Invesco Perp Enh - Inc Annual Financial Report

Invesco Perpetual Enhanced Income Limited

Annual Financial Report

For the year ended 30 September 2018

FINANCIAL INFORMATION AND PERFORMANCE STATISTICS

Performance Statistics

      %
Balance sheet at 30 September 2018 2017 CHANGE
Shareholders’ funds (£’000)(1) 120,677 125,325 –3.7
Net asset value(2) per ordinary share 73.1p 77.5p –5.7
Share price(3) 75.4p 80.3p –6.1
Premium per ordinary share(2) 3.1% 3.6%  
Gross borrowing(2) 18% 23%  
Net borrowing(2) 16% 16%  

   

  Year Ended Year Ended
  30 September 30 September
Total Return(3) 2018 2017
3 month LIBOR rate +0.8% +0.3%
Net asset value (‘NAV’)(2)(4) +0.8% +10.7%
Share price(2) +0.1% +10.5%
     
  Year Ended Year Ended
  30 September 30 September
  2018 2017
Revenue    
Gross income (£’000) 8,917 7,499
Net revenue return (£’000) 7,602 6,484
Dividends per ordinary share:    
– first interim 1.25p 1.25p
– second interim 1.25p 1.25p
– third interim 1.25p 1.25p
– fourth interim 1.25p 1.25p
– Total 5.00p 5.00p
Ongoing Charges(2)    
– ongoing charges(5) 1.06% 1.22%
– performance fee(5) n/a 0.93%
Return per Ordinary Share(6)    
Revenue return 4.6p 4.5p
Capital return (4.0)p 3.1p
Total return 0.6p 7.6p

CHAIRMAN’S STATEMENT

Introduction

I write to report on the year to 30 September 2018 and the outlook for the Company.

Results for the Year

The Portfolio Managers’ Report which follows explains the market background and portfolio strategy during the year which provides context for the Company’s results.

The Company achieved a small but positive total return for shareholders in the year, based on the share price with dividends reinvested, of 0.1%. The dividend was maintained at 5p per share, whilst the share price fell from 80.3p at the start of the year to 75.4p at the year end, a decrease of 6.1%. The NAV total return was 0.8% for the year and the NAV per share decreased 5.7% to 73.1p.

In the current low interest rate environment your Board continues to believe that shareholders place great value on the Company’s consistent dividend stream and has prioritised revenue generation through investment in relatively high-yielding and considered debt positions. Market yields remain at historically low levels but even so your portfolio managers have managed to generate a net revenue return of 4.6p per share. The Board has maintained the 5p annual dividend for the year and a fourth interim dividend of 1.25p per share was declared on 25 September 2018. As reported in the Chairman’s Statements in previous annual financial reports, in the absence of unforeseen circumstances, it is the Board’s current intention that the Company will maintain the annual dividend of not less than 5p per share, paid equally and quarterly.

The shortfall of net revenue earned versus dividend paid was 0.4p which is the equivalent of £615,000 (2017: £836,000), after recognising the costs associated with the management arrangements as discussed below. This has been funded from revenue reserve which the Company has accumulated over a number of years and which, after payment of the year’s dividend and based on the current number of shares in issue of 164,994,855, would be adequate to cover 1.1 times the annual dividend of 5p.

Change of Name

In line with Invesco’s move to a unified global brand – Invesco – the Invesco Perpetual name was retired with effect from 1 October 2018. Accordingly, to bring the Company’s name into line with the Manager’s brand it is proposed, subject to shareholder approval, to change the Company’s name to “Invesco Enhanced Income Limited”. At the forthcoming AGM, special resolution 9 is being proposed to seek your approval to the change of name.

AGM

The Company’s Notice of AGM is contained on page 62 in the annual financial report and will be held at 9.30 a.m. on 25 February 2019. A summary of the special business is set out in the Directors’ Report on page 35 in the annual financial report, and the special resolutions relating to share issuance and buy-backs and the change of name, and the ordinary resolution for the continuation of the Company are explained above. The Directors have considered all the resolutions proposed in the Notice of AGM and, in their opinion, consider them to be in the interests of shareholders as a whole. The Directors therefore recommend that shareholders vote in favour of each resolution.

Outlook

As described in the Portfolio Managers’ Report, whilst there have been some encouraging developments in the high yield bond market for the longer-term outlook, markets continue to face headwinds including global trade tensions and the uncertain outcome of Brexit, whilst concerns over the extent of interest rate rises in the US and the prospect of slower global growth have implications for equities and bonds, particularly those where valuations already appear stretched. The direction of markets will be influenced by these and other factors and until there is greater clarity, markets are likely to experience periods of volatility. The portfolio managers continue to focus on managing the portfolio to provide shareholders with a relatively high, sustainable income and the Board remains supportive of their cautious stance.

Peter Yates

Chairman

12 December 2018