Perpetual Income and Growth Investment Trust plc
Annual Financial Report Announcement
for the Year Ended 31 March 2009
Financial Information And Performance Statistics
The Benchmark Index of the Company is the FTSE All-Share Index.
AT AT
31 MARCH 31 MARCH %
2009 2008 CHANGE
Total return (all income reinvested):
Diluted net assets* -23.7
Benchmark* -29.3
Diluted net asset value per ordinary share:
- after charging second interim and special 176.0p 235.6p -25.3
dividend (capital NAV)
- as balance sheet 182.0p 240.3p -24.3
Shareholders' funds (£'000) 379,256 501,840 -24.4
Mid-market price per:
- ordinary share 171.0p 222.5p -23.1
- subscription share 27.5p 45.5p -39.6
Discount per ordinary share 6.0% 7.4%
Capital return
Benchmark* -32.2
Return per ordinary share:
Diluted revenue return 9.2p 8.0p
Diluted capital return (57.3)p (35.2)p
Diluted total return (48.1)p (27.2)p
Dividend per ordinary share:
First interim dividend 3.30p 3.10p
Second interim dividend 5.20p 4.70p
Special dividend 0.84p -
Total dividend 9.34p 7.80p +19.7
Total Expense Ratio
- excluding performance fee 1.0% 1.1%
- including performance fee 1.2% 1.1%
Gearing
Actual gearing 117 117
Asset gearing 116 116
Notes: * Source: Datastream and Fundamental Data.
Chairman's Statement
Review of the Year
The stockmarket volatility that began in the second half of the last financial
year continued and worsened into the year under review, to the extent that
calendar year 2008 saw the second biggest fall in the UK stockmarket in the
last 100 years. The primary causes of this decline are by now well known.
The Company was not immune to these influences and its diluted net asset value
(`NAV') fell by 23.7%, while the Company's chosen benchmark, the FTSE All-Share
Index (total return) fell by 29.3%. During the year, the Company's share price
fell by 23.1%, reflecting the high volatility in the market which resulted in a
narrowing of the discount to NAV at which the shares were traded.
Outlook
It is perhaps too early to look for results from the Government's recent
measures to resuscitate the economy. Further periods of market volatility may
reasonably be expected in the remainder of the current calendar year. However,
our investment manager took good advantage of the earlier market falls to
acquire holdings in sound companies at attractive valuations and it can
therefore be expected that the full benefit of these prudent actions will be
enjoyed by the Company as and when the recovery becomes more sustained.
Dividend
An increased first interim dividend of 3.3p (2008: 3.1p) was paid to
shareholders on 29 December 2008. The Directors are pleased to declare a second
interim dividend of 5.2p (2008: 4.7p). In addition, a special dividend of 0.84p
in respect of the recovery of VAT on management fees (detailed below) will be
paid, giving total dividends payable for the year of 9.34p (2008: 7.8p), an
increase in the total dividend for the year of 19.7% (9.0% excluding the
special dividend). The second interim and special dividends will be paid on 9
July 2009 to shareholders registered on 19 June 2009. The Board's aim is for
the Company to maintain its policy of real dividend growth.
Gearing
Actual gearing of the Company was 17% at the year end (2008:17%). The Board's
policy is to allow gearing up to a level of 25%.
Subscription Share Exercise
During the year under review, subscription shareholders had their second
opportunity to exercise their right to subscribe for one ordinary share of the
Company at a price of 218.94p. The subscription period ended on 31 August 2008.
As a result, 46,099 shares were allotted on 11 September 2008. Subscription
shareholders will have further opportunities to convert their holdings in each
of the years 2009 to 2013.
Issued Share Capital
The issued share capital of the Company at the time of writing is 208,404,620
ordinary shares of 10p each and 17,720,924 subscription shares.
During the year, the rating of the Company's shares remained high and
occasionally, its shares traded at a premium to net asset value. At times,
demand for shares exceeded supply and your Company responded to two requests
for issues of new shares totalling 400,000 in November 2008. It also supplied
the Invesco Perpetual ISA Scheme with a further 728,540 new shares in December
to satisfy the demands of those investors re-investing their dividends.
VAT on Management Fees
Following the European Court of Justice ruling that investment trusts should be
regarded as special investment funds, no VAT is payable by investment trusts on
management fees.
The Managers have been liaising with HM Revenue & Customs to recover on the
Company's behalf VAT paid in the past on fees. As a result, £5,250,000 was
recovered after the year end from HM Revenue & Customs for the period 2001 to
2007. This has been paid in full to the Company and accordingly has been
credited £979,000 to revenue and £4,273,000 to capital, in the same proportion
as originally charged to the income statement. In addition, estimated interest
thereon of £772,000 has been recognised in revenue. These amounts added 2.9
pence per share to the net asset value, of which 0.84 pence was revenue which
will be distributed as a special dividend.
The Board is in discussions with the Manager in relation to additional refunds
of VAT and interest thereon for various periods. However, as the amounts
involved and the timing of receipts are uncertain, no provision has been made
in these accounts.
Corporate Governance
The Board remains committed to maintaining the highest standards of Corporate
Governance and is accountable to you as shareholders for the governance of the
Company's affairs. The Directors believe that, during the period under review,
they have complied with the provisions of the AIC Code of Corporate Governance
as endorsed by the Financial Reporting Council, save in respect of matters
discussed in the Corporate Governance statements contained on pages 27 to 32 of
the annual financial report.
Annual General Meeting (`AGM')
At the AGM there are four items of Special Business to be proposed:
Share Issuance
1. Your Directors are seeking the usual authority to issue up to an aggregate
nominal amount of £6,946,820 (a third of the Company's issued share capital as
at 8 June 2009) in new ordinary shares. This will allow Directors to issue
shares within the prescribed limits should any favourable opportunities arise
to the advantage of shareholders. The powers authorised will not be exercised
at a price below Net Asset Value so that the interests of existing shareholders
are not diluted. This authority will expire at the AGM in 2010.
2. Your Directors are also seeking the usual authority to issue new ordinary
shares pursuant to a rights issue or otherwise than in accordance with a rights
issue of up to an aggregate nominal amount of £2,315,606 (10% of the Company's
issued share capital as at 8 June 2009) of new ordinary shares disapplying
pre-emption rights. This will allow shares to be issued to new shareholders
without their having to be offered to existing shareholders first, thus
potentially broadening the shareholder base of the Company. This authority will
expire at the AGM in 2010.
Share Buy Backs and Treasury Shares
3. Your Directors are seeking to renew the authority to buy back up to
31,239,852 shares (14.99% of the Company's issued share capital as at 8 June
2009), subject to the restrictions referred to in the Notice of Meeting of the
AGM. This authority will expire at the AGM in 2010. Your Directors are
proposing that shares repurchased by the Company be either cancelled or,
alternatively, held as treasury shares with a view to their resale if
appropriate or cancellation. The holding of treasury shares is restricted to
10% of the Company's issued share capital and any resale of them will only take
place on terms that are in the best interests of shareholders.
Notice Period for General Meetings
4. It is expected that the EU Shareholder Rights Directive, when it is brought
into force, will increase the notice period for general Meetings of companies
to 21 days unless certain conditions are met in which case it may be 14 days'
notice. A shareholders' resolution is required to ensure that the Company's
general Meetings (other than Annual General Meetings) may be held on 14 days'
notice. Accordingly, Special Resolution 11 will propose that the period of
notice for general meetings of the Company (other than AGMs) shall be not less
than 14 clear days' notice.
I am delighted to tell you that Bob Yerbury was appointed to the Board in
December 2008. Bob, a qualified actuary, has had a long and distinguished
career in investment management and is Chief Investment Officer of Invesco
Perpetual. In accordance with the Company's Articles of Association, he will
stand for election at this year's AGM. The Directors who will retire by
rotation and stand for re-election at this year's AGM are Sir Martyn Arbib,
Antony Hardy and myself. James D'Albiac has decided to stand down from the
Board and will not seek re-election at the AGM. James has served as a Director
for the last thirteen years, recently as Senior Independent Director. His
wisdom and sharp intellect will be much missed and I would like to thank him
for all his diligence and hard work on behalf of the Company. Antony Hardy will
take James's place as Senior Independent Director.
I would like to take this opportunity to thank the Board and the Manager for
helping to see the Company through one of the most difficult periods for
investment that most people can remember.
The AGM of the Company will be held at The Lanesborough, Hyde Park Corner,
London SW1X 7TA on 8 July 2009 at 12.00 noon. I do hope that as many
shareholders as possible are able to attend. This will be an opportunity not
only to meet the Directors, but also to hear the views of Mark Barnett, who is
the investment manager at Invesco Perpetual with the day-to-day responsibility
for managing the Company's portfolio.
Bill Alexander
Chairman
8 June 2009
Manager's Report
Market Review
Global equity markets have endured one of the most turbulent periods on record.
Although the effects of the credit crunch were starting to take hold in the
first half of 2008, the decision by the US government to allow Lehman Brothers
to go bankrupt substantially changed the course of the recession. The aftermath
of this decision saw a paralysis of economic activity around the world and very
sharp declines in financial markets in the last quarter of 2008.
Policymakers were pushed into aggressive action to assist banks through a
variety of measures including outright nationalisation, capital injection and
the issuance of state guarantees. While government action across the world
ensured that the banking system stabilised, governments were not able to
prevent the immediate hit to the real economy from the freeze of credit that
followed the Lehman Brothers failure. The sudden withdrawal of credit to
corporates and households resulted in a material contraction in GDP in the
developed world.
On the domestic front, the Bank of England (`BoE') Monetary Policy Committee
cut UK interest rates aggressively during the year in an attempt to mitigate
the worst effects of the credit crunch. At the end of March 2009, the Base Rate
stood at 0.5%, the lowest level in the BoE's 315-year history. The UK economy,
however, continued to deteriorate. GDP growth for Q4 2008 confirmed that the
economy had entered a recession, evidenced by data showing that unemployment
was starting to rise sharply and that the Government's fiscal position was
deteriorating at a much faster pace than expected.
The financial landscape has changed substantially over the last 12 months, with
many of the world's largest financial institutions having disappeared or been
restructured. Within the UK sector, the changes have been no less dramatic:
HBOS was sold to Lloyds TSB following serious concerns about its viability and
Bradford & Bingley's mortgage business was nationalised and its savings assets
sold off to Spain's Santander. The UK government has assumed a much more
prominent role in the financial services industry, part nationalising RBS and
the newly formed Lloyds Banking Group, while Barclays opted not to take the
government assistance, choosing instead to raise additional funding from Middle
Eastern and other private investors.
Putting recent falls into context, the FTSE All-Share Index has declined for
seven consecutive quarters, which is worse than the aftermath of the TMT bubble
in 2000/01 and the recession of 1973/74.
Portfolio Strategy and Review
The Company's net asset value, including reinvested dividends, fell by 23.7%
during the 12 months to the end of March 2009, compared to a fall of 29.3% from
the FTSE All-Share Index (total returns).
In relative terms, the Trust recorded resilient performance even though the
negative returns generated by the portfolio are disappointing. This fall in the
NAV was not helped by the Manager's strategy to maintain a degree of gearing
during the review period. Nevertheless, it is certainly the case that the
cautious macroeconomic view was justified and consequently the defensive
positioning of the fund, with large holdings in Utilities, Tobacco and
Pharmaceuticals, proved to be correct in the falling markets.
There were a number of stocks which showed a positive return during the year,
notably pharmaceutical company AstraZeneca, non-life insurer Hiscox, and the UK
nuclear generator British Energy, which was taken over by French electricity
company EDF. Elsewhere, the strong emphasis on defensive holdings with strong
balance sheets and sustainable cashflows delivered resilient performance,
despite the challenging equity market environment. By contrast,
telecommunications company BT was among the biggest negatives to performance as
a result of contractual problems within its Global Services division.
In terms of portfolio activity, International Power and Provident Financial
were two of the most prominent new positions introduced to the portfolio over
the period. The holding in Provident Financial was built up to take advantage
of the increasingly strong position for the company in the domestic sub prime
lending market. The company is well funded and highly profitable and has the
potential to perform well in a more difficult economic environment. The holding
in International Power was initiated to take advantage of its sharply falling
share price, the result of concerns over its leveraged balance sheet and
exposure to weakening electricity demand in its major markets of the UK, US and
Australia. These factors forced the stock to fall to an attractive valuation
from which a position was established in the portfolio. Elsewhere,
opportunities were taken to add to existing positions that became more
attractive following the market falls and, as a result, the concentration of
the portfolio increased.
Dividends
One of the Company's objectives is real long-term growth in the dividend. It is
concerning therefore that declining profits and stretched balance sheets have
necessitated dividend cuts for many companies within the market. However, a
reasonable number of companies within the portfolio have continued to grow
their dividends and this is an area of ongoing importance to the Manager in
stock selection for this portfolio. It is also worth remembering that the
Company has built up significant revenue reserves over the last few years in
preparation for tougher times. With corporate earnings likely to remain under
pressure for some time, lower nominal dividend growth from the portfolio is
likely. However, with inflation also subdued, the Company's portfolio should be
able to support dividend growth above inflation.
Outlook
During the last three months, the market has staged a strong recovery with the
FTSE All-Share Index registering a gain of 28% from its low point. The recovery
has been led by economically sensitive sectors at the expense of defensive
holdings. This rally has been based on the premise that the rate of decline in
the global economy is slowing. Whilst acknowledging that some economic
indicators have illustrated tentative signs of recovery, these may simply prove
to be the reversal of some of the extreme trends which were witnessed in
reaction to the Lehman Brothers bankruptcy. There are some substantial
challenges that remain unresolved as the process of deleveraging continues and
the Manager remains sceptical that developed economies can experience a strong
recovery by the end of the current year. When the recession does end, the
recovery is unlikely to feel much more robust as unemployment will still be
rising, the housing market will be subdued and, most importantly, the banks
will still make borrowing money difficult.
Against this weak economic backdrop, corporate profitability will remain under
pressure, particularly in cyclical areas of the market and sectors which are
exposed to the consumer economy; areas which have been avoided in the recent
past and which will continue to be avoided in the fund. The focus is therefore
on the more defensive parts of the market, on companies that have robust
business models, strong balance sheets, visible cash generation and growing
dividend streams. The recent performance of the market has offered an extremely
attractive opportunity to invest in these kinds of businesses, as a large
valuation gap has opened up further undervaluing some of the strongest, most
resilient and cheapest stocks in the market.
It is not clear when the mood of the market will shift away from its current
preference for cyclical companies but what is certain is that the importance of
valuation in constructing this portfolio and analysing the stockmarket over the
long term will continue to be the best way to generate superior returns from
equity investing.
Mark Barnett
Investment Manager
8 June 2009
Investments In Order Of Valuation
at 31 March 2009
Ordinary shares listed in the UK unless stated otherwise
MARKET
VALUE % OF
ISSUER SECTOR £'000 PORTFOLIO
Equity Investments
BG Oil and Gas Producers 27,270 6.2
Imperial Tobacco Tobacco 24,545 5.6
BP Oil and Gas Producers 22,740 5.2
GlaxoSmithKline Pharmaceutical and 22,483 5.1
Biotechnology
AstraZeneca Pharmaceutical and 21,947 5.0
Biotechnology
Reynolds American (US common Tobacco 21,471 4.9
stock)
British American Tobacco Tobacco 20,986 4.8
Vodafone Mobile 20,888 4.6
Telecommunications
Tesco Food and Drug Retailers 18,765 4.2
Royal Dutch Shell - B Shares Oil and Gas Producers 14,832 4.2
Royal Dutch Shell - A Shares 3,759
Top ten holdings 219,686 49.8
Capita Support Services 13,114 3.0
National Grid Gas, Water and 12,937 2.9
Multiutilities
Drax Electricity 12,832 2.9
Centrica Gas, Water and 12,580 2.9
Multiutilities
Scottish & Southern Energy Electricity 11,261 2.6
BT Fixed Line 10,953 2.4
Communications
Hiscox Insurance 10,610 2.4
Rolls Royce - ordinary Aerospace and Defence 9,561 2.2
Rolls Royce - C Shares 187
Balfour Beatty Construction and 9,501 2.2
Materials
International Power Electricity 8,894 2.0
Top twenty holdings 332,116 75.3
Provident Financial Finance 8,887 2.0
Pennon Gas, Water and 7,125 1.6
Multiutilities
BAE Systems Aerospace and Defence 6,643 1.5
Northumbrian Water Water 6,624 1.5
Sage Technology Software 6,372 1.4
BTG Pharmaceutical and 5,937 1.3
Biotechnology
Homeserve Support Services 5,070 1.2
Tate & Lyle Food Producers 4,933 1.1
British Airways Travel and Leisure 4,843 1.1
Lombard Medical Healthcare 4,464 1.1
Top thirty holdings 393,014 89.1
Just Retirement Insurance 3,959 1.0
Impax Environmental - ordinary Equity Investment 3,605 0.9
Instruments
Impax Environmental - warrants 93
ARM Technology Hardware 3,619 0.8
Climate Exchange Equity Investment 2,966 0.7
Instruments
Vectura Pharmaceutical and 2,899 0.7
Biotechnology
Beazley - ordinary Property 2,312 0.6
Bealzey - new ordinary 465
Trading Emissions Equity Investment 2,412 0.5
Instruments
Rentokil Support Services 2,386 0.5
Fusion Finance 1,974 0.4
UK Coal Coal 1,863 0.4
Top forty holdings 421,567 95.6
ITV Media 1,579 0.4
TUI Travel Travel and Leisure 1,369 0.3
Macau Property Property 1,190 0.3
Landkom Food Producers 1,025 0.2
Renovo Pharmaceutical and 953 0.2
Biotechnology
Puricore Personal Goods 803 0.2
Brown (N) General Retailers 775 0.2
Helphire Finance 570 0.1
Imperial Innovations Finance 420 0.1
William Hill - ordinary General Retailers 298 0.1
William Hill - rights April 2009 110
Top fifty holdings 430,659 97.7
Xcounter AB Healthcare 324 0.1
XTL Biopharmaceutical (US ADR) Pharmaceutical and 96 0.0
Biotechnology
Napo Pharmaceuticals (US Common Pharmaceutical and 50 0.0
Stock) Biotechnology
Local Radio Media 28 0.0
Mirada Technology Sofware 23 0.0
Total Equity Investments (55) 431,180 97.8
MARKET
MOODY/S&P VALUE % OF
ISSUER AND ISSUE RATING SECTOR £'000 PORTFOLIO
Fixed Interest Investments
Barclays Bank Floating Rate Note NR/NR Electricity 3,356 0.8
February 2019
British Airways Floating 8.75% Ba2/BB Travel and 2,088 0.5
August 2016 Leisure
ITV 6.125% January 2017 Ba3/BB- Media 1,471 0.3
Rexam Floating 6.75% June 2067 Ba2/BB Support 1,306 0.3
Services
Linde Finance Floating 8.125% Baa3/BBB- Finance 1,189 0.2
July 2066
Napo Pharmaceuticals (US stock) NR/NR Pharmaceuticals 260 0.1
8% May 2009 and
Biotechnology
Total Fixed Interest Investments 9,670 2.2
(6)
Total Investments (61) 440,850 100.0
Principal Risks and Uncertainties
The principal risks and uncertainties that could affect the Company's business
can be divided into various areas:
• Investment Objective and Policy;
• Investment Process;
• Market Movements and Portfolio Performance;
• Ordinary Shares;
• Gearing; and
• Regulatory.
A detailed explanation of these principal risks and uncertainties can be found
on pages 18 to 20 of the annual financial report for the year ended 31 March
2009, which will be available on the Company's website shortly.
Statement of Directors' Responsibilities
in respect of the preparation of financial statements
The Directors are responsible for preparing the annual financial report 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 the
financial statements in accordance with applicable United Kingdom Law and
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
The financial statements are required by law to give a true and fair view of
the state of the affairs of the Company and of the profit or loss 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 judgements and 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, to the best of their knowledge, state that:
• the financial statements, prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company; and
• the Report of the Directors 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.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the
Companies Act 1985 (as and when updated by the Companies Act 2006). 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.
Income Statement
for the year ended 31 March
2009 2008
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
NOTES £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments - (119,109) (119,109) - (71,059) (71,059)
at fair value
Foreign exchange - (7,989) (7,989) - 286 286
(losses)/gains
Income 2 22,717 - 22,717 22,482 - 22,482
Investment management 3 (1,116) (3,457) (4,573) (1,632) (3,811) (5,443)
fees
VAT recoverable on 3 979 4,273 5,252 - - -
management fees
Other expenses (497) (3) (500) (507) (3) (510)
Net return before 22,083 (126,285) (104,202) 20,343 (74,587) (54,244)
finance costs and
taxation
Finance costs (1,150) (2,684) (3,834) (2,015) (4,705) (6,720)
Return on ordinary 20,933 (128,969) (108,036) 18,328 (79,292) (60,964)
activities before tax
Tax on ordinary (306) - (306) (311) - (311)
activities
Return on ordinary 20,627 (129,969) (108,342) 18,017 (79,292) (61,275)
activities after tax
for the financial
year
Return per ordinary
share:
Basic 9.9p (62.1)p (52.2)p 8.7p (38.3)p (29.6)p
Diluted 9.2p (57.3)p (48.1)p 8.0p (35.2)p (27.2)p
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 31 March
SHARE SHARE CAPITAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE TOTAL
£'000 £'000 £'000 £'000 £'000
At 31 March 2007 20,686 179,789 360,868 15,352 576,695
Return for the year from the - - (79,292) 18,017 (61,275)
income statement
Dividends paid - note 4 - - - (14,388) (14,388)
Exercise of subscription shares 37 771 - - 808
At 31 March 2008 20,723 180,560 281,576 18,981 501,840
Return for the year from the - - (128,969) 20,627 (108,342)
income statement
Dividends paid - note 4 - - - (16,593) (16,593)
Issue of new shares 112 2,138 - - 2,250
Exercise of subscription shares 5 96 - - 101
At 31 March 2009 20,840 182,794 152,607 23,015 379,256
Balance Sheet
as at 31 March
2009 2008
NOTES £'000 £'000
Fixed assets
Investments at fair value 440,850 584,338
Current assets
Debtors 10,016 7,058
Creditors: amounts falling due within one year (41,906) (59,888)
Net current liabilities (31,890) (52,830)
Total assets less current liabilities 408,960 531,508
Creditors: amounts falling due after more than one year (29,704) (29,668)
Net assets 379,256 501,840
Capital and reserves
Share capital 20,840 20,723
Share premium 182,794 180,560
Capital reserve 152,607 281,576
Revenue reserve 23,015 18,981
Shareholders' funds 379,256 501,840
Net asset value per ordinary share
Basic 5 182.0p 242.2p
Diluted 5 182.0p 240.3p
These financial statements were approved and authorised for issue by the Board
of Directors on 8 June 2009.
Bill Alexander
Chairman
Signed on behalf of the Board of Directors
Cash Flow Statement
for the Year Ended 31 March
2009 2008
NOTES £'000 £'000
Net cashflow from operating activities 17,943 13,241
Servicing of finance (4,038) (6,800)
Capital expenditure and financial investment 25,449 45,099
Equity dividends paid 4 (16,593) (14,388)
Net cash inflow before management of liquid resources 22,761 37,152
and financing
Financing 2,351 808
Increase in cash 25,112 37,960
Reconciliation of net cash flow to movement in net
debt
Increase in cash 25,112 37,960
Exchange movements (7,465) (186)
Debenture stock non-cash movement (36) (3)
Movement in net debt in the year 17,611 37,771
Net debt at beginning of year (83,584) (121,355)
Net debt at end of year (65,973) (83,584)
Notes to the Financial Statements
for the Year Ended 31 March 2009
1. Basis of preparation
(i) Accounting Standards applied
The financial statements have been prepared on a going concern basis and in
accordance with applicable United Kingdom Accounting Standards 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.
(ii) Changes to presentation
Following the publication of the new SORP and technical guidance by the
Institute of Chartered Accountants in England and Wales in Tech 01/08, capital
reserves are now shown in aggregate in the balance sheet and the reconciliation
of movements in shareholders' funds. This has no effect on either the net
assets or earnings of the Company.
2. Income
2009 2008
£'000 £'000
Income from listed investments
UK dividends 19,592 20,406
Overseas dividends 2,033 2,075
Unfranked investment income 262 -
21,887 22,481
Other income
Interest on VAT recoverable on management fees (note 3(iii)) 772 -
Bank interest 2 -
Underwriting commission 56 1
830 1
Total income 22,717 22,482
3. Investment management fees
2009 2008
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee (i) 1,116 2,604 3,720 1,496 3,491 4,987
Performance-related investment - 853 853 - - -
management fee (ii)
VAT thereon (prior to 1 - - - 136 320 456
October 2007) (iii)
1,116 3,457 4,573 1,632 3,811 5,443
(i) Invesco Asset Management Limited (`IAML') provides investment management,
company secretarial and administration services to the Company under an
agreement dated 20 February 1996 and subsequently amended on 27 December 2001.
Details of this are shown in the Report of the Directors. At 31 March 2009 £
791,000 (2008: £1,073,000) was due for payment in respect of the investment
management fee.
(ii) A performance-related fee is payable annually in arrears to the Manager,
if the Company's performance exceeds the FTSE All-Share Index. Details of this
fee is shown in the Report of the Directors.
(iii) With effect from 1 October 2007, no VAT has been paid on management fees.
An amount of £5,252,000 has been recognised in these accounts in respect of VAT
recoverable on management fees paid to IAML (this has been credited £979,000 to
revenue and £4,273,000 to capital, in the same proportions as originally
charged to the income statement) together with £772,000 of interest thereon.
4. Dividends on ordinary shares
Dividends on equity shares paid in the year:
2009 2008
PENCE £'000 PENCE £'000
Second Interim in respect of previous year 4.70 9,740 3.85 7,964
First interim paid 3.30 6,853 3.10 6,424
8.00 16,593 6.95 14,388
Dividends on equity shares in respect of the year:
Set out below are the dividends payable in respect of the financial year, which
is the basis on which the requirements of section 842 Income and Corporation
Taxes Act 1988 are considered.
2009 2008
PENCE £'000 PENCE £'000
First interim 3.30 6,853 3.10 6,424
Second interim 5.20 10,837 4.70 9,740
Special 0.84 1,751 - -
9.34 19,441 7.80 16,164
5. Net asset value
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
2009 2008 2009 2008
PENCE PENCE £'000 £'000
Ordinary shares
- Basic 182.0 242.2 379,256 501,840
- Diluted 182.0 240.3 379,256 540,739
Both the basic and diluted net asset values per share are prepared in
accordance with the SORP and they do not differ, in any material respects, from
those calculated in accordance with the Articles of Association.
The number of shares used in the calculation of the basic net asset value per
share was 208,404,620 (2008: 207,229,981). The number of shares used in the
calculation of the diluted net asset value per share was 208,404,620 (2008:
224,997,004).
The exercise price of subscription shares is 218.49p per share. This is greater
than the ordinary share price and therefore there is no dilution at 31 March
2009.
6. Related-party Transactions
Invesco Asset Management Limited, a wholly-owned subsidiary of Invesco Ltd,
acts as Manager and Company Secretary to the Company. Details of Invesco Asset
Management Limited's services and fees are given in note 3 to the financial
statements. Full details of Directors' interests are set out in the Report of
the Directors.
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 31 March 2009 or 2008. The
financial information for the year ended 31 March 2008 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was
unqualified, did not draw attention to any matters by way of emphasis without
qualifying their report and did not contain a statement under s237(2) or (3)
Companies Act 1985. The audit of the statutory accounts for the year ended 31
March 2009 is not yet complete. These accounts will be finalised on the basis
of the financial information presented by the Directors in this preliminary
announcement and will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
The audited Annual Financial Report will be posted to shareholders shortly.
Copies may be obtained during normal business hours from the Company's
Registered Office, 30 Finsbury Square, London, EC2A 1AG.
The Annual General Meeting will be held on 8 July 2009 at 12.00 noon at The
Lanesborough, Hyde Park Corner, London, SW1X 7TA.
By order of the Board
Invesco Asset Management Limited - Company Secretary
Contacts
Andrew Watkins Tel: 020 7065 4023
Tim Mitchell Tel: 020 7065 3182
Philip Jones Tel: 020 7065 3644
8 June 2009