Short-Term Investments Company (Global Series) plc (Investment Company with Variable Capital)

Transcription

1 Short-Term Investments Company (Global Series) plc (Investment Company with Variable Capital) Condensed Financial Statements For the six month period ended 30 June 2016 (Unaudited)

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3 TABLE OF CONTENTS Page General Information Investment Advisers Report (US Dollar Liquidity Portfolio, Sterling Liquidity Portfolio and Euro Liquidity Portfolio)..3 Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders Notes to Financial Statements Portfolio Listing (US Dollar Liquidity Portfolio) Portfolio Listing (Sterling Liquidity Portfolio) Portfolio Listing (Euro Liquidity Portfolio) Statement of Significant Changes in Composition of Portfolio (US Dollar Liquidity Portfolio) Statement of Significant Changes in Composition of Portfolio (Sterling Liquidity Portfolio) Statement of Significant Changes in Composition of Portfolio (Euro Liquidity Portfolio)

4 GENERAL INFORMATION Short-Term Investments Company (Global Series) plc (the Company ) is constituted as an umbrella fund insofar as the share capital of the Company (the Shares ) is divided into different series of Shares, with each series representing a portfolio of assets which comprise a separate fund (a Portfolio ). At 30 June 2016, three series of Shares have been issued - the US Dollar Liquidity Portfolio, the Sterling Liquidity Portfolio and the Euro Liquidity Portfolio. Shares in the US Dollar Liquidity Portfolio series have been issued in seven classes - the Institutional Class, the Select Class, the Reserve Class, the Corporate Class, the Command Class, the Investor Class and the Institutional Accumulation Class. Shares in the Sterling Liquidity Portfolio have been issued in five classes - the Institutional Class, the Select Class, the Corporate Class, the Command Class and the Institutional Accumulation Class. Shares in the Euro Liquidity Portfolio have been issued in six classes - the Institutional Class, the Select Class, the Reserve Class, the Corporate Class, the Command Class and the Institutional Accumulation Class. Directors: Karen Dunn Kelley (American) Cormac O Sullivan (Irish) Douglas Sharp (Chairman) (Canadian) Dr. Sybille Hofmann* (German) William Manahan ^ (Irish) Registered Office: Central Quay Riverside IV Sir John Rogerson s Quay Dublin 2 Ireland ^ Independent Director * Resigned effective 29 June 2016 Registered Number: Manager: Investment Adviser: Investment Adviser and Distributor: Legal Advisers: Sponsoring Broker: Invesco Global Asset Management DAC** Central Quay Riverside IV Sir John Rogerson s Quay Dublin 2 Ireland Invesco Advisers, Inc Peachtree Street, N.E. Atlanta, Georgia United States of America Invesco Global Liquidity (a division of Invesco Asset Management Limited in the UK) Registered Office Perpetual Park Perpetual Park Drive Henley-on-Thames Oxfordshire RG9 1HH United Kingdom Matheson 70 Sir John Rogerson s Quay Dublin 2 Ireland J & E Davy*** Davy House 49 Dawson Street Dublin 2 Ireland Administrator and Registrar: Depositary: Secretary to the Company and the Manager Independent Auditor: BNY Mellon Fund Services (Ireland) Designated Activity Company Guild House Guild Street International Financial Services Centre Dublin 1 Ireland BNY Mellon Trust Company (Ireland) Limited Guild House Guild Street International Financial Services Centre Dublin 1 Ireland Invesco Asset Management Limited Registered Office Perpetual Park Perpetual Park Drive Henley-on-Thames Oxfordshire RG9 1HH United Kingdom PricewaterhouseCoopers One Spencer Dock North Wall Quay Dublin 1 Ireland ** Effective 12 May 2016 Invesco Global Asset Management Limited converted to Invesco Global Asset Management DAC pursuant to the Companies Act ***Effective 19 July 2016, the Portfolios delisted from the Irish Stock Exchange and as a result J & E Davy no longer act as Sponsoring Broker. 2

5 INVESTMENT ADVISERS REPORT US DOLLAR LIQUIDITY PORTFOLIO Market Recap After hopes, following the first rate increase in the US since 2006, that the economic outlook was turning a corner, 2016 began with a large drop in many risk asset valuations. The S&P 500 Index fell 9% in the first three weeks of January, staged a small recovery before falling 5% following the surprise move by the Bank of Japan ( BoJ ) that took its main interest rate into negative territory at the end of January. It took a recovery in oil prices followed by a better than expected package of new measures by the European Central Bank ( ECB ), to turn around sentiment and ultimately, after all the turmoil, the S&P 500 ended the first three months of 2016 slightly higher than it began. Against the above market turmoil US economic data overall surprised to the upside in the first few months of 2016 with, in particular, better labour and average earnings data. However, the volatile global financial market backdrop saw the Federal Reserve Open Market Committee ( FOMC ), at its meeting in March, materially reduce its expectations for US rate increases in 2016 from four to only two; essentially in line with what markets had been forecasting at the beginning of The next few months of 2016 saw more mixed economic data in the US, most of this emanated from the manufacturing sector where it was feeling the lagged impact of the large rise in the US$ against its major trading partners, where it rose around 25% from mid-2014 through to late The main disappointment however was the jobs market where only 38,000 new jobs were created in May compared to Q1 where they averaged approximately 200,000 per month. There also, however, appeared to be evidence that companies were finding it hard to find suitable candidates suggesting that the labour market was tightening and could start to become an inflationary force, albeit there was little evidence of this in wage growth at 2.5% year on year ( YoY ). Finally, at the end of the first half of the year, the result of the UK Referendum on the 24th June saw the UK public vote to leave the European Union ( EU ). This was an unexpected result and saw the S&P fall by more than 5% on the news. Markets quickly rebounded following soothing noises from Central Banks and the realisation that there would likely be many months, if not years before it would be known how the UK s new relationship with the EU would operate. At their June 15th meeting FOMC members further reduced their longer term expectations for the median Fed Funds Rate for the end of 2017 and 2018 by 25bps and 62.5bps respectively meaning they expected it to reach 2.375% by the end of The markets, following the UK vote to leave the EU, market moved sharply lower still such that by the end of Q2 there was a probability of less than 50% of another increase in the Federal Funds Rate by Q with the next hike not fully priced until October Your Investment Portfolio The US Dollar Liquidity Portfolio invests in high quality money market instruments including both US domestic and Euro US Dollardenominated commercial paper, floating rate notes, medium term notes and selected repurchase agreements. STERLING LIQUIDITY PORTFOLIO Market Recap The main event undoubtedly was the EU Referendum. Prime Minister David Cameron announced on the 20th February that there would be a Referendum on whether the UK electorate wanted to stay in the EU. The vote was to take place on the 23rd June. This initiated a flurry of polls, headlines and analysis. The conclusion ahead of the vote was that although likely to be close it would come down on the side of staying in the EU. Analysis from HM Treasury suggested there would be a material cost to the UK economy if there was a vote to leave the EU. Ahead of the vote there was anecdotal evidence that hiring decisions and/or new investment spending by businesses was being deferred until after the result. The Bank of England ( BoE ) Monetary Policy Committee ( MPC ) met six times and left unchanged the Bank Rate at 0.50% and the size of the Asset Purchases programme at 375bn. At their second meeting the only member voting for a 25 basis point increase moved back to being on hold. The BoE Governor, Mark Carney, in his opening reports at the May Quarterly Inflation Report made reference to the EU Referendum stating a vote to leave the EU could have material economic effects on the exchange rate, on demand and on the economy s supply potential that could affect the appropriate setting of monetary policy. The result of the EU Referendum, on the 24th June, surprised most in the market, with a 51.9% to 48.1% margin, in favour of a vote to leave the UK. Prime Minister David Cameron resigned immediately and there were calls within the main opposition Labour Party for their leader to step-down. The credit rating agencies were quick to downgrade the UK. S&P moved to AA (from AAA) and retained a negative outlook. Moody s held stable at Aa1 but initiated a negative outlook and Fitch cut from AA+ to AA and maintained its negative outlook. The BoE Governor Mark Carney came out with a statement on the 30th June giving a strong hint that more monetary policy easing could take place over the summer. Markets have now priced in almost 40bps of cuts in the Bank Rate and a 13% chance of a move to -0.25% on the Bank Rate by the middle of The Chancellor George Osborne has also suggested a cut in corporation tax from 20% to 15% and made clear that his target to hit a budget surplus in 2019/2020 would no longer be met implying there would be a reduction in austerity measures. The ultimate outcome of the UK s vote to leave the EU will not be known for some time and it is still possible it will not happen at all with legal challenges to its legitimacy, no timetable for evoking Article 50 (which would set the clock ticking for a two year exit timeframe) and several elections in Europe suggesting that the EU may well come back to the table offering a better deal to the UK if it can persuade its electorate to stay in. In this respect uncertainty is likely to continue to cast a cloud over the UK. Your Investment Portfolio The Sterling Liquidity Portfolio invests in high quality sterling money market instruments such as commercial paper, floating rate notes, medium term notes and bank obligations. 3

6 INVESTMENT ADVISERS REPORT (continued) EURO LIQUIDITY PORTFOLIO Market Recap The main event was the ECB meeting on the 26th March 2016 where it cut the rate on the deposit facility by a further 0.1% to -0.4% and announced a raft of new measures; increasing Quantitative Easing ( QE ) bond buying to 80bn from 60bn a month and from Q will also include non-bank investment grade Corporate bonds within its QE programme, from June It will also launch a new series of targeted longer-term refinancing operations ( TLTRO ) each with a maturity of four years and subject to certain conditions, will allow Banks to borrow as low as the deposit rate facility. In the question and answer session, following the ECB announcement, President Draghi said the ECB were not planning to introduce tiered deposit rates suggesting the move to -0.4% might be the final one. The action taken by the ECB, after some initial disappointment regarding the potential for further cuts in interest rates, led to a big rally in financial risk assets. Economic data continues to print at growth of around 1-1.5% and core inflation hovers around 1%. Unemployment, however, continues to fall steadily and leading indicators suggest modest expansion. It was a quiet Q2 for ECB policy with no changes to its main refinancing operations or marginal lending and deposit facilities at either of its two meetings. There were few changes to their latest macroeconomic forecasts but at their most recent 2nd June meeting core inflation was revised lower over the next three years. To put this into context the ECB have now, in total, reduced by 0.5% their underlying inflation forecast for 2017, compared with that projected in June 2015, despite the fact that during this time they have cut interest rates further into negative territory and increased QE. On the 8th June the ECB began its new corporate sector purchase programme ( CSPP ), buying got off to a good start with 96% undertaken in the secondary market. Fears that the Spanish elections would be impacted by the UK s vote to leave the EU proved to be unfounded and although the main party did not end up with overall control there was no swing to the more anti-eu parties. Some form of collation looks likely to be the ultimate outcome. Economic data overall surprised marginally to the upside but partly as factor of depressed expectations than any genuine material improvement. The surprise news on the UK vote to leave the EU saw markets rapidly re-price further rate cuts by the ECB but only by a modest 10-15bps by the end of Your Investment Portfolio The Euro Liquidity Portfolio invests in high quality Euro money market instruments such as commercial paper, floating rate notes, medium term notes and bank obligations. OUR COMMITMENT Invesco is committed to customer service and an investment objective that seeks to maximise current income while preserving capital and maintaining liquidity. As always, we are ready to respond to your comments about this report and any questions you may have about the Portfolios. Please call Invesco in London at Invesco Global Liquidity (A division of Invesco Asset Management Limited) Date: 06 July

7 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016 US Dollar Sterling Euro Liquidity Liquidity Liquidity Combined Portfolio Portfolio Portfolio Total* Note USD GBP EUR USD Assets Transferable securities 2,626,631,580 _ 892,697, ,671,880 4,839,433,703 _ Financial assets at fair value through profit or loss 4 2,626,631, ,697, ,671,880 4,839,433,703 Deposits with credit institutions 3(k) 803,738,704 75,734,212 66,653, ,024,302 Cash 3(k) 70,854 18, ,708 Accrued income and other receivables 5 1,277,482 _ 310,255 11,602 1,705,090 _ Total assets 3,431,647,766 _ 968,812, ,355,557 5,820,278,803 _ Liabilities Bank overdraft 3(k) (4) (4) Distributions payable 6 (1,012,581) (282,150) (1,389,731) Securities purchased payable (10,001,913) (11,112,125) Accrued expenses and other liabilities (1,402,854) _ (338,968) (232,606) (2,114,378) _ Total liabilities (excluding net assets attributable to redeemable participating Shareholders) (2,415,439) _ (621,118) (10,234,519) (14,616,238) _ Net Assets Attributable to redeemable participating Shareholders 7, 16 3,429,232, ,191, ,121,038 5,805,662,565 *All assets and liabilities of the Sterling Liquidity Portfolio and the Euro Liquidity Portfolio were converted into US Dollars at the exchange rates ruling at the period end on 30 June 2016 as disclosed in Note 3 (e) to the financial statements. The accompanying notes form an integral part of these financial statements. 5

8 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015 US Dollar Sterling Euro Liquidity Liquidity Liquidity Combined Portfolio Portfolio Portfolio Total* Note USD GBP EUR USD Assets Transferable securities 2,575,990, ,648, ,515,912 4,232,784,834 Money market instruments 250,000,000 _ 250,000,000 _ Financial assets at fair value through profit or loss 4 2,825,990, ,648, ,515,912 4,482,784,834 Deposits with credit institutions 3(k) 870,931, ,359,047 41,780,529 1,065,696,393 Cash 3(k) 73,405 30, ,771 Accrued income and other receivables 5 653,511 _ 276,891 25,750 1,089,563 _ Total assets 3,697,575,532 _ 850,357, ,352,192 5,549,711,561 _ Liabilities Bank overdraft 3(k) (11,273) (11,273) Distributions payable 6 (429,788) (200,159) (724,782) Accrued expenses and other liabilities (1,281,199) _ (237,114) (121,688) (1,762,835) _ Total liabilities (excluding net assets attributable to redeemable participating Shareholders) (1,722,260) _ (437,273) (121,688) (2,498,890) _ Net Assets Attributable to redeemable participating Shareholders 7, 16 3,695,853, ,920, ,230,504 5,547,212,671 *All assets and liabilities of the Sterling Liquidity Portfolio and the Euro Liquidity Portfolio were converted into US Dollars at the exchange rates ruling at the year end on 31 December 2015 as disclosed in Note 3 (e) to the financial statements. The accompanying notes form an integral part of these financial statements. 6

9 STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2016 US Dollar Sterling Euro Liquidity Liquidity Liquidity Combined Portfolio Portfolio Portfolio Total* Note USD GBP EUR USD Investment income Interest income/(expense) 9,153,555 2,766,560 (464,934) 12,597,879 Total investment income 9,153,555 2,766,560 (464,934) 12,597,879 Operating expenses Operating expenses 9 (3,703,740) (570,922) (192,189) (4,736,030) Total operating expenses before finance costs (3,703,740) (570,922) (192,189) (4,736,030) Negative yield on financial assets 3(c) (226,920) (253,197) Net investment income/(loss) from operations before finance costs 5,449,815 2,195,638 (884,043) 7,608,652 Finance costs Distribution to redeemable participating Shareholders 6 (5,446,098) (1,410,243) - (7,466,271) Proceeds attributable to share redemptions mechanism ,897 92,496 Total finance costs (5,446,098) (1,410,243) 82,897 (7,373,775) Change in Net Assets Attributable to redeemable participating Shareholders 3, ,395 (801,146) 234,877 *The Statement of Comprehensive Income for the Sterling Liquidity Portfolio and the Euro Liquidity Portfolio is converted into US Dollars at the average exchange rates where those rates represent a reasonable approximation to actual rates. The average exchange rates for the period ended 30 June 2016 are disclosed in Note 3 (e) to the financial statements. All the amounts above arose from continuing operations. There are no other gains or losses for the period other than those set out above. The accompanying notes form an integral part of these financial statements. 7

10 STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2015 US Dollar Sterling Euro Liquidity Liquidity Liquidity Combined Portfolio Portfolio Portfolio Total* Note USD GBP EUR USD Investment income Interest income 4,591,335 2,246,388 31,149 8,047,328 Net gains on financial assets at fair value through profit or loss 8 28,781 28,781 Total investment income 4,620,116 2,246,388 31,149 8,076,109 Operating expenses Operating expenses 9 (3,574,905) (650,594) (37,923) (4,608,059) Total operating expenses before finance costs (3,574,905) (650,594) (37,923) (4,608,059) Negative yield on financial assets 3(c) (32,289) (36,015) Net investment income/(loss) from operations before finance costs 1,045,211 1,595,794 (6,774) 3,468,050 Finance costs Distribution to redeemable participating Shareholders 6 (1,015,910) (1,059,127) - (2,628,960) Proceeds attributable to share redemptions mechanism ,525 2,816 Total finance costs (1,015,910) (1,059,127) 2,525 (2,626,144) Change in Net Assets Attributable to redeemable participating Shareholders 29, ,667 (4,249) 841,906 *The Statement of Comprehensive Income for the Sterling Liquidity Portfolio and the Euro Liquidity Portfolio is converted into US Dollars at the average exchange rates where those rates represent a reasonable approximation to actual rates. The average exchange rates for the period ended 30 June 2015 are disclosed in Note 3 (e) to the financial statements. All the amounts above arose from continuing operations. There are no other gains or losses for the period other than those set out above. The accompanying notes form an integral part of these financial statements. 8

11 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO REDEEMABLE PARTICIPATING SHAREHOLDERS FOR THE PERIOD ENDED 30 JUNE 2016 US Dollar Sterling Euro Liquidity Liquidity Liquidity Combined Portfolio Portfolio Portfolio Total* Note USD GBP EUR USD Net Assets Attributable to redeemable participating Shareholders at beginning of the period 3,695,853, ,920, ,230,504 5,547,212,671 Change in Net Assets Attributable to redeemable participating Shareholders 3, ,395 (801,146) 234,877 Proceeds from redeemable Shares issued 6,844,677,629 2,234,007, ,437,458 10,921,285,083 Distributions reinvested 6 2,374, ,621 3,488,226 Cost of redeemable Shares redeemed (7,113,676,575) (2,117,299,786) (361,662,881) (10,550,251,962) Cancellation of shares attributable to share redemption mechanism - - (82,897) (92,496) Currency adjustment 3(e) - (116,213,834) Net Assets Attributable to redeemable participating Shareholders at end of the period 3,429,232, ,191, ,121,038 5,805,662,565 *The Statement of Changes in Net Assets attributable to redeemable participating Shareholders for the Sterling Liquidity Portfolio and the Euro Liquidity Portfolio is converted into US Dollars at the average exchange rates where those rates represent a reasonable approximation to actual rates. The average exchange rates for the period ended 30 June 2016 are disclosed in Note 3 (e) to the financial statements. The accompanying notes form an integral part of these financial statements. 9

12 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO REDEEMABLE PARTICIPATING SHAREHOLDERS FOR THE PERIOD ENDED 30 JUNE 2015 US Dollar Sterling Euro Liquidity Liquidity Liquidity Combined Portfolio Portfolio Portfolio Total* Note USD GBP EUR USD Net Assets Attributable to redeemable participating Shareholders at beginning of the period 4,652,906, ,562, ,073,964 6,618,591,591 Change in Net Assets Attributable to redeemable participating Shareholders 29, ,667 (4,249) 841,906 Proceeds from redeemable Shares issued 9,837,698,056 2,055,406,429 1,099,881,111 14,194,889,439 Distributions reinvested 6 361, ,786 1,407,778 Cost of redeemable Shares redeemed (10,292,863,635) (2,203,086,261) (1,115,010,424) (14,891,846,638) Cancellation of shares attributable to share redemption mechanism - - (2,525) (2.816) Currency adjustment 3(e) (38,240,759) Net Assets Attributable to redeemable participating Shareholders at end of the period 4,198,131, ,106, ,937,877 5,885,640,501 *The Statement of Changes in Net Assets Attributable to Redeemable Participating Shareholders for the Sterling Liquidity Portfolio and the Euro Liquidity Portfolio are converted into US Dollars at the average exchange rates where those rates represent a reasonable approximation to actual rates. The average exchange rates for the period ended 30 June 2015 are disclosed in Note 3 (e) to the financial statements. The accompanying notes form an integral part of these financial statements. 10

13 NOTES TO THE FINANCIAL STATEMENTS 1. Establishment Short-Term Investments Company (Global Series) plc (the Company ) was incorporated as an investment company with variable capital under the laws of Ireland as a public limited company on 12 June The Company was re-authorised by the Central Bank of Ireland (the Central Bank ) on 24 August 1998 as an Undertaking for Collective Investments in Transferable Securities pursuant to the European Communities (Undertakings for Collective Investments in Transferable Securities) Regulations 2011 (as amended) and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (the UCITS Regulations ). The Company is constituted as an umbrella fund insofar as the share capital of the Company (the Shares ) may be divided into different series of Shares, with each series representing a portfolio of assets which comprise a separate fund (a Portfolio ). Pursuant to Irish law, there is segregated liability between Portfolios. As at 30 June 2016, the Company had issued Shares of three Portfolios, the US Dollar Liquidity Portfolio, the Sterling Liquidity Portfolio and the Euro Liquidity Portfolio. The US Dollar Liquidity Portfolio s Shares were divided into Institutional, Select, Reserve, Corporate, Command, Investor and Institutional Accumulation Classes. The Sterling Liquidity Portfolio s Shares were divided into Institutional, Select, Corporate, Command and Institutional Accumulation Classes. The Euro Liquidity Portfolio s Shares were divided into Institutional, Select, Reserve, Corporate, Command, and Institutional Accumulation Classes. Effective 19 July 2016, the Portfolios delisted from the Irish Stock Exchange. Portfolios Primary Objective The primary objective of each Portfolio is to maximise current income, consistent with the preservation of principal and liquidity, and to aim to provide a return in line with money market rates. The further investment objective of each Portfolio is set out below. US Dollar Liquidity Portfolio The investment objective of the US Dollar Liquidity Portfolio is to provide as high a level of current income, in US Dollars as is consistent with the preservation of capital and liquidity, by investing in a diversified portfolio of US Dollar denominated money market instruments considered by the Investment Advisers to be of high quality. Sterling Liquidity Portfolio The investment objective of the Sterling Liquidity Portfolio is to provide investors with as high a level of current income in Pounds Sterling as is consistent with the preservation of capital and liquidity by investing in a diversified portfolio of Sterling denominated money market instruments considered by the Investment Advisers to be of high quality. Euro Liquidity Portfolio The investment objective of the Euro Liquidity Portfolio is to provide investors with as high a level of current income in Euro as is consistent with the preservation of capital and liquidity by investing in a diversified portfolio of Euro denominated money market instruments considered by the Investment Advisers to be of high quality. Invesco Global Asset Management DAC (the Manager ) believes that its investment practices and disciplined approach to investing in US Dollar, Sterling and Euro denominated money market instruments will enable the US Dollar Liquidity, Sterling Liquidity and the Euro Liquidity Portfolios to achieve their stated policies respectively, although this cannot be guaranteed. 2. Basis of Preparation These unaudited condensed financial statements for the period ended 30 June 2016 have been prepared in accordance with FRS 104: Interim Financial Reporting and Irish statute comprising the Companies Act, 2014 and the UCITS Regulations. The unaudited condensed financial statements should be read in conjunction with the audited financial statements for the year ended 31 December 2015, which were prepared in accordance with applicable accounting standards and in accordance with Irish statute comprising the Companies Act, The financial statements have been prepared on a going concern basis for the Company under the historical cost convention as modified by the revaluation of financial assets and liabilities held at fair value through profit or loss. The format and certain wordings of the financial statements have been adapted from those contained in Irish statute so that, in the opinion of the Directors, they more appropriately reflect the nature of the Company s business as an investment fund. The Company has availed of the exemption available to open-ended investment funds under Section 7 Statement of Cash Flows of FRS 102, not to prepare a cash flow statement on the basis that substantially all of the Company s investments are highly liquid and carried at fair value, and the Company provides a Statement of Changes in Net Assets attributable to redeemable participating Shareholders. Segmental Reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Company s segments are based on the nature of the products provided and are considered to be each of the Portfolios. 11

14 NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant Accounting Policies The significant accounting policies adopted by the Company are consistent with those followed in the most recent annual financial statements and are as follows: (a) Use of Estimates The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires the Directors to exercise their judgment in the process of applying the Company s accounting policies. The estimates and associated judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The Directors make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the actual results. Changes in data inputs and assumptions about these factors could affect the reported fair value of financial instruments and differences could be material. Critical accounting estimates and judgments relate to the valuation of investments. (b) Investments The Company classifies its investments in transferable securities and money market instruments as financial assets at fair value through profit or loss. For the purpose of determining the redemption value of the redeemable participating Shares in the Portfolios, the investments held by the Portfolios are valued using amortised cost as a best estimate of fair value. Under FRS 102, in accounting for all of its financial instruments, an entity is required to apply either (a) the full requirements of Sections 11 "Basic Financial Instruments" and Section 12 "Other Financial Instruments Issues" of FRS 102, or (b) the recognition and measurement provisions of International Accounting Standards 39 "Financial Instruments: Recognition and Measurement" ( IAS 39 ) as adopted for use in the European Union and the disclosure requirements of Sections 11 and 12, or (c) the recognition and measurement provisions of International Financial Reporting Standards 9 " Financial Instruments" and the disclosure requirements of Sections 11 and 12. The Company has elected to apply the recognition and measurement provisions of IAS 39 and the disclosure requirements of Sections 11 and 12. In normal market conditions, the difference between the two valuation bases is not significant. Valuation of Financial Assets The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on quoted market prices at the Statement of Financial Position date. The quoted market price used for financial assets held by the Company is the price within the bid-ask spread that is most representative of fair value. The value of any investment which is not normally listed, quoted or traded in on a Recognised Market shall be the probable realisation value of the investment estimated with care and good faith by a competent person approved for the purpose by BNY Mellon Trust Company (Ireland) Limited (the Depositary ), which may be the Directors or their delegate in consultation with Invesco Global Liquidity, a division of Invesco Asset Management Limited in the UK and Invesco Advisers Inc. (the Investment Advisers ). The Company enters into agreements to purchase securities and resell them at a future date (repurchase agreements). The difference between the purchase cost and sales proceeds is recognised as interest income using the effective interest method over the life of the repurchase agreement. As at 30 June 2016, no repurchase agreements were held. Recognition and Measurement Regular purchases and sales of investments are recognised on the trade date the date on which the Company commits to purchase or sell the investment. Financial assets at fair value through profit or loss are initially recognised at fair value. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Realised gains and losses on investment disposals are calculated using the First In First Out ( FIFO ) method and are also recognised as a component of net gains/(losses) on financial assets at fair value through profit or loss and are included in the Statement of Comprehensive Income in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are included in the Statement of Comprehensive Income within net gains/(losses) on financial assets at fair value through profit or loss in the period in which they arise. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. 12

15 NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant Accounting Policies (continued) (c) Income Recognition Interest Income on Securities Interest income on securities includes interest and amortisation of discount earned (net of premium), including original issue discount. Interest income is recognised in the Statement of Comprehensive Income for all debt instruments using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or financial liability, as calculated at the acquisition date. When calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Deposit Interest Interest received and receivable for the period is credited as earned. Negative yield on financial assets Negative yield on financial assets relates to interest expense resulting from a negative effective interest rate on a financial instrument. (d) Functional and Presentation Currency Items included in the Company s financial statements are measured using the currency of the primary economic environment in which each Portfolio operates (the functional currency ). In accordance with Section 30 Foreign Currency Translation of FRS 102, the functional currency of each Portfolio has been evaluated by the Directors. The functional currency of the US Dollar Liquidity Portfolio is US Dollars, the functional currency of the Sterling Liquidity Portfolio is Sterling and the functional currency of the Euro Liquidity Portfolio is Euro. The presentation currency is the same as the functional currency for each of the Portfolios. The presentation currency of the Company is US Dollars. (e) Foreign Currency Transactions and Balances Foreign currency assets and liabilities, including Net Assets Attributable to redeemable participating Shareholders, are converted into functional currency using the closing rate applicable at the valuation date. Foreign currency income and expenses in the Statement of Comprehensive Income are converted into the functional currency at the average exchange rate for the period, which approximates to the actual exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses arising from transactions and conversions are presented in the Statement of Comprehensive Income within net gains/(losses) on financial assets at fair value through profit or loss. For aggregation purposes, all assets and liabilities together with income and expenses for all classes of shares are converted into US Dollars. Each Portfolio s Statement of Financial Position is converted to US Dollars at the exchange rate ruling at the reporting period end date. Each Portfolio s Statement of Comprehensive Income, proceeds from redeemable participating Shares issued and amounts paid on redeemable participating Shares are converted at the average rates where those rates represent a reasonable approximation to actual rates. The above conversion method results in a foreign currency adjustment. This adjustment has no impact on the Net Asset Value of the individual Portfolios for redemption purposes. In respect of the aggregation of Portfolios financial statements, the following exchange rates against the US Dollar were applied in the preparation of the financial statements: 30 June December June 2015 Closing Rate Average Rate Closing Rate Average Rate Closing Rate Average Rate Euro Sterling (f) Expenses All expenses, including management fees and depositary fees, are recognised in the Statement of Comprehensive Income on an accruals basis. (g) Redeemable Shares Redeemable participating Shares are redeemable at the holder s option and are classified as financial liabilities. The dividend, if any, on these redeemable participating Shares is recognised in the Statement of Comprehensive Income as finance costs. The Euro Liquidity Portfolio had negative yield at 30 June 2016 and 31 December 2015, as a result of a share redemption mechanism. For further information please refer to Note 7 of the financial statements. A Share can be redeemed at any time for cash equal to a proportionate share of the relevant Portfolio s Net Asset Value. A Share is carried at the redemption amount that is payable at the Statement of Financial Position date if the holder exercised its right to put the share back to the Portfolio. 13

16 NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant Accounting Policies (continued) (h) Receivables Receivables are financial assets with fixed or determinable payments that are not quoted in an active market. The carrying amount of receivables approximates to their fair value. (i) Payables The carrying amount of payables approximates to their fair value. (j) Transaction Costs Transaction costs are costs incurred to acquire financial assets at fair value through profit or loss. They include the bid-ask spread, fees and commissions paid to agents, advisers, brokers and dealers. Transferable costs on transferable securities and money market instruments are included in the purchase and sale prices of the investments as per standard fixed income market practice. These costs cannot be practically or reliably gathered as these costs are embedded in the cost of the investment and cannot be separately identified or disclosed. All transactions are carried out at normal commercial terms, negotiated at arm s length and in the best interests of shareholders. (k) Cash and Cash Equivalents Cash and cash equivalents including deposits held on call with banks and other short-term highly liquid investments with original maturities of three months or less are valued at its face value plus any accrued interest, where applicable. Bank overdrafts are classified as liabilities. (l) Negative Yield Market conditions, including but not limited to a reduction in interest rates, may have a material impact on any yield payable in respect of a class of Shares in a Portfolio to the extent that either the yield will be so low that following the deduction of the charges and expenses applicable to the Shares, it will be negative net yield or the yield is itself already a negative number before the charges and expenses have been deducted, namely a negative gross yield. Such market conditions, together with any actions taken by financial institutions in response thereto (such as, for example, by way of reducing interest rates and therefore income payable on investments of a Portfolio), are outside the control of the Directors. A negative net yield and/or negative gross yield environment creates potential issues for any Portfolio which seeks to maintain a stable Net Asset Value per Share in a Portfolio in that the yield of the Portfolio may be unable to pay a distribution or other charges or expenses or other liabilities of the Portfolio, such as the fees of service providers or other operating costs. The Company has implemented a Share Redemption Mechanism, to account for the above scenarios. Further information is disclosed in Note 7 to the financial statements. 4. Financial Assets at Fair Value through Profit or Loss The Company has chosen to early adopt FRED 62 Draft Amendments to FRS 102 Fair Value Hierarchy Disclosures, which is effective for accounting periods beginning on or after 1 January The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: 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 (ie 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. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgement by the Investment Manager. The Investment Manager considers observable data to be those market data that are readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. During the period ended 30 June 2016 and the year ended 31 December 2015, there were no transfers between investment levels of the fair value hierarchy for financial assets which were recorded at fair value. 14

17 NOTES TO THE FINANCIAL STATEMENTS (continued) 4. Financial Assets at Fair Value through Profit or Loss (continued) No reconciliation of movements in the fair value of financial investments categorised within Level 3 between the beginning and the end of the reporting period is presented as the Company held no Level 3 investments during the period or the prior year. The following tables analyse within the fair value hierarchy the Company's financial assets measured at fair value at 30 June 2016 and 31 December There were no financial liabilities at the period end. 30 June 2016 Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total USD USD USD USD US Dollar Liquidity Portfolio Transferable Securities Certificate of Deposit 472,000, ,000,368 Commercial Paper 1,393,431,212 1,393,431,212 Floating Rate Notes _ 761,200, ,200,000 _ Total financial assets at fair value through profit or loss _ 2,626,631,580 2,626,631,580 _ Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total GBP GBP GBP GBP Sterling Liquidity Portfolio Transferable Securities Certificate of Deposit 254,574, ,574,710 Commercial Paper 398,539, ,539,059 Floating Rate Notes 159,386, ,386,535 Mutual Bond Fund _ 80,197,133 80,197,133 _ Total financial assets at fair value through profit or loss _ 892,697, ,697,437 _ Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total EUR EUR EUR EUR Euro Liquidity Portfolio Transferable Securities Certificate of Deposit 266,551, ,551,215 Commercial Paper 557,372, ,372,270 Floating Rate Notes 1,860,858 1,860,858 Mutual Bond Fund 91,887,537 91,887,537 Total financial assets at fair value through profit or loss _ 917,671, ,671,880 _ 31 December 2015 Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total USD USD USD USD US Dollar Liquidity Portfolio Transferable Securities Certificate of Deposit 232,000, ,000,000 Commercial Paper 1,519,907,839 1,519,907,839 Corporate Bond 25,889,035 25,889,035 Floating Rate Notes 798,193, ,193,728 Money Market Instruments Repurchase Agreement _ 250,000, ,000,000 _ Total financial assets at fair value through profit or loss _ 2,825,990,602 2,825,990,602 _ 15

18 NOTES TO THE FINANCIAL STATEMENTS (continued) 4. Financial Assets at Fair Value through Profit or Loss (continued) Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total GBP GBP GBP GBP Sterling Liquidity Portfolio Transferable Securities Certificate of Deposit 139,949, ,949,747 Commercial Paper 427,493, ,493,658 Floating Rate Notes 96,191,928 96,191,928 Government Agency 15,013,092 15,013,092 Mutual Bond Fund _ 70,000,000 70,000,000 _ Total financial assets at fair value through profit or loss _ 748,648, ,648,425 _ Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total EUR EUR EUR EUR Euro Liquidity Portfolio Transferable Securities Certificate of Deposit 90,003,873 90,003,873 Commercial Paper 353,535, ,535,319 Floating Rate Notes 12,003,978 12,003,978 Mutual Bond Fund 53,972,742 53,972,742 Total financial assets at fair value through profit or loss _ 509,515, ,515,912 _ 5. Accrued Income and Other Receivables 30 June 2016 US Dollar Sterling Euro Liquidity Liquidity Liquidity Portfolio Portfolio Portfolio Combined Total USD GBP EUR USD Accrued interest income 1,254, ,714 1,652,365 Distributions receivable Other receivable 23,071 12,541 11,008 52,064 1,277, ,255 11,602 1,705, December 2015 US Dollar Sterling Euro Liquidity Liquidity Liquidity Portfolio Portfolio Portfolio Combined Total USD GBP EUR USD Accrued interest income 599, ,713 16, ,073 Distributions receivable Other receivable 53,861 19,178 9,399 92, , ,891 25,750 1,089,563 16

19 NOTES TO THE FINANCIAL STATEMENTS (continued) 6. Distributions to Redeemable Participating Shareholders For the period ended 30 June 2016 US Dollar Liquidity Portfolio Institutional Institutional Select Reserve Corporate Command Investor Accumulation Total Class Class Class Class Class Class Class 2016 USD USD USD USD USD USD USD USD Opening balance (400,922) (2,541) (781) (22,698) (940) (1,906) (429,788) Distributions paid during the period 2,186, , , ,489,021 Distributions reinvested during the period 2,127, ,720 5,404 72,133 25,784 11,047 2,374,284 Distributions payable at period end 873,374 91,712 1,038 38,664 5,958 1,835 1,012,581 4,786, ,601 5, ,689 31,473 11,355 5,446,098 Income transferred to Net Assets Attributable to redeemable participating Shareholders 3,717 3,717 4,786, ,601 5, ,689 31,473 11,355 3,717 5,449,815 Sterling Liquidity Portfolio Institutional Institutional Select Corporate Command Accumulation Total Class Class Class Class Class 2016 GBP GBP GBP GBP GBP GBP Opening balance (188,195) (4,265) (7,696) (3) (200,159) Distributions paid during the period 493,572 14,543 42, ,631 Distributions reinvested during the period 764,689 10,958 1, ,621 Distributions payable at period end 266,710 3,154 12, ,150 1,336,776 24,390 49, ,410,243 Income transferred to Net Assets Attributable to redeemable participating Shareholders 785, ,395 1,336,776 24,390 49, ,395 2,195,638 Euro Liquidity Portfolio Institutional Institutional Select Reserve Corporate Command Accumulation Total Class Class Class Class Class Class 2016 EUR EUR EUR EUR EUR EUR EUR Opening balance Distributions received during the period (39,084) (12,250) (31,112) (82,446) Distributions reinvested during the period Distributions receivable at period end (251) (82) (261) (594) (39,281) (12,297) (31,319) (82,897) Income transferred to Net Assets Attributable to redeemable participating Shareholders (801,146) (801,146) (39,281) (12,297) (31,319) (801,146) (884,043) 17

20 NOTES TO THE FINANCIAL STATEMENTS (continued) 6. Distributions to Redeemable Participating Shareholders (continued) For the period ended 30 June 2015 US Dollar Liquidity Portfolio Institutional Institutional Select Reserve Corporate Command Investor Accumulation Total Class Class Class Class Class Class Class 2015 USD USD USD USD USD USD USD USD Opening balance (118,085) (4,658) (932) (825) (767) (1,034) (126,301) Distributions paid during the period 538,107 20, , ,297 Distributions reinvested during the period 337,155 8,775 5,204 1,829 2,359 6, ,803 Distributions payable at period end 208,244 4, , , , ,421 28,665 5,250 7,931 1,743 6,900 1,015,910 Income transferred to Net Assets Attributable to redeemable participating Shareholders ,421 28,665 5,250 7,931 1,743 6, ,016,431 Sterling Liquidity Portfolio Institutional Institutional Select Corporate Command Accumulation Total Class Class Class Class Class 2015 GBP GBP GBP GBP GBP GBP Opening balance (170,178) (13,174) (13,333) (2) (196,687) Distributions paid during the period 317,670 61,039 27, ,025 Distributions reinvested during the period 671,525 11,339 3, ,786 Distributions payable at period end 150,230 12, , ,247 71,379 18, ,059,127 Income transferred to Net Assets Attributable to redeemable participating Shareholders 536, , ,247 71,379 18, ,667 1,595,794 18