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LEI: 549300JZQ39WJPD7U596
INVESCO SELECT TRUST PLC
HALF-YEARLY FINANCIAL REPORT
SIX MONTHSED 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 Months Year Years Years
Portfolio
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 3.2% 5.8% 16.4% 27.9%
plus 5% per annum
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 31 May 31 May 31 May 31 May
November
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 0.3% 8.3% 23.1% -11.2% -3.2%
(1)
Revenue return per 3.47p 6.00p 3.90p 4.12p 5.73p
share
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 - Travel and Leisure 2,452 1.7
Non-Voting AIM
Phoenix Life Insurance 2,441 1.7
Compass Consumer Services 2,328 1.7
Tesco Personal Care, Drug and Grocery 2,285 1.6
Stores
Smith & Nephew Medical Equipment and Services 2,282 1.6
Chemring Aerospace and Defence 2,251 1.6
JTC Investment Banking and Brokerage 2,038 1.6
Services
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 1,823 1.3
Providers
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 1,510 1.1
Services
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 561 0.4
Services
Sherborne Investors (Guernsey) C Investment Banking and Brokerage 333 0.2
Services
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 Six months ended
30 November 2022 30 November 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (8,554) (8,554) - 5,663 5,663
held at fair value
Losses on foreign exchange - (5) (5) - (4) (4)
Income 2,948 - 2,948 2,754 - 2,754
Investment management fees - note (106) (246) (352) (124) (289) (413)
2
Other expenses (248) (1) (249) (184) (2) (186)
Net return before finance costs 2,594 (8,806) (6,212) 2,446 5,368 7,814
and taxation
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 2,512 (8,932) (6,420) 2,405 5,320 7,725
financial period
Return per ordinary share - note 3.47p (12.35)p (8.88)p 2.95p 6.52p 9.47p
4
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 (314) (452)
borrowings
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 31 May 31 May 31 May 31 May
November
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 (£) 3.9% 7.4% 22.3% 8.9% 5.3%
(1)
Revenue return per 1.84p 4.85p 3.95p 5.39p 6.90p
share
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 2.3 -0.54
(TSMC)
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 13.3 15.1
forecast)
Dividend yield (next 12 months 2.9 2.4
forecast)
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 4,322 6.4
Kingdom
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 & United States 2,580 3.8
Semiconductor Equipment
Zurich Insurance Insurance Switzerland 2,426 3.6
Standard Chartered Banks United 2,334 3.4
Kingdom
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, Switzerland 1,805 2.6
Biotechnology & Life Sciences
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 - Technology Hardware & South Korea 1,633 2.4
preference shares Equipment
Besi Semiconductors & Netherlands 1,567 2.3
Semiconductor Equipment
Progressive Insurance United States 1,539 2.3
Top Twenty Holdings 46,991 69.2
Nvidia Semiconductors & United States 1,524 2.3
Semiconductor Equipment
Taiwan Semiconductor Semiconductors & Taiwan 1,521 2.3
Manufacturing Semiconductor Equipment
Intercontinental Exchange Diversified Financials United States 1,512 2.2
Union Pacific Transportation United States 1,501 2.2
RELX Commercial & Professional United 1,442 2.1
Services Kingdom
Home Depot Retailing United States 1,314 2.0
Melrose Industries Capital Goods United 1,291 1.9
Kingdom
Ferguson Capital Goods United 1,231 1.8
Kingdom
Next Retailing United 1,209 1.8
Kingdom
Canadian Pacific Railway Transportation Canada 1,178 1.7
Top Thirty Holdings 60,714 89.5
Texas Instruments Semiconductors & United States 1,070 1.6
Semiconductor Equipment
Installed Building Consumer Durables & Apparel United States 868 1.3
Products
TencentR Media & Entertainment China 846 1.3
PepsiCo Food, Beverage & Tobacco United States 800 1.2
Danaher Pharmaceuticals, United States 772 1.1
Biotechnology & Life Sciences
Volkswagen - preference Automobiles & Components Germany 667 1.0
shares
Alphabet Media & Entertainment United States 566 0.8
Rolls-Royce Capital Goods United 494 0.7
Kingdom
Ping An InsuranceH 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 - ADRUQ Banks Russia - -
Total Holdings 43 (2022: 67,859 100.0
41)
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 Six months ended
30 November 2022 30 November 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held - 790 790 - 4,628 4,628
at fair value
Gains on foreign exchange - 12 12 - 6 6
Income 702 - 702 663 - 663
Investment management fees (51) (121) (172) (51) (119) (170)
- note 2
Other expenses (83) (1) (84) (70) (1) (71)
Net return before finance 568 680 1,248 542 4,514 5,056
costs and taxation
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 460 626 1,086 478 4,492 4,970
the financial period
Return per ordinary share - 1.84p 2.51p 4.35p 1.96p 18.45p 20.41p
note 4
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 (798) (208)
borrowings
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/ 1,086 5,307
year
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 31 May 31 May 31 May 31 May
November
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 3.2% 5.1% 5.1% 5.9% 5.8%
month LIBOR plus 5% per
annum(1)
(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 Six months ended
30 November 2022 30 November 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (1) (1) - 1 1
held at fair value
(Losses)/gains on derivative 31 (665) (634) 28 (12) 16
instruments
Gains on foreign exchange - 21 21 - 14 14
Income 55 - 55 1 - 1
Investment management fees - (7) (18) (25) (8) (19) (27)
note 2
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 65 (664) (599) 8 (17) (9)
financial period
Return per ordinary share - note 1.55p (15.80)p (14.25)p 0.19p (0.41)p (0.22)p
4
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 98 362
profit or loss
Current assets 798 732
Derivative liabilities held at fair value through (88) (225)
profit or loss
Creditors falling due within one year, excluding (47) (17)
borrowings
Net assets 6,545 7,085
Net asset value per ordinary share - note 5 155.72p 169.87p
Notional exposure of derivative instruments as % 118.5% 145.7%
of net assets
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/ (599) 9
year
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 31 May 31 May 31 May 31 May
November
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 0.17p -0.02p 1.35p(2) 0.65p 0.59p
share
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 Six months ended
30 November 2022 30 November 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments - 9 9 - (3) (3)
held at fair value
Income 6 - 6 4 - 4
Investment management fees - (1) - (1) (1) - (1)
note 2
Other expenses (3) - (3) (3) - (3)
Return before taxation 2 9 11 - (3) (3)
Tax - note 3 - - - - - -
Return after taxation for the 2 9 11 - (3) (3)
financial period
Return per ordinary share - 0.17p 0.67p 0.84p - (0.20)p (0.20)p
note 4
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 The Board monitors the share registers Unchanged
Attractiveness to Investors and the performance of the Company and
There is no guarantee that the each portfolio. It has established a
Investment Policy of the Company and structure offering a range of options
of each portfolio will provide the for investors and has set guidelines to
returns sought by the Company. There ensure that the Investment Policy of
can be no guarantee, therefore, that the Company and each portfolio is
the Company will achieve its pursued by the Manager.
investment objectives or that the
shares will continue to meet
investors' needs.
Market Movements and Portfolio The performance of the Manager is Increased
Performance carefully monitored by the Board and
Individual portfolio performance is the continuation of the Manager's
substantially dependent on the mandates is reviewed each year. The
performance of the securities Board has established guidelines to
(including derivative instruments) ensure that the investment policies of
held within the portfolio. The prices each class of share are pursued by the
of these securities are influenced by Manager.
many factors including the general For a fuller discussion of the economic
health of regional and worldwide and market conditions facing the
economies; interest rates; inflation; Company and the current and future
government policies; industry performance of the different portfolios
conditions; political and diplomatic of the Company, please see both the
events; tax laws; environmental laws; Chairman's Statement on pages 2 to 3
and by the demand from investors. The and the Portfolio Managers' Reports
current conflict in Ukraine has had an starting on pages 4 to 25.
impact on the global economy, ranging The Company has a nil-valued holding in
from decreases to the supply (and/or Sberbank, a Russian bank but no other
increases to the costs) of goods to direct investments in Russia or other
increases (and increased volatility) holdings with significant links to
in energy and commodity prices and Russia.
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 The Board has adopted a discount Unchanged
Shares control policy that applies to all
Shares in the Company are designed to share classes and the Board and the
be held over the long-term and may not Manager monitor the market rating of
be suitable as short-term investments. each share class.
There can be no guarantee that any While it is the intention of the
appreciation in the value of the Directors to pay dividends to holders
Company's shares will occur and of the UK Equity, Global Equity Income
investors may not get back the full and Managed Liquidity Shares, this will
value of their investments. Owing to be affected by the returns achieved by
the potential difference between the the respective portfolios and the
mid-market price of the shares and the dividend policy adopted by the Board.
prices at which they are sold, there Accordingly, the amount of dividends
is no guarantee that their realisable paid to shareholders may fluctuate. Any
value will reflect their mid-market change in the tax or accounting
price. treatment of dividends received or
The market value of a share, as well other returns may also affect the level
as being affected by its net asset of dividend paid on the shares in
value (NAV), is also influenced by future years. The Directors have
investor demand, its dividend yield, resolved, in the absence of unforeseen
where applicable, and prevailing circumstances, to supplement revenue
interest rates, amongst other factors. with capital profits in order to pay
As such, the market value of a share equity portfolio dividends at levels
can fluctuate and may not reflect its set by the Board (see pages 41 and 42
underlying NAV. Shares may therefore of the Company's 2022 Annual Financial
trade at discounts to their NAVs. Report).
Past performance of the Company's
shares is not necessarily indicative
of future performance.
Viability and Compulsory Conversion of The Board monitors share conversions Unchanged
a Class of Share and portfolio sizes and liaises with
It is possible that through poor the Manager on the continued viability
performance, market sentiment, or of each share class.
otherwise, lack of demand for one of The Board has received assurances from
the Company's share classes could the Manager that the size of the
result in the relevant portfolio portfolio is not critical to the
becoming too small to be viable. Manager being able to continue to offer
The continued listing on the Official its investment management services in
List of each class of share is respect of any of the Company's four
dependent on at least 25% of the portfolio strategies.
shares in that class being held in If at any time the Board considers that
public hands. This means that if more the listing of any class of share on
than 75% of the shares of any class the Official List is likely to be
were held by, inter alia, the cancelled and the loss of such listing
Directors, persons connected with would mean that the Company would no
Directors or persons interested in 5% longer be able to qualify for approval
or more of the relevant shares, the as an investment trust under section
listing of that class of share might 1158 of the Corporation Tax Act 2010,
be suspended or cancelled. The Listing the Board may serve written notice on
Rules state that the FCA may allow a the holders of the relevant shares
reasonable period of time for the requiring them to convert their shares
Company to restore the appropriate into another share class.
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 The Directors intend that, in the Unchanged
Liabilities of Another Portfolio 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.
Gearing Gearing levels of the different Unchanged
Borrowing will amplify the effect on portfolios will change from time to
shareholders' funds of gains and time in accordance with the respective
losses on the underlying securities. portfolio managers' assessments of risk
Whilst the use of borrowings by the and reward. The Manager assesses the
Company should enhance the total exposure to gearing on a regular basis,
return on a particular class of share including the level of borrowings and
where the return on the underlying covenants of the credit facility.
securities is rising and exceeds the The Balanced Risk Allocation Portfolio
cost of borrowing, it will have the may also be geared (by up to 250%,
opposite effect where the underlying according to the investment policy set
return is falling, further reducing out on page 40 of the Company's
the total return on that share class. 2022 Annual Financial Report) by means
Similarly, the use of gearing by of the derivative instruments in which
investment companies or funds in which it invests. This is discussed
the Company invests increases the separately below, under the heading:
volatility of those investments. Additional Risks Applicable to Balanced
The Company has a £40 million 364 day Risk Allocation Shares.
multicurrency revolving credit The Manager assesses the exposure to
facility and there is no guarantee gearing on a regular basis, including
that these facilities will be renewed the level of borrowings and covenants
at maturity or on terms acceptable to of the credit facility.
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 The Company may use derivatives to Unchanged
Where hedging is used there is a risk hedge its exposure to currency or other
that the hedge will not be effective. 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.
Regulatory and Tax Related The Manager reviews the level of Unchanged
The Company is subject to various laws compliance with the Corporation Tax Act
and regulations by virtue of its 2010 and other financial regulatory
status as a public limited investment requirements on a daily basis. All
company registered under the Companies transactions, income and expenditure
Act 2006, its status as an investment are reported to the Board. The Board
trust and its listing on the London regularly considers the risks to which
Stock Exchange. Loss of investment the Company is exposed, the measures in
trust status could lead to the Company place to control them and the potential
being subject to UK Capital Gains Tax for other risks to arise. The Board
on the sale of its investments. A ensures that satisfactory assurances
serious breach of other regulatory are received from service providers.
rules could lead to suspension from The depositary and the Manager's
the London Stock Exchange, a fine or a compliance and internal audit officers
qualified Audit Report. Other control report regularly to the Company's Audit
failures, either by the Manager or any Committee.
other of the Company's service The risks and risk management policies
providers, could result in operational and procedures as they relate to the
or reputational problems, erroneous financial assets and liabilities of the
disclosures or loss of assets through Company are also detailed in note 17 to
fraud, as well as breaches of the financial statements in the
regulations. Company's 2022 Annual Financial Report.
Additional Risks Applicable to The Manager actively seeks the most Unchanged
Balanced Risk Allocation Shares liquid means of obtaining the required
The use of financial derivative exposures. The financial derivative
instruments, in particular futures, instruments used for the strategy are
forms part of the investment policy geared instruments and the aggregate
and strategy of the Balanced Risk notional exposure will usually exceed
Allocation Portfolio. The degree of the net asset value of the portfolio.
leverage inherent in futures trading Whilst this could result in greater
potentially means that a relatively fluctuations in the net asset value,
small price movement in a futures and consequently the share price, the
contract may result in an immediate use of leverage is normally necessary
and substantial loss to the portfolio. to achieve the target volatility
The portfolio's ability to use these required to meet the return objective.
instruments may be limited by market The degree of leverage inherent in
conditions, regulatory limits and tax futures trading potentially means that
considerations. a relatively small price movement in a
The absence of a liquid market for any futures contract may result in an
particular instrument at any immediate and substantial loss and it
particular time may inhibit the would be necessary to increase the
ability of the Manager to liquidate a collateral held at the clearing broker
financial derivative instrument at an to cover such loss. This is mitigated
advantageous price. 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.
Third Party Service Providers Risk
Reliance on Third Party Service Third-party service providers are Unchanged
Providers subject to ongoing monitoring by the
The Manager may be exposed to Manager and the Company. The Manager
reputational risks. In particular, the reviews the performance of all
Manager may be exposed to the risk third-party providers regularly through
that litigation, misconduct, formal and informal meetings. The Audit
operational failures, negative Committee reviews regularly the
publicity and press speculation, performance and internal controls of
whether or not it is valid, will harm the Manager and all third-party
its reputation. Any damage to the providers through audited service
reputation of the Manager could result organisation control reports, together
in potential counterparties and third with updates on information security,
parties being unwilling to deal with the results of which are reported to
the Manager and by extension the the Board.
Company. This could have an adverse The Manager's business continuity plans
impact on the ability of the Company are reviewed on an ongoing basis and
to successfully pursue its Investment the Directors are satisfied that the
Policy. Manager has in place robust plans and
The Company has no employees and the infrastructure to minimise the impact
Board comprises non-executive on its operations so that the Company
directors only. The Company is can continue to trade, meet regulatory
therefore reliant upon the performance obligations, report and meet
of third-party service providers for shareholder requirements. The Board
its executive function and service receives regular update reports from
provisions. The Company's operational the Manager and third-party service
structure means that all cyber risk providers on business continuity
(information and physical security) processes and has been provided with
arises at its third-party service assurance from them all insofar as
providers, including fraud, sabotage possible that measures are in place for
or crime against the Company. The them to continue to provide contracted
Company's operational capability services to the Company.
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 MONTHSED 30 NOVEMBER
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (7,756) (7,756) - 10,289 10,289
held at fair value
(Losses)/gains on derivative 31 (665) (634) 28 (12) 16
instruments
Gains on foreign exchange - 28 28 - 16 16
Income 3,711 - 3,711 3,422 - 3,422
Investment management fees - (165) (385) (550) (184) (427) (611)
note 2
Other expenses (348) (3) (351) (270) (4) (274)
Net return before finance costs 3,229 (8,781) (5,552) 2,996 9,862 12,858
and taxation
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 3,039 (8,961) (5,922) 2,891 9,792 12,683
financial period
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 1.84p 2.51p 4.35p 1.96p 18.45p 20.41p
Portfolio
- Balanced Risk Allocation 1.55p (15.80)p (14.25)p 0.19p (0.41)p (0.22)p
Share Portfolio
- Managed Liquidity Share 0.17p 0.67p 0.84p 0.00p (0.20)p (0.20)p
Portfolio
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 MONTHSED 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 - - - 2 (2) - -
shares
Cancellation of share - (122,990) 122,990 - - - -
premium account(1)
Shares bought back and held - - (900) - (3,516) - (4,416)
in treasury
Share conversions (1) - 1,104 - (1,103) - -
Return after taxation per - - - - (8,961) 3,039 (5,922)
the income statement
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 - - (5) 5 - - -
shares
Shares bought back and held - - (9,361) - (8,752) - (18,113)
in treasury
Share conversions (4) - 2,866 - (2,862) - -
Return after taxation per - - - - 9,792 2,891 12,683
the income statement
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 140,371 67,859 5,784 1,519 215,533
profit or loss
Current assets
Derivative assets held at fair value - - 98 - 98
through profit or loss
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 - - (88) - (88)
value through profit or loss
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 - 183.35p 250.38p 155.72p 106.71p
note 5
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 158,450 67,630 6,233 1,445 233,758
profit or loss
Current assets
Derivative assets held at fair value - - 362 - 362
through profit or loss
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 - - (225) - (225)
value through profit or loss
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 - 194.35p 249.00p 169.87p 106.92p
note 5
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 107,866,467 41,603,645 10,665,367 10,613,578
2022
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 1 b 183.35p 250.38p 155.72p 106.71p
per share
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 35 b 194.35p 249.00p 169.87p 106.92p
per share
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 b 1.7% 1.3% 0.0% 1.0%
reinvestments(1)
Net asset value total c = a+b -4.0% 1.9% -8.3% 0.8%
return for the period
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 b 3.6% 3.1% 0.0% 0.8%
reinvestments(1)
Net asset value total c = a+b 6.8% 9.6% 0.3% -0.3%
return for the year
(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 b 1.8% 1.4% 0.0% 1.0%
reinvestments(1)
Share price total return c = a+b -3.9% -0.8% -17.8% 0.0%
for the period
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 b 3.6% 3.1% 0.0% 0.9%
reinvestments(1)
Share price total return c = a+b 3.0% 4.4% -5.2% -4.0%
for the year
(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
END
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