Final Results
Invesco Perpetual UK Smaller Companies Investment Trust plc
Annual Financial Report Announcement
for the year ended 31 January 2008
Financial Information and Performance Statistics
The Benchmark Index of the Company is the Extended Hoare Govett Smaller
Companies Index (excluding Investment Trusts).
At At
31 January 31 January %
2008 2007 Change
Total return (all income reinvested):
Net asset value* -8.4
Benchmark* -15.6
FTSE All-Share Index* -3.6
Net asset value per ordinary share:
- after charging proposed final dividend 203.0p 224.6p -9.6
(capital NAV)
- Balance Sheet 205.2p 226.3p -9.3
Shareholders' funds (£'000) (1) 124,971 151,165 -17.3
Mid-market price per ordinary share 164.25p 195.50p -16.0
Discount per ordinary share 20.0% 13.6%
Capital only return - Indices:
Benchmark* -17.4
FTSE All-Share Index* -6.6
Return and dividend per ordinary share:
Revenue return 3.9p 3.2p
Capital return (23.7)p 39.6p
Total return (19.8)p 42.8p
Interim dividend (2007 adjusted for 1:5 1.50p 1.40p
share split)
Final dividend 2.25p 1.75p
Total dividend 3.75p 3.15p +19.0
Total Expense Ratio(2)
- excluding performance fee 0.94% 0.97%
- including performance fee 0.97% 1.82%
Gearing
Actual gearing(3) 102 100
Potential gearing(4) 120 117
Asset gearing(5) 101 99
* Source: Datastream and Fundamental Data
1. Includes effects of share buy backs in the period.
2. Total Expense Ratio is total expenses (excluding interest) incurred,
including those charged to capital, divided by average Shareholders' funds.
3. Actual gearing reflects the amount of loans already arranged and in use by
the Company. A gearing level of 100 indicates there is no gearing.
4. Potential gearing is based on the lower of 30% of net asset value and £25
million.
5. Asset gearing reflects the amount of loans actively invested in assets and
not held in cash.
Chairman's Statement
The second half of 2007 and the start to 2008 has been a difficult time for
equity markets. In the year under review, the net asset value (`NAV') total
return per share has declined by 8.4%. It should be noted that this fall,
although disappointing, compares favourably with the benchmark, the Extended
Hoare Govett Smaller Companies Index (excluding Investment Trusts) which fell
15.6% for the year ended 31 January 2008.
It is also relevant to note that as at 31 January 2008, the Company has
performed relatively well, in terms of net asset value performance, against the
other UK smaller companies investment trusts, ranking third of twenty three
over one year and fourth of twenty two over three and five years (source:
Cazenove). Although there can never be any guarantee as to the future, the
Board remains confident that the Manager's investment style continues to be
well suited to those investors seeking long-term returns for a reasonable level
of risk. Indeed, the Manager has consistently produced above-average returns
for a relatively low level of volatility.
Your Company's discount to NAV widened during this highly volatile period, to
20% as at 31 January 2008.
The Manager's report reviews the Company's performance during this period and
gives further details of his investment strategy and the current prospects for
your Company.
Dividend
I am pleased to report that, for the year ended 31 January 2008, the Directors
will be proposing to shareholders at the Annual General Meeting a dividend of
2.25 pence per ordinary share, to be paid on 19 May 2008 to shareholders on the
register on 18 April 2008. Given that an interim dividend of 1.5 pence per
share was paid in October 2007, this will mean a total dividend of 3.75 pence
per ordinary share, representing a 19% increase on the previous year. Future
dividends, as well as investment performance, will, of course, depend entirely
on market conditions and the ability of the Manager to achieve satisfactory
results.
Share buy backs
During the year ended 31 January 2008, the Company bought back and cancelled a
total of 5.9 million ordinary shares at an average price of 192.7 pence per
share and at an average discount to NAV of over 17.4%. The effect has been to
buy in 8.8% of the issued share capital and to enhance NAV by approximately
1.6%. Since the period end, a further 1.2 million ordinary shares have been
bought back and cancelled.
VAT on Management Fees
In early November last year, HMRC accepted the European Court of Justice ruling
in a test case that investment trusts should not be charged VAT on management
fees. This paves the way for the start of the process to recover VAT paid in
the past on your Company's management fees. These fees span a number of years
and your Board are holding discussions with the Manager concerning the amounts
recoverable, and will advise shareholders of the outcome in due course.
Objective and Investment Policy
Following changes made to the UKLA Listing Rules, listed investment companies
are now subject to additional requirements in respect of their published
investment policies. The Report of the Directors in the Annual Financial Report
includes a statement setting out the Company's investment policy.
Special Business at the Annual General Meeting
There are four resolutions to be proposed as Special Business at the Annual
General Meeting and these will be proposed as three Special Resolutions and one
Ordinary Resolution.
Authority to Allot Shares and Authority to Buy Back Shares
In order to assist the Board with its commitment to discount management, the
Directors wish to renew the authority to undertake buy backs of the Company's
ordinary shares in the market and to issue new ordinary shares, and are also
seeking authority to issue new ordinary shares whilst disapplying pre-emption
rights, if required, within the set limits set out in Ordinary Resolution 7 and
Special Resolutions 8 and 9 in the Notice of Annual General Meeting. New shares
will not be issued at prices below, nor will shares be repurchased at prices
higher than the prevailing net asset value.
As in previous years, the Directors might consider holding repurchased shares
as treasury shares, with a view to possible resale. To take account of the
possibility of treasury shares, the disapplication of pre-emption rights has
been extended to apply to the resale of treasury shares (if any) in the same
way as to the allotment of new securities.
Articles of Association
In addition, the Board is proposing a Special Resolution which seeks authority
to adopt new Articles of Association for the Company and approve changes to the
new Articles of Association, if adopted, to take effect from 1 October 2008.
Resolution 10.1 is to propose the adoption of new Articles of Association
primarily to take account of changes brought about by the Companies Act 2006.
One change relates to electronic and web communications and would provide
Directors with the general authority to send or supply documents or information
to shareholders in electronic form, e.g. by email, or by means of a website.
The new Articles of Association will also reflect a number of other specific
changes required by the Companies Act 2006.
As some provisions of the Companies Act 2006 do not come into effect until 1
October 2008, it is not possible to reflect these in the Articles of
Association of the Company until that date. Resolution 10.2 is therefore to
propose amendment to the new Articles of Association, to take effect from that
date.
Further explanation of the changes is contained in the Report of the Directors
and the Notice of the Meeting in the Annual Financial Report.
The Directors have carefully considered all the resolutions proposed in the
Notice of the AGM and consider them all to be in the best interests of
shareholders. The Directors accordingly recommend that shareholders vote in
favour of each resolution.
Outlook
It appears that, following a turbulent period in the second half of 2007 for
the UK stock market, the UK economy is entering a difficult time with fears for
a UK recession growing. Sentiment towards smaller companies remains poor at
present but, over the long term, we expect smaller companies to provide
attractive investment opportunities.
Ian Barby
Chairman
9 April 2008
Manager's Report
Investment Review
In the year to January 2008, most major stock markets ended on a weak note.
From a peak in markets in early June, investors became progressively more risk
averse as subprime debt issues emerged. What was thought to be a US$90 billion
problem at worst has so far led to write-offs by financial institutions of well
over that number as contagion has spread to many structured debt obligations.
As banks sought to build-up liquidity, this has led to a credit squeeze, an
effect that central banks are still working hard to overcome. Initially, Asian
and Emerging Markets took comfort in the de-coupling arguments, by which
weakness in the US economy would be offset by the strength of the local
domestic economies. Subsequently these markets have retreated but still
achieved healthy gains in the period under review. Europe ex UK managed a small
gain on the basis that European consumers are less overextended than their UK
and US counterparts, while UK and US markets experienced declines, as weakness
in housing compounded the financial crisis. Japan was the weakest major stock
market, reflecting fears that the economy was once again slipping back into
recession and deflation.
The UK stock market declined by 6.6%, as measured by the FTSE All-Share Index
over the period. The market reached a high in early June and re-tested this
level in October before falling away. Investors were already grappling with
higher interest rates and weaker housing trends when the subprime crisis hit.
The resulting credit crunch led to a dramatic escalation in the spread between
LIBOR rates and base rates as a wave of risk aversion swept through the
markets. This, in turn, precipitated a crisis at Northern Rock, a bank which
relied heavily on wholesale funds to finance its operations. The subsequent
government bail-out and media speculation about the negative economic
consequences dealt a sharp blow to consumer confidence in the run-up to
Christmas. This high level of uncertainty has unsurprisingly led to
underperformance by small and mid-sized companies. Our benchmark index, the
Extended Hoare Govett Smaller Companies Index (excluding Investment Trusts)
fell by 17.4%, ending the run of four consecutive years of outperformance by
smaller companies against the FTSE All-Share Index.
Against such a background, the net asset value (capital) per share of your
company fell by 9.6%, the first decline since the fiscal year of 2003. The main
positive, relative sector contributors were mining, aerospace & defence, oil &
gas producers and services, industrial engineering, pharmaceutical &
biotechnology and software & computer services. In terms of individual
companies, the leading performers were VT Group, a defence support services
group which benefited from a proposed joint venture with BAE Systems to pool
their shipbuilding operations, Chemring, a defence company manufacturing
consumable countermeasures which once again produced excellent results, new
contracts and earnings enhancing acquisitions, and Laird Group, which in recent
years has undergone a major transformation into a focused electronics company.
Your Company has also benefited from a number of takeovers during the year.
Whilst the positive impact of these on the return achieved by your Company
should not be overstated, many of them occurred in the second half of the year
and therefore provided welcome liquidity to the portfolio during the difficult
market at the time. It is a source of some satisfaction to the managers that
the process used to manage your Company's funds has resulted in investment in
underlying companies that their peer companies and private equity also find
attractive. Gearing has been and remains at very modest levels.
In general, and as also mentioned in the Chairman's Statement, your Company is
achieving its objective relative to the sector, of being an above average
performer combined with lower than average volatility, as is illustrated in the
chart in the Annual Financial Report, comparing the five year returns and the
relative volatility of a number of investment trusts in the same sector.
Investment Strategy
Clearly, the economic and investment backdrop has changed materially from that
of a year ago. In last year's annual report we referred to concerns about the
subprime market but never expected it to develop with the severity that it has.
Today all eyes are firmly focused on the US economy. The abrupt reversal in
housing activity and falls in house prices are undermining consumer confidence.
In addition, the credit squeeze brought on by the subprime crisis is still in
place despite aggressive cuts in interest rates by the Federal Reserve. Risk
aversion and the need to build reserves mean that many better quality private
and commercial bank customers are still facing higher borrowing costs. As a
result, a sharp slowdown seems inevitable and, indeed, many commentators are
now expecting the US economy to experience at least a mild recession in 2008.
The global economy ought to fare somewhat better as the strength of the Chinese
and other Emerging country economies offset some, but not all, of the negative
impact from the US.
All of this, however, does not bode well for the UK economy which has many of
the same characteristics as its US counterpart. UK consumers are overextended
with low savings and housing activity and house prices are falling, although
the supply/demand equation for housing remains much more favourable in the UK.
Government spending lacks flexibility and is coming under pressure because of
large budget deficits, in spite of years of economic growth. As in the US, a
large trade deficit threatens the stability of sterling. Moreover, the Bank of
England is at pains to point out the dilemma it faces over UK inflation. Unless
activity falls sharply, it appears that interest rates may not fall as far as
many expect. Whilst consumer confidence has taken a hit because of fears of
mortgage rate increases following the Northern Rock debacle, we see this as
only a part of a longer term slowdown in spending by consumers, as they receive
less support from mortgage equity withdrawal due to lacklustre house prices and
as a consequence, seek to increase savings and supplement pensions. A marked
deceleration in the UK economy seems inevitable but consensus sees it avoiding
a recession.
As ever, we wish to run a portfolio of quality companies. Against a background
of a `muddling through' economy with some inflationary pressures, we believe it
is important to invest in companies that have a high predictability of
revenues, together with some pricing power. Many cyclical areas, particularly
consumer related, will, in our judgement, lack sales momentum for sometime to
come and, as a consequence, their profits will be squeezed by rising cost
pressures. There will, of course, always be niche opportunities within such
sectors. One such example is N Brown Group, a catalogue retailer of clothing
and footwear, which is benefiting from the growth in internet sales. Apart from
this, we have made few changes to the portfolio structure, which has remained
broadly similar for some time. Whilst we are essentially stock-pickers and do
not target sectors, the net effect of our purchases and sales is to leave the
portfolio overweight in aerospace and defence, healthcare, industrial
engineering and support services. Underweight sectors would include general
retailers, real estate, general financial, food producers and
telecommunications. There are currently 136 holdings and the portfolio has an
average weighted capitalisation of £545 million, with an estimated yield of
2.2%.
Contrary to expectations, the percentage of the portfolio in companies listed
on the AIM market modestly expanded to about 17%. This is principally because
the Company's largest holding, Synergy Healthcare, postponed its move to the
main market until later this year. The AIM market actually outperformed in the
last year, largely reflecting its sizeable weighting in resource stocks. The
market's illiquidity may perversely have also been helpful as sellers were
forced to go elsewhere for cash. Debate rages on as to the merits of this
junior market, with some declaring it a `store of value' because of its years
of underperformance. We prefer to take a stock by stock approach. We will not
target a percentage of the portfolio that should be in AIM companies. Rather we
will continue to invest in AIM only if we can find attractive companies that
meet our overall investment criteria.
Current Prospects
The stock market is a reasonable forecaster of economic activity. The stock
market has been weak during the second half of 2007 and into 2008. It follows,
therefore, that it is quite likely that the UK economy and indeed the world
economy are entering more difficult times. The main question now is whether the
economy will be weak enough to justify p/e ratios being at 20 year lows with
dividend yields that are reasonably competitive with deposit rates. Put another
way, will there be a recession in the UK and US - in which case analysts'
estimates are far too high - or will we get away with a mere slowdown in
growth, in which case equities look undervalued? Our bias is towards the latter
slowdown scenario but, from a portfolio perspective, we are in effect taking a
`wait and see' approach. One of the key things that needs to happen is the
normalisation of the credit markets, whereby lower official interest rates
translate into lower costs for quality borrowers, which is not yet the case
today. Another important factor would be an end to the drip-feed of bad news
from the banks regarding their subprime and associated losses. By mid-year, we
should see some crystallisation of these losses as banks go through their
reporting periods and auditors develop a standard approach to the problem. On a
more optimistic note, the balance sheets of many publicly traded companies
remain strong and this is allowing a resumption of low level corporate
activity. It is to be hoped that much of the bad news is now being discounted
by current share prices and that some recovery is possible in the second half
of 2008.
In 2007 UK smaller companies underperformed their larger counterparts for the
first time in 5 years. In the process, the valuation premium accorded to
smaller companies has been eliminated. It is only natural that investors, in
the current uncertain circumstances, will be hesitant towards the sector.
However, if the UK economy avoids recession, smaller companies could once again
prove to be a rewarding asset class. Taking a longer term perspective, smaller
companies have grown, and remain able to grow their profits and share prices at
faster than average rates and this, in our view, means that the sector will
again be an attractive investment proposition, once confidence returns.
Richard Smith
Invesco Asset Management Limited
9 April 2008
Investments in Order of Valuation
at 31 January 2008
Ordinary shares unless stated otherwise
Company Activity by Sector Value % of
£'000 Portfolio
Synergy Health Care Equipment & 4,081 3.2
Healthcare Services
VT Aerospace & Defence 3,883 3.1
Chemring Aerospace & Defence 3,562 2.8
Mouchel Parkman Support Services 3,443 2.7
Fenner Industrial Engineering 3,355 2.7
Dignity General Retailers 2,937 2.3
Expro Oil Equipment Services & 2,412 1.9
Distribution
Serco Support Services 2,244 1.8
Cranswick Food Producers 2,081 1.6
Homeserve Support Services 2,025 1.6
RPS Support Services 1,933 1.5
Northgate Industrial Transportation 1,915 1.5
Victrex Chemicals 1,855 1.5
Spectris Electronic & Electrical 1,784 1.4
Equipment
Luminar Travel & Leisure 1,770 1.4
Charles Taylor General Financial 1,754 1.4
Consulting
Hiscox Non-life Insurance 1,689 1.3
Croda Chemicals 1,683 1.3
Carillion Construction & Materials 1,639 1.3
Dechra Pharmaceuticals & 1,551 1.2
Pharmaceutical Biotechnology
Filtrona Support Services 1,545 1.2
Spirax-Sarco Industrial Engineering 1,515 1.2
Interserve Support Services 1,481 1.2
SIG Support Services 1,477 1.2
Mears Support Services 1,474 1.2
Whatman Health Care Equipment & 1,464 1.2
Services
Aveva Software & Computer Services 1,351 1.1
Laird Electronic & Electrical 1,278 1.0
Equipment
Care UK Health Care Equipment & 1,276 1.0
Services
Wincanton Industrial Transportation 1,269 1.0
Consort Medical Health Care Equipment & 1,269 1.0
Services
Brown (N.) General Retailers 1,234 1.0
MTL Instruments Electronic & Electrical 1,207 1.0
Equipment
Babcock Support Services 1,193 0.9
E2V Technologies Electronic & Electrical 1,153 0.9
Equipment
Ultra Electronic Aerospace & Defence 1,146 0.9
Genus Pharmaceuticals & 1,145 0.9
Biotechnology
Premier Oil Oil & Gas Producers 1,144 0.9
Wichford Real Estate 1,100 0.9
BPP Support Services 1,058 0.8
Diploma Support Services 1,050 0.8
Venture Oil & Gas Producers 1,049 0.8
Production
Omega Insurance Non-life Insurance 1,045 0.8
James Halstead Construction & Materials 1,031 0.8
Meggitt Aerospace & Defence 952 0.8
Rotork Industrial Engineering 952 0.8
Beazley Non-life Insurance 943 0.7
Devro Food Producers 942 0.7
Amlin Non-life Insurance 930 0.7
Salamander Energy Oil & Gas Producers 927 0.7
Domino Printing Industrial Engineering 910 0.7
Rensburg General Financial 885 0.7
Sheppards
Speedy Hire Support Services 877 0.7
Hill & Smith Industrial Engineering 856 0.7
Avocet Mining Chemicals 848 0.7
Gem Diamonds Mining 841 0.7
WSP Support Services 838 0.7
Scott Wilson Support Services 825 0.7
Hansard Global Life Insurance 799 0.6
Fidessa Software & Computer Services 795 0.6
Datacash Support Services 779 0.6
May Gurney Support Services 768 0.6
Melrose Industrial Engineering 766 0.6
Menzies(John) Support Services 755 0.6
Phoenix Software & Computer Services 721 0.6
Headlam Household Goods 719 0.6
Just Retirement Life Insurance 705 0.6
Low & Bonar Construction & Materials 703 0.6
Quintain Estates Real Estate 701 0.6
& Development
Assura Health Care 699 0.6
Bodycote Industrial Engineering 699 0.6
Personal Non-life Insurance 697 0.6
Bovis Homes Household Goods 686 0.5
Dicom Software & Computer Services 681 0.5
Cape Construction & Materials 671 0.5
Anglo Pacific Mining 669 0.5
Sthree Support Services 667 0.5
PZ Cussons Household Goods 642 0.5
Shaftesbury Real Estate 617 0.5
Lupus Capital Construction & Materials 615 0.5
Greene King Travel & Leisure 611 0.5
Ennstone Construction & Materials 590 0.5
Kcom Fixed Line Telecommunications 575 0.5
JKX Oil & Gas Oil & Gas Producers 574 0.5
CSR Technology Hardware & 564 0.4
Equipment
Paypoint Support Services 561 0.4
Fairpoint General Financial 561 0.4
Centaur Media Media 559 0.4
Intec Telecom Software & Computer Services 554 0.4
Systems
CVS General Retailers 551 0.4
Capital & Real Estate 547 0.4
Regional
New Britain Palm Food Producers 545 0.4
Oil
NCC Software & Computer Services 526 0.4
Sterling Energy Oil & Gas Producers 522 0.4
SDL Software & Computer Services 517 0.4
Assetco Support Services 511 0.4
Morson Support Services 510 0.4
Norcros Construction & Materials 507 0.4
Clean Energy Chemicals
Brazil
- ords 470 0.4
- Warrants Dec 12 0.0
2011
482 0.4
RWS Support Services 469 0.4
Vantis General Financial 457 0.4
Augean Support Services 453 0.4
BTG Pharmaceuticals & 450 0.4
Biotechnology
Abbey Protection General Financial 443 0.3
Greggs Food & Drug Retailers 439 0.3
Hogg Robinson Travel & Leisure 432 0.3
PV Crystalox Electronic & Electrical 417 0.3
Solar Equipment
Mavinwood General Financial 410 0.3
Cohort Aerospace & Defence 409 0.3
Mountview Estates Real Estate 390 0.3
Mitie Support Services 390 0.3
Yougov Support Services 389 0.3
Polymer Logistics Support Services 382 0.3
Clyde Process Industrial Engineering 381 0.3
Eaga Support Services 368 0.3
Cyril Sweett Construction & Materials 365 0.3
Protherics Pharmaceuticals & 358 0.3
Biotechnology
Microgen Software & Computer Services 357 0.3
Immunodiagnostics Health Care Equipment & 316 0.2
Services
Ark Therapeutics Pharmaceuticals & 284 0.2
Biotechnology
IBS Opensystems Software & Computer Services 278 0.2
Caduccio's Travel & Leisure 242 0.2
Rugby Estates Real Estate 239 0.2
Vectura Pharmaceuticals & 229 0.2
Biotechnology
Elec Data Process Software & Computer Services 228 0.2
Minorplanet Electronic & Electrical 200 0.2
Systems Equipment
Sinclair Pharmaceuticals & 184 0.1
Pharmaceuticals Biotechnology
XP Power Electronic & Electrical 167 0.1
Equipment
Clinphone Software & Computer Services 149 0.1
Autonomy Software & Computer Services 125 0.1
Strategic Thought Software & Computer Services 110 0.1
Phorm Software & Computer Services 107 0.1
SCS Upholstery General Retailers 88 0.1
Hargreaves Industrial Transportation 50 -
Service
Umeco Aerospace & Defence 2 -
TOTAL INVESTMENTS 126,754 100.0
(136)
As at 31 January 2008, 4 (2007: 5) investments were held with a fair value of
nil.-
Related Party Transactions
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 latest Annual
Financial Report which will be available on the Company's website. Full details
of Directors' interests are also set out in the Annual Financial Report. There
are no other related party transactions.
Principal Risks and Uncertainties
The principal risks and uncertainties that could affect the Company's business
can be divided into various areas:
* Market Movements and Portfolio Performance; and
* Regulatory and Tax Related.
A detailed explanation of these principal risks and uncertainties can be found
in the latest Annual Financial Report, which will be available on the Company's
website.
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 that law the Directors have elected to prepare financial
statements in accordance with International Financial Reporting Standards as
adopted by the European Union. The financial statements are required by law to
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 judgments and estimates that are reasonable and prudent;
• state whether applicable International Financial Reporting Standards as
adopted by the European Union 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, to the best of their knowledge, state that:
• the financial statements, prepared in accordance with International Financial
Reporting Standards as adopted by the European Union, give a true and fair view
of the assets, liabilities, financial position and loss of the company; and
• the Report of the Directors 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.
The Directors are responsible for keeping proper accounting records that
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 1985. 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.
Signed on behalf of the Board of Directors
Richard Brooman
Deputy Chairman
9 April 2008
Condensed Income Statement
for the year ended 31 January
2008 2007
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on
investments
at fair value through - (14,455) (14,455) - 28,516 28,516
profit or loss
Income - Note 2 3,264 88 3,352 2,976 - 2,976
Investment management fee - (540) (578) (1,118) (515) (1,705) (2,220)
Note 3
Other expenses (221) (3) (224) (320) (7) (327)
Profit before finance
costs and taxation 2,503 (14,948) (12,445) 2,141 26,804 28,945
Finance costs (35) (142) (177) (1) (3) (4)
Profit before tax 2,468 (15,090) (12,622) 2,140 26,801 28,941
Taxation (5) - (5) - - -
Profit after tax 2,463 (15,090) (12,627) 2,140 26,801 28,941
Return per ordinary share
Basic - Note 4 3.9p (23.7)p (19.8)p 3.2p 39.6p 42.8p
The total column of this statement represents the Company's Income Statement,
prepared in accordance with International Financial Reporting 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 year.
Condensed Statement of Changes in Equity
for the year ended 31 January
Capital Capital Capital
Share Share Redemption Reserve Reserve - Revenue
-
Capital Premium Reserve realised unrealised Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 13,711 21,244 317 41,919 47,251 3,224 127,666
February
2006
Shares bought
back and (352) - 352 (2,863) - - (2,863)cancelled
Profit for the - - - 10,039 16,762 2,140 28,941
year
Dividends paid - - - - - (2,579) (2,579)
As at 31 13,359 21,244 669 49,095 64,013 2,785 151,165
January
2007
Shares bought
back and (1,181) - 1,181 (11,466) - - (11,466)
cancelled
Profit/(loss) - - - 25,363 (40,453) 2,463 (12,627)
for the year
Dividends paid - - - - - (2,101) (2,101)
- Note 5
At 31 January 12,178 21,244 1,850 62,992 23,560 3,147 124,971
2008
Condensed Balance Sheet
as at 31 January
2008 2007
£'000 £'000
Non-current assets
Investments at fair value through profit or 126,754 149,902
loss
Current assets
Other receivables 1,297 281
Cash and cash equivalents - 2,580
1,297 2,861
Total assets 128,051 152,763
Current liabilities
Other payables (316) (1,598)
Bank overdraft (2,764) -
(3,080) (1,598)
Net assets 124,971 151,165
Issued capital and reserves
attributable to equity holders
Share capital - Note 6 12,178 13,359
Share premium account 21,244 21,244
Other reserves:
Capital redemption reserve 1,850 669
Capital reserves - realised 62,992 49,095
Capital reserves - unrealised 23,560 64,013
Revenue reserve 3,147 2,785
Total Shareholders' funds 124,971 151,165
Net asset value per ordinary share
Basic - Note 7 205.2p 226.3p
Condensed Cash Flow Statement
for the year ended 31 January
2008 2007
£'000 £'000
Cash flow from operating activities
(Loss)/profit before tax (12,622) 28,941
Taxation (5) -
Adjustments for:
Purchases of investments (46,577) (29,735)
Sales of investments 53,995 36,482
7,418 6,747
Losses/(gains) on investments 14,455 (28,516)
Finance costs 177 4
Operating cash flows before movements in 9,423 7,176
working capital
Decrease/(increase) in receivables 161 (146)
Decrease in payables (1,207) (230)
Net cash flows from operating activities after 8,377 6,800
tax
Cash flows from financing activities
Interest paid (154) (3)
Buy back of shares (11,466) (2,863)
Equity dividends - Note 5 (2,101) (2,579)
Net cash used in financing activities (13,721) (5,445)
Net (decrease)/increase in cash and cash (5,344) 1,355
equivalents
Cash, cash equivalents and bank overdraft at 2,580 1,225
the beginning of the year
Cash, cash equivalents and bank overdraft at (2,764) 2,580
the end of the year
Notes to the condensed Financial Statements
1. Accounting policies
(a) Basis of accounting
The condensed financial statements have been prepared on the historical cost
basis, except for the measurement at fair value of investments and in
accordance with International Financial Reporting Standards (`IFRS') which
comprise standards and interpretations approved by the International Accounting
Standard Board (`IASB') and Standing Interpretation Committee interpretations
approved by the IASC that remain in effect, and to the extent that they have
been adopted by the European Union.
Where presentational guidance set out in the Statement of Recommended Practice
(`SORP') for investment trusts issued by the Association of Investment
Companies (`AIC') in December 2005 is consistent with the requirements of IFRS,
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 income statement between items of a revenue and a capital
nature has been presented alongside the income statement, in accordance with
guidance issued by the AIC.
2. Income
2008 2007
£'000 £'000
Income from listed investments
UK dividends 3,123 2,896
Overseas dividends 54 -
3,177 2,896
Other income
Deposit interest 62 68
Underwriting commission 25 12
Total income 3,264 2,976
A special dividend of £88,000 (2007: nil) was in relation to a dividend
received in lieu of a capital distribution. This has been allocated to capital.
3. Investment management fee
2008 2007
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management 484 484 968 438 438 876
fee
Performance-related - 38 38 - 1,013 1,013
fee
VAT thereon 56 56 112 77 254 331
540 578 1,118 515 1,705 2,220
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 in the Annual Financial
Report. The performance-related fee is charged wholly to capital. At 31 January
2008, £68,000 (2007: £98,000) was due for payment in respect of management fees
and £38,000 (2007: £1,190,000) was due for payment in respect of the
performance-related fee.
With effect from 1 October 2007 no VAT has been payable on management or
performance fees following the ruling of the European Court of Justice that
investment trust management fees are exempt VAT.
4. Return per ordinary share
2008 2007
Revenue Capital Total Revenue Capital Total
Basic 3.9p (23.7)p (19.8)p 3.2p 39.6p 42.8p
Basic total return per ordinary share is based on the net total loss for the
financial year of £12,627,000 (2007: £28,941,000 gain).
Basic revenue return per ordinary share is based on the net revenue return on
ordinary activities after taxation of £2,463,000 (2007: £2,140,000).
Basic capital return per ordinary share is based on the net capital loss for
the financial year after taxation of £15,090,000 (2007: £26,801,000 gain).
All three returns are based on the weighted average number of shares in issue
during the year of 63,744,492 (2007: 67,615,567).
5. Dividends on ordinary shares
Dividends on equity shares paid 2008 2007
in the year:
pence £'000 pence†£'000
Final paid in respect of previous 1.75 1,156 2.40 1,640
year
Interim paid 1.50 945 1.40 939
3.25 2,101 3.80 2,579
Dividends on equity shares in respect of the year:
We set out below the total dividend payable in respect of the financial year,
which is the basis on which the requirements of Section 842 Income and
Corporation Taxes Act 1988 are considered.
2008 2007
pence £'000 pence†£'000
Interim 1.50 945 1.40 939
Final 2.25 1,344 1.75 1,156
3.75 2,289 3.15 2,095
†For comparative purposes the rates shown for the final dividend for 2006 and
the interim dividend paid in 2007 have been adjusted to take account of the 1:5
share split of ordinary shares from £1 each to 20p each.
6. Share capital
2008 2007
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 60,889,229 12,178 66,796,725 13,359
During the year the Company bought back its ordinary shares as shown below:
Number £'000
As at 1 February 2007 66,796,725 13,359
Buy backs (5,907,496) (1,181)
At 31 January 2008 60,889,229 12,178
Details of the share buy backs are given in the Report of Directors in the
Annual Financial Report.
7. Net asset value
The net asset value per ordinary share and the net assets attributable at the
year end were as follows:
Net Asset Net Assets
Value per Share Attributable
2008 2007 2008 2007
pence pence £'000 £'000
Ordinary shares 205.2 226.3 124,971 151,165
Net asset value per ordinary share is based on net assets at the year end and
on 60,889,229 (2007: 66,796,725) ordinary shares of 20p each, being the number
of ordinary shares in issue at the year end.
8. This Annual Financial Report announcement is not the company's statutory
accounts. The statutory accounts for the year ended 31 January 2007 have been
delivered to the Registrar of Companies. The statutory accounts for the year
ended 31 January 2007 and 31 January 2008 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 237(2) or 237(3) of the Companies Act
1985. The statutory accounts for the financial year ended 31 January 2008 have
been approved and audited but have not been filed.
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 shortly.
The Annual General Meeting of the Company will be held at 12.00 noon on 14 May
2008 at 30 Finsbury Square, London, EC2A 1AG.
Monday, 13th May 2024
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