REG-Invesco Bond Income Plus Ltd: Annual Financial Report
03/04/2025 07:04
Invesco Bond Income Plus Limited
Annual Financial Report for the year ended 31 December 2024
The following text is extracted from the Annual Financial Report of the
Company for the year ended 31 December 2024. All page numbers below refer to
the Annual Financial Report which will be made available on the Company's
website.
• Net asset value (‘NAV’) and share price total returns with dividends
reinvested for the year of 8.5% and 8.8% respectively.
• Shares traded at a premium for majority of year leading to a strong
demand for shares, including a successful retail offer, resulting in 21.7m
shares being issued.
• Dividend increased to 11.6875p per share for 2024 with an increased
dividend target of 12.25p per share for 2025.
• Dividend continues to be fully covered by current year net revenue along
with revenue reserve growth.
Financial Information and Performance Statistics
Net asset value – total return with dividends reinvested
2024 2023
Total Return Statistics with dividends reinvested (1)(2)
Net asset value – total return with dividends reinvested 8.5% 11.7%
Share price – total return with dividends reinvested 8.8% 10.5%
Capital Statistics
At 31 December 2024 2023 change %
Net assets (£’000) 345,799 304,629 +13.5
Net asset value per ordinary share (2) 170.87p 168.58p +1.4
Share price (1) 174.00p 171.00p +1.8
Premium (2) 1.8% 1.4%
Gearing (2)
– gross gearing 13.1% 15.8%
– net gearing 9.9% 12.4%
Performance Statistics
Year Ended 31 December 2024 2023 change %
Revenue return per ordinary share 12.08p 12.23p
Capital return per ordinary share 1.57p 5.71p
Total return 13.65p 17.94p
Dividend per ordinary share for the year 11.6875p 11.5000p +1.6
Ongoing Charges Ratio (2) 0.89% 0.91%
(1) Source: LSEG Data & Analytics.
(2) Alternative Performance Measure (APM). See Glossary of Terms and
Alternative Performance Measures on pages 77 to 79 of the financial report for
details of the explanation and reconciliations of APMs.
Chairman’s Statement
Highlights
• Net asset value (‘NAV’) and share price total returns with dividends
reinvested for the year of 8.5% and 8.8% respectively(1).
• Shares traded at a premium for majority of year leading to a strong
demand for shares, including a successful retail offer, resulting in 21.7m
shares being issued.
• Dividend increased to 11.6875p per share for 2024 with an increased
dividend target of 12.25p per share for 2025.
• Dividend continues to be fully covered by current year net revenue along
with revenue reserve growth.
The macroeconomic news in 2024 proved to be something of a mixed bag. On a
positive note, declining inflation allowed the Bank of England to start to
ease monetary policy with two cuts which took its Bank Rate from 5.25% to
4.75%. However, UK economic growth was subdued and by the final months of the
year it had become clear that the tentative recovery in activity had run out
of steam. Growth in the Eurozone remained muted, however the United States
economy enjoyed a year of surprisingly robust growth, buoyed by strong
consumer spending. High yield markets made steady progress and credit spreads
– a key barometer of market confidence – remained at the lower end of
historical ranges.
The political landscape was transformed with Labour’s general election
success in July and in the United States with Donald Trump’s successful bid
to return to the White House. Chancellor Rachel Reeves’ first Budget
introduced a marked change of approach to the UK’s economic challenges, an
approach characterised by a combination of higher public spending, higher
taxes and increased government borrowing. In contrast, the anticipation ahead
of the second Trump administration was one of return to his first term’s
playbook of tariffs, lower taxes and deregulation.
Performance
The Company’s Net asset value (‘NAV’) and share price total returns with
dividends reinvested for the year were 8.5% and 8.8% respectively. The 8.5%
NAV return was below the 10.2% achieved by the ICE Bank of America Merrill
Lynch European Currency High Yield Index (hedged to GBP) (‘the Index’) but
above the average return of 4.6% for funds in the Investment Association
Sterling Strategic Bond Sector. The under-performance against the Index is
attributable to a number of factors. Our managers chose to hold a higher
credit quality portfolio, on average, than the index. The portfolio had some
unhedged currency exposure (non-GBP) and the pound was relatively strong in
2024. The portfolio also gained and lost some performance through individual
holdings. These are covered in more detail in the Managers’ report.
The Company’s investment performance continues to compare favourably with
the Index over the longer term. For the five and ten years to the end of 2024
the Company’s NAV total return was 21.7% and 66.7% respectively compared to
total returns of 20.4% and 60.0% for the Index.
Income Account
It is pleasing to report that we were able to increase the dividend payable to
shareholders for a fourth successive year. We announced a dividend for 2024 of
11.6875 pence per share, a 1.6% increase on the 11.50 pence per share for
2023. Our dividend yield of 6.7% comfortably exceeded the rate of inflation
and the dividend was 1.03x covered by earnings.
The dividend was paid in four instalments, with the fourth dividend payment on
the 20 February 2025 in the form of an interim dividend. Paying the final
instalment in the form of an interim dividend means that it can be made
earlier than would be the case had we declared a final dividend since this
would require approval at the Annual General Meeting later in the year.
We expect to be able to build on the Company’s long record of providing
shareholders with a high level of income relative to interest rates in 2025.
Consequently we are targeting a dividend of 12.25 pence per share for 2025
which would mark a 4.8% increase compared to 2024’s outcome.
The Company’s success in providing shareholders with a consistently high
level of income is the result of our Manager’s rigorous process and
expertise in managing high yield portfolios. In addition, our investment
company status means that we have a number of powers to enhance investment
performance. For example, these powers include the opportunity to increase
returns by borrowing as well as the ability to use reserves to smooth returns.
Lastly, we retain our position as the largest company in our AIC Sector and
our size means that we are in a relatively strong position to spread the fixed
costs of running the Company.
Premium/Discount
The majority of investment trusts continued to trade at wide discounts to
their NAV’s during 2024. Despite this background demand for the Company’s
shares remained encouraging throughout 2024 and pleasingly the Company traded
at a premium to NAV for most of the year. We closed the year at a premium of
1.8% having started 2024 at a 1.4% premium and we were able to issue a total
of 21,676,727 shares during the year to meet demand with this total including
7,926,727 shares issued as a result of a successful share placing completed in
February.
Long standing shareholders will recall that Invesco Bond Income Plus Limited
is the product of a merger in May 2021 between City Merchants High Yield Trust
Limited and Invesco Enhanced Income Limited. In the period since the merger we
have been able to steadily increase the Company’s shares by 20.2%. The
growth in the Company benefits shareholders by putting downward pressure on
the Ongoing Charges Ratio and by improving the liquidity of our shares.
Gearing
The level of gearing is determined by the Portfolio Managers according to
their assessment of the opportunities and risks within the high yield market.
The maximum amount of borrowing is 30% of total assets and throughout 2024 the
Company maintained a geared portfolio. As at 31 December 2024 gross gearing
was 13.1% (15.8% as at the 31 December 2023). Net gearing was 9.9% at year-end
compared to 12.4% at the start of the year. Our preferred method of gearing
remains the use of repurchase agreements (‘repo agreements’), which are
described in more detail on page 13.
Ongoing Charges
A key objective for the Board is to ensure that the costs incurred in managing
the Company are competitive and we use the Company’s ongoing charges ratio
(OCR) to measure these costs. Details of the OCR can be found on page 13. The
OCR for the year was 0.89% compared to 0.91% in the previous year. I am
pleased to report that our OCR remains the lowest within our Association of
Investment Companies sector (Debt – Loans and Bonds).
The Board
There will be a number of changes to the Board in 2025. First as result of our
succession planning and subject to regulatory approval I am delighted to
report that we will appoint Arun Sarwal to the Board as a Director. Arun will
bring extensive financial experience to the Board. Secondly, Tom Quigley has
indicated his intention to retire from the Board at the June AGM. I would like
to thank Tom for his substantial contribution to the Board.
In 2024 we began our second participation in the Board Apprentice programme.
This is a scheme which allows individuals to gain first-hand experience of the
functioning and dynamics of boards. I am pleased to report that Anjli Amin was
appointed as a Board Apprentice for a twelve-month period.
AGM
The AGM will be held on 11 June 2025 at 9.00am at the Jersey offices of our
Company Secretary. Further details of the AGM arrangements can be found on
page 35.
Articles of Association (Articles)
The Board proposes that the Company adopt new Articles of Association (the
‘New Articles’) to update the existing Articles for modern practice. The
proposed amendments being introduced in the New Articles relate to changes in
law and regulation and developments in market practice not currently reflected
in the existing Articles. These changes reflect modern best practice and
governance standards and may assist in relieving certain administrative and
cost burdens on the Company. The proposed amendments seek to balance these
administrative burdens with the need to safeguard Shareholder rights. A
description of the proposed amendments being introduced in the New Articles,
together with further explanations for these changes, are set out within the
Directors’ Report on pages 34 to 37. In summary, the proposed changes seek
to:
– modernise the Company’s approach to shareholder dormancy and unclaimed
dividends;
– facilitate electronic communication with shareholders and the holding of
hybrid and electronic meetings (although the Company has no intention of
holding electronic only meetings);
– improve the powers of the Company where shareholders have not responded
to mandatory information requests, including under the Company’s anti-money
laundering and tax reporting obligations;
– provide for annual director re-election and remove the Chair's casting
vote; and
– make other minor changes to reflect changes in law since the existing
Article’s adoption and to remove outdated language.
Outlook
We are barely a month or two into President Trump’s term of office and yet
his impact has been profound both in terms of US’s economic policy and its
international relations. The imposition of tariffs is a worrying development
and a potential threat to the global economic outlook while the sudden end of
long-established international policy norms adds to a sense of heightened
global geopolitical uncertainty as we start 2025.
Our investment policy is to provide a high level of dividend income relative
to prevailing interest rates. The ‘gap’ between the dividend income
provided by the Company and the income available from interest rate savings
widened in 2024. With the macroeconomic outlook suggesting that interest rates
have further to fall, I expect this gap to widen further in 2025.
The Company has consistently provided shareholders with an attractive
dividend, this despite in recent years an ever changing and uncertain
macroeconomic environment, the shock of a global pandemic and heightened
geopolitical uncertainty. I am confident that our successful and long
established investment process, together with the powers we have as an
investment trust, will allow us to build on our strong dividend income record
in 2025 despite the uncertain outlook.
Tim Scholefield
Chairman
2 April 2025
(1) Alternative Performance Measure (‘APM’). See Glossary of Terms and
Alternative Performance Measures on pages 77 to 79 of the financial report for
details of the explanation and reconciliations of APMs.
Portfolio Managers’ Report
Q&A
Portfolio Manager
Rhys Davies, CFA, Fund Manager
Rhys is a fund manager for the Invesco Fixed Interest Europe team, based in
our Henley office.
He began his investment career with Invesco in 2002, moving to the Henley
Fixed Interest team in 2003. He became a fund manager in 2014. He manages high
yield credit portfolios.
He holds a BSc (Honours) in Management Science from the University of
Manchester Management School. He is a CFA charterholder.
Deputy Portfolio Manager
Edward Craven, FCA, Fund Manager
Edward is a fund manager for the Invesco Fixed Interest Europe team, based in
our Henley office.
He began his career with KPMG in 2003. In 2008 he moved to The Royal Bank of
Scotland, where he worked in structured finance. He joined the team at Invesco
in 2011 as a credit analyst and became a fund manager in 2020, managing
multi-asset and high yield funds.
He holds a Master’s degree in Physics from the University of Bath. He is an
FCA qualified chartered accountant.
Q How did bond markets perform in 2024?
A This year, as in 2023, investors who took credit risk were rewarded. While
government bonds delivered modest or negative returns, holders of corporate
bonds did considerably better, benefitting from a combination of income and
capital gain.
As mentioned in the Chairman’s Report, the European High Yield Index(1)
returned 10.2% in sterling hedged terms. In local currency terms, the return
for both the Global(2) and the European was just under 9%. In the case of the
European Index, the total return of 8.8% was a combination of 5.0% income and
3.8% price return. In comparison, the gilt market(3) returned –4.1%, with
2.8% of income more than offset by a –6.9% price return.
This contrast reflects the market’s reaction to macroeconomic developments.
While growth was quite subdued in 2024 (just 0.8% in the UK and the Eurozone
and 2.8%(4) in the US), it was better than had been expected. At the beginning
of the year, predictions of recession were widespread. At the time of writing,
the Bloomberg Recession Probability Forecast measure is 25% for the UK (from
60%), 30% for the Eurozone (from 65%) and 20% for the US (from 50%).
This improvement in growth expectations, combined with some signs of a slower
decline in inflation, meant that interest rates did not fall as much as
forecast. The Bank of England cut rates twice in 2024 (a combined 0.5%), but
over the year investors moved from expecting 2% of interest rate cuts by the
end of 2025 to expecting just 1-1.25%.
Gilts and other developed market government bonds are primarily sensitive to
interest rate expectations and typically fall in value when rate expectations
rise. Credit markets, such as high yield corporate bonds and subordinated debt
instruments, are more sensitive to corporate earnings, as earnings underpin
the ability of corporate bond issuers to repay. Helped by stronger earnings,
measures of indebtedness and debt affordability have remained comfortably
within their historic range(5). Credit markets rallied, with riskier bonds
generally outperforming higher quality bonds.
The corporate bond market was also supported by technical factors. The supply
of new bonds rose in both the investment grade and high yield markets, but net
issuance remains below the rate of a few years ago. Meanwhile, money flowed
into the asset class. As a result, new bond deals tended to be well received
and the whole market benefitted from a tailwind of demand.
The result of these positive conditions was that yields fell and credit
spreads tightened over the year. Using the ICE Bank of America Merrill Lynch
European Currency High Yield Index to illustrate, the yield to maturity fell
from 6.8% to 6.1% while the spread over government bonds fell from 411bps to
316bps. By historic standards, this is a relatively modest level of reward for
the credit risk. The difference in yield between high yield and investment
grade corporate bonds also fell, from 275bps to 215bps(6).
Q How did the company perform?
A Over the 12 months to 31 December 2024 the share price rose from 171.00p
to 174.00p. With dividends reinvested, the Company delivered a share price
total return of 8.8%. The net asset value per share total return with
dividends reinvested was 8.5%.
Q What factors contributed to and detracted from this rise in net asset
value?
A 2024 started with yields of around 7% for European high yield and 5% for
Sterling investment grade. This provided a good base for returns, which were
enhanced by some capital appreciation.
As would be expected from a portfolio focussed on high yield and subordinated
bonds, credit risk was the main driver of performance, accounting for the bulk
of the return. Within credit, exposure to subordinated financials and
corporate high yield bonds contributed most, but there were also contributions
from senior bank debt, corporate hybrid instruments and our small allocation
to emerging markets debt.
Sterling duration (the sensitivity of the portfolio to UK interest rates) did
not contribute significantly to returns. The income that was gained was
cancelled out by the negative price movement. The exposure to US Dollar and
Euro duration was a positive factor.
The strong performance of financials (the Coco market(7) returned over 12%) is
reflected in the list of individual securities that contributed most to
portfolio returns. Six of the top ten are banks and three are insurers.
The ten securities that detracted most are from a variety of sectors. Two are
long-dated gilts, reflecting the weakness of GBP rates markets. Two others are
bonds issued by Thames Water Finance. These cost the portfolio a combined
–0.34%. The process of restructuring Thames into a sustainably financed
business has been long and difficult. As creditors to the company, we are
closely involved in the discussions with government, regulators and other
investors. We see a route to a settlement. The bulk of our holdings are in
Class A bonds, which are the most senior in the structure. They are currently
priced in the market at above 80 pence in the pound.
Q What changes did you make to the portfolio?
A Market yields are still at reasonably high levels. However, credit spreads
have tightened, reducing the reward for taking extra credit risk. In 2023, we
reduced our exposure to lower credit quality parts of the bond market. In
2024, we continued to do this.
Looked at in terms of credit quality ratings, the portfolio ended the year
with 26.7% in investment grade (bonds rated from AAA to BBB-). This compares
to 25.4% at the end of 2023 and 17.6% at the end of 2022. Exposure to high
yield (bonds rated BB+ and below) and unrated bonds is now 73.3%, compared to
74.6% in 2023 and 82.4% in 2022.
The portfolio’s exposure to bank capital has increased over the year.
However, the risk mix within these holdings has changed. Exposure to senior
bank debt is higher. Within subordinated bank debt, exposure to AT1 (the
lowest debt in the capital structure) has been reduced and exposure to
relatively protected Lower Tier 2 debt has increased.
The duration of the portfolio has been managed actively, in line with our view
of the yield opportunity in the interest rate market, but it has been managed
within a tight range and has not moved very far from the duration of the high
yield market over the period.
At the security level, we have of course added and cut positions and increased
and decreased the size of existing holdings. We take a bottom-up approach,
based on fundamental research at the level of the individual bond and bond
issuer, so many of our investment decisions are based on the idiosyncratic
strengths and weakness of a single bond. However, the trend to higher quality
assets in the portfolio is echoed by purchases of bonds from JP Morgan Chase,
Nationwide, Coventry Building Society and John Lewis; alongside sales of Saga
(insurance, travel), Merlin (leisure), Boparan (food) and Heimstaden
(property).
We have also made some trades that reflect the particular strengths of the
closed-end structure of the trust, adding positions in bonds that might be too
small to sit comfortably in open-ended portfolios facing the risk of unit
redemptions. We added two smaller UK building society bonds, both businesses
in which we have confidence and both offering coupons above 10%. We also
bought part of a relatively small debt security resulting from the spin-off of
a high-quality pharmaceutical company.
We are able to use borrowing (leverage) as a way of increasing portfolio
returns when we feel there is sufficient value for the extra risk. In 2022 and
2023, net leverage averaged 17% of net assets. This year, as market valuations
have risen, we have reduced the level. It ended the year at just under 10%.
Notwithstanding this reduction, we think that leverage is a very useful tool
at our disposal.
Q How is Environmental, Social and Governance (‘ESG’) integrated in the
investment process?
A The portfolio is not bound by any specific ESG criteria. However, ESG
factors are important in our credit analysis and our investment decisions.
We incorporate ESG considerations in our process when we research companies,
when we engage with companies and as part of ongoing monitoring. Our credit
analysts assign an ESG rating to issuers they cover. Both we and the analysts
benefit from access to the data and the expertise of the Invesco ESG team. The
ESG team provides ESG portfolio monitoring, including meetings with managers
to assess portfolios, along with support for any issues that arise.
In particular, the ESG team is a valuable partner in our engagement
activities. In 2024, our team had 164 ESG engagements – either meetings
dedicated to ESG issues or ESG discussions within wider meetings. These
interactions tend to cover a wide range of topics across environmental, social
and governance. For example, meeting with Vodafone we discussed environmental
issues relating to their global infrastructure development, labour relations
in their Spanish business and their board composition. With Eléctricité De
France we assessed reactor safety concerns and the governance risk of their
ownership structure (we decided to participate in a new green bond issue). We
also participated in a Coventry Building Society deal, having assessed their
ESG disclosure, their new net zero targets, their employment practices and
their board composition and tenure. Governance questions tend to feature more
for high yield investors than they might for other, due to the higher
proportion of privately owned companies.
Q What is the outlook for 2025?
A 2024 was a less volatile year in our markets than many foresaw. Growth was
stronger than expected and this slowed the rate of interest rate cuts. Along
with positive flows into the asset class, this better growth underpinned
support for corporate bonds.
We expect to see more rate cuts in 2025. Though few are predicting
recessionary conditions, the outlook is for only modest growth, particularly
in Europe. This should mean that there is room for the central banks to cut.
But there is a lot of uncertainty. The new US administration has stated
policies which could impact significantly on growth and inflation in the US
and elsewhere, and we expect that the financial markets will need to digest a
lot of newsflow from this source.
Away from this ‘macro’ view, we will need to continue to assess the
creditworthiness of companies across our universe. We are still in a higher
interest rate environment than we had a few years ago and this is a challenge
for borrowers seeking to refinance. The level of demand for corporate debt was
very supportive of the market in 2024 but there were still individual
borrowers that came under strain. We are sure there will be more this year.
The initial market reaction to President Trump’s victory was positive and
corporate credit spreads remain tight. This reduces the reward for credit
risk. Prudently balancing risk and reward is central to our investment
approach, for the portfolio and for each security. Our positioning is more
cautious now than in the last couple of years. We think this is the right
positioning for current conditions.
(1) ICE Bank of America Merrill Lynch European Currency High Yield Index
(2) ICE Bank of America Merrill Lynch Global High Yield Index
(3) ICE Bank of America Merrill Lynch UK Gilt Index
(4) Bloomberg forecast, 27 January 2025
(5) Morgan Stanely, European Credit Strategy, 2024 Performance Recap, 3
January 2025
(6) Option Adjusted Spread (‘OAS’) of ICE Bank of America Merrill Lynch
European Currency High Yield Index minus OAS of ICE Bank of America Merrill
Lynch Euro Corporate Index
(7) ICE Bank of America Merrill Lynch Contingent Capital Index
Rhys Davies Edward Craven
Portfolio Managers
2 April 2025
Business Review
Purpose, Business Model and Strategy
Invesco Bond Income Plus Limited is a Jersey domiciled investment company
which is listed on the London Stock Exchange
The Company’s purpose is to generate returns over the long-term for its
shareholders by investing their pooled capital to achieve the Company’s
investment objective through the application of its investment policy (set out
below) and with the aim of spreading investment risk.
The strategy the Board follows to achieve the objective is to set investment
policy and risk guidelines, together with investment limits, and to monitor
how they are applied.
The business model the Company has adopted to achieve its objective is to
contract investment management and administration to appropriate external
service providers, who are subject to oversight by the Board. The principal
service providers are:
– Invesco Fund Managers Limited (the ‘Manager’) to manage the portfolio
in accordance with the Board’s strategy; and
– JTC Fund Solutions (Jersey) Limited (the ‘Company Secretary’) to
provide company secretarial, compliance and general administration services.
In addition to the management and administrative functions of the Manager and
the Company Secretary, the Company has contractual arrangements with
Computershare Investor Services (Jersey) Limited to act as registrar and the
Bank of New York Mellon (International) Limited (‘BNYMIL’) as depositary
and custodian.
The Board has oversight of the Company’s service providers, and monitors
them on a formal and regular basis. The Board has a collegiate culture and
pursues its fiduciary responsibilities with independence, integrity and
diligence, taking advice and outside views as appropriate and constructively
challenging and interacting with service providers, including the Manager. The
portfolio managers responsible for the day-to-day management of the portfolio
are Rhys Davies, Portfolio Manager and Edward Craven, Deputy Portfolio
Manager, supported by the wider fixed interest team.
The Company is an alternative investment fund for the purposes of the
Alternative Investment Fund Managers Directive.
Investment Objective and Policy
Investment Objective
The Company’s investment objective is to seek to obtain capital growth and
high income from investment, predominantly in high-yielding fixed-interest
securities.
Investment Policy
The Company seeks to provide a high level of dividend income relative to
prevailing interest rates mainly through investment in bonds and other
fixed-interest securities. The Company also invests in equities and other
equity-like instruments consistent with the Investment Objective.
This Investment Policy should be read in conjunction with the descriptions of
Investment Style, Investment Limits, Derivatives and Currency Hedging, and
Borrowings set out below.
Investment Style
The Manager seeks to ensure that the portfolio is diversified, having regard
to the nature and type of securities (including duration, credit rating,
performance and risk measures and liquidity) and the geographic and industry
sector composition of the portfolio. The Company may hold both illiquid
securities (for example, securities where trading volumes are relatively low
and unlisted securities) and concentrated positions (for example, where a high
proportion of the Company’s total assets are comprised of a relatively small
number of investments).
Investment Limits
– the Company may invest in fixed-interest securities, including but not
restricted to preference shares, loan stocks (convertible and redeemable),
corporate bonds and government stocks, up to 100% of total assets;
– investments in equities may be made up to an aggregate limit of 20% of
total assets;
– the aggregate value of holdings of shares and securities in a single
issuer or company, including a listed investment company or trust, will not
exceed 15% of the value of the Company’s investments; and
– investments in unlisted investments will not exceed 10% of the
Company’s total assets for individual holdings and 25% in aggregate.
All the above limits are measured at the time a new investment is made.
Derivatives and Currency Hedging
The Company may enter into derivative transactions (including options,
futures, contracts for difference, credit derivatives and interest rate swaps)
for the purposes of efficient portfolio management. The Company will not enter
into derivative transactions for speculative purposes.
Efficient portfolio management may include reduction of risk, reduction of
cost and enhancement of capital or income through transactions designed to
hedge all or part of the portfolio, to replicate or gain synthetic exposure to
a particular investment position where this can be done more effectively or
efficiently through the use of derivatives than through investment in
securities or to transfer risk or obtain protection from a particular type of
risk which might attach to portfolio investments.
The Company may hedge against exposure to changes in currency rates to the
full extent of any such exposure.
Borrowings
The Company’s borrowing policy is determined by the Board, which has set a
maximum of 30% of the Company’s total assets. This limit may be varied from
time to time in the light of prevailing circumstances, but has not been
changed since the Company’s incorporation in its current form. The Manager
has discretion to borrow within the limit set by the Board. Any borrowings are
covered by investments in matching currencies to manage exposure to exchange
rate fluctuations.
The Board has reviewed the methods of financing available to the Company
including repo financing whereby a company participates in sale and repurchase
arrangements in connection with its portfolio. Under these arrangements, a
company sells fixed interest securities and is contractually obliged to
repurchase them at a fixed price on a fixed date, whilst retaining economic
exposure to the securities sold. The difference between the (lower) sale price
and the later purchase price is the cost (effectively interest) of the repo
financing. Our preferred method of gearing remains the use of repurchase
agreements and such Repo financing agreements are in place and may be used
subject to the aggregate 30% ceiling. At the year end, the sum borrowed using
this method was £45.1 million (2023: £48.1 million). This represents gross
gearing of 13.1% with cash and cash equivalents including margin of 3.2%
giving net gearing of 9.9% (2023: gross gearing of 15.8% with cash and cash
equivalents including margin of 3.4% giving net gearing of 12.4%)(1).
(1) Alternative Performance Measure (APM). See Glossary of Terms and
Alternative Performance Measures on pages 77 to 79 of the financial report for
details of the explanation and reconciliations of APMs.
Key Performance Indicators
The Board reviews performance by reference to a number of Key Performance
Indicators which include the following:
• Performance
• Dividends
• Premium/Discount
• Ongoing Charges Ratio
Performance
As the Company’s objective is to seek to obtain capital growth and high
income, the performance is best measured in terms of total return. There is
no single index against which the Company’s performance may be meaningfully
assessed. Therefore, the Board refers to a variety of relevant data and this
is reflected in both the Chairman’s Statement and the Portfolio Managers’
Report on pages 6 to 11. The Manager has a long-term horizon and consequently
the Board pays close attention to returns over three and five years in its
assessment of investment performance. As explained in the Chairman’s
Statement, the Board has noted the performance in the year and is satisfied
with the longer term performance of the portfolio.
Dividends and Dividend Payment Policy
Dividends form a key component of the total return to shareholders and the
Company has adopted a dividend policy to target an annualised dividend of
12.25p per share for 2025. In the year under review, the Board agreed to pay
an increased dividend of 11.6875p per share, comprising first, second and
third interim dividends of 2.875p and a fourth interim dividend of 3.0625p to
shareholders. Dividends paid over the last ten years are shown in the table on
page 4.
The Board’s Dividend Payment Policy is to pay dividends on a quarterly basis
in May, August, November and February in respect of each accounting year. The
timing of these regular three-monthly payments means that shareholders do not
have an opportunity to vote on a final dividend. Recognising the importance of
shareholder engagement, and although not required by any regulation,
shareholders are given an opportunity to vote on this policy at the
forthcoming AGM.
Premium/Discount
The Board monitors the price of the Company’s shares in relation to their
net asset value and the premium/discount at which the shares trade. Powers are
taken each year to issue and buy back shares, which can assist short term
management, however the level of discount or premium is mostly a function of
investor sentiment and demand for the shares, over which the Board may have
limited influence. The ideal would be for the shares to trade close to their
net asset value. The graph on page 13 shows the premium/discount through the
year. The Company’s shares traded at a premium for the majority of the year,
with the shares only trading at a discount during certain very limited periods
of time due to market factors, but ended the year at a premium of 1.8%.
Ongoing Charges Ratio
The expenses of managing the Company are carefully monitored by the Board. The
standard measure of these is the ongoing charges ratio (OCR), which is
calculated by dividing the sum of such expenses over the course of the year,
including those charged to capital, by the average net asset value. This
ongoing charges ratio provides a guide to the effect on performance of annual
operating costs. The Company’s ongoing charges ratio for the current year
was 0.89%, compared to 0.91% for the previous year. Your Board continues to
believe that costs remain competitive compared to those of similar products.
Investment Process
At the core of the portfolio managers’ philosophy is a belief in active
investment management. They seek to invest where they see the potential for
attractive returns and to avoid risks that they do not think are well
rewarded. Fundamental principles drive a genuinely active investment approach,
with a strong emphasis on value.
The investment process comprises four key elements to deliver the information
the portfolio managers use to make their decisions:
• top down, macroeconomic analysis – examining the factors that shape the
economy;
• credit analysis using internal and external research with a view to
maximising returns from acceptable and understood credit risk exposure;
• value assessment, considering the risk/return profile of any bond in
relation to cash, core government bonds and the rest of the fixed interest
universe; and
• risk considerations, analysing all holdings to allow for a comprehensive
understanding of risks involved to ensure diversification of the portfolio.
The portfolio managers enter into the majority of positions with a view to
holding them until their call or maturity date and their investment process is
based on making investments where the yield to maturity or call appears to
them to be at least an adequate reward for the risk. The nature of the high
yield market and the Company’s mandate mean that there will be occasions
when the value the portfolio managers assessed in an investment is fully
realised by the market. On these occasions, they may exit the position before
maturity.
The portfolio managers believe that it is good investment practice to try and
keep the level of turnover low, whilst at the same time recognising that this
should not at any time act as a deterrent to effective portfolio management.
Turnover will generally be very low due to the long term nature of many of the
holdings, and given the closed end nature of the Company, the portfolio
managers are not presented with regular daily inflows and outflows which
require managing.
The portfolio managers also consider the aspects of environmental, social and
governance (‘ESG’) details of which are given on pages 18 to 21.
Internal Control and Risk Management
The Directors have overall responsibility for the Company’s system of
internal controls and are responsible for reviewing the effectiveness of these
controls. This includes safeguarding of the Company’s assets. The Directors
have carried out a robust assessment of the principal and emerging risks
facing the Company, including those that would threaten its business model,
future performance, solvency or liquidity.
The Audit & Risk Committee (the ‘Committee’), on behalf of the Board, has
established an ongoing process for identifying and assessing the risks to
which the Company is exposed by reference to a risk control summary, which
maps the risks, mitigating controls in place, and monitoring and reporting of
relevant information to it. The review of the risk control summary also
incorporated a robust assessment of new and emerging risks for monitoring
purposes.
As part of the process, the Committee has identified five risk categories:
strategic; investment management; third party service providers; regulation
and corporate governance; and operational. An explanation of these categories
follows.
Strategic Risk
The Board sets the Company’s strategy, including setting its objective and
how this should be achieved. The Board assesses the performance of the Company
in the context of the market and macro conditions and gives direction to, and
monitors, the Manager’s actions, and those of other third parties, on behalf
of the Company.
Investment Management Risk
Investment management covers management of the portfolio together with cash
management, gearing and hedging, all being areas the portfolio managers can
control, and which generate the Company’s investment performance.
Third Party Service Providers Risk
The Company has no employees and its Directors are appointed on a
non-executive basis. The Company is reliant on Third Party Service Providers
(‘TPPs’) for its executive functions. The Company’s most significant
TPPs are the Manager, to which portfolio management is delegated as well as
certain administrative services including accounting and marketing and the
Company Secretary. Other significant TPPs are the corporate broker,
depositary, custodian, registrar and auditor.
Regulation and Corporate Governance Risk
The Company is required to comply with many regulations. For the year under
review these included but were not limited to, the provisions of the Companies
(Jersey) Law 1991, the UK Listing Rules, the Alternative Investment Fund
Managers Directive, the Market Abuse Regulation, the FCA’s Disclosure
Guidance and Transparency Rules, the UK Corporate Governance Code and
International Financial Reporting Standards (‘IFRS’) as adopted by the
European Union.
Operational Risk
Operational risk covers the day to day operational matters mainly at the
Manager, but also at other TPPs.
A matrix of the risks, set out according to their assessed risk levels after
mitigation, enables the Directors to concentrate on those risks that are most
significant, and also forms the basis of the list of principal risks and
uncertainties on pages 15 and 16. The ratings take into account the Board’s
risk appetite and the ongoing monitoring by the Manager.
Oversight of the control environment is based on the Company’s relationship
with its TPPs, all of which have clearly defined lines of responsibility,
delegated authority, and control procedures and systems. The Company’s main
TPPs, the Manager, Fund Accounting and the Company Secretary, all have, a
‘Three Lines of Defence Model’, which is embedded into their risk
management systems.
The effectiveness of the Company’s internal control and risk management
system is reviewed at least twice a year by the Committee. The Committee
received and considered, together with representatives of the Manager, reports
in relation to operations and systems of internal controls of the Manager,
Company Secretary, accounting administrator, custodian and registrar. The
Committee also receives regular reports from the Company Secretary’s
compliance officer and the Manager’s internal audit and compliance
departments. The Committee also received a comprehensive and satisfactory
report from the depositary at the year end Committee meeting. The Company’s
risk management policies and procedures for financial instruments are set out
in note 19 on pages 64 to 69.
Due diligence is undertaken before any contracts are entered into with any
third party service provider. The Manager regularly reviews, against agreed
service standards, the performance of TPPs through formal and informal
meetings, and by reference to third party independently audited control
reports. The results of the Manager’s reviews are reported to and reviewed
by the Committee. These various reports and reviews did not identify any
significant failings or weaknesses which were relevant to the Company during
the year and up to the date of this Annual Financial Report. If any had been
identified, the required remedial action would have been taken.
Reporting to the Board at each board meeting comprises, but is not limited to:
financial reports, including any hedging and gearing; performance against
relevant indices and the Company’s peers; the portfolio managers’ review,
including of the market, the portfolio, transactions and prospects; revenue
forecasts; and investment monitoring against investment guidelines. The
portfolio managers are permitted discretion within these investment
guidelines, which are set by the Board. Compliance with the guidelines is
monitored daily by the Manager. Any proposed variation to these guidelines is
referred to the Board for consideration and approval.
The Board, through the Management Engagement Committee, formally reviews the
performance of the Manager, the Company Secretary and the other key TPPs
annually. The Board has reviewed and accepted both the Manager’s and Company
Secretary’s whistleblowing policy under which staff of both Invesco Fund
Managers Limited and JTC Fund Solutions (Jersey) Limited can, in confidence,
raise concerns about possible improprieties or irregularities in matters
affecting the Company.
Principal and Emerging Risks and Uncertainties
The Board has carried out a robust assessment of the risks facing the Company,
including those that would threaten its business model, future performance,
solvency and liquidity. As part of this process, the Board conducted a full
review of the Company’s risk control summary and considered new and emerging
risks. These are not necessarily principal risks for the Company, but may have
the potential to be in the future. In carrying out this assessment, the Board
considered the emerging risks facing the Company including geopolitical risks
and uncertainties such as the ongoing conflicts in Ukraine and the Middle
East, uncertain economic outlook in Europe, USA & the UK as a result of
geo-political tensions, evolving cyber threats (including risks associated
with artificial intelligence) and ESG, including climate risk. The principal
risks that follow are those identified by the Board as the most significant
after consideration of mitigating factors and not intended to cover all the
risk categories as shown in the Internal Control and Risk Management section
on page 14.
Category and Principal Risk Description Mitigating Procedures and Ongoing Controls
Strategic Risk
Market and Political Risk The Company invests primarily in fixed interest securities, the majority of which are traded on global security markets. The principal risk for investors in the Company is a significant fall and/or a prolonged period of decline in these markets. This could be triggered by unfavourable developments globally and/or in one or more regions, such as the current conflicts in Ukraine and the Middle East and other geopolitical tensions and uncertainties and their impact on the global economy. The Board cannot control the effect of such external influences on the portfolio. Market risk also arises from movements in foreign An explanation of market risk and how this is addressed is given in note 19.1 to the financial statements. The Portfolio Managers’ Report summarises particular macro economic factors affecting performance during the year and the portfolio managers’ views
currency exchange rates and interest rates. on those most relevant to the outlook for the portfolio
Regulatory or Fiscal Changes The Company is incorporated in Jersey which is a low tax jurisdiction subject to global scrutiny. Any adverse global regulatory or fiscal measures taken against such low tax jurisdictions, could negatively impact the Company. The Board receives regular reports from the Manager and Company Secretary which highlight any proposed changes to the regulatory/fiscal regimes which might impact the Company. Jersey has recently received a positive report from MoneyVal, the Council of
Europe’s permanent monitoring body. MoneyVal concludes that Jersey’s effectiveness in preventing financial crime is among the highest level found in jurisdictions evaluated around the world. More information can be found here:
https://www.gov.je/News/2024/Pages/Jersey%E2%80%99sStr engthInCombattingFinancialCrimeIsRecognised.aspx
Wide Discount leading to Shareholder Dissatisfaction The Company’s shares are subject to market movements and can trade at a premium or discount to NAV. Should the Company’s shares trade at a significant discount compared to its peers, then shareholder dissatisfaction may result if shareholders cannot realise the value of their investment close to NAV, with the ultimate risk that arbitragers join the share register. The Board receives regular reports from both the Manager and the Company’s broker on the Company’s share price performance and level of discount (or premium), together with regular reports on marketing and meetings with shareholders and prospective
investors. The Board recognises the importance of the Company’s scale in terms of the aggregate value of its shares in the market (‘market cap’) in creating liquidity and the benefit of a wide shareholder base, and seeks authority to both issue and buy
back shares to assist with market volatility. The foundation to this lies in solid investment performance and an attractive level of dividend.
Third Party Service Providers Risk
Lack of Control over, or Unsatisfactory Performance of Third Party Service Providers (‘TPPs’) 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 operations of the Company and affect its ability to pursue successfully its investment policy and expose it to reputational risk. Disruption to the accounting, payment systems or custody records could prevent the accurate reporting and monitoring of the Company’s financial position. Details of how the Board monitors the services provided by the Manager and the other TPPs, and the key elements designed to provide effective internal control, are included in the internal control and risk management section on page 14.
Cyber Risk The Company’s operational structure means that cyber risk (information technology and physical security, including risks associated with Artificial Intelligence) predominantly arises at its TPPs. This cyber risk includes fraud, sabotage or crime perpetrated against the Company or any of its TPPs. The Audit & Risk Committee on behalf of the Board periodically reviews TPPs’ service organisation control reports and meets with representatives of the Manager’s Investment Management, Compliance, Internal Audit and Investment Trust teams as well as the
Company Secretary’s senior staff and Compliance team. The Board receives periodic updates on the Manager’s and the Company Secretary’s information security arrangements. The Board monitors TPPs’ business continuity plans and testing – including their
regular ‘live’ testing of workplace recovery arrangements.
Business Continuity Risk Impact of a major event, such as Covid-19, on the operations of the service providers, including any prolonged disruption. The Manager’s and other TPPs business continuity plans are reviewed on a regular basis and the Directors are satisfied that the Manager has in place robust plans and infrastructure to minimise the impact on its operations so that the Company can continue
to trade, meet regulatory obligations, report and meet shareholder requirements. The Board receives periodic reports from the Manager and third-party service providers on business continuity processes and has been provided with assurance from them all
insofar as possible that measures are in place for them to continue to provide contracted services to the Company.
Viability Statement
This Company is an investment company whose business consists of investing the
pooled funds of its shareholders to provide them with capital growth and a
high income over the long term, predominantly from a portfolio of high
yielding fixed income securities. Long term for this purpose is considered to
be at least five years and the Directors have assessed the Company’s
viability over that period. However, the life of the Company is not intended
to be limited to that or any other period.
The main risk to the Company’s continuation is a significant fall in markets
or a prolonged period of decline due to political uncertainty or other macro
factors outside the Company’s control. This could lead to shareholder
dissatisfaction through failure to meet the Company’s investment objective,
through poor investment performance or the investment policy not being
appropriate in prevailing market conditions, any of which could affect the
demand for and liquidity of the Company’s shares. Accordingly, market and
political/fiscal risks, are deemed by the Board to be the key principal risks
of the Company and are given particular consideration in the continuing
assessment of its long term viability.
The Company’s investment objective and policy are kept under review. The
continued relevance of the investment objective and policy are underlined by
the Company’s annual continuation vote. Last year over 98% of the votes
registered were in favour of continuation and the Board has no reason to
believe that the continuation resolution will not be passed at the forthcoming
and subsequent AGMs.
Performance derives from returns for risk taken. The Portfolio Managers’
Report on pages 9 to 11 sets out the current investment strategy of the
portfolio managers. Whilst there has been an increase in the credit quality of
the portfolio during the year, it remains the case that the portfolio
continues to contain a high level of relatively high-yielding non-investment
grade bonds and these carry a higher risk of default than investment grade
paper. This is discussed further in note 19 to the financial statements. The
Board has adopted investment limits within which the portfolio managers
operate. The Directors and the portfolio managers constantly monitor the
portfolio, its ratings and default risk. A bond rating analysis of the
portfolio at the year end is shown on page 24. Exposure is weighted towards
higher quality issuers where the risk of default is considered to be more
remote.
Performance has been strong for many years through different, and difficult,
market cycles – as shown by the ten year total return performance graph on
page 13. The investment policy has been stress tested by market events in
recent times by both global and domestic events such as Covid-19 and the
conflicts in Ukraine and the Middle East. These events affected performance,
but at no time did they threaten the viability of the Company. Whilst past
performance may not be indicative of performance in the future, the investment
policy has been consistent throughout those past periods.
Performance and demand for the Company’s shares are not things that can be
forecast. Indeed, whilst recent geopolitical and macroeconomic events may
impact the Company, there are no current indications that performance or
demand for the Company’s shares may be permanently affected by such events
over the next five years so as to affect the Company’s viability.
As described in note 19.2 to the financial statements on page 68 liquidity
risk is not viewed by the Directors as a significant risk. The majority of the
Company’s assets are readily realisable and amount to many times the value
of its short term liabilities and annual operating costs. The Company is
permitted to borrow up to a maximum of 30% of the Company’s total assets and
currently has no long-term debt obligations.
Based on the above analysis, the Directors confirm that they have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the five year period of their
assessment and the Directors consider that the Company’s investment strategy
will continue to serve shareholders well over the longer term.
Investment Management
As noted earlier, the Manager provides investment management and certain
administrative services to the Company. The agreement is terminable by either
party giving no less than three months’ prior written notice and subject to
earlier termination without compensation in the event of a material breach of
the agreement or the insolvency of either party. The management fee is payable
quarterly in arrears and is equal to 0.1625% of the value of the Company’s
total assets under management less current liabilities at the end of the
relevant quarter. In addition, the Manager was paid a fee of £103,000 during
the year for marketing services (2023: £133,000).
The portfolio managers responsible for the day-to-day management of the
portfolio are Rhys Davies, Portfolio Manager, and Edward Craven, Deputy
Portfolio Manager.
The Manager’s Responsibilities
The Directors have delegated to the Manager the responsibility for the
investment management activities of the Company, for seeking and evaluating
investment opportunities and for analysing the accounts of investee companies.
The Manager has full discretion to manage the assets of the Company in
accordance with the Company’s stated objectives and policies as determined
from time to time by the Board and approved by shareholders. Within the
guidelines specified by the Board, the Manager has discretion to make
purchases and sales, make and withdraw cash deposits, enter into underwriting
commitments and exercise all rights over the investment portfolio. The Manager
also advises on currency exposures and borrowings.
Assessment of the Manager
The performance of the Manager is reviewed continuously by the Board and the
ongoing requirements of the Company and services received are assessed
annually with reference to key performance indicators as set out on page 13.
The Management Engagement Committee is responsible for reviewing the Manager.
Based on its recent review of activities, the Board believes that the
continuing appointment of Invesco Fund Managers Limited remains in the best
interests of the Company and its shareholders.
Financial Position
The Company’s balance sheet on page 55 shows the assets and liabilities at
the year end. The Company has repo financing agreements in place, with an
amount of £45.1 million (2023: £48.1 million) borrowed at year end,
representing gross gearing of 13.1% (2023: 15.8%) and net gearing of 9.9%
(2023: 12.4%), after taking cash and cash equivalents including margin into
account, as at 31 December 2024.
Performance and Future Development
The performance and future development of the Company depend on the success of
the Company’s investment strategy. A review of the Company’s performance,
market background, investment activity and strategy during the year, together
with the investment outlook are provided in the Chairman’s Statement and
Portfolio Managers’ Report on pages 6 to 11.
Annual Continuation Vote
The Articles of Association of the Company require that unless an ordinary
resolution is passed at or before the Annual General Meeting (‘AGM’) each
year releasing the Directors from the obligation to do so, the Directors shall
convene a general meeting within six months of the AGM at which a special
resolution would be proposed to wind up the Company. Having reviewed the
performance of the Company, the Directors have no reason to believe that a
resolution to release them from that obligation will not be passed at the AGM
to be held later in the year. Further details can be found in note 2 (a) (ii)
on page 57.
Substantial Holdings in the Company
The Company has been notified of the following holdings of 3% and over of the
Company’s ordinary share capital carrying unrestricted voting rights:
As at As at As at
28 February 2025 31 December 2024 31 December 2023
Fund Manager/Registered Holder Holding % Holding % Holding %
Hargreaves Lansdown, stockbrokers (EO) 38,215,215 18.83 38,088,524 18.83 29,303,533 16.23
Interactive Investor (EO) 25,798,929 12.71 25,386,222 12.55 20,922,574 11.58
Invesco* 17,540,155 8.64 17,540,155 8.67 17,540,155 9.71
AJ Bell, stockbrokers (EO) 15,364,269 7.57 14,946,175 7.39 11,582,380 6.41
Redmayne Bentley, stockbrokers 10,563,124 5.20 10,622,010 5.25 9,152,417 5.07
Charles Stanley 10,179,788 5.02 10,063,995 4.98 9,597,611 5.31
HSDL, stockbrokers (EO) 7,078,382 3.49 6,976,268 3.45 6,237,521 3.45
EO: Execution only.
* Held across a number of Invesco Funds. Invesco is not considered a related
party. For further information see Related Party Transactions and Transactions
with Manager note 23 on page 71.
Board’s Duty to Promote the Success of the Company
The Directors have a fiduciary duty to act, in good faith, for the benefit of
shareholders taken as a whole. In the UK, section 172 of the Companies Act
2006 seeks to codify this duty and to widen the responsibility to incorporate
the consideration of wider relationships that are necessary for the
Company’s sustainability. As a UK listed Company it is necessary for the
Company to report against this UK statutory duty, being that the Directors
have a duty to promote the success of the Company, whilst also having regard
to certain broader matters, including the need to engage with employees,
service providers, customers and others, and to have regard to their
interests. This is reflected in the summary of the Board’s responsibilities
on pages 39 and 40.
In fulfilling these duties, and in accordance with the Company’s nature as
an investment company with no employees and no customers in the traditional
sense, the Board’s principal concern has been, and continues to be, the
interests of the Company’s shareholders taken as a whole. Notwithstanding
this, the Board has a responsible governance culture and also has due regard
for broader matters so far as they apply. In particular, the Board engages
with the Manager and Company Secretary at every Board meeting and the
Management Engagement Committee also reviews the Company’s relationships
with these and other service providers, such as the registrar, broker,
depositary and custodian, at least annually. The assessment of the Manager
consequent to these reviews is set out above.
The Company communicates with its shareholders at least three times a year
providing information about shareholder meetings, dividend payments and
half-yearly and annual financial results. In addition, the annual general
meeting of the Company provides shareholders with the opportunity to attend
and meet with the Directors and the Manager. The Company’s AGM will be held
on 11 June 2025 at 9.00am at the offices of JTC Fund Solutions (Jersey)
Limited. Shareholders are welcome to attend the AGM in person. Shareholders
who cannot attend in person are encouraged to submit their votes by proxy.
Board Diversity
The Company’s policy on diversity is set out on page 40, under the section
‘Nomination and Remuneration Committee’. The Board considers diversity,
including the balance of skills, knowledge, experience, gender and ethnicity
amongst other factors when reviewing its composition and appointing new
directors. The Board continues to recognise the importance of having a range
of skilled, experienced individuals with the right knowledge represented on
the Board in order to allow it to fulfil its obligations.
In view of its relatively small size, the Board will continue to ensure that
all appointments are made on the basis of merit against the specification
prepared for each appointment. In doing so, the Board will seek to meet the
targets set out in the FCA’s UK Listing Rule 6.6.6R (9)(a), which are
summarised below. In accordance with UK Listing Rule 6.6.6R (9), (10) and (11)
the Board has provided the following information in relation to its diversity
as at 31 December 2024, being the financial year-end of the Company. The
information included in the tables below has been obtained following
confirmation from the individual Directors. As shown in the tables, the
Company did not meet the FCA ethnic diversity target as at 31 December 2024,
however the Board has already progressed recruitment opportunities to address
its diversity targets (see page 39). We continue to monitor diversity
expectations.
Board Gender as at 31 December 2024
Number of Board members Percentage of the Board Number of senior positions on the Board Number in executive management A Percentage of executive management A
Men 2 40% 1 n/a n/a
Women 3 60% B 1 C,D n/a n/a
A the Company does not disclose the number of directors in executive
management as this is not applicable for an investment trust.
B meets the target of 40% as set out in UKLR 6.6.6R (9)(a)(i).
C the positions of Senior Independent Director and Chair of the Audit & Risk
Committee are held by the same woman (Heather MacCallum). The latter position
is not currently defined as a senior position under LR 9.8.6R (9)(a)(ii).
D meets the target of 1 as set out in UKLR 6.6.6R (9)(a)(ii).
Board Ethnic Background as at 31 December 2024
Number of Number of Number in Percentage of
Board Percentage of senior positions executive executive
members the Board on the Board management A management A
White British or other White (including minority-white groups) 5 100% 2 n/a n/a
Minority ethnic 0 B 0% 0 n/a n/a
A the Company does not disclose the number of directors in executive
management as this is not applicable for an investment trust.
B is less than the target of 1 as set out in UKLR 6.6.6R (9)(a)(iii). Given
the proposed appointment noted in the Chairman’s statement on page 7, the
Company expects to meet this target following the conclusion of the 2025 AGM.
There have been no changes since the year end that have affected the
Company’s ability to meet the targets set in UKLR 6.6.6R (9)(a).
Modern Slavery Act 2015
The Company is an investment vehicle and does not provide goods or services in
the normal course of business, or have customers. Accordingly, the Directors
consider that the Company is not required to make any slavery or human
trafficking statement under the Modern Slavery Act 2015.
Environmental, Social and Governance (‘ESG’) Matters
In relation to the portfolio, the Company has delegated the management of the
Company’s investments to the Manager, who has an ESG philosphy and approach
articulated in its UK Stewardship Code Report, which sets out a number of
principles that are intended to be considered in the context of its
responsibility to manage investments in the financial interests of
shareholders. A greenhouse gas emissions statement is included in the
Directors’ Report on page 34.
The Manager forms part of the Invesco Ltd group. Invesco Ltd (‘Invesco’)
is committed to being a responsible investor and applies, and is a signatory
to, the United Nations Principles for Responsible Investment (‘PRI’),
which demonstrates its extensive efforts in terms of ESG integration, active
ownership, investor collaboration and transparency. Invesco scored four stars
for its Investment & Stewardship Policy under new scoring methodology produced
by PRI. This followed five consecutive years of achieving an A+ rating for
responsible investment (Strategy & Governance) under the previous methodology.
In addition, Invesco is an active member of the UK Sustainable Investment and
Finance Association as well as a supporter of the Task Force on
Climate-related Financial Disclosure (‘TCFD’) since 2019 and published its
fourth iteration of its Global TCFD Report in 2023. This report is available
at
https://www.invesco.com/content/dam/invesco/emea/en/pdf/ivz_global-tcfd-report.pdf.
The Manager’s investment team incorporates ESG considerations in its
investment process as part of the evaluation of new opportunities. The
portfolio managers make their own conclusions about the ESG characteristics
of each investment held and about the overall ESG characteristics of the
portfolio, although third party ESG ratings may inform their view.
Additionally, the Manager’s ESG team provides ESG insight and support.
Regarding stewardship, the Board considers that the Company has a
responsibility as an investor towards ensuring that appropriate standards of
corporate governance are maintained in the companies in which it invests. To
achieve this, the Board does not seek to intervene in daily management
decisions, but aims to support high standards of governance and, where
necessary, will take the initiative to ensure those standards are met.
The Company’s stewardship functions have been delegated to the Manager. The
Manager has adopted a clear and considered policy towards its responsibility
as an investor on behalf of the Company. As part of this policy, the Manager
takes steps to satisfy itself about the extent to which the companies in which
it invests look after shareholders’ value and comply with local
recommendations and practices, such as the UK Corporate Governance Code. The
Manager is also a signatory of the Financial Reporting Council’s Stewardship
Code, which seeks to improve the quality of engagement between institutional
investors and companies to help improve long-term returns to shareholders and
the efficient exercise of governance responsibilities.
A copy of the current Manager’s UK Stewardship Code Report can be found at
https://www.invesco.com/content/dam/invesco/
emea/en/pdf/UK_Stewardship_Code_Report_2023.pdf
Insight into Invesco’s ESG Framework
The Henley based Invesco Fixed Income team, of which the portfolio managers
are a part, incorporates ESG considerations in its investment process as part
of the evaluation of new primary and secondary market opportunities, with
identified ESG concerns feeding into the final investment decision and
assessment of relative value.
Investment teams at Invesco are supported on many ESG engagement activities by
a centralised team of ESG professionals. Invesco’s ESG approach is led
globally by their Global Head of ESG and the Global ESG team. This team
reports into the Head of Investments Engagement. This team is further
supported by their global proxy function.
At a local level, The Co-Head of Investments, Invesco Fixed Income has
ultimate oversight of, agrees with and sponsors Invesco’s ESG approach. The
Invesco Fixed Income Europe ESG investor group is chaired by a member of the
global ESG team and is made up of champions from each investment team. Each
ESG champion is a representative of the individual investment teams that has
responsibility for feeding into the overall ESG approach and areas of interest
for further analysis. The role of this group is to help facilitate dialogue
and share insights from across asset classes and regions. The group meets
quarterly.
Training is an essential part of Invesco’s commitment to ESG integration and
keeps the team abreast of the rapidly evolving landscape for responsible
investment. The team’s continuing personal development (‘CPD’) training
programme includes ESG modules. This is augmented by other programmes such as
global sector meetings and CIO insight meetings.
ESG overview
Although ESG integration forms part of the investment process, the Company is
not managed to sustainable ESG objectives, constraints or outcomes.
The portfolio managers’ approach is centred on macroeconomic and corporate
credit research and focuses on fundamental valuation to support the active
management of portfolios. The Manager has always incorporated ESG analysis
into its investment research because it believes that non-financial risks can
have a material impact on credit risk and by identifying those risks, it can
improve its credit risk assessment and produce better risk-adjusted returns in
portfolios.
The core objective of the Manager’s ESG approach is to assess issuers’
performance across environmental, social and governance factors and to
determine where those risks are potentially material or mispriced.
The fixed income universe is broad and varied. Geographical, structural and
regulatory differences mean that data availability, ESG awareness and
management engagement levels can vary greatly. As a result, while the
investment team’s commitment to ESG risk assessment is constant, the path to
arriving at an ESG-based assessment necessarily differs to account for the
constraints and challenges of different circumstances.
Common Principles for ESG Research
The Invesco team’s approach to ESG is based on a belief that incorporating
material environmental, social and governance risks into a broader risk
assessment, leads to better long-term risk-adjusted returns. In order to do
this, the team considers materiality and momentum.
• Issuers may have a myriad of ESG considerations, but materiality means
focusing on those particular ESG risk factors that have the potential to
impact an issuer’s credit risk profile.
• Momentum means understanding the evolution of ESG risks. As with all
risk, Invesco looks to identify positive and negative momentum in ESG risks
and assess the potential for those trends to affect creditworthiness. As a
firm Invesco encourages positive momentum by engaging with companies.
Invesco’s Global ESG team engages with the management of companies and
provide views on matters such as corporate strategy, transparency, capital
allocation and ESG concerns.
ESG analysis for corporate bonds
The Manager’s credit analysts are responsible for understanding and
assessing ESG risks for the companies under their coverage alongside financial
credit risk. Corporate credit research is organised around global industrial
sectors, allowing the analysts to develop a comprehensive understanding of not
only the ESG risks pertinent to each issuer under their coverage but also
those risks prevalent in a sector.
This approach of incorporating ESG risk into the broader assessment is
undertaken for all issuers of corporate bonds, for both developed or emerging
market countries.
External ESG resources
Invesco has a range of third-party research and data available as an input to
support the analysts in their ESG risk assessment.
Examples:
• MSCI ESG Scores, industry percentiles and weights
• CDP carbon and scoring data
• Sustainalytics Risk scores and category summary data
• Global Compact compliance or violation fields (MSCI and Sustainalytics)
• ISS Climate Solutions – Scope 1 to 3 emissions and science-based
emission targets
• Controversies – MSCI & Sustainalytics data feeds
Invesco’s ESG resources
Invesco’s Global ESG team has resources in research, portfolio analytics and
management engagement.
Furthermore, Invesco’s own proprietary developed ESG tool (ESGIntel)
provides ESG insights, metrics, data points and momentum scores from over 50
data points and metrics. Sector differences are accommodated with each having
its own tailor-made framework.
The tool provides a holistic view on how a company’s value chain is impacted
in different ways by various ESG metrics, and ratings are produced both at the
overall company and indicator levels to facilitate a focus on higher risk
company-specific issues. In addition, momentum indicators highlight a
company’s trajectory using five years of data history.
While disclosure levels vary greatly by the company due to sector, size and
regional factors, these data dashboards can provide a comprehensive picture of
each issuer’s performance.
The importance of fundamental ESG analysis
At the issuer level, data availability, disclosure rules and management
engagement levels can vary across each global sector. Raw ESG data can
sometimes present a partial or even misleading picture. When placed alongside
the fact that issuers themselves have unique features in terms of business
models, the weighting of ESG factors in each issuer assessment must be
interpreted and understood in a broader context.
In our research process, the qualitative judgement of the credit analyst is
therefore central to determining whether an ESG factor is evolving in a manner
that may compromise an issuer’s financial indicators and ultimately, its
creditworthiness.
ESG in credit selection
Once a credit analyst has undertaken their credit assessment, including that
of the materiality and momentum of ESG risks, then credit research is
presented to portfolio managers.
The portfolio managers need to assess the type and materiality of any ESG risk
and set that against the potential investment return in the context of the
Company’s objectives.
Other than the exclusions related to certain types of munitions, there are no
pre-determined rules on how securities are selected in light of any ESG risks.
Each investment case is likely to have its own unique set of risks. The
investment team’s credit selection emphasises fund manager judgement and
each case is considered on its own merits.
Engagement with issuers
Invesco engages directly with companies to better understand their positions
and their future intentions and lobby for change where Invesco believe it is
necessary. Although engagement as pure debt investors can be challenging,
Invesco’s ownership of both equity and debt can often be used to increase
our voice as a stakeholder. Engagement is carried out on a case by case basis
by relevant analysts and strategically with co-ordination through Invesco’s
Global ESG team.
Invesco’s Global ESG team is led by the Global Head of ESG. Reporting to the
Global Head of ESG is the Director of ESG Research, who leads the ESG analyst
team who in turn focus on ESG company engagement activity. Invesco has
established a global process to ensure that its ESG-targeted engagements are a
collaboration between its ESG team and the investment teams across Invesco who
may have interest in the issuer:
i. Internal assessment and coordination: the ESG team consults with the
investment teams and reviews the ESG Engagement focus list and decides whether
to: (a) gather feedback on a topic and provide that feedback to an issuer; (b)
schedule a call with the issuer if it is deemed to be necessary; or
(c) engage directly with the issuer and serve as a liaison. Invesco’s ESG
team will arrange contact between the relevant investment teams and issuers
when and if it is deemed necessary. Any ESG engagement meeting is added to a
centralised calendar that investment teams can access.
ii. Research and follow up: the ESG research team conducts in-depth ESG
research in preparation for these meetings and discusses with the relevant
investment teams across Invesco to ensure that companies are questioned on the
key ESG topics. The ESG team produces an Engagement Report for these meetings
which is shared via the Bloomberg platform for all relevant investment teams
to access. Invesco is also a member of several organisations that facilitate
collective dialogue with companies and continues to assess other collective
engagements that we would like to work more closely with in the future:
• Invesco joined the Investor Tailings Initiative when it was first
launched in 2019. Invesco signed letters that were sent to over 600 companies
and actively participated in meetings with companies and governments to ensure
the development of higher standards and to evolve the tools to assess
companies.
• Invesco signed the Investor statement on Covid-19, to encourage the
business community to take what steps they can to mitigate the social impacts
caused by the pandemic. Some of these steps include providing paid leave,
prioritising health and safety, maintaining employment and maintaining
supplier relationships. Invesco has engaged with companies on these topics as
part of its ongoing one-to-one ESG engagements.
ESG portfolio reviews
Dedicated ESG-focused portfolio reviews are in place to complement the
existing risk-return portfolio review process. Invesco’s Global ESG team
leads each review meeting which is attended by fund managers and credit
research analysts. Portfolios are reviewed on the basis of a wide range of ESG
metrics on an absolute basis and also relative to benchmarks where
appropriate.
ESG portfolio monitoring includes measurement, based on Sustainalytics ESG
research data, of total portfolio ESG risk and identification of holdings with
the highest and lowest ESG risk. As of the end of 2024, holdings with the
highest ESG risk were concentrated in the energy sector. The holdings with the
lowest ESG risk were spread across several sectors.
Invesco also carry out Carbon Footprint Analysis of the portfolio, in absolute
terms and compared to the wider high yield market, using data from ISS Climate
Solutions.
Task Force on Climate-related Financial Disclosures (‘TCFD’)
Whilst TCFD is currently not applicable to the Company, the Manager has
produced a product level report on the Company in accordance with the
Financial Conduct Authority’s (‘FCA’) rules and guidance regarding the
disclosure of climate-related financial information consistent with TCFD
Recommendations and Recommended Disclosures. These disclosures are intended to
help meet the information needs of market participants, including
institutional clients and consumers of financial products, in relation to the
climate-related impact and risks of the Manager’s TCFD in-scope business.
The product level report on the Company is available on the Company’s
website at
https://www.invesco.com/uk/en/investment-trusts/invesco-bond-income-plus-limited.html.
Key elements of the product level report include a scenario analysis of how
climate change is likely to impact the portfolio valuation under net zero
2050, delayed transition and hothouse scenarios, and a discussion of the most
significant drivers of performance under those scenarios.
Invesco’s Group Level Task Force on Climate-Related Financial Disclosures
(‘TCFD’) is available on the Managers’ Website at
https://www.invesco.com/content/dam/invesco/emea/en/pdf/ivz_global-tcfd-report.pdf.
In addition the Managers’ Entity Level TCFD Report is available at
https://www.invesco.com/content/dam/invesco/emea/en/pdf/IFML_and_IAML_tcfd-entity-level_report.pdf.
The reports noted above are in the process of being updated for the period to
31 December 2024 and will be made available via the respective websites by 30
June 2025.
Investments in Order of Valuation
at 31 December 2024
Market
Country of Value % of
Issuer/issue Rating (1) Industry Incorporation £’000 Portfolio
Lloyds Banking Group Financials UK
7.875% FRN Perpetual (AT1) Baa3/BB–/BBB 6,987 1.8
8.5% Cnv FRN Perpetual (AT1) Baa3/BB–/BBB 3,235 0.9
8.5% Cnv FRN 27 Mar 2071 (AT1) Baa3/BB–/BBB 1,448 0.4
6.375% FRN Perpetual (AT1) Baa3/BB–/BBB 133 0.0
11,803 3.1
Barclays Financials UK
9.25% Cnv FRN Perpetual (AT1) Ba1/BB–/BB 7,156 1.9
FRN 14 Nov 2032 Baa1/BBB–/BBB 1,675 0.5
8.5% FRN Perpetual (AT1) Ba1/BB–/BB 1,242 0.3
8.875% Cnv FRN Perpetual (AT1) Ba1/BB–/BB 760 0.2
FRN Perpetual (AT1) Ba1/BB–/BB 302 0.1
4.375% FRN Perpetual (AT1) Ba1/BB–/BB 144 0.0
11,279 3.0
UK Treasury Bill Government Bonds UK
0.5% 22 Oct 2061 Aa3/AA/AA 3,370 0.9
3.75% 22 Oct 2053 Aa3/AA/AA 3,173 0.8
0.125% 22 Mar 2051 Aa3/AA/AA 1,696 0.5
4% 22 Oct 2063 Aa3/AA/AA 787 0.2
1.25% 31 Jul 2051 (SNR) Aa3/AA/AA 670 0.2
9,696 2.6
Co-Operative Bank Financials UK
11.75% 22 May 2034 Baa2/NR/BBB 4,205 1.1
7.5% FRN 08 Jul 2026 NR/BB/BB 1,020 0.3
6% FRN 06 Apr 2027 (SNR) Baa2/NR/BBB 1,424 0.4
9.5% Cnv FRN 24 May 2028 (SNR) Baa2/NR/BBB 1,679 0.4
8,328 2.2
Virgin Money Financials UK
8.25% Cnv Perpetual (AT1) Baa3/NR/BBB 4,110 1.1
11% Cnv FRN Perpetual (AT1) Baa3/NR/BBB 2,618 0.7
Cnv FRN 23 Aug 2029 (SNR) A3/BBB/A 1,323 0.4
8,051 2.2
Eléctricité De France Utilities France
7.375% FRN Perpetual Ba2/B+/BB 2,947 0.8
5.875% Perpetual Ba2/B+/BB 1,732 0.5
6% Perpetual Baa1/BBB/BBB 1,486 0.4
7.5% FRN Perpetual Ba2/B+/BB 911 0.2
5.625% FRN Perpetual Ba2/B+/BB 854 0.2
7,930 2.1
Thames Water Finance Utilities UK
7.75% 30 Apr 2044 Caa1/CC/CC 5,543 1.5
8.25% 25 Apr 2040 (SNR) Caa1/CC/CC 2,334 0.6
4.625% 19 May 2026 (SNR) C/NR/C 50 0.0
7,927 2.1
Aviva Financials UK
6.875% Cnv FRN Perpetual Baa2/NR/BBB 5,563 1.5
8.875% Preference NR/NR/NR 1,535 0.4
7,098 1.9
Ineos Quattro Industrials UK
8.5% 15 Mar 29 (SNR) B1/BB/BB 1,510 0.4
9.625% 15 Mar 29 (SNR) B1/BB/BB 1,150 0.3
7.5% 15 Apr 2029 (SNR) Ba3/BB/BB 954 0.3
6.75% 15 Apr 30 (SNR) B1/BB/BB 2,975 0.8
6,589 1.8
Albion Finance Consumer Services Luxembourg
6.125% 15 Oct 2026 (SNR) B1/BB–/BB 2,394 0.6
8.75% 15 Apr 2027 (SNR) B3/B/B 3,578 1.0
5,972 1.6
BNP Paribas Financials France
9.25% FRN Perpetual (AT1) Ba1/BBB–/BBB 1,226 0.3
FRN Perpetual (AT1) Ba1/BBB–/BBB 1,412 0.4
7.375% FRN Perpetual (AT1) Ba1/BBB–/BBB 3,218 0.9
5,856 1.6
Saffron Building Society Financials UK
Cnv FRN 19 Oct 2034 NR/NR/NR 5,514 1.5
CPUK Finance Financials Jersey
4.5% 28 Aug 2027 NR/B/B 1,140 0.3
6.5% 28 Aug 2050 (SNR) NR/B/B 2,182 0.6
7.875% 28 Aug 2055 NR/NR/NR 2,169 0.6
5,491 1.5
Vodafone Group Basic Materials UK
8% FRN Perpetual (SUB) Ba1/BB+/BB 5,406 1.4
Intesa Financials Italy
7.7% FRN Perpetual (AT1) Ba3/BB–/BB 3,616 1.0
6.375% Cnv FRN Perpetual (AT1) Ba3/BB–/BB 1,544 0.4
5,160 1.4
Atom Financials UK
Cnv FRN 08 Jan 2035 NR/NR/NR 5,022 1.3
OSB Financials UK
8.875% Cnv 16 Jan 2030 (SNR) Baa2/NR/BBB 1,912 0.5
Cnv FRN 27 Jul 2033 Baa3/NR/BBB 1,633 0.4
6% FRN Perpetual (SUB) (AT1) NR/NR/BB 1,413 0.4
4,958 1.3
Jupiter Fund Management Financials UK
8.875% 27 Jul 2030 NR/NR/BB 4,724 1.3
Newcastle Building Society Financials UK
12.25% Cnv FRN Perpetual NR/NR/NR 4,672 1.2
Deutsche Bank Financials Germany
6% FRN Perpetual (AT1) Ba2/BB/BB 782 0.2
FRN Perpetual (AT1) Ba2/BB/BB 3,270 0.9
8.125% Cnv FRN Perpetual (AT1) Ca/NR/NR 519 0.1
4,571 1.2
Clarios Consumer Services USA
8.5% 15 May 2027 (SNR) B3/B/B 4,471 1.2
Codere New Topco Consumer Services Luxembourg
A1 Shares NR/NR/NR 2,132 0.6
11% PIK 31 Dec 2028 NR/NR/NR 1,513 0.4
A2 Shares NR/NR/NR 658 0.2
4,303 1.2
Legal & General Financials UK
5.625% FRN Perpetual Baa2/BBB/BBB 4,188 1.1
Sainsbury’s Bank Financials UK
10.5% FRN 12 Mar 2033 Baa3/NR/BBB 4,173 1.1
Ford Motor Credit Consumer Goods USA
6.86% 05 Jun 2026 Ba1/BBB–/BBB 4,090 1.1
Ziggo Bond Finance Telecommunications Netherlands
6% 15 Jan 2027 (SNR) B3/B–/B 3,967 1.1
Lion/Polaris Consumer Goods Luxembourg
FRN 01 July 2029 (SNR) B2/B/B 3,783 1.0
Rino Mastrotto Consumer Goods Italy
FRN 31 Jul 2031 (SNR) B2/B/B 3,690 1.0
Haleon Health Care UK
9.5% Preference NR/NR/NR 3,661 1.0
RL Finance Financials UK
10.125% Cnv FRN Perpetual Baa3/BBB/BBB 3,583 1.0
ING Financials Netherlands
6.25% Cnv FRN 20 May 2033 Baa2/BBB/BBB 3,544 0.9
Jerrold Finco Financials UK
7.875% 15 Apr 2030 NR/BB/BB 3,513 0.9
IHO Verwaltungs Consumer Goods Germany
6.75% 15 Nov 2029 (SNR) Ba2/BB–/BB 1,764 0.5
8% 15 Nov 2032 (SNR) Ba2/BB–/BB 1,635 0.4
3,399 0.9
Petra Diamonds Basic Materials UK
10.5% PIK 08 Mar 2026 Caa2/B–/CCC 3,298 0.9
Common Stock NR/NR/NR 63 0.0
3,361 0.9
Bayer Health Care Germany
5.5% FRN Perpetual (SUB) Baa3/BB+/BB 1,567 0.4
7% FRN Perpetual (SUB) Ba1/BB+/BB 1,740 0.5
3,307 0.9
Commerzbank Financials Germany
6.125% FRN Perpetual (AT1) Ba2/BB/BB 2,167 0.6
7.5% FRN Perpetual (AT1) Ba2/BB/BB 1,117 0.3
3,284 0.9
JP Morgan Chase Financials USA
FRN Perpetual (SNR) (AT1) Baa2/BBB/BBB 3,245 0.9
ASG Finance Design Consumer Services Ireland
9.75% 15 May 2029 (SNR) NR/BB–/BB 3,190 0.9
Grupo Antolin Consumer Goods Spain
10.375% 30 Jan 2030 (SNR) B3/B–/B 3,190 0.9
CSN Resources Basic Materials Luxembourg
8.875% 05 Dec 2030 (SNR) Ba2/NR/BB 3,176 0.8
Pension Insurance Financials UK
7.375% FRN Perpetual NR/NR/BBB 3,170 0.8
DNO ASA Oil and Gas Norway
9.25% 04 Jun 2029 (SNR) NR/NR/NR 2,604 0.7
7.875% 09 Sep 2026 (SNR) Ca/NR/NR 561 0.1
3,165 0.8
Virgin Media O2 Telecommunications UK
4% 31 Jan 2029 (SNR) Ba3/B+/BB 1,936 0.5
4.25% 15 Jan 2030 (SNR) Ba3/B+/BB 1,183 0.3
3,119 0.8
Teva Pharmaceutical Finance Health Care Netherlands
6.75% 01 Mar 2028 (SNR) Ba2/BB/BB 2,446 0.6
5.125% 09 May 2029 (SNR) Ba2/BB/BB 607 0.2
3,053 0.8
Maison Industrials UK
6% 31 Oct 2027 (SNR) NR/B+/B 2,949 0.8
Telefonica Telecommunications Netherlands
6.75% FRN Perpetual (SUB) Ba2/BB/BB 833 0.2
FRN Perpetual Ba2/BB/BB 2,092 0.6
2,925 0.8
Allwyn Entertainment Consumer Services UK
7.25% 30 Apr 2030 NR/BB/BB 798 0.2
7.875% 30 Apr 2029 (SNR) NR/BB/BB 2,052 0.6
2,850 0.8
Banco BVA Financials Spain
6% FRN Perpetual (AT1) Ba2/NR/BB 2,849 0.8
Pinewood Finance Consumer Services UK
6% 27 Mar 2030 (SNR) NR/BB+/BB 2,813 0.7
Gatwick Airport Finance Financials UK
4.375% 07 Apr 2026 (SNR) Ba3/NR/BB 2,753 0.7
RLGH Finance Bermuda Financials Bermuda
8.25% 17 Jul 2031 Baa3/NR/BB 2,737 0.7
BT Telecommunications UK
8.375% FRN Perpetual Ba1/BB+/BB 2,653 0.7
Bank Of Ireland Financials Ireland
7.594% FRN 06 Dec 2032 Baa2/BB+/BBB 1,041 0.3
7.5% FRN Perpetual (AT1) Ba1/BB–/BB 1,590 0.4
2,631 0.7
Aston Martin Consumer Goods Jersey
10.375% 31 Mar 2029 (SNR) B3/B–/B 2,624 0.7
Optics Bidco Technology Italy
7.875% 31 July 2028 (SNR) Ba1/BB+/BB 1,457 0.4
7.721% 04 Jun 2038 (SNR) Ba1/BB+/BB 1,132 0.3
2,589 0.7
Lottomatica Consumer Services Italy
7.13 % 01 Jun 2028 (SNR) Ba3/BB–/BB 1,341 0.4
FRN 15 Dec 2030 (SNR) Ba3/BB–/BB 1,145 0.3
2,486 0.7
Dana Financing Luxembourg Consumer Goods Luxembourg
8.5% 15 Jul 2031 (SNR) B1/BB–/BB 2,428 0.6
Marcolin Health Care Italy
6.125% 15 Nov 2026 (SNR) B2/B/B 2,419 0.6
CaixaBank Financials Spain
8.25% Cnv FRN Perpetual (AT1) NR/BB/BB 2,380 0.6
HSBC Financials UK
5.25% 14 Mar 2044 Baa1/BBB/BBB 450 0.1
FRN 13 Nov 2034 (SUB) Baa1/BBB/BBB 1,928 0.5
2,378 0.6
Morrisons Consumer Goods UK
5.5% 04 Nov 2027 (SNR) B1/B+/B 1,284 0.3
4.75% 04 Nov 2027 (SNR) B1/B+/B 1,087 0.3
2,371 0.6
Societe Generale Financials France
FRN Perpetual (AT1) Ba2/BB/BB 931 0.2
7.875% Cnv FRN Perpetual (AT1) Ba2/BB/BB 1,394 0.4
2,325 0.6
Inspired Entertainment Consumer Services UK
7.875% 01 Jun 2026 (SNR) B2/NR/B 2,288 0.6
Beazley Financials Ireland
5.875% 04 Nov 2026 NR/NR/BBB 2,285 0.6
RAC Bond Consumer Goods UK
FRN 04 Nov 2046 (SNR) NR/B+/B 484 0.1
Var 06 May 2046 NR/BBB/BBB 1,785 0.5
2,269 0.6
Cidron Aida Finco Health Care Luxembourg
6.25% 01 Apr 2028 (SNR) B2/B–/B 2,224 0.6
Heathrow Finance Financials UK
4.125% 01 Sep 2029 (SNR) B1/NR/B 915 0.3
6.625% 01 Mar 2031 (SNR) B1/NR/B 1,267 0.3
2,182 0.6
John Lewis Consumer Services UK
4.25% 18 Dec 2034 (SNR) NR/NR/NR 1,143 0.3
6.125% 21 Jan 2025 (SNR) NR/NR/NR 1,000 0.3
2,143 0.6
Lancashire Financials Bermuda
5.625% 18 Sep 2041 (FRN) Baa3/BB+/BB 2,099 0.6
Mobico Group Consumer Services UK
FRN Perpetual B1/NR/B 2,086 0.6
Tullow Oil Oil and Gas UK
10.25% 15 May 2026 (SNR) Caa1/B–/CCC 2,026 0.5
Nationwide Financials UK
7.5% Cnv FRN Perpetual (AT1) Baa3/BB+/BBB 1,361 0.4
10.25% Perpetual (CCDS) NR/NR/NR 650 0.2
2,011 0.6
Benteler International Consumer Services Austria
10.5% 15 May 2028 Ba3/BB–/BB 534 0.1
9.375% 15 May 2028 Ba3/BB–/BB 1,458 0.4
1,992 0.5
Volkswagen Financial Services Consumer Goods Netherlands
6.5% 18 Sep 2027 (SNR) A3/BBB+/BBB 1,430 0.4
7.875% FRN Perpetual Baa2/BBB–/BBB 552 0.1
1,982 0.5
BP Capital Financials UK
4.25% FRN Perpetual A3/BBB/A 1,976 0.5
Galaxy Bidco Financials UK
8.125% 19 Dec 2029 (SNR) B2/B/B 1,954 0.5
Motion Finco Consumer Services Luxembourg
7.375% 15 Jun 2030 B2/B/B 1,948 0.5
True Potential Financials Jersey
6.5% 15 Feb 2027 (SNR) B1/B+/B 1,932 0.5
Eutelsat Telecommunications France
9.75% 13 Apr 2029 (SNR) Ba3/B/BB 1,924 0.5
La Doria Consumer Goods Italy
FRN 12 Nov 2029 B1/B/B 1,910 0.5
NatWest Financials UK
Cnv FRN 6 Jun 2033 Baa1/BBB–/BBB 940 0.2
8% FRN Perpetual (AT1) Baa3/BB–/BBB 969 0.3
1,909 0.5
TGS ASA Oil and Gas Norway
8.5% 15 Jan 2030 (SNR) Ba3/BB–/BB 1,828 0.5
Banco Sabadell Financials Spain
5% FRN Perpetual (AT1) NR/BB–/BB 648 0.2
5.75% FRN Perpetual (AT1) NR/BB–/BB 1,162 0.3
1,810 0.5
Enel Utilities Netherlands
7.75% 14 Oct 2052 (SNR) Baa1/BBB/BBB 1,794 0.5
Marb Bondco Consumer Services UK
3.95% 29 Jan 2031 (SNR) NR/BB+/BB 1,789 0.5
New Frigoglass Group Industrials Netherlands
Common Stock NR/NR/NR 5 0.0
11% PIK 27 Mar 2026 NR/NR/NR 969 0.3
11% 20 Apr 2028 NR/NR/NR 788 0.2
1,762 0.5
IM Group Consumer Services France
8% 01 Mar 2028 (SNR) Caa1/CCC+/CCC 1,759 0.5
Petroleos Mexicanos Oil and Gas Mexico
9.5% 15 Sep 2027 (SNR) B3/BBB/B 825 0.2
6.75% 21 Sep 2047 (SNR) B3/BBB/B 385 0.1
6.95% 28 Jan 2060 (SNR) B3/BBB/B 496 0.2
1,706 0.5
Stora Enso Industrials Finland
7.25% 15 Apr 2036 Baa3/NR/BBB 1,690 0.5
AA Bond Co Consumer Services Jersey
7.375% 31 Jul 2050 (SNR) NR/BBB/BBB 1,321 0.4
8.45% 31 Jul 2050 (SNR) NR/BBB/BBB 363 0.1
1,684 0.5
Morgan Stanley Financials USA
Depositary Shares (AT1) Baa3/BBB–/BBB 1,678 0.4
Monitchem Basic Materials Luxembourg
8.75% 01 May 2028 (SNR) B3/B/B 1,662 0.4
Bertrand Franchise Consumer Goods France
FRN Perpetual (SNR) B2/B/B 1,660 0.4
Zenith Consumer Services UK
6.5% 30 Jun 2027 (SNR) Caa1/B/CCC 1,642 0.4
NewDay BondCo Financials UK
13.25% 15 Dec 2026 B2/B+/B 1,620 0.4
Sasol Financing USA Financials USA
8.75% 03 May 2029 (SNR) Ba1/BB+/BB 1,609 0.4
Telecom Italia Telecommunications Italy
7.875% 31 Jul 2028 (SNR) Ba3/BB/BB 1,011 0.3
7.721% 04 Jun 2038 (SNR) Ba3/BB/BB 538 0.1
1,549 0.4
Premier Entertainment Consumer Services USA
5.875% 01 Sep 2031 (SNR) Caa1/CCC/CCC 559 0.2
5.625% 01 Sep 2029 (SNR) Caa1/CCC/CCC 925 0.2
1,484 0.4
Preem Oil and Gas Sweden
12% 30 Jun 2027 (SNR) B2/BB–/B 1,398 0.4
Vattenfall Utilities Sweden
6.875% FRN Perpetual (SUB) Baa2/BB+/BB 1,373 0.4
GTCR Financials Netherlands
8.5% 15 Jan 2031 (SNR) Ba3/BB/BB 1,362 0.4
BCP V Modular Services Consumer Services UK
6.125% 30 Nov 2028 B2/B/B 1,343 0.4
Rolls Royce Industrials UK
5.75% 15 Oct 2027 (SNR) Baa3/BBB/BBB 1,335 0.4
Fiber Bidco Industrials Italy
FRN 15 Jan 2030 (SNR) B2/B/B 1,320 0.4
Coventry Building Society Financials UK
8.75% Cnv FRN Perpetual (AT1) Ba1/NR/BB 1,315 0.4
Bellis Consumer Goods UK
4.5% 16 Feb 2026 (SNR) B1/NR/B 1,301 0.3
Ecclesiastical Insurance Office Financials UK
8.625% Preference NR/NR/NR 1,300 0.3
Altice Telecommunications France
5.875% 01 Feb 2027 (SNR) Caa1/CCC/CCC 330 0.1
4.25% 15 Oct 2029 (SNR) Caa1/CCC/CCC 933 0.2
1,263 0.3
Asmodee Consumer Goods Sweden
FRN 15 Dec 2029 B2/NR/B 1,254 0.3
OEG Finance Oil and Gas UK
7.25% 27 Sep 2029 (SNR) B1/NR/B 1,235 0.3
CIRSA Finance Financials Luxembourg
7.875% 31 Jul 2028 (SNR) B2/B+/B 1,229 0.3
Loxam SAS Consumer Services France
5.75% 15 Jul 2027 NR/B/B 1,193 0.3
Aegon Financials Bermuda
5.625% FRN Perpetual Baa3/BB+/BB 1,177 0.3
Travis Perkins Industrials UK
3.75% 17 Feb 2026 (SNR) NR/NR/BB 1,170 0.3
Dynamo Consumer Goods Germany
6.25% 15 Oct 2031 (SNR) B2/B/B 1,157 0.3
Quilter Financials UK
8.625% FRN 18 Apr 2033 NR/NR/BBB 1,118 0.3
Centrica Utilities UK
7% 19 Sep 2033 (SNR) Baa2/BBB/BBB 1,096 0.3
Verisure Industrials Sweden
9.25% 15 Oct 2027 (SNR) B1/B+/B 1,076 0.3
CCO Holdings Telecommunications USA
5.125% 01 May 2027 (SNR) B1/BB–/BB 979 0.3
Alpha Services & Holdings Consumer Goods Greece
11.875% Cnv FRN Perpetual (AT1) B2/NR/B 929 0.2
La Financière ATALIAN Consumer Services France
8.5% PIK 30 Jun 2028 Caa3/CCC+/CCC 928 0.2
AXA Financials France
6.379% FRN Perpetual A3/BBB+/BBB 855 0.2
Castle UK (Miller Homes) Industrials UK
FRN 15 May 2028 B1/B/B 830 0.2
B&M Consumer Services Luxembourg
4% 15 Nov 2028 (SNR) Ba1/BB+/BB 814 0.2
US Treasury Note Government Bonds USA
3.875% 15 Aug 2033 Aaa/AA+/AA 762 0.2
National Bank Of Greece Financials Greece
Cnv FRN 28 Jun 2035 Ba2/NR/BB 745 0.2
HP Consumer Services USA
5.5% 15 Jan 2033 (SNR) Baa2/BBB/BBB 720 0.2
CNP Assurances Financials France
4.875% FRN Perpetual Baa2/BBB/BBB 706 0.2
Zurich Finance Financials Ireland
5.125% FRN 23 Nov 2052 A1/A+/A 679 0.2
PGH Capital Financials UK
5.375% 06 Jul 2027 NR/NR/BBB 661 0.2
Phoenix Financials UK
FRN Perpetual NR/NR/BBB 614 0.2
Cerved Consumer Services Italy
6% 15 Feb 2029 (SNR) B3/B–/B 282 0.1
FRN 15 Feb 2029 (SNR) B3/B–/B 321 0.1
603 0.2
Spectrum Management Telecommunications USA
4.5% 15 Sep 2042 (SNR) Ba1/BBB–/BBB 537 0.1
Rothesay Life Financials UK
8% 30 Oct 2025 Baa1/NR/BBB 509 0.1
Peel Land & Property Investments Financials UK
8.375% Var 30 Apr 2040 NR/BBB/BBB 497 0.1
Hammerson Financials UK
5.875% 08 Oct 2036 Baa2/NR/BBB 478 0.1
British Airways Consumer Services USA
8.375% 15 Nov 2028 NR/A/BBB 455 0.1
Nyrstar Basic Materials Malta
0% 31 Jul 2026 (SNR) NR/NR/NR 432 0.1
MAHLE Consumer Goods Germany
6.5% 02 May 2031 (SNR) Ba2/BB/BB 405 0.1
Kosmos Energy Oil and Gas USA
7.75% 01 May 2027 (SNR) B3u/B/B 387 0.1
FAGE International Consumer Goods Luxembourg
5.625% 15 Aug 2026 (SNR) Ba3/BB/BB 328 0.1
Permanent TSB Financials Ireland
13.25% 26 Apr 2071 (AT1) Ba2/NR/BB 280 0.1
UBS Financials Switzerland
4.5% FRN Perpetual (AT1) NR/NR/NR 36 0.0
9.75% FRN Perpetual (AT1) NR/NR/NR 81 0.0
117 –
Total investments held at fair value
through profit or loss 376,963 100.3
Derivative Instruments – Credit Default Swaps
Market
Coupon Value % of
Company Nominal % Maturity Date £’000 Portfolio
iTraxx Europe Crossover
Series 42 5% 5 Year € 4,500,000 5.00 20 Dec 2029 (297) (0.1)
Series 42 5% 5 Year € 5,000,000 5.00 20 Dec 2029 (331) (0.1)
Series 42 5% 5 Year € 9,000,000 5.00 20 Dec 2029 (595) (0.1)
Total derivatives held at fair value
through profit or loss (1,223) (0.3)
Total investments and derivatives held
at fair value through profit or loss 375,740 100.0
(1) Moody’s/Standard & Poor’s (S&P)/Equivalent average rating.
Abbreviations used in the above valuation:
Cnv: Convertible
FRN: Floating Rate Note
SNR: Senior
SUB: Subordinated Notes
PIK: Payment in Kind
Var: Variable
CCDS: Core Capital Deferred Shares
AT1: Additional Tier 1 bond
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Company’s Annual Financial
Report in accordance with applicable laws and regulations.
The Companies (Jersey) Law 1991 requires the Directors to prepare financial
statements for each financial period. Under that law the Directors have
elected to prepare the financial statements in accordance with International
Financial Reporting Accounting Standards as issued by the International
Accounting Standards Board (‘IFRS Accounting Standards’) as adopted by the
European Union. 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.
International Accounting Standard 1 requires that financial statements present
fairly for each financial year the Company’s financial position, financial
performance and cash flows. This requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board’s
‘Framework for the preparation and presentation of financial statements’.
In virtually all circumstances, a fair presentation will be achieved by
compliance with all applicable IFRSs.
In preparing these financial statements, the Directors are required to:
– properly select and apply accounting policies and then apply them
consistently;
– present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
– provide additional disclosures when compliance with specific requirements
in IFRSs are insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the entity’s
financial position and financial performance; and
– make an assessment of the Company’s ability to continue as a going
concern.
The financial statements have been prepared on a going concern basis. When
considering this, the Directors took into account the annual shareholders’
continuation vote (as explained in detail on page 17) and the following: the
Company’s investment objective and risk management policies, the nature of
the portfolio and expenditure and cash flow projections. As a result, they
determined that the Company has adequate resources, an appropriate financial
structure, readily realisable fixed assets to repay current liabilities and
suitable management arrangements in place to continue in operational existence
for the foreseeable future.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and which enable them to ensure that the accounts comply with the
Companies (Jersey) Law 1991. 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 Corporate Governance Statement and a Directors’ Report that
comply with that law and those regulations.
The Directors of the Company, who are listed on page 33, each confirm to the
best of their knowledge that:
– the financial statements, which have been prepared in accordance with
applicable accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss 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;
– this Annual Financial Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company’s position and performance, business model and strategy;
and
– there is no relevant audit information of which the Company’s auditor
is unaware, and each Director has taken steps that they ought to have taken as
a Director to make themselves aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information.
Signed on behalf of the Board of Directors
Heather MacCallum
Audit & Risk Committee Chair
2 April 2025
a. The directors have delegated responsibility for the maintenance and
integrity of the Invesco Bond Income Plus Limited website to the Manager; the
work carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since they were
initially presented on the website.
b. Legislation in Jersey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Statement of Comprehensive Income
Year ended Year ended
31 December 2024 31 December 2023
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Net gains on investments held at fair value
through profit or loss 11 – 2,093 2,093 – 6,856 6,856
Net gains on derivative instruments –
currency hedges and CDS 13 – 943 943 – 3,197 3,197
Exchange differences – 1,965 1,965 – 1,998 1,998
Income 4 26,370 – 26,370 24,424 – 24,424
Investment management fee 5 (1,090) (1,090) (2,180) (941) (941) (1,882)
Other expenses 6 (856) (40) (896) (802) (3) (805)
Profit before finance costs and taxation 24,424 3,871 28,295 22,681 11,107 33,788
Finance costs 7 (826) (826) (1,652) (984) (984) (1,968)
Profit before taxation 23,598 3,045 26,643 21,697 10,123 31,820
Tax on ordinary activities 8 (61) – (61) – – –
Profit after taxation 23,537 3,045 26,582 21,697 10,123 31,820
Return per ordinary share 9 12.08p 1.57p 13.65p 12.23p 5.71p 17.94p
The total columns of this statement represent the Company’s statement of
comprehensive income, prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The profit after
taxation is the total comprehensive income. 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 of the Company.
No operations were acquired or discontinued in the year.
Statement of Changes in Equity
Stated Capital Revenue
Capital Reserve Reserve Total
Notes £’000 £’000 £’000 £’000
At 31 December 2022 305,062 (32,141) 8,168 281,089
Profit after taxation – 10,123 21,697 31,820
Dividends paid 10 (341) – (20,011) (20,352)
Net proceeds from issue of new shares 16 12,072 – – 12,072
At 31 December 2023 316,793 (22,018) 9,854 304,629
Profit after taxation – 3,045 23,537 26,582
Dividends paid 10 (514) – (21,660) (22,174)
Net proceeds from issue of new shares 16 36,762 – – 36,762
At 31 December 2024 353,041 (18,973) 11,731 345,799
Balance Sheet
At At
31 December 31 December
2024 2023
Notes £’000 £’000
Non-current assets
Investments held at fair value through profit or loss 11 376,963 335,533
Current assets
Other receivables 12 9,939 8,552
Derivative financial instruments – receivable 13 415 1,589
Cash and cash equivalents 8,153 8,138
18,507 18,279
Current liabilities
Other payables 14 (1,000) (916)
Derivative financial instruments – payable 13 (2,321) (199)
Securities sold under agreements to repurchase 15 (45,127) (48,068)
(48,448) (49,183)
Net current liabilities (29,941) (30,904)
Total assets less current liabilities 347,022 304,629
Non-current liabilities
Derivatives held at fair value through profit or loss 13 (1,223) –
Net assets 345,799 304,629
Capital and reserves
Stated capital 16 353,041 316,793
Capital reserve 17 (18,973) (22,018)
Revenue reserve 17 11,731 9,854
Total shareholders’ funds 345,799 304,629
Net asset value per ordinary share 18 170.87p 168.58p
The financial statements were approved and authorised for issue by the Board
of Directors on 2 April 2025.
Signed on behalf of the Board of Directors
Heather MacCallum
Audit & Risk Committee Chair
The accompanying accounting policies and notes are an integral part of these
financial statements.
Statement of Cash Flows
Year ended Year ended
31 December 31 December
2024 2023
£’000 £’000
Cash flow from operating activities
Profit before finance costs and taxation 28,295 33,788
Tax on overseas income (61) -
Adjustment for:
Purchases of investments (139,225) (126,310)
Sales of investments 99,926 115,465
(39,299) (10,845)
Decrease from securities sold under agreements to repurchase (2,941) (5,683)
Profit on investments held at fair value (2,093) (6,856)
Net movement from derivative instruments – currency hedges and CDS 4,519 50
Increase in receivables (1,336) (1,355)
Increase in payables 101 67
Exchange differences on cash and cash equivalents 135 (937)
Net cash (outflow)/inflow from operating activities (12,680) 8,229
Cash flow from financing activities
Finance cost paid (1,669) (1,865)
Proceeds from issue of new shares – note 16 36,856 12,199
Dividends paid – note 10 (22,174) (20,352)
Cost of shares issued – note 16 (183) (92)
Net cash inflow/(outflow) from financing activities 12,830 (10,110)
Net increase/(decrease) in cash and cash equivalents 150 (1,881)
Cash and cash equivalents at start of the year 8,138 9,082
Exchange differences (135) 937
Cash and cash equivalents at the end of the year 8,153 8,138
Reconciliation of cash and cash equivalents to the Balance Sheet is as follows:
Cash held at custodian 7,903 6,038
Invesco Liquidity Funds plc – Sterling 250 2,100
Cash and cash equivalents 8,153 8,138
Cash flow from operating activities includes:
Dividends received 627 283
Interest received 24,984 24,341
Reconciliation of net debt
At At
1 January Cash Non-cash 31 December
2024 flows movement 2024
£’000 £’000 £’000 £’000
Cash and cash equivalents 8,138 150 (135) 8,153
Securities sold under agreements to repurchase (48,068) 2,941 – (45,127)
Total (39,930) 3,091 (135) (36,974)
Notes to the Financial Statements
1. Principal Activity
The Company is a closed-end investment company incorporated in Jersey and
operates under the Companies (Jersey) Law 1991. The principal activity of the
Company is investment in a diversified portfolio of high-yielding
fixed-interest securities as set out in the Company’s Investment Objective
and Policy.
2. Principal Accounting Policies
The principal accounting policies describe the Company’s approach to
recognising and measuring transactions during the year and the position of the
Company at the year end.
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 preceding year, unless otherwise stated.
The financial statements have been prepared on a going concern basis as noted
below.
(a) Basis of Preparation
(i) Accounting Standards Applied
The financial statements have been prepared on a historical cost basis, except
for the measurement at fair value of investments and derivatives, and in
accordance with the applicable International Financial Reporting Standards
(IFRS) 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 the date the financial
statements were approved by the Board.
Where presentational guidance set out in the Statement of Recommended Practice
(SORP) ‘Financial Statements of Investment Trust Companies and Venture
Capital Trusts’, updated by the Association of Investment Companies in July
2022, is consistent with the requirements of IFRS, the Directors have prepared
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 the SORP.
(ii) Going Concern
As explained on page 17, the Company has an Annual Continuation Vote and the
Directors believe shareholders will vote for the Company to continue.
Accordingly, the Directors have determined that the financial statements
should and have been prepared on a going concern basis, which does not include
any adjustments that might arise from cessation of the Company. The Articles
of Association of the Company require that unless an ordinary resolution is
passed at or before the Annual General Meeting (‘AGM’) each year releasing
the Directors from the obligation to do so, the Directors shall convene a
general meeting within six months of the AGM at which a special resolution
would be proposed to wind up the Company. The directors plan on presenting an
ordinary resolution at the forthcoming AGM for which a 50% majority is needed
for a special resolution regarding continuance not to be held.
If a special resolution was held regarding a continuation vote a 75% majority
of the shareholders need to vote for the Company not to continue.
Last year nearly 100% of the votes registered at the AGM were in favour of
releasing the obligation to hold a continuation vote.
Based upon the current financial performance and financial position of the
Company including the net current liability position at the balance sheet date
along with the AGM vote outcome last year and ongoing dialogue with investors,
the Directors do not have any concerns regarding the outcome of the
forthcoming ordinary resolution and hence do not consider there to be a
material uncertainty over going concern.
If a continuation vote was held and was unsuccessful, the basis of preparation
would be switched at that date to a basis other than going concern and the NAV
impacting adjustments would not be material as the majority of investments are
Level 2, based on observable market prices and investments are classified as
held at fair value through profit or loss.
(iii) Adoption of New and Revised Standards
There were no new nor revised standards and interpretations that became
effective during the year having a significant impact on the amounts reported
in these financial statements.
(iv) Critical Accounting Estimates and Judgements
The preparation of the financial statements may require the Directors to make
estimations where uncertainty exists. It also requires the Directors to
exercise judgement in the process of applying the accounting policies. The
Directors, having taken into account the factors in note 2a(ii), judge it
appropriate to continue to use the going concern basis to prepare the
financial statements given the Annual Continuation Vote. In the current year,
the valuation and classification of certain securities as Level 3 involve a
higher degree of judgment or complexity, where assumptions and estimates are
significant to the company. Further details can be found in note 20 on page
70.
(b) Foreign Currency
(i) 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
stated capital and expenses are denominated, as well as a certain proportion
of its income, assets and liabilities.
(ii) Transactions and Balances
Transactions in foreign currency, whether of a revenue or capital nature, are
translated to sterling at the rate of exchange ruling on the date of such
transactions. Foreign currency assets and liabilities are translated to
sterling at the rates of exchange ruling at the balance sheet date. Foreign
exchange gains and losses relating to non investments are presented in the
statement of comprehensive income within ‘exchange differences’. Foreign
exchange gains and losses relating to the financial assets and liabilities
carried at fair value through profit or loss are presented in the statement of
comprehensive income within ’net gains on investments held at fair value
through profit or loss’. All profits and losses, whether realised or
unrealised, are recognised in the statement of comprehensive income and are
taken to capital reserve or revenue reserve, depending on whether the gain or
loss is capital or revenue in nature.
(c) Financial Instruments
(i) Recognition of Financial Assets and Financial Liabilities
Financial assets and financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the instrument. These are
offset if the Company has a legally enforceable right to set off the
recognised amounts and interests and intends to settle on a net basis.
(ii) Derecognition of Financial Assets
Financial assets are derecognised when the contractual rights to the cash
flows from the asset expire, or it transfers the right to receive the
contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset
are transferred. Any interest in the transferred financial asset that is
created or retained by the Company is recognised as an asset.
(iii) Derecognition of Financial Liabilities
Financial liabilities are derecognised when the Company’s obligations are
discharged, cancelled or expired.
(iv) Trade Date Accounting
Purchases and sales of financial assets are recognised on trade date, being
the date on which the Company commits to purchase or sell the assets.
(v) Classification of Financial Assets and Financial Liabilities
Financial assets
Investments are classified as held at fair value through profit or loss as the
investments are managed and their performance evaluated on a fair value basis
in accordance with the Company’s documented investment strategy and this is
also the basis on which information about investments is provided internally
to the Board.
Financial assets held at fair value through profit or loss are initially
recognised at fair value, which is taken to be their cost, with transaction
costs expensed in the statement of comprehensive income, and are subsequently
valued at fair value. Changes in fair value including the related foreign
exchange gains and losses are recognised in the statement of comprehensive
income under net gains and losses on investments.
For investments that are actively traded in organised financial markets, fair
value is determined by reference to stock exchange quoted bid prices at the
balance sheet date. For investments that are not actively traded or where
active stock exchange quoted bid prices are not available, fair value is
determined by reference to a variety of valuation techniques including broker
quotes and price modelling.
Financial Liabilities
Financial liabilities, including borrowings, are initially measured at fair
value, net of transaction costs and are subsequently measured at amortised
cost using the effective interest method, where applicable.
(d) Derivatives and Hedging
Derivative instruments are valued at fair value in the balance sheet. Hedge
accounting has not been adopted.
Forward currency contracts entered into for hedging purposes are valued at the
appropriate forward exchange rate ruling at the balance sheet date and any
profits and losses are recognised in the statement of comprehensive income and
taken to capital.
The treatment of the returns from credit default swaps depends upon the nature
of the transaction. Both motives and circumstances are used to determine
whether returns should be treated as capital or revenue. The capital element
is reflected within profit/(loss) on derivative instruments and the revenue or
expense element is reflected within income or other expenses within the
statement of comprehensive income.
(e) Cash and Cash Equivalents
Cash and cash equivalents may comprise cash (including short term deposits
which are readily convertible to a known amount of cash and are subject to an
insignificant risk of change in value) as well as cash equivalents, including
money market funds.
(f) Securities Sold Under Agreements to Repurchase (‘repo financing’)
The Company participates in repo financing arrangements in connection with its
investment portfolio. Under these arrangements, the Company sells fixed
interest securities but is contractually obliged to repurchase them at a fixed
price on a fixed date. Securities which are the subject of repo financing
arrangements are included in investments in the balance sheet at their fair
value and the associated liability is recognised at amortised cost, being the
capital amounts owing under the repo financing arrangements. The difference
between sale and repurchase prices for such transactions is reflected in the
statement of comprehensive income over the lives of the transactions, within
finance costs which is allocated 50% to capital and 50% to revenue (2023: 50%
capital; 50% revenue). This accounting has been adopted because the repurchase
price results in a lender’s return for the transferee as the Company has
retained substantially all the risks and rewards of ownership of the asset.
(g) Income Recognition
All income is recognised in the statement of comprehensive income. Interest
income arising from fixed income securities classified as fair value through
profit or loss is recognised in the statement of comprehensive income based on
the contractual interest rate. Interest income is recognised as it accrues,
using the coupon rate specified in the bond terms. Dividend income arises from
equity investments held and is recognised on the date investments are marked
‘ex-dividend’. Deposit interest is taken into account on an accruals
basis.
Special dividends are considered individually to ascertain the reason behind
the payment. This will determine whether they are treated as income or capital
in the income statement.
(h) Expenses and Finance Costs
All expenses are accounted for on an accruals basis and are recognised in the
statement of comprehensive income. Investment management fees and finance
costs are allocated 50% to capital and 50% to revenue (2023: 50% capital; 50%
revenue) in accordance with the Board’s expected long-term split of returns,
in the form of capital gains and income respectively, from the investment
portfolio. Except for custodian dealing costs, all other expenses are charged
through revenue.
(i) Taxation
Overseas interest and dividends are shown gross of withholding tax and the
corresponding irrecoverable tax is shown as a charge in the statement of
comprehensive income.
(j) Dividends payable to shareholders
Interim dividends are recognised in the period in which they are paid and are
dealt with in the statement of changes in equity.
(k) Stated Capital
Stated Capital represents the total number of shares in issue, including net
issue proceeds resulting from share issuances and if appropriate, payments as
a result of share buybacks. Stated Capital can be used for distributions under
the Companies (Jersey) Law 1991.
Because the criteria in paragraphs 16C and 16D of IAS 32 Financial
Instruments: Presentation, have been met, the stated capital of the Company is
classified as equity even though there is a continuation vote.
3. Segmental Reporting
No segmental reporting is provided as the Directors are of the opinion that
the Company is engaged in a single segment of business of investing in debt
and, to a significantly lesser extent, equity securities.
4. Income
This note shows the income generated from the portfolio (investment assets) of
the Company and income received from any other source.
2024 2023
£’000 £’000
Income from investments
UK investment income – interest 12,412 9,259
UK dividends 436 189
Overseas investment income – interest 13,067 14,700
Overseas dividends 182 94
26,097 24,242
Other income
Deposit interest 212 112
Other income 61 70
273 182
Total income 26,370 24,424
5. Investment Management Fee
This note shows the fees paid to the Manager, which are calculated quarterly
on the basis of the value of the assets being managed.
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 1,090 1,090 2,180 941 941 1,882
At 31 December 2024, £562,000 (2023: £495,000) was accrued in respect of the
investment management fee.
The investment management fees and finance costs are allocated 50% to capital
and 50% to revenue (2023: 50% to capital and 50% to revenue).
The management fee is payable quarterly in arrears and is equal to 0.1625% of
the value of the Company’s total assets under management less current
liabilities at the end of the relevant quarter.
6. Other Expenses
The other expenses of the Company are presented below; those paid to the
Directors and the auditor are separately identified.
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Directors’ fees(i) 177 – 177 173 – 173
Auditors’ fees(ii):
– for audit of the Company’s
annual financial statements 57 – 57 54 – 54
Other expenses(iii) 622 40 662 575 3 578
856 40 896 802 3 805
(i) The maximum Directors’ fees authorised by the Articles of Association
are £250,000 (2023: £250,000) per annum. The Directors’ Remuneration
Report on page 44, provides further information on Directors’ fees.
(ii) Auditor’s fees include out of pocket expenses.
(iii) Other expenses include:
• custodian transaction charges of £3,600 (2023: £2,700). These are
charged to capital.
• legal and administrative fees of £36,000 related to the share placing
(2023: nil). These were charged to capital.
• amounts due to JTC Fund Solutions (Jersey) Limited who acted as
Administrator and Company Secretary to the Company under an agreement starting
from 10 December 2019. The fee paid for company secretarial and administration
services in the current year was £139,000 (2023: £128,000).
• A fee of £103,000 was paid to the Manager for marketing services on
behalf of the Company (2023: £133,000).
• A premium of £38,000 was paid during the year on credit default swaps
(2023: nil).
7. Finance Costs
Finance costs arise on any borrowing facilities the Company has and comprise
commitment fees on any unused facility as well as interest when the facility
is used.
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest due under repo financing 826 826 1,652 980 980 1,960
Overdraft interest – – – 4 4 8
826 826 1,652 984 984 1,968
The Company has repo financing arrangements in place which were used during
the year. For repos that are denominated in currencies where the interest rate
is negative, the interest is receivable and has been netted against repo
interest payable within finance costs, as they relate to borrowing costs.
8 Taxation
As a Jersey investment company no tax is payable on capital gains and, as the
Company principally invests in assets which do not result in a revenue tax,
the only overseas tax arises on assets domiciled in countries with which
Jersey has no double-taxation treaty.
2024 2023
£’000 £’000
Overseas taxation 61 –
The Company is subject to Jersey income tax at the rate of 0% (2023: 0%). The
overseas tax charge consists of irrecoverable withholding tax suffered.
9. Return per Ordinary Share
Return per ordinary share is the amount of gain generated for the financial
year divided by the weighted average number of ordinary shares in issue.
The basic revenue, capital and total return per ordinary share is based on
each of the returns on ordinary activities after taxation and on 194,765,138
(2023: 177,389,718) ordinary shares, being the weighted average number of
ordinary shares in issue throughout the year.
10. Dividends on Ordinary Shares
Dividends are usually paid from the income less expenses. Dividends are paid
as an amount per ordinary share held.
The fourth interim dividend shown below 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. The fourth interim dividend was paid
after the balance sheet date.
2024 2023
Pence £’000 Pence £’000
Dividends paid and recognised in the year:
Fourth interim 2.8750 5,212 2.8750 5,008
First interim 2.8750 5,554 2.8750 5,087
Second interim 2.8750 5,625 2.8750 5,112
Third interim 2.8750 5,783 2.8750 5,145
11.5000 22,174 11.5000 20,352
Dividends paid in the year have been charged to revenue except for £514,000
(2023: £341,000) which was charged to stated capital. This amount is
equivalent to the income accrued on the new shares issued in the year (see
note 16).
Set out below are the dividends that have been declared in respect of the
financial years ended 31 December:
2024 2023
Pence £’000 Pence £’000
Dividends payable in respect of the year:
First interim 2.8750 5,554 2.8750 5,087
Second interim 2.8750 5,625 2.8750 5,112
Third interim 2.8750 5,783 2.8750 5,145
Fourth interim 3.0625 6,206 2.8750 5,212
11.6875 23,168 11.5000 20,556
The fourth interim dividend for 2024 was paid on 20 February 2025 to
shareholders on the register on 17 January 2025.
11. Investments Held at Fair Value Through Profit and Loss
The portfolio is principally made up of investments which are listed and
traded on regulated stock exchanges. Profits and losses are either:
• realised, usually arising when investments are sold; or
• unrealised, being the difference from cost of those investments still
held at the year end.
(a) Analysis of investment profits in the year
2024 2023
£’000 £’000
Opening book cost 352,292 349,196
Opening investment holding gains (16,759) (31,326)
Opening valuation 335,533 317,870
Movements in year:
Purchases at cost 139,225 126,310
Sales – proceeds (99,888) (115,503)
Net gains on investments in the year 2,093 6,856
Closing valuation 376,963 335,533
Closing book cost 386,556 352,292
Closing investment unrealised loss (9,593) (16,759)
Closing valuation 376,963 335,533
The Company received £99,888,000 (2023: £115,503,000) from investments sold
in the year. The book cost of these investments when they were purchased was
£104,961,000 (2023: £123,927,000) realising a loss of £5,073,000 (2023:
loss of £8,424,000). These investments have been revalued over time and until
they were sold any unrealised gains/losses were included in the fair value of
the investments.
(b) Registration of investments
The investments of the Company are registered in the name of the Company or
in the name of nominees and held to the account of the Company.
(c) Securities sold under agreements to repurchase
Included in the valuation above are securities under agreements to
repurchase which had a market value of £51,461,000 (2023: £56,297,000).
Included within current liabilities are Securities sold under agreements to
repurchase £45,127,000 (2023 £48,068,000), further details are shown in note
15.
12. Other Receivables
Other receivables are amounts which are due to the Company, such as income
which has been earned (accrued) but not yet received and monies due from
brokers for investments sold.
2024 2023
£’000 £’000
Amounts due from brokers – 38
Margin held at brokers 2,783 2,129
Proceeds due from issue of new shares 260 171
Income tax recoverable – 3
Prepayments and accrued income 6,896 6,211
9,939 8,552
13. Derivative Financial Instruments
Derivative financial instruments are financial instruments that derive their
value from the performance of another item, such as an asset or exchange
rates. They are used to manage the risk associated with fluctuations in the
value of certain assets and liabilities. The Company can use derivatives to
manage its exposure to fluctuations in foreign exchange rates.
Derivative financial instruments comprise forward currency contracts and
credit default swaps.
2024 2023
Net derivative financial instruments £’000 £’000
Forward currency contracts:
Forward currency contracts – receivable 415 1,589
Forward currency contracts – payable (2,321) (199)
(1,906) 1,390
2024 2023
£’000 £’000
Credit default swaps (‘CDS’):
Opening CDS assets held at fair value through profit or loss – –
Opening CDS liabilities held at fair value through profit or loss – –
Opening net CDS assets held at fair value as shown in balance sheet – –
Movements in year:
Purchases at cost (1,356) –
CDS holding gains 156 –
Less: Net income arising on derivatives (23) –
Closing net CDS liabilities held at fair value shown in balance sheet (1,223) –
Net gains on derivative instruments – forward currency contracts and CDS
consists of:
2024 2023
£’000 £’000
Movement in derivative holding gains – forward currency contracts (3,296) (50)
Movement in derivative holding gains – CDS 156 –
Net realised gains on derivative instruments – forward currency contracts 4,083 3,247
Net gains on derivative instruments – forward currency contracts and CDS 943 3,197
14. Other Payables
Other payables are amounts which must be paid by the Company, and include
amounts owed to suppliers, such as the Manager and auditor, and any amounts
due to brokers for the purchase of investments.
2024 2023
£’000 £’000
Amounts payable relating to issue of new shares 1 1
Accruals 999 915
1,000 916
15. Securities sold under agreements to repurchase
2024 2023
£’000 £’000
Securities sold under agreements to repurchase 45,127 48,068
During the year, the Company entered into repo financing arrangements whereby
securities are sold under agreements to repurchase. Included within
Investments Held at Fair Value Through Profit and Loss (note 11) are
securities under agreements to repurchase which had a market value of
£51,461,000 (2023: £56,297,000). Further details are shown in note 2(f) and
note 19.3.
16. Stated Capital
The stated capital represents the total number of shares in issue. Stated
capital can be used for distributions under Jersey Law.
2024 2023
Number £’000 Number £’000
Allotted ordinary shares of no par value:
Brought forward 180,702,596 316,793 173,302,596 305,062
Net issue proceeds 21,676,727 36,762 7,400,000 12,072
Dividends paid from stated capital – (514) – (341)
202,379,323 353,041 180,702,596 316,793
At 31 December 2024, the Company’s stated capital consisted of 202,379,323
ordinary shares of no par value, allotted and fully paid.
At a general meeting of the Company every member has one vote on a show of
hands and on a poll one vote for each share held. The notice of general
meeting will specify deadlines for exercising voting rights either by proxy or
in person in relation to resolutions to be passed at the meeting.
The Directors may restrict voting powers where shareholders fail to provide
information with respect to interests in voting rights when so requested, may
refuse to register any transfer of a share in favour of more than four persons
jointly and can require certain US holders of shares to transfer their shares
compulsorily.
Save for the foregoing, there are no restrictions concerning the transfer of
securities in the Company; no special rights with regard to control attached
to securities; no agreements between holders of securities regarding their
transfer known to the Company; and no agreements which the Company is party to
that might affect its control following a successful takeover bid.
For the year to 31 December 2024, 21,676,727 (2023: 7,400,000) new ordinary
shares were issued to the Company’s corporate broker, Winterflood Securities
Limited, for onward transmission to their clients. These shares were issued in
tranches of various quantities throughout the year to satisfy secondary market
demand. The gross issue proceeds were £36,946,000 (2023: £12,225,000), at an
average price of 170.44p (2023: 165.21p), and the net proceeds after issue
costs were £36,762,000 (2023: £12,072,000). The net proceeds included an
aggregate amount of £18,000 (2023: £92,000) which arose from the income
accrued component of the net asset value at the date of issue of the new
shares.
Subsequent to the year end 1,975,000 ordinary shares were issued at an
average price of 172.87p.
Because the criteria in paragraphs 16C and 16D of IAS 32 Financial
Instruments: Presentation, have been met, the stated capital of the Company is
classified as equity even though there is a continuation vote.
17. Reserves
This note explains the different reserves attributable to shareholders. The
aggregate of the reserves and stated capital (see previous note) make up total
shareholders’ funds.
The capital reserve includes unrealised investment holding profits and losses,
being the difference between cost and market value at the balance sheet date,
as well as realised profits and losses on disposal of investments. In
addition, costs allocated to capital are recognised in the capital reserve.
The revenue reserve shows the net revenue after payment of any dividend from
the reserve. Both the capital and revenue reserves are distributable.
18. Net Asset Value per Ordinary Share
The Company’s total net assets (total assets less total liabilities) are
often termed shareholders’ funds and are converted into net asset value per
ordinary share by dividing by the number of shares in issue.
The net asset value per share and the net asset values attributable at the
year end were as follows:
Net asset value Net assets
per ordinary share attributable
2024 2023 2024 2023
Pence Pence £’000 £’000
Ordinary shares 170.87 168.58 345,799 304,629
Net asset value per ordinary share is based on net assets at the year end and
on 202,379,323 (2023: 180,702,596) ordinary shares, being the number of
ordinary shares in issue (excluding treasury) at the year end.
19. Risk Management: Financial Assets and Liabilities
Financial instruments comprise the Company’s investment portfolio and
derivative financial instruments (for the latter see note 13) as well as any
cash, borrowings (i.e. securities sold under agreements to repurchase
otherwise known as ‘repo financing’), other receivables and other
payables. The following note explains the risks that affect the Company’s
financial instruments and looks at the Company’s exposure to these various
risks.
Risk Management Policies and Procedures
The Business Review details the Company’s approach to investment management
risks on page 14 and the accounting policies in note 2 explain the Company’s
valuation basis for investments and currency.
As an investment company, the Company invests in loan stocks, corporate bonds,
government stocks, preference shares and equities which are held for the
long-term in order to achieve the Company’s Investment Objective in
accordance with its Investment Policy. In pursuing these, the Company is
exposed to a variety of risks that could result in either a reduction in the
Company’s net assets or a reduction in the profits available for payment as
dividends.
The Company’s principal financial instruments at risk comprise its
investment portfolio. Other financial instruments at risk include cash and
cash equivalents, borrowings (including repo financing), other receivables and
other payables that arise directly from the Company’s operations.
The Company may enter into derivative transactions, including credit default
swaps, for efficient portfolio management. Derivative instruments can be
highly volatile and expose investors to a high risk of loss. Where used to
hedge risk there is a risk that the return on a derivative does not exactly
correlate to the returns on the underlying investment, obligation or market
sector being hedged against. If there is an imperfect correlation, the Company
may be exposed to greater loss than if the derivative had not been entered
into. During the year the only derivatives entered into were forward currency
contracts and credit default swaps. As at the year end, credit default swaps
with a market value of £(1,223,000) were held by the Company (2023: none).
These risks and the Directors’ approach to managing them are set out below,
and have not changed from those applied in the comparative year.
Risk management is an integral part of the investment management process. The
Manager controls risk by ensuring that the Company’s portfolio is
appropriately diversified and the portfolio managers actively monitor both the
ratings and liquidity of the fixed-interest securities taking into account the
Company’s financing requirements. In-depth and continual analysis of market
and security fundamentals give the portfolio managers the best possible
understanding of the risks associated with a particular security. The
portfolio managers assess the exposure to market risk when making each
investment decision, and monitor the overall level of market risk on the whole
of the portfolio on an ongoing basis.
High-yield fixed-interest securities are subject to a variety of risks,
including credit risk (note 19.3).
The day to day management of the investment activities, borrowings and hedging
of the Company has been delegated to the Manager, and is the responsibility of
the portfolio managers to whom the Board has given discretion to operate
within set guidelines. Any proposed variation outside those guidelines is
referred to the Board and the guidelines themselves are reviewed at every
board meeting.
19.1 Market Risk
Market risk arises from changes in the fair value or future cash flows of a
financial instrument. Market risk comprises three types of risk: currency risk
(note 19.1.1), interest rate risk (note 19.1.2) and other price risk (note
19.1.3).
19.1.1 Currency Risk
The Company has assets, liabilities and income which are denominated in
currencies other than sterling and movements in exchange rates will affect the
sterling value of those items.
Management of the Currency Risk
The Board meets at least quarterly to assess risk and review investment
performance. The portfolio managers monitor the Company’s exposure to
foreign currencies on a daily basis and is reviewed by Directors at each
Board meeting. The Company may use forward currency contracts to mitigate
currency risk. In addition, non-sterling credit default swaps will either
mitigate or increase currency risk depending on whether the Company has sold
or bought the credit default swap as well as exchange movements. Repo
financing is matched to the currency of the underlying assets, which minimises
currency risk on the movement of exchange rates affecting the underlying
investments. Non-sterling investments that are not pledged under repo
financing can be hedged using forward currency contracts. All borrowings and
derivative contracts are limited to currencies and amounts commensurate with
asset exposure to those currencies.
Income denominated in foreign currencies is converted to sterling on receipt.
The Company does not use financial instruments to mitigate the currency
exposure in the period between the time that income is included in the
financial statements and its receipt.
Currency Exposure
The following table shows the fair values of the Company’s monetary items
that have foreign currency exposure at 31 December. Where the Company’s
investments (which are not monetary items) are priced in a foreign currency,
they have been included separately in the analysis to show the overall level
of exposure.
US
Euro Dollar
£’000 £’000
31 December 2024
Investments at fair value through profit or loss that are monetary items
(fixed and floating interest) 90,634 82,395
Forward currency contracts (40,357) (78,983)
Other receivables (due from brokers and dividends) 3,606 1,406
Cash and cash equivalents 5,623 1,147
Derivative liabilities held at fair value through profit or loss (1,223) –
Other payables (due to brokers and accruals) (243) –
Securities sold under agreement to repurchase (45,127) –
Foreign currency exposure on net monetary items 12,913 5,965
Investments at fair value through profit or loss (preference shares and equities) 2,795 1,678
Total net foreign currency 15,708 7,643
US
Euro Dollar
£’000 £’000
31 December 2023
Investments at fair value through profit or loss that are monetary items
(fixed and floating interest) 99,776 66,032
Forward currency contracts (38,317) (52,111)
Other receivables (due from brokers and dividends) 2,291 1,035
Cash and cash equivalents 2,882 2,360
Other payables (due to brokers and accruals) (284) –
Securities sold under agreement to repurchase (48,068) –
Foreign currency exposure on net monetary items 18,280 17,316
Total net foreign currency 18,280 17,316
The above may not be representative of the exposure to risk during the year
reported because the levels of monetary foreign currency exposure may change
significantly throughout the year.
Currency Sensitivity
The effect on the Statement of Comprehensive Income and the net asset value
that changes in exchange rates have on the Company’s financial assets and
liabilities is based on the following currencies. These changes have been
calculated by reference to the volatility of exchange rates during the period
using the standard deviation of currency fluctuations against the mean.
2024 2023
£/Euro ±1.2% ±1.2%
£/US Dollar ±1.7% ±2.2%
The following sensitivity analysis is based on the Company’s monetary
foreign currency financial instruments held at the balance sheet date, taking
account of any forward foreign exchange contracts that offset the effects of
changes in currency exchange rates, and the income receivable in foreign
currency in the year.
If sterling had strengthened by the changes in exchange rates shown above,
this would have had the following effect:
US
Euro Dollar
£’000 £’000
2024
Effect on Statement of Comprehensive Income – profit/(loss) after taxation
Revenue loss (89) (103)
Capital loss (140) (104)
Total loss after taxation for the year (229) (207)
Effect on net asset value –0.1% –0.1%
US
Euro Dollar
£’000 £’000
2023
Effect on Statement of Comprehensive Income – profit/(loss) after taxation
Revenue loss (87) (118)
Capital loss (195) (359)
Total loss after taxation for the year (282) (477)
Effect on net asset value –0.1% –0.2%
If sterling had weakened by the same amounts, the effect would have been the
converse.
In the opinion of the Directors, the above sensitivity analysis is not
representative of the year as a whole, since the level of exposure changes
frequently as part of the currency risk management process of the Company.
19.1.2 Interest Rate Risk
The Company is exposed to interest rate risk in a number of ways. Movements in
interest rates may affect the fair value of fixed-interest rate securities,
income receivable on cash deposits and floating rate securities, and interest
payable on variable rate borrowings, including repo financing. Interest rate
risk is related above all to long-term financial instruments.
Whilst a significant proportion of the portfolio at both current and prior
financial year ends contains securities designated as floating rate, many of
these securities include a fixed interest rate period resulting in a more
predictable income stream than their technical designation would suggest.
Management of Interest Rate Risk
The possible effects on fair value and cash flows that could arise as a result
of changes in interest rates are taken into account as part of the portfolio
management and borrowings processes of the Manager. The Board reviews on a
regular basis the investment portfolio and borrowings. This encompasses the
valuation of fixed-interest and floating rate securities.
When the Company has cash balances, they are held in variable rate bank
accounts yielding rates of interest dependent on the base rate of the
Custodian, the Bank of New York Mellon (International) Limited. Holdings in
Invesco Liquidity Funds plc – Sterling are subject to interest rate changes.
The Company has available repo financing arrangements it can use to finance
investment activity, details of which are shown in note 7 and 15. The Company
uses these at levels approved and monitored by the Board.
Interest Rate Exposure
The following table shows the Company’s exposure to interest rate risk at
the balance sheet date arising from its monetary financial assets and
liabilities.
Within More than
one year one year Total
£’000 £’000 £’000
2024
Exposure to floating interest rates:
Investments held at fair value through profit or loss – 164,673 164,673
Cash and cash equivalents(i) 8,153 – 8,153
Margin held at brokers (including collateral pledged on CDS) 2,783 – 2,783
10,936 164,673 175,609
Exposure to fixed interest rates:
Investments held at fair value through profit or loss 1,509 199,749 201,258
Derivatives held at fair value through profit or loss – (1,223) (1,223)
Securities sold under agreements to repurchase (45,127) – (45,127)
(43,618) 198,526 154,908
Net exposure to interest rates (32,682) 363,199 330,517
Within More than
one year one year Total
£’000 £’000 £’000
2023
Exposure to floating interest rates:
Investments held at fair value through profit or loss – 130,215 130,215
Cash and cash equivalents(i) 8,138 – 8,138
Margin held at brokers (aka collateral pledged on
futures contracts) 2,129 – 2,129
10,267 130,215 140,482
Exposure to fixed interest rates:
Investments held at fair value through profit or loss 1,124 201,283 202,407
Securities sold under agreements to repurchase (48,068) – (48,068)
(46,944) 201,283 154,339
Net exposure to interest rates (36,677) 331,498 294,821
(i) Includes £250,000 (2023: £2,100,000) held in Invesco Liquidity Fund plc
- Sterling.
The nominal interest rates on the investments at fair value through profit or
loss are shown in the portfolio list on pages 25 to 31. The weighted average
effective interest rate on these investments is 7.6% (2023: 7.0%). The
weighted average effective interest rate on cash and cash equivalents is 4.07%
(2023: 4.08%).
Interest Rate Sensitivity
The following table illustrates the sensitivity of the profit or loss after
taxation for the year to a 3.25% (2023: 3.25%) increase in interest rates in
regard to the Company’s financial assets and financial liabilities. As
future changes cannot be estimated with any degree of certainty, the
sensitivity analysis is based on the Company’s financial instruments held at
the balance sheet date, with all other variables held constant.
2024 2023
£’000 £’000
Effect on Statement of Comprehensive Income – profit after taxation
Revenue profit 355 334
Capital loss (47,570) (41,080)
Total loss after taxation for the year (47,215) (40,746)
Effect on NAV per ordinary share (23.3p) (22.5p)
If interest rates had decreased by 3.25% (2023: 3.25%), this would have had an
equal and opposite effect.
The above exposure and sensitivity analysis are not representative of the year
as a whole, since the level of exposure changes frequently as borrowings,
which are predominantly from repo financing arrangements, can vary throughout
the year.
19.1.3 Other Price Risk
Other price risk includes changes in market prices, other than those arising
from currency risk or interest rate risk, which may affect the value of the
investment portfolio, whether by factors specific to an individual investment
or its issuer, or by factors affecting the wider market.
Management of Other Price Risk
It is the portfolio managers’ responsibility to manage the portfolio and
borrowings in accordance with the investment objective and policy, and in
accordance with the investment policy guidelines set by the Board. The Board
manages the market price risks inherent in the investment portfolio by meeting
regularly to monitor on a formal basis compliance with these. The Board also
reviews investment performance. Because the Company’s portfolio is the
result of the portfolio managers’ investment process, performance may not
closely correlate with the markets in which the Company invests.
The Company’s exposure to other changes in market prices at 31 December on
its investments is shown in the fair value hierarchy table on pages 70 and 71.
Concentration of Exposure to Other Price Risks
The Company’s investment portfolio is not concentrated in any single country
of domicile, however, it is recognised that an investment’s country of
domicile or listing does not necessarily equate to its exposure to the
economic conditions in that country.
Other Price Risk Sensitivity
Excluding fixed interest securities and convertibles, at the year end the
Company held other investments of £11,032,000 (2023: £2,912,000). The effect
of a 10% increase or decrease in the fair values of these investments
(including any exposure through derivatives) on the profit after taxation for
the year is £1,103,000 (2023: £291,000). This level of change is considered
to be reasonably possible based on the observation of market conditions during
the financial year.
19.2 Liquidity Risk
This is the risk that the Company may encounter difficulty in meeting its
obligations associated with financial liabilities i.e. when realising assets
or raising/replacing repo financing to meet financial commitments. A lack of
liquidity in the portfolio may make it difficult for the Company to realise
assets at or near their purported value in the event of a forced sale.
Management of Liquidity Risk
Liquidity risk is not viewed by the Directors as a significant risk because
the majority of the Company’s assets comprise readily realisable securities,
although a lack of liquidity in non-investment grade securities may make it
difficult to rebalance the Company’s investment portfolio as and when the
portfolio managers believe it would be advantageous to do so. On a daily basis
the portfolio managers ascertain the Company’s cash and borrowing
requirements by reviewing future cash flows arising from purchases and sales
of investments, interest and dividend receipts, expenses and dividend
payments, and available financing (including repo financing).
Liquidity Risk Exposure
The contractual maturities of the financial liabilities at 31 December, based
on the earliest date on which payment can be required, was as follows:
2024 2023
Less than More Less than More
three than one three than one
months year Total months year Total
£’000 £’000 £’000 £’000 £’000 £’000
Other payables (note 14)
Accruals 1,000 – 1,000 916 – 916
Derivative financial instruments – payable
(note 13) 2,321 1,223 3,544 199 – 199
Securities sold under agreements to
repurchase (note 15) 45,127 – 45,127 48,068 – 48,068
48,448 1,223 49,671 49,183 – 49,183
19.3 Credit Risk
Credit risk is the risk that the failure of the counterparty to a transaction
to discharge its obligation under that transaction could result in a loss to
the Company. The Company’s principal credit risk is the risk of default on
the non-investment grade debt. The Company’s other main credit risk arises
from the repo financing arrangements whereby, if a counterparty failed to sell
the required assets to the Company on the repurchase date, the Company would
be left with the claim against the defaulting counterparty for the stock and,
if applicable, any margin held by the counterparty and not returned.
At the year end 64.5% (2023: 70.4%) of the Company’s portfolio consisted of
non-investment grade securities. To the extent that the Company invests in
non-investment grade securities, the Company may realise a higher current
yield than the yield offered by investment grade securities. On the other
hand, investments in such securities involve a greater volatility of price and
a greater risk of default by the issuers of such securities, with consequent
loss of interest payments and principal. Non-investment grade securities are
likely to be subject to greater uncertainties from exposure to adverse
conditions and will be speculative with respect to an issuer’s capacity to
meet interest payments and repay principal in accordance with its obligations.
Investment grade and non-investment grade securities totalled 91.2% (2023:
95.8%) of the portfolio at the year end. Adverse changes in the financial
position of an issuer of such high-yield fixed-interest securities or in
general economic conditions may impair the ability of the issuer to make
payments of principal and/or interest or may cause the liquidation or
insolvency of an issuer.
The portfolio may be adversely affected if the Company’s custodian suffers
insolvency or other financial difficulties. The appointment of a depositary
has substantially lessened this risk. The Board reviews the custodian’s
annual controls report and the Manager’s management of the relationship with
the custodian.
Management of and Exposure to Credit Risk
Almost all of the Company’s assets are subject to credit risk. Where the
portfolio managers make an investment in a bond, corporate or otherwise, the
credit rating of the issuer is also considered when assessing the risk of
defaults. Investments in bonds are across a variety of industrial sectors and
geographical markets to avoid concentration of credit risk. Counterparties for
derivative transactions are also a source of credit risk. Transactions
involving derivatives are entered into only with banks whose credit ratings
are taken into account to minimise default risk. The credit ratings of the
derivatives counterparties range from Aa3 through to Baa1. In addition, the
Company may use credit default swaps to offset the credit risk of the
portfolio. At the year end, credit default swaps with a market value of
£(1,223,000) were held by the Company (2023: none).
Details of the Company’s investments, including their credit ratings, are
shown below. Credit risk for transactions involving derivatives and equity
investments is minimised as the Company only uses approved counterparties.
2024 2023
% of Cumulative % of Cumulative
Rating Portfolio Total % Portfolio Total %
Investment Grade:
AA+ 0.2 0.2 0.2 0.2
AA 2.6 2.8 1.8 2.0
A+ 0.2 3.0 0.7 2.7
A 0.1 3.1 – 2.7
A– – 3.1 0.8 3.5
BBB+ 0.6 3.7 1.8 5.3
BBB 19.0 22.7 14.7 20.0
BBB– 4.0 26.7 5.4 25.4
Non-investment Grade:
BB+ 7.5 34.2 8.1 33.5
BB 15.4 49.6 13.1 46.6
BB– 13.6 63.2 17.0 63.6
B+ 5.5 68.7 8.5 72.1
B 14.1 82.8 12.1 84.2
B– 4.9 87.7 6.7 90.9
CCC+ 0.7 88.4 2.1 93.0
CCC 0.7 89.1 1.7 94.7
CC 2.1 91.2 – 94.7
D – 91.2 1.1 95.8
NR (including equity and CDS) 8.8 100.0 4.2 100.0
100.0 100.0
Summary of Analysis
Investment Grade 26.7 25.4
Non-investment Grade 64.5 70.4
NR (including equity) 8.8 4.2
Total 100.0 100.0
The Company manages the credit risk inherent in repo financing by only dealing
with good quality counterparties whose credit-standing is reviewed
periodically by the Manager. There is a maximum limit allowed with any one
counterparty, and the repo entered into must have a maturity tenor of three
months or less. The Company has exposure to credit risk on securities pledged
under repo financing held, with 3 counterparties, as follows (2023: 3
counterparties):
2024 2023
Market Market
value of Net value of Net
Amounts securities credit Amounts securities credit
borrowed pledged exposure borrowed pledged exposure
under under to under under to
repo repo counter repo repo counter
financing financing party financing financing party
Counterparty Rating Location £’000 £’000 £’000 £’000 £’000 £’000
BNP UK A1/A+ UK 35,991 40,440 4,449 28,891 32,773 3,882
Morgan Stanley A1/A- UK 4,852 5,977 1,125 13,369 16,263 2,894
HSBC A1/A+ UK 4,284 5,044 760 5,808 7,261 1,453
45,127 51,461 6,334 48,068 56,297 8,229
Net credit exposure as % of net assets 1.8 2.7
2024 Receivable/ Cash collateral
Counterparty (payable) for pledged/
country of derivatives (received)
Name of counterparty incorporation £’000 £’000
Bank Of America United States (1,223) 2,021
Cash balances are held with approved deposit takers only and are limited to a
maximum of 4% of the Company’s net asset value with any one deposit taker.
Balances held with Invesco Liquidity Funds plc, a triple-A rated money market
fund, are limited to a maximum of 10% of the Company’s net asset value. At
the balance sheet date the Company had £7.90 million (2023: £6.04 million)
held at the custodian and £0.25 million held in Invesco Liquidity Funds plc
– Sterling (2023: £2.10 million).
There are no financial assets that are past due or impaired at the year end
(2023: none).
Fair Values of Financial Assets and Financial Liabilities
Financial assets are either carried in the balance sheet at their fair value
(investments and derivatives), or the balance sheet amount is a reasonable
approximation of fair value (due from brokers, dividends receivable, accrued
income, due to brokers, accruals and cash).
Financial liabilities are carried at amortised cost except for derivatives,
which as stated above are carried at fair value.
20. Classification Under Fair Value Hierarchy
The valuation techniques used by the Company are explained in the accounting
policies note 2(c). The table that follows sets out the fair value of the
financial instruments. The three levels set out in IFRS 7 hierarchy follow:
Level 1 – The unadjusted quoted price in an active market for identical
assets or liabilities that the entity can access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or liability,
either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
Categorisation within the hierarchy is determined on the basis of the lowest
level input that is significant to the fair value measurement of each relevant
asset/liability.
Normally investments would be valued using stock market active prices, with
investments disclosed as Level 1 and this is the case for the quoted equity
investments that the Company holds. However, the majority of the Company’s
investments are non-equity investments. Evaluated prices from a third party
pricing vendor are used to price these securities, together with a price
comparison made to secondary and tertiary evaluated third party sources.
Evaluated prices are in turn based on a variety of sources including broker
quotes and benchmarks. As a result, the Company’s non-equity investments
have been shown as Level 2 – recognising that the fair values of these
investments are not as visible as quoted equity investments and their higher
inherent pricing risk. However, this does not mean that the fair values shown
in the portfolio valuation are not achievable at point of sale.
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
2024
Financial assets designated at fair value
through profit or loss:
Quoted Investments:
– Fixed interest securities (1) – 289,607 969 290,576
– Convertibles – 64,897 – 64,897
– Government – 10,458 – 10,458
– Preference 4,513 – 3,661 8,174
– Equities 63 5 2,790 2,858
Derivative financial instruments:
– Currency hedges – (1,906) – (1,906)
– Credit default swaps – (1,223) – (1,223)
Total for financial assets 4,576 361,838 7,420 373,834
A reconciliation of the fair value of Level 3 is set out below.
2024
£’000
Opening fair value –
Securities resulting from restructure 6,913
Purchases at cost 3,694
Movement in holding gains / (losses) (3,187)
Closing fair value of Level 3 7,420
(1) Fixed interest securities include both fixed and floating rate
securities. The directors consider the floating rate securities held by the
Company to be fixed in nature due to their characteristics, including a
predictable income stream.
Level 3 investments are investments for which inputs are unobservable (i.e.
for which market data is unavailable). The Level 3 investments in the
portfolio and their respective values at the year end were Haleon 9.5%
Preference £3,661,000, Frigoglass 11% PIK 27 Mar 2026 £969,000, Codere A1
Shares £2,132,000 and Codere A2 Shares £658,000 (2023: none). Haleon 9.5%
Preference price is based on a single private indicative broker quote with no
publicly observable market price available, therefore as the price is
unobservable this investment has been classified as Level 3. Frigoglass 11%
PIK 27 Mar 2026 is valued at issue price with reference to other comparable
Frigoglass traded debt securities. Judgement involved assessing the seniority
of this security (regarded as “Super Senior” in relation to the other
Frigoglass traded debt securities) which would be a key consideration should
the company fail, with a resultant higher price level compared to comparable
Frigoglass traded debt securities, further justified by its short-term
maturity. The Codere A1 and A2 investments have been classified as fair value
Level 3, due to an initial recognition price of €23 being used as the fair
valuation. The Codere securities, which were taken on as part of a second
restructuring where the Portfolio Manager agreed to participate in short-term
financing, are priced based on private indicative broker quotes as no publicly
observable market price is currently available for these securities. Given the
restricted nature of these quotes, being generally unobservable, that trading
may not be visible due to trading taking place on the OTC market, a cautious
judgement was applied, taking the lowest bid quote available.
Any non-actively traded investments are reviewed relative to appropriate
supporting evidence. The Board reviews detailed portfolio valuations on a
regular basis throughout the year and receives confirmation from the Manager
that the pricing basis is appropriate and in line with relevant accounting
standards as adopted by the Company.
The categorisation of an investment within the hierarchy is based upon the
pricing transparency of the investment and does not necessarily correspond to
the Directors' perceived risk of that investment.
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
2023
Financial assets designated at fair value
through profit or loss:
Quoted Investments:
– Fixed interest securities(1) – 281,481 – 281,481
– Convertibles – 44,200 – 44,200
– Government – 6,941 – 6,941
– Preference 2,769 – – 2,769
– Equities 142 – – 142
Derivative financial instruments:
– Currency hedges – 1,390 – 1,390
Total for financial assets 2,911 334,012 – 336,923
A reconciliation of the fair value of Level 3 is set out below.
2023
£’000
Opening fair value 1,165
Sales – proceeds (1,159)
Sales – net realised gains 19
Unrealised loss (due to foreign exchange movement) (25)
Closing fair value of Level 3 –
(1) Fixed interest securities include both fixed and floating rate
securities. The directors consider the floating rate securities held by the
Company to be fixed in nature due to their characteristics, including a
predictable income stream.
21. Capital Management
The Company’s capital, or equity, is represented by its net assets which are
managed to achieve the Company’s investment objective set out on page 12.
The main risks to the Company’s investments are shown in the Business Review
under the ‘Principal and Emerging Risks and Uncertainties’ section on
pages 15 and 16. These also explain that the Company is able to gear and that
gearing will amplify the effect on equity of changes in the value of the
portfolio.
The Board can also manage the capital structure directly since it has taken
the powers, which it is seeking to renew, to issue and buy-back shares and it
also determines dividend payments.
The Board regularly monitors the level of borrowing used by the Company and
has imposed limits within which borrowings should be managed.
Total equity at 31 December 2024, the composition of which is shown on the
balance sheet on page 55, was £345,799,000 (2023: £304,629,000).
22. Contingencies, Guarantees and Financial Commitments
Liabilities the Company is committed to honour but which are dependent on a
future circumstance or event occurring would be disclosed in this note if any
existed.
There were no contingencies, guarantees or other financial commitments of the
Company as at 31 December 2024 (2023: nil).
23. Related Party Transactions and Transactions with Manager
A related party is a company or individual who has direct or indirect control
or who has significant influence over the Company.
Under International Financial Reporting Standards as adopted by the EU
(‘IFRS’), the Company has identified the Directors and their dependents as
related parties. Directors fees paid have been disclosed in the Directors’
Remuneration Report on pages 44 and 45 with additional disclosure in note 6.
Full details of Directors’ interests are set out in the Directors’
Remuneration Report on page 45. No other related parties have been identified.
Invesco Fund Managers Limited and Invesco Asset Management Limited, both of
which are wholly owned subsidiaries of Invesco Limited, provided investment
management and administration services to the Company. Invesco Limited or its
subsidiaries are not considered related parties as they do not have direct or
indirect control nor significant influence over the Company. Details of the
services and fees are disclosed in the Business Review and management fees
payable are shown in note 5.
24. Post Balance Sheet Events
Any significant events that occurred after the end of the reporting period but
before the signing of the balance sheet will be shown here.
There are no significant events after the end of the reporting period
requiring disclosure. Details of ordinary shares issued subsequent to the year
end are set out in note 16 to the financial statements on page 63.
This annual financial report announcement is not the Company’s statutory
accounts. The statutory accounts for the period ended 31 December 2024 have
been audited and approved but are not yet filed. They received an audit
report which is unqualified and does not include a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying the
report.
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, JTC Fund Solutions (Jersey) Limited, PO Box
1075, 28 Esplanade, St Helier, Jersey JE4 2QP or the Manager’s website via
the directory found at the following link: www.invesco.co.uk/bips. The
Annual General Meeting of the Company will be held at 9.00am on 11 June 2025
at the Company’s Registered Office.
A copy of the annual financial report will be submitted shortly to the
National Storage Mechanism ("NSM") and will be available for inspection at the
NSM, which is situated
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Hilary Jones
JTC Fund Solutions (Jersey) Limited
Company Secretary
Telephone: 01534 700000
2 April 2025
LEI: 549300JLX6ELWUZXCX14
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