Final Results

RNS Number : 6335A

Martin Currie Global Portfolio Tst

02 April 2012

 



Martin Currie Global Portfolio Trust plc

Annual Financial Results

Year to 31 January 2012

The financial information set out below does not constitute the company's statutory accounts for the years ended 31 January 2012 or 2011 but is derived from those accounts.  Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the company's annual general meeting. 

The auditor's have 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, Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2ES on 22 May 2012 at 12.30pm.  Full notice of the meeting can be found within the annual report and accounts.

The unedited full text of those parts of the annual report and accounts for the year ended 31 January 2012, which require to be published are set out on the following pages.

Financial Summary

Key data

	As at 31 January 2012	As at 31 January 2011
Net asset value per share (cum income)	139.2p	135.5p
Net asset value per share (ex income)	136.3p	134.2p
FTSE World index (capital)	341.4	356.8
FTSE All-Share index (capital)	2,932.9	3,044.3
Share price	129.0p	125.0p
Discount*	7.3%	7.7%

*Figures shown are inclusive of income as per AIC guidance.  The discount calculated, exclusive of income, was 5.3% (31 January 2011: 6.8%).

Total returns+

	For the year ended 31 January 2012	For the year ended 31 January 2011
Net asset value per share ~	4.3%	14.8%
Composite index #	0.3%	18.1%
Share price	6.3%	13.5%

+The combined effect of any dividend paid, together with the rise or fall in the share price, net asset value or composite index #

~The net asset value is exclusive of income with dividends reinvested.

# Prior to 1 June 2011, the relevant index was the FTSE All-Share index and the FTSE World index thereafter.

Income

	As at 31 January 2012	As at 31 January 2011
Revenue per share**	3.9p	2.3p
Dividend per share	3.7p	3.5p

**For details of calculation, refer to note 2

Total expenses***

(as a percentage of shareholders' funds)

	For the year ended 31 January 2012	For the year ended 31 January 2011
Excluding performance fees	0.9%	0.9%
Performance Fees	0.7%	-
Total	1.6%	0.9%

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

Long-term total return performance

NAV and share price performance (% change over five years)

Martin Currie Global Portfolio share price +26.1%

Martin Currie Global Portfolio net asset value (NAV) per share +21.4%

Composite index # +9.9%

# Prior to 1 June 2011, the relevant index was the FTSE All-Share index and the FTSE World index thereafter.

Chairman's Statement

Welcome to the annual report, covering the 12 months to 31 January 2012. I am pleased to report that the transition of the company to a truly global equity investment trust on 1 June 2011 has been a successful one. It had very strong support from shareholders and the manager has responded in kind; the company's share price performance moved up to first over 12 months among the 13 peer trusts against which the board monitors performance.

In his manager's review, Tom Walker describes a tough environment for global equity investors. Against this backdrop of challenging global markets, the company's net asset value (NAV) per share returned 4.3% against a composite index return of 0.3% and a negative return from all the other members of the peer group mentioned above. As the chart below shows, the company's share price performance was strong over the 12-month period, returning 6.3%. Please note the index was the FTSE All-Share index prior to 1 June 2011 and the FTSE World index thereafter.

A performance fee of £960,000 (0.7% of year-end net asset value) is payable for the year. Your board firmly believes that your company's fee structure aligns the investment manager's long-term interests with those of shareholders. The fee structure is such that a performance fee can only be earned once the company has outperformed the index by 1% or more since the company last paid a performance fee. Importantly, any performance fee would be halved if the NAV has declined in the 12 month period. That does not apply this year.

One year returns with dividends reinvested

Martin Currie Global       Portfolio share price	+6.3%
Martin Currie Global       Portfolio NAV	+4.3%
Composite index #	+0.3%

# On 1 June 2011, the company's index changed from FTSE All-Share to FTSE World.  Blended index returns are used for periods which include pre 1 June 2011 data.

Source: FTSE International Ltd and Martin Currie Investment Management Ltd.

Past performance is not a guide to future returns

REVENUES AND DIVIDENDS

The company's primary objective is capital growth, and, the board does not constrain the manager's freedom to select the best investments by specifically seeking dividend yield.  Nevertheless, we know that dividends are valued by shareholders and they are an important discipline for management. We have used revenue reserves to sustain the level of dividend in the last two years, and your board is committed to growing the dividend over the longer term, which the changes to the portfolio in 2011 support.

The company's earnings per share were 3.9p; this compares to 2.3p last year. This increase is mostly attributable to the higher level of income generated by the new mandate; your board's expectations are that earnings per share will grow more moderately in years to come. Of course, this ultimately depends on the dividends paid by companies and is subject to the economic backdrop.

Your board is recommending a final dividend of 2.7p per share which brings total dividends payments for the period to 3.7p. The final dividend will be paid on 21 June 2012 to shareholders on the register as at 1 June 2012.

TREASURY SHARES

Over the past few years, the company's buyback policy has served to tighten the discount and enhance the NAV per share. However, this has come at the cost of a decline in liquidity in the company's shares, and so the board believes that it is important to act to maintain liquidity for the benefit of shareholders.

Accordingly, given the low level of discount over an extended period, the board believes that it would be appropriate to hold in treasury any shares bought back in future. Shares held in treasury are not cancelled but are held by the company itself. The shares can then be re-issued at a later date or cancelled, but will carry no voting rights or rights to dividends whilst held in treasury. Subject to obtaining shareholder approval, shares held in treasury could be reissued at a small discount to net asset value at a later date to satisfy subsequent market demand. The following parameters are intended to be adopted on any re-issuance of shares:

- the discount level at which shares are reissued will be narrower than the average discount at which shares were acquired for treasury, and will not be wider than an absolute level of 5%

- a cap will be set on the dilutive impact of reissuing out of treasury at a maximum of 0.5% per year

- shares will be held in treasury for a maximum period of 12 months, after which they will be cancelled.

The necessary resolutions seeking shareholder approval for this policy will be put to the AGM. The board intends to use share-issuance powers in the same way that buyback powers are used to enhance shareholder value and improve the liquidity of our shares. As at the date of this report, the company does not hold any shares in treasury.

THE BOARD

I have served as a director since the company's inception and as chairman for the past 12 years. During this period we have made a number of innovations in the interests of shareholders, several of which have been adopted by other trusts. With the successful introduction of the new truly global mandate, I believe it to be the right moment to stand down.

It is proposed that Neil Gaskell, who stands for election at the AGM following appointment to the board in November 2011, becomes chairman of the company following my retirement. Neil has extensive experience as a non-executive director, across a variety of companies (including investment trusts), and is also currently a governor of the London School of Economics. I am confident that I leave the chair of the company in exceptionally capable hands and wish Neil every success.

THE ROLE AND EFFECTIVENESS OF THE BOARD

For the board, good corporate governance means managing effectively the relationship with the investment manager and other service providers, as well as pro-actively engaging with shareholders and other stakeholders. We try constantly to ensure that the company is operating in the best possible interests of shareholders.

As a UK-listed investment trust company, our principal reporting obligations are under the AIC Code on Corporate Governance ('the Code'), as endorsed by the Financial Reporting Council. The board embraces the spirit of the Code and demonstrates its adherence to the principles in the Corporate governance statement.

During the year, the board carried out an evaluation of its own effectiveness and an evaluation of the chairman. This generated a number of discussion points and proved to be a useful tool in assessing board performance and effectiveness.

The role of chairman is to provide leadership to the board to ensure its effectiveness and to oversee the delivery of the company's objectives. As chairman, I encourage the productive engagement of all board members within a culture of openness and debate, and the chairman's own performance is independently reviewed by the directors, led by the senior independent director.

The board is conscious of the need to monitor risk management and to ensure effectiveness of controls. The renewed emphasis in the Code on risk management is consistent with our current approach, both in satisfying ourselves that our risk-management processes are effective, and in helping investors and other stakeholders to understand our principal risks and how we look to manage them. Further details of our risk assessment and mitigating measures can be found later in the report. The board carries out a risk workshop as part of its annual strategy day.

Our aim as a board is to ensure that our approach continues to secure the best possible return for our shareholders.

LOOKING AHEAD

I thank you for your continued support. Please contact me if you have any questions regarding your company. Contact details can be found at the back of this report. I would also encourage you to visit the company's new website at www.martincurrieglobal.com, which is a comprehensive source of information.

I would like to invite you to attend the company's AGM, which takes place at 12:30pm on Tuesday 22 May 2012 at the offices of Martin Currie, Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES.

Peter Berry

Chairman

2 April 2012

MANAGER'S REVIEW

PERFORMANCE

A year ago, I noted that 2011 might be the year when 'austerity bites', and that equity-market gains might be harder to come by than they were in the previous two years. This has proven to be the case, and although our fund attained a respectable total return of 4.3% over the year, our composite index was, to all intents and purposes, flat (up 0.3%). We are all well aware of the problems facing the eurozone, and it is no surprise that this was one of the weakest areas in the world for stockmarket returns. Perhaps less well known is that emerging markets performed even worse. Indeed, it was only the 5.7% rise of the world's largest stockmarket, the US, that prevented the world index from suffering a meaningful decline.

Economic growth has been challenged, and figures have been revised lower in most countries as the year has progressed. This period of modest economic growth occurred despite the best efforts of many central banks in the developed world, which bent over backwards to create liquidity and shore up still-fragile banking systems. As a result, gilts and Treasury bills produced much better returns than equities, as interest rates fell ever lower. Ten-year gilt yields had fallen to 1.97% by our year-end, from 3.66% a year earlier. While a return to recession has been avoided, these levels of long-term interest rates suggest that growth will be tepid for some years to come. Furthermore, to invest in UK gilts for, say, 10 years with a return of 2% per annum seems most unattractive, given an inflation rate nearly twice that level!

Our portfolio has changed significantly over the last year. The majority of the changes occurred at the end of May when we moved our index from the UK's FTSE All-Share index to the FTSE World index. At that time, I sold down our private-equity investments, reduced exposure to the UK and increased international exposure, notably in the US and Asia ex-Japan. The UK now represents 18% of our assets compared with 56% at the end of January 2011. Since our half-year-end, I have further increased our North American exposure, which now represents 47%, up from 16% a year earlier. By sector, I have much reduced the hefty weightings in oil and gas, basic materials and financials, which had reflected the UK stockmarket's strong bias to those areas. Our largest sector exposure now is the industrial sector, which is itself a highly diversified area of the market, and we have an increased exposure to technology, where so many of the world's higher-growth companies are to be found.

These remarks demonstrate how the portfolio has been restructured at a high level. A bird's-eye view would also confirm that maintaining limited exposure to banks has continued to be a helpful strategic stance in the last year. Beyond that, however, it is of course through selecting individual stocks that we seek to add value. Inevitably, some stocks have worked better than others for us, but I am pleased that our outperformance has been driven by strong stock selection right across the market.

Value added through stock selection and sector allocation in the twelve months to 31 January 2012

Sector	Sector allocation	Stock selection	Relative return contribution
	%	%	%
Oil & gas	0.17	0.24	0.41
Basic materials	0.14	0.58	0.73
Industrials	0.08	1.08	1.16
Consumer goods	(0.36)	0.99	0.63
Healthcare	0.30	(0.25)	0.05
Consumer services	0.07	0.52	0.59
Telecommunications	0.08	1.11	1.19
Utilities	(0.07)	(0.16)	(0.22)
Financials	0.60	(0.83)	(0.24)
Technology	0.10	1.25	1.35
Cash	0.20	0.00	0.20
Other	0.27	0.00	0.27
Totals	1.61	4.57	6.26

The analysis above is calculated geometrically and therefore does not add to the total.  This analysis is calculated gross of fees.

Source: Martin Currie Investment Management Limited

Among our strongest contributors to performance have been well-known names like Apple and McDonald's. Apple's story has been extraordinary in recent years, and with 115% annual earnings growth in its most recent quarter, there is little sign of a slowdown. McDonald's has, of course, benefited from the difficult economic conditions, which have driven consumer traffic to its low-cost restaurants. However, management have also done an excellent job in refreshing both the menu and the ambience of the company's retail outlets. PT Astra International, the Indonesian conglomerate, makes frequent appearances among our top contributors. This year, Indonesia's economy and stockmarket have bucked the trend of emerging-market weakness, and PT Astra's share price rose 61%. We continue to hold all three of these stocks.

At the other end of the scale, two financial companies did badly. Man Group, the UK-quoted hedge-fund manager, has seen significant outflows in funds under management and struggled with the performance of its main fund, AHL. We believe that the company still offers value and retain our holding. French bank BNP Paribas has, we believe, sufficient strength in its balance sheet to avoid the need to raise capital and dilute shareholders. We have sold the stock, however, as the overall outlook for Europe has deteriorated so much through the year that we feel even the stronger European banks will be mired for some time.

OUTLOOK

Europe seems to be making little progress towards resolving the imbalances in the eurozone. Greece's longevity within the eurozone is clearly in doubt, and both the mechanics of exiting and the risk of contagion should one country leave are significant uncertainties. However, the ECB's Long-Term Refinancing Operation (LTRO), launched in December, has done much to shore up the European banking system. Meanwhile, US economic data is trending more positively; we think that the US will avoid recession but we expect a number of years of modest growth as consumers, and the housing market in particular, establish firmer footings. Many emerging economies have been curbing growth and inflation of late, but that process may be close to an end. It is a challenge for many emerging economies to achieve peak rates of growth when demand from the developed world is soggy. Nevertheless, we expect growth rates to edge higher in the emerging world as this year progresses.

With this rather mixed economic outlook, global stockmarkets have enjoyed a strong start to 2012. Valuations are attractive, and companies are accumulating unprecedented levels of cash as earnings continue to grow, but managements are reluctant to invest heavily when the future is so uncertain. As a result, companies are buying back their own shares and making good increases to dividends. This explains some of our own increase in income over the last year. We expect reasonable growth in dividend income to continue at least until the economic outlook improves and investment takes a bigger share of companies' accumulated cash.

The opportunities for savers are largely dictated by interest rates. As we are all very aware, interest rates are extremely low. It is likely that they will stay that way for some time. In this environment, we seek good-quality companies that are growing their earnings and cashflow and sharing that growth with shareholders through both stock-price appreciation and dividends. Returns in the year ahead may be modest once again, but we believe that a good portfolio of diversified global equities should remain at the core of any investment portfolio and, over the long-term, should deliver rewarding returns to shareholders.

Tom Walker

2 May 2012      

Portfolio Summary

Portfolio distribution   

	31 January 2012 Company	FTSE World Index 31 January 2012	31 January 2011 Company
North America	47.3%	51.0%	16.4%
United Kingdom	18.3%	8.8%	56.2%
Developed Asia Pacific ex Japan	11.4%	8.4%	1.9%
Developed Europe ex UK	9.6%	16.6%	8.2%
Global emerging markets	7.7%	7.0%	3.9%
Japan	4.3%	7.9%	2.1%
Private equity	1.4%	-	9.9%
Middle East	-	0.3%	1.0%
Forward foreign currency contracts	-	-	0.4%
	100%	100%	100%

By Sector (excluding cash and private equity)	31 January 2012 Company	31 January 2012 FTSE World Index
Industrials	16.1%	12.1%
Oil and gas	12.9%	10.8%
Technology	11.7%	10.7%
Financials	10.4%	19.4%
Healthcare	9.7%	8.6%
Basic materials	9.4%	7.9%
Consumer services	9.2%	9.8%
Consumer goods	8.7%	12.7%
Telecommunications	8.4%	4.2%
Utilities	3.5%	3.8%

By Asset Class (including cash and borrowings)	31 January 2012	31 January 2011
Equities	97.5%	99.0%
Cash	2.5%	0.6%
Forward foreign currency contracts	-	0.4%
	100.0%	100.0%

Largest 10 Holdings	31 January 2012 Market Value £000	31 January 2012 % of total portfolio	31 January 2011 Market Value £000	31 January 2011 % of total portfolio
Apple	7,033	4.9	2,308	1.6
Phillip Morris International	4,860	3.4	-	-
Royal Dutch Shell	4,708	3.3	5,210	3.6
McDonalds	4,636	3.3	1,322	0.9
PT Astra International	4,369	3.1	1,888	1.3
Microsoft	3,744	2.6	-	-
United Technologies	3,559	2.5	-	-
Sempra Energy	3,264	2.3	1,368	0.9
Pfizer	3,214	2.2	-	-
Taiwan Semiconductor	2,982	2.1	2,259	1.5

	Sector	Market value £	% of total portfolio
North America		67,840,955	47.3
Apple	Technology	7,033,115	4.9
Phillip Morris International	Consumer goods	4,860,013	3.4
McDonalds	Consumer services	4,636,369	3.3
Microsoft	Technology	3,744,462	2.6
United Technologies	Industrials	3,558,985	2.5
Sempra Energy	Utilities	3,264,480	2.3
Pfizer	Healthcare	3,214,396	2.2
El Paso	Oil and gas	2,975,270	2.1
Monsanto	Basic materials	2,774,089	1.9
IBM	Technology	2,707,382	1.9
Wal-Mart	Consumer services	2,642,316	1.8
Watsco	Industrials	2,489,786	1.7
Abbott Laboratories	Healthcare	2,473,160	1.7
Emerson Electric	Industrials	2,434,950	1.7
Du Pont (E.I.) de Nemours	Basic materials	2,280,427	1.6
AT&T	Telecommunications	2,214,818	1.6
PNC Financial	Financials	2,187,959	1.5
Lockheed Martin	Industrials	2,144,267	1.5
Chevron	Oil and gas	2,070,879	1.4
JP Morgan Chase	Financials	2,052,338	1.4
Wellpoint	Healthcare	1,952,322	1.4
Newmont Mining	Basic materials	1,826,901	1.3
Union Pacific	Industrials	1,571,618	1.1
Ultra Petroleum	Oil and gas	730,653	0.5
United Kingdom		26,219,028	18.3
Royal Dutch Shell	Oil and gas	4,707,955	3.3
GlaxoSmithKline	Healthcare	2,415,559	1.7
Babcock International	Industrials	2,344,474	1.6
BT Group	Telecommunications	2,326,784	1.6
Johnson Matthey	Basic materials	2,283,795	1.6
Prudential	Financials	2,153,956	1.5
Rio Tinto	Basic materials	2,012,390	1.4
BHP Billiton	Basic materials	2,003,953	1.4
HSBC Holdings	Financials	1,892,261	1.3
Tesco	Consumer services	1,734,012	1.2
Amlin	Financials	1,217,079	0.9
MAN Group	Financials	1,126,810	0.8

	Sector	Country	Market value £	% of total portfolio
Developed Asia Pacific ex Japan			16,079,573	11.4
Woolworths	Consumer services	Australia	2,835,721	2.0
China Mobile	Telecommunications	Hong Kong	2,676,384	1.9
Jardine Matheson Holdings	Industrials	Singapore	2,378,610	1.7
M1	Telecommunications	Singapore	2,299,359	1.6
United Overseas Bank	Financials	Singapore	2,063,724	1.5
China Construction Bank	Financials	Hong Kong	2,032,214	1.4
China Merchants Holdings	Industrials	Hong Kong	1,793,561	1.3
Developed Europe ex UK			13,819,994	9.6
Seadrill	Oil and gas	Norway	2,435,070	1.7
Novartis	Healthcare	Switzerland	2,018,045	1.4
ENI	Oil and gas	Italy	1,762,012	1.2
CEZ	Utilities	Germany	1,740,402	1.2
Anheuser-Busch Inbev	Consumer goods	Belgium	1,628,517	1.1
Fresenius Medical Care	Healthcare	Germany	1,586,091	1.1
Tecnicas Reunidas	Industrial	Spain	1,537,098	1.1
Vivendi	Consumer services	France	1,112,759	0.8
Global Emerging Markets			10,869,917	7.7
PT Astra International	Consumer goods	Indonesia	4,368,601	3.1
Taiwan Semiconductor	Technology	Taiwan	2,982,322	2.1
Gazprom	Oil and gas	Russia	1,983,937	1.4
Petroleo Brasileiro	Oil and gas	Brazil	1,535,057	1.1
Japan			6,047,424	4.3
Mutsui & Company	Industrials		2,357,946	1.7
NTT Docomo	Telecommunications		2,300,057	1.6
Nintendo	Consumer goods		1,389,421	1.0
Private Equity
F&C Private Equity 'Ordinary'		UK	1,031,274	0.7
Candover Investments		UK	977,854	0.7
Total Portfolio			142,886,019	100.0

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 and the Report of the directors.

The financial position of the company as at 31 January 2012 is shown on the balance sheet. 

Note 15 sets out the company's risk management policies, including those covering market risk, liquidity risk and credit risk.

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

Risks and Uncertainties

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. The board recognises that risks to the company are not static. The board reconsiders and assesses each risk at the annual strategy meeting. Below are the ongoing risks along with details of the latest board assessment where the future impact of the risk is likely to change.

Regulatory change - The board has identified the following legislative developments that will potentially increase operational and regulatory risk for the company.

Retail Distribution Review (UK regulation) - The Retail Distribution Review (RDR) is central to the FSA's agenda of customer protection and will affect firms from the investment product manufacturers, such as insurers and asset managers to the investment product distributors, such as banks, wealth managers and IFA's. The RDR aims to drive structural change throughout the retail investments industry, in order to give consumers confidence that the advice they are given, and products they are sold, are best suited to their needs. Whilst the regulation will not be in force until the end of 2012, the market is already changing and the board is assessing the future market environment in which the company will operate, including the future use of fund platforms, to ensure the company is positioned correctly for the post-RDR market and remains attractive to investors and distributors.

AIFM Directive (EU regulation) - The Alternative Investment Fund Managers (AIFM) Directive is European legislation which creates a European-wide framework for regulating managers of 'alternative investment funds' (AIFs). It is designed to regulate any fund which is not a UCITS fund and which is managed and/or marketed in the EU. This will include hedge funds, private equity funds and property funds. Closed-ended investment companies also fall within the remit of the new regulations.

The Directive originated as a political response to the recent financial and economic crisis. Although policymakers recognised that AIFs did not contribute directly to the problems, the new rules are intended to reduce systemic risk created by the financial sector. The Directive aims to improve regulation, enhance transparency and investor protection, develop a single EU market for AIFs (similar to that for UCITS funds) and implement effective mechanisms for micro- and macro-prudential oversight.

The board continues to monitor developments in AIFM legislation to ensure the company complies with the new requirements.

FATCA (US regulation) - FATCA is an acronym for The Foreign Account Tax Compliance Act. FATCA creates a new tax information reporting and withholding regime for payments made to certain foreign financial institutions and other foreign persons. FATCA is intended to increase transparency for the Internal Revenue Service (IRS) with respect to US persons that may be investing and earning income through non-US institutions. While the primary goal of FATCA is to gain information about US persons, FATCA imposes a withholding tax where the applicable documentation and reporting requirements are not met.

Once the final requirements of FATCA are known the company will work with its advisers and the investment trust industry as appropriate to ensure compliance.

Maintaining market liquidity - In order to retain its place in the FTSE All-Share, 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 board, the manager and the company's broker with a report being reviewed at every board meeting. The board also considers ways to improve the liquidity position of the company at the annual strategy meeting.

Loss of s1158-1159 status - In order to qualify as an investment trust, the company must comply with s1158-1159 of the Corporation Taxes Act 2010.

s1158-1159 qualification criteria are continually monitored by Martin Currie and the results reported to the board.

The board is comfortable that the mitigating measures in place reduces the risk to the greatest extent possible. The Investment Trust tax rules have changed for companies with financial year-ends beginning on or after 1 January 2012. The board believes that due to the more favourable nature of the new rules, the risk of losing investment trust status will be greatly reduced. The application for investment trust status under the new regime will be made during 2012.

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 their premises be subject to operational disruption. The plan was last tested in December 2011 with successful results. Martin Currie 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 relying on good manager stock selection skills within a framework of diversification and other investment restrictions and guidelines. 

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 year end bank borrowings were nil. In accordance with the investment policy the limit on gearing is 20% of total assets.

Foreign exchange risk - A significant portion of the company's portfolio is held in invested in overseas securities and the balance sheet can be significantly affected by movements in foreign exchange rates.  It is not the company's policy to hedge this risk on a continuing basis but the company may, from time to time, match specific overseas investment with foreign currency borrowings.

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

Counterparty and operational risk - The company has outsourced its entire operational infrastructure to third party organisations.  Contracts and service level agreements have been defined to ensure that the service provided by each third party organisation is of sufficiently professional and technically high standard.  The board carry out an annual evaluation of the manager and feedback the results to the manager through the management engagement committee.  Periodically the board requests that representatives from other third party service providers (such as the auditor and custodian) attend board meetings to give the board the opportunity to ensure service standards continue to meet the company's requirements.

Directors' Responsibilities

Statement of directors' responsibilities

The directors are responsible for preparing the Annual report, the Directors' remuneration 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;

·      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 www.martincurrieglobal.com website, which is maintained by the 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, whose names and functions are listed in the Board of directors confirm 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' and Manager's review includes a fair 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.

On behalf of the board

Peter Berry

Chairman

2 April 2012

Income Statement

		Year to 31 January 2012			Year to 31 January 2011
	Note	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Net gains on investments	7	-	4,681	4,681	-	15,462	15,462
Net currency (losses)/gains	11	-	(307)	(307)	-	72	72
Income	3	5,198	-	5,198	3,501	715	4,216
Investment management fee		(239)	(477)	(716)	(238)	(476)	(714)
Performance fee		-	(960)	(960)	-	-	-
Other expenses	5	(515)	-	(515)	(525)	-	(525)
Net return on ordinary activities before taxation		4,444	2,937	7,381	2,738	15,773	18,511
Taxation on ordinary activities	6	(314)	-	(314)	(104)	-	(104)
Net return attributable to shareholders		4,130	2,937	7,067	2,634	15,773	18,407
Net return per ordinary share	2	3.88p	2.76p	6.64p	2.34p	14.02p	16.36p

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

The revenue and capital items are presented in accordance with the Association of Investment Companies (AIC) Statement of Recommended Practice. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The notes form part of these financial statements.

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

Balance Sheet

		As at 31 January 2012		As at 31 January 2011
	Note	£000	£000	£000	£000
Fixed assets
Investments at fair value through profit or loss
Listed on the London Stock Exchange			28,228		96,920
Listed on exchanges abroad			114,658		49,340
	7		142,886		146,260
Forward foreign currency contracts			-		615
			142,886		146,875
Current Assets
Debtors and Prepayments	8	182		243
Cash at bank	9	3,728		890
		3,910		1,133
Creditors
Amounts falling due within one year	10	(1,259)		(277)
Net current assets			2,651		856
Total assets less current liabilities			145,537		147,731
Capitals and reserves
Called-up share capital		5,227		5,449
Special reserve		116,530		122,062
Capital redemption reserve		10,790		10,568
Capital reserve		5,938		3,001
Revenue reserve		7,052		6,651
Total shareholders' fund			145,537		147,731
Net Asset Value per ordinary share	2		139.2p		135.5p

The notes form part of these financial statements.

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

The financial statements were approved and authorised for issue by the board on 2 April 2012, and signed on its behalf by Peter Berry, Chairman.

Reconciliation of Movements in Shareholders' Fund

 

 

	Note	Called up ordinary share capital £000	Capital redemption reserve £000	Special distributable reserve £000	Capital reserve £000	Revenue reserve £000	Total
Reconciliation of movements in shareholders' funds to 31 January 2012
At 31 January 2011		5,449	10,568	122,062	3,001	6,651	147,731
Ordinary shares bought back during the year		(222)	222	(5,532)	-	-	(5,532)
Gains on realisation of investments at fair value	7	-	-	-	16,117	-	16,117
Gains on realisation of forward foreign exchange contracts		-	-	-	611	-	611
Movement in currency gains/(losses)		-	-	-	(307)	-	(307)
Movement in fair value gains/(losses)		-	-	-	(12,047)	-	(12,047)
Capitalised expenses		-	-	-	(1,437)	-	(1,437)
Net revenue		-	-	-	-	4,130	4,130
Dividends paid	4	-	-	-	-	(3,729)	(3,729)
As at 31 January 2012		5,227	10,790	116,530	5,938	7,052	145,537

 

 

	Note	Called up ordinary share capital £000	Capital redemption reserve £000	Special distributable reserve £000	Capital reserve £000	Revenue reserve £000	Total
Reconciliation of movements in shareholders' funds to 31 January 2011
At 31 January 2010		5,842	10,175	131,494	(12,772)	7,977	142,716
Ordinary shares bought back during the year		(393)	393	(9,432)	-	-	(9,432)
Gains on realisation of investments at fair value	7	-	-	-	6,954	-	6,954
Loss on realisation of forward foreign exchange contracts		-	-	-	(56)	-	(56)
Movement in currency gains/(losses)		-	-	-	72	-	72
Movement in fair value gains/(losses)		-	-	-	7,949	-	7,949
Movement in fair value of forward foreign exchange contracts		-	-	-	615	-	615
Capitalised expenses		-	-	-	(476)	-	(476)
Capital dividends received		-	-	-	715	-	715
Net revenue		-	-	-	-	2,634	2,634
Dividends paid	4	-	-	-	-	(3,960)	(3,960)
As at 31 January 2011		5,449	10,568	122,062	3,001	6,651	147,731

 

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

Statement of Cash Flow

	Note	Year to 31 January 2012		Year to 31 January 2011
		£000	£000	£000	£000
Net cash inflow from operating activities	12		3,661		2,839
Capital Expenditure and Financial Investment
Payment to acquire investments		(100,808)		(36,082)
Proceeds from sale of investments		108,327		40,042
Net gain/(loss) from forward foreign currency exchange contracts		1,226		(56)
Net Cash flow from capital expenditure and financial investment			8,745		3,904
Equity dividends paid			(3,729)		(3,960)
Net Cash flow before financing			8,677		2,783
Financing
Repurchase of ordinary share capital	11		(5,532)		(9,432)
Increase/(decrease) in cash	13		3,145		(6,649)

The notes form part of these financial statements

Notes to the Financial Statements

1 Accounting policies

a) Basis of preparation - the financial statements have been prepared under the historical cost convention (modified to include investments at fair value through profit or loss) on a going concern basis and 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 is a UK listed company with a predominantly UK shareholder base. The results and the financial position of the company are expressed in sterling, which is the functional and presentational currency of the company. The accounting policies have been disclosed consistently and in line with Companies Act 2006.

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. 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. Income from underwriting commission is recognised as earned.

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. 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 income statement 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 income statements.

g) Monetary assets and liabilities expressed in foreign currencies are translated into sterling at rates of exchange ruling at the date of the balance sheet or at the related forward contract rate. Transactions in foreign currency are converted to sterling at the rate ruling at the date of the transaction or, where forward foreign currency contracts have been taken out, at contractual rates and included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature.

h) Cash at bank and in hand 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.

Other debtors and creditors (excluding borrowings) do not carry any interest, are short-term in nature and are accordingly stated at nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

i) Dividend payable - under FRS21 final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the Balance Sheet date. Interim dividends are only recognised when they have been paid. Dividends payable to equity shareholders are recognised in the Reconciliation of Movements in Shareholders' Funds when they have been approved by shareholders in the case of a final dividend, or paid in the case of an interim dividend 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 buybacks include the amount of consideration paid, including directly attributable costs and are deducted from the special distributable reserve until the shares are cancelled.

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.

l) 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 income statement 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.

2. 

	Year ended 31 January 2012	Year ended       31 January 2011
Returns and net asset value
The return and net asset value per ordinary share are calculated with reference to the following figures:
Revenue return	£4,130,000	£2,634,000
Revenue return attributable to ordinary shareholders
Weighted average number of shares in issue during year	106,432,137	112,515,991
Return per ordinary share	3.88p	2.34p
Capital return
Capital return attributable to ordinary shareholders	£2,937,000	£15,773,000
Weighted average number of shares in issue during year	106,432,137	112,515,991
Return per ordinary share	2.76p	14.02p
Total return
Total return per ordinary share	6.64p	16.36p
Net asset value per share	As at 31 January 2012	As at 31 January 2011
Net assets attributable to shareholders	£145,537,000	£147,731,000
Number of shares in issue at the year end	104,553,171	108,989,411
Net asset value per share	139.2p	135.5p

Between 1 February and 29 March 2012 no further ordinary shares of 5p were bought back for cancellation.

3. 

	2012 £000	2011 £000
Income from investments
From listed investment
UK equities	2,303	2,594
International equities	2,888	856
Other income
Interest on deposits	7	29
Underwriting commission	-	22
	5,198	3,501

There were no capital distributions during the year to 31 January 2012. During the year ended 31 January 2011, the company received capital dividends of £311,000 and £404,000 from F&C Private Equity Trust.

4.

	2012			2011
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Dividends
Year ended 31 January 2010 - final dividend of 2.50p	-	-	-	2,839	-	2,839
Year ended 31 January 2011 - interim dividend of 1.00p	-	-	-	1,121	-	1,121
Year ended 31 January 2011 - final dividend of 2.50p	2,670	-	2,670	-	-	-
Year ended 31 January 2012 - interim dividend of 1.00p	1,059	-	1,059	-	-	-
	3,729	-	3,729	3,960	-	3,960

Set out below are the total dividends payable in respect of the financial year which forms the basis on which the requirements of Section 1158-1159 of the Corporation Taxes Act 2010 are considered.

	2012 £000	2011 £000
Interim dividend of 1.00p for the year ended 31 January 2012 (2011: 1.00p)	1,059	1,121
Proposed final dividend of 2.7p for the year ended 31 January 2012 (2011: 2.50p)	2,823	2,725
	3,882	3,846

5.

Other expenses	2012 £000	2011 £000
Advertising and public relations	44	45
Bank charges (including custody fees)	17	19
Directors' fees	122	124
Directors and officers liability insurance	17	18
Irrecoverable VAT	34	37
Legal fees	6	16
Marketing	22	19
Printing and postage	23	21
Registration fees	42	52
Retainer paid to company broker	30	30
Secretarial fee	71	67
Other	68	57
	496	505

Auditors' remuneration	2012 £000	2011 £000
Payable to PricewaterhouseCoopers LLP for the audit of the company's annual financial statements	19	20
	515	525

Performance Fee

The performance fee for the year ended 31 January 2012 was £960,000 (2011: nil).  Details of the management and secretarial agreements are provided in the full annual report.

6.

	2012			2011
	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Taxation on ordinary activities
Foreign Tax	314	-	314	104	-	104

The effective corporation tax rate was 26.32% (2011: 28%). 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.

	2012 £000	2011 £000
Net return before taxation	7,381	18,511
Corporation tax at effective rate of 26.32% (2011: 28%)	1,943	5,183
Effects of:
Non taxable UK dividend income	(606)	(726)
Currency losses/(gains) not taxable	80	(20)
Capital distributions not taxable	-	(200)
Gains on investments not taxable	(1,232)	(4,329)
Overseas dividends non taxable	(760)	(224)
Movement in income accruals taxable on receipt	-	4
Overseas tax suffered	314	104
Increase in excess management and loan expenses	575	312
Total current year tax charge	314	104

As of 1 April 2011, the UK Corporation rate fell from 28% to 26%.

As at 31 January 2012, the company had unutilised management expenses of £20.3 million (2011: £18.1 million) and non-trading loan relationship deficit of £4.8 million (2011: £4.8 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.

During the year, as a result of the change in UK corporation tax from 26% to 25, that was substantively enacted on 5 July 2011 and that will be effective from 1 April 2012, the unrecognised deferred tax asset has been re-measured to 25%.

Further reductions to the UK corporation tax rate have been announced. The changes which are expected to be enacted separately each year, propose to reduce the rate by 1% per annum to 23% by 1 April 2014. The changes have not been substantively enacted at the balance sheet date and, therefore are not reflected in these financial statements.

7.

	As at 31 January 2012		As at 31 January 2011
Investments	£000	£000	£000	£000
Opening valuation	146,260		135,502
Opening unrealised investment holding gains	(25,692)		(17,743)
Opening cost		120,568		117,759
Purchases at cost		100,808		35,972
Disposal proceeds	(108,252)		(40,117)
Net profit on disposal of investments	16,117		6,954
Disposal at cost		(92,135)		(33,163)
Closing cost		129,241		120,568
Closing unrealised investment holding gains		13,645		25,692
Valuation as at 31 January		142,886		146,260

Gains on investments	As at 31 January 2012 £000	As at 31 January 2011 £000
Net profit on disposal of investments	16,117	6,954
Net (loss)/gain on revaluation of investments	(12,047)	7,949
Net gain/(loss) on realisation of forward foreign exchange contracts	1,226	(56)
Net (loss)/gain on revaluation of forward foreign exchange contracts	(615)	615
	4,681	15,462

The transaction cost of acquiring investments during the year was £108,000 (2011: £195,000). For disposals, transaction costs were £67,000 (2011: £42,000).

During the year to 31 January 2011, there was a write down in the book costs of F&C Private Equity Trust A shares of £687,000 and ABB Limited of £33,000 which were reflected in the realised net profit of £6,954,000. These were as a result of capital repayments. There were no write-downs of book cost during the year to 31 January 2012.

8. 

	As at 31 January 2012 £000	As at 31 January 2011 £000
Debtors: amounts falling due within one year
Dividends receivable	114	98
Interest accrued	1	-
Amount due from brokers	-	75
Taxation recoverable	37	29
Other debtors	30	41
	182	243

9.

	As at 31 January 2012 £000	As at 31 January 2011 £000
Cash at bank
Sterling bank account	3,698	890
Non-sterling bank account	30	-
	3,728	890

10.

Creditors	As at 31 January 2012 £000	As at 31 January 2011 £000
Amounts falling due within one year:
Due to Martin Currie	1,156	200
Other creditors	103	77
	1,259	277

With the exception of management and secretarial fees there were no related party transactions through the year.

11. 

Called up share capital and analysis of capital reserves

Called up share capital	Number of shares	As at 31 January 2012 £000	Number of shares	As at 31 January 2011 £000
Ordinary shares 5p
Ordinary shares in issue at beginning of the year	108,989,411	5,449	116,834,502	5,842
Ordinary shares bought back during the year	(4,436,240)	(222)	(7,845,091)	(393)
Ordinary shares in issue at end of the year	104,553,171	5,227	108,989,411	5,449

The total cost of share buybacks for the year to 31 January 2012 was £5,532,000 (2011: £9,432,000).

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 2011	(23,306)	26,307	3,001
Gains on realisation of investments at fair value	16,117	-	16,117
Movement in fair value losses of investments	-	(12,047)	(12,047)
Gains on realisation of forward foreign exchange contracts	611	-	611
Movement in fair value losses of forward foreign exchange contracts	615	(615)	-
Movement in currency losses	(307)	-	(307)
Capitalised expenses	(1,437)	-	(1,437)
At 31 January 2012	(7,707)	13,645	5,938

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'.

12. 

	2012 £000	2011 £000
Reconciliation of net return on ordinary activities before finance costs and taxation to net cash inflow from operating activities
Return on ordinary activities before finance costs and taxation	7,381	18,511
Adjustments for:
Gains on investments	(4,681)	(15,462)
Effect of foreign exchange rates	307	(72)
Increase in dividends receivable, interest accrued and other debtors	(6)	(50)
Increase in other creditors and amounts due to Martin Currie	982	9
Overseas withholding tax suffered	(322)	(97)
Net cash inflow from operating activities	3,661	2,839

13.

Analysis of changes in net funds	As at 31 Jan 2011 £000	Cash Flow £000	Exchange Movement £000	As at 31 Jan 2012 £000
Cash at bank and in hand	890	3,145	(307)	3,728

Analysis of changes in net funds	As at 31 Jan 2010 £000	Cash Flow £000	Exchange Movement £000	As at 31 Jan 2011 £000
Cash at bank and in hand	7,467	(6,649)	72	890

14. Related Party Transactions

With the exception of the management and secretarial fees as disclosed there have been no related party transactions during the year.

15. Derivatives and other financial instruments

The company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The company also has the ability to enter into derivative transactions in the form of forward foreign currency contracts, futures and options, for the purpose of managing currency and market risks arising from the company's activities.

The main risks the company faces from its financial instruments are (i) market price risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk.

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

(i) Market price risk

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

Interest rate risk

Interest rate movements may affect:

·      the fair value of the investments in fixed interest rate securities; and

·      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.

Interest risk profile

The interest rate risk profile of the portfolio of financial assets and liabilities at the balance sheet date was as follows:

Interest

At 31 January 2012	Rate %	Local currency 000	Foreign Exchange Rate	Sterling equivalent £000
Assets:
Sterling	-	3,698	1.000	3,698
US dollar	-	48	1.578	30
				3,728
At 31 January 2011
Assets
Sterling	-	890	1.000	890
				890

Interest rate sensitivity

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

If interest rates had been 50 basis points higher or lower and all other variables were held constant, the company's profit for the year ended 31 January 2012 would increase/decrease by £19,000 (2011: increase/decrease by £4,000). This is mainly attributable to the company's exposure to interest rates on its floating rate cash balances.

As at 31 January 2012 a decrease in interest rates of 0.5% is the maximum possible, given the prevailing base rate of 0.5%. This level is considered possible based on observations of market conditions and historic trends.

Foreign currency risk

A significant proportion of the company's investment portfolio is invested in overseas securities and the balance sheet can be significantly affected by movements in foreign exchange rates. It is not the company's policy to hedge this risk on a continuing basis but the company may, from time to time, match specific overseas investment with foreign currency borrowings.

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

Foreign currency risk exposure by currency of denomination:

	31 January 2012
	Investments £000	Net monetary assets £000	Total currency exposure £000
US Dollar	76,721	108	76,829
Euro	9,367	25	9,392
Hong Kong Dollar	6,502	-	6,502
Japanese Yen	6,047	-	6,047
Indonesian Rupiah	4,369	2	4,371
Singapore Dollar	4,363	-	4,363
Australian Dollar	2,836	-	2,836
Norwegian Krone	2,435	-	2,435
Swiss Franc	2,018	-	2,018
Canadian Dollar	-	-	-
Total overseas investments	114,658	135	114,793
Sterling	28,228	2,516	30,744
Forward foreign currency contracts	-	-	-
Total	142,886	2,651	145,537

	31 January 2011
	Investments £000	Net monetary assets £000	Total currency exposure £000
US Dollar	27,290	11	27,301
Euro	8,684	-	8,684
Hong Kong Dollar	2,875	-	2,875
Japanese Yen	3,011	-	3,011
Indonesian Rupiah	1,888	-	1,888
Singapore Dollar	-	-	-
Australian Dollar	-	-	-
Norwegian Krone	1,383	-	1,383
Swiss Franc	1,921	-	1,921
Canadian Dollar	2,288	-	2,288
Total overseas investments	49,340	11	49,351
Sterling	96,920	845	97,765
Forward foreign currency contracts	615	-	615
Total	146,875	856	147,731

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 markets.

Foreign currency sensitivity

There were minimal foreign currency denominated items at the year end.

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 and the stock selection process both act to reduce market risk. The manager actively monitors market prices throughout the year and reports to the board, which meets regularly in order to review investment strategy. The investments held by the company are listed on various stock exchanges worldwide.

Other price risk sensitivity

If market prices at the balance sheet 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 2012 would have increased/decreased by £21,433,000 (2011: increase/decrease of £21,939,000) and equity reserves would have increased/decreased by the same amount. This level of change is considered to be reasonably possible based on observation of market conditions and historic trends.

(ii) Liquidity risk

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

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

(iii) Credit risk

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

The risk is managed as follows:

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

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

None of the company's financial assets are secured by collateral.

Fair values of financial assets and financial liabilities

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

16 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 total 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 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 2012 £000	As at 31 January 2011 £000
Called up ordinary share capital	5,227	5,449
Capital redemption reserve	10,790	10,568
Special distributable reserve	116,530	122,062
Capital reserve	5,938	3,001
Revenue reserve	7,052	6,651
Total shareholders' funds	145,537	147,731

17 Fair value hierarchy

Under FRS 29 'Financial Instruments: Disclosures' an entity is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:

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

·      Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices); and

·      Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The financial assets and liabilities measured at fair value in the balance sheet are grouped into the fair value hierarchy as follows:

		2012
Financial assets at fair value through profit or loss	Note	Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Quoted equities	(a)	142,886	-	-	142,886
Net fair value		142,886	-	-	142,886

	Note	2011
Financial assets at fair value through profit or loss		Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Quoted equities	(a)	146,260	-	-	146,260
Forward foreign exchange contracts	(b)	-	615	-	615
Net fair value		146,260	615	-	146,875

a)         Quoted equities

The fair value of the company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.

b)         Forward foreign exchange contracts

The fair value of the company's forward foreign exchange contracts have been determined using observable market inputs.  There have been no movements between levels in the fair value hierarchy during the year.

18 Post balance sheet event

Since the year end there have been no ordinary shares of 5p bought back for cancellation.

From 1 April 2011 the main rate of corporation tax reduced from 28% to 26%. Furthermore the main rate of corporation tax will reduce from 26% to 24% from 1 April 2012. There is no impact on the financial statements following this change in rate of corporation tax.

In addition to the changes in rates of corporation tax disclosed above a number of further changes to the UK Corporation tax system were announced in the March 2011 UK Budget Statement. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 22% by 1 April 2014.

These further changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.

The proposed reductions of the main rate of corporation tax by 1% per year to 22% by 1 April 2014 are expected to be enacted separately each year. The overall effect of the further changes from 24% to 22%, if these applied to the deferred tax balance at the balance sheet date, would be to reduce the deferred tax asset by £502,000 (being £251,000 recognised in 2013 and £251,000 recognised in 2014).

Website

At www.martincurrieglobal.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 interim reports and information on how to invest.

 

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