Half-year Report
09/02/2023 07:00
LEI: 549300JZQ39WJPD7U596
INVESCO SELECT TRUST PLC
HALF-YEARLY FINANCIAL REPORT
SIX MONTHS ENDED 30 NOVEMBER 2022
Unless noted below all page numbers refer to the Half-Yearly Financial Report
on the Company’s website.
Investment Objective
The Company’s investment objective is to provide shareholders with a choice
of investment strategies and policies, each intended to generate attractive
risk-adjusted returns.
The Company’s share capital comprises four share classes: UK Equity Shares,
Global Equity Income Shares, Balanced Risk Allocation Shares and Managed
Liquidity Shares, each of which has its own separate portfolio of assets and
attributable liabilities.
Investment Policy
The Company’s Investment Policy, which includes the objectives, policies,
risks and investment limits for the Company and the separate portfolios, is
disclosed in full on pages 39 to 41 of the Company’s 2022 Annual Financial
Report, which is available to view or download from each of the share class
web pages. Within this report, the investment objective of each portfolio is
shown at the start of the applicable Portfolio Manager’s Report.
The Company enables shareholders to adjust their asset allocation to reflect
their views of prevailing market conditions by means of an opportunity to
convert between share classes, free of UK capital gains tax, every three
months.
Financial Performance
Cumulative Total Returns((1)(2))
To 30 November 2022
Six One Three Five
UK Equity Share Portfolio Months Year Years Years
Net Asset Value –4.0% –2.9% 13.6% 19.2%
Share Price –3.9% –8.7% 4.6% 9.0%
FTSE All–Share Index 0.3% 6.5% 12.2% 22.8%
Six One Three Five
Global Equity Income Share Portfolio Months Year Years Years
Net Asset Value 1.9% 2.6% 29.9% 42.3%
Share Price –0.8% –6.0% 18.6% 29.7%
MSCI World Index (£) 3.9% –1.0% 35.0% 62.1%
Six One Three Five
Balanced Risk Allocation Share Portfolio Months Year Years Years
Net Asset Value –8.3% –8.0% 6.7% 11.4%
Share Price –17.8% –24.6% –11.8% –7.8%
Composite Benchmark Index ((3)) –12.9% –13.8% –1.7% 6.5%
ICE BoA Merrill Lynch 3 month LIBOR plus 5% per annum 3.2% 5.8% 16.4% 27.9%
Six One Three Five
Managed Liquidity Share Portfolio Months Year Years Years
Net Asset Value 0.8% 0.6% 4.2% 6.9%
Share Price 0.0% –5.8% –3.2% –2.5%
Period end Net Asset Value, Share Price and Discount
Net Asset Share
Value Price Premium/
Share Class (pence) (pence) (Discount)
UK Equity 183.35 165.00 (10.0)%
Global Equity Income 250.38 224.00 (10.5)%
Balanced Risk Allocation 155.72 127.00 (18.4)%
Managed Liquidity 106.71 96.00 (10.0)%
(1) Alternative Performance Measure (APM). See pages 41 to 43 for the
explanation and calculation of APMs. Further details are provided in the
Glossary of Terms and Alternative Performance Measures in the Company’s 2022
Annual Financial Report.
(2) Source: Refinitiv.
(3) With effect from 1 June 2021, the benchmark adopted by the Balanced
Risk Allocation Portfolio is comprised of 50% 30-year UK Gilts Index, 25% GBP
hedged MSCI World Index (net) and 25% GBP hedged S&P Goldman Sachs Commodity
Index. Prior to this, the benchmark was ICE BoA Merrill Lynch 3 month LIBOR
plus 5% per annum. Accordingly, both the new and old benchmark are shown.
Chairman’s Statement
Investment Objective and Policy
The Company’s investment objective is to provide shareholders with a choice
of investment strategies and policies, each intended to generate attractive
risk-adjusted returns.
The Company’s share capital comprises four share classes: UK Equity Shares,
Global Equity Income Shares, Balanced Risk Allocation Shares and Managed
Liquidity Shares, each of which has its own separate portfolio of assets and
attributable liabilities.
The Company enables shareholders to alter their asset allocation to reflect
their views of prevailing market conditions. Shareholders have the
opportunity, every three months, to convert between share classes, free of
capital gains tax and free of charges.
The Company’s investment policy is disclosed in full on pages 39 to 41 of
the Company’s 2022 Annual Financial Report.
Performance
In net asset value (NAV) terms, with dividends reinvested, the UK Equity Share
Portfolio returned –4.0% over the six months to the end of November 2022,
and –3.9% on the share price, compared with its benchmark, the FTSE
All-Share Index total return of +0.3%.
The Global Equity Income Share Portfolio returned +1.9% in NAV terms, and
–0.8% on the share price (both on a total return basis), compared with its
benchmark, the MSCI World Index (£) total return over the period of +3.9%.
The Balanced Risk Allocation Share Portfolio returned –8.3% in NAV terms,
and –17.8% on the share price (both on a total return basis). The
portfolio’s benchmark, the Composite Benchmark Index returned –12.9%.
The Managed Liquidity Share Portfolio had a total return of +0.8% based on NAV
and 0.0% based on the share price.
In the period under review many economies experienced persistently high
inflation adding to fears of the risk of a global recession. Investor
sentiment has remained weak as governments and central banks grapple with the
ongoing challenges brought about by the Covid-19 pandemic and subsequent
supply chain imbalances; the impact of the conflict in Ukraine, including the
effect on energy and commodity prices; as well as other geopolitical
uncertainties, not least the ‘zero tolerance’ Covid policy in China.
Significant and regular increases to interest rates have also piled pressure
on the consumer with global stock and bond markets generally trending lower.
The UK Equity Portfolio has been jointly managed throughout the period under
review by Ciaran Mallon and James Goldstone. During the period UK market
sentiment was driven by rapidly increasing inflation and rising interest rates
as well as political events both in the UK and abroad. The strongest
performance in the portfolio was seen in the healthcare and financial sectors,
with positive relative returns also seen in the energy and telecoms sectors.
Concerns around weaker consumer spending impacted performance of the
portfolio’s consumer discretionary holdings and the portfolio’s large
overweight position to utilities (viewed as an interest rate sensitive sector)
also weighed on performance.
The Global Equity Income Portfolio is managed by Stephen Anness. Whilst this
portfolio has underperformed the benchmark over the period, for the twelve
month period from November 2021 the portfolio has outperformed, achieving
+2.6% compared to –1.0% for the benchmark (both on a total return basis).
Underperformance during the period was concentrated on the portfolio’s
holdings in Asian equities, largely as a result of regional concerns of weaker
economic growth and geopolitical tensions. The portfolio continues to focus on
companies that meet key investment criteria: good quality companies with
strong balance sheets and free cash flow generation and where the investment
represents a significant discount to the company’s intrinsic value.
The Balanced Risk Allocation Portfolio by its very nature has a combination of
equities, bonds and commodities exposures and is managed by Invesco’s Global
Asset Allocation Team, based in Atlanta. A combination of global recession
fears, aggressive Central Bank hikes in interest rates to combat inflationary
pressures and geopolitical events resulted in negative returns across all
three asset classes.
The NAV total return on the Managed Liquidity Portfolio, managed by Derek
Steeden, was +0.8% whereas the share price total return was flat over the
period. Although the portfolio’s income yield has risen, concerns that
inflation will prove more challenging to bring down resulted in markets
expecting higher interest rates for a longer period, this impacted bond prices
and therefore returns. As has been mentioned in the past, this share class has
a lower risk profile than the Company’s other three share classes.
Nevertheless, it is not designed to be a cash fund, and as such is not without
risk to capital.
Our portfolio managers provide a detailed overview of their respective
portfolio’s performance during the period including, where applicable, key
contributors and detractors to performance and their views on the outlook in
their reports which follow on pages 4 to 25.
Dividends
The Board has declared equal first, second and third quarterly dividends for
the current year for each of the equity share classes. These were all at the
same level as last year. Accordingly, for the UK Equity Shares each of these
dividends was 1.50p, making 4.50p declared for the financial year to date. For
the Global Equity Income Shares each of these dividends was 1.55p, making
4.65p declared for the financial year to date.
Your Board recognises that income is an important component of the total
return of these share classes and the ability of companies to make dividend
distributions is closely monitored. As I reported in the Annual Financial
Report, with the current uncertainty of future income flows, due in particular
to the risk of entering a period of global recession and the ongoing conflict
in Ukraine, the Directors have not set dividend targets for the year to 31 May
2023. However, the Company’s dividend policy permits the payment of
dividends in the UK Equity, Global Equity Income and Managed Liquidity
Portfolios from capital and we intend to continue with the policy of a partial
augmentation from capital where the Board feels it appropriate to do so.
It continues to be the case that in order to maximise the capital return on
the Balanced Risk Allocation Shares, the Directors only intend to declare
dividends on the Balanced Risk Allocation Shares to the extent required,
having taken into account the dividends paid on the other share classes, to
maintain the Company’s status as an investment trust. No dividends have been
paid on the Balanced Risk Allocation Shares over the period.
As set out in the Company’s 2022 Annual Financial Report, a dividend of
1.00p has been paid in respect of the current financial year on the Managed
Liquidity Shares. This was paid from retained revenue reserves. Given the
income yield quantum involved it is unlikely that such payments will be more
frequent than annually and may indeed be less frequent.
Discount and Share Buy Backs
Your Company continues to operate a discount control policy for all four share
classes. The period, particularly the third quarter of 2022, saw investment
trust discounts in general, trend wider, and your Company’s shares were
similarly affected. Your Company’s shares’ discounts, other than for the
Balanced Risk Allocation Shares, have remained within a reasonably narrow
range and at 30 November 2022 were similar to the discounts at 31 May 2022.
During the period, the Company bought back 2,132,000 UK Equity shares at an
average price of 163.8p; 390,000 Global Equity Income Shares at an average
price of 221.3p; and 25,000 Balanced Risk Allocation Shares at an average
price of 123.0p.
Share Class Conversions
The Company enables shareholders to adjust their asset allocation to reflect
their views of future market conditions. Shareholders have the opportunity to
convert their holdings of shares into any other class of share, without
incurring any tax charge (under current legislation). The conversion dates for
the year ending 31 May 2023 are: 1 August 2022; 1 November 2022; 1 February
2023; and 2 May 2023. The total number of share class conversions that have
occurred over the first three conversion opportunities resulted in net flows
of £1.3 million out of the UK Equity Share Portfolio; of £1.1 million into
the Global Equity Income Share Portfolio; of £0.1 million into the Balanced
Risk Allocation Share Portfolio; and £0.1 million into the Managed Liquidity
Share Portfolio. Should you wish to convert shares at future conversion dates,
conversion forms, which are available on the Manager’s website at
www.invesco.co.uk/investmenttrusts, or CREST instructions must be received at
least ten days before the relevant conversion date.
Cancellation of the UK Equity and Balanced Risk Allocation Share Premium
Accounts
Following class consents and approval of shareholders at the Company’s
Annual General Meeting on 4 October 2022, the Court process to cancel the
share premium accounts of the UK Equity and Balanced Risk Allocation Share
Classes was implemented on 17 November 2022. Following the implementation the
entire share premium account of each of the UK Equity and Balanced Risk
Allocation Share Classes was cancelled, amounting to £121,700,000 and
£1,290,000 respectively. These distributable reserves provide the Company
with flexibility, subject to financial performance, to make future
distributions and/or, subject to shareholder authority, in buying back shares.
Outlook
Your Company’s investment returns and share ratings were negatively impacted
during the first half of its year, reflecting a period of continued economic
uncertainty on a global level. The second half of your Company’s year has
got off to a more promising start, with net asset values and share prices
recovering much of the lost ground experienced over recent months as investor
confidence starts to improve from depressed levels. NAV total returns from the
period 30 November 2022 to 31 January 2023 versus each respective benchmark
are as follows:
• UK Equity Share Portfolio: 4.3% v 3.0%
• Global Equity Income Share Portfolio: 7.0% v -0.8%
• Balanced Risk Allocation Share Portfolio: 1.0% v -2.5%
• Managed Liquidity Share Portfolio: 1.2% (no benchmark)
The performance of the underlying portfolios and the rating of the individual
share classes continue to be monitored closely by your Board.
During the period under review we witnessed even the best quality companies
performing negatively. With a continuing uncertain backdrop, your equity
portfolio managers still feel it is important to remain balanced across their
respective portfolios and focus on resilient companies that can successfully
manage through a more inflationary environment. Your managers believe it is
important to not position their portfolios for one macro outcome and seek
stock picking to be the driver of returns. Gearing remains a tool that can be
tactically employed in both equity portfolios, as I write, both equity
portfolios’ managers have reduced gearing following a period of underlying
share price increases. Your managers are of the opinion that dividend yields
will play a more significant part in total shareholder returns over the next
few years. They continue to identify some attractive opportunities which fit
their desired company characteristics of being incredibly cash generative,
with strong balance sheets and at an interesting valuation.
The Board continues to believe that the Company’s unique structure, and the
composition of the four portfolios, provide an effective investment tool to
position allocations for future market challenges and opportunities.
Victoria Muir
Chairman
8 February 2023
UK Equity Share Portfolio Performance Record
Total Return
Six Months Year To Year To Year To Year To
To 30 November 31 May 31 May 31 May 31 May
2022 2022 2021 2020 2019
Net Asset Value ((1)) –4.0% 6.8% 34.6% –12.4% –4.9%
Share Price ((1)) –3.9% 3.0% 31.6% –16.2% –3.1%
FTSE All-Share Index ((1)) 0.3% 8.3% 23.1% –11.2% –3.2%
Revenue return per share 3.47p 6.00p 3.90p 4.12p 5.73p
Dividends 3.00p 6.70p 6.65p 6.60p 6.60p
(1) Source: Refinitiv.
UK Equity Share Portfolio Managers’ Report
Q: What have been the key themes in UK equity markets over the six
months to 30 November 2022?
A: UK market sentiment was dominated by concerns around inflation as
the consumer price index (CPI) continued to rise, driven higher by increases
in the prices of imported goods and particularly the rising costs of energy,
all of which had been exacerbated by the war in Ukraine. In order to try and
keep control of the rapidly rising inflation figure the Bank of England raised
interest rates four times during the six month period from 1% to 3%, with an
additional with additional increases in December and February taking the Bank
of England Base rate to 4% currently.
The additional issues of US-China relations regarding Taiwan, and UK domestic
politics, which included two new Prime Ministers over the period, continued to
play a part in the background. The ill-fated ‘mini budget’ announced by
the Truss government caused turmoil in the gilt market. The Bank of England
intervened to provide liquidity to some market participants and after the
unfunded tax cuts were abandoned, yields gradually fell back to levels seen
before the budget. Sterling also recovered from its lows versus the US dollar.
Commodity prices during the period generally remained elevated although some
key commodities such as oil and gas and wheat have eased. Prices of these
commodities are of particular interest as they form a significant part of
input costs for businesses whether it be production, transportation,
ingredients or animal feed. Should prices fall further this would likely bring
inflation down as we move through 2023.
The end of the period was marked by an increase in industrial action by
various trade unions as the increased costs of living weighed on consumers.
This caused many key services to reduce productivity which will undoubtedly
have an impact on the UK economy. Estimates are that the impact of the
disruption since June 2022 currently stands at around £3.2 billion or 0.25%
of GDP. At a time when economic growth will be difficult to come by, a swift
conclusion to the industrial action would be welcome.
Q: How has the portfolio performed over the period and what have been
the key contributors and detractors to performance?
A: The portfolio underperformed the benchmark over the six months to
30 November 2022, with a net asset value total return of –4.0%. Over the
same period the FTSE All-Share Index total return rose 0.3%. Top and bottom
five contributors and detractors to performance:
30 November 2022 Performance
Portfolio Weight Impact
Key Contributors % %
PureTech Health 1.3 +0.42
Lancashire 1.4 +0.38
Bunzl 3.0 +0.22
Ashtead 2.0 +0.16
Experian 2.9 +0.15
30 November 2022 Performance
Portfolio Weight Impact
Key Detractors % %
Newmont 2.1 –0.78
PRS REIT 2.8 –0.65
Future 0.9 –0.31
Essentra 1.1 –0.31
Next 3.9 –0.30
The best performing sectors were healthcare and financials which produced
positive performances relative to the benchmark and demonstrated strong stock
selection. Energy and telecoms also produced positive relative returns. Weaker
performances over the period were seen from basic materials, the consumer
sectors and utilities.
The biggest contribution to positive performance versus the FTSE All-Share
Index was the portfolio’s holdings in the healthcare sector. The
portfolio’s holding of PureTech Health performed well following a year of
progress for a number of their platforms and products. PureTech Health is a
clinical stage biotherapeutics company which provides differentiated
treatments centred around the brain gut axis for debilitating diseases. The
business has an encouraging pipeline and exposure to a number of approved
products and others moving into late-stage studies which we believe have
significant potential. The portfolio’s holdings of AstraZeneca and Smith &
Nephew detracted from relative performance. AstraZeneca is a top 10 holding in
the portfolio, however the position size is underweight (versus the benchmark)
what is now the largest single component of the FTSE All-Share Index and
therefore detracted in relative terms. The share price had been under pressure
since August following potential litigation in the sector relating to
proton-pump inhibitors which treat heartburn. Following a favourable ruling by
a US federal judge, who rejected scientific evidence in a similar case
regarding a different pharmaceutical company, the share price regained some
ground.
The second best performing sector in the portfolio was financials. Lancashire
was a significant contributor to relative performance following encouraging
interim results whilst holdings of JTC, Hiscox and XPS Pensions were also
helpful. Within financials banking stocks Barclays and Lloyds were all
slightly weaker on a relative basis and detracted marginally from relative
performance. A rising and normalising interest rate environment for banks
should be more favourable and exposure to the sector has increased with the
addition of the holding in Lloyds. Jupiter Fund Management was a detractor
from relative performance as the business continues to struggle with
performance and fund outflows and the holding was disposed of.
Stock selection in the industrials sector, where the portfolio is slightly
overweight, was mixed. Bunzl, Experian and Ashtead contributed meaningfully to
performance, however these gains were eroded by the underperformance of
Essentra (which posted weaker-than-expected results), Chemring and Babcock
International.
Overall, the energy sector was a positive contributor to relative performance.
The portfolio’s overweight position in BP was the largest individual
contributor to relative performance following earnings beats and a planned
share buyback. Shell performed well but due to the slight underweight versus
the benchmark it detracted from relative performance.
Basic materials detracted from relative performance as gold miners Newmont and
Barrick Gold were weaker. Despite the concerns around persistent global
inflation the gold price was weaker in part due to ten year real interest
rates moving from heavily negative territory to their highest positive level
in over ten years as the market priced in a successful fight against inflation
by the Federal Reserve. Gold did however strengthen towards the end of the
period and this move continued post period end. Newmont also reported second
quarter adjusted earnings per share that were below expectations.
Additionally, not owning large international industrial metals & mining
companies Glencore and Rio Tinto was a further notable detractor to relative
performance.
Consumer discretionary was a weaker performing sector for the index and the
portfolio as concerns about the health of household finances weighed on share
prices. Detractors included Future, Next and Young & Co’s Brewery. However,
these are all well managed and well-balanced businesses which have a number of
growth drivers and we have confidence in the longer-term prospects for these
companies. Future specifically has been weaker due to the announcement that
the current Chief Executive plans to step down, but we feel that the
succession planning for the business has been carefully conducted and remain
confident that the business can continue to grow going forwards. In consumer
staples, not holding large international brands business Unilever and
international alcoholic beverages maker Diageo was unhelpful to relative
performance.
Exposure to utilities is a large overweight in the portfolio and the holdings
of Drax and National Grid were both weaker over the period. Both companies we
consider critical to the UK’s successful transition to be Net Zero by 2050.
Q: How has gearing impacted the performance over the period and what
is your strategy going forward?
A: The use of gearing in the portfolio over the period was slightly
detrimental to overall performance. Gearing at the start of the six month
period was around 11% and this was decreased to approaching 8% towards the
end. This level is below the limit of 25% set by the Board.
Gearing provides an opportunity to enhance the portfolio’s returns relative
to the FTSE All-Share Index. The appropriate level of gearing is under regular
review and after the interim period end has been reduced to almost zero
reflecting some recent strength in the market following a period of
volatility. Looking to the future our view remains that UK companies remain
attractively valued compared to their twenty year average and compared to
other developed markets such as the US. We will be looking to tactically
deploy gearing again when the market conditions are appropriate.
Q: How has the portfolio evolved over the period and how is it
currently positioned?
A: Changes to the portfolio have been made over the period as the
market environment has changed. The portfolio’s positions in Barratt
Developments, DFS Furniture, Restaurant Group, Johnson Service and Jupiter
Fund Management have been sold. The sale of Barratt was a reflection of our
view that housebuilders were likely to come under increasing pressure as
interest rates rise. DFS Furniture, Restaurant Group and Johnson Service were
all sold as the consumer comes under pressure with the rising cost of living
and pressure on disposable incomes. Jupiter Fund Management was sold as the
business continued to struggle with performance and fund outflows.
New positions in Lloyds and Man Group were introduced in the portfolio. The
portfolio already has a long standing holding in Barclays, but we think that a
holding in Lloyds will complement and diversify our banking exposure. Lloyds
has the largest share of retail deposits in the UK compared with its peers and
less exposure to corporate business. The business has a new leadership team
with a clear mid-term growth strategy and return potential. Man Group is a
leading hedge fund manager with a strong track record of investment return and
performance fee generation which should support significant capital returns
and share buy backs. The business has multiple and diversified sources of
performance fee generation across a broad client base, all of which reduces
the risk.
AstraZeneca, Vodafone and Tesco were reduced within the portfolio whilst the
existing holdings of Phoenix, Coats, Lancashire and Cranswick were added to.
On a sectoral basis and relative to the FTSE All-Share Index, we remain
over-weight utilities and consumer discretionary stocks. The overweight to
utilities offers an inflation-linked return that in our view remains
underappreciated. We have also maintained our exposure to energy as these
companies stand to benefit from higher oil prices as limited supply growth is
outstripped by stronger demand as China continues to reopen. It is also
possible that they will benefit from a rerating as they are rewarded for their
increased commitment to invest in low carbon energy projects.
We remain under-weight consumer staples which we see as expensive, and
financials in general but we do have a sizeable position in Barclays and now a
holding in Lloyds.
Q: Do you have an example of ESG engagement during the period?
A: SSE – in 2022, we engaged with the company on at least five
occasions. We engaged in direct one-on-one calls, site visits and group
conference meetings, and regular post-earnings results updates. The engagement
process, goals and objectives are well aligned with Invesco’s core ESG
principles and priorities, which include climate change, social equity and
good governance. To engage effectively, we regularly meet with C-suite and
director level representatives. This year’s engagement builds on our
previous multi-year dialogues around capital allocation, energy transition and
the company’s pathway toward Net-Zero.
The main topics of discussion with the company over the past twelve months
have centered around energy transition and renewable power generation. SSE is
the largest investor in wind generation in the UK, coupled with hydroelectric
and dispatchable power production. The company spoke to its ambitious plans on
Carbon Capture and Storage (CCS) and target dates which we intend to monitor
closely for material progress. We also covered the topics of windfall taxes
and health and safety following the death of a contractor.
During the 2022 AGM season, we additionally engaged with the company on
governance issues to specifically discuss succession planning and the
remuneration policy. On succession planning they have initiated developmental
process for the assessment of the internal talent and have strong internal
candidates and a focus on increasing diversity. On remuneration they will be
putting their policy to shareholders for approval and will have an increased
focus on ESG metrics over the longer term.
As an outcome of our successful engagements with the company, at the 2022 AGM
we supported the company remuneration proposals and their Net Zero transition
plans.
Q: What is your outlook for the next twelve months and beyond? Why
invest in the UK now?
A: Despite the headwinds of high inflation and higher interest rates
we are optimistic that inflation will moderate over the course of 2023. We
also recognise that uncertainties in the global economy and the geo-political
landscape continue to make the range of possible outcomes particularly wide.
In order to attempt to mitigate these headwinds we have created a balanced
portfolio that we believe can perform in a range of economic and market
regimes. This balance is expected to reduce the reliance on unpredictable
economic or market outcomes and leave the performance of the portfolio to be
driven by the performance of the individual companies we have invested in.
We spend a great deal of time speaking to the management teams of companies.
Their knowledge and expertise give us a great deal of insight into the sectors
and economies in which they operate, often these insights can be more
informative than regional economic data. It is because of this global
footprint of the companies in the FTSE All-Share Index that we often say that
the UK equity market is not a proxy for the UK economy. More than 75% of
corporate earnings in the FTSE All-Share Index are derived internationally.
Our analysis shows UK equities to be cheap across a blend of valuation
measures, relative to history, and in particular relative to the US market.
This opportunity is evident in every major sector, not just at an index level.
The current environment remains difficult to predict and whilst we believe
that inflation may begin to fall quite quickly later this year, the fact
remains that this will be largely due to base effects coming through. Prices
for many of the goods and services that have risen sharply over the last year,
as a result of rising input costs, specifically energy prices and second order
effects of this, will likely remain elevated. Those companies that are able to
pass on or absorb these increases, will likely fair better in our view.
As part of the total return objective of the Trust we consider the level of
income received in the portfolio very carefully. The portfolio has an
attractive dividend yield and we would hope that the dividends will grow over
time. We are careful to ensure that a company’s dividend is satisfactorily
covered by earnings, and that these earnings are not likely to fluctuate too
wildly in the future as a result of volatile commodity prices for example. A
company’s dividend policy can also have a big influence on an investment
decision. These factors are carefully evaluated so that we can have a degree
of confidence in the level of income that the portfolio will generate.
We remain confident in the long-term prospects of the companies that we own in
the UK Equity Portfolio which comprises our highest conviction ideas. The
portfolio is concentrated around high quality, cash generative businesses,
with strong liquidity which we believe are likely to further enhance their
competitive positions in the year ahead.
Ciaran Mallon & James Goldstone
Joint Portfolio Managers
8 February 2023
UK Equity Share Portfolio List of Investments
AT 30 NOVEMBER 2022
Ordinary shares listed in the UK unless stated otherwise
Market
Value % of
Company Sector† £’000 Portfolio
Shell Oil, Gas and Coal 8,697 6.2
BP Oil, Gas and Coal 7,161 5.1
SSE Electricity 6,630 4.7
RELX Media 6,240 4.5
National Grid Gas, Water and Multi-Utilities 6,215 4.4
Next Retailers 5,426 3.9
Barclays Banks 5,216 3.7
AstraZeneca Pharmaceuticals and Biotechnology 4,861 3.5
Barrick Gold – Canadian Listed Precious Metals and Mining 4,539 3.2
Bunzl General Industrials 4,153 3.0
Top Ten Holdings 59,138 42.2
British American Tobacco Tobacco 4,113 2.9
Experian Industrial Support Services 4,069 2.9
PRS REIT Real Estate Investment Trusts 3,989 2.8
Drax Electricity 3,973 2.8
Legal & General Life Insurance 3,579 2.6
Ferguson Industrial Support Services 3,194 2.3
Newmont – US Listed Precious Metals and Mining 2,994 2.1
United Utilities Gas, Water and Multi-Utilities 2,792 2.0
Ashtead Industrial Transportation 2,778 2.0
Croda International Chemicals 2,604 1.9
Top Twenty Holdings 93,223 66.5
Coats General Industrials 2,552 1.8
Young & Co’s Brewery – Non-Voting (AIM) Travel and Leisure 2,452 1.7
Phoenix Life Insurance 2,441 1.7
Compass Consumer Services 2,328 1.7
Tesco Personal Care, Drug and Grocery Stores 2,285 1.6
Smith & Nephew Medical Equipment and Services 2,282 1.6
Chemring Aerospace and Defence 2,251 1.6
JTC Investment Banking and Brokerage Services 2,038 1.6
Whitbread Travel and Leisure 2,028 1.4
Lancashire Non-Life Insurance 1,975 1.4
Top Thirty Holdings 115,855 82.6
PureTech Health Pharmaceuticals and Biotechnology 1,833 1.3
Vodafone Telecommunications Service Providers 1,823 1.3
JD Sports Fashion Retailers 1,786 1.3
Hiscox Non-Life Insurance 1,696 1.2
Essentra Industrial Support Services 1,548 1.1
XPS Pensions Investment Banking and Brokerage Services 1,510 1.1
Hays Industrial Support Services 1,464 1.1
CVS (AIM) Consumer Services 1,461 1.1
Nichols (AIM) Beverages 1,446 1.0
Babcock International Aerospace and Defence 1,440 1.0
Top Forty Holdings 131,862 94.1
Chesnara Life Insurance 1,439 1.0
Cranswick Food Producers 1,288 0.9
Lloyds Banks 1,267 0.9
Future Media 1,264 0.9
Treatt Chemicals 1,169 0.8
Sirius Real Estate Real Estate Investment Trusts 1,139 0.8
Man Group Investment Banking and Brokerage Services 561 0.4
Sherborne Investors (Guernsey) C Investment Banking and Brokerage Services 333 0.2
Barrick Gold – US Listed Precious Metals and Mining 49 –
Total Holdings 49 (2022: 51) 140,371 100.0
(AIM) Investments quoted on AIM.
(†) FTSE Industry Classification Benchmark.
UK Equity Share Portfolio Income Statement
Six months ended 30 November 2022 Six months ended 30 November 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains on investments held at fair value – (8,554) (8,554) – 5,663 5,663
Losses on foreign exchange – (5) (5) – (4) (4)
Income 2,948 – 2,948 2,754 – 2,754
Investment management fees – note 2 (106) (246) (352) (124) (289) (413)
Other expenses (248) (1) (249) (184) (2) (186)
Net return before finance costs and taxation 2,594 (8,806) (6,212) 2,446 5,368 7,814
Finance costs – note 2 (54) (126) (180) (21) (48) (69)
Return before taxation 2,540 (8,932) (6,392) 2,425 5,320 7,745
Tax – note 3 (28) – (28) (20) – (20)
Return after taxation for the financial period 2,512 (8,932) (6,420) 2,405 5,320 7,725
Return per ordinary share – note 4 3.47p (12.35)p (8.88)p 2.95p 6.52p 9.47p
Summary of Net Assets
At At
30 November 31 May
2022 2022
£’000 £’000
Fixed assets 140,371 158,450
Current assets 854 1,126
Creditors falling due within one year, excluding borrowings (314) (452)
Bank facility (10,750) (15,750)
Net assets 130,161 143,374
Net asset value per ordinary share – note 5 183.35p 194.35p
Gearing:
– gross 8.3% 11.0%
– net 8.0% 10.8%
Summary of Changes in Net Assets
At At
30 November 31 May
2022 2022
£’000 £’000
Net assets brought forward 143,374 166,334
Shares bought back and held in treasury (3,516) (22,245)
Share conversions (1,109) (4,956)
Return after taxation for the financial period/year (6,420) 9,454
Dividend paid (2,168) (5,213)
Net assets at the period/year end 130,161 143,374
Global Equity Income Share Portfolio Performance Record
Total Return
Six Months Year To Year To Year To Year To
To 30 November 31 May 31 May 31 May 31 May
2022 2022 2021 2020 2019
Net Asset Value ((1)) 1.9% 9.6% 35.9% –6.4% –1.3%
Share Price ((1)) –0.8% 4.4% 32.6% –6.1% –0.1%
MSCI World Index (£) ((1)) 3.9% 7.4% 22.3% 8.9% 5.3%
Revenue return per share 1.84p 4.85p 3.95p 5.39p 6.90p
Dividends 3.10p 7.15p 7.10p 7.05p 6.90p
(1) Source: Refinitiv.
Global Equity Income Share Portfolio Manager’s Report
Q: Can you comment on the key drivers for global equity markets over
the last six months?
A: Newsflow for equities has generally been negative over the past six
months. Rising inflation and the sharp rises in interest rates imposed by
central banks in order to counteract it were the key macroeconomic events. As
a result, expectations of a recession in 2023 with declining corporate
earnings have grown more acute.
Commodity prices through the period have remained high although the price of
oil and gas and soft commodities such as wheat have fallen somewhat through
the autumn. As a result, there are grounds for optimism that inflation may
fall quite sharply as we go through 2023.
Geopolitics has remained a concern for investors. The Russia-Ukraine war shows
no sign of resolution, and tension between China and the US over Taiwan has
remain elevated. China’s continued pursuit of a ‘zero Covid’ policy kept
economic activity in Asia subdued.
Within equity markets the main feature was the continued underperformance of
highly valued former market leaders, particularly in the technology and
ecommerce space. Higher interest rates negatively impact their valuations
dramatically. Those companies in the relatively early stages of development,
still loss making, were particularly hard hit. Relative outperformers were
concentrated in sectors benefitting from high commodity prices such as oil and
gas and materials as well as sectors seen as safe havens in more difficult
times such as healthcare.
Q: How has the portfolio performed over the period?
A: Over the last six months (in £ terms, total return basis) the
portfolio returned +1.9%, underperforming its benchmark MSCI World Index (in
£ terms, total return basis) which delivered +3.9% over the same time period.
Over the twelve month period from November 2021 the portfolio has outperformed
achieving +2.6% compared to -1.0% for the benchmark.
The top and bottom five contributors to performance are shown below.
30 November 2022
Portfolio Performance
Weight Impact
Stock name % %
Verallia 5.2 0.61
Besi 2.3 0.58
Herc Holdings 3.0 0.55
3i 6.4 0.35
Next 1.8 0.33
30 November 2022
Portfolio Performance
Weight Impact
Stock name % %
Link REIT 2.6 –0.75
American Tower 4.5 –0.63
Taiwan Semiconductor Manufacturing (TSMC) 2.3 –0.54
Tencent 1.3 –0.48
Orron Energy 0.0 –0.35
Our underperforming names were concentrated in Asia, with Link REIT, the Hong
Kong listed property company, weak due primarily to regional economic growth
concerns and regional political turmoil. TSMC underperformed partly due to
China/Taiwan tension, but also global concerns around a downturn in the
semiconductor cycle. Tencent likewise was relatively weak to due regional
economic growth concerns and rotation away from ecommerce related names. We
remain positive on all these companies in the medium term; TSMC is uniquely
well positioned in the semiconductor industry, and both Tencent and Link REIT
are well-managed businesses, attractively valued, geared into the potential
post-Covid recovery in the region. Elsewhere, the key underperformer was
American Tower, the US listed mobile telephony tower operator. It continues to
execute well on its business model, however, rising interest rates negatively
impacted its market valuation.
On the positive side, we enjoyed strong performance from Verallia, the
French-listed glass packaging manufacturer. We were pleased to see our
investment thesis playing out as Verallia delivered strong financial
performance despite rising energy costs.
Our largest portfolio position, 3i, the UK listed private equity business, was
a positive contributor primarily as a result of continued strong performance
of its European discount retail chain (called Action). Also in the UK, we
added Next late in the review period which performed well post purchase, we
felt this well-managed business had become oversold in all the pessimism
regarding the outlook for the UK economy.
The two other leading performers were also examples of high-quality businesses
we felt the market through the summer had become overly pessimistic on; Herc
Holdings is a medium-sized US based industrial equipment company, and Besi is
a Dutch based semiconductor equipment company with leading edge technology
enabling lower energy consumption and size reduction in many technology
applications.
Q: Has the positioning of the portfolio changed significantly in the
period?
A: Neither our geographical nor sector positionings have changed
meaningfully over the last six months.
To reiterate comments we have made in previous reports, we do not allocate to
particular countries or sectors, rather our portfolio is built from the bottom
up with companies that meet our key investment criteria, namely:
Good Quality: We seek businesses that are strong enough to thrive through the
economic cycle. Competitively advantaged within their industry, with strong
balance sheets and no obvious ESG (Environmental, Social and Governance)
risks. Their management teams need to have demonstrated capital allocation
policies that have created value for all shareholders.
Cashflow: We view strong free cashflow as the best measure of a company’s
health. It allows the company to pursue opportunities which enhance
shareholder value: investing at attractive rates, paying dividends, buying
back shares or paying down debt.
Price: We need to be able to buy the company at a price that represents a
significant discount to intrinsic value. In short, we want to buy good
companies when they are ‘on sale’.
Some individual names within the portfolio have of course changed. We disposed
of our holding in Amazon over the summer as we became less confident in the
short-term growth trajectory of its Cloud business (AWS) and also concerns
around the rapid growth in its cost base. We also reduced exposure to Alphabet
on concerns of a slowdown in the advertising cycle, although we remain
attracted to the business model in the longer term. We completed our disposal
of Nestlé, a great business but one we felt had become fairly valued.
New holdings included Intercontinental Exchange (ICE) a US listed financial
and exchange trading company which we believe will be resilient in a world of
higher interest rates and retains significant long term growth potential. Both
Next and Besi were new additions in the period which have already been
discussed.
We also added Ferguson, a US-listed electrical products distributor whose
business is predominantly in the US. It trades at a discount we feel is
unjustified compared to its US competitors given its long term history of
value creation for shareholders.
There has been no material change to portfolio gearing, it has edged down
slightly to around 7.5% from 8% but does reflect any incremental caution on
the market on our part.
Global
Equity MSCI
Income World
Portfolio Metric Portfolio Index
Price/Earnings ratio (next 12 months forecast) 13.3 15.1
Dividend yield (next 12 months forecast) 2.9 2.4
Free cashflow yield 6.2 6.2
Return on Equity 17.5 14.8
Price/Book Value 2.3 2.6
Source: Bloomberg, January 2023.
Q: Do you have an example of ESG engagement during the period?
A: Aker BP – we engaged with the company to better understand
progress the company is making in further reducing its carbon footprint. Its
emissions are currently around 4.3kg CO2 per barrel of oil equivalent
produced, and it is targeting net zero Scope 1 and 2 emissions by 2030, ahead
of the larger oil companies.
We discussed progress the company is making towards this goal, in particular
the electrification of its offshore facilities using onshore based renewable
generation. The company informed us plans are on schedule regarding
electrifying the Edvard Grieg and Ivar Aasen fields by the end of 2022. We
also discussed carbon capture projects which will be necessary if the company
is to be able to offset its Scope 3 emissions. The company aims to utilise its
engineering skills around injection and storage and participate in a carbon
capture and storage round recently licenced by the Norwegian government.
Q: After a difficult 2022 for Global Equities, how do you see 2023?
A: The outlook continues to be extremely difficult to forecast and is
as challenging to predict as we can remember. Furthermore, we devote the bulk
of our efforts to stock selection and analysis, rather than forecasting
market/macro movements.
Has global inflation peaked? Our answer would be yes, and we would expect
inflation and interest rate expectations to decline as we go through 2023. The
message we get from companies we meet is that input costs are starting to
moderate and supply chain bottlenecks have eased.
Our sense is that some degree of slowdown is very much consensus opinion but
interestingly earnings estimates do not reflect any significant fall in
economic output. After the share price falls of 2022, it is tempting to think
a recession is already discounted in equity markets. However, on our
estimates, consensus corporate earnings forecasts for 2023 are currently only
4% below those at the peak of the market at the end of 2021, which implies all
the bad news may not yet be priced in.
Should inflationary pressures ease significantly in the first half of 2023
this may help drive better corporate and consumer cashflows thereby negating
much of the current negative sentiment. Such macro developments would make
positive returns from equities more likely in our view.
We also feel it is likely that dividend yield will play a more significant
part of TSR (total shareholder return) in the coming years than it has in the
recent past, where returns were driven by a rerating of equities driven by
falling interest rates. We continue to focus on finding companies which pay an
attractive yield but, critically, can grow that dividend over the long run. We
do not feel it right to prioritise high current dividend yields at the expense
of business quality and future earnings and dividend growth, as that approach
in our view often leads to lower total shareholder returns in the longer run.
The focus of our efforts continues to be on identifying idiosyncratic stock
specific opportunities in all sectors of the market. Given the tightening
liquidity conditions prevailing throughout the world, our attention will be
particularly focused on balance sheet strength and free cashflow generation.
Stephen Anness
Portfolio Manager
8 February 2023
Global Equity Income Share Portfolio List of Investments
AT 30 NOVEMBER 2022
Ordinary shares unless stated otherwise
Market
Value % of
Company Sector† Country £’000 Portfolio
3i Diversified Financials United Kingdom 4,322 6.4
Verallia Materials France 3,542 5.2
AIA Insurance Hong Kong 3,086 4.6
Coca-Cola Food, Beverage & Tobacco United States 3,086 4.6
American Tower Real Estate United States 3,080 4.5
Microsoft Software & Services United States 3,065 4.5
Broadcom Semiconductors & Semiconductor Equipment United States 2,580 3.8
Zurich Insurance Insurance Switzerland 2,426 3.6
Standard Chartered Banks United Kingdom 2,334 3.4
Kone – B Shares Capital Goods Finland 2,046 3.0
Top Ten Holdings 29,567 43.6
Herc Holdings Capital Goods United States 2,036 3.0
Universal Music Media & Entertainment Netherlands 1,925 2.8
Aker BP Energy Norway 1,815 2.7
Novartis Pharmaceuticals, Biotechnology & Life Sciences Switzerland 1,805 2.6
Link REIT Real Estate Hong Kong 1,745 2.6
KKR & Co Diversified Financials United States 1,722 2.5
JPMorgan Chase Banks United States 1,637 2.4
Samsung Electronics – preference shares Technology Hardware & Equipment South Korea 1,633 2.4
Besi Semiconductors & Semiconductor Equipment Netherlands 1,567 2.3
Progressive Insurance United States 1,539 2.3
Top Twenty Holdings 46,991 69.2
Nvidia Semiconductors & Semiconductor Equipment United States 1,524 2.3
Taiwan Semiconductor Manufacturing Semiconductors & Semiconductor Equipment Taiwan 1,521 2.3
Intercontinental Exchange Diversified Financials United States 1,512 2.2
Union Pacific Transportation United States 1,501 2.2
RELX Commercial & Professional Services United Kingdom 1,442 2.1
Home Depot Retailing United States 1,314 2.0
Melrose Industries Capital Goods United Kingdom 1,291 1.9
Ferguson Capital Goods United Kingdom 1,231 1.8
Next Retailing United Kingdom 1,209 1.8
Canadian Pacific Railway Transportation Canada 1,178 1.7
Top Thirty Holdings 60,714 89.5
Texas Instruments Semiconductors & Semiconductor Equipment United States 1,070 1.6
Installed Building Products Consumer Durables & Apparel United States 868 1.3
Tencent (R) Media & Entertainment China 846 1.3
PepsiCo Food, Beverage & Tobacco United States 800 1.2
Danaher Pharmaceuticals, Biotechnology & Life Sciences United States 772 1.1
Volkswagen – preference shares Automobiles & Components Germany 667 1.0
Alphabet Media & Entertainment United States 566 0.8
Rolls-Royce Capital Goods United Kingdom 494 0.7
Ping An Insurance (H) Insurance China 368 0.5
Royal Unibrew Food, Beverage & Tobacco Denmark 298 0.4
Top Forty Holdings 67,463 99.4
The TJX Companies Retailing United States 254 0.4
Accenture – A Shares Software & Services United States 142 0.2
Sberbank – ADR (UQ) Banks Russia – –
Total Holdings 43 (2022: 41) 67,859 100.0
UQ Unquoted due to delisting of Russian securities.
ADR American Depositary Receipts – are certificates that represent shares in
the relevant stock and are issued by a US bank. They are denominated and pay
dividends in US dollars.
H H-Shares – shares issued by companies incorporated in the
People’s Republic of China (PRC) and listed on the Hong Kong Stock Exchange.
R Red Chip Holdings – holdings in companies incorporated outside
the PRC, listed on the Hong Kong Stock Exchange, and controlled by PRC
entities by way of direct or indirect shareholding and/or representation on
the board.
† MSCI and Standard & Poor’s Global Industry Classification
Standard.
Global Equity Income Share Portfolio Income Statement
Six months ended 30 November 2022 Six months ended 30 November 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Gains on investments held at fair value – 790 790 – 4,628 4,628
Gains on foreign exchange – 12 12 – 6 6
Income 702 – 702 663 – 663
Investment management fees - note 2 (51) (121) (172) (51) (119) (170)
Other expenses (83) (1) (84) (70) (1) (71)
Net return before finance costs and taxation 568 680 1,248 542 4,514 5,056
Finance costs – note 2 (24) (54) (78) (9) (22) (31)
Return before taxation 544 626 1,170 533 4,492 5,025
Tax – note 3 (84) – (84) (55) – (55)
Return after taxation for the financial period 460 626 1,086 478 4,492 4,970
Return per ordinary share – note 4 1.84p 2.51p 4.35p 1.96p 18.45p 20.41p
Summary of Net Assets
At At
30 November 31 May
2022 2022
£’000 £’000
Fixed assets 67,859 67,630
Current assets 778 566
Creditors falling due within one year, excluding borrowings (798) (208)
Bank facility (4,800) (5,350)
Net assets 63,039 62,638
Net asset value per ordinary share – note 5 250.38p 249.00p
Gearing:
– gross 7.6% 8.5%
– net 7.4% 8.2%
Summary of Changes in Net Assets
At At
30 November 31 May
2022 2022
£’000 £’000
Net assets brought forward 62,638 55,602
Shares bought back and held in treasury (869) (1,337)
Share conversions 954 4,823
Return after taxation for the financial period/year 1,086 5,307
Dividend paid (770) (1,757)
Net assets at the period/year end 63,039 62,638
Balanced Risk Allocation Share Portfolio Performance Record
Total Return
Six Months Year To Year To Year To Year To
To 30 November 31 May 31 May 31 May 31 May
2022 2022 2021 2020 2019
Net Asset Value ((1)) –8.3% 0.3% 25.4% –3.1% –2.7%
Share Price ((1)) –17.8% –5.2% 26.4% –6.9% –0.7%
Composite Benchmark ((2)) –12.9% –6.1% 16.8% 2.8% –1.3%
ICE BoA Merrill Lynch 3 month LIBOR plus 5% per annum ((1)) 3.2% 5.1% 5.1% 5.9% 5.8%
(1) Source: Refinitiv.
(2) With effect from 1 June 2021, the benchmark adopted by the Balanced Risk
Allocation Portfolio is comprised of 50% 30-year UK Gilts Index, 25% GBP
hedged MSCI World Index (net) and 25% GBP hedged S&P Goldman Sachs Commodity
Index. Prior to this, the benchmark was ICE BoA Merrill Lynch 3 month LIBOR
plus 5% per annum. Accordingly, both the new and old benchmark are shown.
Source: Refinitiv/Bloomberg.
Balanced Risk Allocation Share Portfolio Manager’s Report
Q: How has the strategy performed in the period under review?
A: The Balanced Risk Allocation Portfolio NAV total return for the six
months to 30 November 2022 was –8.3%. All three asset classes in which the
portfolio invests generated negative absolute performance for the period.
Commodities fared the worst on growing fears of a global recession, while
bonds were negatively impacted by aggressive interest rate hikes by central
banks seeking to tame inflation. Amidst the high inflation readings,
commodities largely held up better on a relative basis for the first half of
the year. However, concerns that the most aggressive interest rate hike
campaign in decades will push economies into recession weighed significantly
on demand for economically sensitive commodities such as energy and industrial
metals. This created an environment that was challenging for all asset classes
and portfolios constrained to a long-only construct. Equities also struggled
over the period as an environment of higher rates, higher inflation and
geopolitical turmoil dampened risk appetite. This unusual six- month period
also continued to witness a positive correlation between equities and bonds
due to increases in inflation and inflation volatility, along with steep
declines for commodities in June and September on renewed concerns of a growth
slowdown. Periods in which all three asset classes fall tend to be rare and
short-lived.
Q: What were the biggest contributors and detractors to performance?
A: Strategic exposure to commodities was the largest detractor from
performance as negative results in June and September outweighed smaller gains
in the other months. All four commodity complexes fell as persistently high
inflation forced central bankers to take aggressive actions that are fueling
global recession concerns. Energy was the worst performer due to double-digit
price declines in oil and refined products. Precious metal prices finished
lower due to rising real yields and the rising US dollar. Industrial metals
were pressured by global growth concerns, especially in China, where strict
Covid-19 measures are weakening demand and reducing economic output. The
strong US dollar also weighed broadly on agriculture.
Strategic exposure to government bonds also detracted from performance as high
inflation readings has bond investors expecting continued interest rate hikes,
which reduce the attractiveness of bonds. The largest detractor was UK gilts,
followed by US treasuries and German bunds. All three markets were negatively
impacted by interest rate hikes as well as comments from central bank leaders
indicating that rates were far from where they need to be to counter
inflation.
Strategic exposure to global equities also detracted due to disappointing
performance from US and emerging markets. Emerging market equities were the
largest detractor as a combination of Covid-19 lockdowns, declining
manufacturing activity and fear of a strong US dollar weighed on prices. US
markets fell as the Federal Reserve continued to press forward with aggressive
rate hikes amid disappointingly persistent inflation readings. Japanese
equities, despite outsized declines in September, outperformed other regions,
benefitting from strong machinery orders, improved consumer confidence and the
full repeal of Covid-19 lockdowns.
Q: How did the tactical allocation perform?
A: The portfolio’s smaller tactical allocation seeks to take advantage
of near-term market opportunities by deviating from the portfolio’s larger
risk-balanced structure (i.e. strategic allocation). Having this flexibility
is important as allows the portfolio to be more adaptive to market cycles and
better match to the current market environment. In more volatile market
environments like 2022, the tactical allocation can be challenged due to the
lack of trends on which to position off. The erratic and trendless nature of
the market environment caused the tactical allocation to detract from results
on aggregate as inconsistent month-to-month returns across assets made
positioning difficult.
Q: What is your 30 day outlook?
A: Relative to the rest of the world, the US has been a bright spot in
terms of economic growth. However, there may be reasons to worry that the US
economy may be vulnerable. Weak growth outside of the US, along with a
persistently strong dollar, has reduced US export volume meaningfully. In the
absence of exports, the consumer becomes the only thing keeping the US economy
from contracting. There is evidence of increased revolving credit usage, which
has helped maintain consumption but may also indicate consumer stress. Adding
insult to injury, the latest non-farm payrolls report indicated jobs falling
in cyclical industries as well as reductions in temporary help. This data will
likely compound investors’ fears that central banks are hiking into
recession, which should keep volatility elevated across markets.
Scott Wolle
Portfolio Manager
8 February 2023
Balanced Risk Allocation Share Portfolio List of Investments
AT 30 NOVEMBER 2022 Market %
Yield value of
% £’000 Portfolio
Short Term Investments
Invesco Liquidity Funds plc - Sterling 2.74 3,177 54.9
UK Treasury Bill – 0% 20 Mar 2023 2.85 742 12.8
UK Treasury Bill – 0% 08 May 2023 3.66 590 10.2
UK Treasury Bill – 0% 02 May 2023 3.71 492 8.5
UK Treasury Bill – 0% 15 May 2023 3.51 271 4.7
UK Treasury Bill – 0% 24 Apr 2023 3.76 197 3.4
Sumitomo Mitsui – Time Deposit 2.91 161 2.8
UK Treasury Bill – 0% 30 Jan 2023 1.94 149 2.6
Total Short Term Investments 5,779 99.9
Hedge Funds ((1))
Harbinger – Streamline Offshore Fund 5 0.1
Total Hedge Funds 5 0.1
Total Fixed Asset Investments 5,784 100.0
(1) The hedge fund investments are residual holdings of the previous
investment strategy, which are awaiting realisation of underlying investments.
Derivative instruments held in the Balanced Risk Allocation Share Portfolio
are shown on the next page. At the period end all the derivative instruments
held in the Balanced Risk Allocation Share Portfolio were exchange traded
futures contracts. Holdings in futures contracts that are not exchange traded
are permitted as explained in the investment policy disclosed in full on pages
39 to 41 of the Company’s 2022 Annual Financial Report.
Balanced Risk Allocation Share Portfolio List of Derivative Instruments
AT 30 NOVEMBER 2022
Notional
Notional Exposure
Exposure as % of
£’000 Net Assets
Government Bond Futures:
Canada 772 11.8
Australia 745 11.4
Europe 730 11.1
UK 630 9.6
Japan 625 9.6
US 318 4.9
Total Bond Futures (6) 3,820 58.4
Equity Futures:
Japan 477 7.3
UK 380 5.8
Emerging markets 367 5.6
Europe 342 5.2
US small cap 306 4.7
US large cap 165 2.5
Total Equity Futures (6) 2,037 31.1
Commodity Futures:
Energy
Gasoline 166 2.5
Low sulphur gasoline 155 2.4
Natural gas 150 2.3
Brent crude 145 2.2
WTI crude 134 2.0
New York Harbor ultra-low sulphur diesel 116 1.8
Agriculture
Cotton 139 2.1
Soyabean 124 1.9
Soyabean meal 105 1.6
Soyabean oil 72 1.1
Corn 55 0.9
Coffee 53 0.8
Sugar 37 0.6
Wheat 34 0.5
Industrial Metals
Copper 168 2.6
Aluminium 99 1.5
Precious Metals
Gold 148 2.2
Total Commodity Futures (17) 1,900 29.0
Total Derivative Instruments (29) 7,757 118.5
Target Annualised Risk:
The targeted annualised risk (volatility of monthly returns) for the portfolio as listed above is analysed as follows:
Asset Class Risk Contribution
Equities 3.6% 44.3%
Commodities 3.2% 39.0%
Fixed Income 1.4% 16.7%
8.2% 100.0%
Balanced Risk Allocation Share Portfolio Income Statement
Six months ended 30 November 2022 Six months ended 30 November 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains on investments held at fair value – (1) (1) – 1 1
(Losses)/gains on derivative instruments 31 (665) (634) 28 (12) 16
Gains on foreign exchange – 21 21 – 14 14
Income 55 – 55 1 – 1
Investment management fees – note 2 (7) (18) (25) (8) (19) (27)
Other expenses (14) (1) (15) (13) (1) (14)
Return before taxation 65 (664) (599) 8 (17) (9)
Tax – note 3 – – – – – –
Return after taxation for the financial period 65 (664) (599) 8 (17) (9)
Return per ordinary share – note 4 1.55p (15.80)p (14.25)p 0.19p (0.41)p (0.22)p
Summary of Net Assets
At At
30 November 31 May
2022 2022
£’000 £’000
Fixed assets 5,784 6,233
Derivative assets held at fair value through profit or loss 98 362
Current assets 798 732
Derivative liabilities held at fair value through profit or loss (88) (225)
Creditors falling due within one year, excluding borrowings (47) (17)
Net assets 6,545 7,085
Net asset value per ordinary share – note 5 155.72p 169.87p
Notional exposure of derivative instruments as % of net assets 118.5% 145.7%
Summary of Changes in Net Assets
At At
30 November 31 May
2022 2022
£’000 £’000
Net assets brought forward 7,085 6,890
Shares bought back and held in treasury (31) (275)
Share conversions 90 461
Return after taxation for the financial period/year (599) 9
Net assets at the period/year end 6,545 7,085
Managed Liquidity Share Portfolio Performance Record
Total Return
Six Months Year To Year To Year To Year To
To 30 November 31 May 31 May 31 May 31 May
2022 2022 2021 2020 2019
Net Asset Value ((1)) 0.8% –0.3% 3.6% 1.1% 1.3%
Share Price ((1)) 0.0% –4.0% 0.5% 1.6% –0.5%
Revenue return per share 0.17p –0.02p 1.35p ((2)) 0.65p 0.59p
Dividends 1.00p 1.00p nil 0.80p 0.80p
(1) Source: Refinitiv.
(2) Includes a £34,000 (1.40p per share) refund of management fees in
respect of prior year overcharges.
Managed Liquidity Share Portfolio Manager’s Report
Q: How does the portfolio generate returns?
A: The investment objective of the portfolio is to produce an
appropriate level of income return combined with a high degree of security. We
aim to generate returns by investing mainly in sterling-based high quality
debt securities and similar assets but with the flexibility to invest in
assets with a greater weighted average maturity than a money market fund.
Accordingly, the value of the portfolio may rise or fall.
The majority of the portfolio is invested in the iShares – £ Ultrashort
Bond ETF. We review the Exchange Traded Fund universe annually and reconfirmed
this fund in December 2022. The ETF delivers a good yield for a low level of
credit risk (average rating AA), while maintaining a low average maturity and
demonstrating good liquidity. The ETF invests in sterling denominated
investment grade corporate bonds and quasi-government bonds, aiming to track
performance of the Markit iBoxx GBP Liquid Investment Grade Ultrashort Index.
It has a weighted average maturity of under one year and an effective duration
of 0.2 years.
We also hold a portion of the portfolio in the AAA-rated Sterling Liquidity
Portfolio of Invesco Liquidity Funds plc. to meet short term payment
obligations.
Q: What has the performance of your fund been over the last 6 months?
A: The Managed Liquidity Portfolio NAV total return for the
six months to 30 November 2022 was 0.8%. The portfolio’s income yield has
risen and the portfolio delivered around 1.0% income over the period. However,
concerns that inflation will prove more challenging to bring down led markets
to expect higher interest rates for longer, which had a negative impact on
bond prices, detracting around 0.2% from the fund’s total return. The fund
was somewhat protected against this reduction in bond prices by maintaining a
very low effective duration (by comparison, 1 year UK Government Bonds fell
1.7% over the period).
Q: What’s the outlook for returns?
A: The portfolio’s low duration means that the major driver of the
returns from year to year is its income yield. However, over shorter period
changes in interest rate expectations (and hence bond prices) have some
impact.
Financial conditions remain supportive for high quality (AAA, AA and A–
rated) issuers, such as those held by the Managed Liquidity Portfolio.
While inflation is likely to remain elevated in 2023-24, year-on-year
inflation has likely peaked. Accordingly, central banks have already begun
slowing their rate of interest rate hikes as they balance the need to control
inflation with the likelihood of a recession.
Looking further ahead, inflation is likely to remain above central bank
targets in 2023-24.
We continue to expect the portfolio to deliver low and stable returns above
cash deposits.
Derek Steeden
Portfolio Manager
8 February 2023
Managed Liquidity Share Portfolio List of Investments
AT 30 NOVEMBER 2022
Market
Value % of
£’000 Portfolio
iShares – £ Ultrashort Bond ETF 1,369 90.1
Invesco Liquidity Funds plc – Sterling 150 9.9
1,519 100.0
Income Statement
Six months ended 30 November 2022 Six months ended 30 November 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Gains/(losses) on investments held at fair value – 9 9 – (3) (3)
Income 6 – 6 4 – 4
Investment management fees – note 2 (1) – (1) (1) – (1)
Other expenses (3) – (3) (3) – (3)
Return before taxation 2 9 11 – (3) (3)
Tax – note 3 – – – – – –
Return after taxation for the financial period 2 9 11 – (3) (3)
Return per ordinary share – note 4 0.17p 0.67p 0.84p – (0.20)p (0.20)p
Managed Liquidity Share Portfolio Summary of Net Assets
AT 30 NOVEMBER 2022
At At
30 November 31 May
2022 2022
£’000 £’000
Fixed assets 1,519 1,445
Current assets 6 17
Creditors falling due within one year, excluding borrowings (138) (138)
Net assets 1,387 1,324
Net asset value per ordinary share – note 5 106.71p 106.92p
Summary of Changes in Net Assets
At At
30 November 31 May
2022 2022
£’000 £’000
Net assets brought forward 1,324 1,738
Shares bought back and held in treasury – (66)
Share conversions 65 (328)
Return after taxation for the financial period/year 11 (5)
Dividend paid (13) (15)
Net assets at the period/year end 1,387 1,324
Principal Risks and Uncertainties
The Board has carried out a robust assessment of the risks facing the Company,
including those that would threaten its business model, future performance,
solvency and liquidity. As part of this process, the Board conducted a full
review of the Company’s risk control summary and considered new and emerging
risks. These are not necessarily principal risks for the Company at present
but may have the potential to be in the future. In carrying out this
assessment, the Board considered the emerging risks facing the Company
including geopolitical risks such as the invasion of Ukraine by Russia, cyber
threats and climate related risks. The principal risks that follow are those
identified by the Board as the most significant after consideration of
mitigating factors and not intended to cover all the risk categories as shown
in the Internal Control and Risk Management section on page 64 of the
Company’s 2022 Annual Financial Report. In the view of the Board, these
principal risks and uncertainties are as much applicable to the remaining six
months of the financial year as they were to the six months under review.
Despite the disruption to markets and revenue streams from the impact of
Covid-19 from March 2020 and the conflict in Ukraine on global economies, the
Company continues to operate effectively and to pursue its investment
objectives. Resilience of the Company, its Board and its service providers has
been demonstrated throughout and the Directors remain confident that the
Company’s investment strategies will continue to serve shareholders well
over the longer term.
Category and Principal Mitigating Procedures Risk trend during
Risk Description and Controls the period
Strategic Risk
Investment Objectives and Attractiveness to Investors There is no guarantee that the Investment Policy of the Company and of each portfolio will provide the returns The Board monitors the share registers and the performance of the Company and each portfolio. It has established a structure offering a range of options for investors and has set guidelines to ensure that the Investment Policy of the Company and each portfolio is pursued by the Manager. Unchanged
sought by the Company. There can be no guarantee, therefore, that the Company will achieve its investment objectives or that the shares will continue to meet investors’
needs.
Market Movements and Portfolio Performance Individual portfolio performance is substantially dependent on the performance of the securities (including derivative The performance of the Manager is carefully monitored by the Board and the continuation of the Manager’s mandates is reviewed each year. The Board has established guidelines to ensure that the investment policies of each class of share are pursued by the Manager. For a fuller discussion of the economic and market conditions facing the Company and the current and future performance of the different portfolios of the Company, please see both the Chairman’s Statement on pages 2 to 3 and the Portfolio Managers’ Reports starting on pages 4 to 25. The Company has a nil-valued holding in Sberbank, a Russian bank but no other direct investments in Russia or other holdings with significant links to Russia. Increased
instruments) held within the portfolio. The prices of these securities are influenced by many factors including the general health of regional and worldwide economies;
interest rates; inflation; government policies; industry conditions; political and diplomatic events; tax laws; environmental laws; and by the demand from investors. The
current conflict in Ukraine has had an impact on the global economy, ranging from decreases to the supply (and/or increases to the costs) of goods to increases (and
increased volatility) in energy and commodity prices and inflation. In addition, the portfolios' investments are subject to risks arising from inflation and rising
interest rates. This was driven by the knock-on effects of the ongoing Covid-19 pandemic and other geopolitical tensions and uncertainties which have impacted global
supply chains. These risks represent the potential loss the portfolio might suffer through holding in the face of negative market movements. The Manager strives to
maximise the total return from the portfolios, but the investments held are influenced by market conditions and the Board acknowledges the external influences on the
performance of each portfolio. Further risks specifically applicable to the Balanced Risk Allocation Shares are set out on page 47 of the Company’s 2022 Annual Financial
Report.
Risks Applicable to the Company’s Shares Shares in the Company are designed to be held over the long-term and may not be suitable as short-term investments. There can be The Board has adopted a discount control policy that applies to all share classes and the Board and the Manager monitor the market rating of each share class. While it is the intention of the Directors to pay dividends to holders of the UK Equity, Global Equity Income and Managed Liquidity Shares, this will be affected by the returns achieved by the respective portfolios and the dividend policy adopted by the Board. Accordingly, the amount of dividends paid to shareholders may fluctuate. Any change in the tax or accounting treatment of dividends received or other returns may also affect the level of dividend paid on the shares in future years. The Directors have resolved, in the absence of unforeseen circumstances, to supplement revenue with capital profits in order to pay equity portfolio dividends at levels set by the Board (see pages 41 and 42 of the Company’s 2022 Annual Financial Report). Unchanged
no guarantee that any appreciation in the value of the Company’s shares will occur and investors may not get back the full value of their investments. Owing to the
potential difference between the mid-market price of the shares and the prices at which they are sold, there is no guarantee that their realisable value will reflect
their mid-market price. The market value of a share, as well as being affected by its net asset value (NAV), is also influenced by investor demand, its dividend yield,
where applicable, and prevailing interest rates, amongst other factors. As such, the market value of a share can fluctuate and may not reflect its underlying NAV. Shares
may therefore trade at discounts to their NAVs. Past performance of the Company’s shares is not necessarily indicative of future performance.
Viability and Compulsory Conversion of a Class of Share It is possible that through poor performance, market sentiment, or otherwise, lack of demand for one of the The Board monitors share conversions and portfolio sizes and liaises with the Manager on the continued viability of each share class. The Board has received assurances from the Manager that the size of the portfolio is not critical to the Manager being able to continue to offer its investment management services in respect of any of the Company’s four portfolio strategies. If at any time the Board considers that the listing of any class of share on the Official List is likely to be cancelled and the loss of such listing would mean that the Company would no longer be able to qualify for approval as an investment trust under section 1158 of the Corporation Tax Act 2010, the Board may serve written notice on the holders of the relevant shares requiring them to convert their shares into another share class. Unchanged
Company’s share classes could result in the relevant portfolio becoming too small to be viable. The continued listing on the Official List of each class of share is
dependent on at least 25% of the shares in that class being held in public hands. This means that if more than 75% of the shares of any class were held by, inter alia,
the Directors, persons connected with Directors or persons interested in 5% or more of the relevant shares, the listing of that class of share might be suspended or
cancelled. The Listing Rules state that the FCA may allow a reasonable period of time for the Company to restore the appropriate percentage if this rule is breached, but
in the event that the listing of any class of shares were cancelled the Company would lose its investment trust status.
Liability of a Portfolio for the Liabilities of Another Portfolio The Directors intend that, in the absence of unforeseen circumstances, each portfolio will effectively operate as if it were a stand-alone company. However, investors should be aware of the following factors: - As a matter of law, the Company is a single entity. Therefore, in the event that any of the portfolios has insufficient funds or assets to meet all of its liabilities, on a winding-up or otherwise, such a shortfall would become a liability of the other portfolios and would be payable out of the assets of the other portfolios in such proportions as the Board may determine; and - The Companies Act 2006 prohibits the Directors from declaring dividends in circumstances where, following the distribution, the Company’s assets would represent less than one and a half times the aggregate of its liabilities or the amount of net assets would be less than the aggregate of its share capital and undistributable reserves. If the Company were to incur material liabilities in the future, a significant fall in the value of the Company’s assets as a whole may affect the Company’s ability to pay dividends on a particular class of share, even though there are distributable profits attributable to the relevant portfolio. Unchanged
Gearing Borrowing will amplify the effect on shareholders’ funds of gains and losses on the underlying securities. Whilst the use of borrowings by the Company should Gearing levels of the different portfolios will change from time to time in accordance with the respective portfolio managers’ assessments of risk and reward. The Manager assesses the exposure to gearing on a regular basis, including the level of borrowings and covenants of the credit facility. The Balanced Risk Allocation Portfolio may also be geared (by up to 250%, according to the investment policy set out on page 40 of the Company’s 2022 Annual Financial Report) by means of the derivative instruments in which it invests. This is discussed separately below, under the heading: Additional Risks Applicable to Balanced Risk Allocation Shares. The Manager assesses the exposure to gearing on a regular basis, including the level of borrowings and covenants of the credit facility. Unchanged
enhance the total return on a particular class of share where the return on the underlying securities is rising and exceeds the cost of borrowing, it will have the
opposite effect where the underlying return is falling, further reducing the total return on that share class. Similarly, the use of gearing by investment companies or
funds in which the Company invests increases the volatility of those investments. The Company has a £40 million 364 day multicurrency revolving credit facility and there
is no guarantee that these facilities will be renewed at maturity or on terms acceptable to the Company. If it were not possible to renew these facilities or replace them
with one from another lender, the amounts owing by the Company would need to be funded by the sale of securities.
Hedging Where hedging is used there is a risk that the hedge will not be effective. The Company may use derivatives to hedge its exposure to currency or other risks and for the purpose of efficient portfolio management. There may be a correlation between price movements in the underlying securities, currency or index, on the one hand, and price movements in the investments, which are the subject of the hedge, on the other hand. In addition, an active market may not exist for a particular hedging derivative instrument at any particular time. Unchanged
Regulatory and Tax Related The Company is subject to various laws and regulations by virtue of its status as a public limited investment company registered under the The Manager reviews the level of compliance with the Corporation Tax Act 2010 and other financial regulatory requirements on a daily basis. All transactions, income and expenditure are reported to the Board. The Board regularly considers the risks to which the Company is exposed, the measures in place to control them and the potential for other risks to arise. The Board ensures that satisfactory assurances are received from service providers. The depositary and the Manager’s compliance and internal audit officers report regularly to the Company’s Audit Committee. The risks and risk management policies and procedures as they relate to the financial assets and liabilities of the Company are also detailed in note 17 to the financial statements in the Company’s 2022 Annual Financial Report. Unchanged
Companies Act 2006, its status as an investment trust and its listing on the London Stock Exchange. Loss of investment trust status could lead to the Company being
subject to UK Capital Gains Tax on the sale of its investments. A serious breach of other regulatory rules could lead to suspension from the London Stock Exchange, a fine
or a qualified Audit Report. 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.
Additional Risks Applicable to Balanced Risk Allocation Shares The use of financial derivative instruments, in particular futures, forms part of the investment policy and The Manager actively seeks the most liquid means of obtaining the required exposures. The financial derivative instruments used for the strategy are geared instruments and the aggregate notional exposure will usually exceed the net asset value of the portfolio. Whilst this could result in greater fluctuations in the net asset value, and consequently the share price, the use of leverage is normally necessary to achieve the target volatility required to meet the return objective. The degree of leverage inherent in futures trading potentially means that a relatively small price movement in a futures contract may result in an immediate and substantial loss and it would be necessary to increase the collateral held at the clearing broker to cover such loss. This is mitigated by the Company not using financial derivative instruments to create net short positions in any asset class combined with holding cash balances sufficient to meet collateral requirements. Unchanged
strategy of the Balanced Risk Allocation Portfolio. The degree of leverage inherent in futures trading potentially means that a relatively small price movement in a
futures contract may result in an immediate and substantial loss to the portfolio. The portfolio’s ability to use these instruments may be limited by market conditions,
regulatory limits and tax considerations. The absence of a liquid market for any particular instrument at any particular time may inhibit the ability of the Manager to
liquidate a financial derivative instrument at an advantageous price.
Third Party Service Providers Risk
Reliance on Third Party Service Providers The Manager may be exposed to reputational risks. In particular, the Manager may be exposed to the risk that litigation, Third-party service providers are subject to ongoing monitoring by the Manager and the Company. 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. Unchanged
misconduct, operational failures, negative publicity and press speculation, whether or not it is valid, will harm its reputation. Any damage to the reputation of the
Manager could result in potential counterparties and third parties being unwilling to deal with the Manager and by extension the Company. This could have an adverse
impact on the ability of the Company to successfully pursue its Investment Policy. 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 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 44. 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.
Governance
Going Concern
The financial statements have been prepared on a going concern basis. The
Directors consider this to be appropriate as the Company has adequate
resources to continue in operational existence for a period of at least 12
months after approval of the financial statements. In reaching this
conclusion, the Directors took into account the value of net assets; the
Company’s Investment Policy; its risk management policies; the diversified
portfolio of readily realisable securities which can be used to meet funding
commitments; the credit facility and the overdraft which can be used for
short-term funding requirements; the liquidity of the investments which could
be used to repay the credit facility in the event that the facility could not
be renewed or replaced; its revenue; the uncertain economic outlook following
the ongoing consequences of the Covid-19 pandemic and the conflict in Ukraine;
and the ability of the Company in the light of these factors to meet all its
liabilities and ongoing expenses.
Related Party Transactions
Under United Kingdom Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law), the Company has identified the Directors and
their dependents as related parties. No other related parties have been
identified during the period. No transactions with related parties have taken
place which have materially affected the financial position or the performance
of the Company.
Directors’ Responsibility Statement
In respect of the preparation of the half-yearly financial report
The Directors are responsible for preparing the half-yearly financial report
using accounting policies consistent with applicable law and UK Accounting
Standards.
The Directors confirm that, to the best of their knowledge:
– the condensed set of financial statements contained within the
half-yearly financial report has been prepared in accordance with the FRC’s
FRS 104 Interim Financial Reporting;
– the interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R of the FCA’s Disclosure
Guidance and Transparency Rules; and
– the interim management report includes a fair review of the
information required on related party transactions.
The half-yearly financial report has not been audited or reviewed by the
Company’s auditor.
Signed on behalf of the Board of Directors.
Victoria Muir
Chairman
8 February 2023
Condensed Income Statement
FOR THE SIX MONTHS ENDED 30 NOVEMBER
2022 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains on investments held at fair value – (7,756) (7,756) – 10,289 10,289
(Losses)/gains on derivative instruments 31 (665) (634) 28 (12) 16
Gains on foreign exchange – 28 28 – 16 16
Income 3,711 – 3,711 3,422 – 3,422
Investment management fees - note 2 (165) (385) (550) (184) (427) (611)
Other expenses (348) (3) (351) (270) (4) (274)
Net return before finance costs and taxation 3,229 (8,781) (5,552) 2,996 9,862 12,858
Finance costs – note 2 (78) (180) (258) (30) (70) (100)
Return before taxation 3,151 (8,961) (5,810) 2,966 9,792 12,758
Tax – note 3 (112) – (112) (75) – (75)
Return after taxation for the financial period 3,039 (8,961) (5,922) 2,891 9,792 12,683
Return per ordinary share – note 4
– UK Equity Share Portfolio 3.47p (12.35)p (8.88)p 2.95p 6.52p 9.47p
– Global Equity Income Share Portfolio 1.84p 2.51p 4.35p 1.96p 18.45p 20.41p
– Balanced Risk Allocation Share Portfolio 1.55p (15.80)p (14.25)p 0.19p (0.41)p (0.22)p
– Managed Liquidity Share Portfolio 0.17p 0.67p 0.84p 0.00p (0.20)p (0.20)p
The total column of this statement represents the Company’s profit and loss
account, prepared in accordance with UK Accounting Standards. The return after
taxation is the total comprehensive income and therefore no additional
statement of other comprehensive income is presented. The supplementary
revenue and capital columns are presented for information purposes in
accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies. All items in the above statement derive
from continuing operations of the Company. No operations were acquired or
discontinued in the period. Income Statements for the different share classes
are shown on pages 10, 16, 21 and 24 for the UK Equity, Global Equity Income,
Balanced Risk Allocation and Managed Liquidity Share Portfolios respectively.
Condensed Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 30 NOVEMBER
Capital
Share Share Special Redemption Capital Revenue
Capital Premium Reserve Reserve Reserve Reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 May 2022 1,709 122,990 18,935 372 70,414 1 214,421
Cancellation of deferred shares – – – 2 (2) – –
Cancellation of share premium account ((1)) – (122,990) 122,990 – – – –
Shares bought back and held in treasury – – (900) – (3,516) – (4,416)
Share conversions (1) – 1,104 – (1,103) – –
Return after taxation per the income statement – – – – (8,961) 3,039 (5,922)
Dividends paid - note 9 – – (310) – – (2,641) (2,951)
At 30 November 2022 1,708 – 141,819 374 56,832 399 201,132
At 31 May 2021 1,715 122,990 25,463 364 80,059 (27) 230,564
Cancellation of deferred shares – – (5) 5 – – –
Shares bought back and held in treasury – – (9,361) – (8,752) – (18,113)
Share conversions (4) – 2,866 – (2,862) – –
Return after taxation per the income statement – – – – 9,792 2,891 12,683
Dividends paid – note 9 – – (271) – (34) (2,898) (3,203)
At 30 November 2021 1,711 122,990 18,692 369 78,203 (34) 221,931
(1) Following class consents and approval of shareholders at the
Company's Annual General Meeting on 4 October 2022, the Court process to
cancel the share premium accounts of the UK Equity and Balanced Risk
Allocation Share Classes was implemented on 17 November 2022. Following the
implementation the entire share premium account of each of the UK Equity and
Balanced Risk Allocation Share Classes was cancelled, amounting to
£121,700,000 and £1,290,000 respectively. These distributable reserves
provide the Company with flexibility, subject to financial performance, to
make future distributions and/or, subject to shareholder authority, in buying
back shares.
Condensed Balance Sheet
Registered Number 5916642
AS AT 30 NOVEMBER 2022
Global Balanced
UK Equity Risk Managed
Equity Income Allocation Liquidity Total
£’000 £’000 £’000 £’000 £’000
Fixed assets
Investments held at fair value through profit or loss 140,371 67,859 5,784 1,519 215,533
Current assets
Derivative assets held at fair value through profit or loss – – 98 – 98
Debtors 551 647 410 4 1,612
Cash and cash equivalents 303 131 388 2 824
854 778 896 6 2,534
Creditors: amounts falling due within one year
Derivative liabilities held at fair value through profit or loss – – (88) – (88)
Other creditors (314) (798) (47) (138) (1,297)
Bank facility (10,750) (4,800) – – (15,550)
(11,064) (5,598) (135) (138) (16,935)
Net current (liabilities)/assets (10,210) (4,820) 761 (132) (14,401)
Net assets 130,161 63,039 6,545 1,387 201,132
Capital and reserves
Share capital 1,079 416 107 106 1,708
Special reserve 121,700 16,982 2,348 789 141,819
Capital redemption reserve 82 81 27 184 374
Capital reserve 6,956 45,560 4,019 297 56,832
Revenue reserve 344 - 44 11 399
Shareholders’ funds 130,161 63,039 6,545 1,387 201,132
Net asset value per ordinary share – note 5 183.35p 250.38p 155.72p 106.71p
AS AT 31 MAY 2022
Global Balanced
UK Equity Risk Managed
Equity Income Allocation Liquidity Total
£’000 £’000 £’000 £’000 £’000
Fixed assets
Investments held at fair value through profit or loss 158,450 67,630 6,233 1,445 233,758
Current assets
Derivative assets held at fair value through profit or loss — — 362 — 362
Debtors 804 351 331 8 1,494
Cash and cash equivalents 322 215 401 9 947
1,126 566 1,094 17 2,803
Creditors: amounts falling due within one year
Derivative liabilities held at fair value through profit or loss — — (225) — (225)
Other creditors (448) (206) (17) (138) (809)
Bank facility (15,754) (5,352) — — (21,106)
(16,202) (5,558) (242) (138) (22,140)
Net current (liabilities)/assets (15,076) (4,992) 852 (121) (19,337)
Net assets 143,374 62,638 7,085 1,324 214,421
Capital and reserves
Share capital 1,085 412 106 106 1,709
Share premium 121,700 — 1,290 — 122,990
Special reserve — 17,211 1,000 724 18,935
Capital redemption reserve 80 81 27 184 372
Capital reserve 20,509 44,934 4,683 288 70,414
Revenue reserve — — (21) 22 1
Shareholders’ funds 143,374 62,638 7,085 1,324 214,421
Net asset value per ordinary share – note 5 194.35p 249.00p 169.87p 106.92p
Condensed Statement of Cash Flows
Six Months Six Months
Ended Ended
30 November 30 November
2022 2021
£’000 £’000
Cash flows from operating activities
Net return before finance costs and taxation (5,552) 12,858
Tax on overseas income (112) (75)
Adjustments for:
Purchase of investments (24,088) (31,020)
Sale of investments 35,057 49,464
Sale of futures (507) 543
10,462 18,987
Scrip dividends (231) (464)
Losses/(gains) on investments 7,756 (10,289)
Losses/(gains) on derivatives 634 (16)
Decrease/(increase) in debtors 203 (251)
Increase/(decrease) in creditors 35 (207)
Net cash inflow from operating activities 13,195 20,543
Cash flows from financing activities
Interest paid on bank borrowings (258) (100)
Decrease in bank facility (5,550) (2,642)
Share buy back costs (4,559) (18,113)
Equity dividends paid - note 9 (2,951) (3,203)
Net cash outflow from financing activities (13,318) (24,058)
Net decrease in cash and cash equivalents (123) (3,515)
Cash and cash equivalents at the start of the period 947 3,204
Cash and cash equivalents at the end of the period 824 (311)
Reconciliation of cash and cash equivalents to the Balance Sheet is as follows:
Cash held at custodian 824 189
Bank overdraft – (500)
Cash and cash equivalents 824 (311)
Cash flow from operating activities includes:
Interest received 8 –
Dividends received 3,589 2,908
At At
1 June Cash 30 November
2022 Flows 2022
£’000 £’000 £’000
Analysis of changes in net debt
Cash and cash equivalents 947 (123) 824
Bank facility (21,100) 5,550 (15,550)
Total (20,153) 5,427 (14,726)
Notes to the Condensed Financial Statements
1. Accounting Policies
The condensed financial statements have been prepared in accordance with
applicable United Kingdom Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland, FRS 104
Interim Financial Reporting and the Statement of Recommended Practice
Financial Statements of Investment Trust Companies and Venture Capital Trusts,
issued by the Association of Investment Companies in July 2022. The financial
statements are issued on a going concern basis.
The accounting policies applied to these condensed financial statements are
consistent with those applied in the Company’s 2022 Annual Financial Report.
2. Management Fees and Finance Costs
Investment management fees and finance costs are charged to the applicable
portfolio as follows, in accordance with the Board’s expected split of
long-term income and capital returns:
Revenue Capital
Portfolio Reserve Reserve
UK Equity 30% 70%
Global Equity Income 30% 70%
Balanced Risk Allocation 30% 70%
Managed Liquidity 100% –
The Manager is entitled to a management fee which is calculated and payable
quarterly. The fee is based on the net assets of each portfolio, at the
following percentages:
– 0.55% per annum on net assets up to £100 million and 0.50% over
£100 million for both UK Equity and Global Equity Income Portfolios;
– 0.75% per annum for the Balanced Risk Allocation Portfolio; and
– 0.12% per annum for the Managed Liquidity Portfolio.
3. Investment Trust Status and Tax
It is the intention of the Directors to conduct the affairs of the Company so
that it satisfies the conditions for approval as an investment trust company.
Any company so approved is not liable for taxation on capital gains.
The tax charge represents withholding tax suffered on overseas income for the
period.
4. Basic Return per Share
Basic revenue, capital and total return per ordinary share is based on each of
the returns on ordinary activities after taxation as shown by the income
statement for the applicable share class and on the following number of shares
being the weighted average number of shares in issue throughout the period for
each applicable share class:
Weighted Average
Number Of Shares
Six Months Six Months
Ended Ended
30 November 30 November
Share 2022 2021
UK Equity 72,322,839 81,573,577
Global Equity Income 24,951,232 24,355,497
Balanced Risk Allocation 4,201,998 4,141,254
Managed Liquidity 1,257,588 1,499,155
5. Net Asset Values per Ordinary Share
The net asset values per ordinary share were based on the following
Shareholders’ funds and shares (excluding treasury shares) in issue at the
period end:
At At
30 November 31 May
2022 2022
£’000 £’000
Portfolio Shareholders’ Funds
UK Equity 130,161 143,374
Global Equity Income 63,039 62,638
Balanced Risk Allocation 6,545 7,085
Managed Liquidity 1,387 1,324
Number Of Shares
At At
30 November 31 May
2022 2022
Portfolio Shares In Issue
UK Equity 70,990,692 73,772,657
Global Equity Income 25,177,486 25,155,784
Balanced Risk Allocation 4,203,149 4,170,938
Managed Liquidity 1,299,900 1,238,254
6. Classification Under Fair Value Hierarchy
FRS 102 as amended for fair value hierarchy disclosures sets out three fair
value levels. These are:
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.
The fair value hierarchy analysis for investments held at fair value at the
period end is as follows:
Global Balanced
UK Equity Risk Managed
Equity Income Allocation Liquidity
At 30 November 2022 £’000 £’000 £’000 £’000
Financial assets designated at fair value through profit or loss:
Level 1 140,371 67,859 2,441 1,369
Level 2 – – 3,436 150
Level 3 – – 5 –
Total for financial assets 140,371 67,859 5,882 1,519
Financial liabilities:
Level 2 – Derivative instruments – – 88 –
Global Balanced
UK Equity Risk Managed
Equity Income Allocation Liquidity
At 31 May 2022 £’000 £’000 £’000 £’000
Financial assets at fair value through profit or loss:
Level 1 158,450 67,630 2,716 1,315
Level 2 – – 3,874 130
Level 3 – – 5 –
Total for financial assets 158,450 67,630 6,595 1,445
Financial liabilities:
Level 2 – Derivative instruments – – 225 –
Level 1 – This is the majority of the Company’s investments and comprises
all quoted investments and Treasury bills.
Level 2 – This comprises liquidity funds held in the Balanced Risk
Allocation and Managed Liquidity Portfolios, and any derivative instruments.
Level 3 – This includes the remaining legacy hedge fund investments of the
Balanced Risk Allocation Portfolio.
7. Movements in Share Capital and Share Class Conversions
Global Balanced
UK Equity Risk Managed
In the six months ended 30 November 2022 Equity Income Allocation Liquidity
Ordinary 1p shares (number)
At 31 May 2022 73,772,657 25,155,784 4,170,938 1,238,254
Shares bought back into treasury (2,132,000) (390,000) (25,000) –
Arising on share conversion:
August 2022 (161,875) 85,260 44,643 19,696
November 2022 (488,090) 326,442 12,568 41,950
At 30 November 2022 70,990,692 25,177,486 4,203,149 1,299,900
Treasury shares (number)
At 31 May 2022 34,743,775 16,036,159 6,437,218 9,313,678
Shares bought back into treasury 2,132,000 390,000 25,000 –
At 30 November 2022 36,875,775 16,426,159 6,462,218 9,313,678
Total shares in issue at 30 November 2022 107,866,467 41,603,645 10,665,367 10,613,578
Average buy back price 163.8p 221.3p 123.0p n/a
As part of the conversion process 530,599 deferred shares of 1p each were
created. All deferred shares are cancelled before the period end and so no
deferred shares are in issue at the start or end of the period.
Subsequent to the period end, 1,190,000 UK Equity Portfolio Shares, 250,000
Global Equity Income Portfolio Shares and 70,000 Managed Liquidity Portfolio
Shares have been bought back to treasury at an average price of 167.0p, 224.4p
and 94.7p respectively.
Also subsequent to the period end, the February 2023 share class conversions
have resulted in £0.20 million out of the UK Equity Share Portfolio; £0.16
million into the Global Equity Income Share Portfolio; £0.03 million into the
Balanced Risk Allocation Share Portfolio; and £0.01 million into the Managed
Liquidity Share Portfolio.
8. Share Prices
Global Balanced
UK Equity Risk Managed
Period end Equity Income Allocation Liquidity
30 November 2021 188.00p 246.00p 168.50p 103.00p
31 May 2022 175.00p 229.00p 154.50p 97.00p
30 November 2022 165.00p 224.00p 127.00p 96.00p
9. Dividends on Ordinary Shares
First quarterly interim dividends for UK Equity, Global Equity Income and
Managed Liquidity shares were paid on 15 August 2022. Second quarterly interim
dividends for UK Equity and Global Equity Income were paid on 15 November
2022:
Number Dividend
of Rate Total
Period end Shares (Pence) £’000
UK Equity
First interim 73,085,657 1.50 1,096
Second Interim 71,478,782 1.50 1,072
3.00 2,168
Global Equity Income
First interim 24,860,784 1.55 385
Second Interim 24,851,044 1.55 385
3.10 770
Managed Liquidity
First interim 1,238,254 1.00 13
1.00 13
Dividends paid for the six months to 30 November 2022 totalled £2,951,000
(six months to 30 November 2021: £3,203,000).
On 6 December 2022 the Company announced the third quarterly interim dividend
for the year ending 31 May 2023. The dividend declared for UK Equity Shares of
1.50p and Global Equity Income Shares of 1.55p will be paid on 15 February
2023 and they went ex-dividend on 19 January 2023.
10. Status of Half-Yearly Financial Report
The financial information contained in this half-yearly financial report,
which has not been reviewed or audited by the independent auditor, does not
constitute statutory accounts within the meaning of section 434 of the
Companies Act 2006. The financial information for the half years ended 30
November 2022 and 30 November 2021 has not been audited. The figures and
financial information for the year ended 31 May 2022 are extracted and
abridged from the latest audited accounts and do not constitute the statutory
accounts for that year. Those accounts have been delivered to the Registrar of
Companies and include the Independent Auditor’s Report, which was
unqualified and did not include a statement under section 498 of the Companies
Act 2006.
By order of the Board
Invesco Asset Management Limited
Company Secretary
Date: 8 February 2023
Glossary of Terms and Alternative Performance Measures
Alternative Performance Measure (APM)
An APM is a measure of performance or financial position that is not defined
in applicable accounting standards and cannot be directly derived from the
financial statements. The calculations shown in the corresponding tables are
for the six months ended 30 November 2022 and the year ended 31 May 2022. The
APMs listed here are widely used in reporting within the investment company
sector and consequently aid comparability.
(Discount)/Premium (APM)
Discount is a measure of the amount by which the mid-market price of an
investment company share is lower than the underlying net asset value (NAV) of
that share. Conversely, Premium is a measure of the amount by which the
mid-market price of an investment company share is higher than the underlying
net asset value of that share. In this half-yearly financial report the
discount is expressed as a percentage of the net asset value per share and is
calculated according to the formula set out below. If the shares are trading
at a premium the result of the below calculation will be positive and if they
are trading at a discount it will be negative.
Global Balanced
UK Equity Risk Managed
30 November 2022 Page Equity Income Allocation Liquidity
Share price 1 a 165.00p 224.00p 127.00p 96.00p
Net asset value per share 1 b 183.35p 250.38p 155.72p 106.71p
Discount c = (a-b)/b (10.0)% (10.5)% (18.4)% (10.0)%
31 May 2022
Share price 40 a 175.00p 229.00p 154.50p 97.00p
Net asset value per share 35 b 194.35p 249.00p 169.87p 106.92p
Discount c = (a-b)/b (10.0)% (8.0)% (9.0)% (9.3)%
Gearing
The gearing percentage reflects the amount of borrowings that a company has
invested. This figure indicates the extra amount by which net assets, or
shareholders’ funds, would move if the value of a company’s investments
were to rise or fall. A positive percentage indicates the extent to which net
assets are geared; a nil gearing percentage, or ‘nil’, shows a company is
ungeared. A negative percentage indicates that a company is not fully invested
and is holding net cash as described below.
There are several methods of calculating gearing and the following has been
used in this report:
Gross Gearing (APM)
This reflects the amount of gross borrowings in use by a company and takes no
account of any cash balances. It is based on gross borrowings as a percentage
of net assets.
Global
UK Equity
Equity Income
30 November 2022 Page £’000 £’000
Bank facility 34 10,750 4,800
Gross borrowings a 10,750 4,800
Net asset value 34 b 130,161 63,039
Gross gearing c = a/b 8.3% 7.6%
31 May 2022
Bank facility 35 15,750 5,350
Gross borrowings a 15,750 5,350
Net asset value 35 b 143,374 62,638
Gross gearing c = a/b 11.0% 8.5%
Net Gearing or Net Cash (APM)
Net gearing reflects the amount of net borrowings invested, i.e. borrowings
less cash and cash equivalents (incl. investments in money market funds). It
is based on net borrowings as a percentage of net assets. Net cash reflects
the net exposure to cash and cash equivalents, as a percentage of net assets,
after any offset against total borrowings.
Global
UK Equity
Equity Income
30 November 2022 Page £’000 £’000
Bank facility 34 10,750 4,800
Less cash and cash equivalents 34 (303) (131)
Net borrowings a 10,447 4,669
Net asset value 34 b 130,161 63,039
Net gearing c = a/b 8.0% 7.4%
31 May 2022
Bank facility 35 15,750 5,350
Less cash and cash equivalents 35 (322) (215)
Net borrowings a 15,428 5,135
Net asset value 35 b 143,374 62,638
Net gearing c = a/b 10.8% 8.2%
Total Return
Total return is the theoretical return to shareholders that measures the
combined effect of any dividends paid, together with the rise or fall in the
share price or NAV. In this half-yearly financial report these return figures
have been sourced from Refinitiv who calculate returns on an industry
comparative basis.
Net Asset Value Total Return (APM)
Total return on net asset value per share, assuming dividends paid by the
Company were reinvested into the shares of the Company at the NAV per share at
the time the shares were quoted ex-dividend.
Global Balanced
UK Equity Risk Managed
30 November 2022 Page Equity Income Allocation Liquidity
As at 30 November 2022 34 183.35p 250.38p 155.72p 106.71p
As at 31 May 2022 35 194.35p 249.00p 169.87p 106.92p
Change in period a –5.7% 0.6% –8.3% –0.2%
Impact of dividend reinvestments ((1)) b 1.7% 1.3% 0.0% 1.0%
Net asset value total return for the period c = a+b –4.0% 1.9% –8.3% 0.8%
31 May 2022
As at 31 May 2022 35 194.35p 249.00p 169.87p 106.92p
As at 31 May 2021 188.33p 233.91p 169.33p 108.11p
Change in year a 3.2% 6.5% 0.3% –1.1%
Impact of dividend reinvestments ((1)) b 3.6% 3.1% 0.0% 0.8%
Net asset value total return for the year c = a+b 6.8% 9.6% 0.3% –0.3%
(1) Total dividends paid during the period for the UK Equity Share
Portfolio of 3.00p (31 May 2022: 6.70p), Global Equity Income Share Portfolio
of 3.10p (31 May 2022: 7.15p) and Managed Liquidity Share Portfolio 1.00p (31
May 2022: 1.00p), reinvested at the NAV or share price on the ex-dividend
date. A fall in the NAV or share price, subsequent to the reinvestment date,
consequently further reduces the returns and vice versa if NAV or share price
rises.
Share Price Total Return (APM)
Total return to shareholders, on a mid-market price basis, assuming all
dividends received were reinvested, without transaction costs, into the shares
of the Company at the time the shares were quoted ex-dividend.
Global Balanced
UK Equity Risk Managed
30 November 2022 Page Equity Income Allocation Liquidity
As at 30 November 2022 40 165.00p 224.00p 127.00p 96.00p
As at 31 May 2022 40 175.00p 229.00p 154.50p 97.00p
Change in period a –5.7% –2.2% –17.8% –1.0%
Impact of dividend reinvestments ((1)) b 1.8% 1.4% 0.0% 1.0%
Share price total return for the period c = a+b –3.9% –0.8% –17.8% 0.0%
31 May 2022 Page
As at 31 May 2022 40 175.00p 229.00p 154.50p 97.00p
As at 31 May 2021 176.00p 226.00p 163.00p 102.00p
Change in year a –0.6% 1.3% –5.2% –4.9%
Impact of dividend reinvestments ((1)) b 3.6% 3.1% 0.0% 0.9%
Share price total return for the year c = a+b 3.0% 4.4% –5.2% –4.0%
(1) Total dividends paid during the period for the UK Equity Share
Portfolio of 3.00p (31 May 2022: 6.70p), Global Equity Share Income Portfolio
of 3.10p (31 May 2022: 7.15p) and Managed Liquidity Share Portfolio 1.00p (31
May 2022: 1.00p), reinvested at the NAV or share price on the ex-dividend
date. A fall in the NAV or share price, subsequent to the reinvestment date,
consequently further reduces the returns and vice versa if NAV or share price
rises.
Benchmark
Total return on the benchmark is on a mid-market value basis, assuming all
dividends received were reinvested, without transaction costs, into the shares
of the underlying companies at the time the shares were quoted ex-dividend.
Notional Exposure
Notional exposure in relation to a future, or other derivative contract, is
the value of the assets referenced by the contract that could alternatively be
held to provide an identical return.
Volatility
Volatility refers to the amount of uncertainty or risk about the size of
changes in a security’s value. It is a statistical measure of the dispersion
of returns for a given security or market index measured by using the standard
deviation or variance of returns from that same security or market index.
Commonly, the higher the volatility, the riskier the security.
Directors, Investment Manager and Administration
Directors
Victoria Muir (Chairman of the Board and Nomination Committee)
Craig Cleland (Chairman of the Audit Committee)
Davina Curling (Senior Independent Director and Chairman of the Management
Engagement Committee)
Mark Dampier (Chairman of the Marketing Committee)
Tim Woodhead
All the Directors are, in the opinion of the Board, independent of the
management company.
All Directors are members of the Management Engagement, Nomination and
Marketing Committees.
All Directors, except the Chairman of the Board, are members of the Audit
Committee.
Registered Office and Company Number
Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH
Registered in England and Wales: No. 05916642
Alternative Investment Fund Manager (Manager)
Invesco Fund Managers Limited
Company Secretary
Invesco Asset Management Limited
Company Secretarial contact: James Poole/Naomi Rogers
Correspondence Address
43-45 Portman Square, London W1H 6LY
Tel: 020 3753 1000
Email: investmenttrusts@invesco.com
Depositary and Custodian
The Bank of New York Mellon (International) Limited
160 Queen Victoria Street, London EC4V 4LA
Corporate Broker
Investec Bank plc
30 Gresham Street, London EC2V 7QP
General Data Protection Regulation
The Company’s privacy notice can be found at
www.invesco.co.uk/investmenttrusts
Invesco Client Services
Invesco has a Client Services Team, available to assist you from 8.30am to
6.00pm Monday to Friday (excluding UK Bank Holidays). Please note no
investment advice can be given. Tel: 0800 085 8677.
www.invesco.co.uk/investmenttrusts
Registrar
Link Group
Central Square, 29 Wellington Street, Leeds, LS1 4DL
If you hold shares directly and have queries relating to your shareholding,
you should contact the Registrar on Tel: 0371 664 0300. Calls are charged at
the standard geographic rate and will vary by provider.
From outside the UK: +44 (0)371 664 0300. Calls from outside the UK will be
charged at the applicable international rate. Lines are open from 9.00am to
5.30pm, Monday to Friday (excluding Bank Holidays in England and Wales).
Shareholders can also access their holding details via Link’s website
www.signalshares.com
Link Group provides on-line and telephone share dealing services to existing
shareholders who are not seeking advice on buying or selling. This service is
available at www.linksharedeal.com or Tel: 0371 664 0445. Calls are charged
at the standard geographic rate and will vary by provider. Calls from outside
the UK will be charged at the applicable international rate. Lines are open
9.00am to 5.30pm Monday to Friday (excluding Bank Holidays in England and
Wales).
Link Group is the business name of Link Market Services Limited.
Investor Warning
The Company, Invesco and the Registrar would never contact members of the
public to offer services or require any type of upfront payment. If you
suspect you have been approached by fraudsters, please contact the FCA
consumer helpline on 0800 111 6768 and Action Fraud on 0300 123 2040.
Further details for reporting frauds, or attempted frauds, can be found below.
The Association of Investment Companies
The Company is a member of the Association of Investment Companies. Contact
details are as follows:
Tel: 020 7282 5555
Email: enquiries@theaic.co.uk
Website: www.theaic.co.uk
Website
Information relating to the Company can be found on the Company’s section of
the Manager’s website.
Each share class has a separate web page that can be accessed via the Invesco
investment trusts hub at www.invesco.co.uk/investmenttrusts.
The contents of websites referred to in this document, or accessible from
links within those websites, are not incorporated into, nor do they form part
of, this document.
The Company’s ordinary shares qualify to be considered as a mainstream
investment product suitable for promotion to retail investors.
National Storage Mechanism
A copy of the Half-Yearly 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.
Hard copies of the Half-Yearly Financial Report will be posted to shareholders
and can be requested from the Company Secretary by email
at investmenttrusts@invesco.com or at the Company’s correspondence
address, 2nd Floor, 43-45 Portman Square, London W1H 6LY.
Invesco Asset Management Limited
Corporate Company Secretary
8 February 2023
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