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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Inv.Perp.Sel Hd | LSE:IVPH | London | Ordinary Share | GB00B1DQ6696 | HEDGE FD SHS 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 90.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Invesco Perpetual Select Trust plc
Annual Financial Report Announcement
YearEnded 31 May 2010
FINANCIAL INFORMATION
For the year ended 31 May
The Company commenced trading on 23 November 2006
UK Equity Share Portfolio 2010 2009 %
Change
Net asset value - total return +20.4
Share price- total return +20.1
Discount at year end 3.4% 3.4%
FTSE All-Share Index - total return +22.9
Revenue return per share 3.7p 3.3p
Dividend - first interim 1.65p 1.80p
- second interim 2.15p 1.65p
- total 3.80p 3.45p
Global Equity Share Portfolio 2010 2009 %
Change
Net asset value - total return +25.3
Share price - total return +25.8
Discount at year end 3.8% 3.6%
MSCI World Index (GBP) - total return +26.7
Revenue return per share 1.5p 2.1p
Dividend - first interim 0.45p 1.20p
- second interim 0.90p 1.05p
- total 1.35p 2.25p
Hedge Fund Share Portfolio 2010 2009 %
Change
Net asset value - total return +7.1
Share price - total return +10.3
Discount at year end 4.8% 7.7%
3 months LIBOR +5% pa - total return +5.8
Managed Liquidity Share Portfolio 2010 2009 %
Change
Net asset value - total return +2.4
Share price - total return +0.4
Discount at year end 2.3% 0.3%
Revenue return per share 0.3p 3.6p
Dividend - first interim 0.4p 2.7p
- second interim - 1.4p
- total 0.4p 4.1p
Chairman's Statement
Invesco Perpetual Select Trust plc has been in existence for three and a half
years and it is now over ten years since the launch of its predecessor, Merrill
Lynch Asset Allocator plc. During those ten years, we have seen turbulent
markets with rather low trend returns and very high volatility and two major
changes in the Capital Gains Tax regime. Turnover in the Shares of the Company
has always been low apart from buy backs by the Company itself. As a result the
shareholders are largely those who tendered loan notes issued by Merrill Lynch
and Gannett. Over time their needs are certain to change and it is important
for shareholders and the Company that we find ways to refresh the Share
Register. The Company continues to be a very efficient way to hold long term
assets, providing high quality and varied investment management and deferral of
Capital Gains Tax at a new and higher rate. However, while those who have
capital gains are interested in deferring them, investors generally and quite
reasonably, do not have this consideration foremost in their minds when making
new investments. As a result, it is likely that any growth of the Company will
be based on corporate transactions rather than conventional secondary market
demand for the Shares. Whether this will be achievable is unclear though some
of the surrounding circumstances have become more favourable.
In the meantime, the Company has maintained its policy of ensuring liquidity
for existing investors through buy backs at narrow discounts, particularly of
the Managed Liquidity Shares. This should also ensure our attractiveness for
any corporate transactions though it does mean that our Shares are unlikely to
appeal through discount cheapness.
Performance
The year under review began with the continuation of the explosive upward move
which had started in March 2009 with the realisation that governments worldwide
had printed a lot of money, that the system would survive and that companies in
many cases were extremely cheap. In addition, very low interest rates and a
steep yield curve made the purchase of longer dated assets such as equities
more attractive. Towards the end of 2009, however, a different mood began to
prevail. While it had become clear that the corporate sector was much
healthier, it was also obvious that governments were beginning to grow weary of
highly unusual monetary and fiscal policies, even though it was not clear
whether it was feasible to reduce support without the debt parcel simply being
passed to another part of the economy which might be less well placed to handle
it. At the same time there were some specific events such as the default by
Dubai World, which first questioned the status of apparently high quality
government-related debt, and the crisis over Greek and other Eurozone debt,
which called into question the future of the Euro. Not surprisingly equity
markets, no longer so well supported by valuation, stalled and 2010 to date has
seen small overall declines in markets generally.
Against this background both the UK Equity and Global Equity Share portfolios
underperformed slightly for the year. However, the UK Equity Share Portfolio
outperformed in the second half of the year so that the scars from having a
defensive portfolio during a strong cyclical upswing are rapidly becoming
invisible. Both equity portfolios, and particularly the UK one, are somewhat
less volatile than the markets.
The Hedge Fund Share Portfolio produced a return of 7.1% which was ahead of the
target return on an annual basis. The Managed Liquidity Share Portfolio
produced a creditable return of 2.4% which does, however, seem likely to fall
in the current year.
Outlook
The macro-economic and political environment looks very difficult to forecast.
It is clear that governments want to reduce their indebtedness but much less
clear whether they will in fact be able to do so without damaging economic
growth considerably. At the same time there is virtually no progress in
rebalancing the pattern of international payments to enable countries to repay
debt without contractions in economic activity that would be likely to be
politically unacceptable. This all looks rather gloomy but is offset by the
good health of the quoted corporate sector, which is continuing to benefit from
low inventories and reasonable demand. My attempt to sum it up results in a
view that serious recession or depression is unlikely with such a steep
positive yield curve and a healthy corporate sector. However, renewed recession
is quite possible and we must hope that governments allow pragmatism to prevail
over ideology.
Changes to the Hedge Fund Share Portfolio
In November 2009, your Directors announced that changes were to be made to the
funds of hedge funds underlying the Hedge Fund Share Portfolio and that the
Portfolio's performance would in future be referenced to Paragon Capital
Appreciation Fund (`Paragon') rather than the Fauchier Allocator Funds
(`FAFs'). The transition has taken a little longer to effect than had been
expected and the FAFs remained the Hedge Fund Share Portfolio's reference asset
for the whole of the year. With effect from 1 June 2010, Paragon represents the
majority of the Hedge Fund Share Portfolio's exposure. Certain positions held
in the FAFs (representing approximately 5.1% of the Hedge Fund Share
Portfolio's assets as at 31 May 2010) have redemption orders outstanding and
will be retained in the FAFs until these are settled.
As previously announced, the changes are not expected to give rise to any
material difference to the way in which the underlying portfolio of hedge funds
is managed, and the transition has not resulted in any period of
under-investment in hedge funds.
Dividend Policy
The ability to convert Shares of one class into another could lead to dilution
or enhancement of revenue reserves per Share for each of the Share classes,
depending on whether there are net conversions into or out of any particular
class. In order to minimise the impact of this the Directors intend to
distribute substantially all net revenues earned for each class during the
period between conversion dates. Accordingly, dividends on the UK Equity,
Global Equity and Managed Liquidity Shares will vary from year to year
depending on net portfolio income; the Board aims to declare two dividends
annually on these three Share classes. Little or no net income is expected from
the assets underlying the Hedge Fund Shares and, accordingly, no dividends are
expected to be paid on those Shares.
For the year ended 31 May 2010, your Directors have declared two interim
dividends on the UK Equity and Global Equity Shares and one interim dividend on
the Managed Liquidity Shares totalling 3.80p (2009: 3.45p), 1.35p (2009: 2.25p)
and 0.40p (2009: 4.1p) respectively. As a consequence of very low interest
rates prevailing throughout the year ended 31 May 2010, the net revenue of the
Managed Liquidity Share Portfolio has been minimal. In view of the
administrative costs, the Directors therefore decided not to declare a second
interim dividend on the Managed Liquidity Shares. The net revenue earned will
be taken into account in considering the first interim dividend for the year
ending 31 May 2011, expected to be declared in October 2010.
Share Class Conversions
The Company enables shareholders to tailor their asset allocation to reflect
their views of prevailing market conditions. Shareholders have the opportunity
to convert their holdings of Shares into any other class of Shares, without
incurring any tax, on or around 1 May and 1 November of each year. Details of
the Share class conversions during the year under review are shown in note 12
(b) on page 66 of the Annual Financial Report. Further information about the
conversion mechanics can be found on page 25 and in note 12(f) on page 67 of
the Annual Financial Report.
Share Capital Movements
During the year to 31 May 2010, the Company purchased and placed in treasury
4,905,551 UK Equity Shares, 4,398,054 Global Equity Shares, 688,735 Hedge Fund
Shares and 8,214,152 Managed Liquidity Shares. In addition, the Company
cancelled 4,286,551 UK Equity Shares, 4,464,268 Global Equity Shares, 983,735
Hedge Fund Shares and 8,155,247 Managed Liquidity Shares from treasury.
Since the year end a further 105,000 UK Equity Shares, 225,000 Global Equity
Shares, 479,000 Hedge Fund Shares and 920,000 Managed Liquidity Shares were
purchased and placed in treasury as share price discounts continue to drift.
The Board intends to use the Company's buy back authorities when this will
benefit existing shareholders as a whole, and will ask shareholders to renew
the authorities as and when appropriate.
Corporate Governance
The Board remains committed to maintaining the highest standards of Corporate
Governance and is accountable to you as shareholders for the governance of the
Company's affairs.
The Directors believe that, during the year to 31 May 2010, they have complied
with the provisions of the AIC Code of Corporate Governance as endorsed by the
Financial Reporting Council, save in respect of matters discussed in the
Corporate Governance statement contained on pages 42 to 47of the annual
financial report.
Annual General Meeting (`AGM')
At the AGM there are four items of Special Business to be proposed:
Share Issuance
Your Directors are asking for the authority to issue up to GBP1,000,000 in UK
Equity Shares, GBP1,000,000 in Global Equity Shares, GBP1,000,000 in Hedge Fund
Shares and GBP1,000,000 in Managed Liquidity Shares. This will allow Directors to
issue Shares within the prescribed limits should any favourable opportunities
arise to the advantage of shareholders. The powers authorised will not be
exercised at a price below NAV of the relevant Share class so that the
interests of existing shareholders are not diluted. This authority will expire
at the AGM in 2011.
Pre-emption Rights
Your Directors are also asking for the usual authority to issue new Shares in
each class pursuant to a rights issue or otherwise than in accordance with a
rights issue of up to an aggregate nominal amount of GBP39,254 in UK Equity
Shares, GBP32,418 in Global Equity Shares, GBP13,416 in Hedge Fund Shares and GBP
11,743 in Managed Liquidity Shares (10% of the issued share capital of each
Share class) disapplying pre-emption rights. This will allow Shares to be
issued to new shareholders without having to be offered to existing
shareholders first, thus broadening the shareholder base of the Company. This
authority will expire at the AGM in 2011.
Share Buy Backs
Your Directors are seeking to renew the authority to buy back up to 5,884,204
UK Equity Shares, 4,859,482 Global Equity Shares, 2,011,071 Hedge Fund Shares
and 1,760,347 Managed Liquidity Shares (14.99% of the issued share capital of
each Share class) subject to the restrictions referred to in the notice of the
AGM. This authority will expire at the AGM in 2011. Your Directors are
proposing that Shares bought back by the Company either be cancelled or,
alternatively, be held as treasury shares with a view to their resale, if
appropriate, or later cancellation. Any resale of treasury shares will only
take place on terms that are in the best interests of shareholders as a whole.
Calling General Meetings at 14 Days' Notice
The EU Shareholder Rights Directive, which was implemented in October 2009,
increased the notice period for a general meeting to 21 days unless certain
conditions are met in which case it may be 14 days' notice. However, companies
are able to pass a special resolution permitting them to continue to call
general meetings (other than AGMs) on a 14 day notice period if they allow
voting by electronic means. It is intended that this flexibility will be used
only for non-routine business and where it is in the interests of shareholders
as a whole. To date, your Directors have used this flexibility to renew the
Company's buy back facility.
Approval of this Special Resolution will therefore enable the Board to call any
general meetings other than AGMs on 14 days' notice, should that be necessary.
The Board recommends that shareholders vote in favour of all resolutions as
each of the Directors intend to do in respect of their own Shares.
Patrick Gifford
Chairman
30 July 2010
UK Equity Share Portfolio
Manager's Report
Investment Objective
The investment objective of the UK Equity Share Portfolio is to provide
shareholders with an attractive real long-term total return by investing
primarily in UK quoted equities.
Market and Economic Review
Set against a backdrop of unprecedented government stimulus measures, record
low interest rates and improving economic data, the UK stockmarket made good
progress in the year to 31 May 2010. The favourable conditions generated
optimism among investors that the economy had started to recover. This
sentiment was reflected in the renewed appetite for riskier assets, which saw
market performance dominated by share price appreciation of companies in
industrial, financial and commodity sectors of the market at the expense of
sectors with stable, predictable earnings. It is worth remembering that we
started 2009 in the midst of a deep recession with a bleak and troubling
near-term outlook for the UK economy. This rather depressing prospect improved
as 2009 progressed, with considerable help from government stimulus.
The Bank of England's Monetary Policy Committee kept interest rates on hold at
0.5% throughout the review period and introduced a quantitative-easing
programme of GBP200 billion, which serves to illustrate the fact that the
authorities see the recovery remaining fragile and, for now, dependent on help
from monetary and fiscal stimulus.
Portfolio Strategy and Review
On a total return basis, the Portfolio's Net Asset Value rose by 20.4% during
the year to the end of May 2010, compared to a gain of 22.9% for the FTSE
All-Share Index - total return.
The Portfolio generated healthy absolute returns over the review period but on
a relative basis was not able to keep pace with the performance of the FTSE
All-Share Index. This was largely on account of the bias towards defensive
sectors of the market, such as utilities, tobacco and pharmaceuticals, which
fell out of favour in an environment where investors continued to sell
defensives to buy cyclical companies. The Portfolio's lack of exposure to the
mining sector was a costly mistake over this period as the state sponsored
resilience of the Chinese economy prompted a surprisingly rapid recovery in
commodity prices.
In terms of Portfolio activity some diversification was added to take advantage
of opportunities to invest in good quality businesses at cheap valuations.
There were several new purchases within the Portfolio, including Babcock
International, Morrison (Wm) Supermarkets, Compass Group and VT Group.
Babcock International was purchased following a period of share-price weakness
and in order to increase the Portfolio's exposure to growth in government
outsourcing following the General Election. After the end of the period Babcock
succeeded in acquiring VT Group. The Portfolio had holdings in both companies
and has retained a position in the enlarged group which has become a business
with increased diversification to outsourcing in central government
expenditure.
A new holding in Morrison (Wm) Supermarkets was initiated following the
announcement of the change of management. In the aftermath of the CEO's
departure, the shares performed poorly but a decision was made to build a
holding as the company continues to succeed in executing its strategy of margin
recovery and geographic expansion.
A dip in Compass Group's share price during the review period presented an
attractive entry point to purchase the shares at a favourable valuation.
In terms of disposals from the Portfolio, life insurer Just Retirement was sold
after being acquired by private equity. Oil majors BP and Royal Dutch Shell
were sold to seek better growth opportunities elsewhere in the market.
Following periods of strong performance, Arm Holdings and British Airways were
also sold from the Portfolio.
Outlook
The enormous levels of fiscal and monetary stimulus pursued by the government
and the Bank of England over 2009 have provided much support for the UK
economy. As a consequence, many investors are of the opinion that the economy
is on a steady path to recovery, similar to the experience of the early 1990's,
and, in response, the UK equity market has moved higher to reflect this
positive view. Despite the signs that the economy is stabilising, the Portfolio
Manager continues to believe that the UK economy is less strong than many
others predict.
We have identified a number of headwinds which still face the economy.
Specifically, high levels of consumer and government debt; high and rising
petrol prices; a dysfunctional banking system; the impact on UK economic growth
from the tax increases and government spending cuts announced in the 22 June
emergency Budget; and uncertainty over the timing of withdrawing the
quantitative-easing programme. We believe that these issues will pose major
risks to the longer-term health of the economy as well as to the sustainability
of the recovery from the recession. Unless and until these headwinds subside,
an uncertain and protracted recovery for the UK is seen. The current
composition of the Portfolio reflects this cautious view, with defensive
sectors such as utilities, tobacco and pharmaceuticals featuring prominently.
The significant disparity in the performance of the UK equity market over the
past year has created an attractive opportunity to buy these kinds of companies
at very low valuations compared to their historic average.
In terms of the outlook for the UK equity market, we believe that UK equities
are now fairly valued and that the stockmarket could rise modestly in 2010,
even though there are pockets of over valuation. The most plausible outcome is
that market leadership will rotate from cyclicals to defensives, which will
benefit the positioning of the Portfolio.
From the perspective of UK dividends, we are confident that the UK market will
continue to be among the better income generating markets globally. Given the
favourable valuation starting point for many of these shares and the high level
of confidence which we hold for the future level of growth in these dividends,
the outlook for the Portfolio looks very promising.
Mark Barnett
Portfolio Manager
Invesco Asset Management Limited
30 July 2010
Global Equity Share Portfolio
Manager's Report
Investment Objective
The investment objective of the Global Equity Share Portfolio is to deliver
long-term capital growth through investing principally in global securities
(including UK equities).
Market and Economic Review
After the downturn of the previous year, the year to 31 May 2010 provided a
significant contrast. Although many economies are still mired in difficulty,
especially in the developed world, stockmarkets reacted positively to renewed
growth in the overall global economy. The unprecedented efforts of governments
to intervene and stabilise the troubled financial sector also helped to
underpin one of the strongest stockmarket rallies of modern times. Clear
economic improvement and strong corporate results, especially in the US,
encouraged investors and moved indices higher. Asia and emerging markets led
gains, along with the US, but one year returns for all markets were healthily
positive. There have been temporary setbacks due to certain specific events,
such as the negative news of Dubai World missing a scheduled debt repayment in
December. More recently, problems surrounding Greek and other European country
debt levels have taken the edge off stockmarket gains and raised questions
about the sustainability of the pace of global growth over the remainder of the
year.
Portfolio Performance
On a total return basis, the Global Equity Share Portfolio's Net Asset Value
rose by 25.3% over the year to the end of May 2010, compared to a gain of 26.7%
in the MSCI World Index - total return.
Portfolio Strategy and Trust Activity
The Portfolio traded strongly over the first half of the review period, having
previously built exposure to stocks which had been indiscriminately sold off in
the wake of the financial crisis engulfing markets at the end of 2008. The
areas we preferred during 2009 included stocks with strong fundamentals and
with limited exposure to the credit problems of the developed world. Included
among these were a good selection of Asian stocks, which we believed to have
the potential to exploit the long-term trend of rising domestic consumer
demand, as incomes and living standards in the region rise. Sectors such as the
Chinese insurance market are underdeveloped and offered significant potential
for growth. Later in 2009 we started taking some profits as certain valuations
began to look full, selling our holdings in Far Eastern Textiles and HDFC Bank.
From late in 2009 we positioned the Portfolio for a more modest recovery,
concentrating on adding stocks with good quality earnings, combined with
sustainable or growing cashflows in what we expected to be an ongoing difficult
economic and business environment. In our view, the strong stockmarket rally
had left many cyclical stocks looking fully valued and that value now lay more
with higher quality stocks.
Throughout the whole review period, we maintained relatively high emerging
markets exposure on a stock specific basis. We remain positive on the prospects
for emerging market equities. The fundamentals in emerging countries at both a
corporate and macro level continue to improve. We are in the midst of a strong
recovery in earnings in the asset class and this is a theme which we believe
will extend into 2011. Despite having superior earnings growth versus developed
markets, global emerging markets continue to trade at a modest discount,
enhancing their attractiveness.
We made sure we had good exposure to companies which could benefit from a
recovery in corporate capital expenditure by holding a number of technology and
industrial cyclical positions, especially in Japan, Asia and the US, and this
helped to drive performance. Later in the period we sold some of our Japanese
technology names, reinvesting the proceeds into a number of underappreciated
stocks focused on the Japanese domestic economy.
The Portfolio is currently positively tilted towards defensive growth companies
with relatively steady earnings streams, sound balance sheets which are able to
generate strong free cashflows, such as capital goods and pharmaceutical
companies. We also hold some selected special situations, such as mispriced
turnaround opportunities, and selected cyclical stocks - especially those which
are late cycle, of high quality and have exposure to emerging markets. We
currently have a preference for technology stocks in the US and Asia and have
positive exposures to emerging markets and Japan, where we see good
opportunities. We prefer companies exposed to capital expenditure over consumer
expenditure. We have low exposure to consumer and commodity cyclical companies,
banks (although we have added here more recently) and have no exposure to
utility companies. Returning to Asia, our present positioning in the region
covers a number of market sectors, including food and beverages and household
and personal products. Insurance and technology groups remain well represented.
China and Hong Kong are our largest Asian country positions, reflecting their
positive long-term growth prospects.
Investments chosen for the Portfolio are stock specific, with no regard to
sector or geographical weighting. The investment strategy of the Portfolio uses
a pragmatic investment approach, based on fundamental, valuation-driven
analysis. All holdings in the Portfolio reflect conviction in each company and
its prospects as an investment. Our valuation focus means that we tend to
reduce exposure to companies when we believe they are becoming fully valued,
and reinvest in names where we see more upside potential. This may give the
Portfolio a contrarian stance as we find value in stocks not favoured by the
majority of investors.
The Portfolio became more concentrated over the 12 months under review. Among
the larger positions we sold out of were the components maker Murata
Manufacturing, Wharf Holdings and Zurich Financial Services, with good profits
taken on each. Our largest new position was in Sumitomo Mitsui Financial Group.
The company is successfully raising funds to bolster its balance sheet and is
undergoing a degree of re-structuring to sell unwanted assets and reduce
unprofitable lending. We do not believe its current valuation reflects its
improved prospects. We also added a new holding in Bilfinger Berger, the German
construction and engineering services company with a growing concessions and
services business. Bilfinger suffered a setback due to a contractual issue and
we believe the share price correction of 20% over the first few months of 2010
provided us with an attractive entry point, taking advantage of what we believe
will be a temporary setback for the company. Bilfinger's growing concessions
business, with long contracts, reduces the volatility of its earnings. The
stock yields 4% and its dividend is forecast to grow by 15% in November 2010.
Another new Japanese holding was Sumco Corporation, which manufactures the
wafers from which silicon chips are produced and has a large market share in
its industry and good operating margins. A further notable addition was Emerson
Electric, the US-headquartered global industrial company, which has a strong
position in the fast growing network power market. Its management has shown a
strong focus on maximising shareholder value and the company retains world
leading positions in engineering and technology. Emerson have paid and grown
their dividend for the last 53 consecutive years and it is typical of the
high-quality company we prefer.
Outlook
We feel that low interest rates, quantitative-easing and the other expansionary
programmes are a symptom of problems of western economies, rather than the
basis of their sustainable economic recovery. These conventional and
unconventional stimulus measures are reviving economic growth currently, but we
have some concerns that stockmarkets have already discounted much of their
positive effects. Removal of this `state aid' will pose significant challenges
for economies and the markets in to 2011 as the true state of unaided economic
growth becomes apparent.
Although they have arguably done well to address the problems presented to them
by the credit crisis, authorities in developed economies still face significant
challenges from indebtedness and resistance to structural reform. Emerging
economies have rebounded well from the downturn but they are still heavily
dependent on growth in the developed world to stimulate demand for their
products and bolster their corporate returns. Global growth has been strong so
far this year and cost cutting has significantly bolstered corporate balance
sheets, helping them to deleverage. These advantages are set to reduce as
developed economies embark on austerity measures to restrain spending and
companies find they have little scope for further cut backs. Despite this, and
especially after the recent pull back in markets, corporate valuations and
cashflows are highly attractive in many areas. Many of these high quality, cash
generative companies that we prefer are trading at absolutely cheap levels. We
are encouraged that we can use our stock-picking abilities to construct a
Portfolio which will benefit the Company over both the rest of the year and the
longer-term.
Bob Yerbury
Portfolio Manager
Invesco Asset Management Limited
30 July 2010
Hedge Fund Share Portfolio Adviser'sReport
Investment Objective
The investment objective of the Hedge Fund Share Portfolio is to achieve an
absolute return of 3-month sterling LIBOR plus 5% per annum over a rolling
5-year period, coupled with low volatility. Capital preservation is a priority.
Performance
For the year ended 31 May 2010, Fauchier Allocator Funds I and II (collectively
the `FAF Funds') produced a return of 7.2%, net of fees. Since 30 November
2006, the FAF Funds have achieved an average annual compound return of 3.7%,
which is equivalent to approximately 0.2% below 3-month sterling LIBOR. Over
the same period the FAF Funds' annualised volatility has been some 10.3% and
its "beta", namely the extent to which its returns are driven by a particular
market or index, to the FTSE All-Share Index has been approximately 0.34 and to
the Citigroup UK Gilt Index, -0.25, both of which are very low.
The table below gives details of the FAF Funds' monthly net asset value
performance since 30 November 2006:
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2010 0.20% -0.14% 1.57% 0.50% -3.42% -1.36%
2009 1.18% -1.06% 0.61% 2.23% 4.62% 0.58% 2.62% 1.96% 2.41% 0.30% 0.64% -0.08% 17.08%
2008 -1.25% 3.10% -3.42% 1.33% 3.92% 1.26% -3.27% -2.56% -7.90% -10.13% -2.74% -2.09% -22.11%
2007 1.32% 2.48% 1.17% 1.65% 1.73% 1.88% 3.88% -0.53% 1.88% 5.08% -0.16% 1.68% 24.28%
2006 1.50% 1.50%
The Portfolio
It is the policy of the FAF Funds to invest in a diversified portfolio of hedge
funds. As at 31 May 2010, the two funds had holdings in 21 hedge funds, one
more than at the same time in 2009, invested across nine different strategies.
During the year seven funds were purchased and six sold.
At year end, the proportion of Absolute Value funds of 73% was similar to last
year.
As previously announced, the Board has been reviewing the Hedge Fund Share
Portfolio with the Investment Adviser and concluded that, because of the
relatively small size of the FAF Funds, shareholders' interests would be better
served by making a change to the underlying portfolios' assets. Accordingly,
from the 1 June 2010, the process of exchanging the assets of the FAF Funds for
units of the Paragon Capital Appreciation Fund (`Paragon') was initiated.
Paragon is an open-ended investment company with assets of some GBP200 million as
at 31 May 2010. It is domiciled in Guernsey and listed on the Irish Stock
Exchange. Fauchier Partners acts as investment manager to Paragon, using the
same team as for the FAF Funds. Paragon's investment objective is to invest in
a diversified portfolio of hedge funds in order to deliver consistent and
superior capital appreciation with low volatility. Its targeted net return is
3-month sterling LIBOR plus 5% per annum. The objective and targeted return are
therefore the same as that of the FAF Funds. The change is not expected to give
rise to any material difference in the way the underlying portfolio is managed,
or to any period of under-investment in hedge funds. The few holdings of the
FAF Funds that are not common with Paragon will continue to be held until
realisation, at which point the proceeds will be invested into Paragon.
Market Review
Conditions in markets for risk assets improved throughout the year but by the
end macro economic fears were resurgent as a result of, amongst other things,
European Sovereign debt issues, concerns over a Chinese economic hard landing
and the ramifications of the massive oil spill in the Gulf of Mexico.
The equity market had been rallying strongly throughout the year but suffered a
significant setback in May. On a total return basis, the MSCI World Index ended
the year to 31 May 2010 up around 27% in sterling terms. Equity market
volatility declined throughout the year only to spike back up again, with the
VIX volatility Index ending May 2010 around 32, up from a low during the year
of around 16.
Liquidity in credit markets improved significantly throughout the year, thanks
to record new issuances of investment grade bonds and convertibles. By the end
of the year however, issuance had dried up and credit markets suffered their
first meaningful sell-off in twelve months.
Government bonds initially sold off and yield curves steepened to record levels
in anticipation of inflationary pressures. However, by the end of the year,
Treasury yields were falling across maturity ranges and the yield curve was
flattening as risk aversion reasserted itself.
Similarly, currency markets were volatile throughout the year with the US
dollar initially falling against other developed country currencies, only to
appreciate rapidly against both Sterling and Euro as macro concerns spread.
Our Global Macro managers performed well over the year, generating profits from
a wide variety of sources, including Emerging Markets, Credit and Foreign
Exchange. More recently the continued volatility and uncertainty in financial
markets has generated ample opportunity for the more liquid trading strategies.
The change in sentiment in May away from the recent pro-growth trend caught
some of our managers although one, who has had a bearish outlook throughout the
year, provided a useful counter-balance.
Our Fixed Income manager had a good year, benefiting from positions in the
front end of the yield curve and in curve steepening trades. More recently,
this manager has also been making gains from option positions designed to take
advantage of higher volatility in fixed income markets.
Equity Hedged managers performed well during the year, against the backdrop of
generally rising equity markets and improved confidence in corporate
fundamentals. Some managers were rewarded for increasing their exposures early
in the year and made good gains, particularly in oil, media and telecom stocks.
Others generated returns from low net exposures, benefiting from successful
stock picking, particularly in consumer, healthcare, technology and financials.
Towards the end of the year, our managers started to reduce net exposure and
build up their short books. Notwithstanding this, the ferocity of the sell-off
in equity markets in May meant that most managers, even those with relatively
low net exposures, gave back a portion of their gains.
With equity markets rising throughout the year, our Short Bias managers
struggled to preserve capital and generated losses overall. The strategy
continues to play an important role in our Portfolio construction process,
crucially dampening volatility in the sell-off months, most notably, May.
Event Driven managers generally performed well, benefiting from the broad rally
in risk assets as well as stock specific news that positively impacted some of
their positions. Managers are actively involved in unlocking value in a number
of situations with gains from certain catalyst-driven debt investments.
Our allocation to Specialist Credit has remained low throughout the year, as
the broad rally in credit markets has favoured our Event Driven and Multiple
Strategy managers. One manager's performance was impacted by a write-down on
certain illiquid assets. As the environment for long/short credit continues to
improve, the Specialist Credit allocation within the Portfolio will increase.
The Volatility Trading strategy performed well as our Convertible Bond
Arbitrage manager benefited from the marked recovery in the convertibles
market. This position was sold in the year.
Outlook
Although the extent of pricing inefficiencies is lower today than a year ago we
believe the environment for hedge fund investing is favourable. The
normalisation of markets throughout 2009 culminated in a relatively
indiscriminate rally in risk assets, but in the longer-term we expect a more
discriminating market to favour our managers' fundamental style of long/short
investing.
Equity Hedged remains one of our preferred strategies as our managers can take
idiosyncratic risk without taking an implicit view on the market. For now,
companies may have patched up their balance sheets and be exceeding earnings
expectations, but many of their fundamental problems have merely been
postponed.
The opportunity in the Specialist Credit and Event Driven strategies will
increase as large quantities of high-yield bonds and leveraged loans mature and
many companies are likely to have problems refinancing, creating substantial
opportunities on both the long and short sides for our managers.
Fauchier Partners LLP
Investment Adviser
30 July 2010
Managed Liquidity Share Portfolio Managers' Report
Investment Objective
The investment objective of the Managed Liquidity Share Portfolio is to produce
an appropriate level of income return combined with a high degree of security.
Market and Economic Review
Throughout the year to 31 May 2010, the UK's Monetary Policy Committee (`MPC')
voted unanimously to keep interest rates unchanged at 0.5%. Earlier in the
year, it was expected that the MPC would expand its quantitative-easing asset
purchases. However, the extension was not announced until August's MPC meeting
when the programme was increased to GBP175 billion, beyond the GBP150 billion that
had been preauthorised by the Treasury. The MPC cited weaker than expected GDP
and money growth as the main reasons for the increase. A further increase to GBP
200 billion was announced during November, since when it has remained at that
level.
UK CPI inflation was volatile. From 2.3% in April 2009, the annual rate fell
below the 2% target, to 1.5% in October, principally due to stabilising fuel
prices. At this point the RPI measure was negative at -0.8%. However, a number
of exceptional events that had depressed prices in December 2008 subsequently
dropped out of the calculation. These included the temporary cut in VAT and
sharp falls in the price of oil. Inflation subsequently rose sharply; the
increase in the CPI rate from 1.9% in November to 2.9% in December was the
largest ever recorded between two months. The rate increased further, to 3.7%
in April, by which time the RPI measure was 5.3%, the highest since July 1991.
In the ensuing letter of explanation from Governor King to the Chancellor, King
reiterated the MPC's belief that high inflation is due to rising oil prices,
the VAT hike and the effects of lower sterling, and these effects would prove
temporary. In his response, the new Chancellor George Osborne said he would
welcome the Governor's views on how the process of including housing costs in
the CPI might be accelerated.
Shortly after the end of the review period, the MPC again voted to keep
interest rates unchanged at 0.5%. However, the minutes caused a surprise by
revealing a 7-1 split in the vote after Andrew Sentence voted for a 25bp hike
in the rate - the first vote for a hike seen since August 2008 - although the
decision to keep asset purchases held at GBP200 billion was unanimous. The MPC's
central view remains that the substantial margin of spare capacity is likely to
persist for some time and cause inflation to fall back in the medium term. The
meeting took place ahead of the emergency Budget which saw aggressive spending
cuts outlined by the Chancellor as well as an increase in VAT to 20%. As a
result, general government gross debt is projected to peak at 85.5% in 2012-13,
below the 100% level that Standard & Poor's had cited as jeopardising the UK's
AAA rating. Planned gilt sales for the current fiscal year were also cut, by GBP
20 billion to GBP165 billion. Inflation also moderated slightly, CPI fell back to
3.4% and RPI to 5.1%.
Portfolio Strategy and Review
In terms of strategy, we have maintained holdings in floating-rate notes
(`FRNs') where yields are reset every three months to reflect changes in LIBOR,
the rate at which the largest banks lend money to one another. As UK interest
rates are widely expected to remain near their current low level for a
considerable time, we have added a number of government, quasi-government and
corporate bonds to the Invesco Perpetual Money Fund. These have higher interest
coupons than those currently available on FRNs. In order to limit risk
exposure, these bonds are both short dated and of high quality.
Outlook
Looking ahead, although annual UK CPI inflation could remain above 3% in the
very short term, the impact of oil prices on base levels will have a fading
impact as they drop out of the annual calculation, while the amount of slack in
the economy should see core inflation remain relatively benign. Although it is
possible that we will see a modest increase in short-term UK interest rates
from the current historic low levels, we would be surprised if they moved
significantly higher over the next couple of years. There is still a huge
amount of deleveraging required, while reduced bank lending and a weak labour
market will continue to restrain economic activity.
Stuart Edwards
Portfolio Manager
Invesco Asset Management Limited
30 July 2010
UK Equity Share Portfolio - List of Investments
At 31 May 2010
Ordinary shares listed in the UK unless stated otherwise
Market
Value % of
Company FTSE Sector GBP'000 Portfolio
Reynolds American
- US common stock Tobacco 2,269 5.7
AstraZeneca Pharmaceuticals and 2,249 5.6
Biotechnology
Imperial Tobacco Tobacco 2,182 5.5
British American Tobacco Tobacco 2,037 5.1
Vodafone Mobile Telecommunications 1,999 5.0
BG Oil and Gas Producers 1,913 4.8
GlaxoSmithKline Pharmaceuticals and 1,754 4.4
Biotechnology
Tesco Food and Drug Retailers 1,688 4.2
Capita Support Services 1,440 3.6
BT Fixed Line Telecommunications 1,416 3.5
Centrica Gas, Water and Multiutilities 1,155 2.9
BAE Systems Aerospace and Defence 1,150 2.9
International Power Electricity 1,102 2.8
Reckitt Benckiser Household Goods and Home 1,065 2.7
Construction
Hiscox Non-Life Insurance 1,006 2.5
National Grid Gas, Water and Multiutilities 919 2.3
Scottish and Southern Energy Electricity 831 2.1
Balfour Beatty Construction and Materials 821 2.1
Pennon Gas, Water and Multiutilities 773 1.9
Provident Financial General Financial 685 1.7
Northumbrian Water Gas, Water and Multiutilities 675 1.7
Drax Electricity 664 1.7
Compass Travel and Leisure 662 1.7
BTG Pharmaceuticals and 623 1.6
Biotechnology
Homeserve Support Services 619 1.5
VT Support Services 603 1.5
Tate & Lyle Food Producers 595 1.5
Bunzl Support Services 585 1.5
Morrison (Wm) Supermarkets Food and Drug Retailers 577 1.4
KCOM Fixed Line Telecommunications 576 1.4
Beazley Non-Life Insurance 531 1.3
A J Bell - Unquoted General Financial 500 1.3
Rentokil Initial Support Services 488 1.2
Sage Software and Computer 474 1.2
Services
Babcock International Support Services 412 1.0
Impax Environmental Markets Equity Investment Instruments 409 1.0
Altria - US common stock Consumer Staples 332 0.8
Yell Media 286 0.7
Rolls Royce
- Ordinary and C Shares Aerospace and Defence 262 0.6
Climate Exchange Financial Services 251 0.6
UK Coal Mining 244 0.6
Ecofin Water and Power
Opportunities
- Ordinary and Subscription Equity Investment Instruments 188 0.6
Shares
- 6% Convertible Loan Stock 41
Ladbrokes Travel and Leisure 212 0.5
Barclays Bank - Nuclear
Power Notes 28 February Electricity 164 0.4
2019(1)
Landkom International Food Producers 157 0.4
Helphire Financial Services 148 0.4
Vectura Pharmaceuticals and 128 0.3
Biotechnology
Renovo Pharmaceuticals and 76 0.2
Biotechnology
XCounter Health Care Equipment and 51 0.1
Services
39,987 100.0
(1) The Nuclear Power Notes (`NPNs') constitute a debt instrument issued by
Barclays Bank and linked to Contingent Value Rights (`CVRs') offered as a
partial alternative to the successful cash bid for British Energy. The CVRs
participate in the performance of British Energy's nuclear power business.
Global Equity Share Portfolio - List of Investments
At 31 May 2010
Ordinary shares unless stated otherwise
Market
Value % of
Company MSCISector Country GBP'000 Portfolio
Samsung Semiconductors and South Korea 1,535 4.2
Electronics Semiconductor
Equipment
Imperial Tobacco Food, Beverages and Tobacco UK 1,241 3.4
Obrascon Huarte Capital Goods Spain 1,237 3.4
Lain
Novartis Pharmaceuticals, Switzerland 1,234 3.4
Biotechnology and
Life Sciences
Rentokil Initial Commercial and Professional UK 1,149 3.2
Services
Nomura Holdings Diversified Financials Japan 1,102 3.0
GS-United Materials India 1,058 2.9
Phosphorus
P/N 22 April
2011*
China Taiping Insurance Hong Kong 1,057 2.9
Jardine Matheson Capital Goods Hong Kong 1,043 2.9
GlaxoSmithKline Pharmaceuticals, UK 1,019 2.8
Biotechnology and
Life Sciences
Oracle Software and Services US 1,019 2.8
Mitsubishi Real Estate Japan 1,017 2.8
Estate
Sumitomo Mitsui Banks Japan 1,015 2.8
Financial
Safran Capital Goods France 999 2.7
Hutchison Capital Goods Hong Kong 941 2.6
Whampoa
Roche Life Sciences Switzerland 918 2.5
ING Diversified Financials Netherlands 906 2.5
Teva Pharmaceuticals, Israel 895 2.5
Pharmaceutical Biotechnology and
Life Sciences
Hewlett-Packard Technology Hardware and US 859 2.4
Equipment
JPMorgan Chase Diversified Financials US 843 2.3
Yamaha Motor Automobiles and Components Japan 833 2.3
Wal-Mart Stores Food and Staples Retailing US 829 2.3
America Movil Telecommunication Services Mexico 809 2.2
BBVA Banking Spain 808 2.2
Emerson Electric Capital Goods US 785 2.2
Visa Software and Services US 781 2.1
Anadarko Energy US 767 2.1
Petroleum
Petroleo Energy Brazil 760 2.1
Brasileiro
Cobham Capital Goods UK 753 2.1
Bilfinger Berger Capital Goods Germany 748 2.1
Gold Fields Materials South 737 2.0
Africa
Raytheon Capital Goods US 709 2.0
Tokyo Electron Semiconductors and Japan 669 1.8
Semiconductor
Equipment
Sumco Semiconductors and Japan 639 1.8
Semiconductor
Equipment
Foster's Food Beverage and Tobacco Australia 637 1.8
Vodafone Telecommunication Services UK 599 1.7
Home Depot Retailing US 599 1.6
BAE Systems Capital Goods UK 564 1.6
HKR Real Estate Hong Kong 517 1.4
International
Schlumberger Energy US 508 1.4
Google Software and Services US 460 1.3
Transocean Energy US 425 1.2
Sterling Energy Energy UK 255 0.7
36,278 100.0
Participation notes (P/N) reflecting the performance of the underlying equity.
HEDGE FUND SHARE PORTFOLIO - LIST OF INVESTMENTS
At 31 May 2010
Market
Value % of
Strategy Fund Name GBP'000 Portfolio
Macro Wexford Offshore Spectrum Fund 1,278 8.6
Fortress Macro Offshore Fund 1,094 7.3
Clarium Capital Fund 213 1.4
Explore Macro Fund 84 0.6
Equity Long Bias Bay Resource Partners Offshore 1,043 6.9
Fund
CCM Small Cap Value Fund 114 0.8
Equity Hedged High Visium Balanced Offshore Fund 1,340 8.9
Volatility
SCP Ocean Fund 1,071 7.1
Lansdowne Global Financials 1,025 6.8
Fund
Lansdowne UK Equity Fund 919 6.1
Indus Pacific Opportunity Fund 14 0.1
Equity Hedged Low Elm Ridge Value Partners 1,092 7.3
Volatility Offshore Fund
Short Bias Fauchier Partners Counterpoint 770 5.1
Fund
Specialist Credit Plainfield Special Situations
Offshore
Feeder Fund 625 4.2
Claren Road Credit Fund 241 1.6
Event Driven Harbinger Capital Partners 1,122 7.5
Offshore Fund I
OZ Europe Overseas Fund II 881 5.9
Fixed Income Brevan Howard Fund 787 5.2
Multiple Strategy Sunbeam Opportunities Offshore 812 5.4
Shepherd Select Asset 293 1.9
Incubator Fauchier Partners Incubator 203 1.3
Fund
Total underlying hedge fund 15,021 100.0
assets
Cash 912
Hedge fund fixed assets 15,933
Hedge Fund investments
The Hedge Fund investments are held by the Company through two debt securities
which are referenced to two funds of hedge funds, Fauchier Allocator Fund I
Limited and Fauchier Allocator Fund II Limited, listed on the Irish Stock
Exchange. The investments, whilst held in separate funds via the two debt
securities, represent one overall Portfolio, and the allocations to the hedge
funds should be viewed as such.
As explained in the Chairman's Statement and Hedge Fund Share Portfolio
Adviser's Report, the Paragon Capital Appreciation Fund has replaced the
Fauchier Allocator Funds as the principal investment underlying the Hedge Fund
Share Portfolio with effect from 1 June 2010.
The definitions of the various hedge fund strategies are detailed in the
Glossary of Terms contained on page 80 of the Annual Financial Report.
MANAGED LIQUIDITY SHARE PORTFOLIO - LIST OF INVESTMENTS
At 31 May
2010 2009
Market Market
Value % of Value % of
GBP'000 Portfolio GBP'000 Portfolio
Invesco Perpetual Money Fund 12,969 100.0 14,677 78.2
AIM Short-Term Investments Company - - 4,081 21.8
12,969 100.0 18,758 100.0
Related Party Transactions
Invesco Asset Management Limited (`IAML'), a wholly owned subsidiary of Invesco
Limited, acts as Manager, Company Secretary and Administrator to the Company.
There are no other related party transactions.
Principal Risks and Uncertainties
The Board has an ongoing process for identifying, evaluating and managing
significant risks. This process is regularly reviewed by the Board and was in
place throughout the year under review. The principal risk factors relating to
the Company can be divided into various areas:
Investment Policy
There is no guarantee that the Investment Policy of the Company will provide
the returns sought by the Company. There can be no guarantee, therefore, that
the Company will achieve its investment objective.
The Board has established guidelines to ensure that the Investment Policy of
the Company is pursued by the Manager and Investment Adviser.
Risks Applicable to the Company
Shares in the Company are designed to be held over the long-term and may not be
suitable as short-term investments. There can be no guarantee that any
appreciation in the value of the Company's investments will occur and investors
may not get back the full value of their investments. Due to the potential
difference between the mid-market price of the Shares and the prices at which
they are sold, there is no guarantee that their realisable value will reflect
their market price.
The market value of a Share, as well as being affected by its NAV, also takes
into account its dividend yield, where applicable, and prevailing interest
rates. As such, the market value of a Share can fluctuate and may not always
reflect its underlying NAV. The market price of a Share may therefore trade at
a discount to its NAV.
While it is the intention of the Directors to pay dividends to holders of the
UK Equity, Global Equity and Managed Liquidity Shares, the ability to do so
will depend upon the level of income received from securities and the timing of
receipt of such income by the Company. Accordingly, the amount of dividends
paid to shareholders may fluctuate. Any change in the tax or accounting
treatment of dividends or other investment income received by the Company may
also affect the level of dividend paid on the Shares in future years.
Compulsory Conversion of a Class of Shares
The continued listing on the Official List of each class of Share is dependent
on at least 25% of the Shares in that class being held in public hands. This
means that if more than 75% of the Shares of any class were held by, inter
alia, the Directors, persons connected with Directors or persons interested in
5% or more of the relevant Shares, the listing of that class of Shares might be
suspended or cancelled. The Listing Rules state that the FSA may allow a
reasonable period of time for the Company to restore the appropriate percentage
if this rule is breached, but in the event that the listing of any class of
Shares were cancelled the Company would lose its investment trust status.
Accordingly, if at any time the Board considers that the listing or any class
of Shares on the Official list is likely to be cancelled and the loss of such
listing would mean that the Company would no longer be able to qualify for
approval as an investment trust under section 1158 of the Corporation Tax Act
2010 (`CTA'), the Board may serve written notice on the holders of the relevant
Shares requiring them to convert their Shares into another class of Shares.
Liability of a Portfolio for the Liabilities of Another Portfolio
The Directors intend that, in the absence of unforeseen circumstances, each
Portfolio will effectively operate as if it were a stand-alone company.
However, investors should be aware of the following factors:
* As a matter of law, the Company is a single entity. Therefore, in the event
that any of the Portfolios has insufficient funds or assets to meet all of its
liabilities, on a winding-up or otherwise, such a shortfall would become a
liability of the other Portfolios and would be payable out of the assets of the
other Portfolios in such proportions as the Board may determine; and
* The Companies Act 2006 prohibits the Directors from declaring any dividends
in circumstances where the Company's assets represent less than one and a half
times the aggregate of its liabilities. If the Company were to incur material
liabilities in the future, a significant fall in the value of the Company's
assets as a whole may affect the Company's ability to pay dividends on a
particular class of Shares, even though there are distributable profits
attributable to the relevant Portfolio.
Gearing
Performance may be geared by use of a GBP15 million 364 day multicurrency
revolving credit facility. In current market conditions, there is no guarantee
that this facility could be renewed at maturity or on terms acceptable to the
Company. If it were not possible to renew this facility or replace it with
another lender, the amounts owing by the Company would need to be funded by the
sale of securities. The Company also has a maximum uncommitted overdraft
facility of 10% of net assets.
Gearing levels of the different Portfolios will change from time to time in
accordance with the respective Portfolio Managers' assessments of risk and
reward. As a consequence, any reduction in the value of a Portfolio's
investments may lead to a correspondingly greater percentage reduction in its
NAV (which is likely to affect Share prices adversely). Any reduction in the
number of Shares in issue (for example, as a result of buy backs) will, in the
absence of a corresponding reduction in borrowings, result in an increase in a
Portfolio's gearing.
Whilst the use of borrowings by the Company should enhance the total return on
a particular class of Shares where the return on the underlying securities is
rising and exceeds the cost of borrowing, it will have the opposite effect
where the underlying return is falling, further reducing the total return on
the Shares. Similarly, the use of gearing by investment companies or funds in
which the Company invests increases the volatility of the NAV of the Company's
Shares.
Market Movements and Portfolio Performance
Individual Portfolio performance is substantially dependent on the performance
of the types of securities held within the Portfolio. The prices of these
securities are influenced by many factors including the general health of
worldwide economies; interest rates; inflation; government policies; industry
conditions; political and diplomatic events; tax laws; environmental laws; and
by the demand from investors for income. The Manager and Investment Adviser
strive to maximise the total return from the stocks in which they invest, but
these securities are influenced by market conditions and the Board acknowledges
the external influences on the performance of each Portfolio.
The performance of the Manager and Investment Adviser is carefully monitored by
the Board, and the continuation of the Manager's and Investment Adviser's
mandates is reviewed each year. The Board has established guidelines to ensure
that the investment policies of each class of Share that are approved are
pursued by the Manager and Investment Adviser. The Board maintains an active
dialogue with both the Manager and Investment Adviser with the aim of ensuring
that the market rating of each Share class reflects the underlying NAV; and
that buy back and issuance facilities help the management of this process.
The Company and the investee hedge funds are able to invest in emerging market
securities. Securities of this nature involve certain risks and special
considerations not typically associated with investing in other more
established economies or securities markets.
Past performance of the Company is not necessarily indicative of future
performance.
For a fuller discussion of the economic and market conditions facing the
Company and the current and future performance of the different Portfolios of
the Company, please see both the Chairman's Statement on pages 4 to 6 and
Portfolio Managers' reports starting on page 7 of the Annual Financial Report.
Hedging
The Company may use derivatives for the purpose of efficient portfolio
management. There may be a price correlation between price movements in the
underlying securities, currency or index, on the one hand, and price movements
in the investments, which are the subject of the hedge, on the other hand. In
addition, an active market may not exist for a particular derivative instrument
at any particular time.
Regulatory and Tax Related
The Company is subject to various laws and regulations by virtue of its status
as a Company registered under the Companies Act 2006 and as an investment trust
and its listing on the London Stock Exchange. A breach of section 1158 of the
CTA could lead to the Company being subject to Capital Gains Tax on the sale of
its investments. A serious breach of other regulatory rules could lead to
suspension from the Stock Exchange, a fine or a qualified Audit Report. Other
control failures, either by the Manager, Investment Adviser or any other of the
Company's service providers, could result in operational or reputational
problems, erroneous disclosures or loss of assets through fraud, as well as
breaches of regulations.
The Manager reviews the level of compliance with the CTA and other financial
regulatory requirements on a daily basis. All transactions, income and
expenditure are reported to the Board. The Board regularly considers all risks,
the measures in place to control them and the possibility of any other risks
that could arise. The Board ensures that satisfactory assurances are received
from service providers. The Manager's Compliance and Internal Audit Officers
produce regular reports for review by the Company's Audit Committee.
The hedge funds in which the Fauchier managed funds invests, including managed
accounts, may not be subject to any form of authorisation or regulatory
supervision. Investment in such vehicles carries a higher potential risk and
this should be taken into account in any investment decision.
Additional Risks Applicable to Managed Liquidity Shares
Investors should note that the Managed Liquidity Shares are not designed to
replicate the returns or other characteristics of a bank or building society
deposit or money market fund.
Additional Risks Applicable to Hedge Fund Shares
The Fauchier Managed Funds may be indirectly exposed to gearing to the extent
that investee funds are themselves geared. This can result in the hedge fund
controlling more assets than it has equity. The use of leverage exposes the
hedge fund to additional levels of risk from investments than would have been
the case had the hedge fund not borrowed to make the investments.
Hedge funds in which Fauchier Managed Funds invest may engage in short selling,
which involves selling securities which are not owned at that point in time
(i.e. selling borrowed securities). These transactions could expose the
investee hedge fund to the risk of uncapped losses until the position is
`closed-out'.
Investee hedge funds may purchase put and call options, commodities and futures
contracts, derivative instruments and high-yield securities. These are
specialised activities and entail greater than ordinary investment risks. It is
also possible that investee hedge funds invest in companies involved in
acquisition attempts or tender offers or companies involved in work-outs,
liquidations, spin-offs, reorganisations, bankruptcies and similar
transactions, the uncertainty of which can increase the potential risk for
losses by such funds. Investee hedge funds may not be subject to any form of
authorisation or regulatory supervision and investment in such vehicles carries
a higher potential risk.
Fauchier Managed Funds may invest in hedge funds that do not permit frequent
redemptions, including hedge funds that may have `lock-up' periods. This means
that an investment may be relatively illiquid.
Reliance on Third Party Service Providers
The Company has no employees and the Directors have all been appointed on a
non-executive basis. The Company is therefore reliant upon the performance of
third party service providers for its executive function. In particular, the
Manager and Investment Adviser perform services which are integral to the
operation of the Company. Failure by any service provider to carry out its
obligations to the Company in accordance with the terms of its appointment
could have a materially detrimental impact on the operation of the Company and
could affect the ability of the Company to successfully pursue its Investment
Policy.
The Manager and/or Investment Adviser may be exposed to reputational risks. In
particular, the Manager and/or Investment Adviser may be exposed to the risk
that litigation, misconduct, operational failures, negative publicity and press
speculation, whether or not it is valid, will harm its reputation. Any damage
to the reputation of one or both of the Manager and Investment Adviser could
result in potential counterparties and third parties being unwilling to deal
with them and by extension the Company. This could have an adverse impact on
the ability of the Company to successfully pursue its Investment Policy.
DIRECTORS' RESPONSIBILITY STATEMENT
in respect of the preparation of the annual financial report
The Directors are responsible for preparing the annual financial report in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under the law the Directors have elected to prepare financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice. Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Company and of the profit or loss of the Company for
that period.
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent; and
* state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and which
enable them to ensure that the financial statements comply with the Companies
Act 2006. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, a Directors' Remuneration Report and a Corporate
Governance Statement that comply with that law and those regulations.
The Directors of the Company each confirm to the best of their knowledge that:
* the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Company; and
* this annual financial report includes a fair review of the development and
performance of the business and the position of the Company together with a
description of the principal risks and uncertainties that it faces.
Signed on behalf of the Board of Directors
Patrick Gifford
Chairman
30 July 2010
Income Statement
for the year ended 31 May
2010 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains/(losses) on - 14,272 14,272 - (22,521) (22,521)
investments
Gains/(losses) on forward - - - - 14 14
currency hedges
Foreign exchange gains/ - 17 17 - (689) (689)
(losses)
Income - see note 2 2,752 - 2,752 3,764 - 3,764
Management fees - see note 3 (142) (358) (500) (141) (376) (517)
Performance fees - see note - - - - (438) (438)
3
Other expenses (429) (5) (434) (488) (50) (538)
Net return before finance 2,181 13,926 16,107 3,135 (24,060) (20,925)
costs and
taxation
Finance costs (40) (108) (148) (67) (166) (233)
Return on ordinary 2,141 13,818 15,959 3,068 (24,226) (21,158)
activities before tax
Tax on ordinary activities (81) - (81) (216) 103 (113)
Return on ordinary 2,060 13,818 15,878 2,852 (24,123) (21,271)
activities after tax for
the financial year
Basic return per ordinary
share:- see note 4
- UK Equity Share Portfolio 3.7p 11.4p 15.1p 3.3p (23.2)p (19.9)p
- Global Equity Share 1.5p 21.4p 22.9p 2.1p (21.3)p (19.2)p
Portfolio
- Hedge Fund Share Portfolio (0.5)p 8.0p 7.5p (0.5)p (27.7)p (28.2)p
- Managed Liquidity Share 0.3p 1.1p 1.4p 3.6p (1.1)p 2.5p
Portfolio
The total column of this statement represents the Company's profit and loss
account, prepared in accordance with UK Accounting Standards. The supplementary
revenue and capital columns are prepared in accordance with the Statement of
Recommended Practice issued by the Association of Investment Companies. All
items in the above statement derive from continuing operations and the Company
has no other gains or losses. Therefore no statement of recognised gains or
losses is presented. No operations were acquired or discontinued in the period.
Income statements for the different Share classes are shown on pages 10, 14, 19
and 22 of the annual financial report for the UK Equity, Global Equity, Hedge
Fund and Managed Liquidity Share Portfolios respectively.
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 May
Share Capital
Share Premium Special Redemption Capital Revenue
Capital Account Reserve Reserve Reserves Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 May 2008 1,321 1,290 124,154 54 9,433 386 136,638
Cancellation of - - (2) 2 - - -
deferred shares
Shares bought back (68) - (9,828) 78 - - (9,818)
and
cancelled/held in
treasury
Realised losses on - - - - (6,913) - (6,913)
disposal of
investments
Movement in - - - - (15,608) - (15,608)
investment holding
Gains on forward - - - - 14 - 14
currency
hedges
Foreign exchange - - - - (689) - (689)
losses
Charged to capital:
- management fees - - - - (376) - (376)
- performance fees - - - - (438) - (438)
- other expenses - - - - (50) - (50)
- finance costs - - - - (166) - (166)
Tax credited to - - - - 103 - 103
capital
Revenue return on - - - - - 2,852 2,852
ordinary
activities per the
income
statement
Dividends - see note - - - - - (3,185) (3,185)
5
At 31 May 2009 1,253 1,290 114,324 134 (14,690) 53 102,364
Cancellation of - - (10) 10 - - -
deferred shares
Shares bought back (182) - (17,401) 179 - - (17,404)
and
cancelled/held in
treasury
Realised gains on - - - - 2,360 - 2,360
disposal of
investments
Movement in - - - - 11,912 - 11,912
investment holding
gains
Foreign exchange - - - - 17 - 17
gains
Charged to capital:
- management fees - - - - (358) - (358)
- other expenses - - - - (5) - (5)
- finance costs - - - - (108) - (108)
Revenue return on - - - - - 2,060 2,060
ordinary
activities per the
income
statement
Dividends - see note - - (17) - - (2,113) (2,130)
5
As at 31 May 2010 1,071 1,290 96,896 323 (872) - 98,708
Balance Sheet
as at 31 May 2010
UK Global Hedge Managed
Equity Equity Fund Liquidity Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments held at fair value 39,987 36,278 15,933 12,969 105,167
through profit
or loss
Current assets
Debtors 286 167 6 220 679
Cash and short-term deposits 159 305 2 606 1,072
445 472 8 826 1,751
Creditors: amounts falling due (6,693) (283) (327) (907) (8,210)
within
one year
Net current (liabilities)/ (6,248) 189 (319) (81) (6,459)
assets
Net assets 33,739 36,467 15,614 12,888 98,708
Shareholders' funds
Share capital - see note 6 432 352 150 137 1,071
Share premium account - - 1,290 - 1,290
Special reserve 39,883 32,077 12,598 12,338 96,896
Capital redemption reserve 73 78 19 153 323
Capital reserves (6,845) 3,874 1,849 250 (872)
Revenue reserve 196 86 (292) 10 -
Shareholders' funds 33,739 36,467 15,614 12,888 98,708
Net asset value per ordinary 85.7p 111.7p 112.4p 101.8p
share - basic
and diluted - see note 7
Balance Sheet
as at 31 May 2009
UK Global Hedge Managed
Equity Equity Fund Liquidity Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments held at fair 40,299 30,262 16,979 18,758 106,298
value through
profit or loss
Current assets
Debtors 301 121 3 364 789
Cash and short-term deposits - 2,224 - 2 2,226
301 2,345 3 366 3,015
Creditors: amounts falling (6,098) (352) (320) (179) (6,949)
due within
one year
Net current (liabilities)/ (5,797) 1,993 (317) 187 (3,934)
assets
Net assets 34,502 32,255 16,662 18,945 102,364
Shareholders' funds
Share capital 495 386 173 199 1,253
Share premium account - - 1,290 - 1,290
Special reserve 45,487 35,496 14,756 18,585 114,324
Capital redemption reserve 22 33 9 70 134
Capital reserves (11,709) (3,676) 647 48 (14,690)
Revenue reserve 207 16 (213) 43 53
Shareholders' funds 34,502 32,255 16,662 18,945 102,364
Net asset value per ordinary 74.5p 89.7p 105.1p 99.8p
share - basic
and diluted - see note 7
Cash Flow Statement
for the year ended 31 May
2010 2009
GBP'000 GBP'000
Net cash inflow from operating activities 1,584 2,319
Servicing of finance (145) (256)
Taxation 135 51
Capital expenditure and financial investment 15,463 15,867
Equity dividends paid (2,130) (3,185)
Net cash inflow before management of liquid resources 14,907 14,796
and financing
Management of liquid resources 1,415 (1,368)
Financing (16,078) (11,927)
Increase in cash 244 1,501
Reconciliation of net cash flow to movement in net debt
Increase in cash 244 1,501
Cashflow from movement in liquid resources (1,415) 1,368
Exchange movements 17 (690)
Cash movements from changes in debt (365) 2,109
Movement of debt in year (1,519) 4,288
Net debt at beginning of year (3,809) (8,097)
Net debt at end of year (5,328) (3,809)
Notes to the Financial Statements
1. Accounting Policies
The principal accounting policies, all of which have been consistently applied
throughout this year and the preceding year, are set out below.
(a) Basis of preparation
(i) Accounting Standards applied
The financial statements have been prepared in accordance with applicable
United Kingdom law and Accounting Standards and with the Statement of
Recommended Practice (`SORP') `Financial Statements of Investment Trust
Companies and Venture Capital Trusts' issued by the Association of Investment
Companies in January 2009.
(ii) Definitions used in the financial statements
`Portfolio' the UK Equity Share Portfolio, the Global Equity Share Portfolio,
the Hedge Fund Share Portfolio and/or the Managed Liquidity Share Portfolio (as
the case may be). Comprising investment portfolio, cash, loans, debtors and
other creditors, which together make up the net assets as shown in the balance
sheet.
`Shares' UK Equity Shares, Global Equity Shares, Hedge Fund Shares, Managed
Liquidity Shares and/or Deferred Shares (as the case may be).
The financial statements for the Company comprise the income statement,
reconciliation of movements in shareholders' funds, the total column of the
balance sheet, the cash flow statement and the notes to the financial
statements.
The UK Equity, Global Equity, Hedge Fund and Managed Liquidity Share
Portfolios' income statements and summaries of net assets do not represent
statutory accounts, are not required under UK Generally Accepted Accounting
Practice or the SORP, and are not audited. These have been disclosed to assist
shareholders' understanding of the assets and liabilities, and income and
expenses of the different Share classes.
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the income statement between items of a revenue and capital nature has
been presented alongside the income statement. In accordance with the Company's
status as a UK investment company under Section 833 of the Companies Act 2006,
net capital returns may not be distributed by way of a dividend. Additionally,
the net revenue is the measure the Directors believe appropriate in assessing
the Company's compliance with certain requirements set out in s1158 of the
Corporation Tax Act 2010 (formerly the requirements were set out in s842 of the
Income and Corporation Taxes Act 1988).
(iii) Functional and presentational currency
The Company's functional currency is pounds sterling as its operating
activities are based in the UK and a majority of its assets, liabilities,
income and expenses are in sterling, which is also the currency in which these
accounts are prepared.
(iv) Transactions and balances
Transactions in foreign currency, whether of a revenue or capital nature, are
translated to sterling at the rates of exchange ruling on the dates of such
transactions. Foreign currency assets and liabilities are translated to
sterling at the rates of exchange ruling at the balance sheet date. Any gains
or losses, whether realised or unrealised, are taken to the capital reserve or
to the revenue account, depending on whether the gain or loss is of a capital
or revenue nature. All gains and losses are recognised in the income statement.
2. Income
UK Global Hedge Managed Company
Equity Equity Fund Liquidity Total
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income from investments
UK dividends 1,564 218 - - 1,782
UK scrip dividends 35 27 - - 62
Overseas dividends 196 568 - 15 779
Unfranked investment income - 3 - - 113 116
interest
1,798 813 - 128 2,739
Other income
Interest 6 1 - 2 9
Underwriting and sundry 4 - - - 4
Total income 1,808 814 - 130 2,752
2009
Income from investments
UK dividends 1,600 329 - - 1,929
UK scrip dividends 19 - - - 19
Overseas dividends 176 644 - 144 964
Overseas scrip dividends - 61 - - 61
Unfranked investment income - - - 3 741 744
interest
1,795 1,034 3 885 3,717
Other income
Interest 6 31 1 4 42
Underwriting and sundry 5 - - - 5
Total income 1,806 1,065 4 889 3,764
3. Management fees
(a) Management fees charged
UK Global Hedge Managed Company
Equity Equity Fund Liquidity Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2010
Management fee:
- charged to revenue 53 84 - 5 142
- charged to capital 122 196 40 - 358
Total management fee 175 280 40 5 500
2009
Management fee:
- charged to revenue 78 58 - 5 141
- charged to capital 183 147 46 - 376
Total management fee 261 205 46 5 517
Performance fee charged to
capital:
- 2009 180 158 - - 338
- 2008 - 100 - - 100
Total performance fee 180 258 - - 438
No performance fee arose in the year ended 31 May 2010.
(b) Details of management fees
Details of the investment management agreement, including amendments during the
previous year, are given on page 38 in the Report of the Directors in the
annual financial report. As a result of those amendments, an additional
performance fee of GBP100,000 was charged in 2009 on the Global Equity Portfolio
in respect of the year ended 31 May 2008. Details of the fees payable on the
Fauchier Managed Funds which comprise the Hedge Fund Share Portfolio are also
given.
(c) Adjustment to UK Equity Portfolio management fee
The UK Equity Portfolio management fee from the date of inception in 2006 to 31
May 2009 was overstated by GBP102,000 as a result of a miscalculation which based
the fee on gross, as opposed to net, assets. This has been corrected in the
year and has been credited back to the Portfolio in the same proportion as it
was originally charged, being GBP30,000 to revenue and GBP72,000 to capital. The
management fee net of this adjustment is shown in note 3(a). In addition,
interest of GBP5,000 on the above amount has been credited wholly to revenue.
The effect of this at the year end was to increase the UK Equity Portfolio's
net asset value by 0.3% (0.27p per share) and its net revenue return by 1.9%.
4. Basic return per Ordinary Share
Basic revenue, capital and total return per ordinary share is based on each of
the returns on ordinary activities after taxation as shown by the income
statement for the applicable Share class and on the following number of Shares
being the weighted average number of Shares in issue throughout the year for
each applicable Share class:
Average Number of Shares
SHARE 2010 2009
UK Equity 42,528,103 45,354,581
Global Equity 35,278,074 35,618,724
Hedge Fund 14,910,221 20,855,531
Managed Liquidity 17,867,313 20,300,485
5. Dividends
Dividends paid for each applicable Share class follow:
2010 2009
Number Dividend Total Number Dividend Total
of Shares Rate (Pence) GBP'000 of Shares Rate GBP'000
(Pence)
UK Equity
First interim 45,161,268 1.65 745 44,997,509 1.80 810
Second interim 39,167,799 2.15 842 44,876,839 1.65 740
3.80 1,587 3.45 1,550
Global Equity
First interim 35,329,468 0.45 159 35,613,603 1.20 428
Second interim 34,322,023 0.90 309 34,424,275 1.05 361
1.35 468 2.25 789
Managed Liquidity
First interim 18,756,237 0.40 75 21,286,581 2.70 575
Second interim - - 19,348,802 1.40 271
0.40 75 4.10 846
Total paid in 2,130 3,185
respect of
the year
6. Share Capital and Reserves
(a) Share Capital
Authorised:
2010 2009
ORDINARY SHARES OF 1P EACH Number GBP'000 Number GBP'000
UK Equity 200,000,000 2,000 200,000,000 2,000
Global Equity 200,000,000 2,000 200,000,000 2,000
Hedge Fund 200,000,000 2,000 200,000,000 2,000
Managed Liquidity 200,000,000 2,000 200,000,000 2,000
A 100,000,000 1,000 100,000,000 1,000
900,000,000 9,000 900,000,000 9,000
Deferred shares of 1p each 105,000,000 1,050 105,000,000 1,050
1,005,000,000 10,050 1,005,000,000 10,050
(b) Movements in Share Capital During the Year
Issued and fully paid:
Total
UK Global Hedge Managed Share
Equity Equity Fund Liquidity Capital
ordinary shares
(Number)
At 31 May 2009 46,339,294 35,957,118 15,853,901 18,985,100 117,135,413
Shares bought back (4,905,551) (4,398,054) (688,735) (8,214,152) (18,206,492)
into treasury
Arising on share
conversion:
- October 2009 (3,151,883) 653,313 (761,834) 2,791,533 (468,871)
- April 2010 1,077,341 430,787 (508,246) (899,001) 100,881
At 31 May 2010 39,359,201 32,643,164 13,895,086 12,663,480 98,560,931
treasury shares
(number)
At 31 May 2009 3,182,000 2,666,214 1,395,000 936,595 8,179,809
Shares bought back 4,905,551 4,398,054 688,735 8,214,152 18,206,492
into treasury
Treasury shares (4,286,551) (4,464,268) (983,735) (8,155,247) (17,889,801)
cancelled
At 31 May 2010 3,801,000 2,600,000 1,100,000 995,500 8,496,500
ordinary SHARES (GBP
'000)
At 31 May 2009 463 359 159 190 1,171
Shares bought back (49) (44) (7) (82) (182)
into treasury
Arising on share
conversion:
- October 2009 (31) 6 (8) 29 (4)
- April 2010 11 5 (5) (10) 1
At 31 May 2010 394 326 139 127 986
treasury shares (GBP
'000)
At 31 May 2009 32 27 14 9 82
Shares bought back 49 44 7 82 182
into treasury
Treasury shares (43) (45) (10) (81) (179)
cancelled
At 31 May 2010 38 26 11 10 85
tOTAL SHARE CAPITAL
(GBP'000)
Ordinary share 394 326 139 127 986
capital
Treasury share 38 26 11 10 85
capital
Total share capital 432 352 150 137 1,071
Average buy back 79.1p 103.9p 101.9p 97.8p
price
As part of the conversion process deferred shares were created and subsequently
cancelled during the year. No deferred shares were in issue at the start or end
of the year.
(c) Movements in ShareCapital after the year end to 30 July 2010
uk Global Hedge Managed
Equity Equity Fund Liquidity
ordinary shares
Shares bought back into treasury 105,000 225,000 479,000 920,000
Average buy back price 84.2p 106.3p 103.4p 99.0p
(d) Dividend and Voting Rights
Each of the classes of Shares will have the right to receive the revenue
profits of the Company attributable to the Portfolio relating to that class of
Shares as determined to be distributed by way of interim and/or final dividend
at such times as the Board determines.
Shares will not carry a fixed number of votes. At general meetings of the
Company the voting rights of each Share will be determined by reference to the
NAV of the Shares of the relevant class. The relative voting power of each
class of Share at the general meeting will depend on the number of Shares of
that class in issue and the NAV of the Portfolio attributable to that class of
Shares. In relation to dividends, each class of Shares will only be able to
vote on dividends for that class.
As the Portfolios are not legal entities in their own right, if the assets of
one of the Portfolios were insufficient to meet its liabilities, any shortfall
would have to be met from assets of the other Portfolio(s).
(e) Deferred Shares
The Deferred shares do not carry any rights to participate in the Company's
profits, do not entitle the holder to any repayment of capital on a return of
assets (except for the sum of 1p) and do not carry any right to receive notice
of or attend or vote at any general meeting of the Company. Any Deferred shares
that arise as a result of conversions of Shares are cancelled in the same
reporting period.
(f) Future Convertibility of the Shares
Shares will be convertible at the option of the holder into any other class of
Shares on or around 1 May and 1 November each year. Notice to convert any class
of Shares on any conversion date will be required up to a maximum of ten
business days prior to the relevant conversion date, save in the case of
conversions of Hedge Fund Shares in relation to which notice to convert will
need to be given approximately four months prior to the relevant conversion
date. However, Hedge Fund shareholders do not have to choose which class of
Share to convert into until 10 days before the conversion date.
Conversion from one class of Shares into another will be on the basis of a
ratio derived from the prevailing underlying net asset value of each class of
relevant Shares, calculated shortly before the date of conversion.
The Directors have been advised that conversion of one class of Shares into
another will not be treated as a disposal for UK capital gains tax purposes.
7. Net asset values per Share
The net asset value per Share and the net assets attributable at the year end
were as follows:
ORDINARY SHARES 2010 2009
Net Asset Net Asset
Value Per Net Assets Value Per Net Assets
Share Attributable Share Attributable
Pence GBP'000 Pence GBP'000
UK Equity 85.7 33,739 74.5 34,502
Global Equity 111.7 36,467 89.7 32,255
Hedge Fund 112.4 15,614 105.1 16,662
Managed Liquidity 101.8 12,888 99.8 18,945
Net asset value per Share is based on net assets at the year end and on the
number of relevant Shares in issue at the year end.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 May 2010. The financial information
for 2009 is derived from the statutory accounts for 2009, which have been
delivered to the Registrar of Companies. The auditors have reported on the 2009
accounts; their report was unqualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying the report and did not contain a statement under section 498 of the
Companies Act 2006. The statutory accounts for the year ended 31 May 2010 have
not yet been delivered to the Registrar of Companies. The statutory accounts
for the year ended 31 May 2010 have been finalised on the basis of the
information presented by the directors in this Annual Financial Report
announcement and will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
The audited annual financial report will be available to shareholders shortly.
Copies may be obtained during normal business hours from the Company's
Registered Office, 30 Finsbury Square, London, EC2A 1AG or the Company's
website at www.invescoperpetual.co.uk/investmenttrusts.
The Annual General Meeting will be held on 27 September 2010 at 11.30am at 30
Finsbury Square, London, EC2A 1AG.
By order of the Board
Invesco Asset Management Limited
30 July 2010
Contacts:
Angus Pottinger 020 7065 4000
Karina Bryant 020 7065 4000
END
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