Martin Currie Global Portfolio Trust Annual report year to 31 January 2016
Registered in Scotland, no 192761 www.martincurrieglobal.com Financial Highlights Strong long-term performance
240 Share price total return 215% n Since launch, the Company’s NAV total return 154% share price and net asset value 200 Benchmark 133% (‘NAV’) have outperformed 160 the benchmark.
120 n Shareholders have enjoyed (%) a share price total return of 80 215% since launch in 1999.
40
0
(40) 1999 2001 2003 20052007 20092011 20132015
Source: Martin Currie Investment Management.
Total returns*
Year ended Year ended 31 January 2016 31 January 2015
Net asset value per share** 0.9% 16.1%
Benchmark (0.1%) 17.3%
Share price (1.4%) 17.4%
Source: Martin Currie Investment Management. * The combined effect of the rise and fall in the share price, net asset value or benchmark together with any dividend paid. ** The net asset value is exclusive of income with dividends reinvested.
Growing income Reducing costs Dividend per share (pence) Ongoing charges (%)***
1.00 4.25 4.15 4.10 0.95 4.00 0.90 4.00 0.90 3.90 0.85 0.80 3.75 3.70 0.80 (% )
(pence) 0.75 0.75 0.73 0.71 3.50 0.70
0.65
3.25 0.60 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
*** Ongoing charges (as a percentage of shareholders’ funds) are calculated using average net assets over the year. The ongoing charges figure has been calculated using the AIC’s recommended methodology.
About Martin Currie Global Portfolio Trust 1
A global strategy for long-term growth Objective Martin Currie Global Portfolio Trust plc (‘the Company’) Long-term capital growth in excess of the capital offers investors a core equity portfolio. It invests in return of the FTSE World index global equities for long-term growth and is well diversified across around 60 individual holdings. Benchmark FTSE World index Managed discount The Company manages its discount to ensure that the Capital structure Company’s share price trades at, or around, NAV in 101,044,956 ordinary shares of 5p, each entitled to normal market conditions. one vote Proven management team Dividends paid Your Board has appointed Edinburgh based Martin January, April, July and October Currie Investment Management Limited (‘Martin Currie’ or the ‘investment manager’) to manage the portfolio. Tom Walker is a portfolio manager with over 25 years experience and is the Martin Currie director responsible for the Company, a role he has fulfilled since 2000. Tom is supported by Martin Currie’s geographical and sectoral research teams.
Contents
Overview Financial review Chairman’s statement 2 Independent auditors’ report 25 Manager’s review 4 Statement of comprehensive income 29 Portfolio summary 6 Statement of financial position 30 Portfolio holdings 7 Statement of changes in equity 31 Strategic report 9 Statement of cash flow 32 Board of directors 12 Notes to the financial statements 33
Governance Investor information Report of the directors 13 Directors and advisers 44 Directors’ remuneration statement 23 Glossary of terms 45 Ways to invest in the Company 47 Shareholder information 48 Chairman’s Statement 2
Welcome to the annual report of Developing the Company your Company, covering the 12 Your Board regularly reviews the Company’s performance months to 31 January 2016. and strategy against the external market environment in The year has been exceptionally which it operates. challenging for global stockmarkets During the year the Company launched a stock lending with significant economic and programme operated by the custodian, State Street, political uncertainty resulting which adds modestly to income. Any stock loans are fully in periods of unusual volatility. collateralised and do not affect the management of the Against this backdrop, I am pleased portfolio by Tom Walker. to report that the NAV total return In the light of the current historically low levels of interest was an increase of 0.9% compared rates, combined with Tom Walker’s belief in the longer with a 0.1% fall in the FTSE World term positive outlook for global equity markets, the Board index. This is a welcome, if modest, is considering the introduction of long term gearing when return to outperformance which conditions are right. The Board believes that, although costs has been successfully delivered by will increase, this will be offset by additional income and, the portfolio manager, Tom Walker, over time, an improved capital growth. There would be no based on his good stock selection. change in the way the portfolio is invested as a result of the While NAV increased, the share additional funds raised by the gearing. price fell by 1.4% because of an unusually large discount of 1.9% Environmental, Social & Corporate Governance on the last day of the year. This (‘ESG’) was largely due to a sharp rise in Environmental, Social & Corporate Governance are now the US market after the London widely recognised as important factors in long-term market closed, increasing the discount overnight which was responsible investing and in the success of companies addressed at the start of the next business day. More detail around the world. I am pleased to report that the of the portfolio performance and holdings is given in Tom investment manager Martin Currie has gained the highest Walker’s report on pages 4 and 5. A+ rating from the United Nations Principles for Responsible Income and dividends Investment (UNPRI) for its approach to ESG. Performance was helped by reducing costs and rising “I am pleased to report that the NAV income. This has allowed a small increase in the total dividend for the year of 0.05p to 4.15p (2015: 4.10p) per total return was an increase of 0.9% share giving a yield on the year end share price of 2.4%. During the year, interim dividends of 0.9p were paid in compared with a 0.1% fall in the FTSE July, October and January and the Board has declared a fourth interim dividend of 1.45p which will be paid on 29 World index.” April 2016 to shareholders on the register at 8 April 2016. The Company has steadily grown its dividend over the years, providing one of the highest dividend yields in the Association of Investment Companies’ (‘AIC’) global sector. 3
Attractive features and benefits “As the global economy enters an anticipated In a crowded sector, I would like to take this opportunity to remind shareholders of three of period of low growth, the ability to pick the the principal benefits of Martin Currie Global stocks that are able to prosper is vital.” Portfolio Trust. n First investment returns; The Company has comfortably Outlook outperformed the benchmark since launch in 1999. Tom Walker, your portfolio manager, has a 16-year tenure Over the last year, the variation in returns from different and I believe that experience, stability and consistency is regions around the world reaffirms the belief that our valuable. global investment remit is well placed to take advantage of the best opportunities among the winners and losers across n Secondly income; The Company continues to pay one of the markets that active management and rigorous analysis the highest dividends in the sector which has grown in identify. As the global economy is expected to continue its real terms as its dividend growth has outpaced inflation. period of low growth, the ability to pick the stocks that are n Finally, a distinctive ‘zero discount’ policy; This is a able to prosper is vital. Tom Walker, backed by a team of significant advantage to shareholders because the 60 investment professionals, has an impressive track record share price will remain close to NAV in normal market and one that we believe will continue. conditions, allowing ample liquidity to both existing I thank you for your continued support. Please contact shareholders and new investors. During the year, the me if you have any questions regarding your Company at turbulence and uncertainty has at times required the [email protected] Company to buy back shares as part of managing the discount, but it has also been able to reissue some of these shares. The net effect has been a reduction of about 2% in total share capital. The Board is confident that the policy is of real benefit to investors over the long term.
Neil Gaskell 24 March 2016 Manager’s Review 4
Market review Perhaps the clearest picture of how expectations have developed in markets over the last year can be seen in the Global equities entered 2015 with yield of 10-Year treasury bonds. This yield is a good gauge strong momentum but peaked in April. of expectations for growth (and inflation) for the next 10 Following a steep decline in August, years. At the start of the period under review, the yield was at they recovered somewhat to end the historically low levels, indicating that investors were concerned year to 31 January 2016 virtually flat. about deflation and a lack of growth. Expectations improved The drivers of these market spasms by early summer and then plateaued. In early 2016, after included economic issues such as the the US Federal Reserve increased interest rates, the yield fell slowing Chinese economy, US interest dramatically again. Investors once again fear that the economy rate cycle and a dramatic collapse is fragile and that growth prospects have deteriorated. in commodity prices, especially oil. However, political uncertainty also had 10-year treasury bonds yields an impact, including the migration crisis 2.6 in the Middle East and Europe, eurozone
dissonance and Russia’s deteriorating 2.4 relationship with the West.
At a regional level, this was another 2.2 year when emerging markets underperformed, falling 20.3%, and % 2.0 the developed markets of South East Asia also lagged, falling 10.9%. The 1.8 best performing developed market was Japan, followed by the US, while Europe 1.6 lagged (the UK market being a drag on the region). However, the range of returns in developed markets 1.4 was not large and the weakness of sterling against the dollar 31 Dec 14 31 Mar 15 31 Jun 15 31 Sep 15 31 Dec 15 and, to a lesser extent the yen, was a positive contributor to Source: Martin Currie Investment Management Limited. returns from these regions. Investment performance and activity Returns from equities have diverged widely by region The Company’s NAV total return for the period and especially sector was 0.9%, 1% ahead of the FTSE World index. 10 The outperformance was delivered by stock 7.9% 6.8% 5.3% selection; both geographic and sector positioning 5 3.3% netted out as neutral contributors to relative Developed Basic performance. Europe Materials Oil & Gas % 0 Japan North Consumer Consumer The worst contributor over the period was America services goods Singapore telecom network, M1. The possibility (5) (3.0%) of a new entrant into the Singapore market caused concern that pricing will become very (10) competitive and destroy margins. We believe this has been overdone and continue to hold (15) (14.7%) M1. Energy distributor Schneider Electric suffered, along with many industrials, as growth (20) (19.8%) rates declined over the year. The valuation of
Source: FTSE GBP total returns for one year to 31 January 2016. Schneider is attractive, but the growth outlook remains poor. While we continued to hold While the spread of returns from developed stock markets was Schneider, we sold United Technologies, which has suffered quite narrow, the range of returns by sector was wide. The basic in a similar way, in particular in its Otis division in China. materials sector, driven by the collapse in commodity prices, fell Insurance company Prudential plc is one of our largest 19.8% and the oil and gas sector was almost as bad, down holdings and continues to operate well in Asia, the US and 14.7%. In contrast, the consumer services and consumer goods UK. However, low long-term interest rates are a headwind sectors rose 7.9% and 6.8%, respectively. to insurance companies and this led to the firm’s poor share price performance during the period. 5
The stocks that drove the Company’s outperformance For many companies, cash flow has been strong, but this has included Facebook, which was a purchase during the year, been utilised more in share buy backs, dividends and merger and two long-term outperforming holdings, L Brands (better and acquisitions than in growth initiatives. known on the High Street as Victoria’s Secret) and defence This process could continue, allowing stock markets to make contractor, Lockheed Martin. It is worth noting that BG modest progress. However, interest rates are already very Group, which was bid for by Shell during the period, was low and in many countries negative. The scope, therefore, also in the top 10 positive contributors – despite the fallout for shocking the economy into growth with lower rates is in the oil and gas sector from falling energy prices. nearly exhausted. New ideas are required and the risk is that Activity during the year was driven by stock selection the credibility of central banks is now severely damaged, preferences. The market collapse in August presented an and investors will ignore the policy statements until the hard opportunity to invest in ARM Holdings, the UK microprocessor evidence of improved growth is apparent. In recent years, giant. We added Japanese telecom- network operator KDDI, which provides reasonable growth in a “It will be a year that challenges advances in global equity low-growth world, at an attractive valuation level. As mentioned earlier, markets. However, we believe this is also an environment social media giant Facebook was that will throw up opportunities…” another significant purchase during the year. It continues to impress, gaining share in the advertising space, and we believe its the mere announcement of a round of quantitative easing apparently rich valuation is justifiable. Other purchases was enough to push markets higher. This may no longer be include CSL (Australia), Airbus (Europe) and United Parcel the case. Services and Mylan (both US). We sold Pentair and United While growth looks really challenged when dealing in the Technologies, which both face slowing demand, possibly for generalities of stock market averages or GDP, there are clearly an extended period. We also disposed of Microsoft, following individual companies and specific niches within economies several years of very strong performance. that are still growing well. There are also companies enjoying As a result of this stock activity, we have less exposure to modest growth at valuations that remain attractive. We Europe than a year ago, while we have reduced weights to expect the year ahead to be one of low growth, low inflation industrials in favour of technology and telecoms. and low interest rates. It will be a year that challenges advances in global equity markets. However, we believe this Outlook is also an environment that will throw up opportunities and A year ago, on balance, investors were most worried about where, by choosing companies wisely, reasonable returns for the extended valuation of equities. Today, their greatest shareholders can be achieved. concern is probably the lack of global economic growth. Despite the efforts of so many central banks to stimulate it, the weak oil price and collapsing sovereign bond yields confirm what we read in the news everyday – growth in the underlying economies is lacking. Easy money has boosted asset prices, but done nothing to lift businesses’ confidence to make long-term investments to expand their operations.
Tom Walker 24 March 2016 Portfolio Summary 6
Portfolio distribution by region 31 January 2016 31 January 2016 31 January 2015 31 January 2015 Company % FTSE World index % Company % FTSE World index % North America 54.1 57.7 52.2 56.4 United Kingdom 11.9 7.2 12.9 7.6 Developed Europe ex UK 11.0 16.0 15.3 16.0 Developed Asia Pacific ex Japan 9.5 5.8 9.3 6.5 Japan 8.6 9.0 6.2 8.5 Global Emerging Markets 3.1 4.0 2.5 4.8 Middle East 1.8 0.3 1.6 0.2 100.0 100.0 100.0 100.0
By sector 31 January 2016 31 January 2016 31 January 2015 31 January 2015 Company % FTSE World index % Company % FTSE World index % Financials 22.7 20.9 21.7 21.3 Consumer services 14.5 11.8 15.8 11.2 Industrials 13.7 12.1 17.6 12.4 Technology 12.8 11.5 9.1 10.8 Healthcare 11.4 11.9 9.4 11.4 Telecommunications 7.2 3.6 4.7 3.5 Oil and gas 6.7 6.1 7.2 7.2 Consumer goods 5.3 14.6 6.4 13.6 Basic materials 4.0 4.1 5.7 5.1 Utilities 1.7 3.4 2.4 3.5 100.0 100.0 100.0 100.0
By asset class 31 January 2016 % 31 January 2015 % Equities 98.1 98.5 Cash 1.9 1.5 100.0 100.0
Largest 10 holdings 31 January 2016 31 January 2016 31 January 2015 31 January 2015 Market value % of total Market value % of total £000 portfolio £000 portfolio JP Morgan Chase 6,853 3.9 6,883 3.8 L Brands 6,181 3.5 6,451 3.5 Facebook 5,921 3.4 — — Lockheed Martin 5,873 3.4 5,330 2.9 Verizon Communications 5,586 3.2 4,861 2.7 Prudential 5,513 3.2 6,576 3.6 Apple 5,234 3.0 6,003 3.3 KDDI 4,694 2.7 — — American International Group 4,365 2.5 3,592 2.0 BG Group 4,319 2.5 3,655 2.0 Portfolio Holdings 7
Market value % of total Sector Country £ portfolio
North America 94,634,717 54.1 JP Morgan Chase Financials 6,853,158 3.9 L Brands Consumer services 6,181,154 3.5 Facebook Technology 5,921,245 3.4 Lockheed Martin Industrials 5,872,788 3.4 Verizon Communications Telecommunications 5,586,105 3.2 Apple Technology 5,234,013 3.0 American International Group Financials 4,364,799 2.5 Philip Morris International Consumer goods 4,003,525 2.3 TJX Companies Consumer services 3,811,236 2.2 CVS Health Consumer services 3,809,658 2.2 Pfizer Healthcare 3,297,131 1.9 AbbVie Healthcare 3,126,482 1.8 Comcast Consumer services 3,095,396 1.8 LyondellBasell Industries Basic materials 3,070,672 1.7 Sempra Energy Utilities 3,036,968 1.7 Crown Castle Financials 2,965,297 1.7 United Parcel Service Industrials 2,902,835 1.7 Mylan Healthcare 2,703,633 1.5 Cognizant Technology Solutions Technology 2,645,821 1.5 Bank of Montreal Financials 2,453,256 1.4 PNC Financial Financials 2,369,576 1.3 Twenty-First Century Fox Consumer services 2,314,252 1.3 Cooper Companies Healthcare 2,033,585 1.2 Chevron Oil and gas 1,949,778 1.1 Voya Financials 1,801,658 1.0 Celgene Healthcare 1,666,602 1.0 Praxair Basic materials 1,564,094 0.9
United Kingdom 20,883,224 11.9 Prudential Financials 5,512,639 3.1 BG Group Oil and gas 4,318,694 2.5 HSBC Holdings Financials 3,098,261 1.8 ARM Technology 2,786,960 1.6 Ashtead Group Industrials 2,467,117 1.4 Rio Tinto Basic materials 1,328,357 0.8 BHP Billiton Basic materials 958,384 0.5 Candover Investments Private equity 412,812 0.2 Portfolio Holdings 8
Market value % of total Sector Country £ portfolio
Developed Europe ex UK 19,323,876 11.0 Roche Healthcare Switzerland 3,537,199 2.0 Airbus Industrials Netherlands 3,422,505 2.0 Schneider Electric Industrials France 3,366,338 1.9 ProSiebenSat.1 Media Consumer services Germany 3,357,582 1.9 Total Oil and gas France 2,321,379 1.3 ENI Oil and gas Italy 1,864,559 1.1 DNB Financials Norway 1,454,218 0.8 Anheuser-Busch Inbev* Consumer goods Belgium 96 0.0
*Unlisted security as at 31st January 2016.
Developed Asia Pacific ex Japan 16,460,681 9.5 CSL Healthcare Australia 3,614,587 2.1 Jardine Matheson Holdings Industrials Singapore 2,775,814 1.6 M1 Telecommunications Singapore 2,213,947 1.3 China Construction Bank Financials Hong Kong 1,769,347 1.0 China Merchants Holdings Industrials Hong Kong 1,682,178 1.0 Woolworths Consumer services Australia 1,625,643 0.9 United Overseas Bank Financials Singapore 1,566,254 0.9 CNOOC Oil and gas Hong Kong 1,212,911 0.7
Japan 15,118,810 8.6 KDDI Telecommunications 4,694,424 2.7 Toyota Consumer goods 3,565,434 2.0 Orix Financials 2,877,567 1.6 Mitsubishi UFJ Financial Group Financials 2,588,688 1.5 Komatsu Industrials 1,392,697 0.8
Global Emerging Markets 5,444,225 3.1 Taiwan Semiconductor Technology Taiwan 2,582,221 1.5 Manufacturing Company PT Astra International Consumer goods Indonesia 1,635,955 0.9 PT Matahari Department Stores Consumer services Indonesia 1,226,049 0.7
Middle East 3,110,497 1.8 Check Point Software Technologies Technology Israel 3,110,497 1.8
Total portfolio holdings 174,976,030 100.0 Strategic Report 9
Business model The wider corporate risks relate mainly to the challenges of managing the Company in an increasingly regulated and The Company seeks to deliver a competitive return to its competitive market place. These risks are each actively managed shareholders through the investment of its funds in a diversified using the mitigation measures which the Board has put in place portfolio of assets with the primary objective of delivering long- and which are discussed on page 10 of this report. term capital growth in excess of the FTSE World index, the policy approved by the Company’s shareholders. The Board Marketing appoints and oversees an independent investment manager The marketing strategy seeks to deepen demand for the to manage the investment portfolio, decides the appropriate Company’s shares by meeting or exceeding expectations of financial policies to manage the assets and liabilities of the existing shareholders and winning new shareholders, enabling Company, ensures compliance with tax, legal and regulatory growth over time in the number of shares in issue. Thereby requirements and reports regularly to shareholders on the improving the efficiency of the Company and increasing investment manager’s performance. The directors do not liquidity for its shares. envisage any change in this model in the foreseeable future. This is supported by a commitment to deliver clear, transparent For more information on investment trusts in general please and regular communication with shareholders delivered visit www.theaic.co.uk. primarily through the Company’s website which contains Strategy information relating to performance, outlook and significant developments as they occur. In addition, the Company utilises The Board’s principal strategies are: best practice marketing tools such as advertising, direct mail, Investment public relations and research. The portfolio manager, Tom The Company invests in predominantly large capitalisation Walker, meets regularly with existing and potential institutional equities; companies which are market leaders in their industries shareholders. and have superior share price appreciation potential due Financial to earnings, assets or valuation anomalies. The resulting The main strategic goals are: the management of shareholder diversified portfolio of international quoted companies is capital; the use of gearing; and the management of the risks to active and focused, containing only around 60 high conviction the assets and liabilities of the Company. stocks selected on the basis of detailed research analysis. This The Board’s principal goal for the management of shareholder active portfolio management policy will inevitably involve capital is long-term growth. Growth should reflect both some periods when the Company’s portfolio outperforms or the investment manager’s investment performance and the underperforms the market as a whole (as represented by the issuance of shares when sufficient demand exists to do this Company’s reference benchmark, which is the FTSE World without diluting the value of existing shareholder capital. index). However, the Board has also maintained or increased dividends The Board does not impose any limits on the investment each year since the Company’s launch in 1999 and remains manager’s discretion to select individual stocks. The investment committed to a progressive dividend policy over the longer manager ensures that investment risk is dominated by the high term. This has resulted in a strong long term total return conviction stocks in the portfolio within the guidelines set by performance on the shareholder capital. the Board but that the combination of stocks held does not The Company operates a ‘zero discount’ policy which ensures lead to unintended reliance on a particular macroeconomic that the share price does not fall materially below the NAV factor (for example, a higher oil price or lower interest rates). and that larger investors can sell as many shares as they wish Current asset allocation and actual holdings are discussed in the without suffering an increased share price discount. Shares manager’s review on pages 4 and 5 and details are contained bought back as part of this policy are held in treasury and in the portfolio summary and portfolio holdings on pages 6, 7 reissued when demand exists which the market cannot supply. and 8. The Company has not recently been geared but this possibility Risk management is currently under consideration by the Board given the currently Risk management is largely focused on managing investment low cost of long term debt. The current parameters state that risk in accordance with the investment policy guidelines borrowing must not exceed 20% of net assets and, if gearing set by the Board. The Board has established risk parameters is introduced, the board considers it appropriate to restrict the with the investment manager within which the portfolio will level of gearing to a modest level well within this ceiling which be managed. The Board reviews, at each board meeting, the can be sustained over the long term. relevant risk metrics presented by the portfolio manager to ensure there is sufficient but not excessive risk being taken within the portfolio. Strategic Report 10
Financial (continued) Principal risks and uncertainties The Company does not currently use derivatives for the purpose Risk and mitigation of mitigating investment risk, although the investment manager The Company’s business model is longstanding and resilient may hedge an excessive concentration of currency risk into to most of the short term operational uncertainties that it sterling should this situation arise. The Board manages risk to faces, which the Board believes are effectively mitigated both assets and liabilities through its oversight of the investment by its internal controls and its oversight of the investment manager’s risk management systems and its active monitoring manager, as described in the table below. Its principal risks of both costs and the risks inherent in financial liabilities. and uncertainties are therefore largely longer term and The Board is committed to its policy of keeping shareholders driven by the inherent uncertainties of investing in global regularly informed about the Company’s performance and, equity markets. The Board believes that it is able to respond in particular, giving an objective and transparent report on to these longer term risks and uncertainties with effective the underlying investment performance of the investment mitigation so that both the potential impact and the manager. The formal annual and half-yearly financial likelihood of these seriously affecting shareholders’ interests statements provide a comprehensive review of the overall are materially reduced. position, compliant with best practice as recommended by Risks are regularly monitored at board meetings and the the Financial Reporting Council. Board’s planned mitigation measures are described in the table below. As part of its annual strategy meeting, the Board carried out a robust assessment of the principal risks facing the Company.
The Board has identified the following principal risks to the Company:
Risk Mitigation
Loss of s1158-9 Loss of s1158-9 tax status would have serious consequences for the attractiveness of the Company’s tax status shares. The Board considers that, given the regular oversight of this risk the likelihood of this risk occurring is minimal.
Long-term The Board monitors the implementation and results of the investment process with the portfolio investment manager, who attends all board meetings and reviews data that show statistical measures of the underperformance Company’s risk profile. Were long-term investment underperformance to emerge despite the mitigation measures taken by the investment manager, the Board would be able to take appropriate action to manage this risk.
Decline in overall The Board recognises that the ‘zero discount’ policy allows shareholders to sell their shares in any size of the volume at close to NAV. Although this improved liquidity encourages investment in the Company, it Company could also increase the risk of a significant decline in the size of the Company. The Company has a clear marketing strategy which is set by the Board and delivered by a well-resourced marketing function within the investment manager. The Board also regularly monitors key indicators for any change in the Company’s reputational risk profile or the attractiveness of its investment objective.
Shareholder The Board recognises the importance of managing shareholder relations. The Board regularly monitors relations the list of major shareholders and the shareholder profile. The directors meet, from time to time, with major shareholders and the investment manager maintains regular contact with the Company’s institutional shareholders. The Company aims to provide all shareholders with a full understanding of the Company’s activities and performance by way of the annual and half-yearly reports. The Company’s website, which is independent of the investment manager’s website, provides all shareholders with relevant information about the Company including its daily NAV and monthly updates. In addition to this all shareholders have the opportunity, and are encouraged, to attend the Company’s annual general meeting (‘AGM’) and to give their views to the Company using the email address noted on the back page of this annual report.
Following the ongoing assessment of the principal risks facing the Company, and its current position, the Board is confident that the Company will be able to continue in operation and meet its liabilities as they fall due. The Board believes that the processes of internal control that the Company has adopted and oversight by the investment manager continue to be effective. 11
Key Performance Indicators and Performance The Board uses certain key performance indicators (‘KPIs’) to monitor and assess its performance in achieving the Company’s objectives.
Summary of KPIs Target Actual Achieved 1. Net asset value performance relative to benchmark Outperform (2.99%) (over 3 years) 2. Performance against Company’s peers Top third performance 11th out of 24 (over 3 years) 3. Ongoing charges Less than 0.75% 0.71%
1. Net asset value performance Viability Statement The Board assesses the net asset return compared to the total The Company’s business model is designed to deliver long return of the FTSE World Index. It is measured on a financial term capital growth to its shareholders though investment in year basis and assessed over a rolling three year period. large and liquid stocks in global equity markets. Its plans are This KPI was not achieved for this period although the therefore based on having no fixed or limited life provided shortfall was less than from that reported last year global equity markets continue to operate normally. The following the outperformance in the last 12 months. The net Board has assessed its viability over a 3 year period in asset value total return for the Company for the three years accordance with provision C.2.2 of the 2014 UK Corporate to 31 January 2016 was 26.56% compared to a total return Governance Code. The Board considers that this reflects the of 29.55% for the FTSE World index over the same period. minimum period which should be considered in the context For more information on the one year performance relative of its long term objective but one which is limited by the to the benchmark see the chairman’s statement on pages 2 inherent and increasing uncertainties involved in assessment and 3 and manager’s review on pages 4 and 5. over a longer period. 2. Performance against the Company’s peers In making this assessment the Directors have considered the The Board monitors the share price total return performance following risks to its ongoing viability: relative to a range of nine competitor funds within the AIC n The principal risks and uncertainties and the mitigating Global sector and 14 open-ended funds over a rolling three actions set out above on page 10; year period. This KPI was not achieved for this financial year. n The ongoing relevance of the Company’s investment The Company ranked 11th, with a share price total return for objective in the current environment; the Company of 27.1% over the three years to 31 January n The level of income forecast to be generated by the 2016. Company and the liquidity of the Company’s portfolio; 3. Ongoing charges: and The Board monitors ongoing charges (‘OGC’) on a regular n The insignificant level of fixed costs and limited debt basis to ensure it meets its target by maintaining cost discipline relative to its liquid assets. and focus on value adding activities. This KPI was achieved, Based on the results of their analysis and the Company’s with the OGC for the year ended 31 January 2016 being processes for monitoring each of the factors set out above, 0.71%, a reduction during the last 3 years of over 15%. The the Directors have a reasonable expectation that the board will continue its focus on the management of costs. Company will be able to continue in operation and meet its liabilities as they fall due over at least the next 3 years. Board of Directors 12
From left to right, top: David Kidd, Tom Walker (portfolio manager), Mike Balfour. Bottom: Gillian Watson, Neil Gaskell (chairman), Paul Evitt (company secretary).
Neil Gaskell, Non-executive director, Chairman David Kidd, Non-executive director, Senior Neil was appointed as a non-executive director of the Company independent director on 24 November 2011 and became chairman on 22 May 2012. David is a director of The Law Debenture Pension Trust Before this, he worked for 35 years with Shell and retired as Corporation P.L.C, which acts as independent trustee for over group treasurer of the Royal Dutch Shell Group and director of 200 pension schemes including many FTSE-100 companies. He Shell International. Neil is currently chairman of Aberdeen Japan has over 30 years investment management experience, having Investment Trust. He was previously a non-executive director of been chief investment officer of the Royal Bank of Scotland’s Wellstream Group and Integra Group and is former chairman of investment management arm, the charity specialists Chiswell Hydrodec Group. Neil is also a governor of the London School Associates and the private bank Arbuthnot Latham. He is a of Economics. non-executive director of The Baillie Gifford Japan Trust plc and a director of The Golden Charter Trust Limited. David was Mike Balfour, Non-executive director, Chairman appointed to the Board on 1 October 2005. of the audit committee Gillian Watson, Non-executive director Mike is a member of the Institute of Chartered Accountants of Scotland and in January 2016 he stepped down as chief Gillian is currently senior managing director at ES Noble & executive at Thomas Miller Investment Ltd. Prior to that, Mike Company Limited, the Edinburgh based boutique investment was chief executive at Glasgow Investment Managers and chief bank. She is also a director of Meallmore Limited and a non- investment officer at Edinburgh Fund Managers Limited. Mike executive director of Scottish Enterprise and The Royal Edinburgh brings 30 years of investment management experience to the Military Tattoo Limited. Gillian has worked in corporate finance, Board, as well as knowledge of the investment trust industry. He strategy and business development across various industry is also a non-executive director of Murray Income Trust plc and sectors and, until March 2013, was chief executive officer of Standard Life Investment Property Income Trust plc. Mike was Giltech Limited. Gillian sits on the University of Strathclyde’s appointed to the Board on 28 January 2010. Commercial and Innovation Advisory Board and is a trustee of the Boswell Trust. Gillian was appointed to the Board on 1 April 2013. Report of the Directors 13
Business review Performance fee The investment manager The investment manager is also entitled to a performance fee should certain criteria be met and the key terms and related Martin Currie is an international equity specialist based in definitions of the calculation of the performance fee are Edinburgh, managing money for a wide range of global summarised below. clients. Its investment process is focused on selecting stocks n through fundamental proprietary research and constructing If the cumulative performance over the relevant period well-balanced high conviction portfolios. The Board closely is less than or equal to 1% then no performance fee is monitors investment performance and Tom Walker, the payable. portfolio manager, attends each board meeting to present a n If the cumulative performance over the relevant period detailed update to the Board. The Board uses this opportunity is greater than 1%, a performance fee is payable. If the to challenge the portfolio manager on any aspect of the Company’s NAV has risen over the final year of the relevant portfolio’s management. period, this fee is 15% of the cumulative performance over that year and 7.5% if the Company’s NAV has fallen. Continued appointment of the investment manager n The maximum performance fee payable in any year is 1% The Board conducts an annual performance appraisal of the of Company’s NAV as at the last day of the relevant period. investment manager against a number of criteria, including operational performance, results and investment performance Definitions and other contractual considerations. Following the recent Relevant period: the relevant period is from 1 February appraisal carried out by the management engagement following the last financial year in which a performance committee on 26 January 2016, the Board considers it is in the fee was paid, to the end of the current financial year. The best interests of shareholders to continue with the appointment relevant period for the year ended 31 January 2016 is 1 of Martin Currie as investment manager. February 2012 to 31 January 2016. The Company’s NAV is Main features of the contractual arrangement with the ex-income NAV before any accrual for performance fee the investment manager and adjusted for the impact of share buy backs. For the year ended 31 January 2016 the performance of the Company’s n Six month notice period. NAV over the relevant period is 28.34%.The Company’s n Immediate termination if Martin Currie ceases to be benchmark is the FTSE World index. As at 31 January 2016 capable of carrying on investment business. the capital performance of the benchmark over the relevant n In the event that the Company terminates the agreement period was 34.58%. otherwise than set out above, Martin Currie is entitled to Cumulative performance is the percentage change of the receive compensation equivalent to four times the basic Company’s NAV per share less the percentage change in the quarterly management fee payable. capital performance of the Company’s benchmark. As at Investment management fee 31 January 2016 the cumulative performance for the relevant period is (6.24%) and therefore no performance Martin Currie is paid an investment management fee of 0.5% fee is payable for the year ended 31 January 2016 (2015: of the NAV of the Company per annum, calculated quarterly. £nil). Martin Currie also provides secretarial and administration services to the Company; the annual secretarial fee for the year ended 31 January 2016 was £50,874 (2015: £50,654). Report of the Directors 14
Further contractual arrangements Board diversity The Company has outsourced its operational infrastructure to The nominations committee considers diversity, including the third party organisations. Contracts and service level agreements balance of skills, knowledge, gender and experience, amongst have been defined to ensure that the service provided by each other factors when reviewing the composition of the Board. It of the third party organisations is of a sufficiently professional does not consider that it is appropriate to establish targets or and technically high standard. The Board actively monitors quotas in this regard. The Board comprises four non-executive performance against these criteria. directors of whom one is a woman, thereby constituting 25% Counterparty risk on each service provider is analysed with female representation. The Company has no employees as the Board monitoring any identified risks. Further details of its investments are managed by Martin Currie, the appointed the Company’s service providers can be found in the investor investment manager. information section on page 44. Environmental matters, social and corporate Performance and outlook of the Company governance issues Please refer to the chairman’s statement on pages 2 and 3 and As an externally managed investment company with no the manager’s review on pages 4 and 5 for an update on the employees, the Company has no policies in place in relation performance of the Company over the year and outlook for to environmental, social or community issues. The Company’s 2016. greenhouse gas emissions are negligible. The directors are aware that Martin Currie gives consideration to operational performance, environmental, social and corporate governance issues, among other factors when investment decisions are made. Statement regarding annual report and accounts Following a detailed review of the financial statements by the audit committee, the directors consider that taken as a whole they are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy. 15
The directors present their report and the audited financial statements of the Company for the year ended 31 January 2016.
Share capital Corporate governance statement The Company repurchased 4,863,436 shares to be held in The Company’s corporate governance statement is set out on treasury at a cost of £8,669,000 during the year. This represented pages 20 to 22 and forms part of this report of the directors. 4.8% of the called up share capital and had a nominal value of £243,172. During the year, the Company reissued 2,845,017 Revenue and dividends shares from treasury at a total value of £4,867,000. The The net revenue return for the year after expenses, interest and Company also cancelled 909,969 shares from treasury at a cost taxation was £4,211,000 (2015: £4,030,000), equivalent to of £45,000. As at 31 January 2016 the issued share capital of a return of 4.15 pence per share (2015: 3.92 pence). Interim the Company was 101,044,956 shares (excluding shares held dividends totalling 2.7 pence have been paid during the year. in treasury). The issued share capital as at 31 January 2015 was The directors recommend a fourth interim dividend of 1.45 103,063,375 (excluding shares held in treasury). pence per share be payable on 29 April 2016 to holders on the register at the close of business on 9 April 2016, making a Shareholders analysis as at % of % of equity total for the year of 4.15 pence (2015: 4.1 pence). The revenue 31 January 2016 shareholders capital reserves as at 31 January 2016 are £5,676,000. Individuals and trustees 74.6 15.5 Trends likely to affect future performance Banks and nominee 23.2 79.7 Please refer to the chairman’s statement on pages 2 and 3 and companies the manager’s review on pages 4 and 5 for information on the Insurance & Investment 0.2 0.0 trends likely to affect the future performance of the Company. companies Other holders 2.0 4.8 Regulatory 100.0 100.0 The European AIFM Directive The Board works closely with its advisers and the AIC as Voting rights appropriate to ensure it is aware of any regulatory changes. As at 31 January 2016, the Company had received notification On 16 July 2014, the Company obtained approval as a small in accordance with the FCA’s Disclosure and Transparency Rule registered UK AIFM. The Board believes this is the most 5.1.2R of the following interests in 3% or more of the voting appropriate and lowest cost level of this regulation for the rights attaching to the Company’s issued share capital. Company.
As at 31 January 2016 2015 As set out in the Chairman’s Statement on pages 2 and 3, the Board is considering the introduction of long-term gearing. DC Thomson & Company Limited 7.4% 7.9% Should this be decided, under the terms of the AIFMD, it will be Legg Mason Inc./Martin Currie necessary for the Company to appoint an external depositary 5.5% 2.5% Investment Management Limited and AIFM who would also be supervised by the Financial Conduct Authority. It is proposed that the Company appoint During the year the Company issued 2,626,433 treasury Martin Currie Fund Management Limited as its AIFM, an shares to Legg Mason, Inc., the ultimate parent company of associated company of Martin Currie Investment Management the Company’s investment manager. Legg Mason, Inc. also Limited. No changes are proposed to the way the Company’s purchased an additional 90,000 ordinary shares through the assets are invested as a result of this. market taking its holding in the Company to 2,716,433 ordinary shares. The Martin Currie Retirement & Death Benefit Plan also Voting policy and the UK Stewardship Code holds 2,808,079 shares (2015: 2,526,849 shares) giving a The Company has delegated responsibility for voting at total holding of 5,524,512 for the investment manager and its investee company shareholder meetings to Martin Currie, ultimate parent company, representing 5.5% of the Company’s who votes in accordance with its corporate governance and issued share capital. responsible investing policy. As reported in the Chairman’s As at 22 March 2016, the Company had not received Statement on pages 2 and 3, Martin Currie has gained notification of any changes to these interests. the highest A+ rating from UNPRI. The Board has noted Martin Currie’s adoption of the UK Stewardship Code and Related party transactions a copy of the policies and voting records can be found at With the exception of the management and secretarial fees www.martincurrie.com/home/about_us/our_policies. (disclosed on page 13), directors’ fees (disclosed on page 24) and directors’ shareholdings (disclosed on page 23) there were no related party transactions through the financial year. Report of the Directors 16
Statement of directors’ responsibilities Each of the directors, whose names and functions are listed in the Board of directors on page 12, confirms that to the best of The directors are responsible for preparing the annual report their knowledge: and the financial statements in accordance with applicable law and regulations. n the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Company law requires the directors to prepare financial Accounting Practice (United Kingdom Accounting statements for each financial year. Under that law the directors Standards and applicable law), give a true and fair view have prepared the financial statements in accordance with of the assets, liabilities, financial position and profit of the United Kingdom Generally Accepted Accounting Practice Company; and (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the n the report of the directors and manager’s review include financial statements unless they are satisfied that they give a a fair, balanced and understandable review of the true and fair view of the state of affairs of the Company and of development and performance of the business and the the profit or loss of the Company for that period. In preparing position of the Company, together with a description of these financial statements, the directors are required to: the principal risks and uncertainties that it faces. n select suitable accounting policies and then apply them Role of the Board consistently; Investment companies have a board of directors whose duty it n make judgements and accounting estimates that are is to govern the Company to secure the best possible return for reasonable and prudent; shareholders within the framework set out in the Company’s n state whether applicable UK Accounting Standards have Articles of Association – in other words, to look after the been followed, subject to any material departures disclosed interests of shareholders. and explained in the financial statements respectively; and Your Board of four experienced independent non-executive n prepare the financial statements on the going concern basis directors meets five times a year on a formal basis and on an unless it is inappropriate to presume that the Company will ad-hoc basis when required to consider the Company’s strategy continue in business. and monitor the Company’s performance. The directors are The directors are responsible for keeping adequate accounting directly answerable to shareholders. records that are sufficient to show and explain the Company’s The Board formally evaluates its investment manager every transactions and disclose with reasonable accuracy at any year, reporting to shareholders why it is appropriate for the time the financial position of the Company and enable them investment manager to continue. to ensure that the financial statements and the directors’ Your Board takes this responsibility extremely seriously. remuneration report comply with the Companies Act 2006. Your Board also serves shareholders by ensuring that the They are also responsible for safeguarding the assets of the interests of the investment manager are aligned as closely as Company and hence for taking reasonable steps for the possible with those of shareholders. prevention and detection of fraud and other irregularities. An investment trust board provides a very specific and proactive The financial statements are published on the Company’s form of direct oversight of the investment of the shareholders’ website (www.martincurrieglobal.com) which is maintained by funds. the investment manager. The directors are responsible for the maintenance and integrity of the Company’s website. Directors Legislation in the United Kingdom governing the preparation As set out in the Board of directors on page 12, Neil Gaskell, and dissemination of financial statements may differ from Mike Balfour, David Kidd and Gillian Watson are directors of legislation in other jurisdictions. the Company. In accordance with the Company’s Articles of Association, Mike Balfour, David Kidd and Gillian Watson will stand for re-election at the AGM. David Kidd has expressed his intention to step down as a director of the Company following the Company’s AGM in 2017, by which time a replacement will have been appointed. 17
Audit committee report A competitive tender for the audit of the Company was held in May 2015, following which Ernst & Young LLP (‘EY’) was The audit committee is chaired by Mike Balfour and comprises selected. all of the directors except the chairman of the Board, Neil Gaskell. Under EY’s rotation policy, the committee’s audit engagement partner will rotate every five years. The audit committee reviews the scope and results of the audit and, during the year, considered and approved the external Auditors’ report auditors’ plan for the audit of the financial statements for the At the conclusion of the audit, EY did not highlight any issues year ended 31 January 2016. A full list of the responsibilities of to the audit committee which would cause it to qualify its audit the committee is on page 21. report nor did it highlight any fundamental internal control Auditors’ appointment weaknesses. EY issued an unqualified audit report which is included on pages 25 to 28. Following Legg Mason’s purchase of Martin Currie, PwC was appointed as the auditor of Martin Currie. The Audit Committee The audit committee takes account of the most significant prefers the Company not to have the same auditors as those of issues and risks, both operational and financial, likely to impact the investment manager and consequently sought to appoint the Company’s financial statements. a new audit firm.
The following significant issues were considered by the audit committee in relation to the financial statements:
Matter Action
Accuracy of portfolio Actively traded listed investments are valued using stock exchange prices provided by third party valuation service providers. The audit committee reviewed the investment manager’s annual internal control report, which is reported on by independent external accountants and which details the systems, processes and controls around the daily pricing of equity securities, including the application of exchange rate movements.
Allocation of The allocation is reviewed by the audit committee annually taking into account the long-term split of expenses between returns from the portfolio, both historic and projected; the objectives of the Company and current, revenue and capital historical and prospective yields.
Revenue recognition The audit committee reviewed the investment manager’s internal control reports for the year, as referred to above, which details the systems, processes and controls around the recording of investment income.
Strength of processes The investment administration function is outsourced to Martin Currie who use State Street Bank and and internal controls Trust Company (‘State Street’) as a subcontractor. Custodial services are also outsourced by the at outsourced Company to State Street. The directors, having carried out due diligence at the time of appointment providers and subsequently with State Street, are satisfied that State Street is an acceptable outsource provider. The audit committee receive regular reports from Martin Currie on the effectiveness of its processes, procedures and internal controls for these arrangements, State Street’s processes, procedures and internal controls which Martin Currie have themselves reviewed and checked. The external auditors also review State Street’s internal controls as part of their audit and have not reported any significant matters to the audit committee. Further details can be found on pages 25 to 28. Report of the Directors 18
Auditors’ independence Going concern status The Company has in place a policy governing and controlling The Company’s business activities, together with the factors the provision of non-audit services by the external auditors, likely to affect its future development, performance and so as to safeguard their independence and objectivity. This is position are set out in the chairman’s statement, manager’s achieved by prohibiting non-audit work where independence review, strategic report and the report of the directors. may be compromised or conflicts arise. Any non-audit work The financial position of the Company as at 31 January 2016 requires specific approval of the audit committee in each case. is shown on the statement of financial position on page 30. The audit fees amounted to £19,000 for the year ended The cash flows of the Company are set out on page 32. 31 January 2016 (2015: £22,340). Non-audit fees amounted to Note 13 on pages 40 and 41 sets out the Company’s risk £3,000 for the year ended 31 January 2016 (2015: £nil). management policies, including those covering market risk, Following a review, the audit committee concluded that the liquidity risk and credit risk. Company’s auditors, EY, remain independent. In accordance with the Financial Reporting Council’s guidance on going concern and liquidity risk issued in October 2009, the Effectiveness of the external audit process directors have undertaken a rigorous review of the Company’s The audit committee evaluated the effectiveness of the ability to continue as a going concern. The Company’s assets external auditor and the external audit it undertook prior to consist of a diverse portfolio of listed equity shares which, in making a recommendation on the appointment of EY at the most circumstances, are realisable within a very short timescale. forthcoming AGM. This evaluation involved an assessment of The directors are mindful of the principal risks and uncertainties the effectiveness of the auditor’s performance against criteria disclosed on page 10. They have reviewed revenue forecasts including qualification, expertise and resources, independence and believe that the Company has adequate financial resources and effectiveness of the audit process. Having reviewed the to continue its operational existence for the foreseeable future. performance of the external auditor as described above, the Accordingly, the directors continue to adopt the going concern audit committee considered it appropriate to recommend the basis in preparing these financial statements. appointment of EY as external auditor. EY has expressed its willingness to be appointed to office and a resolution to appoint it as auditor to the Company and to authorise the directors to determine the remuneration payable will be proposed at the forthcoming AGM. Disclosure of information to the auditors In the case of each of the persons who are directors of the Company at the time when this report was approved: n so far as each of the directors is aware, there is no relevant audit information of which the Company’s auditors are unaware; and n each of the directors has taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. 19
Annual general meeting Re-issue of treasury shares – special resolution The annual general meeting (‘AGM’) of the Company will be Resolution 11, proposed as a special resolution, would give the held at the offices of Dickson Minto W.S., 16 Charlotte Square, directors authority to re-issue shares from treasury within the Edinburgh, EH2 4DF at 12.30pm on 9 June 2016. following parameters: n Resolutions relating to the following items of special business any discount level at which such equity securities may be will be proposed at the forthcoming AGM. sold or transferred out of treasury is always less than the average discount at which the equity securities held in Purchase of own shares and treasury shares – special treasury were purchased; and resolution n a cap will be set on the dilutive impact of reissuing out of Each year the directors seek authority from shareholders to treasury at a maximum of 0.2% per year. purchase the Company’s own shares. The directors recommend The Board intends to use share issuance powers in the same that shareholders renew this authority detailed in resolution 9. way that buy back powers are used to enhance shareholder Any shares purchased pursuant to the authority will be held in value and improve the liquidity of the shares. treasury or cancelled. The authority would lapse at the earlier of the Company’s next AGM or 15 months after the date of Recommendation the resolution. The directors believe all the resolutions proposed are in the The purpose of holding shares in treasury is to allow the best interests of the Company and shareholders as a whole. Company to reissue those shares quickly and cost effectively in The directors unanimously recommend all shareholders vote in accordance with the parameters set out in resolution 11. favour of all the resolutions. The results of the votes on the resolutions at the AGM will be published on the Company’s Disapplication of statutory pre-emption rights – website (www.martincurrieglobal.com). special resolution s561 of the Companies Act 2006 requires, when shares are to be allotted for cash, such new shares first must be offered to existing shareholders in proportion to their existing holdings of shares. Resolution 10 proposed as a special resolution would, if passed, give the directors authority under s570 and s573 of the Companies Act 2006, to allot shares for cash in Neil Gaskell certain circumstances as if s561 of the Companies Act 2006 Chairman did not apply. This authority would enable the directors to issue shares for cash to take advantage of changes in 24 March 2016 market conditions that may arise in order to increase the amount of the Company’s issued share capital. The purpose of such an increase would be to improve the liquidity of the market in the Company’s shares and to spread the fixed cost of administering the Company over a wider base. The directors believe that this would increase the investment attractions of the Company to the benefit of existing shareholders. The resolution, if passed, will give the directors power to allot for cash equity securities of the Company up to a maximum of £249,938 (being an amount equal to 5% of the issued share capital of the Company as at 22 March 2016, the latest practicable date prior to this document) without the application of pre-emption rights described above. The authority contained in resolution 10 will continue until the AGM of the Company in 2017. Report of the Directors 20
Compliance The Company has complied with all of the recommendations of The Board of the Company has considered the principles and the AIC code and, except as set out below, relevant provisions recommendations of the AIC Code of Corporate Governance of the UK Corporate Governance Code: (‘AIC code’) by reference to the AIC Corporate Governance n the role of the chief executive; Guide for investment companies (‘AIC guide’). The AIC code, n executive directors’ remuneration; and as explained by the AIC guide, addresses all the principles set n the need for an internal audit function. out in the UK Corporate Governance Code, as well as setting For the reasons set out in the AIC guide and as explained in out additional principles and recommendations on issues that the UK Corporate Governance Code, the Board considers these are of specific relevance to the Company. provisions not relevant to the position of the Company, being The Board considers that reporting against the principles and an externally managed investment company. The Company has recommendations of the AIC code and by reference to the therefore not reported further in respect of these provisions. AIC guide (which incorporates the UK Corporate Governance Code), will provide better information to shareholders. The principles of the AIC code The AIC code is made up of 21 principles and the Company has complied with all such principles with the exception of principle 11 which is not applicable. Details of the AIC principles and how the Company complies with them can be found on the Company’s website at www.martincurrieglobal.com. 21
Board committees Marketing and communications committee Management engagement committee The marketing and communications committee’s responsibilities The management engagement committee’s responsibilities include: include: n considering the marketing strategy for the Company; n reviewing the continuing appointment of the investment n reviewing the Company’s communications with its manager; shareholders; n reviewing the performance of the investment manager n reviewing the Company’s marketing budget; and in terms of investment performance and the company n reviewing the design and contents of the Company’s secretarial and administrative services provided; financial statements. n reviewing the performance of the personnel employed by The marketing and communications committee met twice the investment manager in relation to the provision of such during the year. services; and Composition – all directors and chaired by Gillian Watson. n reviewing the terms of the investment management agreement, to ensure that it remains competitive and in Audit committee the best interests of shareholders. The audit committee’s responsibilities include: n The committee met once during the year. monitoring and reviewing the integrity of financial statements; Composition – all directors and chaired by Neil Gaskell. n internal financial controls; Nominations committee n the independence, objectivity and effectiveness of the The nominations committee’s responsibilities include: external auditors; n assessing the skills, knowledge, experience and diversity n making recommendations to the Board in relation to the required on the Board and the extent to which each are appointment, evaluation and dismissal of the external represented; auditors, their remuneration, terms of their engagement n establishing processes for the review of the performance of and reviewing their independence and objectivity; the Board committees and the Board as a whole; n developing and implementing policy on the engagement n establishing processes for the identification of suitable of the external auditors to supply non-audit services; and candidates for appointment to the Board; n reporting to the Board, identifying any matter in respect of n overseeing succession planning for the Board; and which it considers that action or improvement is needed n in relation to any director retiring by rotation, and who is and making recommendations as to the steps to be taken. proposing to stand for re-election, reviewing the retiring The audit committee met twice during the year. In addition the director’s performance during the period in which they audit committee chairman had two further sessions with the have been a member of the Board. investment manager. The committee met once during the year. Composition – Mike Balfour (chairman), David Kidd and Gillian Composition – all directors and chaired by Neil Gaskell. Watson.
Directors’ meetings The following table shows the number of formal Board and Board committee meetings held during the year and the number attended by each director or committee member.
Management Marketing and Formal Board engagement Audit Nominations communications meetings committee committee committee committee (5 meetings) (1 meeting) (2 meetings) (1 meeting) (2 meeting) Mike Balfour 5 1 2 1 2 Neil Gaskell 5 1 n/a 1 2 David Kidd 5 1 2 1 2 Gillian Watson 5 1 2 1 2 Report of the Directors 22
Internal control Internal control and risk management systems in The AIC Code and the Disclosure and Transparency Rules require relation to the financial reporting process directors, at least annually, to review the effectiveness of the The directors are responsible for the Company’s system of Company's system of internal control and include a description internal control, designed to safeguard the Company’s assets, of the main features relating to the financial reporting process. maintain proper accounting records and ensure that financial Since investment management and all administrative services information used within the business, or published, is reliable. are provided to the Company by Martin Currie, the Company's Martin Currie has in place stringent controls that monitor the system of internal control mainly comprises monitoring the following activities within the financial reporting process: services provided by Martin Currie, including the operating n investment and related cash transactions are completely and controls established by them, to ensure that they meet the accurately recorded and settled in a timely manner; Company's business objectives. The Company does not have n corporate actions and proxy voting instructions are identified an internal audit function of its own, but relies on the risk and and generated respectively, and then processed and recorded compliance department of Martin Currie. This arrangement is accurately and in a timely manner; kept under review. Martin Currie also carries out a review of n the custodial and administration activities carried out by State investment income is accurately recorded in the proper Street. period; n The Board, either directly or through committees, reviews the investments are valued using current prices obtained from effectiveness of the company’s system of internal control by independent external pricing sources; monitoring the operation of the key controls of Martin Currie n cash and securities positions are completely and accurately and: recorded and reconciled to third party data; and n reviews an internal control report as provided to the Board n investment management fees, and any performance fee, are twice yearly by the investment manager. This report details accurately calculated and recorded. significant risks, regulatory issues, error management and The system of internal control can only be designed to manage complaint handling; rather than eliminate the risk of failure to achieve business n reviews the terms of the management agreement; objectives and therefore can provide only reasonable, but not absolute, assurance against fraud, material mis-statement or n reviews reports on the internal controls and the operations of the investment manager and of the custodian; and loss. By the means of the procedures set out above, the Board n reviews the risk profile of the Company and considers investment risk at every board meeting. confirms that it has reviewed the effectiveness of the Company's systems of internal control for the year ended 31 January 2016 There is an ongoing process for identifying, evaluating and and to the date of approval of this annual report. managing the significant risks faced by the Company as outlined on page 10. This process accords with the Turnbull guidance on internal controls. During the course of its review of internal controls, the Board has not identified or been advised of any failings or weaknesses which it has determined to be significant, and is satisfied with the arrangements. On behalf of the Board Neil Gaskell Chairman 24 March 2016 Directors’ Remuneration Statement 23
Remuneration statement Annual report on remuneration The Board has prepared this report in accordance with the For the year to 31 January 2016, the non-executive directors requirements of the Large and Medium-sized Companies and received a fee of £22,500 per annum, the audit committee Groups (Accounts and Reports) (Amendment) Regulations chairman received a fee of £26,000 and the chairman a fee of 2013. An ordinary resolution to approve this report will be put £35,000 per annum. to the members at the AGM. During the year the nominations committee considered the Company law requires the Company’s auditors to audit certain directors’ fees in the context of the benchmark data from of the disclosures provided in this report. Where disclosures it’s peer group. It was agreed that the level of directors’ fees have been audited, they are indicated as such. The auditors’ remained appropriate and no increase in fees to 31 January opinion is included in their report on pages 25 to 28. 2017 was proposed. No additional discretionary payments were made in the year, nor in the previous year. Directors’ remuneration policy The graph on the following page compares, for the five financial As the Board is composed wholly of non-executive directors, years ended 31 January 2016, the totals return (assuming all the nominations committee considers directors’ remuneration dividends are reinvested) to ordinary shareholders compared to in addition to its nominations function. the total return of the benchmark. The Board’s policy is that the remuneration of non-executive Directors’ shareholdings (audited) directors should reflect the experience of the Board as a whole, be fair and comparable to that of other investment As at 31 January 2016 2015 trusts that are similar in size, have a similar capital structure Mike Balfour 10,000 and have similar investment objectives. It is intended that this 10,000 policy will continue for the year ended 31 January 2017 and Neil Gaskell 12,000 12,000 subsequent years. The fees for the non-executive directors are David Kidd 10,000 10,000 determined within the limits set out in the Company’s Articles Gillian Watson — — of Association. Directors are entitled to be reimbursed for any reasonable expenses properly incurred by them in connection The shareholdings detailed above have not changed between with the performance of their duties. Directors are not eligible 31 January 2016 and 24 March 2016, the date of signing the for bonuses, pension benefits, share options, long-term accounts. incentive schemes or other benefits. Approval Directors do not have service contracts but are provided with An ordinary resolution for the approval of the directors’ annual letters of appointment. report on remuneration will be put to shareholders at the All directors are appointed for an initial term covering the forthcoming AGM. period from the date of that appointment until the first At the annual general meeting on 11 June 2015, the AGM at which they are requested to stand for election shareholders voted in favour of the directors’ remuneration in accordance the Company’s Articles of Association. report for the year ended 31 January 2015. Thereafter the directors retire by rotation at least every three years. There is no notice period and no provision for compensation upon early termination of appointment. The directors’ remuneration policy will be put to shareholders’ vote at least once every three years.
On behalf of the Board Neil Gaskell Chairman 24 March 2016 Directors’ Remuneration Statement 24
Total return (five financial years)
70 Share Price 59.9%
Benchmark 49.7% 60
50
% 40
30
20
10
0 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016
Past performance is not a guide to future returns. Source: FTSE International Limited and Martin Currie Investment Management Limited. Past performance is not a guide to future returns. On 1 June 2011, the Company’s benchmark changed from FTSE All-Share Index to FTSE World Index. Blended index returns are used for periods which include data prior to 1 June 2011.
Directors’ emoluments for the year (audited) 2015/2016 2014/2015 £ £ Mike Balfour (chairman of the audit committee) 26,000 24,500 Neil Gaskell (chairman of the Board) 35,000 35,000 David Kidd 22,500 22,000 Gill Nott* — 8,300 Gillian Watson 22,500 22,000 106,000 111,800
*Retired on 18 June 2014.
Relative importance of spend on directors’ remuneration To enable shareholders to assess the relative importance of spend on remuneration, the directors’ total remuneration has been shown in a table below compared with the Company’s dividend distributions. 2015/2016 2014/2015 Change £000 £000 £000 Directors’ total remuneration 106 112 (6) Dividends paid and payable 4,190 4,216 (26) Independent Auditors’ Report 25
Independent auditors’ report to the members The financial reporting framework that has been applied in the of Martin Currie Global Portfolio Trust plc preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards (United Our opinion on the financial statements Kingdom Generally Accepted Accounting Practice), including In our opinion: FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’. n the financial statements give a true and fair view of the state of the Company’s affairs as at 31 January 2016 and Overview of our audit approach of the Company’s profit for the year then ended; n n the financial statements have been properly prepared in Risks of material Incomplete or inaccurate accordance with United Kingdom Generally Accepted misstatement income recognition Accounting Practice; and through failure to recognise proper income n the financial statements have been prepared in accordance entitlements or apply with the requirements of the Companies Act 2006. appropriate accounting What we have audited treatment. n Martin Currie Global Portfolio Trust plc’s financial statements Incorrect valuation and comprise: existence of the investment portfolio. n Statement of comprehensive income for the year ended 31 January 2016 Audit scope n We performed an audit of n Statement of financial position as at 31 January 2016 Martin Currie Global Portfolio Trust plc. n Statement of changes in equity for the year ended 31 January 2016 Materiality n Materiality of £1.8m n Statement of cash flows for the year ended 31 January which represents 1% of 2016 equity shareholder’s funds. n Related notes 1 to 17 to the financial statements
Our assessment of risk of material misstatement We identified the risks of material misstatement described below as those with the greatest effect on our overall audit strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have performed the procedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express any opinion on these individual areas. What we concluded to the Audit Risk Our response to the risk Committee
Incomplete or inaccurate income recognition We performed the following procedures: We noted no issues in agreeing through failure to recognise proper income We agreed, on a sample basis, dividend the sample of dividends to an entitlements or apply appropriate accounting receipts to an independent source and to independent source and Company treatment (as described on page 17 of the the Company bank statements. bank statements and in agreeing Report of the Audit Committee). the sample of dividends from We agreed on a sample basis, investee the independent source to the Most of the Company’s income is received in company dividend announcements from Company’s records. the form of dividends from equity investments, an independent source to the income being £5.4m (2015: £5.2m) for the year. recorded by the Company. We noted no issues in agreeing the accrued dividend to an independent During the year, the Company received one We agreed all accrued dividends to an source and Company bank special dividend with a value of £148k which independent source and to the Company’s statements. was greater than 25% of our revenue testing post year end bank statements where threshold. The investment income directly possible, to ensure correct cut-off. We noted that the accounting affects the Company’s ability to pay a dividend treatment adopted is consistent with We have reviewed the recognition criteria to shareholders and there is also a manual our interpretation of the underlying applied to the special dividend received and judgemental element in allocating special commercial circumstances giving rise during the year. dividends between revenue and capital. Given to the related dividend. this, we considered this to be an area of audit focus. Independent Auditors’ Report 26
What we concluded to the Audit Risk Our response to the risk Committee
Incorrect valuation and existence of the We performed the following procedures: For all investments, we noted no investment portfolio (as described on page For all listed investments in the portfolio, material differences in market value 17 of the Report of the Audit Committee). we agreed the prices to an independent or exchange rates. The valuation of the portfolio at 31 January source. We noted no differences between 2016 was £175m (2015: £182m) which For those investments priced in currencies the custodian confirmations and consisted primarily of listed equity investments other than sterling we have agreed the the Company’s underlying financial with one immaterial unlisted investment of exchange rates to an independent source. records. £96. We have independently obtained The valuation of the assets held in the confirmation from the Company’s investment portfolio is the key driver of the custodian to confirm the existence of the Company’s net asset value and total return. assets held as at 31 January 2016. Incorrect asset pricing or a failure to maintain proper legal title of the assets held by the Company could have a significant impact on portfolio valuation and, therefore, the return generated for shareholders.
The scope of our audit Performance materiality Our assessment of audit risk, our evaluation of materiality and The application of materiality at the individual account or our allocation of performance materiality determine our audit balance level. It is set at an amount to reduce to an appropriately scope for the Company. This enables us to form an opinion on low level the probability that the aggregate of uncorrected and the financial statements. We take into account size, risk profile, undetected misstatements exceeds materiality. the organisation of the Company and effectiveness of controls On the basis of our risk assessments, together with our and changes in the business environment when assessing assessment of the Company’s overall control environment, our the level of work to be performed. The Company is a single judgment was that overall performance materiality (i.e. our component and we perform a full audit on this Company. tolerance for misstatement in an individual account or balance) for the Company should be 50% of planning materiality, being Our application of materiality £891k. Our objective in adopting this approach was to ensure that total undetected and uncorrected audit differences in all We apply the concept of materiality in planning and performing accounts did not exceed our planning materiality level. We have the audit, in evaluating the effect of identified misstatements set performance materiality at this percentage due to this being on the audit and in forming our audit opinion. the first year audit for our firm. Materiality Given the importance of the distinction between revenue and The magnitude of an omission or misstatement that, individually capital for the Company we also applied a separate testing or in the aggregate, could reasonably be expected to influence threshold of £236k for the revenue column of the Statement the economic decisions of the users of the financial statements. of Comprehensive Income being 5% of the revenue return on Materiality provides a basis for determining the nature and ordinary activities before taxation. extent of our audit procedures. We determined planning materiality for the Company to be Reporting threshold £1.8m which is 1% of equity shareholders’ funds. This provided An amount below which identified misstatements are a basis for determining the nature, timing and extent of our risk considered to be clearly trivial. assessment procedures, identifying and assessing the risks of We agreed with the audit committee that we would report material misstatement and determining the nature, timing and all audit differences in excess of £89k as well as differences extent of further audit procedures. We derived our materiality below that threshold that, in our view, warranted reporting on calculation from a proportion of total equity as we consider that qualitative grounds. to be the most important financial metric on which shareholders We evaluate any uncorrected misstatements against both the judge the performance of the Company. quantitative measures of materiality discussed above and in the light of other relevant qualitative considerations. 27
Scope of the audit of the financial statements Respective responsibilities of directors and An audit involves obtaining evidence about the amounts auditor and disclosures in the financial statements sufficient to give As explained more fully in the Statement of Directors’ reasonable assurance that the financial statements are free Responsibilities set out on page 16 the directors are responsible from material misstatement, whether caused by fraud or for the preparation of the financial statements and for being error. This includes an assessment of: whether the accounting satisfied that they give a true and fair view. Our responsibility policies are appropriate to the Company’s circumstances and is to audit and express an opinion on the financial statements have been consistently applied and adequately disclosed; in accordance with applicable law and International Standards the reasonableness of significant accounting estimates made on Auditing (UK and Ireland). Those standards require us to by the directors; and the overall presentation of the financial comply with the Auditing Practices Board’s Ethical Standards statements. In addition, we read all the financial and non- for Auditors. financial information in the annual report to identify material This report is made solely to the Company’s members, as a body, inconsistencies with the audited financial statements and to in accordance with Chapter 3 of Part 16 of the Companies Act identify any information that is apparently materially incorrect 2006. Our audit work has been undertaken so that we might based on, or materially inconsistent with, the knowledge state to the Company’s members those matters we are required acquired by us in the course of performing the audit. If we to state to them in an auditor’s report and for no other purpose. become aware of any apparent material misstatements or To the fullest extent permitted by law, we do not accept or inconsistencies we consider the implications for our report. assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Opinion on other matters prescribed by the Companies Act 2006 In our opinion: n the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and n the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception
ISAs (UK We are required to report to you if, in our opinion, financial and non- We have no exceptions to report. and Ireland) financial information in the annual report is: reporting n materially inconsistent with the information in the audited financial statements; or n apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or n otherwise misleading. In particular, we are required to report whether we have identified any inconsistencies between our knowledge acquired in the course of performing the audit and the directors’ statement that they consider the annual report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the entity’s performance, business model and strategy; and whether the annual report appropriately addresses those matters that we communicated to the audit committee that we consider should have been disclosed. Independent Auditors’ Report 28
Matters on which we are required to report by exception
Companies We are required to report to you if, in our opinion: We have no exceptions to report. Act 2006 n adequate accounting records have not been kept by the Company, or reporting returns adequate for our audit have not been received from branches not visited by us; or n the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or n certain disclosures of directors’ remuneration specified by law are not made; or n we have not received all the information and explanations we require for our audit.
Listing Rules We are required to review: We have no exceptions to report. review n the directors’ statement in relation to going concern set out on page 18, requirements and longer-term viability, set out on page 11; and n the part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review
Statement on the Directors’ Assessment of the Principal Risks that Would Threaten the Solvency or Liquidity of the Entity
ISAs (UK and We are required to give a statement as to whether we have anything We have nothing material to add or Ireland) material to add or to draw attention to in relation to: to draw attention to. reporting n the directors’ confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity; n the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated; n the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; and n the directors’ explanation in the annual report as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Caroline Mercer Notes: 1. The maintenance and integrity of the Martin Currie Global Portfolio Trust plc web (Senior Statutory Auditor) site is the responsibility of the directors; the work carried out by the auditors does for and on behalf of Ernst & Young LLP, not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial Statutory Auditor statements since they were initially presented on the web site. Edinburgh 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 24 March 2016 Statement of Comprehensive Income 29
Year to 31 January 2016 Year to 31 January 2015 Revenue Capital Total Revenue Capital Total Note £000 £000 £000 £000 £000 £000 Net (losses)/gains on investments 7 — (1,606) (1,606) — 22,345 22,345 Net currency gains/(losses) — 111 111 — (62) (62) Revenue 3 5,423 — 5,423 5,213 — 5,213 Investment management fee 5 (302) (604) (906) (290) (579) (869) Other expenses 5 (401) — (401) (403) — (403) Net return on ordinary activities before 4,720 (2,099) 2,621 4,520 21,704 26,224 taxation Taxation on ordinary activities 6 (509) — (509) (490) — (490) Net return attributable to shareholders 4,211 (2,099) 2,112 4,030 21,704 25,734 Net returns per ordinary share 2 4.15p (2.07)p 2.08p 3.92p 21.10p 25.02p
The total columns of this statement are the profit and loss accounts of the Company. The revenue and capital items are presented in accordance with the Association of Investment Companies (‘AIC’) Statement of Recommended Practice. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The notes on pages 33 to 43 form part of these financial statements Statement of Financial Position 30
As at 31 January 2016 As at 31 January 2015 Note £000 £000 £000 £000 Fixed assets Investments at fair value through profit or loss Listed on the London Stock Exchange 20,883 23,444 Listed on exchanges abroad 154,093 158,354 7 174,976 181,798 Current assets Trade receivables 8 320 289 Cash and cash equivalents 9 3,403 2,813 3,723 3,102 Current liabilities Trade payables 10 (592) (949)
(592) (949) Total assets less current liabilities 178,107 183,951 Equity Called-up share capital 11 5,179 5,224 Capital redemption reserve 10,838 10,793 Special reserve distributable* 110,581 114,383 Capital reserve 11 45,833 47,932 Revenue reserve* 5,676 5,619 Total shareholders' funds 178,107 183,951 Net asset value per ordinary share 2 176.3p 178.5p
*These reserves are distributable. The notes on pages 33 to 43 form part of these financial statements. Martin Currie Global Portfolio Trust plc is registered in Scotland, company number SCO192761. The financial statements on pages 29 to 43 were approved by the Board of directors on 24 March 2016 and signed on its behalf by
On behalf of the Board Neil Gaskell Chairman 24 March 2016 Statement of Changes in Equity 31
Called up Capital Special ordinary share redemption distributable Capital Revenue capital reserve reserve* reserve reserve* Total Note £000 £000 £000 £000 £000 £000 Statement of changes in equity for the year to 31 January 2016 At 31 January 2015 5,224 10,793 114,383 47,932 5,619 183,951 Ordinary shares bought back during — — (8,669) — — (8,669) the year Ordinary shares issued during the year — — 4,867 — — 4,867 Ordinary shares cancelled during the (45) 45 — — — — year Gains on realisation of investments at 7 — — — 10,321 — 10,321 fair value Movement in currency gains/(losses) — — — 111 — 111 Movement in fair value gains/(losses) 7 — — — (11,927) — (11,927) Expenses allocated to capital — — — (604) — (604) Net revenue — — — — 4,211 4,211 Dividends paid 4 — — — — (4,154) (4,154) At 31 January 2016 5,179 10,838 110,581 45,833 5,676 178,107
Statement of changes in equity for the year to 31 January 2015 At 31 January 2014 5,224 10,793 116,249 26,228 5,707 164,201 Ordinary shares bought back during — — (4,964) — — (4,964) the year Ordinary shares issued during the — — 3,098 — — 3,098 year Gains on realisation of investments at 7 — — — 8,065 — 8,065 fair value Movement in currency gains/(losses) — — — (62) — (62) Movement in fair value gains/(losses) 7 — — — 14,280 — 14,280 Expenses allocated to capital — — — (579) — (579)
Net revenue — — — — 4,030 4,030
Dividends paid 4 — — — — (4,118) (4,118) At 31 January 2015 5,224 10,793 114,383 47,932 5,619 183,951
*These reserves are distributable. The notes on pages 33 to 43 form part of these financial statements. Statement of Cash Flow 32
Note Year ended 31 January 2016 Year ended 31 January 2015 £000 £000 £000 £000 Cash flows from operating activities Profit before tax 2,621 26,224
Adjustments for: Loss/(gains) on investments 7 1,606 (22,345) Purchases of investments* (35,167) (32,689) Sales of investments* 39,735 37,639 Dividend income (5,378) (5,209) Interest income (5) (4) Stocklending income (40) — Dividend received 5,351 5,192 Interest received 6 4 Stocklending income received 34 — Increase in receivables 1 (1) Increase in payables 291 18 Overseas withholding tax suffered (509) (490) 5,925 (17,885) Net cash flows from operating activities 8,546 8,339
Cash flows from financing activities Repurchase of ordinary share capital (8,669) (4,964) Shares issued for cash 4,867 3,098 Equity dividends paid 4 (4,154) (4,118) Net cash flows from financing activities (7,956) (5,984)
Net increase in cash and cash equivalents 590 2,355 Cash and cash equivalents at the start of the 2,813 458 year Cash and cash equivalents at the end of the 3,403 2,813 year
*Receipts from the sale of, and payments to acquire, investment securities have been classified as components of cash flows from operating activities because they form part of the Company’s dealing operations. The notes on pages 33 to 43 form part of these financial statements. Notes to the Financial Statements 33
Note 1: Accounting policies (h) Cash and cash equivalents comprises cash and demand deposits which are readily convertible to a known amount of cash and are subject to (a) For the year ended 31 January 2016, the Company is applying for insignificant risk of changes in value. the first time, Financial Reporting Standard (FRS 102) applicable in the (i) Dividend payable – under FRS102 dividends should not be accrued in the UK and Republic of Ireland, which forms part of the revised Generally financial statements unless they have been approved by shareholders Accepted Accounting Practice (New UK GAAP) issued by the Financial before the statement of financial position date. Dividends are only Reporting Council (FRC) in 2012 and 2013. recognised when they have been paid. Dividends payable to equity These financial statements have been prepared on a going concern basis shareholders are recognised in the statement of changes in equity when in accordance with the Disclosure and Transparency Rules of the Financial they have been paid and become a liability of the Company. Conduct Authority, FRS102 issued by the FRC in August 2014 and the (j) Capital reserve – gains or losses on realisation of investments and revised Statement of Recommended Practice “Financial Statements of changes in fair values of investments are transferred to the capital Investment Trust Companies and Venture Capital Trusts” (SORP) issued reserve. Any changes in fair values of investments that are not readily by the AIC in November 2014. convertible to cash are treated as unrealised gains or losses within the As a result of the first time adoption of New UK GAAP and the revised capital reserve. The capital element of the management fee and relevant SORP, comparative amounts and presentation formats have been finance costs are charged to this reserve. Any associated tax relief is also amended where required. The net return attributable to ordinary credited to this reserve. shareholders and total shareholders’ funds remain unchanged from old The cost of share buy backs include the amount of consideration paid, UK GAAP basis, as reported in the preceding annual and interim reports. including directly attributable costs and are deducted from the special The Statement of Cash Flows has been restated to reflect presentational distributable reserve until the shares are cancelled. changes required under FRS 102 and does not include any other material changes. There are no changes to the financial performance or position The special distributable reserve was created through the cancellation as a result of the fund adopting FRS 102. and reclassification of the share premium account in 1999 and 2004, and thereafter the cost of the share buy backs are deducted from this Functional currency – the Company is required to nominate a functional reserve. currency, being the currency in which the Company predominately operates. The Board has determined that sterling is the Company’s The revenue reserve – the net revenue for the year is added to the functional currency, which is also the currency in which these financial revenue reserve and dividends paid are deducted from the revenue statements are prepared. reserve. (b) Income from investments (other than capital dividends), including taxes Capital redemption reserve – the nominal value of the shares bought deducted at source, is included in revenue by reference to the date on back are transferred to the capital redemption reserve. which the investment is quoted ex-dividend, or where no ex-dividend date (k) Taxation – the charge for taxation is based upon the revenue for the is quoted, when the Company’s right to receive payment is established. year and is allocated according to the marginal basis between revenue UK investment income is stated net of the relevant tax credit. Overseas and capital using the Company’s effective rate of corporation tax for the dividends include any taxes deducted at source. Special dividends are accounting period. credited to capital or revenue, according to the circumstances Scrip (l) Deferred taxation – deferred taxation is recognised in respect of all dividends are treated as unfranked investment income; any excess in timing differences that have originated but not reversed at the statement value of the shares received over the amount of the cash dividend is of financial position date where transactions or events that result in an recognised as a capital item in the statement of comprehensive income. obligation to pay more or a right to pay less tax in future have occurred (c) Interest receivable and payable, management fees, performance fees at the statement of financial position date measured on an undiscounted and other expenses are treated on an accruals basis. basis and based on enacted tax rates. This is subject to deferred tax (d) The management fee and finance costs in relation to debt are assets only being recognised if it is considered more likely than not recognised two-thirds as a capital item and one-third as a revenue item that there will be suitable profits from which the future reversal of the in the statement of comprehensive income in accordance with the underlying temporary differences can be deducted. Timing differences Board’s expected long-term split of returns in the form of capital gains are differences arising between the Company’s taxable profits and its and revenue, respectively. The performance fee is recognised 100% as results as stated in the accounts which are capable of reversal in one or a capital item in the statement of comprehensive income as it relates more subsequent periods. Due to the Company’s status as an investment entirely to the capital performance of the Company. All expenses are trust company, and the intention to continue meeting the conditions charged to revenue except where they directly relate to the acquisition required to obtain approval in the foreseeable future, the Company has or disposal of an investment, in which case, they are treated as described not provided deferred tax on any capital gains and losses arising on the in (f) below. revaluation or disposal of investments. (e) Investments – investments have been designated upon initial recognition (m) The Company can use derivative financial instruments to manage risk as fair value through profit or loss. Investments are recognised and de- associated with foreign currency fluctuations arising on the investments recognised at trade date where a purchase or sale is under a contract in currencies other than sterling. This is achieved by the use of forward whose terms require delivery within the time frame established by the foreign currency contracts. Derivative financial instruments are market concerned, and are initially measured as fair value. Subsequent recognised initially at fair value on the contract date and subsequently to initial recognition, investments are valued at fair value. For listed remeasured to the fair value at each reporting date. The resulting investments, this is deemed to be bid market prices. Gains and losses gain or loss is recognised as revenue or capital in the statement of arising from changes in fair value are included in net profit or loss for the comprehensive income depending on the nature and motive of year as a capital item in the statement of comprehensive income and are each derivative transaction. The fair values of the derivative financial ultimately recognised in the capital reserve. instruments are included within non-current assets or within current assets or current liabilities depending on the nature and motive of each (f) Transaction costs incurred on the purchase and disposal of investments derivative transaction. There were nil derivative instruments held as at 31 are recognised as a capital item in the statement of comprehensive January 2016. (2015: Nil). income. (n) Stock Lending income is received net of associated costs and recognised (g) Monetary assets and liabilities expressed in foreign currencies are in revenue as earned. translated into sterling at rates of exchange ruling at the date of the statement of financial position. Transactions in foreign currency are converted to sterling at the rate ruling at the date of the transaction and included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature. Notes to the Financial Statements 34
Note 2: Returns and net asset value Year ended 31 January 2016 Year ended 31 January 2015
The return and net asset value per ordinary share are calculated with reference to the following figures:
Revenue return Revenue return attributable to ordinary shareholders £4,211,000 £4,030,000
Weighted average number of shares in issue during year 101,410,238 102,868,296 Return per ordinary share 4.15p 3.92p
Capital return Capital return attributable to ordinary shareholders (£2,099,000) £21,704,000 Weighted average number of shares in issue during year 101,410,238 102,868,296 Return per ordinary share (2.07p) 21.10p
Total return Total return per ordinary share 2.08p 25.02p
There are no dilutive or potentially dilutive shares in issue.
As at 31 January 2016 As at 31 January 2015
Net asset value per share Net assets attributable to shareholders £178,107,000 £183,951,000 Number of shares in issue at the year end 101,044,956 103,063,375 Net asset value per share 176.3p 178.5p
Between 1 February and 22 March 2016, 1,069,639 ordinary shares of 5p were bought back to Treasury.
Note 3: Revenue from investments Year ended 31 January 2016 Year ended 31 January 2015 £000 £000 From listed investments UK equities 888 690 International equities 4,490 4,519
Other revenue Interest on deposits 5 4 Stock lending 40 — 5,423 5,213
There were no capital dividends received during the year ended 31 January 2016. During the year ended 31 January 2015, there were no capital dividends received. 35
Note 4: Dividends Year ended 31 January 2016 Year ended 31 January 2015 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Year ended 31 January 2014 – final dividend of 1.30p — — — 1,345 — 1,345 Year ended 31 January 2015 – final dividend of 1.40p 1,429 — 1,429 — — — Year ended 31 January 2016 – first interim dividend of 916 — 916 928 — 928 0.90p (2015: 0.90p) Year ended 31 January 2016 – second interim dividend 909 — 909 915 — 915 of 0.90p (2015: 0.90p) Year ended 31 January 2016 – third interim dividend 900 — 900 930 — 930 of 0.90p (2015: 0.90p) 4,154 — 4,154 4,118 — 4,118
Set out below are the total dividends payable in respect of the financial year which forms the basis on which the requirements of s1158-1159 of the Corporation Taxes Act 2010 are considered.
Year ended 31 January Year ended 31 January 2015 2016 £000 £000 First interim dividend of 0.90p for the year ended 31 916 928 January 2016 (2015: 0.90p) Second interim dividend of 0.90p for the year ended 31 909 915 January 2016 (2015: 0.90p) Third interim dividend of 0.90p for the year ended 31 900 930 January 2016 (2015: 0.90p) Proposed fourth interim dividend of 1.45p for the year 1,465 1,443 ended 31 January 2016 (2015: 1.40p) 4,190 4,216 Notes to the Financial Statements 36
Note 5: Other expenses Year ended 31 January 2016 Year ended 31 January 2015 £000 £000
Advertising and public relations 68 48 Bank charges (including custody fees) 19 16 Directors' fees 106 112 Directors and officers liability insurance 12 14 Irrecoverable VAT 15 9 Legal fees — 1 Marketing 26 25 Printing and postage 8 10 Registration fees 33 50 Secretarial fee 51 51 Other 41 45 379 381
Auditors' remuneration* Payable to Ernst & Young for the audit of the 19 22 Company's annual financial statements Payable to Ernst & Young for non-audit fees 3 — 401 403
*The annual financial statements for the year ended 31 January 2015 were audited by PriceWaterhouseCoopers LLP. Performance fee The performance fee for the year ended 31 January 2016 was £nil (2015: £nil). Details of the management and secretarial agreements are provided on page 13.
Year ended 31 January 2016 Year ended 31 January 2015 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Ongoing charges are calculated with reference to the following figures: Investment management fee (302) (604) (906) (290) (579) (869) Other expenses (401) — (401) (403) — (403) Total Expenses (703) (604) (1,307) (693) (579) (1,272) Average net assets over the year 183,190 174,718 Ongoing charges 0.71% 0.73%
Full details of the investment management fee are included in the report of directors on page 13, details of the directors’ fees are included in the directors’ remuneration statement on pages 23 and 24. 37
Note 6: Taxation on ordinary activities Year ended 31 January 2016 Year ended 31 January 2015 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Foreign tax 509 — 509 490 — 490
The effective corporation tax rate was 20.16% (2015: 21.32%). The tax charge for the year differs from the charge resulting from applying the standard rate of corporation tax in the UK for an investment trust company. The differences are explained below.
Year ended 31 January 2016 Year ended 31 January 2015 £000 £000 Net return before taxation 2,621 26,224 Corporation tax at effective rate of 20.16% 528 5,594 (2015: 21.32%) Effects of: Non taxable UK dividend income (179) (147) Currency (gains)/losses not taxable (22) 13 Losses/(gains) on investments not taxable 324 (4,766) Overseas dividends not taxable (897) (964) Overseas tax suffered 509 490 Increase in excess management and loan expenses 246 270 Tax charge for the year 509 490
As of 1 April 2015, the UK Corporation tax rate fell from 21% to 20%. As at 31 January 2016, the Company had unutilised management expenses of £25.3 million (2015: £24.1 million) and non-trading loan relationship deficit of £4.7 million (2015: £4.7 million) carried forward. A deferred tax asset in respect of this has not been recognised and these expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. Due to the Company’s status as an investment trust and the intention to continue to meet the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on capital gains and losses arising on the revaluation or disposal of investments. During the year, as a result of the provision in the Finance Act 2015 the main rate of corporation tax reduced to 19% for the financial year 2017 and 18% for the financial year 2020. Notes to the Financial Statements 38
Note 7: Investments at fair value Year ended 31 January 2016 Year ended 31 January 2015 through profit or loss £000 £000 Opening valuation 181,798 163,755 Opening unrealised investment holding gains (39,584) (25,304) Opening cost 142,214 138,451
Purchases at cost 34,519 33,337 Disposal proceeds (39,735) (37,639) Net profit on disposal of investments 10,321 8,065 Disposal at cost (29,414) (29,574)
Closing cost 147,319 142,214 Closing unrealised investment holding gains 27,657 39,584 Valuation as at 31 January 174,976 181,798
As at 31 January 2016 As at 31 January 2015
Gains on investments
Net profit on disposal of investments 10,321 8,065
Net (loss)/gain on revaluation of investments (11,927) 14,280
(1,606) 22,345
The transaction cost in acquiring investments during the year was £65,000 (2015: £74,000). For disposals, transaction costs were £54,000 (2015: £54,000). As at 31 January 2016 Anheuser-Busch Inbev was an unlisted security (2015: no unlisted securities).
Note 8: Receivables: amounts falling due As at 31 January 2016 As at 31 January 2015 within one year £000 £000 Dividends receivable 186 159 Taxation recoverable 123 124 Other receivables 5 6 Stock lending income receivable 6 — 320 289
Note 9: Cash and cash equivalents As at 31 January 2016 As at 31 January 2015 £000 £000 Sterling bank account 3,403 2,809 Non-sterling bank account — 4 3,403 2,813 39
Note 10: Trade payables As at 31 January 2016 As at 31 January 2015 £000 £000 Amounts falling due within one year: Amount due to brokers — 648 Due to Martin Currie 221 228 Other payables 371 73 592 949
Note 11: Ordinary shares 5p As at 31 As at 31 Number of January 2016 Number of January 2015 shares £000 shares £000
Ordinary shares in issue at the beginning of the year 103,063,375 5,153 104,293,171 5,214 Ordinary shares issued from Treasury during the year 2,845,017 142 1,727,145 87 Ordinary shares bought back to Treasury during the year (4,863,436) (243) (2,956,941) (148)
Ordinary shares in issue at end of the year 101,044,956 5,052 103,063,375 5,153
As at 31 As at 31 Number of January 2016 Number of January 2015 shares £000 shares £000 Treasury shares (Ordinary shares 5p) Treasury shares in issue at the beginning of the year 1,429,796 71 200,000 10 Ordinary shares issued from Treasury during the year (2,845,017) (142) (1,727,145) (87) Ordinary shares cancelled from Treasury during the year (909,969) (45) — — Ordinary shares bought back to Treasury during the year 4,863,436 243 2,956,941 148
Treasury shares in issue at end of the year 2,538,246 127 1,429,796 71
Total ordinary shares in issue and in Treasury at the end 103,583,202 5,179 104,493,171 5,224 of the year
The net cost of share issues from and buy backs to Treasury for the year to 31 January 2016 was £3,802,000 (2015: Net cost of share issues from and buy backs to Treasury £1,866,000). The analysis of the capital reserve is as follows: Unrealised Realised investment Total capital reserve holding gains capital reserve £000 £000 £000 At 31 January 2015 8,348 39,584 47,932 Gains on realisation of investments at fair value 10,321 — 10,321 Movement in fair value losses of investments — (11,927) (11,927) Realised currency gain during the year 111 — 111 Capitalised expenses (604) — (604)
At 31 January 2016 18,176 27,657 45,833
The above split in capital reserve is shown in accordance with provisions of the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’. Notes to the Financial Statements 40
Note 12: Related party transactions (i) Market price risk With the exception of the management and secretarial fees (as The fair value or future cash flows of a financial instrument held disclosed on page 13), directors’ fees (disclosed on page 24) by the Company may fluctuate because of changes in market and directors’ shareholdings (disclosed on page 23), there have prices. This market risk comprises three elements - interest rate been no related party transactions during the year, or in the risk, currency risk and other price risk. prior year. Interest rate risk Interest rate movements may affect: Note 13: Financial instruments n the level of income receivable on cash deposits. The Company’s financial instruments comprise securities and The possible effects on fair value and cash flows that could other investments, cash balances, receivables and payables that arise as a result of changes in interest rates are taken into arise directly from its operations; for example, in respect of sales account when making investment and borrowing decisions. and purchases awaiting settlement, and receivables for accrued income. The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a The Company also has the ability to enter into derivative regular basis. Borrowings may comprise fixed rate, revolving, transactions in the form of forward foreign currency contracts, and uncommitted facilities. Current guidelines state that the futures and options, for the purpose of managing currency and total borrowings will not exceed 20% of the total assets of market risks arising from the Company’s activities. the Company. The Company does not currently have any The main risks the Company faces from its financial instruments gearing. are (i) market price risk (comprising interest rate risk,currency Interest risk profile risk and other price risk), (ii) liquidity risk and (iii) credit risk. The interest rate risk profile of the portfolio of financial assets The Board regularly reviews and agrees policies for managing (comprising cash balances only) at the statement of financial each of these risks. The investment manager’s policies for position date was as follows: managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term receivables and payables, other than for currency disclosures.
Interest rate Local currency Foreign Sterling equivalent At 31 January 2016 % ‘000 exchange rate £000 Assets Sterling 0.25 3,403 1.000 3,403
At 31 January 2015 Assets Sterling 0.25 2,809 1.000 2,809 US dollar 0.01 6 1.502 4 2,813
Interest rate sensitivity The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the statement of financial position date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Company’s profit for the year ended 31 January 2016 would increase/decrease by £17,000 (2015: increase/decrease by £14,000). This is mainly attributable to the Company’s exposure to interest rates on its floating rate cash balances. As at 31 January 2016 a decrease in interest rates of 0.5% is used, given the prevailing base rate is 0.5%. This level is considered possible based on observations of market conditions and historic trends. 41
Foreign currency risk A significant proportion of the Company’s investment portfolio is invested in overseas securities and the statement of financial position can be significantly affected by movements in foreign exchange rates. It is not currently the Company’s policy to hedge this risk. The revenue account is subject to currency fluctuation arising on overseas income. Foreign currency risk exposure by currency of denomination:
Year ended 31 January 2016 Year ended 31 January 2015 Investment Net monetary Total currency Investment Net monetary Total currency exposure exposure exposure exposure exposure exposure £000 £000 £000 £000 £000 £000 US dollar 100,650 148 100,798 101,010 158 101,168 Euro 14,333 123 14,456 18,879 25 18,904 Japanese yen 15,119 — 15,119 11,235 — 11,235 Swiss franc 3,537 — 3,537 6,411 72 6,483 Singapore dollar 3,780 — 3,780 5,600 — 5,600 Norwegian krone 1,454 — 1,454 2,559 — 2,559 Hong Kong dollar 4,664 — 4,664 5,856 — 5,856 Canadian dollar 2,453 23 2,476 2,519 24 2,543 Australian dollar 5,240 — 5,240 2,226 — 2,226 Indonesian rupiah 2,862 — 2,862 2,059 — 2,059 Total overseas 154,092 294 154,386 158,354 279 158,633 investments Sterling 20,884 2,837 23,721 23,444 1,874 25,318 Total 174,976 3,131 178,107 181,798 2,153 183,951
The asset allocation between specific markets can vary from time to time based on the portfolio manager’s opinion of the attractiveness of the individual stocks. Foreign currency sensitivity At 31 January 2016, if sterling had strengthened by 5% in relation to all currencies, with all other variables held constant, total net assets and total return on ordinary activities would have decreased by the amounts shown below. A 5% weakening of sterling against all currencies, with all other variables held constant, would have had an equal but opposite effect on the financial statement amounts. The analysis is performed on the same basis for 2015.
2016 2015 £000 £000 US dollar 5,033 5,051 Euro 717 944 Japanese yen 756 562 Swiss franc 177 321 Singapore dollar 189 280 Norwegian krone 73 128 Hong Kong dollar 233 293 Canadian dollar 123 126 Australian dollar 262 111 Indonesian rupiah 143 103 Notes to the Financial Statements 42
Other price risk (ii) Liquidity risk Other price risks (ie changes in market prices other than those This is the risk that the Company will encounter difficulty in arising from interest rate or currency risk) may affect the value meeting obligations associated with financial liabilities. of the quoted investments. Liquidity risk is not considered to be significant as the Company’s It is the Board’s policy to hold an appropriate spread of assets comprise mainly readily realisable securities, which can investments in the portfolio in order to reduce the risk arising be sold to meet funding commitments if necessary. from factors specific to a particular country or sector. The allocation of assets to international markets as detailed on page (iii) Credit risk 6, and the stock selection process both act to reduce market This is the risk of failure of the counterparty to a transaction to risk. The investment manager actively monitors market prices discharge its obligations under that transaction that could result throughout the year and reports to the Board, which meets in the Company suffering a loss. regularly in order to review investment strategy. Almost all The risk is managed as follows: investments held by the Company are listed on various stock n investment transactions are carried out with a large number exchanges worldwide. of brokers, whose credit rating is reviewed periodically by the Other price risk sensitivity portfolio manager, and limits are set on the amount that may If market prices at the statement of financial position be due from any one broker; and date had been 15% higher or lower while all other n cash is held only with reputable banks with high quality variables remained constant, the return attributable to external credit ratings. ordinary shareholders at the year ended 31 January 2016 The maximum credit risk exposure as at 31 January 2016 was would have increased/decreased by £26,250,000 (2015: £3,723,000 (2015: £3,102,000). This was due to receivables increase/decrease of £27,270,000) and capital reserves and cash as per notes 8 and 9. would have increased/decreased by the same amount. This level of change is considered to be reasonably possible Fair values of financial assets and financial liabilities based on observation of market conditions and historic trends. All financial assets and liabilities of the Company are included in the statement of financial position at fair value or a reasonable approximation of fair value with no material difference in the carrying amount.
Note 14: Capital management policies and procedures The Company’s capital management objectives are: n to ensure that the Company will be able to continue as a going concern; n to maximise the return to its equity shareholders through an appropriate balance of equity capital and debt; and n to limit gearing to 20% of net assets. The Board monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the portfolio manager’s views on the market and the extent to which revenue in excess of that which is required to be distributed under the investment trust rules should be retained. The analysis of shareholders’ funds is as follows:
As at 31 January 2016 As at 31 January 2015 £000 £000 Called up ordinary share capital 5,179 5,224 Capital redemption reserve 10,838 10,793 Special distributable reserve 110,581 114,383 Capital reserve 45,833 47,932 Revenue reserve 5,676 5,619 Total shareholders' funds 178,107 183,951 43
Note 15: Fair value hierarchy Note 16: Stock lending Under FRS 102 ‘The Financial Reporting Standard applicable The Company has a Securities Lending Authorisation in the UK and Republic of Ireland’ an entity is required to Agreement with State Street Bank & Trust Company. classify fair value measurements using a fair value hierarchy As at 31st January 2016 £36,606,000 of investments were that reflects the significance of the inputs used in making subject to stock lending agreements and £37,723,000 was the measurements. The fair value hierarchy shall have the held in collateral. The collateral was held in the form of following levels: cash (in GBP, USD or EUR), government securities issued by any of the OECD countries or equity securities listed and/or n Level a: Quoted prices for identical instruments in active traded on an exchange in the following countries: Australia, markets; Canada, Hong Kong, Japan, New Zealand, Singapore, n Level b: Prices of a recent transaction for identical Switzerland and USA (2015: £Nil of investments subject to instruments. stock lending, £Nil held as collateral). n Level c: Valuation techniques that use: The gross earnings and the fees paid for the year are (i): Observable market data; and: £53,000 (2015: £Nil) and £13,000 (2015: £Nil). (ii): Non-observable market data. Note 17: Post balance sheet events As at 31 January 2016 financial assets in the form of quoted equities held at fair value through profit or loss to the value Since the year end a further 1,069,639 shares of 5p each of £174,976,000 were classified as Level a in the fair value have been bought back to Treasury for a consideration of hierachy (31 January 2015: quoted equities to the value of £1,876,000. £181,798,000 classified as Level 1 – equivalent to the Level a under FRS 102) and holding Anheuser-Busch Inbev with a value of £96 classified as Level b and no assets classified as c(i) or c(ii) (31 January 2015: no assets classified as Level 2 or 3 – equivalent to Level b, c(i) or c(ii) under FRS 102). The fair value of the company’s investments in quoted equities have been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level a are actively traded on recognised stock exchanges. Investor Information 44
Directors and Advisers Directors Brokers Neil Gaskell (chairman) JPMorgan Cazenove Limited Mike Balfour 25 Bank Street David Kidd Canary Wharf Gillian Watson London E14 5SP
Investment manager and company secretary Registrars Martin Currie Investment Management Limited Capita Asset Services Saltire Court The Registry 20 Castle Terrace 34 Beckenham Road Edinburgh EH1 2ES Beckenham Telephone 0131 229 5252 Kent BR3 4TU Fax 0131 228 5959 Telephone 0871 664 0300 www.martincurrie.com www.capitaassetservices.com Martin Currie Investment Management Limited is authorised and regulated by the Financial Conduct Authority. Bankers Lloyds Banking Group plc Registered office 10 Gresham Street Martin Currie Global Portfolio Trust plc London EC2V 7AE Saltire Court State Street Bank and Trust Company 20 Castle Terrace 20 Churchill Place Edinburgh EH1 2ES Canary Wharf Registered in Scotland, registered number SCO192761 London E14 5HJ Independent auditors Custodians Ernst & Young LLP State Street Bank and Trust Company 10 George Street 20 Churchill Place Edinburgh EH2 2D2 Canary Wharf London E14 5HJ Association of Investment Companies 9th Floor 24 Chiswell Street London EC1Y 4YY Telephone 020 7282 5555 www.theaic.co.uk
Martin Currie Global Portfolio Trust is a member of the AIC (the trade body of the investment company industry).
Financial calendar – key dates 2016/7
Annual results announced First interim Second interim Third interim Fourth dividend payment dividend payment dividend payment dividend payment
March/ June July September October January April
Annual general Half-yearly results meeting announced Glossary of Terms 45
Assets Gearing Anything owned or controlled that has value. For investment At its simplest, gearing means borrowing money to buy more companies, this might include shares and securities, property, assets in the hope the company makes enough profit to pay cash etc. back the debt and interest and leave something extra for shareholders. However, if the investment portfolio doesn’t Benchmark perform well, gearing can increase losses. The more an An index or other measure against which the performance of investment company gears, the higher the risk. an investment company is compared or its objectives are set. Internal and external AIFM The financial statements will include an explanation of how Under the AIFM Directive, the AIFM of a company may be either the company has performed against its benchmark over the (a) another person appointed by or on behalf the company and year and the reasons for any under or over performance. which, through that appointment, is responsible for managing Bid price the company (an ‘external AIFM’); or (b) where the legal form The price at which you sell your shares when two prices are of the company permits internal management and the board quoted. This is sometimes shown as the ‘sell’ price and will be chooses not to appoint an external AIFM, the company itself the lower of the two prices shown. (an ‘internal AIFM’). An AIFM will be able to take advantage of lighter touch regulation where the total assets of the companies Discount it manages do not exceed: (a) f500 million (in cases where no The amount, expressed as a percentage, by which the share leverage is used); or (b) f100 million (where leverage is used). price is less than the net asset value per share. This regime will also apply to small companies which are internal AIFMs. The advantage of falling under these thresholds is that Dividend not all of the requirements of the AIFM Directive will apply Income from an investment in shares. Dividends are usually and thus compliance obligations can be reduced. However, paid twice a year but can also be paid quarterly or monthly. Not sub-threshold firms will not benefit from any rights granted all investment companies pay dividends. Dividend income isn’t under the AIFM Directive. guaranteed and may fall as well as rise. Investment company Environmental, social and corporate governance A closed-ended fund which invests in a diversified portfolio (ESG) of assets. Investors buy and sell their shares in the investment Assessment of material environmental, social and corporate company on a stock exchange. governance (ESG) factors and the potential impact on that Investment trust company’s cash flows, statement of financial position, reputation and, ultimately, corporate value in the long term. An investment company which is based in the UK and which meets certain tax conditions so that it doesn’t pay tax on gains Ex income made within the portfolio. Also shown as ‘ex div’ or ‘xd’, this means that if you buy the Net assets shares today, you won’t receive the most recently declared dividend. A measure of the size of an investment company. The total value of all assets held, less liabilities and prior charges, including Shares are being traded all the time on stock markets, so for income for the current year. administrative reasons there needs to be a point when buyers and sellers agree whether they will receive the most recently NAV per share declared dividend. The point when the shares purchased will A very common measure of the underlying value of a share in no longer receive the dividend is known as the ‘ex dividend an investment company. date’ and the shares are said to have ‘gone ex dividend’. The share price will normally fall by the amount of the dividend to In basic terms, the net asset value (‘NAV’) is the value of the reflect this. investment company’s assets, less any liabilities it has. The NAV per share is the NAV divided by the number of shares in issue. If you buy the shares when you are still entitled to the most This will very often be different to the share price. The difference recently declared dividend, this is known as the shares being is known as the discount or premium. cum dividend. Glossary of Terms 46
NAV total return performance Share price A measure showing how the net asset value (‘NAV’) per share The price of a share as determined by the stock market. has performed over a period of time, taking into account both If you see a single share price shown, it’s likely that this is the capital returns and dividends paid to shareholders. mid-market price. This is different to the price at which you buy The AIC shows NAV total return based on a hypothetical and sell the shares, which are known as the bid price (sell) and investment of £100. It assumes that dividends paid to offer price (buy). shareholders are reinvested at NAV at the time the shares are Stock lending quoted ex-dividend. The act of loaning a stock or security to a third party for a fee. NAV total return shows performance which is not affected by movements in discounts and premiums. It also takes into Treasury shares account the fact that different investment companies pay out Shares in a company’s own share capital which the company different levels of dividends. itself owns and which can be sold to investors to raise new Offer price funds. The price at which you can buy shares when two prices are Treasury shares come into existence only when a company quoted. This is also shown as the ‘buy’ price and will be the buys back shares. Instead of cancelling the shares (i.e. they higher of the two prices. cease to exist) they are held ‘in treasury’ by the company and can be sold at a later date to raise new funds. Ongoing charges Zero discount policy Ongoing charges are the total of the Company’s expenses including both the investment management fee (excluding A mechanism that aims to ensure that, in normal market performance fees) and other costs expressed as a percentage conditions, the share price trades at, or very close to, NAV. of NAV.
Premium The amount, expressed as a percentage, by which the share price is more than the net asset value per share.
Share buy backs Describes an investment company buying its own shares and reducing the number of shares in existence. Share buy backs can be used to return money to shareholders, but are also often used to tackle the company’s discount. Discounts may reflect an imbalance between the demand for shares and the number of shares in existence. The hope is that, by reducing the number of shares in existence, the buy back will help to prevent the discount widening or even reduce it. Ways to Invest in the Company 47
The Company’s shares qualify for tax efficient wrapper Private client stockbrokers products like individual savings accounts (‘ISAs’) and self- If you have a large sum to invest, you may want to contact a invested personal pensions (‘SIPPs’) as well as many other private client stockbroker. They can manage your entire investment wrappers that can be used, including those portfolio of shares and will advise you on your investments. designed for children. To find a private client stockbroker visit the Wealth Platforms, fund supermarkets and online Management Association: www.thewma.co.uk. stockbrokers Capita Asset Services You can also invest using a number of fund platforms and You can also buy and sell shares directly by calling the supermarkets. Many offer wrapper products like ISAs and Capita dealing team on 0871 664 0311. SIPPs and children’s savings products. A number of real-time To change your address, request tax vouchers or obtain an execution only stockbroking services also allow you to trade up-to-date valuation of your share holding please contact online, manage your portfolio and buy UK listed shares. Capita Asset Services on 0871 664 0300 (calls cost 10p These services do not offer financial advice and if you are per minute plus network extras, lines are open unsure about investing, we recommend that you speak to a 9:00am-5:30pm Mon-Fri). qualified financial adviser. Alternatively log on to www.capitaassetservices.com Independent financial advisers and register on the share portal to access full information An increasing number of independent financial advisers are on your holding. including investment trusts within their investment Trading codes recommendations for clients. To find an adviser who advises on investment trusts, visit www.unbiased.co.uk. (You may be asked for these when investing) TIDM code: MNP Sedol: 0537241 Reuters code: MNP.L ISIN: GB0005372411 Shareholder Information 48
Shareholder services The registrars of the company are Capita Asset Services. You can buy and sell shares directly by calling the Capita Dealing team on 0371 664 0445. For other services you can contact Capita by telephone or online: Online Telephone Contact details www.capitaassetservices.com 0871 664 0300*
Opening times 24 hour 9:00am – 5:30pm Monday to Friday Change your address Request tax vouchers — Valuation Online proxy voting — Dividend payment records Register and change bank mandate instructions for receipt of dividends Elect to receive shareholder communication electronically Request/download shareholder forms
*calls cost 12p per minute plus network extras.
Checking the share price We want to make it easy for you to follow your investment and ensure that you can check the share price in the way that suits you best: Publications Financial Times, The Herald and The Scotsman Telephone FT Cityline on 09058 171 690* simply say ‘Martin Currie Global Portfolio’ when prompted. Online www.martincurrieglobal.com www.londonstockexchange.com
*Calls are charged at 75p per minute from a BT landline. Average call duration will be 1 minute for one stock quote. Cost from other networks and mobile phones may be higher.
Ten year record Net asset (Discount)/ Revenue return Dividend value per premium Investments Net assets As at 31 January per share per share share* % £000 £000
2007 2.81p 2.40p 129.9p (8.0%) 195,332 186,398
2008 2.83p 2.60p 137.2p (7.8%) 173,633 187,642
2009 4.06p 3.50p 93.1p (3.5%) 117,919 124,724
2010 2.81p 3.50p 122.2p (7.1%) 135,502 142,716
2011 2.34p 3.50p 135.5p (7.7%) 146,260 147,731
2012 3.88p 3.70p 139.2p (7.3%) 142,886 145,537
2013 4.23p 3.90p 152.6p (3.4%) 158,894 159,399
2014 3.76p 4.00p 157.4p (0.6%) 163,755 164,201 2015 3.92p 4.10p 178.5p 0.6% 181,798 183,951 2016 4.15p 4.15p 176.3p (1.9%) 174,976 178,107
*Cum income www.martincurrieglobal.com 49
Martin Currie Global Portfolio Trust has its own dedicated website at www.martincurrieglobal.com. This offers shareholders, prospective investors and their advisers a wealth of information about the Company. Register for monthly updates Subscribe to monthly email updates that offer information on the following: n latest prices n performance data n latest factsheet n press releases and articles n manager videos n portfolio information n research n annual and half yearly reports
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Enquiries If you have an enquiry about Martin Currie Global Portfolio Trust, please get in touch. 0131 229 5252 I [email protected] Mail: please refer to our address on the back page of this report.
This part of the report has been approved by Martin Currie Investment Management Limited (‘MCIM’), the investment manager of Martin Currie Global Portfolio Trust. MCIM is authorised and regulated by the Financial Conduct Authority. The value of shares and the income from them may go down as well as up as a result of market and currency movements. Investors may not get back the amount invested. MCIM is not authorised to give advice and generally provides information on its own services and products. This information is provided for information only and is not an invitation to acquire Martin Currie Global Portfolio Trust shares nor is this a personal recommendation to use any source described above. Calls may be recorded. Martin Currie Global Portfolio Trust
How to contact us
Tel: 0131 229 5252 The Chairman c/o Company secretary Fax: 0131 228 5959 Martin Currie Global Portfolio Trust plc Email: [email protected] Saltire Court 20 Castle Terrace www.martincurrieglobal.com Edinburgh EH1 2ES Calls to the above may be recorded.