Annual Financial Report
Keystone Investment Trust plc
Annual Financial Report Announcement
for the Year Ended 30 September 2014
FINANCIAL INFORMATION AND PERFORMANCE STATISTICS
Performance Statistics
2014 2013
% CHANGE % CHANGE
Total Return Statistics(1)
(capital growth with income reinvested)
Net asset value (NAV) per share:
  - debt at par +11.7 +29.4
  - debt at fair value +12.5 +31.1
Share price +7.4 +29.3
FTSE All-Share Index +6.1 +18.9
AT AT %
30 SEPTEMBER 30 SEPTEMBER CHANGE
2014 2013
Capital Statistics
Net assets (£'000) 250,267 231,480 +8.1
NAV per share:
  - debt at par 1851.3p 1712.3p +8.1
  - debt at fair value 1806.2p 1660.1p +8.8
Share price(1) 1709.0p 1646.0p +3.8
FTSE All-Share Index(1) 3533.9 3443.9 +2.6
Discount†of share price to net asset value per
share:
  - debt at par 7.7% 3.9%
  - debt at fair value 5.4% 0.8%
Gearing from borrowings
- gross 12.8% 13.8%
- net 5.7% 9.5%
FOR THE YEAR TO 30 SEPTEMBER
2014 2013
Revenue Statistics
Net revenue available for ordinary shareholders (£'000) 8,013 7,728
Revenue return per ordinary share 59.3p 57.4p +3.3
Dividends per ordinary share - first interim 18.0p 18.0p
- second interim 32.5p 32.0p
50.5p 50.0p +1.0
- special 8.0p 7.0p
- total 58.5p 57.0p +2.6
Ongoing charges:
  Excluding performance fee 0.87% 0.96%
  Performance fee 0.40% 0.47%
(1) Source: Thomson Reuters Datastream and Morningstar
.
CHAIRMAN'S STATEMENT
Performance
On 17 September 2014 the Company marked its 60th anniversary and I am pleased
to report that the Company's performance in this anniversary year continues to
be good with a total return to shareholders of 7.4%, based on the share price
with dividends reinvested, compared to the Company's benchmark, the FTSE
All-Share Total Return Index, total return of 6.1%. The total return on the
underlying net asset value per share and was 11.7% with debt at par value and
12.5% with debt at market value.
The Company's long term performance also continues to be very strong with three
year and five year share price total returns of 68.0% and 107.5%, respectively,
compared with total returns of 47.9% and 59.1% for the FTSE All-Share Index.
The net asset value per share (with debt at par value) total returns over the
same periods were 67.5% and 101.9%.
Mark Barnett has managed the Company's portfolio since 1 January 2003. The
Company's NAV total return over the period since he took over to 30 September
2014 was 239.5% compared with 132.9% for the benchmark FTSE All-Share Index.
The share price total return was 259.7% (all figures sourced from Thomson
Reuters Datastream). This is a fine record and I am pleased to reiterate my
remark in the Company's half-year report that Mark's promotion to Head of UK
Equities at Invesco Perpetual in March 2014 is well-deserved. We remain
confident that Mark will continue to manage the Company's portfolio to his
exacting standard alongside his new responsibilities.
The Company's ordinary shares traded within a narrow range around their net
asset value throughout the year and the share price stood at a discount of 5.4%
relative to the net asset value (with debt at fair value) at the year end. The
average discount over the course of the year was 2.2%.
Revenue and Dividends
Gross income in the year increased from £9,218,000 last year to £9,507,000,
giving a revenue return after tax of 59.3p per ordinary share (2013: 57.4p). As
was the case in 2013, the Company benefited from the receipt of special
dividends of a non-recurring nature paid by companies in which it invests, and
the Board has decided, once again, to pass this on to shareholders as a special
dividend.
The Board has declared a second interim dividend, in lieu of a final, of 32.5p
per share (2013: 32.0p), giving a total ordinary dividend for the year of 50.5p
per share (2013: 50.0p). The dividend will be paid on 12 December 2014 to
shareholders on the register on 28 November 2014. The special dividend
mentioned above is 8p per share (2013: 7p) and will be paid at the same time as
the second interim dividend.
Alternative Investment Fund Managers Directive (the Directive)
The Company became an AIF, or Alternative Investment Fund, under the Directive
on 22 July 2014 and the Board appointed Invesco Fund Managers Limited (IFML),
as the Company's AIFM, or Alternative Investment Fund Manager, on that date. A
new investment management agreement was signed with IFML replacing the previous
investment management agreement between the Company and Invesco Asset
Management Limited (IAML). IFML has been authorised as an AIFM by the UK's
Financial Conduct Authority and is an affiliate of IAML. Mark Barnett continues
to be responsible for managing the Company's portfolio and it is not expected
or intended that these new arrangements will result in any change to the way
the Company's assets are invested.
The Directive also required the Company to appoint a depositary and the Board
has chosen to appoint BNY Mellon Trust & Depositary (UK) Limited. The
depositary has delegated safe keeping of the Company's investments to the
Company's previous custodian, The Bank of New York Mellon (London Branch). This
has inevitably led to an increase in costs that is unavoidable but difficult to
justify.
Management and Performance Fees
As a Board we continue to like a fee structure where a significant portion of
the Manager's fee is dependent upon good long term performance for shareholders
being achieved. To this end during the year the Board agreed with the Manager a
revised fee arrangement, with an effective date of 1 July 2014. Under this new
arrangement the Manager is entitled to a management fee of 0.6% per annum
(previously 0.8%) of the Company's market capitalisation and a
performance-related fee when the annualised 3-year return exceeds that of the
benchmark by more than 1.25% (previously 2%). Other terms relating to fees and
notice remain unchanged from the previous agreement. In light of the
performance achieved to 30 September 2014 a performance-related fee of £952,000
is payable in respect of the year.
Gearing
When used successfully, gearing through borrowings should enhance the returns
to shareholders and it has contributed modestly to returns in the year. The
Board takes responsibility for the Company's gearing strategy and sets
parameters within which the portfolio manager operates. The Company's
borrowings, in the form of long-term debentures, amount to almost £32 million.
The net gearing of the Company is determined by the extent to which these
borrowings are invested. The Board has become more cautious about gearing in
the past year and currently requires that the Manager must make no net
purchases which would take equity exposure above 105% (reduced from 110% in
November 2013) of net assets, and must make sales if, as a result of market
movements, equity exposure goes higher than 115% of net assets. It is up to the
portfolio manager to decide on exposure subject to these limits. When held,
corporate bonds are not treated as equity exposure for the purposes of the
gearing limits. The Company held no bonds at the year end.
Foreign Exchange
The Company has some non-sterling denominated investments and is therefore
subject to foreign exchange risk. The Board monitors foreign currency exposure
and takes a view, from time to time, on whether foreign currency exposure
should be hedged. For the present, the Board has prescribed that all currency
exposure should be hedged other than US dollar and Swiss franc. At the year end
7.1% of the portfolio was exposed to US dollars and 6.0% to Swiss francs,
neither of which were hedged.
Change of Auditor
In accordance with corporate governance best practice, the Audit Committee put
the audit of the Company's annual financial statements out to competitive
tender during the year. Following this process, the Directors asked Ernst &
Young LLP to resign and invited PricewaterhouseCoopers LLP to take their place.
PricewaterhouseCoopers LLP accepted the position and a resolution for
shareholders to appoint them as the Company's Auditor will be proposed at the
forthcoming Annual General Meeting.
Outlook
The figures at the beginning of my statement illustrate once again the success
of our portfolio manager's investment approach both in the year under review
and over time. Looking ahead, the UK economic environment remains challenging
and uncertain. In these circumstances we remain fully confident in our
portfolio manager's approach and ability to generate worthwhile returns for
shareholders and to enable the Company to continue to fulfil its investment
objective to provide shareholders with long-term growth of capital.
Annual General Meeting
The Notice of the Annual General Meeting of the Company, which is to be held on
22 January 2015, is on pages 60 to 63 and a summary of the resolutions is set
out in the Directors' Report on pages 58 and 59. The Directors recommend that
shareholders vote in favour of all the resolutions.
Beatrice Hollond
Chairman
25 November 2014
.
STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2014
BUSINESS REVIEW
Keystone Investment Trust plc is an investment company holding investments with
a market value in excess of £250 million and its investment objective is set
out below. The strategy the Board follows to achieve that objective is to set
investment policy and risk guidelines, together with investment limits, and to
monitor how they are applied. These are also set out below and have been
approved by shareholders.
The business model the Company has adopted to achieve its objective has been to
contract the services of Invesco Fund Managers Limited (previously Invesco
Asset Management Limited) (the 'Manager') to manage the portfolio in accordance
with the Board's strategy and under its oversight. Successful implementation of
the business model is achieved by buying well and selling at the right point in
an investee company's business cycle, together with the prudent use of gearing,
in order to crystallise financial returns in excess of the Company's benchmark
index, the FTSE All-Share Index.
The Manager also provides company secretarial, marketing and general
administration services. The portfolio manager responsible for the day-to-day
management of the portfolio is Mark Barnett.
Investment Objective and Policy
Investment Objective
The Company's objective is to provide shareholders with long-term growth of
capital, mainly from UK investments.
Investment Policy and Risk
The portfolio is invested by the Manager so as to maximise exposure to the most
attractive sectors and stocks within the UK stock market and, within the limits
set out below, internationally. The Manager does not set out to manage the risk
characteristics of the portfolio relative to the benchmark index and the
investment process will result in potentially very significant over or
underweight positions in individual sectors versus the benchmark.
The Manager controls stock-specific and sector risk by ensuring that the
portfolio is always appropriately diversified. In depth, continual analysis of
the fundamentals of investee companies allows the portfolio manager to assess
the financial risks associated with any particular stock. The portfolio is
typically made up of 50 to 80 stocks. If a stock is not considered to be a good
investment, then the Company will not own it, irrespective of its weight in the
index.
Investment limits
The Board has prescribed the following limits on the investment policy, all of
which are at time of investment unless otherwise stated:
- no single equity investment in a UK listed company may exceed 12.5% of
gross assets;
- the Company will not invest more than 15% of its assets in other listed
investment companies;
- the Company will not invest more than £12 million in bonds, with a maximum
of £1.5 million in any issue;
- the Company will normally not invest more than £5 million in unquoted
investments, at the time of investment, and £10 million at market value;
- the Company will not normally invest more than 15% of its equity
investments in companies that are not UK listed and incorporated; and
- borrowing may be used by the Company to create gearing within limits
determined by the Board.
Gearing Policy
The Board carefully considers the Company's policy in respect of the level of
equity exposure. The Board takes responsibility for the Company's gearing
strategy and sets guidelines to control it, which it may change from time to
time. At the year end these guidelines required that the Manager must make no
net purchases if equity exposure was more than 105% of net assets, and must
make sales if, as a result of market movements, equity exposure was to exceed
115% of net assets. When held, corporate bonds are not treated as equity
exposure for the purposes of the gearing limits.
Performance
Delivery of shareholder value is achieved through outperformance of the
relevant benchmark.
The Board reviews performance by reference to a number of Key Performance
Indicators that include the following:
- net asset value (NAV) and share price total return compared with
benchmark and peer group performance;
- share price premium/discount relative to the net asset value;
- dividends; and
- ongoing charges.
The Company's performance in the year was good, reflecting successful
implementation of the business strategy by the Manager, who, as a consequence,
is entitled to a performance-related fee of £952,000 for the year. The NAV
(debt at par) and share price total return of 11.7% and 7.4%, respectively,
both beat the FTSE All-Share total return of 6.1%. The Manager's Report on
pages 11 and 12 provides a commentary on how this performance was achieved. A
table of these returns for the last ten years, together with a graph, can be
found on page 3.
Peer group performance is monitored by comparing the Company with the 15
investment trust companies making up the UK All Companies sector of the
approximately 300 investment companies in the UK. As at 30 September 2014, in
NAV total return terms, the Company was ranked 4th in its sector over one year,
and ranked 7th and 5th over three and five years, respectively (source:
JPMorgan Cazenove).
During the year the Company's shares traded at a premium or discount relative
to NAV (with debt at fair value) as shown in the following graph. The discount
at the year end was 5.4%.
Although there is no specific target discount range a small discount or a
premium would imply that there was strong demand for the shares. In order to
ensure that the demand for and supply of the Company's shares are roughly in
balance, the Board asks shareholders to approve resolutions every year which
allow for the repurchase of shares (for cancellation or to be held as treasury
shares) and also their issuance. This may assist in the management of the
discount. The Company has not issued any ordinary shares in the year and no
shares were repurchased.
Dividends form a key component of the total return to shareholders. The income
from the portfolio and potential level of dividend payable is reviewed at every
board meeting. A first interim dividend of 18p (2013:18p) per share was paid on
27 June 2014 and a second interim dividend of 32.5p (2013: 32p) per share has
been declared, which is payable on 12 December 2014 to shareholders on the
register at 28 November 2014. These give a total ordinary dividend for the year
of 50.5p compared with 50p for the previous year. The Board has also declared a
special dividend of 8p (2013: 7p) to be paid at the same time as the second
interim dividend. The dividend history of the Company over the last ten years
is shown in the table on page 3.
Ongoing charges is the industry measure of costs as a percentage of net asset
value. The expenses of the Company are reviewed at every board meeting, with
the aim of managing costs incurred and their impact on performance. The ongoing
charges figure, which excludes the performance fee, for the year was 0.87%, a
slight reduction on last year's 0.96%. This ratio is sensitive to the size of
the Company, which has increased, as well as the level of costs. The ten year
record of ongoing charges is shown on page 3.
If the reduction in the management fee rate from 0.8% to 0.6% per annum (as
reported in the Chairman's Statement) had been in place for the full year, the
ongoing charge figure would reduce from 0.87% to 0.73%.
Financial Position
At 30 September 2014, the Company's net assets were valued at £250 million
(2013: £231 million). These comprised a portfolio of mainly equity investments
and net current assets. The Company has an uncommitted short-term overdraft
facility with the custodian for settlement and liquidity purposes.
Due to the readily realisable nature of the Company's assets, cash flow does
not have the same significance as for an industrial or commercial company. The
Company's principal cash flows arise from the purchase and sales of investments
and the income from investments against which must be set the costs of
borrowing and management expenses.
At 30 September 2013 and 30 September 2014, the Company's ordinary shares were
geared by borrowings in the form of two issues of long-term debentures,
totalling just under £32 million nominal. Their weighted average interest rate
was 6.77% for both years. The Company also had £0.25 million of 5% cumulative
preference shares in issue.
Outlook and Future Trends
The main trends and factors likely to affect the future development,
performance and position of the Company's business can be found in the
following Manager's Report section of this Strategic Report. Further details as
to the risks affecting the Company are set out below under 'Principal Risks and
Uncertainties'.
Principal Risks and Uncertainties
The following are considered to be the most significant risks to shareholders
in relation to their investment in the Company. Further details of risks and
risk management policies as they relate to the financial assets and liabilities
of the Company are detailed in note 18 to the financial statements.
Investment Objective
There is no guarantee that the Company's strategy and business model will be
successful in achieving its investment objective.
The Board monitors the performance of the Company and has established
guidelines to ensure that the investment policy that has been approved is
pursued by the Manager.
Market Risk
The majority of the Company's investments are traded on the London Stock
Exchange. The principal risk for investors in the Company is of a significant
fall in stock markets and/or a prolonged period of decline in the markets
relative to other forms of investment. The value of investments held within the
portfolio is influenced by many factors including the general health of the
economy in the UK, interest rates, inflation, government policies, industry
conditions, political events, tax laws, environmental laws and investor
sentiment. The portfolio manager has summarised in the Manager's Report section
of this Strategic Report particular factors affecting the performance of
markets in the year and his view of those most pertinent to the outlook for the
portfolio. Such factors are out of the control of the Board and the Manager and
may give rise to high levels of volatility in the prices of investments held by
the Company, although the use or elimination of gearing may modify the impact
on shareholder return.
Investment Risk
An inherent risk of investment is that the stocks selected for the portfolio do
not perform well.
The investment process employed by the Manager combines top down assessment of
economic and market conditions with stock selection. Fundamental analysis forms
the basis of the Company's stock selection process, with an emphasis on sound
balance sheets, good cash flows, the ability to pay and sustain dividends, good
asset bases and market conditions. The process is complemented by constant
assessment of market valuations. It is important to have a sense of a company's
realistic valuation which, to some extent, will be independent of the price at
which it trades in the market. Overall, the investment process is aiming to
achieve absolute returns through a genuinely active fund management approach.
This can therefore result in a portfolio which looks substantially different
from the benchmark index.
Risk management is an integral part of the investment management process. The
Manager effectively controls risk by ensuring that the Company's portfolio is
always appropriately diversified. Continual analysis of all holdings gives the
Manager a full understanding of financial risks associated with them.
The portfolio of investments held at 30 September 2014 is set out on pages 13
and 14.
Past performance of the Company is not necessarily indicative of future
performance.
Shares
Shareholders are exposed to certain risks in addition to risks applying to the
Company itself.
The ordinary shares of the Company may trade at a discount to its NAV. The
Board monitors the price of the Company's shares in relation to their NAV and
the premium/discount at which they trade.
The value of an investment in the Company and the income derived from that
investment may go down as well as up and an investor may not get back the
amount invested.
While it is the intention of the Directors to pay dividends to ordinary
shareholders twice a year, the ability to do so will depend upon the level of
income received from securities and the timing of receipt of such income by the
Company. Accordingly, the amount of the dividends paid to ordinary shareholders
may fluctuate. Any change in the tax or accounting treatment of dividends or
other investment income received by the Company may also affect the level of
dividend paid.
Gearing
Gearing levels may change from time to time in accordance with the Manager's
and the Board's assessment of risk and reward. Whilst the use of borrowings by
the Company should enhance total return where the return on the Company's
underlying securities is rising and exceeds the cost of borrowing, it will have
the opposite effect where the underlying return is falling. As at 30 September
2014, net gearing from borrowings stood at 5.7%. The Board and the Manager
regularly review gearing and will continue to monitor the level closely over
the year ahead.
Reliance on the Manager and Other Service Providers
The Company has no employees and the Directors have all been appointed on a
non-executive basis. The Company is reliant upon the performance of third party
service providers for its executive function. In particular, the Manager
performs services which are integral to the operation of the Company. Failure
by any service provider to carry out its obligations to the Company in
accordance with the terms of its appointment could have a materially
detrimental impact on the operation of the Company and could affect the ability
of the Company to successfully pursue its investment policy.
The Manager may be exposed to reputational risks. In particular, the Manager
may be exposed to the risk that litigation, misconduct, operational failures,
negative publicity and press speculation, whether or not it is valid, will harm
its reputation. Any damage to the reputation of the Manager could result in
potential counterparties and third parties being unwilling to deal with the
Manager and by extension the Company. This could have an adverse impact on the
ability of the Company to pursue its investment policy successfully. The
Company's main service providers are listed on page 65.
Regulatory
The Company is subject to various laws and regulations by virtue of its status
as a public limited company, as an investment trust company and as an
alternative investment fund. A loss of investment trust status could lead to
the Company being subject to capital gains tax on the profits arising from the
sale of its investments. A serious breach of other regulatory rules might lead
to suspension from the Stock Exchange. Other control failures, either by the
Manager or another of the Company's service providers, might result in
operational or reputational problems, erroneous disclosures or loss of assets
through fraud, as well as breaches of regulations.
The Manager reviews the level of compliance with tax and other regulatory
financial requirements on a daily basis. All transactions, income and
expenditure are reported to the Board. The Board regularly considers all risks,
the measures in place to control them and the possibility of any other risks
that could arise. The Board ensures that satisfactory assurances are received
from service providers. The Manager's Compliance Officer produces regular
reports for review by the Company's Audit Committee.
The most significant regulatory change in the year has been the implementation
of the Alternative Investment Fund Managers Directive. This has required the
appointment of a depositary and a change in the contractual arrangements with
the Manager, who bears the main compliance obligations.
Board Diversity
The Company's policy on diversity is set out on page 51. The Nomination
Committee considers diversity, including the balance of skills, knowledge,
gender and experience, amongst other factors, when reviewing the composition of
the Board and appointing new directors but does not consider it appropriate to
establish targets or quotas in this regard. The Board comprises five
non-executive directors of whom one, the Chairman, is a woman thereby
constituting 20% female representation. Summary biographical details of the
Directors are set out on page 16. The Company has no employees.
Social and Environmental Matters
As an investment trust company with no employees, property or activities
outside investment, environmental policy has limited application. The Manager
considers various factors when evaluating potential investments. While a
company's policy towards the environment and social responsibility, including
with regard to human rights, is considered as part of the overall assessment of
risk and suitability for the portfolio, the Manager does not necessarily decide
to, or not to, make an investment on environmental and social grounds alone.
The Manager applies the United Nations Principles for Responsible Investment.
Stewardship
The Board considers that the Company has a responsibility as a shareholder
towards ensuring that high standards of corporate governance are maintained by
the companies in which it invests. The Company's stewardship functions have
been delegated to the Manager, who exercises the Company's voting rights and
reports back to the Board. The Manager has adopted a clear and considered
policy towards its responsibility as a shareholder on behalf of the Company. As
part of this policy, the Manager takes steps to satisfy itself about the extent
to which the companies in which it invests look after shareholders' value and
comply with local recommendations and practices, such as the UK Corporate
Governance Code. A copy of the Manager's Policy on Corporate Governance and
Stewardship can be found at www.invescoperpetual.co.uk.
.
MANAGER'S REPORT
Market Review
The 12 month period under review constituted two distinct phases: in the first
half of the period, the UK stock market, as measured by the FTSE All-Share
Index, saw a rise of 4.8% (total return), with much of that gain coming in the
final quarter of 2013. In the second half, the market was broadly flat, leading
to a rise in the index of 6.1% over the full year. The equity market re-rating
that had been in progress for the last two years was halted as a result of
concerns over future profit growth, caused by earnings disappointments and the
impending end to the Quantitative Easing (QE) programme in the US. Furthermore,
rising geopolitical risk, the Ebola outbreak and the prospect of UK domestic
elections began to affect the previously stable backdrop for the market. In
addition, as the period unfolded, fears over China's growth rate and a
weakening European economy became more relevant concerns.
Having been persistently negative throughout 2013, earnings momentum declined
further in the first half of 2014. This resulted in a steady and broadly based
expansion of forward-based price/earnings valuation multiples, as prices rose
much more quickly than earnings. Evidence that some share prices had got ahead
of themselves came in the third quarter as a series of high profile profit
warnings, most notably in the food retailing, construction and mining sectors,
resulted in some significant share price falls.
On the positive front, UK domestic inflation, in tandem with other markets,
remained low and, although wage growth has been weak, the price of
non-discretionary items such as petrol and food have been falling, thereby
benefiting households and relieving some of the upward pressure on interest
rates. Government bond yields have been supportive of equities over the period
and the 30 year US government bond recently fell below 3%, suggesting that the
market views the longer term outlook for global inflation as subdued. That
said, falling inflation and declining bond yields have led to fears of
impending global deflation, which could lead to unwelcome pressure on company
balance sheets and profit margins, hampering global economic recovery.
Portfolio Strategy & Review
The Company's net asset value, including reinvested dividends, rose by 11.7%
during the 12 months to the end of September 2014, compared to a rise of 6.1%
from the FTSE All-Share Index (total returns).
The Company's outperformance of its benchmark over the 12 month period
reflected some strong contributions from across the portfolio. Amongst these,
the most significant individual positive contributions came from the holdings
in AstraZeneca and BTG. Both are UK listed pharmaceutical companies with
growing drug development pipelines.
The attractions of AstraZeneca's pipeline were highlighted in April when Pfizer
made a bid for the company, which was subsequently rebuffed by the AstraZeneca
board. The company has continued to make progress and at the time of the
company's half year results in July the CEO commented that there was 'visible
momentum' across their cardiovascular, diabetes and respiratory franchises and
pointed out the strong revenue growth that had been achieved in the emerging
markets. AstraZeneca remains a core holding in the portfolio.
BTG saw a sharp rise in its share price over the period on the back of
significant positive newsflow. The company announced that it had received
approval from the US Food and Drug Administration for its Varithena injectable
foam medication for the non-surgical treatment of varicose veins and more
recently came the news that its DC Bead® oncology product had been approved for
sale in China, which represents the largest potential market for patients
suffering with liver cancer.
Other notable contributions to performance came from Beazley, Reynolds
American, and BT Group.
There were relatively few detractors to performance. Shares in Rolls-Royce
retreated over the period - the company surprised the market in February by
announcing a one-off 'pause' in revenue growth, the causes of which were seen
by the company's chief executive as being unique to 2014, with the long term
earnings outlook remaining intact. UK retailer N Brown's profits were hampered
by weaker performance from its mail order business as it sought to expand its
digital offering. Finally, the share price of Serco was negatively impacted by
a series of profit warnings after winning fewer contracts than expected. A
fundraising exercise was undertaken in the Spring to strengthen the company's
balance sheet and another is planned for the first quarter of 2015.
Amongst the new investments, the holding in Game Digital, a company which
retails video games and consoles from shops and online, was a notable
performer, its share price rising sharply post its stock market flotation in
June.
In terms of portfolio activity, in addition to Game Digital highlighted above
new investments were made in BP, Derwent London, G4S, Horizon Discovery, Nimrod
Sea Assets, Shaftesbury and P2P Global Investments. The holding in Carnival was
sold.
Outlook
The outlook for the UK equity market is likely to remain volatile for the
foreseeable future. The key issues that will continue to overshadow the
performance of the equity market remain the interplay between growing investor
pessimism on the global economic outlook and the ability of policymakers to
create the conditions to reinvigorate growth prospects where necessary. The
recent performance of the Eurozone and the Chinese economies, in particular, is
concerning as prolonged weakness in these areas, and the deflationary forces
that are exported, will undoubtedly have an impact on other developed economies
such as the US and the UK, which have been performing relatively well in 2014.
The overall background for revenue growth is likely to remain subdued into 2015
and will give rise to further profit warnings, which have been a feature of the
recent newsflow in the market.
The influence of the central banks in this environment is becoming weaker as
their two main policy levers, interest rates and liquidity, have been fully
exploited for a number of years. Their last remaining option is to use speeches
and policy guidance to influence the behaviour of economies and market
participants. But this power also has its limitations as the markets grow tired
and sceptical of unfulfilled promises. It is certainly the case that
policymakers are keen to change the current policy stance which has survived
largely unchanged since 2008. However, any change in monetary policy, be it
through the tapering of QE or a move in short-term interest rates provides
another headwind for the markets. Given the recent economic news it is likely
that the anticipated increase in rates in the US and UK will be deferred until
2015 as there is very little sign of inflation pressure in these economies
despite rapidly falling levels of unemployment.
The political backdrop both domestically and internationally has taken on more
relevance in the recent past and is likely to remain an important influence for
the next 12 months. The changes in the political agenda ahead of the UK general
election in May 2015 are likely to be another source of uncertainty for the UK
stock market.
The market falls in recent weeks have started to factor in some of these
concerns and it is true that equities continue to look attractive relative to
other asset classes, but many valuations still look elevated where share prices
do not appropriately anticipate the risk to earnings and cash flows that is
likely to be realised. The investment strategy is therefore largely unchanged
from the recent past. The portfolio manager puts a high price on the companies
in the market that offer visibility of revenues, profits and cash flows in this
low growth world and which are managed for the sole purpose of delivering
shareholder value in the form of a sustainable and growing dividend.
Mark Barnett, Portfolio Manager
The Strategic Report was approved by the Board of Directors on 25 November
2014.
Invesco Asset Management Limited
Company Secretary
.
INVESTMENTS IN ORDER OF VALUATION
AT 30 SEPTEMBER 2014
UK listed ordinary shares unless stated otherwise
Equity Investments MARKET
VALUE % OF
ISSUER SECTOR £'000 PORTFOLIO
British American Tobacco Tobacco 12,438 4.7
AstraZeneca Pharmaceuticals & Biotechnology 11,211 4.2
Imperial Tobacco Tobacco 10,594 4.0
Reynolds American -
US common stock Tobacco 10,472 4.0
BT Group Fixed Line Telecommunications 10,421 3.9
Roche - Swiss common stock Pharmaceuticals & Biotechnology 9,772 3.7
BAE Systems Aerospace & Defence 8,359 3.2
Reckitt Benckiser Household Goods & Home 7,050 2.7
Construction
GlaxoSmithKline Pharmaceuticals & Biotechnology 6,980 2.6
Provident Financial Financial Services 6,205 2.4
Top Ten Investments 93,502 35.4
Novartis - Swiss common Pharmaceuticals & Biotechnology 6,175 2.3
stock
BP Oil & Gas Producers 6,151 2.3
Beazley Non-life Insurance 5,949 2.3
Legal & General Life Insurance 5,895 2.2
BTG Pharmaceuticals & Biotechnology 5,678 2.2
Babcock International Support Services 5,447 2.1
Reed Elsevier Media 5,393 2.0
SSE Electricity 5,216 2.0
Rolls-Royce Aerospace & Defence 5,082 1.9
Bunzl Support Services 5,057 1.9
Top Twenty Investments 149,545 56.6
Capita Support Services 5,041 1.9
Compass Travel & Leisure 4,951 1.9
Amlin Non-life Insurance 4,605 1.7
Rentokil Initial Support Services 4,384 1.7
Hiscox Financial Services 4,359 1.7
Drax Electricity 4,353 1.6
London Stock Exchange Financial Services 4,208 1.6
Thomas Cook Travel & Leisure 4,068 1.5
Napo Pharmaceuticals -
Unquoted US common stock Pharmaceuticals & Biotechnology 4,018 1.5
GAME Digital General Retailers 3,983 1.5
Top Thirty Investments 193,515 73.2
A J Bell - Unquoted Financial Services 3,918 1.5
Shaftesbury Real Estate Investment Trusts 3,875 1.5
NewRiver Retail Real Estate Investment Trusts 3,671 1.4
KCOM Fixed Line Telecommunications 3,583 1.4
G4S Support Services 3,387 1.3
Derwent London Real Estate Investment Trusts 3,310 1.3
Centrica Gas, Water & Multiutilities 3,280 1.2
Workspace Real Estate Investment Trusts 3,248 1.2
Lancashire Non-life Insurance 3,090 1.2
TalkTalk Telecom Fixed Line Telecommunications 3,086 1.2
Top Forty Investments 227,963 86.4
N Brown General Retailers 2,808 1.1
Ladbrokes Travel & Leisure 2,780 1.0
Macau Property
Opportunities
Fund Real Estate Investment & 2,556 1.0
Services
HomeServe Support Services 2,470 0.9
Imperial Innovations Financial Services 2,311 0.9
Nimrod Sea Assets Financial Services 2,255 0.9
P2P Global Investments Investment Instruments 2,142 0.8
Lombard Medical Health Care Equipment & 2,070 0.8
Services
IP Group Financial Services 2,033 0.8
Vectura Pharmaceuticals & Biotechnology 1,767 0.7
Top Fifty Investments 251,155 95.3
CLS Real Estate Investment & 1,642 0.6
Services
Doric Nimrod Air Two - Investment Instruments 1,508 0.6
Preference Shares
Doric Nimrod Air Three - Investment Instruments 1,455 0.6
Preference Shares
Sherborne Investors
Guernsey B - A Shares
Financial Services 1,386 0.5
Damille Investments II Investment Instruments 1,161 0.4
Serco Support Services 1,142 0.4
PuriCore Health Care Equipment & 925 0.3
Services
Nexeon -B Shares - Electronic & Electrical 497
Unquoted Equipment
- Preference C Shares - 400 0.3
Unquoted
- Ordinary shares - 4
Unquoted
Top Sixty Investments 261,275 99.0
Smith & Nephew Health Care Equipment & 753 0.3
Services
Horizon Discovery Health Care Equipment & 581 0.2
Services
Chemring Aerospace & Defence 362 0.1
Coalfield Resources Mining 275 0.1
Friends Life Life Insurance 254 0.1
Altus Resource Capital Investment Instruments 218 0.1
HaloSource Chemicals 69 -
XTL Biopharmaceuticals - Pharmaceuticals & Biotechnology 27 -
ADR
Mirada Media 3 -
Total Equity Investments 263,817 99.9
(69)
Other Investments MARKET
MOODY/ VALUE % OF
ISSUER AND ISSUE SECTOR S&P RATING(2) £'000 PORTFOLIO
Barclays Bank - Nuclear Electricity NR/NR 182 0.1
Power Notes 28 Feb 2019(1)
Total Investments (70) 263,999 100.0
(1) Contingent Value Rights (CVR) referred to as Nuclear Power Notes (NPN) were
offered by EDF as a partial alternative to its cash bid for British Energy
(BE). The NPNs were issued by Barclays Bank. The CVRs participate in BE's
existing business.
(2) NR is non-rated.
.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
IN RESPECT OF THE PREPARATION OF FINANCIAL STATEMENTS
The Directors are responsible for ensuring that the annual financial report is
prepared in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards) and applicable law. Under
company law, the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the net return of the Company for that period.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and accounting estimates that are reasonable and prudent;
- state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records which are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and which
enable them to ensure that the financial statements comply with company law.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, a Corporate Governance Statement, a Directors'
Remuneration Report and a Directors' Report that comply with that law and
those regulations.
The Directors of the Company, whose names are shown on page 16 of this Report,
each confirm to the best of their knowledge that:
- the financial statements, which have been prepared in accordance with
United Kingdom accounting standards on going concern basis, give a true and
fair view of the assets, liabilities, financial position and net return of the
Company;
- the annual financial report includes a fair review of the development and
performance of the business and the position of the Company, together with
a description of the principal risks and uncertainties that it faces; and
- they consider that the annual financial report, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's performance, business model and strategy.
Beatrice Hollond
Chairman
Signed on behalf of the Board of Directors
25 November 2014
.
INCOME STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER
2014 2013
NOTES REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 22,105 22,105 - 49,016 49,016
Foreign exchange losses - (11) (11) - (4) (4)
Income 2 9,507 280 9,787 9,218 - 9,218
Investment management and 3 (433) (2,252) (2,685) (405) (2,172) (2,577)
performance-related fees
Other expenses (344) - (344) (333) - (333)
Net return before finance 8,730 20,122 28,852 8,480 46,840 55,320
costs and taxation
Finance costs (560) (1,643) (2,203) (560) (1,649) (2,209)
Return on ordinary activities 8,170 18,479 26,649 7,920 45,191 53,111
before taxation
Tax on ordinary activities (157) - (157) (192) - (192)
Net return on ordinary 8,013 18,479 26,492 7,728 45,191 52,919
activities after tax for the
financial year
Return per ordinary share
Basic 8 59.3p 136.7p 196.0p 57.4p 335.7p 393.1p
The total column of this statement represents the Company's profit and loss
account, prepared in accordance with the accounting policies detailed in note 1
to the financial statements. 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
or losses is presented. No operations were acquired or discontinued in the
year.
.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 SEPTEMBER
CALLED UP CAPITAL
SHARE SHARE REDEMPTION CAPITAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE RESERVE TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 September 2012 6,685 1,258 466 165,888 8,506 182,803
Dividends paid - note 7 - - - - (6,508) (6,508)
Issue of ordinary shares 75 2,191 - - - 2,266
Net return on ordinary - - - 45,191 7,728 52,919
activities
Balance at 30 September 2013 6,760 3,449 466 211,079 9,726 231,480
Dividends paid - note 7 - - - - (7,705) (7,705)
Net return on ordinary - - - 18,479 8,013 26,492
activities
Balance at 30 September 2014 6,760 3,449 466 229,558 10,034 250,267
The accompanying notes are an integral part of these statements.
.
BALANCE SHEET
AT 30 SEPTEMBER
NOTES 2014 2013
£'000 £'000
Fixed assets
  Investments held at fair value through profit or loss 263,999 254,279
Current assets
  Debtors 2,727 1,553
  Cash and cash funds 17,578 9,809
20,305 11,362
Creditors: amounts falling due within one year (2,122) (2,272)
Net current assets 18,183 9,090
Total assets less current liabilities 282,182 263,369
Creditors: amounts falling due after more than one year (31,915) (31,889)
Provision for liabilities - -
Net assets 250,267 231,480
Capital and reserves
Called up share capital 14 6,760 6,760
Share premium 3,449 3,449
Capital redemption reserve 466 466
Capital reserve 229,558 211,079
Revenue reserve 10,034 9,726
Shareholders' funds 250,267 231,480
Net asset value per ordinary share
Basic 16 1851.3p 1712.3p
The financial statements, on pages 31 to 49, were approved and authorised for
issue by the Board of Directors on 25 November 2014.
Signed on behalf of the Board of Directors
Beatrice Hollond
Chairman
The accompanying notes are an integral part of this statement
.
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER
NOTES 2014 2013
£'000 £'000
Cash inflow from operating activities 17(a) 6,038 6,942
Servicing of finance 17(b) (2,177) (2,179)
Capital expenditure and financial investment 17(b) 11,613 (6,609)
Net equity dividends paid 7 (7,705) (6,508)
Net cash inflow/(outflow) before management of liquid 7,769 (8,354)
resources and financing
Management of liquid resources 17(b) (5,700) 5,720
Financing 17(b) - 2,229
Increase/(decrease) in cash 2,069 (405)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash 2,069 (405)
Cash flow from movement in liquid resources 5,700 (5,720)
Debenture stock non-cash movement (26) (26)
Reduction in debenture stock - 32
Movement in net debt in the year 7,743 (6,119)
Net debt at beginning of the year (22,080) (15,961)
Net debt at end of the year 17(c) (14,337) (22,080)
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting Policies
Accounting policies describe the Company's approach to recognising and
measuring transactions during the year and the position of the Company at the
year end.
A summary of the principal accounting policies adopted by the Company, all of
which have been applied consistently throughout the year and the preceding
year, is set out below.
(a) Basis of Preparation
(i) Accounting Standards applied
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of certain fixed assets, in
accordance with applicable United Kingdom Generally Accepted Accounting
Practice and with the Statement of Recommended Practice ('SORP') 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts', issued by
the Association of Investment Companies in January 2009. The financial
statements are also prepared on a going concern basis.
(ii) Functional and presentation currency
The financial statements are presented in Sterling, which is the
Company's functional and presentation currency and the currency in which the
Company's share capital and expenses, as well as a majority of its assets and
liabilities, are denominated.
(b) Financial Instruments
(i) Recognition of financial assets and financial liabilities
The Company recognises financial assets and financial liabilities when the
Company becomes a party to the contractual provisions of the instrument. The
Company will offset financial assets and financial liabilities if the Company
has a legally enforceable right to set off the recognised amounts and interests
and intends to settle on a net basis.
(ii) Derecognition of financial assets
The Company derecognises a financial asset when the contractual
rights to the cash flows from the asset expire or it transfers the rights to
receive the contractual cash flows on the financial asset in a transaction in
which substantially all the risks and rewards of ownership of the financial
asset are transferred. Any interest in the transferred financial asset that is
created or retained by the Company is recognised as an asset.
(iii) Derecognition of financial liabilities
The Company derecognises financial liabilities when its obligations
are discharged, cancelled or expired.
(iv) Trade date accounting
Purchases and sales of financial assets are recognised on trade date, being the
date on which the Company commits to purchase or sell the assets.
(v) Classification and measurement of financial assets and financial
liabilities
Financial assets
The Company's investments are classified as held at fair value
through profit or loss as the investments are managed and their performance
evaluated on a fair value basis in accordance with a documented investment
strategy, and this is also the basis on which investment information is
provided internally to the Board.
Financial assets held at fair value through profit or loss are
initially recognised at fair value, which is taken to be their cost, with
transaction costs expensed in the income statement, and are subsequently valued
at fair value.
Fair value for investments that are actively traded in organised
financial markets is determined by reference to stock exchange quoted bid
prices at the balance sheet date. For investments that are not actively traded
or where active stock exchange quoted bid prices are not available, fair value
is determined by reference to a variety of valuation techniques including
broker quotes and price modelling. Where there is no active market, unlisted/
illiquid investments are valued by the Directors at fair value based on
recommendations from Invesco's Pricing Committee, which in turn is guided by
the International Private Equity and Venture Capital Valuation Guidelines
issued in 2012, using valuation techniques such as earnings multiples, recent
arm's length transactions and net assets.
Financial liabilities
Financial liabilities, including borrowings, are initially measured
at fair value, net of transaction costs and are subsequently measured at
amortised cost using the effective interest method.
(c) Accounting for Capital Reserves
Realised gains and losses on sales of investments (note 9(b)) and
certificates of deposit (note 10) and realised gains or losses on derivatives
(including any related foreign exchange gains and losses), realised gains and
losses on foreign currency, management fees and finance costs allocated to
capital and any other capital charges, are included in the income statement and
dealt with in the capital reserve. Unrealised increases and decreases in the
valuation of investments and certificates of deposit and any derivatives held
at the year end (including the related foreign exchange gains and losses), are
also included in the income statement and dealt with in the capital reserve.
(d) Income
Dividend income arises from equity investments held and is recognised on
the date investments are marked 'ex-dividend'. Where the Company elects to
receive dividends in the form of additional shares rather than cash, the
equivalent to the cash dividend is recognised as income in the revenue account
and any excess in value of the shares received over the amount of the cash
dividend is recognised in capital reserve. Special dividends are taken to
income unless they arise from a return of capital, when they are allocated to
capital in the income statement. Interest income arising from fixed income
securities and cash is recognised in the income statement using the effective
interest method. Deposit interest and underwriting commission receivable are
taken into account on an accruals basis.
(e) Management and Performance-related fees
Investment management fees are recognised on an accruals basis and are
charged 75% to capital and 25% to revenue. This is in line with the Board's
expected long-term split of returns, in the form of capital gains and income
respectively, from the investment portfolio of the Company.
Performance-related fees are calculated as detailed in the Directors'
Report and are charged wholly to capital as they arise mainly from capital
returns on the portfolio.
(f) Expenses and Finance costs
Expenses are recognised on an accruals basis and finance costs are
recognised using the effective interest method, with the debentures being held
at amortised cost. The finance costs of debt are allocated 75% to capital and
25% to revenue for the reasons outlined in (e) above. The 5% cumulative
preference shares are classified as a liability and therefore the dividends
payable on these shares are classified as finance costs and charged to the
revenue column of the income statement.
(g) Hedging and Derivatives
Forward currency contracts entered into for hedging purposes are valued at
the appropriate forward exchange rate ruling at the balance sheet date. Profits
or losses on the closure or revaluation of positions are included in capital.
Futures contracts may be entered into for hedging purposes and any profits
and losses on the closure or revaluation of positions are included in capital.
Derivative instruments are valued at fair value in the balance sheet and
are classified as held at fair value through profit or loss. Derivative
instruments may be capital or revenue in nature and, accordingly, changes in
their fair value are recognised in revenue or capital in the income statement
as appropriate.
(h) Foreign Currency Translation
Transactions in foreign currency, whether of a revenue or capital nature,
are translated to Sterling at the rates of exchange ruling on the dates of such
transactions. Foreign currency assets and liabilities are translated to
Sterling at the rates of exchange ruling at the balance sheet date. Any gains
or losses, whether realised or unrealised, are taken to capital or to revenue,
depending on whether the gain or loss is of a capital or revenue nature. All
gains and losses are recognised in the income statement.
(i) Taxation
Foreign dividends that suffer withholding tax at source are shown gross,
with the corresponding tax charge in the income statement.
Deferred taxation is provided using the liability method on all timing
differences to the extent that they are expected to reverse in the future
without being replaced, calculated at the rate at which it is anticipated the
timing differences will reverse.
(j) Dividends Payable
Dividends are not recognised in the financial statements unless there is
an obligation to pay at the balance sheet date. Proposed final dividends are
recognised in the period in which they are either approved by or paid to
shareholders.
2. Income
This note shows the income generated from the portfolio (investment assets) of
the Company and income received from any other source.
2014 2013
£'000 £'000
Income from investments
UK dividends
- Ordinary dividends 6,644 6,707
- Special dividends 487 765
Overseas dividends
- Ordinary dividends 1,641 1,521
- Special dividends 631 189
Scrip dividends 88 34
9,491 9,216
Other income
Deposit interest 16 2
Total income 9,507 9,218
A special dividend of £280,000 (2013: £nil) has been recognised in capital.
3. Investment Management and Performance-related Fees
This note shows the fees paid to the Manager. These are made up of the
management fee payable per annum and a performance-related fee calculated
annually. The latter is only payable when the portfolio outperforms the
benchmark index plus 2%.
2014 2013
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 433 1,300 1,733 405 1,215 1,620
Performance-related fee:
- accrued for the year ended 30 September - 952 952 - - -
2014
- accrued for the period 1 January-30 - - - - 1,002 1,002
September 2013
- reversal of prior year provision - - - - (45) (45)
433 2,252 2,685 405 2,172 2,577
Details of the management agreement are disclosed in the Directors' Report.
This includes a revision of the investment management fee from 0.8% to 0.6% as
well as an adjustment of the performance-related fee's hurdle from 2% down to
1.25%; both with effect from 1 July 2014.
The performance-related fee is due if the Company's annualised total return
over the previous three years is greater than the annualised return of the FTSE
All-Share (Total Return) Index over the same period, plus the hurdle.
During the year to 30 September 2013, the period element of the
performance-related fee was revised so that current and future performance fee
calculation periods would be coterminous with the Company's September year end.
As a consequence, for 2013 only the performance fee was based on the shorter
period of two years and nine months to 30 September 2013 with a pro-rated fee
for the period 1 January to 30 September 2013. For 2014 and subsequent
financial years the performance fee period reverts to its normal three years.
At 30 September 2014, an investment management fee of £346,000 (2013: £452,000)
and a performance-related fee of £952,000 (2013: £1,002,000) has been accrued.
4. Other Expenses
The other expenses of the Company are presented below.
2014 2013
£'000 £'000
Directors' fees 108 110
Fees payable to the Company's auditor1 in relation to:
  - the statutory audit of the financial statements 25 26
  - for other services, relating to taxation2 - 6
Other expenses 211 191
344 333
The Directors Remuneration Report provides further information on Directors'
fees.
1 Fees payable to the Company's auditor are shown excluding VAT which is
included in other expenses.
2 Following the change of auditor during the year, fees in relation to taxation
services of £6,000 are no longer payable to the audit firm.
Other expenses includes £6,000 (2013: £6,000) of employer's National Insurance
paid on Directors' fees. As at 30 September 2014, the amount outstanding on
Directors' fees and employer's National Insurance was £6,500 (2013: £7,000).
5. Finance Costs
Finance costs arise on any borrowing that the Company has, with the main
borrowing being the £32 million Debenture stocks (see note 12).
2014 2013
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Interest payable on borrowings repayable
not by instalment:
Debenture stock repayable after 5 years 548 1,643 2,191 548 1,643 2,191
548 1,643 2,191 548 1,643 2,191
Debenture stock buy back - - - - 6 6
Dividends on 5% cumulative preference 12 - 12 12 - 12
shares
560 1,643 2,203 560 1,649 2,209
6. Tax on ordinary activities
As an investment trust, the Company pays no tax on capital gains and as the
Company principally invests in UK assets, it has little overseas tax. This note
shows details of the tax charge and why no deferred tax is required to provide
for tax that is expected to arise in the future due to differences in
accounting and tax bases.
(a) Current Tax Charge
2014 2013
REVENUE REVENUE
£'000 £'000
Overseas tax 157 192
(b) Reconciliation of Current Tax Charge
2014 2013
£'000 £'000
Total return on ordinary activities before taxation 26,649 53,111
UK Corporation Tax effective rate of 22% (2013: 23.5%) 5,863 12,480
Effect of:
- Gains on investments and certificates of deposit (4,863) (11,517)
- Loss on foreign exchange movements 2 -
- UK dividends which are not taxable (1,499) (1,748)
- Non-taxable overseas dividends (488) (392)
- Non-taxable overseas dividends received in capital (62) -
- Overseas tax 157 192
- Non-taxable scrip dividends (19) (8)
- Disallowed expenses 4 6
- Excess of management expenses over taxable income 1,062 1,179
Current tax charge for the year 157 192
(c) Factors that may Affect Future Tax Changes
The Company has excess expenses of £59,267,000 (2013: £54,438,000) that are
available to offset future taxable revenue. A deferred tax asset, of £
11,853,000 measured at the standard corporation tax rate of 20% (2013: £
10,888,000 at 20%), has not been recognised in respect of these expenses since
the Directors believe that there will be no taxable profits in the future
against which the deferred tax asset can be offset.
7. Dividends
Dividends represent the return of income less expenses to shareholders.
Dividends are paid as an amount per ordinary share held.
2014 2013
£'000 £'000
Dividends on equity shares paid and recognised in the year:
Second interim dividend for 2013 of 32p (2012: 30.5p) 4,326 4,100
Special dividend for 2013 of 7p (2012: nil) 946 -
First interim dividend for 2014 of 18p (2013: 18p) 2,433 2,420
7,705 6,520
Return of unclaimed dividends from previous years - (12)
7,705 6,508
2014 2013
£'000 £'000
Dividends on equity shares payable in respect of the year:
First interim paid 18p per ordinary share (2013: 18p) 2,433 2,420
Second interim dividend of 32.5p per ordinary share (2013: 32p) 4,393 4,326
6,826 6,746
Special dividend of 8p per ordinary share (2013: 7p) 1,082 946
7,908 7,692
Investment trusts must ensure that no more than 15% of total income is retained
each year after providing for dividends payable.
8. Return per Ordinary Share
Basic return per share is the amount of gain generated for the financial year
divided by the number of ordinary shares in issue. The calculation is based on
the weighted average number of shares in issue during the year.
Basic revenue, capital and total returns per ordinary share are based on each
of the respective returns on ordinary activities after taxation and on
13,518,799 (2013: 13,458,388) shares being the weighted average number of
ordinary shares in issue throughout the year.
9. Investments
The portfolio is made up primarily of investments which are listed, i.e. traded
on a regulated stock exchange, and some unlisted investments. Gains and losses
in the year are either:
- realised, usually arising when investments are sold; or
- unrealised, being the difference from cost on those investments still held
at the year end.
(a) Analysis of Investments by Listing Status
2014 2013
£'000 £'000
Investments listed on a recognised stock exchange 255,162 246,011
Unlisted investments 8,837 8,268
263,999 254,279
(b) Analysis of Investment Gains and Losses
2014 2013
LISTED UNLISTED TOTAL TOTAL
£'000 £'000 £'000 £'000
Opening valuation 246,011 8,268 254,279 199,259
Movements in year:
  Purchases at cost 49,094 - 49,094 48,677
  Sales - proceeds (61,360) (119) (61,479) (42,673)
   - net realised gains/(losses) 20,854 (1,385) 19,469 8,584
Movement in investment holding gains 563 2,073 2,636 40,432
Closing valuation 255,162 8,837 263,999 254,279
Closing book cost 187,928 5,873 193,801 186,717
Closing investment holding gains 67,234 2,964 70,198 67,562
Closing valuation 255,162 8,837 263,999 254,279
Net realised gains/(losses) based on historical 20,854 (1,385) 19,469 8,584
cost
Movement in investment holding gains in year 563 2,073 2,636 40,432
Gains on investments 21,417 688 22,105 49,016
(c) Transaction Costs
Transaction costs on purchases of £248,000 (2013: £246,000) and on sales
of £80,000 (2013: £69,000) are included within gains and losses on investments
in the income statement.
10. Debtors
Debtors are amounts which are due to the Company, such as income which has been
earned (accrued) but not yet received and monies receivable from brokers for
investments sold.
2014 2013
£'000 £'000
Amounts due from brokers 1,629 774
Unrealised profit on forward currency contracts - 1
Prepayments and accrued income 741 606
Overseas withholding tax recoverable 357 172
2,727 1,553
11. Creditors: amounts falling due within one year
Creditors are amounts which must be paid by the Company, and include any
amounts due to brokers for the purchase of investments or amounts owed to
suppliers, such as the Manager and auditor.
2014 2013
£'000 £'000
Amounts due to brokers - 5
Accruals 1,170 1,265
Performance-related fee 952 1,002
2,122 2,272
Details of the performance-related fee are given in note 3.
12. Creditors: amounts falling due after more than one year
Long term creditors consist solely of the £32 million debentures and a small
issue of preference shares. These form the principal borrowings of the Company
and the fixed interest that the Company pays is reported under note 5 'Finance
Costs'.
2014 2013
£'000 £'000
Debenture Stock:
7.75% redeemable 1 October 2020 7,000 7,000
6.5% redeemable 27 April 2023 24,968 24,968
31,968 31,968
Discount and issue expenses on debenture stock (303) (329)
31,665 31,639
5% cumulative preference shares of £1 each 250 250
31,915 31,889
The debentures rank pari passu with each other, and ahead of shareholders, and
are secured by floating charge over the assets of the Company.
On 8 February 2013, £31,700 of 6.5% Debenture Stock 2023 was repurchased and
cancelled for £37,000 including accrued interest, which constituted a discount
to fair value.
The debenture stocks both pay interest twice a year; the 7.75% Debenture Stock
2020 for the six months ended 31 March and 30 September, and the 6.5% Debenture
Stock 2023 for the six months to 27 April and 27 October. Both debenture stocks
generally make the payments in April and October. The preference shares
dividend is paid bi-annually in March and September.
13. Provision for liabilities
The Company makes a provision when a potential obligation exists, relating to
events in the past that will probably have to settle in cash, but the amount is
estimated.
2014 2013
£'000 £'000
Performance-related fee:
  Opening provision - 322
  Paid in the year - (277)
  Reversal of provision - (45)
Closing provision - -
Details of the performance-related fee are given in the Directors' Report and
in note 3.
14. Called up share capital
Ordinary share capital represents the total number of shares in issue, for
which dividends accrue.
2014 2013
NUMBER £'000 NUMBER £'000
Allotted, called-up and fully paid:
Ordinary shares of 50p each 13,518,799 6,760 13,518,799 6,760
The ordinary shares are fully participating and on a poll carry one vote per £1
nominal held.
No shares were issued during the year (2013: 150,000).
15. Reserves
This note explains the different reserves that have arisen over the years. The
aggregate of the reserves and share capital (see previous note) make up total
shareholders' funds.
The capital redemption reserve maintains the equity share capital arising from
the buy back and cancellation of shares; it, and the share premium account, are
non-distributable.
The capital reserve includes the investment holding gains/(losses), being the
difference between cost and market value at the balance sheet date, totalling a
gain of £70,198,000 (2013: £67,562,000).
The revenue and capital reserves are distributable by way of dividend. Share
buy backs can be funded from the capital reserve.
16. Net Asset Value per Ordinary Share
The Company's total net assets (total assets less total liabilities) are often
termed shareholders' funds and are converted into net asset value per share by
dividing by the number of shares in issue.
The net asset value per ordinary share and the net assets attributable at the
year end were as follows:
NET ASSET VALUE NET ASSETS
PER SHARE ATTRIBUTABLE
2014 2013 2014 2013
PENCE PENCE £'000 £'000
Ordinary shares
- Basic 1851.3 1712.3 250,267 231,480
Net asset value per ordinary share is based on net assets at the year end and
on 13,518,799 (2013: 13,518,799) ordinary shares, being the number of ordinary
shares in issue at the year end.
17. Notes to the Cash Flow Statement
The cash flow statement shows the cash flows of the Company from its operating,
investing and financing activities. The main cash flows arise from the purchase
and sale of investments, with other main flows being any amounts borrowed or
repayment of borrowings in the year.
(a) Reconciliation of Operating Profit to Operating Cash Flows
2014 2013
£'000
£'000
Total return before finance costs and taxation 28,852 55,320
Adjustment for gains on investments (22,105) (49,016)
Adjustment for movement in forward currency contracts 1 (4)
Scrip dividends (88) (34)
(Increase)/decrease in debtors (320) 77
(Decrease)/increase in creditors (145) 791
Tax on overseas dividends (157) (192)
Net cash inflow from operating activities 6,038 6,942
(b) Analysis of Cash Flow for Headings Netted in the Cash Flow Statement
2014 2013
£'000 £'000
Servicing of finance
Preference dividends paid (12) (12)
Interest paid on debenture stocks (2,165) (2,167)
Net cash outflow from servicing of finance (2,177) (2,179)
Capital expenditure and financial investment
Purchase of investments (excludes scrip dividends received as income) (49,011) (48,638)
Sale of investments 60,624 42,029
Net cash inflow/(outflow) from capital expenditure and financial 11,613 (6,609)
investment
Management of liquid resources
Cash movement on cash funds and short term deposits (5,700) 5,720
Net cash (outflow)/inflow from management of liquid resources (5,700) 5,720
Financing
Buyback of debenture stock - (37)
Net proceeds from share issues - 2,266
Net cash inflow from financing - 2,229
(c) Analysis of changes in net debt
DEBENTURE
STOCK
1 OCTOBER CASH NON-CASH 30 SEPTEMBER
2013 FLOW MOVEMENT 2014
£'000 £'000 £'000 £'000
Cash 529 2,069 - 2,598
Cash funds and short term deposits 9,280 5,700 - 14,980
Debentures (31,639) - (26) (31,665)
5% Cumulative preference shares (250) - - (250)
Net debt (22,080) 7,769 (26) (14,337)
18. Financial Instruments
Financial instruments comprise the Company's investment portfolio as well as
its cash, borrowings, debtors and creditors. Derivative financial instruments
are financial instruments that are used to manage the risk associated with
fluctuations in the value of certain assets and liabilities. In accordance with
Board approved policies, the Company can use derivatives to manage its exposure
to fluctuations in foreign exchange rates.
The Company's financial instruments comprise its investment portfolio (as shown
on pages 13 and 14), derivatives, cash, borrowings, debtors and creditors that
arise directly from its operations such as sales and purchases awaiting
settlement and accrued income. The accounting policies in note 1 include
criteria for the recognition and the basis of measurement applied for financial
instruments. Note 1 also includes the basis on which income and expenses
arising from financial assets and liabilities are recognised and measured.
The principal risks that an investment company faces in its portfolio
management activities are set out below:
Market risk - arising from fluctuations in the fair value or future cash flows
of a financial instrument because of changes in market prices. Market risk
comprises three types of risk: currency risk, interest rate risk and other
price risk:
Currency risk - arising from fluctuations in the fair value or future cash
flows of a financial instrument because of changes in foreign exchange rates;
Interest rate risk - arising from fluctuations in the fair value or future cash
flows of a financial instrument because of changes in market interest rates;
and
Other price risk - arising from fluctuations in the fair value or future cash
flows of a financial instrument for reasons other than changes in foreign
exchange rates or market interest rates.
Liquidity risk - arising from any difficulty in meeting obligations associated
with financial liabilities.
Credit risk - arising from financial loss for a company where the other party
to a financial instrument fails to discharge an obligation.
Risk Management Policies and Procedures
The Directors have delegated to the Manager the responsibility for the
day-to-day investment activities of the Company as more fully described in the
Directors' Report.
An investment company invests in equities and other investments for the long
term so as to meet its investment objective and policies. In pursuing its
investment objective, the Company is exposed to a variety of risks that could
result in either a reduction in the Company's net assets or a reduction of the
profits available for distribution by way of dividends.
The risks applicable to the Company and the policies the Company used to manage
these risks for the two years under review follow.
Market risk
The Company's Manager assesses the Company's exposure when making each
investment decision, and monitors the overall level of market risk on the whole
of the investment portfolio on an ongoing basis. The Board meets at least
quarterly to assess risk and review investment performance, as disclosed on
pages 50, 52 and 56. No derivatives or hedging instruments are utilised to
manage market risk. Borrowings are used to enhance returns, however, this will
also increase the Company's exposure to market risk and volatility.
Currency risk
The majority of the Company's assets, liabilities and income are denominated in
Sterling. There is some exposure to US dollars and Swiss francs and, last year,
to Swedish kronas as well.
Management of the currency risk
The Manager monitors the Company's exposure to foreign currencies on a daily
basis and reports to the Board on a regular basis.
Forward currency contracts can be used to limit the Company's exposure to
anticipated future changes in exchange rates which are also used to achieve the
portfolio characteristics that assist the Company in meeting its investment
objective and policies. All contracts are limited to currencies and amounts
commensurate with asset exposure to those currencies.
Income denominated in foreign currencies is converted to Sterling on receipt.
The Company does not use financial instruments to mitigate the currency
exposure in the period between the time that income is included in the
financial statements and its receipt.
Currency exposure
The fair values of the Company's monetary items that have currency exposure at
30 September are shown below. Where the Company's equity investments (which are
not monetary items) are priced in a foreign currency, they have been included
separately in the analysis so as to show the overall level of exposure.
30 SEPTEMBER 2014 30 SEPTEMBER 2013
US SWISS US SWISS SWEDISH
DOLLAR FRANC DOLLAR FRANC KRONA
£'000 £'000 £'000 £'000 £'000
Debtors (due from brokers, dividends) 102 240 114 139 -
Forward currency contracts - - - - (178)
Foreign currency exposure on net monetary 102 240 114 139 (178)
items
Investments at fair value through profit 18,842 15,947 13,615 21,333 175
or loss that are equities
Total net foreign currency exposure 18,944 16,187 13,729 21,472 (3)
The above amounts may not be representative of the exposure to risk during the
year, because the levels of foreign currency exposure may change significantly
throughout each year.
Currency sensitivity
The table on page 46 illustrates the sensitivity of net assets and of net
return after taxation for the year using the exchange rates shown below. It is
based on the Company's monetary foreign currency financial instruments held at
each balance sheet date and takes account of forward foreign exchange contracts
that offset the effects of changes in currency exchange rate.
2014 2013
£/US dollar ±1.9% ±2.5%
£/Swiss franc ±1.8% ±1.9%
£/Swedish krona n/a ±3.2%
The above percentages have been determined based on the market volatility in
the year, using the standard deviation of Sterling's daily fluctuation to the
US dollar and Swiss franc against the mean during the year.
If Sterling had strengthened against the US dollar and Swiss franc to this
extent, this would have had the following effect:
30 SEPTEMBER 2014 30 SEPTEMBER 2013
US SWISS US SWISS
DOLLAR FRANC DOLLAR FRANC
£'000 £'000 £'000 £'000
Income statement - return after taxation
  Revenue return (9) (14) (12) (12)
  Capital return (360) (291) (343) (405)
Total return after taxation for the year (369) (305) (355) (417)
Effect on net asset value (0.1%) (0.1%) (0.2%) (0.2%)
If Sterling had weakened against US dollar and Swiss franc to this extent, the
effect would have been the exact opposite.
In the opinion of the Directors, the above sensitivity analysis is not
representative of the year as a whole, since the level of exposure may change
frequently as part of the currency risk management process of the Company.
Interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits and the interest payable on the variable rate borrowings. When the
Company has cash balances, they are held on variable rate bank accounts
yielding rates of interest dependent on the base rate of the custodian. The
Company has an uncommitted bank overdraft facility which it uses for settlement
purposes, on which interest is payable at a variable rate. Use of this facility
has been minimal over the two years being reported on. At the year end there
was none drawn down (2013: nil).
At the balance sheet date the Company has structural debt comprising £32
million of debenture stock and £250,000 of 5% cumulative preference shares. The
interest rates on the debenture stocks and preference shares are fixed and
details are shown in notes 5 and 12.
The Company's portfolio is substantially invested in equities which are not
directly exposed to interest rate risk.
Other price risk
Other price risks (i.e. changes in market prices other than those arising from
interest rate risk or currency risk) may affect the value of the equity
investments, and it is the business of the Manager to manage the portfolio to
achieve the best returns.
Management of other price risk
The Directors manage the market price risks inherent in the investment
portfolio by meeting regularly to monitor on a formal basis the Manager's
compliance with the Company's stated objectives and policies and to review
investment performance.
The Company's portfolio is the result of the Manager's investment process and
as a result is not correlated with the Company's benchmark or the market in
which the Company invests. The value of the portfolio will not move in line
with the market but will move as a result of the performance of the company
shares within the portfolio.
Based on the equity portfolio value of £263,999,000 (2013: £254,279,000), if
the value of the portfolio rose or fell by 10% at the balance sheet date, the
net return after tax for the year and net assets would increase or decrease by
£26.4 million (2013: £25.4 million) respectively; in calculating these amounts
no adjustment has been made for other variables including management fees.
Liquidity risk
Liquidity risk is minimised as the majority of the Company's investments are
readily realisable securities which can be sold to meet funding commitments if
necessary. In addition, the bank overdraft facility provides for additional
funding flexibility. No special arrangements have been made in connection with
the liquidity of any of the Company's assets.
Liquidity risk exposure
The contractual maturities of the financial liabilities at the year end, based
on the earliest date on which payment can be required, are as follows:
2014 2013
LESS THREE MORE LESS THREE MORE
THAN TO THAN THAN TO THAN
THREE TWELVE ONE THREE TWELVE ONE
MONTHS MONTHS YEAR TOTAL MONTHS MONTHS YEAR TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Debenture stocks - - 31,968 31,968 - - 31,968 31,968
Interest on debenture stocks 811 1,354 15,696 17,861 811 1,354 17,861 20,026
Amounts due to brokers - - - - 5 - - 5
Accruals and deferred income 467 - - 467 561 - - 561
Performance fee accrued 952 - - 952 1,002 - - 1,002
2,230 1,354 47,664 51,248 2,379 1,354 49,829 53,562
The 5% cumulative preference shares do not have a fixed repayment date and are,
as a result, not shown in the above table. Details are shown in note 12 of the
financial statements.
Credit risk
Credit risk encompasses the failure by counterparties to deliver securities
which the Company has paid for, or to pay for securities which the Company has
delivered. This risk is mitigated by using only approved counterparties. Cash
balances are limited to a maximum of either £10 or £15 million with any one
depositary and only depositaries approved by the Board are used.
The portfolio may be adversely affected if the custodian of the Company's
assets suffers insolvency or other financial difficulties. The risk associated
with failure of the custodian is mitigated by the appointment during the year
of a depositary. The depositary is ultimately responsible for safekeeping of
the Company's assets and is strictly liable for the recovery of financial
instruments in the event of loss. As part of the Board's risk management and
control monitoring, the Board reviews the custodian's annual control report and
the Manager's management of the relationship with the custodian.
Fair Values of Financial Assets and Financial Liabilities
The fair values of the financial assets and financial liabilities, other than
debentures and preference shares, are either carried in the balance sheet at
their fair value (investments), or the balance sheet amount is a reasonable
approximation of fair value (due from brokers, dividends receivable, accrued
income, due to brokers, accruals, cash at bank and overdraft). The book cost
and fair value of the debentures and the preference shares based on the offer
value at the balance sheet date follow.
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
2014 2014 2013 2013
£'000 £'000 £'000 £'000
Debentures repayable in more than 5 years:
7.75% Debenture Stock 2020 7,000 8,505 7,000 8,540
6.5% Debenture Stock 2023 24,968 29,293 24,968 30,211
Discount on issue of debentures (303) - (329) -
31,665 37,798 31,639 38,751
5% Cumulative preference shares of £1 each 250 213 250 193
31,915 38,011 31,889 38,944
Fair Value Hierarchy Disclosures
Nearly all of the Company's portfolio of investments are in the Level 1
category as defined in FRS 29 'Financial Instruments: Disclosures'. The three
levels set out in FRS 29 are:
Level 1 - fair value based on quoted prices in active markets for identical
assets.
Level 2 - fair values based on valuation techniques using observable inputs
other than quoted prices within Level 1.
Level 3 - fair values based on valuation techniques using inputs that are not
based on observable market data.
Categorisation within the hierarchy is determined on the basis of the lowest
level input that is significant to the fair value measurement of each relevant
asset/liability. The valuation techniques used by the Company are explained in
the accounting policies note.
2014 2013
Level 1 Level 2 Level 3 TOTAL Level 1 Level 2 Level 3 TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Financial assets
designated at fair value
through profit or loss:
Quoted investments:
  Equities 254,980 - - 254,980 245,699 - - 245,699
  Other securities - 182 - 182 - 312 - 312
Unquoted investments:
  Equities - - 8,837 8,837 - - 8,268 8,268
Derivative financial
  instruments:
  Currency hedges - - - - - 1 - 1
Total for financial 254,980 182 8,837 263,999 245,699 313 8,268 254,280
assets
A reconciliation of the fair value movements in Level 3 is set out below:
2014 2013
£'000 £'000
Opening fair value of Level 3 8,268 7,976
Transfer from Level 1 to Level 3 - 3,028
Transfer to Level 1 from Level 3 - (1,427)
Investments purchased - 323
Investments redeemed, sold or written off (175) (111)
Movement in holding (losses)/gains on assets held at the year end 744 (1,521)
Closing fair value of Level 3 8,837 8,268
Capital Management
The Company's capital, or equity, is represented by its net assets which are
managed to achieve the Company's investment objective set out on page 6.
The Company's total capital employed at 30 September 2014 was £282,182,000
(2013: £263,369,000) comprising borrowings of £31,915,000 (2013: £31,889,000)
and equity share capital and other reserves of £250,267,000 (2013: £
231,480,000).
The Company's total capital employed is managed to achieve the Company's
investment objective and policy as set out on page 6, including that borrowings
may be used to raise equity exposure. At the balance sheet date, net gearing
was 5.7% (2013: 9.5%). The Company's policies and processes for managing
capital are unchanged from the preceding year.
The main risks to the Company's investments are shown in the Strategic Report
under the 'Principal Risks and Uncertainties' section on pages 8 to 10. These
also explain that the Company is able to gear and that gearing will amplify the
effect on equity of changes in the value of the portfolio.
The Board can also manage the capital structure directly since it has taken the
powers, which it is seeking to renew, to issue and buy back shares and it also
determines dividend payments.
The Company is subject to externally imposed capital requirements with respect
to the obligation and ability to pay dividends by section 1159 Corporation Tax
Act 2010 and by the Companies Act 2006, respectively, and with respect to the
availability of the overdraft facility, by the terms imposed by the custodian.
The Board regularly monitors, and has complied with, the externally imposed
capital requirements. This is unchanged from the prior year.
Borrowings comprise debenture stocks and preference shares, details of which
are contained in note 13.
19. Contingencies, Guarantees and Financial Commitments
Contingencies or guarantees that the Company will or has given would be
disclosed in this note if any existed. Likewise any commitments, being those
amounts that the Company is contractually required to pay in the future as long
as the other party meets their obligations.
There were no other contingencies, guarantees or financial commitments of the
Company at the year end (2013: £nil).
20. Related Party Transactions and Transactions with the Manager
A related party is a company or individual who has direct or indirect control
or influence over the Company. Under accounting standards, the Manager is not a
related party.
Under UK GAAP, the Company has identified the Directors as related parties. The
Directors' remuneration and interests have been disclosed on pages 23 and 24
with additional disclosure in note 4. No other related parties have been
identified.
Invesco Fund Managers Limited and Invesco Asset management Limited, both of
which are wholly owned subsidiaries of Invesco Limited, provided investment
management and administration services to the Company. Details of the related
services and fees are disclosed in the Directors' Report and management fees
payable are shown in note 3.
.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 30 September 2014. The financial
information for 2013 is derived from the statutory accounts for 2013, which
have been delivered to the Registrar of Companies. The 2013 accounts were
audited and the audit report was unqualified, did not include a reference to
any matters to which the auditor drew attention by way of emphasis without
qualifying the report and did not contain a statement under section 498 of the
Companies Act 2006. The statutory accounts for the year ended 30 September
2014 have been finalised and audited but have not yet been delivered to the
Registrar of Companies.
The audited annual financial report will be available to shareholders shortly.
Copies may be obtained during normal business hours from the Company's
administration office, 6th Floor, 125 London wall, London EC2Y 5AS and are
available via the Manager's website at www.invescoperpetual.co.uk/
investmenttrusts .
The Annual General Meeting will be held on 22 January 2015 at 11.00am at 43-45
Portman Square, London, W1H 6LY.
By order of the Board
Invesco Asset Management Limited
25 November 2014
Contacts:
Nira Mistry 0203 753 1000
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