months to	months to	ended
				30-Sep-12	30-Sep-11	31-Mar-12
				(unaudited)	(unaudited)	(audited)
				£'000	£'000	£'000
Cash flows from operating activities
Cash inflow from operations				11,599	7,961	14,351
Cash outflow from operations				(12,626)	(9,381)	(15,914)
Cash inflow/(outflow) from changes in unit trust receivables and payables				679	375	(754)
Net cash used in operations				(348)	(1,045)	(2,317)
Interest (paid)/received				(109)	10	22
Tax received				-	70	1,035
Net cash used in operating activities				(457)	(965)	(1,260)
Cash flows from investing activities
Purchase of property and equipment				(9)	(32)	(41)
Sale of credit business				-	1,393	2,434
Acquisitions				(12,240)	-	(2,166)
Sale of seeding investments				161	8,086	7,966
Purchase of seeding investments				(97)	-	-
Net cash (used in)/from investing activities				(12,185)	9,447	8,193
Cash flows from financing activities
Issue of new shares				2,288	-	1,298
Issue of Convertible unsecured loan stock				4,000	-	-
Net cash from financing activities				6,288	-	1,298
Net (decrease)/increase in cash and cash equivalents				(6,354)	8,482	8,231
Opening cash and cash equivalents*				12,388	4,157	4,157
Closing cash and cash equivalents				6,034	12,639	12,388

* Cash and cash equivalents consists only of cash balances.

Consolidated Statement of Change in Equity

Six months ended 30 September 2012

		Share	Share	Capital	Re-	Convertible	Retained	Own shares	Total
		capital	premium	redemption	valuation	Loan Equity	earnings	held	Equity
						Element
		£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000
Balance at 1 April 2012 brought forward		371	11,552	15	-	-	17,073	(12,172)	16,839
Loss for the period		-	-	-	-	-	(3,678)	-	(3,678)
Net loss on available-for-sale financial assets net of tax		-	-	-	(8)	-	-	-	(8)
Amounts recycled through the Consolidated Statement of Comprehensive Income		-	-	-	8	-	-	-	8
Total comprehensive income for the period		-	-	-	-	-	(3,678)	-	(3,678)
Addition of Convertible unsecured loan stock -  Equity component		-	-	-	-	479	-	-	479
Shares issued		18	2,249	-	-	-	-	-	2,267
Equity share options issued		-	-	-	-	-	283	-	283
Balance at 30 Sep 2012		389	13,801	15	-	479	13,678	(12,172)	16,190

Consolidated Statement of Change in Equity

Six months ended 30 September 2011

		Share	Share	Capital	Re-	Retained	Own shares	Total
		capital	premium	redemption	valuation	earnings	held	Equity
		£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000
Balance at 1 April 2011 brought forward		353	10,272	15	151	16,703	(12,172)	15,322
Profit for the period		-	-	-	-	1,499	-	1,499
Net gain on available-for-sale financial assets net of tax		-	-	-	61	-	-	61
Amounts recycled through the Consolidated Statement of Comprehensive Income		-	-	-	(212)	-	-	(212)
Total comprehensive income for the period		-	-	-	(151)	1,499	-	1,348
Shares issued		-	-	-	-	-	-	-
Equity share options issued		-	-	-	-	295	-	295
Balance at 30 Sep 2011		353	10,272	15	-	18,497	(12,172)	16,965

Consolidated Statement of Change in Equity

Year ended 31 March 2012

		Share	Share	Capital	Re-	Retained	Own shares	Total
		capital	premium	redemption	valuation	earnings	held	Equity
		£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000
Balance at 1 April 2011 brought forward		353	10,272	15	151	16,703	(12,172)	15,322
Loss for the period		-	-	-	-	(237)	-	(237)
Net gains on available-for-sale financial assets net of tax		-	-	-	61	-	-	61
Amounts recycled through the Consolidated Statement of Comprehensive Income		-	-	-	(212)	-	-	(212)
Total comprehensive income for the year		-	-	-	(151)	(237)	-	(388)
Shares issued		18	1,280	-	-	-	-	1,298
Equity share options issued		-	-	-	-	607	-	607
Balance at 31 March 2012		371	11,552	15	-	17,073	(12,172)	16,839

Notes to the Financial Statements

1.    Principal accounting policies

Basis of Preparation

This Half Yearly Report is unaudited and does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The financial information for the half years ended 30 September 2012 and 2011 has not been audited or reviewed by the auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. The statutory accounts for 2012, which were prepared in accordance with International Financial Reporting Standards ("IFRS"), comprising standards and interpretations approved by either the International Accounting Standards Board or the International Financial Reporting Interpretations Committee or their predecessors, as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies. The auditors' opinion on these accounts was unqualified and did not contain a statement made under s498 of the Companies Act 2006.                                         

The financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority ("DTR") and with IAS 34 'Interim Financial Reporting'.                                            

The accounting policies applied in this Half Yearly Report are consistent with those applied in the Group's most recent annual accounts.                                             

At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but either not endorsed or not yet effective:                                            

IFRS 9    Financial instruments: Classification                     

The Directors anticipate the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.                                           

2.    Segmental reporting

The Group's operates only in one business segment - Investment management.                                            

The Group offers different fund products through different distribution channels. All financial, business and strategic decisions are made centrally by the Board, which determines the key performance indicators of the Group. The Group reviews financial information presented at a Group level. The Board, is therefore, the chief operating decision-maker for the Group. The information used to allocate resources and assess performance is reviewed for the Group as a whole. On this basis, the Group considers itself to be a single-segment investment management business.                                           

3.    Revenue from Continuing Operations

	Six	Six	Year
	months to	months to	ended
	30-Sep-12	30-Sep-11	31-Mar-12
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Revenue
- Revenue	8,207	4,728	9,831
- Performance fee revenue	20	457	3,883
Total Revenue	8,227	5,185	13,714

4.    Discontinued Operations

In July 2011, the Group completed the sale of its credit business including its credit team to Avoca Capital Holdings (the "Disposal"). The two funds that the credit team managed, the Liontrust Credit Absolute Return Fund and the Liontrust Credit Fund were transferred to Avoca. The total consideration for the Disposal was 3.75% of the assets under management transferred. The gain on this has been calculated as follows:

	Six months to	Six months to	Year ended
	30-Sep-12	30-Sep-11	31-Mar-12
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Proceeds received from sale	-	2,490	2,490
Costs associated with sale	-	(56)	(56)
Cost of intangible asset held on balance sheet	-	(600)	(600)
Taxation on gain	-	-	(265)
Realised gain on sale of credit business	-	1,834	1,569
Revenue	-	275	275
Member and Employee expenses	-	(223)	(223)
Administrative expenses	-	(29)	(29)
Tax	-	(6)	(6)
Profit after tax from Discontinued Operations	-	17	17

5.    Administration expenses from Continuing Operations

	Six	Six	Year
	months to	months to	ended
	30-Sep-12	30-Sep-11	31-Mar-12
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Employee related expenses
Director and employee costs	1,089	1,560	4,533
Share incentivisation expense	176	235	380
Severance compensation	154	-	147
	1,419	1,795	5,060
Non employee related expenses
Members' drawings charged as an expense	4,173	1,446	3,458
Acquisition costs	1,738	-	690
Members' share incentivisation expense	117	73	241
Members' severance compensation	387	-	-
Cost reduction and restructuring programme	395	-	515
Depreciation and intangible asset amortisation	1,356	22	1,109
Other administration expenses	2,424	2,182	4,372
Total administration expenses	12,009	5,518	15,445

6.    Adjusted profit (or loss) before tax

Adjusted profit (or loss) before tax is disclosed in order to give shareholders an indication of the profitability of the Group excluding the gain on the sale of the credit business, non-cash (depreciation, intangible asset amortisation and share incentivisation related) expenses and non-recurring (acquisition, cost reduction, restructuring, share incentivisation and severance compensation related) expenses, and is reconciled in the table below.

	Six	Six	Year
	months to	months to	ended
	30-Sep-12	30-Sep-11	31-Mar-12
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
(Loss)/Profit for the period	(3,678)	1,499	(237)
Taxation on Continuing Operations	(274)	197	250
Taxation on Discontinued Operations	-	6	271
(Loss)/Profit before tax from Continuing and Discontinued Operations	(3,952)	1,702	284
Employee related share incentivisation expense	176	235	621
Member related share incentivisation expense	117	73	-
Severance compensation	541	-	147
Gain on sale of credit business	-	(1,834)	(1,834)
Acquisition related costs	1,738	-	690
Cost reduction and restructuring	395	-	515
Members' advance drawings	531	(176)	(531)
Depreciation and Intangible asset amortisation	1,356	22	1,109
Adjustments	4,854	(1,680)	717
Adjusted profit before tax	902	22	1,001

7.    Taxation

The half yearly tax charge has been calculated at the estimated full year effective UK corporation tax rate of 24% (2011: 26%).

8.    Earnings per share

The calculation of basic earnings per share is based on profit after taxation and the weighted average number of Ordinary Shares in issue for each period. The weighted average number of Ordinary Shares for the six months ended 30 September 2012 was 35,157,320 (30 September 2011: 31,617,555, 31 March 2012: 32,268,104). Shares held by the Liontrust Asset Management Employee Trust are not eligible for dividends and are treated as cancelled for the purposes of calculating earnings per share.

Diluted earnings per share is calculated on the same bases as set out above, after adjusting the weighted average number of Ordinary Shares for the effect of options to subscribe for new Ordinary Shares that were in existence during the six months ended 30 September 2012. The adjusted weighted average number of Ordinary Shares so calculated for the period was 35,454,359 (30 September 2011: 31,815,023, 31 March 2012: 32,465,594). This is reconciled to the actual weighted number of Ordinary Shares as follows:

		30-Sep-12	30-Sep-11	31-Mar-12
Weighted average number of Ordinary Shares		35,157,320	31,617,555	32,268,104
Weighted average number of dilutive Ordinary shares under option:
- to Liontrust Senior Incentive Plan		99,013	-	-
- to Liontrust Incentive Plan		198,026	197,468	197,490
- to Liontrust Option Plan		-	-	-
Adjusted weighted average number of Ordinary Shares		35,454,359	31,815,023	32,465,594

9.    Acquisition of Walker Crips asset Managers Limited

On 13 March 2012, Liontrust announced that it had entered into a conditional share purchase agreement with Walker Crips Group Plc ("Walker Crips") to purchase (the "Acquisition") the entire issued share capital of Walker Crips Asset Managers Limited. The Acquisition completed on 12 April 2012 and Liontrust issued 1,851,719 new Ordinary shares, £4 million of Convertible unsecured loan stock (see note 12 below) and £6,447,853 in cash as consideration payable to Walker Crips, which included net assets of £0.448 million.

10.  Intangible assets

Intangible assets represent investment management contracts that have been capitalised upon acquisition and are amortised on a straight-line basis over a period of 5 years. The intangible asset on the balance sheet represents investment management contracts as follows:

		30-Sep-12	30-Sep-11	31-Mar-12
		£'000	£'000	£'000
Intangible asset from the acquisition of Occam		883	-	1,100
Intangible asset from the acquisition of Walker Crips Asset Managers Limited		11,119	-	-
		12,002	-	1,100

11.  Financial assets

Assets held at fair value through profit and loss:

The Group's assets held at fair value through profit and loss represent units in the UK Authorised unit trusts and shares in sub-funds of the Liontrust Guernsey Fund Limited (a Guernsey domiciled Open ended investment company) held in the manager's box and are valued at bid price.

Assets held as available-for-sale              :                                              

The Group's assets held as available-for-sale represent shares in the Liontrust European Absolute Alpha Return Fund (a sub-fund of Liontrust Umbrella Fund PLC (a Dublin Open ended investment company) and are valued at bid price).                                                     

12.  Convertible unsecured loan stock

On 12 April 2012, as part of the consideration for the acquisition of Walker Crips Asset Managers Limited (see note 9 above),  the Company issued £4 million of Convertible unsecured loan stock (the "Stock"), which may convert into 4 million new Ordinary Shares limited to the total quantity being issued is no more than 4.99% of the number of Ordinary Shares already admitted to trading on a regulated market situated or operated in the United Kingdom at that time in the first year after issuing and no more than 9.99% per year thereafter until the maturity date, being 5 years at the Stockholder's option. The Directors have chosen to present the Stock, in accordance with IAS 32 (Financial Instruments: Presentation), as a financial instrument that contains both a liability and equity component. The liability component has been determined as £3.521 million and is shown as a financial liability; the balance of £0.479 million, being the equity component, is treated as an equity instrument.                                              

13.  Related party transactions

During the six months to 30 September 2012 the Group received fees from unit trusts under management of £8,107,000 (2011: £5,673,000). Transactions with these unit trusts comprised creations of £275,753,000 (2011: £139,394,000) and liquidations of £60,261,000 (2011: £99,590,000). Directors can invest in unit trusts managed by the Group on commercial terms that are no more favourable than those available to staff in general. As at 30 September 2012 the Group owed the unit trusts £11,141,000 (2011: £3,507,000) in respect of unit trust creations and was owed £918,000 (2011: £627,000) in respect of unit trust cancellations and fees.  

  During the six months to 30 September 2012 remuneration paid to key decision makers (the Executive Directors) was  £400,000 (2011: £325,000).         

14.  Key risks

The Directors have identified the risks and uncertainties that affect the Group's business and believe that they will be substantially the same for the second half of the year as the current risks as identified in the 2012 Annual Report.  These can be broken down into risks that are within the management's influence and risks that are outside it.                                                                                                                                                                                                                                                            

Risks that are within management's influence include areas such as the expansion of the business, prolonged periods of under-performance, loss of key personnel, human error, poor communication and service leading to reputational damage and fraud.

Risks outside the management's influence include falling markets, terrorism, a deteriorating UK economy, investment industry price competition and hostile takeovers.                                                                                                                                                                                                                                          

Management monitor all risks to the business, they record how each risk is mitigated and have warning flags to identify increased risk levels. Management recognise the importance of risk management and view it as an integral part of the management process which is tied into the business model and is described further in the Risk management and internal control section on page 17 of the 2012 Annual Report and Note 2 "Financial risk management" on page 35 of the 2012 Annual Report.              

15.  Directors' responsibilities

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the Half Yearly Report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

By Order of the Board

John S. Ions                                                        Vinay K. Abrol

Chief Executive                                                 Chief Operating Officer and Chief Financial Officer

Forward Looking Statements                                                                                    

This report contains certain forward-looking statements with respect to the financial condition, results of operations and businesses and plans of the Group. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that have not yet occurred. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.

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