The headline for the announcement released on 9/8/22 at 9.55am under RNS No 4138V should read Annual Financial Report and not Final Results as originally released. 

 

The announcement text is unchanged and is reproduced in full below.

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 £80,000 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 £2.2 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 £29.6 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 £5 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 £5 million. These facilities are available until 10 February 2025. At the year-end, £2 million of the RCF had been drawn down in the Income Portfolio, resulting in total borrowings of £7 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 ([email protected]). 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

Index	Local Currency % Return	Sterling Adjusted % 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 £1.5 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
		£'000	£'000	£'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
		£'000	£'000	£'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 shares	Growth shares	Total
	Notes	£'000	£'000	£'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 shares	Growth shares	Total
	Notes	£'000	£'000	£'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 shares	Growth shares	Total
		£'000	£'000	£'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 Proceeds from issuance of new shares	4	(3,155) 2,120	- 3,086	(3,155) 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 shares	Growth shares	Total
		£'000	£'000	£'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 Proceeds from issuance of new shares		(2,852) 710	- 4,765	(2,852) 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

 

Income shares	Share capital £000	Share premium account £000	Capital redemption reserve £000	2022 special    reserve £000	2008 special reserve £000	Capital reserves £000	Revenue reserve £000	Total shareholders' funds £000
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

Income shares	Share capital £000	Share premium account £000	Capital redemption reserve £000	2008 special reserve £000	Capital reserves £000	Revenue reserve £000	Total shareholders' funds £000
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
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'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
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'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
	£'000	£'000	£'000	£'000	£'000	£'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
	£'000	£'000	£'000	£'000	£'000	£'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 date	£'000
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 per Income share	17 September 2021	8 October 2021	731
- second interim dividend of 1.55p per Income share	17 December 2021	7 January 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
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'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 shares	Growth shares	Total
		£'000	£'000	£'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 £64,692,000 (2021: £66,766,000), 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 £94,979,000 (2021: £104,226,000), 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 £2,120,000 (2021: £710,000).  

 

     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 £3,086,000 (2021: £4,765,000).

 

     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 £5 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 £3,673,000 (2021: £4,556,000), a Euro denominated investment valued at £1,946,000 (2021: £2,228,000) and a US Dollar denominated investment valued at £1,229,000 (2021: £1,092,000). At 31 May 2022, the Growth Portfolio had a US Dollar denominated investment valued at £1,028,000 (2021: £1,350,000).

       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 £5 million fixed rate term loan and a £5 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, £5 million of the fixed rate term loan was drawn down (2021: £5 million) and £2 million of the unsecured revolving credit facility was drawn down (2021: £2 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 £1,793,000 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 £2,067,000 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 A(1)	Column B(2)	Column C(3)	Column A(1)	Column B(2)	Column C(3)
		£'000	£'000	£'000	£'000	£'000	£'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 A(1)	Column B(2)	Column C(3)	Column A(1)	Column B(2)	Column C(3)
		£'000	£'000	£'000	£'000	£'000	£'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 (Company level)		n/a
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 shares		Income Shares	Growth 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 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.

 

	31 May 2022			31 May 2021
	Income shares	Growth shares		Income Shares	Growth 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 shares	Growth shares		Income Shares	Growth 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 percentage of the year-end share price.

 

		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 Shares £'000	Growth Shares £'000	Income Shares £'000	Growth Shares £'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