Miton Income Opportunities Trust plc (formerly known as Henderson Fledgling Trust plc)

Transcription

1 Miton Miton Income Opportunities Trust plc (formerly known as Henderson Fledgling Trust plc) Half Year Report (unaudited) For the six months to 28 February 2013

2 At a General Meeting of the Company held on 5 April 2013, shareholders approved a revised investment objective and investment policy, as set out below: Investment Objective The Company s investment objective is to provide shareholders with an attractive level of dividends coupled with capital growth over the long-term. Investment Policy The Company will invest primarily in quoted or traded small and mid-sized UK companies and shall seek exposure to those companies that have the prospect of paying good and growing dividends. The Company may also invest in large cap companies, including FTSE 100 constituents, where it is believed that this may increase shareholder value. The Investment Manager will adopt 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 will 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 will be 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. The Company will not invest more than 10% of its gross assets, at the time of acquisition, in other listed closedended investment funds, whether managed by the Investment Manager or not, except that this restriction shall not apply to investments in listed closed-ended investment funds which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed-ended investment funds. In addition to this restriction, the Directors have further determined that no more than 15% of the Company s gross assets will, at the time of acquisition, be invested in other listed closed-ended investment funds (including investment trusts) notwithstanding whether or not such funds have stated policies to invest no more than 15% of their gross assets in other listed closed-ended investment funds. Unquoted investments The Company may invest in unquoted companies from time to time subject to prior Board approval. Investments in unquoted companies in aggregate will not exceed 5% of the value of the Company s investment portfolio as at the time of investment. Borrowing and gearing policy The Board considers that long-term capital growth can be enhanced by the use of gearing which may be through bank borrowings and the use of derivative instruments such as contracts for differences. The Company may borrow (through bank facilities and derivative instruments) up to 15% of net asset value (calculated at the time of borrowing). The Board will oversee the level of gearing in the Company, and will review the position with the Investment Manager on a regular basis.

3 1 Chairman s Statement This report covers the six month period ended 28 February On 15 February 2013 the Company announced a proposed change in its investment policy, the appointment of a new investment manager and a proposed merger with The Diverse Income Trust plc ( DIT ). The net asset value ( NAV ) of the Company has increased by 20.5% over the six month period on a total return basis, which compares with a rise of 22.4% in the FTSE Fledgling (excluding Investment Companies) Index (the Fledgling Index ). During the same period, the share price has increased by 47.6% on a total return basis. The Board is pleased to note the re-rating of the shares following the announcement which saw the discount to NAV reduce from 27.3% to 9.2% as at 28 February An interim dividend of 6p per ordinary share will be paid to shareholders on 28 May This enhanced interim dividend, as referred to in the recent Circular, includes approximately 4p per ordinary share which will be paid from accumulated revenue reserves. The Board has determined that a further interim dividend from reserves may be paid prior to completion of the proposed merger with DIT. It should be noted, however, that in the event the merger with DIT does not take place, the final dividend level may not be maintained at the previous year s level. The Company has sought long-term growth in capital and dividends from investment predominantly in the constituents of the Fledgling Index. In recent years, the policy has been to adopt a broad indexation of the Fledgling Index with an active overlay of up to a maximum of 35% of the portfolio. This dual approach of broad indexation coupled with an active overlay was historically viewed by the Board as a practicable way of obtaining full exposure to any longer-term outperformance of the Fledgling Index. Over the three years to 28 February 2013, on a total return basis, the Company s NAV increased by 11.1% compared with the Fledgling Index, and the All-Share Index, which rose by 32.6% and 35.5% respectively. In addition, the Company s shares traded at an average discount of approximately 20% to their NAV per share for the 12 month period ending 28 February 2013 compared to the UK Smaller Companies Investment Trust sector which traded at an average discount of approximately 15%. The Board was of the view that the structural and cyclical issues highlighted were likely to persist and lead to further underperformance by the Company relative to the All-Share Index and SmallCap Index. The Board therefore initiated a Strategic Review in November 2012 with the aim of proposing a new investment policy designed to improve shareholder returns in the future. This resulted in an announcement on 15 February 2013 that the previous investment strategy would be discontinued and a new investment policy be proposed which would focus upon a UK multicap portfolio with a bias towards small and microcap stocks that paid good and growing dividends. The Board appointed Miton Capital Partners Limited as Investment Manager from 1 March 2013 and agreed to change the name of the Company to Miton Income Opportunities Trust plc subject to shareholder approval of the investment policy change, which was granted on 5 April Following this approval, the portfolio is undergoing a degree of realignment to meet our new investment objective. The original portfolio contained several stocks that were already consistent with our new investment objective and, with recent portfolio transactions, a material part of the portfolio is now aligned with the new strategy. For most of its life, the Company has delivered attractive total returns for shareholders. However, over recent years the Fledgling Index has suffered both structural and cyclical issues, including the increased cost of rebalancing the portfolio every quarter as both the size of the index and the number of constituents within it has declined materially. This led to relative underperformance by the Fledgling Index against both the All-Share Index and the SmallCap Index.

4 2 Chairman s Statement continued The new investment strategy has continued to perform strongly for DIT, which is also managed by Miton and by Gervais Williams, who was formerly this Company s investment manager. Heads of terms have been agreed to merge with DIT when the two portfolios are closely aligned, subject to Board approval. Over the period from 1 September 2012 to 28 February 2013, DIT continued to perform well, returning 21.4% on a total return basis with low volatility. DIT was also the best performing UK Growth and Income Trust during At current market levels, the combined trust would have total assets of around 200m, so our shareholders should potentially enjoy much greater market liquidity after the merger as well as a share price that more fully reflects the value of the assets in the portfolio. The Board is pleased with the progress made to date in re-aligning the portfolio, which will continue in the year ahead. The Board will keep shareholders informed of progress and further developments. While some market volatility can be expected in the year ahead, we anticipate robustly financed companies, with good and growing dividends, to be well placed to deliver premium returns in fluctuating markets over the medium term. The Board would like to thank the previous managers, Henderson Global Investors, for their hard work in managing the Company s investment portfolio. Tom Bartlam Chairman 30 April 2013

5 3 Investment Manager s Report Miton Capital Partners Limited took on the role of Investment Manager of the Company on 1 March 2013, and on 5 April 2013 the investment objective and policy were changed to the mandate that will operate going forward. As has been announced already, there is an intention to merge the Company with The Diverse Income Trust plc in due course, which is itself already managed by Miton Capital Partners Limited. During the period the previous managers made the following significant transactions. They added to the holdings in Thorntons, Bioquell, Trifast, Future, Skyepharma, Vernalis, Acal and office2office and made significant disposals of holdings in Porvair, Thorntons, Dee Valley, Real Estate Credit Investments, MJ Gleeson, Creston, Johnston Press and Gresham Computing. Furthermore, during the period there were a number of corporate transactions that impacted the portfolio including the takeover of Corin and the administration of HMV and Manganese Bronze. Who are Miton? Miton Group plc ( Miton ) is an AIM-listed fund management business, formerly known as MAM Funds plc. Miton operates through two FSA regulated companies: Miton Capital Partners Limited (formerly known as Midas Capital Partners Limited); and Miton Asset Management Limited. Our investment philosophy is based on the belief that we can manage our clients funds better because we recognise the nascent investment trends beyond the credit boom. We manage investments within: eleven open ended funds; four investment trusts; and segregated accounts. The business operates under the single Miton brand and has 41 employees working out of offices in London, Reading and Liverpool. Up until December 2012 we operated under the MAM, Miton, Midas and Acuim brands. What is the Miton investment philosophy? Our fund managers seek value for investors without undue regard for indices and benchmarks. They have the flexibility to invest in companies, funds and asset classes that are better placed to preserve value and see it grow over the medium to longer term. At Miton we aim to make our funds largely perform independent of the trends of their sectors by: limiting our exposure to portfolios with elevated volatility, we anticipate that our funds are less vulnerable to the more adverse trends as credit boom conditions come to an end. crafting our investment strategies so our funds should be better positioned for the potentially choppy markets beyond the credit boom. We are independently-minded and do not necessarily follow the herd. Most of our funds do not use traditional benchmarks and our fund managers are given the freedom to have the courage of their convictions to deliver better risk adjusted returns for our clients. What has shaped their view? A turning point Since the 1980s, investors and investment products have been optimised for credit boom conditions. Consequently, we would contend that most funds are not well-positioned for a major change in global, economic trends as we move beyond the credit boom. Booms are characterised by rises in asset prices. They are normally short lived and cyclical in nature. We are at the end of a period of growth, fuelled by debt or a credit boom, which has persisted for 25 years and which has been global in scale. Speculative and potentially excessively volatile strategies have become endemic within the investment industry. Within our multi asset funds, we principally use a macroeconomic, top down investment approach. For our equity funds, there is a greater focus on specific stock selection from the bottom-up. However, significantly at Miton we allow our fund managers greater freedom to use their knowledge and experience to manage funds without being unduly constrained by conventional benchmarks.

6 4 Investment Manager s Report continued Importantly, our approach gives our fund managers greater ownership of the risks and rewards of their portfolios. This culture best suits leading fund managers who can use their superior talent, experience and conviction to greatest effect. The fund management industry beyond the credit boom The last 25 years have been marked by a significant rise in asset prices. Not only equities, but also bonds, property and commodities have participated. The key issue is that asset prices tend to run up during credit booms. Given that this credit boom has lasted more than 25 years, and has been global in nature, asset prices have tended to rise off and on for an extended period. The trend of rising asset prices has had a significant impact on the way that investors have invested. Frequently the best performing shares have been those that are the most speculative. Indeed, with indices rising relatively rapidly at times, it has been difficult for professional fund managers to keep ahead. Those too cautious have been regularly outpaced by the more adventurous. Darwinian forces have gradually weeded out the excessively prudent. Trading strategies have come to predominate. The culture of the financial industry has radically changed over the last 25 years. US credit market debt % of nominal US GDP Debt as a percentage of GDP was stable for a long period before breaking out upwards around the middle of the 1980s. In the UK, the late 1980s was marked by loadsamoney headlines with sharply rising house prices. Although this did drop back a bit over the early 1990s, the upward trajectory was resumed after the UK came out of the Exchange Rate Mechanism ( ERM ) in Prior to 1985, the fund management industry typically managed assets valued at rather less than 5% of the UK economy. However, after the credit boom took off, this value had risen and risen to beyond 35% of the UK economy. Effectively the fund management sector has grown some ten times in scale during the credit boom. How has this come about? For every pound of credit that is lent, double entry bookkeeping requires an extra pound to be entered on the balance sheet. During credit booms, there is a much greater willingness to take on additional borrowings. So as debt grows, so does notional cash. In time, a proportion of this capital finds its way to professional fund managers. Furthermore, during the boom new fund management sectors have evolved. Prior to the credit boom most corporate credit was funded by banks. But during the credit boom corporate credit has become freely traded with much held in specific funds. We would argue that the change in the scale of the fund management industry has some correlation with the growth of credit during the boom. 400% 350% 300% 250% 200% 150% Government Households Corporates Financials Beyond the credit boom it seems unlikely that the credit mountain will unwind rapidly. In the short term, central bankers have opted to buy in bonds and this has permitted many governments to sustain sizeable budget deficits. So whilst banks have been downsizing the scale of their balance sheets, this has been offset by the dis-saving of the state. Whilst this persists the overall scale of the fund management industry is likely to be broadly unchanged. 100% 50% 0% As a forward-looking business we are preparing ourselves for a time when quantitative easing runs out; a time when the absolute amount of debt in the economy could start to fall back. Already the trends in the fund management industry are beginning to evolve as clients preferences change. What will the new investment trends be?

7 5 Investment Manager s Report continued Three important trends that have been underappreciated during the boom: Premium yield/value shares typically outperform. During the credit boom, many portfolios backed growth stories rather than companies with good and growing dividends/intrinsic value which have progressively outperformed over the last 100 years. Multi cap rather than narrow indexation. Credit boom strategies have tended to favour a narrow range of stocks. In sharply rising markets, capital gains can be taken through trading strategies and overall portfolio performance mimicked the returns of the mid/large cap index benchmarks. Prior to the credit boom, multi cap portfolios were favoured because all holdings were selected for their scope to deliver absolute returns. Small cap stocks in particular have the advantage that they can perform well even at times of tepid index returns. Small cap outperformance is beginning to become re-established. Diversification can be found in developed economies. Although worldwide diversification has a place within portfolios, during more unsettled periods immature economies can impose unwelcome constraints on overseas investors. In contrast, diversification via smaller quoted companies in the developed economies can not only enhance expected returns but also has the benefit of well-developed investor protection. Miton Capital Partners Limited 30 April 2013

8 6 Total Return Performance 1 6 months % 1 year % 3 years % 5 years % 10 years % Net assets per share Ordinary share price Benchmark Financial Highlights At 28 February 2013 At 31 August 2012 Change % Net asset value per ordinary share p 423.8p Ordinary share price 450.5p 308.0p Discount 9.2% 27.3% Half year ended 28 February 2013 Half year ended 29 February 2012 Revenue return per ordinary share 4 2.0p 4.8p Interim dividend per ordinary share 6.0p 4.0p 1 To 28 February 2013 using bid-market priced portfolio valuations and re-investing dividends paid on ex-dividend date. Source: Financial Express. 2 FTSE Fledgling (ex Investment Companies) Index. 3 Based on investments at bid-market value including undistributed revenue. 4 Based on the weighted average number of shares in issue during the period. Financial Calendar April Announcement of Half Year Results May Payment of interim dividend for year ended 31 August 2013 November Announcement of Annual Results December Annual General Meeting December Payment of final dividend for year ended 31 August 2013

9 7 Principal Investments as at 28 February 2013 Company Main activity Valuation '000 % of net assets Future Media 4, Thorntons Food & Drug Retailers 4, Filtronic Technology Hardware & Equipment 3, Communisis Support Services 3, Bioquell Health Care Equipment & Services 3, Trifast Industrial Engineering 3, Acal Support Services 3, office2office Support Services 2, Record Financial Services 2, Skyepharma Pharmaceuticals & Biotechnology 2, largest 33, Liontrust Asset Management Financial Services 2, Moss Bros General Retailers 1, Air Partner Travel & Leisure 1, T Clarke Construction & Materials 1, Vernalis Pharmaceuticals & Biotechnology 1, Vislink Technology Hardware & Equipment 1, Source Bioscience Pharmaceuticals & Biotechnology 1, Energy Assets Support Services 1, Parity Software & Computer Services 1, Crystalox Solar Alternative Energy 1, largest 49, STV Media 1, Dee Valley Gas, Water & Multi-Utilities 1, Local Shopping REIT Real Estate Investment Trusts 1, MS International Industrial Engineering 1, AXA Property Trust Non Equity Investment Instruments 1, Macfarlane General Industrials 1, Gresham Computing Software & Computer Services 1, Jersey Electricity Electricity 1, Hornby Leisure Goods 1, Molins Industrial Engineering 1, largest 61, Tamar European Industrial Fund Equity Investment Instruments 1, Treatt Chemicals Victoria Household Goods Harvey Nash Support Services Group Industrial Engineering J Smart Support Services Oxford Biomedica Pharmaceuticals & Biotechnology Panther Securities Real Estate & Investment Services City of London Group Financial Services Superglass Construction & Materials largest 68, Other listed investments (30 stocks) 6, Total equity investments 75, Cash and other net assets 4, Total net assets 79,

10 8 Classification of Investments and Portfolio Weighting as at 28 February 2013 % of net assets FTSE Fledgling (ex Investment Companies) Index % Relative to the index % Oil & Gas Alternative Energy Basic Materials Chemicals Mining Industrials Construction & Materials Electronic & Electrical Equipment General Industrials Industrial Engineering Support Services Consumer Goods Food Producers Household Goods Leisure Goods Personal Goods Health Care Health Care Equipment & Services Pharmaceuticals & Biotechnology Consumer Services Food & Drug Retailers General Retailers Media Travel & Leisure Utilities Electricity Gas, Water & Multi-utilities Financials Equity Investment Instruments Financial Services Non Equity Investment Instruments Real Estate & Investment Services Real Estate Investment Trusts Technology Software & Computer Services Technology Hardware & Equipment Cash and other net assets 5.6 Total net assets

11 9 Principal Risks and Uncertainties The principal risks and uncertainties associated with the Company's business can be divided into the following main areas: Portfolio and market price risk Operational risk Tax and regulatory risk Information on these risks and how they are managed is given in the Annual Report to 31 August In the view of the Board these principal risks and uncertainties were unchanged over the last six months and are as applicable to the remaining six months of the financial year as they were to the six months under review. 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 Company; and this Half Year Report includes a fair review of the information required by: a) DTR 4.2.7R of the Disclosure 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 b) DTR 4.2.8R of the Disclosure 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 Company during that period; and any changes in the related party transactions that could do so. This Half Year Report was approved by the Board of Directors on 30 April 2013 and the above responsibility statement was signed on its behalf by: Tom Bartlam Chairman

12 10 Statement of Comprehensive Income for the half year ended 28 February 2013 Half year ended 28 February 2013 (unaudited) Half year ended 29 February 2012 (unaudited) Year ended 31 August 2012 (audited) Revenue return Capital return Total Revenue return Capital return Total Revenue return Capital return Gains/(losses) on investments held at fair value through profit or loss 12,562 12,562 (5,126) (5,126) (9,807) (9,807) Investment income (note 2) ,081 1,081 2,318 2,318 Other income (note 2) Total income ,562 13,154 1,083 (5,126) (4,043) 2,320 (9,807) (7,487) Expenses Management fees (note 5) (120) (179) (299) (121) (181) (302) (235) (353) (588) Other expenses (142) (83) (225) (149) (29) (178) (310) (115) (425) Profit/(loss) before finance costs and taxation ,300 12, (5,336) (4,523) 1,775 (10,275) (8,500) Finance costs (6) (9) (15) (34) (51) (85) (51) (76) (127) Profit/(loss) before taxation ,291 12, (5,387) (4,608) 1,724 (10,351) (8,627) Taxation Net profit/(loss) for the period and total comprehensive income ,291 12, (5,387) (4,608) 1,724 (10,351) (8,627) Return per ordinary share (note 3) 2.02p 76.46p 78.48p 4.80p (33.21)p (28.41)p 10.68p (64.10)p (53.42)p Total The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS, as adopted by the European Union. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by The Association of Investment Companies. The Company does not have any other comprehensive income and hence the net profit, as disclosed above, is the same as the Company's total comprehensive income. All items in the above statement derive from continuing activities. No operations were acquired or discontinued during the period (see note 1). The accompanying notes are an integral part of these financial statements.

13 11 Statement of Changes in Equity for the half year ended 28 February 2013 Half year ended 28 February 2013 (unaudited) Called-up share capital Capital redemption reserve Capital reserve Revenue reserve 1 Total equity at 31 August ,019 6,279 55,548 2,285 68,131 Total comprehensive income Profit for the period 12, ,615 Transactions with owners, recorded directly to equity Ordinary dividends paid (965) (965) Total equity at 28 February ,019 6,279 67,839 1,644 79,781 Total Half year ended 29 February 2012 (unaudited) Called-up share capital Capital redemption reserve Capital reserve Revenue reserve 1 Total Total equity at 31 August ,127 6,171 67,488 2,174 79,960 Total comprehensive income (Loss)/profit for the period (5,387) 779 (4,608) Transactions with owners, recorded directly to equity Ordinary dividends paid (970) (970) Buy-backs of ordinary shares (108) 108 (1,588) (1,588) Total equity at 29 February ,019 6,279 60,513 1,983 72,794 Year ended 31 August 2012 (audited) Called-up share capital Capital redemption reserve Capital reserve Revenue reserve 1 Total Total equity at 31 August ,127 6,171 67,488 2,174 79,960 Total comprehensive income (Loss)/profit for the period (10,351) 1,724 (8,627) Transactions with owners, recorded directly to equity Ordinary dividends paid (1,613) (1,613) Buy-backs of ordinary shares (108) 108 (1,589) (1,589) Total equity at 31 August ,019 6,279 55,548 2,285 68,131 1 The revenue reserve represents the amount of reserves distributable by way of dividend. The accompanying notes are an integral part of these financial statements.

14 12 Balance Sheet as at 28 February 2013 Non-current assets Notes 28 February 2013 (unaudited) ' February 2012 (unaudited) ' August 2012 (audited) '000 Investment in subsidiary (122) Investments held at fair value through profit or loss 7 75,275 77,053 69,995 Current assets 75,275 76,931 69,995 Balances due from brokers Other receivables Cash and cash equivalents 4,602 1,084 1,359 4,675 1,774 1,470 Total assets 79,950 78,705 71,465 Current liabilities Balances due to brokers (297) Other payables (169) (5,911) (3,037) (169) (5,911) (3,334) Net assets 79,781 72,794 68,131 Equity attributable to equity shareholders Called-up share capital 4,019 4,019 4,019 Capital redemption reserve 6,279 6,279 6,279 Capital reserve 67,839 60,513 55,548 Revenue reserve 1,644 1,983 2,285 Total equity 79,781 72,794 68,131 Net asset value per ordinary share p 452.8p 423.8p The accompanying notes are an integral part of these financial statements.

15 13 Cash Flow Statement for the half year ended 28 February 2013 Operating activities Half year ended 28 February 2013 (unaudited) '000 Half year ended 29 February 2012 (unaudited) '000 Year ended 31 August 2012 (audited) '000 Net profit/(loss) before finance costs and tax 12,630 (4,523) (8,471) (Increase)/decrease in investments (5,280) 10,146 17,057 Decrease in receivables (Decrease)/increase in payables (471) (268) 60 Net cash inflow from operating activities 6,917 5,447 9,317 Financing activities Buy-backs of ordinary shares (1,588) (1,589) Decrease in bank overdraft (2,683) (2,983) (5,898) Equity dividends paid (965) (970) (1,613) Bank overdraft interest paid (26) (104) (140) Net cash outflow from financing (3,674) (5,645) (9,240) Increase/(decrease) in cash and cash equivalents 3,243 (198) 77 Cash and cash equivalents at the start of the period 1,359 1,282 1,282 Cash and cash equivalents at the end of the period 4,602 1,084 1,359 The accompanying notes are an integral part of these financial statements.

16 14 Notes to the Financial Statements 1. General information The financial statements on pages 10 to 16 comprise the unaudited results of the Company for the six months to 28 February The financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ), as adopted by the European Union, and with the Statement of Recommended Practice ( SORP ) issued by the Association of Investment Companies dated January 2009, where the SORP is consistent with the requirements of IFRS. The trading subsidiary, GFT Dealing Limited, was dissolved from the Companies House register on 19 February As such, there is no longer a group in existence and therefore the financial statements, including comparatives, have been presented on a Company only basis. The financial statements have been prepared on the basis of the accounting policies set out in the Annual Report and Financial Statements for the year ended 31 August They are presented in pounds sterling, as this is the principal currency in which the Company s transactions are undertaken. The financial information contained in this report does not constitute full statutory accounts as defined in Section 434 of the Companies Act The financial statements for the six months to 28 February 2013 and the six months to 29 February 2012 have not been either audited or reviewed by the Company s Auditors. The information for the year ended 31 August 2012 has been extracted from the latest published Annual Report and Financial Statements, which have been filed with the Registrar of Companies. The Report of the Auditors on those financial statements contained no qualification or statement under Section 498(2) or (3) of the Companies Act The Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements. After making enquiries, and bearing in mind the nature of the Company s business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion the Directors have considered the liquidity of the portfolio and the Company s ability to meet obligations as they fall due. 2. Dividends and other income Half year ended 28 February 2013 '000 Half year ended 29 February 2012 '000 Year ended 31 August 2012 '000 Income from listed investments Franked UK dividends ,834 UK property income distributions Overseas dividends ,081 2,318 Other income Interest on deposits ,083 2,320

17 15 Notes to the Financial Statements continued 3. Return per ordinary share Total return per ordinary share is based on the net profit attributable to the ordinary shares of 12,615,000 (half year ended 29 February 2012: loss 4,608,000; year ended 31 August 2012: loss 8,627,000) and on 16,075,080 ordinary shares being the weighted average number of shares in issue (half year ended 29 February 2012: 16,219,827; year ended 31 August 2012: 16,147,058). Revenue return per ordinary share is based on the net revenue return attributable to the ordinary shares of 324,000 (half year ended 29 February 2012: 779,000; year ended 31 August 2012: 1,724,000) and on 16,075,080 ordinary shares being the weighted average number of shares in issue (half year ended 29 February 2012: 16,219,827; year ended 31 August 2012: 16,147,058). Capital return per ordinary share is based on the net capital profit attributable to the ordinary shares of 12,291,000 (half year ended 29 February 2012: loss 5,387,000; year ended 31 August 2012: loss 10,351,000) and on 16,075,080 ordinary shares being the weighted average number of shares in issue (half year ended 29 February 2012: 16,219,827; year ended 31 August 2012: 16,147,058). 4. Net asset value per ordinary share Net asset value per ordinary share is based on the 16,075,080 (half year ended 29 February 2012: 16,075,080; year ended 31 August 2012: 16,075,080) ordinary shares in issue. During the period ended 28 February 2013, nil (half year ended 29 February 2012: 434,000; year ended 31 August 2012: 434,000) ordinary shares were repurchased for cancellation at a total cost of nil (half year ended 29 February 2012: 1,588,000; year ended 31 August 2012: 1,589,000). No further shares have been repurchased since the period end. 5. Management fee The management fee payable to Henderson Global Investors ( Hendersons ) was calculated monthly in arrears at 0.8% on the value of the Company's total assets less current liabilities up to 75 million and at 0.5% per annum thereafter. In this regard, current liabilities exclude any borrowings under facilities other than bank overdraft facilities. The fee accrued to the Balance Sheet date is 103,000 which includes the termination fee payable from 7 February 2013 to 28 February The remainder of the termination fee payable to 7 May 2013 is 118,000 based on net assets of the Company as at 7 February This fee will be apportioned over the remainder of the termination period. With effect from 1 March 2013 Miton Capital Partners Limited ( Miton ) has been appointed as the Investment Manager. In return for its services, Miton will be entitled to receive a management fee of 1% of the market capitalisation. Miton has agreed to waive the management fees for the period up to the earlier of completion of a merger with The Diverse Income Trust plc or 12 months after the effective date of their appointment. The management fee is allocated 60% to capital and 40% to revenue. 6. Interim dividend An interim dividend of 6.0p per ordinary share will be paid on 28 May 2013 to shareholders on the register of members on 10 May The Company's shares will be quoted ex-dividend on 8 May Based on the number of shares in issue on 29 April 2013, the cost of this dividend will be 965,000.

18 16 Notes to the Financial Statements continued 7. Investments held at fair value through profit or loss Income from listed investments At 28 February At 29 February At 31 August '000 '000 '000 Analysis of investments by place of listing: London Stock Exchange 73,100 75,032 68,268 Alternative Investment Market 2,175 2,021 1,727 Valuation of investments 75,275 77,053 69,995

19 Directors and Advisers Directors (all non-executive) Tom Bartlam (Chairman) Rod Birkett Peter Dicks Secretary and Registered Office Capita Company Secretarial Services Limited Beaufort House 51 New North Road Exeter EX4 4EP Telephone: Investment Manager Miton Capital Partners Limited Duke Street Reading RG1 4RU Telephone: Website: Company website Administrator Capita Sinclair Henderson Limited ( trading as Capita Financial Group Specialist Fund Services) Beaufort House 51 New North Road Exeter EX4 4EP Auditor Ernst & Young LLP 1 More London Place London SE1 2AF Solicitors Stephenson Harwood LLP 1 Finsbury Circus London EC2M 7SH Stockbroker Cenkos Securities plc Tokenhouse Yard London EC2R 7AS Bankers and Custodians HSBC Bank plc 8 Canada Square London E14 5HQ Registrar Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA Telephone: Calls to this number cost 8p per minute from a BT landline. Other providers costs may vary. Lines are open 8.30am to 5.30pm Monday to Friday. Website: An investment Company as defined under Section 833 of the Companies Act Registered in England No A member of the Association of Investment Companies. Produced by Capita Financial Desktop Publishing Telephone

20 Miton Duke Street, Reading, Berkshire, RG1 4RU