Annual Financial Report

RNS Number : 1476X

Martin Currie Global Portfolio Tst

25 April 2019

 

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

Annual Financial Results

Year to 31 January 2019

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 January 2019 or 2018 but is derived from those accounts.  Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Company's annual general meeting. 

The auditor has reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

A copy of the annual report and accounts has also been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do

The annual general meeting of the Company will be held at the offices of Martin Currie Investment Management Limited on 11 June 2019 at 12.30pm.  The full notice of the meeting can be found on the Company's website (www.martincurrieglobal.com).

The unedited full text of those parts of the annual report and accounts for the year ended 31 January 2019, which require to be published are set out on the following pages.

Financial

Total returns***

	Year ended 31 January 2019	Year ended 31 January 2018
Net asset value per share*	1.6%	11.9%
Benchmark	0.9%	12.7%
Share price	(0.3%)	12.4%

Source: Martin Currie Investment Management.

*        The net asset value per share total return is calculated using the cum income net asset value with dividends reinvested. This is an Alternative Performance Measure.

**        The benchmark is the FTSE World Index.

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

Chairman's Statement

Welcome to your annual report for the 12 months ending 31 January 2019.

The year has been dominated by political uncertainties accompanied by slower global GDP growth not just in the UK but in much of the rest of the world. The global stock markets have reflected the global growth slowdown by delivering only a modest 0.9% total return over the period, in sharp contrast to the double digit returns in 2017/18. Against this challenging background, the Company delivered another year of relative stability and a pick-up in performance, outperforming the benchmark with a 1.6% Net Asset Value ('NAV') total return which was in the top three in our AIC sector.

Portfolio Manager

During the year we said goodbye to Tom Walker on his retirement after 18 successful years as the Company's portfolio manager. During his tenure Tom has delivered an excellent performance, beating the benchmark in seven out of the eight ten year rolling periods producing an 18-year share price increase of 380%. The Board wishes to express its gratitude to Tom for this sustained delivery of long-term shareholder value. We welcomed Martin Currie's recruitment of Zehrid Osmani as Tom's replacement after a seamless handover in the third quarter following a period as co-managers. Zehrid brings great portfolio management experience and energy. He has already catalysed further enhancements to the investment process including an increasingly focused high conviction portfolio. The portfolio is likely to hold in the range of 25-40 stocks, each with long-term capital strengths, selected from around the world backed up by the deep research which is the hallmark of Martin Currie's investment approach.

More details of the markets, portfolio performance and his approach to managing the portfolio are given in Zehrid's report. 

Investment objective and benchmark update

The capital growth investment objective has been in place since the formation of the Company 20 years ago but now does not fully reflect what shareholders receive from their investment which is a total return, combining both capital growth and dividend income. This 'total return' measure of performance is the most widely used in the sector and reflects the overall return to shareholders rather than simply the capital element. As a result comparability with others in the sector will be improved.

As part of this change the Board is also proposing to adopt the MSCI All Country World index in place of the FTSE World index as its benchmark. The FTSE index covers some countries less well than the MSCI index, in particular some of the larger emerging markets such as China and India in which the Company does sometimes hold investments.

A resolution will therefore be put to the AGM that the Company's investment objective be changed from 'Long-term capital growth in excess of the capital return from the FTSE World index' to 'Long-term returns in excess of the total return from the MSCI All Country World index'.

Subject to approval by shareholders, these changes will take effect from the start of the next full financial year on 1 February 2020. Further information is contained in the Director's report, and a full copy of the proposed Investment Objective and Policy, showing the changes from the existing Investment Objective is included in the Notes to the Notice of AGM.

Dividends

Income per share reduced by 0.2p per share to 3.47p per share largely due to reduced dividend income as sterling strengthened against the US dollar by about 2% over the year. The fourth interim dividend of 1.5p will be paid on 26 April 2019 to shareholders on the register at 12 April 2019 making a total dividend for the year of 4.20p in line with last year's payment. Looking ahead the investment philosophy will focus on quality growth stocks rather than companies with a high dividend yield and the capital growth element of total return is therefore likely to increase.

Low costs

Once more, costs have been controlled and ongoing charges have reduced from 0.68% to 0.63% of NAV using the Association of Investment Companies ('AIC') methodology. This is due mainly to the reduction in the management fee from 0.5% to 0.4% of NAV with effect from 1st February 2018. The improved performance has generated a provision for a performance fee of about 0.20% payable if outperformance of the benchmark were to be maintained during the current year. Details of the performance fee calculation are set out below. 

The Board

Following the conclusion of the AGM Mike Balfour will retire and will be succeeded by Gillian Watson as Senior Independent Director. The Board wishes to express its gratitude to Mike for his nine years of service during which he has been both Audit Committee Chair and Senior Independent Director. Recruitment of a new director is underway and an announcement will be made in due course.

Environmental, Social & Corporate Governance Issues ('ESG')

Your Company publishes its compliance statement in respect of the UK Stewardship Code on its website. The Investment Manager is a signatory, and is assessed as Tier-1 by the FRC, for its statement of compliance with the UK Stewardship Code. The Company works closely with the manager on its

approach in the investment process to:

·      strategy and governance;

·      the integration of ESG into their analytical work; and

·      active ownership through engagement with investee company managements.

Martin Currie has engaged during the year with almost all of our investee companies in a range of ESG issues including the supply chain, sustainable water policies, sustainable packaging and senior management remuneration structures.

Examples of these engagements include discussing with the remuneration committee of a European company its senior management remuneration structures which has concluded successfully and with a US software company on improving employee retention rates with more socially responsive practices which is ongoing.

ESG issues are an important element of the research process for companies being considered for the portfolio which is more fully described by Zehrid in his report below.  More details of the Martin Currie ESG activities are available in the 2019 Stewardship Report on the website at martincurrie.com /corporate/about-us/stewardship.

Outlook

The global equity markets have so far taken the uncertainties of global politics largely in their stride but continuing trade wars and other political issues combined with the global economic growth slowdown will test those businesses which are financially exposed and increase volatility in the stock markets. In this environment the focus of your Company's global portfolio on financially robust, well-managed businesses with sustained good returns on capital positions it strongly to deliver another year of good performance.

Neil Gaskell

Chairman

25 April 2019

Manager's review

Market comment

Over the 12-month period to 31 January 2019 the FTSE World index produced a total return of 0.9%. However, this number does not give insight into the significant regional variation of markets; North America returned 5.4%, whilst Developed Europe, Japan and Emerging Markets declined 6.4%, 4.5% and 3.7%, respectively.

The Company's reporting period started well, helped by economic activity, notably strong US growth and the boost to profits from President Trump's tax cuts. However, as illustrated in the chart below, markets sold off sharply in the latter part of the year, with Europe relatively more impacted. The sell-off was based on fears related to weakening economic activity and less supportive monetary policies.

Economic activity across all key regions globally lost momentum in the second half of 2018. Trade tensions between China and the US contributed to economic uncertainty, with the market becoming concerned about a Chinese economic 'hard landing' and, in the UK, major uncertainty around the shape of the final Brexit deal. On the monetary policy front, the US Federal Reserve ('Fed'), continued to steadily raise rates during the year, and initially sounded increasingly hawkish in its rhetoric (although this subsequently shifted to a more dovish stance in January 2019). The US yield curve flattening during the year led the market to worry about an inverted yield curve, and therefore about an upcoming recession. This increased volatility, and resulted in the marked sell-off in equity markets in the final quarter of 2018, after what had been a very long period of low volatility. An inverted yield curve has historically been a reliable predictor of upcoming recessions in the US (less so in other regions). This is based on the fact that long-term interest rates move below shorter-term rates, which is a reflection of overly tight monetary policies. It also tends to lead to a reduction in bank lending, given that banks traditionally borrow at the short end of the yield curve, to lend at the long end of the curve - which would also contribute to slowing economic activity. We discuss in more detail our view on recession and how the Company would fare in the Market outlook section.

Fund performance & attribution

Despite increased volatility and the market sell-off in the later part of the period, the Company's NAV total return was 1.6% over the 12 months to 31 January 2019, outperforming the total return benchmark by 0.7%. In sector terms, utilities, healthcare, consumer services and technology all performed well. Poorer performers were basic materials, consumer goods and financials. The bulk of the Company's outperformance was driven by the performance of particular stocks, notably in industrials, financials, materials, energy and telecommunications.  

In healthcare, blood-fractionation company CSL contributed positively, as did global biotechnology company Shire, following an acquisition bid by Japanese peer Takeda. Strong industrials performance was notably driven by exposure to human resources software provider ADP, which we think will continue to benefit from the trend for companies to outsource payroll and increasing complexity in regulation, and Waters, an analytical laboratory instrument and software company.

In financials, large positions in Asian insurance company AIA and credit card provider Visa performed well. AIA is a Hong Kong listed life insurer which has a mix of profitable businesses that can generate capital to fund growth throughout Asia. AIA's distribution capabilities, capital strength, brand and strong balance sheet make it well placed to take advantage of Asia's under-penetrated life insurance market, which is driven by demographic trends. Visa will benefit from the continued migration from cash and cheque to electronic payment, which is a multi-year secular trend, still far from mature. We believe the market underestimates the sustainability of this trend. This is apparent in our modelling for the US listed payments company and hence we see tremendous long-term value in this company. 

In consumer goods, exposure to British American Tobacco ('BAT') detracted from performance as the regulatory threat to its business increased. In technology, Facebook was also a notable negative contributor, due to a worsening outlook and ongoing uncertainty around data protection weighing on the stock. 

Future Investment Themes

With more volatility expected in 2019, we believe this should offer entry points to gain exposure to companies tapping into some powerful long-term trends. In particular, we foresee three mega-themes that are supported by strong multi-decade growth drivers and which provide the basis for much of our fundamental research.

1) Demographic change

With the rapid expansion of the emerging market middle class, one area that is going to be of interest in the longer term is luxury goods. We believe there may well be a good opportunity to increase exposure here at a time when the market is worried about a short-term slowdown in China.

2) Resource scarcity

With a global movement to reduce human impact on the environment and preserve our precious resources, the development of electric vehicles is a key theme for us. This trend will be driven by both regulations - as governments legislate to enforce the switch away from the internal combustion engine - and consumer demand, as more environmentally aware customers seek out cleaner forms of transportation.

3) The future of technology

We see robotisation and artificial intelligence as multidecadetrends. As companies look to automate part or all of their processes, it pays to identify the firms which are investing now to either disrupt their own technology or that of the industry. In our view, these are firms that are likely tobe the winners over a longer-term time frame. It is critical to assess disruption risk in any industry we research. We seek to identify the potentially attractive disruptors, while avoiding the companies at risk of having their business models overtaken. In 2019, we will be looking in particular at disruption threats from the large US-based technology giants, which will continue to deploy their substantial cash piles in new, growth areas adjacent to their existing businesses, presenting a sizeable disruption risk to established firms across the globe.

Activity

The year has been busy as we tested our conviction on some of the Company's holdings and reduced the number of stocks in the portfolio from 47 to 37. We also generated many new investment ideas, which led to a level of portfolio activity higher than normal.

We reduced exposure to telecoms, banks, large-cap pharmaceuticals and utilities, as we believe there are limited attractive long-term investment opportunities in these areas. BAT was the most notable 'sell' decision over the period. We exited the stock following negative news on the regulation landscape on menthol combustible cigarettes.  Facebook, Airbus and CVS were also sold over the period. The sale of Facebook was related to our concerns of further regulatory risks, and potential loss of momentum in the growth of its user base. The Airbus sale was due to limited further upside after strong share price performance and, in part, based on concerns around the impact on trading in the event of a no-deal Brexit. US pharmacy retailer CVS is a company we still like and which has a strong investment case, but strong stock performance had led to limited upside versus our share price target, leading us to sell the holding.

New positions included Tencent and Align. Tencent is the main social media platform in China with more than 800 million monthly active users and a long history of value creation, with return on invested capital ('ROIC') well in excess of the cost of capital. The market believes that Tencent's market share is not sustainable and that it is still not capturing the long-term opportunities in key areas such as gaming, advertising and online-to-offline. However, we believe there are good grounds to expect Tencent to put these concerns to rest and for it to be a key beneficiary of trends such as the growth in advertising spending per capita in China from a comparatively low level.

Align is a California-based orthodontic products producer. Growth is driven by four initiatives: international expansion; new product ranges growing the addressable market; greater sales penetration within the dentistry market; and investing in the promotion of its brand to teenage consumers, the largest segment of the market. The company benefits from high barriers to entry due to scale, a suite of patents and long-developed domain expertise and is the clear leader in the market with superior technology, including a fully digital workflow and world-class 3D printing production expertise.

During the year, we also purchased dental implants leader Straumann, given its attractive growth profile and high returns potential. We see market growth of mid-single digits as supportive, and the company's expansion into new adjacent aesthetic dentistry segments as further boosting the top-line growth prospects, which we expect to be in the teens.

We also purchased Linde, given the company's recent combination with Praxair, and the resultant synergies that the management can generate from the combined entity. Other new positions included Waters Corp, the speciality measurement company, and Assa Abloy, the global leader in door-opening solutions.

Waters Corp provides solutions to industries such as pharmaceuticals, using liquid chromatography, mass spectrometry and thermal analysis, serving customers in the life sciences and tools sector ('LST'). The LST market is growing at 5% per annum. We believe Waters can outperform this due to its scale, reputation and continued research and development investment driving innovative new products to market. In addition, the company has a consistent record of expanding margins at around 40bps p.a., while recent US tax reform frees up US$3.5 billion in overseas cash which is being used to accelerate a buyback programme. With a ROIC in excess of 40%, Waters is a high-quality play on healthcare spending growth without the pricing/reimbursement headache.

 Assa Abloy is the Swedish listed global leader in door opening solutions. We see clear potential for growth to accelerate as the smart-lock becomes an integral part of the 'Alexa-enabled' home. As the only truly global company in its industry, Assa Abloy has a significant R&D advantage over peers and is the gatekeeper of choice, partnering with technology platforms such as Google and Amazon in multiple markets.

Finally, we made a key portfolio decision in the luxury goods market, switching the position in the Swiss watchmaker Richemont into sector peers Kering and Moncler. These transactions increased the overall exposure to luxury and moved exposure from 'hard' to 'soft' luxury, where we have a favourable view of the industry's structural growth trends.

Market outlook

Our outlook for the market remains unchanged. Concerns remain focused on a combination of fears of a China-US trade war impacting economic activity, rising interest rates putting pressure on equity valuations, and the growing risk of a recession.

With respect to potential trade wars, the situation remains uncertain and we will need to continue to assess how this evolves. There is still a high likelihood that pragmatism prevails, and that a constructive dialogue around trade agreements happens between the two economic blocks.  On the interest rates front, the Fed has surprised the market with its latest comment sounding more dovish, with the signalling of interest rate policy being close to neutral. This should be more supportive for equity markets, at least in the near term.

On the topic of recession, the weaker economic momentum across the US, Europe and China in particular is a concern. On China specifically however, we do not believe that the Chinese economy will see a hard landing; the Chinese authorities have enough levers to pull, which they are doing, which should mean the economy should stabilise. The flattening yield curve in the US is unnerving investors (as explained above in the Market comment section). Given that we are in the later stage of the longest expansionary economic cycle, it is valid to focus on the growing risk of a recession in the next two to three years. For us, however, it is not so much about whether a recession will happen. The more important aspect to reflect on and analyse is what shape could the next recession have; specifically, will it be a shallow or deep recession, and will it be short lived or longer lasting? We believe we are more likely to see a short and shallow recession, which would be an opportunity for long term investors such as ourselves to increase exposure to quality equities for the next growth cycle.

Also, given the exposure to quality companies with stronger balance sheets, we believe that the Company should fare better than the market during recessionary periods. Closer to home, ongoing uncertainty around Brexit is something we continue to keep a close eye on - it has the potential to negatively impact the economic growth prospects of both the UK and the EU. Our fundamental data analytics enhancements that we introduced during the year have helped us both analyse the Company's underlying exposure to the UK economy in terms of sales and profits, and assess supply chain disruption risks. This makes us confident that the Company's risk exposure can be managed, should there be a disorderly Brexit and trade disruptions.

In conclusion, market volatility remains elevated, and risk aversion is high. While this makes the market direction uncertain in the near term, it typically provides a good opportunity for long-term investors to gain exposure to equity markets for the next growth cycle. In such conditions, it is a good time to be a long-term unconstrained investor.

Zehrid Osmani

25 April 2019

INVESTMENT PHILOSOPHY

Investing in high-quality companies at the right price

To achieve the investment objective, Martin Currie Global Portfolio Trust has adopted a distinctive investment strategy developed by Martin Currie. This distinctive approach clearly focuses on using Martin Currie's global research capabilities in identifying high-quality companies that will benefit from exposure to growth megatrends worldwide.

1)  Finding quality companies

This may sound simple, but not every manager invests in quality, growing companies. Some may be selected simply because they are in an index that the manager follows. Instead, Martin Currie aims to find undervalued, quality growth stocks through its own research and engagement. The portfolio manager seeks companies that are investing in their future, with leadership positions in growing markets. Some of the screens used include:

·       A minimum US$3 billion market capitalisation.

·       A 10-year track record of generating a return on invested capital (ROIC) above the cost of capital.

·        Companies that have the potential to sustain or further improve their return on invested capital to attractive levels.

·        Strong financial position and low, or no, debt.

These are not fixed guidelines and the portfolio manager is free to invest in companies that are close to meeting the criteria. This offers flexibility to invest in new listings and companies below the $3 billion market capitalisation level that demonstrate the desired core qualities and growth potential.

2)  Environmental, Social and Governance (ESG)

ESG issues are also central to Martin Currie's investment philosophy and their approach has been rewarded with the highest possible rating (A+) from the PRI across its three key criteria and a Tier 1 ranking from the UK Financial Reporting Council (FRC). The investment team assesses ESG credentials in detail, and drills deeper into areas of concern, engaging with the company's management to discuss any issues, and aiming to generate a positive impact.

ESG assessment provides an opportunity for constructive engagement between Martin Currie and company management on issues arising. In fact, Martin Currie does not invest in companies that refuse to engage with them on these issues. The Board is satisfied that this approach has been used consistently for over 10 years, and the investment manager is striving to advance its leadership position. 

High conviction portfolio

Finding stocks with growth potential is only one part of the task. Constructing a balanced portfolio in a risk-aware manner is also a critical skill. Martin Currie believes that an appropriately constructed portfolio of 25-40 stocks will deliver a higher level of outperformance, by ensuring meaningful allocations in the most exciting investments, with the necessary level of diversification.

Portfolio Summary

Portfolio distribution

By region	31 January 2019 Company %	31 January 2019 FTSE World index %	31 January 2018 Company %	31 January 2018 FTSE World index %
Developed Europe	43.7	20.5	23.9	22.3
North America	36.7	59.9	54.8	57.4
Developed Asia Pacific ex Japan	13.4	6.0	8.8	6.2
Middle East	3.6	0.2	2.8	0.2
Global Emerging Markets	2.6	4.7	5.9	4.9
Japan	-	8.7	3.8	9.0
	100.0	100.0	100.0	100.0

By sector	31 January 2019 Company %	31 January 2019 FTSE World index %	31 January 2018 Company %	31 January 2018 FTSE World index %
Industrials	27.1	13.1	14.5	13.3
Consumer goods	18.7	11.4	11.4	12.8
Technology	15.5	14.8	15.9	13.5
Healthcare	14.4	11.7	10.1	10.7
Financials	10.5	21.0	21.2	22.4
Consumer services	10.0	11.5	11.1	11.0
Basic materials	3.8	4.4	4.8	4.8
Telecommunications	-	2.8	4.8	2.7
Oil and gas	-	6.0	4.7	5.9
Utilities	-	3.3	1.5	2.9
	100.0 00	100.0	100.0	100.0

By asset class	31 January 2019 %	31 January 2018 %
Equities	98.7	98.2
Cash	1.3	1.8
	100.0	100.0

Largest 10 holdings	31 January 2019 Market value £000	31 January 2019  % of total portfolio	31 January 2018 Market value £000	31 January 2018  % of total portfolio
AIA Group	8,497	4.2	8,735	3.9
Automatic Data Processing	8,355	4.1	5,959	2.7
Straumann Holding	7,711	3.8	-	-
Linde	7,708	3.8	-	-
VISA	7,705	3.8	9,856	4.4
Check Point Software Technologies	7,421	3.6	6,343	2.8
CSL	7,328	3.6	5,811	2.6
Unilever	6,812	3.3	4,579	2.1
Tencent Holdings	6,724	3.3	-	-
Waters	6,694	3.3	-	-

 

 

Portfolio Holdings

	Sector	Country	Market value £000	% of total portfolio
Developed Europe			89,258	43.7
Straumann Holding	Healthcare	Switzerland	7,711	3.8
Linde	Basic Materials	Ireland	7,708	3.8
Unilever	Consumer goods	Netherlands	6,812	3.3
Moncler	Consumer goods	Italy	6,621	3.2
Kering	Consumer services	France	6,602	3.2
Adidas	Consumer goods	Germany	6,206	3.0
Aptiv	Consumer goods	Jersey	5,650	2.8
Kerry Group	Consumer goods	Ireland	5,452	2.7
Reckitt Benckiser	Consumer goods	United Kingdom	5,353	2.6
Prudential	Financials	United Kingdom	5,003	2.5
Accenture	Industrials	Ireland	4,510	2.2
Compass Group	Consumer services	United Kingdom	4,507	2.2
Assa Abloy	Industrials	Sweden	4,335	2.1
Coloplast B	Healthcare	Denmark	4,107	2.0
Atlas Copco	Industrials	Sweden	3,412	1.7
Spirax Sarco Engineering	Industrials	United Kingdom	3,122	1.5
L'Oreal	Consumer goods	France	2,147	1.1
Candover Investments (in liquidation)	Financials	United Kingdom	-	0.0
	Sector	Country	Market value £000	% of total portfolio
North America			74,550	36.7
Automatic Data Processing	Industrials	United States	8,355	4.1
VISA	Financials	United States	7,705	3.8
Waters	Industrials	United States	6,694	3.3
Cognizant Technology Solutions	Technology	United States	6,344	3.1
3M	Industrials	United States	5,921	2.9
Mettler Toledo International	Industrials	United States	5,903	2.9
Apple	Technology	United States	5,810	2.9
Align Technology	Healthcare	United States	5,413	2.7
Rockwell Automation	Industrials	United States	4,985	2.4
Cooper Companies	Healthcare	United States	4,663	2.3
Starbucks	Consumer services	United States	4,605	2.3
Lockheed Martin	Industrials	United States	4,094	2.0
Canadian Natl Railway	Industrials	Canada	4,058	2.0

	Sector	Country	Market value £000	% of total portfolio
Developed Asia Pacific ex Japan			27,325	13.4
AIA Group	Financials	Hong Kong	8,497	4.2
CSL	Healthcare	Australia	7,328	3.6
Tencent Holdings	Technology	China	6,724	3.3
Alibaba Group	Consumer services	China	4,776	2.3

	Sector	Country	Market value £000	% of total portfolio
Middle East			7,421	3.6
Check Point Software Technologies	Technology	Israel	7,421	3.6

	Sector	Country	Market value £000	% of total portfolio
Global Emerging Markets			5,264	2.6
Taiwan Semiconductor Manufacturing Company	Technology	Taiwan	5,264	2.6

Total portfolio holdings

203,818

100.0

Principal risks and uncertainties

Risk and mitigation

The Company's business model is longstanding and resilient to most of the short-term operational uncertainties that it faces. The Board believes these are effectively mitigated by its internal controls and its oversight of the investment manager, as described in the table below. Its principal risks and uncertainties are therefore largely long-term and driven by the inherent uncertainties of investing in global equity markets.

Operational and management risks are regularly monitored at board meetings and the Board's planned mitigation measures for the principal risks are described in the table below. As part of its annual strategy meeting, the Board carries out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

As a consequence of this review, the Board has identified the following principal risks to the Company:

Sustained investment underperformance - The Board monitors the implementation and results of the investment process with the portfolio manager, who attends all board meetings and reviews data that show statistical measures of the Company's risk profile. Should investment underperformance be sustained despite the mitigation measures taken by the investment manager, the Board would assess the cause and take appropriate action to manage this risk.

Material decline in market capitalisation of the Company - The Board recognises that the 'zero discount' policy allows new shareholders to purchase shares and current shareholders to sell their shares in any volume at close to NAV, in normal market conditions. Although this improved liquidity encourages investment in the Company, it could also increase the risk of a material decline in the size of the Company. The Board monitors the performance and pace of

buybacks and the Company's shareholder profile. The Board believes that good long-term performance will increase demand for the Company's shares and increase the market capitalisation of the Company.

Loss of s1158-9 tax status -  Loss of s1158-9 tax status would have serious consequences for the attractiveness of the Company's shares. The Board considers that, given the regular oversight of this risk by the audit committee and

the investment manager, the likelihood of this risk occurring is minimal. The audit committee regularly reviews the eligibility conditions and the Company's compliance against each, including the minimum

dividend requirements and shareholder composition for close company status.

Following the ongoing assessment of the principal risks facing the Company, and its current position, the Board is confident that the Company will be able to continue in operation and meet its liabilities as they fall due. The Board believes that the processes of internal control that the Company has adopted and oversight by the investment manager continue to be effective.

Directors' Responsibilities

Statement of directors' responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements respectively; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the directors' remuneration report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The financial statements are published on the Company's website (www.martincurrieglobal.com) which is maintained by the investment manager. The directors are responsible for the maintenance and integrity of the Company's website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the directors confirms that to the best of their knowledge:

·      the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

·      the report of the directors, strategic report and manager's review include a fair, balanced and understandable review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

Going concern status

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman's statement, manager's review, strategic report and the report of the directors.

The financial position of the Company as at 31 January 2019 is shown on the statement of financial position below. The cash flows of the Company are also set out below.

Note 13 below sets out the Company's risk management policies, including those covering market risk, liquidity risk and credit risk.

In accordance with the Financial Reporting Council's guidance on going concern and liquidity risk issued in October 2009 and C1.3 of the 2016 UK Corporate Governance Code, the directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Company's assets consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale. The directors are mindful of the principal risks and uncertainties disclosed above. They have reviewed revenue forecasts and believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future, and at least one year from the date of this annual report.  

Accordingly, the directors continue to adopt the going concern basis in preparing these financial statements.

Viability Statement

The Company's business model is designed to deliver long term capital growth to its shareholders through investment in large and liquid stocks in global equity markets. Its plans are therefore based on having no fixed or limited life provided global equity markets continue to operate normally. The Board has assessed its viability over a 3 year period in accordance with provision C.2.2 of the 2016 UK Corporate Governance Code. The Board considers that this reflects the minimum period which should be considered in the context of its long-term objective but one which is limited by the inherent and increasing uncertainties involved in assessment over a longer period.

In making this assessment the directors have considered the following risks to its ongoing viability:

·      the principal risks and uncertainties and the mitigating actions set out above;

·      the ongoing relevance of the Company's investment objective in the current environment and evidenced by feedback from major shareholders;

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

·      the low level of fixed costs relative to its liquid assets; and

·      the expectation is that in normal markets more than 99% of the current portfolio could be liquidated within one trading day.

Based on the results of their analysis and the Company's processes for monitoring each of the factors set out above, the directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over at least the next 3 years.

Neil Gaskell

Chairman

25 April 2019

Statement of Comprehensive Income

		Year to 31 January 2019			Year to 31 January 2018
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£000	£000	£000	£000	£000	£000
Net gains on investments	7	-	1,202	1,202	-	22,278	22,278
Net currency gains/ (losses)		59	(6)	53	(105)	105	-
Revenue	3	4,211	-	4,211	4,894	-	4,894
Investment management fee	5	(286)	(573)	(859)	(371)	(743)	(1,114)
Performance fee	11	-	(406)	(406)	-	-	-
Other expenses	5	(510)	-	(510)	(426)	-	(426)
Net return on ordinary activities before taxation		3,474	217	3,691	3,992	21,640	25,632
Taxation on ordinary activities	6	(415)	-	(415)	(483)	-	(483)
Net return attributable to shareholders		3,059	217	3,276	3,509	21,640	25,149
Net returns per ordinary share	2	3.47p	0.25p	3.72p	3.72p	22.96p	26.68p

The total columns of this statement are the profit and loss accounts of the Company.

The revenue and capital items are presented in accordance with the Association of Investment Companies ('AIC') Statement of Recommended Practice 2018.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued in the year.

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

Statement of Financial Position

		As at 31 January 2019		As at 31 January 2018
	Note	£000	£000	£000	£000
Fixed assets
Listed on the London Stock Exchange			21,107		25,669
Listed on exchanges abroad			182,711		197,523
Investments at fair value through profit or loss	7		203,818		223,192
Current assets
Trade receivables	8	174		243
Cash and cash equivalents	9	2,671		4,200
			2,845		4,443
Current liabilities
Trade payables	10	(682)		(449)
			(682)		(449)
Total assets less current liabilities			205,981		227,186
Amounts falling due after more than one year	11		(406)		-
Total Net Assets			205,575		227,186
Equity
Called-up share capital	12	4,934		5,179
Capital redemption reserve		11,083		10,838
Special distributable reserve*		70,673		91,853
Capital reserve	12	114,249		114,032
Revenue reserve*		4,636		5,284
Total shareholders' funds			205,575		227,186
Net asset value per ordinary share	2		245.5p		246.1p

* These reserves are distributable.

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

Martin Currie Global Portfolio Trust plc is registered in Scotland, company number SC192761.

The financial statements were approved by the Board of directors on 25 April 2019 and signed on its behalf by Neil Gaskell, Chairman.

Statement of Changes in Equity

 

	Note	Called 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 2019
As at 31 January 2018		5,179	10,838	91,853	114,032	5,284	227,186
Net return attributable to shareholders**		--	-	-	217	3,509	3,276
Ordinary share cancelled during the period		(245)	245	-	-	-	-
Ordinary shares bought back during the year		-	-	(21,180)	-	-	(21,180)
Dividends paid	4	-	-	-	-	(3,707)	(3,707)
As at 31 January 2019		4,934	11,083	70,673	114,249	4,636	205,575

	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

*These reserves are distributable.

The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.

**The Company does not have any other income or expenses that are not included in the 'Net return attributable to shareholders' as disclosed in the statement of Comprehensive Income and therefore this is also the 'Total Comprehensive Income' for the year.

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

 

Statement of Cash Flow

	Note	Year to 31 January 2019		Year to 31 January 2018
		£000	£000	£000	£000
Cash flows from operating activities
Profit before tax			3,691		25,632
Adjustments for:
Gains on investments	7	(1,202)		(22,278)
Purchases of investments*	7	(147,050)		(31,771)
Sales of investments*	7	167,626		46,517
Dividend income		(4,182)		(4,808)
Stock dividend income		-		(41)
Interest income		(1)		(2)
Stock lending income		(28)		(43)
Dividend received		4,247		4,776
Stock dividend received		-		41
Interest received		1		2
Stock lending income received		31		43
Decrease in receivables		1		-
Increase in payables		366		4
Overseas withholding tax suffered		(415)		(483)
			19,394		(8,043)
Net cash flows from operating activities			23,085		17,589
Cash flows from financing activities
Repurchase of ordinary share capital		(20,907)		(10,399)
Equity dividends paid		(3,707)		(3,964)
Net cash flows from financing activities			(24,614)		(14,363)
Net (decrease)/increase in cash and cash equivalents			(1,529)		3,226
Cash and cash equivalents at the start of the year			4,200		974
Cash and cash equivalents at the end of the year			2,671		4,200

*Receipts from the sale of, and payments to acquire, investment securities have been classified as components of cash flows from operating activities because they form part of the Company's dealing operations.

The notes form part of these financial statements.

 

Notes to the Financial Statements

Note 1: Accounting policies

(a)      For the year ended 31 January 2019, the Company is applying FRS 102 applicable in the UK and Republic of Ireland (FRS 102), which forms part of the revised Generally Accepted Accounting Practice ('UK GAAP') issued by the Financial Reporting Council ('FRC').

These financial statements have been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, FRS102 issued by the FRC in September 2015 and the revised Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ('SORP') issued by the AIC in November 2014 and updated in January 2017 and February 2018.

Functional currency - the Company is required to nominate a functional currency, being the currency in which the Company predominately operates. The Board has determined that sterling is the Company's functional currency, which is also the currency in which these financial statements are prepared. This is also the currency in which all expenses and dividends are paid in.

(b)      Income from investments (other than capital dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend, or where no ex- dividend date is quoted, when the Company's right to receive payment is established. UK investment income is stated net of the relevant tax credit. Overseas dividends include any taxes deducted at source. Special dividends are credited to capital or revenue, according to the circumstances. Stock dividends are treated as unfranked investment income; any excess in value of the shares received over the amount of the cash dividend is recognised as a capital item in the statement of comprehensive income.

(c)      Interest receivable and payable, management fees, performance fees and other expenses are treated on an accruals basis.

(d)      The management fee and finance costs in relation to debt are recognised two-thirds as a capital item and one-third as a revenue item in the statement of comprehensive income in accordance with the Board's expected long-term split of returns in the form of capital gains and revenue, respectively. The performance fee is recognised 100% as a capital item in the statement of comprehensive income as it relates entirely to the capital performance of the Company. All other expenses are charged to revenue except where they directly relate to the acquisition or disposal of an investment, in which case, they are treated as described in (f) below.

(e)      Investments - investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and derecognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured as fair value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices. Gains and losses arising from changes in fair value are included in net profit or loss for the year as a capital item in the statement of comprehensive income and are ultimately recognised in the capital reserve.

(f)       Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the statement of comprehensive income.

(g)      Monetary assets and liabilities expressed in foreign currencies are translated into sterling at rates of exchange ruling at the date of the statement of financial position.  Non-monetary items expressed in foreign currencies held at fair value are translated into sterling at rates of exchange ruling at the date the fair value is measured. Transactions in foreign currency are converted to sterling at the rate ruling at the date of the transaction. Exchange gains and losses are taken to the income statement as a capital or revenue item depending on the nature of the underlying item.

(h)      Cash and cash equivalents comprises cash and demand deposits which are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

(i)       Dividend payable - under FRS102 dividends should not be accrued in the financial statements unless they have been approved by shareholders before the statement of financial position date.  Dividends payable to equity shareholders are recognised in the statement of changes in equity when they have been paid and become a liability of the Company.

(j)       Capital reserve - gains or losses on realisation of investments and changes in fair values of investments are transferred to the capital reserve. Any changes in fair values of investments that are not readily convertible to cash are treated as unrealised gains or losses within the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve.

The cost of share buy backs include the amount of consideration paid, including directly attributable costs and are deducted from the special distributable reserve until the shares are cancelled.

The special distributable reserve was created through the cancellation and reclassification of the share premium account in 1999 and 2004, and thereafter the cost of the share buy backs are deducted from this reserve.

The revenue reserve - the net revenue for the year is added to the revenue reserve and dividends paid are deducted from the revenue reserve.

Capital redemption reserve - the nominal value of the shares bought back and cancelled are transferred to the capital redemption reserve.

(k)      Taxation - the charge for taxation is based upon the revenue for the year and is allocated according to the marginal basis between revenue and capital using the Company's rate of corporation tax for the accounting period.

(l)       Deferred taxation - deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the statement of financial position date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets being recognised only if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

(m)     The Company can use derivative financial instruments to manage risk associated with foreign currency fluctuations arising on the investments in currencies other than sterling. This is achieved by the use of forward foreign currency contracts. Derivative financial instruments are recognised initially at fair value on the contract date and subsequently re-measured to the fair value at each reporting date. The resulting gain or loss is recognised as revenue or capital in the statement of comprehensive income depending on the nature and motive of each derivative transaction. The fair values of the derivative financial instruments are included within non-current assets or within current assets or current liabilities depending on the nature and motive of each derivative transaction. There were nil derivative instruments held as at 31 January 2019 (2018: nil).

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

(o)      There have been no significant judgements, estimates or assumptions for the year.

Note 2: Returns and net asset value    

	Year ended 31 January 2019	Year ended 31 January 2018
The return and net asset value per ordinary share are calculated with reference to the following figures:
Revenue return
Revenue return attributable to ordinary shareholders	£3,509,000	£3,509,000
Weighted average number of shares in issue during year	88,034,756	94,261,477
Return per ordinary share	3.47p	3.72p
Capital return
Capital return attributable to ordinary shareholders	£217,000	£21,640,000
Weighted average number of shares in issue during year	88,034,756	94,261,477
Return per ordinary share	0.25p	22.96p
Total return
Total return per ordinary share	3.72p	26.68p

There are no dilutive or potentially dilutive shares in issue.

Total return

The total return per share for the Company is the combined effect of the rise and fall in the share price or NAV together with the reinvestment of the quarterly dividends paid.

The tables below provide the NAVs and share prices of the Company on the dividend reinvestment dates for the year ended 31 January 2019 and 31 January 2018.

2019	Dividend rate	NAV
Wednesday, 31 January 18	n/a	246.1p
Thursday, 5 April 18	1.5p	234.4p
Thursday, 28 June 18	0.9p	251.0p
Thursday, 4 October 18	0.9p	259.5p
Thursday, 3 January 19	0.9p	228.1p
Thursday, 31 January 19	n/a	245.5p
Total return		1.61%

2018	Dividend rate	NAV
Tuesday, 31 January 17	n/a	223.9p
Thursday, 6 April 17	1.5p	233.7p
Thursday, 29 June 17	0.9p	234.6p
Thursday, 21 September 17	0.9p	234.2p
Thursday, 4 January 18	0.9p	248.2p
Wednesday, 31 January 18	n/a	246.1p
Total return		11.90%

	As at 31 January 2019	As at 31 January 2018
Net asset value per share
Net assets attributable to shareholders	£205,575,000	£227,186,000
Number of shares in issue at the year end	83,724,832	92,302,109
Net asset value per share	245.5p	246.1p

Between 1 February and 23 April 2019, 846,871 ordinary shares of 5p were bought back into Treasury.

Note 3: Revenue from investments 

	Year ended 31 January 2019 £000	Year ended 31 January 2016 £000
From listed investments
UK equities	810	628
International equities	3,372	4,180
Stock dividend	-	41
Other revenue
Interest on deposits	1	2
Stocklending	28	43
	4,211	4,894

There were no capital dividends received during the year ended 31 January 2019 (2018: £nil). There was a one-off capital repayment of £132,000 received during the year ended 31 January 2019 from Candover Investments which was placed into voluntary liquidation.

Note 4: Dividends 

	Year ended 31 January 2019 £000	Year ended 31 January 2018 £000
Year ended 31 January 2017 - fourth interim dividend of 1.50p	-	1,437
Year ended 31 January 2018 - fourth interim dividend of 1.50p	1,365	-
Year ended 31 January 2019 - first interim dividend of 0.90p (2018: 0.90p)	802	851
Year ended 31 January 2019 - second interim dividend of 0.90p (2018: 0.90p)	776	842
Year ended 31 January 2019 - third interim dividend of 0.90p (2018: 0.90p)	764	834
	3,707	3,964

Revenue return per share for the year ended 31 January 2019 is 4.7p (2018: 3.72p), refer to note 2 for details of calculation.

Set out below are the total dividends paid/payable in respect of the financial year which forms the basis on which the requirements of s1158-1159 of the Corporation Taxes Act 2010 are considered.

	Year ended 31 January 2019 £000	Year ended 31 January 2018 £000
First interim dividend of 0.90p for the year ended 31 January 2019 (2018: 0.90p)	802	851
Second interim dividend of 0.90p for the year ended 31 January 2019 (2018: 0.90p)	776	842
Third interim dividend of 0.90p for the year ended 31 January 2019 (2018: 0.90p)	764	834
Proposed fourth interim dividend of 1.50p for the year ended 31 January 2019 (2018: 1.50p)	1,256	1,385
	3,598	3,912

Note 5:  Other expenses

	Year ended 31 January 2019 £000	Year ended 31 January 2017 £000
Advertising and public relations	80	76
Bank charges (including custody fees)	22	20
Directors' fees	137	142
Directors' and officers liability insurance	10	10
Irrecoverable VAT	51	(7)
Legal fees	9	4
Marketing	27	27
Printing and postage	11	10
Registration fees	30	29
Secretarial fee	53	52
Other	58	41
	488	404

Auditors' remuneration
Payable to Ernst & Young for the audit of the Company's annual financial statements	20	20
Payable to Ernst & Young for non-audit fees	2	2
	510	426

Performance fee provision

The performance fee for the year ended 31 January 2019 was £406,000 (2018: £nil).  The performance fee has been provided for based on the performance during the year. This is an estimate of the amount which, if this outperformance was to remain static, would be payable in February 2020. Details of the management and secretarial agreements are provided below.

	Year ended 31 January 2019			Year ended 31 January 2018
	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	(286)	(573)	(859)	(371)	(743)	(1,114)
Other expenses	(510)	-	(510)	(426)	-	(426)
Total expenses	(796)	(573)	(1,369)	(797)	(743)	(1,540)
Average net assets over the year			217,942			225,580
Ongoing charges			0.63%			0.68%
Ongoing charges with performance fee			0.82%			0.68%

Full details of the investment management fee are included in the report of directors, details of the directors' fees are included in the directors' remuneration statement below. The performance fee has been provided for based on the performance during the year. This is an estimate of the amount which, if this outperformance remains static, would be payable in February 2020.

Note 6:  Taxation on ordinary activities

	Year ended 31 January 2019			Year ended 31 January 2018
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Overseas tax suffered	415	-	415	483	-	483

The corporation tax rate was 19.00% (2018: 19.18%). The tax charge for the year differs from the charge resulting from applying the standard rate of corporation tax in the UK for an investment trust company. The differences are explained below.

	Year ended 31 January 2019 £000	Year ended 31 January 2018 £000
Net return before taxation	3,691	25,632
Corporation tax at effective rate of 19.00% (2018: 19.18%)	701	4,916
Effects of:
UK dividends not taxable	(154)	(121)
Currency (gains)/losses not taxable	1	(20)
Gains on investments not taxable	(228)	(4,272)
Overseas dividends not taxable	(645)	(779)
Overseas tax suffered	415	483
Overseas tax expenses	77	(4)
Increase in excess management and loan expenses	248	280
Tax charge for the year	415	483

As at 31 January 2019, the Company had unutilised management expenses of £34million (2018: £33 million) carried forward. Due to the Company's status as an investment trust and the intention to continue to meet the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on capital gains and losses arising on the revaluation or disposal of investments.

The unrecognised deferred tax is £5.8 million which is 17% of the excess management expenses carried forward. (2018: £5.6million, 17% of excess management expenses).

Note 7:  Investments at fair value through profit or loss

	As at 31 January 2019 £000	As at 31 January 2018 £000
Opening valuation	223,192	215,619
Opening unrealised gains	(80,941)	(68,132)
Opening cost	142,251	147,487
Purchases at cost	147,050	31,771
Disposal proceeds	(167,626)	(46,517)
Net profit on disposal of investments	44,739	9,469
Disposal at cost	(122,887)	(37,048)
Closing cost	166,414	142,210
Stock dividend	-	41
Closing unrealised gains	37,404	80,941
Valuation as at 31 January	203,818	223,192

	As at 31 January 2019	As at 31 January 2018
Gain on investments
Net profit on disposal of investments	44,739	9,469
Net (loss)/gain on revaluation of investments	(43,537)	12,809
	1,202	22,278

The transaction costs in acquiring investments during the year were £247,000 (2018: £54,000). For disposals, transaction costs were £70,000 (2018: £44,000). As at 31 January 2019 there were no unlisted securities (2018: nil).

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

	As at 31 January 2019 £000	As at 31 January 2018 £000
Dividends receivable	71	157
Taxation recoverable	97	76
Other receivables	5	6
Stocklending income receivable	1	4
	174	243

Note 9:  Cash and cash equivalents

	As at 31 January 2019 £000	As at 31 January 2018 £000
Sterling bank account	2,647	4,129
Non-sterling bank account	24	71
	2,671	4,200

Note 10: Trade payables

	As at 31 January 2019 £000	As at 31 January 2018 £000
Amounts falling due within one year:
Due to Martin Currie	218	296
Other payables	89	51
Amount due for Ordinary shares bought back	375	102
	682	449

Note 11:  Payables - amounts falling due after more than one year

	As at 31 January 2019 £000	As at 31 January 2018 £000
Performance fee provision	406	-
	406	-

The details of the performance fee are provided in the Directors report.

Note 12: Ordinary shares of 5p and capital reserves

	Number of shares	As at 31 January 2019 £000	Number of shares	As at 31 January 2018 £000
Ordinary shares 5p
Ordinary shares in issue at the beginning of the year	92,302,109	4,614	96,713,730	4,835
Ordinary shares issued from Treasury during the year	-	-	-	-
Ordinary shares bought back to Treasury during the year	(8,577,277)	(429)	(4,411,621)	(221)
Ordinary shares in issue at the end of the year	83,724,832	4,185	92,302,109	4,614

	Number of shares	As at 31 January 2019 £000	Number of shares	As at 31 January 2018 £000
Treasury shares (Ordinary shares of 5p)
Treasury shares in issues at the beginning of the year	11,281,093	565	6,869,472	344
Ordinary shares cancelled from Treasury during the year	(4,907,295)	(245)	-	-
Ordinary shares bought back to Treasury during the year	8,577,277	429	4,411,621	221
Treasury shares in issue at the end of each year	14,951,075	749	11,281,093	565
Total ordinary shares in issue and in Treasury at the end of the year	98,675,907	4,934	103,583,202	5,179

The net cost of share issues from and buy backs to Treasury for the year to 31 January 2019 was £21,180,000 (2018: £10,496,000).

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 2018	33,091	80,941	114,032
Gains on realisation of investments at fair value	44,739	-	44,739
Movement in fair value gains of investments	-	(43,537)	(43,537)
Realised currency losses during the year	(6)	-	(6)
Capitalised expenses	(979)	-	(979)
At 31 January 2019	76,845	37,404	114,249

The above split in capital reserve is shown in accordance with provisions of the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'.

Note 13:  Related Party Transactions

With the exception of the management and secretarial fees, directors' fees and directors' shareholdings, there have been no related party transactions during the year, or in the prior year. The amounts payable for directors' fees as at 31 January 2019 are £14,000 (2018; £11,000).

Note 14:  Financial instruments

The Company's financial instruments comprise securities and other investments, cash balances, receivables and payables that arise directly from its operations; for example, in respect of sales

and purchases awaiting settlement, and receivables for accrued income.

The Company also has the ability to enter into derivative transactions in the form of forward foreign currency contracts, futures and options, for the purpose of managing currency and market risks arising from the Company's activities. The main risks the Company faces from its financial instruments are (a) market price risk (comprising of (i) interest rate risk, (ii) currency risk and (iii) other price risk), (b) liquidity risk and (c)

credit risk.

The Board regularly reviews and agrees policies for managing each of these risks. The investment manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term receivables and payables, other than for currency

disclosures.

(a) Market price risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.

(i) Market risk arising from interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings may comprise fixed rate, revolving, and uncommitted facilities. Current guidelines state that the total borrowings will not exceed 20% of the total assets of the Company. The Company does not currently have any gearing.

Interest risk profile

The interest rate risk profile of the portfolio of financial assets (comprising cash balances only) at the statement of financial position date was as follows:

At 31 January 2019	Interest rate %	Local currency '000	Foreign exchange rate	Sterling equivalent £000
Assets
Sterling	0.07	2,647	1.000	2,647
Euro	(0.60)	28	1.146	24
US Dollar	0.50	0	1.315	0
				2,671
At 31 January 2018
Assets
Sterling	0.01	4,129	1.000	4,129
Euro	(0.60)	27	1.142	24
US Dollar	0.02	66	1.422	47
				4,200

Interest rate sensitivity

The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the statement of financial position date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.

If interest rates had been 50 (2018: 50) basis points higher or lower and all other variables were held constant, the Company's profit for the year ended 31 January 2019 would increase/decrease by £20,000 (2018: increase/decrease by £21,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances.

As at 31 January 2019 an interest rate of 0.75% is used, given the prevailing base rate is 0.5%. This level is considered possible based on observations of market conditions and historic trends.

(ii) Market risk arising from foreign currency risk

A significant proportion of the Company's investment portfolio is invested in overseas securities and the statement of financial position can be significantly affected by movements in foreign exchange rates. It is not currently the Company's policy to hedge this risk.

The revenue account is subject to currency fluctuation arising on overseas income.

Foreign currency risk profile

Foreign currency risk exposure by currency of denomination:

	Year ended 31 January 2019			Year ended 31 January 2018
	Investment exposure £000	Net monetary exposure £000	Total currency exposure £000	Investment exposure £000	Net monetary exposure £000	Total currency exposure £000
US dollar	105,821	-	105,821	134,985	124	135,109
Euro	33,839	63	33,902	18,889	52	18,941
Hong Kong dollar	15,221	1	15,222	13,929	-	13,929
Swiss franc	7,711	49	7,760	3,383	48	3,431
Swedish krona	7,747	-	7,747	5,206	-	5,206
Australian dollar	7,328	-	7,328	5,811	-	5,811
Canadian dollar	4,058	-	4,058	3,794	29	3,823
Danish krone	4,107	9	4,116	-	-	-
Japanese yen	-	-	-	8,430	-	8,430
Indonesian rupiah	-	-	-	3,096	-	3,096
Total overseas investments	185,832	122	185,954	197,523	253	197,776
Sterling	17,986	1,635	19,621	25,669	3,741	29,410
Total	203,818	1,757	205,575	223,192	3,994	227,186

The asset allocation between specific markets can vary from time to time based on the portfolio manager's opinion of the attractiveness of the individual stocks.

Foreign currency sensitivity

At 31 January 2019, if sterling had strengthened by 5% in relation to all currencies, with all other variables held constant, total net assets and total return on ordinary activities would have decreased by the amounts shown below. A 5% weakening of sterling against all currencies, with all other variables held constant, would have had an equal but opposite effect on the financial statement amounts.

	2019 £000	2018 £000
US dollar	5,291	6,755
Euro	1,695	947
Hong Kong dollar	761	696
Swiss franc	388	172
Swedish krona	387	260
Australian dollar	366	291
Canadian dollar	203	191
Danish krone	206	-
Japanese yen	-	422
Indonesian rupiah	-	155

(iii) Market risk arising from other price risk

Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.

It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets as detailed in the annual report, and the stock selection process both act to reduce market risk. The investment manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. All investments held by the Company are listed on various stock exchanges worldwide.

Other price risk sensitivity

If market prices at the statement of financial position date had been 15% higher or lower while all other variables remained constant, the return attributable to ordinary shareholders at the year ended 31 January 2019 would have increased/decreased by £30,570,000 (2018: increase/decrease of £33,480,000) and

capital reserves would have increased/decreased by the same amount. This level of change is considered to be reasonably possible based on observation of market conditions and historic trends.

(b) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary.

(c) Credit risk

This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

The risk is managed as follows:

·      investment transactions are carried out with a large number of brokers, whose credit rating is reviewed periodically by the portfolio manager, and limits are set on the amount that may be due from any one broker; and

·      cash is held only with reputable banks with high quality external credit ratings.

The maximum credit risk exposure as at 31 January 2019 was £2,845,000 (2018: £4,443,000). This was due to trade receivables and cash as per notes 8 and 9.

Please refer to note 17 below and Stocklending disclosure in the Company's annual report and accounts for details of the Company's stocklending and related collateral.

Fair values of financial assets and financial liabilities

All financial assets and liabilities of the Company are included in the statement of financial position at fair value or a reasonable approximation of fair value with no material difference in the carrying amount.

Note 15:   Capital management policies and procedures

The Company's capital management objectives are:

·      to ensure that the Company will be able to continue as a going concern;

·      to maximise the return to its equity shareholders through an appropriate balance of equity capital and debt; and

·      to limit gearing to 20% of net assets.

The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the portfolio manager's views on the market and the extent to which revenue in excess of that which is required to be distributed under the investment trust rules should be retained.

The analysis of shareholders' funds is as follows:

	As at 31 January 2019 £000	As at 31 January 2018 £000
Called up ordinary share capital	4,934	5,179
Capital redemption reserve	11,083	10,838
Special distributable reserve	70,673	91,853
Capital reserve	114,249	114,032
Revenue reserve	4,636	5,284
Total shareholders' funds	205,575	227,186

Note 16:  Fair value hierarchy

Under FRS 102, the Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:

·      Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

·      Level 2: other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc);

·      Level 3: significant unobservable input (including the company's own assumptions in determining the fair value of investments).

The financial assets measured at fair value through profit and loss are grouped into the fair value hierarchy as follows:

At 31 January 2019	Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Financial assets at fair value through profit or loss
Quoted equities	203,818	-	-	203,818
Net fair value	203,818	-	-	203,818

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

 

Note 17:  Stocklending

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

 

As at 31 January 2019 £7,513,000 (2018: £19,093,000) of investments were subject to stock lending agreements and £8,300,000 (2018: £20,524,000) was held in collateral. The collateral was held in the form of cash (in GBP, USD or EUR), government securities issued by any of the OECD countries or equity securities listed and/or traded on an exchange in the following countries: Australia, Canada, Hong Kong,

Japan, New Zealand, Singapore, Switzerland and USA.

The value of collateral in respect of the securities on loan was not less than the value of the securities lent at the balance sheet date or during the period.

The maximum aggregate value of securities on loan at any time during the accounting period was £31,946,000. The gross earnings and the fees paid for the year are £36,000 (2018: £58,000) and £9,000 (2018: £15,000).

 

Note 18:  Post balance sheet events

On 4 April 2019 the Board declared a fourth interim dividend of 1.50p per share. As at 23 April 2019, the Company bought back a further 846,871 ordinary shares at an average price of 255.0p per share resulting in a further reduction of £2,159,606 to the special distributable reserve.

Website

The Company has its own dedicated website at www.martincurrieglobal.com.  This offers shareholders, prospective investors and their advisors a wealth of information about the Company. Updated daily it includes the following: latest prices, performance data, latest factsheet, research, portfolio information, press releases and articles, the manager's latest views and annual and half yearly reports.

 

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