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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Martin Currie Global Portfolio Trust Plc | LSE:MNP | London | Ordinary Share | GB0005372411 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 365.00 | 365.00 | 369.00 | 365.00 | 365.00 | 365.00 | 17,882 | 11:19:54 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | -27.28M | -29.75M | -0.4024 | -9.07 | 269.83M |
From Apr 2019 to Apr 2024
TIDMMNP
RNS Number : 1476X
Martin Currie Global Portfolio Tst
25 April 2019
Martin Currie Global Portfolio Trust plc (the "Company")
Annual Financial Results
Year to 31 January 2019
The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 January 2019 or 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Company's annual general meeting.
The auditor has reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.
A copy of the annual report and accounts has also been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do
The annual general meeting of the Company will be held at the offices of Martin Currie Investment Management Limited on 11 June 2019 at 12.30pm. The full notice of the meeting can be found on the Company's website (www.martincurrieglobal.com).
The unedited full text of those parts of the annual report and accounts for the year ended 31 January 2019, which require to be published are set out on the following pages.
Financial
Total returns***
Hot Features
Premium
Year ended 31 Year ended 31
January 2019 January 2018
Net asset value per
share* 1.6% 11.9%
-------------- --------------
Benchmark 0.9% 12.7%
-------------- --------------
Share price (0.3%) 12.4%
-------------- --------------
Source: Martin Currie Investment Management.
* The net asset value per share total return is calculated using the cum income net asset value with dividends reinvested. This is an Alternative Performance Measure.
** The benchmark is the FTSE World Index.
*** The combined effect of the rise and fall in the share price, net asset value or benchmark together with any dividend paid.
Chairman's Statement
Welcome to your annual report for the 12 months ending 31 January 2019.
The year has been dominated by political uncertainties accompanied by slower global GDP growth not just in the UK but in much of the rest of the world. The global stock markets have reflected the global growth slowdown by delivering only a modest 0.9% total return over the period, in sharp contrast to the double digit returns in 2017/18. Against this challenging background, the Company delivered another year of relative stability and a pick-up in performance, outperforming the benchmark with a 1.6% Net Asset Value ('NAV') total return which was in the top three in our AIC sector.
Portfolio Manager
During the year we said goodbye to Tom Walker on his retirement after 18 successful years as the Company's portfolio manager. During his tenure Tom has delivered an excellent performance, beating the benchmark in seven out of the eight ten year rolling periods producing an 18-year share price increase of 380%. The Board wishes to express its gratitude to Tom for this sustained delivery of long-term shareholder value. We welcomed Martin Currie's recruitment of Zehrid Osmani as Tom's replacement after a seamless handover in the third quarter following a period as co-managers. Zehrid brings great portfolio management experience and energy. He has already catalysed further enhancements to the investment process including an increasingly focused high conviction portfolio. The portfolio is likely to hold in the range of 25-40 stocks, each with long-term capital strengths, selected from around the world backed up by the deep research which is the hallmark of Martin Currie's investment approach.
More details of the markets, portfolio performance and his approach to managing the portfolio are given in Zehrid's report.
Investment objective and benchmark update
The capital growth investment objective has been in place since the formation of the Company 20 years ago but now does not fully reflect what shareholders receive from their investment which is a total return, combining both capital growth and dividend income. This 'total return' measure of performance is the most widely used in the sector and reflects the overall return to shareholders rather than simply the capital element. As a result comparability with others in the sector will be improved.
As part of this change the Board is also proposing to adopt the MSCI All Country World index in place of the FTSE World index as its benchmark. The FTSE index covers some countries less well than the MSCI index, in particular some of the larger emerging markets such as China and India in which the Company does sometimes hold investments.
A resolution will therefore be put to the AGM that the Company's investment objective be changed from 'Long-term capital growth in excess of the capital return from the FTSE World index' to 'Long-term returns in excess of the total return from the MSCI All Country World index'.
Subject to approval by shareholders, these changes will take effect from the start of the next full financial year on 1 February 2020. Further information is contained in the Director's report, and a full copy of the proposed Investment Objective and Policy, showing the changes from the existing Investment Objective is included in the Notes to the Notice of AGM.
Dividends
Income per share reduced by 0.2p per share to 3.47p per share largely due to reduced dividend income as sterling strengthened against the US dollar by about 2% over the year. The fourth interim dividend of 1.5p will be paid on 26 April 2019 to shareholders on the register at 12 April 2019 making a total dividend for the year of 4.20p in line with last year's payment. Looking ahead the investment philosophy will focus on quality growth stocks rather than companies with a high dividend yield and the capital growth element of total return is therefore likely to increase.
Low costs
Once more, costs have been controlled and ongoing charges have reduced from 0.68% to 0.63% of NAV using the Association of Investment Companies ('AIC') methodology. This is due mainly to the reduction in the management fee from 0.5% to 0.4% of NAV with effect from 1st February 2018. The improved performance has generated a provision for a performance fee of about 0.20% payable if outperformance of the benchmark were to be maintained during the current year. Details of the performance fee calculation are set out below.
The Board
Following the conclusion of the AGM Mike Balfour will retire and will be succeeded by Gillian Watson as Senior Independent Director. The Board wishes to express its gratitude to Mike for his nine years of service during which he has been both Audit Committee Chair and Senior Independent Director. Recruitment of a new director is underway and an announcement will be made in due course.
Environmental, Social & Corporate Governance Issues ('ESG')
Your Company publishes its compliance statement in respect of the UK Stewardship Code on its website. The Investment Manager is a signatory, and is assessed as Tier-1 by the FRC, for its statement of compliance with the UK Stewardship Code. The Company works closely with the manager on its
approach in the investment process to:
-- strategy and governance; -- the integration of ESG into their analytical work; and -- active ownership through engagement with investee company managements.
Martin Currie has engaged during the year with almost all of our investee companies in a range of ESG issues including the supply chain, sustainable water policies, sustainable packaging and senior management remuneration structures.
Examples of these engagements include discussing with the remuneration committee of a European company its senior management remuneration structures which has concluded successfully and with a US software company on improving employee retention rates with more socially responsive practices which is ongoing.
ESG issues are an important element of the research process for companies being considered for the portfolio which is more fully described by Zehrid in his report below. More details of the Martin Currie ESG activities are available in the 2019 Stewardship Report on the website at martincurrie.com /corporate/about-us/stewardship.
Outlook
The global equity markets have so far taken the uncertainties of global politics largely in their stride but continuing trade wars and other political issues combined with the global economic growth slowdown will test those businesses which are financially exposed and increase volatility in the stock markets. In this environment the focus of your Company's global portfolio on financially robust, well-managed businesses with sustained good returns on capital positions it strongly to deliver another year of good performance.
Neil Gaskell
Chairman
25 April 2019
Manager's review
Market comment
Over the 12-month period to 31 January 2019 the FTSE World index produced a total return of 0.9%. However, this number does not give insight into the significant regional variation of markets; North America returned 5.4%, whilst Developed Europe, Japan and Emerging Markets declined 6.4%, 4.5% and 3.7%, respectively.
The Company's reporting period started well, helped by economic activity, notably strong US growth and the boost to profits from President Trump's tax cuts. However, as illustrated in the chart below, markets sold off sharply in the latter part of the year, with Europe relatively more impacted. The sell-off was based on fears related to weakening economic activity and less supportive monetary policies.
Economic activity across all key regions globally lost momentum in the second half of 2018. Trade tensions between China and the US contributed to economic uncertainty, with the market becoming concerned about a Chinese economic 'hard landing' and, in the UK, major uncertainty around the shape of the final Brexit deal. On the monetary policy front, the US Federal Reserve ('Fed'), continued to steadily raise rates during the year, and initially sounded increasingly hawkish in its rhetoric (although this subsequently shifted to a more dovish stance in January 2019). The US yield curve flattening during the year led the market to worry about an inverted yield curve, and therefore about an upcoming recession. This increased volatility, and resulted in the marked sell-off in equity markets in the final quarter of 2018, after what had been a very long period of low volatility. An inverted yield curve has historically been a reliable predictor of upcoming recessions in the US (less so in other regions). This is based on the fact that long-term interest rates move below shorter-term rates, which is a reflection of overly tight monetary policies. It also tends to lead to a reduction in bank lending, given that banks traditionally borrow at the short end of the yield curve, to lend at the long end of the curve - which would also contribute to slowing economic activity. We discuss in more detail our view on recession and how the Company would fare in the Market outlook section.
Fund performance & attribution
Despite increased volatility and the market sell-off in the later part of the period, the Company's NAV total return was 1.6% over the 12 months to 31 January 2019, outperforming the total return benchmark by 0.7%. In sector terms, utilities, healthcare, consumer services and technology all performed well. Poorer performers were basic materials, consumer goods and financials. The bulk of the Company's outperformance was driven by the performance of particular stocks, notably in industrials, financials, materials, energy and telecommunications.
In healthcare, blood-fractionation company CSL contributed positively, as did global biotechnology company Shire, following an acquisition bid by Japanese peer Takeda. Strong industrials performance was notably driven by exposure to human resources software provider ADP, which we think will continue to benefit from the trend for companies to outsource payroll and increasing complexity in regulation, and Waters, an analytical laboratory instrument and software company.
In financials, large positions in Asian insurance company AIA and credit card provider Visa performed well. AIA is a Hong Kong listed life insurer which has a mix of profitable businesses that can generate capital to fund growth throughout Asia. AIA's distribution capabilities, capital strength, brand and strong balance sheet make it well placed to take advantage of Asia's under-penetrated life insurance market, which is driven by demographic trends. Visa will benefit from the continued migration from cash and cheque to electronic payment, which is a multi-year secular trend, still far from mature. We believe the market underestimates the sustainability of this trend. This is apparent in our modelling for the US listed payments company and hence we see tremendous long-term value in this company.
In consumer goods, exposure to British American Tobacco ('BAT') detracted from performance as the regulatory threat to its business increased. In technology, Facebook was also a notable negative contributor, due to a worsening outlook and ongoing uncertainty around data protection weighing on the stock.
Future Investment Themes
With more volatility expected in 2019, we believe this should offer entry points to gain exposure to companies tapping into some powerful long-term trends. In particular, we foresee three mega-themes that are supported by strong multi-decade growth drivers and which provide the basis for much of our fundamental research.
1) Demographic change
With the rapid expansion of the emerging market middle class, one area that is going to be of interest in the longer term is luxury goods. We believe there may well be a good opportunity to increase exposure here at a time when the market is worried about a short-term slowdown in China.
2) Resource scarcity
With a global movement to reduce human impact on the environment and preserve our precious resources, the development of electric vehicles is a key theme for us. This trend will be driven by both regulations - as governments legislate to enforce the switch away from the internal combustion engine - and consumer demand, as more environmentally aware customers seek out cleaner forms of transportation.
3) The future of technology
We see robotisation and artificial intelligence as multidecadetrends. As companies look to automate part or all of their processes, it pays to identify the firms which are investing now to either disrupt their own technology or that of the industry. In our view, these are firms that are likely tobe the winners over a longer-term time frame. It is critical to assess disruption risk in any industry we research. We seek to identify the potentially attractive disruptors, while avoiding the companies at risk of having their business models overtaken. In 2019, we will be looking in particular at disruption threats from the large US-based technology giants, which will continue to deploy their substantial cash piles in new, growth areas adjacent to their existing businesses, presenting a sizeable disruption risk to established firms across the globe.
Activity
The year has been busy as we tested our conviction on some of the Company's holdings and reduced the number of stocks in the portfolio from 47 to 37. We also generated many new investment ideas, which led to a level of portfolio activity higher than normal.
We reduced exposure to telecoms, banks, large-cap pharmaceuticals and utilities, as we believe there are limited attractive long-term investment opportunities in these areas. BAT was the most notable 'sell' decision over the period. We exited the stock following negative news on the regulation landscape on menthol combustible cigarettes. Facebook, Airbus and CVS were also sold over the period. The sale of Facebook was related to our concerns of further regulatory risks, and potential loss of momentum in the growth of its user base. The Airbus sale was due to limited further upside after strong share price performance and, in part, based on concerns around the impact on trading in the event of a no-deal Brexit. US pharmacy retailer CVS is a company we still like and which has a strong investment case, but strong stock performance had led to limited upside versus our share price target, leading us to sell the holding.
New positions included Tencent and Align. Tencent is the main social media platform in China with more than 800 million monthly active users and a long history of value creation, with return on invested capital ('ROIC') well in excess of the cost of capital. The market believes that Tencent's market share is not sustainable and that it is still not capturing the long-term opportunities in key areas such as gaming, advertising and online-to-offline. However, we believe there are good grounds to expect Tencent to put these concerns to rest and for it to be a key beneficiary of trends such as the growth in advertising spending per capita in China from a comparatively low level.
Align is a California-based orthodontic products producer. Growth is driven by four initiatives: international expansion; new product ranges growing the addressable market; greater sales penetration within the dentistry market; and investing in the promotion of its brand to teenage consumers, the largest segment of the market. The company benefits from high barriers to entry due to scale, a suite of patents and long-developed domain expertise and is the clear leader in the market with superior technology, including a fully digital workflow and world-class 3D printing production expertise.
During the year, we also purchased dental implants leader Straumann, given its attractive growth profile and high returns potential. We see market growth of mid-single digits as supportive, and the company's expansion into new adjacent aesthetic dentistry segments as further boosting the top-line growth prospects, which we expect to be in the teens.
We also purchased Linde, given the company's recent combination with Praxair, and the resultant synergies that the management can generate from the combined entity. Other new positions included Waters Corp, the speciality measurement company, and Assa Abloy, the global leader in door-opening solutions.
Waters Corp provides solutions to industries such as pharmaceuticals, using liquid chromatography, mass spectrometry and thermal analysis, serving customers in the life sciences and tools sector ('LST'). The LST market is growing at 5% per annum. We believe Waters can outperform this due to its scale, reputation and continued research and development investment driving innovative new products to market. In addition, the company has a consistent record of expanding margins at around 40bps p.a., while recent US tax reform frees up US$3.5 billion in overseas cash which is being used to accelerate a buyback programme. With a ROIC in excess of 40%, Waters is a high-quality play on healthcare spending growth without the pricing/reimbursement headache.
Assa Abloy is the Swedish listed global leader in door opening solutions. We see clear potential for growth to accelerate as the smart-lock becomes an integral part of the 'Alexa-enabled' home. As the only truly global company in its industry, Assa Abloy has a significant R&D advantage over peers and is the gatekeeper of choice, partnering with technology platforms such as Google and Amazon in multiple markets.
Finally, we made a key portfolio decision in the luxury goods market, switching the position in the Swiss watchmaker Richemont into sector peers Kering and Moncler. These transactions increased the overall exposure to luxury and moved exposure from 'hard' to 'soft' luxury, where we have a favourable view of the industry's structural growth trends.
Market outlook
Our outlook for the market remains unchanged. Concerns remain focused on a combination of fears of a China-US trade war impacting economic activity, rising interest rates putting pressure on equity valuations, and the growing risk of a recession.
With respect to potential trade wars, the situation remains uncertain and we will need to continue to assess how this evolves. There is still a high likelihood that pragmatism prevails, and that a constructive dialogue around trade agreements happens between the two economic blocks. On the interest rates front, the Fed has surprised the market with its latest comment sounding more dovish, with the signalling of interest rate policy being close to neutral. This should be more supportive for equity markets, at least in the near term.
On the topic of recession, the weaker economic momentum across the US, Europe and China in particular is a concern. On China specifically however, we do not believe that the Chinese economy will see a hard landing; the Chinese authorities have enough levers to pull, which they are doing, which should mean the economy should stabilise. The flattening yield curve in the US is unnerving investors (as explained above in the Market comment section). Given that we are in the later stage of the longest expansionary economic cycle, it is valid to focus on the growing risk of a recession in the next two to three years. For us, however, it is not so much about whether a recession will happen. The more important aspect to reflect on and analyse is what shape could the next recession have; specifically, will it be a shallow or deep recession, and will it be short lived or longer lasting? We believe we are more likely to see a short and shallow recession, which would be an opportunity for long term investors such as ourselves to increase exposure to quality equities for the next growth cycle.
Also, given the exposure to quality companies with stronger balance sheets, we believe that the Company should fare better than the market during recessionary periods. Closer to home, ongoing uncertainty around Brexit is something we continue to keep a close eye on - it has the potential to negatively impact the economic growth prospects of both the UK and the EU. Our fundamental data analytics enhancements that we introduced during the year have helped us both analyse the Company's underlying exposure to the UK economy in terms of sales and profits, and assess supply chain disruption risks. This makes us confident that the Company's risk exposure can be managed, should there be a disorderly Brexit and trade disruptions.
In conclusion, market volatility remains elevated, and risk aversion is high. While this makes the market direction uncertain in the near term, it typically provides a good opportunity for long-term investors to gain exposure to equity markets for the next growth cycle. In such conditions, it is a good time to be a long-term unconstrained investor.
Zehrid Osmani
25 April 2019
INVESTMENT PHILOSOPHY
Investing in high-quality companies at the right price
To achieve the investment objective, Martin Currie Global Portfolio Trust has adopted a distinctive investment strategy developed by Martin Currie. This distinctive approach clearly focuses on using Martin Currie's global research capabilities in identifying high-quality companies that will benefit from exposure to growth megatrends worldwide.
1) Finding quality companies
This may sound simple, but not every manager invests in quality, growing companies. Some may be selected simply because they are in an index that the manager follows. Instead, Martin Currie aims to find undervalued, quality growth stocks through its own research and engagement. The portfolio manager seeks companies that are investing in their future, with leadership positions in growing markets. Some of the screens used include:
-- A minimum US$3 billion market capitalisation.
-- A 10-year track record of generating a return on invested capital (ROIC) above the cost of capital.
-- Companies that have the potential to sustain or further improve their return on invested capital to attractive levels.
-- Strong financial position and low, or no, debt.
These are not fixed guidelines and the portfolio manager is free to invest in companies that are close to meeting the criteria. This offers flexibility to invest in new listings and companies below the $3 billion market capitalisation level that demonstrate the desired core qualities and growth potential.
2) Environmental, Social and Governance (ESG)
ESG issues are also central to Martin Currie's investment philosophy and their approach has been rewarded with the highest possible rating (A+) from the PRI across its three key criteria and a Tier 1 ranking from the UK Financial Reporting Council (FRC). The investment team assesses ESG credentials in detail, and drills deeper into areas of concern, engaging with the company's management to discuss any issues, and aiming to generate a positive impact.
ESG assessment provides an opportunity for constructive engagement between Martin Currie and company management on issues arising. In fact, Martin Currie does not invest in companies that refuse to engage with them on these issues. The Board is satisfied that this approach has been used consistently for over 10 years, and the investment manager is striving to advance its leadership position.
High conviction portfolio
Finding stocks with growth potential is only one part of the task. Constructing a balanced portfolio in a risk-aware manner is also a critical skill. Martin Currie believes that an appropriately constructed portfolio of 25-40 stocks will deliver a higher level of outperformance, by ensuring meaningful allocations in the most exciting investments, with the necessary level of diversification.
Portfolio Summary
Portfolio distribution
By region 31 January 31 January 31 January 31 January
2019 2019 2018 2018
Company FTSE World Company FTSE World
% index % index
% %
------------------------- ----------- ------------ ----------- ------------
Developed Europe 43.7 20.5 23.9 22.3
North America 36.7 59.9 54.8 57.4
Developed Asia Pacific
ex Japan 13.4 6.0 8.8 6.2
Middle East 3.6 0.2 2.8 0.2
Global Emerging Markets 2.6 4.7 5.9 4.9
Japan - 8.7 3.8 9.0
------------------------- ----------- ------------ ----------- ------------
100.0 100.0 100.0 100.0
------------------------- ----------- ------------ ----------- ------------
By sector 31 January 2019 31 January 2019 31 January 2018 31 January 2018
Company FTSE World index Company FTSE World index
% % % %
------------------- --------------- -------------------- ---------------- -----------------
Industrials 27.1 13.1 14.5 13.3
Consumer goods 18.7 11.4 11.4 12.8
Technology 15.5 14.8 15.9 13.5
Healthcare 14.4 11.7 10.1 10.7
Financials 10.5 21.0 21.2 22.4
Consumer services 10.0 11.5 11.1 11.0
Basic materials 3.8 4.4 4.8 4.8
Telecommunications - 2.8 4.8 2.7
Oil and gas - 6.0 4.7 5.9
Utilities - 3.3 1.5 2.9
------------------- --------------- -------------------- ---------------- -----------------
100.0 100.0 100.0 100.0
00
------------------- --------------- -------------------- ---------------- -----------------
By asset class 31 January 31 January
2019 2018
% %
--------------- ---------- ----------
Equities 98.7 98.2
Cash 1.3 1.8
--------------- ---------- ----------
100.0 100.0
--------------- ---------- ----------
Largest 10 holdings 31 January 31 January 2019 31 January 2018 31 January
2019 Market Market value 2018
value
GBP000 % of total portfolio GBP000 % of total
portfolio
---------------------------------- -------------------- ------------------------ ---------------- -------------- AIA Group 8,497 4.2 8,735 3.9 Automatic Data Processing 8,355 4.1 5,959 2.7 Straumann Holding 7,711 3.8 - - Linde 7,708 3.8 - - VISA 7,705 3.8 9,856 4.4 Check Point Software Technologies 7,421 3.6 6,343 2.8 CSL 7,328 3.6 5,811 2.6 Unilever 6,812 3.3 4,579 2.1 Tencent Holdings 6,724 3.3 - - Waters 6,694 3.3 - - ---------------------------------- -------------------- ------------------------ ---------------- --------------
Portfolio Holdings
Market value % of total
Sector Country GBP000 portfolio
---------------------------- ------------------- -------------- ------------ -----------
Developed Europe 89,258 43.7
Straumann Holding Healthcare Switzerland 7,711 3.8
Linde Basic Materials Ireland 7,708 3.8
Unilever Consumer goods Netherlands 6,812 3.3
Moncler Consumer goods Italy 6,621 3.2
Kering Consumer services France 6,602 3.2
Adidas Consumer goods Germany 6,206 3.0
Aptiv Consumer goods Jersey 5,650 2.8
Kerry Group Consumer goods Ireland 5,452 2.7
Reckitt Benckiser Consumer goods United Kingdom 5,353 2.6
Prudential Financials United Kingdom 5,003 2.5
Accenture Industrials Ireland 4,510 2.2
Compass Group Consumer services United Kingdom 4,507 2.2
Assa Abloy Industrials Sweden 4,335 2.1
Coloplast B Healthcare Denmark 4,107 2.0
Atlas Copco Industrials Sweden 3,412 1.7
Spirax Sarco Engineering Industrials United Kingdom 3,122 1.5
L'Oreal Consumer goods France 2,147 1.1
Candover Investments
(in liquidation) Financials United Kingdom - 0.0
---------------------------- ------------------- -------------- ------------ -----------
Market value % of total
Sector Country GBP000 portfolio
---------------------------- ------------------- -------------- ------------ -----------
North America 74,550 36.7
Automatic Data Processing Industrials United States 8,355 4.1
VISA Financials United States 7,705 3.8
Waters Industrials United States 6,694 3.3
Cognizant Technology
Solutions Technology United States 6,344 3.1
3M Industrials United States 5,921 2.9
Mettler Toledo International Industrials United States 5,903 2.9
Apple Technology United States 5,810 2.9
Align Technology Healthcare United States 5,413 2.7
Rockwell Automation Industrials United States 4,985 2.4
Cooper Companies Healthcare United States 4,663 2.3
Starbucks Consumer services United States 4,605 2.3
Lockheed Martin Industrials United States 4,094 2.0
Canadian Natl Railway Industrials Canada 4,058 2.0
---------------------------- ------------------- -------------- ------------ -----------
Market value % of total
Sector Country GBP000 portfolio
------------------ ------------------- ----------- ------------ -----------
Developed Asia Pacific ex Japan 27,325 13.4
AIA Group Financials Hong Kong 8,497 4.2
CSL Healthcare Australia 7,328 3.6
Tencent Holdings Technology China 6,724 3.3
Alibaba Group Consumer services China 4,776 2.3
------------------ ------------------- ----------- ------------ -----------
Market value % of total
Sector Country GBP000 portfolio
---------------------- ------------ ---------- ------------ -----------
Middle East 7,421 3.6
Check Point Software
Technologies Technology Israel 7,421 3.6
---------------------- ------------ ---------- ------------ -----------
Market value % of total
Sector Country GBP000 portfolio
Global Emerging Markets 5,264 2.6
Taiwan Semiconductor
Manufacturing Company Technology Taiwan 5,264 2.6
Total portfolio holdings 203,818 100.0
---------------------------- ---------------------- ------
Principal risks and uncertainties
Risk and mitigation
The Company's business model is longstanding and resilient to most of the short-term operational uncertainties that it faces. The Board believes these are effectively mitigated by its internal controls and its oversight of the investment manager, as described in the table below. Its principal risks and uncertainties are therefore largely long-term and driven by the inherent uncertainties of investing in global equity markets.
Operational and management risks are regularly monitored at board meetings and the Board's planned mitigation measures for the principal risks are described in the table below. As part of its annual strategy meeting, the Board carries out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.
As a consequence of this review, the Board has identified the following principal risks to the Company:
Sustained investment underperformance - The Board monitors the implementation and results of the investment process with the portfolio manager, who attends all board meetings and reviews data that show statistical measures of the Company's risk profile. Should investment underperformance be sustained despite the mitigation measures taken by the investment manager, the Board would assess the cause and take appropriate action to manage this risk.
Material decline in market capitalisation of the Company - The Board recognises that the 'zero discount' policy allows new shareholders to purchase shares and current shareholders to sell their shares in any volume at close to NAV, in normal market conditions. Although this improved liquidity encourages investment in the Company, it could also increase the risk of a material decline in the size of the Company. The Board monitors the performance and pace of
buybacks and the Company's shareholder profile. The Board believes that good long-term performance will increase demand for the Company's shares and increase the market capitalisation of the Company.
Loss of s1158-9 tax status - Loss of s1158-9 tax status would have serious consequences for the attractiveness of the Company's shares. The Board considers that, given the regular oversight of this risk by the audit committee and
the investment manager, the likelihood of this risk occurring is minimal. The audit committee regularly reviews the eligibility conditions and the Company's compliance against each, including the minimum
dividend requirements and shareholder composition for close company status.
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.
Directors' Responsibilities
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements respectively; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the directors' remuneration report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The financial statements are published on the Company's website (www.martincurrieglobal.com) which is maintained by the investment manager. The directors are responsible for the maintenance and integrity of the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the directors confirms that to the best of their knowledge:
-- the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
-- the report of the directors, strategic report and manager's review include a fair, balanced and understandable review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Going concern status
The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman's statement, manager's review, strategic report and the report of the directors.
The financial position of the Company as at 31 January 2019 is shown on the statement of financial position below. The cash flows of the Company are also set out below.
Note 13 below sets out the Company's risk management policies, including those covering market risk, liquidity risk and credit risk.
In accordance with the Financial Reporting Council's guidance on going concern and liquidity risk issued in October 2009 and C1.3 of the 2016 UK Corporate Governance Code, the directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Company's assets consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale. The directors are mindful of the principal risks and uncertainties disclosed above. They have reviewed revenue forecasts and believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future, and at least one year from the date of this annual report.
Accordingly, the directors continue to adopt the going concern basis in preparing these financial statements.
Viability Statement
The Company's business model is designed to deliver long term capital growth to its shareholders through investment in large and liquid stocks in global equity markets. Its plans are therefore based on having no fixed or limited life provided global equity markets continue to operate normally. The Board has assessed its viability over a 3 year period in accordance with provision C.2.2 of the 2016 UK Corporate Governance Code. The Board considers that this reflects the minimum period which should be considered in the context of its long-term objective but one which is limited by the inherent and increasing uncertainties involved in assessment over a longer period.
In making this assessment the directors have considered the following risks to its ongoing viability:
-- the principal risks and uncertainties and the mitigating actions set out above;
-- the ongoing relevance of the Company's investment objective in the current environment and evidenced by feedback from major shareholders;
-- the level of income forecast to be generated by the Company and the liquidity of the Company's portfolio;
-- the low level of fixed costs relative to its liquid assets; and
-- the expectation is that in normal markets more than 99% of the current portfolio could be liquidated within one trading day.
Based on the results of their analysis and the Company's processes for monitoring each of the factors set out above, the directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over at least the next 3 years.
Neil Gaskell
Chairman
25 April 2019
Statement of Comprehensive Income
Year to 31 January 2019 Year to 31 January 2018
Revenue Capital Total Revenue Capital Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ -------- --------- --------- -------- ---------- ------------ ---------
Net gains on investments 7 - 1,202 1,202 - 22,278 22,278
Net currency gains/ (losses) 59 (6) 53 (105) 105 -
Revenue 3 4,211 - 4,211 4,894 - 4,894
Investment management fee 5 (286) (573) (859) (371) (743) (1,114)
Performance fee 11 - (406) (406) - - -
Other expenses 5 (510) - (510) (426) - (426)
------------------------------------ -------- --------- --------- -------- ---------- ------------ ---------
Net return on ordinary activities
before taxation 3,474 217 3,691 3,992 21,640 25,632
Taxation on ordinary activities 6 (415) - (415) (483) - (483)
------------------------------------ -------- --------- --------- -------- ---------- ------------ ---------
Net return attributable to shareholders 3,059 217 3,276 3,509 21,640 25,149
---------------------------------------------- --------- --------- -------- ---------- ------------ ---------
Net returns per ordinary
share 2 3.47p 0.25p 3.72p 3.72p 22.96p 26.68p
------------------------------------ -------- --------- --------- -------- ---------- ------------ ---------
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 2018.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued in the year.
The notes to the accounts form part of these financial statements.
Statement of Financial Position
As at 31 January As at 31 January
2019 2018
Note GBP000 GBP000 GBP000 GBP000
-------------------------------- ----- --------- -------- --------- --------
Fixed assets
Listed on the London Stock
Exchange 21,107 25,669
Listed on exchanges abroad 182,711 197,523
-------------------------------- ----- --------- -------- --------- --------
Investments at fair value
through profit or loss 7 203,818 223,192
Current assets
Trade receivables 8 174 243
Cash and cash equivalents 9 2,671 4,200
-------------------------------- ----- --------- -------- --------- --------
2,845 4,443
Current liabilities
Trade payables 10 (682) (449)
(682) (449)
Total assets less current
liabilities 205,981 227,186
Amounts falling due after
more than one year 11 (406) -
Total Net Assets 205,575 227,186 -------------------------------- ----- --------- -------- --------- -------- Equity Called-up share capital 12 4,934 5,179 Capital redemption reserve 11,083 10,838 Special distributable reserve* 70,673 91,853 Capital reserve 12 114,249 114,032 Revenue reserve* 4,636 5,284 -------------------------------- ----- --------- -------- --------- -------- Total shareholders' funds 205,575 227,186 Net asset value per ordinary share 2 245.5p 246.1p -------------------------------- ----- --------- -------- --------- --------
* These reserves are distributable.
The notes to the accounts form part of these financial statements.
Martin Currie Global Portfolio Trust plc is registered in Scotland, company number SC192761.
The financial statements were approved by the Board of directors on 25 April 2019 and signed on its behalf by Neil Gaskell, Chairman.
Statement of Changes in Equity
Note Called Capital Special Capital Revenue Total
up ordinary redemption distributable reserve reserve* GBP000
share reserve reserve* GBP000 GBP000
capital GBP000
GBP000 GBP000
------------------------- ------ ------------- ------------ --------------- --------- ---------- --------
Statement of changes
in equity for the year
to 31 January 2019
As at 31 January 2018 5,179 10,838 91,853 114,032 5,284 227,186
Net return attributable
to shareholders** -- - - 217 3,509 3,276
Ordinary share cancelled
during the period (245) 245 - - - -
Ordinary shares bought
back during the year - - (21,180) - - (21,180)
Dividends paid 4 - - - - (3,707) (3,707)
------------------------- ------ ------------- ------------ --------------- --------- ---------- --------
As at 31 January 2019 4,934 11,083 70,673 114,249 4,636 205,575
------------------------- ------ ------------- ------------ --------------- --------- ---------- --------
Called up Capital redemption Special Capital Revenue reserve* Total
Ordinary reserve GBP000 distributable reserve GBP000 GBP000
share capital reserve* GBP000
GBP000 GBP000
Note
-------------------- ------ -------------- ------------------ -------------- -------- ---------------- --------
Statement of changes
in equity for the
year
to 31 January 2018
As at 31 January
2017 5,179 10,838 102,349 92,392 5,739 216,497
Net return
attributable
to shareholders** - - - 21,640 3,509 25,149
Ordinary shares
bought
back during the
year - - (10,496) - - (10,496)
Dividends paid 4 - - - - (3,964) (3,964)
-------------------- ------ -------------- ------------------ -------------- -------- ---------------- --------
As at 31 January
2018 5,179 10,838 91,853 114,032 5,284 227,186
-------------------- ------ -------------- ------------------ -------------- -------- ---------------- --------
*These reserves are distributable.
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.
**The Company does not have any other income or expenses that are not included in the 'Net return attributable to shareholders' as disclosed in the statement of Comprehensive Income and therefore this is also the 'Total Comprehensive Income' for the year.
The notes to the accounts form part of these financial statements.
Statement of Cash Flow
Note Year to 31 January Year to 31 January
2019 2018
GBP000 GBP000 GBP000 GBP000
------------------------------- ----- ---------- --------- ---------- ---------
Cash flows from operating
activities
Profit before tax 3,691 25,632
Adjustments for:
Gains on investments 7 (1,202) (22,278)
Purchases of investments* 7 (147,050) (31,771)
Sales of investments* 7 167,626 46,517
Dividend income (4,182) (4,808)
Stock dividend income - (41)
Interest income (1) (2)
Stock lending income (28) (43)
Dividend received 4,247 4,776
Stock dividend received - 41
Interest received 1 2
Stock lending income
received 31 43
Decrease in receivables 1 -
Increase in payables 366 4
Overseas withholding
tax suffered (415) (483)
19,394 (8,043)
------------------------------- ----- ---------- --------- ---------- ---------
Net cash flows from operating
activities 23,085 17,589
------------------------------- ----- ---------- --------- ---------- ---------
Cash flows from financing
activities
Repurchase of ordinary
share capital (20,907) (10,399)
Equity dividends paid (3,707) (3,964)
------------------------------- ----- ---------- --------- ---------- ---------
Net cash flows from financing
activities (24,614) (14,363)
------------------------------- ----- ---------- --------- ---------- ---------
Net (decrease)/increase
in cash and cash equivalents (1,529) 3,226
Cash and cash equivalents
at the start of the year 4,200 974
------------------------------- ----- ---------- --------- ---------- ---------
Cash and cash equivalents
at the end of the year 2,671 4,200
------------------------------- ----- ---------- --------- ---------- ---------
*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 form part of these financial statements.
Notes to the Financial Statements
Note 1: Accounting policies
(a) For the year ended 31 January 2019, the Company is applying FRS 102 applicable in the UK and Republic of Ireland (FRS 102), which forms part of the revised Generally Accepted Accounting Practice ('UK GAAP') issued by the Financial Reporting Council ('FRC').
These financial statements have been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, FRS102 issued by the FRC in September 2015 and the revised Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ('SORP') issued by the AIC in November 2014 and updated in January 2017 and February 2018.
Functional currency - the Company is required to nominate a functional currency, being the currency in which the Company predominately operates. The Board has determined that sterling is the Company's functional currency, which is also the currency in which these financial statements are prepared. This is also the currency in which all expenses and dividends are paid in.
(b) Income from investments (other than capital dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend, or where no ex- dividend date is quoted, when the Company's right to receive payment is established. UK investment income is stated net of the relevant tax credit. Overseas dividends include any taxes deducted at source. Special dividends are credited to capital or revenue, according to the circumstances. Stock dividends are treated as unfranked investment income; any excess in value of the shares received over the amount of the cash dividend is recognised as a capital item in the statement of comprehensive income.
(c) Interest receivable and payable, management fees, performance fees and other expenses are treated on an accruals basis.
(d) The management fee and finance costs in relation to debt are recognised two-thirds as a capital item and one-third as a revenue item in the statement of comprehensive income in accordance with the Board's expected long-term split of returns in the form of capital gains and revenue, respectively. The performance fee is recognised 100% as a capital item in the statement of comprehensive income as it relates entirely to the capital performance of the Company. All other expenses are charged to revenue except where they directly relate to the acquisition or disposal of an investment, in which case, they are treated as described in (f) below.
(e) Investments - investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and derecognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured as fair value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices. Gains and losses arising from changes in fair value are included in net profit or loss for the year as a capital item in the statement of comprehensive income and are ultimately recognised in the capital reserve.
(f) Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the statement of comprehensive income.
(g) Monetary assets and liabilities expressed in foreign currencies are translated into sterling at rates of exchange ruling at the date of the statement of financial position. Non-monetary items expressed in foreign currencies held at fair value are translated into sterling at rates of exchange ruling at the date the fair value is measured. Transactions in foreign currency are converted to sterling at the rate ruling at the date of the transaction. Exchange gains and losses are taken to the income statement as a capital or revenue item depending on the nature of the underlying item.
(h) Cash and cash equivalents comprises cash and demand deposits which are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.
(i) Dividend payable - under FRS102 dividends should not be accrued in the financial statements unless they have been approved by shareholders before the statement of financial position date. Dividends payable to equity shareholders are recognised in the statement of changes in equity when they have been paid and become a liability of the Company.
(j) Capital reserve - gains or losses on realisation of investments and changes in fair values of investments are transferred to the capital reserve. Any changes in fair values of investments that are not readily convertible to cash are treated as unrealised gains or losses within the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve.
The cost of share buy backs include the amount of consideration paid, including directly attributable costs and are deducted from the special distributable reserve until the shares are cancelled.
The special distributable reserve was created through the cancellation and reclassification of the share premium account in 1999 and 2004, and thereafter the cost of the share buy backs are deducted from this reserve.
The revenue reserve - the net revenue for the year is added to the revenue reserve and dividends paid are deducted from the revenue reserve.
Capital redemption reserve - the nominal value of the shares bought back and cancelled are transferred to the capital redemption reserve.
(k) Taxation - the charge for taxation is based upon the revenue for the year and is allocated according to the marginal basis between revenue and capital using the Company's rate of corporation tax for the accounting period.
(l) Deferred taxation - deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the statement of financial position date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets being recognised only if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
(m) The Company can use derivative financial instruments to manage risk associated with foreign currency fluctuations arising on the investments in currencies other than sterling. This is achieved by the use of forward foreign currency contracts. Derivative financial instruments are recognised initially at fair value on the contract date and subsequently re-measured to the fair value at each reporting date. The resulting gain or loss is recognised as revenue or capital in the statement of comprehensive income depending on the nature and motive of each derivative transaction. The fair values of the derivative financial instruments are included within non-current assets or within current assets or current liabilities depending on the nature and motive of each derivative transaction. There were nil derivative instruments held as at 31 January 2019 (2018: nil).
(n) Stock lending income is received net of associated costs and recognised in revenue as earned.
(o) There have been no significant judgements, estimates or assumptions for the year.
Note 2: Returns and net asset value
Year ended Year ended
31 January 31 January
2019 2018
--------------------------------------------- ------------- --------------
The return and net asset value per ordinary
share are calculated with reference to
the following figures:
Revenue return
Revenue return attributable to ordinary GBP3,509,000 GBP3,509,000
shareholders
Weighted average number of shares in
issue during year 88,034,756 94,261,477
Return per ordinary share 3.47p 3.72p
Capital return
Capital return attributable to ordinary GBP217,000 GBP21,640,000
shareholders
Weighted average number of shares in
issue during year 88,034,756 94,261,477
Return per ordinary share 0.25p 22.96p
Total return
Total return per ordinary share 3.72p 26.68p
--------------------------------------------- ------------- --------------
There are no dilutive or potentially dilutive shares in issue.
Total return
The total return per share for the Company is the combined effect of the rise and fall in the share price or NAV together with the reinvestment of the quarterly dividends paid.
The tables below provide the NAVs and share prices of the Company on the dividend reinvestment dates for the year ended 31 January 2019 and 31 January 2018.
2019 Dividend rate NAV
-------------------------- -------------------------------- --------
Wednesday, 31 January 18 n/a 246.1p
Thursday, 5 April 18 1.5p 234.4p
Thursday, 28 June 18 0.9p 251.0p
Thursday, 4 October 18 0.9p 259.5p
Thursday, 3 January 19 0.9p 228.1p
Thursday, 31 January 19 n/a 245.5p
-------------------------- -------------------------------- --------
Total return 1.61%
-------------------------- -------------------------------- --------
2018 Dividend rate NAV
--------------------------- --------------------------------- -------
Tuesday, 31 January 17 n/a 223.9p
Thursday, 6 April 17 1.5p 233.7p
Thursday, 29 June 17 0.9p 234.6p
Thursday, 21 September 17 0.9p 234.2p
Thursday, 4 January 18 0.9p 248.2p
Wednesday, 31 January 18 n/a 246.1p
--------------------------- --------------------------------- -------
Total return 11.90%
--------------------------- --------------------------------- -------
As at 31 January 2019 As at 31 January
2018
----------------------------------------- ---------------------- -----------------
Net asset value per share
Net assets attributable to shareholders GBP205,575,000 GBP227,186,000
Number of shares in issue at the
year end 83,724,832 92,302,109
Net asset value per share 245.5p 246.1p ----------------------------------------- ---------------------- -----------------
Between 1 February and 23 April 2019, 846,871 ordinary shares of 5p were bought back into Treasury.
Note 3: Revenue from investments
Year ended 31 January Year ended 31 January
2019 2016
GBP000 GBP000
------------------------- ---------------------- ----------------------
From listed investments
UK equities 810 628
International equities 3,372 4,180
Stock dividend - 41
Other revenue
Interest on deposits 1 2
Stocklending 28 43
------------------------- ---------------------- ----------------------
4,211 4,894
------------------------- ---------------------- ----------------------
There were no capital dividends received during the year ended 31 January 2019 (2018: GBPnil). There was a one-off capital repayment of GBP132,000 received during the year ended 31 January 2019 from Candover Investments which was placed into voluntary liquidation.
Note 4: Dividends
Year ended 31 Year ended
January 2019 31 January
GBP000 2018
GBP000
----------------------------------------------------- ---------------- --------------
Year ended 31 January 2017 - fourth interim dividend
of 1.50p - 1,437
Year ended 31 January 2018 - fourth interim dividend 1,365 -
of 1.50p
Year ended 31 January 2019 - first interim dividend
of 0.90p (2018: 0.90p) 802 851
Year ended 31 January 2019 - second interim dividend
of 0.90p (2018: 0.90p) 776 842
Year ended 31 January 2019 - third interim dividend
of 0.90p (2018: 0.90p) 764 834
----------------------------------------------------- ---------------- --------------
3,707 3,964
----------------------------------------------------- ---------------- --------------
Revenue return per share for the year ended 31 January 2019 is 4.7p (2018: 3.72p), refer to note 2 for details of calculation.
Set out below are the total dividends paid/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 Year ended 31
31 January January 2018
2019 GBP000
GBP000
---------------------------------------------- -------------- ----------------
First interim dividend of 0.90p for the year
ended 31 January 2019 (2018: 0.90p) 802 851
Second interim dividend of 0.90p for the year
ended 31 January 2019 (2018: 0.90p) 776 842
Third interim dividend of 0.90p for the year
ended 31 January 2019 (2018: 0.90p) 764 834
Proposed fourth interim dividend of 1.50p for
the year ended 31 January 2019 (2018: 1.50p) 1,256 1,385
---------------------------------------------- -------------- ----------------
3,598 3,912
---------------------------------------------- -------------- ----------------
Note 5: Other expenses
Year ended Year ended
31 January 31 January
2019 2017
GBP000 GBP000
----------------------------------- ------------ ------------
Advertising and public relations 80 76
Bank charges (including custody
fees) 22 20
Directors' fees 137 142
Directors' and officers liability
insurance 10 10
Irrecoverable VAT 51 (7)
Legal fees 9 4
Marketing 27 27
Printing and postage 11 10
Registration fees 30 29
Secretarial fee 53 52
Other 58 41
----------------------------------- ------------ ------------
488 404
----------------------------------- ------------ ------------
Auditors' remuneration
Payable to Ernst & Young for the
audit of the Company's annual
financial statements 20 20
Payable to Ernst & Young for non-audit
fees 2 2
---------------------------------------- ---- ----
510 426
---------------------------------------- ---- ----
Performance fee provision
The performance fee for the year ended 31 January 2019 was GBP406,000 (2018: GBPnil). The performance fee has been provided for based on the performance during the year. This is an estimate of the amount which, if this outperformance was to remain static, would be payable in February 2020. Details of the management and secretarial agreements are provided below.
Year ended 31 January Year ended 31 January
2019 2018
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------- -------- -------- -------- -------- -------- --------
Ongoing charges are calculated with reference to the
following figures:
Investment management
fee (286) (573) (859) (371) (743) (1,114)
Other expenses (510) - (510) (426) - (426)
---------------------------------- -------- -------- -------- -------- -------- --------
Total expenses (796) (573) (1,369) (797) (743) (1,540)
Average net assets over
the year 217,942 225,580
Ongoing charges 0.63% 0.68%
Ongoing charges with performance
fee 0.82% 0.68%
---------------------------------- -------- -------- -------- -------- -------- --------
Full details of the investment management fee are included in the report of directors, details of the directors' fees are included in the directors' remuneration statement below. The performance fee has been provided for based on the performance during the year. This is an estimate of the amount which, if this outperformance remains static, would be payable in February 2020.
Note 6: Taxation on ordinary activities
Year ended 31 January Year ended 31 January
2019 2018
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- -------- -------- -------- -------- -------- --------------
Overseas tax suffered 415 - 415 483 - 483
----------------------- -------- -------- -------- -------- -------- --------------
The corporation tax rate was 19.00% (2018: 19.18%). 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 Year ended
31 January 31 January
2019 2018
GBP000 GBP000
---------------------------------------- ------------ ------------
Net return before taxation 3,691 25,632
---------------------------------------- ------------ ------------
Corporation tax at effective rate of
19.00%
(2018: 19.18%) 701 4,916
Effects of:
UK dividends not taxable (154) (121)
Currency (gains)/losses not taxable 1 (20)
Gains on investments not taxable (228) (4,272)
Overseas dividends not taxable (645) (779)
Overseas tax suffered 415 483 Overseas tax expenses 77 (4) Increase in excess management and loan expenses 248 280 ---------------------------------------- ------------ ------------ Tax charge for the year 415 483 ---------------------------------------- ------------ ------------
As at 31 January 2019, the Company had unutilised management expenses of GBP34million (2018: GBP33 million) carried forward. 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.
The unrecognised deferred tax is GBP5.8 million which is 17% of the excess management expenses carried forward. (2018: GBP5.6million, 17% of excess management expenses).
Note 7: Investments at fair value through profit or loss
As at 31 January As at 31 January
2019 GBP000 2018 GBP000
---------------------------- ----------------- -----------------
Opening valuation 223,192 215,619
Opening unrealised gains (80,941) (68,132)
---------------------------- ----------------- -----------------
Opening cost 142,251 147,487
---------------------------- ----------------- -----------------
Purchases at cost 147,050 31,771
Disposal proceeds (167,626) (46,517)
Net profit on disposal of
investments 44,739 9,469
---------------------------- ----------------- -----------------
Disposal at cost (122,887) (37,048)
---------------------------- ----------------- -----------------
Closing cost 166,414 142,210
Stock dividend - 41
Closing unrealised gains 37,404 80,941
---------------------------- ----------------- -----------------
Valuation as at 31 January 203,818 223,192
---------------------------- ----------------- -----------------
As at 31 January As at 31 January
2019 2018
--------------------------------------- ----------------- -----------------
Gain on investments
Net profit on disposal of investments 44,739 9,469
Net (loss)/gain on revaluation
of investments (43,537) 12,809
1,202 22,278
--------------------------------------- ----------------- -----------------
The transaction costs in acquiring investments during the year were GBP247,000 (2018: GBP54,000). For disposals, transaction costs were GBP70,000 (2018: GBP44,000). As at 31 January 2019 there were no unlisted securities (2018: nil).
Note 8: Trade receivables: amounts falling due within one year
As at 31 January As at 31 January
2019 2018
GBP000 GBP000
-------------------------------- ----------------- -----------------
Dividends receivable 71 157
Taxation recoverable 97 76
Other receivables 5 6
Stocklending income receivable 1 4
-------------------------------- ----------------- -----------------
174 243
-------------------------------- ----------------- -----------------
Note 9: Cash and cash equivalents
As at 31 January As at 31 January
2019 2018
GBP000 GBP000
--------------------------- ----------------- -----------------
Sterling bank account 2,647 4,129
Non-sterling bank account 24 71
--------------------------- ----------------- -----------------
2,671 4,200
--------------------------- ----------------- -----------------
Note 10: Trade payables
As at 31 January As at 31 January
2019 2018
GBP000 GBP000
---------------------------- -------------------------------------- -----------------
Amounts falling due within
one year:
Due to Martin Currie 218 296
Other payables 89 51
Amount due for Ordinary
shares bought back 375 102
---------------------------- -------------------------------------- -----------------
682 449
---------------------------- -------------------------------------- -----------------
Note 11: Payables - amounts falling due after more than one year
As at As at
31 January 31 January
2019 2018
GBP000 GBP000
-------------------------- ----------------- ------------
Performance fee provision 406 -
406 -
-------------------------- ----------------- ------------
The details of the performance fee are provided in the Directors report.
Note 12: Ordinary shares of 5p and capital reserves
Number of As at Number of As at
shares 31 January shares 31 January
2019 GBP000 2018 GBP000
------------------------- ------------ ------------- ------------ -------------
Ordinary shares 5p
Ordinary shares in
issue at the beginning
of the year 92,302,109 4,614 96,713,730 4,835
Ordinary shares issued - - - -
from Treasury during
the year
Ordinary shares bought
back to Treasury
during the year (8,577,277) (429) (4,411,621) (221)
------------------------- ------------ ------------- ------------ -------------
Ordinary shares in
issue at the end
of the year 83,724,832 4,185 92,302,109 4,614
------------------------- ------------ ------------- ------------ -------------
Number of As at Number of As at
shares 31 January shares 31 January
2019 GBP000 2018 GBP000
--------------------------- -------------------- ------------- -------------- -------------
Treasury shares
(Ordinary shares of 5p)
Treasury shares in
issues at the beginning
of the year 11,281,093 565 6,869,472 344
Ordinary shares cancelled
from Treasury during
the year (4,907,295) (245) - -
Ordinary shares bought
back to Treasury
during the year 8,577,277 429 4,411,621 221
--------------------------- -------------------- ------------- -------------- -------------
Treasury shares in
issue at the end
of each year 14,951,075 749 11,281,093 565
--------------------------- -------------------- ------------- -------------- -------------
Total ordinary shares
in issue and in Treasury
at the end of the
year 98,675,907 4,934 103,583,202 5,179
--------------------------- -------------------- ------------- -------------- -------------
The net cost of share issues from and buy backs to Treasury for the year to 31 January 2019 was GBP21,180,000 (2018: GBP10,496,000).
The analysis of the capital reserve is as follows:
Realised Unrealised investment Total
capital reserve holding gains capital reserve
GBP000 GBP000 GBP000
---------------------------- ----------------- ---------------------- -----------------
At 31 January 2018 33,091 80,941 114,032
Gains on realisation of
investments at fair value 44,739 - 44,739
Movement in fair value
gains of investments - (43,537) (43,537)
Realised currency losses
during the year (6) - (6)
Capitalised expenses (979) - (979)
At 31 January 2019 76,845 37,404 114,249
---------------------------- ----------------- ---------------------- -----------------
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'.
Note 13: Related Party Transactions
With the exception of the management and secretarial fees, directors' fees and directors' shareholdings, there have been no related party transactions during the year, or in the prior year. The amounts payable for directors' fees as at 31 January 2019 are GBP14,000 (2018; GBP11,000).
Note 14: Financial instruments
The Company's financial instruments comprise securities and other investments, cash balances, receivables and payables that arise directly from its operations; for example, in respect of sales
and purchases awaiting settlement, and receivables for accrued income.
The Company also has the ability to enter into derivative transactions in the form of forward foreign currency contracts, futures and options, for the purpose of managing currency and market risks arising from the Company's activities. The main risks the Company faces from its financial instruments are (a) market price risk (comprising of (i) interest rate risk, (ii) currency risk and (iii) other price risk), (b) liquidity risk and (c)
credit risk.
The Board regularly reviews and agrees policies for managing each of these risks. The investment manager's policies for 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.
(a) Market price risk
The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.
(i) Market risk arising from interest rate risk
Interest rate movements may affect the level of income receivable on cash deposits.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings may comprise fixed rate, revolving, and uncommitted facilities. Current guidelines state that the total borrowings will not exceed 20% of the total assets of the Company. The Company does not currently have any gearing.
Interest risk profile
The interest rate risk profile of the portfolio of financial assets (comprising cash balances only) at the statement of financial position date was as follows:
At 31 January Interest Local currency Foreign exchange Sterling equivalent
2019 rate '000 rate GBP000
%
--------------- --------- --------------- ----------------- --------------------
Assets
Sterling 0.07 2,647 1.000 2,647
Euro (0.60) 28 1.146 24
US Dollar 0.50 0 1.315 0
--------------- --------- --------------- ----------------- --------------------
2,671
--------------- --------- --------------- ----------------- --------------------
At 31 January
2018
--------------- --------- --------------- ----------------- --------------------
Assets
Sterling 0.01 4,129 1.000 4,129
Euro (0.60) 27 1.142 24
US Dollar 0.02 66 1.422 47
--------------- --------- --------------- ----------------- --------------------
4,200
--------------- --------- --------------- ----------------- --------------------
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 (2018: 50) basis points higher or lower and all other variables were held constant, the Company's profit for the year ended 31 January 2019 would increase/decrease by GBP20,000 (2018: increase/decrease by GBP21,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances.
As at 31 January 2019 an interest rate of 0.75% is used, given the prevailing base rate is 0.5%. This level is considered possible based on observations of market conditions and historic trends.
(ii) Market risk arising from 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 profile
Foreign currency risk exposure by currency of denomination:
Year ended 31 January 2019 Year ended 31 January 2018
------------------ ------------------------------------------- --------------------------------------
Investment Net monetary Total currency Investment Net monetary Total
exposure exposure exposure exposure exposure currency
GBP000 GBP000 GBP000 GBP000 GBP000 exposure
GBP000
------------------ ----------- ------------- --------------- ----------- ------------- ----------
US dollar 105,821 - 105,821 134,985 124 135,109
Euro 33,839 63 33,902 18,889 52 18,941
Hong Kong dollar 15,221 1 15,222 13,929 - 13,929
Swiss franc 7,711 49 7,760 3,383 48 3,431
Swedish krona 7,747 - 7,747 5,206 - 5,206
Australian
dollar 7,328 - 7,328 5,811 - 5,811
Canadian dollar 4,058 - 4,058 3,794 29 3,823
Danish krone 4,107 9 4,116 - - -
Japanese yen - - - 8,430 - 8,430
Indonesian
rupiah - - - 3,096 - 3,096
Total overseas
investments 185,832 122 185,954 197,523 253 197,776
------------------ ----------- ------------- --------------- ----------- ------------- ----------
Sterling 17,986 1,635 19,621 25,669 3,741 29,410
------------------ ----------- ------------- --------------- ----------- ------------- ----------
Total 203,818 1,757 205,575 223,192 3,994 227,186
------------------ ----------- ------------- --------------- ----------- ------------- ----------
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 2019, 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.
2019 2018
GBP000 GBP000
------------------- -------- --------
US dollar 5,291 6,755
Euro 1,695 947
Hong Kong dollar 761 696
Swiss franc 388 172
Swedish krona 387 260
Australian dollar 366 291
Canadian dollar 203 191
Danish krone 206 -
Japanese yen - 422
Indonesian rupiah - 155
------------------- -------- --------
(iii) Market risk arising from other price risk
Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets as detailed in the annual report, and the stock selection process both act to reduce market risk. The investment manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. All investments held by the Company are listed on various stock exchanges worldwide.
Other price risk sensitivity
If market prices at the statement of financial position date had been 15% higher or lower while all other variables remained constant, the return attributable to ordinary shareholders at the year ended 31 January 2019 would have increased/decreased by GBP30,570,000 (2018: increase/decrease of GBP33,480,000) and
capital reserves would have increased/decreased by the same amount. This level of change is considered to be reasonably possible based on observation of market conditions and historic trends.
(b) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary.
(c) Credit risk
This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.
The risk is managed as follows:
-- investment transactions are carried out with a large number of brokers, whose credit rating is reviewed periodically by the portfolio manager, and limits are set on the amount that may be due from any one broker; and
-- cash is held only with reputable banks with high quality external credit ratings.
The maximum credit risk exposure as at 31 January 2019 was GBP2,845,000 (2018: GBP4,443,000). This was due to trade receivables and cash as per notes 8 and 9.
Please refer to note 17 below and Stocklending disclosure in the Company's annual report and accounts for details of the Company's stocklending and related collateral.
Fair values of financial assets and financial liabilities
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 15: Capital management policies and procedures
The Company's capital management objectives are:
-- to ensure that the Company will be able to continue as a going concern;
-- to maximise the return to its equity shareholders through an appropriate balance of equity capital and debt; and
-- 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 As at 31 January
2019 2018
GBP000 GBP000
---------------------------------- ----------------- -----------------
Called up ordinary share capital 4,934 5,179
Capital redemption reserve 11,083 10,838
Special distributable reserve 70,673 91,853
Capital reserve 114,249 114,032
Revenue reserve 4,636 5,284
---------------------------------- ----------------- -----------------
Total shareholders' funds 205,575 227,186
---------------------------------- ----------------- -----------------
Note 16: Fair value hierarchy
Under FRS 102, the Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2: other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc);
-- Level 3: significant unobservable input (including the company's own assumptions in determining the fair value of investments).
The financial assets measured at fair value through profit and loss are grouped into the fair value hierarchy as follows:
Level 1 Level 2 Level 3 Total
At 31 January 2019 GBP000 GBP000 GBP000 GBP000
------------------------ -------- -------- -------- ---------
Financial assets
at fair value through
profit or loss
Quoted equities 203,818 - - 203,818
------------------------ -------- -------- -------- ---------
Net fair value 203,818 - - 203,818
------------------------ -------- -------- -------- ---------
Level 1 Level 2 Level 3 Total
At 31 January 2018 GBP000 GBP000 GBP000 GBP000
------------------------ -------- -------- -------- ---------
Financial assets
at fair value through
profit or loss
Quoted equities 223,192 - - 223,192
------------------------ -------- -------- -------- ---------
Net fair value 223,192 - - 223,192
------------------------ -------- -------- -------- ---------
Note 17: Stocklending
The Company has a Securities Lending Authorisation Agreement with State Street Bank & Trust Company.
As at 31 January 2019 GBP7,513,000 (2018: GBP19,093,000) of investments were subject to stock lending agreements and GBP8,300,000 (2018: GBP20,524,000) was held in collateral. The collateral was held in the form of cash (in GBP, USD or EUR), government securities issued by any of the OECD countries or equity securities listed and/or traded on an exchange in the following countries: Australia, Canada, Hong Kong,
Japan, New Zealand, Singapore, Switzerland and USA.
The value of collateral in respect of the securities on loan was not less than the value of the securities lent at the balance sheet date or during the period.
The maximum aggregate value of securities on loan at any time during the accounting period was GBP31,946,000. The gross earnings and the fees paid for the year are GBP36,000 (2018: GBP58,000) and GBP9,000 (2018: GBP15,000).
Note 18: Post balance sheet events
On 4 April 2019 the Board declared a fourth interim dividend of 1.50p per share. As at 23 April 2019, the Company bought back a further 846,871 ordinary shares at an average price of 255.0p per share resulting in a further reduction of GBP2,159,606 to the special distributable reserve.
Website
The Company has its own dedicated website at www.martincurrieglobal.com. This offers shareholders, prospective investors and their advisors a wealth of information about the Company. Updated daily it includes the following: latest prices, performance data, latest factsheet, research, portfolio information, press releases and articles, the manager's latest views and annual and half yearly reports.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR LLFSSSAIEFIA
(END) Dow Jones Newswires
April 25, 2019 10:54 ET (14:54 GMT)
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