Half Yearly Report

RNS Number : 9857R

Liontrust Asset Management PLC

14 November 2011

 



Embargoed until 0700 hours, Monday 14 November 2011

LIONTRUST ASSET MANAGEMENT PLC

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED

30 SEPTEMBER 2011

Liontrust Asset Management PLC ("Liontrust", the "Company", or the "Group"), the specialist independent specialist fund management group, today announces its Half Yearly Report for the six months ended 30 September 2011.

Results:

·     Profit before tax of £1.7 million (2010: Loss before tax of £3.9 million).

·     Adjusted profit before tax of £22,000 (2010: Adjusted loss before tax of £1.6 million)

·     Performance fees of £0.6 million (2010: £0.2 million)

·     Net cash and financial assets of £15.0 million (2010: £15.0 million)

·     Assets under management ("AuM") were £1,192 million as at 30 September 2011 (2010: £1,128 million). AuM as at close of business on 10 November 2011 was £1,354 million

·     Net positive inflows of £59 million for the six months ended 30 September 2011 with net positive inflows of £12 million since 1 October 2011.

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

"The £59 million of net inflows that Liontrust delivered in the six months to 30 September means we have achieved positive sales for five consecutive quarters. We have also recorded net positive inflows of £12 million since the start of the latest quarter on 1 October. This is a great achievement given the recent volatility in stock markets, the uncertainty this produces among investors and the fact that in the third quarter of 2011 net retail fund sales across the industry hit their lowest level since 2008.

"A key objective of everything we do at Liontrust is to grow our assets under management. This will be achieved by continuing to increase inflows into our funds through ongoing strong performance and broadening our client base. We have been delivering both of these, with five of our actively managed unit trusts being in the first quartile of their respective IMA sectors over three months to 31 October 2011. This provides the bedrock for growing our assets under management over the long term.

"The second way to grow assets under management is to expand into new asset classes and expand our fund management expertise. We have made our first step in this direction by completing the acquisition of Occam Asset Management. This provides us with fund management capability in Asia and Emerging Markets, which we anticipate will be two of the faster growing asset classes over the long term. We will be launching new funds for the two teams in 2012 to meet strong investor demand for these asset classes.

"Another attraction of the Occam acquisition is that it enhances our distribution capability, notably outside the UK.

"These developments all give me great confidence that we can continue to deliver positive inflows across our range of funds, leading to continued growth in our assets under management and therefore increased revenues and profitability."

For further information please contact:

Liontrust Asset Management                                                     020 7412 1700

John Ions                                                                                             www.liontrust.co.uk

Vinay Abrol

Simon Hildrey - Head of Marketing & Communications

Altium                                                                                                  020 7484 4040

Sam Fuller

Paul Chamberlain

Chairman's Statement

Introduction

I am delighted to present the Half Yearly Report for a business that is going from strength to strength and is very well positioned to continue its expansion over the coming months and years. Liontrust has now made it five consecutive quarters of net positive inflows, which is no mean feat in the current environment. We have made an adjusted profit before tax of £22,000 in the first six months of this financial year and our net cash and financial assets balance remains robust at £15.0 million (this comprises cash and cash equivalents, financial assets and the net of receivable and payable balances). We have also successfully completed the acquisition of Occam Asset Management.

Liontrust is benefiting from greater engagement with our client base, continued excellent fund performance, the addition of experienced and good quality individuals across the business through the Occam deal and a focus on managing costs. These developments are all beneficial to the business and its shareholders.

One headwind that all asset management firms currently face is investor nervousness resulting from the recent market volatility and the inability of politicians across Europe to show adequate leadership at a time when it is so badly needed. This has led to many investors adopting a wait and see attitude. It is therefore good to be reminded that investors have faced periods of great uncertainty before, as the following extract from a speech by the great value investor Benjamin Graham in June 1974 shows:

"I think the future of equities will be roughly the same as their past; in particular, common stock purchases will prove satisfactory when made at appropriate price levels. It may be objected that it is far too cursory and superficial a conclusion; that it fails to take into account the new factors and problems that have entered the economic picture in recent years - especially those of . . . the movement towards less consumption and zero growth. Perhaps I should add to my list the widespread public mistrust of Wall Street as a whole, engendered by its well-nigh scandalous behaviour during recent years in the areas of ethics, financial practices of all sorts and plain business sense."

Results

Profit before tax of £1.702 million for the six months ended 30 September 2011 (2010: Loss before tax of £3.927 million) includes a gain of £1.834 million on the disposal of the credit business.

Adjusted profit before tax was £22,000 (2010: Adjusted loss before tax £1.642 million) which includes performances fees earned. Adjusted profit (or loss) before tax is disclosed in order to give shareholders an indication of the profitability of the Group excluding the gain on the sale of the credit business, non-cash (depreciation, intangible asset amortisation and IFRS2 related) expenses, non-recurring (cost reduction, restructuring, Global equities team closure and severance compensation related) expenses and share incentivisation related, see note 6 below for a reconciliation of adjusted profit (or loss) before tax.                                          

AuM

AuM as at close of business on 30 September 2011 stood at £1,192 million, a decrease of 5.10% since 31 March 2011*. The fall in AuM has been mainly caused by market movements.  Over the same period, the FTSE All-Share Index has fallen by 13.5% and the STOXX Europe 600 Index has fallen by 20.2% on a GBP-adjusted basis.

AuM as at close of business on 30 September 2011 were broken down by type and process as follows:-

Process	Total	Institutional	Retail	Offshore Funds
	£m	£m	£m	£m
Cashflow Solution	776	370	399	7
Economic Advantage	367	-	367	-
Indexed	49	-	49	-
Total	1,192	370	815	7

* AuM as at close of business 31 March 2011 were £1,256 million after excluding the credit business related assets to produce like-for-like totals.

AuM as at close of business on 10 November 2011 were £1,354 million.

Fund Flows

Net positive inflows of £59 million were achieved for the six months ended 30 September 2011 with £12 million of net positive inflows in the period 1 October 2011 to 10 November 2011.

A reconciliation of fund flows and assets under management on a quarter by quarter basis is as follows:-

	Total	Institutional	UK Retail	Offshore Funds
	£m	£m	£m	£m
Opening AuM - 1 April 2011	1,343	395	843	105
Inflows	101	7	90	4
Outflows	(88)	(5)	(76)	(7)
Net flows *	13	2	14	(3)
Sale of the credit business **	(85)	-	-	(85)
Market movement	38	17	26	(5)
Closing AuM - 30 June 2011 / Opening AuM - 1 July 2011	1,309	414	883	12
Inflows	123	38	85	-
Outflows	(77)	(16)	(56)	(5)
Net flows	46	22	29	(5)
Market movement	(163)	(66)	(97)	-
Closing AuM - 30 September 2011	1,192	370	815	7

* Excludes credit business related flows post 13 April 2011 announcement of the sale of the credit business.

** Includes credit business related net outflows (including seed money redemptions) of £19m over the period 13 April 2011 to 30 June 2011.

Performance fees

Performance fees of £576,000 were earned in the six month period to 30 September 2011 (2010: £199,000).

Fund Performance (Quartile ranking)

Retail Funds	3 months	1 year	Manager tenure	Manager appointed
Liontrust Income Fund	2	3	1	25/03/2009
Liontrust UK Growth Fund	1	1	1	25/03/2009
Liontrust Special Situations Fund	1	1	1	11/11/2005
Liontrust UK Smaller Companies Fund	1	2	1	08/01/1998
Liontrust European Absolute Return Fund	1	1	3	09/07/2009
Liontrust European Growth Fund	1	1	1	15/11/2006

The past few months have been a challenging period for fund managers but Liontrust has continued to deliver strong relative performance. For the period from 1 July 2011 to 31 October 2011, the Liontrust European Absolute Return Fund returned +5.0%. Over the same time period, the Liontrust Special Situations Fund returned -2.7% and the Liontrust UK Growth Fund returned -2.6% compared to -6.7% by the FTSE All Share index and -6.0% by the average IMA UK All Companies fund.

Source: Financial Express, total return, bid to bid, to 31 October 2011 unless otherwise stated.  The above funds are all UK authorised unit trusts (retail share class).  Past performance is not a guide to the future; the value of investments and the income from them can fall as well as rise. Investors may not get back the amount originally subscribed.

Occam Acquisition

On 4 October 2011, the Group completed its acquisition of the fund management business of Occam Investment Management (Malta) Limited ("Occam Malta"), Occam Asset Management LLP ("Occam LLP") and Occam Investment Services Limited. The consideration for this acquisition was 2.1 per cent of AuM acquired (£84.1 million) plus £131,250, giving an aggregate consideration of £1.898 million (the "Consideration") before associated deal and restructuring costs. The Consideration payable shall be satisfied by the issue of 1,799,946 new Ordinary Shares of 1p of Liontrust to Occam LLP and £572,939 in cash to Occam LLP and Occam Malta.

Outlook

Liontrust is on a sounder financial footing than it has been for many years. We have had net positive inflows over five successive quarters, we have made an adjusted profit before tax of £22,000 in the first six months of this financial year and our balance sheet is still robust with £15.0 million in net cash and financial assets. With our continued excellent fund performance and the recent addition of Occam Asset Management, we are very well positioned to continue the expansion of the business.

Adrian Collins

Chairman

Consolidated Statement of Comprehensive Income

Six months ended 30 September 2011

			Six	Six	Year
			months to	months to	ended
			30-Sep-11	30-Sep-10	31-Mar-11
			(unaudited)	(unaudited)	(audited)
		Notes	£'000	£'000	£'000
Continuing operations
Revenue		3	5,460	4,199	9,918
Cost of sales			(44)	(41)	(80)
Gross profit			5,416	4,158	9,838
Realised gain on sale of financial assets			212	7	701
Gain on sale of credit business		4	1,834	-	-
Administration expenses		5	(5,770)	(8,092)	(15,639)
Operating profit/(loss)			1,692	(3,927)	(5,100)
Interest receivable			10	6	10
Profit/(loss) before tax			1,702	(3,921)	(5,090)
Taxation		7	(203)	(128)	538
Profit/(loss) for the period			1,499	(4,049)	(4,552)
Other comprehensive income:
Net gains/(losses) on available-for-sale financial assets net of tax			61	(45)	445
Amounts recycled through the Consolidated Statement of Comprehensive Income			(212)	(7)	(701)
Exchange differences on translating foreign operations			-	(5)	7
Other Comprehensive income for the period, net of tax			(151)	(57)	(249)
Total comprehensive income			1,348	(4,106)	(4,801)
			Pence	Pence	Pence
Basic earnings per share		8	4.92	0.68	(14.69)
Diluted earnings per share		8	4.89	0.68	(13.65)

Consolidated Balance Sheet

As at 30 September 2011

			30-Sep-11	30-Sep-10	31-Mar-11
			(unaudited)	(unaudited)	(audited)
			£'000	£'000	£'000
Assets
Non current assets
Intangible assets			-	700	600
Property, plant and equipment			134	137	123
Deferred tax assets			1,985	583	2,160
			2,119	1,420	2,883
Current assets
Trade and other receivables			10,800	10,113	10,205
Financial assets		9	369	8,079	8,530
Cash and cash equivalents			12,639	9,059	4,157
Total current assets			23,808	27,251	22,892
Liabilities
Current liabilities
Deferred tax liabilities			-	(138)	(57)
Trade and other payables			(8,809)	(12,270)	(10,277)
Accruals			(153)	(79)	(119)
Total current liabilities			(8,962)	(12,487)	(10,453)
Net current assets			14,846	14,764	12,439
Net assets			16,965	16,184	15,322
Shareholders' equity
Ordinary shares			353	353	353
Share premium			10,272	10,272	10,272
Capital redemption reserve			15	15	15
Revaluation reserve			-	355	151
Retained earnings			18,497	17,361	16,703
Own shares held			(12,172)	(12,172)	(12,172)
Total equity			16,965	16,184	15,322

Consolidated Cash Flow Statement

Six months ended 30 September 2011

				Six	Six	Year
				months to	months to	ended
				30-Sep-11	30-Sep-10	31-Mar-11
				(unaudited)	(unaudited)	(audited)
				£'000	£'000	£'000
Cash flows from operating activities
Cash inflow from operations				7,961	4,413	11,447
Cash outflow from operations				(9,381)	(8,680)	(18,002)
Cash inflow/(outflow) from changes in unit trust receivables and payables				375	2,054	(601)
Net cash used in operations				(1,045)	(2,213)	(7,156)
Interest received				10	6	10
Tax received				70	263	263
Net cash used in operating activities				(965)	(1,944)	(6,883)
Cash flows from investing activities
Purchase of property and equipment				(32)	(44)	(50)
Sale of credit business				1,393	-	-
Sale of seeding investments				8,086	650	703
Net cash from investing activities				9,447	606	653
Cash flows from financing activities
Purchase of minority interest shares				-	(2,654)	(2,654)
Issue of new shares				-	1,327	1,326
Dividends paid to shareholders				-	-	-
Net cash used in financing activities				-	(1,327)	(1,328)
Net increase/(decrease) in cash and cash equivalents				8,482	(2,665)	(7,558)
Effect of exchange rate changes				-	2	(7)
Opening cash and cash equivalents*				4,157	11,722	11,722
Closing cash and cash equivalents				12,639	9,059	4,157

* Cash and cash equivalents consist only of cash balances.

Consolidated Statement of Change in Equity

Six months ended 30 September 2011

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

Consolidated Statement of Change in Equity

Six months ended 30 September 2010

		Share	Share	Capital	Re-	Retained	Own shares	Total
		capital	premium	redemption	valuation	earnings	held	Equity
		£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000
Balance at 1 April 2010 brought forward		337	8,962	15	407	23,881	(12,172)	21,430
Loss for the period		-	-	-	-	(4,049)	-	(4,049)
Net loss on available-for-sale financial assets net of tax		-	-	-	(45)	-	-	(45)
Amounts recycled through the Consolidated Statement of Comprehensive Income		-	-	-	(7)	-	-	(7)
Loss on foreign exchange		-	-	-	-	(5)	-	(5)
Total comprehensive income for the period		-	-	-	(52)	(4,054)	-	(4,107)
Acquisition of minority interest shares		-	-	-	-	(2,654)	-	(2,654)
Shares issued		16	1,310	-	-	-	-	1,326
Equity share options issued		-	-	-	-	188	-	188
Balance at 30 September 2010		353	10,272	15	355	17,361	(12,172)	16,184

Consolidated Statement of Change in Equity

Year ended 31 March 2011

		Share	Share	Capital	Re-	Retained	Own shares	Total
		capital	premium	redemption	valuation	earnings	held	Equity
		£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000
Balance at 1 April 2010 brought forward		337	8,962	15	407	23,881	(12,172)	21,430
Loss for the period		-	-	-	-	(4,552)	-	(4,552)
Net gains on available-for-sale financial assets net of tax		-	-	-	445	-	-	445
Amounts recycled through the Consolidated Statement of Comprehensive Income		-	-	-	(701)	-	-	(701)
Gain on foreign exchange		-	-	-	-	7	-	7
Total comprehensive income for the year		-	-	-	(256)	(4,545)	-	(4,801)
Acquisition of minority interest shares		-	-	-	-	(2,654)	-	(2,654)
Shares issued		16	1,310	-	-	-	-	1,326
Equity share options issued		-	-	-	-	21	-	21
Balance at 31 March 2011		353	10,272	15	151	16,703	(12,172)	15,322

Notes to the Financial Statements

1.    Principal accounting policies

Basis of preparation

This Half Yearly Report is unaudited and does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The financial information for the half years ended 30 September 2011 and 2010 has not been audited or reviewed by the auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. The statutory accounts for 2011, which were prepared in accordance with International Financial Reporting Standards ("IFRS"), comprising standards and interpretations approved by either the International Accounting Standards Board or the International Financial Reporting Interpretations Committee or their predecessors, as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies. The auditors' opinion on these accounts was unqualified and did not contain a statement made under s498 of the Companies Act 2006.

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

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

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

IFRS 9

Financial instruments: Classification

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

2.    Segmental reporting

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

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

3.    Revenue

	Six	Six	Year
	months to	months to	ended
	30-Sep-11	30-Sep-10	31-Mar-11
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Revenue
- Revenue	4,884	4,000	8,588
- Performance fee revenue	576	199	1,330
Total Revenue	5,460	4,199	9,918

4.    Sale of credit business

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

	£'000
Proceeds received from sale	2,490
Costs associated with sale	(56)
Cost of intangible asset held on balance sheet	(600)
	1,834

5.    Administration expenses

	Six	Six	Year
	months to	months to	ended
	30-Sep-11	30-Sep-10	31-Mar-11
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Employee related expenses
Director and employee costs	1,561	3,149	5,119
Share incentivisation expense	235	265	433
Severance compensation	-	1,357	1,458
	1,796	4,771	7,010
Non employee related expenses
Members' drawings charged as an expense	1,668	348	2,175
Members' share incentivisation expense	73	-	-
Global equities team closure costs	-	327	284
Cost reduction and restructuring programme	-	213	892
Depreciation and intangible asset amortisation	22	117	238
Financial Services Compensation Scheme Levy	-	-	414
Other administration expenses	2,211	2,316	4,626
Total administration expenses	5,770	8,092	15,639

On 8 July 2010, as part of a reorganisation of the Group, two subsidiaries of the Company transferred their respective and entire regulated businesses to two newly incorporated limited liability partnerships ("LLP's"). This has meant that as well has having employees the Group has members who are members of these LLP's. The services of the members are provided under the terms of a services agreement between the relevant LLP and the relevant group company or LLP in a similar way to that in which services of the employees of the Company are provided to other group companies and LLP's. Members' drawings are incurred as an expense through the Statement of Comprehensive Income and as such are not subject to claw back from the respective entities.

6.    Adjusted profit (or loss) before tax

Adjusted profit (or loss) before tax is disclosed in order to give shareholders an indication of the profitability of the Group excluding the gain on the sale of the credit business, non-cash (depreciation, intangible asset amortisation and IFRS2 related) expenses, non-recurring (cost reduction, restructuring, Global equities team closure and severance compensation related) expenses and share incentivisation related and is reconciled in the table below.

	Six	Six	Year
	months to	months to	ended
	30-Sep-11	30-Sep-10	31-Mar-11
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Gross profit	5,416	4,158	9,838
Realised gain on sale of financial assets	212	7	701
Director and employee costs	(1,561)	(3,149)	(5,119)
Members' drawings charged as an expense	(1,668)	(348)	(2,175)
Members' advance drawings	(176)	-	(292)
Other administration expenses	(2,211)	(2,316)	(4,626)
Adjusted operating profit/(loss)	12	(1,648)	(1,673)
Interest receivable	10	6	10
Adjusted profit/(loss) before tax	22	(1,642)	(1,663)

7.    Taxation

The half yearly tax charge has been calculated at the estimated full year effective UK corporation tax rate of 26% (2010: 28%).

8.    Earnings per share

The calculation of basic earnings per share is based on profit after taxation and the weighted average number of Ordinary Shares in issue for each period. The weighted average number of Ordinary Shares for the six months ended 30 September 2011 was 31,617,555 (30 September 2010: 30,359,938, 31 March 2011: 30,987,024). Shares held by the Liontrust Asset Management Employee Trust are not eligible for dividends and are treated as cancelled for the purposes of calculating earnings per share.

Diluted earnings per share are calculated on the same bases as set out above, after adjusting the weighted average number of Ordinary Shares for the effect of options to subscribe for new Ordinary Shares that were in existence during the six months ended 30 September 2011. The adjusted weighted average number of Ordinary Shares so calculated for the period was 31,815,023 (30 September 2010: 33,839,002, 31 March 2011: 33,337,489). This is reconciled to the actual weighted number of Ordinary Shares as follows:

		30-Sep-11	30-Sep-10	31-Mar-11
Weighted average number of Ordinary Shares		31,617,555	30,359,938	30,987,024
Weighted average number of dilutive Ordinary shares under option:
- to Liontrust Senior Incentive Plan		-	-	15,978
- to Liontrust Incentive Plan		197,468	1,186,153	1,186,168
- to shareholders in Liontrust European Investment Services Limited		-	2,292,911	1,148,319
Adjusted weighted average number of Ordinary Shares		31,815,023	33,839,002	33,337,489

9.    Financial Assets

Assets held at fair value through profit and loss:

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

10.  Related party transactions

During the six months to 30 September 2011 the Group received fees from unit trusts under management of £5,673,000 (2010: £4,771,000). Transactions with these unit trusts comprised creations of £139,394,000 (2010: £35,730,000) and liquidations of £99,590,000 (2010: £87,005,000). Directors can invest in unit trusts managed by the Group on commercial terms that are no more favourable than those available to staff in general. As at 30 September 2011 the Group owed the unit trusts £3,507,000 (2010: £6,257,000) in respect of unit trust creations and was owed £627,000 (2010: £986,000) in respect of unit trust cancellations and fees. During the six months to 30 September 2011 remuneration paid to key decision makers (the Executive Directors) was  £325,000 (2010: £366,000)

11.  Post balance sheet events

On 4 October 2011, the Group completed its acquisition of the fund management business of Occam Investment Management (Malta) Limited ("Occam Malta"), Occam Asset Management LLP ("Occam LLP") and Occam Investment Services Limited. The consideration for this acquisition was 2.1 per cent of assets under management acquired (£84.1 million) plus £131,250, giving an aggregate consideration of £1.898 million (the "Consideration") before associated deal and restructuring costs. The Consideration payable shall be satisfied by the issue of 1,799,946 new Ordinary Shares to Occam LLP and £572,939 in cash to Occam LLP and Occam Malta.

12.  Key risks

The Directors have identified the risk and uncertainties that affect the Group's business and believe that they will be substantially the same for the second half of the year as the current risks as identified in the 2011 Annual Report.  These can be broken down into risks that are within the management's influence and risks that are outside it.

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

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

Management monitor all risks to the business, they record how each risk is mitigated and have warning flags to identify increased risk levels. Management recognise the importance of risk management and view risk management as an integral part of the management process which is tied into the business model and is described further in the Risk management and internal control section on page 16 of the 2011 Annual Report and Note 2 "Financial risk management" on page 33 of the 2011 Annual Report.

13.  Directors' responsibilities

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

By Order of the Board

John S. Ions                                                        Vinay K. Abrol

Chief Executive                                                Chief Operating Officer and Chief Financial Officer

Forward Looking Statements                                                                                    

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

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