TIDMCMPG
RNS Number : 4138V
CT Global Managed Portfolio Trust
09 August 2022
To: RNS
Date: 9 August 2022
From: CT Global Managed Portfolio Trust PLC
LEI: 213800ZA6TW45NM9YY31
Statement of Audited Results for the year ended 31 May 2022
Income shares - financial highlights
- Annual dividend increased by 7.3% to 6.65p per Income share compared to the prior year.
- Dividend yield(1) of 5.1% at 31 May 2022, based on total
dividends for the financial year of 6.65p per Income share. This
compares to the yield on the FTSE All-Share Index of 3.3%.
Dividends are paid quarterly.
- Net asset value total return(2) per Income share of -1.5% for
the financial year, underperforming the total return of the FTSE
All-Share Index (+8.3%) by -9.8%.
- Share price total return(2) per Income share of -4.4% for the
financial year, underperforming the total return of the FTSE
All-Share Index (+8.3%) by -12.7%.
- Net asset value total return per Income share of +162.9% since
launch on 16 April 2008, the equivalent of +7.1% compound per year.
This has outperformed the total return of the FTSE All-Share Index
of +127.0%, the equivalent of +6.0% compound per year.
Growth shares - financial highlights
- Net asset value total return per Growth share of -11.4% for
the financial year, underperforming the total return of the FTSE
All-Share Index (+8.3%) by -19.7%.
- Share price total return per Growth share of -11.9% for the
financial year, underperforming the total return of the FTSE
All-Share Index (+8.3%) by -20.2%.
- The net asset value per Growth share has increased by +149.4%
since launch on 16 April 2008, the equivalent of +6.7% compound per
year. This has outperformed the total return of the FTSE All-Share
Index of +127.0%, the equivalent of +6.0% compound per year.
- The net asset value total return per Growth share has
outperformed the total return of the FTSE All-Share Index over
three years, five years, ten years and from launch to 31 May
2022.
Notes:
(1) Dividend yield - based on dividends at the annual rate of
6.65p per Income share for the financial year to 31 May 2022 and
the Income share price of 131.0p at 31 May 2022.
(2) Total return - the return to shareholders calculated on a
per share basis taking into account both the reinvestment of any
dividends paid in the period and the increase or decrease in the
share price or NAV in the period.
Chairman's Statement
Performance
For the Company's financial year to 31 May 2022 the NAV total
return (capital performance plus the reinvestment of any dividends
paid) was -1.5% for the Income shares and -11.4% for the Growth
shares, both of which underperformed the +8.3% total return for the
FTSE All-Share Index, the benchmark index for both share classes.
It was particularly disappointing that the Growth Portfolio, after
nine consecutive years of being ahead of the benchmark, gave up so
much ground during the second half of the financial year. The
Income Portfolio followed a similar trend although of a much lesser
magnitude.
The about turn in performance started very early in December and
was caused by major changes in a series of macro factors which
rapidly affected investor sentiment towards financial markets. The
rise in inflation accelerated and then the first increase in
interest rates occurred which was reflected in the beginning of a
marked rise in bond yields. This was behind the change in
leadership within equity markets from companies with secular growth
characteristics - which had led markets upwards for a number of
years, especially so during the pandemic - to old economy companies
with value characteristics e.g. oils, miners, tobaccos and banks.
This is discussed more fully in the Investment Manager's
Review.
Whilst the financial year to 31 May 2022 was difficult in terms
of performance, the NAV total return of both share classes
outperformed the benchmark over five years, ten years and from
launch to 31 May 2022.
For Income shareholders, I am pleased to report that dividends
have now been increased in each of the last eleven years. For
Growth shareholders seeking long term performance, it is pleasing
to note that their net asset value compound annual growth rates
have been 6.0%, 5.6% and 10.0% over three years, five years and ten
years respectively.
Revenue and Dividends
For the financial year ended 31 May 2022, four interim dividends
have now been paid, totalling 6.65p per Income share (6.20p per
Income share for the previous financial year). The fourth interim
dividend was paid after the year-end on 8 July 2022.
In order to make the interim dividends of more equal amounts,
the first three interim dividends were increased to 1.55p per
Income share (1.40p per Income share for the previous financial
year). The fourth interim dividend was maintained at the same rate
as in the prior financial year (of 2.00p per Income share) and,
therefore, the total annual dividend increased by 7.3% in
comparison to the prior financial year. This has been achieved
while adding GBP80,000 to the revenue reserve.
This is the eleventh consecutive year of increase and, as a
result, the yield on the Income shares was 5.1% on the year-end
Income share price, compared with 3.3% for the FTSE All-Share
Index.
From an income perspective, the overall revenue generated showed
a healthy increase on the previous year and was better than had
been expected. Dividend growth came through from a number of
holdings, particularly in the UK equity income and alternatives
sectors. The increase in exposure to UK equity trusts also enhanced
Portfolio revenue growth.
In the absence of unforeseen circumstances, it is the Board's
current intention, in accordance with the Company's stated dividend
policy, to pay four quarterly interim dividends of at least 1.67p
per Income share and that the aggregate dividends for the financial
year to 31 May 2023 will be at least 6.68p per Income share.
After allowing for the payment of the fourth interim dividend,
CT Global Managed Portfolio Trust has a revenue reserve of GBP2.2
million, approximately 68% of the current annual dividend cost (at
6.68p per Income share). In addition, following approval from
shareholders at the 2021 AGM and also the Scottish Court of
Session, the Company's share premium account was cancelled with
effect from 26 May 2022 and a new distributable reserve (2022
special reserve) created in both Portfolios. The GBP29.6 million of
this reserve attributable to the Income Portfolio can be used to
pay or supplement the payment of dividends to Income shareholders
and therefore both this and the revenue reserve are important
buffers which can be used if and when considered appropriate by the
Board.
Borrowing
During the financial year, the Company renewed its borrowing
facilities with The Royal Bank of Scotland International Limited.
It entered into an unsecured loan facility for GBP5 million for a
three-year term at a fixed rate of 2.78% (which was fully drawn
down in the Income Portfolio) and also a three-year unsecured
revolving credit facility ("RCF") for GBP5 million. These
facilities are available until 10 February 2025. At the year-end,
GBP2 million of the RCF had been drawn down in the Income
Portfolio, resulting in total borrowings of GBP7 million in the
Income Portfolio (9.7% of gross assets) and zero in the Growth
Portfolio.
The Board is responsible for the Company's gearing strategy and
sets parameters within which the Investment Manager operates.
Borrowings are not normally expected to exceed 20% of the total
assets of the relevant Portfolio; in practice they have been modest
and primarily used to enhance income in the Income Portfolio by
investing in higher yielding alternatives funds.
Management of Share Premium and Discount to NAV
In normal circumstances we aim to maintain the discount to NAV
at which our shares trade at not more than 5%. In practice over the
years the shares have generally traded close to NAV. During the
financial year to 31 May 2022, we have been able to maintain an
average premium of 1.0% for both the Income shares and the Growth
shares.
We are active in issuing shares to meet demand and equally
buying back when this is appropriate. During the financial year
1,480,000 new Income shares and 1,085,000 new Growth shares were
issued from the Company's block listing facilities at an average
premium to their respective NAVs of 1.6% and no Income shares or
Growth shares were bought back.
The Board is seeking shareholders' approval to renew the powers
to allot shares, buy back shares and sell shares from treasury at
the forthcoming Annual General Meeting ('AGM'). Specifically, the
Board is seeking approval to allow the Company to issue up to 20%
of its Income shares and up to 20% of its Growth shares without
rights of pre-emption and in this respect there are two resolutions
proposed. Each resolution is for up to 10% and, therefore, for an
aggregate of up to 20% of each of the Income shares and Growth
shares. This approach allows any shareholder who may not wish to
give approval to an aggregate limit higher than that recommended by
corporate governance guidelines the ability to approve the first
resolution for up to 10% and to also consider the second resolution
separately for a further 10%. The Board believes the ability to
issue and buy back shares helps to reduce the volatility in the
premium or discount of the share prices to the NAVs and the 20%
overall share allotment authority and the 14.99% buy back authority
with respect to both the Income shares and Growth shares are
therefore in the interests of all shareholders.
Share Conversion Facility
Shareholders have the opportunity to convert their Income shares
into Growth shares or their Growth shares into Income shares
annually subject to minimum and maximum conversion thresholds which
may be reduced or increased at the discretion of the Board.
The ability to convert without incurring UK capital gains tax
should be an attractive facility for shareholders who wish to do
so, and the next conversion date (subject to minimum and maximum
thresholds) will be on 27 October 2022. Information is provided in
the Annual Report and Financial Statements and full details will be
provided on the Company's website (ctglobalmanagedportfolio.co.uk)
from 11 August 2022.
Board Changes
David Harris will retire following the conclusion of the
forthcoming Annual General Meeting on 29 September 2022. David was
appointed as a director at the launch of the Company in 2008, and
the Board would like to convey its thanks to him for his
contribution since then. David is also the Senior Independent
Director and I am pleased to say that Sue Inglis has agreed to
fulfil this role following David's retirement.
As part of its succession plan, the Board was pleased to appoint
Shauna Bevan as a non-executive Director with effect from 9 June
2022 and we believe her investment experience and industry
knowledge will add considerable value to the Board. Shauna's
biographical details are set out in the Annual Report and Financial
Statements and her election will be proposed to shareholders for
approval at the forthcoming AGM on 29 September 2022.
Following the year-end, the Board also agreed to establish a
Marketing Committee. Simon Longfellow, who has extensive experience
of marketing investment trusts to retail investors, will chair the
Committee, which will meet at least twice a year. The objective of
the Committee is to increase investors' awareness of CT Global
Managed Portfolio Trust and its key attributes through appropriate
initiatives. We believe the Company, which provides investors with
access to a broad spread of investment companies, covering a
variety of geographies, sectors and investment managers, together
with its strong long-term performance is particularly well suited
to the retail segment of the market.
Our Manager and Company Name
As reported in our Interim Report, on 8 November 2021, Columbia
Threadneedle Investments, part of Ameriprise Financial, acquired
BMO's EMEA asset management business, which included the Company's
Manager, BMO Investment Business Limited.
As part of the acquisition agreement, permission was granted to
use the BMO prefix for an interim period. The Manager has now
brought its business under the Columbia Threadneedle Investments
brand and removed the BMO name at the start of July. Consequently,
a change of name for your Company was necessary and the Board
resolved to change it to CT Global Managed Portfolio Trust PLC with
effect from 29 June 2022. CT is the mnemonic of Columbia
Threadneedle Investments. A number of other investment trusts
previously branded BMO and also funds managed by and branded as
Columbia Threadneedle have also adopted the CT prefix.
The CT brand will receive considerable marketing support from
the Manager and its savings plans have also changed name from BMO
to CT. Consequently, it appeared that the change of name was
logical and the inclusion of 'Global' will help to articulate the
mandate of the Company and illustrate the spread of geographies
covered within its investment Portfolios. These changes (which
included the renaming of the Company's website and the ticker codes
for the Income shares and Growth shares on the London Stock
Exchange which changed to CMPI and CMPG respectively) took effect
towards the start of July. There is however no change to the
personnel running the activities of your Company in terms of both
fund management and administration. The Manager's name has also
changed to Columbia Threadneedle Investment Business Limited.
The Board has been kept up to date with the integration of the
BMO and Columbia Threadneedle Investments businesses and the
commitment to BMO's investment trust business and the savings plans
is also welcome. The change of ownership and subsequent
developments are issues that the Board will continue to monitor
closely in the coming months.
AGM
The Annual General Meeting is scheduled to be held on 29
September 2022 at Exchange House, Primrose Street, London, EC2A 2NY
at 11.30am. Peter Hewitt, the Investment Manager, will as usual
give a presentation and provide an overview of the financial year
together with his view on the outlook.
Voting on all resolutions at the AGM will be held on a poll, the
results of which will be announced and posted on the Company's
website following the meeting. All shareholders are therefore
encouraged to make use of the proxy form or form of direction
provided, in order that you can lodge your votes.
Should shareholders have any questions or comments in advance,
these can be raised with the Company Secretary
(MPTCoSec@columbiathreadneedle.com). Following the AGM, the
Investment Manager's presentation will be available on the
Company's website ctglobalmanagedportfolio.co.uk
Outlook
In an environment of rising inflation, interest rates and bond
yields, along with heightened geopolitical risks due to the
Russia/Ukraine conflict it is likely equity markets will continue
to experience periods of volatility. In the short term this will
affect investment companies with exposure to technology and high
growth sectors. However, although exposure in these areas has been
pared back, the intention is that they remain a core element of the
Growth Portfolio as it is these types of investment companies which
generate strong performance and excess returns over the long
run.
With the threat of recession raised, both Portfolios will be
managed in a cautious manner. Discounts across the investment
company universe reflect the current uncertainties in both
economies and equity markets, however, for the patient investor,
they offer better value than for many years. As always, the focus
is on selecting only the highest quality investment companies with
experienced managers in the belief that this will serve
shareholders' interests best.
David Warnock
Chairman
8 August 2022
Investment Manager's Review
Stock Market Background
Over the past twelve months the environment for equity markets
has changed significantly. For the first half of the Company's
financial year the focus was on recovery from the pandemic. Central
bankers viewed the inflation that had become apparent, as
"transitory" principally due to supply bottlenecks and deferred any
measure to tighten economic policy for fear of choking off
recovery. By late last year it was clear that inflation which had
risen rapidly was more "sustained" and, belatedly, monetary
authorities moved to begin to tighten economic policy. The Bank of
England moved first by raising interest rates in December.
In February events deteriorated with the start of the
Russia/Ukraine war. Oil prices rose sharply, as did gas prices in
Europe, on fears of shortages as Russia is a large supplier of
both. This meant the upwards momentum for inflation received
another substantial push. The Federal Reserve in the US and the
Bank of England in the UK raised interest rates and made clear that
in order to combat inflation a series of further increases were
highly likely. Bond yields responded by moving upwards, especially
in the US, and, although both interest rates and bond yields remain
at low levels in a historic context, the important point is the
change of direction. Inflation reached a 40 year high in the US
fuelled by a very tight labour market which was also evident in the
UK and Europe.
This type of environment leads to volatility in equity markets
and to significant changes of performance trends within equity
markets.
Total Return by Region for the Year to 31 May 2022 (sterling
adjusted)
S&P Composite (US) +12.2%
FTSE All-Share +8.3%
FTSE World ex UK +7.0%
FTSE Pacific ex Japan +1.3%
FTSE Europe ex UK -1.5%
FTSE Japan -2.2%
MSCI Emerging Markets -9.3%
Source: Columbia Threadneedle Investments
The table above highlights that the UK equity market, for many
years a long-term underperformer amongst global equity markets,
reversed that trend and moved towards the top of the table.
However, this understates the relative performance of the UK equity
market as the returns of many global equity markets (when
translated back into sterling) were boosted by an over 12% decline
of sterling relative to the US Dollar. In local currency the
S&P Composite Index was flat over the past year.
The second half of the financial year saw a major reversal of
performance from many global equity indices. The onset of rising
inflation, increasing interest rates and bond yields created a
headwind for many equity markets. The table below illustrates
performance over the second six months of the financial year from a
selection of equity indices.
Total return from 30 November 2021 to 31 May 2022
Local Currency Sterling Adjusted
Index % Return % Return
-------------------------------------- --------------- ------------------
Dow Jones World Technology Index -22.2 -18.3
Nasdaq composite Index -22.0 -18.2
FTSE Govt All Stocks Index -14.8 -14.8
FTSE closed End Investment Co. Index -13.2 -13.2
FTSE 250 Mid Cap Index -8.2 -8.2
MSCI All Countries World Index -9.1 -4.6
S&P Composite Index -8.9 -4.3
FTSE Small Cap (ex Inv. Co.) Index -3.9 -3.9
FTSE 100 Index 9.8 9.8
-------------------------------------- --------------- ------------------
Source: Columbia Threadneedle Investments
From the perspective of a UK investor, despite the adverse
economic environment previously outlined and the additional
geopolitical upheaval caused by the Russian invasion of Ukraine, UK
equities appear to have achieved a respectable positive return,
particularly during the period of maximum uncertainty of the last
six months. The table highlights that medium and smaller companies
in the UK have in share price terms not fared well. Typically, this
is the area that fund managers look to invest in to outperform
mainstream UK equities. However, this is not confined to the UK and
the World Index has also declined, albeit a weak sterling has
softened the blow when returns are translated back into sterling.
High growth and technology companies in the US, which have driven
returns for a number of years, and particularly so during the
pandemic, suffered a sharp setback. This is best illustrated by the
Nasdaq Composite Index and the Dow Jones World Technology Index,
both of which have fallen over 20% in US Dollar terms.
This puts into perspective the return of the FTSE 100 Index
(which accounts for 80% of the FTSE All-Share Index). The return of
this index is mainly explained by its sector composition. The index
has very little in technology companies, around 1%, whilst it has
heavy weightings in sectors like oils, mining, banks, tobacco,
telecoms and utilities which tend to be resilient during times of
rising inflation and interest rates. In addition, soaring oil and
commodity prices boosted share prices of companies in certain of
these sectors. Viewed together these mature "old economy" sectors
account for nearly half the FTSE 100 Index. However, taking a
longer perspective, it is these very sectors that have been a key
factor behind the long-term underperformance of UK equities.
Performance
For the year to 31 May 2022, the FTSE All-Share Index rose by
8.3% (in total return terms). Over the same period the NAV of the
Growth shares declined by 11.4% whilst that of the Income shares
experienced a smaller decline of 1.5% (again both in total return
terms). After nine consecutive years of outperforming the
benchmark, it is disappointing that the Growth Portfolio, after
being ahead of the benchmark at the interim stage, gave up so much
ground relative to the benchmark during the second six months of
the financial year. A similar trend, though of a much lesser
magnitude, was evident in the performance of the Income
Portfolio.
Changes in macro factors were the causes behind the performance
experienced in the second half of the financial year. The macro
factors being: inflation, interest rates and bond yields and then,
from February, the Russia/Ukraine war. The first three macro
factors have been at very low levels for many years as growth in
the developed world was also at low levels. This scenario was good
for the valuation of companies who promised strong growth in
profits and earnings in the future. Typically, this would be
companies in the technology sector or companies who, through the
use of technology and the internet, disrupted existing industries.
The Growth Portfolio benefitted from these long-term trends by
holding investment companies with significant exposure in these
areas. However, towards the end of 2021 it became clear that rising
inflation was not "transitory" but would be more "sustained" and
that, in order to combat this, a decade of stimulative monetary
policy known as "quantitative easing" would have to end and
ultimately interest rates, which had been at very low levels since
the financial crash of 2008/9, would have to rise. In bond markets,
yields moved upwards as did the perception that both interest rates
and bond yields would have to move markedly higher in the future,
as monetary authorities sought to catch up with what was happening
in the real economy. The Russian invasion of Ukraine exacerbated
matters and with sharply rising oil and commodity prices added
further upwards momentum to inflation.
This caused a sharp compression of valuations among "growth
companies", the very sectors and companies that had driven
performance for most of the decade. Investment companies with
holdings in the technology/biotechnology sectors and high growth
companies more generally, experienced a sharp pull back in asset
values and also a widening of discounts. This is illustrated by the
performance of the Nasdaq Composite and Dow Jones World Technology
Indices in the preceding table. Even in the UK, which does not have
a large technology sector as in the US, the FTSE 250 Mid Cap Index,
which is home to many of the UK's growth companies, underperformed
sharply, after a long period of outperforming the UK equity
market.
In December and January, in the Growth Portfolio, the decision
was taken to reduce exposure to investment companies with large
holdings in these sectors (between one third and a half in most
cases). Examples include Allianz Technology Trust, Scottish
Mortgage Investment Trust, Polar Capital Technology Trust,
Edinburgh Worldwide Investment Trust, Biotech Growth Trust, Monks
Investment Trust, Impax Environmental Markets, Herald Investment
Trust and Worldwide Healthcare Trust. However, holdings at reduced
levels have been maintained as the exposure to secular growth
sectors and companies will generate strong performance over the
long term. The evidence over the fourteen years that CT Global
Managed Portfolio Trust has been listed is that it is from these
type of investment companies that returns multiple times the
original investment are made.
The Income Portfolio was less heavily exposed in these areas as
investment companies exposed to technology and growth companies
tend to have either no or very low dividends. There were certain
reductions made to Bellevue Healthcare Trust and Scottish American
Investment Company whilst the holding in Monks Investment Trust was
sold completely.
Changes in discounts can often be a significant factor behind
the performance of investment companies. For most of the last
decade the average discount for the sector has traded in a tight
range between 3%-5% except for the period immediately following the
Brexit referendum in June 2016 and the start of the pandemic in
March 2020. In both cases discounts tightened back to their range
within weeks. For the first six months of the financial year the
average sector discount began at 2.6% and then continued within its
previous narrow range, however for the second six months, it
steadily widened to finish the year at 7%. Whilst no one reason was
behind the move, a combination of overall market volatility,
uncertain investor sentiment and underperformance from many trusts
with a growth investment style could be identified as factors
behind this trend.
Growth Portfolio - Leaders and Laggards
An illustration of the change in the macro-economic environment
affecting equity markets can be seen in that three of the leading
contributors over the past year are from the sub-group of holdings
that could be viewed as "portfolio protectors". The common theme is
either no or low exposure to equities with the result that they
offset other holdings in the portfolio which are affected in
adverse market conditions. All three have been held in the
portfolio for many years. The best was BH Macro which experienced a
25% share price gain. BH Macro is a macro hedge fund which means it
exploits opportunities in interest rates, bonds and foreign
currencies. The many trades its managers undertake at any one time
are tightly managed in terms of risk. When volatility is low,
returns tend to be muted however when volatility rises, as has been
the case over the past year, returns can be substantial. The Growth
Portfolio has held shares since launch in 2008 and they have proved
a useful offset when equity markets experience volatility.
Shares in two other "portfolio protectors" Ruffer Investment
Company and Capital Gearing Trust rose 10% and 7% respectively.
Both have low exposure to equities at 36% and 45% respectively.
Ruffer's largest holdings are BP and Shell, whilst Capital Gearing
Trust has 16% in property equities and 8% in infrastructure, which
it believes are good hedges against inflation. Both investment
companies have substantial exposure to index-linked bonds which do
well when inflation is a threat to many other asset classes.
Perhaps surprisingly, long-time holding JPMorgan American
Investment Trust delivered a 17% share price gain. The portfolio of
this trust was reorganised two years ago and split equally between
two managers, one of whom runs a "growth portfolio" and the other a
"value portfolio". The mix between the two different styles of
management led to the growth element of the portfolio performing
well in the first half whilst the value element more than offset
the sell-off experienced by many US growth companies in the second
half of the past year.
Finally, HgCapital Trust, the leading private equity trust rose
by 17%. The company has built an exceptional record of long-term
growth in asset value (44% in 2021) through a focus on
business-critical software companies, much of whose revenue is
subscription based. Core areas of focus are payroll, accounting,
tax, legal and regulatory compliance. These sectors offer
considerable growth with pricing power and predictable earnings in
an inflationary environment.
Of the laggards, there was a clear common theme which was
exposure to technology/biotechnology and high growth companies
focused on the internet and digital transformation. In an
environment of rising inflation with central banks belatedly
increasing interest rates and bond markets selling off sharply in
response, such that yields on bonds moved rapidly upwards, equity
markets were adversely affected. In particular, the sectors
mentioned previously which had led equity markets higher for a
number of years sold off sharply. The high valuations many
companies in these sectors had been accorded were vulnerable and
quickly compressed, which resulted in share price declines.
Edinburgh Worldwide Investment Trust which specialises in growth
companies under $5 billion in market value, many of which are in
the technology/biotechnology and healthcare sectors, experienced a
46% fall in its share price.
Biotech Growth Trust , which has been a long time holding and
generated strong returns over that time, had a 40% share price
fall. Baillie Gifford China Growth Trust, with significant holdings
in a number of well-known Chinese technology companies, which were
also affected by restrictions on some activities imposed by the
Chinese government, experienced a 40% share price fall.
As an investment manager, the Baillie Gifford strategy of
identifying structural winners with long-term secular growth
characteristics had resulted in outstanding performance over the
last five years, however investment companies with these
characteristics were the very trusts in the eye of the hurricane,
in terms of the sell-off over the last six months. Another example
was Baillie Gifford European Growth Trust which fell 39%. Perhaps
the most notable is the biggest investment company by market value,
Scottish Mortgage Investment Trust, which experienced a 32% fall in
its share price. Famous for its holdings in Tesla and Amazon, which
were significantly reduced last year, the technology sell-off
impacted the trust negatively. However, it should be noted that the
holding in the Growth Portfolio which was taken in 2008 has still
made over six times the original investment.
Income Portfolio - Leaders and Laggards
The leading performer in the Income Portfolio with a 28% share
price rise was Secure Income REIT, a holding which was added to
during the year. The company has three main assets, where they own
19 private hospitals which Ramsay Healthcare operate, the visitor
attractions operated by Merlin Entertainment (Legoland, Alton
Towers etc) and a portfolio of Travelodge Hotels. The WAULT
(Weighted Average Unsecured Lease Term) is over 30 years, the
longest in the property sector and the most recent net asset value
for the first quarter of 2022 showed a 12% gain, well ahead of
expectations. In May, the company agreed to merge with LXI REIT,
the other listed long lease property company, also with a strong
record. The merged portfolio has 64% of rents indexed-linked, with
a further 19% fixed uplifts. The shares in Secure Income REIT
responded positively to the deal.
3i Infrastructure has been an outstanding performer over the
long term for the Income Portfolio and achieved a 17% gain in share
price. The NAV total return for the year to 31 March 2022 was 17%,
with a 7% rise in the dividend. A further 7% uplift to the dividend
is forecast for the coming year. Supermarket Income REIT had a 18%
rise in share price over the past year. It has rapidly built a
unique portfolio of assets with strong tenant covenants and the
majority on indexed-linked leases. The company offers a 5% dividend
yield with good growth prospects.
NB Private Equity Partners managed a 17% rise in share price and
a second consecutive year in the leaders for the Income Portfolio.
A series of higher than expected realisations from the portfolio
led to an over 40% gain in the net asset value for calendar 2021.
Prospects remain good for this year, yet, due to the de-rating many
private equity trusts have endured, the shares are currently on an
undeserved 40% discount to net asset value.
As with the Growth Portfolio, only one of the leading performers
was an investment company fully invested in listed companies on
global equity markets. In this case it was long time holding Murray
International Trust which favours large mature dividend paying
companies. The asset allocation is 32% in Asia (ex Japan), 27% in
North America, 19% in Europe, 16% in Latin America and only 6% in
UK equities. The trust is 11% geared and around 9% is invested in
bonds. The current environment favours the value style Murray
International Trust employs and is reflected in the better relative
share price performance. The trust has strong revenue reserves, an
excellent record of dividend growth and an attractive 4.8%
yield.
With the laggards, certain similar themes that were apparent in
the Growth Portfolio were also evident in the Income Portfolio.
Shares in JPMorgan China Growth & Income declined by 41% whilst
BB Biotech fell by 21%. Both are exposed to technology/
biotechnology companies which were badly affected by the
compression of valuations due to rising inflation, interest rates
and bond yields. In addition, the JPMorgan trust had to deal with
regulatory interventions from the Chinese government, directed at
companies in the technology and education sectors and then severe
lockdowns in many Chinese cities as the Chinese government brought
to bear their zero COVID-19 policy. Neither of these factors were
positive for the Chinese equity market.
Mercantile Investment Trust has assets of over GBP1.5 billion
and is invested in UK companies, most of which are listed in the
FTSE 250 Index, which is the trust's benchmark. The FTSE 250 Index
is home to many of the UK's leading growth companies and over the
long term they have outperformed the FTSE All-Share Index by some
distance, however over the second half of the financial year,
medium sized growth companies have suffered from the trends
outlined earlier as highlighted by the FTSE 250 Index having
declined by 8% in the last six months. The Mercantile Investment
Trust share price fell by 24% and was also impacted by a widening
discount which moved from 4% to 15% at the end of May 2022.
European Assets Trust has similarities to Mercantile in that it
is mainly invested in medium sized companies, though in this case
in continental Europe, and has growth bias in the investment
approach employed. Whilst this served the trust well in previous
years, recent months has seen a sharp reversal in performance which
has resulted in a 21% fall in the share price, most of which
happened in the second six months.
Civitas Social Housing REIT is the one non-equity investment
company amongst the laggards. Whilst the net asset performance has
been in line with expectations as has the dividend, such that the
shares yield 6.7% as at 31 May 2022, they have yet to recover from
a short seller attack last year. Although management made a strong
rebuttal to the allegations made by the short seller, regulatory
concerns around the financial strength of some of its Housing
Association tenants continue to persist and has resulted in a
discount of over 20%. The fundamentals remain positive with strong
demand for specialist supported social housing for people, many
with high-acuity care needs, who are stuck in care homes or in
hospitals costing the taxpayer far more than if they were in the
type of accommodation offered by Civitas.
(all share prices are total return)
Investment Strategy and Prospects
The prospects for equity markets are perhaps the most
challenging for many years. A number of headwinds, mentioned
earlier in this review, will continue over the next year and when
viewed together have increased the chances of a recession either
later in 2022 or in 2023.
Across developed markets inflation is high, the causes of which
are outwith the control of central banks. However, the longer
inflation remains at high levels, the more destructive it is to
economies, and the wealth of savers and consumers alike. When
inflation first became apparent last year, monetary authorities
were too slow to react, believing it to be "transitory". Having
been late to change policy to combat the inflationary threat, the
danger is they over-react and move up interest rates too far, too
fast, with the risk that economies are pushed into recession.
As explained earlier, during the second half of the financial
year the decision was taken to reduce the exposure in the Growth
Portfolio to investment companies mainly exposed to
technology/biotechnology and high growth companies who were most
affected by the compression of valuations and widespread de-rating
caused by rising inflation and interest rates. In most cases the
size of these holdings were cut by between a third and a half.
Example of reductions include: Scottish Mortgage Investment Trust,
Allianz Technology Trust, Polar Capital Technology Trust, Monks
Investment Trust, Edinburgh Worldwide Investment Trust, Biotech
Growth Trust, Herald Investment Trust, Impax Environmental Markets
and Worldwide Healthcare Trust.
The other side of this move was the decision to re-deploy the
proceeds of the above sales into an increase in holdings of
investment companies invested in UK equities, all of whom have a
"value bias" to their investment style. The UK equity market has
been a long-time relative underperformer when compared to other
equity markets and is the only major equity market valued below
historic long run averages. Part of the reason for the
underperformance was due to substantial weightings in the index of
"old" economy sectors like oil, mining, banks, tobacco, telecoms
and utilities. However, it is this very exposure which has boosted
UK equity performance as the macro environment has changed to
become very favourable for these sectors. UK medium and smaller
companies, which have materially outperformed larger UK companies
in the FTSE 100 Index over the years, markedly lagged UK larger
companies during the second six months of the financial year and
are back to highly attractive valuations. The strategy to raise UK
equity exposure seeks to capture better performance from the UK
stock market and a recovery from UK medium and smaller
companies.
Examples of additions to existing holdings are: Fidelity Special
Values, Law Debenture Corporation, Aurora Investment Trust, Diverse
Income Trust, Lowland Investment Company, Henderson Opportunities
Trust and Artemis Alpha Trust.
These broad themes were also reflected in the Income Portfolio,
however because of the lack of dividend yield from investment
companies with holdings in the technology and high growth companies
segments of the market, the level of activity was much lower.
Examples of sales/reductions were Monks Investment Trust, Bellevue
Healthcare Trust and Scottish American Investment Company. There
were some additions to holdings amongst the UK equity income sector
with examples being: City of London Investment Trust, Diverse
Income Trust, Law Debenture Corporation, Lowland Investment Company
and Murray Income Trust. There was one new holding in this area,
that of Temple Bar Investment Trust. Additions were also made to
two long time holdings in the global equity income sector: Murray
International Trust and Henderson International Income Trust. Both
trusts employ a value investment style which has also been leading
most other global equity markets.
A positive feature over the past year has been the revenue
performance from many holdings, in particular in the Income
Portfolio. A number of UK equity investment trusts restarted growth
in dividends after a pause due to the pandemic, whilst holdings in
the alternatives sector within the Income Portfolio have continued
to deliver dividend growth.
The reduction of a series of investment companies with holdings
in the technology sector (which typically paid little in the way of
dividends) and the reinvestment of proceeds into UK equity trusts
with higher dividends was also an important factor. A combination
of the above allowed the total annual dividend to Income
shareholders for the year to 31 May 2022 to be increased by 7.3%.
This represents the eleventh consecutive year of dividend growth
for Income shareholders and the Income shares have been awarded the
status of a next generation dividend hero by the Association of
Investment Companies.
Looking ahead, the coming year will be both challenging and
volatile for equity markets. High levels of inflation globally,
rising interest rates and bond yields along with geopolitical
instability are all headwinds. All of these factors have raised the
chances of a recession at some point in late 2022 or 2023. However,
it is important to also have a focus on the longer term. It is for
this reason that, while the Growth Portfolio has pared back its
previous significant exposure in investment companies with
substantial underlying holdings in companies with secular growth
characteristics, it is not the intention to exit these holdings
entirely. At some stage, though not in the immediate future, it is
likely they will be re-built in size. It is the experience of CT
Global Managed Portfolio Trust, since its listing over fourteen
years ago, that it is from investment companies with these
characteristics that returns many times the original investment can
be achieved. Meantime, caution is the watchword in these uncertain
times and the focus for both Portfolios will be on holding only the
highest quality investment companies with strong balance sheets and
experienced, proven management.
Peter Hewitt
Investment Manager
Columbia Threadneedle Investment Business Limited
8 August 2022
Income Statement
For the Year Ended 31 May 2022
Notes Revenue Capital Total
GBP'000 GBP'000 GBP'000
-------- --------------------- -----------
Losses on investments - (15,724) (15,724)
Foreign exchange losses - (2) (2)
Income 4,384 - 4,384
Investment management and performance
fees (322) (818) (1,140)
Other expenses (723) - (723)
-------- --------------------- -----------
Return on ordinary activities
before
finance costs and tax 3,339 (16,544) (13,205)
Finance costs (61) (92) (153)
-------- --------------------- -----------
Return on ordinary activities
before tax 3,278 (16,636) (13,358)
Tax on ordinary activities (14) - (14)
-------- --------------------- -----------
Return attributable to shareholders 3,264 (16,636) (13,372)
-------- --------------------- -----------
Return per Income share 3 6.85p (8.95p) (2.10p)
Return per Growth share 3 - (32.28p) (32.28p)
-------- --------------------- -----------
The total column of this statement is the Profit and Loss
Account of the Company. The supplementary revenue and capital
columns are prepared under guidance published by The Association of
Investment Companies.
Segmental analysis, illustrating the two separate portfolios of
assets, the Income Portfolio and the Growth Portfolio, is shown in
note 2 to the financial statements.
All revenue and capital items in the Income Statement derive
from continuing operations.
Return attributable to shareholders represents the profit/(loss)
for the year and also total comprehensive income
Income Statement
For the Year Ended 31 May 2021
Notes Revenue Capital Total
GBP'000 GBP'000 GBP'000
-------- ------------------- ---------
Gains on investments - 38,132 38,132
Foreign exchange losses - (17) (17)
Income 4,022 - 4,022
Investment management and performance
fees (290) (1,360) (1,650)
Other expenses (589) - (589)
-------- ------------------- ---------
Return on ordinary activities
before
finance costs and tax 3,143 36,755 39,898
Finance costs (47) (69) (116)
-------- ------------------- ---------
Return on ordinary activities
before tax 3,096 36,686 39,782
Tax on ordinary activities (16) - (16)
-------- ------------------- ---------
Return attributable to shareholders 3,080 36,686 39,766
-------- ------------------- ---------
Return per Income share 3 6.59p 25.94p 32.53p
Return per Growth share 3 - 67.27p 67.27p
-------- ------------------- ---------
The total column of this statement is the Profit and Loss
Account of the Company. The supplementary revenue and capital
columns are prepared under guidance published by The Association of
Investment Companies.
Segmental analysis, illustrating the two separate portfolios of
assets, the Income Portfolio and the Growth Portfolio, is shown in
note 2 to the financial statements.
All revenue and capital items in the Income Statement derive
from continuing activities.
Return attributable to shareholders represents the profit/(loss)
for the year and also total comprehensive income.
Balance Sheet
As at 31 May 2022
Income Growth
shares shares Total
Notes GBP'000 GBP'000 GBP'000
---------- -------- ----------
Fixed assets
Investments at fair value 69,874 89,258 159,132
---------- -------- ----------
Current assets
Debtors 697 95 792
Cash at bank and on deposit 1,549 5,929 7,478
2,246 6,024 8,270
---------- -------- ----------
Creditors:
Amounts falling due within one
year (2,428) (303) (2,731)
---------- -------- ----------
Net current (liabilities)/ assets (182) 5,721 5,539
---------- -------- ----------
Creditors:
Amounts falling due in more than
one year (5,000) - (5,000)
---------- -------- ----------
Net assets 64,692 94,979 159,671
---------- -------- ----------
Capital and reserves:
Called-up share capital 4,596 3,692 8,288
Capital redemption reserve 257 365 622
2022 special reserve 29,588 29,581 59,169
2008 special reserve 18,980 17,199 36,179
Capital reserves 8,109 44,142 52,251
Revenue reserve 3,162 - 3,162
---------- -------- ----------
Shareholders' funds 64,692 94,979 159,671
Net asset value per share (pence) 6 133.67p 244.41p
---------- -------- ----------
Balance Sheet
As at 31 May 2021
Income Growth
shares shares Total
Notes GBP'000 GBP'000 GBP'000
---------- -------- ----------
Fixed assets
Investments at fair value 72,121 101,052 173,173
---------- -------- ----------
Current assets
Debtors 272 54 326
Cash at bank and on deposit 2,040 3,769 5,809
2,312 3,823 6,135
---------- -------- ----------
Creditors:
Amounts falling due within one
year (7,667) (649) (8,316)
---------- -------- ----------
Net current (liabilities)/ assets (5,355) 3,174 (2,181)
---------- -------- ----------
Creditors:
Amounts falling due in more than - - -
one year
---------- -------- ----------
Net assets 66,766 104,226 170,992
---------- -------- ----------
Capital and reserves:
Called-up share capital 4,459 3,586 8,045
Share premium 27,608 26,599 54,207
Capital redemption reserve 256 365 621
2008 Special reserve 19,017 17,162 36,179
Capital reserves 12,373 56,514 68,887
Revenue reserve 3,053 - 3,053
---------- -------- ----------
Shareholders' funds 66,766 104,226 170,992
Net asset value per share (pence) 6 142.22p 276.01p
---------- -------- ----------
Cash Flow Statement
Year to 31 May 2022
Notes Income Growth
shares shares Total
GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Net cash outflow from operations before
dividends and interest (1,234) (1,463) (2,697)
Dividends received 3,126 1,174 4,300
Interest received 1 9 10
Interest paid (181) - (181)
-------------------------------------------- ------ ---------- ---------- ----------
Net cash inflow / (outflow) from operating
activities 1,712 (280) 1,432
Investing activities
Purchases of investments (5,154) (15,865) (21,019)
Sales of investments 4,025 15,180 19,205
-------------------------------------------- ------ ---------- ---------- ----------
Net cash flows from investing activities (1,129) (685) (1,814)
-------------------------------------------- ------ ---------- ---------- ----------
Net cash flows before financing activities 583 (965) (382)
-------------------------------------------- ------ ---------- ---------- ----------
Financing activities
Equity dividends paid 4 (3,155) - (3,155)
Proceeds from issuance of new shares 2,120 3,086 5,206
Share conversion - Income to Growth (212) 212 -
Share conversion - Growth to Income 173 (173) -
Net cash flows from financing activities (1,074) 3,125 2,051
-------------------------------------------- ------ ---------- ---------- ----------
Net movement in cash and cash equivalents (491) 2,160 1,669
Cash and cash equivalents at the beginning
of the year 2,040 3,769 5,809
Cash and cash equivalents at the end
of the year 1,549 5,929 7,478
-------------------------------------------- ------ ---------- ---------- ----------
Represented by:
Cash at bank and short-term deposits 1,549 5,929 7,478
-------------------------------------------- ------ ---------- ---------- ----------
Cash Flow Statement
Year to 31 May 2021
Income Growth
shares shares Total
GBP'000 GBP'000 GBP'000
-------- ---------- ----------
Net cash outflow from operations before
dividends and interest (606) (1,413) (2,019)
Dividends received 2,891 1,072 3,963
Interest received 1 - 1
Interest paid (118) - (118)
------------------------------------------------- -------- ---------- ----------
Net cash inflow / (outflow) from operating
activities 2,168 (341) 1,827
Investing activities
Purchases of investments (4,363) (8,174) (12,537)
Sales of investments 3,409 4,313 7,722
------------------------------------------------- -------- ---------- ----------
Net cash flows from investing activities (954) (3,861) (4,815)
------------------------------------------------- -------- ---------- ----------
Net cash flows before financing activities 1,214 (4,202) (2,988)
------------------------------------------------- -------- ---------- ----------
Financing activities
Equity dividends paid (2,852) - (2,852)
Proceeds from issuance of new shares 710 4,765 5,475
Share conversion - Income to Growth (300) 300 -
Share conversion - Growth to Income 165 (165) -
Sale of shares from treasury 599 - 599
Shares purchased to be held in treasury (557) - (557)
Loan drawn down 2,000 - 2,000
Net cash flows from financing activities (235) 4,900 4,665
------------------------------------------------- -------- ---------- ----------
Net movement in cash and cash equivalents 979 698 1,677
Cash and cash equivalents at the beginning
of the year 1,061 3,071 4,132
Cash and cash equivalents at the end
of the year 2,040 3,769 5,809
------------------------------------------------- -------- ---------- ----------
Represented by:
Cash at bank and short-term deposits 2,040 3,769 5,809
------------------------------------------------- -------- ---------- ----------
Statement of Changes in Equity
For the Year Ended 31 May 2022
Share Capital 2022 2008 Total
Share premium redemption special special Capital Revenue shareholders'
capital account reserve reserve reserve reserves reserve funds
Income shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
As at 31 May
2021 4,459 27,608 256 - 19,017 12,373 3,053 66,766
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Increase in
share
capital in
issue,
net of share
issuance
expenses 140 1,980 - - - - - 2,120
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Share
conversion (2) - - - (37) - - (39)
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Cancellation
of deferred
shares (1) - 1 - - - - -
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Transfer of
net
income from
Growth
to Income
Portfolio - - - - - 644 644
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Transfer of
capital
from Income
to
Growth
Portfolio - - - - (644) - (644)
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Share premium
cancellation - (29,588) - 29,588 - - - -
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Dividends paid - - - - - (3,155) (3,155)
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Return
attributable
to
shareholders - - - - - (3,620) 2,620 (1,000)
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
As at 31 May
2022 4,596 - 257 29,588 18,980 8,109 3,162 64,692
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Growth shares
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
As at 31 May
2021 3,586 26,599 365 - 17,162 56,514 - 104,226
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Increase in
share
capital in
issue,
net of share
issuance
expenses 104 2,982 - - - - - 3,086
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Share
conversion 2 - - - 37 - - 39
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Transfer of
net
income from
Growth
to Income
Portfolio - - - - - - (644) (644)
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Transfer of
capital
from Income
to
Growth
Portfolio - - - - - 644 - 644
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Share premium
cancellation - (29,581) - 29,581 - - - -
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Return
attributable
to
shareholders - - - - - (13,016) 644 (12,372)
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
As at 31 May
2022 3,692 - 365 29,581 17,199 44,142 - 94,979
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Total Company
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
As at 31 May
2021 8,045 54,207 621 - 36,179 68,887 3,053 170,992
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Increase in
share
capital in
issue,
net of share
issuance
expenses 244 4,962 - - - - - 5,206
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Share - - - - - - - -
conversion
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Cancellation
of deferred
shares (1) - 1 - - - - -
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Share premium
cancellation - (59,169) - 59,169 - - - -
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Dividends paid - - - - - (3,155) (3,155)
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Return
attributable
to
shareholders - - - - - (16,636) 3,264 (13,372)
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Total Company
as at 31 May
2022 8,288 - 622 59,169 36,179 52,251 3,162 159,671
--------------- ---------- ----------- ------------ --------- --------- ----------- ---------- ---------------
Statement of Changes in Equity
For the Year Ended 31 May 2021
Share Capital 2008 Total shareholders'
Share premium redemption special Capital Revenue funds
capital account reserve reserve reserves reserve GBP000
Income shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
As at 31 May
2020 4,415 26,909 252 19,147 240 2,825 53,788
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Increase in share
capital in issue,
net of share issuance
expenses 55 655 - - - - 710
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Shares sold from
Treasury - 44 - 555 - - 599
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Shares purchased
for Treasury - - - (557) - - (557)
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Share conversion (7) - - (128) - - (135)
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Cancellation of
deferred shares (4) - 4 - - - -
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Transfer of net
income from Growth
to Income Portfolio - - - - - 564 564
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Transfer of capital
from Income to
Growth Portfolio - - - - (564) - (564)
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Dividends paid - - - - - (2,852) (2,852)
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Return attributable
to shareholders - - - - 12,697 2,516 15,213
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
As at 31 May
2021 4,459 27,608 256 19,017 12,373 3,053 66,766
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Growth shares
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
As at 31 May
2020 3,408 22,006 364 17,034 31,961 - 74,773
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Increase in share
capital in issue,
net of share issuance
expenses 172 4,593 - - - - 4,765
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Share conversion 7 - - 128 - - 135
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Cancellation of
deferred shares (1) - 1 - - - -
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Transfer of net
income from Growth
to Income Portfolio - - - - - (564) (564)
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Transfer of capital
from Income to
Growth Portfolio - - - - 564 - 564
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Return attributable
to shareholders - - - - 23,989 564 24,553
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
As at 31 May
2021 3,586 26,599 365 17,162 56,514 - 104,226
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Total Company
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
As at 31 May
2020 7,823 48,915 616 36,181 32,201 2,825 128,561
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Increase in share
capital in issue,
net of share issuance
expenses 227 5,248 - - - - 5,475
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Shares sold from
treasury - 44 - 555 - - 599
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Shares purchased
for treasury - - - (557) - - (557)
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Share conversion - - - - - - -
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Cancellation of
deferred shares (5) - 5 - - - -
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Dividends paid - - - - - (2,852) (2,852)
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Return attributable
to shareholders - - - - 36,686 3,080 39,766
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Total Company
as at 31 May 2021 8,045 54,207 621 36,179 68,887 3,053 170,992
----------------------- ---------- --------- ------------ --------- ----------- ---------- --------------------
Principal Risks and Uncertainties
Most of the Company's principal risks and uncertainties that
could threaten the achievement of its objective, strategy, future
performance, liquidity and solvency are market-related and
comparable to those of other investment companies investing
primarily in listed securities.
A summary of the Company's risk management and internal controls
arrangements is included within the Report of the Audit Committee
in the Annual Report and Financial Statements. By means of the
procedures set out in that summary, the Board has established an
ongoing process for identifying, evaluating and managing the
significant risks faced by the Company. Any emerging risks that are
identified and that are considered to be of significance would be
included on the Company's risk register with any mitigations. These
significant risks, emerging risks and other risks, are regularly
reviewed by the Audit Committee and the Board. Ongoing
consideration has been given to the impact from Coronavirus
(COVID-19) and is referred to below in Market Risk and Operational
Risk. They have also regularly reviewed the effectiveness of the
Company's risk management and internal control systems for the
period.
As explained in the Chairman's Statement, BMO GAM (EMEA) was
acquired by Ameriprise Financial and its business is being merged
with Columbia Threadneedle Investments. The Board looks favourably
upon this transaction and expects there to be little change for
your Company. Nevertheless, an acquisition such as this may
introduce some uncertainty, until the integration of systems is
fully implemented. Therefore the Board is treating this aspect as
an emerging risk that it will monitor closely. In addition the
Company faces emerging risks from the uncertainties in economic
recovery from the COVID-19 pandemic, geopolitical unrest, climate
change and rising inflation.
The principal risks and uncertainties faced by the Company, and
the Board's mitigation approach, are described below.
Market Risk
The Company's assets consist mainly of listed closed-end
investment companies and its principal risks are therefore
market-related and include market risk (comprising currency risk,
interest rate risk and other price risk), liquidity risk and credit
risk.
Since early 2020 there has been increased uncertainty in markets
due to the effect of COVID-19 and more recently the war in Ukraine
and rising inflation which has led to falls and volatility in the
Company's NAV.
Increase in overall risk during the year, given the war in
Ukraine, continuing economic and market uncertainty, climate change
and rising inflation.
Mitigation
The Board regularly considers the composition and
diversification of the Income Portfolio and the Growth Portfolio
and considers individual stock performance together with purchases
and sales of investments. Investments and markets are discussed
with the Investment Manager on a regular basis.
The Board has, in particular, considered the impact of market
volatility during the COVID-19 pandemic and the war in Ukraine and
from rising inflation and is discussed in the Chairman's Statement
and Investment Manager's Review. Engagement on ESG matters are
undertaken by the Manager. As a closed-end investment company, it
is not constrained by asset sales to meet redemptions so can remain
invested through volatile market conditions and is well suited to
investors seeking longer term returns.
Investment Risk
Incorrect strategy, asset allocation, stock selection,
inappropriate capital structure, insufficient monitoring of costs,
failure to maintain an appropriate level of discount/premium and
the use of gearing could all lead to poor returns for
shareholders.
Increase in overall risk during the year, due to geopolitical
unrest and rising inflation.
Mitigation
The investment strategy and performance against peers and the
benchmark are considered by the Board at each meeting and reviewed
with the Investment Manager. The Board is responsible for setting
the gearing range within which the Manager may operate and gearing
is discussed at every meeting and related covenant limits are
closely monitored.
The Income Portfolio and Growth Portfolio are diversified and
comprise listed closed-end investment companies and their
compositions are reviewed regularly by the Board.
The Manager's Investment Risk team provide oversight on
investment risk management.
The Board regularly considers ongoing charges and a
discount/premium management policy has operated since the launch of
the Company. Underlying dividends from investee companies are also
closely monitored.
Custody Risk: Safe custody of the Company's assets may be
compromised through control failures by the Custodian.
No change in overall risk during the year.
Mitigation: The Board receives quarterly reports from the
Depositary confirming safe custody of the Company's assets and cash
and holdings are reconciled to the Custodian's records. The
Custodian's internal controls reports are also reviewed by the
Manager and key points reported to the Audit Committee. The Board
also receives periodic updates from the Custodian on its own
cyber-security controls.
The Depositary is specifically liable for loss of any of the
Company's assets that constitute financial instruments under the
AIFMD.
Operational Risk: Failure of the Manager as the Company's main
service provider or disruption to its business, or that of an
outsourced or third party service provider, could lead to an
inability to provide accurate reporting and monitoring, leading to
a potential breach of the Company's investment mandate or loss of
shareholders' confidence.
The risk includes failure or disruption as a consequence of
external events such as the COVID-19 pandemic.
External cyber attacks could cause such failure or could lead to
the loss or sabotage of data.
No change in overall risk during the year, but due to the impact
of COVID-19 on working practices and the eventual integration with
Columbia Threadneedle Investments' systems this risk remains
heightened.
Mitigation: The Board has considered the acquisition of BMO GAM
(EMEA) by Columbia Threadneedle Investments during the year and has
met with senior management to discuss this. Comfort was taken from
its long-term financial strength and resources and commitment
towards the Manager's investment trust business.
The Board meets regularly with the management of the Manager and
its Business Risk team to review internal control and risk reports,
which includes oversight of its own third party service providers.
The Manager's appointment is reviewed annually and the contract can
be terminated with six months' notice. The Manager has a business
continuity plan in place to ensure that it is able to respond
quickly and effectively to an unplanned event that could affect the
continuity of its business.
The Manager has outsourced trade processing, valuation and
middle office tasks and systems to State Street Bank and Trust
Company ('State Street') and supervision of such third party
service providers, including SS&C who administer the Manager's
savings plans, has been maintained by the Manager. This includes
the review of IT security and heightened cyber threats which was
discussed with the Board during the financial year.
Following the easing of government COVID-19 related
restrictions, the Manager has moved from a remote 'working from
home' arrangement to a hybrid model with staff also returning to
work in office locations. Throughout the pandemic the Manager has
continued to serve clients and keep operations running effectively
and in compliance with its regulatory obligations. These
arrangements have and continue to operate without incident or
interruption. The Manager also closely monitors the performance of
its technology platform to ensure it is functioning within
acceptable service levels. The Company's other third party service
providers have also implemented similar arrangements to ensure no
disruption to their service. Having considered these arrangements
and reviewed the service levels over the last year, the Board is
confident that the Company continues to operate as normal and
expected service levels are being maintained.
Viability Assessment and Statement
In accordance with the UK Corporate Governance Code, the Board
is required to assess the future prospects for the Company and
considered that a number of characteristics of the Company's
business model and strategy were relevant to this assessment:
-- The Company's investment objective and policy, which are
subject to regular Board monitoring, means that the Company is
invested principally in two diversified Portfolios of listed
closed-end investment companies and the level of borrowing is
restricted.
-- These investments are principally in listed securities which
are traded in the UK or another Regulated Exchange and which are
expected to be readily realisable.
-- The Company is a listed closed-end investment company whose
shares are not subject to redemptions by shareholders.
-- Subject to shareholder continuation votes, the next of which
will be at the AGM in 2023 and five yearly thereafter, the
Company's business model and strategy is not time limited.
Also relevant were a number of aspects of the Company's
operational arrangements:
-- The Company retains title to all assets held by the Custodian
under the terms of a formal agreement with the Custodian and
Depositary.
-- The borrowing facilities, which remain available until
February 2025, are subject to formal agreements, including
financial covenants with which the Company complied in full during
the year.
-- Revenue and expenditure forecasts are reviewed by the Directors at each Board meeting.
-- The operational robustness of key service providers and the
effectiveness of alternative working arrangements in particular
given the current impact of COVID-19.
-- That alternative service providers can be engaged at relatively short notice if necessary.
In considering the viability of the Company, the Directors
carried out a robust assessment of the principal risks and
uncertainties which could threaten the Company's objective and
strategy, future performance and solvency. This included the impact
of COVID-19 and the war in Ukraine and the impact of a significant
fall in equity markets on the Company's investment Portfolios.
These risks, their mitigations and the processes for monitoring
them are set out in Principal Risks and Uncertainties and in the
Report of the Audit Committee and in the notes to the financial
statements in the Annual Report and Financial Statements.
The Directors also considered:
-- The level of ongoing charges incurred by the Company which
are modest and predictable and (at 31 May 2022), excluding any
performance fee and ongoing charges of underlying funds, total
1.04% and 0.96% of average net assets for the Income shares and
Growth shares respectively.
-- Future revenue and expenditure projections.
-- Its ability to meet liquidity requirements given the
Company's investment Portfolios consist principally of listed
investment companies which can be realised if required.
-- The ability to undertake share buy-backs if required.
-- Whether the Company's investment objective and policy continue to be relevant to investors.
-- Directors are non-executive and the Company has no employees
and consequently the Company does not have redundancy or other
employment-related liabilities or responsibilities.
-- The uncertainty in markets due to the effects of the COVID-19
pandemic and more recently the war in Ukraine, the impact on the
global economy and the prospects for the Company's investment
Portfolios.
These matters were assessed over a three year period to August
2025, and the Board will continue to assess viability over three
year rolling periods.
As part of this assessment the Board considered a number of
stress tests and scenarios which considered the impact of severe
stock market volatility on shareholders' funds over a three-year
period. The results demonstrated the impact on the Company's net
assets and its expenses and its ability to meet its liabilities
over that period.
A rolling three year period represents the horizon over which
the Directors believe they can form a reasonable expectation of the
Company's prospects, although they do have due regard to viability
over the longer term.
Based on their assessment, and in the context of the Company's
business model, strategy and operational arrangements set out
above, the Directors have a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as
they fall due over the three year period to August 2025.
Responsibility Statement of the Directors in Respect of the
Annual Report and Financial Statements
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company;
-- the Strategic Report and the Report of the Directors include
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 the Company faces; and
-- we consider the Annual Report and Financial Statements, 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.
On behalf of the Board
David Warnock
Chairman
8 August 2022
Notes
1. The financial statements of the Company, which are the
responsibility of, and were approved by, the Board on 8 August
2022, have been prepared on a going concern basis in accordance
with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority, Financial Reporting Standards (FRS
102) and the Statement of Recommended Practice (SORP) "Financial
Statements of Investment Trust Companies and Venture Capital
Trusts" issued by The Association of Investment Companies (AIC).
The audited financial statements for the Company comprise the
Income Statement and the total columns of the Balance Sheet, the
Cash Flow Statement and the Statement of Changes in Equity and the
Company totals shown in the notes to the financial statements.
There have been no significant changes to the Company's
accounting policies during the year ended 31 May 2022.
The preparation of the Company's financial statements on
occasion requires management to make judgements, estimates and
assumptions that affect the reported amounts in the primary
financial statements and accompanying disclosures. These
assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities
affected in the current or future periods, depending on the
circumstance. Management do not believe that any significant
accounting judgements or estimates have been applied to this set of
financial statements that have a significant risk of causing a
material adjustment to the carrying amount of assets and
liabilities within the next financial year.
The Company's assets consist mainly of equity shares in
closed-end investment companies which are traded in the UK or
another Regulated Stock Exchange and in most circumstances,
including in the current market environment, are expected to be
readily realisable.
The Board has considered the Company's principal risks and
uncertainties and other matters, including the COVID-19 pandemic
and the war in Ukraine and has considered a number of stress tests
and scenarios which considered the impact of severe stock market
volatility on shareholders' funds and demonstrated that if required
the Company had the ability to raise sufficient funds so as to
remain within its debt covenants and meet its liabilities.
As such, and in light of the controls and review processes in
place and the operational robustness of key service providers, and
bearing in mind the nature of the Company's business and assets and
revenue and expenditure projections, the Directors believe that the
Company has adequate resources to continue in operational existence
for a period of at least twelve months from the date of approval of
the financial statements. For this reason, the Board continues to
adopt the going concern basis in preparing the financial
statements.
2. Segmental Analysis
The Company carries on business as an investment trust and
manages two separate Portfolios of assets: the Income Portfolio and
the Growth Portfolio. The Company's Income Statement can be
analysed as follows. This has been disclosed to assist
shareholders' understanding, but this analysis is additional to
that required by FRS 102:
Year ended 31 May 2022
Income Portfolio Growth Portfolio Total
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on
investments - (3,245) (3,245) - (12,479) (12,479) - (15,724) (15,724)
Foreign
exchange
losses - (2) (2) - - - - (2) (2)
Income 3,176 - 3,176 1,208 - 1,208 4,384 - 4,384
Investment
management
fee (188) (281) (469) (134) (537) (671) (322) (818) (1,140)
Other
expenses (293) - (293) (430) - (430) (723) - (723)
------------------- --------------------- ------------------- ------------------- ---------------------- ---------------------- ------------------- ---------------------- ----------------------
Return on
ordinary
activities
before
finance
costs and
tax 2,695 (3,528) (833) 644 (13,016) (12,372) 3,339 (16,544) (13,205)
Finance
costs (61) (92) (153) - - - (61) (92) (153)
------------------- --------------------- ------------------- ------------------- ---------------------- ---------------------- ------------------- ---------------------- ----------------------
Return on
ordinary
activities
before tax 2,634 (3,620) (986) 644 (13,016) (12,372) 3,278 (16,636) (13,358)
Tax on
ordinary
activities (14) - (14) - - - (14) - (14)
------------------- --------------------- ------------------- ------------------- ---------------------- ---------------------- ------------------- ---------------------- ----------------------
Return # 2,620 (3,620) (1,000) 644 (13,016) (12,372) 3,264 (16,636) (13,372)
------------------- --------------------- ------------------- ------------------- ---------------------- ---------------------- ------------------- ---------------------- ----------------------
Year ended 31 May 2021
Income Portfolio Growth Portfolio Total
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on
investments - 13,297 13,297 - 24,835 24,835 - 38,132 38,132
Foreign
exchange
losses - (17) (17) - - - - (17) (17)
Income 2,982 - 2,982 1,040 - 1,040 4,022 - 4,022
Investment
management
and
performance
fees (170) (514) (684) (120) (846) (966) (290) (1,360) (1,650)
Other
expenses (233) - (233) (356) - (356) (589) - (589)
------------------- -------------------- -------------------- ------------------- -------------------- -------------------- ------------------- -------------------- --------------------
Return on
ordinary
activities
before
finance
costs and
tax 2,579 12,766 15,345 564 23,989 24,553 3,143 36,755 39,898
Finance costs (47) (69) (116) - - - (47) (69) (116)
------------------- -------------------- -------------------- ------------------- -------------------- -------------------- ------------------- -------------------- --------------------
Return on
ordinary
activities
before tax 2,532 12,697 15,229 564 23,989 24,553 3,096 36,686 39,782
Tax on
ordinary
activities (16) - (16) - - - (16) - (16)
------------------- -------------------- -------------------- ------------------- -------------------- -------------------- ------------------- -------------------- --------------------
Return # 2,516 12,697 15,213 564 23,989 24,553 3,080 36,686 39,766
------------------- -------------------- -------------------- ------------------- -------------------- -------------------- ------------------- -------------------- --------------------
# Any net revenue return attributable to the Growth Portfolio is
transferred to the Income Portfolio and a corresponding transfer of
an identical amount of capital is made from the Income Portfolio to
the Growth Portfolio and accordingly the whole return in the Growth
Portfolio is capital. Refer to the Statement of Changes in
Equity.
3. Return per share
The return per share for the year ended 31 May 2022 is as
follows:
Income shares Growth shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------------- ------------------- ----------------- ------------------- ------------------- -----------------
Return
attributable
to
Portfolios 2,620 (3,620) (1,000) 644 (13,016) (12,372)
Transfer of
net
income from
Growth
to Income
Portfolio 644 - 644 (644) - (644)
Transfer of
capital
from Income
to
Growth
Portfolio - (644) (644) - 644 644
-------------- ------------------- ------------------- ----------------- ------------------- ------------------- -----------------
Return
attributable
to
shareholders 3,264 (4,264) (1,000) - (12,372) (12,372)
Return per
share 6.85p (8.95p) (2.10p) - (32.28p) (32.28p)
Weighted
average
number of
shares
in issue
during
the period 47,655,020 38,325,735
-------------- ----------------------------------------------------------- -----------------------------------------------------------
The return per share for the year ended 31 May 2021 is as
follows:
Income shares Growth shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------------- ------------------- ----------------- ------------------- ------------------- -----------------
Return
attributable
to Portfolios 2,516 12,697 15,213 564 23,989 24,553
Transfer of
net
income from
Growth
to Income
Portfolio 564 - 564 (564) - (564)
Transfer of
capital
from Income
to
Growth
Portfolio - (564) (564) - 564 564
--------------- ------------------- ------------------- ----------------- ------------------- ------------------- -----------------
Return
attributable
to
shareholders 3,080 12,133 15,213 - 24,553 24,553
Return per
share 6.59p 25.94p 32.53p - 67.27p 67.27p
Weighted
average
number of
shares
in issue
during
the period 46,772,385 36,497,458
--------------- ----------------------------------------------------------- -----------------------------------------------------------
4. Dividends
2022
Income
shares
Total
Dividends on Income shares Register date Payment GBP'000
date
------------------------------------- --------------- -------------- --------
Amounts recognised as distributions
to shareholders during the year:
For the year ended 31 May 2021
- fourth interim dividend of 2.0p
per Income share 18 June 2021 9 July 2021 939
For the year ended 31 May 2022
- first interim dividend of 1.55p 17 September 8 October
per Income share 2021 2021 731
- second interim dividend of 1.55p 17 December 7 January
per Income share 2021 2022 741
- third interim dividend of 1.55p
per Income share 18 March 2022 8 April 2022 744
------------------------------------- --------------- -------------- --------
3,155
Amounts relating to the year but
not paid at the year end:
- fourth interim dividend of 2.0p
per Income share* 17 June 2022 8 July 2022 968
------------------------------------- --------------- -------------- --------
* Based on 48,397,165 Income shares in issue at the record date
of 17 June 2022.
The fourth interim dividend of 2.0p per Income share was paid on
8 July 2022 to shareholders on the register on 17 June 2022, with
an ex-dividend date of 16 June 2022.
The Growth shares do not carry an entitlement to receive
dividends.
5. (a) Tax on ordinary activities
Year ended 31 May 2022
Income Portfolio Growth Portfolio Total
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current tax
charge
for the year
(all
irrecoverable
overseas
tax) being
taxation
on ordinary
activities 14 - 14 - - - 14 - 14
--------------- ------------------- ------------------- ----------------- ------------------- ------------------- ----------------- ------------------- ------------------- -----------------
(b) Reconciliation of tax charge
2022
Income Growth
shares shares Total
GBP'000 GBP'000 GBP'000
------------------------------------------ -------- --------- ---------
Loss on ordinary activities before
tax: (986) (12,372) (13,358)
------------------------------------------- -------- --------- ---------
Corporation tax at standard rate
of 19 per cent (187) (2,351) (2,538)
Effects of:
Losses on investments not taxable 617 2,371 2,988
Overseas tax suffered 14 - 14
Non-taxable UK dividend income (294) (213) (507)
Non-taxable overseas dividend income (237) (15) (252)
Expenses not utilised 101 208 309
Current year tax charge (note 5 (a)) 14 - 14
------------------------------------------- -------- --------- ---------
6. The net asset value per Income share is calculated on net
assets of GBP64,692,000 (2021: GBP66,766,000), divided by
48,397,165 (2021: 46,944,790) Income shares, being the number of
Income shares in issue at the year-end (excluding any shares held
in treasury).
The net asset value per Growth share is calculated on net assets
of GBP94,979,000 (2021: GBP104,226,000), divided by 38,860,148
(2021: 37,761,553) Growth shares, being the number of Growth shares
in issue at the year-end (excluding any shares held in
treasury).
7. During the year the Company issued 1,480,000 (2021: 575,000)
Income shares from the block listing facility for net proceeds of
GBP2,120,000 (2021: GBP710,000).
During the year, valid conversion notices were received to
convert 150,027 Income shares. These were converted into 73,833
Growth shares in accordance with the Company's Articles and by
reference to the ratio of the relative underlying net asset values
of the Growth shares and Income shares on the conversion date. The
Company's Articles allow for Deferred shares to be allotted as part
of the share conversion to ensure that the conversion does not
result in a reduction of the aggregate par value of the Company's
issued share capital. The Deferred shares were subsequently
repurchased by the Company for nil consideration (as they have no
economic value) and as authorised by shareholders at the 2021
AGM.
8. During the year, the Company issued 1,085,000 (2021:
1,815,000) Growth shares from the block listing facility for net
proceeds of GBP3,086,000 (2021: GBP4,765,000).
During the year, valid conversion notices were received to
convert 60,238 Growth shares. These were converted into 122,402
Income shares in accordance with the Company's Articles and by
reference to the ratio of the relative underlying net asset values
of the Growth shares and Income shares on the conversion date. The
Company's Articles allow for Deferred shares to be allotted as part
of the share conversion to ensure that the conversion does not
result in a reduction of the aggregate par value of the Company's
issued share capital. The Deferred shares were subsequently
repurchased by the Company for nil consideration (as they have no
economic value) and as authorised by shareholders at the 2021
AGM.
9. Financial Instruments
The Company's financial instruments comprise its investment
Portfolios, cash balances, bank borrowings and debtors and
creditors that arise directly from its operations. The Company,
which is an investment trust, holds two Portfolios of financial
assets in pursuit of its investment objective.
Listed and quoted fixed asset investments held are valued at
fair value.
The fair value of the financial assets and liabilities of the
Company at 31 May 2022 and 31 May 2021 is not materially different
from their carrying value in the financial statements.
The main risks that the Company faces arising from its financial
instruments are:
(i) market price risk, being the risk that the value of
investment holdings will fluctuate as a result of changes in market
prices caused by factors other than interest rate or currency rate
movements;
(ii) interest rate risk, being the risk that the future cash
flows of a financial instrument will fluctuate because of changes
in market interest rates;
(iii) foreign currency risk, being the risk that the value of
investment holdings, investment purchases, investment sales and
income will fluctuate because of movements in currency rates;
(iv) credit risk, being the risk that a counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Company; and
(v) liquidity risk, being the risk that the Company may not be
able to liquidate its investments quickly or otherwise raise funds
to meet financial commitments.
Market Price Risk
The management of market price risk is part of the fund
management process and is typical of equity and debt investment.
The Portfolios are managed with an awareness of the effects of
adverse price movements through detailed and continuing analysis
with an objective of maximising overall returns to
shareholders.
Interest Rate Risk
Floating Rate
When the Company retains cash balances the majority of the cash
is held in variable rate bank accounts yielding rates of interest
linked to the UK base rate which was 1.0% at 31 May 2022 (2021:
0.1%). There are no other assets which are directly exposed to
floating interest rate risk.
When the Company draws down amounts under its new revolving
credit facility, interest is payable based on SONIA (which can vary
on a daily basis) plus a margin. In the prior year, interest was
based on LIBOR and was fixed at the time of drawdown.
Fixed Rate
Movements in market interest rates will affect the market value
of fixed interest investments. Neither the Income Portfolio nor the
Growth Portfolio holds any fixed interest investments.
The Company has a GBP5 million fixed rate term loan with an
interest rate of 2.78% per annum.
Foreign Currency Risk
The Company may invest in overseas securities which give rise to
currency risks. At 31 May 2022, the Income Portfolio had Swiss
Franc denominated investments valued at GBP3,673,000 (2021:
GBP4,556,000), a Euro denominated investment valued at GBP1,946,000
(2021: GBP2,228,000) and a US Dollar denominated investment valued
at GBP1,229,000 (2021: GBP1,092,000). At 31 May 2022, the Growth
Portfolio had a US Dollar denominated investment valued at
GBP1,028,000 (2021: GBP1,350,000).
As the remainder of the Company's investments and all other
assets and liabilities are denominated in sterling there is no
other direct foreign currency risk. However, although the Company's
performance is measured in sterling and the Company's investments
(other than the above) are denominated in sterling, a proportion of
their underlying assets are quoted in currencies other than
sterling. Therefore movements in the rates of exchange between
sterling and other currencies may affect the market price of the
Company's investment Portfolios and therefore the market price risk
includes an element of currency exposure.
Credit Risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The Manager has in place a
monitoring procedure in respect of counterparty risk which is
reviewed on an ongoing basis. The carrying amounts of financial
assets best represents the maximum credit risk exposure at the
Balance Sheet date.
Credit risk arising on transactions with brokers relates to
transactions awaiting settlement. Risk relating to unsettled
transactions is considered to be small due to the short settlement
period involved and the acceptable credit quality of the brokers
used. The Manager monitors the quality of service provided by the
brokers used to further mitigate this risk.
All the assets of the Company which are traded on a recognised
exchange are held by JPMorgan Chase Bank, the Company's Custodian.
Bankruptcy or insolvency of the Custodian may cause the Company's
rights with respect to securities held by the Custodian to be
delayed or limited. The Board monitors the Company's risk by
reviewing the Custodian's internal control reports.
The credit risk on liquid funds is controlled because the
counterparties are banks with acceptable credit ratings, normally
rated A or higher, assigned by international credit rating
agencies. Bankruptcy or insolvency of such financial institutions
may cause the Company's ability to access cash placed on deposit to
be delayed, limited or lost.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter
difficulty in realising assets or otherwise raising funds to meet
financial commitments. The risk of the Company not having
sufficient liquidity at any time is not considered by the Board to
be significant, given that the Company's listed and quoted
securities are considered to be readily realisable.
The Company's liquidity risk is managed on an ongoing basis by
the Manager in accordance with policies and procedures in place.
The Company's overall liquidity risks are monitored on a quarterly
basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses
which are settled in accordance with suppliers stated terms. The
Company has a GBP5 million fixed rate term loan and a GBP5 million
unsecured revolving credit facility which are both available until
10 February 2025 with The Royal Bank of Scotland International
Limited. As at 31 May 2022, GBP5 million of the fixed rate term
loan was drawn down (2021: GBP5 million) and GBP2 million of the
unsecured revolving credit facility was drawn down (2021: GBP2
million). The interest rate on the fixed rate term loan, which is
fully drawn, is 2.78% per annum. The interest rate on the unsecured
revolving credit facility is variable, and a non-utilisation fee is
payable on undrawn amounts.
10. Subject to certain minimum and maximum thresholds which may
be set at the discretion of the Board of CT Global Managed
Portfolio Trust PLC, shareholders have the right to convert their
Income shares into Growth shares and/or their Growth shares into
Income shares upon certain dates, the next of which will be on 27
October 2022 and then annually or close to annually thereafter.
Under current law, such conversions will not be treated as
disposals for UK capital gains tax purposes. The Conversion notice
period commences on 11 August 2022 and full details will be
provided on the Company's website and in the Company's Annual
Report and Financial Statements.
11. The Board of Directors (the "Board") is considered a related
party. There are no transactions with the Board other than
aggregated remuneration for services as Directors as disclosed in
the Directors' Remuneration Report within the Annual Report and
Financial Statements. The beneficial interests of the Directors in
the Income shares and Growth shares of the Company are disclosed in
the Annual Report and Financial Statements. There are no
outstanding balances with the Board at the year-end. Until 24
February 2022, Sue Inglis was also a non-executive director and
chairman of The Bankers Investment Trust. The Income Portfolio has
a holding of 1,730,470 shares in this company valued at
GBP1,793,000 at 31 May 2022. David Warnock is also a non-executive
director of ICG Enterprise Trust plc. The Growth Portfolio has a
holding of 190,000 shares in this company valued at GBP2,067,000 at
31 May 2022.
Transactions between the Company and the Manager are detailed in
the notes to the financial statements in the Annual Report and
Financial Statements. The existence of an independent Board of
Directors demonstrates that the Company is free to pursue its own
financial and operating policies and therefore, under the AIC SORP,
the Manager is not considered to be a related party.
12. This statement was approved by the Board on 8 August 2022.
It is not the Company's full statutory accounts in terms of Section
434 of the Companies Act 2006. The statutory Annual Report and
Financial Statements for the year ended 31 May 2022 has been
approved and audited and received an unqualified audit report and
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying the report.
This will be sent to shareholders during August and will be
available for inspection at 6(th) Floor, Quartermile 4, 7a
Nightingale Way, Edinburgh, EH3 9EG the registered office of the
Company.
The full Annual Report and Financial Statements are available on
the Company's website
ctglobalmanagedportfolio.co.uk
The audited financial statements for the year to 31 May 2022
will be lodged with the Registrar of Companies following the Annual
General Meeting to be held on 29 September 2022.
Alternative Performance Measures ("APMs")
The Company uses the following "APMs":
Discount/premium - the share price of an investment company is
derived from buyers and sellers trading their shares on the
stockmarket. This price is not identical to the net asset value
(NAV) per share of the underlying assets less liabilities of the
Company. If the share price is lower than the NAV per share, the
shares are trading at a discount. This usually indicates that there
are more sellers of shares than buyers. Shares trading at a price
above NAV per share are deemed to be at a premium, usually
indicating there are more buyers of shares than sellers.
31 May 2022 31 May 2021
---------------- ----------------
Income Growth Income Growth
--------------------------------
shares shares shares shares
-------------------------- ---- ------- ------- ------- -------
Net asset value per share (a) 133.67p 244.41p 142.22p 276.01p
Share price (b) 131.00p 244.00p 143.50p 277.00p
-------------------------- ---- ------- ------- ------- -------
-Discount/+premium (c =
(b-a)/(a)) (c) -2.0% -0.2% +0.9% +0.4%
-------------------------- ---- ------- ------- ------- -------
Ongoing charges - all operating costs (attributable to the
relevant share class of the Company), incurred and expected to be
incurred in the foreseeable future, whether charged to capital or
revenue in the Company's Income Statement, expressed as a
proportion of the average daily net assets (of the relevant share
class of the Company) over the reporting year. In accordance with
the AIC methodology, the costs of buying and selling investments
are excluded in calculating ongoing charges, as are any performance
fee, the cost of the Company's borrowings, taxation, non-recurring
costs and the costs of buying back or issuing shares. The Company's
ongoing charges calculated in accordance with this methodology are
shown in column A in the following tables.
The AIC recommends that investment companies also disclose
ongoing charges including any performance fee. These calculations
are shown in column B in the following tables.
In addition, the AIC recommends that investment companies with a
substantial proportion of their portfolio invested in other funds
and where the relevant information is readily available should
consider incorporating a relevant proportion of ongoing charges of
the underlying funds into its own ongoing charges figure. These
calculations are shown in column C in the following tables.
The Key Information Document ('KID') on the Company's website
contains a measure of costs calculated in accordance with the UK
version of the EU PRIIPs regulation as it forms part of UK law
following Brexit. In addition to the costs included within the
Company's ongoing charges figure in column A in the following
tables, the KID methodology for calculating costs (attributable to
the relevant share class of the Company) includes the costs of
buying and selling investments, the cost of the Company's
borrowings, any performance fee and a relevant proportion of the
ongoing costs of the underlying funds. These underlying costs cover
operational costs, performance fees and borrowing costs. The
aggregate KID costs are expressed as a proportion of the average
daily net assets (of the relevant share class of the Company) over
the period. For completeness the Company has included a
reconciliation in the following tables, between the
methodologies.
Ongoing Charges Calculations - Income Portfolio
31 May 2022 31 May 2021
Column Column Column Column Column Column
A (1) B (2) C (3) A (1) B (2) C (3)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- ------------------ ------------------ ----------------
Investment management
fee 469 469 469 425 425 425
Other expenses 293 293 293 233 233 233
Performance fee - - - - 259 -
Less non-recurring
costs (68) (68) (68) (14) (14) (14)
Ongoing charges
of
underlying funds - - 683 - - 707
-------- -------- -------- ------------------ ------------------ ----------------
Total (a) 694 694 1,377 644 903 1,351
Average daily net
assets (b) 66,622 66,622 66,622 59,711 59,711 59,711
Ongoing charges
(c=a/b) (c) 1.04% 1.04% 2.07% 1.08% 1.51% 2.26%
-------- -------- -------- ------------------ ------------------ ----------------
Ongoing charges
above 1.04%
Non-recurring costs
above 0.10%
Borrowing costs
(Company
level) 0.23%
Costs of underlying
funds (including
borrowing costs) 1.48%
Performance fees
(Five year Company
average & underlying
funds) 0.23%
Portfolio transaction
costs 0.34%
--------
Costs per KID methodology 3.42%
--------
(1) Excluding performance fee and ongoing charges of underlying
funds
(2) Including performance fee (if applicable) but excluding
ongoing charges of underlying funds
(3) AIC methodology, excluding performance fee but including
ongoing charges of underlying funds
Ongoing Charges Calculations - Growth Portfolio
31 May 2022 31 May 2021
Column Column Column Column Column Column
A (1) B (2) C (3) A (1) B (2) C (3)
-------- -------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- --------
Investment management
fee 671 671 671 600 600 600
Other expenses 430 430 430 356 356 356
Performance fee - - - - 366 -
Less non-recurring
costs (84) (84) (84) (22) (22) (22)
Ongoing charges
of underlying funds - - 792 - - 839
-------- -------- -------- -------- -------- --------
Total (a) 1,017 1,017 1,809 934 1,300 1,773
Average daily net
assets (b) 105,577 105,577 105,577 90,603 90,603 90,603
Ongoing charges
(c=a/b) (c) 0.96% 0.96% 1.71% 1.03% 1.43% 1.96%
-------- -------- -------- -------- -------- --------
Ongoing charges
above 0.96%
Non-recurring costs
above 0.08%
Borrowing costs n/a
(Company level)
Costs of underlying
funds (including
borrowing costs) 1.04%
Performance fees
(Five year Company
average & underlying
funds) 0.54%
Portfolio transaction
costs 0.16%
--------
Costs per KID methodology 2.78%
--------
(1) Excluding performance fee and ongoing charges of underlying
funds
(2) Including performance fee (if applicable) but excluding
ongoing charges of underlying funds
(3) AIC methodology, excluding performance fee but including
ongoing charges of underlying funds
Total return - the return to shareholders calculated on a per
share basis taking into account both any dividends paid in the
period and the increase or decrease in the share price or NAV in
the period. The dividends are assumed to have been re-invested in
the form of shares or net assets, respectively, on the date on
which the shares were quoted ex-dividend.
The effect of reinvesting these dividends on the respective
ex-dividend dates and the share price total returns and NAV total
returns are shown below.
31 May 2022 31 May 2021
------------------------------------ ---------------------- ----------------
Income shares Growth Income Growth
shares Shares Shares
------------------------------------ ------------- ------- ------- -------
NAV per share at start of financial
year 142.22p 276.01p 115.71p 208.35p
NAV per share at end of financial
year 133.67p 244.41p 142.22p 276.01p
Change in the year -6.0% -11.4% +22.9% +32.5%
Impact of dividend reinvestments 4.5% n/a 6.1% n/a
------------------------------------ ------------- ------- ------- -------
NAV total return for the year -1.5% -11.4% +29.0% +32.5%
------------------------------------ ------------- ------- ------- -------
During the y ear to 31 M ay 2022 dividends to talling 6.65p went
ex-dividend with respect to the Income shares. During the y ear to
31 M ay 2021 the equivalent figure was 6.1 p.
31 May 2022 31 May 2021
-------------------------------------------- ---------------- ----------------
Income Growth Income Growth
shares shares Shares Shares
-------------------------------------------- ------- ------- ------- -------
Share price per share at start of financial
year 143.5p 277.0p 117.5p 212.0p
Share price per share at end of financial
year 131.00p 244.00p 143.5p 277.0p
Change in the year -8.7% -11.9% +22.1% +30.7%
Impact of dividend reinvestment 4.3% n/a 6.1% n/a
-------------------------------------------- ------- ------- ------- -------
Share price total return for the year -4.4% -11.9% +28.2% +30.7%
-------------------------------------------- ------- ------- ------- -------
During the year to 31 May 2022 dividends totalling 6.65p went
ex-dividend with respect to the Income shares. During the year to
31 May 2021 the equivalent figure was 6.1p.
Compound Annual Growth Rate - converts the total return over a
period of more than one year to a constant annual rate of return
applied to the compounded value at the start of each year.
31 May 2022 31 May 2021
----------------------------------------- ---------------- ----------------
Income Growth Income Growth
shares shares Shares Shares
----------------------------------------- ------- ------- ------- -------
Indexed total return at launch 100.0 100.0 100.0 100.0
Indexed total return at end of financial
year 262.9 249.4 266.8 281.6
Period (years) 14.125 14.125 13.125 13.125
Compound annual growth rate 7.1% 6.7% 7.8% 8.2%
----------------------------------------- ------- ------- ------- -------
Yield - the total annual dividend expressed as a per cen tage of
the year -end share pric e.
31 May 2022 31 May 2021
------------------- ---- ----------- --------------------
Annual dividend (a) 6.65p 6.2p
Income share price (b) 131.00p 143.50p
------------------- ---- ----------- --------------------
Yield (c = a/b) (c) 5.1% 4.3%
------------------- ---- ----------- --------------------
Net gearing/net cash - this is calculated by expressing the
Company's borrowings less cash and cash equivalents as a percentage
of shareholders' funds. If the amount calculated is positive, this
is described as net gearing. If the amount calculated is negative,
this is described as net cash.
31 May 2022 31 May 2021
-------------------- --------------------
Income Growth Income Growth
Shares Shares Shares Shares
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- --------- ---------
Borrowings 7,000 - 7,000 -
Cash and cash equivalents (1,549) (5,929) (2,040) (3,769)
--------------------------- --------- --------- --------- ---------
5,451 (5,929) 4,960 (3,769)
Net assets 64,692 94,979 66,766 104,226
--------------------------- --------- --------- --------- ---------
Net gearing/-Net cash 8.4% -6.2% 7.4% -3.6%
--------------------------- --------- --------- --------- ---------
For further information, please contact:
Peter Hewitt, Columbia Threadneedle Investment Business Limited 0131 718 1244
Ian Ridge, Columbia Threadneedle Investment Business Limited 0131 718 1010
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