TIDMIPRT
Invesco Perpetual Recovery Trust 2011 plc
Announcement of Audited Annual Financial Results
for the year ended 31 October 2010
FINANCIAL INFORMATION
Performance Statistics
31 October 31 October %
2010 2009 Change
Capital:
Total assets less current liabilities 32,351 28,297 +14.3
(GBP'000)
Net assets attributable to Ordinary 6,174 3,601 +71.5
Shareholders
(GBP'000)
Actual gearing 424% 686%
Asset gearing 420% 616%
Ordinary Shares:
Net asset value 38.5p 22.4p +71.9
Mid-market price 37.5p 35.5p +5.6
Discount/ (premium) with prior charges
deducted:
- at calculated value 2.6% (58.5)%
- at market value 5.5% (10.5)%
Market capitalisation (GBP'000) 6,017 5,696 +5.6
Zero Dividend Preference Shares:
Calculated value 133.5p 125.9p
Mid-market price 132.5p 118.0p
Discount 0.7% 6.3%
Market capitalisation (GBP'000) 25,984 23,140
Units:
Calculated value 1815p 1587p
Mid-market price 1600p 1400p
Discount 11.8% 11.8%
Total Return on Portfolio +18.8
Total Return Indices:
FTSE All-Share 3926.44 3342.38 +17.5
FTSE 350 High Yield 3809.71 3464.60 +10.0
Merrill Lynch Sterling High Yield 362.49 261.38 +38.7
Revenue
Gross income (GBP'000) 1,321 1,154 +14.5
Net revenue available for Ordinary 934 823 +13.5
Shares (GBP'000)
Net Dividends per Ordinary Share
- interims and final 6p 6p
Total Expense Ratio 1.3% 1.4%
Total Return per Ordinary Share
Revenue return 5.8p 5.1p
Capital return 16.2p 11.8p
Total return 22.0p 16.9p
Total Return per Zero Dividend 7.6p 7.1p
Preference Share
CHAIRMAN`S STATEMENT
Investment Performance
In this, my fifth annual financial report to shareholders as the Chairman of
your Company, I am pleased to be able to report an increase in the total assets
less current liabilities (`TALCL') of the Company of 14.3% for the financial
year ended 31 October 2010. I have reminded shareholders in previous reports of
the gearing effect of the Zero Dividend Preference Shares (`ZDP Shares'). If
TALCL rise or fall by a certain percentage then the NAV of the Ordinary Shares
will correspondingly rise or fall by a greater percentage. During this
financial year the gearing effect has operated to the benefit of the Ordinary
Shareholders and the NAV of the Ordinary Shares has risen by 71.9% to 38.5p. At
the end of the last financial year the mid market-price of the Ordinary Shares
was 35.5p and they stood at a premium of 58.5% (with prior charges deducted at
their calculated value) to the NAV of 22.4p. At the same time this year the
mid-market price of the Ordinary Shares was 37.5p and they stood at a discount
of 2.6% (with prior charges deducted at their calculated value) to the NAV of
38.5p. This means that there has been a small rise, of 5.6%, in the price of
the Ordinary Shares over the twelve months.
The nature of the Company's investments, whether equity or fixed income, is
orientated towards company specifics. Your Board considers that the performance
of three company-orientated indices, namely the FTSE All-Share Index, the FTSE
350 High Yield Index (for equity comparison) and the Merrill Lynch Sterling
High Yield Index (for fixed interest comparison) are those generally most
relevant to the investments of the Company for performance comparison purposes.
During the year under review, the Merrill Lynch Sterling High Yield Index has
given a total return of 38.7%. At the start of this year, the Company held
three fixed income recovery investments which represented 10.9% of the
portfolio. At the end of the year the Company held five fixed income securities
representing 15.6% of the portfolio. Otherwise, your Company's investments have
been in equity recovery stocks. The total return of the Company for the year
was 18.8% and the corresponding total returns on the FTSE All-Share Index and
the FTSE 350 High Yield Index were 17.5% and 10.0%, respectively. The Board
considers this to be a satisfactory return for the year.
The UK equity market finished this twelve month reporting period close to its
high for the year, but it had reached similar levels in March/April only to
decline to a low for the year at the beginning of July from which point it has
recovered to end the year 13.6% up overall. It is encouraging that the market
has risen, but not surprising that it is susceptible to concerns about
financial stability and the nature of economic recovery. It must be remembered
that we are only a short way along the path of recovery from one of the most
turbulent financial and economic periods of recent times. I repeat and
emphasise what I said last year. The policy of quantitative easing was adopted
to fend off depression. Evidence suggests that depression has been avoided, but
we are in uncharted waters policy-wise. Unwinding the consequences of
quantitative easing will be a long process. Short term interest rates will have
to rise gradually and government borrowing will have to be reduced. There will
be factors operating against improving economic growth for many years.
Quantitative easing may have been the answer to avoid depression but it has
made a slow recovery of economic growth more likely.
In the UK the newly elected coalition government has announced measures to
reduce substantially the budget deficit and short term interest rates have
remained low with the Bank of England base rate constant at 0.5%. The level of
economic activity has been mildly encouraging but the UK economy has benefited
from temporary measures that have boosted demand. The effects of public sector
cuts and the pressure on take-home pay have yet to be seen. The path of
recovery remains uncertain but fortunately the level of the UK equity market is
determined by investors' perception of the future as well as by current
circumstances.
In this regard it is unfortunate that your Company potentially has a life
extending only to 27 October 2011. It is likely that much of the further
recovery in the UK equity market as a whole may occur later. With this in mind
your Board has been considering whether and how to extend the life of your
Company beyond that date. It may be impossible to do so but your Board will
continue to investigate different options with a view to presenting them to
shareholders if practical and attractive solutions can be found. With the
annual report you should receive a Shareholder Survey with a prepaid reply
envelope seeking the views of shareholders on an extension of the life of the
Company. The Board would be most grateful if you would take the time to
complete it and return it to us.
Revenue and Dividends
The Board has always recognised that during some periods the recovery stocks
held in the portfolio might not produce enough revenue in a particular year to
cover the cost of the dividend. Accordingly, the Board has set the quarterly
dividend at a level that, in normal circumstances, it expects to be
maintainable for future payments. If necessary, to pay the dividend, the
revenue reserves would be used to make up for any shortfall in the year's
revenue. The Board has always envisaged utilising the revenue reserves to pay
the quarterly dividend when necessary to ensure that the Manager is not
constrained by the dividend policy in his ability to invest in recovery stocks
that he sees as offering the likelihood of capital gains.
Some of the revenue reserves were used in the last financial year to pay the
dividend. In the current financial year the cost of the dividend exceeds the
net revenue available to Ordinary Shareholders earned during the year by GBP
30,000 and accordingly this amount of revenue reserves have been utilised. Your
Board has declared three quarterly dividends of 1.5p and also proposes a final
dividend of 1.5p to make a total of 6p for the year. Pending the approval of
shareholders at the AGM for the payment of the final dividend it will be
payable on 9 February 2011 to Ordinary Shareholders on the register on 31
December 2010.
Projected Net Asset Value (`NAV')
The gearing of the Company means that the change in the NAV of the Ordinary
Shares will be greater than the change in TALCL. In assessing the future value
of both the ZDP Shares and Ordinary Shares, I have had tabulated what would
happen in a number of different situations.
Projected NAV of Ordinary Shares
% growth per annum in Total Assets less Approximate NAV per Ordinary Share
Current Liabilities, excluding amounts
due on ZDP Shares
-13.8% nil
-10.0% 7.5p
-5.0% 17.4p
0.0% 27.3p
+10.0% 47.1p
+20.0% 66.9p
+30.0% 86.6p
+36.8% 100.0p
The above projected NAVs show the estimates of capital repayments which could
be made to the Ordinary Shareholders assuming a variety of different growth
rates in the Company's total assets less current liabilities, excluding amounts
due on ZDP Shares to wind-up in October 2011.
Projected NAV of ZDP Shares
% growth per annum in Total Assets less Approximate NAV per ZDP Share
Current Liabilities, excluding amounts
due on ZDP Shares
-13.8% 141.4p
-15.0% 139.4p
-20.0% 131.3p
-25.0% 123.2p
If the TALCL of the Company remain at the 31 October 2010 level, then the ZDP
holders would receive their pre-determined final capital entitlement of 141.4p.
However, the table above illustrates what would happen if the total assets less
current liabilities fell.
Life of the Company and Basis of the Financial Statements
The Company has now entered its final year and the Articles of Association
provide that the Directors are obliged to propose a resolution to wind up the
Company at an extraordinary general meeting of the Company to be held between
13-27 October 2011, unless they are relieved of this obligation by putting
forward proposals to extend the life of the Company or to reconstruct it. The
Board has been considering various options with its advisers and may be
released from this obligation only by special resolution passed not later than
27 July 2011 and with the class consent of both the Ordinary and ZDP
Shareholders. Given this situation, the financial statements have been prepared
on a break up basis. Also given this situation and the range of potential
outcomes, it has not been possible to quantify the liquidation costs with any
certainty, and so no provision has been made in these financial statements.
Annual General Meeting (`AGM')
The holders of the Ordinary Shares have the right to attend and vote at the
AGM, which will take place at 12 noon on 2 February 2011. Your Directors have
carefully considered all the resolutions proposed in the Notice to the AGM and
consider them all to be in the interest of shareholders as a whole. The
Directors therefore recommend that shareholders vote in favour of each
resolution.
At the AGM, one item of special business is proposed. Your Directors are
seeking approval of the EU Shareholder Rights Directive, which was implemented
in October 2009, and has increased the notice period for general meetings of
listed companies to not less than 21 days unless certain conditions are met in
which case it may be not less than 14 days. A shareholders' resolution is
required to ensure that the Company's general meetings (other than AGMs) may be
held on 14 days' notice.
Your Board would like to assure shareholders that they would want to give as
much notice as it was able to of a general meeting. However, it is important to
have the flexibility to call a general meeting (other than an AGM) on 14 days'
notice, should there be circumstances in which it was in the interests of all
shareholders to do so.
I look forward to seeing shareholders at the AGM of the Company. Following the
AGM, there will be an opportunity to meet members of the Board and Mr
Carstairs, the Investment Manager.
The Rt. Hon. the Lord Naseby
Chairman
20 December 2010
Manager`s Report
During the year under review the UK equity market rose overall but in July
dipped to a low for the year before recovering. Contrary to our expectation the
FTSE 250 Index outperformed the FTSE 100 Index by 8.5%. We believed that,
leaving aside the constituents classified as equity investment instruments from
the FTSE 250 companies, it was right to be cautious about many of the rest.
Many are UK oriented and the recovery from recession for the UK will be
protracted. We still believe this will be the case and as the measures taken to
cut the budget deficit and the squeeze on disposable income take effect profit
expectations may well be disappointed.
We have retained our largest holdings, Lloyds Banking, Vodafone, AstraZeneca,
Royal Dutch Shell and GlaxoSmithKline, from the beginning of the year
throughout the period having only reduced Lloyds Banking when we felt that it
was becoming too great a proportion of the portfolio. The first four of these
five stocks all produced better total returns for the year than the FTSE
All-Share Index but the performance of GlaxoSmithKline was disappointing. We
have finished the year with the same five largest holdings because we believe
that there remains further recovery potential in all of them.
Last year, following the change in investment policy passed at the AGM in
January 2009, we purchased a holding in Gartmore Fledgling Trust and we are
pleased to report that it has continued to perform well this year with a total
return of 19.6% which is well ahead of the total return on the FTSE Small Cap
ex Investment Trust index of 6.6% and ahead of the total return on the FTSE
All-Share of 17.5%. It has ended the year as the sixth biggest holding in the
portfolio and has probably achieved the bulk of its recovery potential.
During the year we purchased new holdings in Begbies Traynor, Drax, Findel and
BP. Unfortunately, at this point we are losing money on each purchase, but we
are hopeful that this situation will be reversed in the current financial year.
We also added to the holdings of Marshalls, STV and Luminar and switched the
holding in Mitchell and Butlers to increase the holding in Marstons where we
think there is greater recovery potential. We sold the holdings of TT
Electronics, Lupus, Electrocomponents and United Utilities.
We started the year with three fixed interest holdings and added to one of
them, Skipton 10% Dec 2018, during the year. The return on these three holdings
together was slightly behind the return on the Merrill Lynch Sterling High
Yield Index of 38.7% but such significant appreciation meant that these three
holdings represented an increased proportion of the portfolio even without the
addition. Towards the end of the financial year we added two new holdings to
the fixed interest portfolio with small purchases of Co-operative Bank Floating
Rate Note May 2016 and Anglo Irish Bank Floating Rate Note June 2016. The
latter purchase has already proved to be a poor decision following the rapid
escalation of the pressure on Ireland as part of the euro zone and the
resultant inclination of investors to settle for anything they can get rather
than to enter a stand-off with the government. We shall realise a loss on this
thankfully small investment, but this may be partially offset by a gain on the
other purchase which is currently showing a profit.
Investment Outlook
We believe that the UK equity market will continue to recover but mainly
because we believe there remain undervalued mega-cap companies. With only one
financial year left to report on before the scheduled wind-up date for the
Company we remain hopeful that we shall continue to rebuild the net asset value
of the Ordinary Shareholders and to secure further the amount that the ZDP
Shareholders expect to receive at that time.
Ian Carstairs
Investment Manager
20 December 2010
INVESTMENTS IN ORDER OF VALUATION
at 31 October 2010
All ordinary shares unless otherwise indicated
MARKET
VALUE
INVESTMENT ACTIVITY GBP'000 % OF
PORTFOLIO
Lloyds Banking Banks 3,791 11.8
Vodafone Mobile Telecommunications 3,227 10.1
Royal Dutch Shell Oil & Gas Producers 3,098 9.7
AstraZeneca Pharmaceuticals & 2,660 8.3
Biotechnology
GlaxoSmithKline Pharmaceuticals & 2,587 8.1
Biotechnology
Gartmore Fledgling Trust Equity Investment 1,642 5.1
Instruments
Carnival Travel & Leisure 1,076 3.4
Royal Bank of Scotland Banks 1,038 3.2
BP Oil & Gas Producers 766 2.4
Legal & General Insurance 753 2.3
BT Fixed Line 692 2.2
Telecommunications
Aviva Insurance 677 2.1
Marstons Travel & Leisure 643 2.0
Wolseley Support Services 638 2.0
KCOM Fixed Line 490 1.5
Telecommunications
Cable & Wireless Fixed Line 421 1.3
Worldwide Telecommunications
Redrow Housebuilders 337 1.0
Cable & Wireless Fixed Line 321 1.0
Communications Telecommunications
British Polythene General Industrials 286 0.9
Begbies Traynor Support Services 273 0.9
STV Media 208 0.6
Paragon General Financial 198 0.6
Findel General Retailers 162 0.5
Marshalls Construction & Materials 160 0.5
French Connection General Retailers 159 0.5
Bovis Homes Housebuilders 157 0.5
Bellway Housebuilders 134 0.4
Drax Gas, Water & 133 0.4
Multiutilities
St. Ives Support Services 101 0.3
NXT Leisure Goods 63 0.2
Metalrax Industrial Engineering 39 0.1
Johnston Press Media 38 0.1
Luminar Travel & Leisure 37 0.1
Harvard International Leisure Goods 37 0.1
Warner Estate Real Estate 25 0.1
Biome Technologies Industrial Engineering 23 0.1
Total equity investments 27,090 84.4
Phoenix Life 7.25% Life Insurance (WR) 1,558 4.9
Perpetual
Skipton 10% Dec 2018 Banks (Ba2) 1,376 4.3
Principality 5.375% Jul Banks (B3) 1,320 4.1
2016
Co-operative Bank FRN May Banks (Ba1) 384 1.2
2016
Anglo Irish Bank FRN Jun Banks (C) 365 1.1
2016
Total fixed income 5,003 15.6
investments
Total value of 32,093 100.0
investments
Principal Risks and Uncertainties
The principal risk factors relating to the Company can be divided into the
following areas:
* Investment Policy and Risk Management;
* Market Movements and Portfolio Performance;
* Share Price Risk;
* Gearing;
* Dividends; and
* Regulatory and Tax Related Risk.
A detailed explanation of those principal risks and uncertainties can be found
in the Annual Financial Report for the year ended 31 October 2010.
STATEMENT OF DIRECTOR'S RESPONSIBILITIES
in respect of the preparation of the annual financial report
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 the law the Directors have elected to prepare financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law). The
financial statements are required by law to give a true and fair view of the
state of 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 are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006 (`CA 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.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, a Directors' Remuneration Report and a Corporate
Governance Statement.
In so far as each of the Directors is aware:
* there is no relevant audit information of which the Company's Auditors are
unaware; and
* the Directors have taken all steps that they ought to have taken to make
themselves aware of any relevant audit information and to establish that the
Auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with
provision s418 of CA 2006.
The Directors of the Company each confirm, to the best of their knowledge,
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
* this annual financial report includes a fair review of the development and
performance of the business and the position of the Company together with a
description of the principal risks and uncertainties that it faces.
The Rt. Hon. the Lord Naseby
Signed on behalf of the Board of Directors
20 December 2010
Electronic Publication
The financial statements are published on www.invescoperpetual.co.uk/
investmenttrusts, a website which is maintained by the Company's Manager. The
work carried out by the Auditors does not involve consideration of the
maintenance and integrity of this website and accordingly, the Auditors accept
no responsibility for any changes that have occurred to the financial
statements since they were initially presented on the website. Visitors to the
website need to be aware that legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from
legislation in other jurisdictions.
INCOME STATEMENT
for the year ended 31 October 2010
2010 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments
held at fair value
through profit or loss - 4,084 4,084 - 3,278 3,278
Foreign exchange gains - - - 12 12
- - - -
Income 1,321 - 1,321 1,154 - 1,154
Investment management fees (165) - (165) (144) - (144)
VAT recovered on management - - - 44 - 44
fees
Other expenses (222) - (222) (231) (2) (233)
Net return before finance
costs and taxation 934 4,084 5,018 823 3,288 4,111
Interest payable and similar
charges
Finance cost on Zero
Dividend
Preference Shares - (1,481) (1,481) - (1,398) (1,398)
Dividends on Ordinary (964) - (964) (1,493) - (1,493)
Shares
Return on ordinary
activities before taxation (30) 2,603 2,573 (670) 1,890 1,220
Tax on ordinary activities - - - - - -
Return on ordinary
activities
after tax for the financial (30) 2,603 2,573 (670) 1,890 1,220
year
Return per Ordinary Share
- basic 5.8p 16.2p 22.0p 5.1p 11.8p 16.9p
Return per Zero Dividend
Preference Share - 7.6p 7.6p - 7.1p 7.1p
The total column of this statement represents the Company's profit and loss
account, prepared in accordance with UK Accounting Standards. The supplementary
revenue and capital columns are prepared in accordance with the Statement of
Recommended Practice published by the Association of Investment Companies. All
items in the above statements derive from continuing operations and the Company
has no other gains or losses and therefore no statement of total recognised
gains and losses is presented. No operations were acquired or discontinued in
the year.
RECONCILIATION OF MOVEMENTS IN ORDINARY SHARE CAPITAL AND RESERVES
For the year ended 31 October Share Share p Capital Revenue Total
capital remium reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 October 2008 160 15,563 (14,721) 1,379 2,381
Net return on ordinary activities - - 1,890 (670) 1,220
At 31 October 2009 160 15,563 (12,831) 709 3,601
Net return on ordinary - - 2,603 (30) 2,573
activities
At 31 October 2010 160 15,563 (10,228) 679 6,174
BALANCE SHEET
as at 31 October
2010 2009
GBP'000 GBP'000
Fixed assets
Investments held at fair value through - 25,773
profit or loss
Current assets
Investments held at fair value through profit 32,093 -
or loss
Debtors 250 192
Cash at bank 115 2,635
32,458 2,827
Creditors: amounts falling due within one
year
Amounts due to brokers and accruals (107) (303)
Zero Dividend Preference Shares (26,177) -
(26,284) (303)
Net current assets 6,174 2,524
Total assets less current liabilities 6,174 28,297
Creditors: amounts falling due after more
than one year
Zero Dividend Preference Shares - (24,696)
Net assets attributable to Ordinary 6,174 3,601
Shareholders
Net assets attributable to Ordinary
Shareholders
are represented by:
Ordinary share capital 160 160
Share premium 15,563 15,563
Capital reserve (10,228) (12,831)
Revenue reserve 679 709
6,174 3,601
Net asset value per share:
Ordinary Shares - basic 38.5p 22.4p
Zero Dividend Preference Shares 133.5p 125.9p
These financial statements were approved and authorised for issue by the Board
of Directors on 20 December 2010.
The Rt. Hon. the Lord Naseby
Signed on behalf of the Board of Directors
CASH FLOW STATEMENT
for the year ended 31 October 2010
2010 2009
GBP'000 GBP'000
Net cash inflow from operating activities 884 822
Capital expenditure and financial investment (2,440) 2,306
Dividends paid to Ordinary Shareholders (964) (1,493)
Net cash (outflow)/inflow before management
of liquid resources and financing (2,520) 1,635
Management of liquid resources - 984
Movement in cash (2,520) 2,619
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
A summary of the principal accounting policies, all of which have been applied
consistently throughout the year and the previous year, is set out below.
(a) Basis of preparation
(i) Accounting Standards applied
The financial statements have been prepared 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.
As disclosed in both the Chairman's Statement and the Report of the Directors,
contained within the Annual Financial Report for the year ended 31 October
2010, since the Company may not continue into the foreseeable future, the
financial statements have been prepared on a break up basis. This arises as the
Company is obliged to propose a resolution to wind up by 27 October 2011 at the
latest if it is not released from this obligation by a special resolution
passed not later than 27 July 2011 to extend its life or reconstruct it. As a
consequence, in these financial statements all 2010 assets and liabilities are
classified as current and investments are stated at their realisable value
which is equivalent to their bid value.
Due to the range of potential outcomes for the Company, it has not been
possible to quantify the liquidation costs with any certainty, and so no
provision has been made.
In accordance with Financial Reporting Standard 25: "Financial Instruments:
Disclosure and Presentation", the provisions of the Company's Articles of
Association in connection with the life of the Company mean that the Ordinary
Shares and reserves are classified as liabilities. Consequently, dividends are
included within finance costs. It should be noted that these classifications
are purely presentational and do not affect the rights and obligations of the
Ordinary Shareholders.
ii. Functional and presentation currency
The financial statements are presented in sterling, which is the Company's
functional and presentation currency and the currency in which the Company's
share capital and expenses, as well as most of its assets and liabilities, are
denominated.
.
2. Income
2010 2009
GBP'000 GBP'000
Income from listed investments
UK dividends 944 884
Unfranked investment income - 376 263
interest
1,320 1,147
Other income
Deposit interest 1 4
Interest on VAT recovered - 3
1 7
Total income 1,321 1,154
3. Investment Management fees
2010 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment 165 - 165 144 - 144
management
fee
Details of the investment management agreement can be found in the Report of
the Directors contained within the Annual Financial Report for the year ended
31 October 2010. At 31 October 2010 GBP56,000 (2009: GBP37,000) was owed in respect
of management fees. The performance fees are based on the performance of the
Company since inception. At the year end no performance fees were accrued. With
effect from 1 October 2007, no VAT has been paid on management fees. An amount
of GBP44,000 was recognized in the year ended 31 October 2009 in respect of VAT
recovered on management fees together with GBP3,000 of interest.
4. Dividends on Ordinary Shares
Dividends paid and recognized in the year:
2010 2009
pence GBP'000 pence GBP'000
Final paid in respect of the previous 1.5 241 1.5 241
year
Special paid in respect of the - - 3.3 529
previous year
First interim paid 1.5 241 1.5 241
Second interim paid 1.5 241 1.5 241
Third interim paid 1.5 241 1.5 241
6.0 964 9.3 1,493
As the Articles of Association provide for the winding up of the Company on 27
October 2011 unless shareholders resolve otherwise, Ordinary Shareholders'
funds are classified as liabilities.
Set out below are the dividends payable in respect of the financial year:
2010 2009
pence GBP'000 pence GBP'000
First interim paid 1.5 241 1.5 241
Second interim paid 1.5 241 1.5 241
Third interim paid 1.5 241 1.5 241
Proposed final 1.5 241 1.5 241
6.0 964 6.0 964
Return on ordinary 934 823
activities before finance
costs
Revenue reserve deficit (30) (141)
for the year
The proposed final dividend is subject to approval by Ordinary Shareholders at
the AGM; it has not been included as a liability in these financial statements.
5. Returns per Share
The return per Ordinary Share is based on 16,044,750 (2009: 16,044,750)
Ordinary Shares, being the number of shares in issue throughout the year and on
the following figures:
2010 2009
Revenue Capital Total Revenue Capital Total
Return Return Return Return Return Return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Return on ordinary
activities
after tax for the
financial year (30) 2,603 2,573 (670) 1,890 1,220
Dividends paid to
Ordinary Shareholders 964 - 964 1,493 - 1,493
Return attributable to
Ordinary Shareholders 934 2,603 3,537 823 1,890 2,713
Return per Ordinary
Share
- basic 5.8p 16.2p 22.0p 5.1p 11.8p 16.9p
Dividends paid to Ordinary Shareholders are those paid in the year ending 31
October.
Capital return on Zero Dividend Preference Shares is the increase in the year
of the calculated value of these shares as shown in the income statement of GBP
1,481,000 (2009: GBP1,398,000) and on 19,610,250 (2009:19,610,250) Zero Dividend
Preference Shares in issue.
6. Zero Dividend Preference Shares
2010
2009
GBP'000 GBP'000
Authorised:
55,000,000 Zero Dividend Preference Shares of 1p each 550 550
Allotted, called-up and fully paid
19,610,250 Zero Dividend Preference Shares of 1p each 196 196
Premium on issue of Zero Dividend Preference Shares 19,414 19,414
19,610 19,610
Provision for increase in Zero Dividend Preference Shares 6,567 5,086
26,177 24,696
The Zero Dividend Preference Shares (`ZDP Shares') are designed to provide
pre-determined capital growth from their issue price of 100p to a final capital
entitlement on 27 October 2011 of 141.4p, the equivalent of 0.016% per day, by
which the Company is due to be wound up. However, there is no guarantee that
this will be achieved. This is equivalent to a redemption yield of 6% per annum
based on their issue price. No dividends are payable on the ZDP shares.
7. Ordinary Share Capital
2010 2009
GBP'000 GBP'000
Authorised:
45,000,000 Ordinary Shares of 1p each 450 450
Allotted, called-up and fully paid:
16,044,750 Ordinary Shares of 1p each 160 160
As explained in note 1(a)(i) the Ordinary Shares are classified as liabilities.
8. Reserves
The share premium account arose from the issue of the Ordinary and ZDP shares
and is a non- distributable reserve.
The capital reserve records changes in the fair value of investments, realised
gains and losses, and other items charged to capital in accordance with the
Company's accounting policies. In accordance with guidance issued by the
Institute of Chartered Accountants in England and Wales, as the Company's
investments are readily convertible into cash, revaluation losses, totalling GBP
9,764,000 (2009: loss of GBP14,272,000) are deemed to be realised.
The revenue reserve is the only reserve that is distributable by way of
dividend to the Ordinary Shareholders. The capital reserve cannot be so
distributed.
9. 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
2010 2009 2010 2009
pence pence GBP'000 GBP'000
Ordinary Shares - basic 38.5 22.4 6,174 3,601
ZDP Shares 133.5 125.9 26,177 24,696
The basic net asset value per Ordinary Share is based on the net assets
attributable at the year end and on 16,044,750 Ordinary Shares, being the
number of Ordinary Shares in issue at the year end.
The net asset value per ZDP Share is based on the net assets attributable at
the year end and on 19,610,250 ZDP Shares being the number of ZDP Shares in
issue at the year end
10. Notes to the Cash Flow
Statement
(a) Reconciliation of 2010 2009
total return to net cash
flow from operating GBP'000 GBP'000
activities
Net return before finance 5,018 4,111
costs and taxation
Adjustment for gains on (4,084) (3,278)
investments
Exchange movements - (12)
Increase in debtors (58) (4)
Increase in creditors 8 5
Net cash inflow from 884 822
operating activities
(b) Analysis of cash flows 2010 2009
for headings netted in the
cash flow statement GBP'000 GBP'000
Capital expenditure and (7,393) (6,550)
financial investment
Purchase of investments
Sale of investments 4,953 8,856
Net cash (outflow)/inflow (2,440) 2,306
2010 2009
GBP'000 GBP'000
Management of liquid
resources
Cash recalled from short-term - 984
deposit
Net cash movement - 984
31 October CASH NON-CASH 31 OCTOBER
(c ) Analysis of changes in net 2009 FLOW MOVEMENT 2010
debt
(restated)
Cash GBP,000 GBP,000 GBP,000 GBP,000
Cash at bank 2,635 (2,520) - 115
Debt
Zero Dividend Preference (24,696) - (1,481) (26,177)
liability
Net debt (22,061) (2,520) (1,481) (26,062)
The prior year financial statements showed an analysis of changes in net funds.
This year we are showing an analysis of changes in net debt, as we are now
including the Zero Dividend Preference Shares liability within our definition
of net debt.
(d) Reconciliation of net cash 2010 2009
flow to movement in net debt
(restated)
GBP,000 GBP,000
(Decrease)/increase in cash (2,520) 2,619
Net debt at beginning of year (22,061) (23,282)
Increase in Zero Dividend (1,481) (1,398)
Preference liability
Net debt at end of year (26,062) (22,061)
11. 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. Full details of
Directors' interests are set out in the Report of the Directors in the Annual
Financial Report for the year ended 31 October 2010.
12. This announcement does not constitute the Company's statutory accounts. It
is an abridged version of the audited Annual Financial Report of the Company
for the year ended 31 October 2010. The opinion of the auditors on the 2010
Annual Financial Report is unqualified, and the auditors have not drawn
attention to any matter, nor have they sought to make a statement under section
498 of the Companies Act 2006. Information relating to the year ended 31
October 2009 is taken from the audited Annual Financial Report for that year
which has been delivered to the Registrar of Companies. The Annual Financial
Report for 2010, once approved by shareholders, will be delivered to the
Registrar in due course
13. 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. A copy of the Annual
Financial Report will be available shortly from Invesco Perpetual on the
following website:
http://investmenttrusts.invescoperpetual.co.uk/portal/site/iptrust/
investmentrange/investmenttrusts/recovery
14. The Annual General Meeting of the Company will be held at 12.00 noon on 2
February 2011 at 30 Finsbury Square, London EC2A 1AG.
By order of the Board
Invesco Asset Management Limited
Company Secretary
20 December 2010
END
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