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The Diverse Income Trust Plc (DIVI)

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Thursday 18 February, 2021

The Diverse Income Trust Plc

Half-year Report

THE DIVERSE INCOME TRUST PLC

HALF-YEARLY FINANCIAL REPORT

The Directors present the Half-Yearly Financial Report of the Company for the period to 30 November 2020.

RESULTS FOR THE HALF YEAR TO 30 NOVEMBER 2020

NAV total return to shareholders of 11.7%, 4.8% ahead of the return on the UK market This includes the increase in NAV, plus the dividends paid during the half year and compares with an increase in the FTSE All-Share Index of 6.9% on a total return basis over the six months to 30 November 2020. The share price total return was 11.0% as the discount was slightly wider at the end of November 2020 than the end of May 2020.

Dividends maintained The first and second interim dividends in respect of the period have been held at the same level as the previous year despite a moderate fall of 11.1% in portfolio income. The Board expects at least to maintain the full year dividend, if necessary by using revenue reserves to support dividend growth until portfolio income recovers fully.

Retained revenue reserves brought forward represent retained earnings from previous years of more buoyant portfolio dividends The investment trust structure enables the Company to use such reserves to support distributions in years when incoming portfolio revenue is less buoyant. As already stated in the 2020 Annual Report, the Group used part of its retained revenue reserves to support dividend growth in that year. Revenue earnings of 1.77p per share for this interim period fully covered the two dividends in respect of the period, which were 1.75p per share in total, so there was no further requirement to make use of brought-forward revenue reserves during the period. The Board expects at least to maintain the full year dividend. Although there is a possibility that at the year-end there may be a shortfall in portfolio revenue due to the pandemic, the Board is prepared to use the revenue reserves to support dividend growth until portfolio income recovers fully.

Summary of Results

 30 November                       2020  30 November 
2019 
31 May 
   2020 
NAV per ordinary share 97.10p  95.23p  88.82p 
Ordinary share price (mid) 91.00p  91.60p  84.00p 
Discount to NAV1 6.3%  3.8% 5.4%
Revenue return per ordinary share 1.77p  1.99p  3.27p 
Ongoing charges1 1.07%2 1.11% 1.09%
Ordinary shares in issue 358,045,105   378,289,047  378,289,047  

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

2 Estimated as at 30 November 2020. Ongoing charges are the Company’s annualised revenue and capitalised 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.

CHAIRMAN’S STATEMENT

This report covers the six-month period between 31 May and 30 November 2020, a period when many stock markets staged a recovery after a sharp sell-off earlier in the year at the start of the global pandemic.

Total returns over the half year

Although pandemic control continued to be problematic over the period under review, the news of successful vaccine trials led to a major rally in stock markets towards the end of the half year. The Trust’s NAV total return of 11.7% over the six-month period, compares with the 6.9% total return of the FTSE All-Share Index including dividend income. The share price total return was 11.0%. Improving recovery hopes following the vaccine news spurred a rebound in some of the consumer-linked and other cyclical share prices, which helped the FTSE SmallCap Index (excluding Investment Companies) to deliver a total return of 24.6% over the half year, while that of the FTSE AIM All-Share Index was 20.5%. Both were well ahead of the wider UK market’s returns, after a period of being shunned by investors leery of UK economic exposure.

Revenue returns over the half year

The NAV total return quoted above includes both the capital appreciation of the Trust’s portfolio, and the revenue per share from the portfolio which funds the Trust’s four dividends to shareholders each year. Towards the end of the Trust’s previous year to May 2020, corporate profitability fell steeply due to the pandemic, with many UK-quoted companies having subsequently cut their dividends to investors. The Trust’s revenue per share over this half-year period was 1.77p, compared with the 1.99p revenue per share last year. This was a resilient outcome during a period when many other trusts’ revenues were down by much larger percentages. Both the first and the second interim dividends to shareholders, of 0.85p and 0.90p respectively this year, are the same as last year's. The Board has stated that it expects the Trust’s four dividends for the current year at least to match last year’s total of (3.70p), although this may involve drawing upon past revenue reserves if the Trust’s revenue for the current year is insufficient.

Total return since the Trust was first listed in April 2011

Between 28 April 2011, the date the Trust was first listed, and the end of November 2020, the NAV total return of the Trust was 174.2%, nearly three times the total return on the FTSE All-Share Index over the same period, at 58.9%. Over the same period, the total return on the FTSE 250 index was 108.6%, that on the FTSE SmallCap Index (excluding Investment Trusts) was 122.4% and the FTSE AIM All-Share Index total return was 27.4%. So, the Company, which invests across the market capitalisation spectrum, has beaten the returns on all the principal component indices in the market.

Share redemptions

Over the half year under review, the Trust’s share price and NAV total returns grew at similar rates. With the ongoing investor anxiety during the initial pandemic lockdown period, exacerbated by concerns about Brexit, there was an imbalance of daily buyers and sellers over the half year, and the Trust’ share price had traded at an average discount of 7.3%. This is wider than the Board would expect in normal times and the Board has shareholder authority to buy back shares when the discount is anomalously wide. Clearly these were not normal times and as sentiment stabilised during the summer, the discount narrowed from over 12% in June 2020 to under 7% at the end of November 2020.

In order to help to moderate discount volatility, the Trust offers shareholders the option to redeem all their shares each year. The next redemption point for shareholders will be at the end of May 2021, for those who submit requests during April 2021.

Board succession

This is my first report to you as your Chairman. Please feel free to get in touch with me if you have suggestions, questions or concerns about the Company. Shareholders have every reason to be grateful to Michael Wrobel, my predecessor as Chairman. He and his Board presided over a highly successful first phase of the Company’s life, from its launch in April 2011 until the AGM in October 2020– a truly eventful period which our Manager has navigated with considerable skill. Calum Thomson took over as Senior Independent Director following the AGM.

Prospects

The Trust’s investment universe covers a wider range of industry sectors than others, including well-established mainstream stocks and younger businesses listed on the AIM exchange. The broader opportunity set offers the choice of a greater number of individual successful companies with superior dividend prospects, suitable for inclusion in the Trust’s portfolio. These factors have been reflected in the Trust’s differentiated investment exposure and its outperformance of the comparative stock market indices since April 2011. A second advantage of the more diversified sources of income is the relative resilience of portfolio revenue compared with the highly concentrated income on offer in the FTSE 100 index (where many dividends believed to be reliable were cut in 2020). The Company is also attentive to opportunities for portfolio risk to be scaled back, where warranted, or for gearing to be used with the objective of enhancing returns.

Concerns about the economic risks of Brexit and the associated political uncertainty have complicated the investment story for the UK market, which has performed poorly since 2015. Part of this may be structural, owing to the weightings in mature or low-growth sectors, while part may offer an opportunity to invest in attractive companies whose individual prospects are being dismissed owing to investors’ concerns about the market as a whole. This landscape is, of course, what our Manager’s experienced stock-picking team is employed to navigate on behalf of shareholders. With economic recovery evidently at the top of the political agenda, interest rates at record lows and the “B” word looking date-expired as an excuse for ignoring UK domestic stocks, the prospects for an active stock picking approach in the somewhat neglected UK equity market appear above average.

Finally, 2020 was a year when humanity as the globe’s dominant species was humbled by one of its smallest. It was also a year when scientific minds were able to devise multiple effective vaccines for the coronavirus in less than a tenth of the usual time. This cannot erase the human, often irreversible, effects of the COVID-19 pandemic but it helps to reinforce an optimistic view of mankind’s ability to overcome setbacks and create a better future for succeeding generations. Investment success in the stock market is ultimately rooted in finding companies that do things useful to others better than their competitors do. In a changing world, that is a key driver of active investment management. Another factor is that cash speaks truth. Finding companies that sustainably generate surplus cash is at the heart of what the team at Premier Miton is seeking do, in order to deliver a growing income and on its back, growing shareholder total returns.

Andrew Bell
Chairman

17 February 2021
 

MANAGER’S REPORT

Who are the fund managers of the Trust?

The Company is managed by Premier Portfolio Managers Limited, a wholly-owned subsidiary of Premier Miton Group plc. Premier Miton Group plc is an independent, listed fund management company, formed from the merger of Premier Asset Management and Miton Group in November 2019. The group has a well-established reputation for successfully managing UK-quoted smaller company portfolios over the longer term. Miton Group was appointed as Manager when the Trust listed in April 2011.

The day-to-day management of the Trust’s portfolio continues to be carried out by Gervais Williams and Martin Turner, who came together at the time of the Trust’s launch. Martin and Gervais have had a close working relationship since 2004, with complementary expertise that led them to back a series of successful companies.

Gervais Williams

Gervais joined Miton in March 2011 and is Head of Equities in Premier Miton. He has been an equity fund manager since 1985, including 17 years at Gartmore. He was named Fund Manager of the Year by What Investment? in 2014. Gervais is also a board member of the Quoted Companies Alliance and a member of the AIM Advisory Council.

Martin Turner

Martin joined Miton in May 2011. Martin qualified as a Chartered Accountant with Arthur Andersen and had senior roles and extensive experience at Merrill Lynch and Collins Stewart.

In the half year to November 2020 , the Trust ’s revenues fell slightly and yet its dividends to shareholders were maintained. How sustainable are the Company’s dividends?

For many years, as the cost of borrowing progressively fell, asset valuations simultaneously rose to the extent that many quoted companies were confident enough to scale back their margins of safety. The global pandemic however, led the boards of many to worry that their past assumptions may have been too risky and numerous quoted companies passed their dividends in the period from March to May 2020 – just prior to the start of the half year under review.

Over the half-year period to November 2020, some of the Trust’s portfolio holdings, such as Amino, had not resumed dividend payments, and oil majors such as BP and Royal Dutch Shell had greatly reduced theirs compared with last year. Interestingly, some portfolio holdings have already found that they were overly cautious in the March to May 2020 period, so have subsequently resumed dividend payments after only a short break. Direct Line and Admiral car insurance companies, for example, have not only resumed their previous dividend policies, but also paid additional dividends during this period to make up for those passed in the period between March and May 2020. Others, like CMC Markets, have thrived during the volatile stock market conditions, and considerably increased the dividends they have paid to investors.

Prior to the current period, when the FTSE 100 suffered its major setback in March 2020, the Trust’s holding in a FTSE 100 Put option was sold, bringing in £20m of additional portfolio capital. As this cash has been invested, it has brought in additional dividend revenue for the Trust.

In aggregate, the Trust’s revenue per share has fallen back very modestly over this half-year period as compared with the half year to November 2019. Although some of the Trust’s portfolio holdings may not recover as fast as investors hope, we believe that the prospective revenue per share for the current year to May 2021 will rise ahead of that for the year to May 2020. With this in mind, the Board has stated that it intends at least to maintain the annual dividend this year, as it did last year, even if this involves drawing upon past reserves.

What were the main contributors to the Trust’s outperformance over the half year?

The half year between the end of May and the end of November 2020 was a period when stock markets around the world rallied as good vaccine news more than offset ongoing worries about COVID-19 hotspots. During the half year, the share prices of CMC Markets, AO World and 888 Holdings all appreciated substantially as their businesses continued to thrive through the global recession. Between them, they enhanced the Trust’s return over the half year by over 4.0%.

In contrast, the share prices of Manolete, Centamin and Avacta fell back and collectively detracted just over 1.8% from the Trust’s return in the period. It should be highlighted that the share prices of all three had substantially outperformed just prior to the period under review, and their share price reversals reflected a pull back on previous gains. The elevated valuations of these holdings at the outset did lead to them being trimmed back during the period.

What are the main factors driving the Trust’s outperformance since it first listed in April 2011?

In the UK, an analysis of stock market data since 1955 reveals that the best performing stocks have been those outside the mainstream indices, with the very highest returns from those stocks that also stood on low, overlooked valuations. Whilst stocks with these characteristics have not outperformed continuously, their strong returns have been a persistent trend through a variety of economic and stock market conditions. When they succeed, their share prices tend to rise by much greater percentages than is usual for mainstream stocks. This factor has been evident in the premium return that the Trust’s portfolio has delivered during the six-month period to the end of November 2020.

There are periods when abundant market liquidity boosts investor enthusiasm for higher-profile smallcaps. A good example was the group of dot.com stocks which outperformed over the millennium, but subsequently fell back when market liquidity normalised.

Over recent years, there has been plentiful stock market liquidity and high-profile technology stocks have outperformed by a very substantial margin. Furthermore, the UK’s decision to leave the EU in June 2016 introduced years of uncertainty about the details of Brexit, which has since held back interest in the UK stock market. As both of these factors recede, we anticipate that investor interest in UK stocks will normalise once more.

Despite the two major headwinds outlined above, the Trust’s strategy has still delivered a NAV total return of 174.2% between issue in April 2011 and November 2020. This return equates to a total return of 11.1% per annum which is amongst the best of its peer group. We believe the potential for the strategy through a full stock market cycle – including long periods when regular, overlooked quoted companies outperform – could prove to be an even more differentiating factor in future than it has been in the past.

How unusual is the deep, multi cap investment universe of the UK stock market?

Prior to a sustained period of globalisation over recent decades, the returns on mainstream stock markets were often not very much ahead of the underlying rate of inflation. At that time, institutional investors were obliged to allocate a portion of their capital to quoted small and microcaps to deliver sufficiently commercial returns. During the period of globalisation, the mainstream stock market indices have delivered such strong returns, over such a long period, that institutional interest in small and microcap stocks has faded. Over the last three decades, this lack of institutional interest has resulted in the closure of many of the small and microcap bourses around the world.

Fortunately, an exchange for quoted small and microcap companies has remained viable, because the UK government has offered dedicated tax exemptions on the grounds that these companies generate more skilled employment and productivity improvements than mainstream ones. Furthermore, when quoted smallcaps succeed, they also tend to boost tax revenues.

The current very elevated valuations of government bonds imply that prospective returns on mainstream assets could be much more modest in future. If this becomes a consensus view, it would lead to renewed institutional interest in quoted small and microcaps, as easier asset returns become scarce.

Going forward, the prospects for the UK economy may not be very different from other countries, but we believe that the prospects for the UK stock market could be very different. The UK stock market is distinctive in that over half of the companies listed there have a market capitalisation of less than £150m. The UK’s wide-ranging, vibrant universe of quoted small and microcaps is a marked point of difference which might become relevant if global growth were to prove more patchy in the future.

What are the prospects for the Trust?

During the pandemic-induced recession, both central banks and governments have greatly scaled up their policies of financial stimulus, which has led to stock market valuations around the world actually increasing faster than corporate earnings have declined. As long as inflationary pressures remain benign, we anticipate that these current policies will remain in place.

As successful vaccines are rolled out in 2021, some market commentators anticipate that consumer spending may catch up much more quickly than previously thought. To some degree the valuation of US government bonds appears to reflect inflationary apprehensions. Were the inflationary outlook to become less benign, then the valuations of many high-volatility market favourites could fall back significantly.

A change such as this would be favourable for the UK stock market, given that it has few mega caps with very elevated valuations, and greater weightings in recovery stocks such as financial and energy companies. Specifically, the valuation of many UK-quoted companies has fallen behind that of comparatives around the world so we believe its recovery prospects are strong – always assuming that the implementation of the Brexit agreement with the EU is not chaotic.

In practice, the potential for premium return is often more pronounced further down the market capitalisation scale, because small caps tend to be more overlooked than those in the mainstream indices. Finally, should a number of private businesses fail after such a deep recession, quoted companies with strong balance sheets may find they can enhance their growth prospects by expanding into vacant markets, as well as making low cost acquisitions from the receiver. Companies with a listing have access to external capital, giving them the scope both to repay debts and to fund any additional working capital that may be required in the acquired businesses, whilst retaining key skilled employees.

Overall, we are increasingly confident about the prospects of the Trust over both the short and longer term.

Gervais Williams and Martin Turner
17 February 2021
 

PORTFOLIO INFORMATION
as at 30 November 2020


Rank

Company

Sector & main activity
Valuation
£000
% of net
assets
Yield
1 CMC Markets Financials 12,562 3.6   5.5 
2 Admiral Financials 6,919 2.0   3.9
3 Randall & Quilter2 Financials 6,375 1.8   4.2
4 K3 Capital2 Financials 6,178 1.8   3.4
5 AO World Consumer Services 6,157 1.8   –
6 Kenmare Resources Basic Materials 6,129 1.8   2.1
7 Strix2 Industrials 5,979 1.7    3.3
8 IG Financials 5,841 1.7   5.4
9 888 Holdings Consumer Services 5,628 1.6    2.5
10 Diversified Gas & Oil2 Oil & Gas 5,618 1.6    10.1
Top 10 investments 67,386 19.4
11 Legal & General Financials 5,355 1.5    7.0
12 Morrison (WM) Supermarkets Consumer Services 5,293 1.5   3.8
13 Direct Line Insurance Financials 5,041 1.4 2.5 
14 Phoenix Financials 4,927 1.4 6.5 
15 Sabre Insurance Financials 4,659 1.3 6.8 
16 Plus500 Financials 4,595 1.3 6.4 
17 Centamin Basic Materials 4,489 1.3 7.9 
18 FRP Advisory2 Industrials 4,407 1.3 0.7 
19 Rio Tinto Basic Materials 4,384 1.3 6.2 
20 Tesco Consumer Services 4,343 1.3 4.3 
Top 20 investments 114,879 33.0
21 Intermediate Capital Financials 4,301 1.3 3.2  
22 Touchstone Exploration Oil & Gas 4,300 1.3
23 National Grid Utilities 4,299 1.3 5.5 
24 Mondi Basic Materials 4,216 1.2   2.4 
25 Smurfit Kappa Industrials 4,167 1.2 3.1  
26 Sainsbury (J) Consumer Services 4,160 1.2 1.5 
27 iEnergizer2 Industrials 4,151 1.2 5.2 
28 HSBC Financials 4,075 1.1
29 Drax Utilities 3,928 1.1 5.0 
30 M&G Financials 3,882 1.1 9.6 
Top 30 investments 156,358 45.0
31 Concurrent Technologies2 Technology 3,863 1.1 3.0 
32 DWF Industrials 3,856 1.1 2.3 
33 Polymetal International Basic Materials 3,847 1.1 3.9 
34 Amino Technologies2 Technology 3,839 1.1
35 Pan African Resources2 Basic Materials 3,824 1.1 3.5 
36 BHP Basic Materials 3,724 1.1 5.4 
37 Paypoint Industrials 3,699 1.1 12.3 
38 Aviva Financials 3,681 1.1 4.1 
39 Gamesys Consumer Services 3,676 1.0
40 Vodafone Telecommunications 3,596 1.0 6.6 
Top 40 investments 193,963 55.8
Balance held in 88 equity investments 139,821 40.2
Total equity investments 333,784 96.0
600 Group 8% Convertible Loan Notes 14/02/20223 2,055 0.6
Intercede Group 8% Secured Convertible Loan Notes 29/12/20214 1,802 0.5
Active Energy 8% Loan Notes 14/03/20224 873 0.3
Fixed interest investments 4,730 1.4
Total investments 338,514 97.4
Other net current assets 9,152 2.6
Net assets 347,666 100.0

1 Source: Thomson Reuters. Based on historical yields and therefore not representative of future yields. Includes special dividends where known.

2 AIM/NEX listed.

3 Bermuda Stock Exchange listed.

4 TISE listed.

PORTFOLIO INFORMATION - continued
as at 30 November 2020

Portfolio exposure by sector (%) - £338.5 million
Financials 35.3
Industrials 12.8
Basic Materials 12.8
Consumer Services 11.9
Oil & Gas 9.3
Consumer Goods 4.9
Technology 4.0
Utilities 3.1
Health Care 2.9
Telecomms 1.6
Cash and Fixed Interest 1.4
100.0

   

Actual income by sector (%) - £7.4 million
Financials 47.7
Basic Materials 10.7
Oil & Gas 9.1
Industrials 8.7
Consumer Services 8.6
Utilities 5.1
Cash and Fixed Interest 3.1
Consumer Goods 2.5
Telecomms 2.3
Health Care 1.4
Technology 0.8
100.0

   

Portfolio by asset allocation (%) - £338.5 million
AIM/NEX Exchanges 29.8
FTSE 100 Index 26.3
FTSE 250 Index 20.6
FTSE SmallCap Index 9.2
Other 9.1
International Equities 2.3
Cash and Fixed Interest 1.4
FTSE Fledgling Index 1.3
100.0

   

Portfolio by spread of investment income (%) –
£7.4 million
FTSE 250 Index 33.7
FTSE 100 Index 30.6
AIM/NEX Exchanges 16.9
Other 6.3
FTSE SmallCap Index 4.6
Cash and Fixed Interest 3.1
International Equities 3.0
FTSE Fledgling Index 1.8
100.0

Source: Thomson Reuters.

The LSE assigns all UK-quoted companies to an industrial sector and frequently to a stock market index. The LSE also assigns industrial sectors to many international quoted equities and those that have not been classified by the LSE, have been assigned as though they had. The portfolio as at 30 November 2020 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 six-month period. 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 half year and with regard to the income received by the Company over the six-month period. 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 half 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 each year in the Annual Report.

INTERIM MANAGEMENT REPORT AND DIRECTORS’ RESPONSIBILITY STATEMENT

Interim Management Report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal risks and uncertainties for the remaining six months of the financial year are set out in the Chairman’s Statement and the Manager’s Report above.

The principal risks facing the Group are substantially unchanged since the date of the Annual Report and Accounts for the year ended 31 May 2020 and continue to be as set out in that report on pages 18 to 21.

Risks faced by the Group include, but are not limited to, investment and strategy, smaller companies, sectoral diversification, dividends, share price volatility and liquidity/marketability risk, gearing, key man risk, engagement of third party service providers, market risk and credit and counterparty risk.

Responsibility Statement

The Directors confirm that to the best of their knowledge:

  • the condensed set of financial statements has been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting, as adopted by the European Union; and gives a true and fair view of the assets, liabilities and financial position of the Group; and
  • this Half-Yearly Financial Report includes a fair review of the information required by:
  1. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
  2. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions that could do so.

This Half-Yearly Financial Report was approved by the Board of Directors on 17 February 2021 and the above responsibility statement was signed on its behalf by:

Andrew Bell
C
hairman

17 February 2021

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
for the half year to 30 November 2020

Half year to
30 November 2020
Half year to
30 November 2019
Year ended
31 May 2020*


Notes

Revenue 
£000 

Capital 
£000 

Total 
£000 

Revenue 
£000 

Capital 
£000 

Total 
£000 

Revenue 
£000 

Capital 
£000 

Total 
£000 
Gains/(losses) on investments held at fair value through profit or loss 31,496  31,496  4,849  4,849  (32,881) (32,881)
Gains/(losses) on derivative contracts (2,750) (2,750) 13,674  13,674 
Foreign exchange losses (2) (2) (22) (22) (33) (33)
Income  2 7,441  7,441  8,389  8,389  14,101 
Management fee (344) (1,032) (1,376) (386) (1,157) (1,543) (744) (2,234) (2,234)
Other expenses (381) (381) (440) (440) (841)   -
Return on ordinary activities before finance costs and taxation 6,716  30,462  37,178  7,563  920  8,483  12,516  (21,474) (8,958)
Finance costs (13) (40) (53) (13) (39) (52) (28) (82) (110)
Return on ordinary activities before taxation 6,703  30,442  37,125  7,550  881  8,431  12,488  (21,556) (9,068)
Taxation – irrecoverable withholding tax (335) (335) (22) (22) (67) (67)
Taxation- prior years recoverable withholding tax now irrecoverable - (59) (59)
Return on ordinary activities after taxation

6,368 


30,422 


36,790 


7,528 


881


8,409


12,362 


(21,556)


(9,194)
pence  pence  pence  pence  pence  pence  pence  pence  pence 
Basic and diluted return:
Per ordinary share 3 1.77  8.47  10.24  1.99  0.23  2.22 3.27  (5.70) (2.43)

* Extracted from audited financial statements.

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 accompanying notes are an integral part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
for the half year to 30 November 2020





Notes


Share 
capital 
£000 

Share
premium
account
£000

Capital redemption reserve
£000


Special 
reserve 
£000 


Capital 
reserve 
£000 


Revenue  reserve 
£000 



Total 
£000 
As at 1 June 2020* 428  192,562 6 40,530  87,443  15,041  336,010 
Total comprehensive income:
Net return for the period - - 30,422  6,368  36,790 
Transactions with shareholders
recorded directly to equity:
Cancellation of shares 5 (20) - 20 (18,152) (18,152)
Equity dividends paid 4 -   - (6,982) (6,982)
As at 30 November 2020 408  192,562 26 22,378  117,865  14,427  347,666 
As at 1 June 2019* 434  192,562 - 45,775  108,999  17,470  365,240 
Total comprehensive income:
Net return for the period - -  881  7,528  8,409 
Transactions with shareholders
recorded directly to equity:
Cancellation of shares 5             (6) - 6   (5,245)   (5,245)
Equity dividends paid 4 - - (8,171) (8,171)
As at 30 November 2019 428  192,562 6 40,530  109,880  16,827  360,233 
As at 1 June 2019* 434  192,562 - 45,775  108,999  17,470  365,240 
Total comprehensive income:
Net return for the year - - (21,556) 12,362  (9,194)
Transactions with shareholders recorded directly to equity:
Issue of ordinary shares  (6) - 6  (5,245)  (5,245)
Equity dividends paid 4 - - (14,791) (14,791)
As at 31 May 2020* 428  192,562 6 40,530  87,443  15,041  366,010 

* Extracted from audited financial statements.

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

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
as at 30 November 2020



Notes
30 November 
2020 
£000 
30 November 
2019 
£000 
31 May 
2020*
£000 
Non-current assets:
Investments held at fair value
through profit or loss
338,514  343,527  310,398 
Current assets:
Derivative instruments   -  3,563 
Trade and other receivables 2,123  2,320  2,717 
Cash at bank and cash equivalents 7,367  11,423  25,816 
9,490  17,306  28,533 
Current liabilities:
Trade and other payables (338) (600) (2,921)
Net current assets 9,152  16,706  25,612 
Total net assets 347,666  360,233  366,010 
Capital and reserves:
Share capital – ordinary shares  5 358  378  378 
Share capital – management shares  5 50  50  50 
Share premium account 192,562  192,562  192,562 
Capital redemption reserve   26     6      6
Special reserve 22,378  40,530  40,530 
Capital reserve 117,865  109,880  87,443 
Revenue reserve 14,427  16,827  15,041 
Shareholders’ funds 347,666  360,233  336,010 
    pence  pence    pence
Net asset value per ordinary share 6 97.10  95.23  88.82

* Extracted from audited financial statements.

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

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Half year to 
30 November 
2020 
£000 
Half year to 
30 November 
2019 
£000 
Year ended 
31 May 
2020*
£000 
Operating activities:
Net return before taxation 37,125  8,431  (9,068)
(Gains)/losses on investments and derivatives held at fair value through profit or loss (31,496) (2,099) 19,207 
Financing costs 62  62  112 
Decrease in trade and other receivables 402  3,267      76
(Decrease)/increase in trade and other payables  (32) 197  (33)
Withholding tax paid (335) (22) (126)
Net cash inflow from operating activities 5,726  9,836  10,168 
Investing activities:
Purchase of investments (56,885) (63,554) (138,046)
Sale of investments 57,906  51,124  126,360 
Sale of derivative instruments 19,987 
Net cash inflow/(outflow) from financing activities 1,021 (12,430)  8,301 
Financing activities:
Ordinary shares cancelled (18,152)   (5,245)  (5,245)
Finance costs paid (62) (62) (112)
Equity dividends paid (6,982) (8,171) (14,791)
Net cash outflow from financing (25,196) (13,478) (20,148)
Decrease in cash and cash equivalents (18,449) (16,072) (1,679) 
Reconciliation of net cash flow movements in funds:
Cash and cash equivalents at the start of the period 25,816  27,495  27,495 
Net cash outflow from cash and cash equivalents (18,449) (16,072) (1,679) 
Cash at bank and cash equivalents at the end of the period 7,367  11,423  25,816 

* Extracted from audited financial statements.

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

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1 General Information and Accounting Policies

The consolidated financial statements, which comprise the unaudited results of the Company and its wholly-owned subsidiary, DIT Income Services Limited (together referred to as the “Group”), for the period ended 30 November 2020 have been prepared in accordance with IAS 34 “Interim Financial Reporting”, as adopted by the European Union.

In the current period, the Company has applied a number of amendments to IFRS. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements including updates relating to COVID-19.

The adoption of this standard has not had any material impact on these financial statements and apart from the above, the accounting policies used by the Group followed in these half-yearly financial statements are consistent with the most recent Annual Report for the year ended 31 May 2020.

Going concern

The financial statements have been prepared on a going concern basis and on the basis that approval as an investment trust company will continue to be met. The Directors have made an assessment of the Company’s ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for a period of at least 12 months from the date when these financial statements were approved.

In making the assessment, the Directors have considered the likely impacts of the current COVID-19 pandemic on the Company, operations and the investment portfolio. The Directors noted that the cash balance exceeds any short-term liabilities, the Company has access to a revolving credit facility which has not been drawn down and the Company holds a portfolio of investments listed on the LSE. The current cash balance plus available additional borrowing, through the revolving credit facility, enables the Company to meet any funding requirements and finance future additional investments. The Company is a closed-end fund, where assets are not required to be liquidated to meet day-to-day redemptions.

The Directors have completed stress tests assessing the impact of changes in market value and income with associated cash flows. In making this assessment, they have considered plausible downside scenarios. These tests were driven by the possible effects of continuation of the COVID-19 pandemic but, as an arithmetic exercise, apply equally to any other set of circumstances in which asset value and income are significantly impaired. The conclusion was that in a plausible downside scenario the Company could continue to meet its liabilities. Whilst the economic future is uncertain, and the Directors believe that it is possible the Company could experience further reductions in income and/or market value, the opinion of the Directors is that this should not be to a level which would threaten the Company’s ability to continue as a going concern.

The Directors, the Manager and other service providers have put in place contingency plans to minimise disruption. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern, having taken into account the liquidity of the Company’s investment portfolio and the Company’s financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on the going concern basis.

Comparative information

The financial information contained in this Half-Yearly Report does not constitute statutory accounts as defined in the Companies Act 2006. The financial information for the half-year periods ended 30 November 2019 and 30 November 2020 has not been audited or reviewed by the Company’s Auditor. The comparative figures for the financial year ended 31 May 2020 have been extracted from the latest published Annual Report and Accounts, which have been reported on by the Company’s Auditor and delivered to the Registrar of Companies. The report of the Auditor 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.

2 Income


Half year to
30 November
2020
£000

Half year to 
30 November 
2019 
£000 

Year ended 
31 May 
2020 
£000 
Income from investments:
UK dividends 5,105 6,611 10,346 
UK REIT dividend income 101 115 230 
Non UK dividend income 1,973 1,356 2,890
UK fixed interest 230 262 516 
7,409 8,344  13,982 
Other income:
Bank deposit interest - 12 17 
Exchange gains 15 4   17
Net dealing (loss)/profit of subsidiary (34) 29 85 
Other income                              51 -   - 
Total income 7,441  8,389  14,101 

3 Return per Ordinary Share

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

Half year to
30 November 2020
Half year to
30 November 2019
Year ended
31 May 2020
£000 pence
 per share
£000  pence
per share
£000  pence  per share
Revenue return 6,368 1.77 7,528 1.99 12,362  3.27 
Capital return 30,442 8.47 881 0.23 (21,556) (5.70)
Total return 36,790 10.24 8,409 2.22 (9,194) (2.43)
Weighted average number of ordinary shares 359,261,954 378,679,629  378,484,338

4 Dividends per Ordinary Share

Amounts recognised as distributions to equity holders in the period.

Half year to
30 November 2020
Half year to
30 November 2019
Year ended
31 May 2020
£000 pence per share £000 pence per share £000 pence per share
In respect of the previous period:
Third interim dividend 3,222 0.90 3,405 0.90 3,405  0.90 
Final dividend 3,760 1.05 4,161 1.10 4,161  1.10 
Special dividend - - 605 0.16 605  0.16 
In respect of the period under review:
First interim dividend - - - - 3,215 0.85
Second interim dividend - - - - 3,405 0.90
6,982 1.95 8,171 2.16 14,791 3.91

The Board has declared a first interim dividend of 0.85p per ordinary share, payable on 26 February 2021 to shareholders registered at the close of business on 29 December 2020. The ex-dividend date was 24 December 2020. The Board has also declared a second interim dividend of 0.90p per ordinary share, payable on 28 May 2021 to shareholders registered at the close of business on 26 March 2022. The ex-dividend date will be 25 March 2021. In accordance with IFRS, these dividends have not been included as a liability in these financial statements.

5 Called-up Share Capital

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 annually on 31 May each year. The Board may, at its absolute discretion, elect not to operate the annual redemption facility in whole or in part. In respect of the 31 May 2020 Redemption Point, the Company received redemption requests for 20,243,942 ordinary shares. All of these shares were redeemed at a calculated Redemption Price of 89.76p per share and cancelled by the Company with effect from 12 June 2020.

The issued share capital consisted of 358,045,105 ordinary shares and 50,000 management shares as at 30 November 2020.

6 Net Asset Value

Ordinary Shares

The NAV per ordinary share and the net assets attributable at the period end were as follows:

30 November 2020 30 November 2019 31 May 2020
NAV pence
per share
30 November
2020
 Net assets
attributable
30 November 2020
£000
NAV pence
per share
30 November
2019
Net assets
attributable
30 November
2019
  £000
NAV pence
per share
31 May
2020
Net assets
Attributable
31 May
2020
£000
Basic and diluted 97.10 347,666 95.23 360,233 88.82 366,010

NAV per ordinary share is based on net assets at the period end and 358,045,105 ordinary shares, being the number of ordinary shares in issue at the period end (30 November 2019: 378,289,047 and 31 May 2020: 378,289,047 ordinary shares).

Management Shares

The NAV of £1 (30 November 2019: £1 and 31 May 2020: £1) per management share is based on net assets at the period end of £50,000 (30 November 2019: £50,000 and 31 May 2020: £50,000) and 50,000 (30 November 2019: 50,000 and 31 May 2020: 50,000) management shares. The shareholders have no right to any surplus or capital or assets of the Company.

7 Transaction Costs

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

Half year to
30 November 2020
£000
Half year to
30 November 2019
£000
Year ended
31 May 2020
£000
Costs on acquisitions 168 241 554
Costs on disposals 41 33 82
209 274 636

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

Half year to
30 November 2020
£000

% of average
monthly net assets
Half year to
30 November 2019
£000

% of average monthly net assets
Year ended
31 May 2020
£000

% of average monthly net assets
Costs paid in dealing commissions 65 0.02 77 0.02 164 0.05
Costs of stamp duty 144 0.04 197 0.06 472 0.13
209 0.06 274 0.08 636 0.18

The average monthly net assets for the six months to 30 November 2020 were £326,707,000 (30 November 2019: £354,034,000 and 31 May 2020: £346,694,000).

8 Management Fee

The management fee is calculated at the rate of one-twelfth of 0.9% per calendar month on the average market capitalisation of the Company’s shares up to £300m and one-twelfth of 0.8% per calendar month on the average market capitalisation between £300m and £500m, and 0.7% above £500m, payable monthly in arrears. 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.

At 30 November 2020, an amount of £234,000 was outstanding and due to Premier Portfolio Managers Limited in respect of management fees (30 November 2019: £500,000 and 31 May 2020: £232,000).

9 Valuation of Financial Instruments

The Company measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant assets as follows:

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

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

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

Financial Assets

Financial assets at fair value through profit or loss at 30 November 2020 Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Equity investments 333,781 - - 333,781
Fixed interest bearing securities - 4,733 - 4,733
333,781 4,733 - 338,514

   

Financial assets at fair value through profit or loss at 30 November 2019 Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Equity investments 336,217 532 - 336,749
Derivative contracts 3,563 - - 3,563
Fixed interest bearing securities 1,388 5,390 - 6,778
341,168 5,922 - 347,090

   

Financial assets at fair value through profit or loss at 31 May 2020 Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Equity investments 304,590 1,420 - 306,010
Fixed interest bearing securities - 4,388 - 4,388
304,590 5,808 - 310,398

Subsidiary

The value of the subsidiary, DIT Income Services Limited, held at fair value is £1 (30 November 2019: £1 and 31 May 2020: £1) and is classified as a Level 3 investment.

The Company’s subsidiary completes trading transactions. There were no investments held for trading in the subsidiary at 30 November 2020 (30 November 2019: £nil and 31 May 2020: £nil). The difference between the sale and purchase of assets is trading income recognised in the Income Statement.

10 Transactions with the Manager and Related Parties

The amounts paid and payable to the Manager pursuant to the management agreement are disclosed in note 8. Fees paid to the Directors in the half year to 30 November 2020 amounted to £87,000 (half year to 30 November 2019: £90,000; and year ended 31 May 2020: £180,000).

INVESTMENT OBJECTIVE AND POLICY

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 towards small and mid cap equities. The Company may also invest in large cap companies, including FTSE 100 constituents, where it is believed that this may increase shareholder value.

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 may 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.

SHAREHOLDER INFORMATION

Capital Structure

The Company’s share capital consists of redeemable ordinary shares of 0.1p each (“ordinary shares”) with one vote per share and non-voting management shares of £1 each (“management shares”). From time to time, the Company may issue C ordinary shares of 1p each (“C shares”) with one vote per share.

As at 30 November 2020 and the date of this Report, there are 358,045,105 ordinary shares, none of which are held in treasury, and 50,000 management shares in issue.

Redemption of Ordinary Shares

The Company has a redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of ordinary shares on 31 May each year. Redemption Request forms are available upon request from the Company’s Registrar.

Shareholders submitting valid requests for the redemption of ordinary shares will have their shares redeemed at the Redemption Price or the Company may arrange for such shares to be sold in the market at the NAV (including current period revenue) (the “Dealing Value”) prevailing at the end of May (subject to the Directors’ discretion). The Directors may elect, at their absolute discretion, to calculate the Redemption Price applying on any redemption point by reference to a separate Redemption Pool, when the Redemption Price will be calculated by reference to the amount generated upon the realisation of the Redemption Pool.

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

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

The relevant dates for the May 2021 Redemption Point are:

29 April 2021 Latest date for receipt of Redemption Requests and certificates for certificated shares
3.00pm on 29 April 2021 Latest date and time for receipt of Redemption Requests and TTE (transfer to escrow) instructions for uncertificated shares via CREST
5.00 pm on 28 May 2021 The Redemption Point
On or before 11 June 2021 Company to notify Redemption Price and dispatch redemption monies; or

If the redemption is to be funded by way of a Redemption Pool, Company to notify the number of shares being redeemed. Notification of Redemption Price and dispatch of redemption monies to take place as soon as practicable thereafter
On or before 25 June 2021 Balance certificates to be sent to shareholders

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

Historic Dividend Record

Period/year ended 31 May: 2012 
pence 
per share 
2013
pence
per share
2014
pence
per share
2015 
pence per share 
2016
pence
per share
2017 
pence 
per share 
2018 
pence 
per share 
2019 
pence 
per share 
2020
pence
per share
2021
pence
per share
First interim dividend 0.30  0.30 0.30 0.40  0.65 0.70  0.75  0.80  0.85 0.85
Second interim dividend 0.50  0.50 0.50 0.50  0.65 0.70  0.80  0.85  0.90 0.90
Third interim dividend 0.46  0.46 0.50 0.50  0.75 0.80  0.85  0.90  0.90
Fourth interim dividend 0.761 0.84 0.95 1.00  -   -
Final dividend - - 0.50  0.75 0.80  1.00  1.10  1.05
Special dividend - - -  0.403 0.233 0.163   -
2.02  2.10 2.25 2.902 2.80 3.40  3.63  3.81  3.70 1.75

1 The fourth interim dividend for the period ended 31 May 2012 was 0.93p but this included the benefit of the initial 13-month period. As shown above, on an annualised basis, the fourth interim dividend would have been 0.76p.

2 In order to allow shareholders to vote on the dividend, a final dividend was introduced in the year ended 31 May 2015, resulting in the payment of five dividends for that year. Since then, the Company has paid three interim dividends and a final dividend in respect of each year. There was no interruption in the dividend payment timetable as a result of this change.

3 A special dividend was paid for the years ended 31 May 2017, 31 May 2018 and 31 May 2019, reflecting years when many special dividends were also paid by the companies in the portfolio.

Share Dealing

Shares can be traded through your usual stockbroker.

Share Prices

The Company’s ordinary shares are listed on the Official List of the FCA and traded on the LSE.

Share Register Enquiries

The register for the ordinary shares is maintained by Link Group. In the event of queries regarding your holding, please contact the Registrar on 0371 664 0300 or on +44 (0)371 664 0300 from outside the UK (calls are charged at the standard geographic rate and will vary by provider; calls outside the UK will be charged at the applicable international rate). Lines are open 9.00am to 5.30pm, Monday to Friday, excluding public holidays in England and Wales. You can also email [email protected].

Changes of name and/or address must be notified in writing to the Registrar: Link Group, Shareholder Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.

Electronic Communications from the Company

Shareholders now have the opportunity to be notified by email when the Company’s annual report, half-yearly report and other formal communications are available on the Company’s website, instead of receiving printed copies by post. This has environmental benefits in the reduction of paper, printing, energy and water usage, as well as reducing costs to the Company.

If you have not already elected to receive electronic communications from the Company and wish to do so, please contact the Registrar using the details shown below. Please have your investor code to hand.

Manager: Premier Portfolio Managers Limited

The Company’s Manager is Premier Portfolio Managers Limited, a wholly-owned subsidiary of Premier Miton Group plc. Premier Miton Group is listed on AIM.

Premier Miton Group had pro?forma assets under management of £12.0 billion (as at 31 December 2020, unaudited).

Members of the fund management team invest in their own funds and are significant shareholders in the Premier Miton Group.

Investor updates in the form of monthly factsheets are available from the Company’s website, www.premiermiton.com/dit.

GLOSSARY OF TERMS

AIC

The Association of Investment Companies.

AIM

The Alternative Investment Market is a sub-market of the LSE. 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 the 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 indicators set out in the various relevant parts of the Report.

Discount/Premium*

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

Discount Calculation 30 November
2020
31 May
2020
Closing NAV per share (p) 97.10 88.82 (a)
Closing share price (p) 91.00 84.00 (b)
Discount
(c=((b-a/a)x100) (%) (6.28) (5.43) (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. This financial ratio shows how much an investment pays out in dividends relative to its stock price. The dividends are based upon historic dividend rates and announcements by the investment company. The dividend yield indicates the anticipated future cashflows from the investment contributing to the income of the Group.

Financial Conduct Authority (“FCA”)

This regulator oversees the fund management industry, including the Company’s Manager.

Gearing

Gearing refers to the ratio of the Company’s total 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, but 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.

Group

The Company and its subsidiary, DIT Income Services Limited.

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.

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 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.

NEX Exchange (“NEX”)

The NEX Exchange (previously known as ICAP Securities and Derivatives Exchange or ISDX) operates two primary market segments, the NEX Exchange Main Board and the NEX Exchange Growth Market. The latter is focused on smaller and medium-sized enterprises.

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
30 November
2020
£000
31 May
2020
£000
Management fee 1,376  2,978 
Other administrative expenses 381  840 
Less one-time costs    - (45)
Total management fee and other administrative expenses 1,757  3,773 
Total management fee and other administrative expenses (annualised) 3,506  3,773  (a)
Average net assets in the year 326,707  346,694  (b)
Ongoing charges (c=a/bx100) (%) 1.07  1.09 (c)

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 International Stock Exchange (“TISE”)

The International Stock Exchange is a stock exchange headquartered in Guernsey, which provides a listing facility for international companies to raise capital from investors based around the world.

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 30 November
2020
31 May 
2020 
Closing NAV per share (p) 97.10 88.82 
Add back total dividends paid per share in the period/year (p) 1.95 3.91 
Adjusted closing NAV per share(p) 99.05 92.73  (a)
Opening NAV per share (p) 88.82 95.17  (b)
NAV total return unadjusted
(c=((a-b)/b) x100) (%)
+11.5 (2.6) (c)
NAV total return adjusted (%)** +11.7 (2.5)

   

Share Price Total Return 30 November
2020
31 May 
2020 
Closing share price (p) 91.00 84.00 
Add back total dividends paid per share in the period/year (p) 1.95 3.91 
Adjusted closing share price (p) 92.95 87.91  (a)
Opening share price (p) 84.00 89.00  (b)
Share price total return unadjusted (c=((a-b)/b)x100) (%) +10.7 (1.2) (c)
Share price total return adjusted (%)** +11.0 (1.2)

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.

* Alternative performance measure

** 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.

FINANCIAL CALENDAR

Announcement of half-yearly results
Payment of first interim dividend
February 2021
Year end
Payment of second interim dividend
Redemption Point
May 2021
Announcement of annual results
Payment of third interim dividend
August 2021
Annual General Meeting October 2021
Half year end
Payment of final dividend
November 2021

DIRECTORS AND SECRETARY

Directors (all non-executive)

Andrew Bell (Chairman)
Paul Craig
Caroline Kemsley-Pein
Michelle McGrade
Calum Thomson

Secretary and Registered Office

Link Alternative Fund Administrators Limited
(trading as Link Group)
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 477500

ADVISERS

Alternative Investment Fund Manager or Manager
Premier Portfolio Managers Limited
Paternoster House
65 St Paul’s Churchyard
London EC4M 8AB

Tel: 020 3714 1525
Website: www.premiermiton.com

Company website

www.mitongroup.com/dit

Auditor

BDO LLP
150 Aldersgate Street
London EC1A 4AB

Banker

Bank of New York Mellon
One Piccadilly Gardens
Manchester M1 1RN

Depositary and Custodian

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

Registrar and Transfer Office

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

Tel: 0371 664 0300
(+44 (0)371 664 0300 from outside the UK)
(calls are charged at the standard geographic rate and will vary by provider; calls from outside the UK will be charged at the applicable international rate).
Lines are open 9.00am to 5.30pm, Monday to Friday, excluding public holidays in England and Wales.

Email: [email protected]
Website: www.linkassetservices.com

Solicitor

Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH

Stockbroker

Panmure Gordon
One New Change
London EC4 9AF

An investment company as defined under Section 833 of the Companies Act 2006.

Registered in England No. 7584303.

A member of the Association of Investment Companies.

The Half-Yearly Financial Report will be posted to shareholders shortly. The Report will also be available for download from the Company’s website: www.mitongroup.com/dit  or on request from the Company Secretary.

National Storage Mechanism

A copy of the Half-Yearly Report will be submitted to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism

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

LEI: 2138005QFXYHJM551U45


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