Annual Financial Report
Invesco Perpetual UK Smaller Companies Investment Trust plc
Annual Financial Report Announcement
For the year ended 31 January 2013
FINANCIAL INFORMATION AND PERFORMANCE STATISTICS
The Benchmark Index of the Company is the Numis Smaller Companies Index
(excluding Investment Trusts)
AT AT
31 JANUARY 31 JANUARY %
2013 2012 CHANGE
Net asset value per ordinary share(2):
  - balance sheet 285.7p 237.6p +20.2%
  - after charging proposed dividends 281.3p 234.2p +20.1%
(capital NAV)
Shareholders' funds (£'000)(2) 152,034 126,771 +19.9%
Mid-market price per ordinary share 246.5p 187.5p +31.4%
Discount(1) per ordinary share based on 13.7% 21.1%
balance sheet NAV
Total return (all income reinvested):
Net asset value(1)(2)(3) +22.4%
Benchmark Index(1)(3) +25.6%
FTSE All-Share Index(3) +16.3%
Capital return:
Net asset value(1)(2) +20.2%
Benchmark Index(1)(3) +22.0%
FTSE All-Share Index(3) +12.1%
Gearing:
  - gross gearing(1) nil 6.7%
  - net gearing(1) nil 6.7%
  - net cash(1) 5.1% nil
  - maximum permissable gearing(1) 13.2% 15.8%
Return and dividend per ordinary share:
Revenue return 6.3p 5.2p
Capital return 46.7p (7.8)p
Total return 53.0p (2.6)p
Interim dividend 1.6p 1.6p
Final dividend 4.4p 3.4p
Total dividends 6.0p 5.0p +20.0%
Ongoing charges(1)
  - excluding performance fee 0.87% 0.89%
  - performance fee nil 0.31%
Note: (1) The term is defined in the Glossary on page 53 of the Annual
Financial Report.
(2) Includes enhancements from share repurchases.
(3) Source: Thomson Reuters Datastream.
CHAIRMAN'S STATEMENT
The net asset value (NAV) of your Company rose by 22.4% on a total return basis
during its financial year, which ended on 31 January 2013. Whilst this was a
satisfactory absolute return for shareholders in a very low interest rate
environment, it fell slightly short of the benchmark against which your Board
measures the Company's performance, the Numis Smaller Companies Index
(excluding Investment Trusts), which returned 25.6%. However, your Company did
comfortably out-perform the wider UK stock market, as measured by the FTSE
All-Share Index, which rose by a lesser 16.3%.
Over the same period the mid-market price of the Company's shares increased by
31.4%, from 187.5p to 246.5p per share. The discount to NAV at which the
Company's shares trade narrowed from 21.1% at the end of the previous financial
year to 13.7% at the year end, reflecting improved investor sentiment towards
smaller companies in general and your Company in particular.
Dividend
For the year ended 31 January 2013, an interim dividend of 1.6 pence per share
was paid on 24 October 2012 to shareholders on the register on 28 September
2012. The Board is proposing a final dividend of 4.4 pence per share payable on
24 May 2013 to shareholders on the register on 26 April 2013. Total dividends
for the year to 31 January 2013 therefore amount to 6.0 pence per share, a 20%
increase on the previous year. Future dividends will, as always, depend on
market conditions and investment performance.
The Future of the Company
On 25 May 2012, the Company announced that on or around the date of its AGM in
2017, the Board would make available a number of options for shareholders to
consider. These may include the continuation of the existing Company, a
rollover into a similar or other investment vehicle and/or the provision of a
cash exit at a price close to NAV. In time, one of the benefits the Board hopes
to achieve by this initiative is a permanent narrowing of the discount to NAV
at which the shares trade and progress has already been made in this respect as
noted above. The Manager took the initiative in proposing this strategy to the
Board, which reflects their confidence in being able to retain the loyalty of
the shareholders, through good performance, in the intervening period. Further
information can be found in the Directors' Report on page 17 of the Annual
Financial Report.
Share Repurchases
During the year ended 31 January 2013, the Company purchased for cancellation a
total of 137,000 ordinary shares at a weighted average price of 201.56 pence
per share and at an average discount to NAV of 17.79%. The effect has been to
buy in 0.26% of the issued share capital and to enhance NAV by approximately
0.1%. No further ordinary shares have been bought back since the year end. The
Board believes the ability to buy back a limited number of shares can, in
certain circumstances, be useful in reducing the volatility of the Company's
share price whilst boosting NAV per share and on this basis will seek to renew
this authority once again at the coming AGM.
Annual General Meeting
At this year's AGM the Board will seek shareholder approval to adopt new
Articles of Association which have been amended to afford the Company the
ability to take advantage of changes in the investment trust taxation rules and
to update them generally to reflect current law and best practice. The
Directors have carefully considered all of the resolutions proposed in the
Notice of the AGM and believe them to be in the best interests of shareholders
and the Company as a whole. The Directors, accordingly, recommend that
shareholders vote in favour of each resolution as they themselves intend to do.
Outlook
As you will read in their report that follows, your portfolio managers identify
the drivers behind good stock market performance over the last year to be a
combination of continued quantitative easing, record low interest rates and
accommodative monetary policy measures adopted by the authorities. However, an
end to quantitative easing and the prospect of inflation resulting in rising
interest rates pose a future threat, though one potentially offset by a greater
confidence in the ability of the world economy to deliver growth without
external stimulus. The market may well both anticipate such a scenario and
regard it positively - albeit as one potentially subject to periodic setbacks.
In such an environment, your portfolio managers' preference for investing in
better quality companies may, from time-to-time, work against them as a rising
tide lifts all boats. However, your Board remains firmly of the opinion that
their strategy is correct and that investing in companies with solid balance
sheets and sound business models remains the best long term option.
Ian Barby
Chairman
8 April 2013
.
PORTFOLIO MANAGERS' REPORT
Investment Review
In the year under review, the majority of stock markets, particularly those of
the developed countries, performed strongly. Most have fully recovered from the
sharp setback in mid-2011 caused by the downgrading of US government debt by
ratings agency Standard & Poor's as well as fears of debt contagion amongst
eurozone countries. A resurgence of eurozone worries took place in the second
quarter of 2012, but since then stock markets have trended steadily higher. For
the moment at least, economic tensions have eased. In Europe, the pledge to
preserve the euro by the European Central Bank's president and the generally
supportive role taken by Germany have led to a recovery in the euro and a
narrowing of government debt spreads. In the US, the re-election of President
Obama is regarded as pro-growth and preferable to a divided Republican
opposition. In addition, in spite of the lessons of the 1930's depression,
markets appear to have allowed Japan to undertake a substantial competitive
devaluation of the yen which is necessary in view of Japan's unsustainably high
government debt-to-GDP ratios. Finally, markets have benefited from low
interest rates and easy monetary policies.
The UK stock market, as measured by the FTSE All-Share Index, rose 16.3% on a
total return basis. Economic growth has been disappointing in spite of a
surprising increase in private sector job creation. One of the impediments to
growth in the UK was always going to be the large size of the financial sector
relative both to GDP and to other countries prior to the financial crisis of
2008. The subsequent fall in banks' profits and the resulting lower sector
employment has had a major negative effect on the budget deficit. More
importantly, the poor condition of many UK banks has led to a restriction in
credit growth which has also held back recovery. Not surprisingly, investors
have preferred a selective approach to stock picking. One of the stock market
sectors favoured has been UK small companies. Their size, flexibility and, in
many cases, their financial strength have led to significant outperformance
versus their large cap peers during the last 5 years. In the year to 31 January
2013, the benchmark index, the Numis Smaller Companies Index (ex investment
trusts), rose 25.6% on a total return basis.
Portfolio Strategy and Review
Against this background, your Company produced an increase in net asset value
on a total return basis of 22.4% for the fiscal year. Positive contributions
came from the Health Care and Support Services sectors, while the portfolio's
exposure to the Mining sector negatively impacted performance.
At the individual stock level, the stand-out performer was TalkTalk Telecom
(+92%).This provider of broadband services is recovering from a period of poor
customer performance. PayPoint shares (+51%) also increased in value following
better than expected results. The portfolio benefited from overweight positions
in the two largest holdings in the portfolio - Dechra Pharmaceuticals (+30%)
and Synergy Health (+29%)- while Dunelm (+54%), a retailer of homewares,
performed strongly in what proved a difficult year for UK retailers in general.
While contributors to the portfolio substantially outweighed detractors, there
were disappointments from Avocet Mining (-76%) which issued a profits warning
due to production problems at its main Inata gold mine in West Africa.
Subsequently, the problems facing the company worsened, reserves were reduced
and the dividend was omitted. Since the year end, we sold the holding. Cape
(-43%), a multi-disciplinary supplier of industrial services, suffered from
individual contract problems and a general delay to large energy projects in
Australia. A new chief executive has adopted an appropriately cautious approach
to forecasts which, in our view, still leaves the shares looking undervalued.
May Gurney Integrated Services (-39%), a provider of outsourced services to
local authorities, fell on news of serious operational issues with two of its
environmental contracts.
Investment Strategy
In the Portfolio Managers' Report to end January 2012 we introduced the concept
of secular bull and bear markets, an alternating cycle of about 15/20 years of
significant real returns (bull) followed by a period of disappointing real
returns (bear). The logic behind the pattern is that the bullish phase creates
excesses in the stock market (high valuations) and in the underlying economy,
whilst the bearish phase allows for the correction of these excesses. We
concluded that western stock markets had been in a secular bear market since
2000 (we have experienced negative real returns on a capital only basis since
then) and that, given the economic backdrop of deleveraging by the private
sector and the continuing sharp increase in government debt levels, another
downward phase in stock markets was likely before the start of a new secular
bull market. In this regard, our concern centres on 2013, a year with no major
elections in the US and hence a year of relative freedom for US politicians.
Most commentators are expecting Europe to remain mired in its problems and they
are nervous about excessive infrastructure spending in China and the need for
that economy to become more balanced, with more reliance on domestic
consumption. Therefore they are pinning their hopes for global growth on the US
economy. Recent US GDP figures lend some support to this premise as, when
adjusted for inventory changes, there was reasonable underlying growth taking
place. In addition, it appears that the US has made a better effort to clean up
its banks and, after sharp falls in house prices, there is some evidence of a
turn in its housing market. Taken together with a major improvement in energy
self-sufficiency, the picture looks promising until you remember that it is
2013, the year of the "fiscal cliff", "sequestration" and "debt ceilings".
There will almost certainly be a larger fiscal drag to come from higher taxes
but we also believe there are clear political dangers to be overcome as well.
The difficulty of deficit reduction through harsh austerity measures is all too
apparent in certain countries of the eurozone. In the Italian election, voters
clearly registered their anger over austerity cuts, much as they did in Greece
in May 2012. Meanwhile, the level of debt to GDP for the eurozone area
continues to pose a considerable hurdle. We firmly believe that a restructured
and smaller eurozone will inevitably happen over time, given the differing
economic status of member states.
In the UK, we believe that sterling's fall against the euro and the US dollar
will negatively impact the consumer in 2013 largely as a result of the higher
cost of energy. The UK consumer had benefited from Personal Protection
Insurance payments in 2012 but these payments will run at a lower rate in 2013.
Given the coalition's current intention to stick to its austerity programme, we
feel the economic outlook for the UK looks weaker than for many other developed
countries. Whilst we applaud its resolve, we expect the Government will succumb
to the political pressure that will be applied as we get nearer to the
elections in 2015.
Elsewhere, the weakness in commodity prices ushers in a more subdued period for
emerging countries. During the recent expansion phase, operating costs of many
mining companies have escalated sharply leading to a squeeze in profits and
returns on capital. As a result many mining companies are now focused on
improving their operating ratios, reducing their capital employed and returning
surplus funds to shareholders, as well as increasing dividends. This situation
is not helped by some evidence to show that China appears to have spent
considerably more on infrastructure per capita in comparison with other
emerging countries at a similar stage of development. Since China has been a
major purchaser of commodities and apparently has sizeable stockpiles, this
does not augur well for nearer term prospects. In summary, the outlook for
recovery in global economic growth is unclear with the best chances seen to be
in the US.
Despite the uncertainties surrounding global economic growth, stock markets
have performed surprisingly well. We put that down to easy monetary policies of
low interest rates and quantitative easing (QE). In spite of this, and major
swings within currencies, inflation is generally moderating. To some extent,
this shows how strong the deflationary effects of the financial crisis would
have been without QE. As it is QE has created a pool of liquidity which,
failing to find a natural home within the real economy, has gravitated towards
financial markets. Since the beginning of 2013, stock markets have risen even
more strongly and there is evidence of a broadening of investor interest to
include lower rated, lower quality stocks and companies at the very small end
of the market. We have participated in this trend because of the sizeable
difference in rating between these companies and recognised quality growth
stocks. However, given our views about economic growth, particularly in the UK,
we still think the bulk of the portfolio should remain in quality companies
with the scale and financial strength to control their own destiny.
There have been a number of new holdings and we draw your attention to the
following: Abcam which produces and distributes antibodies via an on-line
catalogue to universities and other research bodies, International Personal
Finance, which was spun out of Provident Financial and which provides small
personal loans in many Eastern European countries and Mexico, and IG Group, the
leader in the provision of spread betting and similar products. In addition the
following holdings were purchased after the year end: Crest Nicholson, a
quality house builder which has recently refloated on the London stock
exchange, Catlin Group, a Lloyds Underwriter and Phoenix Group, a specialist
insurance company which runs off life insurance companies closed to new
business.
Outlook
Since the beginning of 2013, the UK stock market has performed strongly, with
the FTSE All-Share Index rising over 9% but still being outperformed by the
Numis Smaller Companies Index (ex investment trusts) which has gained over 11%.
The upswing that began in 2009 is clearly still intact. The UK stock market is
in the middle of the seasonally strong period (November to May) and could still
move higher, although there is some evidence of slowing momentum. We believe
this rally is the result of QE and growing optimism about the US. If the
politicians can do a deal to end sequestration and remove the threat of the
debt ceiling, then the equity market, we believe, could extend its gains.
Richard Smith Jonathan Brown
Portfolio Managers
8 April 2013
.
INVESTMENTS IN ORDER OF VALUATION
AT 31 JANUARY 2013
Ordinary shares unless stated otherwise
VALUE % OF
COMPANY ACTIVITY BY SECTOR £'000 PORTFOLIO
Synergy Health Health Care Equipment & 5,910 4.0
Services
Dechra Pharmaceuticals Pharmaceuticals & 5,788 4.0
Biotechnology
RPC General Industrials 3,170 2.2
Diploma Support Services 3,123 2.1
Howden Joinery Support Services 2,979 2.0
Premier Oil Oil & Gas Producers 2,803 1.9
Mears Support Services 2,724 1.9
Bellway Household Goods & Home 2,537 1.7
Construction
Dunelm General Retailers 2,492 1.7
RPS Support Services 2,399 1.6
Top Ten Holdings 33,925 23.1
PayPoint Support Services 2,358 1.6
Brewin Dolphin Financial Services 2,352 1.6
Brown (N) General Retailers 2,344 1.6
Greene King Travel & Leisure 2,343 1.6
Senior Aerospace & Defence 2,280 1.6
Micro Focus International Software & Computer 2,150 1.6
Services
RWS AIM Support Services 2,135 1.5
Jupiter Fund Management Financial Services 2,128 1.5
Filtrona Support Services 2,082 1.4
Euromoney Institutional Investor Media 1,976 1.4
Top Twenty Holdings 56,073 38.5
Bovis Homes Household Goods & Home 1,921 1.3
Construction
Domino Printing Sciences Electronic & Electrical 1,872 1.3
Equipment
Rentokil Initial Support Services 1,863 1.3
Elementis Chemicals 1,798 1.2
Workspace Real Estate Investment 1,783 1.2
Trusts
Carphone Warehouse General Retailers 1,781 1.2
HomeServe Support Services 1,770 1.2
AZ Electronic Materials Chemicals 1,755 1.2
Northgate Support Services 1,728 1.2
Aveva Software & Computer 1,709 1.2
Services
Top Thirty Holdings 74,053 50.8
TalkTalk Telecom Fixed Line 1,659 1.2
Telecommunications
IG Group Financial Services 1,610 1.1
Ultra Electronics Aerospace & Defence 1,595 1.1
Rotork Industrial Engineering 1,574 1.1
Victrex Chemicals 1,564 1.1
EnQuest Oil & Gas Producers 1,546 1.1
Amerisur Resources AIM Oil & Gas Producers 1,542 1.1
Beazley Non-life Insurance 1,507 1.0
Babcock International Support Services 1,506 1.0
IQE AIM Technology Hardware & 1,502 1.0
Equipment
Top Forty Holdings 89,658 61.6
MITIE Support Services 1,478 1.0
Fenner Industrial Engineering 1,451 1.0
MoneySupermarket.com Media 1,449 1.0
Restaurant Group Travel & Leisure 1,445 1.0
Berendsen Support Services 1,432 1.0
BTG Pharmaceuticals & 1,410 0.9
Biotechnology
Hunting Oil Equipment, Services 1,389 0.9
& Distribution
Laird Technology Hardware & 1,338 0.9
Equipment
Anglo Pacific Mining 1,290 0.9
Consort Medical Health Care Equipment & 1,283 0.9
Services
Top Fifty Holdings 103,623 71.1
H&T AIM Financial Services 1,278 0.9
Spectris Electronic & Electrical 1,232 0.8
Equipment
Dignity General Retailers 1,223 0.8
Chemring Aerospace & Defence 1,213 0.8
CVS AIM General Retailers 1,204 0.8
EMIS AIM Software & Computer 1,189 0.8
Services
James Halstead AIM Construction & Materials 1,185 0.8
Microgen Software & Computer 1,173 0.8
Services
Paragon Financial Services 1,155 0.8
SDL Software & Computer 1,135 0.8
Services
Top Sixty Holdings 115,610 79.2
International Personal Finance Financial Services 1,117 0.8
Go-Ahead Travel & Leisure 1,091 0.7
Cranswick Food Producers 1,075 0.7
Spirax-Sarco Engineering Industrial Engineering 1,016 0.7
Cape Oil Equipment, Services 989 0.7
& Distribution
LSL Property Services Real Estate Investment & 983 0.7
Services
LondonMetric Property Real Estate Investment 961 0.7
Trusts
Spirent Communications Technology Hardware & 947 0.6
Equipment
Melrose Industries Electronic & Electrical 946 0.6
Equipment
Abcam AIM Pharmaceuticals & 936 0.6
Biotechnology
Top Seventy Holdings 125,671 86.0
Brooks Macdonald AIM Financial Services 913 0.6
Devro Food Producers 899 0.6
May Gurney Integrated Services AIM Support Services 835 0.6
Dixons Retail General Retailers 824 0.6
Hargreaves Services AIM Support Services 785 0.5
Faroe Petroleum AIM Oil & Gas Producers 777 0.5
Barratt Developments Household Goods & Home 776 0.5
Construction
Polar Capital AIM Financial Services 775 0.5
NCC Software & Computer 764 0.5
Services
Sinclair IS Pharma AIM Pharmaceuticals & 763 0.5
Biotechnology
Top Eighty Holdings 133,782 91.4
Xaar Electronic & Electrical 751 0.5
Equipment
Innovation Software & Computer 750 0.5
Services
Renishaw Electronic & Electrical 746 0.5
Equipment
Valiant Petroleum AIM Oil & Gas Producers 743 0.5
Advanced Medical Solutions AIM Health Care Equipment & 727 0.5
Services
Salamander Energy Oil & Gas Producers 722 0.5
Mountview Estates Real Estate Investment & 721 0.5
Services
Sthree Support Services 659 0.5
Xchanging Support Services 649 0.4
Hansard Global Life Insurance 597 0.4
Top Ninety Holdings 140,847 96.2
Fidessa Software & Computer 596 0.4
Services
Mulberry AIM Personal Goods 584 0.4
Abbey Protection AIM Non-life Insurance 484 0.3
Impax Asset Management AIM Financial Services 401 0.3
Northbridge Industrial Services Industrial Engineering 393 0.3
AIM
African Barrick Gold Mining 388 0.3
Trinity Exploration & Production Oil & Gas Producers 382 0.3
AIM (formerly Bayfield Energy)
Craneware AIM Software & Computer 327 0.2
Services
Mood Media AIM Media 321 0.2
London Mining AIM Industrial Metals & 319 0.2
Mining
Top Hundred Holdings 145,042 99.1
Novae Non-life Insurance 308 0.2
Kenmare Resources Mining 302 0.2
Entertainment One Media 300 0.2
Avocet Mining Mining 287 0.2
Active Risk AIM Software & Computer 99 0.1
Services
Berry Starquest Limited Investment Dealing - -
Subsidiary
Total Investments 146,338 100.0
AIM: Investments quoted on AIM (formerly the Alternative Investment Market)
.
Principal Risks and Uncertainties
Investment Objective
There can be no guarantee that the Company will achieve its investment
objective as stated on page 16 of the Annual Financial Report.
Market Movements and Portfolio Performance
The majority of the Company's investments are traded on the London Stock
Exchange with some proportion of investments traded on the AIM Market. The
principal risk for investors in the Company is of a significant fall in the
markets and/or a prolonged period of decline in the markets relative to other
forms of investment as well as bad performance of individual portfolio
companies. The Company invests in smaller and medium sized companies, which are
generally considered riskier than their larger counterparts and therefore their
share prices can be more volatile. As smaller companies do not generally have
the financial strength, diversity and resources of larger companies, they may
find it more difficult to overcome periods of economic slowdown or recession.
In addition, the relatively small capitalisation of such companies can make the
market in their shares less liquid, thus affecting the Company's ability to buy
and sell shares in its portfolio.
The portfolio managers' approach to investment is one of individual stock
selection. Market risk is mitigated via the stock selection process, together
with the slow build-up of holdings rather than the purchase of large positions
outright. This allows the portfolio managers to observe more data points from a
company before adding to a position. The overall portfolio is well diversified
by company and sector. The weighting of an investment in the portfolio tends to
be loosely aligned with the market capitalisation of that company. This means
that the largest holdings will often be amongst the larger of the smaller
companies available. The portfolio managers remain cognisant at all times of
the potential liquidity of the portfolio.
The portfolio managers are relatively risk averse, look for lower volatility in
the portfolio and seek to outperform in more challenging markets. In comparison
to peer group investment trusts, the Company believes that its portfolio often
has a higher than average market capitalisation and a lower than average
exposure to the AIM market.
The portfolio of the portfolio managers is carefully monitored by the Board,
and the continuation of the portfolio managers' mandate is reviewed annually.
The Board has established guidelines to ensure that the approved investment
policy is pursued by the portfolio managers. The Board and the portfolio
managers maintain an active dialogue with the aim of ensuring that the market
rating of the Company's shares reflects the underlying net asset value; and
there are in place both share buy back and issuance facilities to help the
management of this process.
The Risks and Risk Management Policies are detailed in note 19 in the Annual
Financial Report.
Ordinary Shares
The market value of the shares in the Company may not reflect their underlying
net asset value and may trade at a discount to its NAV. The value of an
investment in the Company and the income derived from that investment may go
down as well as up and an investor may not get back the amount invested. The
Board monitors the Company's discount to NAV and undertakes targeted buy backs
of the Company's ordinary shares where deemed appropriate.
Whilst the Directors intend to pay a dividend to ordinary shareholders each
year, the ability to do so will depend upon the level of income received from
securities, the timing of receipts of such income from securities, expenses and
the amount of any distributable reserves. The Company has adopted a policy of
charging 50% of base investment management fees and 80% of finance costs to
capital. The effect of this policy is that income returns in each year will be
higher, and capital returns lower, than they would if such fees were charged
100% to income.
Regulatory Risk
The Company is subject to various laws and regulations by virtue of its status
as an investment trust, and its listing on the London Stock Exchange. A breach
of s1158 CTA could lead to the Company being subject to capital gains tax on
the sale of its investments. Other control failures, either by the Manager or
any other of the Company's service providers, may result in operational or
reputational problems, erroneous disclosures or loss of assets through fraud,
as well as breaches of regulations.
The Manager reviews the level of compliance with s1158 CTA and other financial
regulatory requirements on a daily basis. The Board regularly considers all
risks, the measures in place to control them and the possibility of any other
risks that could arise. The Manager's Compliance and Internal Audit Officers
produce regular reports for review at the Company's Audit Committee.
Gearing
The Company may borrow money for investment purposes. If the investments fall
in value, any borrowings (or `gearing') will magnify the extent of any loss. If
borrowing facilities could not be renewed, the Company might have to sell
investments to repay borrowings. All borrowing and gearing levels are reviewed
at every Board meeting and preset limits agreed.
Reliance on Third Party Providers
The Company has no employees and the Directors have all been appointed on a
non-executive basis. The Company is therefore reliant upon the performance of
third party providers for its executive function. In particular, the Manager
performs services which are integral to the operation of the Company. Failure
by any service provider to carry out its obligations to the Company in
accordance with the terms of its appointment could have a materially
detrimental impact on the operation of the Company and could affect the ability
of the Company to successfully pursue its investment policy.
The Manager may be exposed to reputational risks. In particular, the Manager
may be exposed to the risk that litigation, misconduct, operational failures,
negative publicity and press speculation, whether or not it is valid, will harm
its reputation. Any damage to the reputation of the Manager could result in
potential counterparties and third parties being unwilling to deal with the
Manager and by extension the Company. This could have an adverse impact on the
ability of the Company to pursue its investment policy successfully.
The Audit Committee regularly reviews the performance and internal controls of
the Manager. The results of which are reported to the Board.
The Manager reviews the performance of all third party providers regularly
through formal and informal meetings.
.
DIRECTORS' RESPONSIBILITY STATEMENT
in respect of the preparation of the Annual Financial Report
The Directors are responsible for preparing the annual financial report in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under the law the Directors have elected to prepare financial
statements in accordance with International Financial Reporting Standards as
adopted by the European Union (`IFRSs'). Under company law, the Directors must
not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of the profit or
loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable IFRSs have been followed, subject to any material
departures disclosed and explained in the financial statements; and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006 and Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
In so far as each of the Directors is aware:
- there is no relevant audit information of which the Company's auditor is
unaware; and
- the Directors have taken all steps that they ought to have taken to make
themselves aware of any relevant audit information and to establish that the auditors are aware of that
information.
The Directors of the Company each confirm to the best of their knowledge, that:
- the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities, financial position and
profit of the Company;
- this annual financial report includes a fair review of the development and
performance of the business and the position of the Company together with a description of the
principal risks and uncertainties that it faces; and
- the annual report and accounts, taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Company's performance,
business model and strategy.
Signed on behalf of the Board of Directors
Ian Barby
Chairman
8 April 2013
Electronic Publication
The annual financial report is published on www.invescoperpetual.co.uk/
investmenttrusts which is the Company's website maintained by the Company's
Manager. The work carried out by the Auditor did not involve consideration of
the maintenance and integrity of this website and accordingly, the Auditor
accept no responsibility for any changes that have occurred to the financial
statements since they were initially presented on the website. Visitors to the
website need to be aware that legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from
legislation in other jurisdictions.
.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JANUARY
2013 2012
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profits/(losses) on - 25,353 25,353 - (3,441) (3,441)
investments at fair value
Losses on derivative - (45) (45) - - -
instruments
Income 2 4,123 - 4,123 3,590 - 3,590
Investment management fees (451) (451) (902) (421) (812) (1,233)
Other expenses (290) (2) (292) (309) (2) (311)
Profit/(loss) before 3,382 24,855 28,237 2,860 (4,255) (1,395)
finance costs and taxation
Finance costs (7) (29) (36) (3) (12) (15)
Profit/(loss) before tax 3,375 24,826 28,201 2,857 (4,267) (1,410)
Taxation (5) - (5) (5) - (5)
Profit/(loss) after tax 3,370 24,826 28,196 2,852 (4,267) (1,415)
Return per ordinary share
  Basic 4 6.3p 46.7p 53.0p 5.2p (7.8)p (2.6)p
The total column of this statement represents the Company's statement of
comprehensive income, prepared in accordance with International Financial
Reporting Standards. The profit after tax is the total comprehensive income for
the year. The supplementary revenue and capital columns are both prepared in
accordance with the Statement of Recommended Practice issued 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 year.
.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JANUARY
Capital
Share Share Redemption Capital Revenue
NOTES Capital Premium Reserve Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 January 2011 11,032 21,244 2,996 95,030 3,697 133,999
(Loss)/profit for - - - (4,267) 2,852 (1,415)
the year
Shares repurchased (363) - 363 (3,464) - (3,464)
and cancelled
Dividends paid 5 - - - - (2,349) (2,349)
At 31 January 2012 10,669 21,244 3,359 87,299 4,200 126,771
Profit for the year - - - 24,826 3,370 28,196
Shares repurchased (27) - 27 (278) - (278)
and cancelled
Dividends paid 5 - - - - (2,655) (2,655)
At 31 January 2013 10,642 21,244 3,386 111,847 4,915 152,034
The accompanying notes are an integral part of this statement.
.
BALANCE SHEET
AS AT 31 JANUARY
Notes 2013 2012
£'000 £'000
Non-current assets
  Investments held at fair value 146,338 135,045
through profit or loss
Current assets
  Other receivables 950 1,284
  Cash and cash equivalents 7,742 -
8,692 1,284
Total assets 155,030 136,329
Current liabilities
  Other payables (2,996) (9,558)
Net assets 152,034 126,771
Issued capital and reserves
Share capital 6 10,642 10,669
Share premium 21,244 21,244
Capital redemption reserve 3,386 3,359
Capital reserve 111,847 87,299
Revenue reserve 4,915 4,200
Total Shareholders' funds 152,034 126,771
Net asset value per ordinary share 7 285.7p 237.6p
Basic
These financial statements were approved and authorised for issue by the Board
of Directors on
8 April 2013.
Signed on behalf of the Board of Directors
Ian Barby
Chairman
Richard Brooman
Deputy Chairman
The accompanying notes are an integral part of this statement.
.
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 JANUARY
2013 2012
£'000 £'000
Cash flow from operating activities
Profit/(loss) before tax 28,201 (1,410)
Taxation (5) (5)
Adjustments for:
  Purchases of investments (33,823) (41,274)
  Sales of investments 50,595 35,419
16,772 (5,855)
(Profits)/losses on investments (25,353) 3,441
Finance costs 36 15
Operating cash flows before movements in working 19,651 (3,814)
capital
Increase in receivables (62) (21)
(Decrease)/increase in payables (378) 331
Net cash flows from operating activities after 19,211 (3,504)
tax
Cash flows from financing activities
Interest paid (36) (15)
Shares repurchased and cancelled (280) (3,477)
Equity dividends paid - note 5 (2,655) (2,349)
Net cash used in financing activities (2,971) (5,841)
Net increase/(decrease) in cash and cash 16,240 (9,345)
equivalents
Cash, cash equivalents and bank overdraft at the (8,498) 847
beginning of the year
Cash, cash equivalents and bank overdraft at the 7,742 (8,498)
end of the year
The accompanying notes are an integral part of this statement.
.
NOTES TO THE FINANCIAL STATEMENTS
1. Principal Accounting Policies
The principal accounting policies adopted in the preparation of these financial
statements are set out below. These policies have been consistently applied
during the current year and the preceding year, unless otherwise stated. The
accounts have been prepared on a going concern basis. The disclosure on going
concern on page 22 of the Report of the Directors in the Annual Financial
Report forms part of the financial statements.
(a) Basis of Preparation
(i) Accounting Standards applied
The financial statements have been prepared on an historical cost basis, except
for the measurement at fair value of investments and derivatives, and in
accordance with the applicable International Financial Reporting Standards
(IFRSs) and interpretations issued by the International Financial Reporting
Interpretations Committee as adopted by the European Union. The standards are
those endorsed by the European Union and effective at 31 January 2013.
Where presentational guidance set out in the Statement of Recommended Practice
(SORP) `Financial Statements of Investment Trust Companies and Venture Capital
Trusts', issued by the Association of Investment Companies in January 2009, is
consistent with the requirements of IFRSs, the Directors have sought to prepare
the financial statements on a basis compliant with the recommendations of the
SORP. The supplementary information which analyses the statement of
comprehensive income between items of a revenue and a capital nature is
presented in accordance with this.
(ii) Adoption of New and Revised Standards
New and revised standards and interpretations that became effective during the
year had no significant impact on the amounts reported in these financial
statements but may impact accounting for future transactions and arrangements.
At the date of authorising these financial statements, the following standards
and interpretations, which have not been applied in these financial statements,
were in issue but not yet effective (and in some cases had not yet been adopted
by the EU).
- IFRS 9: Financial Instruments (effective for accounting periods starting on
or after 1 January 2015)
- IFRS 10: Consolidated Financial Statements (effective for accounting periods
starting on or after 1 January 2013)
- IFRS 12: Disclosure of Interests in Other Entities (effective for accounting
periods starting on or after 1 January 2013)
- IFRS 13: Fair Value Measurement (effective for accounting periods starting on
or after 1 January 2013)
- IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures
for offsetting financial assets and financial liabilities (effective 1 January 2013)
- IAS 32 Financial Instruments: Presentation - Amendments to application
guidance on the offsetting of financial assets and financial liabilities (effective 1 January
2014)
- Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9
and IFRS 7(effective 1 January 2015)
- Amendments to IFRS10, IFRS 12 and IAS 27 (October 2012) - Investment Entities
(effective for accounting periods starting on or after 1 January 2014)
The Directors do not expect the adoption of the above standards and
interpretations (or any other standards and interpretations which are in issue
but not effective) will have a material impact on the financial statements of
the Company in future periods.
2. Income
2013 2012
£'000 £'000
Income from listed investments
UK dividends 3,859 3,416
UK unfranked investment income 76 10
Overseas dividends 188 164
Total income 4,123 3,590
3. Investment Management Fees
2013 2012
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Base 451 451 902 421 421 842
management
fee
Performance - - - - 391 391
fee charged
to capital
451 451 902 421 812 1,233
Invesco Asset Management Limited (`IAML') provides investment and
administration services to the Company. Details of the Investment Management
Agreement can be found in the Report of the Directors.
At 31 January 2013 £81,000 (2012: £75,000) was accrued in respect of the base
management fee and there was no accrual for the performance fee (2012: £
391,000).
4. Earnings per Ordinary Share
2013 2012
Revenue Capital Total Revenue Capital Total
Basic 6.3p 46.7p 53.0p 5.2p (7.8)p (2.6)p
Basic total earnings per ordinary share is based on the net total profit for
the financial year of £28,196,000 (2012: loss of £1,415,000).
Basic revenue earnings per ordinary share is based on the net revenue profit
for the financial year of £3,370,000 (2012: £2,852,000).
Basic capital earnings per ordinary share is based on the net capital profit
for the financial year of £24,826,000 (2012: loss of £4,267,000).
All three earnings are based on the weighted average number of shares in issue
during the year of 53,217,249 (2012: 54,467,398).
5. Dividends on Ordinary Shares
Dividends paid in the year: 2013 2012
pence £'000 pence £'000
Final paid in respect of 3.40 1,809 2.70 1,489
previous year
Interim paid 1.60 852 1.60 867
Return of unclaimed dividends - (6) - (7)
from previous years
5.00 2,655 4.30 2,349
Dividends payable in respect
of the year:
2013 2012
pence £'000 pence £'000
Interim 1.60 852 1.60 867
Final 4.40 2,341 3.40 1,809
6.00 3,193 5.00 2,676
The final dividend is based on shares in issue at the record date or, if the
record date has not been reached, on shares in issue on the date the balance
sheet is signed.
6. Share Capital
2013 2012
Number £'000 Number £'000
Authorised:
Ordinary shares of 20p each 160,000,000 32,000 160,000,000 32,000
Allotted, called-up and fully
paid:
Ordinary shares of 20p each 53,209,084 10,642 53,346,084 10,669
During the year the Company ordinary share movements were as follows:
Number £'000
At 1 February 2012 53,346,084 10,669
Shares repurchased and cancelled (137,000) (27)
At 31 January 2013 53,209,084 10,642
Details of the shares repurchases are given in the Report of the Directors on
page 26 of the Annual Financial Report.
7. Net Asset Value per Ordinary Share
The net asset value per share and the net asset values attributable at the year
end were as follows:
Net asset Net assets
value per share attributable
2013 2012 2013 2012
pence pence £'000 £'000
Ordinary shares
- Basic 285.7 237.6 152,034 126,771
Net asset value per ordinary share is based on net assets at the year end and
on 53,209,084 (2012: 53,346,084) ordinary shares, being the number of ordinary
shares in issue at the year end.
8. Related Party Transactions and Transactions with the Manager
Invesco Asset Management Limited (`IAML'), a wholly owned subsidiary of Invesco
Limited, acts as Manager, Company Secretary and Administrator to the Company.
Details of IAML's services and fees are disclosed in the Report of the
Directors.
Fees paid to Directors are disclosed in the Directors Remuneration Report on
page 30 of the Annual Financial Report, with additional disclosure in note 4.
Full details of Directors' interests are set out in the Report of the Directors
on page 26 of the Annual Financial Report.
9. This Annual Financial Report announcement is not the Company's statutory
accounts. The statutory accounts for the year ended 31 January 2012 have been
delivered to the Registrar of Companies. The statutory accounts for the year
ended 31 January 2012 received an audit report which was unqualified, did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying the report, and did not include a statement
under either section 498(2) or 498(3) of the Companies Act 2006. The statutory
accounts for the financial year ended 31 January 2013 have been approved and
audited but have not yet been filed.
10. The Audited Annual Financial Report will be posted to shareholders shortly.
Copies may be obtained during normal business hours from the Company's
registered office, 30 Finsbury Square, London EC2A 1AG. A copy of the Annual
Financial Report will be available from Invesco Perpetual on the following
website:
www.invescoperpetual.co.uk/investmenttrusts
11. The Annual General Meeting of the Company will be held at 12.00 noon on 21
May 2013 at 30 Finsbury Square, London EC2A 1AG.
By order of the Board
Invesco Asset Management Limited - Company Secretary
8 April 2013
End of announcement
Latest directors dealings
- 2 hours ago Marlowe
- 2 hours ago Haleon
- 2 hours ago TUI AG Reg Shs (DI)
- 2 hours ago Georgia Capital
- 2 hours ago Weir Group