Invesco Asia Trust plc
Half-Yearly Financial Report
For the Six Months to 31 October 2015
KEY FACTS
Invesco Asia Trust plc (the ‘Company’) is an investment trust listed on the London Stock Exchange.
Investment Objective
The Company’s objective is to provide long-term capital growth by investing in a diversified portfolio of Asian and Australasian companies. The Company aims to achieve growth in its net asset value (NAV) in excess of the Benchmark Index, the MSCI AC Asia ex Japan Index (total return, in sterling terms).
Investment Policy
Invesco Asia Trust plc invests primarily in the equity securities of companies listed on the stockmarkets of Asia (ex Japan) including Australasia. It may also invest in unquoted securities up to 10% of the value of the Company’s gross assets, and in warrants and options when it is considered the most economical means of achieving exposure to an asset.
The Company is actively managed and the Manager has broad discretion to invest the Company’s assets to achieve its investment objective. The Manager seeks to ensure that the portfolio is appropriately diversified having regard to 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 are on page 6 of the 2015 annual financial report.
Performance Statistics
The Benchmark Index of the Company is the MSCI AC Asia ex Japan Index (total return, in sterling terms).
Terms marked † are defined in the Glossary of Terms on page 67 of the 2015 annual financial report.
|
SIX MONTHS |
|
|
|
ENDED |
|
|
|
31 OCT 2015 |
|
|
| Total Return Statistics(1): |
|
|
|
| – Net asset value† (NAV) |
–11.8% |
|
|
| – Share Price |
–13.1% |
|
|
| – Benchmark index† |
–16.3% |
|
|
| Capital Statistics |
AT 31 OCT |
AT 30 APR |
% |
|
2015 |
2015 |
CHANGE |
| Net assets (£’000) |
173,820 |
202,167 |
–14.0 |
| Gearing†: |
|
|
|
| – gross gearing |
0.1% |
0.3% |
|
| – net gearing |
— |
0.3% |
|
| Net cash |
0.1% |
— |
|
| NAV† per share – basic |
199.3p |
230.7p |
–13.6 |
| Share price |
177.4p |
208.0p |
–14.7 |
| Benchmark index(1) |
337.6 |
411.0 |
–17.9 |
| Discount† per ordinary share: |
|
|
|
| – cum income |
11.0% |
9.8% |
|
| – ex income |
9.9% |
8.3% |
|
| Average discount over the |
|
|
|
| six months/year (ex income) |
9.4% |
9.5% |
|
(1) Source: Thomson Reuters Datastream.
.
INTERIM MANAGEMENT REPORT INCORPORATING THE CHAIRMAN’S STATEMENT
Chairman’s Statement
Performance
The six months to 31 October 2015 has witnessed significant falls in Asian equity markets. Concerns over China’s economic slowdown, weak Asian export growth, uncertainty over the direction of US Federal Reserve policy and the slow progress in structural reform across Asia all contributed to the decline. In addition, the Chinese authorities’ introduction of measures to stabilise the Chinese equity market and a poorly explained change in currency policy served to raise uncertainty over China’s economic policy. There was however some respite towards the end of the period as low valuations became a strong support for markets.
As a consequence, the Company’s benchmark index, the MSCI AC Asia ex Japan Index, fell by 16.3% in total return, sterling terms. However, I would note that although the net asset value of the Company also decreased, its return of -11.8% meant that the Company outperformed its benchmark. The Company’s share price also decreased, by 14.7% (from 208p to 177.4p), and the discount to net asset value ex-income at which the shares trade widened from 8.3% to 9.9%.
Dividend
For the six months to 31 October 2015, the revenue per ordinary share was 2.5p (2.3p: 2014). As has been the case in previous years, the Board does not intend to pay an interim dividend. At the last AGM held on 6 August 2015, a final dividend of 3.65p per share was approved and paid to shareholders on 12 August 2015.
Borrowings
The Manager has the freedom to borrow within a working range set by the Board within the overall limit of the Company’s investment policy which permits gearing up to 25% of net assets. The Board has currently set a working range of up to 15% of net assets. In practice during the period, the Company has either had no or very low (less than 1% of net assets) borrowings.
Discount Control and Tender Offer
The Board considers it desirable that, in normal market conditions, the Company’s shares should trade at a price which, on average, represents a discount of less than 10% to NAV excluding income. In the period the shares traded at an average discount of 9.4%.
At its 2015 Annual General Meeting, the Company renewed its authority to purchase its own shares and this is used to assist in maintaining the discount within the 10% limit. During the period 430,867 shares were bought back and cancelled at an average price of 179.32p per share. This enhanced the NAV by £80,500 or 0.05%. At the period end the share capital consisted of 90,486,421 ordinary shares including 3,277,224 shares held in treasury. Subsequent to the period end, the Company bought back and cancelled a further 244,131 shares at an average price of 176.8p per share.
Outlook
Over the past few years, Asian stock markets have been adjusting to slower regional economic activity. This is in part a cyclical phenomenon due to sluggishness in global growth combined with the maturity of the Asian credit cycle. It is also a reflection of the structural change seen in some Asian economies. For instance, the rebalancing of the Chinese economy away from investment as the primary driver of economic growth will inevitably lead to a lower rate of GDP growth over the medium term. This is not necessarily negative for equities if, as a result, returns on capital improve in the process. However, it helps to explain why there is a growing focus on economic reform in Asia and which countries are best placed to deliver it.
In China, we are seeing signs that activity indicators are bottoming and the valuation multiples of these stocks are now offering tempting entry points. We are also positive about the opportunities in India, despite economic growth being relatively slow to recover, and Korea, where there are indications that dividend payments could rise significantly. Samsung is leading the way here. As in China, these markets are now offering some attractive buying opportunities. The Portfolio Manager’s Report covers these developments in greater detail.
Against this backdrop, Asian equities are cheaper both in absolute terms and relative to other global equity markets. With price to prospective 2016 earnings at 11.2 times, current valuations are approaching the level at which the market has historically bottomed out. The current 30% discount of Asian markets to the MSCI World Index is wide by historical standards, and yet both asset classes have offered similar growth in corporate earnings over the last five years. The last six months have seen steep falls. However, your portfolio manager and the Board consider that the worst is behind us and that share prices have reached a level where there are many attractive opportunities for investment.
Carol Ferguson
Chairman
16 December 2015
PORTFOLIO MANAGER’S REPORT
Market Review
Asian equity markets, as measured by the MSCI AC Asia ex Japan Index (total return), fell by 16.3% over the review period in sterling terms. MSCI China led the decline in Asian markets. Offshore Chinese equities began the period at an inflated level. This was driven by the hope that the Hong Kong Shanghai Connect programme would lead to capital flow into Hong Kong-listed equities as valuations there were lower than those prevailing in the Shanghai market. As it turned out, it was a substantial fall in Shanghai equities that caused Hong Kong’s discount to narrow. This decline began with the realisation that continued slower Chinese economic growth did not support the re-rating of Chinese shares and was subsequently exacerbated by the government’s decision to intervene to support the market. A poorly explained change in the Renminbi regime in early August further encouraged the notion that China had decided to engage in competitive devaluation to support growth. This view has subsequently been shown to be incorrect.
Another important feature of the markets in the period was the significant weakness in ASEAN currencies. This resulted in the South East Asian equity markets being amongst the worst performers in sterling terms. The increasing likelihood that the US Federal Reserve would begin to raise interest rates in 2015, weak commodity prices leading to pressure on trade balances and political upheaval were all contributing factors to this trend.
Elsewhere in the region, the Indian market was relatively resilient. Unlike many emerging market economies, India is a clear beneficiary of lower commodity prices and, in particular, crude oil. This has hastened India’s path to a lower current account deficit and has required relatively less of a domestic demand contraction than experienced elsewhere. As a result the Indian rupee has been stable compared to other emerging market currencies. In addition, India has been identified as an economy with fewer structural headwinds with the markets remaining convinced that the Modi government can successfully unlock India’s economic potential over time.
Portfolio Review
In the six months to the end of October 2015, the Company’s net asset value decreased by 11.8% (total return, £). This performance, however, was better than the benchmark which declined by 16.3% (total return, £).
The Company’s holdings in Chinese internet companies were key contributors to relative outperformance. In particular NetEase, the second largest holding in the portfolio, enjoyed strong share price gains. This was driven by growing evidence that the company has been able to translate its expertise in PC games to games played on smartphones. NetEase has grown revenue contribution from mobile games to 40% from nothing two years ago. This change in revenue mix did initially have a negative impact on margins but the recent third quarter results demonstrated that margins are beginning to bottom out allowing rapid revenue growth to be translated into net profit growth. Despite the excellent growth record of this business, its valuation has historically been depressed by its reliance on a few successful PC games. The growing diversity of its revenue sources has led to a gradual re-rating of NetEase’s valuation.
HDFC Bank, the Indian private bank, was also a strong performer over the period. The long-term investment case for HDFC Bank is based on its ability to gain market share from the Indian Government-owned banks. These public banks still dominate the industry with 70% loan share but are unable to match HDFC in terms of customer service, product innovation, efficiency and credit control. However, in the shorter term HDFC has also benefited from the fact that most Indian banks are struggling to deal with asset quality problems stemming from excessive leverage in the private infrastructure sector. This is also resulting in a shortage of capital in some banks that the government has been slow to address. HDFC Bank’s valuation has gained from this as it is well-capitalised and has benign asset quality. It is thus experiencing more rapid market share gains as a result.
The Indian agrochemical company, UPL, a long term holding in the portfolio, has continued its strong run of performance. Given the quality and diversity of UPL’s branded generic business, we have always felt that the company has been unfairly saddled with a valuation more akin to a commodity chemical business. An examination of UPL’s historical financials indicates a business of steady growth and stable profitability. Recent performance exemplifies this. Against a backdrop of weak agricultural commodity prices and volatile emerging market currencies, UPL has managed a volume growth of 14% in H1FY16. During the half year, UPL’s valuation rose to 16x compared to a trough level of 9x. In our view, this approaches fair value and thus we have reduced the weighting in the portfolio.
The other notable positive contribution to performance was stock selection in Korea. Firstly, Samsung Electronics, in addition to reporting better than forecast earnings, announced a capital return policy that greatly exceeded our modest expectations. The company will buy back USD10 billion worth of shares over the next 18 months. It will also cancel these shares – something that Korean companies have historically been loath to do. It has also committed to return up to 50% of free cash flow in dividends in future years. Secondly, Korean Reinsurance profited from a period of benign catastrophe claims such that nine month earnings were already in excess of analysts’ forecasts for the full year. Lastly, Shinsegae, a Korean department store chain, rose on expectations that it would win a duty free licence in Seoul. Korea is currently a favoured destination for Chinese tourists and as a consequence the duty free business has proven to be a lucrative area. We have used the strength in Korean Re and Shinsegae to exit these positions.
Conversely, the negative contributors to relative performance mainly came from the oil and materials sectors. These are a relatively small part of the portfolio but have impacted performance nonetheless. Commodity prices have reached the levels that many of the producers are loss making and at levels that should reasonably result in supply rationalisation. In addition, it has been our expectation that a sustained improvement in residential property sales in China since April 2015 would eventually lead to a stabilisation in construction activity. Indeed, there has been a modest increase in the China activity indices that we follow but this has yet to positively influence commodity prices or commodity equities. This is because excess supply has become the dominant factor driving prices and it seems that more drastic action is needed on the supply-side to stabilise markets.
Outlook
Asian equities have been stuck in a trading range over the last few years and have underperformed developed market equities. Earnings expectations have consistently had to be revised down as markets have had to come to terms with Asia’s lower economic growth. While Asian earnings growth has, in fact, been similar to that experienced in developed markets, this has been insufficient to attract capital from investors who have traditionally seen Asia as a source of higher return through more rapid earnings growth. Consequently, relative valuations have had to de-rate to the point that the investor is appropriately rewarded for putting money to work in the region. With Asian valuations at a 30% discount to MSCI World and within 10-15% of the previous valuation troughs, this process of de-rating is quite advanced.
While we certainly recognise the challenges that the Chinese government is facing in re-orientating the economy away from investment, we believe that consensus has become excessively pessimistic on China at precisely the moment at which there appear to be signs of a modest increase in economic activity. This has enabled us to invest in high quality businesses with robust growth prospects like the Chinese internet companies, NetEase and Baidu, at much more reasonable valuations than prevail in other markets. Despite the growing negativity surrounding China, these investments have been amongst the top contributors to the Company’s performance over recent years. We continue to hunt for structural winners with a ‘China discount’. Examples of recent additions to the portfolio are ENN Energy, the city gas distributor, and Minth, the auto parts manufacturer. Both of these companies trade at a discount to regional valuations and offer better growth prospects.
As far as India is concerned, we think that the market has correctly identified India as having superior growth prospects. While the progress on reform is rather stop-start, we are especially encouraged by the government’s determination to rein in the lax fiscal policy of the previous administration and to get inflation under control. This is laying the foundations for a more durable economic cycle. However, we have found it increasingly hard to uncover new investments in India that we believe to be genuinely undervalued. This explains the static weight of India in the portfolio despite the market’s outperformance.
From these valuation levels, Asian markets should be quite sensitive to any indication of improved economic fundamentals and earnings momentum. For Asia, in addition to a stabilisation in the Chinese construction cycle, this is most likely to come from a better external demand environment. Asian exports have been stagnant for several years now reflecting the weak global environment. Thus we are watching to see if the recent improvement in lead indicators in Europe and Asia can be sustained and whether the short term weakness in the US will reverse. For now we are retaining a portion of the portfolio in companies with more cyclical earnings such as in the oil, materials, technology hardware and automotive sectors that would benefit from better growth sentiment. Many of these stocks are now trading at the lowest valuations in their history.
Ian Hargreaves
Portfolio Manager
16 December 2015
.
RELATED PARTY TRANSACTIONS
Under United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law), the Company has identified the Directors as related parties. No other related parties have been identified during the period. No transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.
PRINCIPAL RISKS AND UNCERTAINTIES
The 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;
– 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;
– 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;
– 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;
– Borrowings – the use of borrowings will amplify the effect on shareholders’ funds of portfolio gains and losses;
– 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 9 to 11 of the Company’s 2015 annual financial report, which is available on the Company’s section of the Manager’s website www.invescoperpetual.co.uk/invescoasia.
In the view of the Board, these principal risks and uncertainties are as much applicable to the remaining six months of the financial year as they were to the six months under review.
GOING CONCERN
The financial statements have been prepared on a going concern basis. The Directors consider this is the appropriate basis as they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, being at least 12 months after the approval of this half-yearly financial report. In considering this, the Directors took into account the diversified portfolio of readily realisable securities which can be used to meet short-term funding commitments, the ability of the Company to meet all of its liabilities and ongoing expenses from its assets, and revenue forecasts.
DIRECTORS’ RESPONSIBILITY STATEMENT
in respect of the preparation of the half-yearly financial report
The Directors are responsible for preparing the half-yearly financial report using accounting policies consistent with applicable law and UK Accounting Standards.
The Directors confirm that to the best of their knowledge:
– the condensed set of financial statements contained within the half-yearly financial report have been prepared in accordance with the FRC’s FRS 104 Interim Financial Reporting;
– the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure 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
16 December 2015
.
TWENTY-FIVE LARGEST HOLDINGS AT 31 OCTOBER 2015
Ordinary shares unless otherwise stated
The industry group is based on MSCI and Standard & Poor’s Global Industry Classification Standard.
|
|
|
MARKET |
|
|
|
|
VALUE |
% OF |
| COMPANY |
INDUSTRY GROUP |
COUNTRY |
£’000 |
PORTFOLIO |
| Samsung Electronics – Ordinary Shares |
Technology Hardware & Equipment |
South Korea |
6,416 |
6.6 |
| Samsung Electronics – Preference Shares |
|
|
5,093 |
|
| NetEase – ADR |
Software & Services |
China |
8,758 |
5.0 |
| Baidu – ADR |
Software & Services |
China |
7,282 |
4.2 |
| China MobileR |
Telecommunication Services |
China |
6,985 |
4.0 |
| HDFC Bank |
Banks |
India |
5,824 |
3.3 |
| CK Hutchison |
Capital Goods |
Hong Kong |
5,351 |
3.1 |
| AIA |
Insurance |
Hong Kong |
5,017 |
2.9 |
| Industrial & Commercial Bank Of ChinaH |
Banks |
China |
4,866 |
2.8 |
| China Life Insurance – Taiwan |
Insurance |
Taiwan |
4,647 |
2.7 |
| Shinhan Financial |
Banks |
South Korea |
4,389 |
2.5 |
| Hyundai Motor – Preference Shares |
Automobiles & Components |
South Korea |
4,325 |
2.5 |
| Taiwan Semiconductor Manufacturing |
Semiconductors & Semiconductor Equipment |
Taiwan |
4,321 |
2.5 |
| Hon Hai Precision Industry |
Technology Hardware & Equipment |
Taiwan |
4,116 |
2.4 |
| HSBC |
Banks |
Hong Kong |
4,077 |
2.3 |
| UPL |
Materials |
India |
3,761 |
2.2 |
| Cheung Kong Property |
Real Estate |
Hong Kong |
3,600 |
2.1 |
| PT Bank Negara Indonesia Persero |
Banks |
Indonesia |
3,589 |
2.1 |
| Samsonite International |
Consumer Durables & Apparel |
Hong Kong |
3,522 |
2.0 |
| United Overseas Bank |
Banks |
Singapore |
3,440 |
2.0 |
| Korea Electric Power Corporation |
Utilities |
South Korea |
3,321 |
1.9 |
| Tata Consultancy |
Software & Services |
India |
3,175 |
1.8 |
| ICICI |
Banks |
India |
3,146 |
1.8 |
| Telekomunikasi Indonesia |
Telecommunication Services |
Indonesia |
3,142 |
1.8 |
| Hyundai Mobis |
Automobiles & Components |
South Korea |
2,987 |
1.7 |
| MINTH |
Automobiles & Components |
China |
2,898 |
1.7 |
|
|
|
|
|
|
|
|
118,048 |
67.9 |
| Other investments |
|
|
56,138 |
32.1 |
|
|
|
|
|
| Total investments |
|
|
174,186 |
100.0 |
ADR: American Depositary Receipts – are certificates that represent shares in the relevant stock and are issued by a US bank. They are denominated and pay dividends in US dollars.
H: H-Shares – shares issued by companies incorporated in the People’s Republic of China (PRC) and listed on the Hong Kong Stock Exchange.
R: Red Chip Holdings – holdings in companies incorporated outside the PRC, listed on the Hong Kong Stock Exchange, and controlled by PRC entities by way of direct or indirect shareholding and/or representation on the board.
.
CONDENSED INCOME STATEMENT
|
SIX MONTHS TO |
SIX MONTHS TO |
|
31 OCTOBER 2015 |
31 OCTOBER 2014 |
|
REVENUE |
CAPITAL |
TOTAL |
REVENUE |
CAPITAL |
TOTAL |
|
RETURN |
RETURN |
RETURN |
RETURN |
RETURN |
RETURN |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
| (Losses)/gains on investments at fair value |
— |
(25,974) |
(25,974) |
— |
25,252 |
25,252 |
| Losses on foreign currency revaluation |
— |
(82) |
(82) |
— |
(513) |
(513) |
| Income – note 2 |
2,840 |
— |
2,840 |
2,789 |
573 |
3,362 |
|
2,840 |
(26,056) |
(23,216) |
2,789 |
25,312 |
28,101 |
| Investment management fee – note 3 |
(163) |
(488) |
(651) |
(173) |
(519) |
(692) |
| Other expenses |
(260) |
(3) |
(263) |
(328) |
(2) |
(330) |
| Net return before finance costs and taxation |
2,417 |
(26,547) |
(24,130) |
2,288 |
24,791 |
27,079 |
| Finance costs – note 3 |
(6) |
(18) |
(24) |
(11) |
(35) |
(46) |
| Return on ordinary activities before taxation |
2,411 |
(26,565) |
(24,154) |
2,277 |
24,756 |
27,033 |
| Tax on ordinary activities – note 4 |
(218) |
— |
(218) |
(178) |
— |
(178) |
| Return on ordinary activities after taxation for the |
|
|
|
|
|
|
| financial period |
2,193 |
(26,565) |
(24,372) |
2,099 |
24,756 |
26,855 |
|
|
|
|
|
|
|
| Return per ordinary share |
|
|
|
|
|
|
| Basic |
2.5p |
(30.4)p |
(27.9)p |
2.3p |
27.9p |
30.2p |
|
|
|
|
|
|
|
| Weighted average number of ordinary shares in issue |
|
|
87,467,925 |
|
|
88,811,664 |
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 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 six months ended 31 October 2015 |
|
|
|
|
|
|
|
| At 30 April 2015 |
9,092 |
— |
4,032 |
93,803 |
89,352 |
5,888 |
202,167 |
| Final dividend for 2015 – note 7 |
— |
— |
— |
— |
— |
(3,195) |
(3,195) |
| Net return from ordinary activities |
— |
— |
— |
— |
(26,565) |
2,193 |
(24,372) |
| Shares bought back and cancelled |
(43) |
— |
43 |
(780) |
— |
— |
(780) |
| At 31 October 2015 |
9,049 |
— |
4,075 |
93,023 |
62,787 |
4,886 |
173,820 |
|
|
|
|
|
|
|
|
| For the six months ended 31 October 2014 |
|
|
|
|
|
|
|
| At 30 April 2014 |
9,214 |
95,911 |
3,910 |
— |
48,316 |
5,618 |
162,969 |
| Final dividend for 2014 |
— |
— |
— |
— |
— |
(3,066) |
(3,066) |
| Unclaimed dividends |
— |
— |
— |
— |
— |
2 |
2 |
| Net return from ordinary activities |
— |
— |
— |
— |
24,756 |
2,099 |
26,855 |
| Transfer to special reserve |
— |
(95,911) |
— |
95,911 |
— |
— |
— |
| Shares bought back and cancelled |
(11) |
— |
11 |
— |
(200) |
— |
(200) |
| At 31 October 2014 |
9,203 |
— |
3,921 |
95,911 |
72,872 |
4,653 |
186,560 |
.
CONDENSED BALANCE SHEET
Registered Number 03011768
|
AT |
AT |
|
31 OCTOBER |
30 APRIL |
|
2015 |
2015 |
|
£’000 |
£’000 |
| Fixed assets |
|
|
| Investments designated at fair value – |
|
|
| note 5 |
174,186 |
202,176 |
|
|
|
| Current assets |
|
|
| Amounts due from brokers |
184 |
6,704 |
| Tax recoverable |
174 |
133 |
| VAT recoverable |
13 |
16 |
| Prepayments and accrued income |
113 |
418 |
| Cash and cash equivalents |
290 |
140 |
|
|
|
|
774 |
7,411 |
|
|
|
| Current liabilities: amounts falling |
|
|
| due within one year |
|
|
| Bank overdraft |
(190) |
— |
| Bank loan |
— |
(652) |
| Amounts due to brokers |
(450) |
(6,180) |
| Accruals |
(500) |
(588) |
|
|
|
|
(1,140) |
(7,420) |
|
|
|
| Net current liabilities |
(366) |
(9) |
|
|
|
| Total net assets |
173,820 |
202,167 |
|
|
|
| Capital and reserves |
|
|
| Share capital – note 6 |
9,049 |
9,092 |
| Other reserves: |
|
|
| Capital redemption reserve |
4,075 |
4,032 |
| Special reserve |
93,023 |
93,803 |
| Capital reserve |
62,787 |
89,352 |
| Revenue reserve |
4,886 |
5,888 |
|
|
|
|
173,820 |
202,167 |
|
|
|
| Net asset value per share – basic |
199.3p |
230.7p |
|
|
|
| Number of 10p ordinary shares in |
|
|
| issue at the period end – note 6 |
87,209,197 |
87,640,064 |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Accounting Policies
The condensed financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and with the latest Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts, issued by the Association of Investment Companies in November 2014. Accordingly, FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland applies for the year ending 30 April 2016 and these condensed financial statements. In addition, FRS 104 Interim Financial Reporting, issued by the Financial Reporting Council in March 2015 has been applied for the first time. The financial statements are issued on a going concern basis.
As a result of the first time adoption of FRS 102 and the revised SORP, comparative figures and presentational formats have been revised where required. The net return attributable to ordinary shareholders and shareholders’ funds remain unchanged. The Company as an investment fund has taken the option not to present a cash flow statement. A cash flow statement is not required when an investment fund meets all the following conditions: substantially all investments are highly liquid and are carried at market value, and where a statement of changes in equity is provided.
The accounting policies applied to these condensed financial statements are consistent with those applied in the financial statements for the year ended 30 April 2015, with the following revision:
Cash and cash equivalents may comprise cash (including short term deposits which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value) as well as cash equivalents, including money market funds. Investments are regarded as cash equivalents if they meet all of the following criteria; highly liquid investments held in the Company’s base currency that are readily convertible to a known amount of cash, are subject to an insignificant risk of change in value and provide a return no greater than the rate of a three-month high quality government bond.
No other accounting policies have changed as a result of the application of FRS 102 and the revised SORP.
2. Income
|
SIX MONTHS TO |
SIX MONTHS TO |
|
31 OCTOBER |
31 OCTOBER |
|
2015 |
2014 |
|
£’000 |
£’000 |
| Income from investments |
|
|
| Overseas dividends |
2,445 |
2,289 |
| Special dividends – overseas |
35 |
93 |
| Scrip dividends |
218 |
287 |
| UK dividends |
142 |
120 |
|
|
|
| Total income |
2,840 |
2,789 |
No special dividends have been recognised in capital (31 October 2014: £573,000).
3. Management Fee and Finance Costs
Investment management fees and finance costs on any borrowings are charged 75% to capital and 25% to revenue. A management fee is payable quarterly in arrears and is equal to 0.75% per annum of the value of the Company’s total assets less current liabilities (including any short-term borrowings) under management at the end of the relevant quarter.
4. Investment Trust Status and Tax
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.
5. Classification Under Fair Value Hierarchy
The fair value hierarchy analysis for investments at fair value at the period end is as follows:
|
AT 31 OCTOBER |
AT 30 APRIL |
|
2015 |
2015 |
|
£’000 |
£’000 |
| Quoted prices for identical instruments in |
|
|
| active markets |
174,186 |
202,176 |
6. Share Capital
(a) Ordinary Shares of 10p each
|
SIX MONTHS TO |
YEAR TO |
|
31 OCTOBER |
30 APRIL |
|
2015 |
2015 |
| Number of ordinary shares: |
|
|
| Brought forward |
87,640,064 |
88,859,369 |
| Shares bought back and cancelled |
(430,867) |
(1,219,305) |
|
|
|
| Carried forward |
87,209,197 |
87,640,064 |
During the period a total of 430,867 ordinary shares were repurchased and cancelled for an average price of 179.32p per share.
Since the period end a further 244,131 ordinary shares have been repurchased and cancelled for an average price of 176.8p per share.
(b) Treasury Shares
|
SIX MONTHS TO |
YEAR TO |
|
31 OCTOBER |
30 APRIL |
|
2015 |
2015 |
| Number of treasury shares: |
|
|
| Brought forward |
3,277,224 |
3,277,224 |
|
|
|
| In issue at period end |
3,277,224 |
3,277,224 |
|
|
|
| Ordinary shares in issue |
|
|
| (including treasury) |
90,486,421 |
90,917,288 |
7. Dividends per Ordinary Share
The Company paid a final dividend of 3.65p per ordinary share for the year ended 30 April 2015 on 12 August 2015 to shareholders on the register on 17 July 2015.
8. Status of Half-Yearly Financial Report
The financial information contained in this half-yearly report, which has not been audited or reviewed by the independent auditor, does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 31 October 2015 and 31 October 2014 has not been audited. The figures and financial information for the year ended 30 April 2015 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 included the Independent Auditor’s Report, 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
16 December 2015
.
