TIDMIPU
LEGAL ENTITY IDENTIFIER: 549300K1D1P23R8U4U50
Invesco Perpetual UK Smaller Companies Investment Trust plc
Annual Financial Report Announcement for the Year Ended 31 January 2023
The following text is extracted from the Annual Financial Report of the Company
for the year ended 31 January 2023. All page numbers below refer to the Annual
Financial Report which will be made available on the Company's website.
Investment Objective
The Company is an investment trust whose investment objective is to achieve
long-term total returns for shareholders primarily by investment in a broad
cross-section of small to medium sized UK quoted companies.
Financial Highlights
Total Return Statistics (with dividends reinvested)
Change for the year (%) 2023 2022
Net asset value(1)(2) -17.5 +18.8
Share price(1)(2) -17.0 +21.9
Benchmark Index(2)(3) -12.4 +11.6
Capital Statistics
At 31 January 2023 2022 Change
Total shareholders' funds (£'000) 174,915 220,753 -20.8%
Net asset value per share ('NAV') 517.09p 652.60p -20.8%
Share price(1)(2) 451.00p 570.00p -20.9%
Discount(1) (12.8)% (12.7)%
Gearing(1):
- gross gearing nil nil
- net gearing nil nil
- net cash 2.9% 0.7%
Maximum authorised gearing 8.6% 6.8%
For the year ended 31 January 2023 2022
Return(1) and dividend per ordinary share:
Revenue return 11.99p 8.30p
Capital return (124.70)p 97.85p
Total return (112.71)p 106.15p
First interim dividend 3.75p 3.75p
Second interim dividend 3.75p 3.75p
Third interim dividend 3.75p 3.75p
Final dividend 6.79p 11.55p
Total dividends 18.04p 22.80p -20.9%
Dividend Yield(1) 4.0% 4.0%
Dividend payable for the year (£'000):
- from current year net revenue 4,055 2,808
- from capital reserve (2022: from capital reserve) 2,047 4,905
6,102 7,713
Capital dividend as a % of year end net assets(1) 1.2% 2.2%
Ongoing charges(1) 0.95% 0.92%
Notes: (1) Alternative Performance Measure (APM). See Glossary of
Terms and Alternative Performance Measures on pages 66 to 68 of the financial
report for details of the explanation and reconciliations of APMs.
(2) Source: Refinitiv.
(3) From 1 February 2022, the Benchmark Index of the
Company changed to the Numis Smaller Companies + AIM (excluding Investment
Companies) Index with dividends reinvested. For the year to 31 January 2022,
the Benchmark Index of the Company was the Numis Smaller Companies (excluding
Investment Companies) Index with dividends reinvested.
Chairman's Statement
Highlights
* Net asset value return of -17.5% and share price return of -17.0%, compared
to benchmark return of -12.4%, all based on total return with dividends
reinvested. The share price is showing signs of recovery from lows
following the mini-Budget in September 2022.
* Dividend of 18.04p per share for the year, providing a yield of 4.0% based
on the year end share price.
Dear Shareholders,
Performance
Against a backdrop of energy supply issues and concerns about inflation, with
both heightened by the continuing hostilities in Ukraine, it is perhaps
unsurprising that for the year ended 31 January 2023 your Company returned
-17.5% in Net Asset Value ('NAV') terms, underperforming its Benchmark Index,
the Numis Smaller Companies + AIM (excluding Investment Companies) Index, which
returned -12.4%, (in each case measured on total return with dividends
reinvested).
The Company's share price total return for the year was -17.0% (with dividends
reinvested).
This weak one year return should not be viewed out of context as in 2022 our
Portfolio Managers delivered strong results in terms of both NAV and share
price total returns and their longer term performance shown in the graph on the
preceding page in the Annual Financial Report, speaks for itself.
As at the latest practicable date prior to the publication of this report,
being 17 April 2023, the discount stands at 12.3% and the Company's share price
has fallen by 3.7%, the NAV has fallen by 4.2% and the Benchmark Index is down
by 3.9% over the period between 1 February and 17 April 2023. This reflects the
ongoing difficult trading environment for many UK listed smaller companies and
investment trusts that invest in them including your Company and many of its
peers.
Discount
During the year the Company's shares traded at a discount to its NAV ranging
between 9.8% to 18.6%. Many other trusts investing in UK smaller companies also
continue to trade at wider discounts than their historic averages. We hope that
shareholders and potential investors recognise the Company has continued to
deliver a yield in excess of the average yield of its UK smaller company
investment trust peers through investment in a broad cross-section of small to
medium sized UK quoted companies.
The Board continues to monitor the level at which the Company's shares trade
and may seek to limit any future volatility through the prudent use of both
share issuance and share buybacks, as the circumstances require.
Dividend and Dividend Policy
The Board has decided that the Company will propose a final dividend of 6.79p
per share to bring the total dividends paid for the year to 18.04p per share
(2022: 22.80p).
The total dividend of 18.04p per share is in line with the Company's stated
dividend policy which includes a target dividend yield of 4.0% of year end
share price which was 451.00p as at 31 January 2023. This represents all of the
available revenue earned by the Company's portfolio over the year, together
with 6.05p per share from realised capital profits.
The Company's revenue per share has increased from 8.30p per share last year to
11.99p per share this year, which means that the resulting balance of dividend
being paid from realised capital profits represents 1.2% of net assets at the
year end and it continues to represent a relatively small proportion of the
longer-term total returns achieved by the Portfolio Managers.
The Company's dividends are paid quarterly in September, December, March and
June. For the year ended 31 January 2023, three interim dividends of 3.75p per
share each have already been paid and the Board has proposed a final dividend
of 6.79p per share, making a total for the year of 18.04p per share. The final
dividend will be payable, subject to shareholder approval, on 13 June 2023 to
shareholders on the register on 12 May 2023 and the shares will go ex-dividend
on 11 May 2023.
Board Composition
As planned, and reported in the Interim Report, I will retire as a Director and
Chairman of the Company at the conclusion of the AGM to be held in June 2023.
Bridget Guerin will be appointed Chairman of the Board and of the Nomination
Committee on my retirement. Mike Prentis will take over as Senior Independent
Director and as Chairman of the Management Engagement Committee.
The Nomination Committee has commenced the search to find a new non-executive
director and will report the results of this process to shareholders in due
course.
Annual General Meeting ('AGM')
This year's meeting will be held in person at Invesco's London office at
12.00pm on Thursday 8 June 2023. As well as the Company's formal business,
there will be a presentation from Jonathan Brown and Robin West, the
opportunity to ask questions of the Portfolio Managers and Directors and to
chat informally with all of us over lunch. Shareholders may bring a guest to
these meetings. The Directors and I look forward to meeting as many of you as
possible. For those unable to attend in person, we will record a special
version of the presentation and post it onto our website after the AGM.
Shareholders wishing to lodge questions in advance of the AGM should do so by
email to the Company Secretary at investmenttrusts@invesco.com or, by letter,
to 43-45 Portman Square, London W1H 6LY.
Concluding Thoughts
As your Portfolio Managers have highlighted in their report on the following
pages, over the past year, equity markets have been adversely affected by the
ongoing conflict in Ukraine, UK politics and more recently, renewed worries
about the global banking system.
In the face of all of the macroeconomic problems and political turmoil, I am
pleased to report that your Portfolio Managers have continued to manage your
portfolio according to their investment philosophy, namely seeking out well
managed, growing businesses with outstanding products or services, with the
prospect of taking market share from competitors and which are also profitable
and cash generative.
Conviction that UK smaller companies continue to provide investment
opportunities with which to deliver long-term total returns for shareholders
remains a constant, regardless of the investment conditions which prevail. This
year it has led Jonathan and Robin to a more 'barbell' portfolio construction
with investments typically categorised as cyclical or defensive to find balance
in the uncertain market conditions in which they have been working. Such
pragmatism has meant that the quality and valuation metrics your Portfolio
Managers seek for the portfolio have not been sacrificed.
The year ahead will doubtless see the portfolio evolve further as conditions
change again, hopefully for the better. While I will not be witnessing those
changes as a director of your Company, I shall look forward to following them
as a shareholder.
Jane Lewis
Chairman
18 April 2023
Portfolio Managers' Report
Q What were the key influences on the market over the year?
A The war in Ukraine and its impact on energy prices was the dominant
feature of the year. Hopes that inflation would be transitory were dashed and
markets began to factor in materially higher interest rates. The shift from the
ultra-low interest rate environment in the decade following the Global
Financial Crisis to a level more in line with historical norms had a dramatic
impact on asset prices. Equities tumbled both in the UK and overseas, and bond
prices fell sharply as traders factored in the rapidly changing outlook. The
sell-off initially focussed on highly rated growth and technology stocks but
broadened into consumer related sectors as the cost-of-living crisis began to
bite.
The situation was further exacerbated by political turmoil in the UK. The
short-lived Liz Truss government unsettled markets with a package of tax
give-aways and spending pledges which led some commentators to question how the
UK could fund itself. A run on Sterling and significantly higher gilt yields
paved the way for further change, with Truss becoming the shortest lived Prime
Minister in UK history. The Sunak government reversed many of the policies of
his predecessor, which prompted the beginning of a market rally, reversing some
of the declines of the previous year.
Q How did the portfolio perform over the period?
A The Net Asset Value total return for the portfolio over the period
was -17.5%, compared with the Benchmark Index, the Numis Smaller Companies +
AIM (excluding Investment Companies) Index, which returned -12.4% on the same
basis. This performance compares to a return of -16.8% for the Investment
Association UK Smaller Companies sector.
Q What factors led to the underperformance versus the benchmark?
A In a difficult year for the market, very few sectors ended the
period in positive territory. However, in the wake of the Russian invasion of
Ukraine, Oil & Gas, Defence and Mining all performed strongly. Whilst we have
some exposure to these areas, it is not always possible to find companies that
meet our quality criteria in these sectors, and therefore we were underweight
relative to the benchmark.
Q Which stocks contributed to and detracted from performance?
A The best performing stocks over the period included: Online
promotional products business, 4imprint (+64%), which is the leading player in
its sector in the US. Management's decision to continue investing in the
business through the pandemic saw it emerge from the downturn with a stronger
market position. The stock benefitted from a series of upgrades to analysts'
earnings expectations. Keywords Studios (+13%), which is a global leader in
providing outsourced services to the computer games industry, continued to grow
strongly, driven by a mixture of above market growth and acquisitions. The
computer games industry, which is now a £220bn per year sector, continues to
grow and is ever more reliant on outsourcers to help manage the creation of new
titles. Oil & Gas business, Energean (+23%), benefitted from improved sentiment
towards the sector as the Ukraine conflict elevated the price of energy. The
business achieved initial production from its substantial gas discovery in the
eastern Mediterranean and also had further drilling success in the region.
Coats (+11%) is a world leading supplier of thread and other components to
global apparel manufacturers. The business benefitted from two acquisitions,
giving it market leadership in the casual footwear segment, and from a recovery
in the sector following the pandemic. Defence business, Ultra Electronics
(+14%), was taken over for an attractive price at the beginning of the period.
It was a difficult period for markets so inevitably there were more poorly
performing holdings than usual:
Hilton Food (-36%) saw its margins squeezed by raw material price increases.
Russian trawlers are a significant source of white fish and sanctions imposed
following the invasion of Ukraine led to a surge in prices. The business was
unable to quickly pass this on to its supermarket customers and saw a shortfall
in profit. We believe the business can navigate through this issue and still
has significant growth potential. We used the decline in the share price to add
to our holding. Media business, Future (-52%), a publisher of online and
magazine content, has historically been an excellent performer in the
portfolio. Although the business continued to trade well, it initially fell
along with many other growth and technology businesses earlier in the year, and
then declined further when its CEO announced she would be retiring at the end
of 2023. We have taken substantial profits from the holding over the last few
years, and although the recent decline is disappointing, we believe the
business could be significantly more valuable in future. Law business, Knights
(-76%), a legal and professional services business, suffered a profit warning
which management attributed to Covid-19 related staff absences. We believe
there is evidence of other issues within the company, so we sold the holding
shortly before your Company's year end. Inspecs (-71%), which manufactures
eyewear, initially retreated due to an accounting irregularity in its small US
subsidiary, and then from a sudden decline in demand from its German customers
following the Russian invasion of Ukraine. The US issue has been resolved and
German demand has rebounded, however, we have reduced the holding and will
continue to closely assess the performance of the business and the new CEO.
Q What is the current portfolio strategy?
A Our investment philosophy remains unchanged. The current portfolio
is comprised of 70-80 stocks with the sector weightings being determined by
where we are finding attractive companies at a given time, rather than by
allocating assets according to a "top down" view of the economy. We continue to
seek growing businesses, which have the potential to be significantly larger in
the medium term. These tend to be companies that either have great products or
services, that can enable them to take market share from their competitors, or
companies that are exposed to higher growth niches within the UK economy or
overseas. We prefer to invest in cash generative businesses that can fund their
own expansion, although we are willing to back strong management teams by
providing additional capital to invest for growth.
The sustainability of returns and profit margins is vital for the long-term
success of a company. The assessment of the position of a business within its
supply chain and a clear understanding of how work is won and priced are key to
determining if a company has "pricing power", which is particularly important
in the current inflationary environment. It is also important to determine
which businesses possess unique capabilities, in the form of intellectual
property, specialist know-how or a scale advantage in their chosen market. We
conduct around 300 company meetings and site visits a year, and these areas are
a particular focus for us on such occasions.
In terms of portfolio construction, we are currently opting for a "barbell"
approach, with a balance of both cyclical (economically sensitive) stocks, and
more defensive businesses that should be more resilient in a downturn. Whilst
cyclical stocks could see weaker trading in event of a recession this year,
this is to some extent factored into profit expectations and valuations, which
in many cases are already "pricing in" an economic downturn. These stocks could
outperform when the market starts to look through the current weakness to the
recovery ahead. Counterbalancing this are more defensive businesses that should
continue to trade resiliently even if the economy struggles more than
anticipated. These stocks offer a greater degree of certainty, and this is
often reflected in higher valuations. The future is unpredictable, so we
believe that running a balanced portfolio and maintaining our focus on quality
and valuation will serve us best in this environment. We would expect to tilt
the barbell as more clarity emerges on the economic outlook.
Q What are the major holdings in the portfolio?
A The 5 largest holdings in the portfolio at the end of the year were:
. 4imprint (4.7% of the portfolio) sells promotional materials such as
pens, bags and clothing which are emblazoned with company logos. The business
gathers orders through online and catalogue marketing, which are then routed to
their suppliers who produce and dispatch the products to customers. As a result
of outsourcing the majority of manufacturing, the business has a relatively low
capital requirement and can focus on marketing and customer service. Continual
reinvestment of revenue into marketing campaigns has enabled the business to
generate an enviable long term growth record whilst maintaining margins.
. CVS (2.9% of the portfolio) is a leading veterinary services business,
which owns over 500 vet surgeries and specialist centres, predominantly in the
UK. The scale of the business gives it purchasing power, allowing it to
generate a higher margin than individual surgeries. The business has been a
leading consolidator of the UK market and has recently entered continental
Europe. The business is relatively immune to the economic cycle and, with ever
more being spent on the wellbeing of the nation's pets, can continue to grow
for many years to come.
. JTC (2.8% of the portfolio) is a financial administration business
providing services to real estate and private equity funds, multinational
companies, and high net worth individuals. The business has a strong culture, a
reputation for quality and has augmented its organic growth with acquisitions.
Margins and returns on capital are strong and the business benefits from long
term contracts, giving it excellent earnings visibility.
. Hollywood Bowl (2.7% of the portfolio) is a leisure business operating
ten pin bowling alleys in the UK and Canada. The sector had historically been
woefully underinvested in the UK and management have successfully grown the
business by acquiring and modernising existing sites and by opening new sites
in leisure and retail parks. The low ticket, family friendly nature of the
activity has allowed the business to grow even in more difficult economic
conditions. Management recently acquired a business in Canada, where they
believe there is a similar opportunity to consolidate and modernise the sector.
. Hill & Smith (2.5% of the portfolio) is a supplier of products and
services into the infrastructure sectors in the UK, US and Europe. Its
proprietary steel and composite products are used in the rail, roads, water and
energy sectors. The business also provides galvanizing services to protect
steel structures, and leases temporary road barriers and security products. The
company generates good margins and benefits from exposure to growing
infrastructure investment.
Q What were the new holdings added over the period?
A We took advantage of the significant de-rating of a number of
technology/growth stocks that we have known for some time, and in some cases
owned previously, to start positions in these businesses - for example Auction
Technology, GB Group and AJ Bell discussed below.
. XP Power manufactures power conversion units for the semiconductor,
healthcare and industrial technology sectors. Power converters convert high
voltage alternating current from the main grid into the stable, low voltage
direct current required for electronic equipment. Its products are sold
globally, with North America accounting for 63% of revenue, Europe 28% and Asia
9%. Whilst clearly cyclical, the business has a good long term growth record
and a strong level of repeat revenue once designed into a product. Although
there is not significant intellectual property in the business, its reputation
for quality, reliability and service levels enables it to generate circa 20%
margins. It is a business we have followed for some time and the 40% share
price decline presented us with an opportunity to start building a position.
. Auction Technology is a business we have previously held in the
portfolio. The origin of the business was as the publisher of the Auction Trade
Gazette, the trade magazine for the UK antiques industry. The business moved
into providing an online platform for auction houses (the-saleroom.com) to
augment the "in-room" bidding. This pulls in a significantly larger pool of
bidders and improves pricing, which has led to rapid adoption by auctioneers in
both the UK, US and continental Europe. The business has also diversified into
the auction of used industrial equipment in the US, which is a very sizable
market. The company generates very high margins, but these have potential to
grow further as its largely fixed cost base is leveraged by increasing revenue.
We decided to rebuild the position following a circa 50% decline in its share
price.
. GB Group helps online companies to validate and verify the identity
and locations of their customers. It enables organisations to offer a better
user experience, protect themselves against fraud, and ensure regulatory
compliance. Services include ID verification, credit risk checking, anti-money
laundering compliance, age verification and document validation. The business
has a strong long-term organic growth record which it augments via acquisition.
The circa 50% decline in its share price provided us with an interesting entry
point.
. AJ Bell provides online investment platform and stockbroking services.
The business has two main products: Direct-to-Consumer platform, AJ Bell, and
Investcentre, a Business-to-Consumer platform focussed on the IFA market. It is
one of the UK's leading players with around £75 billion of assets under
administration and aims to offer lower fee rates than its main rivals. The
company has an enviable long-term growth record and still has plenty of scope
for market share gains. We like the financial characteristics of the business
(cash generative, high margins, strong balance sheet), although revenue is
impacted by market levels. We have owned the business historically and believe
the recent 30%+ decline in the share price offered a good opportunity to
rebuild the holding.
. Marshalls is the UK's leading hard landscaping manufacturer, supplying
natural stone and innovative concrete products to the construction, home
improvement and landscape markets. Its products include paving blocks, walling,
drainage systems, greenhouses, garages, and street furniture. Public sector and
commercial end markets are the largest users of Marshalls' products. The UK
accounts for about 95% of Marshalls' total revenue. The business recently
acquired Marley, which is the UK leading supplier of roof tiles. Clearly the
business is facing cost headwinds and a weaker demand environment. However, we
believe this is more than reflected in its valuation following a 65% decline in
its share price.
. Ergomed is a contract research organisation focussed on the
pharmaceutical industry. Around two thirds of revenue is derived from
pharmacovigilance, which collects data for on-market drugs, particularly around
adverse events associated with the drug. A third of revenue is derived from
clinical research services, which provides services to pharma and biotech
business which facilitate the process of conducting medical trials and
ultimately achieving regulatory approval for new products. The business
focusses on the niche areas of oncology and rare diseases, which offer higher
potential growth rates. Services include patient recruitment, project
management, clinical monitoring, data management and medical writing. The
business has a good long term growth record, both organically and via
acquisition.
. Next Fifteen Communications is part advertising agency and part
digital transformation consultancy. The company helps businesses market
themselves more effectively and improves the way they interact with customers
online. It counts 57 of the top 100 "best loved" global brands as clients,
generating around 60% of revenue from the US. The business has a good track
record of winning clients and then expanding the range of services that they
supply, which often results in multi-year relationships with major businesses.
The company has a very good long term growth record.
Q What is the managers approach to gearing?
A Gearing decisions are taken after reviewing a variety of metrics
including valuations, earnings momentum, market momentum, bond spreads and a
range of economic indicators. After analysing this data and following
discussions with the Board, we concluded that the Company should not be geared
at this point, although we have reduced the cash position towards the year end.
We will continue to monitor these factors and look to gear the Company when the
indicators turn more positive.
Q How does Environment, Social and Governance ('ESG') factor in the
investment process?
A ESG issues are increasingly a focus for many investors and analysis
of these factors has always been a core part of our investment process. Invesco
has significant resources focussed on ESG, both at a group and individual team
level. Our proprietary ESGintel system draws in company specific data from a
broad range of sources and enables ESG related metrics to be quantified. This
provides fund managers with clear overview of areas of concern, allowing
targeted engagement with businesses to bring about positive change.
Environmental liabilities, socially dubious business practises and poor
corporate governance can have a significant impact on share prices. We assess
environmental risks within a business, and analyse the steps being taken to
reduce its environmental impact. We like businesses with strong cultures and
engaged employees, and avoid businesses which, whilst acting within the law,
run the risk of a public backlash, or being constrained by new legislation.
When it comes to governance, board structure and incentivisation, we
proactively consult with all the businesses we own and vote against resolutions
where standards fall short of our expectations. We believe that high standards
of governance and incentivisation that aligns management with shareholders, are
the most important aspects of ESG for driving shareholder returns within the
smaller companies sector. Further details of the ESG process of the Manager is
disclosed on pages 19 to 22.
A recent example of engagement was with a company that provides equipment for
rental and associated services to a range of end markets including
infrastructure, construction, and oil and gas. We engaged as part of a regular
update with the company and discussed both environmental and governance
factors.
On environmental factors, the company is investing in greener, more
environmentally friendly equipment. In many cases this new equipment is no more
expensive than replacing the old petrol equipment. The company has continued to
make good progress in their engagement with customers and supply chain partners
to deliver sustainable fleet solutions as they strive to reduce emissions. They
are investing further in battery and solar powered equipment and in lower
emission commercial vehicles and as a result are seeing increased demand from
customers. The heavier equipment they provide is more difficult to convert to
electric and hydrogen may be longer term solution for this area.
With regard to governance factors, we successfully engaged with the company
regarding refreshment of the board given the long tenure of two non-executive
directors ('NEDs'). The change was instigated with a view to improving board
independence. We are pleased with the improvements made on governance factors
and are content to maintain the position.
Q What is the dividend policy of the Company?
A The Company pays out all the income earned within the portfolio and
enhances it using a small amount of realised capital profits to target a
dividend yield of 4% based on the year end share price. This provides
shareholders with an attractive and consistent yield whilst allowing us to
target businesses that we believe will deliver the best total return, without
having to compromise on quality to achieve an income target.
Q What are your expectations for the year ahead?
A The last three years have been unusually volatile, however we can
see a more stable picture emerging. Energy prices have declined substantially
from their peak, with oil and gas prices now below the level they were a year
ago. Whilst there is always a lag to this feeding through to the cost of
living, it seems likely that inflation will return towards its historical
average of 4-5% as we move through the middle of the year. Tight labour markets
are a blessing for job hunters, but wage demands could potentially cause
inflation to be quite stubborn around this level. We would expect the Bank of
England to halt interest rate increases this year, and this should be a
positive for markets, but it seems less likely that we will see cuts to base
rates in the short term.
The UK smaller companies sector is very cheap when compared to both its own
history and other global markets. A more stable political situation in the UK,
a peaking of the interest rate cycle and the prospect of economic recovery
could all provide the catalyst for this discount to narrow. We continue to see
interesting opportunities across a range of sectors and will continue to take
advantage of these as they arise. So, whether we see a recession or not this
year, we believe that the UK smaller companies sector continues to offer a
wealth of opportunity for investors.
Jonathan Brown Robin West
Portfolio Managers Deputy Portfolio Manager
18 April 2023
Principal Risks and Uncertainties
The Directors confirm that they have carried out a robust assessment of the
emerging and principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or liquidity. Most of
these risks are market related and are similar to those of other investment
trusts investing primarily in listed markets. The Audit Committee reviews the
Company's risk control summary at each meeting, and as part of this process,
gives consideration to identify emerging risks. Emerging risks, such as
evolving cyber threat, geo-political tension and climate related risks, have
been considered during the year as part of the Directors' assessment.
Principal Risk Description Mitigating Procedures and Controls
Market (Economic) Risk The Directors have assessed the market
Factors such as fluctuations in stock markets, impact of the ongoing uncertainty from the
interest rates and exchange rates are not under conflict in Ukraine and the resulting
the control of the Board or the Portfolio sanctions imposed on Russia, and the
Managers, but may give rise to high levels of concerns regarding the global banking
volatility in the share prices of investee system through regular discussions with the
companies, as well as affecting the Company's Portfolio Managers and the Corporate
own share price and the discount to its NAV. Broker. The Company's current portfolio
The risk could be triggered by unfavourable consists of companies listed on the main UK
developments globally and/or in one or more equity market and those listed on AIM. The
regions, contemporary examples being the market Company does not have direct investments in
uncertainty in relation to the ongoing invasion Russia or hold stocks with significant
of Ukraine by Russia and renewed concerns links to Russia. To a limited extent,
regarding the global banking system. futures can be used to mitigate the market
(economic) risk, as can the judicious
holding of cash or other very liquid
assets. Futures are not currently being
used.
Investment Risk The Portfolio Managers' approach to
The Company invests in small and medium-sized investment is one of individual stock
companies traded on the London Stock Exchange selection. Investment risk is mitigated via
or on AIM. By their nature, these are generally the stock selection process, together with
considered riskier than their larger the slow build-up of holdings rather than
counterparts and their share prices can be more the purchase of large positions outright.
volatile, with lower liquidity. In addition, as This allows the Portfolio Managers,
smaller companies may not generally have the cautiously, to observe more data points
financial strength, diversity and resources of from a company before adding to a position.
larger companies, they may find it more The overall portfolio is well diversified
difficult to overcome periods of economic by company and sector. The weighting of an
slowdown or recession. investment in the portfolio tends to be
loosely aligned with the market
Furthermore, the risk of climate change and capitalisation of that company. This means
matters concerning ESG could affect the that the largest holdings will often be
valuation of companies held in the portfolio. amongst the larger of the smaller companies
available. The Portfolio Managers are
relatively risk averse, look for lower
volatility in the portfolio and seek to
outperform in more challenging markets. The
Portfolio Managers remain cognisant at all
times of the potential liquidity of the
portfolio. There can be no guarantee that
the Company's strategy and business model
will be successful in achieving its
investment objective. The Board monitors
the performance of the Company, giving due
consideration to how the Manager has
incorporated ESG considerations including
climate change into their investment
process. Further details can be found on
pages 19 to 22. The Board also has
guidelines in place to ensure that the
Portfolio Managers adhere to the approved
investment policy. The continuation of the
Manager's mandate is reviewed annually.
Shareholders' Risk The Board reviews regularly the Company's
The value of an investment in the Company may investment objective and strategy to ensure
go down as well as up and an investor may not that it remains relevant, as well as
get back the amount invested. reviewing the composition of the
shareholder register, peer group
performance on both a share price and NAV
basis, and the Company's share price
discount to NAV per share. The Board and
the Portfolio Managers maintain an active
dialogue with the aim of ensuring that the
market rating of the Company's shares
reflects the underlying NAV; both share buy
back and issuance facilities are in place
to help the management of this process.
Reliance on the Manager and other Third-Party Third-party service providers are subject
Service Providers to ongoing monitoring by the Manager and
The Company has no employees and the Board the Board.
comprises non-executive directors only. The
Company is therefore reliant upon the The Manager reviews the performance of all
performance of third-party service providers third-party providers regularly through
for its executive function and service formal and informal meetings.
provisions. The Company's operational structure
means that all cyber risk (information and The Audit Committee reviews regularly the
physical security) arises at its third-party performance and internal controls of the
service providers, including fraud, sabotage or Manager and all third-party providers
crime against the Company. The Company's through audited service organisation
operational capability relies upon the ability control reports, together with updates on
of its third-party service providers to information security, the results of which
continue working throughout the disruption are reported to the Board.
caused by a major event such as the Covid-19
pandemic. Failure by any service provider to The Manager's business continuity plans are
carry out its obligations to the Company in reviewed on an ongoing basis and the
accordance with the terms of its appointment Directors are satisfied that the Manager
could have a materially detrimental impact on has in place robust plans and
the operation of the Company and could affect infrastructure to minimise the impact on
the ability of the Company to successfully its operations so that the Company can
pursue its investment policy. The Company's continue to trade, meet regulatory
main service providers, of which the Manager is obligations, report and meet shareholder
the principal provider, are listed on page 65. requirements. The Board receives regular
The Manager may be exposed to reputational update reports from the Manager and
risks. In particular, the Manager may be third-party service providers on business
exposed to the risk that litigation, continuity processes and has been provided
misconduct, operational failures, negative with assurance from them all insofar as
publicity and press speculation, whether or not possible that measures are in place for
it is valid, will harm its reputation. Damage them to continue to provide contracted
to the reputation of the Manager could services to the Company.
potentially result in counterparties and third
parties being unwilling to deal with the
Manager and by extension the Company, which
carries the Manager's name. This could have an
adverse impact on the ability of the Company to
pursue its investment policy successfully.
Regulatory Risk The Manager reviews the level of compliance
The Company is subject to various laws and with tax and other financial regulatory
regulations by virtue of its status as an requirements on a regular basis. The Board
investment trust, its listing on the London regularly considers all risks, the measures
Stock Exchange and being an Alternative in place to control them and the
Investment Fund under the UK AIFMD regime. A possibility of any other risks that could
loss of investment trust status could lead to arise. The Manager's Compliance and
the Company being subject to corporation tax on Internal Audit team produce annual reports
the chargeable capital gains arising on the for review by the Company's Audit
sale of its investments. Other control Committee. Further details of risks and
failures, either by the Manager or any other of risk management policies as they relate to
the Company's service providers, could result the financial assets and liabilities of the
in operational or reputational problems, Company are detailed in note 16 of this
erroneous disclosures or loss of assets through Annual Financial Report.
fraud, as well as breaches of regulations.
Viability Statement
In accordance with provision 31 of the UK Code of Corporate Governance 2018,
the Directors have assessed the prospects of the Company over a longer period
than 12 months. The Company is an investment trust, a collective investment
vehicle designed and managed for long term investment. While the appropriate
period over which to assess the Company's viability may vary from year to year,
the long term for the purpose of this viability statement is currently
considered by the Board to be at least five years, with the life of the Company
not intended to be limited to that or any other period.
The main risks to the Company's continuation are: poor investment performance
over an extended period; shareholder dissatisfaction through failure to meet
the Company's investment objective; or the investment policy not being
appropriate in prevailing market conditions. Accordingly, failure to meet the
Company's investment objective, and contributory market and investment risks
are deemed by the Board to be principal risks of the Company and are given
particular consideration when assessing the Company's long term viability.
Despite the current impact on global markets resulting from the invasion of
Ukraine by Russia, the Directors remain confident that the Company's investment
strategy will continue to serve shareholders well over the longer term.
The investment objective of the Company has been substantially unchanged for
many years. The 2015 amendment to dividend policy gave some additional weight
to targeting increased dividend income to shareholders. This change does not
affect the total return sought or produced by the Portfolio Managers but was
designed to increase returns distributed to shareholders. The Board considers
that the Company's investment objective remains appropriate. This is confirmed
by contact with major shareholders.
Performance derives from returns for risk taken. The Portfolio Managers' Report
on pages 9 to 12 sets out their current investment strategy. There has been no
material change in the Company's investment objective or policy.
Demand for the Company's shares and performance are not things that can be
forecast, but there are no current indications that either or both of these may
decline substantially over the next five years so as to affect the Company's
viability.
The Company is a closed end investment trust and can pursue a long term
investment strategy and make use of gearing to enhance returns through
investment cycles without the need to maintain liquidity for investor
redemptions.
Based on the above analysis, including review of the revenue forecast for
future years along with stress testing of both the revenue forecast and the
portfolio valuation, reverse stress testing of debt covenants and dividend
sensitivity analysis, the Directors confirm that they expect the Company will
continue to operate and meet its liabilities, as they fall due, during the five
years ending January 2028.
Investments in Order of Valuation
AT 31 JANUARY 2023
Ordinary shares unless stated otherwise
Market
Value % of
Company Sector £'000 Portfolio
4imprint Media 8,068 4.7
CVSAIM Consumer Services 4,938 2.9
JTC Investment Banking and Brokerage 4,845 2.8
Services
Hollywood Bowl Travel and Leisure 4,709 2.7
Hill & Smith Industrial Metals and Mining 4,375 2.5
Advanced Medical SolutionsAIM Medical Equipment and Services 4,255 2.5
Alfa Financial Software Software and Computer Services 3,955 2.3
Energean Oil, Gas and Coal 3,833 2.2
Hilton Food Food Producers 3,613 2.1
Keywords StudiosAIM Leisure Goods 3,585 2.1
Top Ten Holdings 46,176 26.8
Brooks MacdonaldAIM Investment Banking and Brokerage 3,572 2.1
Services
Essentra Industrial Support Services 3,501 2.0
discoverIE Electronic and Electrical Equipment 3,500 2.0
Serco Industrial Support Services 3,417 2.0
AJ Bell Investment Banking and Brokerage 3,407 2.0
Services
Coats General Industrials 3,382 2.0
Marshalls Construction and Materials 3,344 1.9
RWSAIM Industrial Support Services 3,281 1.9
Chemring Aerospace and Defence 3,154 1.8
Videndum Industrial Engineering 3,065 1.8
Top Twenty Holdings 79,799 46.3
Kainos Software and Computer Services 3,007 1.7
Learning TechnologiesAIM Software and Computer Services 2,897 1.7
Alpha Financial Markets Industrial Support Services 2,826 1.6
ConsultingAIM
FDM Industrial Support Services 2,818 1.6
Aptitude Software Software and Computer Services 2,810 1.6
Johnson ServiceAIM Industrial Support Services 2,744 1.6
FocusriteAIM Leisure Goods 2,711 1.6
Jadestone EnergyAIM Oil, Gas and Coal 2,702 1.6
Volution Construction and Materials 2,696 1.6
Future Media 2,645 1.5
Top Thirty Holdings 107,655 62.4
Robert Walters Industrial Support Services 2,540 1.5
LoungersAIM Travel and Leisure 2,459 1.4
The Gym Travel and Leisure 2,405 1.4
Crest Nicholson Household Goods and Home Construction 2,326 1.3
CLS Real Estate Investment and Services 2,279 1.3
Churchill ChinaAIM Household Goods and Home Construction 2,258 1.3
Ricardo Construction and Materials 2,252 1.3
Young & Co's Brewery - Travel and Leisure 2,220 1.3
Non-VotingAIM
PZ Cussons Personal Care, Drug and Grocery Stores 2,217 1.3
Genuit Construction and Materials 2,186 1.3
Top Forty Holdings 130,797 75.8
VP Industrial Transportation 2,102 1.2
Wickes Retailers 2,058 1.2
Secure Trust Bank Banks 2,028 1.2
Severfield Construction and Materials 1,972 1.1
Vistry Household Goods and Home Construction 1,959 1.1
Gresham HouseAIM Closed End Investments 1,954 1.1
Auction Technology Software and Computer Services 1,910 1.1
James Fisher and Sons Industrial Transportation 1,898 1.1
GB GroupAIM Software and Computer Services 1,809 1.1
MidwichAIM Industrial Support Services 1,732 1.0
Top Fifty Holdings 150,219 87.0
RestoreAIM Industrial Support Services 1,654 1.0
Restaurant Group Travel and Leisure 1,642 1.0
Avon Protection Aerospace and Defence 1,634 0.9
MarloweAIM Industrial Support Services 1,578 0.9
Workspace Real Estate Investment Trusts 1,538 0.9
Mitchells & Butlers Travel and Leisure 1,441 0.9
M&C SaatchiAIM Media 1,272 0.7
Topps Tiles Retailers 1,258 0.7
FD TechnologiesAIM Software and Computer Services 1,247 0.7
XP Power Electronic and Electrical Equipment 1,188 0.7
Top Sixty Holdings 164,671 95.4
Treatt Chemicals 1,118 0.6
Dunelm Retailers 1,022 0.6
Savills Real Estate Investment and Services 895 0.5
ErgomedAIM Pharmaceuticals and Biotechnology 856 0.5
Gooch & HousegoAIM Technology Hardware and Equipment 826 0.5
InspecsAIM Personal Goods 825 0.5
Next Fifteen CommunicationsAIM Media 805 0.5
CohortAIM Aerospace and Defence 690 0.4
ThruvisionAIM Electronic and Electrical Equipment 530 0.3
Tyman Construction and Materials 405 0.2
Top Seventy Holdings 172,643 100.0
Total Investments (70) 172,643 100.0
AIM Investments quoted on AIM.
The percentage of the portfolio by value invested in AIM stocks at the year end
was 32.8% (2022: 30.9%). There were 26 AIM stocks held at the year end,
representing 37.1% of the 70 stocks (2022: 26 AIM stocks held representing
34.2% of the 76 stocks held).
Directors' Responsibilities Statement
The Directors are responsible for preparing the Annual Financial Report in
accordance with United Kingdom applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under the law the Directors have elected to prepare financial
statements in accordance with UK-adopted international accounting standards.
Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period.
In preparing these financial statements, the Directors are required to:
. select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and then apply
them consistently;
. make judgements and estimates that are reasonable and prudent;
. present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
. present additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the group and
company financial position and financial performance;
. state whether UK-adopted international accounting standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
. prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing the Strategic Report, a Corporate Governance Statement, a Directors'
Remuneration Report and a Directors' Report that comply with the law and
regulations.
The Directors of the Company each confirm to the best of their knowledge, that:
. the financial statements, prepared in accordance with UK adopted
international accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
. this Annual Financial Report includes a fair review of the development
and performance of the business and the position of the Company together with a
description of the principal risks and uncertainties that it faces; and
. they consider that this Annual Financial Report, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Signed on behalf of the Board of Directors
Jane Lewis
Chairman
18 April 2023
Statement of Comprehensive Income
FOR THE YEARED 31 JANUARY
2023 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
(Loss)/profit on 9 - (41,010) (41,010) - 34,552 34,552
investments held at fair
value
Profit on foreign - 5 5 - - -
exchange
Income 2 4,646 - 4,646 3,448 - 3,448
Investment management 3 (206) (1,165) (1,371) (254) (1,440) (1,694)
fees
Other expenses 4 (384) (3) (387) (385) (5) (390)
(Loss)/profit before
finance costs and 4,056 (42,173) (38,117) 2,809 33,107 35,916
taxation
Finance costs 5 (1) (7) (8) (1) (7) (8)
(Loss)/profit before 4,055 (42,180) (38,125) 2,808 33,100 35,908
taxation
Taxation 6 - - - - - -
(Loss)/profit after 4,055 (42,180) (38,125) 2,808 33,100 35,908
taxation
Return per ordinary 7 11.99p (124.70)p (112.71)p 8.30p 97.85p 106.15p
share
The total column of this statement represents the Company's statement of
comprehensive income, prepared in accordance with UK-adopted international
accounting standards. The (loss)/profit after taxation is the total
comprehensive (loss)/income. The supplementary revenue and capital columns are
both prepared in accordance with the Statement of Recommended Practice issued
by the Association of Investment Companies. All items in the above statement
derive from continuing operations of the Company. No operations were acquired
or discontinued in the year.
Statement of Changes in Equity
FOR THE YEARED 31 JANUARY
Capital
Share Share Redemption Capital Revenue
Capital Premium Reserve Reserve Reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
At 31 January 2021 10,642 22,366 3,386 154,986 - 191,380
Total comprehensive
income for the year - - - 33,100 2,808 35,908
Dividends paid 8 - - - (3,997) (2,538) (6,535)
At 31 January 2022 10,642 22,366 3,386 184,089 270 220,753
Total comprehensive
loss for the year - - - (42,180) 4,055 (38,125)
Dividends paid 8 - - - (4,905) (2,808) (7,713)
At 31 January 2023 10,642 22,366 3,386 137,004 1,517 174,915
The accompanying accounting policies and notes are an integral part of these
financial statements.
Balance Sheet
AS AT 31 JANUARY
2023 2022
Notes £'000 £'000
Non-current assets
Investments held at fair value through profit or loss 9 172,643 219,818
Current assets
Other receivables 10 400 157
Cash and cash equivalents 5,055 1,530
5,455 1,687
Total assets 178,098 221,505
Current liabilities
Other payables 11 (3,183) (752)
Total assets less current liabilities 174,915 220,753
Net assets 174,915 220,753
Capital and reserves
Share capital 12 10,642 10,642
Share premium 13 22,366 22,366
Capital redemption reserve 13 3,386 3,386
Capital reserve 13 137,004 184,089
Revenue reserve 13 1,517 270
Total shareholders' funds 174,915 220,753
Net asset value per ordinary share
Basic 14 517.09p 652.60p
The financial statements were approved and authorised for issue by the Board of
Directors on 18 April 2023.
Signed on behalf of the Board of Directors
Jane Lewis
Chairman
The accompanying accounting policies and notes are an integral part of these
financial statements.
Statement of Cash Flows
FOR THE YEARED 31 JANUARY
2023 2022
£'000 £'000
Cash flow from operating activities
(Loss)/profit before finance costs and taxation (38,117) 35,916
Adjustments for:
Purchase of investments (37,739) (55,442)
Sale of investments 46,313 57,863
8,574 2,421
Loss/(profit) on investments held at fair value 41,010 (34,552)
(Increase)/decrease in receivables (195) 31
(Decrease)/increase in payables (26) 39
Net cash inflow from operating activities 11,246 3,855
Cash flow from financing activities
Finance cost paid (8) (8)
Dividends paid - note 8 (7,713) (6,535)
Net cash outflow from financing activities (7,721) (6,543)
Net increase/(decrease) in cash and cash equivalents 3,525 (2,688)
Cash and cash equivalents at start of the year 1,530 4,218
Cash and cash equivalents at the end of the year 5,055 1,530
Reconciliation of cash and cash equivalents to the Balance
Sheet is as follows:
Cash held at custodian 80 155
Invesco Liquidity Funds plc - Sterling, money market fund 4,975 1,375
Cash and cash equivalents 5,055 1,530
Cash flow from operating activities includes:
Dividends received 4,447 3,481
Interest received 2 -
As the Company did not have any long term debt at both the current and prior
year ends, no reconciliation of the financial liabilities position is
presented.
The accompanying accounting policies and notes are an integral part of these
financial statements.
Notes to the Financial Statements
1. Principal Accounting Policies
Accounting policies describe the Company's approach to recognising and
measuring transactions during the year and the position of the Company at the
year end.
The principal accounting policies adopted in the preparation of these financial
statements together with the approach to recognition and measurement are set
out below. These policies have been consistently applied during the current
year and the preceding year, unless otherwise stated.
The financial statements have been prepared on a going concern basis on the
grounds that the Company's investment portfolio (including cash) is
sufficiently liquid and significantly exceeds all balance sheet liabilities,
there are no unrecorded commitments or contingencies and its gearing facilities
remain undrawn. The disclosure on going concern on page 29 in the Directors'
Report provides further detail. The Directors believe the Company has adequate
resources to continue in operational existence for the foreseeable future and
has the ability to meet its financial obligations as and when they fall due for
a period until at least 30 April 2024.
(a) Basis of Preparation
(i) Accounting Standards Applied
The financial statements have been prepared on a historical cost basis, except
for the measurement at fair value of investments which for the Company are
quoted bid prices for investments in active markets at the Balance Sheet date
and therefore reflect market participants' view of climate change risk and in
accordance with the applicable UK-adopted international accounting standards.
The standards are those that are effective at the Company's financial year end.
Where presentational guidance set out in the Statement of Recommended Practice
('SORP') 'Financial Statements of Investment Trust Companies and Venture
Capital Trusts', updated by the Association of Investment Companies in July
2022, is consistent with the requirements of UK-adopted international
accounting standards. The Directors have prepared the financial statements on a
basis compliant with the recommendations of the SORP. The supplementary
information which analyses the statement of comprehensive income between items
of a revenue and a capital nature is presented in accordance with the SORP.
The Directors have considered the impact of climate change on the value of the
listed investments that the Company holds. In the view of the Directors, as the
portfolio consists of listed equities, their market prices should reflect the
impact, if any, of climate change and accordingly no adjustment has been made
to take account of climate change in the valuation of the portfolio in these
financial statements.
(ii) Critical Accounting Estimates and Judgements
The preparation of the financial statements may require the Directors to make
estimations where uncertainty exists. It also requires the Directors to make
judgements, estimates and assumptions, in the process of applying the
accounting policies. There have been no significant judgements, estimates or
assumptions for the current or preceding year.
(b) Foreign Currency and Segmental Reporting
(i) Functional and Presentation Currency
The financial statements are presented in Sterling, which is the Company's
functional and presentation currency and the currency in which the Company's
share capital and expenses are denominated, as well as a majority of its assets
and liabilities.
(ii) Transactions and Balances
Foreign currency assets and liabilities are translated into Sterling at the
rates of exchange ruling at the balance sheet date. Transactions in foreign
currency, are translated into Sterling at the rates of exchange ruling on the
dates of such transactions, and profit or loss on translation is taken to
revenue or capital depending on whether it is revenue or capital in nature. All
are recognised in the statement of comprehensive income.
(iii) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business of investing in equity and debt securities, issued by
companies operating and generating revenue mainly in the UK.
(c) Financial Instruments
(i) Recognition of Financial Assets and Financial Liabilities
The Company recognises financial assets and financial liabilities when the
Company becomes a party to the contractual provisions of the instrument. The
Company offsets financial assets and financial liabilities if the Company has a
legally enforceable right to set off the recognised amounts and interests and
intends to settle on a net basis.
(ii) Derecognition of Financial Assets
The Company derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the right to receive the
contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are
transferred. Any interest in the transferred financial asset that is created or
retained by the Company is recognised as an asset.
(iii) Derecognition of Financial Liabilities
The Company derecognises financial liabilities when its obligations are
discharged, cancelled or expired.
(iv) Trade Date Accounting
Purchases and sales of financial assets are recognised on trade date, being the
date on which the Company commits to purchase or sell the assets.
(v) Classification of Financial Assets and Financial Liabilities
Financial assets
The Company classifies its financial assets as measured at amortised cost or
measured at fair value through profit or loss on the basis of both: the
entity's business model for managing the financial assets; and the contractual
cash flow characteristics of the financial asset.
Financial assets measured at amortised cost include cash, debtors and
prepayments.
A financial asset is measured at fair value through profit or loss if its
contractual terms do not give rise to cash flows on specified dates that are
solely payments of principal and interest ('SPPI') on the principal amount
outstanding or it is not held within a business model whose objective is either
to collect contractual cash flows, or to both collect contractual cash flows
and sell. The Company's equity investments are classified as fair value through
profit or loss as they do not give rise to cash flows that are SPPI.
Financial assets held at fair value through profit or loss are initially
recognised at fair value, which is usually the transaction price and are
subsequently valued at fair value.
For investments that are actively traded in organised financial markets, fair
value is determined by reference to stock exchange quoted bid prices at the
balance sheet date.
Financial liabilities
Financial liabilities, including borrowings, are initially measured at fair
value, net of transaction costs and are subsequently measured at amortised cost
using the effective interest method, where applicable.
(d) Cash and Cash Equivalents
Cash and cash equivalents include any cash held at custodian and approved
depositories, holdings in Invesco Liquidity Funds plc - Sterling, a triple-A
rated money market fund and overdrafts. Cash and cash equivalents are defined
as cash itself or being readily convertible to a known amount of cash and are
subject to an insignificant risk of change in value.
(e) Income
All dividends are taken into account on the date investments are marked
ex-dividend; other income from investments is taken into account on an accruals
basis. Where the Company elects to receive scrip dividends (i.e. in the form of
additional shares rather than cash), the equivalent of the cash dividend
foregone is recognised as income in the revenue account and any excess in value
of the shares received over the amount of the cash divided recognised in
capital. Deposit interest is taken into account on an accruals basis. Special
dividends representing a return of capital are allocated to capital in the
Statement of Comprehensive Income and then taken to capital reserves. Dividends
will generally be recognised as revenue however all special dividends will be
reviewed, with consideration given to the facts and circumstances of each case,
including the reasons for the underlying distribution, before a decision over
whether allocation is to revenue or capital is made.
(f) Expenses and Finance Costs
All expenses and finance costs are accounted for in the Statement of
Comprehensive Income on an accruals basis.
The investment management fee and finance costs are allocated 85% to capital
and 15% to revenue. This is in accordance with the Board's expected long term
split of returns, in the form of capital gains and income respectively, from
the portfolio.
Investment transaction costs such as brokerage commission and stamp duty are
recognised in capital in the Statement of Comprehensive Income. All other
expenses are allocated to revenue in the Statement of Comprehensive Income.
(g) Taxation
Tax represents the sum of tax payable, withholding tax suffered and deferred
tax. Tax is charged or credited in the statement of comprehensive income. Any
tax payable is based on taxable profit for the year, however, as expenses
exceed taxable income no corporation tax is due. The Company's liability for
current tax is calculated using tax rates that have been enacted or
substantially enacted by the balance sheet date.
Deferred taxation is recognised in respect of all temporary differences that
have originated but not reversed at the balance sheet date, where transactions
or events that result in an obligation to pay more tax in the future or right
to pay less tax in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is considered
probable that there will be suitable profits from which the future reversal of
the temporary differences can be deducted. Deferred tax assets and liabilities
are measured at the tax rates expected to apply in the period when the
liability is settled or the asset realised.
Investment trusts which have approval under Section 1158 of the Corporation Tax
Act 2010 are not liable for taxation on capital gains.
(h) Dividends
Dividends are not accrued in the financial statements, unless there is an
obligation to pay the dividends at the balance sheet date. Proposed final
dividends are recognised in the financial year in which they are approved by
the shareholders.
(i) Consolidation
Consolidated accounts have not been prepared as the subsidiary, whose principal
activity is investment dealing, is not material in the context of these
financial statements. The one hundred pounds net asset value of the investment
in Berry Starquest Limited has been included in the investments in the
Company's balance sheet. Berry Starquest Limited has not traded throughout the
year and the preceding year and, as a dormant company, has exemption under
Section 480(1) of the Companies Act 2006 from appointing auditors or obtaining
an audit.
2. Income
This note shows the income generated from the portfolio (investment assets) of
the Company and income received from any other source.
2023 2022
£'000 £'000
Income from investments:
UK dividends 4,124 3,062
UK special dividends 288 198
Overseas dividends 232 188
Deposit interest 2 -
Total income 4,646 3,448
No special dividends have been recognised in capital during the year (2022:
nil).
Overseas dividends include dividends received on UK listed investments where
the investee company is domiciled outside of the UK.
3. Investment Management Fee
This note shows the fees due to the Manager. These are made up of the
management fee calculated and paid monthly and, for the previous year. This fee
is based on the value of the assets being managed.
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 206 1,165 1,371 254 1,440 1,694
Details of the investment management and administration agreement are given on
pages 29 and 30 in the Directors' Report.
At 31 January 2023, £109,000 (2022: £138,000) was accrued in respect of the
investment management fee.
4. Other Expenses
The other expenses of the Company are presented below; those paid to the
Directors and auditor are separately identified.
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Directors' remuneration(i) 117 - 117 119 - 119
Auditor's fees(ii):
- for audit of the Company's
annual financial statements 45 - 45 45 - 45
Other expenses(iii) 222 3 225 221 5 226
384 3 387 385 5 390
(i) The Directors' Remuneration Report on page 37 provides further information
on Directors' fees.
(ii) Auditor's fees include out of pocket expenses but excludes VAT. The VAT is
included in other expenses.
(iii) Other expenses shown above include:
. amounts payable to the registrar, depositary, custodian, brokers, printers
and other legal & professional fees;
. £11,600 (2022: £10,500) of employer's National Insurance payable on
Directors' remuneration. As at 31 January 2023, the amounts outstanding on
employer's National Insurance on Directors' remuneration was £900 (2022: £900),
the amounts outstanding for Directors' fee was £9,700 (2022: £9,200); and
. custodian transaction charges of £3,200 (2022: £5,000). These are charged to
capital.
5. Finance Costs
Finance costs arise on any borrowing facilities the Company has.
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Bank overdraft facility fee 1 6 7 1 7 8
Overdraft interest - 1 1 - - -
1 7 8 1 7 8
The £15 million overdraft facility was renewed on 14 September 2022 and the
interest rate is at a margin above the Bank of England base rate.
6. Taxation
As an investment trust the Company pays no tax on capital gains and, as the
Company invested principally in UK equities, it has little overseas tax. In
addition, no deferred tax is required to provide for tax that is expected to
arise in the future due to differences in accounting and tax bases.
(a) Tax charge
2023 2022
£'000 £'000
Overseas taxation - -
(b) Reconciliation of tax charge
2023 2022
£'000 £'000
(Loss)/profit before taxation (38,125) 35,908
Theoretical tax at the current UK Corporation Tax rate of 19% (7,244) 6,823
(2022: 19%)
Effects of:
- Non-taxable UK dividends (767) (563)
- Non-taxable UK special dividends (55) (38)
- Non-taxable overseas dividends (35) (36)
- Non-taxable loss/(gains) on investments 7,791 (6,565)
- Excess of allowable expenses over taxable income 309 378
- Disallowable expenses 1 1
Tax charge for the year - -
(c) Factors that may affect future tax changes
The Company has cumulative excess management expenses of £44,324,000 (2022: £
42,720,000) that are available to offset future taxable revenue.
A deferred tax asset of £11,081,000 (2022: £10,680,000) at 25% (2022: 25%) has
not been recognised in respect of these expenses since the Directors believe
that there will be no taxable profits in the future against which the deferred
tax assets can be offset.
The Finance Act 2021 increases the UK Corporation Tax rate from 19% to 25%
effective 1 April 2023. The Act received Royal Assent on 10 June 2021. Deferred
tax assets and liabilities on balance sheets prepared after the enactment of
the new tax rate must therefore be re-measured accordingly, so as a result the
deferred tax asset has been calculated at 25%.
7. Return per Ordinary Share
Return per ordinary share is the amount of gain or loss generated for the
financial year divided by the weighted average number of ordinary shares in
issue.
2023 2022
Revenue Capital Total Revenue Capital Total
Return £'000 4,055 (42,180) (38,125) 2,808 33,100 35,908
Return per ordinary share 11.99p (124.70)p (112.71) 8.30p 97.85p 106.15p
p
The returns per ordinary share are based on the weighted average number of
ordinary shares in issue during the year of 33,826,929 (2022: 33,826,929).
8. Dividends on Ordinary Shares
The Company paid four dividends in the year - three interims and a final.
The final dividend shown below is based on shares in issue at the record date
or, if the record date has not been reached, on shares in issue on the date the
balance sheet is signed. The third interim and final dividends are paid after
the balance sheet date.
2023 2022
Pence £'000 Pence £'000
Dividends paid from revenue in the year:
Third interim (prior year) 0.80 270 - -
First interim 3.75 1,269 3.75 1,269
Second interim 3.75 1,269 3.75 1,269
Total dividends paid from revenue 8.30 2,808 7.50 2,538
Dividends paid from capital in the year:
Third interim (prior year) 2.95 999 3.75 1,269
Final (prior year) 11.55 3,906 8.07 2,728
Total dividends paid from capital 14.50 4,905 11.82 3,997
Total dividends paid in the year 22.80 7,713 19.32 6,535
2023 2022
Pence £'000 Pence £'000
Dividends payable in respect of the year:
First interim 3.75 1,269 3.75 1,269
Second interim 3.75 1,269 3.75 1,269
Third interim 3.75 1,269 3.75 1,269
Final 6.79 2,295 11.55 3,906
18.04 6,102 22.80 7,713
The third interim dividend of 3.75p per share, in respect of the year ended 31
January 2023, was paid to shareholders on 14 March 2023.
The Company's dividend policy was changed in 2015 so that dividends will be
paid firstly from current year revenue and any revenue reserves available, and
thereafter from capital reserves. The amount payable in respect of the year is
shown below:
2023 2022
£'000 £'000
Dividends in respect of the year:
- from current year net revenue 4,055 2,808
- from capital reserves 2,047 4,905
6,102 7,713
Dividend payable from the capital reserves of £2,047,000 (2022: capital
reserves of £4,905,000) as a percentage of year end net assets of £174,915,000
(2022: £220,753,000) is 1.2% (2022: 2.2%). The Company has £134,201,000 (2022:
£137,089,000) of realised distributable capital reserves at the year end.
9. Investments Held at Fair Value Through Profit and Loss
The portfolio is made up of investments which are listed or traded on a
regulated stock exchange or AIM. Profit and losses in the year include:
. realised, usually arising when investments are sold; and
. unrealised, being the difference from cost on those investments still held at
the year end.
2023 2022
£'000 £'000
Investments listed on a regulated stock exchange 116,417 151,948
AIM quoted investments 56,226 67,870
172,643 219,818
Opening valuation 219,818 187,782
Movements in year:
Purchases at cost 40,196 55,321
Sales proceeds (46,361) (57,837)
(Loss)/profit on investments in the year (41,010) 34,552
Closing valuation 172,643 219,818
Closing book cost 169,842 172,818
Closing investment unrealised gain 2,801 47,000
Closing valuation 172,643 219,818
The transaction costs amount to £134,000 (2022: £217,000) on purchases and £
28,000 (2022: £27,000) for sales. These amounts are included in determining
(loss)/profit on investments held at fair value as disclosed in the Statement
of Comprehensive Income.
The Company received £46,361,000 (2022: £57,837,000) from investments sold in
the year. The book cost of these investments when they were purchased was £
43,172,000 (2022: £34,458,000) realising a profit of £3,189,000 (2022: £
23,379,000). These investments have been revalued over time and until they were
sold any unrealised profits/losses were included in the fair value of the
investments.
10. Other Receivables
Other receivables are amounts which are due to the Company, such as monies due
from brokers for investments sold and income which has been earned (accrued)
but not yet received.
2023 2022
£'000 £'000
Amounts due from brokers 48 -
Overseas withholding tax recoverable 31 14
Prepayments and accrued income 321 143
400 157
11. Other Payables
Other payables are amounts which must be paid by the Company, and include any
amounts due to brokers for the purchase of investments or amounts owed to
suppliers (accruals), such as the Manager and auditor.
2023 2022
£'000 £'000
Amounts due to brokers 2,974 517
Accruals 209 235
3,183 752
12. Share Capital
Share capital represents the total number of shares in issue, including shares
held in treasury.
2023 2022
Number £'000 Number £'000
Allotted, called-up and fully paid
Ordinary shares of 20p each 33,826,929 6,765 33,826,929 6,765
Treasury shares of 20p each 19,382,155 3,877 19,382,155 3,877
53,209,084 10,642 53,209,084 10,642
For the year to 31 January 2023, no shares were bought back into or issued from
treasury (2022: nil).
Subsequent to the year end, no shares were bought back into or issued from
treasury.
13. Reserves
This note explains the different reserves attributable to shareholders. The
aggregate of the reserves and share capital (see previous note) make up total
shareholders' funds.
The share premium arises whenever shares are issued at a price above the
nominal value plus any issue costs. The capital redemption reserve maintains
the equity share capital and arises from the nominal value of shares
repurchased and cancelled. The share premium and capital redemption reserve are
non-distributable.
Capital investment gains and losses are shown in note 9, and form part of the
capital reserve. The revenue reserve shows the net revenue retained after
payment of dividends. The capital and revenue reserves are distributable by way
of dividend. In addition, the capital reserve is also distributable by way of
share buy backs.
14. Net Asset Value per Ordinary Share
The Company's total net assets (total assets less total liabilities) are often
termed shareholders' funds and are converted into net asset value per ordinary
share by dividing by the number of shares in issue.
The net asset value per share and the net asset values attributable at the year
end were as follows:
Net asset value Net assets
per ordinary share attributable
2023 2022 2023 2022
Pence Pence £'000 £'000
Ordinary shares 517.09 652.60 174,915 220,753
Net asset value per ordinary share is based on net assets at the year end and
on 33,826,929 (2022: 33,826,929) ordinary shares, being the number of ordinary
shares in issue (excluding shares held in treasury) at the year end.
15. Subsidiary Undertaking
The Company has one dormant subsidiary which has total assets of £100.
Net asset Country of
value at incorporation Description
31 January Principal and of shares Percentage
2023 activity operation held held
Berry Starquest Limited £100 Investment England and Ordinary 100%
dealing Wales shares
During the year and the preceding year, no transactions were undertaken by the
subsidiary. Following the year end, the subsidiary was dissolved on 28 February
2023.
16. Risk Management, Financial Assets and Liabilities
Financial instruments comprise the Company's investment portfolio as well as
any cash, borrowings, other receivables and other payables.
Financial Instruments
The Company's financial instruments comprise its investment portfolio (as shown
on pages 23 and 24), cash, overdraft, other receivables and other payables that
arise directly from its operations such as sales and purchases awaiting
settlement and accrued income. The accounting policies in note 1 include
criteria for the recognition and the basis of measurement applied for financial
instruments. Note 1 also includes the basis on which income and expenses
arising from financial assets and liabilities are recognised and measured.
Risk Management Policies and Procedures
The Directors have delegated to the Manager the responsibility for the
day-to-day investment activities of the Company as more fully described in the
Directors' Report.
As an investment trust the Company invests in equities and other investments
for the long-term, so as to meet its investment policy (incorporating the
Company's investment objective). In pursuing its investment objective, the
Company is exposed to a variety of risks that could result in either a
reduction in the Company's net assets or a reduction of the profits available
for dividends. Those related to financial instruments include market risk,
liquidity risk and credit risk. These policies are summarised below and have
remained substantially unchanged for the two years under review.
The main risk that the Company faces arising from its financial instruments is
market risk - this risk is reviewed in detail below. Since the Company invests
mainly in UK equities traded on the London Stock Exchange, liquidity risk and
credit risk are not significant. Liquidity risk is minimised as the majority of
the Company's investments comprise a diversified portfolio of readily
realisable securities which can be sold to meet funding commitments as
necessary. In addition, an overdraft facility provides short-term funding
flexibility.
Credit risk encompasses the failure by counterparties to deliver securities
which the Company has paid for, or to pay for securities which the Company has
delivered, and cash balances. Counterparty risk is minimised by using only
approved counterparties. The Company's ability to operate in the short-term may
be adversely affected if the Company's custodian suffers insolvency or other
financial difficulties. The appointment of a depositary has substantially
lessened this risk. The Board reviews the custodian's annual controls report
and the Manager's management of the relationship with the custodian, The Bank
of New York Mellon (International) Limited, an A-1+ rated financial
institution. Cash balances are limited to a maximum of 2.5% of net assets with
any one deposit taker, with only approved deposit takers being used, and a
maximum of 7.5% of net assets for holdings in the Invesco Liquidity Funds plc -
Sterling, a triple-A rated money market fund.
Market Risk
The fair value or future cash flows of a financial instrument may fluctuate
because of changes in market prices. This market risk comprises three elements
- currency risk, interest rate risk and other price risk. The Company's Manager
assesses the Company's exposure when making each investment decision, and
monitors the overall level of market risk on the whole of the investment
portfolio on an ongoing basis. The Board meets at least quarterly to assess
risk and review investment performance. The Company may utilise hedging
instruments to manage market risk. Gearing is used to enhance returns, however,
this will also increase the Company's exposure to market risk and volatility.
1. Currency Risk
The exposure to currency risk is considered minor as the Company's financial
instruments are mainly denominated in Sterling. At the current and preceding
year end, the Company held no foreign currency investments or cash, although
a small amount of dividend income was received in foreign currency.
During this and the previous year, the Company did not use forward currency
contracts to mitigate currency risk.
2. Interest Rate Risk
Interest rate movements will affect the level of income receivable on cash
deposits and the interest payable on variable rate borrowings. When the Company
has cash balances, they are held in variable rate bank accounts yielding rates
of interest dependent on the base rate of the Custodian, The Bank of New York
Mellon (International) Limited. Additionally, holdings in Invesco Liquidity
Funds plc - Sterling are subject to interest rate changes.
The Company has an uncommitted bank overdraft facility up to a maximum of 30%
of the net asset value of the Company or £15 million (2022: £15 million),
whichever is the lower; the interest rate is charged at a margin over the Bank
of England base rate. The Company uses the facility when required, at levels
approved and monitored by the Board.
At the year end, there was no overdraft drawn down (2022: none). Based on the
maximum amount that can be drawn down at the year end under the overdraft
facility of £15 million (2022: £15 million), the effect of a +/- 1% in the
interest rate would result in an increase or decrease to the Company's
statement of comprehensive income of £150,000 (2022: £150,000).
The Company's portfolio is not directly exposed to interest rate risk.
3. Other Price Risk
Other price risks (i.e. the risk of changes in market prices, other than those
arising from interest rates or currency) may affect the value of the
investments.
Management of Other Price Risk
The Directors manage the market price risks inherent in the investment
portfolio by meeting regularly to monitor on a formal basis the Manager's
compliance with the Company's stated objectives and policies and to review
investment performance.
The Company's portfolio is the result of the Manager's investment process and
as a result is not correlated with the Company's benchmark or the markets in
which the Company invests. Therefore, the value of the portfolio will not move
in line with the market but will move as a result of the performance of the
company shares within the portfolio.
If the value of the portfolio fell by 10% at the balance sheet date, the loss
after tax for the year would increase by £17 million (2022: profit after tax
for the year would decrease by £22 million). Conversely, if the value of the
portfolio rose by 10%, the loss after tax would decrease (2022: profit after
tax would increase) by the same amount.
Fair Values of Financial Assets and Financial Liabilities
The financial assets and financial liabilities are either carried in the
balance sheet at their fair value (investments), or the balance sheet amount is
a reasonable approximation of fair value (due from brokers, dividends
receivable, accrued income, due to brokers, accruals, cash at bank and
overdraft).
Fair Value Hierarchy Disclosures
Except for the one Level 3 investment (2022: one Level 3 investment) described
below, all of the Company's investments are in the Level 1 category as set out
in IFRS 13, the three levels of which follow:
Level 1 - The unadjusted quoted price in an active market for identical assets
or liabilities that the entity can access at the measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or liability,
either directly or indirectly.
Level 3 - Inputs are unobservable (i.e. for which market data is unavailable)
for the asset or liability.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of each
relevant asset/liability.
Berry Starquest Limited was the only Level 3 investment in the portfolio at the
current year end and was also Level 3 investment at the 2022 year end. Berry
Starquest Limited is a dormant subsidiary and is valued at £100 (2022: £100).
Subsequent to the year end this subsidiary was dissolved.
17. Maturity Analysis of Contractual Liability Cash Flows
The contractual liabilities of the Company are shown in note 11 and comprise
amounts due to brokers and accruals. All are paid under contractual terms. For
amounts due to brokers, this will generally be the purchase date of the
investment plus two business days; accruals would generally be due within three
months.
18. Capital Management
The Company's capital, or equity, is represented by its net assets which are
managed to achieve the Company's investment objective set out on page 13.
The main risks to the Company's investments are shown in the Strategic Report
under the 'Principal Risks and Uncertainties' section on pages 14 and 15. These
also explain that the Company is able to gear and that gearing will amplify the
effect on equity of changes in the value of the portfolio. The Board can also
manage the capital structure directly since it determines dividend payments and
has taken the powers, which it is seeking to renew, to buy-back shares, either
for cancellation or to be held in treasury, and to issue new shares or sell
shares held in treasury.
The Company is subject to externally imposed capital requirements with respect
to the obligation and ability to pay dividends by s1158 Corporation Tax Act
2010 and by the Companies Act 2006, respectively, and with respect to the
availability of the overdraft facility and by the terms imposed by the lender.
The Board regularly monitors, and has complied with, the externally imposed
capital requirements. This is unchanged from the prior year.
Total equity at 31 January 2023, the composition of which is shown on the
Balance Sheet on page 48, was £174,915,000 (2022: £220,753,000).
19. Contingencies, Guarantees and Financial Commitments
Liabilities the Company is committed to honour but which are dependent on a
future circumstance or event occurring would be disclosed in this note if any
existed.
There were no contingencies, guarantees or other financial commitments of the
Company as at 31 January 2023 (2022: nil).
20. Related Party Transactions and Transactions with Manager
A related party is a company or individual who has direct or indirect control
or who has significant influence over the Company.
Under UK-adopted international accounting standards the Company has identified
the Directors as related parties. The Directors' remuneration and interests
have been disclosed on pages 37 to 39 with additional disclosure in note 4. No
other related parties have been identified.
Details of the Manager's services and fees are disclosed in the Directors'
Report on pages 29 and 30 and in note 3.
21. Post Balance Sheet Events
There are no significant events after the end of the reporting period requiring
disclosure.
22. 2023 Financial Information
The figures and financial information for the year ended 31 January 2023 are
extracted from the Company's annual financial statements for that year and do
not constitute statutory accounts. The Company's annual financial statements
for the year to 31 January 2023 have been audited but have not yet been
delivered to the Registrar of Companies. The Auditor's report on the 2023
annual financial statements was unqualified, did not include a reference to any
matter to which the Auditor drew attention without qualifying the report, and
did not contain any statements under Section 498 of the Companies Act 2006.
23. 2022 Financial Information
The figures and financial information for the year ended 31 January 2022 are
compiled from an extract of the published accounts for that year and do not
constitute statutory accounts. Those accounts have been delivered to the
Registrar of Companies and included the report of the Auditor which was
unqualified and did not contain a statement under Sections 498(2) or 498(3) of
the Companies Act 2006.
24. Annual Financial Report
The audited 2023 annual financial report will be available to shareholders, and
will be delivered to the Registrar of Companies, shortly. Copies may be
obtained during normal business hours from the Company's Registered Office,
from its correspondence address, 43-45 Portman Square, London W1H 6LY, and via
www.invesco.co.uk/ipukscit .
A copy of the annual financial report will be submitted shortly to the National
Storage Mechanism ("NSM") and will be available for inspection at the NSM,
which is situated at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Notice of Annual General Meeting
THIS NOTICE OF ANNUAL GENERAL MEETING IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION. If you are in any doubt as to what action to take, you should
consult your stockbroker, solicitor, accountant or other appropriate
independent professional adviser authorised under the Financial Services and
Markets Act 2000. If you have sold or otherwise transferred all your shares in
Invesco Perpetual UK Smaller Companies Investment Trust plc, please forward
this document and the accompanying Form of Proxy to the person through whom the
sale or transfer was effected, for transmission to the purchaser or transferee.
NOTICE IS GIVEN that the Annual General Meeting ('AGM') of Invesco Perpetual UK
Smaller Companies Investment Trust plc will be held at the offices of Invesco
at 43-45 Portman Square, London W1H 6LY at 12.00pm on 8 June 2023 for the
following purposes:
Ordinary Business
1. To receive and consider the Annual Financial Report for the year
ended 31 January 2023.
2. To approve the Directors' Remuneration Policy.
3. To approve the Annual Statement and Report on Remuneration for the
year ended 31 January 2023.
4. To approve a final dividend as recommended.
5. To re-elect Bridget Guerin as a Director of the Company.
6. To re-elect Graham Paterson as a Director of the Company.
7. To re-elect Mike Prentis as a Director of the Company.
8. To re-appoint the auditor, Ernst & Young LLP.
9. To authorise the Audit Committee to determine the auditor's
remuneration.
Special Business
To consider and, if thought fit, to pass the following resolutions of which
resolution 10 will be proposed as an ordinary resolution and resolutions 11 to
13 as special resolutions:
Authority to Allot Shares
10. That:
the Directors be generally and unconditionally authorised in accordance with
Section 551 of the Companies Act 2006 as amended from time to time prior to the
date of the passing of this resolution (the 'Act') to exercise all powers of
the Company to allot shares and grant rights to subscribe for, or convert any
securities into, shares up to an aggregate nominal amount (within the meaning
of Sections 551(3) and (6) of the Act) of £676,538, this being 10% of the
Company's issued ordinary share capital as at 18 April 2023, such authority to
expire at the conclusion of the next AGM of the Company or the date 15 months
after the passing of this resolution, whichever is the earlier unless the
authority is renewed or revoked at any other general meeting prior to such
time, but so that this authority shall allow the Company to make offers or
agreements before the expiry of this authority which would or might require
shares to be allotted, or rights to be granted, after such expiry as if the
authority conferred by this resolution had not expired.
Disapplication of Pre-emption Rights
11. That:
the Directors be and are hereby empowered, in accordance with Sections 570 and
573 of the Act to allot equity securities (within the meaning of Section 560
(1), (2) and (3) of the Act) for cash, either pursuant to the authority given
by resolution 10 set out above or (if such allotment constitutes the sale of
relevant shares which, immediately before the sale, were held by the Company as
treasury shares) otherwise, as if Section 561 of the Act did not apply to any
such allotment, provided that this power shall be limited:
(a) to the allotment of equity securities in connection with a rights issue in
favour of all holders of a class of equity securities where the equity
securities attributable respectively to the interests of all holders of
securities of such class are either proportionate (as nearly as may be) to the
respective numbers of relevant equity securities held by them or are otherwise
allotted in accordance with the rights attaching to such equity securities
(subject in either case to such exclusions or other arrangements as the
Directors may deem necessary or expedient in relation to fractional
entitlements or legal or practical problems under the laws of, or the
requirements of, any regulatory body or any stock exchange in any territory or
otherwise);
(b) to the allotment (otherwise than pursuant to a rights issue) of equity
securities up to an aggregate nominal amount of £676,538, this being 10% of the
Company's issued ordinary share capital as at 18 April 2023; and
(c) to the allotment of equity securities at a price not less than the net
asset value per share (as determined by the Directors),
and this power shall expire at the conclusion of the next AGM of the Company or
the date 15 months after the passing of this resolution, whichever is the
earlier unless the authority is renewed or revoked at any other general meeting
prior to such time, but so that this power shall allow the Company to make
offers or agreements before the expiry of this power which would or might
require equity securities to be allotted after such expiry as if the power
conferred by this resolution had not expired; and so that words and expressions
defined in or for the purposes of Part 17 of the Act shall bear the same
meanings in this resolution.
Authority to Make Market Purchases of Shares
12. That:
the Company be generally and subject as hereinafter appears unconditionally
authorised in accordance with Section 701 of the Act to make market purchases
(within the meaning of Section 693(4) of the Act) of its issued ordinary shares
of 20p each in the capital of the Company ('Shares').
PROVIDED ALWAYS THAT:
(a) the maximum number of Shares hereby authorised to be purchased shall be
14.99% of the Company's issued ordinary shares, this being 5,070,657 as at
18 April 2023;
(b) the minimum price which may be paid for a Share shall be 20p;
(c) the maximum price which may be paid for a Share must not be more than the
higher of: (i) 5% above the average of the mid-market values of the Shares for
the five business days before the purchase is made; and (ii) the higher of the
price of the last independent trade in the Shares and the highest then current
independent bid for the Shares on the London Stock Exchange;
(d) any purchase of Shares will be made in the market for cash at prices below
the prevailing net asset value per Share (as determined by the Directors);
(e) the authority hereby conferred shall expire at the conclusion of the next
AGM of the Company or the date 15 months after the passing of this resolution,
whichever is the earlier, unless the authority is renewed or revoked at any
other general meeting prior to such time;
(f) the Company may make a contract to purchase Shares under the authority
hereby conferred prior to the expiry of such authority which will be executed
wholly or partly after the expiration of such authority and may make a purchase
of Shares pursuant to any such contract; and
(g) any Shares so purchased shall be cancelled or, if the Directors so
determine and subject to the provisions of Sections 724 to 731 of the Act and
any applicable regulations of the United Kingdom Listing Authority, be held (or
otherwise dealt with in accordance with Section 727 or 729 of the Act) as
treasury shares.
Period of Notice Required for General Meetings
13. THAT the period of notice required for general meetings of the Company
(other than AGMs) shall be not less than 14 clear days.
Dated this 18 April 2023
By order of the Board
Invesco Asset Management Limited
Corporate Company Secretary
END
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