Half-yearly Report
The Edinburgh Investment Trust plc
Half-Yearly Financial Report
Six months to 30 September 2012
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 %
2012 2012 Change
Capital Return
Net asset value (`NAV'):
  - debt at par 506.36p 502.03p +0.9
  - debt at market value 480.11p 478.30p +0.4
FTSE All-Share Index 2998.86 3002.78 -0.1
Share price 517.0p 497.6p +3.9
(Premium)/discount:
  - debt at par (2.1)% 0.9%
  - debt at market value (7.7)% (4.0)%
Gearing at par:
  - gross gearing(1) 20.2% 20.4%
  - net gearing(2) 20.0% 20.3%
%
for the six months to 30 september 2012 2011 Change
Revenue return per share 11.3p 11.0p +2.7
First interim dividend(3) 5.0p 5.0p -
Retail Price Index - increase over period 1.4% 2.3%
Total Return (capital growth with income
reinvested)
NAV - debt at par +3.4
NAV - debt at market value +3.0
FTSE All-Share Index +1.9
Share price +6.5
Notes:
1. Gross gearing: borrowings ÷ shareholders' funds.
2. Net gearing: borrowings less cash and investments in money market funds ÷
shareholders' funds.
3. Dividends declared in respect of the financial year.
interim management report incorporating THE chairman's statement
Chairman's Statement
Dear Shareholder,
The ongoing difficult macroeconomic environment continued to present challenges
for financial markets during the period. There have been no changes to the
Company's investment approach and its portfolio has delivered investment
out-performance against benchmark in the 6 month period to 30 September 2012.
An unchanged first interim dividend of 5.0p will be paid on 30 November 2012
(2011: 5.0p).
Performance over the Six Month Period to 30 September 2012
Capital: The Company's Net Asset Value (`NAV') increased by 0.9% (debt at par)
and 0.4% (debt at market), the latter being impacted primarily by contracting
bond market yields. NAV (debt at par) remains the better indicator of the
underlying performance of the equity portfolio and represents out-performance
in the period compared to the Company's benchmark, the FTSE All-Share Index
(the `Index'), which fell by 0.1%. The key drivers of this out-performance have
been the portfolio's overweight positions in pharmaceuticals and the lack of
exposure to the banking and mining sectors. More details are contained in the
Manager's Report.
Total Return: On a total return basis (capital growth with income reinvested),
the Company's NAV (debt at par) increased by 3.4% compared to the Index, which
rose 1.9%. In addition, based on the out-performance of the relevant three year
performance period, a performance fee of £10,005,000 has been recognised in the
half-yearly financial report.
Shareholders' Return: The Company's share price (including income reinvested)
increased over the six months by 6.5% and this compares very favourably to the
Index total return of 1.9% over the same period. The 2.1% premium of the share
price to NAV (debt at par) at 30 September 2012 was an improvement on the
0.9% discount at 31 March 2012; with debt at market value, the shares ended the
period at a premium of 7.7%, an increase from 4.0% at 31 March 2012.
Gearing
The Company continues to have long-term debt amounting to £200 million. This is
all deployed in the market for investment purposes. At the end of the period
the net gearing level was 20.0% compared to 20.3% at 31st March 2012.
Dividend
Income from the portfolio for the 6 months to 30 September 2012 was £26.8m
(2011: £26.0m), with a corresponding increase in return per share from 11p to
11.3p.
The Board has declared an unchanged first interim dividend of 5.0 pence per
share and this will be paid on 30 November 2012 to shareholders on the register
on the 16 November 2012.
Retail Distribution Review (`RDR')
RDR comes into effect on 31 December 2012 and will have significant
implications in respect of how financial advice is provided, retail fund
platforms operate and financial products are distributed. Many commentators
have suggested that the abolition of commission under RDR should result in more
retail demand for investment trusts. The likely beneficiaries of this demand,
should it materialise, would be the larger investment trusts, such as The
Edinburgh Investment Trust plc, which have good levels of liquidity in their
own shares and can demonstrate a strong investment track record, a clear
investment strategy and a compelling brand.
The Board continues to monitor developments on RDR closely as they evolve to
ensure that the Company is positioned appropriately to benefit in the new
environment of 2013 and thereafter.
Board
As flagged in last year's annual financial report, there will be further Board
changes over the next few years as a number of Directors reach their 9 year
mark of service. On 31 December 2012 Will Samuel retires from the Board, and I
should like to take this opportunity of thanking Will for his valuable
contribution and sound advice during his tenure on the Board. A search is
underway for Will's replacement.
When appointing a new Director, the Board takes into account the diversity of
the board, balance of skills, knowledge and experience on the Board as well as
the ability of a new Director to devote sufficient time to the Company to carry
out his or her duties effectively. The Board has appointed an external search
consultant to ensure that candidates are drawn from the widest pool of talent
on the basis of a set of objective criteria.
Outlook
Economic growth in the western world remains anaemic at best. Furthermore,
growth in China showed signs of further slowdown in quarter 3. Although there
has been a recent rally in European Bond markets following the President of the
European Central Bank Mario Draghi's pledge to `do whatever it takes' to
preserve the Euro, this in itself does not resolve the fundamental issues
facing Europe. Against this backdrop, the Company's investment strategy remains
unaltered. As the Board has emphasised in the past, the concentrated nature of
the portfolio may from time to time give rise to material short term
under-performance against benchmark. However, from a medium to longer term
perspective, the Company's investment portfolio has been constructed with
stocks which should be resilient in difficult times, whilst still providing
potential upside in more positive market environments.
Jim Pettigrew
Chairman
13 November 2012
manager's report
Market Review
Global growth concerns continued to dominate UK stock market sentiment over the
six months. Despite this, global stock markets have made positive progress
during the period, buoyed by developments in Europe and the promise of
substantial further monetary stimulus. European leaders committed themselves to
the idea of a single supervisor of Eurozone banks and a mechanism to inject
capital into troubled banks directly. A further boost came as the European
Central Bank announced a new bond buying plan - Outright Monetary Transactions
- and the US Federal Reserve announced additional and unlimited quantitative
easing in an effort to boost the US economy and employment levels. The end of
the period, however, saw a warning from the International Monetary Fund that it
would cut its forecast for global economic growth, while civil unrest in Spain
and Greece highlighted the challenges facing governments intent on imposing
further austerity.
The period was also noteworthy for the number of profit downgrades from
companies. These included Caterpillar, the world's largest construction
equipment manufacturer and a traditional bellwether of the global corporate
outlook, which cut its earnings forecasts as far ahead as 2015, citing weak
demand from the mining industry.
Portfolio Strategy and Review
The Company's net asset value, including reinvested dividends, rose by 3.4%
during the period, compared with a rise of 1.9% (total return) by the FTSE
All-Share Index.
The portfolio has no exposure to the mining sector and this provided a positive
impact on performance over the six months. The sector underperformed as results
confirmed the impact that falling commodity prices and rising costs are having
on earnings and future projects in the sector.
The Company is very heavily exposed to the pharmaceutical sector, and this too
provided a positive impact on performance. AstraZeneca in particular saw a
welcome return to favour by its shares, as the company announced the
appointment of a new Chief Executive and further pleased investors with the
news that it had signed a deal with Pfizer for the US company to market
AstraZeneca's heartburn drug, Nexium, for approved over-the-counter use.
The portfolio also has a significant weighting in the tobacco sector, which
underperformed over the period. News that the Australian Government had been
successful in defending a challenge from the tobacco industry against the
introduction of plain packaging had largely been expected, but appeared to act
as a catalyst for profit taking in a sector which has performed very strongly
over the past few years. The investment manager remains of the view that the
companies held in the sector represent exactly the sort of quality stocks that
can deliver attractive profit and dividend growth through a low economic growth
environment - and does not believe that this potential is yet valued
appropriately.
Shares in BAE Systems had performed strongly in the months before the company
confirmed that it was in early stage talks with EADS regarding a merger. The
deal did not look particularly beneficial to shareholders and, after an initial
spike higher, BAE Systems shares retreated to the level they stood at
immediately before the announcement. Since the half year end, the two companies
have confirmed that merger negotiations have been terminated. The investment
manager is of the opinion that this holding will be a valuable future
contributor to the portfolio.
Other news to impact the Company came from GDF Suez, which had announced in
March its intention to buy the remaining 30% of International Power which it
does not already own. The shares quickly moved to trade at a price above the
initial bid price which was rejected, but an improved offer was agreed upon
shortly afterwards. The position has subsequently been sold.
The Company took advantage of a placing of shares to increase its investment in
Capita. Capita issued this additional share capital to allow the company
headroom to make further bolt-on acquisitions, commenting that `the current
acquisitions environment continues to offer a rare opportunity to broaden the
business.' Later in the period, Capita announced a very positive update with
its results, claiming that it is confident of growing revenue this year and
beyond as it takes advantage of a buoyant outsourcing market in the UK public
sector.
In terms of trading activity within the portfolio, in addition to the disposal
of International Power and purchase of Capita noted above, the Company disposed
of its holding in Hibu (formerly Yell Group) and reduced its exposure to BG and
Tate & Lyle. The Company's exposure to the healthcare sector was increased via
a new holding in Elan and an increase in the holding in Smith & Nephew while
new investments were also made in G4S, Lancashire Holdings and Revolymer.
Outlook
The investment manager has remained cautious on the global economic outlook
throughout this year. As 2012 has progressed it has become clear that the
economic headwinds that others were confident would recede at the start of the
year have instead become more intense. This is consistent with the investment
manager's message of the past four years - sustainable economic progress
remains elusive. Meanwhile the crisis in the Eurozone is no nearer a final
resolution. While there has been greater co-operation and commitment from
Europe's political elite and the ECB, much of the recent progress has dealt
with the symptoms of the European crisis rather than its underlying causes. It
is hard to predict how the Eurozone crisis will be resolved, but it is likely
to be coincident with a prolonged period of poor economic performance.
However, the manager maintains his view that there is a population of stocks
that can grow consistently through this difficult period. Companies that have
been delivering growth before, during and after the financial crisis will be
able to continue to do so, and the investment manager does not believe that
their current valuations reflect that potential.
Neil Woodford
Investment Manager
13 November 2012
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 (`IAML'), 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 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 2012 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 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.
Directors' Responsibility Statement
in respect of the preparation of the half-yearly financial report
The Directors are responsible for preparing the half-yearly financial report
using accounting policies consistent with applicable law and UK Accounting
Standards.
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements contained within the half-yearly
financial report have been prepared in accordance with the Accounting Standards
Board's Statement `Half-Yearly Financial Reports';
- the interim management report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules;
and
- the interim management report includes a fair review of the information
required on related party transactions.
Signed on behalf of the Board of Directors.
Jim Pettigrew
Chairman
13 November 2012
TOP TWENTY Holdings
at 30 September 2012
UK listed and ordinary shares unless otherwise stated
Market
Value % of
investment Sector £'000 Portfolio
GlaxoSmithKline Pharmaceuticals & 108,102 9.0
Biotechnology
AstraZeneca Pharmaceuticals & 105,960 8.9
Biotechnology
British American Tobacco Tobacco 85,080 7.1
BT Fixed Line 73,753 6.2
Telecommunications
Roche - Pharmaceuticals & 63,564 5.3
  Swiss Common Stock Biotechnology
Imperial Tobacco Tobacco 56,832 4.8
Reynolds American - Tobacco 55,771 4.7
  US Common Stock
BAE Systems Aerospace & 52,388 4.4
Defence
Reckitt Benckiser Household Goods & 50,557 4.2
Home Construction
Capita Support Services 44,446 3.7
Top ten holdings 696,453 58.3
Vodafone Mobile 44,348 3.7
Telecommunications
Altria - US Common Stock Tobacco 41,556 3.5
Rolls Royce Aerospace & 36,756 3.1
Defence
BG Oil & Gas 35,946 3.0
Producers
Novartis - Pharmaceuticals &
  Swiss Common Stock Biotechnology 35,198 3.0
Centrica Gas & Water 33,348 2.8
Multiutilities
SSE Electricity 22,737 1.9
Drax Electricity 20,831 1.7
Sanofi - Pharmaceuticals & 20,308 1.7
  French Common Stock Biotechnology
Wm Morrison Supermarkets Food & Drug 19,589 1.6
Retailers
Top twenty holdings 1,007,070 84.3
Aggregate value of other 187,760 15.7
investments
Total investments 1,194,830 100.0
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 2012 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 Services Authority
(the `UK FSA'). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.
Directors' Responsibilities
The half-yearly report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the UK FSA. As disclosed in note
1, the annual financial statements of the Company are prepared in accordance
with UK Accounting Standards and applicable law (UK Generally Accepted
Accounting Practice). The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance with the
Statement `Half-Yearly Financial Reports' as issued by the UK Accounting
Standards Board.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently does
not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2012 is not prepared, in
all material respects, in accordance with the Statement `Half-Yearly Financial
Reports' as issued by the UK Accounting Standards Board and the DTR of the UK
FSA.
Salim Tharani
for and on behalf of KPMG Audit Plc
Chartered AccountantsÂ
London
13 November 2012
Condensed Income Statement
Six Months TO 30 six months to 30 Year
September 2012 September 2011 ended
(Unaudited) (Unaudited) 31 March
2012
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 27,646 27,646 - 11,598 11,598 109,922
Foreign exchange - 866 866 - (4) (4) 6
profits
Income
  UK dividends 22,667 - 22,667 22,363 - 22,363 41,945
  Scrip dividends 484 - 484 423 - 423 743
  Overseas dividends 3,605 - 3,605 3,191 - 3,191 10,527
  Income from money 6 - 6 5 - 5 9
market funds
  Interest on VAT - - - 18 - 18 18
recovered on
  management fees
  Underwriting and - - - 13 - 13 13
other income
26,762 28,512 55,274 26,013 11,594 37,607 163,183
Operating costs
Investment (874) (2,040) (2,914) (818) (1,908) (2,726) (5,539)
management fee -
note 2
Performance fee - - (10,005) (10,005) - (6,010) (6,010) (3,584)
note 3
Other expenses (361) (2) (363) (406) - (406) (777)
Net return before 25,527 16,465 41,992 24,789 3,676 28,465 153,283
finance costs and
taxation
Finance costs - note (2,925) (6,826) (9,751) (2,944) (6,871) (9,815) (19,503)
2
Return on ordinary 22,602 9,639 32,241 21,845 (3,195) 18,650 133,780
activities before
tax
Tax on ordinary (523) - (523) (446) - (446) (1,490)
activities - note 4
Return on ordinary 22,079 9,639 31,718 21,399 (3,195) 18,204 132,290
activities after tax
Return per ordinary 11.3p 4.9p 16.2p 11.0p (1.7)p 9.3p 67.8p
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 2012
(Unaudited)
At 31 March 2012 48,779 6,639 24,676 841,659 60,425 982,178
Dividends paid - note 6 - - - - (23,378) (23,378)
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
For the year ended
31 March 2012 (Audited)
At 31 March 2011 48,779 6,639 24,676 752,448 61,364 893,906
Dividends paid - note 6 - - - - (44,018) (44,018)
Net return on ordinary - - - 89,211 43,079 132,290
activities
At 31 March 2012 48,779 6,639 24,676 841,659 60,425 982,178
For the six months ended
30 September 2011
(Unaudited)
At 31 March 2011 48,779 6,639 24,676 752,448 61,364 893,906
Dividends paid - note 6 - - - - (24,506) (24,506)
Net return on ordinary - - - (3,195) 21,399 18,204
activities
At 30 September 2011 48,779 6,639 24,676 749,253 58,257 887,604
Condensed BALANCE SHEET
Registered number SC1836
At At At
30 September 30 September 31 March
2012 2011 2012
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Fixed assets
  Investments at fair value 1,194,830 1,088,236 1,175,075
through profit or loss
Current assets
  Amounts due from brokers 713 - 2,888
  Unrealised profit on forward 128 - 103
currency contracts
  Prepayments and accrued income 4,888 4,973 6,912
  Tax recoverable 1,424 689 1,496
  Cash and cash funds 1,527 1,296 207
8,680 6,958 11,606
Creditors: amounts falling due
within one year
  Amounts due to brokers (1,977) (830) (24)
  Accruals (3,520) (3,512) (3,531)
  Performance fee payable - - (3,584)
(5,497) (4,342) (7,139)
Net current assets 3,183 2,616 4,467
Total assets less current 1,198,013 1,090,852 1,179,542
liabilities
Creditors: amounts falling due
after more than one year
  Debenture stock (197,490) (197,238) (197,364)
Provision for performance fee (10,005) (6,010) -
Net assets 990,518 887,604 982,178
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 851,298 749,253 841,659
Revenue reserve 59,126 58,257 60,425
Shareholders' funds 990,518 887,604 982,178
Net asset value per ordinary share
  Basic - note 7 506.36p 453.49p 502.03p
Condensed Cash Flow Statement
Six Months Six Months
to to year ended
30 September 30 september 31 march
2012 2011 2012
(Unaudited) (unAudited) (audited)
£'000 £'000 £'000
Net return before finance costs 41,992 28,465 153,283
and taxation
Scrip dividends (484) (423) (743)
Gains on investments (27,646) (11,598) (109,922)
Foreign exchange (gains)/losses (866) 4 (6)
Decrease/(increase) in debtors 2,096 1,844 (1,005)
Increase in creditors and 6,410 4,309 1,965
provisions
Overseas tax paid (523) (446) (1,490)
Net cash inflow from operating 20,979 22,155 42,082
activities
Servicing of finance (9,625) (9,626) (19,251)
Financial investment
  Purchase of investments (84,586) (40,290) (111,286)
  Sale of investments 97,089 53,383 132,490
Net equity dividends paid - note 6 (23,378) (24,506) (44,018)
Net cash inflow before management 479 1,116 17
of liquid resources and financing
Net cash outflow from management (1,330) (1,275) (160)
of liquid resources
Decrease in cash (851) (159) (143)
  Cashflow from movement in liquid 1,330 1,275 160
resources
  Exchange movements 841 (4) 6
  Debenture stock non-cash (126) (126) (252)
movement
Net debt at beginning of period (197,157) (196,928) (196,928)
Net debt at end of period (195,963) (195,942) (197,157)
Analysis of changes in net debt:
Brought forward:
  Cash and cash funds 207 184 184
  Debenture stock (197,364) (197,112) (197,112)
Net debt brought forward (197,157) (196,928) (196,928)
Movements in the period:
  Cash inflow from cash and cash 479 1,116 17
funds
  Exchange movements 841 (4) 6
  Debenture stock non-cash (126) (126) (252)
movement
Net debt carried forward (195,963) (195,942) (197,157)
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 2012 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 3 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 £10,005,000 (30 September 2011: £6,010,000) is
provided for in these accounts. A performance fee of £3,584,000 was accrued for
the year ended 31 March 2012. 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
2012 2011 2012
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Returns after tax:
Revenue 22,079 21,399 43,079
Capital 9,639 (3,195) 89,211
Total return after tax 31,718 18,204 132,290
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
2012 2011 2012
(Unaudited) (Unaudited) (Audited)
pence £'000 Pence £'000 Pence £'000
Dividends paid:
Third interim 5.00 9,756 5.00 9,268 4.75 9,268
Special interim - - 1.26 2,458 1.26 2,458
Final 7.00 13,658 6.55 12,780 6.55 12,780
First interim - - - - 5.00 9,756
Second interim - - - - 5.00 9,756
Return of unclaimed - (36) - - - -
dividends from previous
years
12.00 23,378 12.81 24,506 22.56 44,018
A first interim dividend of 5p (2012: 5p) for the year ended 31 March 2013,
will be paid on 30 November 2012 to shareholders on the register on 16 November
2012.
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 30 31 March
September September
2012 2011 2012
(Unaudited) (Unaudited) (Audited)
pence Pence Pence
NAV per ordinary share 507.65 454.91 503.38
Less: unamortised discount and expenses (1.29) (1.42) (1.35)
arising from debenture issue
NAV - debt at par 506.36 453.49 502.03
(b) Debt at market value
30 30 31 March
September September
2012 2011 2012
(Unaudited) (Unaudited) (Audited)
pence Pence Pence
NAV - debt at par 506.36 453.49 502.03
Debt at par 102.50 102.50 102.50
Debt at market value (128.75) (127.88) (126.23)
NAV - debt at market value 480.11 428.11 478.30
8. Share capital
30 30 31 March
September September
2012 2011 2012
(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 is 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 2012 and 2011 has not been audited. The figures
and financial information for the year ended 31 March 2012 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 2012
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