Half-year Report

Invesco Asia Trust plc

Half-Yearly Financial Report

For the Six Months to 31 October 2019

KEY FACTS

Invesco Asia Trust plc (the ‘Company’) is an investment trust listed on the London Stock Exchange.

Investment Objective

The Company’s objective is to provide long-term capital growth by investing in a diversified portfolio of Asian and Australasian companies. The Company aims to achieve growth in its net asset value (NAV) in excess of the Benchmark Index, the MSCI AC Asia ex Japan Index (total return, in sterling terms).

Investment Policy

Invesco Asia Trust plc invests primarily in the equity securities of companies listed on the stock markets of Asia (ex Japan) including Australasia. It may also invest in unquoted securities up to 10% of the value of the Company’s gross assets, and in warrants and options when it is considered the most economical means of achieving exposure to an asset.

The Company is actively managed and the Manager has broad discretion to invest the Company’s assets to achieve its investment objective. The Manager seeks to ensure that the portfolio is appropriately diversified having regard to individual stock weightings and the geographic and sector composition of the portfolio.

Full details of the Company’s investment limits are on page 14 of the 2019 annual financial report.

Performance Statistics

The Benchmark Index of the Company is the MSCI AC Asia ex Japan Index (total return, in sterling terms).

	SIX MONTHS
	ENDED
	31 OCT 2019
Total Return Statistics(1)                 (dividends reinvested)
– Net asset value (NAV)(2)	–3.7%
– Share price	–6.7%
– Benchmark index(2)	–1.7%
Capital Statistics	AT 31 OCT	AT 30 APR	%
	2019	2019	CHANGE
NAV per ordinary share(2)	308.0p	322.7p	–4.6
Share price(1)	268.0p	294.0p	–8.8
Benchmark index(1)(2)	933.36	969.82	–3.8
Discount(2) per ordinary share:
– cum income(3)	(12.0)%	(8.9)%
Average discount over six months/year(1)	(11.1)%	(11.6)%
Gearing(2):
– Gross gearing – excluding
effect of cash	3.4%	nil
– Net gearing – including
effect of cash	3.4%	nil
– Net cash	nil	(1.1)%

(1) Source: Refinitiv.

(2) Alternative Performance Measure (APM), see the half-yearly financial report to 31 October 2019.

(3) The discount to NAV as at 31 October 2019 above has been calculated based on the NAV per share after deducting the proposed first interim dividend of 3.4p and not the NAV per share as disclosed on the Company’s balance sheet. This is due to accounting standards requiring that dividends be reflected in the accounts only when they become a legally binding liability, which in practice translates into being the date dividends are paid to shareholders. Accordingly, as the first interim dividend for 2019 was marked ex dividend (‘ex div’) on 24 October 2019 and is reflected in the Company’s share price at 31 October 2019, any share rating based on this ex div price also needs to be calculated using a 304.6p ex div NAV.

.

CHAIRMAN’S STATEMENT

Two steps forward and two steps back would be a fair summary of the six months to 31 October 2019. The measures we announced in our “Corporate Proposition” published in the half-yearly report to 31 October 2018 and the subsequent move to a tougher cum-dividend rather than ex-dividend discount target seemed to help the discount (cum-dividend) narrow from 8.9% at end-April to 7.8% by late May. However an unusual flurry of political news (Hong Kong protests, US-Sino trade wars, South Korea-Japan dispute and the Indian election), combined with lacklustre current performance, pushed the discount out to 12.0% at the end of the period.

Net asset value performance was –3.7% over the six months which was behind our benchmark MSCI AC Asia ex Japan Index of –1.7% (both expressed on a total return basis). The main contributors to underperformance were stock specific: Ian Hargreaves discusses performance in more detail in his Portfolio Manager’s Report. This short-term performance has impacted the three year numbers which are now behind the benchmark but our five and ten year numbers remain well ahead.

	TOTAL RETURN (DIVIDENDS REINVESTED) TO 31 OCTOBER 2019(1)
	ONE YEAR	THREE YEAR	FIVE YEAR	TEN YEAR
Net asset value (NAV)	8.5%	17.3%	59.1%	171.4%
Share price	10.9%	16.5%	58.9%	167.3%
Benchmark index(2)	12.1%	21.4%	52.7%	128.0%

(1) Source: Refinitiv.

(2) The benchmark index of the Company was changed on 1 May 2015 to the MSCI AC Asia ex Japan Index from the MSCI All Companies Asia Pacific ex Japan Index (both indices total return, sterling terms).

We are pleased to welcome Vanessa Donegan to the Board. Vanessa was appointed from a strong shortlist compiled by Sapphire Partners, an external search company. She recently retired as a fund manager and Head of Asia Pacific Equities at Colombia Threadneedle and brings 37 years’ experience of managing Asian portfolios. Vanessa is the replacement for Tom Maier who will retire this year after eleven years on the Board.

Every three years shareholders are given the opportunity to vote on the future of the Company. I am pleased to report that at the 2019 AGM, the majority of shareholders voted in favour of the special resolution to release the Directors from the obligation to wind-up the Company. The same resolution will next be put to shareholders at the 2022 AGM.

In the period the Board announced its decision to bring forward the timing of dividend payments in order to align more closely with receipt of income into the Company’s portfolio, thus paying two dividends in respect of each financial year in November and April, rather than in January and September.

The Company increased the interim dividend by 21% from 2.8p to 3.4p. The scale of the increase might be surprising to some but in fact it all derives from earned revenue. Dividend growth from the portfolio companies in the period has been strong*.

Other developments include a new supporting role for Fiona Yang. Fiona joined Invesco’s Asian & Emerging Markets Equities team in 2017 from Goldman Sachs. She will provide strong support to Ian in both the portfolio management and marketing of Invesco Asia Trust plc. Our new website is nearly ready to launch and we have started planning, writing and recording new content.

Outlook

The outlook for Asian markets is still mixed: politics remains to the fore in Hong Kong and India, while progress in the resolution of the disputes between the US and China, and also South Korea and Japan, has been slow. However, the liquidity backdrop to stock markets is favourable as central banks continue to support economic growth through monetary easing. Asian growth rates are higher than those in the developed world and corporate profits there are rising.

Ian Hargreaves’ investment process is to invest in companies that are worth more than the market believes. He uses rigorous fundamental analysis combined with a focus on valuation and has a long-term investment horizon. We remain confident that the investment philosophy and process behind Ian, Fiona and their team will deliver good performance.

From its week of company visits in the region in early December, the Board is reassured that there are many Asian companies with good fundamentals at attractive valuations that are very well positioned to prosper when conditions return to normal. When that might be depends upon political and market sentiment but our experience tells us that it is better to be positioned early.

Update

From 31 October 2019 to 9 January 2020, the Company has outperformed its benchmark index with net asset value up by 10.1% and the MSCI AC Asia ex Japan Index up by 8.0%, both on a total return basis. The political clouds have started to lift with the US and China agreeing a “phase one trade deal”. Asian stock markets seem to be starting to climb the wall of worry. Weak market sentiment has thrown up opportunities for Ian to buy some new attractive stocks cheaply, taking advantage of our borrowing facility. Net gearing for the Company has risen from 3.4% at 31st October to 6.8% at the time of writing.

The Company bought back 970,688 shares in the six months to 31 October 2019. At the time of writing we had bought back a further 2,645,500 shares since 31 October 2019. In total this represents 5.1% of the total shares in issue since 30 April 2019. The discount has narrowed to 10.2% on a cum-income basis, still higher than our target.

Neil Rogan

Chairman

10 January 2020

* Please be aware that the Board provides no guarantees of future dividends and that all future dividend payments will be at Directors’ discretion.

.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

PORTFOLIO MANAGER’S REPORT

Market Review

Asian equity markets have fallen back slightly over the past six months, twice recovering from sell-offs triggered by the see-saw nature of US-China trade negotiations which have rumbled on in the background. Civil unrest in Hong Kong and trade tensions between South Korea and Japan have added to geopolitical uncertainty in the region. Recent news flow has turned more positive, with a ‘phase 1’ US-China trade deal appearing within reach.

Meanwhile, the US Federal Reserve System (the Fed) has twice cut interest rates, assuming a more dovish policy stance given the lack of inflationary pressure and a weakening outlook for global growth. Asian central banks have also been cutting interest rates, which combined with policy stimulus measures such as India’s corporate tax rate cut, should support growth. China’s economy appears relatively robust, but has continued to slow, in part a result of the authorities’ reluctance to resort to significant stimulus measures that might jeopardise progress made in deleveraging and reducing financial risk in the economy.

Portfolio Review

Over the six months to 31 October 2019, the Company’s net asset value fell by 3.7% (total return, in sterling terms). This performance was below that of the reference index which fell by 1.7% (total return, in sterling terms).

Whilst the Company’s two largest areas of exposure – technology and financials – added value over the period, this was more than offset by the performance of a small number of holdings that disappointed. Geographically, stock selection in Taiwan and an underweight position in Hong Kong relative to the benchmark index added the most relative value, although this was offset by weakness in specific Indian and Malaysian holdings.

While US-China trade tensions have been a source of uncertainty for Asian manufacturers, Taiwanese technology companies were amongst the best performing stocks in Asia over the period, buoyed by an improvement in the growth outlook for electronic components. Our holding in chip-design company MediaTek was the biggest single contributor to relative performance, benefiting from Chinese telecom equipment makers swift momentum in shifting development of their telecommunications infrastructure towards 5G. Expected adoption of 5G by mid to low-end smartphones has also lifted earnings growth expectations, with MediaTek already having chips in its pipeline specifically designed for this market with competitive pricing. Taiwan Semiconductor Manufacturing (TSMC) has also benefited from the shift to 5G and a recovery in data centre-related demand. Samsung Electronics in Korea outperformed given signs of restocking as we appear to be nearing the bottom of the downturn in the memory chip cycle, with improvements in their mobile phone business also supporting the share price.

The challenging global macroeconomic backdrop and the Fed’s decision to shift back to a more accommodative monetary policy allowed Asian central banks to cut interest rates without compromising their currencies. Concerns over the banking sector’s net interest margins negatively impacted our holdings in Thailand’s Kasikornbank and PT Bank Negara Indonesia Persero, although this was more than offset by the positive impact of Indian private banks ICICI and HDFC Bank. State-owned banks in India continue to be constrained by asset quality problems and weak balance sheets, while the expansion of non-banking financial companies has been hampered by higher wholesale funding costs due to funding pressures. This has allowed ICICI Bank and HDFC Bank to continue taking market share profitably, which the market has rewarded. ICICI is also close to completing the process of provisioning for the bulk of its previous asset quality issues, which is gradually leading to an improvement in its core profitability.

The portfolio continues to have exposure to a consumer-related theme, which includes highly cash generative Chinese internet companies. Overall stock selection in this area was positive, with online game developer NetEase and e-commerce player JD.com adding value. Both reported better than expected earnings results and have been demonstrating their ability to grow profitably and not overspend on new initiatives. However, the positive impact of these holdings was partly offset by weakness from Baidu, which has seen a weakening revenue growth outlook for its core search business given its sensitivity to advertising spend in China. Profit margins are also lower due to spending on growth initiatives such as online video, voice search and autonomous driving, none of which have yet to turn a profit, with Baidu’s share price implying that they never will. Our analysis suggests that even accounting for this, the market is significantly undervaluing its core search business given stakes in iQiyi and Ctrip (both separately listed) and a strong balance sheet with around 25% of its market capitalisation in cash.

Other significant detractors to performance included British American Tobacco (BAT) Malaysia and Aurobindo Pharma. Aurobindo is a generic drug manufacturer that fell in response to a US Food and Drug Administration (FDA) report tied to an inspection at one of its seventeen plants. This pointed out several deficiencies in quality control procedures, with it being clear that the FDA has further raised the standards that it expects from Indian manufacturers given their importance to US drug supply. It is possible that Aurobindo will not receive approval for new drugs from this plant until it meets the FDA’s requirements, but in our view the market has overreacted to this situation, either implying large near-term earnings risk or a lack of medium-term growth potential. Neither seem likely to us.

Finally, BAT Malaysia has had to contend with competition from illicit cigarettes and the growth of vaping in Malaysia. Government initiatives to tackle illegal cigarettes have not yet yielded results leading to earnings downgrades. However, the government has started to order new scanners for the country’s ports which may help clamp down on illegal cigarettes. The stock’s investment case is supported by strong dividends given the cash generative nature of the business, with the potential for market share gains over time.

Outlook & Strategy

Global growth has decelerated over the past eighteen months, with particular weakness in the manufacturing sector. It is now undershooting relatively solid final demand growth in the developed world. There are several reasons for this: the lagged effect of China’s earlier policy tightening; a weak auto cycle in many countries; and an inventory correction associated with the trade war. Companies are not willing to hold high inventory when there is so much uncertainty about tariffs, and at the same time, they remain cautious about making investment decisions in their businesses.

The geopolitical outlook remains clouded, but with the potential for some improvement in trade and many parts of the world now pursuing more supportive policy measures, we would expect to see economic fundamentals start to bottom out and the divergence between manufacturing output and final demand begin to reverse. This is important for Asia as earnings revisions tend to be correlated to the global manufacturing cycle. As the outlook for earnings improves, this should support Asian equity returns and the value/cyclical elements of the market where we have exposure.

Some stocks have been excessively penalised for the weaker growth environment, and we have been adding to those where there is scope for earnings to improve, medium-term growth potential, and a significant discount to our estimate of fair value. This has encouraged us to introduce a higher level of gearing into the Company, using the borrowing facility, to take advantage of these opportunities.

In China we sold Qingling Motors preferring to add to Dongfeng Motor, which has seen its stock de-rate alongside the weak auto cycle in China. However, the shares trade at a price to earnings ratio (P/E) of just 4x 2019 expected earnings, or a price to book ratio (P/B) of 0.4x with a double-digit return on equity and a dividend yield of around 5%. Another way of looking at it is that the sum value of Dongfeng’s stake in PSA Peugeot Citroen and the cash it holds on the balance sheet and at joint-venture (JV) level, is worth in excess of its current market capitalisation – implying that the market is attributing a negative value for the profitable JVs it has with Japanese partners. We also increased our position in Pacific Basin Shipping and introduced Korean conglomerate LG Corp which trades at a 50% discount to its sum of parts, has no net debt, and has room to raise dividends substantially. Elsewhere, any improvement in growth momentum would help the valuations of banks where concerns about asset quality has led to a de-rating, particularly in countries such as Korea, Thailand and Indonesia.

Although a recovery is likely, it may be more gradual than in previous cycles as China is not easing as aggressively as it has done during past slowdowns. The authorities have shown more discipline in attempting to strike a balance between maintaining an acceptable level of economic growth whilst managing financial risk. As such, we believe it is important to retain a well-balanced portfolio by having exposure to companies that are less sensitive to the global manufacturing cycle.

Fortunately, opportunities have emerged in India due to the current economic slowdown. India offers one of the best structural growth stories in Asia supported by a government that is bringing about tangible structural change. Historically, it has been a challenge to find undervalued investment opportunities in high quality well-run businesses. However, recent market weakness in the mid-cap space has led to several new opportunities.

Shriram Transport Finance is the largest second-hand commercial vehicle financing company in India. It’s a company we have known for several years but generally too highly valued for consideration. However, the noticeable share price decline caused by stress within India’s wholesale financing sector triggered our interest. We believe the company to be well-managed while the long-term outlook for commercial vehicle growth in India is positive. We also introduced Mahindra & Mahindra, an Indian conglomerate with an auto business, which has seen its valuation fall due to a downturn in the tractor cycle. We believe the concerns are overdone as the cycle should reverse and we take comfort in the company’s significant cost restructuring, the diversified nature of its business model and its healthy balance sheet.

Companies that have a competitive edge in what we would consider the next technological wave after smartphones, including 5G, Artificial Intelligence, and the Internet of Things, are an important theme in the portfolio. Asia is home to companies that can benefit from semiconductor proliferation as the trend is towards more processing and storage of data from an increasing number of connected smart devices with 5G at its core. Recent outperformers MediaTek and TSMC have benefited from trends related to this theme and we have taken profits here, but maintain significant positions given their undemanding valuations and strong competitive positions in these growth industries. Meanwhile, Samsung Electronics still only trades slightly above its book value despite its being a global leader in memory semiconductors.

Chinese internet companies have generally been very good long-term investments. However, in the past few years management have shown a propensity for ‘land grabbing’, spending on new initiatives to improve their footprint in non-core areas including ecommerce, social media, gaming and other online services. This has had the effect of diluting their overall profitability. There are signs that this is improving, and we favour companies that are showing more discipline than the market is giving them credit for. For example, in addition to its successful gaming business, NetEase is realising value by selling its ecommerce business to Alibaba and listing its music business. JD.com is opting to kerb spending in its loss-making logistics business to demonstrate its ability to convert sales growth into profits.

Finally, we believe there is an impressive trend of greater capital discipline being displayed by companies across the region, with strong balance sheets and improving free cash flow generation, which we seek to capitalise on. This is an important feature of the portfolio, maintaining high exposure to heavily cash-backed businesses with strong free cashflow generation and offering the potential for dividend growth. This is prevalent within the technology sector in Taiwan and Korea as well as the consumer sector in China. Selected financials across Asia are very well capitalised which should leave them relatively protected in a period of softer global interest rates.

Ian Hargreaves

Portfolio Manager                      

10 January 2020                                                                                                                                                                                                                                                                                                                                                                                                                                                      

RELATED PARTY TRANSACTIONS

Under United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law), the Company has identified the Directors as related parties. No other related parties have been identified. No transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.

PRINCIPAL RISKS AND UNCERTAINTIES

The Board carries out a regular review of the risk environment in which the Company operates. The principal risk factors relating to the Company can be summarised as follows:

Strategic Risk

Market Risk

A significant fall and/or a prolonged period of decline in the markets in which this Company invests could negatively affect the performance of the portfolio, as could other macro events including Brexit.

Investment Objectives

The Company’s investment objectives and structure may no longer meet investors’ demands.

Wide Discount

Lack of liquidity and lack of marketability of the Company’s shares may lead to a stagnant share price and wide discount, with a persistently high discount leading to continual buy backs of the Company’s shares and shrinkage of Company.

Investment Management Risk

Performance

The risk that as a result of the portfolio manager’s decisions, the Company could consistently underperform the benchmark and/or peer group over 3-5 years.

Key Person Dependency

The risk that the portfolio manager (Ian Hargreaves) ceased to be portfolio manager or is incapacitated or otherwise unavailable.

Currency Fluctuation Risk

The movement of exchange rates may have an unfavourable impact on returns as nearly all of the Company’s assets are non-sterling denominated.

Third Party Service Providers Risk

Unsatisfactory Performance of Third Party Service Providers

Failure by any service provider to carry out its obligations to the Company could have a materially detrimental impact on operations; could affect the ability of the Company to successfully pursue its investment policy; and expose the Company to reputational risk.

Information Technology Resilience and Security

The Company’s operational structure means that all cyber risk (information and physical security) emanates from its third party service providers (TPPs). This cyber risk could include fraud, sabotage or crime perpetrated against the Company or any of its TPPs.

Regulation and Corporate Governance Risk

Failure to Comply With Relevant Law and Regulations

The failure to ensure regulatory compliance, or adverse regulatory or fiscal changes, could damage the Company and its ability to continue in business.

A detailed explanation of these principal risks and uncertainties can be found on pages 18 and 19 of the 2019 annual financial report, which is available on the Company’s section of the Manager’s website at www.invesco.co.uk/invescoasia. 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.

.

.

TWENTY-FIVE LARGEST HOLDINGS AT 31 OCTOBER 2019

Ordinary shares unless otherwise stated

^† The industry group is based on MSCI and Standard & Poor’s Global Industry Classification Standard.

			MARKET
			VALUE	% OF
COMPANY	INDUSTRY GROUPâ€	COUNTRY	£’000	PORTFOLIO
Samsung Electronics – ordinary shares –              preference shares	Technology Hardware & Equipment	South Korea	9,499 5,885	6.9
Taiwan Semiconductor Manufacturing	Semiconductors & Semiconductor Equipment	Taiwan	11,668	5.3
TencentR	Media & Entertainment	China	10,335	4.7
Alibaba – ADS	Retailing	China	9,060	4.1
ICICI – ADR	Banks	India	8,588	3.9
MediaTek	Semiconductors & Semiconductor Equipment	Taiwan	8,241	3.7
AIA	Insurance	Hong Kong	7,932	3.6
United Overseas Bank	Banks	Singapore	7,321	3.3
Industrial & Commercial Bank Of ChinaH	Banks	China	7,195	3.2
NetEase – ADR	Media & Entertainment	China	7,183	3.2
HDFC Bank	Banks	India	6,414	2.9
Hyundai Motor – preference shares	Automobiles & Components	South Korea	5,468	2.5
CNOOCR	Energy	China	5,116	2.3
China Pacific InsuranceH	Insurance	China	5,092	2.3
CK Hutchison	Capital Goods	Hong Kong	4,849	2.2
UPL	Materials	India	4,198	1.9
Bangkok Bank	Banks	Thailand	4,124	1.9
QBE Insurance	Insurance	Australia	4,062	1.8
JD.com – ADR	Retailing	China	4,055	1.8
Dongfeng MotorH	Automobiles & Components	China	3,887	1.8
KB Financial	Banks	South Korea	3,780	1.7
Aurobindo Pharma	Pharmaceuticals, Biotechnology & Life Sciences	India	3,730	1.7
China MobileR	Telecommunication Services	China	3,694	1.7
China Life Insurance (Taiwan)	Insurance	Taiwan	3,470	1.6
China BlueChemicalH	Materials	China	3,160	1.4
			158,006	71.4
Other Investments (30)			63,436	28.6
Total Holdings (55)			221,442	100.0

ADR/ADS: American Depositary Receipts/Shares – are certificates that represent shares in the relevant stock and are issued by a US bank. They are denominated and pay dividends in US dollars.

H:               H-Shares – shares issued by companies incorporated in the People’s Republic of China (PRC) and listed on the Hong Kong Stock Exchange.

R:               Red Chip Holdings – holdings in companies incorporated outside the PRC, listed on the Hong Kong Stock Exchange, and controlled by PRC entities by way of direct or indirect shareholding and/or representation on the board.

.

CONDENSED STATEMENT OF CHANGES IN EQUITY

		CAPITAL
	SHARE	REDEMPTION	SPECIAL	CAPITAL	REVENUE
	CAPITAL	RESERVE	RESERVE	RESERVE	RESERVE	TOTAL
	£’000	£’000	£’000	£’000	£’000	£’000
For the six months ended 31 October 2019
At 30 April 2019	7,500	5,624	45,015	163,763	5,473	227,375
Return on ordinary activities	—	—	—	(12,633)	4,081	(8,552)
Dividends paid – note 5	—	—	—	—	(2,028)	(2,028)
Shares bought back and held in treasury	—	—	(2,752)	—	—	(2,752)
At 31 October 2019	7,500	5,624	42,263	151,130	7,526	214,043
For the six months ended 31 October 2018
At 30 April 2018	7,500	5,624	46,203	166,502	7,423	233,252
Return on ordinary activities	—	—	—	(27,414)	3,223	(24,191)
Dividends paid – note 5	—	—	—	—	(3,900)	(3,900)
Return of unclaimed dividends from previous years	—	—	—	—	9	9
At 31 October 2018	7,500	5,624	46,203	139,088	6,755	205,170

CONDENSED INCOME STATEMENT

	SIX MONTHS TO			SIX MONTHS TO
	31 OCTOBER 2019			31 OCTOBER 2018
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£’000	£’000	£’000	£’000	£’000	£’000
Losses on investments held at fair value	—	(12,353)	(12,353)	—	(27,177)	(27,177)
Gains on foreign exchange	—	373	373	—	388	388
Income – note 2	5,045	—	5,045	4,046	—	4,046
Gross return	5,045	(11,980)	(6,935)	4,046	(26,789)	(22,743)
Investment management fee – note 3	(208)	(624)	(832)	(203)	(610)	(813)
Other expenses	(305)	(1)	(306)	(271)	—	(271)
Net return before finance costs and taxation	4,532	(12,605)	(8,073)	3,572	(27,399)	(23,827)
Finance costs – note 3	(9)	(28)	(37)	(5)	(15)	(20)
Return on ordinary activities before taxation	4,523	(12,633)	(8,110)	3,567	(27,414)	(23,847)
Tax on ordinary activities – note 4	(442)	—	(442)	(344)	—	(344)
Return on ordinary activities after taxation for the financial period	4,081	(12,633)	(8,552)	3,223	(27,414)	(24,191)
Return per ordinary share
Basic	5.83p	(18.05)p	(12.22)p	4.54p	(38.65)p	(34.11)p
Weighted average number of ordinary shares in issue during the period			69,980,943			70,914,475

The total column of this statement represents the Company’s profit and loss account, prepared in accordance with UK Accounting Standards. The return on ordinary activities after taxation is the total comprehensive income and therefore no additional statement of other comprehensive income is presented. 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 of the Company. No operations were acquired or discontinued in the period.

.

CONDENSED BALANCE SHEET

Registered Number 3011768

	AT	AT
	31 OCTOBER	30 APRIL
	2019	2019
	£’000	£’000
Fixed assets
Investments held at fair value through
profit or loss – note 7	221,442	224,934
Current assets
Tax recoverable	192	91
VAT recoverable	26	21
Prepayments and accrued income	223	365
Cash and cash equivalents	—	2,582
	441	3,059
Creditors: amounts falling
due within one year
Bank facility	(6,218)	—
Bank overdraft	(990)	—
Accruals	(632)	(618)
	(7,840)	(618)
Net current (liabilities)/assets	(7,399)	2,441
Net assets	214,043	227,375
Capital and reserves
Share capital	7,500	7,500
Capital redemption reserve	5,624	5,624
Special reserve	42,263	45,015
Capital reserve	151,130	163,763
Revenue reserve	7,526	5,473
Total shareholders’ funds	214,043	227,375
Net asset value per ordinary share
Basic	308.0p	322.7p
Number of 10p ordinary shares in
issue at the period end – note 6	69,498,787	70,469,475

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1.          Accounting Policies

The condensed financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, FRS 104 Interim Financial Reporting and the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts, issued by the Association of Investment Companies in October 2019. The financial statements are issued on a going concern basis.

The accounting policies applied to these condensed financial statements are consistent with those applied in the financial statements for the year ended 30 April 2019.

2.          Income

	SIX MONTHS TO	SIX MONTHS TO
	31 OCTOBER	31 OCTOBER
	2019	2018
	£’000	£’000
Income from investments
UK dividends	—	145
Overseas dividends – ordinary	4,931	3,603
– special	107	219
Scrip dividends	—	69
Deposit interest	7	10
Total income	5,045	4,046

No special dividends have been recognised in capital (31 October 2018: £nil).

3.          Investment Management Fee and Finance costs

Investment management fee and finance costs on any borrowings are charged 75% to capital and 25% to revenue. A management fee is payable quarterly in arrears and is equal to 0.75% per annum of the value of the Company’s total assets less current liabilities (including any short term borrowings) under management at the end of the relevant quarter and 0.65% per annum for any net assets over £250 million.

4.          Taxation and Investment Trust Status

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. As such, no tax liability arises on capital gains. The tax charge represents withholding tax suffered on overseas income.

5.          Dividends paid on Ordinary Shares

The Company paid a final dividend of 2.9p per ordinary share for the year ended 30 April 2019 on 9 September 2019 to shareholders on the register on 9 August 2019.

As noted in the Chairman’s Statement, an interim dividend of 3.4p per share was paid on 26 November 2019 to shareholders on the register on 25 October 2019. Shares were marked ex-dividend on 24 October 2019.

In accordance with accounting standards, dividends payable after the period end have not been recognised as a liability.

6.          Share Capital, including Movements

(a)        Ordinary Shares of 10p each

	SIX MONTHS TO	YEAR TO
	31 OCTOBER	30 APRIL
	2019	2019
Number of ordinary shares:
Brought forward	70,469,475	70,914,475
Shares bought back into treasury	(970,688)	(445,000)
Carried forward	69,498,787	70,469,475

(b)        Treasury Shares

	SIX MONTHS TO	YEAR TO
	31 OCTOBER	30 APRIL
	2019	2019
Number of treasury shares:
Brought forward	4,530,406	4,085,406
Shares bought back into treasury	970,688	445,000
Carried forward	5,501,094	4,530,406
Ordinary shares in issue (including treasury)	74,999,881	74,999,881

Subsequent to the period end 2,645,500 ordinary shares were bought back at an average price of 279.17p.

7.          Classification Under Fair Value Hierarchy

FRS 102 sets out three fair value levels. These are:

Level 1 – The unadjusted quoted price in an active market for identical assets that the entity can access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.

Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

The fair value hierarchy analysis for investments held at fair value at the period end is as follows:

	AT 31 OCTOBER	AT 30 APRIL
	2019	2019
Financial assets designated at fair value	£’000	£’000
Level 1	221,317	224,812
Level 3	125	122
Total for financial assets	221,442	224,934

The Level 3 investment consists of one holding in Finetex EnE (30 April 2019: Finetex EnE).

8.          Status of Half-Yearly Financial Report

The financial information contained in this half-yearly report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 31 October 2019 and 31 October 2018 has not been audited. The figures and financial information for the year ended 30 April 2019 are extracted and abridged from the latest audited accounts and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the Report of the Independent Auditor, which was unqualified and did not include a statement under section 498 of the Companies Act 2006.

.

GOING CONCERN

The financial statements have been prepared on a going concern basis. The Directors consider this is the appropriate basis as they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, being at least 12 months after the approval of this half-yearly financial report. In considering this, the Directors took into account the diversified portfolio of readily realisable securities which can be used to meet short-term funding commitments, the ability of the Company to meet all of its liabilities and ongoing expenses from its assets and revenue forecasts. The net current liabilities as at 31 October 2019 can be covered from the sale of securities.

The Company is required by its Articles to have a vote on its future every three years, the next vote being in 2022. The Directors have no reason to believe that shareholders will not vote to release the Directors from their obligation to propose a wind up resolution at that time.

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 FRC’s FRS 104   Interim Financial Reporting;

–              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 Guidance and                 Transparency Rules; and

–              the interim management report includes a fair review of the information required on related party transactions.

The half-yearly financial report has not been audited or reviewed by the Company’s auditor.

Signed on behalf of the Board of Directors.

Neil Rogan
Chairman                                 

10 January 2020                 
     

By order of the Board
Invesco Asset Management Limited
Company Secretary

10 January 2020