INVO SELE
Invesco Perpetual Select Trust plc
HALF-YEARLY FINANCIAL REPORT
SIX MONTHS ENDED 30 NOVEMBER 2014
.
FINANCIAL PERFORMANCE
CUMULATIVE TOTAL RETURNS TO 30 NOVEMBER 2014
UK Equity Portfolio
SIX ONE THREE FIVE
MONTHS YEAR YEARS YEARS
Net Asset Value 4.8% 13.8% 80.9% 139.2%
Share Price 6.0% 16.0% 109.1% 147.8%
FTSE All-Share Index -0.1% 4.7% 40.7% 60.9%
Global Equity Income Portfolio
The name and objective of this Portfolio were changed with effect from 30
November 2011.
SIX ONE THREE FIVE
MONTHS YEAR YEARS YEARS
Net Asset Value 5.4% 10.5% 60.0% 68.4%
Share Price 5.5% 9.2% 72.4% 73.2%
MSCI World Index (£) 9.5% 13.9% 57.1% 76.2%
Balanced Risk Portfolio
The name and objective of this Portfolio were changed with effect from 8
February 2012. The three and five year figures below are presented for
consistency. However, the strategy followed prior to 8 February 2012 was
substantially different to the strategy now in place.
SINCE
SIX ONE 8 FEB THREE FIVE
MONTHS YEAR 2012 YEARS YEARS
Net Asset Value 1.5% 6.7% 16.6% 14.9% 5.0%
Share Price 0.0% 5.2% 27.5% 25.4% 9.2%
3 month LIBOR +5% pa 2.8% 5.5% 15.9% 17.1% 28.5%
Managed Liquidity Portfolio
SIX ONE THREE FIVE
MONTHS YEAR YEARS YEARS
Net Asset Value 0.1% 0.3% 1.6% 3.2%
Share Price 0.2% 0.9% 2.7% 3.7%
Source: Thomson Reuters Datastream.
PERIOD END NET ASSET VALUE, SHARE PRICE AND DISCOUNT
NET ASSET SHARE
VALUE PRICE
SHARE CLASS (PENCE) (PENCE) DISCOUNT
UK Equity 160.7 159.8 0.6%
Global Equity Income 155.6 153.5 1.3%
Balanced Risk 120.7 116.0 3.9%
Managed Liquidity 103.3 101.6 1.7%
.
INTERIM MANAGEMENT REPORT INCORPORATING THE
CHAIRMAN'S STATEMENT
Investment Objective and Policy
The Company's investment objective is to provide shareholders with a choice of
investment strategies and policies, each intended to generate attractive
risk-adjusted returns.
The Company's share capital comprises four share classes: UK Equity Shares,
Global Equity Income Shares, Balanced Risk Shares and Managed Liquidity Shares,
each of which has its own separate portfolio of assets and attributable
liabilities.
The Company enables shareholders to alter their asset allocation to reflect
their view of prevailing market conditions. Shareholders have the opportunity
every three months to convert between share classes free of capital gains tax.
Performance
In NAV terms, with dividends reinvested, the UK Equity Portfolio returned +4.8%
over the six months to the end of November 2014 compared with a total return of
-0.1% for its benchmark, the FTSE All-Share Index. The share price total return
was +6.0%, reflecting the benefit of a slight narrowing of the discount.
The Global Equity Income Portfolio returned +5.4% in NAV terms, and +5.5% on
the share price, compared with its benchmark, the MSCI World Index's total
return over the period of +9.5%.
The Balanced Risk Portfolio returned +1.5% in NAV terms, but the discount
widened and there was no change in the share price. The Portfolio's benchmark,
3 month LIBOR plus 5% p.a., returned +2.8%.
The Company's Managed Liquidity Shares, whose objective is derived from cash
returns, returned +0.1% based on the NAV and +0.2% based on the share price.
Relative performance across the share classes was more varied than in the
recent past. The UK Equity class continued to perform very well both absolutely
and relatively. The Global Equity Income class underperformed its benchmark,
largely because of a significant underweight position in the US market. This
has always been a difficult market in which to find attractive higher yielding
equities. However, in the last six months it has outperformed all other
developed markets substantially while also being the largest such market. Our
performance problems have been far from unique and the share class has in fact
performed well relative to most actively managed competitors. The Balanced Risk
share class suffered somewhat from major weakness in commodities, most notably
oil, and the concentration of equity market performance in the US.
The period under review was characterised by increasingly apparent divergence
in economic performance. The US looks increasingly healthy while Europe is
struggling to find growth and is clearly flirting with deflation, not helped by
the constraints of the common currency in the Eurozone. In Asia, China is
facing the effects of badly allocated and excessive capital investment while
Japan may be waking up from its long slumber. The UK meanwhile has experienced
welcome economic growth while avoiding the stresses seen elsewhere in Europe.
Taken overall the forces of slower growth and possible deflation proved
stronger than the acceleration of the US economy. As a result bond yields,
especially in real terms, fell to levels hitherto undreamt of by most fund
managers and industrial commodities were very weak, led by the oil price which
fell by 48% (WTI Crude, in US dollar terms) over the period.
AIFMD
The Company became an AIF, or Alternative Investment Fund, under the EU
Alternative Investment Fund Managers Directive on 22 July 2014. The Company has
appointed Invesco Fund Managers Limited as its AIFM, or Alternative Investment
Fund Manager (Manager), and BNY Mellon Trust & Depositary (UK) Limited as its
depositary, both effective from 22 July 2014. The portfolio managers
responsible for the Company's portfolios on a day to day basis have not changed
and nor has the custodian, The Bank of New York Mellon. However, they now
operate under delegated authority from the contracted AIFM and depositary.
Management Fees
The Board announced on 2 September 2014 that it had agreed with the Company's
Manager a reduction in the basic management fee on the UK Equity and Global
Equity Income portfolios from 0.75% per annum to 0.65% per annum and a
reduction in the maximum performance fee payable in any one year on these two
portfolios from 0.75% of net assets per annum to 0.65%. The changes were
effective retrospectively from 1 June 2014. No changes have been made to the
fees payable in respect of the Balanced Risk and Managed Liquidity portfolios.
Dividends
For the remainder of this financial year it remains the Directors' policy to
distribute substantially all net revenues earned between each conversion date
for each share class.
The following first and second interim dividends have been paid:
15 August 2014 14 November 2014
UK Equity Shares: 1.00p 1.30p
Global Equity Income 1.45p 0.95p
Shares:
Third interim dividends, payable on 13 February 2015, have also been declared,
as follows:
UK Equity Shares: 1.20p
Global Equity Income 0.40p
Shares:
In consequence of the continued very low interest rates prevailing, the
cumulative retained net revenue of the Managed Liquidity Portfolio continues to
be minimal and in view of the administrative costs, the Directors have not
declared any dividends on the Managed Liquidity Shares since 18 April 2012.
In order to maximise the capital return on the Balanced Risk Shares, the
Directors only intend to declare dividends on the Balanced Risk Shares to the
extent required, having taken into account the dividends paid on the other
Share classes, to maintain the Company's status as an investment trust. Present
estimates continue to indicate that it is unlikely that any dividend will be
declared on the Balanced Risk shares for some time.
The Directors have decided to modify the dividend policy in respect of the two
equity portfolio share classes for the next and subsequent financial years.
Having observed that the existing policy has delivered a rather uneven dividend
progression and, in the belief that shareholders would appreciate more
consistency of dividends, it is proposed that, for both UK Equity and Global
Equity Income, the Company move to a model of three equal interim dividends in
July, October and January with a larger `wrap-up' fourth interim in April.
Depending on the level of income received in the relevant quarters, some of the
three equal dividends for each share class may be enhanced with contributions
from capital to achieve this. However, it is intended that total dividends over
the course of the year will not be materially different from revenue earnings
per share for each share class.
Share Buy Backs and Discount
The Company has continued to operate a strict discount control policy in
respect of all four share classes. During the six months to 30 November 2014,
the Company bought back, into treasury, 100,000 Global Equity Income shares,
100,000 Balanced Risk shares and 49,569 Managed Liquidity shares in connection
with operating this policy.
Outlook
After a period in which trends reversed before they really became established,
those that appeared in the second half of 2014 seem likely to have some staying
power. The divergences in economic performance appear well established. In
particular the problems of European economies, largely excepting the UK, look
stubbornly entrenched and China's difficulties have a substantial long-term
structural component. The weakness of demand that these imply and the low short
term marginal costs of production should inhibit any immediate revival in
commodity markets, although the bulk of the falls may have been seen.
The future political scene looks turbulent and clearly capable of disturbing
financial markets. Established conflicts in the Middle East and Ukraine are
unresolved and appear intractable. In the meantime the passivity of European
electorates in the face of poor economic performance is increasingly likely to
be challenged whether in Greece or the UK. The US is likely to remain
attractively stable while also organisationally dysfunctional.
The Board remains confident in the management of the different share classes.
Our equity managers are suitably sceptical about the opportunities they see and
Balanced Risk has an investment process that should enable it to continue to
generate relatively smooth absolute returns. These classes therefore provide
attractive alternative investment solutions for existing and prospective
shareholders and all offer advantages to holders in the current market
conditions. We further believe that the Company's structure, which enables
shareholders to switch between share classes on a quarterly basis, without cost
or crystallising capital gains tax, is an attractive feature for private
investors.
.
Related Party Transactions and Transactions with the Manager
Under United Kingdom Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law), the Company has identified the Directors as
related parties. No other related parties or related party transactions have
been identified during the period.
With effect from 22 July 2014, Invesco Fund Managers Limited (IFML), a wholly
owned subsidiary of Invesco Limited and associate company of Invesco Asset
Management Limited (IAML), was appointed as Manager. Prior to 22 July 2014,
IAML was the Manager and it continues to carry out its previous functions under
delegated authority from IFML. The fee arrangements with the Manager were
changed on 2 September 2014 and are effective from 1 June 2014. Previously the
fee arrangements as disclosed in the 2014 annual financial report were in
effect.
Principal Risks and Uncertainties
Explanations of the Company's principal risks and uncertainties are set out on
pages 33 to 35 of the 2014 annual financial report, which is available on the
Manager's website.
These are summarised as follows:
• Investment Policy - the investment policies may not achieve the published
investment objectives;
• Risks Applicable to the Company - the prices of shares in the Company may not
appreciate and the level of dividends may fluctuate;
• Compulsory Conversion of a Class of Shares - if ownership of a class of
shares becomes too concentrated the Directors may serve notice on holders of
the affected class requiring them to convert to another class;
• Liability of a Portfolio for the Liabilities of Another Portfolio - in the
event that any Portfolio was unable to meet its liabilities, the shortfall
would become a liability of the other Portfolios;
• Market Movements and Portfolio Performance - falls in stock markets will
affect the performance of the individual Portfolios and securities held within
the Portfolios;
• Gearing - borrowing will amplify the effect on shareholders' funds of gains
and losses on the underlying securities;
• Hedging - where hedging is used there is a risk that the hedge will not be
effective;
• Regulatory and Tax Related - whilst compliance with rules and regulations is
closely monitored, breaches could affect returns to shareholders;
• Additional Risks Applicable to Balanced Risk Shares - the use of financial
derivative instruments, in particular futures, forms part of the investment
policy and strategy of the Balanced Risk Portfolio. The degree of leverage
inherent in futures trading potentially means that a relatively small price
movement in a futures contract may result in an immediate and substantial loss
to the Portfolio;
• Additional Risks Applicable to Managed Liquidity Shares - the Shares are not
designed to replicate a bank or building society deposit or money market fund;
and
• Reliance on Third Party Service Providers - the Company has no employees, so
is reliant upon the performance of third party service providers, particularly
the Manager, for it to function.
In the view of the Board these principal risks and uncertainties are as equally
applicable to the remaining six months of the financial year as they were to
the six months under review.
Going Concern
The financial statements have been prepared on a going concern basis. The
Directors consider this to be appropriate as the Company has adequate resources
to continue in operational existence for the foreseeable future being 12 months
after approval of the financial statements. In reaching this conclusion, the
Directors took into account the value of net assets; the Company's Investment
Policy; its risk management policies; the diversified portfolio of readily
realisable securities which can be used to meet funding commitments; the credit
facility and the overdraft which can be used for short-term funding
requirements; the liquidity of the investments which could be used to repay the
credit facility in the event that the facility could not be renewed or
replaced; its revenue; and the ability of the Company in the light of these
factors to meet all its liabilities and ongoing expenses.
Patrick Gifford
Chairman
29 January 2015
.
DIRECTORS' RESPONSIBILITY STATEMENT
in respect of the preparation of the half-yearly financial report
The Directors are responsible for preparing the half-yearly financial report
using accounting policies consistent with applicable law and UK Accounting
Standards.
The Directors confirm that, to the best of their knowledge:
- the condensed set of financial statements contained within the half-yearly
financial report have been prepared in accordance with the Accounting Standards
Board's Statement "Half-Yearly Financial Report";
- the interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R of the FCA's Disclosure and Transparency
Rules; and
- the interim management report includes a fair review of the information
required on related party transactions.
The half-yearly financial report has not been audited or reviewed by the
Company's auditor.
Signed on behalf of the Board of Directors.
Patrick Gifford
Chairman
29 January 2015
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UK EQUITY SHARE PORTFOLIO
PERFORMANCE RECORD
Total Return
SIX MONTHS YEAR TO YEAR TO YEAR TO YEAR TO
TO 30 NOV 31 MAY 31 MAY 31 MAY 31 MAY
2014 2014 2013 2012 2011
Net Asset Value 4.8% 18.3% 42.8% -1.0% 28.1%
Share Price 6.0% 9.2% 63.5% -3.4% 27.5%
FTSE All-Share Index -0.1% 8.9% 30.1% -8.0% 20.4%
Source: Thomson Reuters Datastream.
Revenue return per share 2.41p 5.40p 5.48p 4.22p 4.07p
Dividend 2.30p 5.30p 5.55p 4.25p 4.20p
UK EQUITY SHARE PORTFOLIO
MANAGER'S REPORT
Investment Objective
The investment objective of the UK Equity Portfolio is to provide shareholders
with an attractive real long-term total return by investing primarily in UK
quoted equities.
Market and Economic Review
The six month period under review saw the UK equity market, as measured by the
FTSE All-Share Index, finish broadly flat with a fall of 0.1% (with dividends
reinvested). This return represented a material pause after a six year long
bull market rally, as concerns surfaced over future profit growth, caused by
disappointing company results statements, and over the ending of the
Quantitative Easing (QE) programme in the US. In addition, over the course of
the period, fears over China's growth rate and a weakening European economy
became more relevant concerns. Furthermore, rising geopolitical risk and the
prospect of UK domestic elections began to affect the previously stable
backdrop for the market.
On the positive front, inflation remained subdued and, although wage growth was
weak, the prices of non-discretionary items including petrol and food were
falling, thereby benefiting households and relieving some of the upward
pressure on interest rates. Government bond yields were supportive of equities
over the period and the 30 year US government bond yield fell below 3%,
suggesting that the market views the longer term outlook for global inflation
as subdued.
Portfolio Performance
On a total return basis, the UK Equity Share Portfolio's net asset value per
share, including re-invested dividends, rose by 4.8% over the six months to the
end of November 2013, compared to a fall of 0.1% in the FTSE All-Share Index.
Portfolio Strategy and Review
The Portfolio's outperformance over the six month period reflected some strong
contributions from across its holdings. The most significant positive
contributions came from BAE Systems, BTG, AstraZeneca, Reynolds American and
Imperial Tobacco.
BAE Systems' share price continued to rise amid growing instability in the
Middle East, helped also by the ongoing implementation of its £1 billion share
repurchase programme and the successful resolution of a large contract
negotiation with Saudi Arabia.
BTG saw a sharp rise in its share price over the period on the back of
significant positive news flow. Having previously announced that it had
received approval from the US Food and Drug Administration for its Varithena
injectable foam medication for the non-surgical treatment of varicose veins,
further positive news came during the period under review when the company
announced that its DC Bead® oncology product had been approved for sale in
China, which represents the largest potential market for patients suffering
with liver cancer.
AstraZeneca continued to grow its drug pipeline in 2014, with its chief
executive commenting post the company's half year results in July that
`significant progress' had been made and that there was `visible momentum'
across their cardiovascular, diabetes and respiratory franchises, as well as
strong growth in the emerging markets. Meanwhile, Reynolds American and
Imperial Tobacco have seen their share prices rise following merger &
acquisition activity, with both companies awaiting final US government approval
for Reynolds' planned merger with Lorillard and Imperial Tobacco's purchase of
certain of both companies' brands.
Amongst the detractors to performance over the period were Thomas Cook,
Rolls-Royce, BP and N Brown.
Thomas Cook saw its share price decline sharply when it failed to match last
year's sales growth, and more latterly in reaction to fears that the Ebola
outbreak and unrest in Turkey would negatively affect bookings. We note here
that the disruption in Turkey is several hundred miles from the holiday
destinations on the Mediterranean coast.
Rolls-Royce warned that sales would decline this year and could fall again in
2015 as a result of lower demand for defence equipment due to a deteriorating
global economic backdrop, client specific order delays and Russian sanctions,
which have blocked diesel-engine exports to Russia. In spite of the recent
share price falls we remain supportive of this holding, not least due to the
company's continuing positive long term prospects, strong market position,
global reputation and specialist technological and manufacturing expertise.
BP's shares retreated over the period in sympathy with falling oil prices and
from negative fallout relating to its minority stake in the Russian state
controlled oil company, Rosneft, which has been affected by the weakness of the
rouble.
Finally, UK retailer N Brown's profits were hampered by weaker performance from
its mail-order business, as it sought to expand its digital offering, as well
as by a challenging winter clothing sales environment as the month of September
proved to be one of the warmest on record.
In terms of portfolio activity, new investments comprised Game Digital and
Friends Life, with no disposals being made over the period.
Outlook
The UK equity market is likely to become more volatile. The key issues which
continue to overshadow the performance of the equity market remain the
interplay between growing investor pessimism on the global economic outlook and
the ability of policymakers to create the conditions to reinvigorate growth
prospects where necessary. The recent performance of the Eurozone and Chinese
economies in particular is concerning. Weaker than expected growth in these
areas and the deflationary forces that are exported will undoubtedly have an
impact on other developed economies such as the US and the UK, which performed
relatively well in 2014. The overall background for revenue growth is likely to
remain challenging in 2015.
The speed and severity of the decline in the oil price neatly encapsulates both
sides of the economic debate. On the positive side, it is certainly a boost to
consumption in the developed world, but it is clearly a deflationary force and
represents a reminder of the underlying weakening demand in the Chinese
economy. The speed of the recent decline and how companies respond to this new
volatility represents an additional contributor to stock market volatility.
Given the recent economic news it is likely that the anticipated increase in
rates in the US and UK will be deferred until at least mid-2015 as there is
very little sign of inflationary pressure in these economies, despite rapidly
falling levels of unemployment.
The political backdrop both domestically and internationally is another issue
which has taken on more relevance in the recent past and which is likely to
remain an important influence for the next 12 months. The changes in the
political agenda ahead of the UK general election in May 2015 are likely to be
another source of uncertainty for the UK stock-market.
Moments of market weakness in recent weeks are symptomatic of some of these
concerns. It is true that equities continue to look attractive relative to
other asset classes, but in some cases absolute valuations still look elevated
where share prices do not appropriately anticipate the risk to earnings and
cash flows. The portfolio strategy is therefore largely unchanged. A high price
is placed on companies in the market that offer visibility of revenues, profits
and cash flows in this low growth world and which are managed for the principal
purpose of delivering shareholder value in the form of a sustainable and
growing dividend.
Mark Barnett
Portfolio Manager
29 January 2015
UK EQUITY SHARE PORTFOLIO
LIST OF INVESTMENTS
AT 30 NOVEMBER 2014
Ordinary shares listed in the UK unless stated otherwise
MARKET
VALUE % OF
COMPANY SECTOR† £'000 PORTFOLIO
British American Tobacco Tobacco 3,667 4.9
Imperial Tobacco Tobacco 3,425 4.6
Reynolds American - US common Tobacco 3,402 4.6
stock
AstraZeneca Pharmaceuticals & 3,194 4.3
Biotechnology
BT Group Fixed Line 3,181 4.3
Telecommunications
Roche - Swiss common stock Pharmaceuticals & 2,862 3.8
Biotechnology
BAE Systems Aerospace & Defence 2,818 3.8
GlaxoSmithKline Pharmaceuticals & 2,040 2.7
Biotechnology
BTG Pharmaceuticals & 1,900 2.6
Biotechnology
SSE Electricity 1,883 2.5
Legal & General Life Insurance 1,855 2.5
Babcock International Support Services 1,781 2.4
Reckitt Benckiser Household Goods & Home 1,777 2.4
Construction
Provident Financial Financial Services 1,651 2.2
Reed Elsevier Media 1,627 2.2
BP Oil & Gas Producers 1,619 2.2
Capita Support Services 1,561 2.1
Beazley Non-life Insurance 1,554 2.1
Bunzl Support Services 1,527 2.0
GAME Digital General Retailers 1,436 1.9
Compass Travel & Leisure 1,386 1.9
London Stock Exchange Financial Services 1,373 1.8
Hiscox Non-life Insurance 1,370 1.8
Thomas Cook Travel & Leisure 1,370 1.8
Rolls-Royce - Ordinary Shares Aerospace & Defence 1,350
- C Shares 14 1.8
G4S Support Services 1,356 1.8
Novartis - Swiss common stock Pharmaceuticals & 1,343 1.8
Biotechnology
Amlin Non-life Insurance 1,283 1.7
Rentokil Initial Support Services 1,280 1.7
Shaftesbury Real Estate Investment 1,176 1.6
Trusts
Drax Electricity 1,140 1.5
NewRiver Retail Real Estate Investment 1,125 1.5
Trusts
Derwent London Real Estate Investment 1,112 1.5
Trusts
KCOM Fixed Line 967 1.3
Telecommunications
Centrica Gas, Water & Multiutilities 958 1.3
Workspace Real Estate Investment 958 1.3
Trusts
TalkTalk Telecom Fixed Line 911 1.2
Telecommunications
A J Bell - Unquoted Financial Services 781 1.1
Friends Life Life Insurance 765 1.0
Lancashire Non-life Insurance 755 1.0
HomeServe Support Services 723 1.0
N Brown General Retailers 721 1.0
Ladbrokes Travel & Leisure 672 0.9
Macau Property Opportunities Real Estate Investment & 656 0.9
Fund Services
Smith & Nephew Health Care Equipment & 597 0.8
Services
Nimrod Sea Assets Equity Investment Instruments 592 0.8
CLS Real Estate Investment & 590 0.8
Services
Vectura Pharmaceuticals & 510 0.7
Biotechnology
Doric Nimrod Air Two - Equity Investment Instruments 338 0.5
Preference Shares
Doric Nimrod Air Three - Equity Investment Instruments 334 0.5
Preference Shares
Sherborne Investors Guernsey B Financial Services 279 0.4
- A Shares
Chemring Aerospace & Defence 267 0.4
Serco Support Services 207 0.3
PuriCore Health Care Equipment & 184 0.3
Services
Coalfield Resources Real Estate Investment & 79 0.1
Services
Barclays Bank - Nuclear Power Electricity 52 0.1
Notes 28 Feb 2019
HaloSource Chemicals 18 -
74,352 100.0
†FTSE Industry Classification Benchmark.
.
UK EQUITY SHARE PORTFOLIO
INCOME STATEMENT
YEAR
ENDED
SIX MONTHS ENDED SIX MONTHS ENDED 31 MAY
30 NOVEMBER 2014 30 NOVEMBER 2013 2014
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 2,476 2,476 - 4,363 4,363 8,384
Foreign exchange gains - - - - 4 4 (1)
/(losses)
Income 1,137 - 1,137 919 60 979 2,556
Management fee - note 2 (61) (142) (203) (63) (147) (210) (442)
Performance fee - note 2 - (331) (331) - (289) (289) (561)
Other expenses (93) - (93) (85) - (85) (176)
Net return before 983 2,003 2,986 771 3,991 4,762 9,760
finance costs and
taxation
Finance costs (19) (46) (65) (17) (39) (56) (106)
Return on ordinary 964 1,957 2,921 754 3,952 4,706 9,654
activities before tax
Tax on ordinary (10) - (10) (11) - (11) (46)
activities
Return on ordinary 954 1,957 2,911 743 3,952 4,695 9,608
activities after tax
for the financial
period
Basic return per 2.41p 4.95p 7.36p 1.92p 10.20p 12.12p 24.59p
ordinary share - note 4
SUMMARY OF NET ASSETS
AT AT AT
30 NOVEMBER 30 NOVEMBER 31 MAY
2014 2013 2014
£'000 £'000 £'000
Fixed assets 74,352 64,730 70,373
Current assets 313 2,671 758
Creditors falling due within one (1,299) (1,298) (1,447)
year, excluding borrowings
Bank loan (9,800) (8,800) (8,200)
Net assets 63,566 57,303 61,484
Net asset value per ordinary share - 160.7p 146.5p 155.6p
note 5
Gearing:
- gross 15.4% 15.4% 13.3%
- net 15.3% 11.1% 12.7%
.
GLOBAL EQUITY INCOME SHARE PORTFOLIO
PERFORMANCE RECORD
The name, objective and benchmark of this Portfolio were changed with effect
from 30 November 2011.
Total Return
SIX MONTHS YEAR TO YEAR TO YEAR TO YEAR TO
TO 30 NOV 31 MAY 31 MAY 31 MAY 31 MAY
2014 2014 2013 2012 2011
Net Asset Value 5.4% 9.6% 33.9% -8.6% 9.8%
Share Price 5.5% 8.3% 40.4% -8.0% 8.1%
MSCI World Index (£) 9.5% 7.4% 29.7% -4.8% 13.0%
Source: Thomson Reuters Datastream.
Revenue return per share 1.55p 4.22p 3.28p 2.69p 1.99p
Dividend 2.40p 3.55p 3.40p 2.50p 1.70p
GLOBAL EQUITY INCOME SHARE PORTFOLIO
MANAGER'S REPORT
Investment Objective
The investment objective of the Global Equity Income Portfolio is to provide an
attractive and growing level of income return and capital appreciation over the
long term, predominantly through investment in a diversified portfolio of
equities worldwide.
Market and Economic Review
In a year characterised by a series of economic, geopolitical, and market
shifts, economic growth has been disappointing virtually everywhere with the
exception of the US and UK. Over the past six months in particular, focus has
shifted to the accelerating slide in oil prices (more than 40% decline since
June 2014). A surprise surge in production and weaker than expected global
demand for crude have sent oil reserves soaring and prices tumbling, which has
increased concerns about slower economic growth across global financial markets
in recent months. Energy stocks have suffered as have oil-dependent countries
such as Venezuela and Russia. However, in our view, financial markets appear to
be overreacting. The focal point has been stock price volatility rather than
the real benefit of lower oil prices, which we view as a greater level of
consumption amid the transfer of wealth from (oil) producers to consumers (and
corporates) around the world. This has the potential to provide a significant
boost to global economic growth in the months ahead. Nonetheless, we remain
vigilant about the negative impact on the energy sector and the potential for
worsening credit quality for some financial institutions.
Portfolio Performance
On a total return basis, the Portfolio's net asset value per share increased
5.4% over the six months to the end of November 2014, compared to a return of
9.5% by the benchmark MSCI World Index (£, net of withholding tax).
Portfolio Strategy and Review
The Portfolio underperformed the benchmark during the six months due to its
overweight positions in Europe and the UK relative to the index, which both
underperformed the broader benchmark, and its underweight exposure to the US.
Notwithstanding the geographical returns of the benchmark index, portfolio
stock selection was strong in the UK. The US accounts for approximately 58% of
the MSCI World Index and outperformed the broader benchmark due to economic
growth picking up, driven by a surge in business and consumer spending, strong
corporate results, and the commitment to loose monetary conditions by
policymakers. Albeit that exposure to the US was underweight relative to the
index, which significantly contributed to the portfolio lagging in the period,
some of the strongest stock performers in the portfolio included US stocks
Amgen, Microsoft, Covidien and Macy's. Despite worries over Chinese economic
growth, stock selection within Asia ex-Japan was positive. Some of the
strongest individual stock performers in that region included Yue Yuen
Industrial, ComfortDelGro and Telekomunikasi Indonesia.
At the sector level, performance from both cyclical stocks (those more
sensitive to the economic cycle) and more defensive areas of the market (those
less sensitive to the economic cycle) was mixed. Consumer staples, health care,
IT, telecoms and utilities all performed well at the broader market level, and
the Portfolio's overweight exposure to consumer staples (Mead Johnson
Nutrition) and health care (Novartis) as well as stock picking within materials
(Orora) and consumer discretionary (Macy's, Target), was beneficial for
performance. However, the Portfolio's underweight exposure to IT and telecoms
as well as a zero weight in utilities detracted from returns.
Amid a strong appetite for dividend-paying stocks, the de-rating of more
economically-sensitive areas of the market provided us with a number of
attractively-valued opportunities within financials and other out-of-favour
sectors. Together with the strong performance of defensive, or so called bond
proxy stocks, this has led us to reduce the Portfolio's overweight exposure to
health care and other stable, defensive areas of the market.
Outlook
Against a backdrop of disappointing economic growth globally, Europe has been
particularly weak. However, in our view, pessimism about the region is
overdone. We remain optimistic that a number of European companies offer
compelling valuation opportunities and should benefit from the combined
tailwinds of a weaker euro, lower oil price and loose monetary policy. Our
strategy remains constant, to invest in high quality companies at attractive
valuations. We view high quality companies as those that can sustain profit
margins and deliver positive returns through the economic cycle. We view
growing and sustainable dividends as clear evidence of these sorts of
companies. In aggregate therefore, we target companies that offer attractive
yields, sustainable income and capital upside.
Nick Mustoe
Portfolio Manager
29 January 2015
GLOBAL EQUITY INCOME SHARE PORTFOLIO
LIST OF INVESTMENTS
AT 30 NOVEMBER 2014
Ordinary shares unless stated otherwise
MARKET
VALUE % OF
COMPANY INDUSTRY GROUP† COUNTRY† £'000 PORTFOLIO
Novartis Pharmaceuticals Switzerland 2,524 4.6
Biotechnology & Life
Sciences
Reed Elsevier NV Media Netherlands 2,063 3.7
BT Group Telecommunication Services UK 1,994 3.6
Roche Pharmaceuticals Switzerland 1,695 3.1
Biotechnology & Life
Sciences
Legal & General Insurance UK 1,685 3.0
British American Food Beverage & Tobacco UK 1,637 3.0
Tobacco
Amgen Pharmaceuticals US 1,628 2.9
Biotechnology & Life
Sciences
Pfizer Pharmaceuticals US 1,596 2.9
Biotechnology & Life
Sciences
Microsoft Software & Services US 1,580 2.9
Nordea Banks Sweden 1,462 2.6
HSBC Banks UK 1,427 2.6
Macy's Retailing US 1,423 2.6
RTL Media Luxembourg 1,410 2.5
United Technologies Capital Goods US 1,408 2.5
Allianz Insurance Germany 1,317 2.4
Atlantia Transportation Italy 1,228 2.2
Deutsche Boerse Diversified Financials Germany 1,182 2.1
PNC Financial Banks US 1,166 2.1
Services
Adecco Commercial & Professional Switzerland 1,165 2.1
Services
Target Retailing US 1,072 1.9
Total Energy France 1,066 1.9
UBS Diversified Financials Switzerland 1,047 1.9
Philip Morris Food Beverage & Tobacco US 1,046 1.9
International
Hutchison Whampoa Capital Goods Hong Kong 1,041 1.9
Baxter International Health Care Equipment & US 1,038 1.9
Services
BP Energy UK 1,006 1.8
Kellogg Food Beverage & Tobacco US 991 1.8
United Parcel Transportation US 919 1.7
Service - B Shares
Aon - A Shares Insurance US 896 1.6
Statoil Energy Norway 863 1.6
ING Banks Netherlands 858 1.5
GlaxoSmithKline Pharmaceuticals UK 858 1.5
Biotechnology & Life
Sciences
Booker Food & Staples Retailing UK 825 1.5
Chevron Energy US 818 1.5
Deutsche Post Transportation Germany 808 1.5
BNP Paribas Banks France 777 1.4
Canon Technology Hardware & Japan 763 1.4
Equipment
Nielsen Commercial & Professional US 744 1.3
Services
Hiscox Insurance UK 717 1.3
Honda Motor Automobiles & Components Japan 711 1.3
Las Vegas Sands Consumer Services US 675 1.2
Orora Materials Australia 622 1.1
Mead Johnson Food Beverage & Tobacco US 618 1.1
Nutrition
Standard Chartered Banks UK 612 1.1
Telekomunikasi Telecommunication Services Indonesia 604 1.1
Indonesia
Amcor Materials Australia 604 1.1
Yue Yuen Industrial Consumer Durables & Apparel Hong Kong 597 1.1
Rolls-Royce - Capital Goods UK 582
Ordinary Shares
- C Shares 6 1.1
Koninklijke Ahold Food & Staples Retailing Netherlands 558 1.0
DS Smith Materials UK 533 1.0
Ladbrokes Consumer Services UK 432 0.8
Denbury Resources Energy US 381 0.7
ComfortDelGro Transportation Singapore 84 0.1
55,362 100.0
†MSCI and Standard & Poor's Global Industry Classification Standard.
.
GLOBAL EQUITY INCOME SHARE PORTFOLIO
INCOME STATEMENT
YEAR
ENDED
SIX MONTHS ENDED SIX MONTHS ENDED30 31 MAY
30 NOVEMBER 2014 NOVEMBER 2013 2014
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 1,896 1,896 - 1,801 1,801 3,015
Foreign exchange losses - - - - (2) (2) (9)
Income 658 - 658 509 - 509 1,850
Management fees - note 2 (47) (109) (156) (50) (117) (167) (343)
Other expenses (71) (1) (72) (67) (3) (70) (138)
Net return before 540 1,786 2,326 392 1,679 2,071 4,375
finance costs and
taxation
Finance costs (12) (28) (40) (1) (3) (4) (32)
Return on ordinary 528 1,758 2,286 391 1,676 2,067 4,343
activities before tax
Tax on ordinary (42) - (42) (41) - (41) (137)
activities
Return on ordinary 486 1,758 2,244 350 1,676 2,026 4,206
activities after tax
for the financial
period
Basic return per 1.55p 5.60p 7.15p 1.12p 5.39p 6.51p 13.45p
ordinary share - note 4
SUMMARY OF NET ASSETS
AT AT AT
30 NOVEMBER 30 NOVEMBER 31 MAY
2014 2013 2014
£'000 £'000 £'000
Fixed assets 55,362 47,062 51,398
Current assets 584 314 564
Creditors falling due within one year, (196) (144) (129)
excluding borrowings
Bank loan (7,000) (1,500) (4,400)
Net assets 48,750 45,732 47,433
Net asset value per ordinary share - note 5 155.6p 145.9p 150.9p
Gearing:
- gross 14.4% 3.3% 9.3%
- net 13.7% 2.9% 8.6%
.
BALANCED RISK SHARE PORTFOLIO
PERFORMANCE RECORD
The name and objective of this Portfolio were changed with effect from on 8
February 2012.
Total Return
SIX MONTHS YEAR TO YEAR TO YEAR TO YEAR TO
TO 30 NOV 31 MAY 31 MAY 31 MAY 31 MAY
2014 2014 2013 2012 2011
Net Asset Value 1.5% 5.5% 8.3% -8.0% -0.3%
Share Price 0.0% 4.5% 20.7% -12.4% -1.9%
3 month LIBOR +5% pa 2.8% 5.5% 5.7% 5.9% 5.7%
Source: Thomson Reuters Datastream.
Total Return - since change of objective (8 February 2012) 8 FEBRUARY TO
30 NOVEMBER
2014
Net Asset Value 16.6%
Share Price 27.5%
3 month LIBOR +5% pa 15.9%
BALANCED RISK SHARE PORTFOLIO
MANAGER'S REPORT
Investment Objective
The investment objective of the Balanced Risk Portfolio is to provide
shareholders with an attractive total return in differing economic and
inflationary environments, and with low correlation to equity and bond market
indices by gaining exposure to three asset classes: debt securities, equities
and commodities.
Market and Economic Review
Stocks, bonds and commodities all started the period off on a positive note.
Bond yields fell as geopolitical concerns drove demand for safe-haven assets.
Bonds also benefited from weak economic data as evidenced by the final
iteration of US GDP for the first quarter of the calendar year coming in below
expectations. Government bond yields across developed markets continued to
contract throughout the six months under review in response to weak
manufacturing data and activity slowing in the Eurozone, Japan and China.
Equity prices continued to climb higher through June despite elevated
valuations in key markets and lacklustre economic data, indicating that
investor sentiment was most likely the primary driver of returns. However,
equity prices pulled back in July as volatility returned amidst geopolitical
tensions and softening business conditions in Europe, while bond prices
continued to rise. Developed equity markets were mixed from August through to
October, but ended in positive territory in November, despite headwinds
presented by the uneven global economic landscape.
Energy and metals commodity prices rose on geopolitical fears in the first
months of the period under review. Agriculture prices tailed off over the
second quarter of the calendar year, as more favourable weather patterns helped
to alleviate concerns over poor crop yields, and then commodity prices
generally came under pressure from August through to the end of November. In
September, a rising US Dollar and weak economic data out of China and Europe
caused negative returns across all four primary complexes. Oversupply and
OPEC's decision in November to maintain output at its current levels caused
further commodity price contraction.
Portfolio Performance
The Balanced Risk Share Portfolio posted a positive return per share of 1.5%
for the period, but underperformed the benchmark, 3 month LIBOR plus 5%, which
returned 2.8%.
Portfolio Strategy and Review
Stocks and bonds started the period off with positive performance while
commodity prices were mixed. Results of the opening tactical positioning were
positive as we had overweighted all six bond and all six equity markets.
Bonds contributed positively to results through to August as yields contracted
in the face of continued conflict in Ukraine and the escalation of hostilities
in the middle east. German and Japanese bonds generated positive results while
yields in the US, UK, Australia and Canada rose meaningfully during September
before settling at slightly higher yield levels at the end of that month. Bonds
ended the period in positive territory as yields fell across all the markets
represented within the strategy and our tactical overweights to all bond
markets during November paid off nicely.
Equity markets weakened in July but bounced back slightly in August. The six
developed equity markets posted mixed results through to October but then
posted gains in November despite weak manufacturing data and the bleak economic
outlook for Japan, which prompted the Bank of Japan to launch an enhanced
quantitative easing program. Overweight positions to all six markets proved
timely and helped bolster results.
Commodity performance was positive in June, but mixed in July and weakened in
August with all four complexes posting losses. Commodities continued to face
headwinds through to November. Precious metals declined the least as gold
managed a slight gain on news of major purchases by foreign central banks which
helped to soften the negative result from silver, which declined on weak
manufacturing data. With a few exceptions, like wheat and corn, agricultural
commodity prices generally declined on strong supply estimates, while
industrial metals softened on sub-par manufacturing PMI (purchasing managers
index) data, especially from China. Energy commodities were the biggest loser,
with WTI (West Texas intermediate) crude, Brent crude and key distillates all
down double digits. Underweight tactical positions across the majority of the
commodity spectrum helped to soften the blow from the weak asset class
performance.
Outlook
As we see out 2014, it is hard to ignore the performance divergences that have
grown between asset classes over the past 11 months. Global government bond
yields are reaching depths not seen since the financial crisis, or in some
cases, in all of history. At the same time, economically sensitive commodities
like copper and energy have fallen by double digits. Clearly, the picture being
painted by bonds and commodities is one of disinflation, if not outright
deflation, while equities, at least in local currency terms, continue to trade
higher, reflecting optimism about continued central bank largesse and the solid
prospects for the US economy.
Our tactical positioning continues to overweight all bond markets, although on
a reduced scale. All six equity markets also continue to carry overweights with
increased exposure to Europe and the UK and tempered exposures to Hong Kong and
the US. The strategy remains underweight commodities and, from a target risk
contribution perspective, that segment is now at the low end of the allowable
range for the first time since inception of the strategy (all references to
overweights and underweights represent tactical active overlays relative to
their respective strategic allocations as determined by our proprietary
analysis process).
Scott Wolle
Chief Investment Officer
Invesco Global Strategies
29 January 2015
BALANCED RISK SHARE PORTFOLIO
LIST OF INVESTMENTS
AT 30 NOVEMBER 2014
MARKET %
YIELD VALUE OF NET
% £'000 ASSETS
Short Term Investments
UK Treasury Bill 9 Feb 2015 0.378 2,997 32.3
Short-Term Investment Company (Global Series) 0.449 2,750 29.7
UK Treasury Bill 2 Mar 2015 0.495 2,597 28.0
Total Short Term Investments 8,344 90.0
Hedge Funds(1) 22 0.2
Total Fixed Asset Investments 8,366 90.2
(1)The hedge fund investments are residual holdings of the previous investment
strategy, which are in process of disposal and/or liquidation.
LIST OF DERIVATIVE INSTRUMENTS
AT 30 NOVEMBER 2014
NOTIONAL
NOTIONAL EXPOSURE
EXPOSURE AS % OF
£'000 NET ASSETS
Government Bonds
UK 1,763 19.0
Australia 1,707 18.4
Germany 1,580 17.0
Canada 1,538 16.6
Japan 1,108 11.9
US 912 9.8
Total Bond Futures 8,608 92.7
Equities
Hong Kong 692 7.5
Europe 671 7.2
Japan 608 6.6
UK 538 5.8
US large cap 530 5.7
US small cap 454 4.9
Total Equity Futures 3,493 37.7
Commodities
Industrial Metals
Copper 526 5.7
Aluminium 230 2.5
Agriculture
Soy bean 230 2.5
Soy meal 227 2.4
Sugar 212 2.3
Precious Metals
Gold 301 3.2
Silver 200 2.2
Energy
WTI crude 131 1.4
Gasoline 101 1.1
Brent crude 95 1.0
Total Commodities Futures 2,253 24.3
Total Derivative Instruments 14,354 154.7
The targeted annualised risk (volatility of monthly returns) for the portfolio
as listed above is analysed as follows:
ASSET CLASS RISK CONTRIBUTION
Bonds 3.3% 36.5%
Equities 4.2% 46.8%
Commodities 1.5% 16.7%
9.0% 100.0%
Derivative instruments held in the Balanced Risk Share Portfolio are shown
above. At the period end all derivative instruments held in this Portfolio were
exchange traded future contracts. Holdings in futures contracts that are not
exchange traded are permitted as explained in the investment policy which is
disclosed in full on page 28 of the 2014 annual financial report.
.
BALANCED RISK SHARE PORTFOLIO
INCOME STATEMENT
YEAR
ENDED
SIX MONTHS ENDED SIX MONTHS ENDED30 31 MAY
30 NOVEMBER 2014 NOVEMBER 2013 2014
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on - 2 2 - (1) (1) -
investments
Gains on derivative 54 149 203 64 110 174 641
instruments
Foreign exchange gains/ - 14 14 - (45) (45) (67)
(losses)
Income 17 - 17 15 - 15 31
Management fees - note 2 (10) (24) (34) (11) (25) (36) (70)
Other expenses (22) - (22) (22) - (22) (45)
Return on ordinary 39 141 180 46 39 85 490
activities before
finance costs
Finance costs - - - - - - -
Return on ordinary 39 141 180 46 39 85 490
activities before tax
Tax on ordinary - - - - - - -
activities
Return on ordinary 39 141 180 46 39 85 490
activities after tax
for the financial
period
Basic return per 0.51p 1.82p 2.33p 0.52p 0.44p 0.96p 5.61p
ordinary share - note 4
SUMMARY OF NET ASSETS
AT AT AT
30 NOVEMBER 30 NOVEMBER 31 MAY
2014 2013 2014
£'000 £'000 £'000
Fixed assets 8,366 9,035 8,370
Derivative assets held at fair value 262 307 357
through profit or loss
Current assets 793 670 704
Derivative liabilities held at fair value (105) (43) (54)
through profit or loss
Other creditors excluding borrowings (40) (27) (54)
Net assets 9,276 9,942 9,323
Net asset value per ordinary share - note 120.7p 113.1p 118.4p
5
Exposure 154.7% 144.4% 172.1%
.
MANAGED LIQUIDITY SHARE PORTFOLIO
PERFORMANCE RECORD
Total Return
SIX MONTHS YEAR TO YEAR TO YEAR TO YEAR TO
TO 30 NOV 31 MAY 31 MAY 31 MAY 31 MAY
2014 2014 2013 2012 2011
Net Asset Value 0.1% 0.2% 0.5% 0.8% 1.0%
Share Price 0.2% 0.4% 1.3% 0.3% 1.0%
Source: Thomson Reuters Datastream.
Revenue return per share -0.07p 0.02p 0.10p 0.33p 0.49p
Dividend nil nil nil 0.50p 0.50p
MANAGED LIQUIDITY SHARE PORTFOLIO
MANAGER'S REPORT
Investment Objective
The investment objective of the Managed Liquidity Share Portfolio is to produce
an appropriate level of income return combined with a high degree of security.
Market and Economic Review
Although the Bank of England kept interest rates at the record low level of
0.5% for the entire six month period, market expectations about the timing of
the first hike in interest rates since this level was set in March 2009 shifted
considerably. With the UK unemployment rate falling and wage growth showing
potential for improvement two members of the Monetary Policy Committee (MPC)
voted for a 0.25% rate increase at the August meeting. The remaining seven
members voted for no change. This divide of the vote persisted until the
January 2015 meeting at which point unanimity for no change in the bank rate
once again prevailed. The split vote initially brought forward expectations
about the timing of the first hike. However, subsequently there has been a
marked fall in inflation that has seen expectations about the timing once again
pushed out. The market's expectation is that the first rate increase will now
not occur until late 2015, or even early 2016. As recently as August the market
was expecting the first hike to occur in February 2015.
After peaking at 1.9% in June UK Consumer Price Index (CPI) inflation fell to
1.0% in November. The fall has largely been driven by lower fuel prices, which
have in turn reduced transport costs. Economic growth has remained robust with
quarterly growth of 0.9% in the quarter to June 2014 (Q2) and 0.7% in Q3. The
unemployment rate has continued to fall with the latest data as at 30 November
recording a level of 6%, its lowest level since 2008. Wage growth increased
over the period but although the bank noted that this was promising it did not
think it enough to offset the medium term outlook for inflation.
Longer dated gilt yields were lower over the period reflecting the drop in
inflation expectations. The 10 year Gilt yield fell from 2.6% to 1.9% at 30
November, while the 2 year fell from 0.7% to 0.5%. According to data from
Merrill Lynch, Gilts had a total return for the period of 8.2%.
Portfolio Performance
The Managed Liquidity Share Portfolio posted a return per share of 0.1% for the
period.
Portfolio Strategy and Review
Our investment strategy is achieved by investing in the Invesco Perpetual Money
Fund and Short-Term Investments Company (Global Series), each of which invests
in a diversified portfolio of high quality sterling denominated short-term
money market instruments.
In terms of strategy, the Invesco Perpetual Money Fund has some holdings in
floating-rate notes (FRNs) where yields are reset every three months to reflect
changes in LIBOR. As we continue to believe that UK interest rates will remain
near their current low levels for a considerable time - because we think any
policy adjustments will be gradual and drawn out - the fund also has positions
in government, quasi-government and corporate bonds. In order to limit risk
exposure, these bonds are both short dated and of high quality. The Short-Term
Investments Company (Global Series) portfolio is managed in a modified barbell
structure, investing in repurchase agreements, time deposits, commercial paper,
certificates of deposit, medium-term notes and floating rate notes, rated A-1/
P-1 or better, with a maximum weighted average maturity of 60 days and a
maximum weighted average life of 120 days.
Outlook
While economic growth remains robust in the UK the sharp fall in the oil price
has a clear deflationary impact that has greatly reduced the pressures on the
Bank of England to hike interest rates. Given this we do not expect interest
rates will rise very quickly from their current levels.
Stuart Edwards
Portfolio Manager
29 January 2015
MANAGED LIQUIDITY SHARE PORTFOLIO
LIST OF INVESTMENTS
AT AT AT
30 NOVEMBER 30 NOVEMBER 31 MAY
2014 2013 2014
MARKET MARKET MARKET
VALUE VALUE VALUE
£'000 £'000
£'000
Invesco Perpetual Money Fund† 4,876 6,610 4,870
Short-Term Investments Company (Global 1,080 640 980
Series)
5,956 7,250 5,850
†At the period end the Managed Liquidity Share Portfolio held 9.6% (November
2013: 11.4%; May 2014: 10.3%) of the outstanding shares in the Invesco
Perpetual Money Fund.
MANAGED LIQUIDITY SHARE PORTFOLIO
INCOME STATEMENT
YEAR
ENDED
SIX MONTHS ENDED SIX MONTHS ENDED30 31 MAY
30 NOVEMBER 2014 NOVEMBER 2013 2014
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments - - - - (2) (2) (1)
Income 8 - 8 14 - 14 25
Management fees - note 2 (1) - (1) - - - -
Other expenses (11) - (11) (12) - (12) (23)
(Loss)/return on (4) - (4) 2 (2) - 1
ordinary activities
before tax for the
financial period
Tax on ordinary - - - - - - -
activities
(Loss)/return on (4) - (4) 2 (2) - 1
ordinary activities
after tax for the
financial period
Basic (loss)/return per (0.07)p - (0.07)p 0.03p (0.03)p - 0.01p
ordinary share - note 4
SUMMARY OF NET ASSETS
AT AT AT
30 NOVEMBER 30 NOVEMBER 31 MAY
2014 2013 2014
£'000 £'000 £'000
Fixed assets 5,956 7,250 5,850
Current assets 97 59 197
Creditors falling due within one year, (157) (161) (158)
excluding borrowings
Net assets 5,896 7,148 5,889
Net asset value per ordinary share - note 5 103.3p 103.2p 103.3p
.
INVESCO PERPETUAL SELECT TRUST PLC
CONDENSED INCOME STATEMENT
YEAR
ENDED
SIX MONTHS ENDED SIX MONTHS ENDED30 31 MAY
30 NOVEMBER 2014 NOVEMBER 2013 2014
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 4,374 4,374 - 6,161 6,161 11,398
Gains on derivative 54 149 203 64 110 174 641
instruments
Foreign exchange gains/ - 14 14 - (43) (43) (77)
(losses)
Income 1,820 - 1,820 1,457 60 1,517 4,462
Management fees - note 2 (119) (275) (394) (124) (289) (413) (855)
Performance fees - note 2 - (331) (331) - (289) (289) (561)
Other expenses (197) (1) (198) (186) (3) (189) (382)
Net return before 1,558 3,930 5,488 1,211 5,707 6,918 14,626
finance costs and
taxation
Finance costs (31) (74) (105) (18) (42) (60) (138)
Return on ordinary 1,527 3,856 5,383 1,193 5,665 6,858 14,488
activities before tax
Tax on ordinary (52) - (52) (52) - (52) (183)
activities
Return on ordinary 1,475 3,856 5,331 1,141 5,665 6,806 14,305
activities after tax for
the financial period
Basic return/(loss) per
ordinary share - note 4
UK Equity Share 2.41p 4.95p 7.36p 1.92p 10.20p 12.12p 24.59p
Portfolio
Global Equity Income 1.55p 5.60p 7.15p 1.12p 5.39p 6.51p 13.45p
Share Portfolio
Balanced Risk Share 0.51p 1.82p 2.33p 0.52p 0.44p 0.96p 5.61p
Portfolio
Managed Liquidity (0.07)p - (0.07) 0.03p (0.03)p - 0.01p
Share Portfolio p
The total column of this statement represents the Company's profit and loss
account, prepared in accordance with UK Accounting Standards. The supplementary
revenue and capital columns are 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 and the Company
has no other gains or losses. Therefore no statement of recognised gains or
losses is presented. No operations were acquired or discontinued in the period.
Income Statements for the different Share classes are shown on pages 11, 15, 20
and 23 for the UK Equity, Global Equity Income, Balanced Risk and Managed
Liquidity Share Portfolios respectively.
.
INVESCO PERPETUAL SELECT TRUST PLC
CONDENSED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
CAPITAL
REDEMPTION
SHARE SHARE SPECIAL RESERVE CAPITAL REVENUE
CAPITAL PREMIUM RESERVE £'000 RESERVE RESERVE TOTAL
£'000 £'000 £'000 £'000 £'000 £'000
SIX MONTHS ENDED
30 NOVEMBER 2014
At 31 May 2014 1,062 1,290 83,467 340 37,598 372 124,129
Shares bought back - - (309) - - - (309)
and held in treasury
Net return on - - - - 3,856 1,475 5,331
ordinary activities
Dividends - note 8 - - - - - (1,663) (1,663)
At 30 November 2014 1,062 1,290 83,158 340 41,454 184 127,488
YEAR ENDED
31 MAY 2014
At 31 May 2013 1,070 1,290 85,147 332 26,827 23 114,689
Cancellation of (8) - - 8 - - -
deferred shares
Net proceeds from - - 284 - - - 284
shares issued from
treasury
Shares bought back - - (1,964) - - - (1,964)
and held in treasury
Net return on - - - - 10,771 3,534 14,305
ordinary activities
Dividends for the - - - - - (3,185) (3,185)
year
At 31 May 2014 1,062 1,290 83,467 340 37,598 372 124,129
30 NOVEMBER 2013
At 31 May 2013 1,070 1,290 85,147 332 26,827 23 114,689
Cancellation of (5) - - 5 - - -
deferred shares
Net proceeds from - - 284 - - - 284
shares issued from
treasury
Shares bought back - - (417) - - - (417)
and held in treasury
Net return on - - - - 5,665 1,141 6,806
ordinary activities
Dividends - - (73) - - (1,164) (1,237)
At 30 November 2013 1,065 1,290 84,941 337 32,492 - 120,125
.
INVESCO PERPETUAL SELECT TRUST PLC
CONDENSED BALANCE SHEET
REGISTERED NUMBER 5916642
GLOBAL
UK EQUITY BALANCED MANAGED
EQUITY INCOME RISK LIQUIDITY TOTAL
£'000 £'000 £'000 £'000 £'000
AT 30 NOVEMBER 2014
Fixed assets
Investments held at fair 74,352 55,362 8,366 5,956 144,036
value through profit or loss
Current assets
Derivative assets held at - - 262 - 262
fair value through profit or
loss
Debtors 267 255 12 46 580
Cash, short-term deposits and 46 329 781 51 1,207
cash held at brokers
313 584 1,055 97 2,049
Creditors: amounts falling
due within one year
Derivative liabilities held - - (105) - (105)
at fair value through profit
or loss
Other creditors (11,099) (7,196) (40) (157) (18,492)
Net current (liabilities)/ (10,786) (6,612) 910 (60) (16,548)
assets
Net assets 63,566 48,750 9,276 5,896 127,488
Shareholders' funds
Share capital 461 359 118 124 1,062
Share premium - - 1,290 - 1,290
Special reserve 40,958 30,992 5,854 5,354 83,158
Capital redemption reserve 73 78 22 167 340
Capital reserve 21,870 17,182 2,161 241 41,454
Revenue reserve 204 139 (169) 10 184
Shareholders' funds 63,566 48,750 9,276 5,896 127,488
Net asset value per ordinary
share
Basic - note 5 160.7p 155.6p 120.7p 103.3p
AT 31 MAY 2014
Fixed assets
Investments held at fair 70,373 51,398 8,370 5,850 135,991
value through profit or loss
Current assets
Derivative assets held at - - 357 - 357
fair value through profit or
loss
Debtors 394 266 8 56 724
Cash, short-term deposits and 364 298 696 141 1,499
cash held at brokers
758 564 1,061 197 2,580
Creditors: amounts falling
due within one year
Derivative liabilities held - - (54) - (54)
at fair value through profit
or loss
Other creditors (9,647) (4,529) (54) (158) (14,388)
Net current (liabilities)/ (8,889) (3,965) 953 39 (11,862)
assets
Net assets 61,484 47,433 9,323 5,889 124,129
Shareholders' funds
Share capital 460 359 120 123 1,062
Share premium - - 1,290 - 1,290
Special reserve 40,879 31,165 6,079 5,344 83,467
Capital redemption reserve 73 78 22 167 340
Capital reserve 19,913 15,424 2,020 241 37,598
Revenue reserve 159 407 (208) 14 372
Shareholders' funds 61,484 47,433 9,323 5,889 124,129
Net asset value per ordinary
share
Basic - note 5 155.6p 150.9p 118.4p 103.3p
AT 30 NOVEMBER 2013
Fixed assets
Investments held at fair 64,730 47,062 9,035 7,250 128,077
value through profit or loss
Current assets
Derivative assets held at - - 307 - 307
fair value through profit or
loss
Debtors 258 150 12 57 477
Cash, short-term deposits and 2,413 164 658 2 3,237
cash held at brokers
2,671 314 977 59 4,021
Creditors: amounts falling
due within one year
Derivative liabilities held - - (43) - (43)
at fair value through profit
or loss
Other creditors (10,098) (1,644) (27) (161) (11,930)
Net current (liabilities)/ (7,427) (1,330) 907 (102) (7,952)
assets
Net assets 57,303 45,732 9,942 7,148 120,125
Shareholders' funds
Share capital 452 358 124 131 1,065
Share premium - - 1,290 - 1,290
Special reserve 40,259 30,984 7,100 6,598 84,941
Capital redemption reserve 73 78 21 165 337
Capital reserve 16,367 14,216 1,669 240 32,492
Revenue reserve 152 96 (262) 14 -
Shareholders' funds 57,303 45,732 9,942 7,148 120,125
Net asset value per ordinary
share
Basic - note 5 146.5p 145.9p 113.1p 103.2p
.
INVESCO PERPETUAL SELECT TRUST PLC
CONDENSED CASH FLOW STATEMENT
SIX MONTHS SIX MONTHS YEAR
ENDED ENDED ENDED
30 NOVEMBER 30 NOVEMBER 31 May
2014 2013 2014
£'000 £'000 £'000
Total return before finance costs and tax 5,488 6,918 14,626
Adjustment for gains on investments (4,374) (6,161) (11,398)
Adjustment for gains on derivatives (149) (110) (506)
Adjustment for exchange (gains)/losses (14) 43 77
Scrip dividends received as income (37) (8) (27)
Decrease/(increase) in debtors 157 29 (153)
(Decrease)/increase in creditors (165) (116) 194
Overseas tax (52) (52) (183)
Net cash inflow from operating activities 854 543 2,630
Servicing of finance (105) (60) (140)
Taxation 64 65 (7)
Capital expenditure and financial (3,346) 133 (2,312)
investment
Equity dividends paid (1,663) (1,237) (3,185)
Net cash outflow before management of (4,196) (556) (3,014)
liquid resources and financing
Management of liquid resources - - -
Financing
Shares bought back (310) (419) (1,965)
Net proceeds from issue of shares - 284 284
Increase in bank borrowings 4,200 2,600 4,900
(Decrease)/increase in cash (306) 1,909 205
Reconciliation of net cash flow to
movement in net debt
(Decrease)/increase in cash (306) 1,909 205
Exchange movements 14 (43) (77)
Cash movement from changes in debt (4,200) (2,600) (4,900)
Movement in period (4,492) (734) (4,772)
Net debt at beginning of year (11,101) (6,329) (6,329)
Net debt at end of period (15,593) (7,063) (11,101)
Analysis of changes in net debt
31 MAY EXCHANGE CASH 30 NOVEMBER
2014 MOVEMENTS FLOW 2014
£'000 £'000 £'000 £'000
Cash, short-term deposits and 1,499 14 (306) 1,207
cash held at brokers
Bank loan (12,600) - (4,200) (16,800)
Net debt (11,101) 14 (4,506) (15,593)
.
INVESCO PERPETUAL SELECT TRUST PLC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Accounting Policy
The condensed financial statements have been prepared using the same accounting
policies as those adopted in the 2014 annual financial report, which are
consistent with applicable United Kingdom Accounting Standards and with the
Statement of Recommended Practice `Financial Statements of Investment Trust
Companies and Venture Capital Trusts' issued by the Association of Investment
Companies, in January 2009.
2. Management Fees
Revisions to the UK Equity and Global Equity Income Portfolios' management fees
are explained in the Chairman's Statement on page 3. Further to this, the
Manager is entitled to a basic fee which is calculated and payable quarterly.
The fee is based on the net assets of each Portfolio, at the following
percentages:
- 0.65% (up to 31 May 2014: 0.75%) per annum in the case of the UK Equity and
Global Equity Income Portfolios;
- 0.75% per annum for the Balanced Risk Portfolio; and
- 0.25% per annum for the Managed Liquidity Portfolio.
The Manager is also entitled to receive performance fees in respect of the UK
Equity and Global Equity Income Portfolios of 12.5% of the increase in net
assets per relevant Share in excess of a hurdle of the relevant benchmark plus
1% per annum. The amount of the performance fee that can be earned in any one
year is limited to 0.65% (up to 31 May 2014: 0.75%) of the net assets of the
relevant Portfolio and payment is subject to a high water mark. Any
underperformance of the benchmark, or performance above the cap, is carried
forward to subsequent periods.
The UK Equity Portfolio earned a performance fee of £331,000 in the period (six
months ended 30 November 2013: £289,000 and for the year ended 31 May 2014: £
561,000) which is charged wholly to capital.
No performance fee was earned by the Global Equity Portfolio during the six
months. For the comparable six months to 30 November 2013 and the year to 31
May 2014, the Global Equity Income Portfolio outperformed its benchmark by more
than the 1% hurdle. However, this overperformance was used to offset
underperformance bought forward and at 31 May 2014 the underperformace carried
forward was £259,000.
The management fees and finance costs are charged to the applicable Portfolio
as follows, in accordance with the Board's expected split of long-term income
and capital returns:
REVENUE CAPITAL
PORTFOLIO RESERVE RESERVE
UK Equity 30% 70%
Global Equity Income 30% 70%
Balanced Risk 30% 70%
Managed Liquidity 100% -
Any entitlement to the investment performance fee which is attributable to the
UK Equity or Global Equity Income Portfolio is allocated 100% to capital as it
is directly attributable to the capital performance of the investments in those
Portfolios.
3. Tax expense represents the sums of tax currently payable and deferred tax.
Any tax payable is based on the taxable profit for the period.
It is the intention of the Directors to conduct the affairs of the Company so
that it satisfies the conditions for approval as an investment trust company.
Any company so approved is not liable for taxation on capital gains.
4. Basic Return per Ordinary Share
Basic revenue, capital and total return per ordinary share is based on each of
the returns on ordinary activities after taxation as shown by the income
statement for the applicable Share class and on the following number of shares
being the weighted average number of shares in issue throughout the period for
each applicable Share class:
WEIGHTED AVERAGE NUMBER OF SHARES
SIX MONTHS SIX MONTHS YEAR
ENDED ENDED ENDED
30 NOVEMBER 30 NOVEMBER 31 May
2014 2013 2014
£'000 £'000 £'000
UK Equity 39,543,866 38,782,924 39,077,545
Global Equity Income 31,405,689 31,109,723 31,262,679
Balanced Risk 7,736,808 8,886,283 8,742,185
Managed Liquidity 5,701,014 7,619,791 6,956,381
5. Net Asset Values per Ordinary Share
The net asset values per ordinary share were based on the following
Shareholders' funds and shares (excluding treasury shares) in issue at the
period end:
AT AT AT
30 NOVEMBER 30 NOVEMBER 31 MAY
2014 2013 2014
£'000 £'000 £'000
PORTFOLIO SHAREHOLDERS' FUNDS
UK Equity 63,566 57,303 61,484
Global Equity Income 48,750 45,732 47,433
Balanced Risk 9,276 9,942 9,323
Managed Liquidity 5,896 7,148 5,889
PORTFOLIO shares in issue at period
end
UK Equity 39,561,880 39,123,468 39,509,336
Global Equity Income 31,323,049 31,340,725 31,443,444
Balanced Risk 7,684,451 8,787,651 7,876,821
Managed Liquidity 5,708,510 6,928,668 5,699,509
6. Movements in Share Capital and Share Class Conversion
IN THE SIX MONTHS ENDED 30 NOVEMBER 2014
GLOBAL
UK EQUITY BALANCED MANAGED
EQUITY INCOME RISK LIQUIDITY
Ordinary 1p shares
(number)
At 31 May 2014 39,509,336 31,443,444 7,876,821 5,699,509
Shares bought back into - (100,000) (100,000) (49,569)
treasury
Arising on share
conversion:
- August 2014 53,834 (13,899) (103,488) 60,256
- November 2014 (1,290) (6,496) 11,118 (1,686)
At 30 November 2014 39,561,880 31,323,049 7,684,451 5,708,510
Treasury Shares (number)
At 31 May 2014 6,523,000 4,438,000 4,050,000 6,638,216
Shares bought back into - 100,000 100,000 49,569
treasury
At 30 November 2014 6,523,000 4,538,000 4,150,000 6,687,785
Total shares in issue at 46,084,880 35,861,049 11,834,451 12,396,295
30 November 2014
Average buy back price - 143.0p 115.8p 101.5p
(including costs)
Average issue price - - - -
As part of the conversion process 57,839 deferred shares of 1p each were
created. All deferred shares are cancelled before each period end and so no
deferred shares are in issue at the start or end of a period.
7. Share Prices
GLOBAL
UK EQUITY BALANCED MANAGED
PERIOD END EQUITY INCOME RISK LIQUIDITY
30 November 2013 143.0p 144.9p 110.3p 100.8p
31 May 2014 153.0p 148.0p 116.0p 101.4p
30 November 2014 159.8p 153.5p 116.0p 101.6p
8. Dividends on Ordinary Shares
The first and second interim dividends were paid on 15 August 2014 and 14
November 2014 respectively:
PORTFOLIO NUMBER DIVIDEND TOTAL
OF SHARES RATE £'000
UK Equity
First interim 39,509,136 1.00p 395
Second interim 39,562,970 1.30p 514
2.30p 909
Global Equity Income
First interim 31,443,444 1.45p 456
Second interim 31,323,049 0.95p 298
2.40p 754
Dividends paid for the six months to 30 November 2014 totalled £1,663,000 (six
months to 30 November 2013: £1,237,000).
9. The financial information contained in this half-yearly financial report,
which has not been reviewed or audited by the independent auditor, does not
constitute statutory accounts within the meaning of section 434 of the
Companies Act 2006. The financial information for the half years ended 30
November 2014 and 30 November 2013 have not been audited. The figures and
financial information for the year ended 31 May 2014 are extracted and abridged
from the latest published accounts and do not constitute the statutory accounts
for that year. Those accounts have been delivered to the Registrar of Companies
and include the Report of the Independent Auditors, which was unqualified and
did not include a statement under section 498 of the Companies Act 2006.
By order of the Board
Invesco Asset Management Limited
Company Secretary
INVESCO PERPETUAL SELECT : Half-yearly Report
January 29, 2015 at 11:27 am
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