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INVESCO PERPETUAL UK SMALLER CO'S INVESTMENT TRUST PLC: Annual Financial Report

INVESCO PERPETUAL UK SMALLER CO'S INVESTMENT TRUST PLC: Annual Financial Report
Invesco Perpetual UK Smaller Companies Investment Trust plc           
                 Annual Financial Report Announcement                       


                      For the year ended 31 January 2013                       

FINANCIAL INFORMATION AND PERFORMANCE STATISTICS

The Benchmark Index of the Company is the Numis Smaller Companies Index
(excluding Investment Trusts)
                                                       AT           AT         
                                                                               
                                               31 JANUARY   31 JANUARY        %
                                                                               
                                                     2013         2012   CHANGE


                                                                           
Net asset value per ordinary share(2):                                          
                                                                           
  - balance sheet                                  285.7p       237.6p   
+20.2% 
                                                                           
  - after charging proposed dividends              281.3p       234.2p   
+20.1%
(capital NAV)                                                                   
                                                                           
Shareholders' funds (£'000)(2)                 152,034         126,771   
+19.9% 
                                                                           
Mid-market price per ordinary share                246.5p       187.5p   +31.4% 
                                                                           
Discount(1) per ordinary share based on             13.7%        21.1%         
balance sheet NAV                                                               
                                                                           
Total return (all income reinvested):                                           
                                                                           
Net asset value(1)(2)(3)                                                 +22.4% 
                                                                           
Benchmark Index(1)(3)                                                    +25.6% 
                                                                           
FTSE All-Share Index(3)                                                  +16.3% 
                                                                           
Capital return:                                                                 
                                                                           
Net asset value(1)(2)                                                    +20.2% 
                                                                           
Benchmark Index(1)(3)                                                    +22.0% 
                                                                           
FTSE All-Share Index(3)                                                  +12.1% 
                                                                           
Gearing:                                                                        
                                                                           
  - gross gearing(1)                                  nil         6.7%       
                                                                               
  - net gearing(1)                                    nil         6.7%       
                                                                               
  - net cash(1)                                      5.1%          nil       
                                                                               
  - maximum permissable gearing(1)                  13.2%        15.8%       
                                                                               
Return and dividend per ordinary share:                                         
                                                                           
Revenue return                                       6.3p         5.2p          
                                                                           
Capital return                                      46.7p       (7.8)p          
                                                                           
Total return                                        53.0p       (2.6)p          
                                                                           
Interim dividend                                     1.6p         1.6p          
                                                                           
Final dividend                                       4.4p         3.4p          
                                                                           
Total dividends                                      6.0p         5.0p   +20.0% 
                                                                           
Ongoing charges(1)                                                              
                                                                           
  - excluding performance fee                       0.87%        0.89%       
                                                                               
  - performance fee                                   nil        0.31%       

Note: (1) The term is defined in the Glossary on page 53 of the Annual
Financial Report. 
(2) Includes enhancements from share repurchases. 
(3) Source: Thomson Reuters Datastream. 
CHAIRMAN'S STATEMENT 
The net asset value (NAV) of your Company rose by 22.4% on a total return basis
during its financial year, which ended on 31 January 2013. Whilst this was a
satisfactory absolute return for shareholders in a very low interest rate
environment, it fell slightly short of the benchmark against which your Board
measures the Company's performance, the Numis Smaller Companies Index
(excluding Investment Trusts), which returned 25.6%. However, your Company did
comfortably out-perform the wider UK stock market, as measured by the FTSE
All-Share Index, which rose by a lesser 16.3%. 
Over the same period the mid-market price of the Company's shares increased by
31.4%, from 187.5p to 246.5p per share. The discount to NAV at which the
Company's shares trade narrowed from 21.1% at the end of the previous financial
year to 13.7% at the year end, reflecting improved investor sentiment towards
smaller companies in general and your Company in particular. 
Dividend 
For the year ended 31 January 2013, an interim dividend of 1.6 pence per share
was paid on 24 October 2012 to shareholders on the register on 28 September
2012. The Board is proposing a final dividend of 4.4 pence per share payable on
24 May 2013 to shareholders on the register on 26 April 2013. Total dividends
for the year to 31 January 2013 therefore amount to 6.0 pence per share, a 20%
increase on the previous year. Future dividends will, as always, depend on
market conditions and investment performance. 
The Future of the Company 
On 25 May 2012, the Company announced that on or around the date of its AGM in
2017, the Board would make available a number of options for shareholders to
consider. These may include the continuation of the existing Company, a
rollover into a similar or other investment vehicle and/or the provision of a
cash exit at a price close to NAV. In time, one of the benefits the Board hopes
to achieve by this initiative is a permanent narrowing of the discount to NAV
at which the shares trade and progress has already been made in this respect as
noted above. The Manager took the initiative in proposing this strategy to the
Board, which reflects their confidence in being able to retain the loyalty of
the shareholders, through good performance, in the intervening period. Further
information can be found in the Directors' Report on page 17 of the Annual
Financial Report. 
Share Repurchases 
During the year ended 31 January 2013, the Company purchased for cancellation a
total of 137,000 ordinary shares at a weighted average price of 201.56 pence
per share and at an average discount to NAV of 17.79%. The effect has been to
buy in 0.26% of the issued share capital and to enhance NAV by approximately
0.1%. No further ordinary shares have been bought back since the year end. The
Board believes the ability to buy back a limited number of shares can, in
certain circumstances, be useful in reducing the volatility of the Company's
share price whilst boosting NAV per share and on this basis will seek to renew
this authority once again at the coming AGM. 
Annual General Meeting 
At this year's AGM the Board will seek shareholder approval to adopt new
Articles of Association which have been amended to afford the Company the
ability to take advantage of changes in the investment trust taxation rules and
to update them generally to reflect current law and best practice. The
Directors have carefully considered all of the resolutions proposed in the
Notice of the AGM and believe them to be in the best interests of shareholders
and the Company as a whole. The Directors, accordingly, recommend that
shareholders vote in favour of each resolution as they themselves intend to do. 
Outlook 
As you will read in their report that follows, your portfolio managers identify
the drivers behind good stock market performance over the last year to be a
combination of continued quantitative easing, record low interest rates and
accommodative monetary policy measures adopted by the authorities. However, an
end to quantitative easing and the prospect of inflation resulting in rising
interest rates pose a future threat, though one potentially offset by a greater
confidence in the ability of the world economy to deliver growth without
external stimulus. The market may well both anticipate such a scenario and
regard it positively - albeit as one potentially subject to periodic setbacks. 
In such an environment, your portfolio managers' preference for investing in
better quality companies may, from time-to-time, work against them as a rising
tide lifts all boats. However, your Board remains firmly of the opinion that
their strategy is correct and that investing in companies with solid balance
sheets and sound business models remains the best long term option. 
Ian Barby 
Chairman 
8 April 2013 
. 
PORTFOLIO MANAGERS' REPORT 
Investment Review 
In the year under review, the majority of stock markets, particularly those of
the developed countries, performed strongly. Most have fully recovered from the
sharp setback in mid-2011 caused by the downgrading of US government debt by
ratings agency Standard & Poor's as well as fears of debt contagion amongst
eurozone countries. A resurgence of eurozone worries took place in the second
quarter of 2012, but since then stock markets have trended steadily higher. For
the moment at least, economic tensions have eased. In Europe, the pledge to
preserve the euro by the European Central Bank's president and the generally
supportive role taken by Germany have led to a recovery in the euro and a
narrowing of government debt spreads. In the US, the re-election of President
Obama is regarded as pro-growth and preferable to a divided Republican
opposition. In addition, in spite of the lessons of the 1930's depression,
markets appear to have allowed Japan to undertake a substantial competitive
devaluation of the yen which is necessary in view of Japan's unsustainably high
government debt-to-GDP ratios. Finally, markets have benefited from low
interest rates and easy monetary policies. 
The UK stock market, as measured by the FTSE All-Share Index, rose 16.3% on a
total return basis. Economic growth has been disappointing in spite of a
surprising increase in private sector job creation. One of the impediments to
growth in the UK was always going to be the large size of the financial sector
relative both to GDP and to other countries prior to the financial crisis of
2008. The subsequent fall in banks' profits and the resulting lower sector
employment has had a major negative effect on the budget deficit. More
importantly, the poor condition of many UK banks has led to a restriction in
credit growth which has also held back recovery. Not surprisingly, investors
have preferred a selective approach to stock picking. One of the stock market
sectors favoured has been UK small companies. Their size, flexibility and, in
many cases, their financial strength have led to significant outperformance
versus their large cap peers during the last 5 years. In the year to 31 January
2013, the benchmark index, the Numis Smaller Companies Index (ex investment
trusts), rose 25.6% on a total return basis. 
Portfolio Strategy and Review 
Against this background, your Company produced an increase in net asset value
on a total return basis of 22.4% for the fiscal year. Positive contributions
came from the Health Care and Support Services sectors, while the portfolio's
exposure to the Mining sector negatively impacted performance. 
At the individual stock level, the stand-out performer was TalkTalk Telecom
(+92%).This provider of broadband services is recovering from a period of poor
customer performance. PayPoint shares (+51%) also increased in value following
better than expected results. The portfolio benefited from overweight positions
in the two largest holdings in the portfolio - Dechra Pharmaceuticals (+30%)
and Synergy Health (+29%)- while Dunelm (+54%), a retailer of homewares,
performed strongly in what proved a difficult year for UK retailers in general.
While contributors to the portfolio substantially outweighed detractors, there
were disappointments from Avocet Mining (-76%) which issued a profits warning
due to production problems at its main Inata gold mine in West Africa.
Subsequently, the problems facing the company worsened, reserves were reduced
and the dividend was omitted. Since the year end, we sold the holding. Cape
(-43%), a multi-disciplinary supplier of industrial services, suffered from
individual contract problems and a general delay to large energy projects in
Australia. A new chief executive has adopted an appropriately cautious approach
to forecasts which, in our view, still leaves the shares looking undervalued.
May Gurney Integrated Services (-39%), a provider of outsourced services to
local authorities, fell on news of serious operational issues with two of its
environmental contracts. 
Investment Strategy 
In the Portfolio Managers' Report to end January 2012 we introduced the concept
of secular bull and bear markets, an alternating cycle of about 15/20 years of
significant real returns (bull) followed by a period of disappointing real
returns (bear). The logic behind the pattern is that the bullish phase creates
excesses in the stock market (high valuations) and in the underlying economy,
whilst the bearish phase allows for the correction of these excesses. We
concluded that western stock markets had been in a secular bear market since
2000 (we have experienced negative real returns on a capital only basis since
then) and that, given the economic backdrop of deleveraging by the private
sector and the continuing sharp increase in government debt levels, another
downward phase in stock markets was likely before the start of a new secular
bull market. In this regard, our concern centres on 2013, a year with no major
elections in the US and hence a year of relative freedom for US politicians.
Most commentators are expecting Europe to remain mired in its problems and they
are nervous about excessive infrastructure spending in China and the need for
that economy to become more balanced, with more reliance on domestic
consumption. Therefore they are pinning their hopes for global growth on the US
economy. Recent US GDP figures lend some support to this premise as, when
adjusted for inventory changes, there was reasonable underlying growth taking
place. In addition, it appears that the US has made a better effort to clean up
its banks and, after sharp falls in house prices, there is some evidence of a
turn in its housing market. Taken together with a major improvement in energy
self-sufficiency, the picture looks promising until you remember that it is
2013, the year of the "fiscal cliff", "sequestration" and "debt ceilings".
There will almost certainly be a larger fiscal drag to come from higher taxes
but we also believe there are clear political dangers to be overcome as well. 
The difficulty of deficit reduction through harsh austerity measures is all too
apparent in certain countries of the eurozone. In the Italian election, voters
clearly registered their anger over austerity cuts, much as they did in Greece
in May 2012. Meanwhile, the level of debt to GDP for the eurozone area
continues to pose a considerable hurdle. We firmly believe that a restructured
and smaller eurozone will inevitably happen over time, given the differing
economic status of member states. 
In the UK, we believe that sterling's fall against the euro and the US dollar
will negatively impact the consumer in 2013 largely as a result of the higher
cost of energy. The UK consumer had benefited from Personal Protection
Insurance payments in 2012 but these payments will run at a lower rate in 2013.
Given the coalition's current intention to stick to its austerity programme, we
feel the economic outlook for the UK looks weaker than for many other developed
countries. Whilst we applaud its resolve, we expect the Government will succumb
to the political pressure that will be applied as we get nearer to the
elections in 2015. 
Elsewhere, the weakness in commodity prices ushers in a more subdued period for
emerging countries. During the recent expansion phase, operating costs of many
mining companies have escalated sharply leading to a squeeze in profits and
returns on capital. As a result many mining companies are now focused on
improving their operating ratios, reducing their capital employed and returning
surplus funds to shareholders, as well as increasing dividends. This situation
is not helped by some evidence to show that China appears to have spent
considerably more on infrastructure per capita in comparison with other
emerging countries at a similar stage of development. Since China has been a
major purchaser of commodities and apparently has sizeable stockpiles, this
does not augur well for nearer term prospects. In summary, the outlook for
recovery in global economic growth is unclear with the best chances seen to be
in the US. 
Despite the uncertainties surrounding global economic growth, stock markets
have performed surprisingly well. We put that down to easy monetary policies of
low interest rates and quantitative easing (QE). In spite of this, and major
swings within currencies, inflation is generally moderating. To some extent,
this shows how strong the deflationary effects of the financial crisis would
have been without QE. As it is QE has created a pool of liquidity which,
failing to find a natural home within the real economy, has gravitated towards
financial markets. Since the beginning of 2013, stock markets have risen even
more strongly and there is evidence of a broadening of investor interest to
include lower rated, lower quality stocks and companies at the very small end
of the market. We have participated in this trend because of the sizeable
difference in rating between these companies and recognised quality growth
stocks. However, given our views about economic growth, particularly in the UK,
we still think the bulk of the portfolio should remain in quality companies
with the scale and financial strength to control their own destiny. 
There have been a number of new holdings and we draw your attention to the
following: Abcam which produces and distributes antibodies via an on-line
catalogue to universities and other research bodies, International Personal
Finance, which was spun out of Provident Financial and which provides small
personal loans in many Eastern European countries and Mexico, and IG Group, the
leader in the provision of spread betting and similar products. In addition the
following holdings were purchased after the year end: Crest Nicholson, a
quality house builder which has recently refloated on the London stock
exchange, Catlin Group, a Lloyds Underwriter and Phoenix Group, a specialist
insurance company which runs off life insurance companies closed to new
business. 
Outlook 
Since the beginning of 2013, the UK stock market has performed strongly, with
the FTSE All-Share Index rising over 9% but still being outperformed by the
Numis Smaller Companies Index (ex investment trusts) which has gained over 11%.
The upswing that began in 2009 is clearly still intact. The UK stock market is
in the middle of the seasonally strong period (November to May) and could still
move higher, although there is some evidence of slowing momentum. We believe
this rally is the result of QE and growing optimism about the US. If the
politicians can do a deal to end sequestration and remove the threat of the
debt ceiling, then the equity market, we believe, could extend its gains. 
Richard Smith Jonathan Brown 
Portfolio Managers 
8 April 2013 
. 
INVESTMENTS IN ORDER OF VALUATION 
AT 31 JANUARY 2013 
Ordinary shares unless stated otherwise 
                                                          VALUE        % OF 
                                                                           
COMPANY                            ACTIVITY BY SECTOR         £'000   
PORTFOLIO 
                                                                           
Synergy Health                     Health Care Equipment &    5,910         4.0 
                               Services                                     
                                                                           
Dechra Pharmaceuticals             Pharmaceuticals &          5,788         4.0 
                               Biotechnology                                
                                                                           
RPC                                General Industrials        3,170         2.2 
                                                                           
Diploma                            Support Services           3,123         2.1 
                                                                           
Howden Joinery                     Support Services           2,979         2.0 
                                                                           
Premier Oil                        Oil & Gas Producers        2,803         1.9 
                                                                           
Mears                              Support Services           2,724         1.9 
                                                                           
Bellway                            Household Goods & Home     2,537         1.7 
                               Construction                                 
                                                                           
Dunelm                             General Retailers          2,492         1.7 
                                                                           
RPS                                Support Services           2,399         1.6 
                                                                           
Top Ten Holdings                                             33,925        23.1 
                                                                           
PayPoint                           Support Services           2,358         1.6 
                                                                           
Brewin Dolphin                     Financial Services         2,352         1.6 
                                                                           
Brown (N)                          General Retailers          2,344         1.6 
                                                                           
Greene King                        Travel & Leisure           2,343         1.6 
                                                                           
Senior                             Aerospace & Defence        2,280         1.6 
                                                                           
Micro Focus International          Software & Computer        2,150         1.6 
                               Services                                     
                                                                           
RWS AIM                            Support Services           2,135         1.5 
                                                                           
Jupiter Fund Management            Financial Services         2,128         1.5 
                                                                           
Filtrona                           Support Services           2,082         1.4 
                                                                           
Euromoney Institutional Investor   Media                      1,976         1.4 
                                                                           
Top Twenty Holdings                                          56,073        38.5 
                                                                           
Bovis Homes                        Household Goods & Home     1,921         1.3 
                               Construction                                 
                                                                           
Domino Printing Sciences           Electronic & Electrical    1,872         1.3 
                               Equipment                                    
                                                                           
Rentokil Initial                   Support Services           1,863         1.3 
                                                                           
Elementis                          Chemicals                  1,798         1.2 
                                                                           
Workspace                          Real Estate Investment     1,783         1.2 
                               Trusts                                       
                                                                           
Carphone Warehouse                 General Retailers          1,781         1.2 
                                                                           
HomeServe                          Support Services           1,770         1.2 
                                                                           
AZ Electronic Materials            Chemicals                  1,755         1.2 
                                                                           
Northgate                          Support Services           1,728         1.2 
                                                                           
Aveva                              Software & Computer        1,709         1.2 
                               Services                                     
                                                                           
Top Thirty Holdings                                          74,053        50.8 
                                                                           
TalkTalk Telecom                   Fixed Line                 1,659         1.2 
                               Telecommunications                           
                                                                           
IG Group                           Financial Services         1,610         1.1 
                                                                           
Ultra Electronics                  Aerospace & Defence        1,595         1.1 
                                                                           
Rotork                             Industrial Engineering     1,574         1.1 
                                                                           
Victrex                            Chemicals                  1,564         1.1 
                                                                           
EnQuest                            Oil & Gas Producers        1,546         1.1 
                                                                           
Amerisur Resources AIM             Oil & Gas Producers        1,542         1.1 
                                                                           
Beazley                            Non-life Insurance         1,507         1.0 
                                                                           
Babcock International              Support Services           1,506         1.0 
                                                                           
IQE AIM                            Technology Hardware &      1,502         1.0 
                               Equipment                                    
                                                                           
Top Forty Holdings                                           89,658        61.6 
                                                                           
MITIE                              Support Services           1,478         1.0 
                                                                           
Fenner                             Industrial Engineering     1,451         1.0 
                                                                           
MoneySupermarket.com               Media                      1,449         1.0 
                                                                           
Restaurant Group                   Travel & Leisure           1,445         1.0 
                                                                           
Berendsen                          Support Services           1,432         1.0 
                                                                           
BTG                                Pharmaceuticals &          1,410         0.9 
                               Biotechnology                                
                                                                           
Hunting                            Oil Equipment, Services    1,389         0.9 
                               & Distribution                               
                                                                           
Laird                              Technology Hardware &      1,338         0.9 
                               Equipment                                    
                                                                           
Anglo Pacific                      Mining                     1,290         0.9 
                                                                           
Consort Medical                    Health Care Equipment &    1,283         0.9 
                               Services                                     
                                                                           
Top Fifty Holdings                                          103,623        71.1 
                                                                           
H&T AIM                            Financial Services         1,278         0.9 
                                                                           
Spectris                           Electronic & Electrical    1,232         0.8 
                               Equipment                                    
                                                                           
Dignity                            General Retailers          1,223         0.8 
                                                                           
Chemring                           Aerospace & Defence        1,213         0.8 
                                                                           
CVS AIM                            General Retailers          1,204         0.8 
                                                                           
EMIS AIM                           Software & Computer        1,189         0.8 
                               Services                                     
                                                                           
James Halstead AIM                 Construction & Materials   1,185         0.8 
                                                                           
Microgen                           Software & Computer        1,173         0.8 
                               Services                                     
                                                                           
Paragon                            Financial Services         1,155         0.8 
                                                                           
SDL                                Software & Computer        1,135         0.8 
                               Services                                     
                                                                           
Top Sixty Holdings                                          115,610        79.2 
                                                                           
International Personal Finance     Financial Services         1,117         0.8 
                                                                           
Go-Ahead                           Travel & Leisure           1,091         0.7 
                                                                           
Cranswick                          Food Producers             1,075         0.7 
                                                                           
Spirax-Sarco Engineering           Industrial Engineering     1,016         0.7 
                                                                           
Cape                               Oil Equipment, Services      989         0.7 
                               & Distribution                               
                                                                           
LSL Property Services              Real Estate Investment &     983         0.7 
                               Services                                     
                                                                           
LondonMetric Property              Real Estate Investment       961         0.7 
                               Trusts                                       
                                                                           
Spirent Communications             Technology Hardware &        947         0.6 
                               Equipment                                    
                                                                           
Melrose Industries                 Electronic & Electrical      946         0.6 
                               Equipment                                    
                                                                           
Abcam AIM                          Pharmaceuticals &            936         0.6 
                               Biotechnology                                
                                                                           
Top Seventy Holdings                                        125,671        86.0 
                                                                           
Brooks Macdonald AIM               Financial Services           913         0.6 
                                                                           
Devro                              Food Producers               899         0.6 
                                                                           
May Gurney Integrated Services AIM Support Services             835         0.6 
                                                                           
Dixons Retail                      General Retailers            824         0.6 
                                                                           
Hargreaves Services AIM            Support Services             785         0.5 
                                                                           
Faroe Petroleum AIM                Oil & Gas Producers          777         0.5 
                                                                           
Barratt Developments               Household Goods & Home       776         0.5 
                               Construction                                 
                                                                           
Polar Capital AIM                  Financial Services           775         0.5 
                                                                           
NCC                                Software & Computer          764         0.5 
                               Services                                     
                                                                           
Sinclair IS Pharma AIM             Pharmaceuticals &            763         0.5 
                               Biotechnology                                
                                                                           
Top Eighty Holdings                                         133,782        91.4 
                                                                           
Xaar                               Electronic & Electrical      751         0.5 
                               Equipment                                    
                                                                           
Innovation                         Software & Computer          750         0.5 
                               Services                                     
                                                                           
Renishaw                           Electronic & Electrical      746         0.5 
                               Equipment                                    
                                                                           
Valiant Petroleum AIM              Oil & Gas Producers          743         0.5 
                                                                           
Advanced Medical Solutions AIM     Health Care Equipment &      727         0.5 
                               Services                                     
                                                                           
Salamander Energy                  Oil & Gas Producers          722         0.5 
                                                                           
Mountview Estates                  Real Estate Investment &     721         0.5 
                               Services                                     
                                                                           
Sthree                             Support Services             659         0.5 
                                                                           
Xchanging                          Support Services             649         0.4 
                                                                           
Hansard Global                     Life Insurance               597         0.4 
                                                                           
Top Ninety Holdings                                         140,847        96.2 
                                                                           
Fidessa                            Software & Computer          596         0.4 
                               Services                                     
                                                                           
Mulberry AIM                       Personal Goods               584         0.4 
                                                                           
Abbey Protection AIM               Non-life Insurance           484         0.3 
                                                                           
Impax Asset Management AIM         Financial Services           401         0.3 
                                                                           
Northbridge Industrial Services    Industrial Engineering       393         0.3
AIM                                                                             
                                                                           
African Barrick Gold               Mining                       388         0.3 
                                                                           
Trinity Exploration & Production   Oil & Gas Producers          382         0.3
AIM (formerly Bayfield Energy)                                                  
                                                                           
Craneware AIM                      Software & Computer          327         0.2 
                               Services                                     
                                                                           
Mood Media AIM                     Media                        321         0.2 
                                                                           
London Mining AIM                  Industrial Metals &          319         0.2 
                               Mining                                       
                                                                           
Top Hundred Holdings                                        145,042        99.1 
                                                                           
Novae                              Non-life Insurance           308         0.2 
                                                                           
Kenmare Resources                  Mining                       302         0.2 
                                                                           
Entertainment One                  Media                        300         0.2 
                                                                           
Avocet Mining                      Mining                       287         0.2 
                                                                           
Active Risk AIM                    Software & Computer           99         0.1 
                               Services                                     
                                                                           
Berry Starquest Limited            Investment Dealing             -           - 
                               Subsidiary                                   
                                                                           
Total Investments                                           146,338       100.0 
AIM: Investments quoted on AIM (formerly the Alternative Investment Market) 
. 
Principal Risks and Uncertainties 
Investment Objective 
There can be no guarantee that the Company will achieve its investment
objective as stated on page 16 of the Annual Financial Report. 
Market Movements and Portfolio Performance 
The majority of the Company's investments are traded on the London Stock
Exchange with some proportion of investments traded on the AIM Market. The
principal risk for investors in the Company is of a significant fall in the
markets and/or a prolonged period of decline in the markets relative to other
forms of investment as well as bad performance of individual portfolio
companies. The Company invests in smaller and medium sized companies, which are
generally considered riskier than their larger counterparts and therefore their
share prices can be more volatile. As smaller companies do not generally have
the financial strength, diversity and resources of larger companies, they may
find it more difficult to overcome periods of economic slowdown or recession.
In addition, the relatively small capitalisation of such companies can make the
market in their shares less liquid, thus affecting the Company's ability to buy
and sell shares in its portfolio. 
The portfolio managers' approach to investment is one of individual stock
selection. Market risk is mitigated via the stock selection process, together
with the slow build-up of holdings rather than the purchase of large positions
outright. This allows the portfolio managers to observe more data points from a
company before adding to a position. The overall portfolio is well diversified
by company and sector. The weighting of an investment in the portfolio tends to
be loosely aligned with the market capitalisation of that company. This means
that the largest holdings will often be amongst the larger of the smaller
companies available. The portfolio managers remain cognisant at all times of
the potential liquidity of the portfolio. 
The portfolio managers are relatively risk averse, look for lower volatility in
the portfolio and seek to outperform in more challenging markets. In comparison
to peer group investment trusts, the Company believes that its portfolio often
has a higher than average market capitalisation and a lower than average
exposure to the AIM market. 
The portfolio of the portfolio managers is carefully monitored by the Board,
and the continuation of the portfolio managers' mandate is reviewed annually.
The Board has established guidelines to ensure that the approved investment
policy is pursued by the portfolio managers. The Board and the portfolio
managers maintain an active dialogue with the aim of ensuring that the market
rating of the Company's shares reflects the underlying net asset value; and
there are in place both share buy back and issuance facilities to help the
management of this process. 
The Risks and Risk Management Policies are detailed in note 19 in the Annual
Financial Report. 
Ordinary Shares 
The market value of the shares in the Company may not reflect their underlying
net asset value and may trade at a discount to its NAV. The value of an
investment in the Company and the income derived from that investment may go
down as well as up and an investor may not get back the amount invested. The
Board monitors the Company's discount to NAV and undertakes targeted buy backs
of the Company's ordinary shares where deemed appropriate. 
Whilst the Directors intend to pay a dividend to ordinary shareholders each
year, the ability to do so will depend upon the level of income received from
securities, the timing of receipts of such income from securities, expenses and
the amount of any distributable reserves. The Company has adopted a policy of
charging 50% of base investment management fees and 80% of finance costs to
capital. The effect of this policy is that income returns in each year will be
higher, and capital returns lower, than they would if such fees were charged
100% to income. 
Regulatory Risk 
The Company is subject to various laws and regulations by virtue of its status
as an investment trust, and its listing on the London Stock Exchange. A breach
of s1158 CTA could lead to the Company being subject to capital gains tax on
the sale of its investments. Other control failures, either by the Manager or
any other of the Company's service providers, may result in operational or
reputational problems, erroneous disclosures or loss of assets through fraud,
as well as breaches of regulations. 
The Manager reviews the level of compliance with s1158 CTA and other financial
regulatory requirements on a daily basis. The Board regularly considers all
risks, the measures in place to control them and the possibility of any other
risks that could arise. The Manager's Compliance and Internal Audit Officers
produce regular reports for review at the Company's Audit Committee. 
Gearing 
The Company may borrow money for investment purposes. If the investments fall
in value, any borrowings (or `gearing') will magnify the extent of any loss. If
borrowing facilities could not be renewed, the Company might have to sell
investments to repay borrowings. All borrowing and gearing levels are reviewed
at every Board meeting and preset limits agreed. 
Reliance on Third Party Providers 
The Company has no employees and the Directors have all been appointed on a
non-executive basis. The Company is therefore reliant upon the performance of
third party providers for its executive function. In particular, the Manager
performs services which are integral to the operation of the Company. Failure
by any service provider to carry out its obligations to the Company in
accordance with the terms of its appointment could have a materially
detrimental impact on the operation of the Company and could affect the ability
of the Company to successfully pursue its investment policy. 
The Manager may be exposed to reputational risks. In particular, the Manager
may be exposed to the risk that litigation, misconduct, operational failures,
negative publicity and press speculation, whether or not it is valid, will harm
its reputation. Any damage to the reputation of the Manager could result in
potential counterparties and third parties being unwilling to deal with the
Manager and by extension the Company. This could have an adverse impact on the
ability of the Company to pursue its investment policy successfully. 
The Audit Committee regularly reviews the performance and internal controls of
the Manager. The results of which are reported to the Board. 
The Manager reviews the performance of all third party providers regularly
through formal and informal meetings. 
. 
DIRECTORS' RESPONSIBILITY STATEMENT 
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 International Financial Reporting Standards as
adopted by the European Union (`IFRSs'). Under company law, the Directors must
not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of the 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 IFRSs 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 and Article 4 of the IAS Regulation. 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. 
In so far as each of the Directors is aware: 
- there is no relevant audit information of which the Company's auditor is
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. 
The Directors of the Company each confirm to the best of their knowledge, that: 
- the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities, 
financial position and
profit of the Company; 
- 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; and 
- the annual report and accounts, taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess 
the Company's performance,
business model and strategy. 
Signed on behalf of the Board of Directors 
Ian Barby 
Chairman 
8 April 2013 
Electronic Publication 
The annual financial report is published on www.invescoperpetual.co.uk/
investmenttrusts which is the Company's website maintained by the Company's
Manager. The work carried out by the Auditor did not involve consideration of
the maintenance and integrity of this website and accordingly, the Auditor
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. 
. 
STATEMENT OF COMPREHENSIVE INCOME 
FOR THE YEAR ENDED 31 JANUARY 


                                            2013                   2012        
                                                                               
                           Notes Revenue Capital  Total Revenue Capital   Total
                                                                               


                               £'000   £'000  £'000   £'000   £'000   
£'000 
                                                                           
Profits/(losses) on                    -  25,353 25,353       - (3,441) (3,441)
investments at fair value                                                       
                                                                           
Losses on derivative                   -    (45)   (45)       -       -       -
instruments                                                                     
                                                                           
Income                     2       4,123       -  4,123   3,590       -   3,590 
                                                                           
Investment management fees         (451)   (451)  (902)   (421)   (812) (1,233) 
                                                                           
Other expenses                     (290)     (2)  (292)   (309)     (2)   (311) 
                                                                           
Profit/(loss) before               3,382  24,855 28,237   2,860 (4,255) (1,395)
finance costs and taxation                                                      
                                                                           
Finance costs                        (7)    (29)   (36)     (3)    (12)    (15) 
                                                                           
Profit/(loss) before tax           3,375  24,826 28,201   2,857 (4,267) (1,410) 
                                                                           
Taxation                             (5)       -    (5)     (5)       -     (5) 
                                                                           
Profit/(loss) after tax            3,370  24,826 28,196   2,852 (4,267) (1,415) 
                                                                           
Return per ordinary share                                                       
                                                                           
  Basic                    4        6.3p   46.7p  53.0p    5.2p  (7.8)p  
(2.6)p 
The total column of this statement represents the Company's statement of
comprehensive income, prepared in accordance with International Financial
Reporting Standards. The profit after tax is the total comprehensive income for
the year. The supplementary revenue and capital columns are both prepared 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. No
operations were acquired or discontinued in the year. 
. 
STATEMENT OF CHANGES IN EQUITY 
FOR THE YEAR ENDED 31 JANUARY 


                                                Capital                        
                                                                               
                               Share   Share Redemption Capital Revenue        
                                                                               
                     NOTES   Capital Premium    Reserve Reserve Reserve   Total
                                                                               


                           £'000   £'000      £'000   £'000   £'000   
£'000 
                                                                           
At 31 January 2011            11,032  21,244      2,996  95,030   3,697 133,999 
                                                                           
(Loss)/profit for                  -       -          - (4,267)   2,852 (1,415)
the year                                                                        
                                                                           
Shares repurchased             (363)       -        363 (3,464)       - (3,464)
and cancelled                                                                   
                                                                           
Dividends paid       5             -       -          -       - (2,349) (2,349) 
                                                                           
At 31 January 2012            10,669  21,244      3,359  87,299   4,200 126,771 
                                                                           
Profit for the year                -       -          -  24,826   3,370  28,196 
                                                                           
Shares repurchased              (27)       -         27   (278)       -   (278)
and cancelled                                                                   
                                                                           
Dividends paid       5             -       -          -       - (2,655) (2,655) 
                                                                           
At 31 January 2013            10,642  21,244      3,386 111,847   4,915 152,034 


                                                                               

The accompanying notes are an integral part of this statement.

.

BALANCE SHEET

AS AT 31 JANUARY
                                    Notes                    2013          2012
                                                                               


                                                        £'000         
£'000 
                                                                           
Non-current assets                                                              
                                                                           
  Investments held at fair value                          146,338       
135,045
through profit or loss                                                          
                                                                           
Current assets                                                                  
                                                                           
  Other receivables                                           950         
1,284 
                                                                           
  Cash and cash equivalents                                 7,742           
  - 


                                                                               
                                                            8,692         1,284


                                                                           
Total assets                                              155,030       136,329 
                                                                           
Current liabilities                                                             
                                                                           
  Other payables                                          (2,996)       
(9,558) 
                                                                           
Net assets                                                152,034       126,771 
                                                                           
Issued capital and reserves                                                     
                                                                           
Share capital                       6                      10,642        10,669 
                                                                           
Share premium                                              21,244        21,244 
                                                                           
Capital redemption reserve                                  3,386         3,359 
                                                                           
Capital reserve                                           111,847        87,299 
                                                                           
Revenue reserve                                             4,915         4,200 
                                                                           
Total Shareholders' funds                                 152,034       126,771 
                                                                           
Net asset value per ordinary share  7                      285.7p        237.6p
Basic                                                                           
These financial statements were approved and authorised for issue by the Board
of Directors on 
8 April 2013. 
Signed on behalf of the Board of Directors 
Ian Barby 
Chairman 
Richard Brooman 
Deputy Chairman 
The accompanying notes are an integral part of this statement. 
. 
STATEMENT OF CASH FLOW 
FOR THE YEAR ENDED 31 JANUARY 


                                                             2013          2012
                                                                               


                                                        £'000         
£'000 
                                                                           
Cash flow from operating activities                                             
                                                                           
Profit/(loss) before tax                                   28,201       (1,410) 
                                                                           
Taxation                                                      (5)           (5) 
                                                                           
Adjustments for:                                                                
                                                                           
  Purchases of investments                               (33,823)      
(41,274) 
                                                                           
  Sales of investments                                     50,595        
35,419 


                                                                               
                                                           16,772       (5,855)


                                                                           
(Profits)/losses on investments                          (25,353)         3,441 
                                                                           
Finance costs                                                  36            15 
                                                                           
Operating cash flows before movements in working           19,651       (3,814)
capital                                                                         
                                                                           
Increase in receivables                                      (62)          (21) 
                                                                           
(Decrease)/increase in payables                             (378)           331 
                                                                           
Net cash flows from operating activities after             19,211       (3,504)
tax                                                                             
                                                                           
Cash flows from financing activities                                            
                                                                           
Interest paid                                                (36)          (15) 
                                                                           
Shares repurchased and cancelled                            (280)       (3,477) 
                                                                           
Equity dividends paid - note 5                            (2,655)       (2,349) 
                                                                           
Net cash used in financing activities                     (2,971)       (5,841) 
                                                                           
Net increase/(decrease) in cash and cash                   16,240       (9,345)
equivalents                                                                     
                                                                           
Cash, cash equivalents and bank overdraft at the          (8,498)           847
beginning of the year                                                           
                                                                           
Cash, cash equivalents and bank overdraft at the            7,742       (8,498)
end of the year                                                                 
The accompanying notes are an integral part of this statement. 
. 
NOTES TO THE FINANCIAL STATEMENTS 
1. Principal Accounting Policies 
The principal accounting policies adopted in the preparation of these financial
statements are set out below. These policies have been consistently applied
during the current year and the preceding year, unless otherwise stated. The
accounts have been prepared on a going concern basis. The disclosure on going
concern on page 22 of the Report of the Directors in the Annual Financial
Report forms part of the financial statements. 
(a) Basis of Preparation 
(i) Accounting Standards applied 
The financial statements have been prepared on an historical cost basis, except
for the measurement at fair value of investments and derivatives, and in
accordance with the applicable International Financial Reporting Standards
(IFRSs) and interpretations issued by the International Financial Reporting
Interpretations Committee as adopted by the European Union. The standards are
those endorsed by the European Union and effective at 31 January 2013. 
Where presentational guidance set out in 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, is
consistent with the requirements of IFRSs, the Directors have sought to prepare
the financial statements on a basis compliant with the recommendations of the
SORP. The supplementary information which analyses the statement of
comprehensive income between items of a revenue and a capital nature is
presented in accordance with this. 
(ii) Adoption of New and Revised Standards 
New and revised standards and interpretations that became effective during the
year had no significant impact on the amounts reported in these financial
statements but may impact accounting for future transactions and arrangements. 
At the date of authorising these financial statements, the following standards
and interpretations, which have not been applied in these financial statements,
were in issue but not yet effective (and in some cases had not yet been adopted
by the EU). 
- IFRS 9: Financial Instruments (effective for accounting periods starting on
or after 1 January 2015) 
- IFRS 10: Consolidated Financial Statements (effective for accounting periods
starting on or after 1 January 2013) 
- IFRS 12: Disclosure of Interests in Other Entities (effective for accounting
periods starting on or after 1 January 2013) 
- IFRS 13: Fair Value Measurement (effective for accounting periods starting on
or after 1 January 2013) 
- IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures
for offsetting financial assets and financial liabilities (effective 1 January 
2013) 
- IAS 32 Financial Instruments: Presentation - Amendments to application
guidance on the offsetting of financial assets and financial liabilities 
(effective 1 January
2014) 
- Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9
and IFRS 7(effective 1 January 2015) 
- Amendments to IFRS10, IFRS 12 and IAS 27 (October 2012) - Investment Entities
(effective for accounting periods starting on or after 1 January 2014) 
The Directors do not expect the adoption of the above standards and
interpretations (or any other standards and interpretations which are in issue
but not effective) will have a material impact on the financial statements of
the Company in future periods. 
2. Income 


                                                           2013            2012
                                                                               


                                                      £'000           
£'000 
                                                                           
Income from listed investments                                                  
                                                                           
UK dividends                                              3,859           3,416 
                                                                           
UK unfranked investment income                               76              10 
                                                                           
Overseas dividends                                          188             164 
                                                                           
Total income                                              4,123           3,590 
3. Investment Management Fees 


                          2013                             2012              
                                                                             
               Revenue    Capital      Total    Revenue    Capital      Total
                                                                             


             £'000      £'000      £'000      £'000      £'000      
£'000 
                                                                         
Base               451        451        902        421        421        842
management                                                                   
fee                                                                           
                                                                         
Performance          -          -          -          -        391        391
fee charged                                                                  
to capital                                                                    
                                                                          


                   451        451        902        421        812      1,233

Invesco Asset Management Limited (`IAML') provides investment and
administration services to the Company. Details of the Investment Management
Agreement can be found in the Report of the Directors.

At 31 January 2013 £81,000 (2012: £75,000) was accrued in respect of the base
management fee and there was no accrual for the performance fee (2012: £
391,000).

4. Earnings per Ordinary Share
                           2013                              2012              
                                                                               
                Revenue     Capital      Total    Revenue    Capital      Total


                                                                           
Basic              6.3p       46.7p      53.0p       5.2p     (7.8)p     (2.6)p 
Basic total earnings per ordinary share is based on the net total profit for
the financial year of £28,196,000 (2012: loss of £1,415,000). 
Basic revenue earnings per ordinary share is based on the net revenue profit
for the financial year of £3,370,000 (2012: £2,852,000). 
Basic capital earnings per ordinary share is based on the net capital profit
for the financial year of £24,826,000 (2012: loss of £4,267,000). 
All three earnings are based on the weighted average number of shares in issue
during the year of 53,217,249 (2012: 54,467,398). 
5. Dividends on Ordinary Shares 
Dividends paid in the year:             2013                     2012           
                                                                            
                                pence        £'000       pence        
£'000 
                                                                           
Final paid in respect of             3.40        1,809        2.70        1,489
previous year                                                                   
                                                                           
Interim paid                         1.60          852        1.60          867 
                                                                           
Return of unclaimed dividends           -          (6)           -          (7)
from previous years                                                             


                                                                               
                                     5.00        2,655        4.30        2,349


                                                                           
Dividends payable in respect                                                   
of the year:                                                                    


                                                                               
                                        2013                     2012          
                                                                               


                                pence        £'000       pence        
£'000 
                                                                           
Interim                              1.60          852        1.60          867 
                                                                           
Final                                4.40        2,341        3.40        1,809 


                                                                               
                                     6.00        3,193        5.00        2,676
                                                                               

The final dividend is based on shares in issue at the record date or, if the
record date has not been reached, on shares in issue on the date the balance
sheet is signed.

6. Share Capital
                                           2013                   2012         
                                                                               


                                   Number      £'000      Number      
£'000 
                                                                           
Authorised:                                                                     
                                                                           
Ordinary shares of 20p each       160,000,000     32,000 160,000,000     32,000 
                                                                           
Allotted, called-up and fully                                                  
paid:                                                                           
                                                                           
Ordinary shares of 20p each        53,209,084     10,642  53,346,084     10,669 
During the year the Company ordinary share movements were as follows: 
                                                 Number               
£'000 
                                                                           
At 1 February 2012                               53,346,084              10,669 
                                                                           
Shares repurchased and cancelled                  (137,000)                (27) 
                                                                           
At 31 January 2013                               53,209,084              10,642 


                                                                               

Details of the shares repurchases are given in the Report of the Directors on
page 26 of the Annual Financial Report.

7. Net Asset Value per Ordinary Share

The net asset value per share and the net asset values attributable at the year
end were as follows:
                           Net asset                      Net assets           
                                                                               
                        value per share                  attributable          
                                                                               
                           2013            2012            2013            2012
                                                                               


                      pence           pence           £'000           
£'000 
                                                                           
Ordinary shares                                                                 
                                                                           
- Basic                   285.7           237.6         152,034         126,771 
Net asset value per ordinary share is based on net assets at the year end and
on 53,209,084 (2012: 53,346,084) ordinary shares, being the number of ordinary
shares in issue at the year end. 
8. Related Party Transactions and Transactions with the Manager 
Invesco Asset Management Limited (`IAML'), a wholly owned subsidiary of Invesco
Limited, acts as Manager, Company Secretary and Administrator to the Company.
Details of IAML's services and fees are disclosed in the Report of the
Directors. 
Fees paid to Directors are disclosed in the Directors Remuneration Report on
page 30 of the Annual Financial Report, with additional disclosure in note 4.
Full details of Directors' interests are set out in the Report of the Directors
on page 26 of the Annual Financial Report. 
9. This Annual Financial Report announcement is not the Company's statutory
accounts. The statutory accounts for the year ended 31 January 2012 have been
delivered to the Registrar of Companies. The statutory accounts for the year
ended 31 January 2012 received an audit report which was unqualified, did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying the report, and did not include a statement
under either section 498(2) or 498(3) of the Companies Act 2006. The statutory
accounts for the financial year ended 31 January 2013 have been approved and
audited but have not yet been filed. 
10. 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 from Invesco Perpetual on the following 
website: 
www.invescoperpetual.co.uk/investmenttrusts 
11. The Annual General Meeting of the Company will be held at 12.00 noon on 21
May 2013 at 30 Finsbury Square, London EC2A 1AG. 
By order of the Board 
Invesco Asset Management Limited - Company Secretary 
8 April 2013 
End of announcement 
END 
-0- Apr/09/2013 06:00 GMT