Last checked at 
17 Feb 2022 07:00
The Diverse Income Trust Plc - Half-year ReportThe Diverse Income Trust Plc - Half-year Report
PR Newswire
London, February 16
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 2021.
RESULTS FOR THE HALF YEAR TO 30 NOVEMBER 2021
NAV total return to shareholders of -3.8%, 4.9% behind 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 Numis All-Share Index* of 1.1% on a total return basis over the six months to 30 November 2021. The share price total return was -5.9% as the Company’s shares traded at a discount at the end of November 2021 whilst they traded at a premium at the end of May 2021. First half dividend increased The first two interim dividends this year amounted to 1.80 pence per share, a small rise on the 1.75p paid in respect of the same period of 2020. Although there was a 24.3% rise in the revenue return per share during the period, a prudent approach has been taken as 2020 was affected by special factors and the outcome for the current year seems likely to be close to the previous year’s. The Board expects at least to maintain the full year dividend. Retained revenue reserves have also increased At the half year, retained revenue reserves were £15.9m, up from £15.2m as at the end of May 2021, and compared to £13.2m of dividends paid to shareholders last year. Over the half year to November 2021, revenue earnings per share more than fully covered the dividends declared, hence the increase in revenue reserves.* The Company will report its results in relation to Numis UK Equity indices in future, rather than FTSE index comparators. Please see the Manager’s Report below further details.
Summary of Results
| As at 30 November 2021 | As at 30 November 2020 | As at 31 May 2021 | |
| NAV per ordinary share | 111.81p | 97.10p | 118.31p |
| Ordinary share price (mid) | 110.00p | 91.00p | 119.00p |
| (Discount)/premium to NAV1 | (1.62%) | (6.28%) | 0.58% |
| Ordinary shares in issue | 361,445,105 | 358,045,105 | 361,445,105 |
| Period to 30 November 2021 | Period to 30 November 2020 | Period to 31 May 2021 | |
| Revenue return per ordinary share | 2.20p | 1.77p | 3.73p |
| Ongoing charges1 | 1.06%2 | 1.07% | 1.06% |
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 half year between June and November 2021, when the stock market recovery was unsettled by the revival of inflationary pressures, and a new Covid variant.
Index comparators
Whereas previously the Trust's returns were stated in the context of a number of FTSE index comparators, in future the Company will report its results in relation to Numis UK Equity indices. Please refer to the Manager's Report below for further details on this change.
Half year returns
After the 33.2% rise during the previous financial year, the net asset value slipped back 5.5% as investors took a more cautious view of companies’ recovery prospects. This was due to the adverse pressures from cost inflation, supply disruptions and the uncertainty created by the seasonal rise in Covid cases and, at the end of the period, the arrival of the Omicron variant of the virus. Taking account of reinvested dividends (which amounted to 2p per share during the period) the Trust’s NAV total return during the period was -3.9%, which compares with a rise of 1.1% for the Numis All-Share index. The share price total return was -5.9%, as the shares moved from a premium of 0.6% at the end of May 2021 to a discount of 1.6% at the end of November 2021. So the Trust gave back some of the previous year’s outperformance, when on the same basis it had delivered a total return of 38.4%, compared with the market’s return of 25.2%*.
Over the half year the Trust’s revenue per share rose from 1.77p to 2.20p, with the first two interim dividends declared for the 2021-22 financial year amounting to 1.80p compared with 1.75p last year.
After the share prices of many of the Trust’s portfolio holdings appreciated so well in the year to May 2021, there was a degree of profit taking over this half year period. Since many of the largest quoted companies principally operate overseas, the strength of the US Dollar over the half year favoured the larger stocks, with the Numis Large Cap Index up 1.8%. There was some profit-taking amongst smallcap stocks and hence the Numis Smaller Companies Plus AIM Index (excluding Investment Companies) declined by 2.5%.
Returns since the Trust was first listed in April 2011
Over the ten year and seven month period since the Trust was first listed in April 2011, its NAV total return has been 226.5% which compares with the 83.6% total return in the Numis All-Share Index over the same period. Despite the uncertainties of Brexit since 2016, smallcap stocks outperformed over the 10+ years, with the Numis Small Cap Plus AIM Index (excluding Investment Companies) up 132.8% and the Numis Large Cap Index up 69.0%.
Share Issuance and Redemptions
Since the Trust’s share price reflects the balance of buyers and sellers, when there is an imbalance, the Trust’s share price can diverge (upwards or downwards) from its NAV.
In order to help to address any persistent imbalances between buyers and sellers, the Trust offers all shareholders the option to redeem their shares each year. At the end of April 2021, 347,580 shares (0.1% of the issued share capital) were offered for redemption, and these were sold to new investors at the redemption point NAV at the end of May 2021.
Over the half year to November 2021 the Trust’s share price traded at an average of 1.2% below its daily NAV. Since the period end, the Trust’s share price moved to a premium to NAV and 475,000 shares were issued at a premium to NAV in December 2021. As at 11 February 2022, the shares traded at a 0.14% premium to NAV.
Board Refreshment
As indicated in the 2021 Annual Report, a search has been conducted for a new non-Executive Director, using Nurole, an external search agency, and Charles Crole was selected to join the Board with effect from 1 February 2022. Charles has extensive experience as a UK equity fund manager and in the marketing of investment trusts. The Board believes these skills are central to its role and I should like to take this opportunity to welcome him to the Board. With effect from 28 February 2022, Paul Craig is standing down after almost 11 years on the Board. His experience and counsel have served shareholders’ interests well during a decade of significant changes and he leaves with our thanks.
Prospects
Over recent decades, share price appreciation has been driven by ongoing global growth, combined with rising valuations of assets, as long-dated bond yields have declined. More recently however, structural factors have led to a marked slowing of the Chinese economy and, if this trend were to persist, then long-term global growth may also slow. Furthermore, if recent inflationary pressures also turn out to be persistent, then long-dated bond yields could rise further. Both factors are likely to present challenges to stock market indices’ appreciation in future.
Fortunately, the UK stock market includes many relatively young businesses that serve immature markets, where prospects are less reliant on the fluctuations of global growth. The UK’s equity income universe also includes stocks generating abundant surplus cash, which are not reliant on shareholder subscriptions to fund their ongoing growth. Finally, the Trust’s active selection of its portfolio holdings has added considerable incremental outperformance of the comparative indices since it was listed in April 2011.
At times when economic and stock market conditions are more challenging, all three of these factors can offer major advantages. This offers the potential for the Company to continue its record of outperformance, in an environment where the headwinds to UK equity performance in an international context may be reversing, and becoming tailwinds.
Andrew Bell
Chairman
16 February 2022
* This figure refers to total returns based on the Numis All Share Index.
MANAGER’S REPORT
Who are the fund managers of the Trust?
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, with a well-established reputation for successfully managing UK-quoted multicap portfolios over the longer term. The Trust’s Board appointed Premier Miton as Manager when it was 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 as a team in April 2011.
Gervais Williams
Gervais joined Miton Group in March 2011 and is now 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 Group in May 2011. Martin qualified as a Chartered Accountant with Arthur Anderson and had senior roles and extensive experience at Merrill Lynch and Collins Stewart.
Martin and Gervais have had a close working relationship since 2004, with complementary expertise that has led them to back a series of successful companies.
Why are the index comparatives used in this report different from those used previously?When the Trust was first listed in April 2011, the Prospectus highlighted that the Trust would not have a formal stock market index benchmark, given the nature of its multicap portfolio. Even so, it was always envisaged that the Trust would report its results in the context of the returns of various parts of the UK stock market. To date, this has been carried out with reference to the FTSE investment universe, which in this case included the FTSE All-Share Index, the FTSE Small Cap Index (excluding Investment Companies), and the FTSE AIM All-Share Index.
However, given the licensing terms available from London Stock Exchange (who own the FTSE Index data) and the fact that publication of these indices would require a separate licence for the Trust, (notwithstanding that Premier Miton, as Manager, already has a licence), the Trust has decided that reference will only be made to the Numis indices going forward. Premier Miton also has a licence for the use of Numis data, who have confirmed that their terms do extend to the use of the data by Premier Miton clients.
Therefore, to avoid unnecessary costs for the Trust, it will now report its results in the context of the Numis Index data as a performance comparator. Since the Trust was listed in April 2011, the returns of both sets of indices happen to be broadly similar, so the strength Trust’s past record relative to the comparator stock market indices remains largely unchanged.
What were the main contributors to the Trust’s return over the half year?
Over the half year, larger listed stocks in aggregate benefited from the appreciation of the US Dollar, as so many have a very substantial percentage of their operations overseas. The Numis Large Cap Index delivered a total return of 1.8% between May and November 2021, which compares with the Numis Small Companies Plus AIM (excluding Investment Companies) Index that fell by 2.5%. Generally, there was a degree of profit taking amongst small companies after outperformance in previous periods. As the Diverse Equity Income has much larger weightings in AIM listed than the mainstream larger stocks, the trends in the half year amounted to a slight headwind.
Indeed, since many of the AIM listed holdings in the Trust’s portfolio had outperformed by such large percentages in prior periods, the profit-taking in the Trust’s portfolio was little more marked than the indices implied. A good example was the holding in CMC Markets, where substantial profits had already been taken on very strong outperformance in previous periods. Alongside, all the profits had been taken on the holding in IG Index, since the share prices of both it and CMC Markets are relatively closely correlated. Over much of 2021, asset prices have been less volatile and hence the CMC Markets’ share price declined, making it one of the greatest detractors to the Trust’s returns over the half year. Other examples of previous winners peaking out were AO World and Avacta, both of which had also greatly outperformed in previous periods. The Manager has retained the holdings of CMC Markets, AO World and Avacta given their limited correlation with other portfolio holdings, and in expectation that they will generate very substantial cash surpluses in the coming years.
The best contributor to portfolio returns over the half year was William Morrison, the supermarket group, which accepted a premium takeover offer. The share price of River & Mercantile also performed strongly when it announced that it had sold a major part of its business to Schroder for a market capitalisation that was little different from that of the total listed value of the company. Drax Group also was a major contributor, as investors recognised that its investment in the biomass supply chain has put it in a strong position as this industry expands.
What are the main factors that have driven the Trust’s returns since it first listed in April 2011?
Historically, small, quoted companies have outperformed larger quoted companies over the longer term. Alongside, over the ten year and seven-month period since the Company was listed, stock market returns have generally been good. Since the Trust's listing in April 2011, many AIM listed and small quoted companies have outperformed the rising trends, in spite of the uncertainties of Brexit and the global pandemic. Between April 2011 and November 2021, the Numis Smaller Companies plus AIM Index (excluding Investment Companies) has appreciated by 132.8% which compares with a total return of 69.0% for the Numis Large Companies Index.
During this period, stocks forecast to grow rapidly have tended to outperform those that grow more modestly and generate surplus cashflow that is paid as dividend income, (which includes most of the stocks in the Trust’s portfolio). Despite this factor, active stock selection has greatly enhanced the return of the Trust’s portfolio, such that its NAV total return has risen by 226.5% since issue.
Over the first half, why has the Trust’s revenue per share improved compared with last year?
With the onset of the global pandemic in the half year period to November 2020, a number of the portfolio holdings announced that they would suspend dividends for precautionary reasons. Subsequently, as the global economy recovered, most portfolio holdings have resumed paying dividends. This resumption of dividend payments has led to a major improvement in the Trust’s income after expenses over the half year to November 2021 and led the Trust’s revenue to increase from £6.7m to £8.1m.
Last year, a number of the Trusts’ holdings made up for the cancelled dividends early in the period, with extra one-off dividends in the second half of the Trust’s year to May 2021. This one-off income is not anticipated this year, and hence whilst the underlying dividend income (excluding special dividends) for the current year is expected to increase, we do not expect the percentage improvement to be anything as great as that of the half year figures stated above.
How unusual is the UK quoted small company investment universe?
Sometimes economic conditions can be unsettled and adverse geopolitical events can cause substantial volatility in asset prices. Mainstream stock markets do not always appreciate and sometimes can deliver disappointing returns over several years. During these kinds of periods, institutional investors seek out sectors that have the potential to buck the wider pattern, which includes areas such as smaller quoted companies.
During globalisation, asset market returns have been excellent. Aside from Japan, stock markets around the world have typically delivered strong returns over a number of decades. During this period of plenty, institutional allocations in UK quoted small companies have gradually been crowded out by larger weightings in some of the best performing areas, such as US technology stocks. This trend has been evident globally, with most exchanges dedicated to quoted small companies closed for lack of institutional interest.
Fortunately, the government has sustained support for a number of small companies exchanges in the UK via dedicated tax exemptions. Small, quoted companies have the political advantage that they generate additional skilled employment and increased productivity, and ultimately enhance the tax take for the Exchequer.
As outlined elsewhere in this report, we worry that mainstream stock markets may not continue to deliver strong returns in future. If this is the case, then the UK has a major advantage over others in having retained its vibrant universe of quoted smaller companies – with all the advantages of genuine diversification they bring. If the returns on many mainstream stock markets do disappoint in future, then the ongoing advantages of UK quoted smaller companies could lead to renewed institutional interest. The multicap nature of the Diverse Income Trust strategy would be well placed to participate if this occurred.
What are the prospects for the Trust?
The Company’s strategy differs from most others in its peer group, in that it has greater potential to sustain an attractive return even at times when the mainstream stock market indices may not be steadily rising.
Specifically, its portfolio invests in a wider opportunity set of quoted companies, and is not as restricted as others to a portion of the investment universe. Hence the portfolio includes many young, immature, businesses that supply industry sectors where demand is growing on a structural basis, rather than being reliant on the cyclical fluctuations of the global economy. Currently, there are indications that the Chinese economy (which has been the cornerstone of past global expansion) has reached a point where its growth may moderate considerably in future. In this is the case, then the Trust’s multicap investment universe could be a major advantage. During periods of inflation and rising interest rates, or at times when the cost of labour is rising and corporate profit margins are under pressure, it is usual for a growing number of businesses to run out of cash. Over-indebted businesses often find they are obliged to sell parts of their company, even at disappointing valuations, to repay debt. Others end up in insolvency. At times like this, quoted companies have a major advantage over private businesses, in that they can raise additional capital to acquire the businesses being sold at low valuations, and enhance the potential for the combined businesses to generate further cash surpluses. Whilst such transactions can incrementally enhance the returns of large mainstream quoted companies, the same deal for an AIM quoted business can proportionally deliver much greater enhancement. Hence, when the global economy or the mainstream stock markets are unsettled, the nature of the Trust’s multicap approach has additional advantages.In summary, since the Trust was first listed, it has delivered returns well ahead of the index comparator. To date, these premium returns have not appeared as differentiated given that so many other strategies have delivered strong returns as well. However, with the prospective yields on long-dated bonds now rising, we believe the Company’s strategy could become more distinctive in future. Furthermore, such a change could initiate a progressive rise in UK weightings that might drive the UK’s outperformance compared to international exchanges. If that were to occur, then the Trust might well become increasingly relevant to a much wider range of investors in future.
Gervais Williams and Martin Turner
16 February 2022
PORTFOLIO INFORMATION
as at 30 November 2021
| Rank Company | Sector & main activity | Valuation £’000 | % of net assets | Yield1 % |
| 1 Kenmare Resources | Basic Materials | 8,654 | 2.1 | 2.7 |
| 2 K3 Capital2 | Financials | 8,542 | 2.1 | 3.1 |
| 3 CMC Markets | Financials | 7,204 | 1.8 | 10.7 |
| 4 Strix2 | Industrials | 7,066 | 1.8 | 2.6 |
| 5 Drax | Utilities | 6,579 | 1.6 | 3.2 |
| 6 888 | Consumer Discretionary | 6,430 | 1.6 | 3.6 |
| 7 Randall & Quilter2 | Financials | 6,012 | 1.5 | 1.3 |
| 8 Legal & General | Financials | 5,974 | 1.5 | 6.3 |
| 9 National Grid | Utilities | 5,942 | 1.5 | 4.9 |
| 10 Aferian2 | Telecommunications | 5,742 | 1.4 | 1.8 |
| Top 10 investments | 68,145 | 16.9 | ||
| 11 Sainsbury (J) | Consumer Staples | 5,451 | 1.4 | 3.8 |
| 12 MAN | Financials | 5,450 | 1.3 | 3.4 |
| 13 I3 Energy2 | Energy | 5,450 | 1.3 | 3.3 |
| 14 Phoenix | Financials | 5,444 | 1.3 | 7.5 |
| 15 Tesco | Consumer Staples | 5,313 | 1.3 | 3.5 |
| 16 Touchstone Exploration2 | Oil & Gas | 5,277 | 1.3 | – |
| 17 FRP Advisory2 | Industrials | 5,142 | 1.3 | 3.3 |
| 18 Lords Group Trading2 | Industrials | 5,103 | 1.3 | 0.5 |
| 19 Admiral | Financials | 5,083 | 1.3 | 6.0 |
| 20 DWF | Industrials | 4,831 | 1.2 | 4.2 |
| Top 20 investments | 120,689 | 29.9 | ||
| 21 iEnergizer2 | Industrials | 4,696 | 1.2 | 5.3 |
| 22 Just | Financials | 4,627 | 1.1 | – |
| 23 Direct Line Insurance | Financials | 4,611 | 1.1 | 8.2 |
| 24 Polymetal International | Basic Materials | 4,574 | 1.1 | 7.4 |
| 25 Galliford Try | Industrials | 4,541 | 1.1 | 2.8 |
| 26 XPS Pensions | Financials | 4,479 | 1.1 | 4.9 |
| 27 AVIVA | Financials | 4,412 | 1.1 | 5.5 |
| 28 BT | Telecommunications | 4,357 | 1.1 | – |
| 29 Vodafone | Telecommunications | 4,274 | 1.1 | 7.0 |
| 30 Bloomsbury Publishing | Consumer Discretionary | 4,179 | 1.0 | 5.1 |
| Top 30 investments | 165,439 | 40.9 | ||
| 31 River and Mercantile | Financials | 4,117 | 1.0 | 3.7 |
| 32 Mears | Industrials | 3,936 | 1.0 | 1.3 |
| 33 BHP | Basic Materials | 3,892 | 1.0 | 10.9 |
| 34 Centamin | Basic Materials | 3,849 | 1.0 | 7.0 |
| 35 Jadestone Energy2 | Energy | 3,849 | 1.0 | 1.6 |
| 36 Blackbird2 | Technology | 3,845 | 1.0 | – |
| 37 Inspired2 | Energy | 3,843 | 0.9 | 1.5 |
| 38 IOG2 | Energy | 3,751 | 0.9 | – |
| 39 Sabre Insurance | Financials | 3,746 | 0.9 | 6.3 |
| 40 Paypoint | Industrials | 3,730 | 0.9 | 5.6 |
| Top 40 investments | 203,997 | 50.5 | ||
| Balance held in 82 equity investments | 176,429 | 43.6 | ||
| Total equity investments | 380,426 | 94.1 | ||
| 600 Group 8% Convertible Loan Notes 14/08/2023 | 2,255 | 0.5 | ||
| Fixed interest investments | 2,255 | 0.5 | ||
| Listed Put option | ||||
| UKX – December 2022 6,200 Put | 7,115 | 1.8 | ||
| Traded options | 7,115 | 1.8 | ||
| Total investment portfolio | 389,796 | 96.4 | ||
| Other net current assets | 14,348 | 3.6 | ||
| Net assets | 404,144 | 100.0 | ||
1 Source: Refinitiv. Based on historical yields and therefore not representative of future yields. Includes special dividends where known.
2 AIM/AQUIS listed.
3 Bermuda Stock Exchange listed.
Portfolio as at 30 November 2021
| Portfolio exposure by sector (%) - £389.8 million | |
| Financials | 30.2 |
| Industrials | 18.2 |
| Basic Materials | 11.4 |
| Consumer Discretionary | 8.5 |
| Energy | 6.6 |
| Consumer Staples | 5.2 |
| Telecoms | 4.2 |
| Utilities | 4.0 |
| Real Estate | 3.4 |
| Technology | 3.2 |
| Health Care | 2.4 |
| Oil & Gas | 2.2 |
| Fixed Interest | 0.5 |
| 100.0 | |
| Actual income by sector (%) - £9.0 million | |
| Financials | 35.2 |
| Industrials | 14.8 |
| Basic Materials | 14.7 |
| Consumer Discretionary | 7.7 |
| Energy | 6.0 |
| Telecoms | 4.8 |
| Consumer Staples | 4.5 |
| Technology | 3.6 |
| Utilities | 3.1 |
| Real Estate | 2.2 |
| Oil & Gas | 1.2 |
| Health Care | 1.1 |
| Fixed Interest | 1.1 |
| 100.0 | |
The LSE assigns all UK-quoted companies to an industrial sector. 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 2021 is set out in detail above, in line with that included in the Balance Sheet set out below. 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 two bars 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.
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 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 set out 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 2021 and continue to be as set out in that report on pages 17 to 20.
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 the applicable set of accounting standards and Article 4 of the IAS Regulation; and gives a true and fair view of the assets, liabilities and financial position and return of the Group; and this Half-Yearly Financial Report includes a fair review of the information required by: 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 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 16 February 2022 and the above responsibility statement was signed on its behalf by:
Andrew Bell
Chairman
16 February 2022
CONDENSED CONSOLIDATED INCOME STATEMENT
for the half year to 30 November 2021 (unaudited)
| Half year to 30 November 2021 | Half year to 30 November 2020 | Year ended 31 May 2021* | ||||||||
| Notes | Revenue £’000 | Capital £’000 | Total £’000 | Revenue £’000 | Capital £’000 | Total £’000 | Revenue £’000 | Capital £’000 | Total £’000 | |
| (Losses/ Gains) on investments held at fair value through profit or loss | - | (21,917) | (21,971) | - | 31,496 | 31,496 | - | 106,793 | 106,793 | |
| Losses on derivative contracts | - | (902) | (902) | - | - | - | - | - | - | |
| Foreign exchange losses | - | (14) | (14) | - | (2) | (2) | - | (12) | (12) | |
| Income | 2 | 9,007 | 79 | 9,086 | 7,441 | - | 7,441 | 15,472 | 1,245 | 16,717 |
| Management fee | (457) | (1,371) | (1,828) | (344) | (1,032) | (1,376) | (764) | (2,293) | (3,057) | |
| Other expenses | (426) | - | (426) | (381) | - | (381) | (761) | - | (761) | |
| Return on ordinary activities before finance costs and taxation | 8,124 | (24,179) | (16,055) | 6,716 | 30,462 | 37,178 | 13,947 | 105,733 | 119,680 | |
| Finance costs | (12) | (35) | (47) | (13) | (40) | (53) | (28) | (85) | (113) | |
| Return on ordinary activities before taxation | 8,112 | (24,214) | (16,102) | 6,703 | 30,442 | 37,125 | 13,919 | 105,648 | 119,567 | |
| Taxation - irrecoverable holding tax | (167) | - | (167) | (335) | - | (335) | (539) | - | (539) | |
| Return on ordinary activities after taxation | 7,945 | (24,214) | (16,269) | 6,368 | 30,422 | 36,790 | 13,380 | 105,648 | 119,028 | |
| Basic and diluted return: | pence | pence | pence | pence | pence | pence | pence | pence | pence | |
| Per ordinary share | 3 | 2.20 | (6.70) | (4.50) | 1.77 | 8.47 | 10.24 | 3.73 | 29.43 | 33.16 |
* Extracted from audited financial statements.
The total column of this statement is the Income Statement of the Group prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. 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
for the half year to 30 November 2021 (unaudited)
| 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 2021* | 411 | 196,562 | 26 | 22,378 | 193,091 | 15,174 | 427,642 | |
| Total comprehensive income: | ||||||||
| Net return for the period | - | - | - | - | (24,214) | 7,945 | (16,269) | |
| Transactions with shareholders recorded directly to equity: | ||||||||
| Equity dividends paid | 4 | - | - | - | - | - | (7,229) | (7,229) |
| As at 30 November 2021 | 411 | 192,562 | 26 | 22,378 | 168,877 | 15,890 | 404,144 | |
| 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: | ||||||||
| Shares bought back and cancelled | 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 2020* | 428 | 192,562 | 6 | 40,530 | 87,443 | 15,041 | 336,010 | |
| Total comprehensive income: | ||||||||
| Net return for the year | - | - | - | - | 105,648 | 13,380 | 119,028 | |
| Transactions with shareholders recorded directly to equity: | ||||||||
| Issue of ordinary shares | 3 | 4,000 | - | - | - | - | 4,003 | |
| Shares bought back and cancelled | (20) | - | 20 | (18,152) | - | - | (18,152) | |
| Equity dividends paid | 4 | - | - | - | - | - | (13,247) | (13,247) |
| As at 31 May 2021* | 411 | 196,562 | 26 | 22,378 | 193,091 | 15,174 | 427,642 | |
* Extracted from audited financial statements.
The accompanying notes are an integral part of these financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 November 2021 (unaudited)
| Notes | 30 November 2021 £000 | 30 November 2020 £000 | 31 May 2021* £000 | |
| Non-current assets: | ||||
| Investments held at fair value through profit or loss | 382,681 | 338,514 | 414,823 | |
| Current assets: | ||||
| Derivative instruments | 7,115 | – | – | |
| Trade and other receivables | 1,439 | 2,123 | 1,877 | |
| Cash at bank and cash equivalents | 15,745 | 7,367 | 11,379 | |
| 24,299 | 9,490 | 13,256 | ||
| Current liabilities: | ||||
| Trade and other payables | (2,836) | (338) | (437) | |
| Net current assets | 21,463 | 9,152 | 12,819 | |
| Total net assets | 404,144 | 347,666 | 427,642 | |
| Capital and reserves: | ||||
| Share capital – ordinary shares | 5 | 361 | 358 | 361 |
| Share capital – management shares | 5 | 50 | 50 | 50 |
| Share premium account | 196,562 | 192,562 | 196,562 | |
| Capital redemption reserve | 26 | 26 | 26 | |
| Special reserve | 22,378 | 22,378 | 22,378 | |
| Capital reserve | 168,877 | 117,865 | 193,091 | |
| Revenue reserve | 15,890 | 14,427 | 15,174 | |
| Shareholders’ funds | 404,144 | 347,666 | 427,642 | |
| pence | pence | pence | ||
| Net asset value per ordinary share | 6 | 111.81 | 97.10 | 118.31 |
* Extracted from audited financial statements.
The accompanying notes are an integral part of these financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
as at 30 November 2021 (unaudited)
| Half year to 30 November 2021 £’000 | Half year to 30 November 2020 £’000 | Year ended 31 May 2021* £’000 | |
| Operating activities: | |||
| Net return before taxation | (16,102) | 37,125 | 119,567 |
| Losses/(gains) on investments and derivatives held at fair value through profit or loss | 22,873 | (31,496) | (106,793) |
| Financing costs | 51 | 62 | 113 |
| Decrease in trade and other receivables | 438 | 402 | 441 |
| (Decrease)/increase in trade and other payables | (33) | (32) | 67 |
| Withholding tax paid | (167) | (335) | (539) |
| Net cash inflow from operating activities | 7,060 | 5,726 | 12,856 |
| Investing activities: | |||
| Purchase of investments | (35,035) | (56,885) | (114,655) |
| Sale of investments | 47,638 | 57,906 | 114,872 |
| Purchase of derivative instruments | (8,017) | - | - |
| Net cash inflow from financing activities | 4,586 | 1,021 | 217 |
| Financing activities: | |||
| Ordinary shares issued | - | - | 4,003 |
| Shares bought back and cancelled | - | (18,152) | (18,152) |
| Finance costs paid | (51) | (62) | (113) |
| Equity dividends paid | (7,229) | (6,982) | (13,248) |
| Net cash outflow from financing | (7,280) | (25,196) | (27,510) |
| Increase/(decrease) in cash and cash equivalents | 4,366 | (18,449) | (14,437) |
| Reconciliation of net cash flow movements in funds: | |||
| Cash and cash equivalents at the start of the period | 11,379 | 25,816 | 25,816 |
| Net cash inflow/(outflow) from cash and cash equivalents | 4,366 | (18,449) | (14,437) |
| Cash at bank and cash equivalents at the end of the period | 15,745 | 7,367 | 11,379 |
* Extracted from audited financial statements.
The accompanying notes are an integral part of these financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the half year to 30 November 2021 (unaudited)
1. General Information and Accounting Policies
The condensed 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 2021 have been prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting”.
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 these updates 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 2021.
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 Company, with the current cash balance and holding a portfolio of listed investments, is able to meet its obligations as they fall due. 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 continuously monitor 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 values 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.
Directors, the Investment 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 2020 and 30 November 2021 has not been audited or reviewed by the Company’s Auditor. The comparative figures for the financial year ended 31 May 2021 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 2021 | Half year to 30 November 2021 | Year ended 31 May 2021 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
| Income from investments: | ||||||||||
| UK dividends | 7,242 | 79 | 7,321 | 5,105 | – | 5,105 | 10,628 | 1,245 | 11,873 | |
| UK REIT dividend income | 105 | – | 105 | 101 | – | 101 | 169 | – | 169 | |
| Non UK dividend income | 1,550 | – | 1,550 | 1,973 | – | 1,973 | 4,288 | – | 4,288 | |
| UK fixed interest | 95 | – | 95 | 230 | – | 230 | 386 | – | 386 | |
| 8,992 | 79 | 9,071 | 7,409 | – | 7,409 | 15,471 | 1,245 | 16,716 | ||
| Other income: | ||||||||||
| Exchange gains | 13 | – | 13 | 15 | – | 15 | 19 | – | 19 | |
| Net dealing loss of subsidiary* | – | – | – | (34) | – | (34) | (88) | – | (88) | |
| Underwriting income | – | – | – | - | – | – | 19 | – | 19 | |
| Other income | 2 | – | 2 | 51 | – | 51 | 51 | – | 51 | |
| Total income | 9,007 | 79 | 9,086 | 7,441 | – | 7,441 | 15,472 | 1,245 | 16,717 | |
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 2021 | Half year to 30 November 2020 | Year ended 31 May 2021 | ||||
| £’000 | pence per share | £’000 | pence per share | £’000 | pence per share | |
| Revenue return | 7,945 | 2.20 | 6,368 | 1.77 | 13,380 | 3.73 |
| Capital return | (24,214) | (6.70) | 30,422 | 8.47 | 105,648 | 29.43 |
| Total return | (16,269) | (4.50) | 36,790 | 10.24 | 119,028 | 33.16 |
| Weighted average number of ordinary shares | 361,445,105 | 359,261,954 | 358,929,991 | |||
4. Dividends per Ordinary Share
Amounts recognised as distributions to equity holders in the period.
| Half year to 30 November 2021 | Half year to 30 November 2020 | Year ended 31 May 2021 | ||||
| £’000 | pence per share | £’000 | pence per share | £’000 | pence per share | |
| In respect of the previous period: | ||||||
| Third interim dividend | 3,253 | 0.90 | 3,222 | 0.90 | 3,222 | 0.90 |
| Final dividend | 3,976 | 1.10 | 3,760 | 1.05 | 3,760 | 1.05 |
| In respect of the period under review: | ||||||
| First interim dividend | - | - | - | - | 3,043 | 0.85 |
| Second interim dividend | - | - | - | - | 3,222 | 0.90 |
| 7,229 | 2.00 | 6,982 | 1.95 | 13,247 | 3.70 | |
The Board has declared a first interim dividend of 0.90p per ordinary share, payable on 25 February 2022 to shareholders registered at the close of business on 24 December 2021. The ex-dividend date was 23 December 2021. The Board has also declared a second interim dividend of 0.90p per ordinary share, payable on 31 May 2022 to shareholders registered at the close of business on 25 March 2022. The ex-dividend date will be 24 March 2022 and the latest date to elect for dividends to be reinvested via the Dividend Reinvestment Plan ("DRIP") will be 8 April 2022. 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 28 May 2021 Redemption Point, the Company received redemption requests for 347,580 ordinary shares. All of these shares were matched with buyers and sold at a calculated Redemption Price of 118.08p per share.
The issued share capital consisted of 361,445,105 ordinary shares and 50,000 management shares as at 30 November 2021.
6. Net Asset Value
Ordinary Shares
The NAV per ordinary share and the net assets attributable at the period end were as follows:
| NAV pence per share 30 November 2021 | Net assets attributable 30 November 2021 £’000 | NAV pence per share 30 November 2020 | Net assets attributable 30 November 2020 £’000 | NAV pence per share 31 May 2021 | Net assets attributable 31 May 2021 £’000 | |
| Basic and diluted | 111.81 | 404,144 | 97.10 | 347,666 | 118.31 | 427,542 |
NAV per ordinary share is based on net assets at the period end and 361,445,105 ordinary shares, being the number of ordinary shares in issue at the period end (30 November 2020: 358,045,105 and 31 May 2021: 361,445,105 ordinary shares).
Management shares
The NAV of £1 (30 November 2020: £1 and 31 May 2021: £1) per management share is based on net assets at the period end of £50,000 (30 November 2020: £50,000 and 31 May 2021: £50,000) and 50,000 (30 November 2020: 50,000 and 31 May 2021: 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 2021 £’000 | Half year to 30 November 2020 £’000 | Year ended 31 May 2021 £’000 | |
| Costs on acquisitions | 97 | 168 | 393 |
| Costs on disposals | 21 | 41 | 68 |
| 118 | 209 | 461 |
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/AQUIS exchanges). A breakdown of these costs is set out below:
| Half year to 30 November 2021 £’000 | % of average monthly net assets | Half year to 30 November 2020 £’000 | % of average monthly net assets | Year ended 31 May 2021 £’000 | % of average monthly net assets | |
| Costs paid in dealing commissions | 35 | 0.01 | 65 | 0.02 | 114 | 0.03 |
| Costs of stamp duty | 83 | 0.02 | 144 | 0.04 | 347 | 0.10 |
| 118 | 0.03 | 209 | 0.06 | 461 | 0.13 |
The average monthly net assets for the six months to 30 November 2021 were £421,569,000 (30 November 2020: £326,707,000 and 31 May 2021: £359,991,000).
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 2021, the management fee was £1,828,000 (30 November 2020: £1,376,000 and 31 May 2021: £3,057,000), of which an amount of £297,000 was outstanding and due to Premier Portfolio Managers Limited in respect of management fees (30 November 2020: £234,000 and 31 May 2021: £316,000).
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
| Level 1 £’000 | Level 2 £’000 | Level 3 £’000 | Total £’000 | |
| Financial assets at fair value through profit or loss at 30 November 2021 | ||||
| Equity investments | 380,426 | - | - | 380,426 |
| Derivative contracts | - | 7,115 | - | 7,115 |
| Fixed interest bearing securities | - | 2,255 | - | 2,255 |
| 380,426 | 9,370 | - | 389,796 |
| Level 1 £’000 | Level 2 £’000 | Level 3 £’000 | Total £’000 | |
| Financial assets at fair value through profit or loss at 30 November 2020 | ||||
| Equity investments | 333,781 | - | - | 333,781 |
| Fixed interest bearing securities | - | 4,733 | - | 4,733 |
| 333,781 | 4,733 | - | 338,514 |
| Level 1 £’000 | Level 2 £’000 | Level 3 £’000 | Total £’000 | |
| Financial assets at fair value through profit or loss at 31 May 2021 | ||||
| Equity investments | 412,568 | - | - | 412,568 |
| Fixed interest bearing securities | - | 2,255 | - | 2,255 |
| 412,568 | 2,255 | - | 414,823 |
Subsidiary
The value of the subsidiary, DIT Income Services Limited, held at fair value is £1 (30 November 2020: £1 and 31 May 2021: £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 2021 (30 November 2020: £nil and 31 May 2021: £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 2021 amounted to £80,000 (half year to 30 November 2020: £87,000 and year ended 31 May 2021: £163,000).
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 toward 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, 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 2021, there were 361,445,105 ordinary shares in issue. As at the date of this Report there are 361,920,105 ordinary shares in issue, 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 2022 Redemption Point are:
| 3 May 2022 | Latest date for receipt of Redemption Requests and certificates for certificated shares |
| 3.00pm on 3 May 2022 | Latest date and time for receipt of Redemption Requests and TTE (transfer to escrow) instructions for uncertificated shares via CREST |
| 5.00 pm on 31 May 2022 | The Redemption Point |
| On or before 16 June 2022 | 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 30 June 2022 | 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 | 2022 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 | 0.90 |
| Second interim dividend | 0.50 | 0.50 | 0.50 | 0.50 | 0.65 | 0.70 | 0.80 | 0.85 | 0.90 | 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 | 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 | 1.10 | - |
| 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 | 3.75 | 1.80 |
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 enquiries@linkgroup.co.uk.
Changes of name and/or address must be notified in writing to the Registrar: Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL.
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 £13.9 billion (as at 31 December 2021, 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.diverseincometrust.com.
DIRECTORS AND ADVISORS
Directors (all non-executive)
Andrew Bell, Chairman
Paul Craig
Charles Crole
Caroline Kemsley-Pein
Michelle McGrade
Calum Thomson
Alternative Investment Fund Manager or Manager
Premier Portfolio Managers Limited
Paternoster House
65 St Paul’s Churchyard
London EC4M 8AB
Tel: 020 3714 1525
Web: www.premiermiton.com
Company website
https://www.diverseincometrust.com/
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Banker
Bank of New York MellonOne Piccadilly GardensManchester M1 1RN
Depositary and Custodian
The Bank of New York Mellon (International) Limited
One Canada Square
London E14 5AL
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
Registrar and Transfer Office
Shareholder Services Department
The Registry
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
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: enquiries@linkgroup.co.ukWeb: www.linkassetservices.com
Solicitor
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Stockbroker
Panmure GordonOne New ChangeLondon EC4 9AF
FINANCIAL CALENDAR
| Announcement of half-yearly results Payment of first interim dividend | February 2022 |
| Year end Payment of second interim dividend Redemption Point | May 2022 |
| Announcement of annual results Payment of third interim dividend | August 2022 |
| Annual General Meeting | October 2022 |
| Half-year end Payment of final dividend | November 2022 |
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.
AQUIS Stock Exchange (“AQUIS”)
The AQUIS Stock Exchange (previously known as NEX, ICAP Securities and Derivatives Exchange or ISDX) operates two primary traded market segments, the AQUIS Stock Exchange Main Market and the AQUIS Stock Exchange Growth Market. Both AQUIS Stock Exchanges are focused on smaller enterprises, with the latter focused on both smaller and medium-sized enterprises.
CO2e/BOE
The infrastructure required for the extraction of oil or gas itself involves emitting carbon into the atmosphere. The term CO2e/BOE is an assessment of the overall carbon emitted to build and decommission the infrastructure that brings a new oil or gas field into production, averaged over the life of the field, set out on the basis of each barrel of crude oil produced, or gaseous energy equivalent.
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)/ premium Calculation | 30 November 2021 | 31 May 2021 | |
| Closing NAV per share (p) | 111.81 | 118.31 | (a) |
| Closing share price (p) | 110.00 | 119.00 | (b) |
| (Discount)/premium | |||
| (c=((b-a/a)x100) (%) | (1.62) | 0.58 | (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. 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.
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.
Numis indices
The Numis indices mentioned in this report comprise the following:
Numis All-Share Index comprises all fully listed companies on the main UK equity market. Numis Large Cap Index contains all the stocks that, as at the annual end-year rebalancing date, make up the largest 80% by value of the UK fully listed equity market (including Premium and Standard Listings) as at the annual end-year rebalancing date. Numis Smaller Companies + AIM ex Investment Companies Index covers the smallest 10% by market value of the UK fully listed equity market, plus AIM stocks that meet this size limit. It excludes investment companies. Numis Mid Cap Index contains all the stocks that, as at the annual end-year rebalancing date, make up the smallest 20% by value of the UK fully listed equity market (including Premium and Standard Listings), excluding the bottom 5% by value of the UK fully listed equity market. Numis Alternative Markets Index contains all stocks listed on qualifying UK Alternative markets, regardless of market capitalisation. Currently the AIM market is the only market that qualifies.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 2021 £’000 | 31 May 2021 £’000 | |
| Management fee | 1,828 | 3,057 | |
| Other administrative expenses | 426 | 760 | |
| Less one-time costs | (25) | (4) | |
| Total management fee and other administrative expenses | 2,229 | 3,813 | |
| Total management fee and other administrative expenses (annualised) | 4,471 | 3,813 | (a) |
| Average net assets in the year | 421,569 | 359,991 | (b) |
| Ongoing charges (c=a/bx100) (%) | 1.06 | 1.06 | (c) |
FTSE 100 Put Option
A FTSE 100 Put Option is a type of derivative contract in which the underlying value is based on the level of the FTSE 100 index.
When the Trust’s portfolio appreciates, along with the mainstream Stock Market, the value of Put option tends to become worthless over its term (which in the case of the Trust currently extends to December 2022). The key advantage of investing in a FTSE 100 Put option is that at times of major market setbacks, the valuation of the Put option rises, which can then offset a part of the decline of other portfolio holdings. During the March 2020 setback for example, the Trust was able to take profits on its FTSE Puts after they had risen. It then bought more UK microcaps with the additional cash, at a time when their share prices were low. This process boosted the returns of the Trust through the market setback and the subsequent recovery.
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 2021 | 31 May 2021 | |
| Closing NAV per share (p) | 111.81 | 118.31 | |
| Add back total dividends paid per share in the period/year (p) | 2.00 | 3.70 | |
| Adjusted closing NAV per share(p) | 113.81 | 122.01 | (a) |
| Opening NAV per share (p) | 118.31 | 88.82 | (b) |
| NAV total return unadjusted (c=((a-b)/b) x100) (%) | (3.8) | 37.4 | (c) |
| NAV total return adjusted (%)** | (3.9) | 38.4 |
| Share Price Total Return | 30 November 2021 | 31 May 2021 | |
| Closing share price (p) | 110.00 | 119.00 | |
| Add back total dividends paid per share in the period/year (p) | 2.00 | 3.70 | |
| Adjusted closing share price (p) | 112.00 | 122.70 | (a) |
| Opening share price (p) | 119.00 | 84.00 | (b) |
| Share price total return unadjusted (c=((a-b)/b)x100) (%) | (5.9) | 46.1 | (c) |
| Share price total return adjusted (%)** | (6.0) | 47.6 |
* 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.
VolatilityThe 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.
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