Half Yearly Report

RNS Number : 6423T

Martin Currie Portfolio Inv Tst PLC

30 September 2010

 



Martin Currie Portfolio Investment Trust plc

Half-yearly financial report

Year to 31 July 2010

Copies of the Half Year report for the six months ended 31 July 2009 have been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility situated at:

Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS.

A copy of this half year report can be downloaded at www.martincurrieportfolio.com.

Financial Summary

Key data

	As at 31 July 2010	As at 31 January 2010
Net asset value per share	121.0p	122.2p
FTSE All-Share index	2,715.4	2,660.5
Share price	113.8p	113.5p
Discount*	5.9%	7.1%

*Figures shown are inclusive of income as per AIC guidance.  The discount calculated, exclusive of income, was 4.8% (5.6%).

Total returns+

	Six months ended 31 July 2010	Six months ended 31 July 2009
Net asset value per share*	1.5%	18.4%
FTSE All-Share index	4.0%	16.2%
Share price	2.4%	16.2%

+The combined effect of any dividend paid, together with the rise or fall in the share price, net asset value or FTSE All-Share index.

* Figures shown are inclusive of income as per AIC guidance.  The discount calculated, exclusive of income, was 4.8% (5.6%).

Income

	Six months ended 31 July 2010	Six months ended 31 July 2009
Revenue per share**	1.48p	1.85p
Dividend per share	1.00p	1.00p

**For details of calculation, refer to note 2

Total expenses***

(as a percentage of shareholders' funds)

	Six months ended 31 July 2010	Six months ended 31 July 2009
Excluding performance fees	1.0%	1.0%
Performance Fees	-	-
Total	1.0%	1.0%

***Total expenses (as a percentage of shareholders' funds) are calculated using average net assets over the period.

Chairman's Statement

Performance

In the six-month period under review the company's net asset value per share returned 1.5%, a modest continuation of the recovery seen in the last full financial year. This masks what was an exceptionally volatile period for equity markets, with investors responding - both positively and negatively - to new economic data. While this performance was slightly behind our benchmark, the FTSE All-Share, it reflected the wide spread of investments both by geography and type.

The benchmark returned 4.0% over the period, while the company's share price returned 2.4%, reflecting a narrowing discount from 7.1% at 31 January to 5.9% at the end of July, within the parameters set by the board to reduce share price volatility.

The chart on the previous page shows the share price and net asset value total returns (with income reinvested) against the benchmark index over the past five years. Martin Currie Portfolio remains comfortably ahead of its benchmark over this period.

While the company's benchmark is based on the London Stock Market, reflecting a substantial portion of the assets and the domicile of our shareholders, the manager has flexibility to choose the best stocks internationally and to have a part of the portfolio in private equity. The performance in the most recent six-month period from each portion of the portfolio is reflected below:

 The UK equity portion of the portfolio fell by 3.0%;

 The international portion of the portfolio rose by 4.8%;

 The private equity portion of the portfolio rose by 6.2%.

Revenues and dividends

The board is recommending an unchanged interim dividend of 1.0p (2009: 1.0p), which will be paid on 28 October 2010 to shareholders on the register as at 8 October 2010.

Looking ahead

As Tom Walker explains in his manager's review, volatility is set to be a feature of equity markets for some time. However with valuations undemanding and few alternative investments with the attractions of equities, investors are still putting their cash to work in equity markets. Despite real concerns about the economic outlook for the next few years, there is no question that many companies have recovered profitability impressively, making the most of lower cost bases.

The problems are most acute in developed markets, which almost all face similar problems of public debt. We believe the stock markets of developing economies will increasingly compensate for slower rates of growth in developed countries. We task our manager with identifying companies, wherever domiciled, that can outperform.

Peter Berry

Chairman

30 September 2010

Manager's Review

Stockmarkets are often compared to rollercoasters; it has never been truer than in the last six months to 31 July 2010. The FTSE All-Share index has established no less than seven up and down 'trends' in the space of six months. As you can see on the chart, these moves were all in excess of 5% and only two were less than 9%.

The current uncertainty surrounding the outlook for the global economy has clearly resulted in a market lacking direction and conviction. In net terms it rose 4% in the period under review and it may be that future gains will follow a similar pattern; at least until the outlook becomes clearer.

After the strong rise and initial fall in markets, I raised cash to 15% of the portfolio in early May. I have since reinvested some of that cash and cash stood at 11% at the end of July. New holdings this half-year include Canadian oil-sands company Suncor, the generic drugs manufacturer Teva and mining giant Rio Tinto, while, included in our selling activity was the complete sale of Intercontinental Hotels, a strong performer whose share price may be discounting an overly optimistic recovery.

REVIEW

United Kingdom

Although the change of government after the May election changed the rhetoric around economic policies, it seems probable that the outcome for the economy - thus far at least, has been little changed. Not so the currency. On the one hand, the problems of the Eurozone in the period led to the euro depreciating by 5% against sterling. Against the dollar however, sterling first fell over 10% to mid-May before almost fully recovering to be only about 1.5% weaker over the six months to 31 July 2010. Currency markets clearly credit the new UK government's intention to address the UK's fiscal deficit more urgently.

The UK economy is growing, but slowly. Consumer confidence is weak and lending activity by the banks, for mortgages and other personal loans, is limited by the preference of consumers to pay down debt. The banks are also repairing their balance sheets and loan terms, if available at all, reflect their ongoing aversion to risk. House prices have stabilised and are above their level of a year ago but the housing market is also fragile. The manufacturing sector has seen some signs of life but it will be hard for the UK economy to recover meaningfully until consumer confidence returns.

In contrast, UK PLC is in good health. Strong balance sheets and, in many cases, healthy cash flow complement the robust growth in earnings from the recessionary environment of a year ago. Mid-year earnings results have generally been surprisingly strong. Valuations are attractive. The trailing dividend yield is close to parity with the 10-year gilt yield which has often been a strong buy signal for equities. The uncertainty arises from the 2011 economic outlook and that is what is holding share prices back.

A particular feature of the UK stockmarket in the last six months was the collapse of BP's share price following the Macondo oil spill. BP's share price fell from £6.55 to £2.96 before recovering to £4.06 at the end of July. Shell and BG also underperformed making the oil sector easily the worst performing sector, down 10%. Although we reduced our holding in BP early in the period, we have taken the view that the share price has been overly punished so we still retained the holding at the half-year end.

International

The economies of the world can be readily divided into two main categories at present.

 The developed world needs to save more and reduce its debt burden.

 The developing world must move to stimulate domestic demand and rely less on the US and European consumer. Although better placed to grow, developing economies need to avoid high inflation and some have raised interest rates accordingly. Inflation is a key concern in countries like China, Brazil and India.

Essentially the problems across the developed world are the same though the approach to solving the problems is different. Europe is entering a period of austerity as escalating government debt in countries like Spain and Greece has forced policies of thrift on the whole region. The USA remains more wedded to Keynesian stimulus and so far, both the government and central bank have emphasised the need to maintain the fragile economic recovery and deal with the fiscal deficit thereafter. The political cycle has relevance here (as it did in the UK earlier this year). President Obama's democrats face congressional mid-term elections in November and could lose their majority in both Houses. Japan is a little different again. As is well known, Japan has been battling deflation for many years and that struggle is intensified by slow global demand growth.

In terms of stockmarket performance, emerging markets and North America performed best in the period under review, while Europe, with the weak euro, lagged. But this geographical differentiation does not best describe how we manage the portfolio. Many of the companies we own have only a small proportion of their earnings generated in the country in which they are domiciled. For example, our two German investments, Tognum and Fresenius Medical Care, were among our best performers as their earnings are genuinely international, Germany and Europe accounting for well under half their turnover.

Private equity

Volume of activity remains subdued in the private-equity world. However, compared with a year ago, liquidity and activity is much improved. Our private-equity investments likely saw the low point for valuation in the middle of last year and published values have improved. This reflects recovery of underlying operations for portfolio investments as well as better valuations on the quoted equity market which is used as a benchmark to value private companies. Importantly for our investments, balance-sheet concerns have been addressed with the raising of new capital and the postponement or cancellation of future investment commitments.

Our investments in private-equity funds remain at 30% or greater discounts to their most recent asset values despite share price recoveries. We expect these discounts to narrow further over time.

PERFORMANCE

The performance of our portfolio lagged the market in this period, our NAV returning 1.5%. Our private-equity and overseas listed investments outperformed but we underperformed in the UK, where not holding a number of large index constituents was unhelpful. Notably about half of our underperformance flowed from our cautious stance on the banking sector, which enjoyed a strong bounce.

At the stock level, our best contributors to relative performance were P T Astra International, the Indonesian conglomerate, Weir Group, the Glasgow-based engineer and Apple, whose products have captured consumers' imagination worldwide. At the other end of the scale, it was two large index stocks that we did not own, Vodafone and Standard Chartered Bank, and our investment in biopharmaceutical company, Gilead, that impaired relative performance most in the period. We continue to hold Gilead, as we believe the derating of its share price is overdone and that the company has attractive growth potential despite pricing pressures in the pharmaceutical industry.

OUTLOOK

It is convenient to use our home economy as a proxy for developed markets when considering the outlook - they all face similar problems. In the UK we are yet to see the impact of some of the large public spending cuts flagged at the budget in late June. We also know that VAT is to rise next year. Unemployment will remain high, possibly heading even higher with public sector spending cuts but interest rates should remain low for the foreseeable future, absent a crisis of confidence in government funding. We expect the slow pace of economic growth in the UK and most other developed economies to continue for some years.

However, we believe developing countries will be more resilient and, as a result, the world economy will continue to grow and a return into recession will be avoided. Over time, many years, emerging countries will undoubtedly take up more and more of the slack arising from slower rates of growth in developed countries. This will occur spasmodically and doubts and hopes as to the successful outcome of this process will ebb and flow. In the investment community, this probably means that the rollercoaster ride will continue. It is our task to identify companies, wherever based, that can benefit as this process evolves.

Tom Walker

30 September 2010

Risk and mitigation

The board closely monitors the risks of the company. The board carries out a risk workshop as part of its annual strategy meeting and has identified the following as key risks to the company. The board has also implemented specific mitigating measures to reduce the probability and impact of each risk to the greatest extent possible.

 

Loss of s1158-1159 status - In order to qualify as an investment trust, the company must comply with Sections 1158-1159 of the Corporation Taxes Act 2010 (previously s842 of the Income and Corporation Taxes Act 1988).  Section 1158 qualification criteria are continually monitored by Martin Currie and the results reported to the board at each meeting.

Operational disruption at the manager's premises - Martin Currie has in place a full disaster recovery and business continuity plan which facilitates continued operation of the business should the Manager's premises be subject to operational disruption. The plan was last tested in December 2009 with successful results. The manager maintains a fully operational off-site disaster recovery centre for use by key staff during any disruption.

Regulatory, accounting/internal control breach - The company must comply with the Companies Act 2006 and the UKLA Rules. The board relies on the services of its company secretary and its professional advisers to ensure compliance. 

Loss of investment team or portfolio manager - Martin Currie takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team based approach, as well as special efforts to retain key personnel.

Failure to manage the discount - The board regularly discusses discount policy and has set parameters for the manager and the company's broker to follow.

Investment underperformance - The board manages the risk of investment underperformance by diversification of investments and through a set of investment restrictions and guidelines that are monitored and reported on by Martin Currie.  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.

Gearing/Interest rate risk - From time to time the company finances its operations through bank borrowings. However, the board monitors such borrowings (gearing) closely and takes a prudent approach.  At the period end bank borrowings were nil. In accordance with the investment policy the limit on gearing is 20% of total assets.

Foreign exchange risk - A portion of the company's portfolio is held in currencies other than sterling and a high proportion of major UK listed companies receive a substantial percentage of their revenues from international operations, so in principle the board charges the manager to consider exchange risk in the normal course of market and stock analysis. From time to time the manager may, however, hedge overall exposure to a particular currency (for example the US dollar or Japanese yen) sometimes by borrowing in these currencies against portfolio exposure to them.

Counterparty risk - Martin Currie monitors counterparty relationships on behalf of Martin Currie Portfolio. This process includes identifying major counterparties, mapping exposure and analysing the risks through the manager's risk, compliance, dealing, operations and middle office teams. The aim is to enable the board of Martin Currie to determine an appropriate level of counterparty risk exposure, and to diversify or mitigate this, as required. This process is subject to continual monitoring and review with any recommendations made to the board.

Major regulatory change - In response to the financial crisis, the European Commission produced a draft Alternative Investment Fund Managers Directive. The directive was aimed at hedge funds and private equity funds but investment trusts fall within its scope. Intense representation has taken place to ensure the special circumstances of investment trusts are recognised.

Liquidity test failure - In order to retain its place in the FTSE All-Share Index, the company must satisfy the liquidity test criteria set by the FTSE at each annual review. The liquidity of the company is monitored by the manager and the company's broker with a report being reviewed by the board regularly.

Directors' Responsibilities

In accordance with Chapter 4 of the Disclosure and Transparency Rules, and to the best of their knowledge, each director of Martin Currie Portfolio, confirms that the financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and net return of the company. Furthermore, each director certifies that the interim management report includes an indication of important events that have occurred during the first six months of the financial year, and their impact on the financial statements, together with a description of the principal risks and uncertainties that the company faces. In addition, each director of Martin Currrie Portfolio confirms that there have been no related party transactions during the first six months of the financial year.

By order of the board

Peter Berry

Chairman

Edinburgh 30 September 2010

 

Portfolio Summary

Portfolio distribution

By Region	31 July 2010	31 January 2010
United Kingdom	51.3%	57.3%
International*	37.7%	33.8%
Private Equity	11.0%	8.9%
	100.0%	100.0%

*International	31 July 2010	31 January 2010
North America	18.3%	15.9%
Europe (ex UK)	8.6%	8.5%
Global Emerging Markets	5.1%	4.9%
Japan	2.4%	2.3%
Developed Asia	2.2%	2.2%
Middle East	1.1%	-

By Sector (excluding cash and private equity)	31 July 2010 Company	31 July 2010 FTSE All Share Index
Financials	14.4%	24.2%
Oil and gas	13.5%	15.9%
Basic materials	12.4%	11.8%
Industrials	11.7%	7.4%
Healthcare	11.2%	7.6%
Technology	10.2%	1.7%
Consumer goods	10.1%	11.5%
Consumer services	9.3%	10.0%
Utilities	4.8%	3.8%
Telecommunications	2.4%	6.1%
	100.0%	100.0%

By Asset Class (including cash and borrowings)	31 July 2010	31 January 2010
Equities	87.8%	94.8%
Cash	12.2%	5.2%
	100.0%	100.0%

Largest 10 Holdings	31 July 2010 Market Value £000	31 July 2010 % of total portfolio	31 January 2010 Market Value £000	31 January 2010 % of total portfolio
F&C Private Equity Trust*	11,370	9.4	10,843	8.0
HSBC Holdings	9,303	7.7	10,951	8.1
BP	6,918	5.7	11,228	8.3
GlaxoSmithKline	6,084	5.0	7,479	5.5
British American Tobacco	4,478	3.7	4,744	3.5
Rio Tinto	3,825	3.2	-	-
BHP Billiton	3,625	3.0	6,341	4.7
Xstrata	3,587	3.0	4,090	3.0
BG	3,216	2.7	4,098	3.0
Tesco	2,961	2.4	3,621	2.7

*Ordinary and restricted voting shares combined

 Unaudited Income Statement

		Six months to 31 July 2010			Six months to 31 July 2009
	Notes	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Net (losses)/gains on investments	6	-	(416)	(416)	-	19,545	19,545
Net currency gains/(losses)	9	-	82	82	-	4	4
Income	3	2,177	311	2,488	2,846	195	3,041
Investment management fee		(117)	(234)	(351)	(107)	(214)	(321)
VAT recoverable on investment management fees	11	-	-	-	-	98	98
Other expenses		(305)	-	(305)	(268)	(6)	(274)
Net return on ordinary activities before taxation		1,755	(257)	1,498	2,471	19,622	22,093
Taxation on ordinary activities	5	(70)	-	(70)	(74)	-	(74)
Return on ordinary activities after taxation		1,685	(257)	1,428	2,397	19,622	22,019
Returns per ordinary share		1.48p	(0.23p)	1.25p	1.85p	15.15p	17.00p

Unaudited income statement cont.

		(Audited) Year to 31 January 2010
	Notes	Revenue £000	Capital £000	Total £000
Net gains/(losses) on investments	6	-	36,875	36,875
Net currency gains/(losses)	9	-	(51)	(51)
Income	3	4,325	195	4,520
Investment management fee		(222)	(444)	(666)
VAT recoverable on Investment Management fees	11	-	97	97
Other expenses		(511)	(7)	(518)
Net return on ordinary activities before taxation		3,592	36,665	40,257
Taxation on ordinary activities		(102)	-	(102)
Return on ordinary activities after taxation		3,490	36,665	40,115
Returns per ordinary share		2.81p	29.51p	32.32p

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

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

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

No operations were acquired or discontinued in the six months.

A Statement of total recognised gains and losses is not required as all gains and losses of the company have been reflected in the above statement.

Unaudited Balance Sheet

		As at 31 July 2010		As at 31 July 2009		(Audited) as at 31 Jan 2009
	Note	£000	£000	£000	£000	£000	£000
Non-current assets
Investments at fair value through profit or loss
Listed on Exchanges in the UK			75,252		73,273		89,855
Listed on exchanges abroad			45,833		53,236		45,647
	6		121,085		126,509		135,502
Current Assets
Loans and Receivables	7	291		294		125
Cash at bank		16,832		4,621		7,467
		17,123		4,915		7,592
Creditors
Amounts falling due within one year	8	(1,834)		(602)		(378)
Net current assets			15,289		4,313		7,214
Net assets			136,374		130,822		124,724
Capital and Reserves
Called-up share capital		5,636		6,071		5,842
Special reserve		126,566		136,539		131,494
Capital redemption reserve		10,381		9,946		10,175
Capital reserve		(13,029)		(29,815)		(12,772)
Revenue reserve		6,820		8,081		7,977
Equity Shareholders' Funds			136,374		130,822		142,716
Net asset value per ordinary share	2		121.0p		107.7p		122.2p

Unaudited Reconciliation of Movements in Shareholders Funds

Reconciliation of movements in shareholders funds for the six months to 31 July 2010	Called up ordinary share capital £000	Capital redemption reserve £000	Special distributable reserve £000	Capital reserve £000	Revenue Reserve £000
At 31 January 2010	5,842	10,175	131,494	(12,772)	7,977
Ordinary shares bought back during the period	(206)	206	(4,928)	-	-
Gains on realisation of investments at fair value	-	-	-	4,663	-
Realised currency gain during the period	-	-	-	82	-
Movement in fair value losses	-	-	-	(5,079)	-
Capitalised expenses	-	-	-	(234)	-
Capital dividends received	-	-	-	311	-
Return on ordinary activities after taxation	-	-	-	-	1,685
Dividends Paid	-	-	-	-	(2,842)
At 31 July 2010	5,636	10,381	126,566	(13,029)	6,820

Reconciliation of movements in shareholders funds for the six months to 31 July 2009 (restated)	Called up ordinary share capital £000	Capital redemption reserve £000	Special distributable reserve £000	Capital reserve £000	Revenue Reserve £000
At 31 January 2009 (restated)	6,699	9,318	149,138	(49,437)	9,006
Ordinary shares bought back during the period	(97)	97	(1,774)	-	-
Redemption of ordinary shares	(531)	531	(10,825)	-	-
Losses on realisation of investments at fair value	-	-	-	(6,703)	-
Realised currency gain during the period	-	-	-	4	-
Movement in fair value gains	-	-	-	26,248	-
Capitalised expenses	-	-	-	(220)	-
Capital dividends received	-	-	-	195	-
VAT recoverable on capital expenses	-	-	-	98	-
Return on ordinary activities after taxation	-	-	-	-	2,397
Dividends Paid	-	-	-	-	(3,322)
At 31 July 2009	6,071	9,946	136,539	(29,815)	8,081

Reconciliation of movements in shareholders funds for the year to 31 January 2010	Called up ordinary share capital £000	Capital redemption reserve £000	Special distributable reserve £000	Capital reserve £000	Revenue Reserve £000
At 31 January 2009 (restated)	6,699	9,318	149,138	(49,437)	9,006
Ordinary shares bought back during the year	(326)	326	(6,905)	-	-
Redemption of ordinary shares	(531)	531	(10,739)	-	-
Losses on realisation of investments at fair value	-	-	-	(6,623)	-
Movement in currency losses	-	-	-	(51)	-
Movement in fair value gains	-	-	-	43,498	-
Capitalised expenses	-	-	-	(451)	-
Capital dividends received	-	-	-	195	-
VAT recoverable on capital expenses	-	-	-	97	-
Return on ordinary activities after taxation	-	-	-	-	3,490
Dividends paid	-	-	-	-	(4,519)
At 31 January 2010	5,842	10,175	131,494	(12,772)	7,977

Unaudited Statement of Cash Flow

	Note	Six months to 31 July 2010		Six months to 31 July 2009		(Audited) As at 31 January 2010
		£000	£000	£000	£000	£000	£000
Net cash inflow from operating activities	9		1,607		3,905		4,886
Capital expenditure and financial investment
Payment to acquire investments		(9,240)		(8,490)		(16,064)
Sales of investments		24,660		18,294		34,315
Net cash inflow from capital expenditure and financial investment			15,420		9,804		18,251
Equity dividends paid			(2,842)		(3,322)		(4,519)
Net cash inflow before financing			14,185		10,387		18,618
Financing
Repurchase of ordinary share capital			(4,902)		(1,489)		(6,905)
Redemption of ordinary shares			-		(10,825)		(10,739)
Increase/(decrease) in cash			9,283		(1,927)		974

 

	Six months to 31 July 2010 £000	Six months to 31 July 2009 £000	(Audited) year to 31 January 2010 £000
Reconciliation of net cash flow to movements in net cash
Increase/(decrease) in cash	9,283	(1,927)	974
Foreign exchange movements	82	4	(51)
Movement in net cash in the period	9,365	(1,923)	923
Opening net cash	7,467	6,544	6,544
Closing net cash	16,832	4,621	7,467

Notes to the Financial Statements

1 Accounting policies

a) Basis of preparation - The financial statements have been prepared in accordance with applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in January 2009. They have also been prepared on the assumption that approval as an investment trust will continue to be granted.

The company continues to adopt the going concern basis in the preparation of the financial statements.

b) Income from investments (other than special 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. Franked investment income is stated net of the relevant tax credit. Other income includes any taxes deducted at source. Special dividends are credited to capital or revenue, according to the circumstances. Scrip dividends are treated as unfranked investment income; any excess in value of the shares received over the amount of the cash dividend is recognised as a capital item in the income statement.

c) Interest receivable and payable, management expenses 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 income statement in accordance with the board's expected long-term split of returns in the form of capital gains and income, respectively. The performance fee is recognised 100% as a capital item in the income statement as it relates entirely to the capital performance of the company. All expenses are charged to revenue except where they directly relate to the acquisition or disposal of an investment, in which case, they are added to the cost of the investment or deducted from the sale proceeds.

e) Investments - Investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured as fair value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from The London Stock Exchange. SETS is the London Stock Exchange's electronic trading service for UK blue chip securities including all the FTSE 100 constituents and the most liquid FTSE 250 along with some other securities. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the income statement and are ultimately recognised in the unrealised reserve.

The valuation of forward currency contracts are included on the balance sheet. Period changes to these valuations are recognised as unrealised gains and losses in the income statement.

In accordance with FRS29, all investments have been categorised as Level 1 - quoted in an active market.

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

g) Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature.

h) All financial assets and liabilities are recognised in the financial statements.

i) Dividends payable - Interim and final dividends are recognised in the period in which they are paid.

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.

Share buybacks are funded through the special distributable reserve.

k) Deferred taxation - Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet 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 balance sheet date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted. Timing differences are differences arising between the company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods.

Due to the company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

2. 

	Six months to 31 July 2010	Six months to 31 July 2009	Year to 31 January 2010
Returns and net asset value
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	£1,685,000	£2,397,000	£3,490,000
Average number of shares in issue during period	114,152,403	129,557,839	124,260,224
Return per ordinary share	1.48p	1.85p	2.81p
Capital return
Capital return attributable to ordinary shareholders	(£257,000)	£19,622,000	(£36,665,000)
Average number of shares in issue during period	114,152,403	129,557,839	124,260,224
Return per ordinary share	(0.23p)	15.15p	29.51p
Total return
Total return per ordinary shares	1.25p	17.00p	32.32p
Net asset value per share
Net assets attributable to shareholders	£136,374,000	£130,822,000	£142,716,000
Number of shares in issue at the period end	112,715,590	121,426,723	116,834,502
Net asset value per share	121.0p	107.7p	122.2p

Since the period end, a further 809,163 ordinary shares of 5p each have been bought back for cancellation at a cost of £924,324.

3. 

	Six months to 31 July 2010 £000	Six months to 31 July 2009 £000	Year to 31 January 2010 £000
Income
From listed investments
UK equities	1,641	2,016	3,237
International equities	512	541	782
Stock dividends	-	1	1
Other income
Interest received on VAT recovery from HMRC	-	232	232
Interest on deposits	24	16	31
Underwriting commission	-	40	42
	2,177	2,846	6,003

In addition, during the six months to 31 July 2009, the company received a capital distribution of £311,000 from F&C Private Equity Trust.  During the six months to 31 July 2009, the company received capital dividends of £155,000 and £40,000.  These related to capital distributions from F&C Private Equity Trust and ABB Limited respectively.

4. Performance fee

As at 31 July 2010, there is no accrual for the performance fee for the year to 31 January 2011 (31 July 2009: £nil).

5.

	Six months to 31 July 2010			Six months to 31 July 2009			Year to 31 January 2010
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Taxation on ordinary activities
Foreign Tax	70	-	70	74	-	74	102	-	102

6.

	Six months to 31 July 2010	Six months to 31 July 2009 £000	Year to 31 January 2010 £000
Investments
Opening valuation	135,502	117,919	117,919
Opening investment holding (gains)/losses	(17,743)	25,755	25,755
Opening cost	117,759	143,674	143,674
Purchases at cost	10,659	7,264	14,948
Disposal proceeds	(24,660)	(18,219)	(34,240)
Less: net profit/(loss) on disposal of investments	4,663	(6,703)	(6,623)
Disposal at cost	(19,997)	(24,922)	(40,863)
Closing cost	108,421	126,016	117,759
Investment holding gains/(losses)	12,664	493	17,743
Valuation at end of period	121,085	126,509	135,502
(Losses)/gains on investments held at fair value			(6,163)
Net profit /(loss) on disposal of investments	4,663	(6,703)	(6,623)
Net profit/(loss) on revaluation of investments	(5,079)	26,248	43,498
	(416)	19,545	36,875

The transaction costs in acquiring investments during the period were £49,000 (2009: £21,000). For disposals, transaction costs were £19,000 (2009: £18,000).

During the period there was a write down in the book costs of F&C Private Equity Trust A shares of £354,000 (2009: £189,000) which was reflected in the realised net gain of £4,663,000 (2009: net loss £6,703,000).  This was the result of a capital repayment made in April 2010.

7. 

	As at 31 July 2010 £000	As at 31 July 2009 £000	As at 31 January 2010 £000
Debtors: amounts falling due within one year
Dividends receivable	184	213	51
Taxation recoverable	39	56	36
Other debtors	68	25	38
	291	294	125

8.

	As at 31 July 2010 £000	As at 31 July 2009 £000	As at 31 January 2010 £000
Creditors
Amounts falling due within one year:
Due to brokers	1,529	-	110
Due to brokers for repurchase of ordinary shares	26	285	-
Due to Martin Currie	185	177	192
Other creditors	94	140	76
	1,834	602	378

9. 

	Six months to 31 July 2010	Six months to 31 July 2009	Year to 31 January 2010
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Return on ordinary activities before finance costs and taxation	1,498	22,093	40,257
Adjustments for:
Losses/(gains) on investments held at fair value	416	(19,545)	(36,875)
Net capitalised currency (gains)/losses	(82)	(4)	51
(Increase)/decrease in dividends receivable and other debtors	(163)	1,352	1,501
Increase in other creditors and other accruals	11	100	51
Overseas withholding tax suffered	(73)	(91)	(99)
Net cash inflow from operating activities	1,607	3,905	4,886

10 Interim report

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in s434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 July 2010 has not been audited.

The information for the year ended 31 January 2010 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under s498 (2), (3) or (4) of the Companies Act 2006.

Website

At www.martincurrieportfolio.com we maintain a website specifically for shareholders in the trust and their advisers. It includes price and performance statistics, monthly update, webcasts, online versions of the trust's annual and half-year reports and information on how to invest.

 

END

 

 

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