Information  X 
Enter a valid email address

Edinburgh Inv. Trust (EDIN)

  Print   

Thursday 14 November, 2013

Edinburgh Inv. Trust

Half-yearly Report


                      The Edinburgh Investment Trust plc                       

                         Half-Yearly Financial Report                          

                        Six months to 30 September 2013                        

FINANCIAL INFORMATION AND PERFORMANCE STATISTICS

The Edinburgh Investment Trust plc (the `Company') is a UK investment trust
listed on the London Stock Exchange, which invests primarily in UK securities.

Investment Objective of the Company

The Company invests primarily in UK securities with the 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           %
                                                  2013         2013      Change
                                                                               
Total Return(1)                                                                
                                                                               
NAV - debt at par                                                          +4.4
                                                                               
NAV - debt at market value                                                 +5.1
                                                                               
Share price                                                                +7.2
                                                                               
FTSE All-Share Index                                                       +3.8
                                                                               
Capital Return                                                                 
                                                                               
Net asset value (NAV):                                                         
                                                                               
- debt at par                                  591.89p      581.89p        +1.7
                                                                               
- debt at market value                         573.32p      559.01p        +2.6
                                                                               
Share price                                     599.5p       572.0p        +4.8
                                                                               
FTSE All-Share Index                           3443.85      3380.64        +1.9
                                                                               
(Premium)/discount:                                                            
                                                                               
- debt at par                                   (1.3)%         1.7%            
                                                                               
- debt at market value                          (4.6)%       (2.3)%            
                                                                               
Gearing at par:                                                                
                                                                               
- gross gearing(2)                               17.3%        17.6%            
                                                                               
- net gearing(3)                                 17.1%        17.6%            

                                                                             %
for the six months to 30 september               2013        2012       Change
                                                                              
Revenue return per share                        12.1p       11.3p         +7.1
                                                                              
First interim dividend(4)                        5.0p        5.0p            -
                                                                              
Retail Price Index - increase over period        1.3%        1.4%             

Notes: 

1. Capital growth with income reinvested. Source: Thomson Reuters
Datastream.

2. Gross gearing: borrowings ÷ shareholders' funds.

3. Net gearing: borrowings less cash and investments in money market funds ÷
shareholders' funds.

4. Dividends declared in respect of the financial year.

.

INTERIM MANAGEMENT REPORT INCORPORATING THE CHAIRMAN'S STATEMENT

Chairman's Statement

Dear Shareholder,

The recovery in equity markets reported in my last Chairman's Statement to
shareholders has continued into the new financial year, albeit at a slower rate
on the back of ongoing uncertainties around the strength and sustainability of
economic growth and the timing of tapering of quantitative easing in the US.

There has been no change in the investment strategy which has been in place
since 2008, and this has delivered investment out-performance against benchmark
in the six month period to 30 September 2013. More detail on performance is
given below. The income generation of the portfolio remains good and an
unchanged first interim dividend of 5.0 pence per share will be paid on 29
November 2013 (2012: 5.0p)

Since the period end it has been announced by Invesco Perpetual that the
Company's Portfolio Manager, Neil Woodford will be leaving in April 2014. This
is discussed in more detail below.

UK Equity Market

The positive sentiment towards equity markets continued in the period;
supported in part by continuing monetary stimuli, but also as a consequence of
a low interest rate environment reducing the attractiveness of many other asset
classes. However, the market correction in June provided a timely reminder of
the potential effect on equity markets of the eventual unwinding of
quantitative easing.

A more detailed discussion on the UK equity market and the Company's portfolio
is contained in the Manager's Report.

Performance

The Company produced a net asset value (NAV) total return for the six months
to 30 September 2013 of 4.4% (debt at par) and 5.1 % (debt at market), which
compares with a total return of 3.8% for the FTSE All-Share Index (the
`Index'), the Company's benchmark. The share price total return (share price
with dividends reinvested) for the period was 7.2%. The portfolio continues to
be concentrated in a relatively small number of sectors and its overweight or
underweight positions in various sectors can be material drivers of the
Company's relative investment performance.

The Company's share price at 30 September 2013 was 599.5p, an increase of 4.8%
from the year end share price of 572.0p. The shares traded at a discount of
1.7% to NAV (debt at par) at the year end of 31 March 2013, but moved to a
premium of 1.3% at 30 September 2013; valuing debt at market, the shares ended
the period trading at a premium of 4.6%, an increase from the year end premium
of 2.3%. At 11 November 2013, the latest practical date to signing this report,
the NAV was 616.05p, the share price was 582.5p and the resultant discount was
5.4% (debt at par) and 2.5% (debt at market value), reflecting a reaction in
the market to the announcement on 15 October 2013 of Neil Woodford's departure
from Invesco Perpetual in April 2014.

Performance Fee

A performance fee is payable in respect of each three year rolling period in
which the Company outperforms its benchmark index plus a hurdle of 1.25% per
annum. This fee is capped at 1% of the period end net assets, before deduction
of performance fee.

The Company performed strongly in the two and a half years to 30 September 2013
in comparison to the Index, producing a total return of 45.6% against the Index
total return of 22.9%. If the Company's NAV were to perform in line with the
Index in the next six months, the calculated fee would be in excess of the cap,
and so a capped performance fee of £11.7 million is provided for in this
half-yearly financial report.

Gearing

The Company continues to benefit from debt amounting to £200 million in the
form of two £100 million debentures. This debt is fully deployed for investment
purposes. As a result of the appreciation in NAV over the six month period, at
30 September 2013 the gross gearing level fell to 17.3% from 17.6% at 31 March
2013.

One of the debentures, the 11.5 % £100 million debenture, matures in June 2014.
The Board continues to keep this position under review, both in terms of
whether and how best to replace the financing represented by that debenture.

Dividend

The Board declares an unchanged first interim dividend of 5.0 pence per share
which will be paid on 29 November 2013 to shareholders on the register on
22 November 2013. Shares will be quoted ex-dividend on 20 November 2013.

The Manager

On 15 October 2013, the Board was informed by its Manager, Invesco Asset
Management Limited, that Neil Woodford, the Company's portfolio manager, will
be leaving Invesco Perpetual in April 2014. The Board has been assured by
Invesco Perpetual that this will not result in any immediate change to the
Company's management.

The Board has met with senior management at Invesco Perpetual, including Mark
Armour, the CEO, to discuss the management arrangements for the Company and has
been assured that Neil Woodford remains committed to the management of the
Company's portfolio until his departure.

The Board would like to take some time to consider the options for the future
management of the Company before it makes a decision, but in the meantime it is
satisfied with the assurances that have been received from Invesco Perpetual.
The Board is also mindful that, as has been the case since we appointed Invesco
Perpetual, working with Neil Woodford is a highly experienced investment team
backed by the resources of a global company.

Outlook

It is appropriate to adopt a cautionary tone in respect of investment
performance in the short term. Equity valuations are higher than they have been
over the last few years and there remains considerable uncertainty around the
strength and sustainability of economic recovery, and the timing of the
withdrawal of extraordinary monetary policy.

Additionally, the Board, following the announcement of Neil Woodford's
departure next year, is in the process of reviewing its investment management
arrangements. I can assure you that the Board has your interests uppermost in
its considerations as we determine the future management of the Company. When
we have made our decision we will inform you in a timely manner. In the
meantime, we would like to reassure you that the management of the Company
continues in good hands.

Jim Pettigrew

Chairman

13 November 2013


Total Returns to 30 September 2013

                         6 MONTHS   1 YEAR  2 YEARS  3 YEARS  5 YEARS 10 YEARS
                                                                              
NAV (debt at par) (%)         4.4     22.0     42.9     56.2     89.3    163.7
                                                                              
Share Price (%)               7.2     20.9     45.8     65.0    125.9    242.1
                                                                              
FTSE All-Share (%)            3.8     18.9     39.4     33.4     66.2    140.2

Source: Thomson Reuters Datastream.

.

MANAGER'S REPORT

Market Review

The UK stock market continued its upward progress over the period under review.
A run of 12 consecutive months of positive returns ended with a sharp sell-off
in June, confirming that the positive sentiment towards equities had mainly
been driven by loose monetary policy - the weakness followed comments from Ben
Bernanke, Chairman of the US Federal Reserve, that "it would be appropriate to
moderate the pace of purchases later this year". Equities rallied as US GDP
growth forecasts were marked down and Mario Draghi, President of the European
Central Bank, stated that the "ECB will maintain its easy money policy for the
foreseeable future". Stock market volatility remained high, against a backdrop
of rising government bond yields and some conflicting economic and political
newsflow, including the Syrian crisis and concerns over slowing economic growth
in China.

The commencement of Mark Carney's tenure as Governor of the Bank of England in
the summer saw GDP growth for Q2 confirmed at 0.7%, its fastest rate for three
years, and an upward revision to the IMF's forecasts for UK economic growth to
1.4% this year and 1.9% next. The half year concluded with a stalemate over the
US spending bill - although the market remained fairly relaxed about the
likelihood of a deal. After the period end, a deal was finalised, temporarily
resolving the on-going issues of budget reform and the debt ceiling.

Portfolio Strategy and Review

The Company's net asset value, including reinvested dividends, rose by 4.4%
(debt at par) and 5.1% (debt at market value) during the period under review,
compared with a rise of 3.8% (total return) by the FTSE All-Share Index. The
share price with dividends reinvested rose 7.2%.

This year's rise in the stock market has been noteworthy for its breadth. While
previous rallies have been driven by a relatively small number of "risk-on"
sectors, notably mining and banks, this year has seen strong performances from
a wide spread of sectors, including those perceived as defensive. Investors
have favoured stocks where they have confidence in their dividend paying
ability and the prospect of sustainable growth. The stock market has begun to
recognise that the shares of some companies that have these attributes were
profoundly undervalued, as we have believed for some while, and this has
benefited the portfolio's performance.

At an individual stock level, the portfolio's holding in BT continued to
deliver a strongly positive impact - despite the company announcing that Ian
Livingston was stepping down from his role as Chief Executive to take up the
role of Minister of State for Trade for the UK Government. It is testimony to
the job that Ian has done at BT that the stock market took the news relatively
well, focusing instead on the company's on-going scope for cost cutting and its
increasingly dominant position in the UK broadband market - bolstered by its
new TV sports channel.

BAE Systems provided a major positive impact on the portfolio's performance.
The company's operational performance since it halted the merger talks with
EADS has confirmed its ability to thrive as an independent entity. This a
company whose stock market perception is shifting from negative growth, exposed
to a challenging US defence spending environment, towards a combination of slow
growth in mature markets and faster growth in the emerging world.

Capita saw its shares continue their very positive performance of the past
12 months, as the company announced that it had formed a 10 year strategic
partnership with O2 for customer management services. The group confirmed that
it has now secured over £2.0 billion of new and extended contracts in 2013 and
has increased its forecast for organic growth for the year, underpinning our
confidence in the scale of the opportunities available to the business.

The holdings in UK tobacco companies, however, weighed on the portfolio's
performance. The UK government delayed the proposed introduction of plain
packaging while the European parliament was due to vote on new regulations to
limit packaging design and the packet sizes, but there was no major newsflow to
fundamentally justify the sector's underperformance.

The holdings in Centrica and SSE fell in value towards the end of the period,
on the back of the 20 month utility bill price freeze proposed by the Labour
Party should they win the next general election. This policy would clearly be
popular with the electorate but the economics of it are in our view absurd. We
believe it is irrational for any privately-owned company to sell its products
or services at a loss and we would encourage any company that was forced to do
so to simply stop supplying. Furthermore, energy bills have been increasing in
recent years due to higher commodity prices and as a result of policies
designed to increase the UK's sourcing of energy from renewables. Prices have
not increased through company profiteering - there have been 20 separate
inquiries into the energy market since 2001, none of which have found evidence
of anti-competitive behaviour.

There was some disappointing news from G4S, with the company warning that its
operating profit margin will contract this year. The company subsequently
announced not only that its Chief Executive, Nick Buckles, had decided to step
down to be replaced by its recently appointed Finance Director, Ashley Almanza,
but also a rights issue to strengthen its balance sheet.

In terms of portfolio activity, we disposed of the holding in Elan, following
the confirmation of an agreed bid from US healthcare company Perrigo. We
participated in the rights issue by G4S, as outlined above, as well as in share
placings by Lancashire Holdings, which announced the acquisition of Lloyd's
insurer Cathedral Capital, and by BTG, which announced the purchase of EKOS, an
interventional vascular business, and of the Targeted Therapies division of
Nordion.

Outlook

Further confirmation of the extent to which the stock market's progress has
been driven by quantitative easing came over the period, most recently with the
market's positive reaction to the news of no imminent tapering in the US. There
are many explanations as to why the Federal Reserve chose not to commence
tapering in September, as had been widely expected, but the most popular view
suggests that the Fed was concerned that the political impasse could have
an increasingly negative impact on economic confidence and market sentiment.

Although the timing is impossible to predict, the withdrawal of extraordinary
monetary policy in the US is ultimately inevitable. We expect the pace of
withdrawal to be gradual but, like the US Federal Reserve, we do worry about
the near-term implications of tapering for our asset class. It is even more
difficult than usual to predict the path that the market will take over the
next few months but the fund is positioned, with a focus on companies which can
deliver attractive cash flows, earnings and dividend growth. It therefore has
the potential to deliver an attractive positive return over more sensible,
longer time horizons. We would caution, however, that returns over the next
three years are likely to be somewhat lower than over the last three years,
purely as a consequence of the higher valuations that we now see in our market.

Neil Woodford

Investment Manager

13 November 2013

.

Related Parties and Transactions with the Manager

Under United Kingdom Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law), the Company has identified no related parties
and there have been no related party transactions during the period. Invesco
Asset Management Limited, a wholly owned subsidiary of Invesco Limited, acts as
Manager, Company Secretary and Administrator to the Company. Details of the
management fee arrangements are given in notes 2 and 3 of the condensed
financial statements.

Principal Risks and Uncertainties

The principal risk factors relating to the Company can be summarised as
follows:

• Market Risks - a fall in the stock market as a whole will affect the
performance of the portfolio, as well as the performance of individual
portfolio investments; it also includes interest rate and currency risks;

• Investment Performance Risk - this is the stock specific risk that the stock
selection process may not achieve the Company's published objectives;

• Gearing Risk - borrowing will amplify the effect on shareholders' funds of
portfolio losses;

• Income/Dividend Risk - investment income may fail to reach the level required
to meet the Company's income objective;

• Share Price Risk - the Company's prospects and NAV may not be fully reflected
in the share price;

• Control System Risk - the Board relies on the effectiveness of the Manager's
control systems which include control activities in fund management operations,
financial controls, meeting regulatory requirements and managing relations with
third parties;

• Reliance on Third Party Providers Risk - the Company has no employees, so is
reliant upon the performance of third party service providers for it to
function, particularly the Manager, Custodian and Registrars; and

• Other Risks - the Company may be affected by other risks such as business and
strategic risks, and the perceived impact of the designated Investment Manager
ceasing to be involved with the Company.

A detailed explanation of these principal risks and uncertainties can be found
on pages 16 to 18 of the 2013 annual financial report, which is available on
the Manager's website at www.invescoperpetual.co.uk/investmenttrusts.

In the view of the Board, these principal risks and uncertainties are unchanged
from the previous year end and are as much applicable to the remaining six
months of the financial year, as they were to the six months under review. As
highlighted in the annual financial report, the Manager's style may result in a
concentrated portfolio. In addition, the Manager manages other portfolios
holding many of the same stocks as the Company which reflects the Manager's
high conviction style of investment management. This could potentially increase
liquidity risk under certain scenarios and market conditions.

Going Concern

The financial statements have been prepared on a going concern basis. The
Directors consider this is the appropriate basis as the Company has adequate
resources to continue in operational existence for the foreseeable future. In
considering this, the Directors took into account the diversified portfolio of
readily realisable securities which can be used to meet funding commitments,
and the ability of the Company to meet all its liabilities and ongoing expenses
from its assets and revenue.

.

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 2013 which comprises the condensed income statement, condensed
reconciliation of movements 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 Conduct Authority (the
`UK FCA'). 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 FCA. 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 2013 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
FCA.

Salim Tharani
for and on behalf of KPMG Audit Plc
Chartered Accountants
London
13 November 2013

.

INVESTMENTS IN ORDER OF VALUATION
at 30 September 2013

UK listed and ordinary shares unless stated otherwise.

AIM Investments quoted on AIM (formerly Alternative Investment Market).

                                                           Market               
                                                            Value           % of
Investment              Sector                              £'000      Portfolio
                                                                                
GlaxoSmithKline         Pharmaceuticals & Biotechnology   121,456            8.9
                                                                                
AstraZeneca             Pharmaceuticals & Biotechnology   118,882            8.7
                                                                                
BT                      Fixed Line Telecommunications     106,811            7.8
                                                                                
British American        Tobacco                            85,591            6.3
Tobacco                                                                         
                                                                                
Roche - Swiss common    Pharmaceuticals & Biotechnology    84,528            6.2
stock                                                                           
                                                                                
BAE Systems             Aerospace & Defence                77,045            5.6
                                                                                
Imperial Tobacco        Tobacco                            70,383            5.2
                                                                                
Reckitt Benckiser       Household Goods & Home             62,342            4.6
                                                                                
                        Construction                                            
                                                                                
Reynolds American -     Tobacco                            60,553            4.4
                                                                                
  US common stock                                                               
                                                                                
Capita                  Support Services                   58,964            4.3
                                                                                
Ten largest holdings                                      846,555           62.0
                                                                                
Rolls-Royce             Aerospace & Defence                51,336            3.8
                                                                                
Centrica                Gas, Water & Multiutilities        50,073            3.7
                                                                                
Altria - US Common      Tobacco                            37,194            2.7
Stock                                                                           
                                                                                
Sanofi - French common  Pharmaceuticals & Biotechnology    34,035            2.5
stock                                                                           
                                                                                
Novartis - Swiss common Pharmaceuticals & Biotechnology    33,247            2.4
stock                                                                           
                                                                                
Drax                    Electricity                        30,629            2.2
                                                                                
Smith & Nephew          Health Care Equipment &            28,030            2.1
                        Services                                                
                                                                                
SSE                     Electricity                        26,399            1.9
                                                                                
G4S                     Support Services                   23,222            1.7
                                                                                
Provident Financial     Financial Services                 21,812            1.6
                                                                                
Twenty largest holdings                                 1,182,532           86.6
                                                                                
Wm Morrison             Food & Drug Retailers              19,245            1.4
Supermarkets                                                                    
                                                                                
Raven Russia -          Real Estate Investment &            8,028               
Preference              Services                                                
                                                                                
 - Ordinary                                                 7,128               
                                                                                
                                                           15,156            1.1
                                                                                
BTG                     Pharmaceuticals & Biotechnology    15,117            1.1
                                                                                
Rentokil Initial        Support Services                   14,702            1.1
                                                                                
Hiscox                  Non-life Insurance                 14,415            1.1
                                                                                
Serco                   Support Services                   13,489            1.0
                                                                                
Amlin                   Non-life Insurance                 12,834            0.9
                                                                                
Catlin - US common      Non-life Insurance                  9,464            0.7
stock                                                                           
                                                                                
PayPoint                Support Services                    9,241            0.7
                                                                                
HomeServe               Support Services                    8,579            0.6
                                                                                
Thirty largest holdings                                 1,314,774           96.3
                                                                                
IP Group                Financial Services                  7,236            0.5
                                                                                
Legal & General         Life Insurance                      6,970            0.5
                                                                                
Lancashire              Non-life Insurance                  5,969            0.4
                                                                                
Stobart                 Industrial Transportation           5,952            0.4
                                                                                
Smiths                  General Industrials                 5,632            0.4
                                                                                
Burford Capital AIM     Investment Instruments              5,362            0.4
                                                                                
Chemring                Aerospace & Defence                 4,781            0.4
                                                                                
Barclays Bank - Nuclear Investment Instruments              3,423            0.3
Power                                                                           
                                                                                
  Notes 28 Feb 2019(1)                                                          
                                                                                
Oxford Pharmascience    Pharmaceuticals & Biotechnology     1,907            0.1
AIM                                                                             
                                                                                
HSBC                    Banks                               1,338            0.1
                                                                                
Forty largest holdings                                  1,363,344           99.8
                                                                                
Proximagen - Rights -   Pharmaceuticals & Biotechnology       815            0.1
                                                                                
  Unquoted                                                                      
                                                                                
Helphire                Financial Services                    689            0.1
                                                                                
Revolymer AIM           Chemicals                             475              -
                                                                                
Velcoys                 Oil Equipment, Services &             450              -
                        Distribution                                            
                                                                                
Eurovestech - Unquoted  Financial Services                    289              -
                                                                                
Total holdings (45)                                     1,366,062          100.0

(1) Contingent Value Rights (CVRs) referred to as Nuclear Power Notes (NPNs)
were offered by EDF as a partial alternative to cash in its bid for British
Energy (BE). The NPNs were issued by Barclays Bank. The CVRs participate in
BE's existing business.

.

CONDENSED INCOME STATEMENT


                          Six Months TO 30          six months to 30           Year
                           September 2013            September 2012           ended
                             (Unaudited)               (Unaudited)         31 March
                                                                               2013
                                                                          (audited)
                      Revenue  Capital    Total Revenue  Capital    Total     Total
                        £'000    £'000    £'000   £'000    £'000    £'000     £'000
                                                                                   
Gains on investments        -   41,484   41,484       -   27,646   27,646   185,241
                                                                                   
Foreign exchange            -      169      169       -      866      866     (377)
profits                                                                            
                                                                                   
Income                                                                             
                                                                                   
  UK dividends         23,101        -   23,101  22,667        -   22,667    40,609
                                                                                   
  Scrip dividends         572        -      572     484        -      484       823
                                                                                   
  Overseas dividends    3,732        -    3,732   3,605        -    3,605    10,986
                                                                                   
  Special dividends     1,092       22    1,114       -        -        -       462
                                                                                   
  Income from money         3        -        3       6        -        6         7
market funds                                                                       
                                                                                   
  Underwriting and          1        -        1       -        -        -         -
other income                                                                       
                                                                                   
                       28,501   41,675   70,176  26,762   28,512   55,274   237,751
                                                                                   
Operating costs                                                                    
                                                                                   
Investment management (1,038)  (2,422)  (3,460)   (874)  (2,040)  (2,914)   (6,011)
fee - note 2                                                                       
                                                                                   
Performance fee -           - (11,688) (11,688)       - (10,005) (10,005)  (11,492)
note 3                                                                             
                                                                                   
Other expenses          (395)      (1)    (396)   (361)      (2)    (363)     (724)
                                                                                   
Net return before      27,068   27,564   54,632  25,527   16,465   41,992   219,524
finance costs and                                                                  
taxation                                                                           
                                                                                   
Finance costs - note  (2,925)  (6,826)  (9,751) (2,925)  (6,826)  (9,751)  (19,501)
2                                                                                  
                                                                                   
Return on ordinary     24,143   20,738   44,881  22,602    9,639   32,241   200,023
activities before tax                                                              
                                                                                   
Tax on ordinary         (532)        -    (532)   (523)        -    (523)   (1,565)
activities - note 4                                                                
                                                                                   
Return on ordinary     23,611   20,738   44,349  22,079    9,639   31,718   198,458
activities after tax                                                               
                                                                                   
Return per ordinary     12.1p    10.6p    22.7p   11.3p     4.9p    16.2p    101.7p
share - note 5                                                                     

The total column of this statement represents the Company's profit and loss
account, prepared in accordance with UK Accounting Standards. The supplementary
revenue and capital columns are presented for information purposes 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 therefore no
statement of recognised gains or losses is presented. No operations were
acquired or discontinued in the period.

.

CONDENSED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS'FUNDS

                                            Capital                             
                          Share    Share redemption   Capital  Revenue          
                        Capital  Premium    Reserve   Reserve  Reserve     Total
                          £'000    £'000      £'000     £'000    £'000     £'000
                                                                                
For the six months                                                              
ended                                                                           
30 September 2013                                                               
(Unaudited)                                                                     
                                                                                
At 31 March 2013         48,779    6,639     24,676   997,171   60,481 1,137,746
                                                                                
Dividends paid - note         -        -          -         - (24,948)  (24,948)
6                                                                               
                                                                                
Net return on ordinary        -        -          -    20,738   23,611    44,349
activities                                                                      
                                                                                
At 30 September 2013     48,779    6,639     24,676 1,017,909   59,144 1,157,147
                                                                                
For the year ended 31                                                           
March 2013 (Audited)                                                            
                                                                                
At 31 March 2012         48,779    6,639     24,676   841,659   60,425   982,178
                                                                                
Dividends paid - note         -        -          -         - (42,890)  (42,890)
6                                                                               
                                                                                
Net return on ordinary        -        -          -   155,512   42,946   198,458
activities                                                                      
                                                                                
At 31 March 2013         48,779    6,639     24,676   997,171   60,481 1,137,746
                                                                                
For the six months                                                              
ended                                                                           
30 September 2012                                                               
(Unaudited)                                                                     
                                                                                
At 31 March 2012         48,779    6,639     24,676   841,659   60,425   982,178
                                                                                
Dividends paid - note         -        -          -         - (23,378)  (23,378)
6                                                                               
                                                                                
Net return on ordinary        -        -          -     9,639   22,079    31,718
activities                                                                      
                                                                                
At 30 September 2012     48,779    6,639     24,676   851,298   59,126   990,518

.

CONDENSED BALANCE SHEET

Registered number SC1836

                                                    At           At          At
                                          30 September 30 September    31 March
                                                  2013         2012        2013
                                           (Unaudited)  (Unaudited)   (Audited)
                                                 £'000        £'000       £'000
                                                                               
Fixed assets                                                                   
                                                                               
  Investments at fair value through          1,366,062    1,194,830   1,340,948
profit or loss                                                                 
                                                                               
Current assets                                                                 
                                                                               
  Amounts due from brokers                           -          713           -
                                                                               
  Unrealised profit on forward currency              -          128         617
contracts                                                                      
                                                                               
  Prepayments and accrued income                 4,770        4,888       7,125
                                                                               
  Tax recoverable                                  833        1,424       1,668
                                                                               
  Cash and cash funds                            2,067        1,527          87
                                                                               
                                                 7,670        8,680       9,497
                                                                               
Creditors: amounts falling due within one                                      
year                                                                           
                                                                               
  Amounts due to brokers                       (3,532)      (1,977)           -
                                                                               
  Accruals                                     (3,624)      (3,520)     (3,592)
                                                                               
  Debenture Stock 2014                       (100,000)            -           -
                                                                               
  Performance fee payable                            -            -    (11,492)
                                                                               
                                             (107,156)      (5,497)    (15,084)
                                                                               
Net current (liabilities)/assets              (99,486)        3,183     (5,587)
                                                                               
Total assets less current liabilities        1,266,576    1,198,013   1,335,361
                                                                               
Creditors: amounts falling due after more                                      
than one year                                                                  
                                                                               
  Debenture Stock 30 Jun 2014                        -    (100,000)   (100,000)
                                                                               
  Debenture Stock 30 Sep 2022                 (97,741)     (97,490)    (97,615)
                                                                               
Provision for performance fee                 (11,688)     (10,005)           -
                                                                               
Net assets                                   1,157,147      990,518   1,137,746
                                                                               
Capital and reserves                                                           
                                                                               
Share capital                                   48,779       48,779      48,779
                                                                               
Share premium                                    6,639        6,639       6,639
                                                                               
Capital redemption reserve                      24,676       24,676      24,676
                                                                               
Capital reserve                              1,017,909      851,298     997,171
                                                                               
Revenue reserve                                 59,144       59,126      60,481
                                                                               
Shareholders' funds                          1,157,147      990,518   1,137,746
                                                                               
Net asset value per ordinary share                                             
                                                                               
  Basic - note 7                               591.89p      506.36p     581.89p

.

CONDENSED CASH FLOW STATEMENT

                                            Six Months   Six Months            
                                                    to           to  Year Ended
                                          30 September 30 September    31 March
                                                  2013         2012        2013
                                           (Unaudited)  (Unaudited)   (Audited)
                                                 £'000        £'000       £'000
                                                                               
Net return before finance costs and             54,632       41,992     219,524
taxation                                                                       
                                                                               
Scrip dividends                                  (572)        (484)       (823)
                                                                               
Gains on investments                          (41,484)     (27,646)   (185,241)
                                                                               
Foreign exchange losses/(gains)                    617         (25)       (514)
                                                                               
Decrease/(increase) in debtors                   3,190        2,096       (385)
                                                                               
Increase in creditors and provisions               228        6,410       7,969
                                                                               
Overseas tax paid                                (532)        (523)     (1,565)
                                                                               
Net cash inflow from operating activities       16,079       21,820      38,965
                                                                               
Servicing of finance                           (9,625)      (9,625)    (19,250)
                                                                               
Financial investment                                                           
                                                                               
  Purchase of investments                     (58,415)     (84,586)   (148,477)
                                                                               
  Sale of investments                           78,889       97,089     171,532
                                                                               
Net equity dividends paid - note 6            (24,948)     (23,378)    (42,890)
                                                                               
Net cash inflow/(outflow) before                 1,980        1,320       (120)
managementof liquid resources and                                              
financing                                                                      
                                                                               
Net cash (outflow)/inflow from management            -      (1,330)         160
of liquid resources                                                            
                                                                               
Increase/(decrease) in cash                      1,980         (10)          40
                                                                               
  Cashflow from movement in liquid                   -        1,330       (160)
resources                                                                      
                                                                               
  Debenture stock non-cash movement              (126)        (126)       (251)
                                                                               
Net debt at beginning of period              (197,528)    (197,157)   (197,157)
                                                                               
Net debt at end of period                    (195,674)    (195,963)   (197,528)
                                                                               
Analysis of changes in net debt:                                               
                                                                               
Brought forward:                                                               
                                                                               
  Cash and cash funds                               87          207         207
                                                                               
  Debenture stock                            (197,615)    (197,364)   (197,364)
                                                                               
Net debt brought forward                     (197,528)    (197,157)   (197,157)
                                                                               
Movements in the period:                                                       
                                                                               
  Cash inflow/(outflow) from cash and            1,980        1,320       (120)
cash funds                                                                     
                                                                               
  Debenture stock non-cash movement              (126)        (126)       (251)
                                                                               
Net debt carried forward                     (195,674)    (195,963)   (197,528)

.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1. Basis of preparation

These condensed financial statements of the Company have been prepared using
the same accounting policies as those adopted in the 2013 annual financial
report, which are consistent with applicable United Kingdom Accounting
Standards, and with the Statement of Recommended Practice `Financial Statements
of Investment Trust Companies and Venture Capital Trusts'. These financial
statements are prepared on a going concern basis.

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 three months'
notice.

The management fee is payable monthly in arrears and is equal to 0.05% of the
market capitalisation of the Company's ordinary shares at each month end.
Investment management fee and finance costs are allocated 30% to revenue and
70% to capital.

3. Performance fee

IAML is entitled to a performance fee of 15% of the out-performance of the NAV
(with debt at par), up to a maximum of 1% of net assets (prior to the deduction
of the performance fee) in any one year, in respect of each rolling three year
period in which the Company outperforms its benchmark (the FTSE All-Share
Index) plus a hurdle rate, being the equivalent of 1.25% per annum.

A performance fee provision of £11,688,000 (30 September 2012: £10,005,000) is
provided for in these accounts. A performance fee of £11,492,000 was accrued
and paid for the year ended 31 March 2013. Performance fees are allocated
wholly to capital.

4. Tax

Owing to the Company's status as an investment company no tax liability arises
on capital gains. The tax charge represents withholding tax suffered on
overseas income.

A deferred tax asset is not recognised in respect of surplus management
expenses since the Directors believe that there will be no taxable profits in
the future against which these can be offset.

5. Return per ordinary share

The basic revenue, capital and total returns per share are based on the returns
after tax and the average number of shares in issue during the period as
follows:

                                            Six months   Six months  Year Ended
                                                    to           to            
                                          30 September 30 September    31 March
                                                  2013         2012        2013
                                           (Unaudited)  (Unaudited)   (Audited)
                                                 £'000        £'000       £'000
                                                                               
   Returns after tax:                                                          
                                                                               
   Revenue                                      23,611       22,079      42,946
                                                                               
   Capital                                      20,738        9,639     155,512
                                                                               
   Total return after tax                       44,349       31,718     198,458
                                                                               
   Weighted average number of shares in    195,116,734  195,116,734 195,116,734
   issue during the period                                                     

6. Dividends

                             Six months to    six months to      year ended   
                              30 September     30 September       31 March    
                                  2013             2012             2013      
                              (Unaudited)      (Unaudited)       (Audited)    
                              pence    £'000   Pence    £'000   Pence    £'000
                                                                              
   Dividends paid:                                                            
                                                                              
   Third interim                5.0    9,756     5.0    9,756     5.0    9,756
                                                                              
   Final                        7.8   15,219     7.0   13,658     7.0   13,658
                                                                              
   First interim                  -        -       -        -     5.0    9,756
                                                                              
   Second interim                 -        -       -        -     5.0    9,756
                                                                              
   Return of unclaimed            -     (27)       -     (36)       -     (36)
   dividends from previous                                                    
   years                                                                      
                                                                              
                               12.8   24,948    12.0   23,378    22.0   42,890

A first interim dividend of 5p (2013: 5p) for the year ended 31 March 2014,
will be paid on 29 November 2013 to shareholders on the register on 22 November
2013.

7. Net asset value (NAV) per ordinary share

(a) Debt at par

The shareholders' funds in the balance sheet are accounted for in accordance
with accounting standards, however, this does not reflect the rights of
shareholders on a return of assets under the Articles of Association. These
rights are reflected in the net assets with debt at par and the corresponding
NAV per share.

                                          30 September 30 September    31 March
                                                  2013         2012        2013
                                           (Unaudited)  (Unaudited)   (Audited)
                                                 pence        Pence       Pence
                                                                               
   NAV per ordinary share                       593.05       507.65      583.11
                                                                               
   Less: unamortised discount and               (1.16)       (1.29)      (1.22)
   expenses arising from debenture issue                                       
                                                                               
   NAV - debt at par                            591.89       506.36      581.89

(b) Debt at market value

                                          30 September 30 September    31 March
                                                  2013         2012        2013
                                           (Unaudited)  (Unaudited)   (Audited)
                                                 pence        Pence       Pence
                                                                               
   NAV - debt at par                            591.89       506.36      581.89
                                                                               
   Debt at par                                  102.50       102.50      102.50
                                                                               
   Debt at market value                       (121.07)     (128.75)    (125.38)
                                                                               
   NAV - debt at market value                   573.32       480.11      559.01

8. Share capital

                                          30 September 30 September    31 March
                                                  2013         2012        2013
                                           (Unaudited)  (Unaudited)   (Audited)
                                                                               
   Allotted, called-up and fully paid                                          
                                                                               
   Number of ordinary shares of 25p each   195,116,734  195,116,734 195,116,734

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
within the meaning of section 1158 of the Corporation Tax Act 2010.

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 434 of the Companies Act 2006. The financial information for the
half years ended 30 September 2013 and 2012 has not been audited. The figures
and financial information for the year ended 31 March 2013 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 Register of
Companies and included the Report of the Independent Auditors, which was
unqualified.

By order of the Board

Invesco Asset Management Limited

Company Secretary

13 November 2013

.

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 FCA'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.

Jim Pettigrew
Chairman
13 November 2013

a d v e r t i s e m e n t