Half-yearly Report
Invesco Asia Trust plc
Half-Yearly Financial Report
For the Six Months to 31 October 2013
KEY FACTS
Invesco Asia Trust plc is an investment trust listed on the London Stock
Exchange.
Investment Objective
The objective of Invesco Asia Trust plc 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 in excess of the MSCI
All Countries Asia Pacific ex Japan Index (total return), measured in sterling.
Investment Policy
Invesco Asia Trust plc invests primarily in the equity securities of companies
listed on the stockmarkets of China, Hong Kong, India, Malaysia, Singapore,
South Korea, Taiwan, Thailand and 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 the
nature and type of securities (such as performance and liquidity) and the
geographic and sector composition of the portfolio.
Full details of the Company's investment limits can be found on page 19 of the
2013 annual financial report.
Performance Statistics
The Benchmark Index of the Company is the MSCI All Countries Asia Pacific ex
Japan Index (in sterling terms).
At 31 OCT At 30 APR %
2013 2013 CHANGE
Total Return Statistics(1):
- Net asset value +3.2
- Share Price +2.6
- Benchmark index -1.8
Capital Statistics
Net assets (£'000) 166,723 195,528 -14.7
Gearing:
-gross nil 5.6%
-net nil 5.1%
-net cash 1.8% nil
Net asset value 186.5p 184.6p +1.0
Benchmark index(1) 299.1 311.1 -3.9
Mid-market price per ordinary share 165.0p 164.0p +0.6
Discount(2) per ordinary share:
-cum income 11.5% 11.2%
-ex income 10.2% 9.6%
(1) Source: Thomson Reuters Datastream.
(2) The discount is the amount by which the mid-market price per ordinary share
is less than the net asset value per share.
INTERIM MANAGEMENT REPORT INCORPORATING THE CHAIRMAN'S STATEMENT
Chairman's Statement
Performance
This has been a challenging six month period for investors in Asian equity
markets. Fearing the negative impact of a reduction in global liquidity,
investors turned away from Asian stocks in favour of developed markets where
there are clearer signs of a broadening recovery. Nevertheless, it is pleasing
to be able to report that the current financial year has started well for the
Company as it outperformed the declining benchmark index MSCI All Countries
Asia Pacific ex Japan (in sterling terms) to deliver positive returns. During
the six months to 31 October 2013 the Company's Net Asset Value (NAV) on a
total return basis rose by 3.2% against a fall in the index of 1.8%. The
Company's share price increased slightly from 164p to 165p, and the ex-income
discount to NAV at which the shares traded ended the period at 10.2%, while
over the six months it averaged 9.8%.
Following a strategic review of the Company, the investment managers have
gradually been reducing the number of holdings in the portfolio from 64 to the
current level of 59. This concentration on `best ideas' has contributed to the
recent superior performance such that over the last six months, the Company has
been the second best performing trust in its peer group.
Discount Control and the Tender Offer
At the Company's General Meetings on 8 August 2013, all resolutions were
passed, including the proposal to hold a tender offer for 15% of the
outstanding shares. The Board considers it desirable that the Company's shares
do not trade at a significant discount to NAV and believes that in normal
market conditions the shares should trade at a price which on average
represents a discount of less than 10% to the ex income NAV. As the shares had
traded at an average discount of more than 10% to the ex income NAV for the
year to 30 April 2013, the Board sought approval for a tender offer based on a
2% discount to NAV after deduction of costs. Shareholders approved this in
August 2013 and, in accordance with the tender offer circular, 15% of the
issued shares were bought back for 170.3877p per share.
At the same time, the Company renewed its authority to purchase its own shares
and this will be used to assist in maintaining the discount within the 10%
limit. During the period 640,340 ordinary shares have been bought back and
cancelled at an average price of 159.27p, including costs. This enhanced the
NAV by £101,000 or 0.06%. At the period end the share capital consisted of
92,661,901 ordinary shares, of which 3,277,224 continued to be held in
treasury.
The Board is committed to maintaining the discount of the share price to the
ex-income NAV at not more than 10%. We therefore believe it to be in
shareholders' interests to extend the discount control arrangements for a
further year.
Revenue Account
For the six months to 31 October 2013, the revenue return showed a small
increase over the comparable period last year, amounting to 2.4p per share (31
October 2012: 2.2p). It is anticipated that, as in previous years, no interim
dividend will be paid. At the last Annual General Meeting, a final dividend of
3.2p per share was approved and paid to shareholders on 13 August 2013.
Regulatory
The Alternative Investment Fund Managers Directive became UK law with effect
from 22 July 2013. From this date, there is a transition period of 12 months to
allow companies time to comply with the provisions of the Directive, including
the appointment of an Alternative Investment Fund Manager (AIFM) and a
Depositary. The Board and its advisers are reviewing the options open to the
Company to ensure that all the processes and documentation are in place in
order to comply with the Directive before the 22 July 2014 deadline.
Board
Having decided to step down from the Board, my predecessor as Chairman, David
Hinde, did not seek re-election at the General Meeting in August 2013. David
was a Director for ten years and the Chairman since 2005. On behalf of the
Board, I would like to thank him for his enormous contribution over the years,
and especially for his guidance and leadership. We wish him well for the
future.
The Board's composition is reviewed on a regular basis to ensure that it has
the appropriate balance of skills, knowledge, diversity and experience, as well
as ensuring that the membership is refreshed. To this end, we welcomed Owen
Jonathan to the board early in 2013, and we will continue to keep the balance
and composition of the Board under review.
Outlook
The direction of Asian equity markets remains sensitive to the global liquidity
environment, with recent volatility largely driven by changing expectations as
to when the Fed will start to normalise its monetary policy. This normalisation
is likely to be gradual given the fragile nature of the recovery in the US, and
the US economy's sensitivity to rising interest rates. However, the recent
anticipation of a correction to tapering has been a wake-up call for
governments across Asia to be more proactive in policy-making including raising
interest rates and reducing subsidies. The region faces economic challenges,
but these are manageable and the slowdown in Asian economic growth appears to
have stabilised. The outlook for Asian equity markets now looks more positive,
and should enjoy the support of structural trends that can be expected to
remain intact over the medium-term, such as rising incomes and robust domestic
consumption. As Asian markets have significantly underperformed global markets
so far this year, valuations have discounted much negative news, and are below
average levels. This is a challenging macroeconomic environment for investors
but our managers remain focused on seeking out undervalued earnings growth
prospects in our investment sector.
Carol Ferguson
Chairman
13 December 2013
Investment Managers' Report
Market & Economic Review
Asian equity markets and currencies performed poorly over the six month period
to the end of October 2013, against a backdrop of uncertainty surrounding the
global liquidity environment. In May, the US authorities suggested that they
may start to slow the pace of their bond purchases (QE-tapering) if the US
economy continued to recover, an announcement that saw a sell-off in
risk-assets, including Asian equities. Markets have since recovered from their
June lows, buoyed by signs of stabilisation in China's economy as well as a
gradual improvement in the outlook for global economic growth. The surprise
decision by the Federal Reserve in September to postpone QE-tapering has also
helped ease investor concerns and seen Asian equity markets recover, ending the
period only slightly lower.
In China, economic indicators have continued to suggest a stabilisation of
growth over the second half of the year, with third quarter GDP rising to 7.8%
year-on-year (y-o-y) from 7.5% the previous quarter. Industrial production,
fixed asset investment and retail sales have remained resilient, although
exports fell slightly in September having shown signs of a pick-up earlier in
the period. Investor sentiment also improved after the Chinese government
reiterated its 2013 growth target of 7.5%. Meanwhile, the authorities have
taken supportive measures; removing lending rate controls in a step towards
allowing banks to set interest rates, eliminating taxes on small businesses,
reducing costs for exporters and lining up funds for railway construction.
North Asian equity markets were generally deemed less vulnerable to changes in
the global liquidity environment, and as such have outperformed the region,
helped by further evidence of a gradual global economic recovery which has been
seen as supportive for exporters to developed markets. Conversely, South Asian
equity markets and currencies were hit hardest by concerns over the impact of
QE-tapering, having benefited from supportive liquidity conditions in recent
years. There has been a particular focus on those economies with widening
current account deficits, particularly Indonesia, where inflation has remained
elevated and the central bank has raised interest rates to 7.50% from 5.75%
over the past six months. The Philippines and Thailand have not been immune,
although stronger fundamentals and more robust macroeconomic indicators have
helped stem losses in their equity markets.
While there have also been concerns over India's large current account deficit,
depreciating currency and slowing economic growth, recently announced measures
from the new central bank governor have been well received, which along with
better-than-expected corporate earnings have helped lift the equity market in
local currency terms. The Australian dollar's status as a safe-haven has come
into question, erasing equity market gains in sterling terms.
Company Performance
In the six months to the end of October 2013, the Company's net asset value
grew by 3.2% (total return, in sterling terms) compared with the benchmark MSCI
All Countries Asia Pacific ex-Japan index, which returned -1.8% (total return,
in sterling terms).
The Company's strong performance over the period was largely attributable to
good stock selection, particularly in the IT and financials sectors. In the IT
sector, holdings in Chinese internet stocks added notable value, with Baidu the
biggest single contributor after the market responded positively to the
announcement of its US$1.9 billion acquisition of 91 Wireless, a mobile app
distribution platform, while there is a growing appreciation of its ability to
monetise mobile traffic. The holding in Indian software company Infosys also
had a positive impact, with signs of revenue growth momentum helping the shares
recover some of their recent underperformance.
In financials, while holdings in Indian and ASEAN banks and real estate
companies detracted due to lingering concerns over QE-tapering and specific
macro concerns, this was more than compensated for by strong stock selection
elsewhere. Online real estate company E-House saw its share price climb sharply
on signs suggesting positive earnings momentum for the company after a period
of more difficult market conditions; while an improved macroeconomic outlook in
North Asia has helped lift holdings in Taiwanese and Korean banks and
insurers.The Company's underweight position in some of the larger Australian
banks has also benefited overall returns as they underperformed. Other notable
contributors included holdings in Korean autos and auto parts manufacturers, as
well as conglomerate Hutchison Whampoa, where economic data from Europe has
seen the outlook for its businesses improve.
Conversely, notable detractors included holdings in footwear retailer Daphne
International after a first half profits warning due to slower than expected
sales, and Philippine conglomerate LT Group over specific macro concerns and
fears that its tobacco joint venture with Phillip Morris is losing market share
due to illicit cigarette production by local manufacturers. Elsewhere, the
Company's holding in Newcrest Mining has continued to disappoint, while Jardine
Matheson has seen the market's valuation of its shares come under pressure
after brokers lowered earnings expectations on slower growth from Astra and
Dairy Farm, two of its biggest earnings drivers.
Outlook for Asian Economies and Markets
The overall direction of Asian equity markets remains sensitive to the global
liquidity environment, with recent volatility largely driven by changing
expectations as to when the Federal Reserve Bank will start to normalise its monetary policy.
While QE-tapering is inevitable, we believe the Federal Reserve Bank will be
mindful of withdrawing liquidity too quickly given the potential negative
impact on US economic activity. However, the slow and gradual recovery underway
in both the US and Europe should be supportive for Asian exporters to developed
markets.
The slowdown in China's economy appears to have stabilised, with recent
economic indicators continuing to suggest further gradual improvement over the
second half of the year. The reform package announced by China's new leadership
in November has also seen an improvement in the outlook for the economy over
the medium-term. The announcement saw a decisive shift in favour of a more
market-orientated economy, and included a host of major initiatives including a
relaxation of the one-child policy and proposals for reform in taxation, land
tenure and state-owned enterprises. While the success of these reforms is by no
means guaranteed, they are undoubtedly positive for consumer and service areas
of the economy that we favour.
QE-tapering issues have clearly sharpened the focus on emerging ASEAN equity
markets, where there had been concerns over widening current account deficits,
weakening currencies, and consequently the outlook for growth and corporate
profitability. However, markets have started to discount the inevitable
normalisation of US monetary policy, but we believe that comparisons drawn with
conditions before the last Asian crisis in 1997/98 are far from the mark. Asia
is in a fundamentally stronger position than it was then, with fewer fixed
currencies, healthier national balance sheets, large foreign exchange reserves
and lower levels of foreign-denominated debt. However, appropriate action is
required from the authorities in countries such as India and Indonesia if they
are to restore investor confidence and avoid further capital outflows.
Although Asian economic growth has slowed, we expect it to be sufficiently high
to offer attractive investment opportunities. Consensus earnings growth
forecasts for Asia Pacific ex Japan companies in 2013 currently stand at around
8.4%, bringing current valuation levels for the region to 13.3 times 2013
earnings. Although some companies may still face a downward revision to their
earnings forecasts, in our opinion, valuation levels remain supportive.
Investment Managers' Strategy
We believe the portfolio remains well-balanced, with exposure to a variety of
businesses that possess what we consider to be strong competitive advantages
and undervalued earnings growth prospects. Over the period we have sought to
consolidate the portfolio further, focusing on companies that exhibit
management quality, balance sheet strength and cash generation, and which are
trading at a significant discount to what we consider to be fair value.
The portfolio's largest overweight position relative to the benchmark
index continues to be in Hong Kong and China, where we favour consumer-related
areas of the market, such as Hong Kong listed conglomerate Hutchison Whampoa.
We have also disposed entirely of holdings in real estate developer Wharf,
China Resources Enterprise, and Digital China Holdings, and have taken some
profits from holdings in Chinese internet companies, selling out of Sohu,
although retaining a significant level of exposure in other holdings in this
area which continue to generate strong free cash flow and remain fundamentally
undervalued in our opinion.
The portfolio continues to have considerable exposure in the technology sector,
with relatively high weightings in Samsung Electronics and Taiwan Semiconductor
Manufacturing. These companies are global leaders in their industry and key
beneficiaries of the move away from PCs to smartphones and tablets, and remain
attractively valued. The portfolio has an underweight position in Australia,
particularly its banks, as we believe it is at a later stage in the credit
cycle and has a lower growth profile compared to other economies in the region,
while the Australian dollar still remains overvalued in our opinion, even after
its recent correction. However, the portfolio has significant exposure in
financials across Asia, as we prefer to hold high quality, but undervalued
banks in Korea and Hong Kong, as well as banks in areas like India, that are
able to grow their loan books profitably, benefiting from still low levels of
credit penetration. While we have added a holding in United Overseas Bank, we
have sold out of Korea Investment Holdings and Metropolitan Bank & Trust, and
reduced the portfolio's exposure in Kasikornbank, Standard Chartered and HDFC.
Elsewhere, we have slightly increased the portfolio's weighting in India,
adding a holding in Adani Ports & Special Economic Zone, a high quality port
asset on the west coast of India with competitive advantages such as location,
infrastructure and efficiencies that we believe will drive earnings above
market expectations. We have also added exposure in the energy and utility
sectors, where valuations appeared attractive given the potential for gradually
improving earnings growth, with new holdings including Origin Energy and
Meridian Energy as well as Korea Electric Power Corp. We believe the latter is
set to see an earnings recovery as headwinds for the company subside with a
strengthening won, easing fuel costs and normalising electricity tariffs.
Finally, the portfolio also continues to have selective exposure to smaller
companies (with market cap of less than US$1 billion), which offer the
opportunity to deliver superior returns being at an earlier stage in their
growth cycle.
Stuart Parks / Ian Hargreaves
Investment Managers
13 December 2013
RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE MANAGER
Invesco Asset Management Limited (IAML), a wholly-owned subsidiary of
Invesco Limited, acts as Manager, Company Secretary and Administrator to the
Company. Details of IAML's services and fee arrangements, together with fees
paid to Directors, are given in the 2013 annual financial report, which is
available on the Manager's website at www.invescoperpetual.co.uk/
investmenttrusts.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risk factors relating to the Company can be summarised as
follows:
- Investment objective - there can be no guarantee that the Company will meet
its investment objective;
- Investment process - core to the process is that risks taken are not
incidential but are understood and taken with conviction;
- Market risk - a fall in the stock markets and/or a prolonged period of
decline in the stock markets relative to other forms of investment will affect
the performance of the portfolio;
- Investment risk - the risk of poor performance of individual investments.
This is mitigated by diversification and ongoing monitoring of investment
guidelines;
- Foreign exchange risk - foreign exchange currency movements will affect the
non-sterling assets and liabilities of the Company and could have a detrimental
impact on performance;
- Ordinary Shares - the market value of the ordinary shares may not reflect
their underlying NAV and may trade at a discount to it. The Company has a
discount monitoring mechanism to help the management of this;
- Gearing - the use of borrowings will amplify the effect on shareholders'
funds of portfolio gains and losses;
- Derivatives - derivative returns that do not exactly match the returns of the
underlying assets or liabilities being hedged may expose the Company to greater
loss than if derivative contracts had not been entered into;
- Reliance on Third Party Service Providers - failure by any service provider
to carry out its obligations to the Company could have a materially detrimental
impact on the operation of the Company and affect the ability of the Company to
successfully pursue its investment policy; and
- Regulatory - consequences of a serious breach of regulatory rules could
include, but are not limited to, the Company being subject to capital gains on
its investments; suspension from the London Stock Exchange; fines; a qualified
audit report; reputational problems and a loss of assets through fraud.
A detailed explanation of these principal risks and uncertainties can be found
on pages 20 to 23 of the Company's 2013 annual financial report, which is
available on the Manager's website 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.
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. 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, and the ability of the
Company to meet all of its liabilities and ongoing expenses from its assets,
and revenue forecasts for the coming year.
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.
The half-yearly financial report has not been audited or reviewed by the
Company's auditor.
Signed on behalf of the Board of Directors.
Carol Ferguson
Chairman
13 December 2013
TWENTY-FIVE LARGEST HOLDINGS AT 31 OCTOBER 2013
Ordinary shares unless otherwise stated
MARKET
VALUE % OF
COMPANY INDUSTRY GROUP†COUNTRY £'000 PORTFOLIO
Samsung Electronics - Semiconductors & South 11,685 7.1
Ordinary & Preference Semiconductor Equipment Korea
Shares
Hutchison Whampoa Capital Goods Hong Kong 7,588 4.6
Baidu - ADR Software & Services China 6,948 4.2
Taiwan Semiconductor Semiconductors & Taiwan 5,705 3.5
Manufacturing Semiconductor Equipment
UPL (formerly United Materials India 5,436 3.3
Phosphorus)
Hyundai Motor - Automobiles & Components South 4,772 2.9
Preference Shares Korea
NetEase - ADR Software & Services China 4,717 2.9
HSBC - Hong Kong Reg Banks United 4,449 2.7
Kingdom
CNOOCR Energy China 4,289 2.6
ICICI Bank Banks India 4,146 2.5
Shinhan Financial Banks South 3,989 2.4
Korea
China MobileR Telecommunication China 3,915 2.4
Services
BHP Billiton Materials United 3,636 2.2
Kingdom
POSCO Materials South 3,621 2.2
Korea
Korea Electric Power Utilities South 3,610 2.2
Corporation Korea
AIA Group Insurance Hong Kong 3,600 2.2
Hyundai Mobis Automobiles & Components South 3,574 2.2
Korea
Hon Hai Precision Technology Hardware & Taiwan 3,382 2.1
Industry Equipment
Industrial & Commercial Banks China 3,201 2.0
Bank Of ChinaH
Infosys Software & Services India 2,807 1.7
E.Sun Financial Banks Taiwan 2,725 1.7
Cathay Pacific Airways Transportation Hong Kong 2,716 1.7
Korean Reinsurance Insurance South 2,691 1.7
Korea
Australia & New Zealand Banks Australia 2,602 1.6
Banking
Samsonite International Consumer Durables & Hong Kong 2,601 1.6
Apparel
108,405 66.2
Other investments 55,448 33.8
Total investments 163,853 100.0
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.
†MSCI and Standard & Poor's Global Industry Classification Standard.
CONDENSED INCOME STATEMENT
SIX MONTHS TO SIX MONTH TO YEAR TO
31 OCTOBER 2013 31 OCTOBER 2012 30
APRIL
2013
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL TOTAL
RETURN RETURN RETURN RETURN RETURN RETURN RETURN
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on - 1,275 1,275 - (3,239) (3,239) 17,236
investments
Losses on foreign - (188) (188) - (199) (199) (869)
currency revaluation
Income
  Overseas dividends 2,531 - 2,531 2,487 - 2,487 3,985
  Special dividends - 35 - 35 52 - 52 165
Overseas
  Scrip dividends 255 - 255 109 - 109 140
  UK dividends 246 - 246 121 - 121 267
Gross return 3,067 1,087 4,154 2,769 (3,438) (669) 20,924
Investment management (164) (492) (656) (155) (465) (620) (1,355)
fee - note 2
Other expenses (266) (3) (269) (259) (4) (263) (549)
Return before finance 2,637 592 3,229 2,355 (3,907) (1,552) 19,020
costs and taxation
Finance costs - note 2 (11) (31) (42) (14) (42) (56) (141)
Return on ordinary 2,626 561 3,187 2,341 (3,949) (1,608) 18,879
activities before tax
Tax on ordinary (182) - (182) (159) - (159) (317)
activities
Net return on ordinary 2,444 561 3,005 2,182 (3,949) (1,767) 18,562
activities after tax
for the period
Return per ordinary
share - note 3
Basic 2.4p 0.6p 3.0p 2.2p (4.0)p (1.8)p 18.3p
Diluted n/a n/a n/a n/a n/a n/a 18.1p
The total column of this statement represents the Company's profit and loss
account. 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 total recognised gains and losses is
presented. No operations were acquired or discontinued in the period.
CONDENSED BALANCE SHEET
Registered Number 03011768
at at at
31 October 31 October 30 April
2013 2012 2013
£'000 £'000 £'000
Fixed assets
Investments designated at fair value 163,853 189,051 205,883
Current assets
Amounts due from brokers - 132 -
Taxation 255 292 289
VAT recoverable 38 13 8
Prepayments and accrued income 80 72 723
Cash at bank 3,070 92 944
3,443 601 1,964
Creditors: amounts falling due within one
year
Bank overdraft (39) (550) -
Bank loans - (11,779) (10,939)
Amounts owed to brokers - - (888)
Accruals and deferred income (534) (464) (492)
(573) (12,793) (12,319)
Net current assets/(liabilities) 2,870 (12,192) (10,355)
Total net assets 166,723 176,859 195,528
Capital and reserves
Share capital 9,266 11,034 10,919
Share premium 95,911 95,907 95,911
Capital redemption reserve 3,858 2,090 2,205
Special reserve - 4,113 2,449
Capital reserve 52,958 59,186 78,369
Revenue reserve 4,730 4,529 5,675
166,723 176,859 195,528
Net asset value per share - note 4
Basic 186.5p 165.2p 184.6p
CONDENSED CASH FLOW STATEMENT
SIX MONTHS SIX MONTHS
TO TO YEAR TO
31 OCTOBER 31 OCTOBER 30 APRIL
2013 2012 2013
£'000 £'000 £'000
Return before finance costs and taxation 3,229 (1,552) 19,020
Adjustment for (gains)/losses on (1,275) 3,239 (17,236)
investments
Adjustment for losses on currency 188 199 869
revaluation
Tax on unfranked investment income (182) (197) (317)
Scrip dividends received as income (255) (109) (140)
Decrease/(increase) in debtors 647 302 (375)
(Decrease)/increase in creditors (52) 19 49
Cash inflow from operating activities 2,300 1,901 1,870
Servicing of finance
Interest paid on bank loans and overdraft (41) (56) (143)
Taxation - 4 -
Capital expenditure and financial
investment
Purchase of investments (32,044) (42,216) (72,481)
Sale of investments 74,716 20,403 55,362
Dividends paid (3,389) (2,980) (2,980)
Net cash inflow/(outflow) before 41,542 (22,944) (18,372)
financing
Management of liquid resources (2,804) - -
Financing
Bank debt (11,007) 5,408 3,969
Tender offer, including costs (27,401) - -
Shares bought back (927) (5,174) (6,838)
Net proceeds from exercise of - 22,039 22,043
subscription shares
(Decrease)/increase in cash in the period (597) (671) 802
Cash outflow(/inflow) from movement in 11,007 (5,408) (3,969)
debt
Cashflow from movement of liquid 2,804 - -
resources
Loss on currency revaluation (188) (199) (869)
Movement in net funds/(debt) in the 13,026 (6,278) (4,036)
period
Net debt at beginning of period (9,995) (5,959) (5,959)
Net funds/(debt) at end of period 3,031 (12,237) (9,995)
Analysis of changes in net (debt)/funds
Brought forward:
  Cash at bank 944 327 327
  Debt due within one year (10,939) (6,286) (6,286)
Net debt brought forward (9,995) (5,959) (5,959)
Movements in the period:
  Cash inflow/(outflow) from bank and 2,207 (671) 802
cash funds
  Movement on currency revaluation (188) (199) (869)
  Debt due within one year 11,007 (5,408) (3,969)
Net funds/(debt) at end of period 3,031 (12,237) (9,995)
CONDENSED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
CAPITAL
SHARE SHARE REDEMPTION SPECIAL CAPITAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE RESERVE RESERVE TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000
For the year ended 30
April 2013
At 30 April 2012 9,493 75,457 2,042 9,287 63,135 5,327 164,741
Interim (in lieu of - - - - - (2,980) (2,980)
final) dividend for
2012
Net return from - - - - 15,234 3,328 18,562
ordinary activities
Exercise of (176) 176 - - - - -
subscription shares
into ordinary shares
Net proceeds from issue 1,765 20,278 - - - - 22,043
of ordinary shares on
exercise of
subscription shares
Shares bought back and (163) - 163 (6,838) - - (6,838)
held in treasury/
cancelled
At 30 April 2013 10,919 95,911 2,205 2,449 78,369 5,675 195,528
For the six months
ended 31 October 2013
At 30 April 2013 10,919 95,911 2,205 2,449 78,369 5,675 195,528
Final dividend for 2013 - - - - - (3,389) (3,389)
Net return from - - - - 561 2,444 3,005
ordinary activities
Tender offer (1,589) - 1,589 (2,449) (24,952) - (27,401)
Shares bought back and (64) - 64 - (1,020) - (1,020)
cancelled
At 31 October 2013 9,266 95,911 3,858 - 52,958 4,730 166,723
For the six months
ended 31 October 2012
At 30 April 2012 9,493 75,457 2,042 9,287 63,135 5,327 164,741
Interim (in lieu of - - - - - (2,980) (2,980)
final) dividend for
2012
Net return from - - - - (3,949) 2,182 (1,767)
ordinary activities
Exercise of (176) 176 - - - - -
subscription shares
into ordinary shares
Net proceeds from issue 1,765 20,274 - - - - 22,039
of ordinary shares on
exercise of
subscription shares
Shares bought back and (48) - 48 (5,174) - - (5,174)
cancelled/held in
treasury
At 31 October 2012 11,034 95,907 2,090 4,113 59,186 4,529 176,859
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Accounting Policy
The condensed financial statements have been prepared using the same accounting
policies as those adopted in the 2013 annual financial report, which were
prepared under the historical cost convention and are consistent with
applicable UK Accounting Standards and with the Statement of Recommended
Practice `Financial Statements of Investment Trust Companies and Venture
Capital Trusts'.
2. Management Fee and Finance Costs
Investment management fees and finance costs of borrowings are charged 75% to
capital and 25% to revenue.
3. Basis of Returns
SIX MONTHS SIX MONTHS
TO TO YEAR TO
31 OCT 2013 31 OCT 2012 30 APR 2013
Basic returns after tax:
Revenue £2,444,000 £2,182,000 £3,328,000
Capital £561,000 £(3,949,000) £15,234,000
Total £3,005,000 £(1,767,000) £18,562,000
Weighted average number of ordinary
shares in issue during the period:
- basic 98,615,025 97,550,904 101,744,195
- diluted n/a n/a 102,364,101
4. Basis of Net Asset Value (NAV) per Ordinary Share
At 31 Oct At 31 Oct At 30 Apr
2013 2012 2013
Total shareholders' funds £ £ £
166,723,000 176,859,000 195,528,000
Number of ordinary shares in issue 89,384,677 107,061,686 105,911,686
NAV per ordinary share 186.5p 165.2p 184.6p
5. Share Capital
(a) Ordinary Shares of 10p each
SIX MONTHS SIX MONTHS
TO TO YEAR TO
31 OCT 2013 31 OCT 2012 30 APR 2013
Number of ordinary shares:
Brought forward 105,911,686 93,165,757 93,165,757
Tender offer (15,886,669) - -
Subscription shares exercised - 17,648,153 17,648,153
Shares bought back and cancelled (640,340) (475,000) (1,625,000)
Shares bought back into treasury - (3,277,224) (3,277,224)
In issue at period end 89,384,677 107,061,686 105,911,686
(b) Treasury Shares
SIX MONTHS SIX MONTHS
TO TO YEAR TO
31 OCT 2013 31 OCT 2012 30 APR 2013
Number of treasury shares:
Brought forward 3,277,224 - -
Shares bought back into treasury - 3,277,224 3,277,224
In issue at period end 3,277,224 3,277,224 3,277,224
Ordinary shares in issue (including 92,661,901 110,338,910 109,188,910
treasury)
On 8 August 2013 shareholders consented to a tender offer whereby 15,886,669
shares were repurchased at a price of 170.3877p per share and subsequently
cancelled. In addition, fixed costs and expenses of the tender offer amounted
to £332,000.
Further to this a total of 640,340 ordinary shares were repurchased and
cancelled for an average price of 159.27p per share including costs. Since the
period end a further 246,366 ordinary shares have been repurchased and
cancelled for an average price of 162.28p per share.
6. Dividends
The Company paid a final dividend of 3.2p per ordinary share for the year ended
30 April 2013 on 13 August 2013 to shareholders on the register on 19 July
2013.
7. 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.
8. Status of Half-Yearly Financial Report
The financial information contained in this half-yearly report, which has not
been reviewed or audited by the independent auditors, does not constitute
statutory accounts within the meaning of section 434 of the Companies Act 2006.
The financial information for the half years ended 31 October 2013 and 31
October 2012 have not been audited. The figures and financial information for
the year ended 30 April 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 Registrar of Companies and include
the Report of the Independent Auditor, which was unqualified and did not
include a statement under section 498 of the Companies Act 2006.
By order of the Board
Invesco Asset Management Limited
Company Secretary
13 December 2013
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