Half-yearly Report
The Edinburgh Investment Trust plc
Half-Yearly Financial Report
Six Months to 30 September 2008
Financial Information and Performance Statistics
The Edinburgh Investment Trust plc (the `Company') is a UK investment trust
listed on the London Stock Exchange.
Investment Objective of the Company
The Company invests in UK securities with long term objective of achieving:
1. an increase of the Net Asset Value per share by more than the growth in the
FTSE All-Share Index; and
2. growth in dividends per share by more than the rate of UK inflation.
Performance Statistics
At At
30 September 31 March %
2008 2008 Change
Capital Return
Net asset value (`NAV') - debt at par 402.51p 474.74p -15.2
- debt at market value 380.31p 448.53p -15.2
FTSE All-Share index 2483.67 2927.05 -15.1
Share price 342.50p 403.25p -15.1
Discount - debt at par 14.9% 15.1%
- debt at market value 9.9% 10.1%
Gearing - actual(1) 24.7% 12.9%
Gearing - potential(2) 25.4% 21.2%
%
for the six months to 30 September 2008 2007 Change
Revenue Return
First interim dividend(3) 4.75p 4.75p
Revenue return per share 12.01p 10.44p +15.0
Retail price index(4) +4.8% +3.8%
Total Return (capital growth with income
reinvested)
NAV - at par -13.4
NAV - at market value -13.3
Share price -13.0
FTSE All-Share Index -13.5
Notes:
1. Actual gearing: borrowings less cash and investments in money market funds ÷
shareholders' funds.
2. Potential gearing: borrowings ÷ shareholders' funds.
3. Dividends recommended in respect of the financial year.
4. RPI annualised return for the six months to 30 September 2008 and actual RPI
for year ended 31 March 2008.
INTERIM MANAGEMENT REPORT INCORPORATING CHAIRMAN'S STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
Chairman's Statement
Introduction
I wrote to shareholders in mid-September advising them that Fidelity
International (`Fidelity') had, with effect from 12th September 2008, resigned
as the Company's Manager and Secretary and that the Board had in its place
appointed Invesco Asset Management Limited (`Invesco Perpetual'). This account
of the Company's performance for the period April to September 2008 concerns
therefore the stewardship of the two Managers and what I believe to have been a
smooth and economical transfer from one to the other. A separate report from
the Manager covering September 2008 follows this statement.
The UK Equity Market
The FTSE All-Share Index (`the Index') fell by 15.1% in the six months to 30th
September 2008. Despite deteriorating UK credit and economic conditions, the
equity market remained initially firm and the Index increased steadily in the
early part of the six month period under review. It then fell back slowly
during the early summer months and by end August had made little overall
progress since the start of the period. Prompted initially by bank and
investment bank failures in the US, confidence fell sharply during September.
By 12th September - the last trading day before Manager transition - the Index
was 5.8% lower than at 1st April; that fall had increased to 15.1% at the end
of the month.
Capital Performance
During the six months as a whole, the Company's Net Asset Value per share
(`NAV') fell by 15.2% (with debentures marked either at par or at market
value): fractionally more than the reduction in the Index. Given that all the
expenses of Manager transition - largely stamp duty and transaction costs on
portfolio changes - were absorbed by the NAV, the Board believes that the
overall capital performance was satisfactory relative to the benchmark Index,
whilst clearly disappointing in absolute terms.
The overall six month performance conceals differences in the periods of
stewardship by Fidelity and Invesco Perpetual. In the period 1st April to 12th
September, the day prior to hand-over, the Index (see above) fell by 5.8%. The
Company's NAV had at this stage fallen by a greater amount - by 9.6%
(debentures at par value) and 8.7% (at market value). The new Manager's
portfolio changes recovered the position relative to the Index in the following
two weeks. The Company's NAV incorporates a provision for a performance fee as
described in Note 2 to the condensed financial statements.
Share Price
The share price fell over the six months as a whole, by 15.1%, again marginally
less than the Index. The Company bought back 3.178 million shares during the
period, enhancing NAV for remaining shareholders by about 0.15p.
Income
The Company's income objective is to increase dividends by more than the rate
of UK inflation: this objective has been achieved, particularly over the last
three years when the Company's dividend payments have increased by amounts well
above the rate of UK inflation - this was due both to increasing payouts by
underlying investments and to a change in portfolio emphasis towards higher
yielding securities. Shareholders may recall that in my Statements in the
Report and Accounts for both the years ending 31st March 2007 and 2008, I
counselled that the rate of dividend growth was likely to slow in future, but
nevertheless the Board expressed confidence that the Company's income objective
would continue to be met. As far as the current year to 31st March 2009 is
concerned, the Board and Manager are confident that the Company is capable of
paying a dividend of at least the same amount as in the year to 31st March
2008. As regards future years, the Company's dividend policy will be determined
largely by payments from its own investments. The Manager, as discussed in his
review, remains confident of the portfolio's capacity to produce a growing
dividend stream, although accepts that any forecast in current conditions
carries an unusually high degree of risk.
Meanwhile, the Board has declared an unchanged first interim dividend of 4.75
pence per share. This declared dividend will be paid on 28 November 2008 to
shareholders on the Company's register on 14 November 2008 (ex dividend date 12
November 2008).
Portfolio Structure
When I informed shareholders in September of the appointment of Invesco
Perpetual, I explained that the Fund would be managed personally by Neil
Woodford, Head of Investment, who had an outstanding record in managing
high-yield funds. Mr Woodford's approach is to construct portfolios which are
compatible with his view of future trends in the UK economy. He is a long term
investor, prepared to take substantial positions in securities and sectors
which may well be out of current fashion, but which he believes have potential
for material increases in earnings, dividends and, in due course, share prices.
The Board believes that this approach will provide good, long term capital
growth in excess of the Company's objectives. It does however also accept that
Mr Woodford's investment style carries the risk that the Fund's performance
will diverge, possibly for quite long time periods, from movements in the
benchmark Index.
On assuming control of the portfolio on 15 September, Mr Woodford reduced
exposure to the financial, basic material industrial and consumer services
sectors. The funds realised were invested in what are perceived to be more
defensive sources of growth, such as the tobacco, pharmaceutical and utilities
sectors. Whilst the major ten holdings are little changed, the overall number
of holdings has been substantially reduced, and a much greater proportion of
the portfolio is contained within the FTSE 100 section of the Index. In
addition to responsibility for stock selection, the new Manager has accepted
full discretion over the utilisation of the Company's Debenture Stocks, and at
30 September 2008 had invested virtually all of the £200 million in the equity
market.
Since the end of September, the Index, in common with all world equity markets,
has recorded almost unprecedented weakness, and it is useful to examine the
movement in the Company's NAV in the period since 12 September, when transfer
prices were determined. In the time from this latter date to 27 October (the
latest practical date before this report was completed) the Index (total
return) fell by 29.1%, whereas Company's NAV (total return, debt at par) fell
by 24.8%.
VAT on Management Fees
My statement six months ago reported that the Company was in discussion with
Fidelity over recovery of VAT paid since 2002 and with Aberdeen Asset Managers
in respect of prior periods. There has been no significant progress in these
negotiations. I can however report that as part of the Termination Agreement
between the two parties, Fidelity has undertaken that the Company will receive
repayment terms no worse than those agreed with the investment trusts which
remain under Fidelity management.
Outlook
It is now more than a year since the US sub-prime mortgage crisis gave first
indication of the credit crunch. The issue has continued to develop and has
provoked a global crisis of confidence and liquidity within the financial
sector. Its effects have begun to spread to the wider economy where the quantum
breadth and duration of what now seems to be certain recession is the subject
of active debate.
Against this uncertain background, the Manager's view, shared by the Board, is
that UK equity valuations are not, by historic criteria, demanding and that the
Index is near to a low point. There are however perceived to be significant
differences between sectors in the prospects for share price appreciation. The
outlook for the finance sector remains highly uncertain and failures are likely
in consumer facing sectors of the economy. The Manager does however feel that
there is considerable resilience in other sectors of the market where
valuations are low. He believes that unless the economy contracts by a
significantly greater amount than that presently envisaged, his current
defensive portfolio is well placed to grow earnings and dividends over the next
12-18 months. Clearly this will be a difficult period and markets will continue
to be volatile. The Board believes that the Company's portfolio is in good
hands and The Edinburgh Investment Trust provides an appropriate defensive
exposure to the UK equity market.
Scott Dobbie
Chairman
6 November 2008
Investment Manager's Report
For the month to 30 September 2008
Market Review
The UK equity market experienced unprecedented levels of market volatility over
September, taking its lead from the US. In this environment, economic news took
a back seat in determining stockmarket direction. All sectors of the FTSE
All-Share index ended the month in negative territory, while at the stock
level, the London Stock Exchange was the best performing company in the FTSE
100 index, while HBOS was the worst, after seeing its share price fall sharply
amid concerns over its future. Against this backdrop, the FTSE All-Share, the
FTSE 100 and the FTSE 250 indices (total returns) fell by 13.2%, 12.9% and
15.6%, respectively. As a result of the ongoing turmoil in the financials
sector, the map of the UK banking industry continued to be redrawn. For
instance, Spanish bank Santander - owner of Abbey and soon-to-be owner of
Alliance & Leicester - announced plans to purchase Bradford & Bingley's £24bn
deposit book for £612m (Bradford & Bingley's mortgage book is to be
nationalised). Meanwhile, HBOS agreed to be purchased by Lloyds TSB for £
12.2bn.
Portfolio Strategy & Review
The Company's net asset value, including reinvested dividends, fell by 12.5%
during the month to 30 September 2008, compared to a fall of 13.2% from the
FTSE All Share index (total returns).
Holdings which enhanced the Company's performance in September included those
which were the recipients of takeover offers, for example British Energy (by
EDF) and Acambis (by Sanofi Pasteur). By contrast, holdings which detracted
from the Company's performance included oil & gas producers BP and BG which
were both negatively impacted by the fall in the oil price over the month.
In view of the volatile equity-market conditions over the month, activity
within the Company was kept to portfolio reconstruction. There was, however,
the opportunity to add to some of our existing holdings in BT and Imperial
Tobacco at favourable levels, while in terms of disposals, we sold Acambis
following its acquisition by Sanofi Pasteur.
Outlook
I have been cautious in my outlook for the UK economy for some time now and,
for the last two or three years, would describe my stance as being at the
bearish end of expectations. However, the credit crunch has made that economic
setback significantly worse than it otherwise would have been, and I clearly
did not anticipate anything like the scale of problem that we are now
navigating our way through. Indeed, from a financial markets perspective, we
are living through momentous times and the implications of the current fragile
conditions will be quite negative for the UK economy for the remainder of 2008
and most of 2009.
In terms of the UK equity market, valuations are low in my view, and I believe
that the FTSE All-Share index is somewhere near a low point. However, that does
not mean that there is no further downside in stocks; on the contrary, I
believe that there is further downside in individual stocks and in some cases
we will see some rather spectacular corporate failures, particularly in
consumer facing sectors of the economy. Outside of those sectors, however, I
believe that there is a substantial amount of resilience in other areas of the
market where valuations are extremely low, and where businesses in good shape
will navigate their way through these difficult times. By `good shape' I mean
to be able to grow earnings, cashflows and dividends through the next 12-18
months. In most cases, the capacity to do that is not discounted in current
valuations. That is why I believe, on a medium-term perspective, we are
somewhere near a low point in the market. Indeed, now is not the time to be
abandoning ship with respect to the UK equity market. In terms of the Company,
I believe that the right portfolio, positioned in the right stocks, should be
able to deliver decent positive returns over the next 12-18 months, admittedly,
it is going to be a tough period.
Neil Woodford
Investment Manager
6 November 2008
Related Party
Invesco Asset Management Limited (`IAML'), a wholly owned subsidiary of Invesco
Limited, took over as manager and secretary to the Company on 15 September
2008. Prior to this, Fidelity Investments International Limited was manager and
secretary and outline details of the management fee arrangements are given in
note 2.
Principal Risks and Uncertainties
The principal risks and uncertainties that could affect the Company's business
can be divided into various areas:
• Market risk;
• Performance risk;
• Gearing risk;
• Income/dividend risk;
• Share price risk;
• Control system risk; and
• Other risks.
A detailed explanation of these principal risks and uncertainties can be found
on pages 12 to 14 of the annual financial report for the year ended 31 March
2008, which is available on the Company's website at www.invescoperpetual.co.uk
/investmenttrusts.
In the view of the Board, these principal risks and uncertainties are equally
applicable to the remaining six months of the financial year as they were to
the six months under review.
DIRECTORS' RESPONSIBILITY STATEMENT
IN RESPECT OF THE PREPARATION OF THE HALF-YEARLY FINANCIAL REPORT
The Directors are responsible for preparing the half-yearly financial report
using accounting policies consistent with applicable law and UK Accounting
Standards.
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements contained within the half-yearly
financial report have been prepared in accordance with the Accounting Standards
Board's Statement `Half-Yearly Financial Reports';
- the interim management report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules;
and
- the interim management report includes a fair review of the information
required on related party transactions.
Signed on behalf of the Board of Directors.
Scott Dobbie
Chairman
6 November 2008
TOP TWENTY HOLDINGS
AT 30 SEPTEMBER 2008
UK listed and ordinary shares unless otherwise stated
Market Percentage
Value of
Investment Sector £'000 Portfolio
BP Oil & Gas Producers 75,245 7.7
GlaxoSmithKline Pharmaceuticals & Biotechnology 71,380 7.3
British Energy Electricity 66,283 6.8
British American Tobacco 59,879 6.1
Tobacco
BT Fixed Line Telecommunications 57,590 5.9
Vodafone Mobile Telecommunications 54,717 5.6
National Grid Gas, Water & Multiutilities 52,431 5.3
Transco
Imperial Tobacco Tobacco 50,512 5.1
AstraZeneca Pharmaceuticals & Biotechnology 50,453 5.1
Royal Dutch Shell - Oil & Gas Producers 46,056 4.7
`B'
Ten largest 584,546 59.6
investments
BG Oil & Gas Producers 42,794 4.4
Tesco Food & Drug Retailer 40,614 4.1
Drax Electricity 28,975 3.0
Scottish & Southern Electricity 23,990 2.4
Energy
Rolls Royce Aerospace & Defence 21,717 2.2
Centrica Gas, Water & Multiutilities 20,975 2.2
Capita Support Services 20,955 2.1
Reckitt Benckiser Household Goods & Home 18,959 1.9
Construction
Tate & Lyle Food Producers 17,702 1.8
International Power Electricity 16,383 1.7
Twenty largest 837,610 85.4
investments
Aggregate value of 143,115 14.6
other investments
Value of all 980,725 100.0
investments
CONDENSED INCOME STATEMENT
Six Months to 30 September
2008
(Unaudited)
Revenue Capital Total
£'000 £'000 £'000
Losses on investments - (136,577) (136,577)
Losses on foreign exchange - (60) (60)
Income
UK dividends 23,518 - 23,518
Scrip dividends 768 - 768
Income from cash funds 1,379 - 1,379
Other investment income 738 - 738
Deposit interest 825 - 825
Premium on call options - - -
Underwriting and other income 24 - 24
27,252 (136,637) (109,385)
Operating costs
Investment management fee - note 2 (433) (1,009) (1,442)
Performance fee - note 2 - (1,382) (1,382)
Other expenses (361) (43) (404)
Net return before finance costs
and taxation 26,458 (139,071) (112,613)
Finance costs - note 2 (2,937) (6,853) (9,790)
Profit/(loss) before tax 23,521 (145,924) (122,403)
Tax - note 3 (20) - (20)
Profit/(loss) after tax 23,501 (145,924) (122,423)
Return per ordinary share - note 4 12.01p (74.58)p (62.57)p
The total column of this statement represents the Company's Income Statement,
prepared in accordance with UK Accounting Standards. The supplementary revenue
and capital columns are both prepared under guidance published by the
Association of Investment Companies. All items in the above statement derive
from continuing operations and the Company has no other gains or losses. No
operations were acquired or discontinued in the period.
CONDENSED INCOME STATEMENT continued
Year ended
31 March
Six months to 30 September 2008
2007
(Unaudited) (audited)
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Losses on investments - (8,069) (8,069) (163,699)
Losses on foreign exchange (3) (17) (20) (9)
Income
UK dividends 23,628 - 23,628 45,108
Scrip dividends 23 - 23 23
Income from cash funds 1,061 - 1,061 2,601
Other investment income 275 - 275 742
Deposit interest 830 - 830 1,980
Premium on call options - - - 1,199
Underwriting and other income 56 - 56 70
25,870 (8,086) 17,784 111,985
Operating costs
Investment management fee - note 2 (621) (1,450) (2,071) (3,708)
Other expenses (394) - (394) (705)
Net return before finance costs
and taxation 24,855 (9,536) 15,319 (116,398)
Finance costs - note 2 (2,944) (6,870) (9,814) (19,501)
Profit/(loss) before tax 21,911 (16,406) 5,505 (135,899)
Tax - note 3 (115) - (115) (276)
Profit/(loss) after tax 21,796 (16,406) 5,390 (136,175)
Return per ordinary share - note 4 10.44p (7.86)p 2.58p (66.60)p
CONDENSED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Share Capital Capital Capital
Share Premium Redemption Reserve- Reserve- Revenue
capital Account reserve realised unrealised Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
For the six months to 30 September 2008 (Unaudited)
Shareholders'
funds at
31 March 2008 49,574 6,639 23,881 808,103 (728) 57,569 945,038
Dividends paid
- third interim - - - - - (9,441) (9,441)
2008
- final 2008 - - - - - (11,085) (11,085)
Net return on
ordinary
activities per
the
Income - - - (145,270) (654) 23,501 (122,423)
Statement
Repurchase of (795) - 795 (13,202) - - (13,202)
shares
Shareholders'
funds at
30 September 48,779 6,639 24,676 649,631 (1,382) 60,544 788,887
2008
For the year ended 31 March 2008 (Audited)
Shareholders'
funds at
31 March 2007 53,875 6,639 19,580 859,873 210,943 54,317 1,205,227
Dividends paid
- third interim - - - - - (9,444) (9,444)
2007
- final 2007 - - - - - (12,028) (12,028)
Net return on
ordinary
activities per
the
Income - - - 31,722 (211,671) 43,774 (136,175)
Statement
Repurchase of (4,301) - 4,301 (83,492) - - (83,492)
shares
Dividends paid
- first interim - - - - - (9,601) (9,601)
2008
- second - - - - - (9,449) (9,449)
interim 2008
Shareholders'
funds at
31 March 2008 49,574 6,639 23,881 808,103 (728) 57,569 945,038
For the six months to 30 September 2007 (Unaudited)
Shareholders'
funds at
31 March 2007 53,875 6,639 19,580 859,873 210,943 54,317 1,205,227
Dividends paid
- third interim - - - - - (9,444) (9,444)
for 2007
- final for - - - - - (12,028) (12,028)
2007
Net return on
ordinary
activities per
the
Income - - - 53,680 (70,086) 21,796 5,390
Statement
Repurchase of (3,021) - 3,021 (59,933) - - (59,933)
shares
Shareholders'
funds at
30 September 50,854 6,639 22,601 853,620 140,857 54,641 1,129,212
2007
CONDENSED BALANCE SHEET
At At At
30 September 31 March 30
September
2008 2008 2007
(Unaudited) (Audited) (Unaudited)
£'000 £'000 £'000
Fixed assets
Investments held at fair value
through profit or loss 980,725 1,064,645 1,234,535
Current assets
Amounts due from brokers 2,347 1,415 -
Prepayments and accrued income 3,577 9,318 7,988
Cash funds 5,332 52,601 51,061
Cash 35 25,444 39,879
11,291 88,778 98,928
Creditors: amounts falling due
within one year
Amounts due from brokers (1,949) (5,839) (3,777)
Accruals (3,314) (6,190) (4,241)
(5,263) (12,029) (8,018)
Net current assets 6,028 76,749 90,910
Total assets less current liabilities 986,753 1,141,394 1,325,445
Creditors: amounts falling due after
more than one year
Debenture stock (196,484) (196,356) (196,233)
Provision for performance fee (1,382) - -
Net assets 788,887 945,038 1,129,212
Capital and reserves
Share capital 48,779 49,574 50,854
Share premium account 6,639 6,639 6,639
Capital redemption reserve 24,676 23,881 22,601
Capital reserve - realised 649,631 808,103 853,620
Capital reserve - unrealised (1,382) (728) 140,857
Revenue reserve 60,544 57,569 54,641
Shareholders' funds 788,887 945,038 1,129,212
Net asset value per share - note 6
Basic and diluted 402.51p 474.74p 553.29p
CONDENSED CASH FLOW STATEMENT
Six months Six months
to to Year ended
30 September 30 September 31 March
2008 2007 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net (loss)/return before finance
costs and taxation (111,231) 15,319 (116,398)
Capital loss for the period 136,577 8,069 163,699
Net return before finance costs and 25,346 23,388 47,301
taxation
Scrip dividends (768) (23) (23)
Decrease/(increase) in debtors 5,742 3,828 (15)
(Decrease)/increase in creditors (243) 8 (552)
Overseas taxation paid (20) (115) (276)
Net cash inflow from operating 30,057 27,086 46,435
activities
Servicing of finance (9,625) (9,625) (19,250)
Financial investment
Purchase of investments (688,758) (202,547) (475,734)
Sale of investments 631,965 334,223 624,890
Exchange movements 60 17 (57)
Equity dividends paid (20,526) (21,472) (40,522)
Net cash (outflow)/inflow before
management
of liquid resources and financing (56,827) 127,682 135,762
Net cash inflow/(outflow) from
management of liquid resources 47,269 (51,061) (52,601)
Financing - repurchase of ordinary (15,794) (64,606) (85,595)
shares
(Decrease)/increase in cash (25,352) 12,015 (2,434)
Cashflow from movement in liquid (47,269) 51,061 52,601
resources
Exchange movements (60) 40 57
Debenture stock non-cash movement (125) (125) (251)
Net debt at beginning of period (118,311) (168,284) (168,284)
Net debt at end of period (191,117) (105,293) (118,311)
Analysis of changes in debt:
Brought forward:
Cash and cash funds 78,045 27,821 27,821
Debenture stock (196,356) (196,105) (196,105)
Net debt brought forward (118,311) (168,284) (168,284)
Movements in the period:
Cash (outflow)/inflow from cash and
cash funds (72,621) 63,076 50,167
Exchange movements (60) 40 57
Debenture stock non-cash movement (125) (125) (251)
Net debt carried forward (191,117) (105,293) (118,311)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. The condensed financial statements of the Company have been prepared using
the same accounting policies as those adopted in the annual financial report
for 31 March 2008, which are consistent with applicable UK Accounting
Standards, and with the Statement of Recommended Practice `Financial Statements
of Investment Trust Companies'.
2. Investment Management Fee and Finance Costs
Invesco Asset Management Limited (`IAML') acts as Manager and Secretary to the
Company under an investment management agreement dated 15 September 2008. The
agreement is terminable by either party by giving not less than 3 months'
notice provided such notice may not expire any earlier than 15 September 2009.
The management fee is payable monthly in arrears and is equal to 5 basis points
of the market capitalisation of the Company at each month end. IAML will be
entitled to a performance fee in respect of each period in which the Company
outperforms its benchmark, the FTSE All-Share Index, plus a hurdle rate, being
the equivalent of 1.25% pa, as adjusted for shorter periods. The first, second
and third performance periods will commence on 15 September 2008, being the
date of the appointment of IAML, and will end on 31 March in each of the years
2009, 2010 and 2011. Thereafter, performance periods will be on a three year
rolling basis. The fee is capped at 1% of net asset value, as adjusted for
shorter periods where required.
The performance fee is payable annually based on 15% of the out-performance and
accordingly, a performance fee of £1,382,000 is provided for in these financial
statements. The amount that will crystallise and become payable at 31 March
2009 may be substantially different.
Details of the management agreement with the previous manager, Fidelity
Investments International Limited, can be found on pages 8 and 25 and note 3 on
pages 35 and 36 of the 2008 annual financial report.
Investment management fee and finance costs are allocated 30% to revenue and
70% to capital and the performance fee is allocated wholly to capital.
3. Taxation
Any tax payable is based on taxable profit for the period. The Company's
liability for current tax is calculated using tax rates that have been enacted
or substantially enacted by the balance sheet date.
4. Basis of Returns
Six months Six months
to to Year ended
30 September 30 31 March
September
2008 2007 2008
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Returns after tax:
Revenue 23,501 21,796 43,774
Capital (145,924) (16,406) (179,949)
Total return after tax (122,423) 5,390 (136,175)
Weighted average number of
shares
during the period 195,657,784 208,702,928 204,452,781
5. Dividends
A first interim dividend of 4.75p (2007: 4.75p) for the year ended 31 March
2009 will be paid on 28 November 2008 to shareholders on the register on 14
November 2008.
6. Net Asset Value per 25p Ordinary Share
30 30 September 31 March
September
2008 2007 2008
(Unaudited) (Unaudited) (Audited)
Shareholders' funds per 404.31p 555.14p 476.58p
ordinary share
Less: unamortised discount and
expenses
arising from debenture issue (1.80)p (1.85)p (1.84)p
402.51p 553.29p 474.74p
Ordinary shares in issue at 195,116,734 203,411,748 198,294,748
period end
7. Movements in Share Capital
Six months Six months
to to Year ended
30 September 30 September 31 March
2008 2007 2008
(Unaudited) (Unaudited) (Audited)
Number of ordinary shares:
Brought forward 198,294,748 215,496,748 215,496,748
Bought back and cancelled (3,178,014) (12,085,000) (17,202,000)
In issue at period end 195,116,734 203,411,748 198,294,748
Average price of shares bought 415.43p 495.93p 485.36p
back
8. Contingent Asset
In November 2007, HMRC announced that investment management services supplied
to investment trusts are exempt from VAT. The Board is in negotiations with the
former managers in order to recover VAT suffered by the Company. However, as
these negotiations are ongoing and the amounts involved are uncertain, no asset
has been recognised in these financial statements.
9. It is the intention of the Directors to conduct the affairs of the Company
so that it satisfies the conditions for approval as an investment trust company
set out in section 842 of the Income and Corporation Taxes Act 1988.
10. The financial information contained in this half-yearly financial report,
which has not been audited, does not constitute statutory accounts as defined
in section 240 of the Companies Act 1985. The financial information for the
half years' ended 30 September 2008 and 2007 has not been audited. The figures
and financial information for the period ended 31 March 2008 are extracted and
abridged from the latest published accounts and do not constitute the statutory
accounts for that year. Those accounts have been delivered to the Registrar of
Companies and included the Report of the Independent Auditors, which was
unqualified and did not include a statement under either section 237(2) or 237
(3) of the Companies Act 1985.
By order of the Board
Invesco Asset Management Limited
Secretary
6 November 2008
INDEPENDENT REVIEW REPORT
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2008 which comprises the condensed income statement, condensed
reconciliation of movement in shareholders' funds, condensed balance sheet,
condensed cash flow statement and the related explanatory notes. We have read
the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules (the `DTR') of the UK's Financial Services Authority
(the `UK FSA'). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.
Directors' Responsibilities
The half-yearly report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the UK FSA. As disclosed in note
1, the annual financial statements of the Company are prepared in accordance
with UK Accounting Standards and applicable law (UK Generally Accepted
Accounting Practice). The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance with the
Statement `Half-Yearly Financial Reports' as issued by the UK Accounting
Standards Board.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently does
not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2008 is not prepared, in
all material respects, in accordance with the Statement `Half-Yearly Financial
Reports' as issued by the UK Accounting Standards Board and the DTR of the UK
FSA.
KPMG Audit Plc
Chartered Accountants
Edinburgh
6 November 2008
DIRECTORS, INVESTMENT MANAGER AND ADMINISTRATION
Directors
Scott Dobbie, Chairman
Richard Barfield, Senior Independent Director
James Pettigrew, Audit Committee Chairman
Nicola Ralston
William Samuel
Sir Nigel Wicks
Manager, Company Secretary
Invesco Asset Management Limited
30 Finsbury Square
London EC2A 1AG
Company Secretary contact: Carolyn Ladd
Registered Office
Quartermile One
15 Lauriston Place
Edinburgh EH3 9EP
Registered in Scotland: No. SC1836
Registrars
Equiniti Limited
PO Box 28448
Finance House, Orchard Brae
Edinburgh EH4 1WQ
0871 384 2431
Fax: 0871 384 2100
Website: www.shareview.co.uk
Invesco Perpetual Investor Services
Invesco Perpetual has an Investor Services Team (available from 8.30 a.m. to
6.30 p.m. every working day) to help you. Please feel free to take advantage of
this expertise.
0800 085 8677
Website: www.invescoperpetual.co.uk/investmenttrusts
Tuesday, 4th June 2024
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