LEI:
549300JZQ39WJPD7U596
Invesco
Global Equity Income Trust plc
Annual
Financial Report for the year ended 31 May
2024
The
following text is extracted from the Annual Financial Report of the
Company for the year ended 31 May
2024. All page numbers below refer to the Annual Financial
Report which will be made available on the Company's
website.
Financial
Performance
Capital
Statistics – Company Level(1)
At
31 May
|
|
2024
|
2023
|
change
%
|
|
Net Assets
(£'000)
|
197,555
|
199,739
|
–1.1%
|
|
|
|
|
|
|
Revenue
Statistics – Company Level(1)
|
|
|
|
|
Year
ended 31 May
|
|
|
|
|
|
2024
|
2023
|
|
|
Net revenue
return after taxation for the financial year (£’000)
|
6,099
|
5,994
|
|
|
Net capital
return after taxation for the financial year (£’000)
|
21,943
|
(5,664)
|
|
|
Net total
return after taxation for the financial year (£’000)
|
28,042
|
330
|
|
|
|
|
|
|
|
Year
end Net Asset Value, Share Price and Discount – Company
Level(1)
|
|
|
Net
Asset
Value
(pence)
|
Share
Price
(pence)
|
Discount
|
|
Global
Equity Income
|
313.30
|
286.00
|
(8.7)%
|
|
(1) At
31 May 2024 the Company consists solely of the Global Equity Income
Portfolio, following the restructure on 7 May 2024 which involved
the closure of the UK Equity,
Balanced Risk Allocation and Managed Liquidity
Portfolios.
|
|
Cumulative
Portfolio Total Returns(2)(3)
To
31 May 2024
|
|
|
|
|
|
One
|
Three
|
Five
|
|
Global
Equity Income Portfolio (formerly Global Equity Income Share
Portfolio)
|
Year
|
Years
|
Years
|
|
Net Asset
Value
|
21.0%
|
45.5%
|
84.7%
|
|
Share
Price
|
26.9%
|
38.6%
|
72.6%
|
|
MSCI World
Index (£)
|
21.6%
|
35.5%
|
80.4%
|
|
Cumulative
Portfolio Total Returns(2)(3)
To
3 May 2024
|
|
|
|
|
|
One
|
Three
|
Five
|
|
UK
Equity Share Portfolio(4)
|
Year
|
Years
|
Years
|
|
Net Asset
Value
|
11.3%
|
15.7%
|
36.5%
|
|
Share
Price
|
8.3%
|
6.4%
|
17.3%
|
|
FTSE
All–Share Index
|
13.8%
|
23.8%
|
35.4%
|
|
|
|
|
|
|
|
One
|
Three
|
Five
|
|
Balanced
Risk Allocation Share Portfolio(4)
|
Year
|
Years
|
Years
|
|
Net Asset
Value
|
9.0%
|
–3.2%
|
17.6%
|
|
Share
Price
|
11.1%
|
–9.7%
|
6.3%
|
|
Composite
Benchmark Index(5)
|
11.1%
|
–5.3%
|
9.5%
|
|
ICE BoA
Merrill Lynch 3 month LIBOR plus 5% per annum
|
9.9%
|
22.7%
|
33.7%
|
|
|
|
|
|
|
|
One
|
Three
|
Five
|
|
Managed
Liquidity Share Portfolio(4)
|
Year
|
Years
|
Years
|
|
Net Asset
Value
|
6.9%
|
10.4%
|
15.6%
|
|
Share
Price
|
17.8%
|
7.2%
|
9.4%
|
|
(2) Alternative
Performance Measure (APM). See Glossary of Terms and Alternative
Performance Measures on pages 97 to 100 of the financial report for
details of the explanation and reconciliations of APMs.
(3) Source:
LSEG Data & Analytics/Bloomberg.
(4) This
class was closed on 7 May 2024, all performance data is calculated
to 3 May 2024, being the date of the final computed Net Asset Value
of the class.
(5) 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
Highlights
– Consolidation
and simplification of Company structure completed to form Invesco
Global Equity Income Trust plc (Ticker: IGET)
– Continued
strong performance has delivered a share price total return ahead
of benchmark of 26.9% for the year.
– Dividend
to be increased by at least 70% over previous dividend share class
arrangement.
Welcome to
the first annual report and accounts for the recently consolidated
and renamed Invesco Global Equity Income Trust, ticker
‘IGET’.
It has been
a year of much change for your Company.
Following a
comprehensive review and consultation regarding the strategy and
market appeal of your Company, an announcement in December and then
a Circular, outlining reconstruction proposals, was published in
February 2024. The proposals included
reclassifying the UK Equity, Balanced Risk Allocation and the
Managed Liquidity shares into the Global Equity Income share-class,
thus simplifying the structure of the trust, creating a one
share-class vehicle. Part of these plans included enhancing and
giving more predictability to the dividend level, a new maximum
discount level objective as well as the introduction of a five
yearly continuation vote. The objective of the restructure and
simplification of your Company was two-fold: to broaden the appeal
of the Company’s shares, thus improving liquidity and narrowing the
discount at which the shares trade; and, by converting to a global
equity mandate, offering the broadest set of investment
opportunities for equity investors, whilst also providing
diversification benefits.
Your
Company was launched in 2006 with a multi-share class structure to
enable shareholders to invest in a wide array of asset classes and
to rebalance their portfolio by allowing them to convert,
tax-efficiently, between share-classes. In recent years there was
only a limited take-up of the conversion opportunity by
shareholders and the pattern of conversions had gradually, over the
years, led to the size of the Balanced Risk Allocation and Managed
Liquidity share-classes representing, in aggregate, only a low
single-digit percentage of the Company’s overall net asset
value.
Investors
are increasingly demanding larger, more liquid investment vehicles,
and your Board believe that it would have been increasingly
challenging to separately market the four individual share-classes
and that the multi-share-class structure may have added an
additional hurdle for some investors.
Your Board
concluded that the broader, global, investment remit, in
combination with Stephen Anness’s Global Equity Team’s management,
presented the best outcome for the Company’s
shareholders.
Shareholders
voted in favour of the various resolutions recommended by the
Board, to bring about the simplification of the Company’s structure
and associated enhancements, at Company and Share Class meetings
held in late March and early April. Thank you for your support of
these proposals.
The
proposals included the opportunity for a 15% tender on the UK
Equity share-class and a full cash exit opportunity on the two
smaller share-classes, given their significantly differentiated
risk profile and asset exposure compared to the Global share-class.
Whilst the UK Equity Share tender was subscribed in full, the
majority of shareholders of the Balanced Risk Allocation and
Managed Liquidity shares opted to roll their investment into Global
shares.
The
restructure completed in early May, and in mid-May your Company
changed its name from Invesco Select Trust plc to Invesco Global
Equity Income Trust plc, with the memorable and distinctive ticker
of IGET.
Your
Company’s Articles of Association were also updated to reflect the
change from a multi to a single share-class structure.
Performance
As at
31 May 2024 your Company’s net assets
stood at over £197m.
Over the
period the Global Equity Income Shares’ NAV total return was 21.0%
against the MSCI World Index (£) return of 21.6%. Although the
portfolio’s NAV return was marginally below the index, it is
important to acknowledge that your Portfolio Managers have achieved
this return with a portfolio that looks quite different to the
index.
This is
covered in more detail in the Portfolio Managers’ update on page
12, as it’s an achievement that should not be overlooked. Your
Company’s share price total return successfully surpassed that of
the index, at 26.9%.
The returns
for the previous share-classes (UK Equity, Balanced Risk Allocation
and Managed Liquidity) are shown on pages 24, 27 and 30. Please
note they show a partial period (to 3 May
2024), as shareholders in these share-classes either had
their holding reclassified into Global Equity Income Shares or
elected for a full or partial cash tender as a result of the
reconstruction proposals. Thus, shareholders who elected to
continue to hold shares in the Company will have a performance
return made up of their original share-class returns from
1 June 2023 to 3 May 2024 and, added to this, the returns made
by the Global Equity Income share-class from 7 May to 31 May 2024.
Your
Team
As a great
number of IGET shareholders will have recently converted into the
Global Equity Income shares from previous share-classes, we thought
it would be helpful to include a chart of the Global Equity Team;
please find this on page 18. Your Board has been impressed with the
team’s track record of process and performance, throughout varying
market conditions, as well as the calibre of the individuals within
the team.
As
Stephen Anness refers to in the
Portfolio Managers’ report, there is a depth and breadth of
comprehensive thought and analysis in how the team select and
monitor stocks for the portfolio. The team are not afraid to hold a
mirror up to their process, with the aim of constantly and
continually improving and evolving their fund management approach,
to enhance shareholder outcomes.
Within the
team, Stephen Anness has been ably
assisted by Joe Dowling; the
Portfolio Managers have worked together for 11 years.
To better reflect Joe’s work and contribution to the management of
your Company’s portfolio, we have decided to change Joe’s title to
Deputy Portfolio Manager, effective 1 September
2024. A biography of both Portfolio Managers is included on
page 12.
Global
Portfolio
The
objective of the Global Equity Income portfolio is to provide an
attractive level of predictable income and capital appreciation
over the long term, predominantly through investment in a
diversified portfolio of equities worldwide.
Although
the fundamental focus of the Portfolio Managers remains on stock
selection rather than sector, geographic or macro-economic trend
forecasting, the only constant in the global backdrop is change.
Key aspects include inflation or disinflation, interest rates and
to cut or not to cut, elections have happened or will happen, with
a particular eye to the USA.
A key
driver of performance for global stock markets has been the narrow
focus on a handful of Artificial Intelligence (AI) stocks. As I
write, there has been some challenge to the one-way performance of
these stocks, which highlights the importance of two of the key
fundamentals of our Portfolio Managers’ approach – diversification
and valuation.
Gearing
Your
Company has the ability to ‘gear’ its portfolio by tactically using
borrowings to amplify portfolio returns. During the period your
Board renewed the Company’s revolving credit bank loan facility, at
a level of £40 million.
Your Portfolio Managers have the ability to employ borrowings up to
30% of the value of the Company’s total assets. As at the date I
write, your Portfolio Managers have decided to not employ
gearing.
Consumer
Duty
Your Board
continues to work with the Manager to ensure adherence to Consumer
Duty, in respect of the four areas of focus, namely products and
services, price and value, consumer understanding and consumer
support.
To improve
the access to information on your Company, the Board, in
conjunction with the Manager, has introduced a new information
service, which allows shareholders to register to receive updates
and similar information; further details are included
below.
Company
Profile and Information Updates
Following
on from the award win in November for the International Income
category at the Citywire Investment Trust Awards and being given a
Kepler Growth Rating, the performance of IGET and the Global
Equities Team continues to be recognised by independent parties.
Recently, your Company has been shortlisted by a panel of experts
for the Global Equity category for the AJ Bell Investment Awards
and, additionally, shortlisted at the Investment Week, Investment
Company Awards, for the Global Income category.
Appreciating
that the reliability of income can be important for the Company’s
shareholders, IGET is classified as an AIC ‘Next Generation
Dividend Hero’, with 14 consecutive years of dividend
increases.
Shareholders
may have noticed that, aligned with the change of structure, your
Company has had a significant change in how it is presented, which
is a small part of a broader marketing campaign, designed to
enhance the profile of the Company. This includes the creation of a
new information service, which aims to provide shareholders with
regular updates on the portfolio and Manager’s views, which I would
encourage you to register for by scanning the QR code included on
page 8 with your smartphone/device, visiting the Company’s specific
page on the Manager’s website, at
https://intouch.rdir.com/Public/PreferenceCentre/Invesco/Standard,
or by contacting Invesco directly at
investmenttrusts@invesco.com.
Dividend
Policy and Dividends Paid
The
previous dividend policy consisted of three equal interim dividends
and a ‘wrap up’ fourth interim dividend. For the year under review
the first three dividends declared were 1.60p per share, with a
final fourth interim dividend declared in April 2024 of 2.55p, bringing the total for the
year to 7.35p.
Your
Company’s new policy will pay an annual dividend of at least 4%,
calculated on the unaudited year-end NAV, paid quarterly in equal
amounts, thus giving a smoother, more predictable and enhanced
income to shareholders. The intention is that these dividends will
be paid from your Company’s revenues and, if required, capital
reserves. The unaudited year-end NAV was 313.30p; accordingly the
first interim dividend, in respect of the year ending May 2025, of 3.13p was paid on 15 August 2024. This represents a projected
annualised total dividend of 12.52p per share, which amounts to an
increase of at least 70% over the annual dividend that was paid to
shareholders of any share class for the year ending 31 May 2024.
As is
normal practice an advisory vote on the dividend policy will be put
to shareholders at the 2024 annual general meeting
(AGM).
Discount
Management and Share Capital Movements
Your
Company adopted a new discount control policy as part of its
reconstruction proposals, whereby ad hoc share buybacks may be used
to seek to maintain the discount at less than 10%, in normal market
conditions. The Board will ask shareholders to renew the buyback
authorities as and when appropriate and intends to put a resolution
to shareholders at the 2024 AGM to renew this authority.
As at the
date of my statement, for the financial year ending May 2025, 57,000 Global Equity Shares have been
repurchased, and placed in treasury, at an average price of
285.79p. Your Company currently has a 6.4% share price discount to
NAV. No shares have been issued in the present year.
Full
details of shares bought back during the year, including those in
the former share classes are set out in the table on page
39.
Other than
in connection with the reconstruction proposals, no shares were
issued over the period, including shares issued from
treasury.
UK Equity,
Balanced Risk Allocation and Managed Liquidity shares held in
treasury were cancelled as part of the reconstruction
proposals.
Prior to
the announcement of the restructuring proposals there were two
share conversion opportunities, these took place in August and
November 2023. Full details of the
share movements arising on those conversions are set out in the
table on page 39.
On 19 April
and 3 May respectively, your Board formally announced the outcome
of the restructuring tender, (including the number of shares to be
repurchased and the tender prices), and the results of the
restructuring and the calculation ratios in respect of the
reclassification of the former share-classes into Global Equity
Income Shares. I refer shareholders to those announcements as well
as the table showing movements in the share capital of your Company
set out on page 39.
Continuation
Vote
As
described in February’s Circular, your Board intends to put forward
a vote at the Company’s annual general meeting in 2026 for the
continuation of the Company. If the 2026 Continuation Vote is
passed the Board will put forward a continuation vote at the
Company’s annual general meeting in 2031 and, if passed, at each
fifth AGM thereafter.
Corporate
Broker changes
Cavendish
Capital Markets Ltd were appointed as joint corporate broker to
your Company in March 2024. Upon
completion of the reconstruction proposals Winterflood Securities
Limited retired from their position and Cavendish Capital Markets
continue as your Company’s sole corporate broker.
Board
Succession
There were
no changes to the composition of your Board during the
period.
I have
recently reached my 9-year anniversary of serving on the Board and
therefore it is my intention to retire once my successor has been
appointed.
Davina Curling joined the Board of your Company following
its merger with Invesco Income Growth Trust plc in 2021, where she
served as a director from 2011; Davina intends to retire at the
upcoming AGM. I thank Davina for her service to your
Company.
A
recruitment process is underway to appoint a new Chair of the Board
and a new director; announcements will be made once those
appointments are formalised. Your Board will be taking into account
the skill and diversity make-up of the directors in its hiring
decision-making.
Your
Company’s remaining three directors will all stand for re-election
at the forthcoming AGM.
Timeline
of AGM and Invitation to Attend
The Annual
General Meeting of your Company will be held at the offices of
Invesco Asset Management, 43-45 Portman Square, London, W1H 6LY on Thursday, 21 November 2024 at 3.00pm. A separate circular, including the Notice
of AGM and voting instructions, will be sent to shareholders during
October 2024.
Any
shareholder wishing to submit questions to the Board or the Manager
is encouraged to do so by following the procedures which will be
set out in the circular. We look forward to welcoming as many of
you as possible to the AGM.
Outlook
The NAV
total return for the period 31 May to the latest practical date
available at the signing of this report is 4.0%, versus 2.5% for
the benchmark.
Your Board
believes that the Global Equity universe offers the broadest set of
investment opportunities for equity investors. We also believe that
your Company is well positioned, as Stephen
Anness, Joe Dowling and the
Global Equities Team will continue to seek out investment
opportunities to deliver capital growth with predictable income, to
generate the best returns for the ongoing benefit of
shareholders.
As my time
on the Board comes towards an end, I would like to thank the
members of the Board, past and present, as well as your Company’s
Manager and corporate advisors, for their service and expertise;
and particularly to you, the Company’s shareholders, for your
support of IGET, over recent times and into the future.
Victoria Muir
Chairman
25 September 2024
Global
Equity Income
(formerly
Global Equity Income Share Portfolio)
Total
Return
For the
year ended 31 May
|
|
2024
|
2023
|
2022
|
2021
|
2020
|
|
Net Asset
Value(1)
|
21.0%
|
9.8%
|
9.6%
|
35.9%
|
–6.4%
|
|
Share
Price(1)
|
26.9%
|
4.6%
|
4.4%
|
32.6%
|
–6.1%
|
|
MSCI World
Index (£)(1)
|
21.6%
|
3.8%
|
7.4%
|
22.3%
|
8.9%
|
|
Revenue
return per share
|
9.03p
|
5.20p
|
4.85p
|
3.95p
|
5.39p
|
|
Dividends
|
7.35p
|
7.20p
|
7.15p
|
7.10p
|
7.05p
|
(1) Source:
LSEG Data & Analytics.
Global
Equity Income Share Portfolio Historical Shareholder Returns from
an Initial Investment of £1,000 on 31 May
2014
|
|
|
Annual
|
Cumulative
|
|
Capital
|
Outcome
if
|
|
|
Annual
|
dividends
|
dividends
|
|
value
(using
|
dividends
|
|
|
dividends
|
from
|
from
|
Mid-market
|
mid-market
|
reinvested
on
|
|
|
per
share(1)
|
investment(1)
|
investment(1)
|
share
price
|
share
price)
|
payment
date
|
|
31
May
|
pence
|
£
|
£
|
pence
|
£
|
£
|
|
2014
|
–
|
–
|
–
|
148.00
|
1,000
|
1,000
|
|
2015
|
4.60
|
31
|
31
|
166.75
|
1,127
|
1,160
|
|
2016
|
6.00
|
40
|
71
|
156.00
|
1,054
|
1,128
|
|
2017
|
6.40
|
43
|
114
|
197.50
|
1,334
|
1,478
|
|
2018
|
6.70
|
45
|
159
|
202.00
|
1,365
|
1,561
|
|
2019
|
6.90
|
47
|
206
|
195.00
|
1,317
|
1,560
|
|
2020
|
7.05
|
48
|
254
|
176.50
|
1,192
|
1,465
|
|
2021
|
7.10
|
48
|
302
|
226.00
|
1,527
|
1,941
|
|
2022
|
7.15
|
48
|
350
|
229.00
|
1,547
|
2,028
|
|
2023
|
7.20
|
48
|
398
|
232.00
|
1,567
|
2,120
|
|
2024
|
7.35
|
50
|
448
|
286.00
|
1,932
|
2,689
|
Source:
LSEG Data & Analytics.
Global
Equity Income Share Portfolio Managers’ Report
Q What
changes has the Company undergone?
A After
the share class consolidation and the subsequent relaunch of
Invesco Global Equity Income Trust (IGET), some shareholders will
note the significant transformation that the Company has undergone,
whilst others will have remained in the same portfolio throughout,
but for all it marks a new chapter in the Company’s
history.
For
continuing shareholders, I thank you for your support and to our
new shareholders, welcome.
Both myself
and the Global Equities Team have ensured that throughout the
consolidation process, capital was invested into the portfolio as
quickly and smoothly as possible and without incident.
This
strategic shift aims to enhance capital growth and income potential
for investors. With a diversified portfolio of global companies,
IGET is targeting capital growth alongside a predictable income,
setting an annual dividend target of at least 4% as set by the
board.
For those
who know us less well, our investment approach is centred around
bottom-up stock selection, with a focus on finding quality
companies at attractive prices. We look to build a concentrated
portfolio of around 40-45 stocks where holdings are mostly
uncorrelated to one another, giving the Trust the best opportunity
to perform well through most market conditions.
Q How
has the Company performed in the year under
review?
A In
what has been an extremely narrow market, we were pleased to
deliver 21.0% (net asset value, total return, sterling), remaining
broadly in line with the index (MSCI World) which rose by
21.6%.
2023 was
seen by many as the year of “The Magnificent 7”. The 7 largest
stocks in the S&P 500 made up over 50% of the returns of the
MSCI World. When 7 out of 500 companies make up 60% of the total
return of a major index, being benchmark agnostic (or underweight
them) can be extremely painful.
Stock
market leadership has continued to remain narrow in 2024, mostly a
result of the strong share price appreciation in Nvidia.
The bedrock
of our philosophy is a focus on cash flows, dividend paying
companies and a strict focus on valuation. Given that only 3 of the
magnificent 7 pay a dividend we tend to be underweight these
companies.
Q What
have been some of the biggest contributors?
A Rolls
Royce. The
turnaround continues at Rolls Royce: flying hours are recovering
and cost control remains excellent. The company is well positioned
with a strong recurring revenue stream in a growing and duopolistic
market.
3i
Group continues
to benefit from the very strong performance of its main underlying
portfolio company, Action, a European discount retailer. Though we
have taken some profits and reduced our exposure, the stock remains
the portfolio’s largest holding as we continue to see a long runway
for growth.
Broadcom
delivered
strong results supported by accelerating demand for its custom AI
semiconductor chips combined with the early benefits derived from
its acquisition of VM Ware. We have since reduced our position size
to reflect the significant valuation re-rating in the
shares.
KKR
has
performed really well over the period following a series of
earnings beats. Though we have reduced some of our exposure this
year following the sharp rally in 2023, it remains in the portfolio
as a core holding as we think the business should continue to
deliver above average growth and improvement in margins.
Progressive.
The business continues to take market share (with price increases).
They are using their technology advantage to great effect by giving
consumers low prices and advertising with high return on
investments.
|
|
Average
|
Average
|
|
|
|
Portfolio
|
Benchmark
|
Attribution
|
|
Name
|
Weight
|
Weight
|
Effect
|
|
Rolls-Royce
|
2.31
|
0.05
|
2.17
|
|
3i
Group
|
5.78
|
0.05
|
2.14
|
|
Broadcom
|
3.89
|
0.80
|
1.88
|
|
KKR
|
2.50
|
0.08
|
1.42
|
|
Progressive
|
3.08
|
0.17
|
1.13
|
Q And
detractors?
A Nvidia
shares have
rallied sharply in the previous 12 months
which has been a headwind to relative performance since we do not
own the stock. As readers of our previous updates will know we
bought Nvidia in the summer of 2022 following a sharp selloff and
then subsequently sold in March 2023,
after the share price had more than doubled. In hindsight it is
easy to say we were too early in selling but we followed our
process and stuck to our valuation discipline. Today, we remain
hesitant to buy back into the shares as investor expectations are
high and the valuation multiple leaves limited room for error, as
we have more recently seen.
AIA
group. We have
undergone a review of this holding to ensure the investment story
remains intact and that there has not been a thesis change. Part of
the underperformance appears to be related to the accounting move
to IFRS 17, rather than any cracks appearing in AIA’s economic
moats. We have maintained our exposure.
Azelis.
A mid-cap specialty chemicals manufacturer has struggled of late as
the cyclical recovery story has been pushed out. The share price
came under further pressure when a large shareholder disposed of
their holding. We have reviewed the thesis, met management and even
conducted a visit to one of their research sites and remain
confident in the long term prospects of the business.
Inwit
has
struggled in the ‘higher for longer’ interest rate environment due
to the nature of its balance sheet, i.e., it is highly leveraged.
We like the business for its relatively defensive earnings power
and the diversification role it plays from a portfolio construction
perspective (should benefit when monetary policy begins to
ease).
Reckitt
Benckiser. When we
started the buying the stock a year ago, we regarded it as a ‘cheap
defensive’ with an attractive yield that would benefit from an
improvement in some of its key brands and better management
execution. Unfortunately, recent results have shown this not to be
the case. We have sold our position and we put this down to a
thesis break and quickly moved on.
|
|
Average
|
Average
|
|
|
|
Portfolio
|
Benchmark
|
Attribution
|
|
Name
|
Weight
|
Weight
|
Effect
|
|
Nvidia
|
–
|
2.67
|
–3.30
|
|
AIA
Group
|
3.33
|
0.16
|
–2.10
|
|
Azelis
|
3.23
|
–
|
–1.44
|
|
Inwit
|
2.63
|
0.01
|
–1.25
|
|
Reckitt
Benckiser
|
2.41
|
0.08
|
–1.23
|
Q Have
there been any changes to the investment
process?
A It
is important to note that although a new dividend policy has been
introduced, the unique nature of the investment trust wrapper means
that this does not impact our approach
of rigorous research to select quality companies at attractive
valuations.
For stock
selection and portfolio construction, the Global Equities Team are
always trying to reflect on our process and whether we can improve
the results we achieve. As part of this we have been working with a
behavioural finance consultancy called Essentia. Essentia use our
trading data and try to understand our strengths and
weaknesses.
In 2022
Essentia diagnosed our strengths as generating alpha from high
conviction stock picks that we had held for the long term
(+18 months).
Our weaknesses primarily laid around exit timing – selling
positions entirely instead of gently trimming would have added to
returns. We also tended to average down into both winners and
losers. Averaging down to mixed effect is a bias that is common in
valuation driven investors and so this was an area we had been
actively working on.
In
October 2023 we received our latest
“check-up” results. We were very pleased to see that we had made
significant progress on our exit timing – there were no benefits to
trimming vs exiting over three months. Our adding to positions had
brought significant value and most importantly we were also
delighted to see that we had maintained a high hit rate and
payoff.
Q When
considering stock selection for the portfolio, how do you
incorporate ESG risks and considerations?
A We
view analysing ESG risks as a key part of our investment process.
As active, fundamental managers we consider every key aspect of a
company’s true worth, including material ESG considerations because
we believe that the most sustainable way to make money is to buy
companies for less than they are worth.
Establishing
an estimated ‘fair value’ of a company is therefore essential and
this entails incorporating ESG aspects into our investment
methodology. We take a holistic approach where a company’s ESG
credentials are scrutinised alongside traditional financial and
qualitative aspects to derive a fair value. All companies face
challenges regarding ESG and therefore we must consider materiality
(the impact of ESG factors on fair value) and ESG momentum (the
potential for ESG improvement over time). Both can influence a
stock’s potential returns and our conviction levels in an
investment. As shareholders we actively engage with companies to
enhance the value of our investments.
We
encourage companies to create sustainable value and mitigate risks
in relation to their corporate activities. This can include
prompting them to improve governance structures, make better asset
allocation decisions, instilling sustainable practices and
policies, and providing better disclosure. This reinforces our
fundamental belief that responsible investing demands a long-term
view and that a stakeholder-centric culture of ownership and
stewardship is at the heart.
Q What
are your reflections on the market today?
A The
key dynamic this year has been the ongoing concentration of market
performance in the largest of companies. This has created a
challenging backdrop for a number of reasons:
Firstly, it
is a key aim of the fund to make sure that we have a diverse
portfolio which has the potential to deliver performance in a
variety of conditions.
Secondly,
that diversity of portfolio helps us to manage risk for clients by
avoiding excessive factor or correlation bias. It is challenging to
do this when the market performance is so narrow: 2 stocks
accounted for around 80% of the index (MSCI World) returns in
Q2.
Thirdly,
many of the stocks which are some of the largest in the market are
deemed somewhat impervious to the macro cycle. This type of
behaviour has occurred in the past and generally does not end
well.
Of course,
much of this has been driven by enthusiasm for AI related
stocks.
Q What
are your thoughts on AI?
A Technology
moves quickly, and it is crucial to understand how it affects our
businesses. From advances in semiconductors to artificial
intelligence, we are always looking at how these innovations can
enhance or challenge the companies within our portfolio.
With
regards to AI, we fully appreciate that this new technology will
prove to be incredibly important for the world. However, a lot has
now been priced into the share prices of many of these companies
and we still need to see the speed/scale of AI adoption in proven
use cases.
We have
seen staggering earnings per share (EPS) upgrades in companies such
as Nvidia, and we believe it is unlikely we will see similar going
forward. Indeed, it is an interesting point to note that none of
the 50+ buy rated analysts covering Nvidia saw the scale of
upgrades coming. AI did ‘surprise’ with the pace of change to
Nvidia’s earnings which it delivered. It does make us slightly
caution how we should think about the EPS power of Nvidia. Might
analysts have over-corrected and assumed no cyclicality in
demand?
Perhaps the
best illustration of the market cap gains of Nvidia, is the
comparison with Berkshire Hathaway. It took Warren Buffett almost 60 years to build his
company up to a trillion dollars; Nvidia managed to add a trillion
in 30 days from April
2024.
Q Are
you finding more opportunities in UK equities given how much they
have lagged other markets such as the US?
A I
guess the first thing to say on that is we do not make asset
allocation decisions and the portfolio construction is driven by a
bottom-up approach. Although the portfolio has significant exposure
to the UK this is not driven by our macroeconomic view of the UK
market, but rather the attractive valuation of specific companies
within it. Part of this is linked to the UK becoming a smaller and
smaller part of the overall index meaning less and less managers
are looking at it and so you can find some interesting
opportunities and hidden gems.
One such
example, albeit less of a hidden gem now after recent performance,
is 3i Group – a stock that has been the largest position in the
portfolio for quite some time now. What particularly attracted us
to 3i when we first looked at it in 2020 was one of its underlying
portfolio companies, Action – Europe’s fastest-growing non-food
discount retailer. We see this as nothing less than one of the best
businesses on the continent, hidden within “Financials”. Action
currently has more than 2,300 stores across Europe and plans to open 400 a year by 2026.
We estimate it could take almost 20 years to saturate Europe alone so there is a very long runway
for growth. The company has a c. 2%
dividend yield at the time of writing, and the dividend per share
has grown at around 16% pa over the last 3 years.
Q What
are your thoughts on gearing?
A We
have maintained a neutral position over the period (no gearing) due
to some caution on adding additional risk to the portfolio at a
point when expectations are already quite high in the market and
the cost of gearing has risen. However, this can change quickly if
there are any notable market events and we see an opportunity to
scale up our risk.
Q Where
have you found opportunities in the market?
A We
look to build a diverse portfolio of stocks that can perform
through most environments.
We do this
by carefully managing the risk in the portfolio, namely ensuring we
are not overly exposed to any one particular factor and that
correlation amongst stocks is limited.
We wrote in
our Q2 letter that the market had become excessively concentrated
and valuations for some stocks (e.g. magnificent
7 /
AI winners) was unlikely to be sustainable, particularly if we were
to hit any macro weakness or saw earnings disappointments. Although
being underweight this theme had been extremely painful in the past
few months, we stuck to our process, and we are pleased to see that
this is starting to prove beneficial for our clients.
We will
continue to stick to our bottom-up process as we navigate this
period of market volatility. These events often provide exceptional
opportunities to buy good businesses on sale and the current
drawdown is no different.
Stephen Anness Joe
Dowling
Portfolio
Manager Deputy
Portfolio Manager
25 September 2024
Global
Equity Income Share Portfolio List of
Investments
AT
31 May 2024
Ordinary
shares unless stated otherwise
|
|
|
|
At
Market
|
|
|
|
|
|
Value
|
%
of
|
|
Company
|
Industry†
|
Countty
|
£’000
|
Portfolio
|
|
3i
|
Financial
Services
|
United
Kingdom
|
11,891
|
6.1
|
|
UnitedHealth
|
Health Care
Equipment & Services
|
United
States
|
8,691
|
4.3
|
|
Microsoft
|
Software
& Services
|
United
States
|
8,182
|
4.2
|
|
Texas
Instruments
|
Semiconductors
& Semiconductor Equipment
|
United
States
|
7,812
|
4.1
|
|
Union
Pacific
|
Transportation
|
United
States
|
7,348
|
3.7
|
|
Broadcom
|
Semiconductors
& Semiconductor Equipment
|
United
States
|
7,201
|
3.7
|
|
Rolls-Royce
|
Capital
Goods
|
United
Kingdom
|
6,973
|
3.6
|
|
Azelis
|
Capital
Goods
|
Belgium
|
6,904
|
3.5
|
|
Verallia
|
Materials
|
France
|
6,404
|
3.3
|
|
AIA
|
Insurance
|
Hong
Kong
|
6,115
|
3.1
|
|
Top
Ten Holdings
|
|
|
77,521
|
39.6
|
|
Coca-Cola
Europacific Partners
|
Food,
Beverage & Tobacco
|
United
Kingdom
|
5,855
|
3.0
|
|
Intercontinental
Exchange
|
Financial
Services
|
United
States
|
5,843
|
3.0
|
|
London
Stock Exchange
|
Financial
Services
|
United
Kingdom
|
5,778
|
3.0
|
|
Universal
Music
|
Media &
Entertainment
|
Netherlands
|
5,690
|
2.9
|
|
American
Tower
|
Equity Real
Estate Investment Trusts (REITs)
|
United
States
|
5,518
|
2.8
|
|
Progressive
|
Insurance
|
United
States
|
5,280
|
2.7
|
|
Infrastrutture
|
Telecommunication
Services
|
Italy
|
5,277
|
2.7
|
|
Recordati
|
Pharmaceuticals,
Biotechnology & Life Sciences
|
Italy
|
5,128
|
2.6
|
|
Standard
Chartered
|
Banks
|
United
Kingdom
|
5,061
|
2.6
|
|
LVMH
|
Consumer
Durables & Apparel
|
France
|
4,985
|
2.5
|
|
Top
Twenty Holdings
|
|
|
131,936
|
67.4
|
|
Analog
Devices
|
Semiconductors
& Semiconductor Equipment
|
United
States
|
4,847
|
2.5
|
|
Aker
BP
|
Energy
|
Norway
|
4,815
|
2.5
|
|
Royal
Unibrew
|
Food,
Beverage & Tobacco
|
Denmark
|
4,804
|
2.4
|
|
Coca-Cola
|
Food,
Beverage & Tobacco
|
United
States
|
4,745
|
2.4
|
|
Tractor
Supply
|
Consumer
Discretionary Distribution & Retail
|
United
States
|
4,535
|
2.3
|
|
Herc
Holdings
|
Capital
Goods
|
United
States
|
4,437
|
2.3
|
|
Zurich
Insurance
|
Insurance
|
Switzerland
|
4,375
|
2.2
|
|
KKR &
Co
|
Financial
Services
|
United
States
|
4,183
|
2.1
|
|
CME
|
Financial
Services
|
United
States
|
3,664
|
1.9
|
|
Old
Dominion Freight Line
|
Transportation
|
United
States
|
3,358
|
1.7
|
|
Top
Thirty Holdings
|
|
|
175,699
|
89.7
|
|
|
|
|
At
Market
|
|
|
|
|
|
Value
|
%
of
|
|
Company
|
Industry†
|
Country
|
£’000
|
Portfolio
|
|
Prosus
|
Consumer
Discretionary Distribution & Retail
|
Netherlands
|
3,100
|
1.6
|
|
Canadian
Pacific Kansas City
|
Transportation
|
Canada
|
2,671
|
1.4
|
|
RELX
|
Commercial
& Professional Services
|
United
Kingdom
|
2,631
|
1.4
|
|
Danaher
|
Pharmaceuticals,
Biotechnology &
|
United
States
|
2,413
|
1.2
|
|
|
Life
Sciences
|
|
|
|
|
Howden
Joinery
|
Capital
Goods
|
United
Kingdom
|
2,209
|
1.1
|
|
Apple
|
Technology
Hardware & Equipment
|
United
States
|
2,118
|
1.1
|
|
Taiwan
Semiconductor Manufacturing
|
Semiconductors
& Semiconductor Equipment
|
Taiwan
|
1,890
|
1.0
|
|
Samsung
Electronics – preference shares
|
Technology
Hardware & Equipment
|
South
Korea
|
1,791
|
0.9
|
|
Home
Depot
|
Consumer
Discretionary Distribution &
|
United
States
|
1,029
|
0.5
|
|
|
Retail
|
|
|
|
|
Accenture -
A Shares
|
Software
& Services
|
United
States
|
273
|
0.1
|
|
Top
Forty Holdings
|
|
|
195,824
|
100.0
|
|
Sberbank*
–
ADR
|
Banks
|
Russia
|
–
|
–
|
|
Harbinger
– Streamline
Offshore Fund+
|
Hedge
Funds
|
Cayman
Islands
|
–
|
–
|
|
Total
Holdings 42 (31 May 2023: 43)
|
|
|
195,824
|
100.0
|
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.
†
MSCI and
Standard & Poor’s Global Industry Classification
Standard.
* The
investment in Sberbank – ADR has been valued at zero as secondary
listings of the depositary receipts on Russian companies have been
suspended from trading.
+ The
hedge fund investments are residual holdings of the previous
investment strategy, transferred from the Balanced Risk Allocation
Portfolio as part of the Company’s restructure in May 2024, which are awaiting realisation of
underlying investments. Given lack of availability of recent
valuation, the market value has been written-down to
zero.
Global
Equity Income Share Portfolio
Individual
portfolio breakdowns are provided for additional information only.
See note 1(a)(ii) on page 75 for further details.
Income
Statement
|
|
Year
ended 31 May 2024
|
Year
ended 31 May 2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Gains on
investments held at fair value
|
–
|
16,083
|
16,083
|
–
|
4,782
|
4,782
|
|
(Losses)/gains
on foreign exchange
|
–
|
(21)
|
(21)
|
–
|
11
|
11
|
|
Income
|
3,192
|
–
|
3,192
|
1,893
|
92
|
1,985
|
|
Investment
management fees
|
(137)
|
(319)
|
(456)
|
(107)
|
(250)
|
(357)
|
|
Other
expenses
|
(204)
|
(266)
|
(470)
|
(176)
|
(4)
|
(180)
|
|
Net
return before finance costs and taxation
|
2,851
|
15,477
|
18,328
|
1,610
|
4,631
|
6,241
|
|
Finance
costs
|
(7)
|
(16)
|
(23)
|
(50)
|
(117)
|
(167)
|
|
Return
before taxation
|
2,844
|
15,461
|
18,305
|
1,560
|
4,514
|
6,074
|
|
Tax
|
(291)
|
3
|
(288)
|
(261)
|
(14)
|
(275)
|
|
Return
after taxation for the financial year
|
2,553
|
15,464
|
18,017
|
1,299
|
4,500
|
5,799
|
|
Return
per ordinary share – note
7
|
9.03p
|
54.72p
|
63.75p
|
5.20p
|
18.03p
|
23.23p
|
Summary
of Net Assets
|
|
At
31 May 2024
|
At
31 May 2023
|
|
|
£’000
|
£’000
|
|
Fixed
assets
|
195,824
|
66,026
|
|
Current
assets
|
3,498
|
861
|
|
Creditors
falling due within one year, excluding borrowings
|
(1,767)
|
(144)
|
|
Net
assets
|
197,555
|
66,743
|
|
Net
asset value per share
|
313.30p
|
265.53p
|
|
Gearing:
|
|
|
|
–
gross
|
0.0%
|
0.0%
|
|
–
net
|
–0.9%
|
–0.8%
|
Global
Equity Income Share Portfolio Summary of Changes in Net
Assets
|
|
Year
ended
|
Year
ended
|
|
|
31
May 2024
|
31
May 2023
|
|
|
£’000
|
£’000
|
|
Net assets
brought forward
|
66,743
|
62,638
|
|
Shares
bought back and held in treasury
|
(360)
|
(1,677)
|
|
Share
conversions
|
2,159
|
1,774
|
|
Return
after taxation for the financial year – Global Equity
Income
|
18,017
|
5,799
|
|
Return
after taxation for the financial year – UK Equity
|
9,316
|
–
|
|
Return
after taxation for the financial year – Balanced Risk
Allocation
|
494
|
–
|
|
Return
after taxation for the financial year – Managed
Liquidity
|
215
|
–
|
|
Reserves
transferred in respect of the share class
reclassification
|
107,667
|
–
|
|
Dividend
paid – Global Equity Income
|
(1,864)
|
(1,791)
|
|
Dividend
paid – UK Equity
|
(4,695)
|
–
|
|
Dividend
paid – Balanced Risk Allocation
|
(124)
|
–
|
|
Dividend
paid – Managed Liquidity
|
(13)
|
–
|
|
Net
assets at the year end
|
197,555
|
66,743
|
UK
Equity Share Portfolio Performance Record
Total
Return
For
the year ended 31 May
|
|
2024(2)
|
2023
|
2022
|
2021
|
2020
|
|
Net Asset
Value(1)
|
11.3%
|
–2.6%
|
6.8%
|
34.6%
|
–12.4%
|
|
Share
Price(1)
|
8.3%
|
–4.7%
|
3.0%
|
31.6%
|
–16.2%
|
|
FTSE
All-Share Index(1)
|
13.8%
|
0.4%
|
8.3%
|
23.1%
|
–11.2%
|
|
Revenue
return per share
|
5.12p
|
6.40p
|
6.00p
|
3.90p
|
4.12p
|
|
Dividends
|
7.35p
|
7.05p
|
6.70p
|
6.65p
|
6.60p
|
(1) Source:
LSEG Data & Analytics.
(2) This
class was closed on 7 May 2024, all
performance data is calculated to 3 May
2024, being the date of the final computed Net Asset Value
of the class.
UK
Equity Share Portfolio
Individual
portfolio breakdowns are provided for additional information only.
See note 1(a)(ii) on page 75 for further details. This share class
was closed on 7 May
2024.
Income
Statement
|
|
Period
ended 3 May 2024
|
Year
ended 31 May 2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Gains/(losses)
on investments held at fair value
|
–
|
7,464
|
7,464
|
–
|
(8,678)
|
(8,678)
|
|
(Losses)/gains
on foreign exchange
|
–
|
(41)
|
(41)
|
–
|
2
|
2
|
|
Income
|
3,899
|
–
|
3,899
|
5,314
|
176
|
5,490
|
|
Investment
management fees
|
(188)
|
(439)
|
(627)
|
(210)
|
(490)
|
(700)
|
|
Other
expenses
|
(317)
|
(409)
|
(726)
|
(418)
|
(1)
|
(419)
|
|
Net return
before finance costs and taxation
|
3,394
|
6,575
|
9,969
|
4,686
|
(8,991)
|
(4,305)
|
|
Finance
costs
|
(187)
|
(437)
|
(624)
|
(97)
|
(226)
|
(323)
|
|
Return
before taxation
|
3,207
|
6,138
|
9,345
|
4,589
|
(9,217)
|
(4,628)
|
|
Tax
|
(29)
|
–
|
(29)
|
(48)
|
–
|
(48)
|
|
Return
after taxation for the financial year
|
3,178
|
6,138
|
9,316
|
4,541
|
(9,217)
|
(4,676)
|
|
Return per
ordinary share – note 7
|
5.12p
|
9.89p
|
15.01p
|
6.40p
|
(12.99)p
|
(6.59)p
|
Summary
of Changes in Net Assets
|
|
Period
ended
|
Year
ended
|
|
|
3
May 2024
|
31
May 2023
|
|
|
£’000
|
£’000
|
|
Net assets
brought forward
|
125,436
|
143,374
|
|
Shares
bought back and held in treasury
|
(2,342)
|
(6,286)
|
|
Share
conversions
|
(2,004)
|
(1,995)
|
|
Costs
associated with tender offer
|
(134)
|
–
|
|
Tender
offer in respect of the share class reclassification
|
(19,119)
|
–
|
|
Reserves
transferred in respect of the share class
reclassification
|
(106,458)
|
–
|
|
Return
after taxation for the financial year
|
9,316
|
(4,676)
|
|
Dividend
paid
|
(4,695)
|
(4,981)
|
|
Net assets
at the year end
|
–
|
125,436
|
Balanced
Risk Allocation Share Portfolio Performance
Record
Total
Return
For
the year ended 31 May
|
|
2024(3)
|
2023
|
2022
|
2021
|
2020
|
|
Net Asset
Value(1)
|
9.0%
|
–11.4%
|
0.3%
|
25.4%
|
–3.1%
|
|
Share
Price(1)
|
11.1%
|
–14.3%
|
–5.2%
|
26.4%
|
–6.9%
|
|
Composite
Benchmark(2)
|
11.1%
|
–17.1%
|
–6.1%
|
16.8%
|
2.8%
|
|
ICE BoA
Merrill Lynch 3 month
|
|
|
|
|
|
|
LIBOR
plus 5% per annum(1)
|
9.9%
|
7.5%
|
5.1%
|
5.1%
|
5.9%
|
|
Revenue
return per share
|
4.45p
|
3.38p
|
1.05p
|
–0.17p
|
–0.02p
|
|
Dividends
|
3.00p
|
1.00p
|
nil
|
nil
|
nil
|
(1) Source:
LSEG Data & Analytics.
(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: LSEG Data &
Analytics/Bloomberg.
(3) This
class was closed on 7 May 2024, all
performance data is calculated to 3 May
2024, being the date of the final computed Net Asset Value
of the class.
Balanced
Risk Allocation Share Portfolio
Individual
portfolio breakdowns are provided for additional information only.
See note 1(a)(ii) on page 75 for further details. This share class
was closed on 7 May
2024.
Income
Statement
|
|
Period
ended 3 May 2024
|
Year
ended 31 May 2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Gains/(losses)
on investments held at fair value
|
–
|
68
|
68
|
–
|
(2)
|
(2)
|
|
Gains/(losses)
on derivative instruments
|
(10)
|
261
|
251
|
27
|
(963)
|
(936)
|
|
(Losses)/gains
on foreign exchange
|
–
|
(6)
|
(6)
|
–
|
15
|
15
|
|
Income
|
270
|
–
|
270
|
172
|
–
|
172
|
|
Investment
management fees
|
(13)
|
(30)
|
(43)
|
(15)
|
(34)
|
(49)
|
|
Other
expenses
|
(24)
|
(22)
|
(46)
|
(27)
|
(2)
|
(29)
|
|
Net return
before finance costs and taxation
|
223
|
271
|
494
|
157
|
(986)
|
(829)
|
|
Finance
costs
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Return
before taxation
|
223
|
271
|
494
|
157
|
(986)
|
(829)
|
|
Tax
|
(56)
|
56
|
–
|
(16)
|
16
|
–
|
|
Return
after taxation for the financial year
|
167
|
327
|
494
|
141
|
(970)
|
(829)
|
|
Return per
ordinary share – note 7
|
4.45p
|
8.72p
|
13.17p
|
3.38p
|
(23.16)p
|
(19.78)p
|
Summary
of Changes in Net Assets
|
|
Period
ended
|
Year
ended
|
|
|
3
May 2024
|
31
May 2023
|
|
|
£’000
|
£’000
|
|
Net assets
brought forward
|
6,190
|
7,085
|
|
Shares
bought back and held in treasury
|
–
|
(147)
|
|
Share
conversions
|
(218)
|
122
|
|
Costs
associated with tender offer
|
(8)
|
–
|
|
Tender
offer in respect of the share class reclassification
|
(1,104)
|
–
|
|
Reserves
transferred in respect of the share class
reclassification
|
(5,230)
|
–
|
|
Return
after taxation for the financial year
|
494
|
(829)
|
|
Dividend
paid
|
(124)
|
(41)
|
|
Net assets
at the year end
|
–
|
6,190
|
Managed
Liquidity Share Portfolio Performance Record
Total
Return
For the
year ended 31 May
|
|
2024(3)
|
2023
|
2022
|
2021
|
2020
|
|
Net Asset
Value(1)
|
6.9%
|
3.5%
|
–0.3%
|
3.6%
|
1.1%
|
|
Share
Price(1)
|
17.8%
|
–5.2%
|
–4.0%
|
0.5%
|
1.6%
|
|
Revenue
return per share
|
17.07p(4)
|
1.06p
|
–0.02p
|
1.35p(2)
|
0.65p
|
|
Dividends
|
1.00p
|
1.00p
|
1.00p
|
nil
|
0.80p
|
(1) Source:
LSEG Data & Analytics.
(2)
Includes a £34,000 (1.40p per share) refund of management fees in
respect of prior year overcharges.
(3) This
class was closed on 7 May 2024, all
performance data is calculated to 3 May
2024, being the date of the final computed Net Asset Value
of the class.
(4)
Includes a £137,000 (11.6p per share) corporation tax liability
write-back and transfer to the Global Equity Income Portfolio as
part of the Company restructure in May
2024.
Managed
Liquidity Share Portfolio
Individual
portfolio breakdowns are provided for additional information only.
See note 1(a)(ii) on page 75 for further details. This share class
was closed on 7 May
2024.
Income
Statement
|
|
Period
ended 3 May 2024
|
Year
ended 31 May 2023
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Gains on
investments held at fair value
|
–
|
19
|
19
|
–
|
23
|
23
|
|
Income
|
72
|
–
|
72
|
21
|
–
|
21
|
|
Investment
management fees
|
(2)
|
–
|
(2)
|
(2)
|
–
|
(2)
|
|
Other
expenses
|
(6)
|
(5)
|
(11)
|
(6)
|
–
|
(6)
|
|
Net return
before finance costs and taxation
|
64
|
14
|
78
|
13
|
23
|
36
|
|
Finance
costs
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Return
before taxation
|
64
|
14
|
78
|
13
|
23
|
36
|
|
Tax
|
137
|
–
|
137
|
–
|
–
|
–
|
|
Return
after taxation for the financial year
|
201
|
14
|
215
|
13
|
23
|
36
|
|
Return per
ordinary share – note 7
|
17.07p
|
1.15p
|
18.22p
|
1.06p
|
1.80p
|
2.86p
|
|
|
|
|
|
|
|
|
Summary
of Changes in Net Assets
|
|
Period
ended
|
Year
ended
|
|
|
3
May 2024
|
31
May 2023
|
|
|
£’000
|
£’000
|
|
Net assets
brought forward
|
1,370
|
1,324
|
|
Shares
bought back and held in treasury
|
–
|
(77)
|
|
Share
conversions
|
63
|
99
|
|
Costs
associated with tender offer
|
(3)
|
–
|
|
Tender
offer in respect of the share class reclassification
|
(460)
|
–
|
|
Reserves
transferred in respect of the share class
reclassification
|
(1,172)
|
–
|
|
Return
after taxation for the financial year
|
215
|
36
|
|
Dividend
paid
|
(13)
|
(12)
|
|
Net assets
at the year end
|
–
|
1,370
|
Environmental,
Social and Corporate Governance (‘ESG’) statement from the
Manager
What
does ESG mean to us?
Stephen Anness
Head of
Global Equities
Joe Dowling
Global
Equities Fund Manager
• We
draw upon ESGintel, Invesco’s proprietary tool, which helps us to
better understand how companies are addressing ESG
issues
• Engaging
with companies to understand corporate strategy today in order to
assess how this could evolve in the future
• Monitoring
how companies are performing from an ESG perspective and if the
valuations fairly reflect the progress being made
Our focus
as active fund managers is always on finding mispriced stocks and
ESG integration underpins our investment process.
The
incorporation of ESG into our investment process considers ESG
factors as inputs into the wider investment process as part of a
holistic consideration of the investment risk and opportunity, from
valuation through investment process to engagement and monitoring.
The core aspects of our ESG philosophy include: materiality; ESG
momentum; and engagement.
• Materiality
refers to the consideration of ESG issues that are financially
material to the company we are analysing.
• The
concept of ESG Momentum, or improving ESG performance over time,
indicates the degree of improvement of various ESG metrics and
factors and help fund managers identify upside in the future. We
find that companies which are improving in terms of their ESG
practices may enjoy favourable financial performance in the longer
term.
• Engagement
is part of our responsibility as active owners which we take very
seriously, and we see engagement with companies as an opportunity
to encourage continual improvement. Dialogue with portfolio
companies is a core part of the investment process for our
investment team. As such, we often participate in board level
dialogue and are instrumental in giving shareholder views on
management, corporate strategy, transparency and capital allocation
as well as wider ESG aspects.
ESG
integration is an ongoing strategic effort to systematically
incorporate ESG Factors into fundamental analysis. As illustrated
by the diagram below, the aim is to provide a 360 degree evaluation
of financial and non-financial materially relevant considerations
and to help guide the portfolio strategy.
Our
investment process has four stages. In this report we go through in
detail how ESG is integrated into each stage of our
process.
Idea
Generation
We believe
it is important to spread our nets as wide as possible when trying
to come up with stock ideas which may find their way into our
portfolios. We remain open minded as to the type of companies we
will consider. This means not ruling out companies just because
they happen to be unpopular at that time and vice versa. By
focussing on fundamentals and the broader investment landscape –
can be a unique way for our portfolios to potentially generate
returns in excess of the benchmark as those businesses that have
got ESG momentum behind them have the potential to be
rerated.
Fundamental
Research & ESG Analysis
Research is
at the core of what we do. Our fundamental analysis covers many
drivers, for example, corporate strategy, market positioning,
competitive dynamics, the macroeconomic environment, financials,
regulation, valuation, and, of course, ESG considerations, which
guide our analysis throughout.
We use a
variety of tools from different providers to measure ESG factors.
In addition, at Invesco, we have developed ESGintel, Invesco’s
proprietary tool built by our Global ESG research team in
collaboration with our Technology Strategy Innovation and Planning
(SIP) team.
ESGintel
provides fund managers with environmental, social and governance
insights, metrics, data points and direction of change. In
addition, ESGintel offers fund managers an internal rating on a
company, a rating trend, and a rank against sector peers. The
approach ensures a targeted focus on the issues that matter most
for sustainable value creation and risk management.
This
provides a holistic view on how a company’s value chain is impacted
in different ways by various ESG topics, such as compensation and
alignment, health and safety, and low carbon transition/climate
change.
We always
try to meet with a company prior to investment. Based on our
fundamental research, including any ESG findings, we focus on truly
understanding the key drivers and, most importantly, the path to
change. This helps us better understand corporate strategy today
and how this could evolve in the future.
Portfolio
Construction
We aim to
create a well-diversified portfolio of active positions that
reflect our assessment of the potential upside for each stock
weighted against our assessment of the risks. Sustainability and
ESG factors will be assessed alongside other fundamental drivers of
valuation. The impact of any new purchases will need to be
considered at a portfolio level. How will it affect the shape of
the portfolio having regard to objectives, existing positions,
overall size of the portfolio, liquidity and conviction.
We do not
seek out stocks which score well on internal or third party
research simply to reduce portfolio risk.
Ongoing
Monitoring
Our fund
managers and analysts continuously monitor how the stocks are
performing as well as considering possible replacements. Is the
company performing from an ESG perspective and are the valuations
fairly reflecting the progress being made or not?
How do we
monitor our holdings from an ESG perspective? Again, the same
resources used during the fundamental stage are available to us.
Our regular meetings with the management teams of the companies we
own provides an ideal platform to discuss key ESG issues, which
will be researched in advance. We draw on our own knowledge as well
as relevant analysis from our ESG team and data from our previously
mentioned proprietary system ESGintel which allows us to monitor
progress and improvement against sector peers. Outside of company
management meetings we constantly discuss as a team all relevant
ESG issues, either stimulated internally or from external
sources.
Challenge,
Assessing & Monitoring Risk
In
addition, there are two more formal ways in which our portfolios
are monitored:
There is a
rigorous semi-annual review process which includes a meeting led by
the ESG team to assess how our portfolios are performing from an
ESG perspective. This ensures a circular process for identifying
flags and monitoring of improvements over time. These meetings are
important in capturing issues that have developed and evolved
whilst we have been shareholders.
There is
also the ‘CIO challenge’, a formal review meeting held between the
Henley Investment Centre’s Chief Investment Officer (CIO) and each
fund manager. This review includes a full breakdown of the ESG
performance using Sustainalytics and ISS data, such as the absolute
ESG performance of the portfolio, relative performance to
benchmarks, stocks exposed to severe controversies, top and bottom
ESG performers, carbon intensity and trends. The ESG team review
the ESG data and develop stock specific or thematic ESG questions.
The ESG performance of the portfolio is discussed with the CIO
using the data and the stock specific questions to analyse the fund
manager’s level of ESG integration. The aim of these meetings is
not to prevent a fund manager from holding any specific stock:
rather, what matters is that the fund manager can evidence
understanding of ESG issues and show that they have been taken into
consideration when building the investment case.
Global
Equity Income Portfolio Example
Asian
company that manufactures a wide range of consumer and industrial
electronic products
Key
ESG issues
E
Environmental
Policy
S
No major
issues
G
Senior
Management
Rated Low
Risk by Sustainalytics.
– Invesco’s
ESG team have met with management several times alongside members
of the investment team over the past few years. The company has had
previous issues with senior corruption, which is still a risk and
therefore a priority for management. We were also keen to have an
update on their sustainability targets.
– Company
representatives walked Invesco through their potential candidates
for director positions with the upcoming AGM approaching. This took
up a majority of the call, however when we broached the subject of
environmental sustainability, we were directed to their new
environmental policy which is yet to be released. They did not
provide any details surrounding targets, as they will be found in
the policy.
– Invesco
has asked for a follow up meeting once the environmental policy has
been released in order to evaluate the ambitiousness of the
standards.
Voting
Policy
The Global
Equity Team’s corporate engagement specialists review AGM and EGM
proposals taking into account our own knowledge of the companies in
which our funds are invested, as well as the comments and
recommendations of ISS*, Glass Lewis and IVIS**. In addition,
Invesco provides proprietary proxy voting recommendations and
publishes these recommendations via its PROXYintel
platform.
Especially
where there are situations of controversy or differing views
between the consultants mentioned above we will draw on the
additional expertise of our internal ESG team.
There will
be times when we will follow the recommendations made by ISS, Glass
Lewis and IVIS but times where we disagree with the stance being
taken. Voting in line with management recommendations should not be
seen as evidence of a lack of challenge on our part, but rather
that either the governance of the companies in which we are
invested is already good and worthy of support or we have engaged
with the company and our concerns have been addressed
satisfactorily.
|
|
Total
|
Total
|
|
Category
|
Number
|
(%)
|
|
Ballots
Votes
|
45
|
100%
|
|
Ballots
against management recommendations
|
13
|
29%
|
|
Ballots
against ISS recommendations
|
18
|
40%
|
Source:
Invesco, relates to the period 1 June
2023 to 31 May 2024 for the
Invesco Global Equity Income Trust plc.
Engagements
in 2023
Our ESG
interactions with companies typically occur in group or 1:1 calls
between our fund manager(s)/analyst(s) and corporate
representative(s).
We strive
to meet with companies in order to better understand the management
team and their focus and outlook, and to bring up any concerns and
suggestions; this can often cover ESG.
|
|
|
|
|
|
%
meetings
|
|
|
Combination
|
|
|
|
where
ESG
|
|
Total
ESG Engagements
|
of
E, S, or G
|
E
|
S
|
G
|
was
discussed
|
|
51
|
12
|
17
|
6
|
16
|
34%
|
Source:
Invesco, Data relates to the Henley-based Global Equities team, as
at 31 December 2023.
Conclusion
The
regulatory landscape is rapidly evolving, which increasingly
compels organisations and investors alike to clearly demonstrate
their awareness of ESG issues in their decisions. Landmark
initiatives such as the European Union’s new Sustainable Finance
Disclosure Regulation (SFDR) are at the forefront of this
shift.
We believe
that our approach is fair, coherent and pragmatic. Whilst we
consider ESG aspects, we are not bound by any specific ESG criteria
and have the flexibility to invest across the ESG spectrum from
best to worst in class, but we think that the principles behind ESG
deserve to be embedded in an investment framework which encourages
positive change. Coupling this with a focus on valuation is, to our
minds, the best way to deliver strong investment outcomes for our
clients long term. This reinforces our fundamental belief that
responsible investing demands a long-term view and that a
stakeholder-centric culture of ownership and stewardship is at the
heart of ESG integration.
* ISS –
Institutional Shareholder Services.
** IVIS –
Institutional Voting Information Service.
Business
Review
Purpose,
Business Model and Strategy
Invesco
Global Equity Income Trust plc is an investment company and its
investment objective is set out below. The strategy the Board
follows to achieve that objective is to set investment policy and
risk guidelines, together with investment limits, and to monitor
how they are applied. These are also set out below and have been
approved by shareholders.
The
Company’s purpose is to generate returns for shareholders by
investing their pooled capital to achieve the Company’s investment
objective through the application of its investment policy and with
the aim of spreading investment risk.
The
business model the Company has adopted to achieve its investment
objective has been to contract out investment management and
administration to appropriate external service providers, which are
overseen by the Board.
The
principal service provider is Invesco Fund Managers Limited, which
throughout this report is referred to as ‘the Manager’. Invesco
Asset Management Limited, an associate company of the Manager,
manages the Company’s investments and acts as Company Secretary
under delegated authority from the Manager.
The Manager
provides company secretarial, marketing and general administration
services including accounting and manages the portfolio in
accordance with the Board’s strategy.
Stephen Anness and Joe
Dowling are the Portfolio Managers responsible for the
day-to-day management of the portfolio.
The Company
also has contractual arrangements with Link Asset Services to act
as registrar and the Bank of New York Mellon (International)
Limited (BNYMIL) as depositary and custodian.
Investment
Objective
Following
completion of the restructuring on 7 May
2024, the Company’s investment objective aims to provide an
attractive level of predictable income and capital appreciation
over the long term, predominately through investment in a
diversified portfolio of equities worldwide.
Investment
Policy and Risk
The
portfolio will be invested predominantly in a portfolio of listed,
quoted or traded equities worldwide, but may also hold other
securities from time to time including, inter alia, fixed interest
securities, preference shares, convertible securities and
depositary receipts. Investment may also be made in regulated or
authorised collective investment schemes. The portfolio will not
invest in companies which are not listed, quoted or traded at the
time of investment, although it may have exposure to such companies
where, following investment, the relevant securities cease to be
listed, quoted or traded. The Manager will at all times invest and
manage the portfolio’s assets in a manner that is consistent with
spreading investment risk, but there will be no rigid industry,
sector, region or country restrictions.
The
portfolio may utilise derivative instruments including index-linked
notes, contracts for differences, covered options and other
equity-related derivative instruments for efficient portfolio
management and investment purposes. Any use of derivatives for
investment purposes will be made on the basis of the same
principles of risk spreading and diversification that apply to the
portfolio’s direct investments, as described above.
It is
expected that, typically, the portfolio will hold between
40 and
55 securities.
The
Directors believe that the use of borrowings can enhance returns to
shareholders, and the Company may use borrowings in pursuing its
investment objective.
The
Company’s foreign currency investments will not be hedged to
sterling as a matter of general policy. However, the Manager may
employ currency hedging, either back to sterling or between
currencies (i.e. cross hedging of portfolio
investments).
Investment
Limits
The Board
has prescribed the following limits on the investment policy of the
Company:
• no
more than 20% of the gross assets of the Company may be invested in
fixed interest securities;
• no
more than 10% of the gross assets of the Company may be held in a
single investment;
• no
more than 10% of the gross assets of the Company may be held in
other listed investment companies (excluding REITs); and
• borrowings
may be used to raise equity exposure up to a maximum
of 20% of the net assets of the Company, when it is considered
appropriate.
Key
Performance Indicators
The Board
reviews the performance of the Company by reference to a number of
Key Performance Indicators, which include the following:
•
Investment
Performance
•
Revenue and
Dividends
•
Discount/Premium
•
Ongoing
Charges
Investment
Performance
To assess
investment performance the Board monitors the net asset value (NAV)
performance of the Company relative to that of the benchmark index
it considers to be appropriate. However, given the requirements and
constraints of the investment objective and policy followed, no
index can be expected to fully represent the performance that might
reasonably be expected from the Company’s Global Equity Income
Portfolio.
The NAV
total return performance of the Global Equity Income portfolio over
the year to 31 May 2024 and of the
relevant benchmark index as follows:
|
Global
Equity Income Portfolio
|
21.0%
|
|
MSCI W orld
Index (£)
|
21.6%
|
Source:
LSEG Data & Analytics.
Details of
the NAV total return on the Company’s former share classes
including other performance periods, together with share price
total returns, are shown on pages 24, 27 and 30.
Further
details on the definition and calculation of total returns can be
found in the Glossary and Alternative Performance Measures on pages
97 to 100 of the financial report.
Revenue
and Dividends
The
Directors review revenue estimates and prospective dividend levels
at each Board meeting. Whilst the Directors have become more
focussed on total return and have sanctioned contributions to
dividends from capital, dividends paid continue to be mostly
constituted from revenue and revenue is an important element of
overall portfolio returns. Details of dividends paid during the
year, including those paid on the Company’s former share classes
are set out below.
Global
Equity Income Shares
Revenue
earnings per Share for the Global Equity Income Share Portfolio was
9.03p (2023: 5.20p), based on net revenue for the year of
£2,553,000 (2023: £1,299,000), which included £21,000 (2023:
£1,000) of non-recurring special dividends.
Dividend
Policy:
As a result
of the restructuring and in recognition of the continuing
importance of dividends to Shareholders, the Board has introduced a
new dividend policy. Under this new policy the Company will pay an
annual dividend of at least 4% calculated on the unaudited prior
year end NAV, paid quarterly in equal amounts.
The
intention is that these dividends are to be paid from the Company’s
revenues and, if required, capital reserves.
The Board
believes that this new dividend policy should provide both an
enhanced dividend compared to historical level of dividends paid on
the Global Share Class and, once the relevant unaudited year end
NAV is known, a smoother, more predictable income to
Shareholders.
Dividends
Declared:
The
Directors have declared and paid four interim dividends for the
year ended 31 May 2024 totalling
7.35p (2023: 7.20p) per Global Equity Income Share, of which 5.02p
(2023: 5.20p) was met from revenue earned in the year. The
aggregate of dividends paid in respect of the year was £1,864,000
(2023: £1,791,000).
A first
interim dividend for the year to 31 May
2025 of 3.13p was declared on 10 July
2024. In the absence of unforeseen circumstances, and in
accordance with the dividend policy set out above, the Board
intends for this to set the level for the next
three quarterly
dividends.
UK
Equity Shares
Revenue
earnings per Share for the UK Equity Share Portfolio was 5.12p
(2023: 6.40p), based on net revenue for the year of £3,178,000
(2023: £4,541,000), which included £244,000 (2023: £92,000) of
non-recurring special dividends.
Dividends
Declared:
Prior to
completion of the restructuring, the Directors declared and paid
four interim dividends for the year ended 31
May 2024 totalling 7.35p per UK Equity Share (2023: 7.05p)
of which 7.35p (2023: 6.40p) was met from revenue earned in the
year. The aggregate of dividends paid in respect of the year was
£4,695,000 (2023: £4,981,000).
Balanced
Risk Allocation Shares
Prior to
completion of the restructuring, the Directors declared and paid
one interim dividend and one special dividend for the year ended
31 May 2024 totalling 3.00p (2023:
1.00p). The portfolio
recorded a net
revenue return of £167,000 in the year (2023: £141,000).
Managed
Liquidity Shares
Prior to
completion of the restructuring, the Directors declared and paid
one interim dividend for the year ended 31
May 2024 totalling 1.00p (2023: 1.00p). The Managed
Liquidity Portfolio recorded a net revenue return for the year of
£201,000 (2023:
£13,000).
Discount
As a result
of the restructuring the Company introduced a new discount control
policy. Under this policy the Company intends to use ad hoc share
buybacks to seek to maintain the discount at less than 10%, in
normal market conditions. It is the Board’s policy to buy back
shares and to sell shares from treasury on terms that do not dilute
the net asset value attributable to existing shareholders at the
time of the transaction. The Board reviews the buy back parameters
from time to time taking into account current market conditions and
other factors and instructs the brokers accordingly.
The
operation of this policy is dependent upon the authorities to buy
back and issue shares being renewed by shareholders.
Notwithstanding the intended effect of this policy, there can be no
guarantee that the Company’s Global Equity Income shares will trade
at close to their respective net asset value. Shareholders should
also be aware that there is a risk that this discount policy may
lead to a reduction
in the size of the Company over time.
The Board
and the Manager closely monitor movements in the Company’s share
price and dealings in the Company’s shares. Share movements in the
year are summarised on page 39. At 31 May
2024, the share price, net asset values (‘NAV’) and the
discount of the Global Equity Income shares were as
follows:
|
|
2024
|
2023
|
|
|
Net
Asset
|
Share
|
|
Net
Asset
|
Share
|
|
|
|
Value
|
Price
|
|
Value
|
Price
|
|
|
|
(Pence)
|
(Pence)
|
Discount(1)
|
(Pence)
|
(Pence)
|
Discount(1)
|
|
Global
Equity Income
|
313.30
|
286.00
|
(8.7)%
|
265.53
|
232.00
|
(12.6)%
|
(1) Further
details on the definition and calculation of the discount can be
found in the Glossary and Alternative Performance Measures on pages
97 to 100 of the financial report.
Ongoing
Charges
The
expenses of managing the Company are reviewed by the Board at every
meeting. The Board aims to minimise the ongoing charges figure
which provides a guide to the effect on performance of all annual
operating costs of the Company. The ongoing charges figure is
calculated by dividing the annualised ongoing charges, including
those charged to capital, by the average daily net asset value
during the year, expressed as a percentage.
Further
details on the definition and calculation of ongoing charges can be
found in the Glossary and Alternative Performance Measures on pages
97 to 100 of the financial report.
At the year
end the ongoing charges figure of the Company was as
follows:
|
|
|
Company
|
|
2024
|
|
0.82%
|
|
2023
|
|
0.83%
|
In addition
to inflationary effects, shrinkage from buybacks in connection with
the discount control policy will tend to cause the ongoing charge
percentages to gradually increase.
Financial
Position
Assets
and Liabilities
The
Company’s balance sheet on page 73 shows the assets and liabilities
at the year end. Details of the Company’s borrowing facility are
shown in note 13 of the financial statements on
page 84,
with interest paid (finance costs) in note 5.
Owing to
the readily realisable nature of the Company’s assets, cash flow
does not have the same significance as for an industrial or
commercial company. The Company’s principal cash flows arise from
the purchases and sales of investments and the income from
investments against which must be set the costs of borrowing and
management expenses.
Borrowing
Policy
Borrowing
policy is under the control of the Board, which has established
effective parameters for the portfolios. Borrowing levels are
regularly reviewed. As part of the Company’s Investment Policy, the
approved borrowing limit is 30% of the Company’s total
assets.
Issued
Share Capital
The Global
Equity Income shares have a nominal value of 1 penny per
share.
Authorities
given to the Directors at the AGM on 2
October 2023 to allot shares, disapply statutory pre-emption
rights and buy back shares will expire at the forthcoming AGM. The
following table summarises the Company’s share capital at the year
end and movements during the year, including the impact of the
restructuring. As a result of the restructuring, on 7 May 2024 the UK Equity, Balanced Risk
Allocation and Managed Liquidity shares were redesignated as Global
Equity Income shares. The number of new Global Equity Income shares
arising from the redesignation is set out in the table.
|
|
Global
|
|
Balanced
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
|
Number
of shares
|
Income
|
Equity
|
Allocation
|
Liquidity
|
|
Shares held
at the year end
|
|
|
|
|
|
– excluding
treasury
|
63,056,464
|
–
|
–
|
–
|
|
– held in
treasury
|
16,930,122
|
–
|
–
|
–
|
|
– % of
issued shares held in treasury
|
21.17
|
–
|
–
|
–
|
|
Movements
during the year
|
|
|
|
|
|
As at 1
June 2023 (including treasury shares)
|
41,911,901
|
107,396,928
|
10,686,213
|
10,645,038
|
|
– Shares
bought back
|
153,963
|
1,510,343
|
–
|
–
|
|
– Shares
transferred to treasury
|
(153,963)
|
(1,510,343)
|
–
|
–
|
|
–
(Decrease)/increase arising from quarterly conversions
|
565,132
|
(800,197)
|
(129,244)
|
65,932
|
|
– (Decrease
arising from tender repurchase and
|
|
|
|
|
|
cancellation)
|
–
|
(9,985,591)
|
(714,610)
|
(417,453)
|
|
– (Treasury
shares cancelled during the year)
|
–
|
(40,026,118)
|
(6,547,218)
|
(9,393,678)
|
|
–
(Decrease)/increase arising from restructuring
|
|
|
|
|
|
reclassification
|
37,509,553
|
(56,585,022)
|
(3,295,141)
|
(899,839)
|
|
As at 31
May 2024
|
79,986,586
|
–
|
–
|
–
|
|
– % of
issued shares (excluding treasury shares) bought
|
|
|
|
|
|
back during
year (including tender repurchase)
|
0.61
|
16.69
|
17.27
|
33.36
|
|
– Average
price thereon
|
233.78p
|
186.57p
|
154.51p
|
110.33p
|
|
– Nominal
value of shares bought back (including tender
|
|
|
|
|
|
repurchase)
|
£1,539.63
|
£114,959.34
|
£7,146.10
|
£4,174.53
|
Details of
treasury shares cancelled during the year are shown in the table
above. Since the year end 57,000 Global Equity Income shares have
been bought back into treasury at an average price of
285.79p.
Further
details on net changes in issued share capital are set out in note
14 to the financial statements on pages 84 and 85.
Current
and Future Developments
As part of
the Company’s overall strategy, the Company seeks to manage its
affairs so as to maximise returns for shareholders. The Board also
has a longer-term to increase the size of the Company in the belief
that increasing the assets of the Company in this way will make the
Company’s shares more attractive to investors and improve the
liquidity of the shares.
Details of
trends and factors likely to affect the future development,
performance and position of the Company’s business can be found in
the Chairman’s Statement and the Portfolio Managers’ report.
Further details as to the risks affecting the Company are set out
under ‘Principal Risks and Uncertainties’ below.
Principal
Risks and Uncertainties
The Audit
Committee regularly undertakes a robust assessment of the risks the
Company faces, including those that would threaten its business
model, future performance, solvency, reputation or liquidity and
emerging risks, on behalf of the Board (see Audit Committee Report
on pages 56 and 57). In carrying out this assessment, the Audit
Committee together with the Manager, have considered emerging risks
such as geopolitical risks, evolving cyber threats (including risks
associated with Artificial Intelligence) and ESG, including climate
related risks.
The
following are considered to be the most significant risks, after
consideration of mitigating factors, to the Company and to
shareholders in relation to their investments in the Company.
Further details of risks and risk management policies as they
relate to the financial assets and liabilities of the Company are
detailed in note 17 to the financial statements.
|
Category
and Principal Risk Description
|
Mitigating
Procedures and Controls
|
Risk
trend during the year
|
|
Strategic
Risk
|
|
Market
Risk
The
Company’s investments are mainly traded on Global stock markets
including those in Asia, Europe, the US, and the UK. The principal
risk for investors in the Company is a significant fall and/or a
prolonged period of decline in these Global markets. This could be
triggered by unfavourable developments within the region or events
outside it.
|
The Company
has a diversified investment portfolio by country, sector and
stock. Due to its investment trust structure, no forced sales need
to take place and investments can be held over a longer-term
horizon. However, there are few ways to mitigate absolute market
risk because it is engendered by factors which are outside the
control of the Board and the Manager. These factors include the
general health of the world economy, interest rates, inflation,
government policies, industry conditions, and changing investor
demand and sentiment. Such factors may give rise to high levels of
volatility in the prices of investments held by the
Company.
The
performance of the Manager is carefully monitored by the Board and
the continuation of the Manager’s mandate is reviewed each year.
The Board has established guidelines to ensure that the investment
policy of the Company is pursued by the Manager.
For a
fuller discussion of the economic and market conditions facing the
Company and the current and future performance of the Company,
please see both the Chairman’s Statement on pages 6 to 8 and the
report of the Portfolio Managers’ on pages 12 to 18.
|
Unchanged
|
|
Geopolitical
Risk
Political
risk has always been a feature of investing in stock markets and it
is particularly so when investing on a Global basis. Wider
political developments in Global geographies, such as the war in
Ukraine and conflict in the Middle East, can create risks to the
value of the Company’s assets. Global markets encompass a variety
of political systems. There are many examples of diplomatic
skirmishes and military tensions and sometimes these resort to
military engagement.
|
The Manager
evaluates and assesses political risk as part of the stock
selection and asset allocation policy which is monitored at every
Board meeting. This includes political, military and diplomatic
events and changes to legislation. Balancing political risk and
reward is an essential part of the active management
process.
The Company
has a nil-valued holding in Sberbank, a Russian bank, but no other
direct investments in Russia or other holdings with significant
links to Russia.
|
Increased
|
|
Investment
Objectives and Strategy
The
Company’s investment objective and strategy are no longer meeting
investors’ demands.
|
The Board
receives regular reports reviewing the Company’s investment
performance against its stated objective and peer group, and
reports from discussions with its brokers and major shareholders.
The Board also has a separate annual strategy meeting.
|
Unchanged
|
|
Widening
Discount
A lack of
liquidity and/or lack of investor interest in the Company’s shares
leads to a depressed share price and a widening discount to its
NAV.
A
persistently high discount may lead to buybacks of the Company’s
shares and result in the shrinkage of the Company.
|
The Board
receives regular reports from both the Manager and the Company’s
broker on the Company’s share price performance, level of share
price discount to NAV and recent trading activity in the Company’s
shares. As a result of the restructuring in 2024, the Board has
introduced initiatives to help address the Company’s share rating
including new Discount Control and Dividend policies. It may seek
to reduce the volatility and absolute level of the share price
discount to NAV for shareholders through buying back shares within
stated shareholder authorities. The Board also receives regular
reports on investor relation meetings with shareholders and
prospective investors and works to ensure that the Company’s
investment proposition is actively marketed through relevant
messaging across many distribution channels.
|
Unchanged
|
|
Performance
Risk that
the Portfolio Managers consistently underperform the benchmark
and/or peer group over 3-5 years.
|
The Board
regularly compares the Company’s NAV performance over both the
short and long term to that of the benchmark and peer group as well
as reviewing the portfolio’s performance against benchmark
(attribution) and risk adjusted performance of the Company and its
peers.
|
Unchanged
|
|
ESG
including climate risk
Risks
associated with climate change and ESG considerations could affect
the valuation of the Company’s holdings.
|
ESG
considerations are integrated as part of the investment
decision-making in constructing the portfolio. Such investment
decisions include the transactions undertaken in the year, the
review of active portfolio positions and consideration of the
gearing position and, if applicable, hedging. The Manager’s process
around ESG is described in the ESG Monitoring and Engagement
section on pages 33 to 35.
|
Unchanged
|
|
Currency
Fluctuation Risk
Exposure to
currency fluctuation risk negatively impacts the Company’s NAV. The
movement of exchange rates may have an unfavourable or favourable
impact on returns as nearly all of the Company’s assets are
non-sterling denominated..
|
With the
exception of borrowings in foreign currency, the Company does not
normally hedge its currency positions but may do so should the
Portfolio Managers or the Board feel this to be appropriate.
Contracts are limited to currencies and amounts commensurate with
the asset exposure. The foreign currency exposure of the Company is
reviewed at Board meetings.
|
Unchanged
|
|
Third
Party Service Providers Risk
|
|
Information
Technology Resilience and Security
The
Company’s operational structure means that all cyber risk
(information and physical security) arises at its Third-Party
Service Providers (‘TPPs’). This cyber risk includes fraud,
sabotage or crime perpetrated against the Company or any of its
TPPs.
|
The Audit
Committee receives regular updates on the Manager’s information and
cyber security. This includes updates on the cyber security
framework, staff resource and training, and the testing of its
security systems designed to protect against a cyber security
attack.
As well as
conducting a regular review of TPPs’ audited service organisation
control reports, the Audit Committee monitors TPPs’ business
continuity plans and testing including the TPPs’ and Manager’s
regular ‘live’ testing of workplace recovery arrangements should a
cyber event occur.
|
Unchanged
|
|
Operational
Resilience
The
Company’s operational capability relies upon the ability of its
TPPs to continue working throughout the disruption caused by a
major event such as the Covid-19 pandemic.
|
The
Manager’s business continuity plans are reviewed on an ongoing
basis and the Directors are satisfied that the Manager has in place
robust plans and infrastructure to minimise the impact on its
operations so that the Company can continue to trade, meet
regulatory obligations, report and meet shareholder
requirements.
The Manager
has arrangements and prioritises between work deemed necessary to
be carried out on business premises and work from home arrangements
should it be necessary, for instance due to further restrictions.
Any meetings are held in person, virtually or via conference calls.
Other similar working arrangements are in place for the Company’s
TPPs. The Audit Committee receives regular update reports from the
Manager and TPPs on business continuity processes.
|
Unchanged
|
|
Regulatory
Risk
|
|
Regulatory
and Tax Related
The Company
is subject to various laws and regulations by virtue of its status
as a public limited investment company registered under the
Companies Act 2006, its status as an investment trust and its
listing on the London Stock Exchange. Loss of investment trust
status could lead to the Company being subject to UK Capital Gains
Tax on the sale of its investments. A serious breach of other
regulatory rules could lead to suspension from the London Stock
Exchange, a fine or a qualified Audit Report. Other control
failures, either by the Manager or any other of the Company’s
service providers, could result in operational or reputational
problems, erroneous disclosures or loss of assets through fraud, as
well as breaches of regulations.
|
The Manager
reviews the level of compliance with the Corporation Tax Act 2010
and other financial regulatory requirements on a daily basis. All
transactions, income and expenditure are reported to the Board. The
Board regularly considers the risks to which the Company is
exposed, the measures in place to control them and the potential
for other risks to arise. The Board ensures that satisfactory
assurances are received from service providers. The depositary and
the Manager’s compliance and internal audit officers report
regularly to the Company’s Audit Committee.
The risks
and risk management policies and procedures as they relate to the
financial assets and liabilities of the Company are also detailed
in note 17 to the financial statements.
|
Unchanged
|
Continuation
Vote
As part of
the ancillary changes introduced as part of the restructuring, the
Board intends to put forward a vote at the Company’s Annual General
Meeting in 2026 for the continuation of the Company (the 2026
Continuation Vote). If the 2026 Continuation Vote is passed the
Board will put forward a continuation vote at the Company’s annual
general meeting in 2031 and, if passed, at each fifth annual
general meeting thereafter.
Viability
Statement
The Company
is an investment company which operates as a collective investment
vehicle, designed and managed for long term investment. The Board
considers long term for this purpose to be at least three years and
so has assessed the Company’s viability over this period. However,
the life of the Company is not intended to be limited to that or
any other period.
In
assessing the viability of the Company the Board considered the
principal and emerging risks to which it is exposed, as set out on
pages 39
to 41,
together with mitigating factors. The risks of failure to meet the
Company’s investment objectives, contributory market and investment
risks and the challenges of lack of scale have been considered to
be of particular importance. The Board also took into account the
capabilities of the Manager and the varying market conditions
already experienced by the Company since its launch in 2006,
including the impact of the Covid-19 pandemic on global economies
and the war in Ukraine. Despite
the disruption to markets from these and other more recent
geopolitical and macro-economic events such as the ongoing conflict
in the Middle East, the Directors
remain confident that the Company’s investment strategy will
continue to serve shareholders well over the longer
term.
In terms of
financial risks to viability, materially all of the investments are
readily realisable. The portfolio also produces a stream of
dividend income, which may fluctuate but which the Board expects to
continue. The Company has no long term liabilities and the total
value of the portfolio more than covers the value of the Company’s
short term liabilities and annual operating costs. In arriving at
this assessment, the Board considered stressed scenario-testing for
both income and loan covenants; borrowing structure; level of
gearing; and the liquidity of the portfolio. Consequently, there
appears little to no prospect of the Company not being able to meet
its financial obligations as they fall due in the next
three years.
Based on
the above, the Board has a reasonable expectation that,
notwithstanding the continuation vote in 2026, the Company will be
able to continue in operation and meet its liabilities
as they fall due over the three-year period of
their assessment.
Audit
Committee Report
The audit
committee report required by the AIC Corporate Governance Code is
set out on pages 56 and 57.
There are no areas of concern in relation to the financial
statements to bring to the attention of shareholders.
Duty
to Promote the Success of the Company (s.172)
The
Directors have a statutory duty under section 172 of the Companies
Act 2006 to promote the success of the Company whilst also having
regard to certain broader matters, including the need to engage
with employees, suppliers, customers and others, and to have regard
to their interests. The Company has no employees and no customers
in the traditional sense and in accordance with the Company’s
nature as an investment trust, the Board’s principal concern has
been, and continues to be, the interests of the Company’s
shareholders taken as a whole. In doing so, it has due regard to
the desirability of the Company maintaining a reputation for high
standards of business conduct, the need to foster the Company's
business relationships and the impact of its actions on other
stakeholders including the Manager, other third-party service
providers and the impact of the Company’s operations on the
community and the environment which are all taken into account
during all discussions and as part of the Board’s decision
making.
The Board
is committed to maintaining open channels of communication and
engagement with stakeholders in a manner which they find most
meaningful. The table below sets out how the Board engages with
each of its key stakeholders:
|
Stakeholder
|
Key
considerations and engagement
|
|
Shareholders
– continued
shareholder support and engagement are important to the business
and the delivery of its long-term strategy. Further details of our
strategy can be found on page 36.
|
To help the
Board in its aim to act fairly as between the Company’s members,
shareholder relations are given high priority by the Board and the
Manager. The prime means by which the Company communicates with
shareholders are the annual and half-yearly financial reports,
which aim to provide shareholders with a full understanding of the
Company’s activities and its results. This information is
supplemented by daily publication of the NAV of the Company’s
shares via the London Stock Exchange, ad hoc regulatory
announcements, the monthly factsheet and other information on the
Manager’s website
https://www.invesco.com/uk/en/investment-trusts/invesco-global-equity-income-trust.html,
including pre-investment information, Key Information Document
(‘KID’), shareholder circulars, portfolio disclosures, Stock
Exchange announcements, schedule of matters reserved for the Board,
terms of reference of Board Committees, Directors’ letters of
appointment, the Company’s share price and proxy voting results.
The Chairman and Directors welcome contact with shareholders. There
is a regular dialogue between the Manager and individual major
shareholders to discuss aspects of investment performance,
governance and strategy and to listen to shareholder views in order
to help develop a balanced understanding of their issues and
concerns. The Company’s corporate broker, Cavendish Capital Markets
Limited, is also consulted. General presentations to institutional
shareholders and analysts take place throughout the year. All
meetings between the Manager and institutional shareholders are
reported to the Board. It is the intention of the Board that the
annual financial report and the notice of the AGM be issued to
shareholders so as to provide at least twenty working days’ notice
of the AGM. Shareholders wishing to lodge questions in advance of
the AGM are invited to do so in writing to the Company Secretary at
the address given on page 96.
|
|
The
Manager – the
Manager’s performance is critical for the Company to successfully
deliver its investment strategy and meet its objective to provide
shareholders with consistent long-term returns. Further details of
the Portfolio Managers’ investment approach can be found in the
Portfolio Managers’ Report on pages 12 to 18.
|
The Board
engages with the Manager at every Board meeting and reviews the
Company’s relationships with other service providers, such as the
registrar, depositary and custodian, at least annually. During the
year the most significant engagement was with the Manager and the
Portfolio Managers. At every Board meeting the Directors receive an
investor relations update from the Manager, which details any
significant changes in the Company’s shareholder register,
shareholder feedback, as well as notifications of any publications
or press articles.
Maintaining
a close and constructive working relationship with the Manager is
crucial as the Board and the Manager both aim to achieve
consistent, long-term returns in line with the Company’s investment
strategy. Important components in the collaboration with the
Manager, representative of the Company’s culture are:
– Encouraging
an open discussion with the Manager, allowing time and space for
original and innovative thinking;
– Recognising
that the interests of shareholders and the Manager are, for the
most part, well aligned, adopting a tone of constructive challenge,
balanced with robust negotiation of the Manager’s terms of
engagement if those interests should not be fully
united;
– The
regular review of underlying strategic and investment
objectives;
– Drawing
on Directors’ individual experience and knowledge to support and
challenge the Manager in its monitoring of and engagement with its
investee companies; and
– Willingness
to make the Directors’ experience available to support and
challenge the Manager in the sound long-term development of its
business and resources, recognising that the long-term health of
the Manager’s business is in the interests of shareholders in the
Company.
|
|
Third-party
Service Providers – in order
to function as an investment trust with a premium listing on the
London Stock Exchange, the Company relies on a diverse range of
reputable advisers for support in meeting all relevant
obligations.
|
The Board
through the Manager maintains regular contact with its key external
service providers and receives regular reporting from them, both
through the Board and committee meetings, as well as outside of the
regular meeting cycle. Their advice, as well as their needs and
views are routinely taken into account.
The Board
(through the Management Engagement Committee) formally assesses the
third-party service providers’ performance, fees and continuing
appointment annually to ensure that the key service providers
continue to function at an acceptable level and are appropriately
remunerated to deliver the expected level of service.
The Audit
Committee reviews and evaluates the financial reporting control
environments in place at each service provider. There have been no
material changes to the level of service provided by the Company’s
third-party suppliers as a result of the Covid-19
pandemic.
|
|
Investee
Companies – the Board
recognises the importance of good stewardship and communication
with investee companies in meeting the Company’s investment
objective and strategy.
|
On the
Company’s behalf the Portfolio Managers engage with investee
companies, particularly in relation to ESG matters and shares held
in the portfolio are voted at general meetings.
An example
of the Portfolio Managers’ engagement with an investee company can
be found on page 35.
|
|
Regulators
– the
Company can only operate as an investment trust if it conducts its
affairs in compliance with such status. Interaction with regulators
such as the Financial Conduct Authority (‘FCA)’ and Financial
Reporting Council (‘FRC’), who have a legitimate interest in how
the Company operates in the market and treats its shareholders, and
industry bodies such as the Association of Investment Companies,
remains an area of Board focus.
|
The Company
regularly considers how it meets various regulatory and statutory
obligations and how any governance decisions it makes can have an
impact on its stakeholders, both in the shorter and in the longer
term. The Board receives reports from the Manager and Auditor on
their respective regulatory compliance and any inspections or
reviews that are commissioned by regulatory bodies.
The Company
is a member of the AIC, which looks after the interests of
investment trusts and provides information to the market.
Comprehensive information relating to the Company can be found on
the AIC website, www.aic.co.uk.
As a member
of the AIC, the Company is welcomed to comment on consultations and
proposal documents on matters affecting the Company and annually to
nominate and vote for future board members.
|
The
mechanisms for engaging with stakeholders are kept under review by
the Directors and will be discussed on a regular basis at Board
meetings to ensure that they remain effective. Examples of key
discussions and considerations of the Board made during the year
were:
• to
consider and approve, for the long-term benefit of the Company and
its shareholders, the restructuring of the Company (see page 2 and
the Chairman’s Statement on pages 6 to 8 for further
details);
• to
consider and approve the appointment of a new corporate broker and
financial adviser (see page 8 for further details);
• to
consider and approve the renewal of the Company’s loan
facility;
• to
consider and approve four quarterly dividend payments (see page 37
for further details); and
• to
consider and approve the ongoing use of share buybacks as part of
the Board’s adopted discount policy (see page 37 for further
details).
Board
Diversity
The
Company’s policy on diversity is set out on page 51, under the
section ‘Nomination Committee’. The Board considers diversity,
including the balance of skills, knowledge, experience and gender
amongst other factors when reviewing its composition and appointing
new directors. The Board continues to recognise the importance of
having a range of skilled, experienced individuals with the right
knowledge represented on the Board in order to allow it to fulfil
its obligations.
In view of
its relatively small size, the Board will continue to ensure that
all appointments are made on the basis of merit against the
specification prepared for each appointment. In doing so, the Board
will seek to meet the targets set out in the FCA’s UK Listing Rule
6.6.6R (9)(a), which are summarised below.
In
accordance with Listing Rule 6.6.6R (9), (10) and (11) the Board
has provided the following information in relation to its diversity
as at 31 May 2024, being the
financial year-end of the Company. The information included in the
tables below has been obtained following confirmation from the
individual Directors. As shown in the tables, the Company did not
meet the FCA ethnic diversity target as at 31 May 2024, however the Board will continue to
take all matters of diversity into account as part of its
succession planning.
Board
Gender as at 31 May
2024
|
|
|
|
Number
of
|
Number
in
|
Percentage
of
|
|
|
Number
of
|
Percentage
|
senior
positions
|
executive
|
executive
|
|
|
Board
members
|
of
the Board
|
on
the Board
|
managementA
|
managementA
|
|
Men
|
3
|
60%
|
0C
|
n/a
|
n/a
|
|
Women
|
2
|
40%B
|
2C,D
|
n/a
|
n/a
|
A The
Company does not disclose the number of directors in executive
management as this is not applicable for an investment
trust.
B Meets
the target of 40% as set out in UKLR 6.6.6R (9)(a)(i).
C The
positions of Chairman and Senior Independent Director are held by
women. The position of Chair of the Audit Committee is held by a
man but this is not currently defined as a senior
position.
D Exceeds
target of 1 as set out in UKLR 6.6.6R (9)(a)(ii).
|
|
|
|
Number
of
|
Number
in
|
Percentage
of
|
|
|
Number
of
|
Percentage
of
|
senior
positions
|
executive
|
executive
|
|
|
Board
members
|
the
Board
|
on
the Board
|
managementA
|
managementA
|
|
White
British or other White
|
|
|
|
|
|
|
(including
minority-white groups)
|
5
|
100%
|
2
|
n/a
|
n/a
|
|
Minority
ethnic
|
0B
|
0%
|
0
|
n/a
|
n/a
|
A The
Company does not disclose the number of directors in executive
management as this is not applicable for an investment
trust.
B Does
not meet the target as set out in UKLR 6.6.6R
(9)(a)(iii).
There have
been no changes since the year end that have affected the Company’s
ability to meet the targets set in LR 6.6.6R
(9)(a).
Environment,
Social and Governance (‘ESG’) Matters
In relation
to the portfolios, the Company has delegated the management of the
Company’s investments to the Manager, who has an ESG Guiding
Framework which sets out a number of principles that are considered
in the context of its responsibility to manage investments in the
financial interests of shareholders.
The Manager
is committed to being a responsible investor and applies, and is a
signatory to, the United Nations Principles for Responsible
Investment (‘PRI’), which demonstrates its extensive efforts in
terms of ESG integration, active ownership, investor collaboration
and transparency. The Manager scored four stars for its Investment
& Stewardship Policy under new scoring methodology produced by
PRI. This followed five consecutive years of achieving an A+ rating
for responsible investment (Strategy & Governance) under the
previous methodology. In addition, the Manager is an active member
of the UK Sustainable Investment and Finance Association as well as
a supporter of the Task Force for Climate Related Financial
Disclosure (‘TCFD’) since 2019 and published its fourth iteration
of its TCFD-aligned Climate Change Report in 2023.
The Manager
is complying with the spirit of the Sustainable Finance Disclosure
Regulation (‘SFDR’) which came into effect within the European
Union on 10 March 2021 and is
disclosing in its AIFM document as well as its website how
sustainability risks are integrated.
The wider
Invesco investment team incorporates ESG considerations in its
investment process as part of the evaluation of new opportunities,
with identified ESG concerns feeding into the final investment
decision and assessment of relative value. The Portfolio Managers
make their own conclusions about the ESG characteristics of each
investment held and about the overall ESG characteristics of the
portfolios, although third party ESG ratings may inform their view.
Additionally, the Manager’s ESG team provides formalised ESG
portfolio monitoring. This is a rigorous semi-annual process where
the portfolios are reviewed from an ESG perspective.
Regarding
stewardship, the Board considers that the Company has a
responsibility as a shareholder towards ensuring that high
standards of corporate governance are maintained in the companies
in which it invests. To achieve this, the Board does not seek to
intervene in daily management decisions, but aims to support high
standards of governance and, where necessary, will take the
initiative to ensure those standards are met. The principal means
of putting shareholder responsibility into practice is through the
exercise of voting rights. The Company’s voting rights are
exercised on an informed and independent basis.
Further
details are shown in the ESG Statement from the Manager on pages 33
to 35.
The
Company’s stewardship functions have been delegated to the Manager.
The Manager has adopted a clear and considered policy towards its
responsibility as a shareholder on behalf of the Company. As part
of this policy, the Manager takes steps to satisfy itself about the
extent to which the companies in which it invests look after
shareholders’ value and comply with local recommendations and
practices, such as the UK Corporate Governance Code. The Manager is
also a Tier 1 signatory of the Financial Reporting Council’s
Stewardship Code, which seeks to improve the quality of engagement
between institutional investors and companies to help improve
long-term returns to shareholders and the efficient exercise of
governance responsibilities.
A copy of
the current Manager’s Stewardship Policy can be found at
www.invesco.com/uk.
A
greenhouse gas emissions statement is included in the Directors’
Report on page 52.
Whilst TCFD
is currently not applicable to the Company, the Manager has
produced a product level report on the Company in accordance with
the Financial Conduct Authority’s (‘FCA’) rules and guidance
regarding the disclosure of climate-related financial information
consistent with TCFD Recommendations and Recommended Disclosures.
These disclosures are intended to help meet the information needs
of market participants, including institutional clients and
consumers of financial products, in relation
to the climate-related impact and risks of the Manager’s TCFD
in-scope business. The product level report on the
Company is
available on the Company’s website at
https://www.invesco.com/uk/en/investment-trusts/invesco-global-equity-income-trust.html.
Key
elements of the product level report include a scenario analysis of
how climate change is likely to impact the portfolio valuation
under net zero 2050, delayed transition and hothouse scenarios, and
a discussion of the most significant drivers of performance under
those scenarios.
Invesco’s
Group Level Task Force on Climate-Related Financial Disclosures
(‘TCFD’) is available on the Managers’ Website at
https://www.invesco.com/uk/en/about-us/esg-and-responsibleinvesting.html
Modern
Slavery
As an
investment vehicle the Company does not provide goods or services
in the normal course of business, and does not have customers.
Accordingly, the Directors consider that the Company is not within
the scope of the Modern Slavery Act 2015.
This
Strategic Report was approved by the Board on
25 September 2024.
James Poole
Senior
Company Secretary
Invesco
Asset Management Limited
Corporate
Company Secretary
Statement
of Directors’ Responsibilities
IN RESPECT
OF THE PREPARATION OF THE ANNUAL FINANCIAL REPORT.
The
Directors are responsible for preparing the Annual Financial Report
in accordance with applicable law and regulations.
Company law
requires the Directors to prepare financial statements for each
financial year. Under the law the Directors have elected to prepare
financial statements in accordance with UK Accounting Standards,
including FRS 102 ‘The Financial Reporting Standard applicable in
the UK and Republic of Ireland.’ Under company law, the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
In
preparing these financial statements, the Directors are
required to:
• select
suitable accounting policies and then apply them
consistently;
• make
judgements and estimates that are reasonable and
prudent;
• state
whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
• prepare
the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business.
The
Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial
position of the Company and which enable them to ensure that the
financial statements comply with the Companies Act 2006. They have
general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Company and to prevent and
detect fraud and other irregularities.
Under
applicable law and regulations, the Directors are also responsible
for preparing a Strategic Report, a Directors’ Report, which
includes a Corporate Governance Statement, and a Directors’
Remuneration Report that comply with that law and those
regulations.
The
Directors confirm that:
• in
so far as they are aware, there is no relevant audit information of
which the Company’s Auditor is unaware; and
• each
Director has taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit
information and to establish that the Company’s Auditor is aware of
that information.
The
Directors of the Company each confirm to the best of their
knowledge that:
• the
financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the
assets, liabilities, financial position, net return and cash flows
of the Company; and
• this
Annual Financial Report includes a fair review of the development
and performance of the business and the position of the Company
together with a description of the principal risks and
uncertainties that it faces.
The
Directors consider that this Annual Financial Report, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
Signed on
behalf of the Board of Directors
Victoria Muir
Chairman
25 September 2024
Electronic
Publication
The Annual
Financial Report is published on the Manager’s website
https://www.invesco.com/uk/en/investment-trusts/invesco-global-equity-income-trust.html.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website, which is maintained by the Company’s Manager. Legislation
in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
Income
Statement
|
|
Year
ended 31 May 2024
|
Year
ended 31 May 2023
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
Notes
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Gains/(losses)
on investments held at
|
|
|
|
|
|
|
|
|
fair
value
|
9
|
–
|
23,634
|
23,634
|
–
|
(3,875)
|
(3,875)
|
|
Gains/(losses)
on derivative instruments
|
10
|
(10)
|
261
|
251
|
27
|
(963)
|
(936)
|
|
(Losses)/gains
on foreign exchange
|
|
–
|
(68)
|
(68)
|
–
|
28
|
28
|
|
Income
|
2
|
7,433
|
–
|
7,433
|
7,400
|
268
|
7,668
|
|
Investment
management fees
|
3
|
(340)
|
(788)
|
(1,128)
|
(334)
|
(774)
|
(1,108)
|
|
Other
expenses
|
4
|
(551)
|
(702)
|
(1,253)
|
(627)
|
(7)
|
(634)
|
|
Net return
before finance costs and taxation
|
|
6,532
|
22,337
|
28,869
|
6,466
|
(5,323)
|
1,143
|
|
Finance
costs
|
5
|
(194)
|
(453)
|
(647)
|
(147)
|
(343)
|
(490)
|
|
Return
before taxation
|
|
6,338
|
21,884
|
28,222
|
6,319
|
(5,666)
|
653
|
|
Tax
|
6
|
(239)
|
59
|
(180)
|
(325)
|
2
|
(323)
|
|
Return
after taxation for the financial year
|
|
6,099
|
21,943
|
28,042
|
5,994
|
(5,664)
|
330
|
|
Return per
ordinary share (basic and diluted)
|
7
|
|
|
|
|
|
|
|
– Global
Equity Income (formerly Global
|
|
|
|
|
|
|
|
|
Equity
Income Share Portfolio)
|
|
9.03p
|
54.72p
|
63.75p
|
5.20p
|
18.03p
|
23.23p
|
|
– UK
Equity Share Portfolio(1)
|
|
5.12p
|
9.89p
|
15.01p
|
6.40p
|
(12.99)p
|
(6.59)p
|
|
– Balanced
Risk Allocation Share Portfolio(1)
|
|
4.45p
|
8.72p
|
13.17p
|
3.38p
|
(23.16)p
|
(19.78)p
|
|
– Managed
Liquidity Share Portfolio(1)
|
|
17.07p
|
1.15p
|
18.22p
|
1.06p
|
1.80p
|
2.86p
|
(1) This
Portfolio was closed as part of the Company restructure on
7 May 2024.
The total
column of this statement represents the Company’s Income Statement
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 current year. Income Statements for the
different share classes are shown on pages 21, 25, 28 and 31 for
the Global Equity Income, UK Equity, Balanced Risk Allocation and
Managed Liquidity Share Portfolios respectively.
The
accompanying accounting policies and notes are an integral part of
these financial statements.
Statement
of Changes in Equity
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
Share
|
Share
|
Special
|
redemption
|
Capital
|
Revenue
|
|
|
|
|
capital
|
premium
|
reserve
|
reserve
|
reserve
|
reserve
|
Total
|
|
|
Notes
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
At 31 May
2022
|
|
1,709
|
122,990
|
18,935
|
372
|
70,414
|
1
|
214,421
|
|
Cancellation
of deferred shares
|
|
–
|
–
|
(5)
|
5
|
–
|
–
|
–
|
|
Shares
bought back and held in treasury
|
14
|
–
|
–
|
(4,671)
|
–
|
(3,516)
|
–
|
(8,187)
|
|
Share
conversions
|
|
(2)
|
–
|
1,107
|
–
|
(1,105)
|
–
|
–
|
|
Return
after taxation per the income
|
|
|
|
|
|
|
|
|
|
statement
|
|
–
|
–
|
–
|
—
|
(5,664)
|
5,994
|
330
|
|
Dividends
paid
|
8
|
–
|
–
|
(932)
|
–
|
–
|
(5,893)
|
(6,825)
|
|
Cancellation
of share premium account
|
15
|
–
|
(122,990)
|
122,990
|
–
|
–
|
–
|
–
|
|
|
|
|
|
|
|
|
|
|
|
At 31 May
2023
|
|
1,707
|
-
|
137,424
|
377
|
60,129
|
102
|
199,739
|
|
Cancellation
of deferred shares
|
|
–
|
–
|
(233)
|
233
|
–
|
–
|
–
|
|
Shares
bought back and held in treasury
|
14
|
–
|
–
|
(2,702)
|
–
|
–
|
–
|
(2,702)
|
|
Share
conversions
|
|
(348)
|
–
|
232
|
116
|
–
|
–
|
–
|
|
Return
after taxation per the income
|
|
|
|
|
|
|
|
|
|
statement
|
|
–
|
–
|
–
|
–
|
21,943
|
6,099
|
28,042
|
|
Dividends
paid
|
8
|
–
|
–
|
(597)
|
–
|
–
|
(6,099)
|
(6,696)
|
|
Costs
associated with tender offer
|
|
–
|
–
|
(145)
|
–
|
–
|
–
|
(145)
|
|
Tender
offer in respect of the share class
|
|
|
|
|
|
|
|
|
|
reclassification
|
|
–
|
–
|
(20,683)
|
–
|
–
|
–
|
(20,683)
|
|
Treasury
shares cancellation
|
|
(559)
|
–
|
–
|
559
|
–
|
–
|
–
|
|
At 31 May
2024
|
|
800
|
-
|
113,296
|
1,285
|
82,072
|
102
|
197,555
|
The
accompanying accounting policies and notes are an integral part of
these financial statements.
Balance
Sheet
|
|
|
At
|
At
|
|
|
|
31
May 2024
|
31
May 2023
|
|
|
|
Company
|
Company
|
|
|
|
Total
|
Total
|
|
|
Notes
|
£’000
|
£’000
|
|
Fixed
assets
|
|
|
|
|
Investments
held at fair value through
|
|
|
|
|
profit
or loss
|
9
|
195,824
|
207,389
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
Derivative
assets held at fair value through profit or loss
|
10
|
–
|
125
|
|
Debtors
|
11
|
1,639
|
1,546
|
|
Cash and
cash equivalents
|
|
1,859
|
1,094
|
|
|
|
3,498
|
2,765
|
|
Creditors:
amounts falling due within one year
|
|
|
|
|
Derivative
liabilities held at fair value through profit or loss
|
10
|
–
|
(186)
|
|
Other
creditors
|
12
|
(1,767)
|
(579)
|
|
Bank
facility
|
13
|
–
|
(9,650)
|
|
|
|
(1,767)
|
(10,415)
|
|
Net current
assets/(liabilities)
|
|
1,731
|
(7,650)
|
|
Net
assets
|
|
197,555
|
199,739
|
|
Capital and
reserves
|
|
|
|
|
Share
capital
|
14(a)
|
800
|
1,707
|
|
Share
premium
|
15
|
–
|
–
|
|
Special
reserve
|
15
|
113,296
|
137,424
|
|
Capital
redemption reserve
|
15
|
1,285
|
377
|
|
Capital
reserve
|
15
|
82,072
|
60,129
|
|
Revenue
reserve
|
15
|
102
|
102
|
|
Shareholders’
funds
|
|
197,555
|
199,739
|
|
Net asset
value per ordinary share(1)
|
16
|
313.30p
|
|
(1) No
prior year net asset value per ordinary share is stated as the
Company comprised of four individual portfolios until the Company
restructure on 7 May 2024, with each
portfolio having a separate net asset value per ordinary
share.
The total
column of this statement represents the Company’s Balance Sheet
prepared in accordance with UK accounting standards.
The
financial statements were approved and authorised for issue by the
Board of Directors on 25 September
2024.
Signed on
behalf of the Board of Directors
Victoria Muir
Chairman
Company No.
05916642
The
accompanying accounting policies and notes are an integral part of
these financial statements.
Cash
Flow Statement
|
|
|
Year
ended
|
Year
ended
|
|
|
|
31
May 2024
|
31
May 2023
|
|
|
Notes
|
£’000
|
£’000
|
|
Cash flows
from operating activities
|
|
|
|
|
Net return
before finance costs and taxation
|
|
28,869
|
1,143
|
|
Tax on
overseas income
|
|
(180)
|
(323)
|
|
Adjustments
for:
|
|
|
|
|
Purchase
of investments
|
|
(177,227)
|
(50,391)
|
|
Sale
of investments
|
|
212,682
|
73,142
|
|
Sale
of futures
|
|
190
|
(738)
|
|
|
|
|
|
|
|
|
35,645
|
22,013
|
|
Scrip
dividends
|
|
(109)
|
(342)
|
|
Gains/(losses)
on investments
|
|
(23,634)
|
3,875
|
|
Gains/(losses)
on derivatives
|
|
(251)
|
936
|
|
Decrease/(increase)
in debtors
|
|
954
|
(52)
|
|
(Decrease)/increase
in creditors
|
|
(12)
|
32
|
|
Net cash
inflow from operating activities
|
|
41,282
|
27,282
|
|
Cash flows
from financing activities
|
|
|
|
|
Interest
paid on bank borrowings
|
|
(641)
|
(493)
|
|
Decrease in
bank facility
|
|
(9,650)
|
(11,456)
|
|
Costs
associated with tender offer
|
|
(145)
|
–
|
|
Tender
offer in respect of the share class reclassification
|
|
(20,683)
|
–
|
|
Share buy
back costs
|
|
(2,702)
|
(8,361)
|
|
Equity
dividends paid
|
8
|
(6,696)
|
(6,825)
|
|
Net cash
outflow from financing activities
|
|
(40,517)
|
(27,135)
|
|
Net
increase in cash and cash equivalents
|
|
765
|
147
|
|
Cash and
cash equivalents at the start of the year
|
|
1,094
|
947
|
|
Cash and
cash equivalents at the end of the year
|
|
1,859
|
1,094
|
|
Reconciliation
of cash and cash equivalents to the Balance Sheet is as
follows:
|
|
|
|
|
Cash held
at custodian
|
|
559
|
1,094
|
|
Invesco
Liquidity Funds plc – Sterling, money market fund
|
|
1,300
|
–
|
|
Cash and
cash equivalents
|
|
1,859
|
1,094
|
|
Cash flow
from operating activities includes:
|
|
|
|
|
Interest
received
|
|
47
|
27
|
|
Dividends
received
|
|
6,599
|
6,900
|
The
accompanying accounting policies and notes are an integral part of
these financial statements.
Notes
to the Financial Statements
1. Accounting
Policies
Accounting
policies describe the Company’s approach to recognising and
measuring transactions during the year and the position of the
Company at the year end.
The
principal accounting policies are set out below:
(a) Basis
of Preparation
(i) Accounting
Standards Applied
The
financial statements have been prepared in accordance with
applicable United Kingdom Accounting Standards, including FRS 102
‘the Financial Reporting Standard applicable in the UK and Republic
of Ireland’, and applicable law (UK Generally Accepted Accounting
Practice (‘UK GAAP’)) and with the Statement of Recommended
Practice Financial Statements of Investment Trust Companies and
Venture Capital Trusts, updated by the Association of Investment
Companies (‘AIC’) in July 2022. The
financial statements are issued on a going
concern basis as disclosed on page 51.
The
accounting policies applied to these financial statements are
consistent with those applied for the preceding year.
(ii) Definitions
used in the financial statements
‘Portfolio’ the
Global Equity Income Share Portfolio, the UK Equity Share
Portfolio, the Balanced Risk Allocation Share Portfolio and/or the
Managed Liquidity Share Portfolio (as the case may be). Each
comprises, or may include, an investment portfolio, derivative
instruments, cash, loans, debtors and other creditors, which
together make up the net assets as shown in the balance
sheet.
‘Share’ Global
Equity Income Share, UK Equity Share, Balanced Risk Allocation
Share, Managed Liquidity Share and/or Deferred Share (as the case
may be).
The Global
Equity Income, UK Equity, Balanced Risk Allocation and Managed
Liquidity Share Portfolios’ income statement (shown on pages 21,
25, 28 and 31) do not represent statutory accounts, are not
required under UK Generally Accepted Accounting Practice and the
auditor does not express an opinion on each individual portfolio.
These have been disclosed to assist shareholders’ understanding of
the assets and liabilities, and income and expenses of the
different share classes.
In order to
better reflect the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary
information which analyses the income statement between items of a
revenue and capital nature has been presented alongside the income
statement.
(iii) Functional
and presentational currency
The
Company’s investments are made in several currencies, however, the
financial statements are presented in sterling, which is the
Company’s functional currency. In arriving at this conclusion, the
Directors considered that the Company’s shares are listed and
traded on the London Stock Exchange, the shareholder base is
predominantly in the United
Kingdom and the Company pays dividends and expenses in
sterling.
(iv) Transactions
and balances
Transactions
in foreign currency, whether of a revenue or capital nature, are
translated to sterling at the rates of exchange ruling on the dates
of such transactions. Foreign currency assets and liabilities are
translated to sterling at the rates of exchange ruling at the
balance sheet date. Any gains or losses, whether realised or
unrealised, are taken to the capital reserve or to the revenue
account, depending on whether the gain or loss is of a capital or
revenue nature. All gains and losses are recognised in the income
statement.
(v) Significant
Accounting Estimates and Judgements
The
preparation of the financial statements may require the Directors
to make estimations where uncertainty exists. It also requires the
Directors to make judgements, estimates and assumptions, in the
process of applying the accounting policies. There have been no
significant judgements, estimates or assumptions for the current or
preceding year.
(b) Financial
Instruments
The Company
has chosen to apply the provisions of Sections 11 and 12 of FRS 102
in full in respect of the financial instruments, which is explained
below.
(i) Recognition
of Financial Assets and Financial Liabilities
The Company
recognises financial assets and financial liabilities when the
Company becomes a party to the contractual provisions of the
instrument. The Company will offset financial assets and financial
liabilities if the Company has a legally enforceable right to set
off the recognised amounts and interests and intends to settle on a
net basis.
(ii) Derecognition
of Financial Assets
The Company
derecognises a financial asset when the contractual rights to the
cash flows from the asset expire or it transfers the right to
receive the contractual cash flows on the financial asset in a
transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in
the transferred financial asset that is created or retained by the
Company is recognised as an asset.
(iii) Derecognition
of Financial Liabilities
The Company
derecognises financial liabilities when its obligations are
discharged, cancelled or expire.
(iv) Trade
Date Accounting
Purchases
and sales of financial assets are recognised on trade date, being
the date on which the Company commits to purchase or sell the
assets.
(v) Classification
and measurement of financial assets and financial
liabilities
Financial
assets
The
Company’s investments, including financial derivative instruments,
are classified as held at fair value through profit or
loss.
Financial
assets held at fair value through profit or loss are initially
recognised at fair value, which is taken to be their cost, with
transaction costs expensed in the income statement, and are
subsequently valued at fair value.
Fair value
for investments, including financial derivative instruments, that
are actively traded in organised financial markets is determined by
reference to stock exchange quoted bid prices at the balance sheet
date. For investments that are not actively traded or where active
stock exchange quoted bid prices are not available, fair value is
determined by reference to a variety of valuation techniques
including broker quotes and price modelling. Where there is no
active market, unlisted/illiquid investments are valued by the
Directors at fair value with regard to the International Private
Equity and Venture Capital Valuation Guidelines and on
recommendations from Invesco’s Pricing Committee, both of which use
valuation techniques such as earnings multiples, recent arm’s
length transactions and net assets.
Financial
liabilities
Financial
liabilities, excluding financial derivative instruments but
including borrowings, are initially measured at fair value, net of
transaction costs and are subsequently measured at amortised cost
using the effective interest method.
(c)
Derivatives
and hedging
Derivative
instruments are valued at fair value in the balance sheet.
Derivative instruments may be capital or revenue in nature and,
accordingly, changes in their fair value are recognised in revenue
or capital in the income statement as appropriate.
Forward
currency contracts entered into for hedging purposes are valued at
the appropriate forward exchange rate ruling at the balance sheet
date. Profits or losses on the closure or revaluation of positions
are included in capital reserves.
Futures
contracts may be entered into for hedging purposes and any profits
and losses on the closure or revaluation of positions are included
in capital reserves. Where futures contracts are used for
investment exposure any income element arising on bond futures is
recognised as a gain
on derivative instruments in the income statement and shown in
revenue.
(d) Cash
and cash equivalents
Cash and
cash equivalents may comprise cash (including short term deposits
which are readily convertible to a known amount of cash and are
subject to an insignificant risk of change in value) as well as
cash equivalents, including money market funds. Investments are
regarded as cash equivalents if they meet all of the following
criteria: highly liquid investments held in the Company’s base
currency that are readily convertible to a known amount of cash,
are subject to an insignificant risk of change in value, have a
maturity of less than three months at date of origination and
provide a return no greater than the rate of a three-month high
quality government bond.
(e) Income
Dividend
income from investments is recognised when the shareholders’ right
to receive payment has been established, normally the ex-dividend
date. UK dividends are stated net of related tax credits. Interest
income arising from cash is recognised on an accruals basis and
underwriting commission is recognised as earned. Special dividends
are taken to revenue unless they arise from a return of capital,
when they are allocated to capital in the income statement. Income
from fixed income securities is recognised in the income statement
using the effective interest method.
(f) Expenses
and finance costs
All
expenses are accounted for on an accruals basis. Expenses are
charged to the income statement and shown in revenue except where
expenses are presented as capital items when a connection
with the maintenance or enhancement of the value of the investments
held can be demonstrated and thus management fees and finance costs
are charged to revenue and capital to reflect the Directors’
expected long-term view of the nature of the investment returns of
each Portfolio.
Expenses
charged to the Company in relation to a specific Portfolio were
charged directly to that Portfolio until the Company restructure on
7 May 2024 following which all
expenses were incurred by the one remaining Portfolio.
Expenses
charged to the Company that are common to more than one Portfolio
were allocated between those Portfolios in the same proportions as
the net assets of each Portfolio at the latest conversion date up
until the Company restructure.
Finance
costs are accounted for on an accruals basis using the effective
interest rate method.
The
management fees and finance costs are charged in accordance with
the Board’s expected split of long-term returns, in the form of
capital gains and income, to the applicable Portfolio as
follows:
|
|
|
Revenue
|
Capital
|
|
Portfolio
|
|
Reserve
|
Reserve
|
|
Global
Equity Income
|
|
30%
|
70%
|
|
UK
Equity*
|
|
30%
|
70%
|
|
Balanced
Risk Allocation*
|
|
30%
|
70%
|
|
Managed
Liquidity*
|
|
100%
|
–
|
* This
share class was closed on 7 May
2024.
(g) Dividends
Dividends
are accrued in the financial statements when there is an obligation
to pay the dividends at the balance sheet date.
(h) Taxation
Tax expense
represents the sum of tax currently payable and deferred tax. Any
tax payable is based on taxable profit for the period. Taxable
profit differs from profit before tax as reported in the income
statement because it excludes items of income or expenses that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Company’s liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
For the
Company, any allocation of tax relief to capital is based on the
marginal basis, such that tax allowable capital expenses are offset
against taxable income. Until the Company restructure, where
individual Portfolios had extra tax capacity arising from unused
tax allowable expenses which could be used by a different
Portfolio, this extra tax capacity was transferred between the
Portfolios at a valuation of 1% of the amount
transferred.
Deferred
taxation is recognised in respect of all timing differences that
have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax
or a right to pay less tax in the future have occurred. Timing
differences are differences between the Company’s taxable profits
and its results as stated in the financial statements. Deferred
taxation assets are recognised where, in the opinion of the
Directors, it is more likely than not that these amounts will be
realised in future periods.
A deferred
tax asset has not been recognised in respect of surplus management
expenses as the Company is unlikely to have sufficient future
taxable revenue to offset against these.
Investment
trusts which have approval under the appropriate tax regulations
are not liable for taxation on capital gains.
(i)
Segmental
reporting
The
Directors are of the opinion that the Company is engaged in a
single segment of business being investment business.
2. Income
This
note shows the income generated from the portfolios (investment
assets) of the Company and income received from any other
source.
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
2024
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
Income
from investments:
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
UK
dividends:
|
|
|
|
|
|
|
– ordinary
dividends
|
779
|
3,102
|
–
|
–
|
3,881
|
|
– scrip
dividends
|
–
|
109
|
–
|
–
|
109
|
|
|
779
|
3,211
|
–
|
–
|
3,990
|
|
Overseas
dividends
|
|
|
|
|
|
|
– ordinary
dividends
|
2,382
|
430
|
146
|
69
|
3,027
|
|
– special
dividends
|
21
|
244
|
–
|
–
|
265
|
|
Interest
from Treasury bills
|
–
|
–
|
103
|
–
|
103
|
|
|
3,182
|
3,885
|
249
|
69
|
7,385
|
|
Other
income:
|
|
|
|
|
|
|
Deposit
interest
|
10
|
14
|
21
|
2
|
47
|
|
Rebates of
management fee
|
–
|
–
|
–
|
1
|
1
|
|
Total
income
|
3,192
|
3,899
|
270
|
72
|
7,433
|
|
|
|
|
|
|
|
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2023
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Income from
investments:
|
|
|
|
|
|
|
UK
dividends:
|
|
|
|
|
|
|
–
ordinary dividends
|
273
|
4,159
|
–
|
–
|
4,432
|
|
–
special dividends
|
–
|
92
|
–
|
–
|
92
|
|
–
Scrip dividends
|
–
|
342
|
–
|
–
|
342
|
|
|
273
|
4,593
|
–
|
–
|
4,866
|
|
Overseas
dividends:
|
|
|
|
|
|
|
– ordinary
dividends
|
1,615
|
714
|
92
|
20
|
2,441
|
|
– special
dividends
|
1
|
–
|
–
|
–
|
1
|
|
Interest
from Treasury bills
|
–
|
–
|
64
|
–
|
64
|
|
|
1,889
|
5,307
|
156
|
20
|
7,372
|
|
Other
income:
|
|
|
|
|
|
|
Deposit
interest
|
4
|
7
|
16
|
–
|
27
|
|
Rebates of
management fee
|
–
|
–
|
–
|
1
|
1
|
|
Total
income
|
1,893
|
5,314
|
172
|
21
|
7,400
|
Special
dividends recognised as revenue for the year are as shown above.
Special dividends of £nil (2023: £92,000) in respect of Global
Equity Income Portfolio and £nil (2023: £176,000) in respect of UK
Equity Portfolio were recognised in capital during the
year.
3. Investment
management fees
This
note shows the fees paid to the Manager. These are made up of the
individual Portfolio investment management fees calculated
quarterly on the basis of their net asset values in respect of the
UK Equity and Global Equity Income Portfolios.
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2024
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Investment
management fee:
|
|
|
|
|
|
|
– charged
to revenue
|
137
|
188
|
13
|
2
|
340
|
|
– charged
to capital
|
319
|
439
|
30
|
–
|
788
|
|
Total
investment management fee
|
456
|
627
|
43
|
2
|
1,128
|
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2023
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Investment
management fee:
|
|
|
|
|
|
|
– charged
to revenue
|
107
|
210
|
15
|
2
|
334
|
|
– charged
to capital
|
250
|
490
|
34
|
–
|
774
|
|
Total
investment management fee
|
357
|
700
|
49
|
2
|
1,108
|
Details of
the investment management agreement are given on page 52 in the
Directors’ Report.
4. Other
Expenses
The
other expenses of the Company, including those paid to Directors
and the auditor, are presented below; those paid to the Directors
and the auditor are separately identified.
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2024
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Charged to
revenue:
|
|
|
|
|
|
|
Directors’
remuneration (i)(ii)
|
67
|
94
|
4
|
1
|
166
|
|
Auditor’s
fees (iii):
|
|
|
|
|
|
|
– for
the audit of the Company’s financial statements
|
38
|
33
|
2
|
1
|
74
|
|
Other
expenses (iv)
|
109
|
190
|
18
|
4
|
321
|
|
|
214
|
317
|
24
|
6
|
561
|
|
Charged to
capital:
|
|
|
|
|
|
|
Directors’
remuneration (i)(v)
|
10
|
–
|
–
|
–
|
10
|
|
Auditor’s
fees (iii):
|
|
|
|
|
|
|
– non-audit
fees
|
14
|
22
|
1
|
–
|
37
|
|
Custodian
transaction charges
|
5
|
1
|
1
|
–
|
7
|
|
Other
expenses (vi)
|
227
|
386
|
20
|
5
|
638
|
|
Total
|
470
|
726
|
46
|
11
|
1,253
|
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2023
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Charged to
revenue:
|
|
|
|
|
|
|
Directors’
remuneration (i)(ii)
|
49
|
103
|
5
|
1
|
158
|
|
Auditor’s
fees (iii):
|
|
|
|
|
|
|
– for
the audit of the Company’s financial statements
|
20
|
39
|
2
|
1
|
62
|
|
Other
expenses (iv)
|
107
|
276
|
20
|
4
|
407
|
|
|
176
|
418
|
27
|
6
|
627
|
|
Charged to
capital:
|
|
|
|
|
|
|
Custodian
transaction charges
|
4
|
1
|
2
|
–
|
7
|
|
Total
|
180
|
419
|
29
|
6
|
634
|
(i) The
Director’s Remuneration Report provides information on Directors’
fees. Included within other expenses is £16,000 (2023: £16,000) of
employer’s national insurance payable on Directors’
remuneration.
(ii) As
at 31 May 2024, the amounts
outstanding on Directors’ fees and employer’s national insurance
was £30,000 (2023: £28,000).
(iii) The
Auditor’s fees shown include out of pocket expenses, but exclude
VAT, which is included in other administrative expenses. An
additional fee of £10,000 was paid to the Auditor in respect of
extra work performed in relation to the share class
reclassification. Grant Thornton UK LLP provided non-audit services
related to work on the share class reclassification, which amounted
to £37,000 (2023: none).
(iv) Includes
fees for depositary, broker and registrar, and also printing,
postage and listing costs.
(v) Includes
a Directors’ remuneration fee of £10,000 related to the share class
reclassification.
(vi) Includes
other costs related to the share class reclassification.
5. Finance
Costs
Finance
costs arise on any borrowing the Company has utilised in the year.
The Company has a committed £40 million revolving credit facility
(see note 13 for further details).
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2024
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Interest
payable on borrowings repayable within one year
|
|
|
|
|
|
|
as
follows:
|
|
|
|
|
|
|
–
charged to revenue
|
7
|
187
|
–
|
–
|
194
|
|
–
charged to capital
|
16
|
437
|
–
|
–
|
453
|
|
Total
|
23
|
624
|
–
|
–
|
647
|
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2023
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Interest
payable on borrowings repayable within one year
|
|
|
|
|
|
|
as
follows:
|
|
|
|
|
|
|
–
charged to revenue
|
50
|
97
|
–
|
–
|
147
|
|
–
charged to capital
|
117
|
226
|
–
|
–
|
343
|
|
Total
|
167
|
323
|
–
|
–
|
490
|
6. Tax
As
an investment trust, the Company pays no tax on capital gains.
However, the Company suffers tax on certain overseas dividends that
is irrecoverable and this note shows details of the tax charge. In
addition, this note clarifies the basis for the Company having no
deferred tax asset or liability.
(a) Tax
charge
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2024
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Corporation
Tax
|
137
|
–
|
–
|
(137)
|
–
|
|
Overseas
tax
|
151
|
29
|
–
|
–
|
180
|
|
|
288
|
29
|
–
|
(137)
|
180
|
|
2023
|
|
|
|
|
|
|
Overseas
tax
|
275
|
48
|
–
|
–
|
323
|
The
accounting policy for taxation is disclosed in note
1(h).
(b)
Reconciliation
of tax charge
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2024
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Return
before taxation
|
18,305
|
9,345
|
494
|
78
|
28,222
|
|
Theoretical
tax at the
|
|
|
|
|
|
|
UK
Corporation Tax rate of 25.00% (2023: 20.00%)
|
4,577
|
2,336
|
123
|
20
|
7,056
|
|
Effect
of:
|
|
|
|
|
|
|
– Non-taxable
losses on investments and derivatives
|
(4,005)
|
(1,866)
|
(82)
|
(5)
|
(5,958)
|
|
– Non-taxable
losses on foreign exchange
|
5
|
10
|
2
|
–
|
17
|
|
– Non-taxable
scrip dividends
|
–
|
(27)
|
–
|
–
|
(27)
|
|
– Non-taxable
UK dividends
|
(194)
|
(743)
|
–
|
–
|
(937)
|
|
– Non-taxable
overseas dividends
|
(523)
|
(103)
|
–
|
–
|
(626)
|
|
– Non-taxable
overseas special dividends
|
(5)
|
(61)
|
–
|
–
|
(66)
|
|
– Corporation
tax transferred to successor fund
|
137
|
–
|
–
|
(137)
|
–
|
|
– Overseas
tax
|
151
|
29
|
–
|
–
|
180
|
|
– Disallowable
expenses
|
51
|
102
|
5
|
1
|
159
|
|
– Excess
of allowable expenses over taxable income
|
94
|
352
|
(48)
|
(16)
|
382
|
|
Tax charge
for the year
|
288
|
29
|
–
|
(137)
|
180
|
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2023
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Return
before taxation
|
6,074
|
(4,628)
|
(829)
|
36
|
653
|
|
Theoretical
tax at the
|
|
|
|
|
|
|
UK
Corporation Tax rate of 20.00% (2022: 19.00%)
|
1,215
|
(926)
|
(166)
|
8
|
131
|
|
Effect
of:
|
|
|
|
|
|
|
– Non-taxable
losses/(gains) on investments and derivatives
|
(956)
|
1,735
|
194
|
(5)
|
968
|
|
– Non-taxable
losses on foreign exchange
|
(2)
|
–
|
(3)
|
–
|
(5)
|
|
– Non-taxable
scrip dividends
|
-
|
(68)
|
–
|
–
|
(68)
|
|
– Non-taxable
UK dividends
|
(55)
|
(818)
|
–
|
–
|
(873)
|
|
– Non-taxable
UK special dividends
|
-
|
(53)
|
–
|
–
|
(53)
|
|
– Non-taxable
overseas dividends
|
(286)
|
(141)
|
–
|
–
|
(427)
|
|
– Non-taxable
overseas special dividends
|
(19)
|
–
|
–
|
–
|
(19)
|
|
– Foreign
tax expensed
|
(3)
|
–
|
–
|
–
|
(3)
|
|
– Overseas
tax
|
275
|
48
|
–
|
–
|
323
|
|
– Disallowable
expenses
|
1
|
–
|
–
|
–
|
1
|
|
– Excess
of allowable expenses over taxable income
|
105
|
271
|
(25)
|
(3)
|
348
|
|
Tax charge
for the year
|
275
|
48
|
–
|
–
|
323
|
|
|
|
|
|
|
|
|
|
|
Given the
Company’s status as an investment trust, and the intention to
continue meeting the conditions required to retain such status for
the foreseeable future, the Company has not provided any UK
corporation tax on any realised or unrealised capital gains or
losses arising on investments.
(c) Factors
that may affect future tax charges
The Company
has excess management expenses and loan relationship deficits of
£20,209,000 (2023: £18,674,000) that are available to offset future
taxable revenue. A deferred tax asset of £5,052,000 (2023:
£4,668,000), measured at the standard corporation tax substantively
enacted rate of 25% (2023: 25%) has not been recognised in respect
of these expenses since the Directors believe that there will be no
taxable profits in the future against which the deferred tax assets
can be offset.
The UK
corporation tax rate increased from 19% to 25% from 1 April 2023. Deferred tax assets and liabilities
on balance sheets prepared after the enactment of the new tax rate
must therefore be re-measured accordingly, so as a result the
deferred tax asset has been calculated at 25%.
7. Return
per Ordinary Share
Return
per share is the amount of profit (or loss) generated for each
share class in the financial year divided by the weighted average
number of the shares in issue. The basic and diluted returns per
share are identical as the ordinary shares for each of the
portfolios are not dilutive.
Revenue,
capital and total return per ordinary share is based on each of the
returns after taxation shown by the income statement for the
applicable share class and on the following numbers of Shares being
the weighted average number of Shares in issue throughout the year
for each Share class:
|
|
Average
number
of shares
|
|
|
|
Share
|
2024
|
2023
|
|
Global
Equity Income
|
28,258,528
|
24,967,715
|
|
UK
Equity(1)
|
62,061,213
|
71,005,942
|
|
Balanced
Risk Allocation(1)
|
3,757,960
|
4,190,331
|
|
Managed
Liquidity(1)
|
1,177,858
|
1,252,806
|
(1)
This Share
class was closed on 7 May 2024, the
2024 figures above are calculated to 3 May
2024, being the date of the final computed Net Asset Value
of the Share class.
Return per
Ordinary Share per Portfolio is shown in the Income Statement on
page 71.
8. Dividends
Dividends
are distributions of Portfolio returns to shareholders. These are
determined by the Directors and paid four times a
year.
Dividends
paid for each applicable share class, which represent distributions
for the purpose of s1159 of the Corporation Tax Act 2010,
follows:
|
|
2024
|
2023
|
|
|
Number
|
Dividend
|
Total
|
Number
|
Dividend
|
Total
|
|
|
of
shares
|
rate
(pence)
|
£’000
|
of
shares
|
rate
(pence)
|
£’000
|
|
Global
Equity Income
|
|
|
|
|
|
|
|
First
interim
|
25,135,742
|
1.60
|
402
|
24,860,784
|
1.55
|
385
|
|
Second
interim
|
25,127,260
|
1.60
|
402
|
24,851,044
|
1.55
|
385
|
|
Third
interim
|
25,546,911
|
1.60
|
409
|
24,927,486
|
1.55
|
386
|
|
Fourth
interim
|
25,546,911
|
2.55
|
651
|
24,890,617
|
2.55
|
635
|
|
|
|
7.35
|
1,864
|
|
7.20
|
1,791
|
|
UK
Equity
|
|
|
|
|
|
|
|
First
interim
|
68,881,153
|
1.60
|
1,102
|
73,085,657
|
1.50
|
1,096
|
|
Second
interim
|
67,701,484
|
1.60
|
1,083
|
71,478,782
|
1.50
|
1,072
|
|
Third
interim
|
66,641,813
|
1.60
|
1,067
|
69,800,692
|
1.50
|
1,047
|
|
Fourth
interim
|
56,585,022
|
2.55
|
1,443
|
69,244,026
|
2.55
|
1,766
|
|
|
|
7.35
|
4,695
|
|
7.05
|
4,981
|
|
Balanced
Risk Allocation
|
|
|
|
|
|
|
|
First
interim
|
4,138,995
|
1.00
|
41
|
4,138,995
|
1.00
|
41
|
|
Special
|
4,138,995
|
2.00
|
83
|
–
|
–
|
–
|
|
|
|
3.00
|
124
|
|
1.00
|
41
|
|
Managed
Liquidity
|
|
|
|
|
|
|
|
First
interim
|
1,251,360
|
1.00
|
13
|
1,238,254
|
1.00
|
12
|
|
|
|
1.00
|
13
|
|
1.00
|
12
|
|
Total paid
in the year
|
|
|
6,696
|
|
|
6,825
|
The
Company’s dividend policy permits the payment of dividends from
capital. An analysis of dividends paid in the year from revenue and
capital follows.
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2024
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Dividends
paid in the year:
|
|
|
|
|
|
|
From
revenue – current year
|
1,267
|
4,695
|
124
|
13
|
6,099
|
|
From
revenue
|
1,267
|
4,695
|
124
|
13
|
6,099
|
|
From
capital
|
597
|
–
|
–
|
–
|
597
|
|
|
1,864
|
4,695
|
124
|
13
|
6,696
|
|
|
Global
|
|
Balanced
|
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Company
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Total
|
|
2023
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Dividends
paid in the year:
|
|
|
|
|
|
|
From
revenue – current year
|
1,299
|
4,541
|
41
|
12
|
5,893
|
|
From
revenue
|
1,299
|
4,541
|
41
|
12
|
5,893
|
|
From
capital
|
492
|
440
|
–
|
–
|
932
|
|
|
1,791
|
4,981
|
41
|
12
|
6,825
|
9. Investments
held at fair value
The
Portfolio is made up of investments which are listed, i.e. traded
on a regulated stock exchange, and a small proportion of
investments which are valued by the Directors as they are unlisted
or not regularly traded. Gains and losses are
either:
• realised,
usually arising when investments are sold; or
• unrealised,
being the difference from cost on the investments held at the year
end.
(a) Analysis
of investments by listing status
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
UK listed
investments
|
40,398
|
141,292
|
|
Overseas
listed investments(i)
|
155,426
|
66,092
|
|
Unquoted
hedge fund investments
|
–
|
5
|
|
|
195,824
|
207,389
|
(i)
Includes the Invesco Liquidity Funds plc - Sterling, money market
fund positions held by the Balanced Risk Allocation Portfolio of
£nil (2023: £3,107,000) and Managed Liquidity Portfolio of £nil
(2023: £130,000).
(b) Analysis
of investment gains
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Opening
valuation
|
207,389
|
233,758
|
|
Movements
in year:
|
|
|
|
Purchases
at cost
|
178,530
|
50,648
|
|
Sales
proceeds
|
(213,729)
|
(73,142)
|
|
Gains/(losses)
on investments in the year
|
23,634
|
(3,875)
|
|
Closing
valuation
|
195,824
|
207,389
|
|
Closing
book cost
|
179,567
|
194,009
|
|
Closing
investment holding gains
|
16,257
|
13,380
|
|
Closing
valuation
|
195,824
|
207,389
|
The Company
received £213,729,000 (2023: £73,142,000) from investments sold in
the year. The book cost of these investments when they were
purchased was £192,972,000 (2023: £71,730,000) realising a profit
of £20,757,000 (2023: profit £1,412,000). These investments have
been revalued over time and until they were sold any unrealised
profits/losses were included in the fair value of the
investments.
(c) Transaction
costs
Transaction
costs were £236,000 (2023: £84,000) on purchases and £103,000
(2023: £36,000) on sales.
10. Derivative
instruments
Derivative
instruments are contracts whose price is derived from the value of
other securities or indices. The Balanced Risk Allocation Portfolio
used futures, which represented agreements to buy or sell
commodities or financial instruments at a pre-determined price in
the future.
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Opening
derivative assets held at fair value through profit or
loss
|
125
|
362
|
|
Opening
derivative liabilities held at fair value through profit or
loss
|
(186)
|
(225)
|
|
Opening net
derivative (liabilities)/assets held at fair value as shown in
balance sheet
|
(61)
|
137
|
|
Closing
derivative assets held at fair value through profit or
loss
|
–
|
125
|
|
Closing
derivative liabilities held at fair value through profit or
loss
|
–
|
(186)
|
|
Closing net
derivative liabilities held at fair value shown in balance
sheet
|
–
|
(61)
|
|
Movement in
derivative holding liabilities
|
61
|
(198)
|
|
Net
realised gains/(losses) on derivative instruments
|
200
|
(765)
|
|
Net capital
gains/(losses) on derivative instruments as shown in the income
statement
|
261
|
(963)
|
|
Net
(expense)/income arising on derivatives
|
(10)
|
27
|
|
Total
gains/(losses) on derivative instruments
|
251
|
(936)
|
The
derivative assets/(liabilities) shown in the balance sheet for the
year to 31 May 2023 are the
unrealised gains/(losses) arising from the revaluation to fair
value of futures contracts held in the Balanced Risk Allocation
Share Portfolio. Following the Company restructure in May 2024 there are no derivative positions
held.
11. Debtors
Debtors
are amounts due to the Company, such as monies due from brokers for
investments sold and income which has been earned (accrued) but not
yet received.
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Amounts due
from brokers
|
1,047
|
–
|
|
Collateral
pledged for futures contracts
|
–
|
443
|
|
Tax
recoverable
|
256
|
217
|
|
Prepayments
and accrued income
|
336
|
886
|
|
|
1,639
|
1,546
|
12. Other
creditors
Creditors
are amounts owed by the Company and include amounts due to brokers
for the purchase of investments and amounts owed to suppliers, such
as the Manager and auditor.
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Tax
payable
|
137
|
137
|
|
Amounts due
to brokers
|
1,194
|
–
|
|
Margin due
to brokers
|
–
|
9
|
|
Accruals
|
436
|
433
|
|
|
1,767
|
579
|
Interest
payable on the bank facility is included within the amounts
outstanding on the bank facility as shown on the balance
sheet.
13. Bank
facility and overdraft
At the year
end the Company had a £40 million (2023: £40 million) committed 364
day multicurrency revolving credit facility, which is due for
renewal on 23 April 2025 (2023:
24 April 2024). In addition, an
overdraft facility for the purpose of short term settlement is also
available however, this was unutilised at year end (2023:
unutilised). Both facilities are with The Bank of New York Mellon.
The interest payable on the credit facility is based on the
Adjusted Reference Rate (principally SONIA, SOFR and €STR
respectively in respect of loans drawn in GBP, USD and Euro) plus a
margin for amounts drawn.
Under the
bank facility’s covenants, the Company’s total indebtedness must
not exceed 30% of total assets and the total assets must not be
less than £100 million (2023: £120 million). The Company was in
compliance with the covenants throughout the year and at year
end.
At the year
end, the interest payable on the bank facility was £nil (2023:
£nil).
14. Share
Capital and Reserves
Share
capital represents the total number of shares in issue, including
treasury shares.
All shares
have a nominal value of 1
pence.
(a) Movements
in Share Capital during the Year
Issued and
fully paid:
|
|
Global
|
|
Balanced
|
|
Total
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Share
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Capital
|
|
Ordinary
Shares (number)
|
|
|
|
|
|
|
At 31 May
2023
|
25,135,742
|
68,881,153
|
4,138,995
|
1,251,360
|
99,407,250
|
|
Shares
bought back into treasury
|
(153,963)
|
(1,510,343)
|
–
|
–
|
(1,664,306)
|
|
Arising on
share conversion:
|
|
|
|
|
|
|
– August
2023
|
108,847
|
(228,495)
|
78,597
|
2,668
|
(38,383)
|
|
– November
2023
|
456,285
|
(571,702)
|
(207,841)
|
63,264
|
(259,994)
|
|
Tender
offer in respect of the share class
|
|
|
|
|
|
|
reclassification
|
–
|
(9,985,591)
|
(714,610)
|
(417,453)
|
(11,117,654)
|
|
Share class
reclassification
|
37,509,553
|
(56,585,022)
|
(3,295,141)
|
(899,839)
|
(23,270,449)
|
|
At 31 May
2024
|
63,056,464
|
–
|
–
|
–
|
63,056,464
|
|
Treasury
Shares (number)
|
|
|
|
|
|
|
At 31 May
2023
|
16,776,159
|
38,515,775
|
6,547,218
|
9,393,678
|
71,232,830
|
|
Shares
bought back into treasury
|
153,963
|
1,510,343
|
–
|
–
|
1,664,306
|
|
Treasury
shares cancelled
|
–
|
(40,026,118)
|
(6,547,218)
|
(9,393,678)
|
(55,967,014)
|
|
At 31 May
2024
|
16,930,122
|
–
|
–
|
–
|
16,930,122
|
|
|
Global
|
|
Balanced
|
|
Total
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
Share
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
Capital
|
|
Ordinary
Shares of 1 penny each (£’000)
|
|
|
|
|
|
|
At 31 May
2023
|
252
|
689
|
41
|
12
|
994
|
|
Shares
bought back into treasury
|
(2)
|
(15)
|
–
|
–
|
(17)
|
|
– August
2023
|
1
|
(2)
|
1
|
–
|
–
|
|
– November
2023
|
5
|
(6)
|
(2)
|
1
|
(2)
|
|
Tender
offer in respect of the share class
|
|
|
|
|
|
|
reclassification
|
–
|
(100)
|
(7)
|
(4)
|
(111)
|
|
Share class
reclassification
|
375
|
(566)
|
(33)
|
(9)
|
(233)
|
|
At 31 May
2024
|
631
|
–
|
–
|
–
|
631
|
|
Treasury
Shares of 1 penny each (£’000)
|
|
|
|
|
|
|
At 31 May
2023
|
167
|
385
|
66
|
95
|
713
|
|
Shares
bought back into treasury
|
2
|
15
|
–
|
–
|
17
|
|
Treasury
shares cancellation
|
–
|
(400)
|
(66)
|
(95)
|
(561)
|
|
At 31 May
2024
|
169
|
–
|
–
|
–
|
169
|
|
Total Share
Capital (£’000)
|
|
|
|
|
|
|
Ordinary
share capital
|
631
|
–
|
–
|
–
|
631
|
|
Treasury
share capital
|
169
|
–
|
–
|
–
|
169
|
|
At 31 May
2024
|
800
|
–
|
–
|
–
|
800
|
|
Average buy
back price
|
233.78p
|
161.79p
|
158.52p
|
114.55p
|
|
The total
cost of share buybacks was £2,702,000 (2023: £8,187,000. As part of
the conversion process 454,200 (2023: 457,700) deferred shares of
1p each were created and subsequently cancelled during the year. No
deferred shares were in issue at the start or end of the
year.
No ordinary
shares were issued from treasury during the year (2023:
nil).
(b) Movements
in Share Capital after the Year End
Since the
year end the Company has bought back 57,000 Global Equity Income
Shares to be held in treasury. As at the date of this report the
Company has 62,999,464 Global Equity Income Shares in issue and
holds 16,987,122 Global Equity Income Shares in
treasury.
(c) Voting
Rights
Rights
attaching to the shares are described in the Directors’ Report on
page 52.
(d) Deferred
Shares
The
Deferred shares do not carry any rights to participate in the
Company’s profits, do not entitle the holder to any repayment of
capital on a return of assets (except for the sum of 1p) and do not
carry any right to receive notice of or attend or vote at any
general meeting of the Company. Any Deferred shares that arise as a
result of conversions of shares are cancelled in the same reporting
period.
(e) Future
Convertibility of the Shares
Following
the restructure of the Company in May 2024 there are only Global
Equity Income Shares in existence and therefore all share class
conversions have ceased.
15. Reserves
This
note explains the different reserves attributable to shareholders.
The aggregate of the reserves and share capital (see previous note)
make up total shareholders’ funds.
The share
premium comprises the net proceeds received by the Company
following the issue of new shares, after deduction of the nominal
amount of 1 penny and any applicable costs.
The special
reserve arose from the cancellation of the share premium account,
in January 2007, and is available as distributable profits to be
used for all purposes under the Companies Act 2006, including buy
back of shares and payment of dividends.
The capital
redemption reserve arises from the nominal value of shares bought
back and cancelled; this and the share premium are
non-distributable.
Capital
investment gains and losses are shown in note 9(b), and form part
of the capital reserve. The revenue reserve shows the net revenue
retained after payments of any dividends. The capital and revenue
reserves are distributable.
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.
16. Net
Asset Value per Share
The
Company’s total net assets (total assets less total liabilities)
are often termed shareholders’ funds and are converted into net
asset value per ordinary share by dividing by the number of shares
in issue as at the reporting date.
The net
asset value per Share and the net assets attributable at the year
end were as follows:
|
Ordinary
Shares
|
2024
|
2023
|
|
|
Net
Asset
|
|
Net
Asset
|
|
|
|
Value
Per
|
Net
Assets
|
Value
Per
|
Net
Assets
|
|
|
Share
|
Attributable
|
Share
|
Attributable
|
|
|
Pence
|
£’000
|
Pence
|
£’000
|
|
Company
total(1)
|
313.30
|
197,555
|
–
|
199,739
|
(1) No
prior year net asset value per ordinary share is stated as the
Company comprised of four individual portfolios until the Company
restructure on 7 May 2024, with each portfolio having a separate
net asset value per ordinary share.
Net asset
value per share is based on net assets at the year end and on the
number of shares in issue (excluding Treasury Shares) at the year
end.
17. Financial
Instruments
This
note summarises the risks deriving from the financial instruments
that comprise the Company’s assets and liabilities.
At 31 May
2024 the Company’s financial instruments comprise the
following:
• investments
in equities and liquidity funds which are held in accordance with
the Company’s investment objectives; and
• short-term
debtors, creditors and cash arising directly from
operations.
The
financial instruments held by the Company are shown on pages 19 and
20.
The
accounting policies in note 1 include criteria for the recognition
and the basis of measurement applied for these financial
instruments. Note 1 also includes the basis on which income and
expenses arising from financial assets and liabilities are
recognised and measured.
The
Company’s principal risks and uncertainties are outlined in the
Strategic Report on pages 39
to 41. This note expands on risk areas in relation to the Company’s
financial instruments. The Portfolio is managed in accordance with
the Company’s investment policies and objectives, which are set out
on page 36. The management process is subject to risk controls,
which the Audit Committee reviews on behalf of the Board, as
described on page 57.
The
principal risks that an investment company faces in its portfolio
management activities are set out below:
Market risk – arising
from fluctuations in the fair value or future cash flows of a
financial instrument because of changes in market prices. Market
risk comprises three types of risk: currency risk, interest rate
risk and other price risk:
Currency risk – arising
from fluctuations in the fair value or future cash flows of a
financial instrument because of changes in foreign exchange
rates;
Interest rate risk – arising
from fluctuations in the fair value or future cash flows of a
financial instrument because of changes in market interest rates;
and
Other price risk – arising
from fluctuations in the fair value or future cash flows of a
financial instrument for reasons other than changes in foreign
exchange rates or market interest rates, whether those changes are
caused by factors specific to the individual financial instrument
or its issuer, or factors affecting all similar financial
instruments traded in the market.
Liquidity risk – arising
from any difficulty in meeting obligations associated with
financial liabilities.
Credit risk incorporating counterparty
risk – arising
from financial loss for a company where the other party to a
financial instrument fails to discharge an obligation.
Risk
Management Policies and Procedures
As an
investment trust the Company invests in equities and other
investments for the long-term in accordance with its investment
policies so as to meet its investment objectives. In pursuing its
objectives, the Company is exposed to a variety of risks that could
result in a reduction in the Company’s net assets or a reduction of
the profits available for dividends. The risks applicable to the
Company and the Directors’ policies for managing these risks
follow. These have not changed from those applying in the previous
year.
The
Directors have delegated to the Manager the responsibility for the
day-to-day investment activities of the Company as more fully
described in the Directors’ Report.
The main
risk that the Company faces arising from its financial instruments
is market risk – this risk is reviewed in detail below. Since the
Company mainly invests in quoted investments, liquidity risk and
credit risk are significantly mitigated.
17.1
Market
Risk
Market risk
arises from changes in the fair value of future cash flows of a
financial instrument because of movements in market prices. Market
risk comprises three types of risk: currency risk (17.1.1),
interest rate risk (17.1.2) and other price risk
(17.1.3).
The
Company’s Portfolio Managers assess the Company’s exposure when
making each investment decision, and monitors the overall level of
market risk on the whole of the investment portfolio on an ongoing
basis. The Board meets at least quarterly to assess risk and review
investment performance. Borrowings can be used, which will increase
the Company’s exposure to market risk and volatility. The borrowing
limit is 30% of attributable total assets.
17.1.1 Currency
Risk
The
majority of the Company consists of assets, liabilities and income
denominated in currencies other than sterling. As a result,
movements in exchange rates will affect the sterling value of
those items.
Management
of the currency risk
The
Portfolio Managers monitor the Company’s exposure to foreign
currencies on a daily basis and report to the Board on a regular
basis. Forward foreign currency contracts can be used to limit the
Company’s exposure to anticipated future changes in exchange rates
and to achieve portfolio characteristics that assist the Company in
meeting its investment objectives in line with its investment
policies. All contracts are limited to currencies and amounts
commensurate with the exposure to those currencies. No such
contracts were in place at the current or preceding year end.
Income denominated in foreign currencies is converted to sterling
on receipt. The Company does not use financial instruments to
mitigate the currency exposure in the period between the time that
income is accrued and its receipt.
Foreign
Currency Exposure
The fair
values of the Company’s monetary items that have currency exposure
at 31 May are shown below. Where the Company’s investments (which
are not monetary items) are priced in a foreign currency they have
been included separately in the analysis so as to show the overall
level of exposure.
Global
Equity Income:
Year ended
31 May 2024
|
|
Derivative
assets
held
at
fair
value
through
profit
or
loss
|
|
|
Derivative
liabilities
held
at
fair
value
through
profit
or
loss
|
|
|
Investments
at
fair value
through
profit
or
loss
that
are
equities
|
|
|
|
|
|
|
Foreign
currency
exposure
on
net
monetary
items
|
|
|
|
|
|
Creditors
(due
to
brokers
and
accruals)
|
|
|
|
Debtors
|
|
|
|
|
(due
from
|
Cash
and
cash
equivalents
|
Total
net
foreign
currency
|
|
|
brokers
&
|
|
|
dividends)
|
|
Currency
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Australian
dollar
|
–
|
–
|
4
|
–
|
–
|
4
|
–
|
4
|
|
Canadian
dollar
|
–
|
–
|
5
|
–
|
–
|
5
|
2,671
|
2,676
|
|
Danish
krone
|
–
|
23
|
–
|
–
|
(8)
|
15
|
4,804
|
4,819
|
|
Euro
|
–
|
120
|
72
|
–
|
(161)
|
31
|
37,488
|
37,519
|
|
Hong Kong
dollar
|
–
|
121
|
–
|
–
|
–
|
121
|
6,115
|
6,236
|
|
Japanese
yen
|
–
|
–
|
5
|
–
|
–
|
5
|
–
|
5
|
|
Norwegian
krone
|
–
|
17
|
–
|
–
|
–
|
17
|
4,815
|
4,832
|
|
South
Korean won
|
–
|
–
|
–
|
–
|
–
|
-
|
1,791
|
1,791
|
|
Swiss
franc
|
–
|
159
|
–
|
–
|
–
|
159
|
4,375
|
4,534
|
|
Taiwan
dollar
|
–
|
1
|
–
|
–
|
–
|
1
|
1,890
|
1,891
|
|
US
dollar
|
–
|
1,121
|
1
|
–
|
(753)
|
369
|
97,332
|
97,701
|
|
|
–
|
1,562
|
87
|
–
|
(922)
|
727
|
161,281
|
162,008
|
|
Year ended
31 May 2023
|
|
|
|
|
|
|
|
|
|
Australian
dollar
|
–
|
91
|
–
|
(25)
|
–
|
66
|
–
|
66
|
|
Canadian
dollar
|
–
|
20
|
4
|
(1)
|
–
|
23
|
906
|
929
|
|
Danish
krone
|
–
|
7
|
–
|
–
|
–
|
7
|
2,107
|
2,114
|
|
Euro
|
38
|
107
|
24
|
–
|
–
|
169
|
10,266
|
10,435
|
|
Hong Kong
dollar
|
–
|
49
|
–
|
–
|
–
|
49
|
5,089
|
5,138
|
|
Japanese
yen
|
49
|
–
|
7
|
–
|
(9)
|
47
|
1,582
|
1,629
|
|
New
Zealand
|
–
|
–
|
–
|
–
|
–
|
–
|
155
|
155
|
|
Norwegian
krone
|
–
|
16
|
–
|
–
|
–
|
16
|
1,800
|
1,816
|
|
South
Korean won
|
–
|
–
|
–
|
–
|
–
|
–
|
2,374
|
2,374
|
|
Swedish
Krona
|
–
|
3
|
–
|
–
|
–
|
3
|
–
|
3
|
|
Swiss
franc
|
–
|
114
|
9
|
–
|
–
|
123
|
2,777
|
2,900
|
|
Taiwan
dollar
|
–
|
–
|
–
|
–
|
–
|
–
|
1,231
|
1,231
|
|
US
dollar
|
35
|
538
|
19
|
(144)
|
–
|
448
|
34,348
|
34,796
|
|
|
122
|
945
|
63
|
(170)
|
(9)
|
951
|
62,635
|
63,586
|
Foreign
Currency sensitivity
The
preceding exposure analysis is based on the Company’s monetary
foreign currency financial instruments held at each balance sheet
date and takes account of forward foreign exchange contracts, if
used, that offset the effects of changes in currency exchange
rates.
The effect
of strengthening or weakening of sterling against other currencies
to which the Company is exposed is calculated by reference to the
volatility of exchange rates during the year using the standard
deviation of currency fluctuations against the mean, giving the
following exchange rate fluctuations:
|
|
2024
|
2023
|
|
£/Australian
Dollar
|
+/–1.3%
|
+/–3.1%
|
|
£/Canadian
Dollar
|
+/–1.2%
|
+/–3.7%
|
|
£/Danish
Krone
|
+/–0.7%
|
+/–1.6%
|
|
£/Euro
|
+/–0.7%
|
+/–1.6%
|
|
£/Hong Kong
Dollar
|
+/–1.6%
|
+/–3.3%
|
|
£/Japanese
Yen
|
+/–2.9%
|
+/–2.3%
|
|
£/New
Zealand Dollar
|
n/a
|
+/–2.0%
|
|
£/Norwegian
Krone
|
+/–1.7%
|
+/–4.7%
|
|
£/South
Korean Won
|
+/–1.9%
|
+/–2.6%
|
|
£/Swedish
Krona
|
+/–2.1%
|
+/–1.9%
|
|
£/Swiss
Franc
|
+/–1.8%
|
+/–2.3%
|
|
£/Taiwan
Dollar
|
+/–1.5%
|
+/–2.5%
|
|
£/US
Dollar
|
+/–1.6%
|
+/–3.4%
|
The tables
that follow illustrate the exchange rate sensitivity of revenue and
capital returns arising from the Company’s financial non-sterling
assets and liabilities for the year using the exchange rate
fluctuations shown above.
If
sterling had strengthened against other currencies by the exchange
rate fluctuations shown in the table above, this would have had the
following after tax effect:
|
|
2024
|
2023
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
return
|
return
|
return
|
return
|
return
|
return
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Australian
Dollar
|
–
|
–
|
–
|
–
|
(2)
|
(2)
|
|
Canadian
Dollar
|
–
|
(32)
|
(32)
|
–
|
(35)
|
(35)
|
|
Danish
Krone
|
–
|
(34)
|
(34)
|
(1)
|
(35)
|
(36)
|
|
Euro
|
(6)
|
(262)
|
(268)
|
(10)
|
(164)
|
(174)
|
|
Hong Kong
Dollar
|
(3)
|
(98)
|
(101)
|
(6)
|
(168)
|
(174)
|
|
Japanese
Yen
|
–
|
–
|
–
|
–
|
(37)
|
(37)
|
|
New Zealand
Dollar
|
–
|
–
|
–
|
–
|
(3)
|
(3)
|
|
Norwegian
Krone
|
(4)
|
(82)
|
(86)
|
(5)
|
(85)
|
(90)
|
|
Swedish
Krona
|
–
|
–
|
–
|
–
|
–
|
–
|
|
South
Korean Won
|
(1)
|
(34)
|
(35)
|
(1)
|
(62)
|
(63)
|
|
Swiss
Franc
|
(3)
|
(79)
|
(82)
|
(3)
|
(64)
|
(67)
|
|
Taiwan
Dollar
|
–
|
(28)
|
(28)
|
(1)
|
(31)
|
(32)
|
|
US
Dollar
|
(12)
|
(1,562)
|
(1,574)
|
(61)
|
(1,174)
|
(1,235)
|
|
Total
return
|
(29)
|
(2,211)
|
(2,240)
|
(88)
|
(1,860)
|
(1,948)
|
|
Net
assets
|
(29)
|
(2,211)
|
(2,240)
|
(88)
|
(1,860)
|
(1,948)
|
If sterling
had weakened by the same amounts, the effect would have been the
converse.
17.1.2 Interest
Rate Risk
Interest
rate movements may affect:
• the
fair value of the investments in fixed interest rate
securities;
• the
level of income receivable on cash deposits; and
• the
interest payable on variable rate borrowings.
Management
of interest rate risk
The
possible effects on fair value and cash flows that could arise as a
result of changes in interest rates are taken into account as part
of the portfolio management and borrowings processes of the
Portfolio Managers. The Board reviews on a regular basis the
investment portfolio and borrowings. This encompasses the valuation
of fixed-interest and floating rate securities and gearing
levels.
When the
Company has cash balances, they are held in variable rate bank
accounts yielding rates of interest dependent on the base rate of
the custodian or deposit taker. The Company has a £40 million
(2023: £40 million), 364 day multicurrency revolving credit
facility which is due for renewal on 23 April 2025. The Company
uses the facility when required at levels approved and monitored by
the Board.
Interest
rate exposure
The Company
also has available an uncommitted overdraft facility for settlement
purposes and interest is dependent on the base rate determined by
the custodian.
At 31 May
the exposure of financial assets and financial liabilities to
interest rate risk is shown by reference to:
• floating
interest rates (giving cash flow interest rate risk) – when the
interest rate is due to be reset; and
• fixed
interest rates (giving fair value interest rate risk) – when the
financial instrument is due for repayment.
The
following table sets out the financial assets and financial
liabilities exposure at the year end:
|
|
Company
|
|
|
Total
|
|
2024
|
£’000
|
|
Exposure to
floating interest rates:
|
|
|
Cash and
short term deposits
|
1,859
|
|
Net
exposure to interest rates
|
1,859
|
|
|
Company
|
|
|
Total
|
|
2023
|
£’000
|
|
Exposure to
floating interest rates:
|
|
|
Investments
held at fair value through profit
|
|
|
or
loss(1)
|
3,237
|
|
Cash and
short term deposits
|
1,094
|
|
Bank
Loans
|
(9,650)
|
|
|
(5,319)
|
|
Exposure to
fixed interest rates:
|
|
|
Investments
held at fair value through profit
|
|
|
or
loss including UK Treasury Bills
|
2,430
|
|
Net
exposure to interest rates
|
(2,889)
|
(1) Comprises
holdings in the Invesco Liquidity Funds plc – Sterling.
Interest
rate sensitivity
At the
maximum possible borrowing level of £40 million (2023: £40
million), the maximum effect over one year of a 3.5%
movement in interest rates would be a £1,400,000 (2023: maximum
effect over one year of a 5% movement: £2,000,000) movement in the
Company’s income and net assets.
The effect
of a 3.5% movement in the interest rates on investments held at
fair value through profit and loss would result in a £nil (2023: 5%
movement: £38,000) maximum movement in the Company’s income
statement and net assets.
The above
exposure and sensitivity analysis are not representative of the
year as a whole, since the level of exposure changes frequently
throughout the year.
Other price
risks (i.e. changes in market prices other than those arising from
interest rate risk or currency risk) may affect the value of the
equity investments, but it is the role of the Portfolio Managers to
manage the Portfolio to achieve the best return.
17.1.3 Other
Price Risk
Management
of other price risk
The
Directors monitor the market price risks inherent in the investment
portfolio by meeting regularly to review performance.
The
Company’s investment portfolio is the product of the Manager’s
investment processes and the application of the Portfolio
investment policy. The value will move according to the performance
of the shares held within the Portfolio. However, the Portfolio
does not replicate its benchmark or the markets in which it is
invested, so the performance may not correlate.
Notwithstanding
the issue of correlation, if the fixed asset value of an investment
portfolio moved by 10% at the balance sheet date, the profit after
tax and net assets for the year would increase/decrease by the
following amounts:
|
|
Global
|
|
Balanced
|
|
|
|
Equity
|
UK
|
Risk
|
Managed
|
|
|
Income
|
Equity
|
Allocation
|
Liquidity
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
|
2024
|
|
|
|
|
|
Profit
after tax increase/decrease due to rise/fall of 10%
|
19,582
|
–
|
–
|
–
|
|
2023
|
|
|
|
|
|
Profit
after tax increase/decrease due to rise/fall of 10%
|
6,603
|
13,435
|
554
|
148
|
17.2 Liquidity
Risk
Management of liquidity risk
Liquidity
risk is mitigated by the investments held by the Company’s
portfolio being diversified and the majority being readily
realisable securities which can be sold to meet funding
commitments. If required, the Company’s borrowing facilities
provide additional long-term and short-term flexibility.
The
Directors’ policy is that in normal market conditions short-term
borrowings be used to manage short term liabilities and working
capital requirements rather than realising investments.
Liquidity risk
The
contractual maturities of financial liabilities at the year end,
based on the earliest date on which payment can be required, are as
follows:
|
|
3
months
|
More
than
|
|
|
or
less
|
3
months
|
|
2024
|
£’000
|
£’000
|
|
Amount due
to brokers
|
1,194
|
–
|
|
Other
creditors and accruals
|
573
|
–
|
|
|
1,767
|
–
|
|
|
3
months
|
More
than
|
|
|
or
less
|
3
months
|
|
2023
|
£’000
|
£’000
|
|
Bank
facility(1)
|
9,650
|
–
|
|
Amount due
to brokers
|
9
|
–
|
|
Other
creditors and accruals
|
433
|
–
|
|
Derivative
financial instruments
|
136
|
50
|
|
|
10,228
|
50
|
(1) Interest
due on the bank facility at the year end was £nil (2023:
£nil).
17.3 Credit
Risk
Credit risk
is that the failure of the counterparty in a transaction to
discharge its obligations under that transaction could result in
the Company suffering a loss.
This risk
is managed as follows:
• investment
transactions are carried out with a selection of brokers, approved
by the Manager and settled on a delivery versus payment basis.
Brokers’ credit ratings are regularly reviewed by the Manager, so
as to minimise the risk of default to the Company;
• the
risk of counterparty exposure due to failed trades causing a loss
to the Company is mitigated by the daily review of failed trade
reports and the use of daily stock and cash reconciliations. Only
approved counterparties are used;
• the
Company’s ability to operate in the short-term may be adversely
affected if the Company’s Manager, other outsource service
providers, or their delegates suffer insolvency or other financial
difficulties. The Board reviews annual controls reports from major
service providers; and
• cash
balances are limited to a maximum of 4% of NAV, across all deposit
takers. Only deposit takers approved by the Manager are
used.
The
following table sets out the maximum credit risk exposure at the
year end:
|
|
Company
|
|
|
Total
|
|
2024
|
£’000
|
|
Cash and
short-term deposits
|
1,859
|
|
|
1,859
|
|
|
Company
|
|
|
Total
|
|
2023
|
£’000
|
|
Bonds (UK
Treasury bills)
|
2,430
|
|
Cash held
as short-term investment(1)
|
3,237
|
|
Unquoted
securities
|
5
|
|
Derivative
financial instruments
|
(61)
|
|
Debtors(2)
|
464
|
|
Cash and
short-term deposits
|
1,094
|
|
|
7,169
|
(1) Invesco
Liquidity Funds plc, money market fund.
(2) Cash
collateral pledged for futures contracts of £nil is included in
debtors (2023: £443,000) and excludes tax recoverable and
prepayments and accrued income.
18. Fair
Values of Financial Assets and Financial
Liabilities
‘Fair
value’ in accounting terms is the amount at which an asset can be
bought or sold in a transaction
between willing parties, i.e. a market-based, independent measure
of value. This note sets out the fair value hierarchy comprising
three ‘levels’ and the aggregate amount of investments in each
level.
The
financial assets and financial liabilities are either carried in
the balance sheet at their fair value (investments and derivative
instruments), or the balance sheet amount is a reasonable
approximation of fair value.
FRS 102 as
amended for fair value hierarchy disclosures sets out three fair
value levels. These are:
Level
1 – fair
value based on quoted prices in active markets for identical
assets.
Level
2 – fair
values based on valuation techniques using observable inputs other
than quoted prices within level 1.
Level
3 – fair
values based on valuation techniques using inputs that are not
based on observable market data.
Categorisation
within the hierarchy is determined on the basis of the lowest level
input that is significant to the fair value measurement of each
relevant asset/liability.
The
valuation techniques used by the Company are explained in the
accounting policies note. The majority of the Company’s investments
are quoted equity investments and Treasury bills which are deemed
to be Level 1. Level 2 comprises all other quoted fixed income
investments, derivative instruments and liquidity funds held in the
Balanced Risk Allocation and Managed Liquidity Portfolios. Level 3
investments comprise any unquoted securities and the remaining
hedge fund investments of the Balanced Risk Allocation
Portfolio.
|
|
Company
|
|
|
Total
|
|
2024
|
£’000
|
|
Financial
assets designated at fair value through profit
|
|
|
or
loss:
|
|
|
Level
1
|
195,824
|
|
Level
2
|
–
|
|
Level
3
|
–
|
|
Total for
financial assets
|
195,824
|
|
|
Company
|
|
|
Total
|
|
2023
|
£’000
|
|
Financial
assets designated at fair value through profit
|
|
|
or
loss:
|
|
|
Level
1
|
204,147
|
|
Level
2(1)
|
3,362
|
|
Level
3
|
5
|
|
Total for
financial assets
|
207,514
|
|
Financial
liabilities:
|
|
|
Level
2(1)
–
derivatives liabilities held at fair value
|
186
|
(1) Level
2 comprises Invesco Liquidity Funds plc – Sterling of £3,237,000
and unrealised profit on derivative assets of £125,000. These
financial assets have been classed as Level 2 due to their nature
as non-equity investments with underlying holdings using evaluated
prices from a third party pricing vendor.
19. Capital
Management
This
note is designed to set out the Company’s objectives, policies and
processes for managing its capital. The capital is funded from
monies invested in the Company by shareholders (both initial
investment and any retained amounts) and any borrowings by the
Company.
The
Company’s total capital employed at 31 May 2024 was £197,555,000
(2023: £209,389,000) comprising borrowings of £nil (2023:
£9,650,000) and equity share capital and other reserves of
£197,555,000 (2023: £199,739,000).
The
Company’s total capital employed is managed to achieve the
Company’s investment objective and policy as set out on
page 36,
including that borrowings may be used to raise equity exposure up
to a maximum of 20% of net assets. At the balance sheet date,
maximum gross gearing was nil% (2023: 4.8%). The Company’s policies
and processes for managing capital are unchanged from the preceding
year.
The main
risks to the Company’s investments are shown in the Directors’
Report under the ‘Principal Risks and Uncertainties’ section on
pages 39 to 41. These also explain that the Company has borrowing
facilities which can be used in accordance with each Portfolio’s
investment objectivity and policy and that this will amplify the
effect on equity of changes in the value of each applicable
portfolio.
The Board
can also manage the capital structure directly since it has taken
the powers, which it is seeking to renew, to issue and buy back
shares and it also determines dividend payments.
The Company
is subject to externally imposed capital requirements with respect
to the obligation and ability to pay dividends by Corporation Tax
Act 2010 and by the Companies Act 2006, respectively, and with
respect to the availability of the overdraft facility, by the terms
imposed by the lender. The Board regularly monitors, and has
complied with, the externally imposed capital requirements. This is
unchanged from the prior year.
Borrowings
can comprise any drawings on the credit and/or overdraft
facilities, details of which are given in note 13.
20. Contingencies,
guarantees and financial commitments
Any
liabilities the Company is committed to honour but which are
dependent on a future circumstance or event occurring would be
disclosed in this note if any existed.
There were
no contingencies, guarantees or financial commitments of the
Company at the year end (2023: £nil).
21. Analysis
of changes in net debt
This
note summarises the changes in net debt from the start of the year
to the end of the year.
|
|
At
|
|
At
|
|
|
1
June
|
Cash
|
31
May
|
|
|
2023
|
Flows
|
2024
|
|
|
£’000
|
£’000
|
£’000
|
|
Cash and
cash equivalents
|
1,094
|
765
|
1,859
|
|
Bank
facility
|
(9,650)
|
9,650
|
–
|
|
Total
|
(8,556)
|
10,415
|
1,859
|
22. Related
party transactions and transactions with the
Manager
A
related party is a company or individual who has direct or indirect
control or who has significant influence over the Company. Under
accounting standards, the Manager is not a related
party.
Under UK
GAAP, the Company has identified the Directors as related parties.
The Directors’ remuneration and interests have been disclosed on
pages 59 and 60 with additional disclosure in note 4. No other
related parties have been identified.
Details of
the Manager’s services and fees are disclosed in the Director’s
Report on pages 51 and 52 and note 3.
23. Post
Balance Sheet Events
Any
significant events that occurred after the Company’s financial year
end but before the signing of the balance sheet will be shown
here.
There are
no significant events after the end of the reporting period
requiring disclosure.
The figures
and financial information for the year ended 31 May 2024 are
extracted from the Company's annual financial statements for that
year and do not constitute statutory accounts. The Company's annual
financial statements for the year to 31 May 2024 have been audited
but have not yet been delivered to the Registrar of Companies. The
Auditor's report on the 2024 annual financial statements was (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The figures
and financial information for the year ended 31 May 2023 are
compiled from an extract of the published accounts for that year
and do not constitute statutory accounts.
Those
accounts have been delivered to the Registrar of Companies.
The Auditor's report on
the 2023 annual financial statements was (i) unqualified, (ii) did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
The audited
annual financial report will be posted to shareholders during
October 2024, and will be delivered to the Registrar of Companies,
shortly.
Copies may
be obtained during normal business hours from the Company’s
Registered Office, from its correspondence address, 43-45 Portman
Square, London W1H 6LY, and via the Manager’s website
at https://www.invesco.com/uk/en/investment-trusts/invesco-global-equity-income-trust.html.
A copy of
the annual financial report will be submitted
shortly to the National Storage Mechanism ("NSM") and will be
available for inspection at the NSM, which is situated
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.