REG-Invesco Perpetual UK Smaller Co's Investment Trust Plc: Annual Financial Report
01/05/2024 07:15
LEGAL ENTITY IDENTIFIER: 549300K1D1P23R8U4U50
Invesco Perpetual UK Smaller Companies Investment Trust plc
Annual Financial Report Announcement for the Year Ended 31 January 2024
The following text is extracted from the Annual Financial Report of the
Company for the year ended 31 January 2024. All page numbers below refer to
the Annual Financial Report which will be made available on the Company's
website.
Investment Objective
The Company is an investment trust whose investment objective is to achieve
long-term total returns for shareholders primarily by investment in a broad
cross-section of small to medium sized UK quoted companies.
Financial Highlights
Total Return Statistics (with dividends reinvested)
Change for the year (%) 2024 2023
Net Asset Value (1)(2) –4.1 –17.5
Share Price (1)(2) –1.8 –17.0
Benchmark Index (2)(3) –3.3 –12.4
Capital Statistics
At 31 January 2024 2023 Change
Total shareholders’ funds (£’000) 161,395 174,915 –7.7%
Net asset value (NAV) per share 477.12p 517.09p –7.7%
Share price (1)(2) 424.00p 451.00p –6.0%
Discount (1) (11.1)% (12.8)%
Gearing (1):
– gross gearing 5.4% nil
– net gearing 5.4% nil
– net cash nil 2.9%
Maximum authorised gearing 9.3% 8.6%
For the year ended 31 January 2024 2023
Return (1) and dividend per ordinary share:
Revenue return 13.18p 11.99p
Capital return (34.91)p (124.70)p
Total return (21.73)p (112.71)p
First interim dividend 3.85p 3.75p
Second interim dividend 3.85p 3.75p
Third interim dividend 3.85p 3.75p
Final dividend 5.41p 6.79p
Total dividends 16.96p 18.04p –6.0%
Dividend Yield (1) 4.0% 4.0%
Dividend payable for the year (£’000):
– from current year net revenue 4,459 4,055
– from capital reserve (2023: from capital reserve) 1,278 2,047
5,737 6,102
Capital dividend as a % of year end net assets (1) 0.8% 1.2%
Ongoing charges (1) 1.01% 0.95%
Notes: (1) Alternative Performance Measure (APM). See Glossary of Terms and
Alternative Performance Measures on pages 66 to 68 of the financial report for
details of the explanation and reconciliations of APMs.
(2) Source: LSEG Data & Analytics.
(3) The Benchmark Index of the Company is the Deutsche Numis Smaller
Companies + AIM (excluding Investment Companies) Index with dividends
reinvested.
Chairman’s Statement
Highlights
* Dividend of 16.96p per share for the year, providing a yield of 4.0% based
on the year end share price.
* Net asset value return of –4.1% and share price return of –1.8%,
compared to benchmark return of –3.3%, all based on total return with
dividends reinvested.
* Long-term performance is strong over 5 years and 10 years, with superior
returns to the Company’s benchmark.
Dear Shareholders,
Having been appointed Chairman of the Board on 8 June 2023, this is my first
Chairman’s statement for the Annual Financial Report.
Performance
Throughout the earlier stages of 2023, the influence of the ongoing
Ukraine/Russia conflict and the cost-of-living crisis persisted with
heightened inflation and interest rates, making for a very tough environment
for company profits and the UK consumer.
Latterly, expectations of future inflation and interest rates appear to have
peaked in the UK, leading to an equity rally in Q4 2023. However, the UK’s
economic backdrop continues to be mixed, with the UK in a technical recession
(classified as two consecutive quarters of shrinking GDP) in the second half
of 2023.
Against a challenging backdrop, for the year ended 31 January 2024 our
Portfolio Managers have marginally underperformed the benchmark by –0.8% on
a net asset value (‘NAV’) total return basis; where the Company’s NAV
returned –4.1% vs –3.3% for the Benchmark Index, the Deutsche Numis
Smaller Companies + AIM (excluding Investment Companies) Index (both on a
total return basis). However, the Company’s share price total return, our
shareholders’ experience, was able to deliver a better than benchmark total
return of –1.8%, as a result of the discount continuing its trend of
narrowing from 11.6% at the end of July 2023, to 11.1% at the end of January
2024.
The Board continues to monitor the level at which the Company’s shares trade
and is actively seeking to attract potential investors in the Company which,
by increasing demand, should help to further improve the Company’s share
rating.
Dividend and Dividend Policy
The Company’s dividend policy is to target a dividend yield of 4.0% of the
year end share price paid from income derived from dividends from the
portfolio and enhanced, as necessary, through the use of realised capital
profits. In accordance with this policy, interim dividends of 3.85p were paid
in September and December 2023, with a third interim dividend of 3.85p paid
following the year end on 12 March 2024.
The Board has resolved that the Company will propose a final dividend of 5.41p
per share to bring the total dividends paid for the year to 16.96p per share
(2023: 18.04p). The final dividend will be payable, subject to shareholder
approval, on 11 June 2024 to shareholders on the register on 10 May 2024 and
the shares will go ex-dividend on 9 May 2024.
The total dividend of 16.96p per share is in line with the Company’s stated
dividend policy which includes a target dividend yield of 4.0% of year end
share price which was 424.00p as at 31 January 2024. This represents all of
the available revenue earned by the Company’s portfolio over the year,
together with 3.78p per share from realised capital profits.
The Company’s revenue per share has increased from 11.99p per share last
year to 13.18p per share this year, which means that the resulting balance of
dividend being paid from realised capital profits represents 0.8% of net
assets at the year end and it continues to represent a relatively small
proportion of the longer-term total returns achieved by the Portfolio
Managers.
Shareholders who hold shares on the main register (as a paper share
certificate) and are residents of the UK, Channel Islands and Isle of Man,
have the opportunity to reinvest their dividend via the Dividend Reinvestment
Plan (‘DRIP’). Shareholders will need to submit an election by 20 May
2024. Further information can be found in the leaflet included on the
Company’s webpage: www.invesco.co.uk/ipukscit.
Board Composition
I would like to once again thank Jane Lewis who retired from the Board on 8
June 2023 for all her hard work and service to the Company.
As previously announced, Simon Longfellow joined the Board on 1 July 2023. His
experience of investment trust marketing and communication, especially when
communicating with retail shareholders has been very valuable. He has already
made a significant contribution, working with the Invesco marketing team to
develop an enhanced marketing and communications strategy for the Company
which we hope shareholders will become aware of as the year progresses.
Future of the Company
In 2012, the Board made a commitment to offer shareholders the opportunity to
realise their investment at close to NAV through a tender offer in 2017. This
resulted in a positive rebalancing of the shareholder register towards
supportive, long-term shareholders. During 2019, the Directors reviewed the
Company’s prospects and consulted major shareholders. As a result, the Board
put a continuation vote to shareholders at the AGM in 2019 which was passed
with 99.84% of votes cast in favour.
At that time, the Board committed to put a further range of options to
shareholders at the Company’s 2024 AGM. Your directors have subsequently
reviewed the Company’s position and prospects along with consideration of
shareholder feedback where a view had been forthcoming. The Board believes
that the Company has a portfolio of smaller companies which are well managed
and should benefit from a recovery in sentiment towards the UK market. The
Board has confidence in the Portfolio Managers’ ongoing ability to find
attractive investment opportunities which is reinforced by the Company’s
good long-term performance. The NAV cumulative total return over the past 5
years is 18.8% which surpasses the benchmark return of 9.8% by 9.0%, whilst
over 10 years the Company’s return has been 85.4%, surpassing the benchmark
return of 40.4% by 45%. Positively, your Company’s long-term outperformance
was recently recognised in an article published by The Association of
Investment Companies, titled “Top performing Investment trust ISAs over the
last 25 years”*.
The Board believes that it is desirable to allow the Company the opportunity
to continue to grow over a longer market cycle and therefore, it will give
shareholders the opportunity to vote for the continuation of the Company at
the forthcoming AGM on 6 June 2024. If Resolution 15 is passed the Directors
intend to introduce a continuation vote policy. Shareholders will be given the
opportunity to vote for the continuation of the Company at each third AGM, the
next one being 2027.
The Directors believe that a continuation of the Company is in the interests
of shareholders and recommend that you vote in favour of the continuation
resolution, as they intend to do in respect of their own shareholdings.
Annual General Meeting (‘AGM’)
This year’s meeting will be held at Invesco’s London office at 12.00pm on
Thursday 6 June 2024. As well as the Company’s formal business, there will
be a presentation from Jonathan Brown and Robin West, the opportunity to ask
questions of the Portfolio Managers and Directors and to chat informally with
all of us over lunch. Shareholders may bring a guest to these meetings. The
Directors and I look forward to meeting as many of you as possible. For those
unable to attend in person, a video update from the Portfolio Managers will be
available on the Company’s website after the AGM. Shareholders wishing to
lodge questions in advance of the AGM should do so by email to the Company
Secretary at investmenttrusts@invesco.com or, by letter, to 43-45 Portman
Square, London W1H 6LY.
Concluding Thoughts
We are going through a testing time for UK smaller companies, potentially
comparable to the impact of the global financial crash for the asset class.
Subsequent to the major recession that the global financial crash of 2007/8
caused, your Company’s NAV rose by 40.1% in the financial year to 31 January
2010 with the following financial year seeing a return of 28.6%.
The portfolio’s investment performance may look different to that time,
however with recovery likely not far off and interest rates likely to fall in
the UK this year, this feels very much like a time when the market will turn
more favourable for your Company.
Ultimately, my hope is that there is an improvement in the market sentiment
for UK listed stocks which should benefit your Company and its share price.
Bridget Guerin
Chairman
30 April 2024
(*www.theaic.co.uk/aic/news/press-releases/top-performing-investment-trust-isas-over-the-last-25-years
– published on 13th March 2024).
Portfolio Managers’ Report
Q What were the key influences on the market over the year?
A Inflation and interest rates were once again the major influences on the
market. The Bank of England raised rates significantly, from 3.5% to 5.25%, as
it grappled with the highest inflation in four decades. The principal driver
of price increases was the rapid rise in energy prices following the Russian
invasion of Ukraine, which fed through to most areas of the economy over time.
The surge in costs, along with lower demand as businesses reduced inventory as
supply chain tightness abated, created an unusually difficult period for
company profits. A study by Ernst & Young LLP showed that this culminated in a
record 18.2% of UK listed companies issuing profit warnings last year, which
surpassed the previous peak of 17.7% during the 2008 global financial crisis.
Against that backdrop, the market struggled for much of the year.
Thankfully as the year progressed, energy prices reduced towards their
pre-conflict levels, and the spectre of inflation began to abate. Sharply
lower inflation data in October 2023 led to a substantial rally in equity
markets, with many economists believing that interest rate cuts could be back
on the agenda in 2024.
The much-heralded UK recession finally materialised in the second half of
year, when figures were revised downwards to show a small level of economic
contraction. Nevertheless, we continue to benefit from full employment and
relatively strong consumer balance sheets, although that is cold comfort to
those squeezed by higher mortgage costs over the last year. Elsewhere however,
the significant increase in income from savings and return to growth of real
wages, have created a much stronger consumer backdrop than the news headlines
would have led you to believe, with the leisure sector in particular
performing well.
Another notable feature of the year was the bout of artificial intelligence
(‘AI’) exuberance. This was prompted by the launch of the latest version
of “AI” software ChatGPT. Whilst various forms of machine learning have
been in use for the last decade, ChatGPT captured the imagination of investors
due to its ability to produce written output with a realistic human like
quality. Whilst it is a very useful tool, its lack of any actual intelligence
makes it prone to regurgitating false information in a highly convincing way.
As with all popular stock market trends, investment banks created various
instruments (“baskets” of stocks) to allow investors to play this theme.
This negatively impacted the shares of a number of companies, which rightly or
wrongly, were deemed to be potential victims of this new technology. Whilst we
see “AI” as an important tool for driving productivity, we were surprised
by the market volatility created by this phenomenon.
Q How did the portfolio perform over the year?
A The NAV total return for the portfolio over the year was –4.1%, which is
an under performance of 0.8% when compared with the Benchmark Index, the
Deutsche Numis Smaller Companies+ AIM (excluding Investment Companies), which
returned –3.3% on the same basis. The share price total return was –1.8%,
reflecting the narrowing of the discount from 12.8% at last financial year end
to 11.1% at the end of this year.
Q Which sectors contributed to and detracted from performance?
A Although the cost of living crisis was in the headlines during the year,
the consumer discretionary sector was the most positive contributor to
portfolio performance, with leisure stocks in particular performing well. We
also benefitted from being less exposed to the basic materials and energy
sectors than the wider market. The sector that detracted the most from
performance was industrials, which was impacted by companies reducing
inventories, and technology, where higher interest rates triggered a
widespread de-rating.
Q Which stocks contributed to and detracted from performance?
A The best performing stocks over the year included: infrastructure products
business, Hill & Smith (+49%), which is benefitting from increased spending on
infrastructure, particularly in the US, where the company generates most of
its profits. 4imprint (+24%), which sells promotional products, predominantly
in the US, had another strong year. The business, which is the largest player
in its niche, continued to take share by increasing its advertising spend. The
company has strong long-term prospects and remains the largest holding in the
portfolio. Defence business Chemring (+25%), saw strong demand for its
products in the wake of the war in Ukraine. The company specialises in
propellants for missiles, cyber security and electronic warfare, demand for
which should remain buoyant for some time to come.
Despite the cost of living crisis, leisure spending remained robust. We
benefitted from strong performances from pub groups, Mitchells and Butlers
(+58%) and Young & Co’s Brewery (+17%), and ten-pin bowling operator
Hollywood Bowl (+15%). Additionally, Restaurant Group (+78%), which is best
known for its Wagamama brand, received a takeover approach and was
subsequently sold.
In such a difficult period for company profitability, inevitably we had some
disappointments:
Videndum (–68%) which is a leading manufacturer of equipment used in
photography, broadcasting and film making, was hit by a combination of weaker
demand due to destocking, and the actor and writers strikes in the US.
Unfortunately, this led to a substantial profit shortfall and the business had
to be recapitalised via a rights issue. The company should benefit from
pent-up demand now the strikes have ended, and it typically sees stronger
trading during Olympic and US presidential election years, so we have retained
a holding in the stock. Jadestone Energy (–68%), suffered from reduced
production due to some maintenance issues at its main oil field. The profit
shortfall meant the business had to issue shares at a discount to bolster its
cash position. We believe the company can recover from these issues and have
retained a position for now. Keywords Studios (–41%), which provides
outsourced services to the computer games industry, continued to trade well,
but was caught up in the bout of “AI mania” which gripped the market
following the release of the latest version of ChatGPT. Some commentators
believe that its revenue could be negatively impacted by generative AI.
However, the company already uses AI as a productivity tool in various areas
of its business, so we believe the fears are misplaced. We think it is an
excellent business and used the share price weakness to add to the holding.
Q What is the current portfolio strategy?
A Our investment philosophy remains unchanged. The current portfolio is
comprised of 60-70 stocks with the sector weightings being determined by where
we are finding attractive companies at a given time, rather than by allocating
assets according to a “top down” view of the economy. We continue to seek
growing businesses, which have the potential to be significantly larger in the
medium term. These tend to be companies that either have great products or
services, that can enable them to take market share from their competitors, or
companies that are exposed to higher growth niches within the UK economy or
overseas. We prefer to invest in cash generative businesses that can fund
their own expansion, although we are willing to back strong management teams
by providing additional capital to invest for growth.
The sustainability of returns and profit margins is vital for the long-term
success of a company. The assessment of the position of a business within its
supply chain and a clear understanding of how work is won and priced are key
to determining if a company has “pricing power”, which has been
particularly important in the recent inflationary environment. It is also
important to determine which businesses possess unique capabilities, in the
form of intellectual property, specialist know-how or a scale advantage in
their chosen market. We conduct around 300 company meetings and site visits a
year, and these areas are a particular focus for us on such occasions.
In terms of portfolio construction, we continue to favour a mix of both
cyclical (economically sensitive) stocks, and more defensive businesses.
Whilst many cyclical stocks are currently experiencing more difficult trading,
this is largely factored into profit expectations and valuations. These stocks
have the potential to outperform when investors begin to look beyond the
short-term weakness. Market moves over the last few months suggest that this
process may be underway, and this has encouraged us to begin adding to this
area of the portfolio.
Counterbalancing this are more defensive businesses that should continue to
trade resiliently even if the economy struggles more than anticipated. These
stocks offer a greater degree of certainty, and this is often reflected in
higher valuations. As we gain more confidence that a recovery is underway, we
may look to take profits from some of these positions and redeploy the
proceeds elsewhere.
Q What are the major holdings in the portfolio?
A The 5 largest holdings in the portfolio at the end of the year were:
• 4imprint (4.9% of the portfolio) sells promotional materials such as
pens, bags and clothing which are emblazoned with company logos. The business
gathers orders through online and catalogue marketing, which are then routed
to their suppliers who produce and dispatch the products to customers. As a
result of outsourcing most of the manufacturing, the business has a relatively
low capital requirement and can focus on marketing and customer service.
Continual reinvestment of revenue into marketing campaigns has enabled the
business to generate an enviable long term growth record whilst maintaining
margins.
• JTC (3.8% of the portfolio) is a financial administration business
providing services to real estate and private equity funds, multinational
companies, and high net worth individuals. The business has a strong culture,
a reputation for quality and has augmented its organic growth with
acquisitions. Margins and returns on capital are strong and the business
benefits from long term contracts, giving it excellent earnings visibility.
• Hollywood Bowl (3.2% of the portfolio) is a leisure business operating
ten pin bowling alleys in the UK and Canada. The sector had historically been
woefully underinvested in the UK. Management have successfully grown the
business by acquiring and modernising existing sites, and by opening new sites
in leisure and retail parks. The low ticket price and family friendly nature
of the activity has allowed the business to grow even in more difficult
economic conditions. Management recently acquired a business in Canada, where
they believe there is a similar opportunity to consolidate and modernise the
sector.
• Hill & Smith (3.1% of the portfolio) is a supplier of products and
services into the infrastructure sectors in the UK, US, and Europe. Its
proprietary steel and composite products are used in the rail, road, water,
and energy sectors. The business also provides galvanizing services to protect
steel structures, and leases temporary road barriers and security products.
The company generates good margins and benefits from exposure to growing
infrastructure investment.
• Hilton Food (2.9% of the portfolio) partners with major supermarkets
across the world to supply their prepacked meat, fish, and plant-based
products on a long-term “cost plus” basis. This model reduces the
volatility in profits typically seen in food businesses by allowing them to
pass changes in the cost of raw materials on to their customers. The business
has benefitted from the global trend in supermarkets moving from in-store to
centralised packing and relying on a reduced number of trusted suppliers.
Hilton Food has an excellent long term growth record, both from signing
customers in new countries, most recently with Walmart in Canada, and growing
revenue from existing customers. The business has also successfully added new
product categories via acquisition, which it can then sell into its global
customer base.
Q What were the new holdings added over the year?
A New stocks that we added to the portfolio in the year include:
• Tatton Asset Management creates model portfolios which it sells via
independent financial advisors (‘IFAs’) in the UK. The outsourcing of
investment decisions by IFAs to businesses such as Tatton has increased
significantly over the last decade due to an increasing burden of regulation
on IFAs. Tatton has a range of model portfolios, made up of both active and
passive funds, that correspond with a variety of risk categories for clients.
The service has one of the lowest fee structures in the industry, a good
long-term performance record and a strong reputation within the IFA sector.
The business is growing strongly, and with a highly scalable business model,
achieves an enviable level of profitability.
• NIOX is a medical diagnostic business with technology that can more
accurately diagnose and monitor asthma. The company is the world leader in
fractional exhaled nitric oxide (‘FeNO’) testing, which measures exhaled
Nitric Oxide as a diagnostic marker for asthma. FeNO testing is significantly
more accurate than traditional methods of testing. The product is approved by
The National Institute for Health Care Excellence (‘NICE’) in the UK and
is reimbursable in all its major markets (which is one of the factors that
determines which products in development eventually make it to market). We
believe the business can substantially grow its installed base of devices, and
this should drive a high level of recurring test kit revenue.
• YouGov is a market research company that uses online polling to generate
data which it packages and sells to businesses. The business has gained a
strong reputation for quality by consistently being the most accurate polling
organisation in predicting the outcomes of general elections. The business has
leveraged this reputation to take share from the large incumbents in the
sector, which has driven an impressive level of organic growth. The company
recently announced the acquisition of GFK’s consumer panel business, which
management believe can accelerate the internationalisation of the business and
facilitate the launch of new products. The business benefits from multi-year
relationships with its customers, giving the business good visibility over
future revenue.
• MJ Gleeson is a UK housebuilder focussed on low-cost housing. Management
claim that a couple earning the minimum wage can afford to buy the majority of
houses in their developments. They achieve this by buying cheap land in less
desirable areas of towns, often brownfield sites in need of remediation, and
by using easier/cheaper methods to build housing designs. We have met with the
business several times and visited a number of their sites over the years. We
were keen to increase our housebuilding exposure given the improvement in
mortgage rates, and the substantial wage growth experienced by the company’s
target customers.
Q What is the Portfolio Managers’ approach to gearing?
A Gearing decisions are taken after reviewing a variety of metrics including
valuations, earnings momentum, market momentum, bond spreads and a range of
economic indicators. After analysing this data, we have moved the Company to a
geared position of around 5%.
The factors influencing our decision to utilise gearing include the
substantial reduction in the UK inflation rate which suggests that we may have
seen the peak in the recent interest rate cycle. Many economists are expecting
inflation to fall further as we move through 2024 and this could trigger a
reduction in interest rates. This has led to an improvement in market momentum
over the last few months. Additionally, the market valuation is low compared
to history, and this has resulted in a pick-up in takeover activity for UK
small cap stocks which should bolster investor sentiment towards the sector.
Q How does ESG factor in the investment process?
A Environment, Social and Governance (‘ESG’) issues are increasingly a
focus for many investors and analysis of these factors has always been a core
part of our investment process. Invesco has significant resources focussed on
ESG, both at a group and individual team level. Our proprietary ESGintel
system draws in company specific data from a broad range of sources and
enables ESG related metrics to be quantified. This provides fund managers with
clear overview of areas of concern, allowing targeted engagement with
businesses to bring about positive change.
Environmental liabilities, socially dubious business practices and poor
corporate governance, can have a significant impact on share prices. We assess
environmental risks within a business, and analyse the steps being taken to
reduce its environmental impact. We like businesses with strong cultures and
engaged employees, and avoid businesses, which, whilst acting within the law,
run the risk of a public backlash, or being constrained by new legislation. We
believe that governance, board structure and incentivisation, are by far the
most important factors within ESG in determining shareholder returns. The
importance of businesses being managed by good quality people, with
appropriate incentivisation should not be underestimated. Therefore, we
proactively consult with all the businesses we own on these matters and vote
against resolutions where standards fall short of our expectations.
Q What is the dividend policy of the Company?
A The Company pays out all the income earned within the portfolio and
enhances it using a small amount of realised capital profits to target a
dividend yield of 4.0% based on the year end share price. This provides
shareholders with an attractive and consistent yield whilst allowing us to
target businesses that we believe will deliver the best total return, without
having to compromise on quality to hit an income target.
Q What are your expectations for the year ahead?
A Although the current level of economic growth in the UK is anaemic, we
believe the situation should improve over the coming year. Forward looking
indicators suggest the service sector, a significant driver of the UK economy,
is returning to growth. The UK also continues to benefit from full employment,
which along with falling inflation, lower energy costs and higher wages should
lead to an improved outlook for the consumer sector.
The industrial sector has struggled as businesses reduce inventories. Many
businesses had carried buffer stocks to cope with supply chain disruption
following the pandemic. With lead times normalising, businesses have reduced
these stocks, leading to lower demand elsewhere. Recent conversations with
businesses suggest that this process has largely run its course, so an
industrial sector recovery will hopefully emerge as the year progresses.
The valuation attractions of the UK smaller companies sector is very evident
to us. Whether we compare current valuations to history, or to other
international markets, the sector looks anomalously cheap. The value on offer
has not gone unnoticed, with corporate and private equity buyers stepping in
to take advantage. A surge in takeover activity is often a prelude to a
stronger market, as the proceeds from these bids are redeployed into other
stocks in the sector.
Whilst the news headlines are dominated by doom and gloom, we see a nascent
economic recovery and a market offering considerable value. So, after a
difficult few years for the sector, we feel optimistic about the year ahead.
Jonathan Brown & Robin West
Portfolio Managers
30 April 2024
Principal Risks and Uncertainties
The Directors confirm that they have carried out a robust assessment of the
emerging and principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or liquidity. Most
of these risks are market related and are similar to those of other investment
trusts investing primarily in listed markets. The Audit Committee reviews the
Company’s risk control summary at each meeting, and as part of this process,
gives consideration to identify emerging risks. Emerging risks, such as
evolving cyber threat, geo-political tension and climate related risks, have
been considered during the year as part of the Directors’ assessment.
Principal Risk Description Mitigating Procedures and Controls
Market (Economic) Risk Factors such as fluctuations in stock markets, interest rates and exchange rates are not under the control of the Board or the Portfolio Managers, but may give rise to high levels of volatility in the share prices of investee The Directors have assessed the market impact of the ongoing uncertainty from the conflict in Ukraine and the resulting sanctions imposed on Russia through regular discussions with the Portfolio Managers and the Corporate Broker. The Company’s current portfolio consists of companies listed on the main UK equity market and those listed on AIM. The Company does not have direct investments in Russia or hold stocks with significant links to Russia. To a limited extent, futures can be used to mitigate against market (economic) risk, as can the judicious holding of cash or other very liquid assets. Futures are not currently being used.
companies, as well as affecting the Company’s own share price and the discount to its NAV. The risk could be triggered by unfavourable developments globally and/or in one or more regions, contemporary examples being the market uncertainty in relation to
the wider political developments in Ukraine and the Middle East.
Investment Risk The Company invests in small and medium-sized companies traded on the London Stock Exchange or on AIM. By their nature, these are generally considered riskier than their larger counterparts and their share prices can be more volatile, with The Portfolio Managers’ approach to investment is one of individual stock selection. Investment risk is mitigated via the stock selection process, together with the slow build-up of holdings rather than the purchase of large positions outright. This allows the Portfolio Managers, cautiously, to observe more data points from a company before adding to a position. The overall portfolio is well diversified by company and sector. The weighting of an investment in the portfolio tends to be loosely aligned with the market capitalisation of that company. This means that the largest holdings will often be amongst the larger of the smaller companies available. The Portfolio Managers are relatively risk averse, look for lower volatility in the portfolio and seek to outperform in more challenging markets. The Portfolio Managers remain cognisant at all times of the potential liquidity of the portfolio. There can be no guarantee that the Company’s strategy and business model will be successful in achieving its investment objective. The Board monitors the performance of the Company, giving due consideration to how the Manager has incorporated ESG considerations including climate change into their investment process. Further details can be found on pages 19 to 22. The Board also has guidelines in place to ensure that the Portfolio Managers adhere to the approved investment policy. The continuation of the Manager’s mandate is reviewed annually.
lower liquidity. In addition, as smaller companies may not generally have the financial strength, diversity and resources of larger companies, they may find it more difficult to overcome periods of economic slowdown or recession. Furthermore, the risk of
climate change and matters concerning ESG could affect the valuation of companies held in the portfolio.
Shareholders’ Risk The value of an investment in the Company may go down as well as up and an investor may not get back the amount invested. The Board reviews regularly the Company’s investment objective and strategy to ensure that it remains relevant, as well as reviewing the composition of the shareholder register, peer group performance on both a share price and NAV basis, and the Company’s share price discount to NAV per share. The Board and the Portfolio Managers maintain an active dialogue with the aim of ensuring that the market rating of the Company’s shares reflects the underlying NAV; both share buy back and issuance facilities are in place to help the management of this process.
Reliance on the Manager and other Third-Party Service Providers The Company has no employees and the Board comprises non-executive directors only. The Company is therefore reliant upon the performance of third-party service providers for its executive Third-party service providers are subject to ongoing monitoring by the Manager and the Board. The Manager reviews the performance of all third-party providers regularly through formal and informal meetings. The Audit Committee reviews regularly the performance and internal controls of the Manager and all third-party providers through audited service organisation control reports, together with updates on information security, the results of which are reported to the Board. The Manager’s business continuity plans are reviewed on an ongoing 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 regular update 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.
function and service provisions. The Company’s operational structure means that all cyber risk (information and physical security) arises at its third-party service providers, including fraud, sabotage or crime against the Company. The Company’s
operational capability relies upon the ability of its third-party service providers to continue working throughout the disruption caused by a major event such as the Covid-19 pandemic. Failure by any service provider to carry out its obligations to the
Company in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Company and could affect the ability of the Company to successfully pursue its investment policy. The Company’s main service
providers, of which the Manager is the principal provider, are listed on page 65. The Manager may be exposed to reputational risks. In particular, the Manager may be exposed to the risk that litigation, misconduct, operational failures, negative publicity
and press speculation, whether or not it is valid, will harm its reputation. Damage to the reputation of the Manager could potentially result in counterparties and third parties being unwilling to deal with the Manager and by extension the Company, which
carries the Manager’s name. This could have an adverse impact on the ability of the Company to pursue its investment policy successfully.
Regulatory Risk The Company is subject to various laws and regulations by virtue of its status as an investment trust, its listing on the London Stock Exchange and being an Alternative Investment Fund under the UK AIFMD regime. A loss of investment trust The Manager reviews the level of compliance with tax and other financial regulatory requirements on a regular basis. The Board regularly considers all risks, the measures in place to control them and the possibility of any other risks that could arise. The Manager’s Compliance and Internal Audit team produce annual reports for review by the Company’s Audit Committee. Further details of risks and risk management policies as they relate to the financial assets and liabilities of the Company are detailed in note 16 of this Annual Financial Report.
status could lead to the Company being subject to corporation tax on the chargeable capital gains arising on the sale of its investments. Other control failures, either by the Manager or any other of the Company’s service providers, could result in
operational or reputational problems, erroneous disclosures or loss of assets through fraud, as well as breaches of regulations.
Viability Statement
In accordance with provision 31 of the UK Code of Corporate Governance 2018,
the Directors have assessed the prospects of the Company over a longer period
than 12 months. The Company is an investment trust, a collective investment
vehicle designed and managed for long term investment. While the appropriate
period over which to assess the Company’s viability may vary from year to
year, the long term for the purpose of this viability statement is currently
considered by the Board to be at least five years, with the life of the
Company not intended to be limited to that or any other period.
The main risks to the Company’s continuation are: insufficient liquidity to
meet liabilities as they fall due; poor investment performance over an
extended period; shareholder dissatisfaction through failure to meet the
Company’s investment objective; or the investment policy not being
appropriate in prevailing market conditions. Accordingly, failure to meet the
Company’s investment objective, and contributory market and investment risks
are deemed by the Board to be principal risks of the Company and are given
particular consideration when assessing the Company’s long term viability.
Despite the current impact on global markets resulting from the ongoing
political developments in Ukraine, Israel and Palestine, the Directors remain
confident that the Company’s investment strategy will continue to serve
shareholders well over the longer term.
The investment objective of the Company has been substantially unchanged for
many years. The 2015 amendment to dividend policy gave some additional weight
to targeting increased dividend income to shareholders. This change does not
affect the total return sought or produced by the Portfolio Managers but was
designed to increase returns distributed to shareholders. The Board considers
that the Company’s investment objective remains appropriate. This is
confirmed by contact with major shareholders.
Performance derives from returns for risk taken. The Portfolio Managers’
Report on pages 9 to 12 sets out their current investment strategy. There has
been no material change in the Company’s investment objective or policy.
Demand for the Company’s shares and performance are not things that can be
forecast, but there are no current indications that either or both of these
may decline substantially over the next five years so as to affect the
Company’s viability.
The Company is a closed end investment trust and can pursue a long term
investment strategy and make use of gearing to enhance returns through
investment cycles without the need to maintain liquidity for investor
redemptions.
Based on the above analysis, including review of the revenue forecast for
future years along with stress testing of both the revenue forecast and the
portfolio valuation, reverse stress testing of debt covenants and dividend
sensitivity analysis, and that shareholders pass the resolution at the
forthcoming AGM for the continuation of the Company, the Directors confirm
that they expect the Company will continue to operate and meet its
liabilities, as they fall due, during the five years ending January 2029.
Investments in Order of Valuation
AT 31 JANUARY 2024
Ordinary shares unless stated otherwise
Market
Value % of
Company Sector £’000 Portfolio
4imprint Media 8,397 4.9
JTC Investment Banking and Brokerage Services 6,433 3.8
Hollywood Bowl Travel and Leisure 5,398 3.2
Hill & Smith Industrial Metals and Mining 5,206 3.1
Hilton Food Food Producers 4,852 2.9
Chemring Aerospace and Defence 4,623 2.7
Serco Industrial Support Services 4,519 2.7
CVS AIM Consumer Services 4,426 2.6
Alfa Financial Software Software and Computer Services 4,402 2.6
Advanced Medical Solutions AIM Medical Equipment and Services 4,089 2.4
Top Ten Holdings 52,345 30.9
AJ Bell Investment Banking and Brokerage Services 4,003 2.4
Coats General Industrials 3,766 2.2
discoverIE Electronic and Electrical Equipment 3,583 2.1
Keywords Studios AIM Leisure Goods 3,452 2.0
Energean Oil, Gas and Coal 3,400 2.0
Genuit Construction and Materials 3,397 2.0
Brooks Macdonald AIM Investment Banking and Brokerage Services 3,311 1.9
Essentra Industrial Support Services 3,169 1.9
Volution Construction and Materials 3,148 1.9
Johnson Service AIM Industrial Support Services 2,984 1.8
Top Twenty Holdings 86,558 51.1
Kainos Software and Computer Services 2,936 1.7
Alpha Financial Markets Consulting AIM Industrial Support Services 2,859 1.7
Young & Co’s Brewery - Non-Voting AIM Travel and Leisure 2,826 1.7
Marshalls Construction and Materials 2,782 1.7
Loungers AIM Travel and Leisure 2,773 1.6
Mitchells & Butlers Travel and Leisure 2,574 1.5
Robert Walters Industrial Support Services 2,531 1.5
Aptitude Software Software and Computer Services 2,429 1.4
Wickes Retailers 2,404 1.4
RWS AIM Industrial Support Services 2,339 1.4
Top Thirty Holdings 113,011 66.7
Ricardo Construction and Materials 2,250 1.3
Churchill China AIM Household Goods and Home Construction 2,241 1.3
Learning Technologies AIM Software and Computer Services 2,197 1.3
The Gym Travel and Leisure 2,196 1.3
Videndum Industrial Engineering 2,195 1.3
Avon Protection Aerospace and Defence 2,172 1.3
XP Power Electronic and Electrical Equipment 2,170 1.3
Focusrite AIM Leisure Goods 2,056 1.2
Secure Trust Bank Banks 2,007 1.2
Severfield Construction and Materials 1,993 1.1
Top Forty Holdings 134,488 79.3
Midwich AIM Industrial Support Services 1,971 1.1
Auction Technology Software and Computer Services 1,950 1.1
Tatton Asset Management AIM Investment Banking and Brokerage Services 1,875 1.1
FDM Industrial Support Services 1,861 1.1
Crest Nicholson Household Goods and Home Construction 1,829 1.1
Next Fifteen Communications AIM Media 1,813 1.1
Workspace Real Estate Investment Trusts 1,795 1.1
VP Industrial Transportation 1,707 1.0
GB Group AIM Software and Computer Services 1,630 1.0
CLS Real Estate Investment and Services 1,623 1.0
Top Fifty Holdings 152,542 90.0
Future Media 1,555 0.9
PZ Cussons Personal Care, Drug and Grocery Stores 1,539 0.9
Treatt Chemicals 1,354 0.8
YouGov AIM Media 1,352 0.8
M&C Saatchi AIM Media 1,342 0.8
Dunelm Retailers 1,299 0.8
FD Technologies AIM Software and Computer Services 1,287 0.8
Topps Tiles Retailers 1,194 0.7
Jadestone Energy AIM Oil, Gas and Coal 942 0.6
Marlowe AIM Industrial Support Services 911 0.5
Top Sixty Holdings 165,317 97.6
Gooch & Housego AIM Technology Hardware and Equipment 909 0.5
Vistry Household Goods and Home Construction 888 0.5
NIOX AIM Medical Equipment and Services 746 0.4
Savills Real Estate Investment and Services 609 0.4
MJ Gleeson Household Goods and Home Construction 579 0.3
Thruvision AIM Electronic and Electrical Equipment 433 0.3
Total Investments: (66) 169,481 100.0
AIM Investments quoted on AIM.
The percentage of the portfolio by value invested in AIM stocks at the year
end was 29.9% (2023: 32.8%). There were 24 AIM stocks held at the year end,
representing 36.4% of the 66 stocks (2023: 26 AIM stocks held representing
37.1% of the 70 stocks held).
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Financial Report in
accordance with United Kingdom applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under the law the Directors have elected to prepare financial
statements in accordance with UK-adopted international accounting standards.
Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors and then apply them
consistently;
• make judgements and estimates that are reasonable and prudent;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
• present additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the group and
company financial position and financial performance;
• state whether UK-adopted international accounting standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. 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 the Strategic Report, a Corporate Governance Statement, a
Directors’ Remuneration Report and a Directors’ Report that comply with
the law and regulations.
The Directors of the Company each confirm to the best of their knowledge,
that:
• the financial statements, prepared in accordance with UK adopted
international accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
• this Annual Financial Report includes a fair review of the development
and performance of the business and the position of the Company together with
a description of the principal risks and uncertainties that it faces; and
• they consider that 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.
Signed on behalf of the Board of Directors
Bridget Guerin
Chairman
30 April 2024
Statement of Comprehensive Income
FOR THE YEAR ENDED 31 JANUARY
Year ended 31 January Year ended 31 January
2024 2023
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Loss on investments held at fair value 9 – (11,138) (11,138) – (41,010) (41,010)
Profit on foreign exchange – – – – 5 5
Income 2 5,088 491 5,579 4,646 – 4,646
Investment management fees 3 (182) (1,029) (1,211) (206) (1,165) (1,371)
Other expenses 4 (424) (3) (427) (384) (3) (387)
Loss before finance costs and taxation 4,482 (11,679) (7,197) 4,056 (42,173) (38,117)
Finance costs 5 (23) (130) (153) (1) (7) (8)
Loss before taxation 4,459 (11,809) (7,350) 4,055 (42,180) (38,125)
Taxation 6 – – – – – –
Loss after taxation 4,459 (11,809) (7,350) 4,055 (42,180) (38,125)
Return per ordinary share 7 13.18p (34.91)p (21.73)p 11.99p (124.70)p (112.71)p
The total columns of this statement represent the Company’s statement of
comprehensive income, prepared in accordance with UK-adopted international
accounting standards. The loss after taxation is the total comprehensive loss.
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
Capital
Share Share Redemption Capital Revenue
Capital Premium Reserve Reserve Reserve Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
At 31 January 2022 10,642 22,366 3,386 184,089 270 220,753
Total comprehensive loss for the year – – – (42,180) 4,055 (38,125)
Dividends paid 8 – – – (4,905) (2,808) (7,713)
At 31 January 2023 10,642 22,366 3,386 137,004 1,517 174,915
Total comprehensive loss for the year – – – (11,809) 4,459 (7,350)
Dividends paid 8 – – – (2,048) (4,122) (6,170)
At 31 January 2024 10,642 22,366 3,386 123,147 1,854 161,395
The accompanying accounting policies and notes are an integral part of these
financial statements.
Balance Sheet
As at As at
31 January 31 January
2024 2023
Notes £’000 £’000
Non-current assets
Investments held at fair value through profit or loss 9 169,481 172,643
Current assets
Other receivables 10 932 400
Cash and cash equivalents – 5,055
932 5,455
Total assets 170,413 178,098
Current liabilities
Other payables 11 (9,018) (3,183)
(9,018) (3,183)
Total assets less current liabilities 161,395 174,915
Net assets 161,395 174,915
Capital and reserves
Share capital 12 10,642 10,642
Share premium 13 22,366 22,366
Capital redemption reserve 13 3,386 3,386
Capital reserve 13 123,147 137,004
Revenue reserve 13 1,854 1,517
Total shareholders’ funds 161,395 174,915
Net asset value per ordinary share
Basic 14 477.12p 517.09p
The financial statements were approved and authorised for issue by the Board
of Directors on 30 April 2024.
Signed on behalf of the Board of Directors
Bridget Guerin
Chairman
The accompanying accounting policies and notes are an integral part of these
financial statements.
Statement of Cash Flows
Year ended Year ended
31 January 31 January
2024 2023
£’000 £’000
Cash flow from operating activities
Loss before taxation (7,350) (38,125)
Add back finance costs 153 8
Adjustments for:
Purchase of investments (32,646) (37,739)
Sale of investments 21,263 46,313
(11,383) 8,574
Loss on investments held at fair value 11,138 41,010
Increase in receivables (51) (195)
Increase/(decrease) in payables 8 (26)
Net cash (outflow)/inflow from operating activities (7,485) 11,246
Cash flow from financing activities
Finance cost paid (153) (8)
Dividends paid – note 8 (6,170) (7,713)
Increase in bank overdraft 8,753 –
Net cash inflow/(outflow) from financing activities 2,430 (7,721)
Net (decrease)/increase in cash and cash equivalents (5,055) 3,525
Cash and cash equivalents at start of the year 5,055 1,530
Cash and cash equivalents at the end of the year — 5,055
Reconciliation of cash and cash equivalents to the Balance Sheet is as follows:
Cash held at custodian – 80
Invesco Liquidity Funds plc – Sterling, money market fund – 4,975
Cash and cash equivalents — 5,055
Cash flow from operating activities includes:
Dividends received 5,523 4,447
Interest received 3 2
As the Company did not have any long term debt at both the current and prior
year ends, no reconciliation of the financial liabilities position is
presented.
The accompanying accounting policies and notes are an integral part of these
financial statements.
Notes to the Financial Statements
1. Principal Accounting Policies
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 together with the approach to recognition and measurement
are set out below. These policies have been consistently applied during the
current year and the preceding year, unless otherwise stated.
The financial statements have been prepared on a going concern basis on the
grounds that the Company’s investment portfolio is sufficiently liquid and
significantly exceeds all balance sheet liabilities, there are no unrecorded
commitments or contingencies. The disclosure on going concern on page 29 in
the Directors’ Report provides further detail. The Directors believe the
Company has adequate resources to continue in operational existence for the
foreseeable future and has the ability to meet its financial obligations as
and when they fall due for a period until at least 30 April 2025.
(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 which for the Company are
quoted bid prices for investments in active markets at the Balance Sheet date
and therefore reflect market participants’ view of climate change risk and
in accordance with the applicable UK-adopted international accounting
standards. The standards are those that are effective at the Company’s
financial year end.
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 UK-adopted international
accounting standards, 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.
The Directors have considered the impact of climate change on the value of the
listed investments that the Company holds. In the view of the Directors, as
the portfolio consists of listed equities, their market prices should reflect
the impact, if any, of climate change and accordingly no adjustment has been
made to take account of climate change in the valuation of the portfolio in
these financial statements.
(ii) 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 make
judgements, estimates and assumptions, in the process of applying the
accounting policies. There have been no significant judgements, estimates or
assumptions for the current or preceding year.
(iii) Continuation Vote
Having consulted the Company’s major shareholders through the remit of its
advisers, the Directors have a reasonable belief that the continuation vote
will be supported by the majority of shareholders at the 2024 AGM.
(b) Foreign Currency and Segmental Reporting
(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
share capital and expenses are denominated, as well as a majority of its
assets and liabilities.
(ii) Transactions and Balances
Foreign currency assets and liabilities are translated into Sterling at the
rates of exchange ruling at the balance sheet date. Transactions in foreign
currency, are translated into Sterling at the rates of exchange ruling on the
dates of such transactions, and profit or loss on translation is taken to
revenue or capital depending on whether it is revenue or capital in nature.
All are recognised in the statement of comprehensive income.
(iii) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business of investing in equity and debt securities, issued by
companies operating and generating revenue mainly in the UK.
(c) Financial Instruments
(i) Recognition of Financial Assets and Financial Liabilities
The Company recognises financial assets and financial liabilities when the
Company becomes a party to the contractual provisions of the instrument. The
Company offsets financial assets and financial liabilities 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
The Company derecognises a financial asset 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
The Company derecognises financial liabilities when its 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
The Company classifies its financial assets as measured at amortised cost or
measured at fair value through profit or loss on the basis of both: the
entity’s business model for managing the financial assets; and the
contractual cash flow characteristics of the financial asset.
Financial assets measured at amortised cost include cash, debtors and
prepayments.
A financial asset is measured at fair value through profit or loss if its
contractual terms do not give rise to cash flows on specified dates that are
solely payments of principal and interest (‘SPPI’) on the principal amount
outstanding or it is not held within a business model whose objective is
either to collect contractual cash flows, or to both collect contractual cash
flows and sell. The Company’s equity investments are classified as fair
value through profit or loss as they do not give rise to cash flows that are
SPPI.
Financial assets held at fair value through profit or loss are initially
recognised at fair value, which is usually the transaction price and are
subsequently valued at fair value.
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.
Financial liabilities
Financial liabilities, including borrowings through the Bank Overdraft, 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) Cash and Cash Equivalents
Cash and cash equivalents include any cash held at custodian and approved
depositories as well as holdings in Invesco Liquidity Funds plc – Sterling,
a triple-A rated money market fund. Cash and cash equivalents are defined as
cash itself or being readily convertible to a known amount of cash and are
subject to an insignificant risk of change in value with original maturities
of three months or less.
(e) Income
All dividends are taken into account on the date investments are marked
ex-dividend; other income from investments is taken into account on an
accruals basis. Where the Company elects to receive scrip dividends (i.e. in
the form of additional shares rather than cash), the equivalent of the cash
dividend foregone is recognised as income in the revenue account and any
excess in value of the shares received over the amount of the cash divided
recognised in capital. Deposit interest is taken into account on an accruals
basis. Special dividends representing a return of capital are allocated to
capital in the statement of comprehensive income and then taken to capital
reserves. Dividends will generally be recognised as revenue however all
special dividends will be reviewed, with consideration given to the facts and
circumstances of each case, including the reasons for the underlying
distribution, before a decision over whether allocation is to revenue or
capital is made.
(f) Expenses and Finance Costs
All expenses and finance costs are accounted for in the statement of
comprehensive income on an accruals basis.
The investment management fee and finance costs (including those related to
the bank overdraft facility) are allocated 85% to capital and 15% to revenue.
This is in accordance with the Board’s expected long term split of returns,
in the form of capital gains and income respectively, from the portfolio.
Investment transaction costs such as brokerage commission and stamp duty are
recognised in capital in the statement of comprehensive income. All other
expenses are allocated to revenue in the statement of comprehensive income.
(g) Taxation
Tax represents the sum of tax payable, withholding tax suffered and deferred
tax. Tax is charged or credited in the statement of comprehensive income. Any
tax payable is based on taxable profit for the year, however, as expenses
exceed taxable income no corporation tax is due. The Company’s liability for
current tax is calculated using tax rates that have been enacted or
substantially enacted by the balance sheet date.
Deferred taxation is recognised in respect of all temporary differences that
have originated but not reversed at the balance sheet date, where transactions
or events that result in an obligation to pay more tax in the future or right
to pay less tax in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is considered
probable that there will be suitable profits from which the future reversal of
the temporary differences can be deducted. Deferred tax assets and liabilities
are measured at the tax rates expected to apply in the period when the
liability is settled or the asset realised.
Investment trusts which have approval under Section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital gains.
(h) Dividends
Dividends are not accrued in the financial statements, unless there is an
obligation to pay the dividends at the balance sheet date. Proposed final
dividends are recognised in the financial year in which they are approved by
the shareholders.
(i) Consolidation
Consolidated accounts have not been prepared as the subsidiary, whose
principal activity was investment dealing, is not material in the context of
these financial statements. The subsidiary was dissolved on 28 February 2023.
Berry Starquest Limited did not trade during the year (prior to being
dissolved) and the preceding year and, as a dormant company, had exemption
under Section 480(1) of the Companies Act 2006 from appointing auditors or
obtaining an audit.
2. 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 dividends 4,443 4,124
UK special dividends 511 288
Overseas dividends 131 232
Deposit interest 3 2
Total income 5,088 4,646
A special dividend of £491,000 was recognised in capital during the year (2023: nil).
Overseas dividends include dividends received on UK listed investments where the investee company is domiciled outside of the UK.
3. Investment Management Fee
This note shows the fees due to the Manager. These are made up of the
management fee calculated and paid monthly and, for the previous year. This
fee is based on the value of the assets being managed.
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 182 1,029 1,211 206 1,165 1,371
Details of the investment management and secretarial agreement are given on
page 30 in the Directors’ Report.
At 31 January 2024, £106,000 (2023: £109,000) was accrued in respect of the
investment management fee.
4. Other Expenses
The other expenses of the Company are presented below; those paid to the
Directors and auditor are separately identified.
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Directors’ remuneration (i) 125 – 125 117 – 117
Auditor’s fees(ii):
– for audit of the Company’s
annual financial statements 49 – 49 45 – 45
Other expenses (iii) 250 3 253 222 3 225
424 3 427 384 3 387
(i) The Director’s Remuneration Report provides further information on
Directors’ fees.
(ii) Auditor’s fees include expenses but excludes VAT. The VAT is included
in other expenses.
(iii) Other expenses include:
• £11,800 (2023: £11,600) of employer’s National Insurance payable on
Directors’ remuneration. As at 31 January 2024, the amounts outstanding on
employer’s National Insurance on Directors’ remuneration was £1,000
(2023: £900), the amounts outstanding for Directors’ fee was £10,400
(2023: £9,700); and
• custodian transaction charges of £3,100 (2023: £3,200). These are
charged to capital.
5. Finance Costs
Finance costs arise on any borrowing facilities the Company has.
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Bank overdraft facility fee 1 6 7 1 6 7
Overdraft interest 22 124 146 – 1 1
23 130 153 1 7 8
The £15 million overdraft facility was renewed on 9 September 2023 and the
interest rate is at a margin above the Bank of England base rate.
6. Taxation
As an investment trust the Company pays no tax on capital gains and, as the
Company invested principally in UK equities, it has little overseas tax. In
addition, no deferred tax is required to provide for tax that is expected to
arise in the future due to differences in accounting and tax bases.
(a) Tax charge
2024 2023
£’000 £’000
Overseas taxation – –
(b) Reconciliation of tax charge
2024 2023
£’000 £’000
Loss before taxation (7,350) (38,125)
Theoretical tax at the current UK Corporation Tax rate of 24.03% (2023: 19%) (1,766) (7,244)
Effects of:
– Non-taxable UK dividends (1,036) (767)
– Non-taxable UK special dividends (241) (55)
– Non-taxable overseas dividends (24) (35)
– Non-taxable loss on investments 2,676 7,791
– Excess of allowable expenses over taxable income 390 309
– Disallowable expenses 1 1
Tax charge for the year – –
(c) Factors that may affect future tax changes
The Company has cumulative excess management expenses of £45,945,000 (2023:
£44,324,000) that are available to offset future taxable revenue.
A deferred tax asset of £11,486,000 (2023: £11,081,000) at 25% (2023: 25%)
has not been recognised in respect of these expenses since the Directors
believe that there will be no taxable profits in the future against which the
deferred tax assets can be offset
The Finance Act 2021 increases the UK Corporation Tax rate from 19% to 25%
effective 1 April 2023. The Act received Royal Assent on 10 June 2021.
Deferred tax assets and liabilities on balance sheets prepared after the
enactment of the new tax rate must therefore be re-measured accordingly, so as
a result the deferred tax asset has been calculated at 25%.
7. Return per Ordinary Share
Return per ordinary share is the amount of gain or loss generated for the
financial year divided by the weighted average number of ordinary shares in
issue.
2024 2023
Revenue Capital Total Revenue Capital Total
Return £’000 4,459 (11,809) (7,350) 4,055 (42,180) (38,125)
Return per ordinary share 13.18p (34.91)p (21.73)p 11.99p (124.70)p (112.71)p
The returns per ordinary share are based on the weighted average number of
shares in issue during the year of 33,826,929 (2023: 33,826,929)
8. Dividends on Ordinary Shares
The Company paid four dividends in the year – three interims and a final.
The final 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 third interim and final dividends are paid
after the balance sheet date.
2024 2023
Pence £’000 Pence £’000
Dividends paid from revenue in the year:
Third interim (prior year) 3.75 1,269 0.80 270
Final (prior year) 0.74 249 – –
First interim 3.85 1,302 3.75 1,269
Second interim 3.85 1,302 3.75 1,269
Total dividends paid from revenue 12.19 4,122 8.30 2,808
Dividends paid from capital in the year:
Third interim (prior year) – – 2.95 999
Final (prior year) 6.05 2,048 11.55 3,906
Total dividends paid from capital 6.05 2,048 14.50 4,905
Total dividends paid in the year 18.24 6,170 22.80 7,713
2024 2023
Pence £’000 Pence £’000
Dividends payable in respect of the year:
First interim 3.85 1,302 3.75 1,269
Second interim 3.85 1,302 3.75 1,269
Third interim 3.85 1,302 3.75 1,269
Final 5.41 1,831 6.79 2,295
16.96 5,737 18.04 6,102
The third interim dividend of 3.85p per share, in respect of the year ended 31
January 2024, was paid to shareholders on 12 March 2024. The Company’s
dividend policy was changed in 2015 so that dividends will be paid firstly
from current year revenue and any revenue reserves available, and thereafter
from capital reserves. The amount payable in respect of the year is shown
below:
2024 2023
£’000 £’000
Dividends in respect of the year:
– from revenue reserve 4,459 4,055
– from capital reserve 1,278 2,047
5,737 6,102
Dividend payable from the capital reserves of £1,278,000 (2023: capital
reserves of £2,047,000) as a percentage of year end net assets of
£161,395,000 (2023: £174,915,000) is 0.8% (2023: 1.2%). The Company has
£128,237,000 (2023: £134,201,000) of realised distributable capital reserves
at the year end.
9. Investments Held at Fair Value Through Profit and Loss
The portfolio is made up of investments which are listed or traded on a
primary stock exchange or AIM. Profit and losses in the year include:
• realised, usually arising when investments are sold; and
• unrealised, being the difference from cost on those investments still
held at the year end.
2024 2023
£’000 £’000
Investments listed on a primary stock exchange 118,717 116,417
AIM quoted investments 50,764 56,226
169,481 172,643
Opening valuation 172,643 219,818
Movements in year:
Purchases at cost 29,720 40,196
Sales proceeds (21,744) (46,361)
Loss on investments in the year (11,138) (41,010)
Closing valuation 169,481 172,643
Closing book cost 174,572 169,842
Closing investment unrealised (loss)/gain (5,091) 2,801
Closing valuation 169,481 172,643
The transaction costs amount to £90,000 (2023: £134,000) on purchases and
£12,000 (2023: £28,000) for sales. These amounts are included in determining
loss on investments held at fair value as disclosed in the Statement of
Comprehensive Income.
The Company received £21,744,000 (2023: £46,361,000) from investments sold
in the year. The book cost of these investments when they were purchased was
£24,989,000 (2023: £43,172,000) realising a loss of £3,245,000 (2023:
profit of £3,189,000). These investments have been revalued over time and
until they were sold any unrealised profits/losses were included in the fair
value of the investments.
10. Other Receivables
Other receivables are amounts which are due to the Company, such as monies due
from brokers for investments sold and income which has been earned (accrued)
but not yet received.
2024 2023
£’000 £’000
Amounts due from brokers 529 48
Overseas withholding tax recoverable 30 31
Income tax recoverable 4 –
Prepayments and accrued income 369 321
932 400
11. Other Payables
Other payables are amounts which must be paid by the Company, and include any
amounts due to brokers for the purchase of investments or amounts owed to
suppliers (accruals), such as the Manager and auditor.
2024 2023
£’000 £’000
Amounts due to brokers 48 2,974
Bank overdraft 8,753 –
Accruals 217 209
9,018 3,183
12. Share Capital
Share capital represents the total number of shares in issue, including shares
held in treasury.
2024 2023
Number £’000 Number £’000
Allotted, called-up and fully paid
Ordinary shares of 20p each 33,826,929 6,765 33,826,929 6,765
Treasury shares of 20p each 19,382,155 3,877 19,382,155 3,877
53,209,084 10,642 53,209,084 10,642
For the year to 31 January 2024, no shares were bought back into or issued
from treasury (2023: nil). Subsequent to the year end, no shares were bought
back into or issued from treasury.
13. Reserves
This note explains the different reserves attributable to shareholders. The
aggregate of the reserves and share capital (see previous note) make up total
shareholders’ funds.
The share premium arises whenever shares are issued at a price above the
nominal value plus any issue costs. The capital redemption reserve maintains
the equity share capital and arises from the nominal value of shares
repurchased and cancelled. The share premium and capital redemption reserve
are non-distributable.
Capital investment gains and losses are shown in note 9, and form part of the
capital reserve. The revenue reserve shows the net revenue retained after
payment of dividends. The capital (to the extent that it constitutes realised
profits) and revenue reserves are distributable by way of dividend. In
addition, the capital reserve is also distributable by way of share buy backs.
14. 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 477.12 517.09 161,395 174,915
Net asset value per ordinary share is based on net assets at the year end and
on 33,826,929 (2023: 33,826,929) ordinary shares, being the number of ordinary
shares in issue (excluding treasury) at the year end.
15. Subsidiary Undertaking
The dormant subsidiary, Berry Starquest Limited, was dissolved on 28 February
2023 (Net asset value at 31 January 2023: £100).
16. Risk Management, Financial Assets and Liabilities
Financial instruments comprise the Company’s investment portfolio as well as
any cash, borrowings, other receivables and other payables.
Financial Instruments
The Company’s financial instruments comprise its investment portfolio (as
shown on pages 23 and 24), cash, overdraft, other receivables and other
payables that arise directly from its operations such as sales and purchases
awaiting settlement and accrued income. The accounting policies in note 1
include criteria for the recognition and the basis of measurement applied for
financial instruments. Note 1 also includes the basis on which income and
expenses arising from financial assets and liabilities are recognised and
measured.
Risk Management Policies and Procedures
The Directors have delegated to the Manager the responsibility for the
day-to-day investment activities of the Company as more fully described in the
Directors’ Report.
As an investment trust the Company invests in equities and other investments
for the long-term, so as to meet its investment policy (incorporating the
Company’s investment objective). In pursuing its investment objective, 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 of the profits
available for dividends. Those related to financial instruments include market
risk, liquidity risk and credit risk. These policies are summarised below and
have remained substantially unchanged for the two years under review.
The main risk that the Company faces arising from its financial instruments is
market risk – this risk is reviewed in detail below. Since the Company
invests mainly in UK equities traded on the London Stock Exchange, liquidity
risk and credit risk are not significant. Liquidity risk is minimised as the
majority of the Company’s investments comprise a diversified portfolio of
readily realisable securities which can be sold to meet funding commitments as
necessary. In addition, an overdraft facility provides short-term funding
flexibility.
Credit risk encompasses the failure by counterparties to deliver securities
which the Company has paid for, or to pay for securities which the Company has
delivered, and cash balances. Counterparty risk is minimised by using only
approved counterparties. The Company’s ability to operate in the short-term
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, The Bank of New York Mellon (International) Limited, an A-1+ rated
financial institution. Cash balances are limited to a maximum of 2.5% of net
assets with any one deposit taker, with only approved deposit takers being
used, and a maximum of 7.5% of net assets for holdings in the Invesco
Liquidity Funds plc – Sterling, a triple-A rated money market fund.
Market Risk
The fair value or future cash flows of a financial instrument may fluctuate
because of changes in market prices. This market risk comprises three elements
– currency risk, interest rate risk and other price risk. The Company’s
Manager assesses the Company’s exposure when making each investment
decision, and monitors the overall level of market risk on the whole of the
investment portfolio on an ongoing basis. The Board meets at least quarterly
to assess risk and review investment performance. The Company may utilise
hedging instruments to manage market risk. Gearing is used to enhance returns,
however, this will also increase the Company’s exposure to market risk and
volatility.
1. Currency Risk
The exposure to currency risk is considered minor as the Company’s financial
instruments are mainly denominated in Sterling. At the current and preceding
year end, the Company held no foreign currency investments or cash, although
a small amount of dividend income was received in foreign currency.
During this and the previous year, the Company did not use forward currency
contracts to mitigate currency risk.
2. Interest Rate Risk
Interest rate movements will affect the level of income receivable on cash
deposits and the interest payable on variable rate borrowings. 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. Additionally, holdings in
Invesco Liquidity Funds plc – Sterling are subject to interest rate changes.
The Company has an uncommitted bank overdraft facility up to a maximum of 30%
of the net asset value of the Company or £15 million (2023: £15 million),
whichever is the lower; the interest rate is charged at a margin over the Bank
of England base rate. The Company uses the facility when required, at levels
approved and monitored by the Board.
At the year end £8.8 million of the overdraft was drawn down (2023: none).
Based on the maximum amount that can be drawn down at the year end under the
overdraft facility of £15 million (2023: £15 million), the effect of a
+/– 3.25% (2023: +/– 1%) in the interest rate would result in an
increase or decrease to the Company’s statement of comprehensive income of
£488,000 (2023: £150,000).
The Company’s portfolio is not directly exposed to interest rate risk.
3. Other Price Risk
Other price risks (i.e. the risk of changes in market prices, other than those
arising from interest rates or currency) may affect the value of the
investments.
Management of Other Price Risk
The Directors manage the market price risks inherent in the investment
portfolio by meeting regularly to monitor on a formal basis the Manager’s
compliance with the Company’s stated objectives and policies and to review
investment performance.
The Company’s portfolio is the result of the Manager’s investment process
and as a result is not correlated with the Company’s benchmark or the
markets in which the Company invests. Therefore, the value of the portfolio
will not move in line with the market but will move as a result of the
performance of the company shares within the portfolio.
If the value of the portfolio fell by 10% at the balance sheet date, the loss
after tax for the year would increase by £16 million (2023: loss after tax
for the year would increase by £17 million). Conversely, if the value of the
portfolio rose by 10%, the loss after tax would decrease (2023: loss after tax
would decrease) by the same amount.
Concentration of exposure to market price risk
There is a concentration of exposure to the UK, though it should be noted that
the Company’s investments may not be entirely exposed to economic conditions
in the UK, as many UK listed companies do much of their business overseas.
Fair Values of Financial Assets and Financial Liabilities
The financial assets and financial liabilities are either carried in the
balance sheet at their fair value (investments), or the balance sheet amount
is a reasonable approximation of fair value (due from brokers, dividends
receivable, accrued income, due to brokers, accruals, cash at bank and
overdraft).
Fair Value Hierarchy Disclosures
All of the Company’s investments are in the Level 1 category as set out in
IFRS 13, the three levels of which 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 has been determined on the basis of the
lowest level input that is significant to the fair value measurement of each
relevant asset/liability.
17. Maturity Analysis of Contractual Liability Cash Flows
The contractual liabilities of the Company are shown in note 11 and comprise
amounts due to brokers and accruals. All are paid under contractual terms. The
bank overdraft is repayable upon demand. For amounts due to brokers, this will
generally be the purchase date of the investment plus two business days;
accruals would generally be due within three months.
18. 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 13.
The main risks to the Company’s investments are shown in the Strategic
Report under the ‘Principal Risks and Uncertainties’ section on pages 14
and 15. 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 determines
dividend payments and has taken the powers, which it is seeking to renew, to
buy-back shares, either for cancellation or to be held in treasury, and to
issue new shares or sell shares held in treasury.
The Company is subject to externally imposed capital requirements with respect
to the obligation and ability to pay dividends by s1158 Corporation Tax Act
2010 and by the Companies Act 2006, respectively, and with respect to the
availability of the overdraft facility and by the terms imposed by the lender.
The Board regularly monitors, and has complied with, the externally imposed
capital requirements. This is unchanged from the prior year.
Total equity at 31 January 2024, the composition of which is shown on the
Balance Sheet on page 48, was £161,395,000 (2023: £174,915,000).
19. 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 January 2024 (2023: nil).
20. 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 UK-adopted international accounting standards the Company has identified
the Directors as related parties. The Directors’ remuneration and interests
have been disclosed on pages 37 to 39 with additional disclosure in note 4. No
other related parties have been identified.
Details of the Manager’s services and fees are disclosed in the Directors’
Report on page 30 and in note 3.
21. Post Balance Sheet Events
There are no significant events after the end of the reporting period
requiring disclosure.
22. 2024 Financial Information
The figures and financial information for the year ended 31 January 2024 are
extracted from the Company's annual financial statements for that year and do
not constitute statutory accounts. The Company's annual financial statements
for the year to 31 January 2024 have been audited but have not yet been
delivered to the Registrar of Companies. The Auditor's report on the 2024
annual financial statements was unqualified, did not include a reference to
any matter to which the Auditor drew attention without qualifying the report,
and did not contain any statements under Section 498 of the Companies Act
2006.
23. 2023 Financial Information
The figures and financial information for the year ended 31 January 2023 are
compiled from an extract of the published accounts for that year and do not
constitute statutory accounts. Those accounts have been delivered to the
Registrar of Companies and included the report of the Auditor which was
unqualified and did not contain a statement under Sections 498(2) or 498(3) of
the Companies Act 2006.
24. Annual Financial Report
The audited 2024 annual financial report will be available to shareholders,
and will be delivered to the Registrar of Companies, shortly. Copies may be
obtained during normal business hours from the Company’s Registered Office,
from its correspondence address, 43-45 Portman Square, London W1H 6LY, and
via www.invesco.co.uk/ipukscit.
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.
Notice of Annual General Meeting
THIS NOTICE OF ANNUAL GENERAL MEETING IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION. If you are in any doubt as to what action to take, you should
consult your stockbroker, solicitor, accountant or other appropriate
independent professional adviser authorised under the Financial Services and
Markets Act 2000. If you have sold or otherwise transferred all your shares in
Invesco Perpetual UK Smaller Companies Investment Trust plc, please forward
this document and the accompanying Form of Proxy to the person through whom
the sale or transfer was effected, for transmission to the purchaser or
transferee.
NOTICE IS GIVEN that the Annual General Meeting (‘AGM’) of Invesco
Perpetual UK Smaller Companies Investment Trust plc will be held at the
offices of Invesco at 43-45 Portman Square, London W1H 6LY at 12.00pm on 6
June 2024 for the following purposes:
Ordinary Business
1. To receive and consider the Annual Financial Report for the year ended 31
January 2024.
2. To approve the Directors’ Remuneration Policy.
3. To approve the Annual Statement and Report on Remuneration for the year
ended 31 January 2024.
4. To approve the final dividend of 5.41p for the year ended 31 January 2024.
5. To re-elect Bridget Guerin as a Director of the Company.
6. To re-elect Graham Paterson as a Director of the Company.
7. To re-elect Mike Prentis as a Director of the Company.
8. To elect Simon Longfellow as a Director of the Company.
9. To re-appoint the auditor, Ernst & Young LLP.
10. To authorise the Audit Committee to determine the auditor’s
remuneration.
Special Business
To consider and, if thought fit, to pass the following resolutions of which
resolution 11 and 15 will be proposed as an ordinary resolution and
resolutions 12 to 14 as special resolutions:
Authority to Allot Shares
11. That:
the Directors be generally and unconditionally authorised in accordance with
Section 551 of the Companies Act 2006 as amended from time to time prior to
the date of the passing of this resolution (the ‘Act’) to exercise all
powers of the Company to allot shares and grant rights to subscribe for, or
convert any securities into, shares up to an aggregate nominal amount (within
the meaning of Sections 551(3) and (6) of the Act) of £676,538, this being
10% of the Company’s issued ordinary share capital as at 30 April 2024,
such authority to expire at the conclusion of the next AGM of the Company or
the date 15 months after the passing of this resolution, whichever is the
earlier unless the authority is renewed or revoked at any other general
meeting prior to such time, but so that this authority shall allow the Company
to make offers or agreements before the expiry of this authority which would
or might require shares to be allotted, or rights to be granted, after such
expiry as if the authority conferred by this resolution had not expired.
Disapplication of Pre-emption Rights
12. That:
the Directors be and are hereby empowered, in accordance with Sections 570 and
573 of the Act to allot equity securities (within the meaning of Section 560
(1), (2) and (3) of the Act) for cash, either pursuant to the authority given
by resolution 11 set out above or (if such allotment constitutes the sale of
relevant shares which, immediately before the sale, were held by the Company
as treasury shares) otherwise, as if Section 561 of the Act did not apply to
any such allotment, provided that this power shall be limited:
(a) to the allotment of equity securities in connection with a rights issue
in favour of all holders of a class of equity securities where the equity
securities attributable respectively to the interests of all holders of
securities of such class are either proportionate (as nearly as may be) to the
respective numbers of relevant equity securities held by them or are otherwise
allotted in accordance with the rights attaching to such equity securities
(subject in either case to such exclusions or other arrangements as the
Directors may deem necessary or expedient in relation to fractional
entitlements or legal or practical problems under the laws of, or the
requirements of, any regulatory body or any stock exchange in any territory or
otherwise);
(b) to the allotment (otherwise than pursuant to a rights issue) of equity
securities up to an aggregate nominal amount of £676,538, this being 10% of
the Company’s issued ordinary share capital as at 30 April 2024; and
(c) to the allotment of equity securities at a price not less than the net
asset value per share (as determined by the Directors), and this power shall
expire at the conclusion of the next AGM of the Company or the date 15 months
after the passing of this resolution, whichever is the earlier unless the
authority is renewed or revoked at any other general meeting prior to such
time, but so that this power shall allow the Company to make offers or
agreements before the expiry of this power which would or might require equity
securities to be allotted after such expiry as if the power conferred by this
resolution had not expired; and so that words and expressions defined in or
for the purposes of Part 17 of the Act shall bear the same meanings in this
resolution.
Authority to Make Market Purchases of Shares
13. That:
the Company be generally and subject as hereinafter appears unconditionally
authorised in accordance with Section 701 of the Act to make market purchases
(within the meaning of Section 693(4) of the Act) of its issued ordinary
shares of 20p each in the capital of the Company (‘Shares’).
PROVIDED ALWAYS THAT:
(a) the maximum number of Shares hereby authorised to be purchased shall be
14.99% of the Company’s issued ordinary shares, this being 5,070,657 as at
30 April 2024;
(b) the minimum price which may be paid for a Share shall be 20p;
(c) the maximum price which may be paid for a Share must not be more than the
higher of: (i) 5% above the average of the mid-market values of the Shares
for the five business days before the purchase is made; and (ii) the higher of
the price of the last independent trade in the Shares and the highest then
current independent bid for the Shares on the London Stock Exchange;
(d) any purchase of Shares will be made in the market for cash at prices
below the prevailing net asset value per Share (as determined by the
Directors);
(e) the authority hereby conferred shall expire at the conclusion of the next
AGM of the Company or the date 15 months after the passing of this resolution,
whichever is the earlier, unless the authority is renewed or revoked at any
other general meeting prior to such time;
(f) the Company may make a contract to purchase Shares under the authority
hereby conferred prior to the expiry of such authority which will be executed
wholly or partly after the expiration of such authority and may make a
purchase of Shares pursuant to any such contract; and
(g) any Shares so purchased shall be cancelled or, if the Directors so
determine and subject to the provisions of Sections 724 to 731 of the Act and
any applicable regulations of the United Kingdom Listing Authority, be held
(or otherwise dealt with in accordance with Section 727 or 729 of the Act) as
treasury shares.
Period of Notice Required for General Meetings
14. THAT the period of notice required for general meetings of the Company
(other than AGMs) shall be not less than 14 clear days.
Continue in Existence
15. THAT the Company continue in existence as an investment trust.
Dated this 30 April 2024
By order of the Board
Invesco Asset Management Limited
Corporate Company Secretary
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