Annual Financial Report

RNS Number : 2563T

Martin Currie Global Portfolio Tst

24 March 2016

 

Martin Currie Global Portfolio Trust plc (the "Company")

Annual Financial Results

Year to 31 January 2016

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 January 2016 or 2015 but is derived from those accounts.  Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 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 Dickson Minto W.S., 16 Charlotte Square, Edinburgh EH2 4DF on 9 June 2016 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 2016, which require to be published are set out on the following pages.

Financial Summary

Total returns*

	For the year ended 31 January 2016	For the year ended 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 Limited

*        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.

Chairman's Statement

Welcome to the annual report of your Company, covering the 12 months to 31 January 2016.

The year has been exceptionally challenging for global stockmarkets with significant economic and political uncertainty resulting in periods of unusual volatility. Against this backdrop, I am pleased to report that the NAV total return was an increase of 0.9% compared with a 0.1% fall in the FTSE World index. This is a welcome, if modest, return to outperformance which has been successfully delivered by the portfolio manager, Tom Walker, based on his good stock selection. While NAV increased, the share price fell by 1.4% because of an unusually large discount of 1.9% on the last day of the year. This was largely due to a sharp rise in the US market after the London market closed, increasing the discount overnight which was addressed at the start of the next business day. More detail of the portfolio performance and holdings is given in Tom Walker's report below.

Income and dividends

Performance was helped by reducing costs and rising income. This has allowed a small increase in the total dividend for the year of 0.05p to 4.15p (2015: 4.10p) per share giving a yield on the year end share price of 2.4%. During the year, interim dividends of 0.9p were paid in July, October and January and the Board has declared a fourth interim dividend of 1.45p which will be paid on 29 April 2016 to shareholders on the register at 9 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.

Developing the Company

Your Board regularly reviews the Company's performance and strategy against the external market environment in which it operates.

During the year the Company launched a stock lending programme operated by the custodian, State Street, which adds modestly to income. Any stock loans are fully collateralised and do not affect the management of the portfolio by Tom Walker.

 In the light of the current historically low levels of interest rates, combined with Tom Walker's belief in the longer term positive outlook for global equity markets, the Board is considering the introduction of long term gearing when conditions are right. The Board believes that, although costs will increase, this will be offset by additional income and, over time, an improved capital growth. There would be no change in the way the portfolio is invested as a result of the additional funds raised by the gearing.

Environmental, Social & Corporate Governance (ESG)

Environmental, Social & Corporate Governance are now widely recognised as important factors in long-term responsible investing and in the success of companies around the world. I am pleased to report that the investment manager Martin Currie has gained the highest A+ rating from the United Nations Principles for Responsible Investment (UNPRI) for its approach to ESG.

Attractive features and benefits

In a crowded sector, I would like to take this opportunity to remind shareholders of three of the principal benefits of Martin Currie Global Portfolio Trust.

·      First investment returns; The Company has comfortably outperformed the benchmark since launch in 1999. Tom Walker, your portfolio manager, has a 16-year tenure and I believe that experience, stability and consistency is valuable.

·      Secondly income; The Company continues to pay one of the highest dividends in the sector which has grown in real terms as its dividend growth has outpaced inflation.

·      Finally, a distinctive 'zero discount' policy; This is a significant advantage to shareholders because the share price will remain close to NAV in normal market conditions, allowing ample liquidity to both existing shareholders and new investors. During the year, the turbulence and uncertainty has at times required the 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.

Outlook

Over the last year, the variation in returns from different regions around the world reaffirms the belief that our global investment remit is well placed to take advantage of the best opportunities among the winners and losers across the markets that active management and rigorous analysis identify. As the global economy is expected to continue its period of low growth, the ability to pick the stocks that are able to prosper is vital. Tom Walker, backed by a team of 60 investment professionals, has an impressive track record and one that we believe will continue.

I thank you for your continued support. Please contact me if you have any questions regarding your Company at [e-mail].

Neil Gaskell

Chairman

24 March 2016

Manager's review

Market review

Global equities entered 2015 with strong momentum but peaked in April. Following a steep decline in August, they recovered somewhat to end the year to 31 January 2016 virtually flat. The drivers of these market spasms included economic issues such as the slowing Chinese economy, US interest rate cycle and a dramatic collapse in commodity prices, especially oil. However, political uncertainty also had an impact, including the migration crisis in the Middle East and Europe, eurozone dissonance and Russia's deteriorating relationship with the West.

At a regional level, this was another year when emerging markets underperformed, falling 20.3%, and the developed markets of South East Asia also lagged, falling 10.9%. The best performing developed market was Japan, followed by the US, while Europe lagged (the UK market being a drag on the region). However, the range of returns in developed markets was not large and the weakness of sterling against the dollar and, to a lesser extent the yen, was a positive contributor to returns from these regions.

While the spread of returns from developed stock markets was quite narrow, the range of returns by sector was wide. The basic materials sector, driven by the collapse in commodity prices, fell 19.8% and the oil and gas sector was almost as bad, down 14.7%. In contrast, the consumer services and consumer goods sectors rose 7.9% and 6.8%, respectively.

Perhaps the clearest picture of how expectations have developed in markets over the last year can be seen in the yield of 10-Year treasury bonds. This yield is a good gauge of expectations for growth (and inflation) for the next 10 years. At the start of the period under review, the yield was at historically low levels, indicating that investors were concerned about deflation and a lack of growth. Expectations improved by early summer and then plateaued. In early 2016, after the US Federal Reserve increased interest rates, the yield fell dramatically again. Investors once again fear that the economy is fragile and that growth prospects have deteriorated.

Investment performance and activity

The Company's NAV total return for the period was 0.9%, 1% ahead of the FTSE World index. The outperformance was delivered by stock selection; both geographic and sector positioning netted out as neutral contributors to relative performance.

The worst contributor over the period was Singapore telecom network, M1. The possibility of a new entrant into the Singapore market caused concern that pricing will become very competitive and destroy margins. We believe this has been overdone and continue to hold M1. Energy distributor Schneider Electric suffered, along with many industrials, as growth rates declined over the year. The valuation of Schneider is attractive, but the growth outlook remains poor. While we continued to hold Schneider, we sold United Technologies, which has suffered in a similar way, in particular in its Otis division in China. Insurance company Prudential plc is one of our largest holdings and continues to operate well in Asia, the US and UK. However, low long-term interest rates are a headwind to insurance companies and this led to the firm's poor share price performance during the period.

The stocks that drove the Company's outperformance included Facebook, which was a purchase during the year, and two long-term outperforming holdings, L Brands (better known on the High Street as Victoria's Secret) and defence contractor, Lockheed Martin. It is worth noting that BG Group, which was bid for by Shell during the period, was also in the top 10 positive contributors - despite the fallout in the oil and gas sector from falling energy prices. 

Activity during the year was driven by stock selection preferences. The market collapse in August presented an opportunity to invest in ARM Holdings, the UK microprocessor giant. We added Japanese telecom-network operator KDDI, which provides reasonable growth in a low-growth world, at an attractive valuation level. As mentioned earlier, social media giant Facebook was another significant purchase during the year. It continues to impress, gaining share in the advertising space, and we believe its apparently rich valuation is justifiable. Other purchases include CSL (Australia), Airbus (Europe) and United Parcel Services and Mylan (both US). We sold Pentair and United Technologies, which both face slowing demand, possibly for an extended period. We also disposed of Microsoft, following several years of very strong performance.

As a result of this stock activity, we have less exposure to Europe than a year ago, while we have reduced weights to industrials in favour of technology and telecoms.

Outlook

A year ago, on balance, investors were most worried about the extended valuation of equities. Today, their greatest 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.

For many companies, cash flow has been strong, but this has been utilised more in share buy backs, dividends and merger and acquisitions than in growth initiatives.

This process could continue, allowing stock markets to make modest progress. However, interest rates are already very low and in many countries negative. The scope, therefore, for shocking the economy into growth with lower rates is nearly exhausted. New ideas are required and the risk is that the credibility of central banks is now severely damaged, and investors will ignore the policy statements until the hard evidence of improved growth is apparent. In recent years, the mere announcement of a round of quantitative easing was enough to push markets higher. This may no longer be the case.

While growth looks really challenged when dealing in the generalities of stock market averages or GDP, there are clearly individual companies and specific niches within economies that are still growing well. There are also companies enjoying modest growth at valuations that remain attractive. We expect the year ahead to be one of low growth, low inflation and low interest rates. It will be a year that challenges advances in global equity markets. However, we believe this is also an environment that will throw up opportunities and where, by choosing companies wisely, reasonable returns for shareholders can be achieved.

Tom Walker

24 March 2016

 

Portfolio Summary

Portfolio distribution   

By region	31 January 2016 Company %	31 January 2016 FTSE World index %	31 January 2015 Company %	31 January 2015 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 Company %	31 January 2016 FTSE World index %	31 January 2015 Company %	31 January 2015 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 00	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 Market value £000	31 January 2016  % of total portfolio	31 January 2015 Market value £000	31 January 2015 %  of total 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

	Sector		Market value £	% of total 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

	Sector		Market value £	% of total portfolio
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
BP Billiton	Basic materials		958,384	0.5
Candover Investments	Private equity		412,812	0.2

	Sector	Country	Market value £	% of total 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.

	Sector	Country	Market value £	% of total portfolio
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

	Sector		Market value £	% of total portfolio
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

	Sector	Country	Market value £	% of total portfolio
Global Emerging Markets			5,444,225	3.1
Taiwan Semiconductor Manufacturing Company	Technology	Taiwan	2,582,221	1.5
PT Astra International	Consumer goods	Indonesia	1,635,955	0.9
PT Matahari Department Stores	Consumer services	Indonesia	1,226,049	0.7

	Sector	Country	Market value £	of total portfolio
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

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, which the Board believes are effectively mitigated by its internal controls and its oversight of the investment manager, as described below. Its principal risks and uncertainties are therefore largely longer term and driven by the inherent uncertainties of investing in global equity markets. The Board believes that it is able to respond to these longer term risks and uncertainties with effective mitigation so that both the potential impact and the likelihood of these seriously affecting shareholders' interests are materially reduced.

Risks are regularly monitored at board meetings and the Board's planned mitigation measures are described below. As part of its annual strategy meeting, the Board carried out a robust assessment of the principal risks facing the Company.

Loss of s1158-1159 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 the likelihood of this risk occurring is minimal.

Long-term 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. 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 size of the Company - The Board recognises that the 'zero discount' policy allows shareholders to sell their shares in any volume at close to NAV. Although this improved liquidity encourages investment in the Company, it 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 relations: The Board recognises the importance of managing shareholder relations. The Board regularly monitors 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 the Company's 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.

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 prepares in accordance with the 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 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.

Viability Statement

The Company's business model is designed to deliver long term capital growth to its shareholders though 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 2014 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;

·      The level of income forecast to be generated by the Company and the liquidity of the Company's portfolio; and

·      The insignificant level of fixed costs and limited debt relative to its liquid assets.

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.

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 2016 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, 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 set out above.  They have reviewed revenue forecasts and believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing these financial statements.

Neil Gaskell

Chairman

24 March 2016

Statement of Comprehensive Income

		Year to 31 January 2016			Year to 31 January 2015
	Note	Revenue	Capital	Total	Revenue	Capital	Total
		£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 taxation		4,720	(2,099)	2,621	4,520	21,704	26,224
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.

Statement of Financial Position

		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
List 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' fund			178,107		183,951
Net Asset Value per ordinary share	2		176.3p		178.5p

* These reserves are distributable.

Martin Currie Global Portfolio Trust plc is registered in Scotland, company number 192761.

The notes to the accounts form part of these financial statements.

The financial statements were approved by the Board of directors on 24 March 2016 and signed on its behalf by Neil Gaskell, Chairman

Statement of Changes in Equity

 

	Note	Called up  Ordinary share capital £000	Capital redemption reserve £000	Special distributable reserve* £000	Capital reserve £000	Revenue reserve* £000	Total £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 the year		-	-	(8,669)	-	-	(8,669)
Ordinary shares issued during the year		-	-	4,867	-	-	4,867
Ordinary shares cancelled during the year		(45)	45	-	-	-	-
Gains on realisation of investments at fair value	7	-	-	-	10,321	-	10,321
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

	Note	Called up Ordinary share capital £000	Capital redemption reserve £000	Special distributable reserve   £000	Capital reserve     £000	Revenue reserve     £000	Total       £000
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 the year		-	-	(4,964)	-	-	(4,964)
Ordinary shares issued during the year		-	-	3,098	-	-	3,098
Gains on realisation of investments at fair value	7	-	--	-	8,065	-	8,065
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 to the accounts form part of these financial statements.

 

Statement of Cash Flow

	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 year			2,813		458
Cash and cash equivalents at the end of the year			3,403		2,813

* 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 2016, the Company is applying for the first time, Financial Reporting Standard (FRS 102) applicable in the UK and Republic of Ireland, which forms part of the revised Generally Accepted Accounting Practice (New UK GAAP) issued by the Financial Reporting Council (FRC) in 2012 and 2013.

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 August 2014 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.

As a result of the first time adoption of New UK GAAP and the revised SORP, comparative amounts and presentation formats have been amended where required. The net return attributable to ordinary shareholders and total shareholders' funds remain unchanged from old UK GAAP basis, as reported in the preceding annual and interim reports. The Statement of Cash Flows has been restated to reflect presentational changes required under FRS 102 and does not include any other material changes. There are no changes to the financial performance or position as a result of the fund adopting FRS 102.

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.

(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 Scrip 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 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 de-recognised 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. 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.

(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 are only recognised when they have been paid. 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 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 effective 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 only being recognised 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 remeasured 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 noncurrent 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 2016. (2015: Nil).

(n)  Stock Lending income is received net of associated costs and recognised in revenue as earned.

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 2015, 1,069,639 ordinary shares of 5p were bought back to Treasury.

Note 3: Revenue from investments 

	Year ended 31 January 2016 £000	Year ended 31 January 2015 £000
From listed investment
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.

Note 4: Dividends 

	Year ended 31 January 2016			Year ended 31 January 2015
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Year ended 31 January 2014 - final dividend of 1.30p	-	-	-	1,345	-	1,345
Year ended 31 January 2015 - final dividend of 1.30p	1,429	-	1,429	-	-	-
Year ended 31 January 2016 - first interim dividend of 0.90p (2015: 0.90p)	916	-	916	928	-	928
Year ended 31 January 2016 - second interim dividend of 0.90p (2015: 0.90p)	909	-	909	915	-	915
Year ended 31 January 2016 - third interim dividend of 0.90p (2015: 0.90p)	900	-	900	930	-	930
	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 s1158-9 of the Corporation Taxes Act 2010 are considered.

	Year ended 31 January 2016 £000	Year ended 31 January 2015 £000
First interim dividend of 0.90p for the year ended 31 January 2016 (2015: 0.90p)	916	928
Second interim dividend of 0.90p for the year ended 31 January 2016 (2015: 0.90p)	909	915
Third interim dividend of 0.90p for the year ended 31 January 2016 (2015: 0.90p)	900	930
Proposed fourth interim dividend of 1.45p for the year ended 31 January 2016 (2015: 1.40p)	1,465	1,443
	4,190	4,216

Note 5:  Other expenses

	Year ended 31 January 2016 £000	Year ended 31 January 2015 £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 Company's annual financial statements	19	22
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 in the Company's annual report and accounts.

	Year ended 31 January 2016			Year ended 31 January 2015
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £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 and directors' fees are included in the Company's annual report and accounts.

Note 6:  Taxation on ordinary activities

	Year ended 31 January 2016			Year ended 31 January 2015
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £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 £000	Year ended 31 January 2015 £000
Net return before taxation	2,621	26,224
Corporation tax at effective rate of 20.16% (2015: 21.32%)	528	5,594
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 non 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 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.

Note 7:  Investments at fair value through profit and loss

	As at 31 January 2016 £000	As at 31 January 2015 £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 £000	As at 31 January 2015 £000
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 of acquiring investments during the year was £65,000 (2014: £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 within one year

	As at 31 January 2016 £000	As at 31 January 2015 £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 £000	As at 31 January 2015 £000
Sterling bank account	3,403	2,809
Non-sterling bank account	-	4
	3,403	2,813

Note 10: Trade payables

Trade payables	As at 31 January 2016 £000	As at 31 January 2015 £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 

	Number of shares	As at 31 January 2016 £000	Number of shares	As at 31 January 2015 £000
Ordinary shares in issue at 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

	Number of shares	As at 31 January 2016 £000	Number of shares	As at 31 January 2015 £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 of the year	103,583,202	5,179	104,493,171	5,224

The net cost of the 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 and buy backs to Treasury £1,866,000).

The analysis of the capital reserve is as follows:

	Realised capital reserve £000	Unrealised investment holding gains £000	Total capital reserve £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 gains 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'.

Note 12:  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.

Note 13:  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 (i) market price risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) 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 receivable and payables, other than for currency disclosures.

(i) 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.

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 2016	Interest rate %	Local currency '000	Foreign exchange rate	Sterling equivalent £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 the maximum possible, given the prevailing base rate of 0.5%. This level is considered possible based on observations of market conditions and historic trends.

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 exposure £000	Net monetary exposure £000	Total currency exposure £000	Investment exposure £000	Net monetary exposure £000	Total currency exposure £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 investments	154,092	294	154,386	158,354	279	158,633
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 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 £000	2015 £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

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 set out above, 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. Almost 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 2016 would have increased/decreased by £26,250,000 (2015: increase/decrease of £27,270,000) 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.

(ii) 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.

(iii) 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 2016 was £3,723,000 (31.01.15: £3,102,000).  This was due to receivables and cash as pert notes 8 and 9 above.

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 14:   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 2016 £000	As at 31 January 2015 £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

Note 15:  Fair value hierarchy

Under FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' an entity 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 a: Quoted prices for identical instruments in active markets;

·      Level b: Prices of a recent transaction for identical instruments; and

·      Level c: Valuation techniques that use:

(i)   Observable market data, and

(ii)   Non-observable market data.

As at 31 January 2016 financial assets in the form of quoted equities held at fair value through profit or loss to the value of £174,976,000 were classified as Level a in the fair value hierarchy (31 January 2015: quoted equities to the value of £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 Level b, 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.

 

Note 16:  Stock lending

The Company has a Securities Lending Authorisation Agreement with State Street Bank & Trust Company.

As at 31st January 2016 £36,606,000 of investments were subject to stock lending agreements and £37,723,000 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 (2015: £Nil of investments subject to stock lending, £Nil held as collateral).

The gross earnings and the fees paid for the year are £53,000 (2015: £Nil) and £13,000 (2015: £Nil).

 

Note 17:  Post balance sheet events

 

Since the year end a further 1,069,639 shares of 5p each have been bought back to Treasury for a consideration of £1,876,000.

The main rate of corporation tax reduced from 20% to 19% from 1 April 2017 and 18% from 1 April 2019. There is no impact on the financial statements following this change in rate of corporation tax.

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.

 

END

 

 

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