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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Edinburgh Investment Trust Plc | LSE:EDIN | London | Ordinary Share | GB0003052338 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 7.00 | 0.95% | 742.00 | 739.00 | 741.00 | 741.00 | 733.00 | 733.00 | 163,613 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | 55.02M | 42.24M | 0.2643 | 28.00 | 1.18B |
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The Edinburgh Investment Trust plc
Half-Yearly Financial Report
Six Months to 30 September 2018
Investment Objective
The Edinburgh Investment Trust plc is an investment trust whose investment
objective is to invest primarily in UK securities with the long term objective
of achieving:
1. an increase of the Net Asset Value per share in excess of the
growth in the FTSE All-Share Index; and
2. growth in dividends per share in excess of the rate of UK
inflation.
The Company will generally invest in companies quoted on a recognised stock
exchange in the UK. The Company may also invest up to 20% of the portfolio in
securities listed on stock exchanges outside the UK. The portfolio is selected
on the basis of assessment of fundamental value of individual securities and is
not structured on the basis of industry weightings.
Nature of the Company
The Company is a public listed Investment Company whose shares are traded on
the London Stock Exchange. The business of the Company consists of investing
the pooled funds of its shareholders, according to a specified investment
objective and policy (set out on page 12 of the Company's 2018 annual financial
report), with the aim of spreading investment risk and generating a return for
shareholders.
The Company uses borrowing to enhance returns to shareholders. This increases
the risk to shareholders should the value of investments fall.
The Company has contracted with an external investment manager, Invesco Fund
Managers Limited (the 'Manager'), to manage its investments and to provide the
Company's general administration. Other administrative functions are contracted
to other external service providers. The Company has a Board of non-executive
directors who oversee and monitor the activities of the Manager and other
service providers on behalf of shareholders and ensure that the investment
objective and policy is adhered to. The Company has no employees.
Performance Statistics
Six months to
30 September
2018
Total Return(1)(2) (all with income % Change
reinvested)
Net asset value (NAV) - debt at +8.7
market value
Share price +7.6
FTSE All-Share Index +8.3
The Company's benchmark is the FTSE
All-Share Index.
At At
30 31 March %
September
2018 2018 Change
Capital Return(2)
Net asset value - debt at market 749.12p 703.34p +6.5
value
Share price(1) 676.0p 642.0p +5.3
FTSE All-Share Index(1) 4,127.91 3,894.17 +6.0
Discount2 - debt at market value 9.8% 8.7%
Gearing (debt at market value) - gross gearing 11.1% 12.1%
(3)
- net gearing(4) 10.1% 11.8%
Retail Price Index(1) - annual 3.3% 3.3%
change
%
Six months to 30 September 2018 2017 Change
Revenue Return
Revenue return per ordinary share 15.6p 16.9p -7.7
First interim dividend(5) 6.25p 5.8p +7.8
Notes:
1. Source: Refinitiv (Thomson Reuters).
2. Defined in the Glossary of Terms and Alternative Performance Measures on
page 75 of the 2018 annual financial report.
3. Gross gearing: borrowings ÷ NAV (both with debt at market value).
4. Net Gearing: borrowings less cash and cash equivalents ÷NAV (both with debt
at market value).
5. Dividends declared in respect of the financial year.
Chairman's Statement
These six month results are reported against the continued backdrop of
uncertainties arising from Brexit negotiations and global trade tensions.
Our portfolio manager Mark Barnett, with an unchanged strategy, continues to
focus on the long term fundamentals of the companies he invests in. His
Portfolio Manager's Report gives an overall market review, together with a
review of major portfolio changes during the six months.
Performance
The Company produced a positive net asset value (NAV) total return for the six
months to 30 September 2018 of 8.7% (with debt at market value). This was
marginally ahead of that of the FTSE All-Share Index, the Company's benchmark,
which returned 8.3%. The share price total return (share price with dividends
reinvested) for the period was 7.6%, with the Company's share price ending the
period at 676.0p, an increase of 5.3% from the year end share price of 642.0p.
The discount of the NAV to the share price widened from 8.7% at the year end to
9.8% on 30 September 2018, reflecting a general widening of discounts across
the sector in the period. At 16 November 2018, the share price of 628.0p was at
a 8.1% discount to the NAV of 683.1p (the latest practical date prior to
signing this report).
During the period 185,000 shares were bought back and held in treasury at an
average price of 675.48p per share, excluding costs. At the period end the
share capital consisted of 195,481,734 shares in circulation and 185,000 shares
held in treasury. Subsequent to the period end, no shares have been bought
back.
The portfolio continues to be concentrated in a number of stocks and sectors
and its overweight or underweight positions in various sectors will be material
drivers of the Company's relative investment performance.
Dividend
As in previous years, the Board continues its aim to rebalance the interim and
final dividends towards the interims, whilst simultaneously aiming to at least
maintain the final dividend. Consequently, the Board has declared a first
interim dividend of 6.25p (2017: 5.8p), an increase of 7.8%. This will be paid
on 30 November 2018 to shareholders on the register on 16 November 2018, with
shares quoted ex-dividend on 15 November 2018.
The Board is committed to grow the dividend payable to shareholders by at least
the rate of inflation.
Borrowings
The Company has in place a mixture of fixed and floating rate debt. The former
is the Company's GBP100 million 7¾% debenture which matures in 2022 and the
latter a GBP150 million, 364 day bank credit facility. By this means, Mark has
the ability to vary the gearing level of the portfolio depending on his view of
the market. During the period under review aggregate borrowings ranged between
GBP139.6 million and GBP177.6 million, and ended the period at GBP142.6 million -
equivalent to gross gearing of 11.1%.
Outlook
The portfolio is based on a number of key pillars: exposure to tobacco, which
Mark believes continues to offer value even in an environment of rising
interest rates, the UK Domestic sector, which has been de-rated significantly
since the Brexit vote and where there is potential for recovery, non-correlated
financials and a set of attractive large caps. Together the portfolio offers a
degree of resilience in the face of uncertainties underpinned by dividend
growth.
The Board remains confident that Mark's high conviction approach to investment,
driven by fundamental careful stock selection, remains an appropriate approach
for such uncertain times. This approach will inevitably lead to periods in
which portfolio performance diverges from that of the benchmark FTSE All-Share
Index and therefore may result in periods of underperformance.
Glen Suarez
Chairman
20 November 2018
Total Returns to 30 September 2018
6 mths 1 yr 2 yr 3 yr 5 yr 10 yr
NAV (debt at
market value) (%) 8.7 2.2 10.7 22.3 56.0 202.9
Share Price (%) 7.6 1.1 0.5 9.0 35.5 206.1
FTSE All-Share Index (%) 8.3 5.9 18.5 38.4 43.5 138.5
Source: Refinitiv (Thomson Reuters).
Portfolio Manager's Report
Market Review
UK equity markets provided a positive return over the six month period to 30
September 2018. Markets rallied strongly in April and May on the back of rising
oil prices and sterling weakness against the US dollar, which boosted the
returns of international earners within the FTSE 100 Index. Markets traded
broadly sideways for the remainder of the period, before weakening at the
beginning of September as a result of global trade tensions and a peak in the
ongoing Brexit uncertainty.
Expectations that the Bank of England's Monetary Policy Committee (MPC) would
raise interest rates grew during spring. At its August meeting, the MPC voted
unanimously to increase the UK's base interest rate by 0.25% to 0.75%. The
widely anticipated rise was an indication from the MPC that the underlying
performance of the UK economy was better than expected. The increases over the
past twelve months offer the MPC greater flexibility to pare back interest
rates if deemed necessary, following the final deal negotiated for the UK's
exit from the European Union.
As a result of looming US sanctions against Iran, the oil price rose during the
six month period under review reaching a three-year high of US$82 per barrel in September. In contrast, sterling weakened materially to levels last seen in the fourth quarter of 2017 on increasing fears of a hard-Brexit and the European Union's rejection of the Government's Chequers plan. Elsewhere, economic data released during the period showed that the sustained hot weather and growth in real incomes provided a boost to consumer spending. The UK government also permitted the largest public sector pay rise in more than a decade, lifting the 1% cap on pay increases for over a million public sector workers, including teachers, police and prison officers, as well as for NHS staff. Portfolio Strategy and Review The Company's net asset value, including reinvested dividends, rose by 8.7% during the period under review, compared with a return of 8.3% (total return) by the FTSE All-Share Index. The portfolio's holdings in the industrials sector provided the largest contribution to performance. BAE Systems, HomeServe, BCA Marketplace and Capita all provided a notable positive return over the period. The share price of BAE Systems made strong gains during the first half of the period. The company was supported by news of new contract wins, notably a GBP20 billion contract to provide the Australian government with a fleet of warships. Shares in Capita ended the period higher following an equity issue in May, with the share price also encouraged by new contract wins. HomeServe released full year results in May, which saw record profits and a 25% increase in the dividend, aided by growth in its US operation. Meanwhile the share price of BCA Marketplace rose sharply in June, following an unsuccessful takeover bid from private equity company Apax. The portfolio's performance was also aided by its holdings in the oil & gas sector, namely BP and Royal Dutch Shell. The oil majors rallied through April and May, then trading sideways for most of the period before a further rally in September, largely supported by the rising oil price. Shares in BP, the largest single contributor to performance, were further assisted by the release of strong results for the first quarter of 2018, which included the continuation of its share buyback programme and an unchanged dividend. Whilst the portfolio has a significant weighting in the oil & gas sector, its underweight position versus the FTSE All-Share Index meant that the portfolio suffered relative underperformance. Meanwhile, stock selection within the financial sector was a positive contributor to performance. Litigation financer Burford Capital provided a positive return over the period. Shares rose sharply in July as the company reported strong results for the first half of 2018. Results included a 61% increase in cash generation on the previous period and confirmation that 72% of the guided full year pre-tax-profit had already been generated. Also within the financial sector, Legal & General and Hiscox provided a positive contribution to returns. Meanwhile, the exclusion of mainstream banks provided a boost to relative returns, with this sector performing weakly over the period. Other notable contributors to performance included Drax and AstraZeneca. Shares in Drax rose throughout the period, supported by rising wholesale power prices and performance improvements in the production of biomass electricity, whilst AstraZeneca released half-year results that beat analysts' estimates, citing revenue and profit at the upper-end of previous guidance. Shares also responded warmly to news that the company had been granted permission to import and distribute olaparib tablets, used to treat ovarian and breast cancer. The active use of the Company's gearing facility also helped to support the portfolio's positive return over the six month period. Conversely, there were a number of holdings that detracted from returns over the six month period. British American Tobacco (BAT) has provided exceptional returns to the portfolio over a number of years. However, the shares have come under notable pressure in recent months, as the stock market has continued to focus on concerns over the outlook for next generation products. BAT provided positive returns in the first half of the period, before gains fell away on renewed negative momentum in the sector. BAT was also impacted by news that rival Philip Morris International (PMI) intends to sue for copyright infringement over BAT's flagship cigarette alternative Glo. Sentiment was further dimmed by concerns over the effects of BAT's competitive pricing of Glo in Japan. The portfolio manager's view remains that the tobacco companies' focus on pricing power, cash conversion and product innovation should continue to provide a reliable source of income, underpinning longer term returns to shareholders, while next generation products have the potential to deliver a significant new revenue stream. Furthermore, the steep decline in the valuation of this sector leaves the shares looking, increasingly, attractive long-term investments. Elsewhere the portfolio's holdings in Thomas Cook and easyJet also provided a negative return. Shares in Thomas Cook traded weakly throughout the period, suffering a sharp drop in September on the release of a profit warning. The update cited the impact of weaker trading in the tour operator's 'lates' market (last minute, high-margin holiday sales), after an unusually hot summer across Northern Europe. easyJet meanwhile traded well through the first three months of the period under review, before the shares weakened on fears of the impact of rising oil prices on profit margins. Provident Financial, noted in the last update as the largest negative contributor to returns, also provided a negative return in the six months to the end of September. Shares in the lender traded with some volatility during the period, ending September lower despite reporting results for the first half of the year that showed the recovery plan was underway. The firm was impacted by negative sentiment towards sub-prime credit providers following the collapse of payday lender Wonga. The portfolio's holding in BTG was another drag on performance. Shares in the healthcare company fell on the release of year end results during the second quarter, which revealed a pre-tax loss of GBP70 million on lower sales and slower than expected market development of PneumRx Coils - a treatment for severe emphysema. In June, investor confidence was further dented by news that the US Food & Drug Administration had voted against the approval of its Elevair drug. Changes made within the portfolio during the period have modestly increased exposure to sterling revenues, through additions to BT, Tesco, Capita and Eddie Stobart Logistics. Funding for these increased positions has been achieved by realising gains in more internationally exposed names: from disposal of AstraZeneca, and from reductions in BAE Systems, HomeServe, Rentokil and easyJet. The exposure to stocks which offer an absolute return that is not correlated with regular business cycles has also been emphasised, with additions to Amigo loans and initiation of a position in Plus500. Portfolio manager's outlook Over the course of 2018 the UK stockmarket has been range bound, effectively fluctuating within a 10% range. This pattern is likely to continue for the foreseeable future until the market has clarity over two key issues, namely the extent and duration of rising US interest rates and the Brexit negotiations. The political uncertainty has been especially damaging and has resulted in a wide degree of polarisation within the market. Companies with substantial overseas revenues have benefitted from the devaluation of sterling and by contrast, UK domestic facing stocks have generally performed poorly and remain undervalued relative to the broader market. The extent of this relative cheapness is substantial and although the overall market is not expensive at present the most glaring opportunities rest within domestic sectors. Many are valued at multi-year lows both in absolute terms and relative to the wider market and share prices are discounting a sharp deterioration in profits and a slowdown in the UK economy, both of which look overly pessimistic. Recently published economic indicators point to continued steady, if unspectacular, economic growth in the UK. The level of GDP growth can reasonably expect to be higher over the remainder of the year supported by robust employment growth and a recovery in real wages, which in turn should help to strengthen consumption growth. Given the forecast increase in government spending next year and the Treasury's flexibility to provide further injections after the Brexit date, it is reasonable to expect the UK economy to be more resilient than most forecasts assume. The key investment themes which underpin the portfolio have remained consistent over the course of this calendar year. The exposure to sterling revenues has been modestly increased as uncertainties surrounding Brexit have exacerbated a pessimistic consensus towards the UK. The exposure to stocks which offer an absolute return that is not correlated with regular business cycles has also been emphasised. These themes remain prominent in the portfolio, alongside a number of global industries namely in the oil and tobacco sector which remain attractively valued in a market driven by short-termism and an emphasis on new disruptive business models in all industries. In recent weeks the return of more volatile markets has suggested a breakdown in momentum style investing which has been such a powerful characteristic of the multi-year bull market. It is to be hoped that this change will herald a return to valuation based investing with an emphasis on fundamental company analysis. The core principles of the strategy employed on this Company are unchanged and are consistent with the strong long term record. I remain
convinced that these principles will be the key to future long term sustainable
return for investors.
Mark Barnett James Goldstone
Portfolio Manager Deputy Portfolio Manager
20 November 2018
Principal Risks and Uncertainties
The principal risk factors relating to the Company can be summarised as
follows:
* Market Risk - a fall in the stock market as a whole will affect the
performance of the portfolio, as well as the performance of individual
portfolio investments; it also includes interest rate and currency risks;
market risk may be impacted by increased volatility during the period of
uncertainty arising from the Brexit negotiations;
* Investment Performance Risk - this is the stock specific risk that
the stock selection process may not achieve the Company's published objectives;
* Gearing and Borrowing Risk - in addition to the debenture in issue,
the Company may also borrow money for investment purposes. If the investments
fall in value, the gearing will have an adverse impact on performance. If the
borrowing facility could not be renewed, the Company might have to sell
investments to repay this;
* Income/Dividend Risk - investment income may fail to reach the
level required to meet the Company's income objective;
* Share Price Risk - the Company's prospects and NAV may not be fully
reflected in the share price;
* Control Systems Risk - the Board relies on the effectiveness of the
Manager's control systems which include control activities in fund management
operations, financial controls, meeting regulatory requirements and managing
relations with third parties;
* Reliance on Manager and other Third Party Providers Risk - the
Company has no employees, so is reliant upon the performance of third party
service providers for it to function, particularly the Manager, depositary,
custodian and registrar; and
* Other Risks - the Company may be affected by other risks such as
business, cyber security, strategic, policy and political risks, as well as
regulatory risks (such as an adverse change in the tax treatment of investment
companies) and the perceived impact of the Manager ceasing to be involved with
the Company.
A detailed explanation of these principal risks and uncertainties can be found
on pages 14 to 16 of the 2018 annual financial report, which is available on
the Company's section of the Manager's website at www.invesco.co.uk/edinburgh.
In the view of the Board, these principal risks and uncertainties are
substantially unchanged from the previous year end and are as much applicable
to the remaining six months of the financial year, as they were to the six
months under review.
As highlighted in the annual financial report, the Manager's style may result
in a concentrated portfolio. In addition, the Manager manages other portfolios
holding many of the same stocks as the Company which reflects the Manager's
high conviction style of investment management. This could potentially increase
liquidity risk under certain scenarios and market conditions.
Investments in Order of Valuation at 30 September 2018
UK listed ordinary shares unless otherwise stated.
Market
value % of
Investment Sector GBP'000 Portfolio
BP Oil & Gas Producers 102,293 6.3
British American Tobacco Tobacco 92,541 5.7
Burford CapitalAIM Financial Services 71,166 4.4
Legal & General Life Insurance 59,471 3.7
Royal Dutch Shell - A shares Oil & Gas Producers 56,782 3.5
Altria - US common stock Tobacco 55,468 3.5
Hiscox Non-life Insurance 53,367 3.3
Imperial Brands Tobacco 51,381 3.2
BAE Systems Aerospace & Defence 48,007 3.0
Next General Retailers 45,151 2.8
Ten Top Holdings 635,627 39.4
Aviva Life Insurance 44,644 2.8
RELX Media 42,231 2.6
Roche - Swiss common stock Pharmaceuticals & Biotechnology 40,349 2.5
BT Fixed Line Telecommunications 39,706 2.5
Novartis - Swiss common stock Pharmaceuticals & Biotechnology 38,644 2.4
Derwent London Real Estate Investment Trusts 38,145 2.4
HomeServe Support Services 37,424 2.3
Tesco Food & Drug Retailers 37,346 2.3
Rentokil Initial Support Services 34,672 2.2
NewRiver REIT Real Estate Investment Trusts 34,641 2.1
Twenty Top Holdings 1,023,429 63.5
easyJet Travel & Leisure 33,756 2.1
BCA Marketplace Financial Services 33,471 2.0
G4S Support Services 32,253 2.0
Provident Financial Financial Services 31,738 2.0
Babcock International Support Services 31,574 2.0
BTG Pharmaceuticals & Biotechnology 31,505 2.0
Drax Electricity 30,904 1.9
British Land Real Estate Investment Trusts 30,261 1.9
Capita Support Services 25,008 1.5
Beazley Non-life Insurance 24,558 1.5
Thirty Top Holdings 1,328,457 82.4
Investments in Order of Valuation continued
Market
value % of
Investment Sector GBP'000 Portfolio
Honeycomb Investment Trust Equity Investment Instruments 20,055 1.2
Lancashire Non-life Insurance 19,741 1.2
Plus500 Financial Services 18,003 1.1
CLS Real Estate Investment & 17,035 1.1
Services
Assura Real Estate Investment Trusts 16,021 1.0
IP Group Financial Services 15,935 1.0
ReddeAIM Financial Services 15,542 1.0
Secure Trust Bank Banks 15,122 0.9
KCOM Fixed Line Telecommunications 13,997 0.9
P2P Global Investments Equity Investment Instruments 13,643 0.8
Forty Top Holdings 1,493,551 92.6
Secure Income REITAIM Real Estate Investment Trusts 12,986 0.8
TalkTalk Telecom Fixed Line Telecommunications 12,981 0.8
Amigo Financial Services 12,964 0.8
Eddie Stobart LogisticsAIM Industrial Transportation 12,898 0.8
Raven Property (formerly Raven Russia) Real Estate Investment & 5,472
- Ordinary Services
Raven Property Group - Preference 3,813
9,285 0.6
Vectura Pharmaceuticals & Biotechnology 9,230 0.6
Thomas Cook Travel & Leisure 9,229 0.6
Urban ExposureAIM Financial Services 8,241 0.5
Zegona Communications Non-Equity Investment 6,925 0.4
Instruments
Funding Circle SME Equity Investment Instruments 6,561 0.4
Fifty Top Holdings 1,594,851 98.9
VPC Specialty Lending Investments Financial Services 6,427 0.4
Hadrian's Wall Secured Investments - Equity Investment Instruments 5,407
Ordinary
- C shares 1,002
6,409 0.4
Circassia Pharmaceuticals Pharmaceuticals & Biotechnology 3,725 0.2
Barclays Bank - Nuclear Power Notes
28 Feb 2019NR Electricity 804 0.1
EurovestechUQ Financial Services 297 0.0
Total Holdings (55) 1,612,513 100.0
AIM Investments quoted on AIM
UQ Unquoted investment
NR Non-rated (by both Moody's and S&P)
Going Concern
These financial statements have been prepared on a going concern basis. The
Directors consider this is the appropriate basis as the Company has adequate
resources to continue in operational existence for the foreseeable future being
at least 12 months after the date of approval of these half year financial
statements. In considering this, the Directors took into account the
diversified portfolio of readily realisable securities which can be used to
meet funding commitments, and the ability of the Company to meet all its
liabilities and ongoing expenses from its assets and revenue. The Directors
also considered the revenue forecasts for the forthcoming year and future
dividend payments in concluding that the going concern basis is appropriate.
Related Party Transactions
Under UK Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law), the Company has identified the Directors as related parties.
No other related parties have been identified. No transactions with related
parties have taken place which have materially affected the financial position
or the performance of the Company.
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 has been prepared in
accordance with the FRS 104 Interim Financial Reporting; and
* the interim management report includes a fair review of the
information required by Disclosure Guidance and Transparency Rules (DTR):
(a) DTR 4.2.7R, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the principal risks
and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R, being related party transactions that have taken place in the
first six months of the current financial year and that have materially
affected the financial position or performance of the Company during that
period; and any changes in the related party transactions described in the last
annual report that could do so.
Signed on behalf of the Board of Directors.
Glen Suarez
Chairman
20 November 2018
Independent Review Report
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2018 which comprises the Condensed Income Statement, the Condensed
Statement of Changes in Equity, the Condensed Balance Sheet and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2018 is not prepared, in
all material respects, in accordance with FRS 104 Interim Financial Reporting
and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial report and
consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in Note 1, the annual financial statements of the Company are
prepared in accordance with UK Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland. The Directors
are responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with FRS 104 Interim
Financial Reporting.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Catherine Burnet
for and on behalf of KPMG LLP
Chartered Accountants
Saltire Court
20 Castle Terrace
Edinburgh EH1 2EG
20 November 2018
Condensed Income Statement
Six Months To Six Months To
30 September 2018 30 September 2017
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains/(losses) on investments held at - 90,325 90,325 - (19,668) (19,668)
fair value
Foreign exchange gains/(losses) - 1 1 - (401) (401)
Income - note 2 33,821 1,002 34,823 36,422 492 36,914
33,821 91,328 125,149 36,422 (19,577) 16,845
Investment management fee - note 3 (1,106) (2,580) (3,686) (1,183) (2,760) (3,943)
Other expenses (443) - (443) (456) (1) (457)
Net return before finance costs and 32,272 88,748 121,020 34,783 (22,338) 12,445
taxation
Finance costs - note 3 (1,329) (3,102) (4,431) (1,365) (3,186) (4,551)
Return on ordinary activities before 30,943 85,646 116,589 33,418 (25,524) 7,894
taxation
Tax on ordinary activities - note 4 (358) - (358) (368) - (368)
Return on ordinary activities after
taxation
for the financial period 30,585 85,646 116,231 33,050 (25,524) 7,526
Return per ordinary share - basic 15.6p 43.8p 59.4p 16.9p (13.1)p 3.8p
Weighted average number of ordinary
shares in issue
during the period 195,557,086 195,666,734
The total column of this statement represents the Company's profit and loss
account, prepared in accordance with UK Accounting Standards. The return on
ordinary activities after taxation is the total comprehensive income and
therefore no additional statement of comprehensive income is presented. The
supplementary revenue and capital columns are presented for information
purposes in accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies. All items in the above statement derive
from continuing operations of the Company. No operations were acquired or
discontinued in the period.
Condensed Statement of Changes in Equity
Capital
Share Share Redemption Capital Revenue
Capital Premium Reserve Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the six months ended 30
September 2018 (Unaudited)
At 31 March 2018 48,917 10,394 24,676 1,235,091 80,791 1,399,869
Shares bought back and held in - - - (1,252) - (1,252)
treasury
Dividends paid - note 5 - - - - (29,200) (29,200)
Net return on ordinary activities - - - 85,646 30,585 116,231
At 30 September 2018 48,917 10,394 24,676 1,319,485 82,176 1,485,648
For the six months ended 30
September 2017 (Unaudited)
At 31 March 2017 48,917 10,394 24,676 1,376,475 74,719 1,535,181
Dividends paid - note 5 - - - - (28,470) (28,470)
Net return on ordinary activities - - - (25,524) 33,050 7,526
At 30 September 2017 48,917 10,394 24,676 1,350,951 79,299 1,514,237
Condensed Balance Sheet
Registered number SC1836
At At
30 September 31 March
2018 2018
(Unaudited) (Audited)
GBP'000 GBP'000
Fixed assets
Investments held at fair value through profit or loss 1,612,513 1,535,929
Current assets
Amounts due from brokers - 1,301
Prepayments and accrued income 2,405 3,371
Unclaimed dividends recoverable 150 -
Tax recoverable 1,865 1,700
Cash and cash equivalents 15,511 4,320
19,931 10,692
Creditors: amounts falling due within one year
Bank facility (42,600) (43,900)
Amounts due to brokers (3,806) (3,131)
Share buybacks awaiting settlement (508) -
Accruals (886) (851)
(47,800) (47,882)
Net current liabilities (27,869) (37,190)
Total assets less current liabilities 1,584,644 1,498,739
Creditors: amounts falling due after more than one year
73/4% Debenture Stock 30 Sep 2022 (98,996) (98,870)
Net assets 1,485,648 1,399,869
Capital and reserves
Share capital - note 7 48,917 48,917
Share premium 10,394 10,394
Capital redemption reserve 24,676 24,676
Capital reserve 1,319,485 1,235,091
Revenue reserve 82,176 80,791
Shareholders' funds 1,485,648 1,399,869
Net asset value per ordinary share - note 6
Basic - debt at par 759.48p 714.85p
Basic - debt at market value 749.12p 703.34p
Number of 25p ordinary shares in issue at the period end 195,481,734 195,666,734
Notes to the Condensed Financial Statements
1. Accounting Policies
The condensed financial statements have been prepared in accordance with
applicable United Kingdom Accounting Standards and applicable law (UK Generally
Accepted Accounting Practice), including FRS 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland, FRS 104 Interim
Financial Reporting and the Statement of Recommended Practice Financial
Statements of Investment Trust Companies and Venture Capital Trusts, issued by
the Association of Investment Companies in November 2014, as updated in
February 2018. The financial statements are issued on a going concern basis.
The accounting policies applied to these condensed financial statements are
consistent with those applied in the financial statements for the year ended 31
March 2018.
2. Income
Six Months to Six Months to
30 Sept 2018 30 Sept 2017
(Unaudited) (Unaudited)
GBP'000 GBP'000
Income from listed investments:
UK dividends - ordinary 27,809 28,529
UK dividends - special - 2,545
Overseas dividends - ordinary 4,700 4,210
Unfranked investment income 1,307 1,132
Income from money market funds 3 3
33,819 36,419
Other income:
Deposit interest 2 3
Total income 33,821 36,422
Special dividends of GBP1,002,000 were recognised in capital (2017: GBP492,000).
3. Management fee and finance costs
The management fee arrangements are as reported in the 2018 annual financial
report, being a flat fee of 0.0458333% of the market capitalisation of the
Company's ordinary shares at each month end. This equates to 0.55% per annum.
The management fee and finance costs are allocated 30% to revenue and 70% to
capital.
4. Tax
Owing to the Company's status as an investment company no tax liability arises
on capital gains. The tax charge represents withholding tax suffered on
overseas income. A deferred tax asset is not recognised in respect of surplus
management expenses since the Directors believe that there will be no taxable
profits in the future against which these can be offset.
5. Dividends
Six Months to Six Months to
30 Sept 2018 30 Sept 2017
(Unaudited) (Unaudited)
Pence GBP'000 Pence GBP'000
Dividends paid:
Third interim 5.80 11,349 5.40 10,566
Final 9.20 18,001 9.15 17,904
15.00 29,350 14.55 28,470
Return of unclaimed dividends
from previous years (150) -
29,200 28,470
A first interim dividend of 6.25p (2018: 5.80p) for the year ended 31 March
2019, will be paid on 30 November 2018.
6. Net asset value (NAV) per ordinary share
(a) NAV - debt at par
The shareholders' funds in the balance sheet are accounted for in accordance
with accounting standards, however; this does not reflect the rights of
shareholders on a return of assets under the Articles of Association. These
rights are reflected in the net assets with debt at par and the corresponding
NAV per share.
30 Sept 31 Mar
2018 2018
(Unaudited) (Audited)
Pence per Pence per
share share
Shareholders' funds 759.99 715.43
Less: unamortised discount and expenses
arising from debenture issue (0.51) (0.58)
NAV - debt at par 759.48 714.85
(b) NAV - debt at market value
The market value of the debenture stock is determined by reference to the daily
closing price, and is subject to review against various data providers to
ensure consistency between data providers and against the reference gilt.
30 Sept 31 Mar
2018 2018
(Unaudited) (Audited)
Pence per Pence per
share share
NAV - debt at par 759.48 714.85
Debenture stock - debt at par 51.16 51.11
- debt at market value (61.52) (62.62)
NAV - debt at market value 749.12 703.34
7. Share Capital Movements
Six Months to Six Months
to
30 Sept 2018 30 Sep 2017
(Unaudited) (Unaudited)
Share capital:
Ordinary shares of 25p each GBP48,870,434 GBP48,916,684
Treasury shares of 25p each GBP46,250 -
GBP48,916,684 GBP48,916,684
Number of ordinary shares in issue:
Brought forward 195,666,734 195,666,734
Shares bought back into treasury (185,000) -
195,481,734 195,666,734
8. Classification Under Fair Value Hierarchy
The fair value hierarchy analysis for investments held at fair value at the
period end is as follows:
30 Sept 31 Mar 2018
2018
(Unaudited) (Audited)
GBP'000 GBP'000
Level 1 - The unadjusted quoted price
in an active market for
identical assets or liabilities
that the entity can access
at the measurement date 1,612,216 1,535,513
Level 2 - Inputs other than quoted prices
included within Level 1 that
are observable (i.e. developed
using market data) for the
asset or liability, either
directly or indirectly - 94
Level 3 - Inputs are unobservable
(i.e. for which market data
is unavailable) for the asset
or liability 297 322
1,612,513 1,535,929
Barclays Bank - Nuclear Power Notes 28 Feb 2019, which was shown in Level 2 as
at 31 March 2018 (GBP94,000), is included in Level 1 as at 30 September 2018 (GBP
804,000) due to increased levels of market activity.
The Level 3 investment consists of one holding in Eurovestech (31 March 2018:
Eurovestech).
9. Investment Trust Status
It is the intention of the Directors to conduct the affairs of the Company so
that it satisfies the conditions for approval as an investment trust company
within the meaning of section 1158 of the Corporation Tax Act 2010.
10. Status of Half-Yearly Financial Report
The financial information contained within the financial statements in this
half-yearly financial report does not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006. The financial information for
the half years ended 30 September 2018 and 30 September 2017 has not been
audited. The figures and financial information for the year ended 31 March 2018
are extracted and abridged from the latest audited accounts and do not
constitute the statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and included the Independent Auditor's
Report which was unqualified and did not contain a statement under section 498
of the Companies Act 2006.
By order of the Board
Invesco Asset Management Limited
Company Secretary
20 November 2018
END
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