Invesco Bond Income Plus Limited - Annual Financial Report
Annual Financial Report for year ended
The following text is extracted from the Annual Financial Report of the Company for the year ended
Highlights
• Net asset value (‘NAV’) and share price total returns with dividends reinvested for the year of 8.7% and 8.0% respectively (1) .
• Shares traded at a premium for majority of 2025 leading to a strong demand for shares resulting in 34.95m shares being issued, raising gross proceeds of £60.50m.
• In addition strong issuance demand continued in 2026 with a further 20.12m shares issued, including a successful placing and retail offer, raising £34.97m in gross proceeds.
• Dividend increased to 12.25p per share for 2025. Dividend target of 12.25p per share unchanged for 2026.
• Dividend continues to be fully covered by current year net revenue along with revenue reserve growth.
(1) Alternative Performance Measure (‘APM’). See Glossary of Terms and Alternative Performance Measures on pages 78 to 81 of the financial report for details of the explanation and reconciliations of APMs.
Financial Information and Performance Statistics
Net asset value – total return with dividends reinvested
2025 2024
Total Return Statistics with dividends reinvested
(1)(2)
Net asset value – total return with dividends 8.7% 8.5%
reinvested
Share price – total return with dividends reinvested 8.0% 8.8%
Capital Statistics
At 31 December 2024 2023 change %
Net assets (£’000) 410,275 345,799 +18.6
Net asset value per ordinary share (2) 172.87p 170.87p +1.2
Share price (1) 175.00p 174.00p +0.6
Premium (2) 1.2% 1.8%
Gearing (2)
– gross gearing 9.3% 13.1%
– net gearing 2.8% 9.9%
Performance Statistics
Year Ended 31 December 2025 2024 change %
Revenue return per ordinary share 13.07p 12.08p
Capital return per ordinary share 1.08p 1.57p
Total return 14.15p 13.65p
Dividend per ordinary share for the year 12.2500p 11.6875p +4.8
Ongoing Charges Ratio (2) 0.88% 0.89%
(1) Source: LSEG Data & Analytics.
(2) Alternative Performance Measure (APM). See Glossary of Terms and Alternative Performance Measures on pages 78 to 81 of the financial report for details of the explanation and reconciliations of APMs.
Chairman’s Statement
High yield markets benefitted from a largely favourable macroeconomic and political environment in 2025. Modest economic growth and subdued inflation allowed central banks to continue to ease monetary policy and in the
Performance
The Company’s NAV and share price total returns for the year were 8.7% and 8.0%, respectively. The 8.7% NAV return was higher than both the 7.4% achieved by the ICE Bank of America Merrill Lynch European High Yield Index (‘the Index’) and the average return of 7.3% for funds in the Investment Association Sterling Strategic Bond Sector. The Company’s investment performance continues to compare favourably with the Index over the longer term. For the five and ten years to the end of 2025 the Company’s NAV total return was 23.9% and 76.5% respectively compared to total returns of 25.4% and 68.6% for the Index.
Income Account
It is pleasing to report that we were once again able to increase the dividend paid to shareholders. We announced a dividend for 2025 of 12.25p per share, a 4.8% increase on the 11.6875p per share for 2024. Our dividend yield of 7% comfortably exceeded the rate of inflation and the dividend was 1.07x covered by earnings.
The dividend was paid in four instalments, with the fourth dividend payment on the
We expect to continue the Company’s long record of providing shareholders with a high level of income relative to interest rates in 2026 and our dividend target of 12.25p per share remains unchanged. The Company’s long-term success in providing shareholders with a consistently high level of income is the result of our Manager’s rigorous investment process and expertise in managing high yield portfolios. Moreover, we are able to enhance returns by making use of the powers available to us as an investment company, for example in our use of gearing which I discuss in more detail later in this Statement. Lastly, we retained our position as the largest company in our
Discount/Premium
The vast majority of investment trusts have traded at wide discounts to their NAV’s since the start of 2022. Despite this backdrop, demand for the Company’s shares remained very encouraging and our share price remained at a healthy premium to NAV throughout 2025, ending the year at a premium of 1.2%.
Where the Board is able to reduce the gap between our share price and NAV we will take action and in 2025 we continued to issue shares to meet the strong demand for shares. We issued a total of 34,950,000 shares during the year and since the start of 2026 we have issued a further 20,122,588 shares, including a successful placing of 14.37 million shares in February.
Ongoing Charges
A key objective for the Board is to ensure that the costs incurred in managing the Company are competitive and we use the Company’s ongoing charges ratio (OCR) to measure these costs. Details of the OCR can be found on page 12 . The OCR for the year was 0.88% compared to 0.89% in the previous year. The growth in our shares in issue discussed in the previous paragraphs provides a further benefit to shareholders in that it allows us to spread the Company’s fixed costs over a larger base and hence to place downward pressure on our OCR. I am pleased to report that our OCR remains the lowest within our AIC sector (Debt – Loans and Bonds).
Gearing
The degree to which the portfolio is geared is determined by the Portfolio Managers according to their assessment of the opportunities and risks within the high yield market. The maximum amount of borrowing is 30% of total assets and throughout the year the Company maintained a geared portfolio. As at
The Board
In June this year I will complete nine years with the Board and consequently, in accordance with good corporate governance practice, I will not seek re-election at the 2026 AGM. As a result of our succession planning and subject to regulatory approval, I am delighted to report that
Marketing, Investor Engagement and Communication
A primary focus for your Board, both last year and continuing into the current year, is to raise the Company’s profile and expand the pool of investors familiar with its investment proposition and strong track record. Ultimately, the Board aims to grow the Company’s size, which is expected to enhance share liquidity and reduce the ongoing charges ratio.
As part of this focus, over the last 12 months the Board has reviewed the Company’s marketing and communications strategy and refreshed the value proposition and agreed improvements to the Company’s dedicated page on the Investment Manager’s website at www.invesco.co.uk/bips.
Engaging with our shareholders is of utmost importance. Over the past year, your Investment Manager has actively sought opportunities to meet with shareholders and prospective investors, both virtually and in person, to discuss the Company’s strategy, performance, and outlook. We greatly value the feedback received. Should you wish to communicate with the Board or the Investment Manager, please reach out via email at
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AGM
The AGM will be held on
Outlook
The immediate outlook for high yield securities is overshadowed by events in the
At the time of writing it is unclear how or when the conflict will be resolved and hence it is extremely difficult to reach any firm conclusions on the outlook for global economy and financial markets. There is a clear risk
The Company began 2026 with a relatively conservative exposure to risk compared to its history. Net gearing is low and the overall credit exposure is tilted towards higher quality bonds and well diversified, giving some resilience to potential shocks. Together with this lower-risk starting point, the Company's closed ended structure makes it well positioned to take advantage of a sell-off when good quality bonds could be available at deeply discounted prices, locking in returns for the future. Furthermore, in an uncertain world a regular, dependable source of income is key for our shareholders and despite the challenging geopolitical outlook I have no doubt that your Company will continue to meet this requirement in 2026.
Chairman
Portfolio Managers’ Report
Q&A
Portfolio Manager
Rhys is a fund manager for the Invesco Fixed Interest Europe team, based in our Henley office.
He began his investment career with Invesco in 2002, moving to the Henley Fixed Interest team in 2003. He became a fund manager in 2014. He manages high yield credit portfolios.
He holds a BSc (Honours) in Management Science from the
Deputy Portfolio Manager
Edward is a fund manager for the Invesco Fixed Interest Europe team, based in our Henley office.
He began his career with
He holds a Master’s degree in Physics from
the
Q What happened in the bond markets in 2025?
A
Investment in corporate bonds in 2025 was rewarded with a return well above cash and
Total return for European High Yield was 7.4%
(1)
, compared to 4.3% for cash
(2)
and 5% for
While the high yield market as a whole outperformed investment grade, lower credit quality did not outperform within high yield. Spreads tightened more for higher-quality BB than for lower-quality B rated bonds. In fact, B spreads widened slightly. So within high yield, prudence was rewarded.
The return of 7.4% for high yield is a reminder of the potential of bonds to deliver attractive total returns in the world of higher yields we have inhabited since 2022.
The fundamental backdrop for the market was strong. Interest rates fell. Both the
Viewed in the context of these factors, it makes sense that indicators of the risk premium in corporate debt, for example the iTraxx XOVER index, are at multi-year lows. But it is worth remembering that this support has persisted, almost unbroken, through a year of rapid and unusual political change. Investors appear to have shown remarkable sang-froid in the face of increased and volatile trade tariffs, military action and geopolitical volatility in the
Q How did the company perform?
A
Over the 12 months to
Q What drove this return?
A Our portfolio is focused on higher yielding bonds, but with a substantial allocation to investment grade. The starting yield in 2025 for European high yield bonds was 6.1% and for sterling investment bonds 5.6%. These yields provided the base for our returns, which were then enhanced by bond and market selection, our leverage strategy and our trading.
The parts of the portfolio which made the biggest contributions to return were, as usual, high yield corporate bonds and subordinated financial securities. Subordinated bank debt was one of the strongest parts of the market. Although we have become more cautious as valuations have risen, reducing our overall allocation, we added to positions in some high yielding, smaller bank names. Across the corporate high yield market, we exercised caution on valuation.
The ability to use gearing to increase income is a key feature of the closed-ended structure of the investment trust. Gearing allows us to add credit exposure. We use it as a tool for our general management approach – seeking to align the level of risk with our view of the level of available reward. As valuations have continued to rise over the last couple of years, we have moderated the level of gearing. At the end of 2024, gross borrowing was 13.1% and net gearing was 9.9%. At the end of 2025, the equivalent numbers were 9.3% and 2.8%. We manage our leverage in line with our view of market value. This boosted returns in 2025.
2025 was a generally strong period for our markets, but it was not without its moments! In particular, markets were weak in the build-up to and immediate aftermath of the US import tariff announcements in April. This was a quite short-lived sell-off, but we used it to add to positions, both bonds we already held and others we had chosen not to buy on the terms on which they were originally offered to the market. This allowed us to enhance yield and boost our total return.
Looking at the individual securities which made the largest positive contributions to returns, financials feature – both smaller banks we added, such as
Atom
and
One additional factor which helped our returns was the decision to slightly increase the portfolio’s sensitivity to interest rate changes. Our modified duration averaged 3.8 over the year, which meant that we benefitted more from government bond yields and the falling rate environment than the general high yield market.
Q How have you managed your asset allocation?
A We seek to align our level and type of risk to the reward available in the market. As credit markets rallied strongly in 2023 and 2024, we reduced our exposure to credit risk. Our allocation to high yield rated bonds fell from 80% in late-2022 to 68% at the end of 2024. Investment grade rose.
With the much more modest change in the level of yield in 2025, our allocations have been more stable, high yield (bonds rated BB+ and below) declining from 65% to 58%. Investment grade has increased more modestly from 27% to around 30%. Duration remains slightly higher than the high yield market.
Also, with a view to aligning risk with reward in a more highly valued market, we have reduced gross portfolio leverage from 13.1% to 9.3%.
One risk we have held a bit more of in the last couple of years is liquidity risk. As a closed-ended vehicle, the trust does not face the redemption risk of an open-ended fund. We therefore feel that it is more appropriate in this portfolio to hold some bonds from smaller bond deals, where there is consequently likely to be less market liquidity if we want to sell. We have increased our allocations to bonds in this category over the past several quarters, to about 7% of our portfolio. The compensation for this risk is higher coupons.
Index Credit Default Swaps are a useful tool to manage credit risk by taking long or short exposure to a broad range of underlying bonds, as opposed to buying or selling individual bonds in the portfolio. We have used them over the course of 2025 to reduce credit risk, as part of our wider strategy of holding a more defensive portfolio in an environment of tighter credit spreads.
Q How is Environmental, Social and Governance (‘ESG’) integrated in the investment process?
A The portfolio is not bound by any specific ESG criteria. However, ESG factors are important in our credit analysis and our investment decisions.
We incorporate ESG considerations in our process when we research companies, when we engage with companies and as part of ongoing monitoring. Our credit analysts assign an ESG rating to issuers they cover. One of the resources we benefit from as part of the wider Invesco team is the data and the expertise of the Invesco ESG team. The ESG team provides a wide range of services to us, including portfolio monitoring and meetings with managers to assess portfolios, along with support for meetings with companies and deep knowledge on particular ESG issues.
Our analysts have worked hard over several years to assess and monitor the ESG factors relating to the companies they cover. In 2025, our team had 70 ESG engagements – either meetings dedicated to ESG issues or ESG discussions within wider meetings. These interactions tend to cover a wide range of topics across environmental, social and governance and vary from name to name. For example, Invesco’s recent engagement with
Q How is the bond market looking as we begin 2026?
A Entering 2026, we viewed the market as well-supported but also quite fully valued. Corporate earnings were growing and leverage and debt-affordability metrics were far from stressed levels. In this environment, supply of bonds was high but was matched by demand as money flowed into the asset class. We had a broadly positive macroeconomic outlook, although perhaps not so rosy as many economic commentators. Of greater concern was the tight level of credit spreads, on a historical basis, and the potential for these to widen in 2026.
The outbreak of military conflict in the Persian Gulf has added a great deal of risk to the economic outlook. This has been reflected in some market weakness, but we think there is potential for more. Disruption in energy supplies impacts inflation directly. Expectations for interest rates have already risen substantially. For how long the conflict persists is a crucial unknown. It will have a bearing on the size of the inflationary impulse and on the extent to which growth is affected as well as inflation. Credit spreads in our market have widened in recent weeks but they are still relatively low.
We are confident that we can deliver the income needed for the trust’s dividends while still aligning risk with reward prudently. As set out earlier in this report, our portfolio is relatively conservative, with substantial investment grade exposure and less leverage. This positioning was built on the view we have had for some time – that valuations were high and the reward for risk was not very attractive. We think it will serve us well in the higher risk environment we now face, offering some protection. If we see further weakness, either due to a general heightening in risk-aversion or the deterioration of corporate fundamentals, we will be eager to assess opportunities to add exposure to credit-worthy bonds at attractive yields.
(1) ICE BofA European Currency High Yield Index, hedged to GBP.
(2)
(3)
ICE BofA
(4) ICE BofA Sterling Corporate Index.
(5)
JP Morgan, High Yield Talking Points - High Yield Issuer Fundamentals,
(6)
JP Morgan, European Credit Fund Flows,
Portfolio Managers
Business Review
Purpose, Business Model and Strategy
The Company’s purpose is to generate returns over the long-term for its shareholders by investing their pooled capital to achieve the Company’s investment objective through the application of its investment policy (set out below) and with the aim of spreading investment risk.
The strategy the Board follows to achieve the objective is to set investment policy and risk guidelines, together with investment limits, and to monitor how they are applied.
The business model the Company has adopted to achieve its objective is to contract investment management and administration to appropriate external service providers, who are subject to oversight by the Board. The principal service providers are:
–
–
In addition to the management and administrative functions of the Manager and the Company Secretary, the Company has contractual arrangements with
The Board has oversight of the Company’s service providers, and monitors them on a formal and regular basis. The Board has a collegiate culture and pursues its fiduciary responsibilities with independence, integrity and diligence, taking advice and outside views as appropriate and constructively challenging and interacting with service providers, including the Manager. The portfolio managers responsible for the day-to-day management of the portfolio are
The Company is an alternative investment fund for the purposes of the Alternative Investment Fund Managers Directive.
Investment Objective and Policy
Investment Objective
The Company’s investment objective is to seek to obtain capital growth and high income from investment, predominantly in high-yielding fixed-interest securities.
Investment Policy
The Company seeks to provide a high level of dividend income relative to prevailing interest rates mainly through investment in bonds and other fixed-interest securities. The Company also invests in equities and other equity-like instruments consistent with the Investment Objective.
This Investment Policy should be read in conjunction with the descriptions of Investment Style, Investment Limits, Derivatives and Currency Hedging, and Borrowings set out below.
Investment Style
The Manager seeks to ensure that the portfolio is diversified, having regard to the nature and type of securities (including duration, credit rating, performance and risk measures and liquidity) and the geographic and industry sector composition of the portfolio. The Company may hold both illiquid securities (for example, securities where trading volumes are relatively low and unlisted securities) and concentrated positions (for example, where a high proportion of the Company’s total assets are comprised of a relatively small number of investments).
Investment Limits
– the Company may invest in fixed-interest securities, including but not restricted to preference shares, loan stocks (convertible and redeemable), corporate bonds and government stocks, up to 100% of total assets;
– investments in equities may be made up to an aggregate limit of 20% of total assets;
– the aggregate value of holdings of shares and securities in a single issuer or company, including a listed investment company or trust, will not exceed 15% of the value of the Company’s investments; and
– investments in unlisted investments will not exceed 10% of the Company’s total assets for individual holdings and 25% in aggregate.
All the above limits are measured at the time a new investment is made.
Derivatives and Currency Hedging
The Company may enter into derivative transactions (including options, futures, contracts for difference, credit derivatives and interest rate swaps) for the purposes of efficient portfolio management. The Company will not enter into derivative transactions for speculative purposes.
Efficient portfolio management may include reduction of risk, reduction of cost and enhancement of capital or income through transactions designed to hedge all or part of the portfolio, to replicate or gain synthetic exposure to a particular investment position where this can be done more effectively or efficiently through the use of derivatives than through investment in securities or to transfer risk or obtain protection from a particular type of risk which might attach to portfolio investments.
The Company may hedge against exposure to changes in currency rates to the full extent of any such exposure.
Borrowings
The Company’s borrowing policy is determined by the Board, which has set a maximum of 30% of the Company’s total assets. This limit may be varied from time to time in the light of prevailing circumstances, but has not been changed since the Company’s incorporation in its current form. The Manager has discretion to borrow within the limit set by the Board. Any borrowings are covered by investments in matching currencies to manage exposure to exchange rate fluctuations.
The Board has reviewed the methods of financing available to the Company including repo financing whereby a company participates in sale and repurchase arrangements in connection with its portfolio. Under these arrangements, a company sells fixed interest securities and is contractually obliged to repurchase them at a fixed price on a fixed date, whilst retaining economic exposure to the securities sold. The difference between the (lower) sale price and the later purchase price is the cost (effectively interest) of the repo financing. Our preferred method of gearing remains the use of repurchase agreements and such repo financing agreements are in place and may be used subject to the aggregate 30% ceiling. At the year end, the sum borrowed using this method was £38.0 million (2024: £45.1 million). This represents gross gearing of 9.3% with cash and cash equivalents including margin of 6.5% giving net gearing of 2.8% (2024: gross gearing of 13.1% with cash and cash equivalents including margin of 3.2% giving net gearing of 9.9%) (1) .
(1) Alternative Performance Measure (APM). See Glossary of Terms and Alternative Performance Measures on pages 78 to 81 of the financial report for details of the explanation and reconciliations of APMs.
Key Performance Indicators
The Board reviews performance by reference to a number of Key Performance Indicators which include the following:
• Performance
• Dividends
• Premium/Discount
• Ongoing Charges Ratio
Performance
As the Company’s objective is to seek to obtain capital growth and high income, the performance is best measured in terms of total return. There is no single index against which the Company’s performance may be meaningfully assessed. Therefore, the Board refers to a variety of relevant data and this is reflected in both the Chairman’s Statement and the Portfolio Managers’ Report on pages 6 to 10. The Manager has a long-term horizon and consequently the Board pays close attention to returns over three and five years in its assessment of investment performance. As explained in the Chairman’s Statement, the Board has noted the performance in the year and is satisfied with the longer term performance of the portfolio.
Dividends and Dividend Payment Policy
Dividends form a key component of the total return to shareholders and the Company has adopted a dividend policy to target an annualised dividend of 12.25p per share for 2026. In the year under review all 4 interim dividends paid to shareholders were 3.0625p totalling 12.25p. Dividends paid over the last ten years are shown in the table on page 4.
The Board’s Dividend Payment Policy is to pay dividends on a quarterly basis in May, August, November and February in respect of each accounting year. The timing of these regular three-monthly payments means that shareholders do not have an opportunity to vote on a final dividend. Recognising the importance of shareholder engagement, and although not required by any regulation, shareholders are given an opportunity to vote on this policy at the forthcoming AGM.
Premium/Discount
The Board monitors the price of the Company’s shares in relation to their net asset value and the premium/discount at which the shares trade. Powers are taken each year to issue and buy back shares, which can assist short term management, however the level of discount or premium is mostly a function of investor sentiment and demand for the shares, over which the Board may have limited influence. The ideal would be for the shares to trade close to their net asset value. The graph on page 12 shows the premium/discount through the year. The Company’s shares traded at a premium for the majority of the year, with the shares only trading at a discount during certain very limited periods of time due to market factors, but ended the year at a premium of 1.2%.
Ongoing Charges Ratio
The expenses of managing the Company are carefully monitored by the Board. The standard measure of these is the ongoing charges ratio (OCR), which is calculated by dividing the sum of such expenses over the course of the year, including those charged to capital, by the average net asset value. This ongoing charges ratio provides a guide to the effect on performance of annual operating costs. The Company’s ongoing charges ratio for the current year was 0.88%, compared to 0.89% for the previous year. Your Board continues to believe that costs remain competitive compared to those of similar products.
Investment Process
At the core of the portfolio managers’ philosophy is a belief in active investment management. They seek to invest where they see the potential for attractive returns and to avoid risks that they do not think are well rewarded. Fundamental principles drive a genuinely active investment approach, with a strong emphasis on value.
The investment process comprises four key elements to deliver the information the portfolio managers use to make their decisions:
• top down, macroeconomic analysis – examining the factors that shape the economy;
• credit analysis using internal and external research with a view to maximising returns from acceptable and understood credit risk exposure;
• value assessment, considering the risk/return profile of any bond in relation to cash, core government bonds and the rest of the fixed interest universe; and
• risk considerations, analysing all holdings to allow for a comprehensive understanding of risks involved to ensure diversification of the portfolio.
The portfolio managers enter into the majority of positions with a view to holding them until their call or maturity date and their investment process is based on making investments where the yield to maturity or call appears to them to be at least an adequate reward for the risk. The nature of the high yield market and the Company’s mandate mean that there will be occasions when the value the portfolio managers assessed in an investment is fully realised by the market. On these occasions, they may exit the position before maturity.
The portfolio managers believe that it is good investment practice to try and keep the level of turnover low, whilst at the same time recognising that this should not at any time act as a deterrent to effective portfolio management. Turnover will generally be very low due to the long term nature of many of the holdings, and given the closed end nature of the Company, the portfolio managers are not presented with regular daily inflows and outflows which require managing.
The portfolio managers also consider environmental, social and governance (‘ESG’) factors details of which are given on pages 17 to 20.
Internal Control and Risk Management
The Directors have overall responsibility for the Company’s system of internal controls and are responsible for reviewing the effectiveness of these controls. This includes safeguarding of the Company’s assets. The Directors have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity.
As part of the process, the Committee has identified five risk categories: strategic; investment management; third party service providers; regulation and corporate governance; and operational. An explanation of these categories follows.
Strategic Risk
The Board sets the Company’s strategy, including setting its objective and how this should be achieved. The Board assesses the performance of the Company in the context of the market and macro conditions and gives direction to, and monitors, the Manager’s actions, and those of other third parties, on behalf of the Company.
Investment Management Risk
Investment management covers management of the portfolio together with cash management, gearing and hedging, all being areas the portfolio managers can control, and which generate the Company’s investment performance.
Third Party Service Providers Risk
The Company has no employees and its Directors are appointed on a non-executive basis. The Company is reliant on Third Party Service Providers (‘TPPs’) for its executive functions. The Company’s most significant TPPs are the Manager, to which portfolio management is delegated as well as certain administrative services including accounting and marketing and the Company Secretary. Other significant TPPs are the depositary, custodian, registrar, external auditor and corporate broker.
Regulation and Corporate Governance Risk
The Company is required to comply with many regulations. For the year under review these included but were not limited to, the provisions of the Companies (Jersey) Law 1991, the
Operational Risk
Operational risk covers the day to day operational matters mainly at the Manager, but also at other TPPs.
A matrix of the risks, set out according to their assessed risk levels after mitigation, enables the Directors to concentrate on those risks that are most significant, and also forms the basis of the list of principal risks and uncertainties on pages 14 and 15. The ratings take into account the Board’s risk appetite and the ongoing monitoring by the Manager.
Oversight of the control environment is based on the Company’s relationship with its TPPs, all of which have clearly defined lines of responsibility, delegated authority, and control procedures and systems. The Company’s main TPPs, the Manager, Fund Accounting and the Company Secretary, all have, a ‘Three Lines of Defence Model’, which is embedded into their risk management systems.
The effectiveness of the Company’s internal control and risk management system is reviewed at least twice a year by the Committee. The Committee received and considered, together with representatives of the Manager, reports in relation to operations and systems of internal controls of the Manager, Company Secretary, accounting administrator, custodian and registrar. The Committee also receives regular reports from the Company Secretary’s compliance officer and the Manager’s internal audit and compliance departments. The Committee also received a comprehensive and satisfactory report from the depositary at the year end Committee meeting. The Company’s risk management policies and procedures for financial instruments are set out in note 19 on pages 63 to 70.
Due diligence is undertaken before any contracts are entered into with any third party service provider. The Manager regularly reviews, against agreed service standards, the performance of TPPs through formal and informal meetings, and by reference to third party independently audited control reports. The results of the Manager’s reviews are reported to and reviewed by the Committee. These various reports and reviews did not identify any significant failings or weaknesses which were relevant to the Company during the year and up to the date of this Annual Financial Report. If any had been identified, the required remedial action would have been taken.
Reporting to the Board at each board meeting comprises, but is not limited to: financial reports, including any hedging and gearing; performance against relevant indices and the Company’s peers; the portfolio managers’ review, including of the market, the portfolio, transactions and prospects; revenue forecasts; and investment monitoring against investment guidelines. The portfolio managers are permitted discretion within these investment guidelines, which are set by the Board. Compliance with the guidelines is monitored daily by the Manager. Any proposed variation to these guidelines is referred to the
The Board, through the Management Engagement Committee, formally reviews the performance of the Manager, the Company Secretary and the other key TPPs annually. The Board has reviewed and accepted both the Manager’s and Company Secretary’s whistleblowing policy under which staff of both
Principal Risks and Uncertainties
The Board has carried out a robust assessment of the risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. As part of this process, the Board conducted a full review of the Company’s risk control summary and considered new and emerging risks. These are not necessarily principal risks for the Company, but may have the potential to be in the future. In carrying out this assessment, the Board considered the emerging risks facing the Company including geopolitical risks and uncertainties such as the ongoing conflicts in
______________________________________________________________________________ | Category and Principal| Mitigating Procedures and Ongoing Controls | |Risk Description | | |_______________________|______________________________________________________| | Strategic Risk | |______________________________________________________________________________| | Market and Political | | |Risk | | | | | |The Company invests | | |primarily in fixed | | |interest securities, | | |the majority of which | | |are traded on global | | |security markets. The | | |principal risk for | | |investors in the | | |Company is a | | |significant fall and/or| | |a prolonged period of | | |decline in these | | |markets. This could be |An explanation of market risk and how this is | |triggered by |addressed is given in note 19.1 to the financial | |unfavourable |statements. The Portfolio Managers’ Report summarises | |developments globally |particular macro economic factors affecting | |and/or in one or more |performance during the year and the portfolio | |regions, such as the |managers’ views on those most relevant to the outlook | |current conflicts in |for the portfolio. | |Ukraine and the Middle | | |East and other | | |geopolitical tensions | | |and uncertainties and | | |their impact on the | | |global economy. | | | | | |Since the end of the |The Directors continue to monitor developments closely| |accounting year, |during this period of heightened uncertainty and are | |conflict in the Middle |actively assessing any potential implications for the | |East has significantly |Company. | |escalated with the US | | |and Israel launching | | |coordinated strikes | | |against Iran. This | | |escalation has | | |contributed to | | |increased market | | |volatility and | | |disruptions to global | | |energy supply routes. | | | | | |Market risk also arises| | |from movements in | | |foreign currency | | |exchange rates and | | |interest rates. | | |_______________________|______________________________________________________| | Regulatory or Fiscal | | |Changes |The Board receives regular reports from the Manager | | |and Company Secretary which highlight any proposed | |The Company is |changes to the regulatory/fiscal regimes which might | |incorporated in Jersey |impact the Company. In 2024, Jersey received a | |which is a low tax |positive report from MoneyVal, the Council of Europe’s| |jurisdiction subject to|permanent monitoring body. MoneyVal concludes that | |global scrutiny. Any |Jersey’s effectiveness in preventing financial crime | |adverse global |is among the highest level found in jurisdictions | |regulatory or fiscal |evaluated around the world. More information can be | |measures taken against |found here: | |such low tax | | |jurisdictions, could |https://www.gov.je/News/2024/Pages/Jersey%E2%80%99sStr| |negatively impact the |engthInCombattingFinancialCrimeIsRecognised.aspx | |Company. | | |_______________________|______________________________________________________| | Wide Discount leading | | |to Shareholder | | |Dissatisfaction | | | | | |The Company’s shares | | |are subject to market |The Board receives regular reports from both the | |movements and can trade|Manager and the Company’s corporate broker on the | |at a premium or |Company’s share price performance and level of | |discount to NAV. Should|discount (or premium), together with regular reports | |the Company’s shares |on marketing and meetings with shareholders and | |trade at a significant |prospective investors. The Board recognises the | |discount compared to |importance of the Company’s scale in terms of the | |its peers, then |aggregate value of its shares in the market (‘market | |shareholder |cap’) in creating liquidity and the benefit of a wide | |dissatisfaction may |shareholder base, and seeks authority to both issue | |result if shareholders |and buy back shares to assist with market volatility. | |cannot realise the |The foundation to this lies in solid investment | |value of their |performance and an attractive level of dividend. | |investment close to | | |NAV, with the ultimate | | |risk that arbitragers | | |join the share | | |register. | | |_______________________|______________________________________________________| | Third Party Service Providers Risk | |______________________________________________________________________________| | Unsatisfactory | | |Performance by TPPs | | | | | |Failure by any service | | |provider to carry out | | |its obligations to the | | |Company in accordance | | |with the terms of its | | |appointment could have | | |a materially | | |detrimental impact on |Details of how the Board monitors the services | |the operations of the |provided by the Manager and the other TPPs, and the | |Company and affect its |key elements designed to provide effective internal | |ability to pursue |control, are included in the internal control and risk| |successfully its |management section on page 13. | |investment policy and | | |expose it to | | |reputational risk. | | |Disruption to the | | |accounting, payment | | |systems or custody | | |records could prevent | | |the accurate reporting | | |and monitoring of the | | |Company’s financial | | |position. | | |_______________________|______________________________________________________| | Cyber Risk | | | | | |The Company’s | | |operational structure |The Audit & Risk Committee on behalf of the Board | |means that cyber risk |periodically reviews TPPs’ service organisation | |(information technology|control reports and meets with representatives of the | |and physical security, |Manager’s Investment Management, Compliance, Internal | |including risks |Audit and Investment Trust teams as well as the | |associated with |Company Secretary’s senior staff and Compliance team. | |Artificial |The Board receives periodic updates on the Manager’s | |Intelligence) |and the Company Secretary’s information security | |predominantly arises at|arrangements. The Board monitors TPPs’ business | |its TPPs. This cyber |continuity plans and testing – including their regular| |risk includes fraud, |‘live’ testing of workplace recovery arrangements. | |sabotage or crime | | |perpetrated against the| | |Company or any of its | | |TPPs. | | |_______________________|______________________________________________________| | |The Manager’s and other TPPs, business continuity | | |plans are reviewed on a regular basis and the | | Business Continuity |Directors are satisfied that the Manager has in place | |Risk |robust plans and infrastructure to minimise the impact| | |on its operations so that the Company can continue to | |Impact of a major |trade, meet regulatory obligations, report and meet | |event, such as |shareholder requirements. | |Covid-19, on the | | |operations of the |The Board receives periodic reports from the Manager | |service providers, |and TPPs on business continuity processes and has been| |including any prolonged|provided with assurance from them all insofar as | |disruption. |possible that measures are in place for them to | | |continue to provide contracted services to the | | |Company. | |_______________________|______________________________________________________|
Viability Statement
This Company is an investment company whose business consists of investing the pooled funds of its shareholders to provide them with capital growth and a high income over the long term, predominantly from a portfolio of high yielding fixed income securities. Long term for this purpose is considered to be at least five years and the Directors have assessed the Company’s viability over that period. However, the life of the Company is not intended to be limited to that or any other period.
The main risks to the Company’s continuation is a significant fall in markets or a prolonged period of decline due to political uncertainty or other macro factors outside the Company’s control. This could lead to shareholder dissatisfaction through failure to meet the Company’s investment objective, through poor investment performance or the investment policy not being appropriate in prevailing market conditions, any of which could affect the demand for and liquidity of the Company’s shares. Accordingly, market and political/fiscal risks, are deemed by the Board to be the key principal risks of the Company and are given particular consideration in the continuing assessment of its long term viability.
The Company’s investment objective and policy are kept under review. The continued relevance of the investment objective and policy are underlined by the Company’s annual continuation vote. Last year over 99% of the votes registered were in favour of continuation and the Board has no reason to believe that the continuation resolution will not be passed at the forthcoming and subsequent AGMs.
Performance derives from returns for risk taken. The Portfolio Managers’ Report on pages 9 and 10 sets out the current investment strategy of the portfolio managers. Whilst there has been an increase in the credit quality of the portfolio during the year, it remains the case that the portfolio continues to contain a high level of relatively high-yielding non-investment grade bonds and these carry a higher risk of default than investment grade paper. This is discussed further in note 19 to the financial statements. The Board has adopted investment limits within which the portfolio managers operate. The Directors and the portfolio managers constantly monitor the portfolio, its ratings and default risk. A bond rating analysis of the portfolio at the year end is shown on page 23. Exposure is weighted towards higher quality issuers where the risk of default is considered to be more remote.
Performance has been strong for many years through different, and difficult, market cycles – as shown by the ten year total return performance graph on page 12. The investment policy has been stress tested by market events in recent times by both global and domestic events such as the pandemic and the conflicts in
Performance and demand for the Company’s shares are not things that can be forecast. Indeed, whilst recent geopolitical and macroeconomic events may impact the Company, there are no current indications that performance or demand for the Company’s shares may be permanently affected by such events over the next five years so as to affect the Company’s viability.
The Company is permitted to borrow up to a maximum of 30% of the Company’s total assets and currently has no long-term debt obligations. Current borrowing is in the form of repo financing spread over a number of good quality counterparties whose credit-standing is reviewed periodically by the Manager. There is a maximum limit allowed with any one counterparty, and the repo entered into must have a maturity tenor of three months or less. Debt levels have been stress tested with more than adequate debt cover in place.
As described in note 19.2 to the financial statements on pages 67 to 68 liquidity risk is not viewed by the Directors as a significant risk. The majority of the Company’s assets are readily realisable and amount to many times the value of its short term liabilities and annual operating costs.
Based on the above analysis, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of their assessment and the Directors consider that the Company’s investment strategy will continue to serve shareholders well over the longer term.
Investment Management
As noted earlier, the Manager provides investment management and certain administrative services to the Company. The agreement is terminable by either party giving no less than three months’ prior written notice and subject to earlier termination without compensation in the event of a material breach of the agreement or the insolvency of either party. The management fee is payable quarterly in arrears and is equal to 0.1625% of the value of the Company’s total assets under management less current liabilities at the end of the relevant quarter. In addition, the Manager was paid a fee of £103,000 during the year for marketing services (2024: £103,000).
The portfolio managers responsible for the day-to-day management of the portfolio are
The Manager’s Responsibilities
The Directors have delegated to the Manager the responsibility for the investment management activities of the Company, for seeking and evaluating investment opportunities and for analysing the accounts of investee companies. The Manager has full discretion to manage the assets of the Company in accordance with the Company’s stated objectives and policies as determined from time to time by the Board and approved by shareholders. Within the guidelines specified by the Board, the Manager has discretion to make purchases and sales, make and withdraw cash deposits, enter into underwriting commitments and exercise all rights over the investment portfolio. The Manager also advises on currency exposures and borrowings.
Assessment of the Manager
The performance of the Manager is reviewed continuously by the Board and the ongoing requirements of the Company and services received are assessed annually with reference to key performance indicators as set out on page 12.
The Management Engagement Committee is responsible for reviewing the Manager. Based on its recent review of activities, the Board believes that the continuing appointment of
Financial Position
The Company’s balance sheet on page 54 shows the assets and liabilities at the year end. The
Company has repo financing agreements in place, with an amount of £38.0 million (2024: £45.1
million) borrowed at year end, representing gross gearing of 9.3% (2024: 13.1%) and net gearing of 2.8% (2024: 9.9%), after taking cash and cash equivalents including margin into account, as at 31
Performance and
The performance and future development of the Company depend on the success of the Company’s investment strategy. A review of the Company’s performance, market background, investment activity and strategy during the year, together with the investment outlook are provided in the Chairman’s Statement and Portfolio Managers’ Report on pages 6 to 10.
Annual Continuation Vote
The Articles of
The Company has been notified of the following holdings of 3% and over of the Company’s ordinary share capital carrying unrestricted voting rights:
As at As at As at
28 February 31 December 31 December
2026 2025 2024
Fund Manager/Registered Holding % Holding % Holding %
Holder
Hargreaves Lansdown, 49,293,992 19.19 44,928,699 18.96 38,088,524 18.83
stockbrokers (EO)
Interactive Investor (EO) 36,794,502 14.33 34,140,629 14.41 25,386,222 12.55
AJ Bell, stockbrokers (EO) 24,666,816 9.60 20,817,911 8.79 14,946,175 7.39
Invesco* 17,540,155 6.83 17,540,155 7.40 17,540,155 8.67
Redmayne Bentley, 15,540,868 6.05 14,683,425 6.20 10,622,010 5.25
stockbrokers
Charles Stanley 10,891,138 4.24 10,515,903 4.44 10,063,995 4.98
HSDL, stockbrokers (EO) 8,803,620 3.43 8,325,810 3.51 6,976,268 3.45
EO: Execution only.
* Held across a number of Invesco Funds. Invesco is not considered a related party. For further information see Related Party Transactions and Transactions with Manager note 23 on page 72.
Board’s Duty to Promote the Success of the Company
The Directors have a fiduciary duty to act, in good faith, for the benefit of shareholders taken as a
whole. In the
In fulfilling these duties, and in accordance with the Company’s nature as an investment company with no employees and no customers in the traditional sense, the Board’s principal concern has been, and continues to be, the interests of the Company’s shareholders taken as a whole. Notwithstanding this, the Board has a responsible governance culture and also has due regard for broader matters so far as they apply. In particular, the Board engages with the
The Company formally communicates with its shareholders at least three times a year providing information about shareholder meetings, dividend payments and half-yearly and annual financial results. As set out on page 34, the Company uses a number of methods to engage with its shareholders via regular communications such as the monthly factsheet and through investor events and other media channels. The annual general meeting of the Company provides shareholders with the opportunity to attend and meet with the Directors and the Manager. The Company’s AGM will be held on
Board Diversity
The Company’s policy on diversity is set out on page 39, under the section ‘Nomination and Remuneration Committee’. The Board considers diversity, including the balance of skills, knowledge, experience, gender and ethnicity amongst other factors when reviewing its composition and appointing new directors. The Board continues to recognise the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow it to fulfil its obligations.
In view of its relatively small size, the Board will continue to ensure that all appointments are made on the basis of merit against the specification prepared for each appointment. In doing so, the Board will seek to meet the targets set out in the FCA’s
Board Gender as at
Number of Number of Number in Percentage of
Percentage of
Board senior executive executive
the Board positions
members management A management A
on the Board
Men 2 40% 1 n/a n/a
Women 3 60% B 1 C,D n/a n/a
A the Company does not disclose the number of directors in executive management as this is not applicable for an investment trust.
B meets the target of 40% as set out in UKLR 6.6.6R (9)(a)(i).
C the positions of Senior Independent Director and Chair of the
D meets the target of 1 as set out in UKLR 6.6.6R (9)(a)(ii).
Board Ethnic Background as at
Number of Number of Number in Percentage of
Percentage
Board of senior executive executive
positions
members the Board management management
on the Board A A
White British
or other White
4 80% 2 n/a n/a
(including
minority-white
groups)
Minority 1 B 20% 0 n/a n/a
ethnic
A the Company does not disclose the number of directors in executive management as this is not applicable for an investment trust.
B meets the target of 1 as set out in UKLR 6.6.6R (9)(a)(iii).
There have been no changes since the year end that have affected the Company’s ability to meet the targets set in UKLR 6.6.6R (9)(a).
Modern Slavery Act 2015
The Company is an investment vehicle and does not provide goods or services in the normal course of business, or have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015.
Sustainability-related Matters
In relation to the portfolio, the Company has delegated the management of the Company’s investments to the Manager. The Manager’s approach to investment stewardship and to the use of sustainability-related information is outlined in its
The Manager forms part of the Invesco Ltd group, which is a signatory to, the United Nations Principles for
The Manager’s investment team may take sustainability-related information (including selected environmental, social and governance data) into account as one input among many when evaluating investments, where relevant to the investment thesis and the Company’s objectives. Third-party data and ratings may inform analysis but do not determine investment decisions. Investment professionals are supported by the Manager’s investment stewardship function, which provides research and engagement support.
Regarding stewardship, the Board considers that the Company has a responsibility as an investor towards ensuring that appropriate standards of corporate governance are maintained in the companies in which it invests. To achieve this, the Board does not seek to intervene in daily management decisions, but aims to support high standards of governance and, where necessary, will take the initiative to ensure those standards are met.
The Company’s stewardship functions have been delegated to the Manager. The Manager has adopted a clear and considered policy towards its responsibility as an investor on behalf of the Company. As part of this policy, the Manager takes steps to satisfy itself about the extent to which the companies in which it invests look after shareholders’ value and comply with local recommendations and practices, such as the
A copy of the current Manager’s
How the investment team incorporates sustainable investing in its process
The Invesco Fixed Income team (‘IFI’), of which the portfolio managers are a part, has managed ESG-aware portfolios for more than two decades and their approach has consistently evolved. Exclusion based screening once dominated the ESG landscape, but has since been augmented by positive selection-based criteria for holdings as well as embedding decarbonisation objectives. This reflects how industry dynamics have changed and how the appetite for more sophisticated and targeted sustainability-linked outcomes has grown among clients.
IFI believes that evaluating ESG criteria leads to better long-term risk-adjusted returns. With this in mind, IFI looks for a combination of materiality, momentum, and engagement.
Materiality means being clear about the ESG considerations that have the potential to most impact an issuer’s ability to meet its debt obligations. IFI integrate these ESG considerations into their fundamental research processes by providing an independent assessment of each investment, complementing third-party ESG ratings and expanding the investable universe to include issuers that lack external coverage. IFI maintain global standards for research and investment decision-making, allowing ESG considerations to be applied across asset classes where appropriate and enhancing comparability across multi-sector fixed income portfolios.
Momentum means using expert analysis to determine which issuers are outpacing their peers in terms of making progress on ESG considerations. IFI believes that a link may exist between positive momentum in ESG characteristics and improving creditworthiness, which is potentially advantageous for fixed income prices and investment returns.
Engagement means encouraging momentum by working with Invesco’s Sustainable Investing Services team and other experts to engage with issuers to provide our views on matters such as strategy, transparency, capital allocation and ESG concerns. IFI view active ownership as a vital element of our fiduciary responsibilities to clients.
The fixed income landscape is broad and varied. It encompasses government securities issued by countries, securitised debt, loans undertaken by private companies, and many other forms of asset. Geographical, structural, and regulatory differences mean that data availability, ESG factors, and management engagement levels are highly diverse.
As a result, while the underlying approach taken by IFI to ESG is consistent, the path to arriving at an ESG-based assessment differs to account for the constraints and challenges posed by a particular asset class. It is important to highlight that integration is an ongoing strategic effort and these approaches will continue to evolve.
ESG overview
Although ESG integration forms part of the investment process, the Company is not managed to sustainable ESG objectives, constraints or outcomes.
The portfolio managers’ approach is centred on macroeconomic and corporate credit research and focuses on fundamental valuation to support the active management of portfolios. The Manager has always incorporated ESG analysis into its investment research because it believes that non-financial risks can have a material impact on credit risk and by identifying those risks, it can improve its credit risk assessment and produce better risk-adjusted returns in portfolios.
The core objective of the Manager’s ESG approach is to assess issuers’ performance across environmental, social and governance factors and to determine where those risks are potentially material or mispriced.
The fixed income universe is broad and varied. Geographical, structural and regulatory differences mean that data availability, ESG awareness and management engagement levels can vary greatly. As a result, while the investment team’s commitment to ESG risk assessment is constant, the path to arriving at an ESG-based assessment necessarily differs to account for the constraints and challenges of different circumstances.
Common Principles for
The Invesco team’s approach to ESG is based on a belief that incorporating material environmental, social and governance risks into a broader risk assessment, leads to better long-term risk-adjusted returns. In order to do this, the team considers materiality and momentum.
ESG analysis for corporate bonds
IFI’s credit analysts are tasked with understanding the ESG drivers for the companies they cover and conducting ESG-based analysis along with their fundamental financial analysis. This applies across corporate credit research teams in
IFI’s corporate research follows the same set of standards globally, encompassing investment grade and high yield issuers, whether an issuer is based in a developed or an emerging market country. This approach is also applied to short-dated securities held in IFI-managed global liquidity products. Analysts are primarily focused on identifying risk factors that could be financially material, and these may be common to all industry participants or unique to a specific issuer.
The starting point for ESG assessment is at the industry level. Global sector teams set out common ESG risk factors for each industry, and individual analysts work within this framework on each issuer in their coverage area, while also seeking to identify idiosyncratic ESG risks to which individual issuers might be exposed.
IFI also use third-party research and data to provide broad market context and transparency. These external sources supplement our proprietary research and assist analysts in identifying areas or issues of interest where engagement with company management is warranted. We engage directly with companies to better understand their positions and their future intentions. IFI and industry participants’ increased focus and engagement on ESG factors has resulted in material improvements in ESG-related issuer reporting and heightened management focus on governance practices.
IFI has developed its own ESG methodology and grading system to provide clear and consistent outputs for portfolio managers. Each issuer receives a proprietary overall ESG grade, accompanied by sub-grades covering the three pillars of E,
IFI is committed to continuous innovation and improvement in its ESG corporate research process. For example, with the increased issuance of green bonds and growing client interest, we have recently developed specialised templates to aid in analysing such bonds.
Within the investment team, ESG views are formed by credit analysts and feed into their fundamental investment recommendations. Analysts work with their colleagues at a sector level across our global platform to identify key ESG metrics per sector to consider when analysing individual companies. This all forms part of the toolkit which portfolio managers have at their disposal when constructing portfolios.
IFI believes that evaluating ESG criteria leads to better long-term risk adjusted returns. IFI follows an investment approach that integrates ESG into the fundamental research carried out by Invesco’s credit research analysts. Integrating ESG criteria into research provides an independent assessment of each investment’s suitability for responsible investment strategies to complement ratings from third party providers or indeed, expand the investable universe for issuers not yet covered by external providers.
External ESG resources
Invesco has a range of third-party research and data available as an input to support the analysts in their ESG risk assessment.
Examples:
• MSCI ESG Scores, industry percentiles and weights
• CDP carbon and scoring data
• Sustainalytics Risk scores and category summary data
• Global Compact compliance or violation fields (MSCI and Sustainalytics)
• ISS Climate Solutions – Scope 1 to 3 emissions and science-based emission targets
• Controversies – MSCI & Sustainalytics data feeds
Invesco’s Stewardship resources
Invesco’s Global Sustainable Investing Services team has resources in research, portfolio analytics and management engagement.
Furthermore, Invesco’s own proprietary developed tool – ESGCentral – brings together multiple external and internal datasets and maps them to portfolios and benchmarks to provide portfolio and issuer-level sustainability analytics and screening capabilities for strategies and clients that request such analysis. Availability varies by dataset, license, and mandate.
In addition to portfolio views, ESGCentral can surface issuer-level analytics linked to portfolio holdings (and, where relevant, benchmark constituents). These issuer views provide snapshots of selected indicators, disclosures, and controversies (with source and date), peer comparisons and point-in-time vs historical perspectives. Issuer-level analytics are analytical reference views to support research and stewardship workflows; they do not impose firmwide criteria or generate compliance determinations.
While disclosure levels vary greatly by the issuer due to sector, size and regional factors, these data analytics can provide a comprehensive picture of each issuer’s performance.
The importance of fundamental ESG analysis
At the issuer level, data availability, disclosure rules and management engagement levels can vary across each global sector. Raw ESG data can sometimes present a partial or even misleading picture. When placed alongside the fact that issuers themselves have unique features in terms of business models, the weighting of ESG factors in each issuer assessment must be interpreted and understood in a broader context.
In our research process, the qualitative judgement of the credit analyst is therefore central to determining whether an ESG factor is evolving in a manner that may compromise an issuer’s financial indicators and ultimately, its creditworthiness.
ESG in credit selection
Once a credit analyst has undertaken their credit assessment, including that of the materiality and momentum of ESG risks, then credit research is presented to portfolio managers.
The portfolio managers need to assess the type and materiality of any ESG risk and set that against the potential investment return in the context of the Company’s objectives.
Other than the exclusions related to certain types of munitions, there are no pre-determined rules on how securities are selected in light of any ESG risks. Each investment case is likely to have its own unique set of risks. The investment team’s credit selection emphasises fund manager judgement and each case is considered on its own merits.
Engagement with issuers
Invesco engages directly with companies to better understand their positions and their future intentions and lobby for change where Invesco believe it is necessary. Although engagement as pure debt investors can be challenging, Invesco’s ownership of both equity and debt can often be used to increase our voice as a stakeholder. Engagement is carried out on a case by case basis by relevant analysts and strategically with co-ordination through Invesco’s Sustainable Investing Services Team.
Invesco’s Sustainable Investing Services Team is led by the Global Head of ESG. Reporting to the Global Head of ESG is the Director of
i. Internal assessment and coordination: the Sustainable Investing Services Team consults with the investment teams and reviews the ESG Engagement focus list and decides whether to: (a) gather feedback on a topic and provide that feedback to an issuer; (b) schedule a call with the issuer if it is deemed to be necessary; or (c) engage directly with the issuer and serve as a liaison. Invesco’s Sustainable Investing Services Team will arrange contact between the relevant investment teams and issuers when and if it is deemed necessary. Any ESG engagement meeting is added to a centralised calendar that investment teams can access.
ii. Research and follow up: the Sustainable Investing Services Research team conducts in-depth ESG research in preparation for these meetings and discusses with the relevant investment teams across Invesco to ensure that companies are questioned on the key ESG topics. The Sustainable Investing Services Team produces an Engagement Report for these meetings which is shared via the Bloomberg platform for all relevant investment teams to access. Invesco is also a member of several organisations that facilitate collective dialogue with companies and continues to assess other collective engagements that we would like to work more closely with in the future.
ESG portfolio reviews
Dedicated ESG-focused portfolio reviews are in place to complement the existing risk-return portfolio review process. Invesco’s Global Sustainable Investing Services team leads each review meeting which is attended by fund managers and credit research analysts. Portfolios are reviewed on the basis of a wide range of ESG metrics on an absolute basis and also relative to benchmarks where appropriate.
ESG portfolio monitoring includes measurement, based on Sustainalytics ESG research data, of total portfolio ESG risk and identification of holdings with the highest and lowest ESG risk. As of the end of 2025, holdings with the highest ESG risk were concentrated in the energy sector. The holdings with the lowest ESG risk were spread across several sectors.
Invesco also carry out Carbon Footprint Analysis of the portfolio, in absolute terms and compared to the wider high yield market, using data from ISS Climate Solutions.
Whilst TCFD is currently not applicable to the Company, the Manager has produced a product level report on the Company in accordance with the Financial Conduct Authority’s (‘FCA’) rules and guidance regarding the disclosure of climate-related financial information consistent with TCFD Recommendations and Recommended Disclosures. These disclosures are intended to help meet the information needs of market participants, including institutional clients and consumers of financial products, in relation to the climate-related impact and risks of the Manager’s TCFD in-scope business. The product level report on the Company is available on the Managers’ website at www.invesco.co.uk/bips. Key elements of the product level report include a scenario analysis of how climate change is likely to impact the portfolio valuation under net zero 2050, delayed transition and hothouse scenarios, and a discussion of the most significant drivers of performance under those scenarios.
Invesco’s
In addition the Managers’ Entity Level TCFD Report is available at https://www.invesco.com/content/dam/invesco/emea/en/pdf/IFML_and_IAML_tcfd-entity-level_report.pdf.
The reports noted above are in the process of being updated for the period to
Investments in Order of Valuation
at
Market
Country of Value % of
Issuer/issue Rating(1) Industry Incorporation £’000 Portfolio
Lloyds Financials UK
Banking Group
7.875% FRN Baa3/BBB–/BBB 7,200 1.7
Perpetual (AT1)
8.5% Cnv FRN Baa3/BBB–/BBB 3,275 0.8
Perpetual (AT1)
8.5% Cnv FRN 27 Baa3/BBB–/BBB 1,478 0.4
Mar 2071 (AT1)
11,953 2.9
Nationwide Financials UK
7.875% FRN Baa3/NR/BBB 4,401 1.1
Perpetual (AT1)
10.25%
Perpetual NR/NR/NR 3,911 0.9
(CCDS)
7.5% Cnv FRN Baa3/BB+/BBB 3,493 0.8
Perpetual (AT1)
11,805 2.8
Barclays Financials UK
9.25% Cnv FRN Ba1/BB+/BB 5,334 1.3
Perpetual (AT1)
FRN 14 Nov 2032 Baa1/BBB/BBB 3,825 0.9
8.5% FRN Ba1/BB+/BB 965 0.2
Perpetual (AT1)
8.875% Cnv FRN Ba1/BB+/BB 767 0.2
Perpetual (AT1)
2.6
10,891
Aviva Financials UK
6.875% Cnv FRN Baa2/NR/BBB 5,782 1.4
Perpetual
7.75% FRN Baa2/NR/BBB 4,739 1.1
Perpetual
2.5
10,521
Co-Operative Financials UK
Bank
11.75% 22 May Baa2/NR/BBB 4,129 1.0
2034
9.5% Cnv FRN 24 Baa2/NR/BBB 1,647 0.4
May 2028 (SNR)
6% FRN 06 Apr Baa2/NR/BBB 1,421 0.3
2027 (SNR)
7.5% FRN 08 Jul NR/BB–/BB 1,008 0.3
2026
8,205 2.0
Eléctricité De Utilities France
France
7.375% FRN Ba2/B+/BB 2,976 0.7
Perpetual
5.875% Ba2/B+/BB 1,804 0.4
Perpetual
6% Perpetual Baa1/BBB/BBB 1,503 0.4
7.5% FRN Ba2/B+/BB 951 0.2
Perpetual
5.625% FRN Ba2/B+/BB 908 0.2
Perpetual
8,142 1.9
Thames Water Utilities UK
Finance
7.75% 30 Apr Caa3/CCC/CCC 4,869 1.1
2044
8.25% 25 Apr Caa3/CCC/CCC 2,024 0.5
2040 (SNR)
9.75% 10 Oct B2/NR/B 1,145 0.3
2027
0% 22 Mar 2027 NR/NR/NR 63 0.0
4.625% 19 May NR/NR/NR 20 0.0
2026 (SNR)
8,121 1.9
BNP Paribas Financials France
9.25% FRN Ba1/BBB–/BBB 6,503 1.6
Perpetual (AT1)
FRN Perpetual Ba1/BBB–/BBB 1,358 0.3
(AT1)
7,861 1.9
OSB Financials UK
7.75% FRN Ba2/NR/BB 3,599 0.8
Perpetual (AT1)
8.875% Cnv 16 Baa2/NR/BBB 1,952 0.5
Jan 2030 (SNR)
Cnv FRN 27 Jul Baa3/NR/BBB 1,653 0.4
2033
7,204 1.7
Engineering
Ingegneria Technology Italy
Informatica
11.125% 15 May B3/B–/B 4,150 1.0
2028
FRN Perpetual B3/B–/B 1,951 0.5
8.625% 15 Feb B3/B–/B 934 0.2
2030 (SNR)
7,035 1.7
Market Bidco Consumer Goods UK
Finco
8.75% 31 Jan B1/B+/B 3,943 1.0
2031 (SNR)
6.75% 31 Jan B1/B+/B 3,032 0.7
2031 (SNR)
6,975 1.7
Ineos Quattro Basic Materials UK
7.25% 31 Mar B2/BB–/BB 2,999 0.7
2031 (SNR)
6.75% 15 Apr B3/BB–/BB 1,602 0.4
2030 (SNR)
8.5% 15 Mar B3/BB–/BB 1,038 0.2
2029 (SNR)
7.5% 15 Apr B2/BB–/BB 754 0.2
2029 (SNR)
9.625% 15 Mar B3/BB–/BB 309 0.1
2029 (SNR)
6,702 1.6
Jerrold Finco Financials UK
7.875% 15 Apr NR/BB/BB 3,551 0.9
2030
7.5% 15 Jun NR/BB/BB 3,067 0.7
2031 (SNR)
6,618 1.6
Techem Consumer Services Germany
FRN 15 Jul 2032 B2/B+/B 6,592 1.6
(SNR)
Zopa Group Financials UK
14.4% FRN 25 NR/NR/NR 4,459 1.1
Nov 2033
12.875% FRN NR/NR/NR 2,120 0.5
Perpetual (AT1)
6,579 1.6
UK Treasury Government Bonds UK
Bill
0.5% 22 Oct Aa3/AA/AA 3,129 0.7
2061
3.75% 22 Oct Aa3/AA/AA 2,356 0.6
2053
4% 22 Oct 2063 Aa3/AA/AA 772 0.2
6,257 1.5
Natwest Financials UK
7.5% Cnv FRN Baa3/NR/BBB 3,665 0.9
Perpetual (AT1)
7.625% FRN Baa3/NR/BBB 1,475 0.4
Perpetual (AT1)
Cnv FRN 6 Jun Baa1/BBB+/BBB 947 0.2
2033
6,087 1.5
Saffron
Building Financials UK
Society
Cnv FRN 19 Oct NR/NR/NR 5,996 1.4
2034
Volkswagen
Financial Consumer Goods Netherlands
Services
5.994% FRN Baa3/BBB–/BBB 5,867 1.4
Perpetual
Atom Financials UK
Cnv FRN 08 Jan NR/NR/NR 5,663 1.4
2035
Vodafone Group Basic Materials UK
8% FRN Ba1/BB+/BB 5,450 1.3
Perpetual (SUB)
888.com Consumer Services Gibraltar
10.75% 15 May B2/B–/B 3,772 0.9
2030 (SNR)
8% 30 Sep 2031 B2/B–/B 1,560 0.4
(SNR)
5,332 1.3
Virgin Media Telecommunications Ireland
O2
7.875% 15 Mar NR/NR/NR 5,159 1.2
2032
Newcastle
Building Financials UK
Society
12.25% Cnv FRN NR/NR/NR 5,004 1.2
Perpetual
CPUK Finance Consumer Services Jersey
7.875% 28 Aug NR/B/B 2,197 0.5
2055
6.875% 28 Aug NR/B/B 1,472 0.4
2032
4.5% 28 Aug NR/B/B 1,176 0.3
2027
4,845 1.2
UTB Partners Financials UK
13% FRN NR/NR/NR 4,472 1.1
Perpetual (AT1)
Kane Bidco Financials Jersey
7.75% 15 Jul B1/B+/B 2,852 0.7
2031 (SNR)
FRN 15 Jul 2032 B1/B+/B 1,547 0.4
(SNR)
4,399 1.1
Legal & Financials UK
General
5.625% FRN Baa2/BBB/BBB 4,379 1.1
Perpetual
DNO ASA Oil and Gas Norway
9.25% 04 Jun NR/NR/NR 2,510 0.6
2029 (SNR)
8.5% 27 Mar NR/NR/NR 1,684 0.4
2030 (SNR)
4,194 1.0
Atos Technology France
5% Var 18 Dec NR/CCC/CCC 2,153 0.5
2030 (SNR)
9% Var 18 Dec NR/B+/B 1,996 0.5
2029
4,149 1.0
Waga Bond Consumer Services Jersey
8.5% 15 Jun B2/B/B 4,111 1.0
2030 (SNR)
Punch Finance Consumer Services UK
7.8755% 30 Dec B3/NR/B 4,077 1.0
2030 (SNR)
Ford Motor Consumer Goods USA
Credit
6.86% 05 Jun Ba1/BBB–/BBB 4,063 1.0
2026
Lion/Polaris Consumer Goods Luxembourg
FRN 01 July B2/B/B 4,026 1.0
2029 (SNR)
Sainsbury’s Financials UK
Bank
10.5% FRN 12 Ba1/NR/BB 4,016 1.0
Mar 2033
Deutsche Bank Financials Germany
FRN Perpetual Ba2/BB/BB 3,446 0.8
(AT1)
8.125% Cnv FRN Ba2/BB/BB 568 0.1
Perpetual (AT1)
4,014 0.9
Bertrand Consumer Goods France
Franchise
FRN Perpetual B3/B–/B 3,980 0.9
(SNR)
Fiber Bidco Industrials Italy
FRN 15 Jan 2030 B3/B–/B 2,134 0.5
(SNR)
5.125% 30 Jan Ba1/BB+/BB 1,773 0.4
2032 (SNR)
3,907 0.9
Rino Mastrotto Consumer Goods Italy
FRN 31 Jul 2031 B2/B/B 3,797 0.9
(SNR)
RL Finance Financials UK
10.125% Cnv FRN Baa3/BBB/BBB 3,741 0.9
Perpetual
Haleon Health Care UK
9.5% Preference NR/NR/NR 3,654 0.9
Bayer Health Care Germany
7% FRN Ba1/BB+/BB 1,917 0.5
Perpetual (SUB)
5.5% FRN Baa3/BB+/BB 1,713 0.4
Perpetual (SUB)
3,630 0.9
ING Financials Netherlands
6.25% Cnv FRN Baa2/BBB+/BBB 3,604 0.9
20 May 2033
IHO Consumer Goods Germany
Verwaltungs
6.75% 15 Nov Ba2/BB–/BB 1,929 0.5
2029 (SNR)
8% 15 Nov 2032 Ba2/BB–/BB 1,604 0.4
(SNR)
3,533 0.9
ASG Finance Consumer Services Ireland
Design
9.75% 15 May NR/BB–/BB 3,461 0.8
2029 (SNR)
IM Group Consumer Services France
8% 01 Mar 2028 Caa1/CCC+/CCC 3,430 0.8
(SNR)
Pension Financials UK
Insurance
7.375% FRN NR/NR/BBB 3,269 0.8
Perpetual
Telefonica Telecommunications Netherlands
FRN Perpetual Ba2/BB/BB 2,174 0.5
6.75% FRN Ba2/BB/BB 868 0.2
Perpetual (SUB)
3,042 0.7
JP Morgan Financials USA
Chase
FRN Perpetual Baa1/BBB/BBB 3,026 0.7
(SNR) (AT1)
Maison Industrials UK
6% 31 Oct 2027 NR/B/B 2,974 0.7
(SNR)
Grupo Antolin Consumer Goods Spain
10.375% 30 Jan B3/B–/B 2,952 0.7
2030 (SNR)
Teva
Pharmaceutical Health Care Netherlands
Finance
6.75% 01 Mar Ba1/BB+/BB 2,315 0.6
2028 (SNR)
5.125% 09 May Ba1/BB+/BB 585 0.1
2029 (SNR)
2,900 0.7
Pinewood Consumer Services UK
Finance
6% 27 Mar 2030 NR/BB+/BB 2,855 0.7
(SNR)
BT Telecommunications UK
8.375% FRN Ba1/BB+/BB 2,672 0.6
Perpetual
ZF Group Consumer Goods Netherlands
7% 12 Jun 2030 Ba2/BB–/BB 1,836 0.4
(SNR)
6.125% 13 Mar Ba2/BB–/BB 452 0.1
2029 (SNR)
7.125% 14 Apr Ba2/BB–/BB 375 0.1
2030 (SNR)
2,663 0.6
Codere New Consumer Services Luxembourg
Topco
11% PIK 31 Dec NR/NR/NR 1,707 0.4
2028
A1 Shares NR/NR/NR 639 0.1
A2 Shares NR/NR/NR 302 0.1
2,648 0.6
Allwyn Consumer Services UK
Entertainment
7.875% 30 Apr NR/BB/BB 1,780 0.4
2029 (SNR)
7.25% 30 Apr NR/BB/BB 830 0.2
2030
2,610 0.6
Flora Food Consumer Goods Netherlands
Management
6.875% 02 Jul B2/B/B 2,606 0.6
2029 (SNR)
RLGH Finance Financials Bermuda
Bermuda
8.25% 17 Jul Baa2/NR/BBB 2,604 0.6
2031
CaixaBank Financials Spain
8.25% Cnv FRN NR/BB+/BB 2,526 0.6
Perpetual (AT1)
Dana Financing Consumer Goods Luxembourg
Luxembourg
8.5% 15 Jul B1/BB–/BB 2,508 0.6
2031 (SNR)
Société Financials France
Générale
7.875% Cnv FRN Ba2/BB/BB 1,509 0.4
Perpetual (AT1)
FRN Perpetual Ba2/BB/BB 890 0.2
(AT1)
2,399 0.6
Voyager Parent Consumer Services USA
9.25% 01 Jul B1/B/B 2,367 0.6
2032 (SNR)
Boots Group Health Care USA
Finco
7.375% 31 Aug B1/B+/B 1,447 0.4
2032 (SNR)
5.375% 31 Aug B1/B+/B 901 0.2
2032 (SNR)
2,348 0.6
Petra Diamonds Basic Materials UK
10.5% PIK 08 NR/B–/B 2,289 0.6
Mar 2026
Common Stock NR/NR/NR 55 0.0
2,344 0.6
HSBC Financials UK
FRN 13 Nov 2034 Baa1/BBB+/BBB 1,885 0.5
(SUB)
5.25% 14 Mar Baa1/BBB+/BBB 444 0.1
2044
2,329 0.6
Eutelsat Telecommunications France
9.75% 13 Apr Ba3/NR/BB 2,304 0.6
2029 (SNR)
DeepOcean Oil and Gas Jersey
6% 08 Apr 2031 B1/BB–/BB 2,234 0.5
(SNR)
New Frigoglass Industrials Netherlands
Group
11% PIK 27 Mar NR/NR/NR 1,145 0.3
2026
11% 20 Apr 2028 NR/NR/NR 877 0.2
0% 27 Mar 2028 NR/NR/NR 187 0.0
Common Stock NR/NR/NR 5 0.0
2,214 0.5
Heathrow Financials UK
Finance
6.625% 01 Mar B1/NR/B 1,267 0.3
2031 (SNR)
4.125% 01 Sep B1/NR/B 938 0.2
2029 (SNR)
2,205 0.5
Aston Martin Consumer Goods Jersey
10.375% 31 Mar Caa1/CCC+/CCC 1,821 0.4
2029 (SNR)
10% 31 Mar 2029 Caa1/CCC+/CCC 346 0.1
(SNR)
2,167 0.5
Beazley Financials Ireland
5.875% 04 Nov NR/NR/BBB 2,147 0.5
2026
Benteler Consumer Goods Austria
International
7.25% 15 Jun Ba3/BB–/BB 2,089 0.5
2031 (SNR)
Lancashire Financials Bermuda
5.625% 18 Sep Baa3/BBB–/BBB 2,087 0.5
2041 (FRN)
MAHLE Consumer Goods Germany
7.125% 15 Jul Ba2/BB–/BB 1,607 0.4
2032 (SNR)
6.5% 02 May Ba2/BB–/BB 453 0.1
2031 (SNR)
2,060 0.5
BP Capital Financials UK
4.25% FRN A3/BBB/A 2,037 0.5
Perpetual
Galaxy Bidco Financials UK
8.125% 19 Dec B2/B/B 2,036 0.5
2029 (SNR)
Forvia Consumer Goods France
8% 15 Jun 2030 B1/BB–/BB 1,990 0.5
(SNR)
ContourGlobal Utilities Luxembourg
6.75% 28 Feb NR/BB/BB 1,946 0.5
2030 (SNR)
Currenta Group Basic Materials Luxembourg
5.5% 15 May Ba3/BB–/BB 1,937 0.5
2030 (SNR)
Albion Finance Consumer Services Luxembourg
7% 21 May 2030 B1/BB–/BB 980 0.2
(SNR)
5.375% 21 May B1/BB–/BB 898 0.2
2030 (SNR)
1,878 0.4
Nexture Consumer Goods Italy
FRN 30 Jul 2032 B2/B/B 1,872 0.4
(SNR)
Marb Bondco Consumer Services UK
3.95% 29 Jan NR/BB+/BB 1,804 0.4
2031 (SNR)
Petroleos Oil and Gas Mexico
Mexicanos
9.5% 15 Sep B1/BBB/BB 788 0.2
2027 (SNR)
6.95% 28 Jan B1/BBB/BB 548 0.1
2060 (SNR)
6.75% 21 Sep B1/BBB/BB 428 0.1
2047 (SNR)
1,764 0.4
TGS ASA Oil and Gas Norway
8.5% 15 Jan Ba3/BB–/BB 1,738 0.4
2030 (SNR)
AA Bond Co Consumer Services Jersey
7.375% 31 Jul NR/BBB/BBB 1,353 0.3
2050 (SNR)
8.45% 31 Jul NR/BBB/BBB 366 0.1
2050 (SNR)
1,719 0.4
Enel Utilities Netherlands
7.75% 14 Oct Baa1/BBB/BBB 1,716 0.4
2052 (SNR)
Monitchem Basic Materials Luxembourg
8.75% 01 May B3/B/B 1,661 0.4
2028 (SNR)
Stora Enso Industrials Finland
7.25% 15 Apr Baa3/NR/BBB 1,645 0.4
2036
Intesa Financials Italy
6.375% Cnv FRN Ba2/BB/BB 1,642 0.4
Perpetual (AT1)
Telecom Italia Telecommunications Italy
7.875% 31 Jul Ba2/BB/BB 1,053 0.3
2028 (SNR)
7.721% 04 Jun Ba2/BB/BB 537 0.1
2038 (SNR)
1,590 0.4
Viridien Oil and Gas France
10% 15 Oct 2030 B2/B/B 1,567 0.4
(SNR)
Genesis Energy Oil and Gas USA
8.875% 15 Apr B3/B/B 1,563 0.4
2030 (SNR)
Gatwick Financials UK
Airport Finance
6% 21 Nov 2030 Ba2/NR/BB 1,560 0.4
(SNR)
Morgan Stanley Financials USA
Depositary Baa3/BBB–/BBB 1,551 0.4
Shares (AT1)
Quick Top Technology Sweden
FRN 21 Mar 2030 B2/B/B 1,518 0.4
(SNR)
Saturn Financials UK
Holdings
9% FRN 26 Feb NR/NR/NR 1,511 0.4
2036
Preem Oil and Gas Sweden
12% 30 Jun 2027 B2/BB–/B 1,444 0.4
(SNR)
Ecclesiastical
Insurance Financials UK
Office
8.625% NR/NR/NR 1,440 0.3
Preference
Altice Telecommunications France
5.625% 15 Jun Caa1/CCC+/CCC 958 0.2
2032 (SNR)
7.25% 01 Nov Caa1/CCC+/CCC 333 0.1
2029 (SNR)
Common Stock NR/NR/NR 135 0.0
1,426 0.3
Lottomatica Consumer Services Italy
4.875% 31 Jan Ba2/BB/BB 1,404 0.3
2031 (SNR)
FR Bondco Consumer Goods France
6.875% 31 Oct Caa1/CCC+/CCC 1,394 0.3
2032 (SNR)
Vattenfall Utilities Sweden
6.875% FRN Baa2/BB+/BB 1,375 0.3
Perpetual (SUB)
Coventry
Building Financials UK
Society
8.75% Cnv FRN Ba1/NR/BB 1,370 0.3
Perpetual (AT1)
GTCR Technology Netherlands
8.5% 15 Jan Ba3/BB/BB 1,364 0.3
2031 (SNR)
Valeo Consumer Goods France
5.125% 20 May Ba1/BB/BB 1,348 0.3
2031 (SNR)
Virgin Money Financials UK
Cnv FRN 23 Aug A3/BBB+/A 1,332 0.3
2029 (SNR)
Mobico Group Consumer Services UK
4.875% 26 Sep B2/NR/B 690 0.2
2031 (SNR)
FRN Perpetual Caa1/NR/CCC 626 0.1
1,316 0.3
OEG Finance Oil and Gas UK
7.25% 27 Sep B1/NR/B 1,307 0.3
2029 (SNR)
CIRSA Finance Consumer Services Luxembourg
7.875% 31 Jul B1/NR/B 1,282 0.3
2028 (SNR)
John Lewis Consumer Services UK
4.25% 18 Dec NR/NR/NR 1,272 0.3
2034 (SNR)
Aegon Financials Bermuda
5.625% FRN Baa3/BB+/BB 1,256 0.3
Perpetual
Alexandrite
Lake Lux Financials Luxembourg
Holdings
6.75% 30 Jul NR/B+/B 1,254 0.3
2030 (SNR)
Dynamo Consumer Goods Germany
6.25% 15 Oct B2/B/B 1,209 0.3
2031 (SNR)
Quilter Financials UK
8.625% FRN 18 NR/NR/BBB 1,116 0.3
Apr 2033
Centrica Utilities UK
7% 19 Sep 2033 Baa2/BBB/BBB 1,108 0.3
(SNR)
Commerzbank Financials Germany
7.5% FRN Ba1/BB/BB 1,093 0.3
Perpetual (AT1)
Bank Of Financials Ireland
Ireland
7.594% FRN 06 Baa1/BBB/BBB 1,046 0.2
Dec 2032
FiberCop Technology Italy
7.721% 04 Jun Ba1/BB+/BB 1,004 0.2
2038 (SNR)
Hammerson Financials UK
5.875% 08 Oct Baa2/NR/BBB 1,000 0.2
2036
Alpha Services Consumer Goods Greece
& Holdings
11.875% Cnv FRN Ba3/NR/BB 970 0.2
Perpetual (AT1)
Castello BC Consumer Services Italy
Bidco
FRN 14 Nov 2031 B2/B/B 879 0.2
(SNR)
Chesnara Financials UK
8.5% FRN NR/NR/BBB 867 0.2
Perpetual
Germany
(Federal Government Bonds Germany
Republic Of)
2.5% 15 Feb NR/AAA/AAA 851 0.2
2035
AXA Financials France
6.379% FRN A2/BBB+/BBB 850 0.2
Perpetual
B&M Consumer Services Luxembourg
4% 15 Nov 2028 Ba1/BB+/BB 833 0.2
(SNR)
Bausch & Lomb Consumer Services USA
FRN 15 Jan 2031 B1/NR/B 813 0.2
(SNR)
National Bank Financials Greece
Of Greece
Cnv FRN 28 Jun Ba1/NR/BB 777 0.2
2035
CCO Holdings Telecommunications USA
7.375% 01 Mar B1/BB–/BB 759 0.2
2031 (SNR)
US Treasury Government Bonds USA
Note
3.875% 15 Aug Aa1/AA+/AA 739 0.2
2033
Zurich Finance Financials Ireland
5.125% FRN 23 A1/A+/A 710 0.2
Nov 2052
CNP Assurances Financials France
4.875% FRN Baa2/BBB/BBB 693 0.2
Perpetual
Phoenix Financials UK
FRN Perpetual NR/NR/BBB 648 0.2
La Financière Consumer Services France
ATALIAN
8.5% PIK 30 Jun Caa3/CCC+/CCC 646 0.2
2028
PGH Capital Financials UK
5.375% 06 Jul NR/NR/BBB 624 0.1
2027
Cerved Consumer Services Italy
FRN 15 Feb 2029 B3/B/B 614 0.1
(SNR)
Nickel Basic Materials Australia
Industries
9% 30 Sep 2030 B1/NR/B 611 0.1
(SNR)
UBS Financials Switzerland
9.75% FRN NR/NR/NR 384 0.1
Perpetual (AT1)
4.5% FRN NR/NR/NR 171 0.0
Perpetual (AT1)
555 0.1
Spectrum Telecommunications USA
Management
4.5% 15 Sep Ba1/BBB–/BBB 516 0.1
2042 (SNR)
RAC Bond Consumer Goods UK
FRN 04 Nov 2046 NR/B+/B 496 0.1
(SNR)
Peel Land &
Property Financials UK
Investments
8.375% Var 30 NR/BBB/BBB 494 0.1
Apr 2040
Italy Government Bonds Italy
(Republic Of)
3.65% 01 Aug Baa2/BBB/BBB 443 0.1
2035
Spain (Kingdom Government Bonds Spain
Of)
3.15% 30 Apr NR/A+/A 433 0.1
2035
Kosmos Energy Oil and Gas USA
7.75% 01 May Caa3/CCC+/CCC 338 0.1
2027 (SNR)
Total
investments
held at fair 420,214 100.6
value through
profit or loss
Derivative Instruments – Credit Default Swaps
Market
Coupon Value % of
Company Nominal % Maturity Date £’000 Portfolio
iTraxx Europe
Crossover
Series 42 5% 5 €6,000,000 5.00 20 Dec 2030 (1,857) (0.5)
Year
Series 42 5% 5 €19,000,000 5.00 20 Dec 2030 (586) (0.1)
Year
Total
derivatives held
at fair value
through profit (2,443) (0.6)
or loss
Total
investments and
derivatives held
at fair value
through profit 417,771 100.0
or loss
(1) Moody’s/Standard & Poor’s (S&P)/Equivalent average rating. Please see Credit Ratings Definitions on page 81 for further information.
Abbreviations used in the above valuation:
Cnv: Convertible
FRN: Floating Rate Note
SNR: Senior
SUB: Subordinated Notes
PIK: Payment in Kind
Var: Variable
CCDS: Core Capital Deferred Shares
AT1: Additional Tier 1 bond
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Company’s Annual Financial Report in accordance with applicable laws and regulations.
The Companies (Jersey) Law 1991 requires the Directors to prepare financial statements for each financial period. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Accounting Standards issued by the International Financial Reporting Standards as adopted by the
International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the preparation and presentation of financial statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS Accounting Standards as adopted by the EU.
In preparing these financial statements, the Directors are required to:
– properly select and apply accounting policies and then apply them consistently;
– present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
– provide additional disclosures when compliance with specific requirements in IFRS Accounting Standards are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
– make an assessment of the Company’s ability to continue as a going concern.
The financial statements have been prepared on a going concern basis. When considering this, the Directors took into account the annual shareholders’ continuation vote (as explained in detail on page 56) and the following: the Company’s investment objective and risk management policies, the nature of the portfolio and expenditure and cash flow projections. As a result, they determined that the Company has adequate resources, an appropriate financial structure, readily realisable fixed assets to repay current liabilities and suitable management arrangements in place to continue in operational existence for the foreseeable future.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and which enable them to ensure that the accounts comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Corporate Governance Statement and a Directors’ Report that comply with that law and those regulations.
The Directors of the Company, who are listed on page 33, each confirm to the best of their knowledge that:
– the financial statements, which have been prepared in accordance with applicable accounting standards, give a true and fair view of the financial position and profit or loss of the Company;
– this Annual Financial Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces;
– this Annual Financial Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy; and
– there is no relevant audit information of which the Company’s auditor is unaware, and each Director has taken steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
Signed on behalf of the Board of Directors
Audit & Risk Committee Chair
a.
The directors have delegated responsibility for the maintenance and integrity of the
b. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Statement of Comprehensive Income
Year ended Year ended
31 December 2025 31 December 2024
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Net gains on
investments held at
fair value
through profit or 11 – 3,548 3,548 – 2,093 2,093
loss
Net gains on
derivative
instruments –
forward currency 13 – 3,273 3,273 – 943 943
contracts and CDS
Exchange differences – (2,717) (2,717) – 1,965 1,965
Income 4 30,853 – 30,853 26,370 – 26,370
Investment management 5 (1,230) (1,230) (2,460) (1,090) (1,090) (2,180)
fee
Other expenses 6 (815) (14) (829) (856) (40) (896)
Profit before finance 28,808 2,860 31,668 24,424 3,871 28,295
costs and taxation
Finance costs 7 (534) (534) (1,068) (826) (826) (1,652)
Profit before 28,274 2,326 30,600 23,598 3,045 26,643
taxation
Tax on ordinary 8 (89) – (89) (61) – (61)
activities
Profit after taxation 28,185 2,326 30,511 23,537 3,045 26,582
Earnings per ordinary 9 13.07p 1.08p 14.15p 12.08p 1.57p 13.65p
share
The total columns of this statement represent the Company’s statement of comprehensive income, prepared in accordance with International Financial Reporting Standards (‘IFRS’) Accounting Standards adopted by the
The accompanying accounting policies and notes are an integral part of these financial statements.
Statement of Changes in Equity
Stated Capital Revenue
Capital Reserve Reserve Total
Notes £’000 £’000 £’000 £’000
At 31 December 2023 316,793 (22,018) 9,854 304,629
Profit after taxation – 3,045 23,537 26,582
Dividends paid 10 (514) – (21,660) (22,174)
Net proceeds from issue of new shares 16 36,762 – – 36,762
At 31 December 2024 353,041 (18,973) 11,731 345,799
Profit after taxation – 2,326 28,185 30,511
Dividends paid (642) – (25,491) (26,133)
Net proceeds from issue of new shares 16 60,098 – – 60,098
At 31 December 2025 412,497 (16,647) 14,425 410,275
The accompanying accounting policies and notes are an integral part of these financial statements.
Balance Sheet
At At
31 December 31 December
2025 2024
Notes £’000 £’000
Non-current assets
Investments held at fair value through 11 420,214 376,963
profit or loss
Current assets
Other receivables 12 13,783 9,939
Derivative financial instruments – 13 1,729 415
receivable
Cash and cash equivalents 21,232 8,153
36,744 18,507
Current liabilities
Other payables 14 (6,198) (1,000)
Derivative financial instruments – payable 13 (24) (2,321)
Securities sold under agreements to 15 (38,018) (45,127)
repurchase
(44,240) (48,448)
Net current liabilities (7,496) (29,941)
Total assets less current liabilities 412,718 347,022
Non-current liabilities
Derivatives held at fair value through 13 (2,443) (1,223)
profit or loss
Net assets 410,275 345,799
Capital and reserves
Stated capital 16 412,497 353,041
Capital reserve 17 (16,647) (18,973)
Revenue reserve 17 14,425 11,731
Total shareholders’ funds 410,275 345,799
Net asset value per ordinary share 18 172.87p 170.87p
The financial statements were approved and authorised for issue by the Board of Directors on
Signed on behalf of the Board of Directors
Audit & Risk Committee Chair
The accompanying accounting policies and notes are an integral part of these financial statements.
Statement of Cash Flows
Year ended Year ended
31 December 31 December
2025 2024
£’000 £’000
Cash flow from operating activities
Profit before finance costs and taxation 31,668 28,295
Tax on overseas income (89) (61)
Adjustment for:
Purchases of investments (164,225) (139,225)
Sales of investments 129,737 99,926
(34,488) (39,299)
Decrease from securities sold under agreements to (7,109) (2,941)
repurchase
Net gains through profit or loss on investments held (3,548) (2,093)
at fair value
Net movement from derivative instruments – forward (2,391) 4,519
currency contracts and CDS
Increase in other receivables (3,446) (1,336)
Increase in other payables 80 101
Effect of foreign exchange rate changes 545 135
Net cash outflow from operating activities (18,778) (12,680)
Cash flow from financing activities
Finance cost paid (1,167) (1,669)
Net proceeds from issue of new shares - note 16 60,103 36,856
Dividends paid – note 10 (26,133) (22,174)
Cost of shares issued – note 16 (401) (183)
Net cash inflow from financing activities 32,402 12,830
Net increase in cash and cash equivalents 13,624 150
Cash and cash equivalents at start of the year 8,153 8,138
Effect of foreign exchange rate changes (545) (135)
Cash and cash equivalents at the end of the year 21,232 8,153
Reconciliation of cash and cash equivalents to the
Balance Sheet is as follows:
Cash held at custodian 5,114 7,903
Invesco Liquidity Funds plc – Sterling 16,118 250
Cash and cash equivalents 21,232 8,153
Cash flow from operating activities includes:
Dividends received 642 627
Interest received 29,073 24,984
Reconciliation of net debt
At At
1 January Cash Non-cash 31 December
2025 flows movement 2025
£’000 £’000 £’000 £’000
Cash and cash equivalents 8,153 13,624 (545) 21,232
Securities sold under agreements to (45,127) 7,109 – (38,018)
repurchase
Total (36,974) 20,733 (545) (16,786)
Notes to the Financial Statements
1. Principal Activity
The Company is a closed-end investment company incorporated in Jersey and operates under the Companies (Jersey) Law 1991. The principal activity of the Company is investment in a diversified portfolio of high-yielding fixed-interest securities as set out in the Company’s Investment Objective and Policy.
2. Principal Accounting Policies
The principal accounting policies describe the Company’s approach to recognising and measuring transactions during the year and the position of the Company at the year end.
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied during the current year and preceding year, unless otherwise stated. The financial statements have been prepared on a going concern basis as noted below.
(a) Basis of Preparation
(i) Accounting Standards Applied
The financial statements have been prepared on a historical cost basis, except for the measurement at fair value of investments and derivatives, and in accordance with the applicable International Financial Reporting Standards as adopted by the
Where presentational guidance set out in the Statement of Recommended Practice (SORP) ‘Financial Statements of
(ii) Going Concern
As explained on page 16, the Company has an Annual Continuation Vote and the Directors believe shareholders will vote for the Company to continue. Accordingly, the Directors have determined that the financial statements should and have been prepared on a going concern basis, which does not include any adjustments that might arise from cessation of the Company. The Articles of
If a special resolution was held regarding a continuation vote a 75% majority of the shareholders need to vote for the Company not to continue.
Last year nearly 100% of the votes registered at the AGM were in favour of releasing the obligation to hold a continuation vote.
Based upon the current financial performance and financial position of the Company including the net current liability position at the balance sheet date along with the AGM vote outcome last year and ongoing dialogue with investors, the Directors do not have any concerns regarding the outcome of the forthcoming ordinary resolution and hence do not consider there to be a material uncertainty over going concern.
If a continuation vote was held and was unsuccessful, the basis of preparation would be switched at that date to a basis other than going concern and the NAV impacting adjustments would not be material as the majority of investments are Level 2, based on observable market prices and investments are classified as held at fair value through profit or loss.
(iii) Adoption of New and Revised Standards
There were no new nor revised standards and interpretations that became effective during the year having a significant impact on the amounts reported in these financial statements.
During the year the following standards were issued but were not effective and the Company has chosen not to early adopt:
•
IFRS 18, ‘Presentation and Disclosure in Financial Statements’ – effective
•
Amendments to the Classification and Measurement of Financial Instruments – Amendments to IFRS 9 and IFRS 7 – effective
(iv) Critical Accounting Estimates and Judgements
The preparation of the financial statements may require the Directors to make estimations where uncertainty exists. It also requires the Directors to exercise judgement in the process of applying the accounting policies. The Directors, having taken into account the factors in note 2a(ii), judge it appropriate to continue to use the going concern basis to prepare the financial statements given the Annual Continuation Vote.
The area requiring the most significant judgement and estimation in the preparation of the financial statements is: accounting for the value of Level 3 investments. Further details can be found in note 20 on pages 70 and 71.
(b) Foreign Currency
(i) Functional and Presentation Currency
The financial statements are presented in sterling, which is the Company’s functional and presentation currency and the currency in which the Company’s stated capital and expenses are denominated, as well as a certain proportion of its income, assets and liabilities.
(ii) Transactions and Balances
Transactions in foreign currency, whether of a revenue or capital nature, are translated to sterling at the rate of exchange ruling on the date of such transactions. Foreign currency assets and liabilities are translated to sterling at the rates of exchange ruling at the balance sheet date. Foreign exchange gains and losses relating to non investments are presented in the statement of comprehensive income within ‘exchange differences’. Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the statement of comprehensive income within ’net gains on investments held at fair value through profit or loss’. All profits and losses, whether realised or unrealised, are recognised in the statement of comprehensive income and are taken to capital reserve or revenue reserve, depending on whether the gain or loss is capital or revenue in nature.
(c) Financial Instruments
(i) Recognition of Financial Assets and Financial Liabilities
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. These are offset if the Company has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.
(ii) Derecognition of Financial Assets
Financial assets are derecognised when the contractual rights to the cash flows from the asset expire, or it transfers the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in the transferred financial asset that is created or retained by the Company is recognised as an asset.
(iii) Derecognition of Financial Liabilities
Financial liabilities are derecognised when the Company’s obligations are discharged, cancelled or expired.
(iv) Trade Date Accounting
Purchases and sales of financial assets are recognised on trade date, being the date on which the Company commits to purchase or sell the assets.
(v) Classification of Financial Assets and Financial Liabilities
Financial assets
Investments are classified as held at fair value through profit or loss as the investments are managed and their performance evaluated on a fair value basis in accordance with the Company’s documented investment strategy and this is also the basis on which information about investments is provided internally to the Board.
Financial assets held at fair value through profit or loss are initially recognised at fair value, which is taken to be their cost, with transaction costs expensed in the statement of comprehensive income, and are subsequently valued at fair value. Changes in fair value including the related foreign exchange gains and losses are recognised in the statement of comprehensive income under net gains and losses on investments.
For investments that are actively traded in organised financial markets, fair value is determined by reference to stock exchange quoted bid prices at the balance sheet date. For investments that are not actively traded or where active stock exchange quoted bid prices are not available, fair value is determined by reference to a variety of valuation techniques including broker quotes and price modelling.
Financial Liabilities
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, where applicable.
(d) Derivatives and Hedging
Derivative instruments are valued at fair value in the balance sheet. Hedge accounting has not been adopted.
Forward currency contracts entered into for hedging purposes are valued at the appropriate forward exchange rate ruling at the balance sheet date and any profits and losses are recognised in the statement of comprehensive income and taken to capital.
The treatment of the earnings from credit default swaps depends upon the nature of the transaction. Both motives and circumstances are used to determine whether earnings should be treated as capital or revenue. Given that the primary rationale for holding credit default swaps is capital protection, any gains/(losses) and premiums paid are reflected within net gain/(losses) on derivative instruments and taken to capital. Prior to
(e) Cash and Cash Equivalents
Cash and cash equivalents may comprise cash (including short term deposits which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value) as well as cash equivalents, including money market funds.
(f) Securities Sold Under Agreements to Repurchase (‘repo financing’)
The Company participates in repo financing arrangements in connection with its investment portfolio. Under these arrangements, the Company sells fixed interest securities but is contractually obliged to repurchase them at a fixed price on a fixed date. Securities which are the subject of repo financing arrangements are included in investments in the balance sheet at their fair value and the associated liability is recognised at amortised cost, being the capital amounts owing under the repo financing arrangements. The difference between sale and repurchase prices for such transactions is reflected in the statement of comprehensive income over the lives of the transactions, within finance costs which is allocated 50% to capital and 50% to revenue (2024: 50% capital; 50% revenue). This accounting has been adopted because the repurchase price results in a lender’s return for the transferee as the Company has retained substantially all the risks and rewards of ownership of the asset.
(g) Income Recognition
All income is recognised in the statement of comprehensive income. Interest income arising from fixed income securities classified as fair value through profit or loss is recognised in the statement of comprehensive income based on the contractual interest rate. Interest income is recognised as it accrues, using the coupon rate specified in the bond terms. Dividend income arises from equity investments held and is recognised on the date investments are marked ‘ex-dividend’. Deposit interest is taken into account on an accruals basis.
Special dividends are considered individually to ascertain the reason behind the payment. This will determine whether they are treated as income or capital in the statement of comprehensive income.
(h) Expenses and Finance Costs
All expenses are accounted for on an accruals basis and are recognised in the statement of comprehensive income. Investment management fees and finance costs are allocated 50% to capital and 50% to revenue (2024: 50% capital; 50% revenue) in accordance with the Board’s expected long-term split of earnings, in the form of capital gains and income respectively, from the investment portfolio. Except for custodian dealing costs, all other expenses are charged through revenue.
(i) Taxation
Overseas interest and dividends are shown gross of withholding tax and the corresponding irrecoverable tax is shown as a charge in the statement of comprehensive income.
(j) Dividends payable to shareholders
Interim dividends are recognised in the period in which they are paid and are dealt with in the statement of changes in equity.
(k)
Because the criteria in paragraphs 16C and 16D of IAS 32 Financial Instruments: Presentation, have been met, the stated capital of the Company is classified as equity even though there is a continuation vote.
3. Segmental Reporting
No segmental reporting is provided as the Directors are of the opinion that the Company is engaged in a single segment of business of investing in debt and, to a significantly lesser extent, equity securities.
4. Income
This note shows the income generated from the portfolio (investment assets) of the Company and income received from any other source.
2025 2024
£’000 £’000
Income from investments
UK investment income – interest 14,122 12,412
UK dividends 367 436
Overseas investment income – interest 15,806 13,067
Overseas dividends 252 182
30,547 26,097
Other income
Deposit interest 199 212
Other income 107 61
306 273
Total income 30,853 26,370
5. Investment Management Fee
This note shows the fees paid to the Manager, which are calculated quarterly on the basis of the value of the assets being managed.
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 1,230 1,230 2,460 1,090 1,090 2,180
Details of the investment management and secretarial agreement are given on page 35 in the Directors’ Report.
At
The management fee is payable quarterly in arrears and is equal to 0.1625% of the value of the Company’s total assets under management less current liabilities at the end of the relevant quarter.
6. Other Expenses
The other expenses of the Company are presented below; those paid to the Directors and the auditor are separately identified.
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Directors’ remuneration(i) 182 – 182 177 – 177
Auditors’ fees(ii):
– for audit of the
Company’s
annual financial 70 – 70 57 – 57
statements
Other expenses(iii) 563 14 577 622 40 662
815 14 829 856 40 896
(i) The maximum Directors’ fees authorised by the Articles of Association are £250,000 (2024: £250,000) per annum. The Directors’ Remuneration Report on page 43, provides further information on Directors’ fees.
(ii)
Auditor’s fees include out of pocket expenses. There was a £6,500 additional fee in relation to Level 3 investments incurred in respect of the year to
(iii) Other expenses include:
• custodian transaction charges of £3,000 (2024: £4,000). These are charged to capital.
• legal and administrative fees of £11,000 related to the adoption of updated Articles of Association (2024: £36,000 share placing). These were charged to capital.
•
amounts due to
• A fee of £103,000 was paid to the Manager for marketing services on behalf of the Company (2024: £103,000).
•
A premium of £38,000 was paid from revenue, during the year to
7. Finance Costs
Finance costs arise on any borrowing the Company has and comprises of interest due under repo financing, being the Company's preferred method of borrowing.
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Interest due under repo 534 534 1,068 826 826 1,652
financing
534 534 1,068 826 826 1,652
The Company has repo financing arrangements in place which were used during the year. For repos that are denominated in currencies where the interest rate is negative, the interest is receivable and has been netted against repo interest payable within finance costs, as they relate to borrowing costs.
8 Taxation
As a Jersey investment company no tax is payable on capital gains and, as the Company principally invests in assets which do not result in a revenue tax, the only overseas tax arises on assets domiciled in countries with which Jersey has no double-taxation treaty.
2025 2024
£’000 £’000
Overseas taxation 89 61
The Company is subject to Jersey income tax at the rate of 0% (2024: 0%). The overseas tax charge consists of irrecoverable withholding tax suffered.
9. Earnings per Ordinary Share
Earnings per ordinary share is the amount of gain generated for the financial year divided by the weighted average number of ordinary shares in issue.
The basic revenue, capital and total earnings per ordinary share is based on each of the earnings on ordinary activities after taxation and on 215,592,679 (2024: 194,765,138) ordinary shares, being the weighted average number of ordinary shares in issue throughout the year.
10. Dividends on Ordinary Shares
Dividends are usually paid from the income less expenses. Dividends are paid as an amount per ordinary share held.
The fourth interim dividend shown below is based on shares in issue at the record date or, if the record date has not been reached, on shares in issue on the date the balance sheet is signed. The fourth interim dividend was paid after the balance sheet date.
2025 2024
Pence £’000 Pence £’000
Dividends paid and recognised in the year:
Fourth interim 3.0625 6,206 2.8750 5,212
First interim 3.0625 6,294 2.8750 5,554
Second interim 3.0625 6,677 2.8750 5,625
Third interim 3.0625 6,956 2.8750 5,783
12.2500 26,133 11.5000 22,174
Dividends paid in respect of the year have been charged to revenue except for £642,000 (2024: £514,000) which was charged to stated capital. This amount is equivalent to the cumulative income accrued on the new shares issued in the year. When new shares are issued there is an element of income accrued in the issuance price paid, with proceeds fully taken to capital. As a result, the accrued income element is then used as part of dividend payments from stated capital. This has the effect of reducing the amount of revenue used for dividend payments.
2025 2024
Pence £’000 Pence £’000
Dividends payable in respect of the year:
First interim 3.0625 6,294 2.8750 5,554
Second interim 3.0625 6,677 2.8750 5,625
Third interim 3.0625 6,956 2.8750 5,783
Fourth interim 3.0625 7,372 3.0625 6,206
12.2500 27,299 11.6875 23,168
The fourth interim dividend for 2025 was paid on
11. Investments Held at Fair Value Through Profit and Loss
The portfolio is principally made up of investments which are listed and traded on regulated stock exchanges. Profits and losses are either:
• realised, usually arising when investments are sold; or
• unrealised, being the difference from cost of those investments still held at the year end.
(a) Analysis of investment profits in the year.
2025 2024
£’000 £’000
Opening book cost 386,556 352,292
Opening investment holding losses (9,593) (16,759)
Opening valuation 376,963 335,533
Movements in year:
Purchases at cost 169,440 139,225
Sales – proceeds (129,737) (99,888)
Net gains on investments held at fair value through profit or 3,548 2,093
loss
Closing valuation 420,214 376,963
Closing book cost 423,811 386,556
Closing investment holding losses (3,597) (9,593)
Closing valuation 420,214 376,963
The Company received £129,737,000 (2024: £99,888,000) from investments sold in the year. The book cost of these investments when they were purchased was £131,942,000 (2024: £104,961,000) realising a loss of £2,205,000 (2024: £5,073,000). These investments have been revalued over time and until they were sold any unrealised profits/losses were included in the fair value of the investments.
(b) Registration of investments
The investments of the Company are registered in the name of the Company or in the name of nominees and held to the account of the Company.
(c) Securities sold under agreements to repurchase
Included in the valuation above are securities under agreements to repurchase which had a market value of £44,796,000 (2024: £51,461,000). Included within current liabilities are Securities sold under agreements to repurchase £38,018,000 (2024: £45,127,000), further details are shown in note 15.
12. Other Receivables
Other receivables are amounts which are due to the Company, such as income which has been earned (accrued) but not yet received and monies due from brokers for investments sold.
2025 2024
£’000 £’000
Margin held at brokers 5,141 2,783
Proceeds due from issue of new shares 658 260
Prepayments and accrued income 7,984 6,896
13,783 9,939
13. Derivative Financial Instruments
Derivative financial instruments are financial instruments that derive their value from the performance of another item, such as an asset or exchange rates. They are used to manage the risk associated with fluctuations in the value of certain assets and liabilities. The Company can use derivatives to manage its exposure to fluctuations in foreign exchange rates or to mitigate credit risk.
Derivative financial instruments comprise forward currency contracts and credit default swaps.
2025 2024
Net derivative financial instruments £’000 £’000
Forward currency contracts:
Forward currency contracts – receivable 1,729 415
Forward currency contracts – payable (24) (2,321)
1,705 (1,906)
2025 2024
£’000 £’000
Credit default swaps (‘CDS’):
Opening net CDS liabilities held at fair value as shown in (1,223) –
balance sheet
Movements in year :
Purchases at cost (4,539) (1,356)
Sales - proceeds 3,494 –
Net realised gains relating to underlying price movements 112 –
Net change in unrealised (losses)/gains relating to underlying (283) 156
price movements
Add: Prior year notional interest arising on derivatives 23 –
Less : Notional interest arising on derivatives (27) (23)
Closing net CDS liabilities held at fair value as shown in (2,443) (1,223)
balance sheet
Net gains on derivative instruments – forward currency contracts and CDS consists of:
2025 2024
£’000 £’000
Movement in derivative holding gains – forward currency 3,611 (3,296)
contracts
Net realised gains on derivative instruments - CDS 112 –
Movement in derivative holding gains – CDS (283) 156
Premium paid - CDS(i) (917) –
Net realised gains on derivative instruments – forward currency 750 4,083
contracts
Net gains on derivative instruments – forward currency contracts 3,273 943
and CDS
(i)
Premiums paid on CDS are reflected within net gains on derivative instruments and taken to capital. Prior to
14. Other Payables
Other payables are amounts which must be paid by the Company, and include amounts owed to suppliers, such as the Manager and auditor, and any amounts due to brokers for the purchase of investments.
2025 2024
£’000 £’000
Amounts due to brokers 5,215 –
Amounts payable relating to issue of new shares 3 1
Accruals 980 999
6,198 1,000
15. Securities sold under agreements to repurchase
2025 2024
£’000 £’000
Securities sold under agreements to repurchase 38,018 45,127
During the year, the Company entered into repo financing arrangements whereby securities are sold under agreements to repurchase. Included within Investments Held at Fair Value Through Profit and Loss (note 11) are securities under agreements to repurchase which had a market value of £44,796,000 (2024: £51,461,000). Further details are shown in note 2(f) and note 19.3.
16.
The stated capital represents the total number of shares in issue and their attributed value. Stated capital can be used for distributions under Jersey Law.
2025 2024
Number £’000 Number £’000
Allotted ordinary shares of no par
value:
Brought forward 202,379,323 353,041 180,702,596 316,793
Net issue proceeds 34,950,000 60,098 21,676,727 36,762
Dividends paid from stated capital – (642) – (514)
237,329,323 412,497 202,379,323 353,041
At
For the year to
Subsequent to the year end and up to
Because the criteria in paragraphs 16C and 16D of IAS 32 Financial Instruments: Presentation, have been met, the stated capital of the Company is classified as equity even though there is a continuation vote.
17. Reserves
This note explains the different reserves attributable to shareholders. The aggregate of the reserves and stated capital (see previous note) make up total shareholders’ funds.
The capital reserve includes unrealised net gains and losses on investments held at fair value through profit and loss, being the difference between cost and market value at the balance sheet date, as well as gains and losses on disposal of investments held at fair value through profit and loss. In addition, costs allocated to capital are recognised in the capital reserve. The revenue reserve shows the net revenue after payment of any dividend from the reserve. Both the capital and revenue reserves are distributable.
18. Net Asset Value per Ordinary Share
The Company’s total net assets (total assets less total liabilities) are often termed shareholders’ funds and are converted into net asset value per ordinary share by dividing by the number of shares in issue.
The net asset value per share and the net asset values attributable at the year end were as follows:
Net asset Net assets
value
per ordinary attributable
share
2025 2024 2025 2024
Pence Pence £’000 £’000
Ordinary shares 172.87 170.87 410,275 345,799
Net asset value per ordinary share is based on net assets at the year end and on 237,329,323 (2024: 202,379,323) ordinary shares, being the number of ordinary shares in issue (excluding treasury) at the year end.
19. Risk Management: Financial Assets and Liabilities
Financial instruments comprise the Company’s investment portfolio and derivative financial instruments (for the latter see note 13) as well as any cash, borrowings (i.e. securities sold under agreements to repurchase otherwise known as ‘repo financing’), other receivables and other payables. The following note explains the risks that affect the Company’s financial instruments and looks at the Company’s exposure to these various risks.
Risk Management Policies and Procedures
The Business Review details the Company’s approach to investment management risks on page 13 and the accounting policies in note 2 explain the Company’s valuation basis for investments and currency.
As an investment company, the Company invests in loan stocks, corporate bonds, government stocks, preference shares and equities which are held for the long-term in order to achieve the Company’s Investment Objective in accordance with its Investment Policy. In pursuing these, the Company is exposed to a variety of risks that could result in either a reduction in the Company’s net assets or a reduction in the profits available for payment as dividends.
The Company’s principal financial instruments at risk comprise its investment portfolio. Other financial instruments at risk include cash and cash equivalents, borrowings (including repo financing), other receivables and other payables that arise directly from the Company’s operations.
The Company may enter into derivative transactions, including credit default swaps, for efficient portfolio management. Derivative instruments can be highly volatile and expose investors to a high risk of loss. Where used to hedge risk there is a risk that the return on a derivative does not exactly correlate to the returns on the underlying investment, obligation or market sector being hedged against. If there is an imperfect correlation, the Company may be exposed to greater loss than if the derivative had not been entered into. During the year the only derivatives entered into were forward currency contracts and credit default swaps. As at the year end, credit default swaps with a market value of £(2,443,000) were held by the Company (2024: £(1,223,000)).
These risks and the Directors’ approach to managing them are set out below, and have not changed from those applied in the comparative year.
Risk management is an integral part of the investment management process. The Manager controls risk by ensuring that the Company’s portfolio is appropriately diversified and the portfolio managers actively monitor both the ratings and liquidity of the fixed-interest securities taking into account the Company’s financing requirements. In-depth and continual analysis of market and security fundamentals give the portfolio managers the best possible understanding of the risks associated with a particular security. The portfolio managers assess the exposure to market risk when making each investment decision, and monitor the overall level of market risk on the whole of the portfolio on an ongoing basis.
High-yield fixed-interest securities are subject to a variety of risks, including credit risk (note 19.3).
The day to day management of the investment activities, borrowings and hedging of the Company has been delegated to the Manager, and is the responsibility of the portfolio managers to whom the Board has given discretion to operate within set guidelines. Any proposed variation outside those guidelines is referred to the Board and the guidelines themselves are reviewed at every board meeting.
19.1 Market Risk
Market risk arises from changes in the fair value or future cash flows of a financial instrument. Market risk comprises three types of risk: currency risk (note 19.1.1), interest rate risk (note 19.1.2) and other price risk (note 19.1.3).
19.1.1 Currency Risk
The Company has assets, liabilities and income which are denominated in currencies other than sterling and movements in exchange rates will affect the sterling value of those items.
Management of the Currency Risk
The Board meets at least quarterly to assess risk and review investment performance. The portfolio managers monitor the Company’s exposure to foreign currencies on a daily basis and exposure is reviewed by Directors at each Board meeting. The Company may use forward currency contracts to mitigate currency risk. In addition, non-sterling credit default swaps will either mitigate or increase currency risk depending on whether the Company has sold or bought the credit default swap as well as exchange movements. Repo financing is matched to the currency of the underlying assets, which minimises currency risk on the movement of exchange rates affecting the underlying investments. Non-sterling investments that are not pledged under repo financing can be hedged using forward currency contracts. All borrowings and derivative contracts are limited to currencies and amounts commensurate with asset exposure to those currencies.
Income denominated in foreign currencies is converted to sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements and its receipt.
Currency Exposure
The following table shows the fair values of the Company’s monetary items that have foreign currency exposure at 31 December. Where the Company’s investments (which are not monetary items) are priced in a foreign currency, they have been included separately in the analysis to show the overall level of exposure.
US
Euro Dollar
£’000 £’000
31 December 2025
Investments at fair value through profit or loss that are
monetary items
(fixed and floating interest) 128,645 66,355
Forward currency contracts (92,958) (69,411)
Other receivables (due from brokers and dividends) 5,828 1,494
Cash and cash equivalents 2,081 715
Derivative liabilities held at fair value through profit or (2,443) –
loss
Other payables (due to brokers and accruals) (133) –
Securities sold under agreement to repurchase (34,939) –
Foreign currency exposure on net monetary items 6,081 (847)
Investments at fair value through profit or loss (preference 1,060 1,551
shares and equities)
Total net foreign currency 7,141 704
US
Euro Dollar
£’000 £’000
31 December 2024
Investments at fair value through profit or loss that are
monetary items
(fixed and floating interest) 90,634 82,395
Forward currency contracts (40,357) (78,983)
Other receivables (due from brokers and dividends) 3,606 1,406
Cash and cash equivalents 5,623 1,147
Derivative liabilities held at fair value through profit or (1,223) –
loss
Other payables (due to brokers and accruals) (243) –
Securities sold under agreement to repurchase (45,127) –
Foreign currency exposure on net monetary items 12,913 5,965
Investments at fair value through profit or loss (preference 2,795 1,678
shares and equities)
Total net foreign currency 15,708 7,643
The above may not be representative of the exposure to risk during the year reported because the levels of monetary foreign currency exposure may change significantly throughout the year.
Currency Sensitivity
The effect on the Statement of Comprehensive Income and the net asset value that changes in exchange rates have on the Company’s financial assets and liabilities is based on the following currencies. These changes have been calculated by reference to the volatility of exchange rates during the period using the standard deviation of currency fluctuations against the mean.
2025 2024
£/Euro ±1.9% ±1.2%
£/US Dollar ±3.0% ±1.7%
The following sensitivity analysis is based on the Company’s monetary foreign currency financial instruments held at the balance sheet date, taking account of any forward foreign exchange contracts that offset the effects of changes in currency exchange rates, and the income receivable in foreign currency in the year.
If sterling had strengthened by the changes in exchange rates shown above, this would have had the following effect:
US
Euro Dollar
£’000 £’000
2025
Effect on Statement of Comprehensive Income – profit/(loss) after
taxation
Revenue loss (198) (170)
Capital loss (22) 12
Total loss after taxation for the year (220) (158)
Effect on net asset value –0.1% 0.0%
If sterling had weakened by the same amounts, the effect would have been the converse.
US
Euro Dollar
£’000 £’000
2024
Effect on Statement of Comprehensive Income – profit/(loss) after
taxation
Revenue loss (89) (103)
Capital loss (140) (104)
Total loss after taxation for the year (229) (207)
Effect on net asset value –0.1% –0.1%
If sterling had weakened by the same amounts, the effect would have been the converse.
In the opinion of the Directors, the above sensitivity analysis is not representative of the year as a whole, since the level of exposure changes frequently as part of the currency risk management process of the Company.
19.1.2 Interest Rate Risk
The Company is exposed to interest rate risk in a number of ways. Movements in interest rates may affect the fair value of fixed-interest rate securities, income receivable on cash deposits and floating rate securities, and interest payable on variable rate borrowings, including repo financing. Interest rate risk is related above all to long-term financial instruments.
Whilst a significant proportion of the portfolio at both current and prior financial year ends contains securities designated as floating rate, many of these securities include a fixed interest rate period resulting in a more predictable income stream than their technical designation would suggest.
Management of Interest Rate Risk
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account as part of the portfolio management and borrowings processes of the Manager. The Board reviews on a regular basis the investment portfolio and borrowings. This encompasses the valuation of fixed-interest and floating rate securities.
When the Company has cash balances, they are held in variable rate bank accounts yielding rates of interest dependent on the base rate of the Custodian, the
The Company has available repo financing arrangements it can use to finance investment activity, details of which are shown in notes 7 and 15. The Company uses these at levels approved and monitored by the Board.
Interest Rate Exposure
The following table shows the Company’s exposure to interest rate risk at the balance sheet date arising from its monetary financial assets and liabilities.
Within More than
one year one year Total
£’000 £’000 £’000
2025
Exposure to floating interest rates:
Investments held at fair value through profit or 1,008 202,375 203,383
loss
Cash and cash equivalents(i) 21,232 – 21,232
Margin held at brokers (including collateral 5,141 – 5,141
pledged on CDS)
27,381 202,375 229,756
Exposure to fixed interest rates:
Investments held at fair value through profit or 7,375 201,675 209,050
loss
Derivatives held at fair value through profit or – (2,443) (2,443)
loss
Securities sold under agreements to repurchase (38,018) – (38,018)
(30,643) 199,232 168,589
Net exposure to interest rates (3,262) 401,607 398,345
Within More than
one year one year Total
£’000 £’000 £’000
2024
Exposure to floating interest rates:
Investments held at fair value through profit or – 164,673 164,673
loss
Cash and cash equivalents(i) 8,153 – 8,153
Margin held at brokers (including collateral 2,783 – 2,783
pledged on CDS)
10,936 164,673 175,609
Exposure to fixed interest rates:
Investments held at fair value through profit or 1,509 199,749 201,258
loss
Derivatives held at fair value through profit or – (1,223) (1,223)
loss
Securities sold under agreements to repurchase (45,127) – (45,127)
(43,618) 198,526 154,908
Net exposure to interest rates (32,682) 363,199 330,517
(i)
Includes £16,118,000 (2024: £250,000) held in
The nominal interest rates on the investments at fair value through profit or loss are shown in the portfolio list on pages 24 to 31. The weighted average effective interest rate on these investments is 7.9% (2024: 7.6%). The weighted average effective interest rate on cash and cash equivalents is 3.21% (2024: 4.07%).
Interest Rate Sensitivity
The following table illustrates the sensitivity of the profit or loss after taxation for the year to a 3.25% (2024: 3.25%) increase in interest rates in regard to the Company’s financial assets and financial liabilities. As future changes cannot be estimated with any degree of certainty, the sensitivity analysis is based on the Company’s financial instruments held at the balance sheet date, with all other variables held constant.
2025 2024
£’000 £’000
Effect on Statement of Comprehensive Income – profit after
taxation
Revenue profit 857 355
Capital loss (52,169) (47,570)
Total loss after taxation for the year (51,312) (47,215)
Effect on NAV per ordinary share (25.4)p (23.3p)
If interest rates had decreased by 3.25% (2024: 3.25%), this would have had an equal and opposite effect.
The above exposure and sensitivity analysis are not representative of the year as a whole, since the level of exposure changes frequently as borrowings, which are predominantly from repo financing arrangements, can vary throughout the year.
19.1.3 Other Price Risk
Other price risk includes changes in market prices, other than those arising from currency risk or interest rate risk, which may affect the value of the investment portfolio, whether by factors specific to an individual investment or its issuer, or by factors affecting the wider market.
Management of Other Price Risk
It is the portfolio managers’ responsibility to manage the portfolio and borrowings in accordance with the investment objective and policy, and in accordance with the investment policy guidelines set by the Board. The Board manages the market price risks inherent in the investment portfolio by meeting regularly to monitor on a formal basis compliance with these. The Board also reviews investment performance. Because the Company’s portfolio is the result of the portfolio managers’ investment process, performance may not closely correlate with the markets in which the Company invests.
The Company’s exposure to other changes in market prices at 31 December on its investments is shown in the fair value hierarchy table on pages 70 and 71.
Concentration of Exposure to Other Price Risks
The Company’s investment portfolio is not concentrated in any single country of domicile, however, it is recognised that an investment’s country of domicile or listing does not necessarily equate to its exposure to the economic conditions in that country.
Other Price Risk Sensitivity
Excluding fixed interest securities and convertibles, at the year end the Company held other investments of £7,781,000 (2024: £11,032,000). The effect of a 10% increase or decrease in the fair values of these investments (including any exposure through derivatives) on the profit after taxation for the year is £778,000 (2024: £1,103,000). This level of change is considered to be reasonably possible based on the observation of market conditions during the financial year.
19.2 Liquidity Risk
This is the risk that the Company may encounter difficulty in meeting its obligations associated with financial liabilities i.e. when realising assets or raising/replacing repo financing to meet financial commitments. A lack of liquidity in the portfolio may make it difficult for the Company to realise assets at or near their purported value in the event of a forced sale.
Management of Liquidity Risk
Liquidity risk is not viewed by the Directors as a significant risk because the majority of the Company’s assets comprise readily realisable securities, although a lack of liquidity in non-investment grade securities may make it difficult to rebalance the Company’s investment portfolio as and when the portfolio managers believe it would be advantageous to do so. On a daily basis the portfolio managers ascertain the Company’s cash and borrowing requirements by reviewing future cash flows arising from purchases and sales of investments, interest and dividend receipts, expenses and dividend payments, and available financing (including repo financing).
Liquidity Risk Exposure
The contractual maturities of the financial liabilities at 31 December, based on the earliest date on which payment can be required, was as follows:
2025 2024
Less than More Less than More
three than one three than one
months year Total months year Total
£’000 £’000 £’000 £’000 £’000 £’000
Amounts due to 5,215 – 5,215 – – –
brokers (note 14)
Accruals and amounts
payable relating to
issue of new 983 – 983 1,000 – 1,000
shares (note 14)
Derivative financial
instruments – payable
(note 13) 24 2,443 2,467 2,321 1,223 3,544
Securities sold under
agreements to
repurchase (note 38,018 – 38,018 45,127 – 45,127
15)
44,240 2,443 46,683 48,448 1,223 49,671
19.3 Credit Risk
Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligation under that transaction could result in a loss to the Company. The Company’s principal credit risk is the risk of default on the non-investment grade debt. The Company’s other main credit risk arises from the repo financing arrangements whereby, if a counterparty failed to sell the required assets to the Company on the repurchase date, the Company would be left with the claim against the defaulting counterparty for the stock and, if applicable, any margin held by the counterparty and not returned.
At the year end 57.7% (2024: 64.5%) of the Company’s portfolio consisted of non-investment grade securities. To the extent that the Company invests in non-investment grade securities, the Company may realise a higher current yield than the yield offered by investment grade securities. On the other hand, investments in such securities involve a greater volatility of price and a greater risk of default by the issuers of such securities, with consequent loss of interest payments and principal. Non-investment grade securities are likely to be subject to greater uncertainties from exposure to adverse conditions and will be speculative with respect to an issuer’s capacity to meet interest payments and repay principal in accordance with its obligations.
Investment grade and non-investment grade securities totalled 87.7% (2024: 91.2%) of the portfolio at the year end. Adverse changes in the financial position of an issuer of such high-yield fixed-interest securities or in general economic conditions may impair the ability of the issuer to make payments of principal and/or interest or may cause the liquidation or insolvency of an issuer.
The portfolio may be adversely affected if the Company’s custodian suffers insolvency or other financial difficulties. The appointment of a depositary has substantially lessened this risk. The Board reviews the custodian’s annual controls report and the Manager’s management of the relationship with the custodian.
Management of and Exposure to Credit Risk
Almost all of the Company’s assets are subject to credit risk. Where the portfolio managers make an investment in a bond, corporate or otherwise, the credit rating of the issuer is also considered when assessing the risk of defaults. Investments in bonds are across a variety of industrial sectors and geographical markets to avoid concentration of credit risk. Counterparties for derivative transactions are also a source of credit risk. Transactions involving derivatives are entered into only with banks whose credit ratings are taken into account to minimise default risk. The credit ratings of the derivatives counterparties range from Aa3 through to Baa1. In addition, the Company may use credit default swaps to offset the credit risk of the portfolio. At the year end, credit default swaps with a market value of £(2,443,000) were held by the Company (2024: £(1,223,000)).
Details of the Company’s investments, including their credit ratings, are shown below. Credit risk for transactions involving derivatives and equity investments is minimised as the Company only uses approved counterparties.
2025 2024
% of Cumulative % of Cumulative
Rating Portfolio Total % Portfolio Total %
Investment Grade:
AAA 0.2 0.2 – –
AA+ 0.2 0.4 0.2 0.2
AA 1.5 1.9 2.6 2.8
A+ 0.3 2.2 0.2 3.0
A – 2.2 0.1 3.1
BBB+ 2.2 4.4 0.6 3.7
BBB 17.4 21.8 19.0 22.7
BBB– 8.2 30.0 4.0 26.7
Non-investment Grade:
BB+ 9.1 39.1 7.5 34.2
BB 10.4 49.5 15.4 49.6
BB– 8.7 58.2 13.6 63.2
B+ 7.4 65.6 5.5 68.7
B 12.0 77.6 14.1 82.8
B– 5.7 83.3 4.9 87.7
CCC+ 2.2 85.5 0.7 88.4
CCC 2.2 87.7 0.7 89.1
CC – 87.7 2.1 91.2
NR (including equity and CDS) 12.3 100.0 8.8 100.0
100.0 100.0
Summary of Analysis
Investment Grade 30.0 26.7
Non-investment Grade 57.7 64.5
NR (including equity and CDS) 12.3 8.8
Total 100.0 100.0
NR: not rated.
The Company manages the credit risk inherent in repo financing by only dealing with good quality counterparties whose credit-standing is reviewed periodically by the Manager. There is a maximum limit allowed with any one counterparty, and the repo entered into must have a maturity tenor of three months or less. The Company has exposure to credit risk on securities pledged under repo financing held, with 4 counterparties, as follows (2024: 3 counterparties):
2025 2024
Market Market
value of Net value of Net
Amounts securities credit Amounts securities credit
borrowed pledged exposure borrowed pledged exposure
under under to under under to
repo repo counter repo repo counter
financing financing party financing financing party
Counterparty Rating Location £’000 £’000 £’000 £’000 £’000 £’000
Barclays A1/A+ UK 3,573 4,201 628 – – –
BNP UK A1/A+ UK 21,678 25,393 3,715 35,991 40,440 4,449
Morgan A1/A- UK 6,444 7,576 1,132 4,852 5,977 1,125
Stanley
HSBC A1/A+ UK 6,323 7,626 1,303 4,284 5,044 760
38,018 44,796 6,778 45,127 51,461 6,334
Net credit
exposure as % 1.7% 1.8
of net assets
2025 2024
Receivable/ Cash Receivable/ Cash
collateral collateral
Counterparty (payable) pledged/ Counterparty (payable) pledged/
for for
country of derivatives country of derivatives
(received) (received)
Name of incorporation £’000 £’000 incorporation £’000 £’000
counterparty
Bank Of United States (2,443) 3,289 United States (1,223) 2,021
America
Cash balances are held with approved deposit takers only and are limited to a maximum of 4% of the Company’s net asset value with any one deposit taker. Balances held with
There are no financial assets that are past due or impaired at the year end (2024: none).
Fair Values of Financial Assets and Financial Liabilities
Financial assets are either carried in the balance sheet at their fair value (investments and derivatives), or the balance sheet amount is a reasonable approximation of fair value (due from brokers, dividends receivable, accrued income, due to brokers, accruals and cash).
Financial liabilities are carried at amortised cost except for derivatives, which as stated above are carried at fair value.
20. Classification Under Fair Value Hierarchy
The valuation techniques used by the Company are explained in the accounting policies note 2(c). The table that follows sets out the fair value of the financial instruments. The three levels set out in IFRS 7 hierarchy follow:
Level 1 – The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
Categorisation within the hierarchy is determined on the basis of the lowest level input that is significant to the fair value measurement of each relevant asset/liability.
Normally investments would be valued using stock market active prices, with investments disclosed as Level 1 and this is the case for the quoted equity investments that the Company holds. However, the majority of the Company’s investments are non-equity investments. Evaluated prices from a third party pricing vendor are used to price these securities, together with a price comparison made to secondary and tertiary evaluated third party sources. Evaluated prices are in turn based on a variety of sources including broker quotes and benchmarks. As a result, the Company’s non-equity investments have been shown as Level 2 – recognising that the fair values of these investments are not as visible as quoted equity investments and their higher inherent pricing risk. However, this does not mean that the fair values shown in the portfolio valuation are not achievable at point of sale.
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
2025
Financial assets designated at fair value
through profit or loss:
Quoted Investments:
– Fixed interest securities (i) – 338,116 1,332 339,448
– Convertibles – 64,695 – 64,695
– Government – 8,290 – 8,290
– Preference 2,991 – 3,654 6,645
– Equities 55 135 946 1,136
Derivative financial instruments:
– Currency hedges – 1,705 – 1,705
– Credit default swaps – (2,443) – (2,443)
Total for financial assets 3,046 410,498 5,932 419,476
A reconciliation of the fair value of Level 3 is set out below.
2025
£’000
Opening fair value 7,420
Transfers from Level 2 to Level 3 (ii) 5
Purchases at cost 308
Sales
– proceeds (629)
– net realised losses (1,433)
Movement in holding gains/(losses) 261
Closing fair value of Level 3 5,932
(i) Fixed interest securities include both fixed and floating rate securities. The directors consider the floating rate securities held by the Company to be fixed in nature due to their characteristics, including a predictable income stream.
(ii) Frigoglass Common Stock was reclassified from Level 2 to Level 3 of the fair value hierarchy during the year. The transfer reflects reduced market observability of key valuation inputs, resulting in the fair value measurement now relying on significant unobservable inputs.
Level 3 investments are investments for which inputs are unobservable (i.e. for which market data is unavailable). The Level 3 investments in the portfolio and their respective values at the year end were Haleon 9.5% Preference £3,654,000 (2024: £3,661,000), Frigoglass 11% PIK
Any non-actively traded investments are reviewed relative to appropriate supporting evidence. The Board reviews detailed portfolio valuations on a regular basis throughout the year and receives confirmation from the Manager that the pricing basis is appropriate and in line with relevant accounting standards as adopted by the Company.
The categorisation of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Directors’ perceived risk of that investment.
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
2024
Financial assets designated at fair value
through profit or loss:
Quoted Investments:
– Fixed interest securities (i) – 289,607 969 290,576
– Convertibles – 64,897 – 64,897
– Government – 10,458 – 10,458
– Preference 4,513 – 3,661 8,174
– Equities 63 5 2,790 2,858
Derivative financial instruments:
– Currency hedges – (1,906) – (1,906)
– Credit default swaps – (1,223) – (1,223)
Total for financial assets 4,576 361,838 7,420 373,834
A reconciliation of the fair value of Level 3 is set out below.
2024
£’000
Opening fair value –
Securities resulting from restructure 6,913
Purchases at cost 3,694
Movement in holding gains/(losses) (3,187)
Closing fair value of Level 3 7,420
(i) Fixed interest securities include both fixed and floating rate securities. The directors consider the floating rate securities held by the Company to be fixed in nature due to their characteristics, including a predictable income stream.
21. Capital Management
The Company’s capital, or equity, is represented by its net assets which are managed to achieve the Company’s investment objective set out on page 11.
The main risks to the Company’s investments are shown in the Business Review under the ‘Principal and Emerging Risks and Uncertainties’ section on pages 14 and 15. These also explain that the Company is able to gear and that gearing will amplify the effect on equity of changes in the value of the portfolio.
The Board can also manage the capital structure directly since it has taken the powers, which it is seeking to renew, to issue and buy-back shares and it also determines dividend payments.
The Board regularly monitors the level of borrowing used by the Company and has imposed limits within which borrowings should be managed.
Total equity at
22. Contingencies, Guarantees and Financial Commitments
Liabilities the Company is committed to honour but which are dependent on a future circumstance or event occurring would be disclosed in this note if any existed.
There were no contingencies, guarantees or other financial commitments of the Company as at
23. Related Party Transactions and Transactions with Manager
A related party is a company or individual who has direct or indirect control or who has significant influence over the Company.
Under IFRS Accounting Standards as adopted by the EU, the Company has identified the Directors and their dependents as related parties. Directors fees paid have been disclosed in the Directors’ Remuneration Report on pages 43 and 44 with additional disclosure in note 6. Full details of Directors’ interests are set out in the Directors’ Remuneration Report on page 44. No other related parties have been identified.
24. Post Balance Sheet Events
Any significant events that occurred after the end of the reporting period but before the signing of the balance sheet will be shown here.
There was a successful placing and Winterflood Retail Access Platform (‘WRAP’) retail offer, announced on 29
This annual financial report announcement is not the Company’s statutory accounts.
The statutory accounts for the period ended
The audited annual financial report will be posted to shareholders shortly.
Copies may be obtained during normal business hours from the Company’s Registered Office,
A copy of the annual financial report will be
submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
.
Claire Brazenall
Company Secretary
Telephone: 01534 700000
LEI: 549300JLX6ELWUZXCX14
