Annual Financial Report

RNS Number : 0006K

Martin Currie Global Portfolio Tst

05 April 2018

 

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

Annual Financial Results

Year to 31 January 2018

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 January 2018 or 2017 but is derived from those accounts.  Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 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 12 June 2018 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 2018, which require to be published are set out on the following pages.

Financial

Total returns*

	Year ended 31 January 2018	Year ended 31 January 2017
Net asset value per share**	11.9%	29.7%
Benchmark	12.7%	33.6%
Share price	12.4%	32.1%

Source: Martin Currie Investment Management.

*        The combined effect of the rise and fall in the share price, net asset value or benchmark together with any dividend paid.

**       The net asset value per share total return is calculated using the cum income Net Asset Value with dividends reinvested.

Chairman's Statement

Welcome to your annual report for the 12 months ended 31 January 2018.  The global stock markets delivered another year of strong returns driven by both improving GDP growth in the major economies and the continued surge in the technology sector which has grown to almost 15% of the global equity market's capitalisation. The Company produced a net asset value per share total return of 11.9%, slightly below the benchmark total return of 12.7% over the year, reflecting a diversified portfolio positioned conservatively rather than for continuing market buoyancy. The volatility of the portfolio remains one of the lowest in the global equity investment trust sector.

Although this is the second consecutive year of underperformance against the benchmark, the Board believes that the investment manager's focus on stocks which deliver consistently healthy long term returns on invested capital should give the portfolio sustained strong performance in the future as in the past. Your Company was recognised by the Association of Investment Companies ('AIC') in July 2017 as one of the most consistent performers over the last decade. With a diversified portfolio, an active high conviction style of investing and low costs, it is well positioned to deliver consistent long-term shareholder value.

More details of the markets and portfolio performance are given in Tom Walker's report.

Income and dividends

The net asset value of the Company grew by £11m to £227m, after share buybacks of £11m under the ongoing zero discount policy. Income per share reduced mainly because of stronger sterling. The Board recommends that the dividend be maintained at 4.2p for the year giving a yield of 1.7% on the year end share price. The fourth interim dividend of 1.5p will be paid on 27 April 2018 to shareholders on the register at 6 April 2018.

Developing the Company

The Company's ongoing charges have been reduced as a result of the continuing focus on cost control. Using the new mandatory European MiFID II methodology the total ongoing charges as published in the Key Information Document are 0.69%. This is one of the three lowest ongoing charges in the global equity investment trust sector, partly due to the absence of any interest expense on borrowing which many others incur.

The Board has agreed with the investment manager to reduce the annual investment management fee from 0.5% to 0.4% of ex income net asset value with effect from 1 February 2018 and to calculate the performance fee for future relevant periods at 12.5% of cumulative outperformance of the benchmark from its level on 1 February 2018. These changes will reduce the annual management fee to one of the lowest in the global equity investment trust sector and increase the proportion of the investment manager's income which is dependent on investment performance, thus strengthening the alignment of the investment manager's financial interest with that of shareholders. Full details of this change are explained in the Directors' Report.

Following the conclusion of the AGM, Marian Glen will take over as Chairman of the Audit Committee from Mike Balfour who is now the Senior Independent Director and has served as Audit Committee Chairman for the last 8 years.  

Environmental, Social & Corporate Governance ('ESG')

Your Company is a signatory of the Stewardship Code and works closely with the investment manager which is also a signatory to the UN Principles for Responsible Investment and is rated each year by PRI, on their approach to: 

·      strategy and governance in their investment process,

·      the integration of environmental, social and governance

·      factors into their analytical work; and

·      active ownership through engagement with investee company managements.

In 2017, for the first time, Martin Currie achieved the highest PRI rating of A+ for all three of these components reflecting its strong commitment to these issues. As part of its active ownership, Martin Currie has engaged during the year with our investee companies in a range of areas including remuneration structures and driving improvements in cyber security, in collaboration with others.

Outlook

The global equity markets have achieved a remarkable sterling return of just over 50% over the last two years.  It is likely that this year will see more moderate market performance despite generally improved economic growth rates. There has already been one short term market correction and it is possible that others could occur, especially if inflation exceeds current expectations of a gradual increase during the year. Against this background, the portfolio is well positioned to produce a good performance, notwithstanding Brexit, focused as it is on global stocks with strong long term returns on invested capital.

Neil Gaskell

Chairman

5 April 2018

Manager's review

Market review

For the year to 31 January 2018, global equities generated strong double-digit returns. Generally improving economic trends in most regions and the continuing benign interest rate environment proved very supportive. However, this came against a backdrop where there was certainly no shortage of political distractions.

For UK investors, the ongoing saga of Brexit negotiations has been the main headline grabber, generating emotions ranging from boredom to anxiety! However, beyond these shores, most of the newsflow has (perhaps predictably) been generated by President Trump. For much of the year, it was the president's inability to push through his political agenda and his outspoken commentary when dealing with domestic and foreign issues that filled column inches. However, his meaningful reductions in US taxation, in particular for companies, has been an extremely positive short-term driver of investor sentiment. Time alone will tell if the ballooning US fiscal deficit will come back to haunt the leadership and investors alike. Meanwhile, the European Union's apparent 'upper hand' in Brexit negotiations has so far rallied support to Brussels and this improved political confidence has also been reflected in improved economic data. Turning to the detailed performance of global equity markets, emerging markets and Europe were the strongest regions of the world, while both North America and Japan lagged the global index. However, it is an analysis of sectors, not regions, that best highlights differences in performance over the year (which is ultimately about stock selection, as is so often the case). By sector, technology rose by 25%, far outstripping the second strongest sector, industrials (up 16%) and the worst-performing sector, telecommunications, which fell 4%.

Investment Performance and Activity

The Company's NAV total return of 11.9% lagged that of the FTSE World index, which was up 12.7%. A year ago, we reported exceptional returns for the portfolio which had been flattered by sterling's weakness following the European Union referendum results. This year, in contrast, sterling has been strong against the most impactful foreign currency - the US dollar - so the healthy returns achieved came in spite of that particular headwind.  

In the half-yearly report we wrote of our concern about the concentration of market performance in a small number of, principally, technology stocks (the so-called 'FAANGS' phenomenon). The momentum in most of these stocks continued through the rest of the year and greater exposure here would have been helpful in this period. We retain some exposure (for instance, Facebook, Apple, Alibaba) and we are overweight to the technology sector generally, while maintaining our concern that stretched valuations in some over-hyped stocks leave their share prices especially vulnerable to any setbacks.

Given this preamble to a discussion of stock selection, perhaps unsurprisingly, our top-contributing stock to relative performance was Alibaba, the Chinese online retailer. Towards the end of the year, with the share price having nearly doubled year to date, we reduced the size of this holding. Delphi Automotive, the autoparts manufacturer (focused on safety, reduced emissions and infotainment), also did very well. It divided itself into two separate entities, Aptiv and Delphi Technologies in December and we continue to hold both companies. Airbus, the European commercial aircraft manufacturer; Visa, the global payment platform; and Facebook, the social media giant, were among our other top contributors. At the other end of the scale, L Brands, known best for its Victoria's Secret retail stores, detracted most from relative performance, suffering along with many retailers as investors worried about online competition. Japanese telecom operator, KDDI, was also weak despite steady profit growth. The company suffered on the prospect of a new entrant to the mobile telephony market in Japan which could eventually increase competitive pressures in the sector. 

Two of our healthcare stocks, Shire and Celgene, de-rated dramatically on concerns over their long-term outlook and the competitive landscape.

During the year, we continued to reduce the number of holdings in the portfolio, standing at 47 at the end of January. This enables us to achieve a greater portfolio concentration to really focus on our highest-conviction stocks and further differentiate the portfolio from the index. Significantly, the majority of purchases in the year were additions to existing holdings. As a result, Asian insurance company AIA, and cybersecurity firewall provider Check Point Software Technologies are now within the top-ten positions in the portfolio. We also added new positions in Atlas Copco, the global leader in compressor manufacturing and Automatic Data Processing, a human resources software and services provider. These companies are leaders in their space and enjoy very strong returns on invested capital (ROIC) - well in excess of their cost of capital. Included in our sales during the period were a number of financial stocks including US insurer Voya and Mitsubishi UFJ, the Japanese bank - where we felt share price upside potential was more limited. We also exited our position in the US telecom real estate company Crown Castle.

The alleged breaches of privacy involving Facebook and Cambridge Analytica became public knowledge last month. We have reduced our holding in Facebook as a result. This reputational damage and the increased regulatory scrutiny of its platform have the potential to significantly reduce its popularity and profit outlook.

Outlook

Just as the reporting year for the Trust concluded, global equity markets 'wobbled'. Coming after such a sustained period of equity strength, this understandably raised a number of questions in investors' minds. Was this merely a long-overdue, short-term correction, or an augury of the end of the nine-year bull market? Of course, only time will tell, and for our part we rarely expend much energy on divinations of economic, currency or interest rate movements (preferring instead to focus on the fundamental analysis of companies). However, we have often cited the US 10-year Treasury yield as indicative of the prospects for global equities. With this in mind, the yield has grown from just over 2% in early September, to now approaching the notionally significant 3% level.

So what does this potentially mean for equity-market prospects in the coming year? In our view, equity valuations are only 'excessive' if long-term interest rates are going to rise meaningfully and that is only likely to happen if economic growth or inflation make sustained upward moves. Market bears will point to rising inflation (notably wages in the US) or the synchronistic global economic growth outlook as reasons that long-term interest rates are likely to rise. We do not yet believe this is the case. We also perceive real reluctance on the part of central banks to raise interest rates too rapidly thereby potentially inducing another crisis. In our view, debt levels are worryingly high and global economies far from robust, and we believe central banks see it that way too. 

So, we are not overly gloomy on market prospects and believe a severe market correction is unlikely. Our expectation is for a period of market consolidation, then in the next couple of years, more modest returns than we have seen in recent years. Having said that, our focus continues to be on identifying and researching companies that deliver consistent, strong returns on the capital that they invest; companies that do not rely most heavily on the external environment to create long-term value for their shareholders.   

Tom Walker

5 April 2018

 

Portfolio Summary

Portfolio distribution

By region	31 January 2018 Company %	31 January 2018 FTSE World index %	31 January 2017 Company %	31 January 2017 FTSE World index %
North America	54.8	57.4	56.9	58.5
Developed Europe	23.9	22.3	21.0	21.6
Developed Asia Pacific ex Japan	8.8	6.2	6.7	6.2
Global Emerging Markets	5.9	4.9	5.9	4.6
Japan	3.8	9.0	7.5	8.9
Middle East	2.8	0.2	2.0	0.2
	100.0	100.0	100.0	100.0

By sector	31 January 2018 Company %	31 January 2018 FTSE World index %	31 January 2017 Company %	31 January 2017 FTSE World index %
Financials	21.2	22.4	23.8	22.1
Technology	15.9	13.5	12.7	12.1
Industrials	14.5	13.3	9.0	12.8
Consumer goods	11.4	12.8	11.0	13.4
Consumer services	11.1	11.0	14.8	11.0
Healthcare	10.1	10.7	11.6	10.6
Basic materials	4.8	4.8	5.0	5.0
Telecommunications	4.8	2.7	5.6	3.2
Oil and gas	4.7	5.9	4.8	6.6
Utilities	1.5	2.9	1.7	3.2
	100.0 00	100.0	100.0	100.0

By asset class	31 January 2018 %	31 January 2017 %
Equities	98.2	99.6
Cash	1.8	0.4
	100.0	100.0

Largest 10 holdings	31 January 2018 Market value £000	31 January 2018  % of total portfolio	31 January 2017 Market value £000	31 January 2017  % of total portfolio
VISA	9,856	4.4	7,417	3.5
Facebook	9,846	4.4	7,758	3.6
JP Morgan Chase	9,111	4.1	10,239	4.8
Apple	9,003	4.0	7,371	3.5
AIA Group	8,735	3.9	3,407	1.6
Prudential	7,346	3.3	5,906	2.7
Lockheed Martin	7,135	3.2	5,712	2.6
Check Point Software Technologies	6,343	2.8	4,396	2.0
Airbus	6,283	2.8	4,184	1.9
Aptiv	6,258	2.8	-	-

 

 

Portfolio Holdings

	Sector	Country	Market value £000	% of total portfolio
North America			122,500	54.8
VISA	Financials	United States	9,856	4.4
Facebook	Technology	United States	9,846	4.4
JP Morgan Chase	Financials	United States	9,111	4.1
Apple	Technology	United States	9,003	4.0
Lockheed Martin	Industrials	United States	7,135	3.2
Aptiv	Consumer goods	United States	6,258	2.8
Verizon Communications	Telecommunications	United States	6,034	2.7
Automatic Data Processing	Industrials	United States	5,959	2.7
Praxair	Basic materials	United States	5,854	2.6
Cognizant Technology Solutions	Technology	United States	5,692	2.6
American International Group	Financials	United States	4,930	2.2
Philip Morris International	Consumer goods	United States	4,758	2.1
Comcast	Consumer services	United States	4,729	2.1
TJX Companies	Consumer services	United States	4,289	1.9
Pfizer	Healthcare	United States	4,013	1.8
CVS Health	Consumer services	United States	3,846	1.7
Bank of Montreal	Financials	Canada	3,794	1.7
Cooper Companies	Healthcare	United States	3,785	1.7
Sempra Energy	Utilities	United States	3,425	1.5
L Brands	Consumer services	United States	3,211	1.4
Pioneer Natural Resources	Oil and gas	United States	3,152	1.4
Celgene	Healthcare	United States	2,604	1.2
Delphie Technologies	Consumer goods	United States	1,216	0.6

	Sector	Country	Market value £000	% of total portfolio
Developed Europe			53,147	23.9
Prudential	Financials	United Kingdom	7,346	3.3
Airbus	Industrials	Netherlands	6,283	2.8
Reckitt Benckiser	Consumer goods	United Kingdom	6,211	2.8
Atlas Copco	Industrials	Sweden	5,206	2.3
BHP Billiton	Basic materials	United Kingdom	4,943	2.2
Unilever	Consumer goods	Netherlands	4,579	2.1
Ashtead Group	Industrials	United Kingdom	4,103	1.8
Roche	Healthcare	Switzerland	3,383	1.5
Total	Oil and gas	France	3,098	1.4
Shire	Healthcare	United Kingdom	2,817	1.3
ProSiebenSat.1 Media	Consumer services	Germany	2,592	1.2
EIN	Oil and gas	Italy	2,337	1.1
Candover Investments	Private equity	United Kingdom	249	0.1

	Sector	Country		Market value £000	% of total portfolio
	Sector		Country	Market value £000		% of total portfolio
Developed Asia Pacific ex Japan				19,740		8.8
AIA Group	Financials		Hong Kong	8,735		3.9
CSL	Healthcare		Australia	5,811		2.6
China Construction Bank	Financials		Hong Kong	3,338		1.5
CNOOC	Oil and gas		Hong Kong	1,856		0.8

	Sector	Country	Market value £000	% of total portfolio
Global Emerging Markets			13,031	5.9
Alibaba Group	Consumer services	China	5,359	2.4
Taiwan Semiconductor Manufacturing Company	Technology	Taiwan	4,576	2.1
PT Astra International	Consumer goods	Indonesia	2,221	1.0
PT Matahari Department Store	Consumer services	Indonesia	875	0.4

	Sector	Country	Market value £000	% of total portfolio
Japan			8,431	3.8
KDDI	Telecommunications	Japan	4,750	2.1
Komatsu	Industrials	Japan	3,681	1.7

	Sector	Country	Market value £000	% of total portfolio
Middle East			6,343	2.8
Check Point Software Technologies	Technology	Israel	6,343	2.8

Total portfolio holdings

223,192

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 longer 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 carried 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 be able to 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 2018 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

5 April 2018

Statement of Comprehensive Income

		Year to 31 January 2018			Year to 31 January 2017
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£000	£000	£000	£000	£000	£000
Net gains on investments	7	-	22,278	22,278	-	47,347	47,347
Net currency (losses)/gains		(105)	105	-	116	(120)	(4)
Revenue	3	4,894	-	4,894	5,382	-	5,382
Investment management fee	5	(371)	(743)	(1,114)	(334)	(668)	(1,002)
Other expenses	5	(426)	-	(426)	(454)	-	(454)
Net return on ordinary activities before taxation		3,992	21,640	25,632	4,710	46,559	51,269
Taxation on ordinary activities	6	(483)	-	(483)	(572)	-	(572)
Net return attributable to shareholders		3,509	21,640	25,149	4,138	46,559	50,697
Net returns per ordinary share	2	3.72p	22.96p	26.68p	4.21p	47.41p	51.62p

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 2014.

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 2018		As at 31 January 2017
	Note	£000	£000	£000	£000
Fixed assets
Listed on the London Stock Exchange			25,669		25,395
Listed on exchanges abroad			197,523		190,224
Investments at fair value through profit or loss	7		223,192		215,619
Current assets
Trade receivables	8	243		252
Cash and cash equivalents	9	4,200		974
			4,443		1,226
Current liabilities
Trade payables	10	(449)		(348)
			(449)		(348)
Total assets less current liabilities			227,186		216,497
Equity
Called-up share capital	11	5,179		5,179
Capital redemption reserve		10,838		10,838
Special distributable reserve*		91,853		102,349
Capital reserve	11	114,032		92,392
Revenue reserve*		5,284		5,739
Total shareholders' funds			227,186		216,497
Net asset value per ordinary share	2		246.1p		223.9p

* 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 192761.

The financial statements were approved by the Board of directors on 5 April 2018 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 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

	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 2017
As at 31 January 2016		5,179	10,838	110,581	45,833	5,676	178,107
Net return attributable to shareholders**		-	-	-	46,559	4,138	50,697
Ordinary shares bought back during the year		-	-	(8,232)	-	-	(8,232)
Dividends paid	4	-	-	-	-	(4,075)	(4,075)
As at 31 January 2017		5,179	10,838	102,349	92,392	5,739	216,497

* These reserves are distributable.

** 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 2018		Year to 31 January 2017
		£000	£000	£000	£000
Cash flows from operating activities
Profit before tax			25,632		51,269
Adjustments for:
Gains on investments	7	(22,278)		(47,347)
Capital distribution received*	7	-		1,568
Purchases of investments**	7	(31,771)		(48,515)
Sales of investments**	7	46,517		53,660
Dividend income		(4,808)		(5,278)
Stock dividend income		(41)		(9)
Interest income		(2)		(1)
Stock lending income		(43)		(94)
Dividend received		4,776		5,336
Stock dividend received		41		9
Interest received		2		1
Stock lending income received		43		96
Increase in receivables		-		(1)
Increase/ (decrease) in payables		4		(244)
Overseas withholding tax suffered		(483)		(572)
			(8,043)		(41,391)
Net cash flows from operating activities			17,589		9,878
Cash flows from financing activities
Repurchase of ordinary share capital		(10,399)		(8,232)
Equity dividends paid	4	(3,964)		(4,075)
Net cash flows from financing activities			(14,363)		(12,307)
Net increase/(decrease) in cash and cash equivalents			3,226		(2,429)
Cash and cash equivalents at the start of the year			974		3,403
Cash and cash equivalents at the end of the year	9		4,200		974

*This relates to the proceeds from the 'Exchange offer' between BG Group and Royal Dutch Shell.

**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 2018, the Company is applying Financial Reporting Standard 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 2017.

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. 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 2018 (2017: 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 31 January 2018	Year ended 31 January 2017
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	£3,509,000	£4,138,000
Weighted average number of shares in issue during year	94,261,447	98,207,595
Return per ordinary share	3.72p	4.21p
Capital return
Capital return attributable to ordinary shareholders	£21,640,000	£46,559,000
Weighted average number of shares in issue during year	94,261,477	98,207,595
Return per ordinary share	22.96p	47.41p
Total return
Total return per ordinary share	26.68p	51.62p

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 2018 and 31 January 2017.

2018	Dividend rate	NAV	Share price
31 January 2017	n/a	223.9p	223.8p
6 April 2017	1.50p	233.7p	228.0p
29 June 2017	0.9p	234.6p	233.3p
21 September 2017	0.9p	234.2p	234.0p
4 January 2018	0.9p	248.2p	247.0p
31 January 2018	n/a	246.1p	247.0p
Total return		11.90%	12.40%

2017	Dividend rate	NAV	Share price
31 January 2016	n/a	176.3p	173.0p
7 April 2016	1.45p	183.3p	182.5p
30 June 2016	0.9p	195.4p	194.0p
22 September 2016	0.9p	211.5p	210.0p
5 January 2017	0.9p	225.4p	223.0p
31 January 2017	n/a	223.9p	223.8p
Total return		29.70%	32.10%

	As at 31 January 2018	As at 31 January 2017
Net asset value per share
Net assets attributable to shareholders	£227,186,000	£216,497,000
Number of shares in issue at the year end	92,302,109	96,713,730
Net asset value per share	246.1p	223.9p

Between 1 February and 3 April 2018, 1,213,398 ordinary shares of 5p were bought back into Treasury.

Note 3: Revenue from investments 

	Year ended 31 January 2018 £000	Year ended 31 January 2016 £000
From listed investments
UK equities	628	903
International equities	4,180	4,375
Stock dividend	41	9
Other revenue
Interest on deposits	2	1
Stocklending	43	94
	4,894	5,382

There were no capital dividends received during the year ended 31 January 2018 (2017: £nil).

Note 4: Dividends 

	Year ended 31 January 2018 £000	Year ended 31 January 2017 £000
Year ended 31 January 2016 - fourth interim dividend of 1.45p	-	1,445
Year ended 31 January 2017 - fourth interim dividend of 1.50p	1,437	-
Year ended 31 January 2018 - first interim dividend of 0.90p (2016: 0.90p)	851	885
Year ended 31 January 2018 - second interim dividend of 0.90p (2016: 0.90p)	842	874
Year ended 31 January 2018 - third interim dividend of 0.90p (2016: 0.90p)	834	871
	3,964	4,075

Revenue return per share for the year ended 31 January 2018 is 3.72p (2017: 4.21p), 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 31 January 2018 £000	Year ended 31 January 2017 £000
First interim dividend of 0.90p for the year ended 31 January 2018 (2017: 0.90p)	851	885
Second interim dividend of 0.90p for the year ended 31 January 2017 (2016: 0.90p)	842	874
Third interim dividend of 0.90p for the year ended 31 January 2017 (2016: 0.90p)	834	871
Proposed fourth interim dividend of 1.50p for the year ended 31 January 2018 (2017: 1.50p)	1,385	1,451
	3,912	4,081

Note 5:  Other expenses

	Year ended 31 January 2018 £000	Year ended 31 January 2017 £000
Advertising and public relations	76	77
Bank charges (including custody fees)	20	20
Directors' fees	142	114
Directors' and officers' liability insurance	10	12
Irrecoverable VAT	(7)	17
Legal fees	4	2
Marketing	27	27
Printing and postage	10	9
Registration fees	29	37
Secretarial fee	52	51
Other	41	67
	404	433

Auditors' remuneration
Payable to Ernst & Young for the audit of the Company's annual financial statements	20	19
Payable to Ernst & Young for non-audit fees	2	2
	426	454

Performance Fee

The performance fee for the year ended 31 January 2018 was £nil (2017: £nil).  Details of the management and secretarial agreements are provided in the Company's annual report and accounts.

	Year ended 31 January 2018			Year ended 31 January 2017
	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	(371)	(743)	(1,114)	(334)	(668)	(1,002)
Other expenses	(426)	-	(426)	(454)	-	(454)
Total expenses	(797)	(743)	(1,540)	(788)	(668)	(1,456)
Average net assets over the year			225,580			196,884
Ongoing charges			0.68%			0.74%

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 2018			Year ended 31 January 2017
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Overseas tax suffered	483	-	483	572	-	572

The corporation tax rate was 19.18% (2017: 20.00%). 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 2018 £000	Year ended 31 January 2017 £000
Net return before taxation	25,632	51,269
Corporation tax at effective rate of 19.18% (2017: 20.00%)	4,916	10,254
Effects of:
UK dividends not taxable	(121)	(181)
Currency (gains)/losses not taxable	(20)	24
Gains on investments not taxable	(4,272)	(9,470)
Overseas dividends not taxable	(779)	(864)
Overseas tax suffered	483	572
Overseas tax expenses	(4)	(4)
Increase in excess management and loan expenses	280	241
Tax charge for the year	483	572

As at 31 January 2018, the Company had unutilised management expenses of £33 million (2017: £31 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.

Note 7:  Investments at fair value through profit or loss

	As at 31 January 2018 £000	As at 31 January 2017 £000
Opening valuation	215,619	174,976
Opening unrealised gains	(68,132)	(27,657)
Opening cost	147,487	147,319
Purchases at cost	31,771	48,515
Disposal proceeds	(46,517)	(53,660)
Net profit on disposal of investments	9,469	5,304
Disposal at cost	(37,048)	(48,356)
Closing cost	142,210	147,478
Stock dividend	41	9
Closing unrealised gains	80,941	68,132
Valuation as at 31 January	223,192	215,619

	As at 31 January 2018 £000	As at 31 January 2017 £000
Gain on investments
Net profit on disposal of investments	9,469	5,304
Net gain on revaluation of investments	12,809	40,475
Capital distribution received*	-	1,568
	22,278	47,347

* This relates to the proceeds from the 'Exchange offer' between BG Group and Royal Dutch Shell.

The transaction costs in acquiring investments during the year were £54,000 (2017: £111,000). For disposals, transaction costs were £44,000 (2017: £63,000).

As at 31 January 2018 there were no unlisted securities (2017: nil).

Note 8:  Trade receivables: amounts falling due within one year

	As at 31 January 2018 £000	As at 31 January 2017 £000
Dividends receivable	157	125
Taxation recoverable	76	117
Other receivables	6	6
Stocklending income receivable	4	4
	243	252

Note 9:  Cash and cash equivalents

	As at 31 January 2018 £000	As at 31 January 2017 £000
Sterling bank account	4,129	901
Non-sterling bank account	71	73
	4,200	974

Note 10: Trade payables

	As at 31 January 2018 £000	As at 31 January 2017 £000
Amounts falling due within one year:
Due to Martin Currie	296	269
Other payables	153	79
	449	348

Note 11:  Ordinary shares of 5p and capital reserves

	Number of shares	As at 31 January 2018 £000	Number of shares	As at 31 January 2017 £000
Ordinary shares of 5p
Ordinary shares in issue at beginning of the year	96,713,730	4,835	101,044,956	5,052
Ordinary shares bought back into Treasury during the year	(4,411,621)	(221)	(4,331,226)	(217)
Ordinary shares in issue at end of the year	92,303,109	4,614	96,713,730	4,835

	Number of shares	As at 31 January 2018 £000	Number of shares	As at 31 January 2017 £000
Treasury shares (Ordinary shares 5p)
Treasury shares in issue at the beginning of the year	6,869,472	344	2,538,246	127
Ordinary shares bought back into Treasury during the year	4,411,621	221	4,331,226	217
Treasury shares in issue at the end of year	11,281,093	565	6,869,472	344
Total ordinary shares in issue and in Treasury at the end of the year	103,583,202	5,179	103,583,202	5,179

The net cost of share issues from and buy backs to Treasury for the year to 31 January 2018 was £10,496,000 (2017: £8,232,000).

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 2017	24,260	68,132	92,392
Gains on realisation of investments at fair value	9,469	-	9,469
Movement in fair value gains of investments	-	12,809	12,809
Realised currency losses during the year	105	-	105
Capitalised expenses	(743)	-	(743)
At 31 January 2018	33,091	80,941	114,032

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 (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 2018	Interest rate %	Local currency '000	Foreign exchange rate	Sterling equivalent £000
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
At 31 January 2017
Assets
Sterling	0.01	901	1.000	901
Euro	(0.60)	28	1.164	24
US Dollar	0.01	62	1.258	49
				974

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 (2017: 25) basis points higher or lower and all other variables were held constant, the Company's profit for the year ended 31 January 2018 would increase/decrease by £21,000 (2017: increase/decrease by £2,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances.

As at 31 January 2018 an interest rate of 0.5% is used, given the prevailing base rate is 0.5%. This level is considered possible based on observations of market conditions and historic trends.

(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 2018			Year ended 31 January 2017
	Investment exposure £000	Net monetary exposure £000	Total currency exposure £000	Investment exposure £000	Net monetary exposure £000	Total currency exposure £000
US dollar	134,985	124	135,109	132,322	135	132,457
Euro	18,889	52	18,941	16,274	60	16,334
Japanese yen	8,430	-	8,430	16,025	-	16,025
Hong Kong dollar	13,929	-	13,929	7,564	-	7,564
Australian dollar	5,811	-	5,811	4,723	-	4,723
Canadian dollar	3,794	29	3,823	3,922	30	3,952
Swiss franc	3,383	48	3,431	3,658	81	3,739
Indonesian rupiah	3,096	-	3,096	3,671	-	3,671
Singapore dollar	-	-	-	2,064	-	2,064
Swedish krona	5,206	-	5,206	-	-	-
Total overseas investments	197,523	253	197,776	190,223	306	190,529
Sterling	25,669	3,741	29,410	25,396	572	25,968
Total	223,192	3,994	227,186	215,619	878	216,497

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 2018, 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 2017.

	2018 £000	2017 £000
US dollar	6,755	6,616
Euro	947	814
Japanese yen	422	801
Hong Kong dollar	696	378
Australian dollar	291	236
Canadian dollar	191	196
Swiss franc	172	183
Indonesian rupiah	155	184
Swedish krona	260	-
Singapore dollar	-	103

(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 2018 would have increased/decreased by £33,480,000 (2017: increase/decrease of £32,340,000) 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 2018 was £4,443,000 (2017: £1,226,000). This was due to trade receivables and cash as per notes 8 and 9.

Please refer to note 16 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 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 2018 £000	As at 31 January 2017 £000
Called up ordinary share capital	5,179	5,179
Capital redemption reserve	10,838	10,838
Special distributable reserve	91,853	102,349
Capital reserve	114,032	92,392
Revenue reserve	5,284	5,739
Total shareholders' funds	227,186	216,497

Note 15:  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:

At 31 January 2018	Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Financial assets at fair value through profit or loss
Quoted equities	223,192	-	-	223,192
Net fair value	223,192	-	-	223,192

At 31 January 2017	Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Financial assets at fair value through profit or loss
Quoted equities	215,619	-	-	215,619
Net fair value	215,619	-	-	215,619

 

Note 16:  Stocklending

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

 

As at 31 January 2018 £19,093,000 (2017: £21,549,000) of investments were subject to stock lending agreements and £20,524,000 (2017: £23,104,000) 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 loan was not less than the value of the securities lent at the balance sheet date or during the year.

The maximum aggregate value of securities on loan at any time during the accounting period was £31,744,000.

The gross earnings and the fees paid for the year are £58,000 (2017: £125,000) and £15,000 (2017: £31,000).

Note 17:  Post balance sheet events

 

On 27 March 2018 the Board declared a fourth interim dividend of 1.50p per share. As at 3 April 2018, the Company bought back a further 1,213,398 ordinary shares at the price of £2,825,132 resulting in a further reduction of £2,825,132 to the special distributable reserve.

As set out in the chairman's statement, a change to the investment fee and performance fee has been agreed between the Board and the investment manager with effect from 1 February 2018.

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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