Martin Currie GblPrt - Final Results
23/04/2024 17:21
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RNS Number : 7561L Martin Currie Global Portfolio Tst 23 April 2024
Martin Currie Global Portfolio Trust plc (the "Company")
Legal Entity Identifier: 549300RKB85NFVSTBM94
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ANNUAL FINANCIAL RESULTS - YEAR TO 31 JANUARY 2024
The financial information set out below does not constitute the Company's
statutory accounts for the years ended 31 January 2024 or 2023 but is derived
from those accounts. Statutory accounts for 2023 have been delivered to the
Registrar of Companies and those for 2024 will be delivered following the
Company's annual general meeting.
The auditor has reported on those accounts; their report was unqualified.
The unedited full text of those parts of the annual report and accounts for
the year ended 31 January 2024 which are required to be published are set out
on the following pages.
The annual general meeting of the Company will be held on 20 June 2024. The
notice of meeting will shortly be issued to shareholders and a copy can be
downloaded on the Company's website (www.martincurrieglobal.com
(http://www.martincurrieglobal.com/) ).
A copy of the full annual report and accounts will be submitted to the
National Storage Mechanism and will be available for inspection.
FINANCIAL HIGHLIGHTS
Highlights
· Strong performance in the financial year
· Ongoing focus on the quality growth strategy of the Company
· Maintained annual dividends
Key data
Year ended Year ended
31 January 2024 31 January 2023
Net asset value per share ('NAV') (pence)(1) 360.5p 382.2p
NAV total return(2) 11.2% -8.8%
MSCI All Country World index (benchmark) total return(2,3) 10.9% 0.3%
Share price (pence) 350.0p 319.0p
Share price total return(2) 11.1% -9.3%
Ongoing charges (as a percentage of shareholders' funds)(4) 0.64% 0.61%
Revenue return per share(5) 2.37p 2.16p
Dividend per share 4.20p 4.20p
Past performance is not a guide to future returns. All returns are total
returns unless otherwise stated.
Source: Martin Currie Investment Management.
(1) (1)The net asset value per share total return is calculated using the cum
income net asset value with dividends reinvested on the ex-dividend date. This
is an Alternative Performance Measure, see the annual report and accounts for
more details.
(2)Total return is the combined effect of the rise and fall in the share
price, net asset value or benchmark together with any dividend paid. See the
annual report and accounts for more details on Alternative Performance
Measures.
(3) The benchmark with effect from 1 February 2020 is the MSCI All Country
World index. Prior to this, the benchmark was the FTSE World index to 31
January 2020. Prior to this, the benchmark was the FTSE All-Share to 31 May
2011.
(4) Ongoing charges (as a percentage of shareholders' funds) are calculated
using average net assets over the period. The ongoing charges figure has
been calculated in line with the Association of Investment Companies ('AIC')
recommended methodology. This is an Alternative Performance Measure, see the
annual report and accounts for more details.
(5) For details of calculation, refer to note 5 in the annual report and
accounts.
Performance
· +11.2% Net Asset Value total return for the year.
· +11.1% Share price total return for the year.
· +10.9% Benchmark total return for the year.
CHAIR'S STATEMENT
Dear Shareholder
Investment performance
I am pleased to report that over the year to 31 January 2024 your Company's
NAV total return was +11.2%, which compares favourably with the return of the
benchmark index of +10.9% and was ahead of the average return of our peer
group. Our investment manager focuses on investment in companies with robust
earnings and prospects of superior long-term growth by understanding
fundamental changes and trends in economies and businesses. In 2023 one such
change was that the world started to realise the potential of Artificial
Intelligence ("AI"). Some of the companies in our portfolio - including our
largest holding Nvidia - were selected for their potential to benefit from
advances in computing and have been major beneficiaries of the focus on AI.
The returns over the last year illustrate the benefits of a focus on companies
that can take advantage of emerging opportunities for growth.
Income and dividends
Net revenue earnings per share for the period amounted to 2.37 pence. The
Company has paid three interim dividends of 0.9 pence per share and will pay a
fourth interim dividend of 1.5 pence per share on 26 April 2024 to
shareholders on the register on 5 April 2024. The total dividends with
respect to the year to 31 January 2024 will be 4.2 pence per share,
maintaining the same total dividend as the previous year.
Capital growth is the primary focus of the investment manager and the
investment strategy is not constrained by any income target. Nevertheless,
the Board recognises that dividends are important for many shareholders and
hence continues to maintain its dividend in line with previous levels. The
Company's Articles of Association permit the distribution of realised capital
gains and the Company has substantial distributable reserves. The Board has
again used these alongside revenue earnings to maintain the dividend, while
not impinging on the investment manager's approach to managing the portfolio.
Gearing
The Board carried out a detailed review of gearing during the year under
review as we approached the maturity date of the Company's three-year fixed
loan. On 23 November 2023, the Company entered into an unsecured three-year
£10 million sterling revolving loan facility agreement with The Royal Bank of
Scotland International Limited ("RBSI"). The Company's existing loan of £30m
from RBSI matured on the same date and was repaid in full. We agreed to draw
down the full amount available under the new £10 million facility on 23
November and for an initial period of six months. The Company's debt therefore
reduced from £30m to £10m and gearing was 3.9% as at 31 January 2024.
Promoting the shares
Franklin Templeton Investment Trust Management Limited, the Alternative
Investment Fund Manager ('AIFM') is very active in promoting the Company,
including regular meetings with major shareholders, a wide variety of online
marketing designed to encourage investors to go to our interesting and
informative website, and regular press coverage of the portfolio manager's
distinctive investment style. The Company is recognised as a long-term leader
in ESG investing and continues to maintain the highest possible 'Five Globes'
from Morningstar. It is also rated in the top 2% of over 8,000 funds in
Morningstar's global large cap category for ESG. The Board believes that the
Company's distinctive approach to investing is important in stimulating demand
for shares in a crowded market and against a background of continuing focus on
the environment, and in particular climate change, and on social and
governance issues.
While over the past two years demand for investment trusts in general has
reduced, the Board and investment manager continue to believe that making
investors aware of the attractions of investing in the Company is an essential
part of our role and we will continue actively and energetically to market the
Company as part of our long-term strategy.
We also continue to operate our zero discount policy under which the Company
buys back and issues shares with the objective of providing shareholders, in
normal market conditions, with:
• assurance that the share price is aligned with the prevailing NAV per
share; and
• liquidity so that investors can buy or sell as many shares as they wish at
a price which is not materially different from the NAV.
The Board believes that this policy is instrumental in making the Company
attractive to investors. During the year under review, the Company bought back
5,551,747 shares which were placed in Treasury and issued 675,000 shares from
Treasury. Shares were bought back in February and March 2023, were issued in
April and May 2023 and then were bought back in the following eight months.
The activity reflects levels of market demand both for the Company's shares
and more widely for investment trusts. We continued to be successful in
achieving the aims of the zero discount policy, with the share price generally
remaining close to NAV. Shares which are bought back are held in Treasury
rather than cancelled as they can be reissued from Treasury at lower cost than
issuing new shares.
The Board
My predecessor as Chair, Gillian Watson, retired after the Annual General
Meeting on 1 June last year. My fellow Directors and I would like to repeat
our thanks Gillian for her commitment and diligence over the ten years that
she on the Board and wish her every success in her future endeavours. For the
first time this year we are required to report on both the gender and ethnic
diversity of the Board and note that, while meeting the recommended gender
diversity, we do not meet the target for ethnic diversity. We will take this
into account when we next recruit a director but, being mindful of costs, have
decided that we will continue to operate with four directors at least for the
time being.
AGM
I am pleased to be able to invite all shareholders to attend our AGM in person
at the offices of Franklin Templeton, 5 Morrison Street, Edinburgh EH3 8BH on
Thursday 20 June 2024 at 11.30am.
We do recognise that some shareholders may be unable to come to the AGM and if
you have any questions about the annual report, the investment portfolio or
any other matter relevant to the Company, please write to me either via email
at ftcosec@franklintempleton.com or by post to The Company Secretary, Martin
Currie Global Portfolio Trust plc, 5 Morrison Street Edinburgh EH3 8BH. If you
are unable to attend, I urge you to submit your proxy votes in good time for
the meeting, following the instructions enclosed with the proxy form.
Keep in touch
The Company's website at www.martincurrieglobal.com is a comprehensive source
of information and includes regular portfolio manager updates and outlook
videos, monthly performance factsheets and independent research reports. I
recommend that you subscribe for regular email updates that will keep you
abreast of the news on your Company, if you have not already done so.
The Board is always interested to hear shareholders' views. Please contact
me if you have any questions or points regarding your Company by email at:
ftcosec@franklintempleton.com (mailto:ftcosec@franklintempleton.com) .
Outlook
The world continues to face a number of serious challenges, both economic and
political. Inflation which started to take hold as a result of shortages
resulting from lockdowns to prevent the spread of Covid-19 was then
exacerbated by the Russian war on Ukraine and by tension between the USA and
China. Geopolitical issues were also further highlighted in October 2023 by
the attack by Hamas on Israel and the resulting conflict in Gaza. Against this
difficult background it was encouraging to see progress in major economies in
2023, with GDP in the USA growing despite predictions of a recession and China
also growing, albeit at a significantly lower pace than pre-Covid.
Governments and central banks around the world are continuing to tread a fine
line in aiming to contain inflation while not causing a destructive recession.
It is apparent that both inflation and interest rates will remain higher than
we were used to before 2020 for some time and it is highly unlikely that we
will again see the exceptionally low interest rates that were prevalent in the
years before the Covid-19 crisis.
It is encouraging to be able to report the strong returns that our investment
manager produced over the year under review. Looking forward, against the
current geopolitical and macroeconomic background, the type of companies in
which we invest with resilient earnings growth, exposed to long-term
structural growth themes, that have pricing power and solid balance sheets
should be well placed to produce superior returns for shareholders. There will
inevitably be challenges along the way and equity markets will always be prone
to volatility in the face of bad news but we remain confident in our
investment manager's ability to select a portfolio of high quality, growing
companies that will produce long-term performance for the Company's
shareholders.
Christopher Metcalfe
Chair
23 April 2024
MANAGER'S REVIEW
Review of financial year ended 31 January 2024
Over the year to 31 January 2024 markets remained volatile and interspersed by
geopolitical and macroeconomic risks. It was, however, pleasing to see that
fundamentals re-established themselves, after an unprecedented year in 2022
when both bonds and equities had fallen. That was only the third time in the
past 100 years that there was significant underperformance of both asset
classes at the same time. A lot happened in 2023, including some seismic
shifts such as the confirmation that Artificial Intelligence ('AI') will be a
major source of innovation and disruption and from which the Company's focus
on mega-trends and a long-term time horizon should benefit. At the same
time, a lot of potential problems were averted in 2023, notably the
possibility of (i) systemic bank risk and contagion from US regional bank
failures, (ii) a hard landing in the US economy, and (iii) a US government
debt default. Geopolitical risks rose further during the year, with the
Russia-Ukraine war, the emergence of the Israel-Gaza conflict, the proxy war
in the Straight of Hormuz between Iran and the US, the ongoing agitations by
North Korea and the gradually escalating China-US-Europe tensions related to
Taiwan and the strategic dimension of the semi-conductor industry.
We had some localised regional bank failures in the US in the first few months
of 2023, which led to market concerns of systemic risk and fears of contagion
into the broader global banking sector. In contrast, we believed that the risk
would be limited and failures would be localised. This so far has proven
accurate, even if Credit Suisse ended up in a regulator-imposed takeover by
UBS. The market sighed in relief as these systemic concerns dissipated. This
highlighted the fundamental reasons why we do not hold banks in the portfolio.
Readers can gain more insight on a feature article in the News & Views
section of our website www.martincurrieglobal.com.
We then had the fear of a US government debt default, which would have been
the first in history, as the debt ceiling negotiations between Democrats and
Republicans threatened to be unproductive in May and June. We believed that a
resolution would be found, perhaps not so much at the eleventh hour as at a
few minutes prior to midnight, which ultimately restored some calm and
confidence to the market.
At the same time, we had a market that started 2023 with a quasi-certain
prediction of a recession during the year, which went against our central
scenario of a sharp slowdown rather than a recession, both at the Global and
the US levels. We were proved right.
The year 2023 was also marked by ongoing interest rate hikes by the major
Western central banks, as inflation remained elevated during the first half of
the year with the US Federal Funds Rate increasing by 1% to 5.25%-5.5%, the
European Central Bank increasing rates by 2% to 4.5% and the Bank of England
increasing rates by 1.75% to 5.25%.
In the financial year to 31 January 2024, the portfolio performed positively,
with the NAV total return being +11.2%, vs a benchmark index return of +10.9%.
Pleasingly, this strong outperformance came on the back of no changes to our
investment approach, as our shareholders would have expected, and little
change in terms of stock and sector exposures. We kept our exposure to our
high conviction holdings, with many of them coming through strongly during the
period, notably some of our top 10 holdings such as Nvidia, Ferrari,
Microsoft, Atlas Copco, Moncler, Kingspan, and Linde.
The strongest performing sectors during the financial year were Technology
(+36.4%), Telecommunications (+21.2%), Industrials (+10.8%) - all three
performing ahead or in line with the MSCI ACWI index. All other sectors
underperformed the market, notably Real Estate (-8.3%), Materials (-6.7%),
Consumer Staples (-2.2%).
Stock Contributors during the year
• Nvidia (6.6% contribution to relative performance for the year ended 31
January 2024)- Nvidia outperformed as ChatGPT radically increased the
projected level of demand for its products, bringing 'the iPhone moment in the
AI industry'. Revenue/EPS for FY24 ended 108/199% higher respectively than
expected by analysts' consensus at the start of 2023. We believe that we are
at the start of a multi-year migration of datacentre infrastructure to
accelerated computing. We think that Nvidia has the potential to claim a high
share of overall IT infrastructure spending. Nvidia is the Company's top
holding, see largest 10 holdings in the annual report and accounts for more
information.
• Adobe (1.2% contribution to relative performance for the year ended 31
January 2024) - Adobe's share price benefited from a continued rollout of
generative AI products as well as a positive read across from the pricing of
these products from other parts of the industry. In the period Adobe's
attempted defensive acquisition of Figma was cancelled, which raises question
marks over Adobe's competitive offering. In addition we are seeing competitors
develop more advanced solutions that may encroach on Adobe's designer space
going forward (e.g. Sora - Open AI's text-to-video generative AI solution).
The opportunity and threats from AI technologies therefore remain uncertain.
Adobe enjoyed a strong rally through 2023 so we concluded to sell the position
and lock in profits after the end of the reporting period.
• Microsoft (1.0% contribution to relative performance for the year ended 31
January 2024) - The share price was strong in the period, as wider adoption of
AI has brought to the fore the company's advantages as a platform with a large
installed customer base. The company released CoPilot, an AI-powered virtual
assistant and this is in the early stages of adoption. Second quarter 2023
results were strong with revenue and EPS ahead of market expectations. The
crucial performance indicator of growth of the Azure cloud platform was also
ahead of expectations at +28%, vs 25-26% guidance. Within that AI contributed
6%, above the previous quarter's level of 3%, driven by Open-AI and CoPilot.
We continue to believe in Microsoft's potential to become the platform of
choice for AI, with a first mover advantage especially in the enterprise
setting. Microsoft is the Company's second largest holding, see largest 10
holdings in the annual report and accounts for more information.
Stock Detractors during the year
• Masimo (-2.0% contribution to relative performance for the year ended 31
January 2024) - Masimo's share price started the period strongly, rebounding
by 15% between February and April 2023. However, it was negatively impacted by
the activist investor Politan Capital gaining board seats at the AGM in late
June. On the operational side, the company's healthcare division was
challenged by delays to orders, weak hospital demand and budget constraints.
We engaged with the company and were reassured that the management understands
the need to return to a level of performance akin to their historical track
record, especially after a large acquisition in 2022. However, given the low
visibility into the improvement of consumer sentiment, we decided to exit the
position in October 2023.
• Wuxi Biologics (-1.9% contribution to relative performance for the year
ended 31 January 2024) - A confluence of several factors contributed to the
weakness in Wuxi shares. In the period from February to June the share price
declined by 46% in line with weakness in the Chinese equity market. This was
despite a solid set of pre-released results, albeit with some compression in
the overall profit margin due to investments to expand capacity. While we
believe that execution has been strong relative to the market, reflected by
continuous market share gains, we think that Wuxi now needs to rebuild
credibility with investors. Whilst we still favour the underlying exposures
and thematics of Wuxi, namely innovation, drug complexity, outsourcing, we saw
a clearer pathway to realise the upside elsewhere and exited our position in
Wuxi in December 2023.
• ResMed (-1.4% contribution to relative performance for the year ended 31
January 2024) - Having broadly traded flat in the first 6 months of the year,
ResMed shares were under pressure in August amid concerns surrounding the
second order impacts of GLP-1 drugs which stimulate insulin production in the
body. Specifically, with obesity as a comorbidity of many diseases including
sleep apnea, ResMed's key market, investors were concerned that any impact on
obese patients could lower volumes and addressable markets for businesses
serving these comorbidities. This remains to be proven as access, adherence
and drug stay time have historically proven material barriers to gathering
evidence to demonstrate this point. In late October, ResMed reported a
positive quarterly result, while reiterating the point that higher diagnoses
of obesity could in fact result in simultaneous sleep apnea diagnoses,
increasing patient flow. This drove 2-4% earnings upgrades and alleviated
the concerns around the stock with the share price rebounding c.41% in the
last 3 months of the period. This was accompanied by a positive competitive
backdrop as Philips, the main competitor, agreed on the broad terms of a
consent decree under which it will not sell new sleep therapy devices in the
US. We see Eli Lilly's trial of GLP-1's in sleep apnea, due to be reported in
in the second quarter of 2024, as an important next step.
Portfolio Activity
In the year under review we purchased Pernod Ricard and Estée Lauder in the
consumer sector, Mettler Toledo, Idexx, and Sartorius Stedim in Healthcare,
and Adyen in the Financials sector. We sold out of Dr. Martens and Kerry Group
in Consumer, Masimo and Wuxi Biologics in Healthcare, and AIA in the
Financials sector. We replaced VISA with Mastercard and replaced Ansys with
Cadence Design Systems.
New positions
• Idexx - Idexx is the leading pure play on the structural growth in animal
diagnostics, a market that is more attractive for investors than human health
(with longer product cycles, lower competition and lower customer power).
Idexx boasts structural growth, pricing power, high barriers to entry and
sticky customers with 90% recurring revenues.
• Sartorius Stedim - We sold Wuxi Biologics in the period to fund a purchase
in Sartorius Stedim. While we like the underlying exposures and thematics of
both stocks, namely innovation, drug complexity, outsourcing and single-use
efficiency, we see a clearer pathway to realise the upside of our thesis in
Stedim. Stedim is a single-use biologic manufacturing equipment company.
• Cadence Design Systems - Cadence Design Systems, a US software company,
operating in the oligopolistic Exploratory Data Analysis ("EDA") market and
moving into the adjacent Simulation sector, was a new purchase during the year
under review. We believe that the upside to growth due to the development of
AI is underappreciated by the market, while in our assessment it is poised to
bring a secular shift in EDA akin to the productivity benefits from IT last
seen in the 1980s. Generally, we are buying into long-term growth. The
purchase was funded by the sale of Ansys, a leader in simulation software.
We have greater conviction in Cadence's business model and duration of
value-accretive growth. Meanwhile, both stocks are trading close to fair
value, per our recent reviews. Therefore, we are using today's valuations as
an opportunity to make changes in our concentrated portfolio in line with our
investment conviction.
• Adyen - Adyen is a leading global payment company whose growth is
supported by multiple structural trends in payment such as frictionless
payments, omni-channel e-commerce, and the platform economy. A combination of
a high net revenue CAGR, high medium-term EBITDA margin and a projected 100%+
ROIC profile made it a strong candidate for the portfolio. We took the
opportunity of a sharp pullback in the share price in April as a result of
higher costs incurred for their international expansion as an attractive entry
point.
• Mettler Toledo - Mettler Toledo is a leading provider of precision
instruments and analytical tools across the laboratory, industrial and food
segments with a legacy business in scales and balances. The company's sales
are growing at 7% per year, ROIC is currently 40% and forecast to move to 60%
over five years. The stock has been impacted by a period of underperformance
based on risks of earnings downgrades, which gave us the opportunity in July
to initiate a position. We have held the stock in the past, and believe that
the earnings projections are near their low point.
• Pernod Ricard - We initiated a position in Pernod Ricard in February,
following a period of underperformance of the share price. We believe that
Pernod has a supportive mix of growth and returns profile in consumer staples,
with expected growth over 5 years in sales, earnings, and free cash flow.
Anticipated ROIC improvement and robust earnings results support the potential
for upgrades to analysts' consensus views of future earnings. Trading at a 17%
discount to its 5-year average PE, the stock has an attractive valuation and
in our view is poised to capitalise on premiumisation trends with strong
pricing power.
• Estée Lauder - In June, we initiated a new position in Estée Lauder,
following significant underperformance of the stock and a profit warning in
May. We have a high conviction in the company's leadership within prestige
beauty in the medium and long term, despite the market concerns in the short
term. Whilst we acknowledge that near term trading is challenged we see
inventory issues in China as transitory. With a strong brand portfolio and
mid-teens market share, Estée Lauder's luxury segment growth aligns with high
margin channels, particularly in China. This led to the decision to sell AIA
in favour of Estée Lauder.
• Mastercard - Both VISA and Mastercard are leaders in the payment
technology industry, both operate a capital light model with >60% EBITDA
margin and deliver low to mid-teens revenue growth, underpinned by a secular
shift to cashless payments. We replaced VISA with Mastercard due to the higher
ROIC support from Mastercard (>70%, vs VISA's >40%, with both expanding
over time). In addition, Mastercard offers a slightly better growth outlook
due to its higher exposure to international payments and credits.
Additions to an existing position
• Illumina - Illumina is the global leader in next generation sequencing
('NGS') with a 90% market share at the high-end. It sells instruments and
consumables enabling research and clinical applications at the leading edge of
therapeutics, diagnostics and applied fields.
Exits
• Dr. Martens - We sold our very small position in Dr. Martens.
• Kerry Group - During the period, we exited Kerry Group, as our review
indicated better alternatives in the sector. Despite believing that Kerry
Group's thesis remains intact, its projected rate of growth is not
sufficiently attractive for us.
• Masimo - We sold out of Masimo and used the proceeds to top up Illumina.
• Wuxi Biologics - We sold Wuxi Biologics in the period to fund a purchase
in Sartorius Stedim.
• AIA - We sold AIA in favour of Estée Lauder.
• Ansys - The sale of Ansys, a leader in simulation software, funded the
purchase of Cadence Design Systems.
• VISA - As noted we replaced VISA with Mastercard.
Our outlook for 2024
As we look ahead, we highlight that the market should be supported by the
expected shift in monetary policies globally towards rate cuts in the second
half of 2024, which should favour the quality growth style of the portfolio.
The key predictions from our 2024 outlook are as follows:
Key predictions:
• Inflation could be more elevated and longer lasting in 2024, despite
general easing in pressures coming through.
• Wage inflation, deglobalisation, technological and geopolitical
fragmentation, and energy transition have the potential to keep inflation
structurally more elevated in the medium term.
• Western central bank interest rates have peaked, but we do not expect any
pivot towards cuts in rates until the second half of 2024.
• Central banks have become heavily dependent on key data in making
decisions on interest rates, which will likely fuel volatility in equity
markets in the lead up to inflation reports
• Macroeconomic momentum is at risk of weakening, potentially leading to
ongoing stagflation in EU and the UK in 2024, and slowdowns in the US and
Chinese economies.
• The rapid interest rate hikes in 2022-23 could lead to a rising risk of
recession, although this is still not our central scenario for the US, and
recent economic data has remained very strong for the US economy.
• China is facing a slowdown and structural headwinds, absent additional
government policy initiatives to stimulate the economy.
• We forecast aggregate corporate earnings growth to remain pedestrian and
weak in 2024, (Global +4%, US +5%, EU +3%, Asia +5%, Japan +6%).
• There is an ongoing risk of downgrades to analysts' consensus on earnings,
given optimistic current estimates (World +9%, US +10%, EU +4%, Asia +16% and
Japan +9%).
• Monetary policies shifting towards cuts in the second half of 2024 should
be supportive for equity markets, and for the quality growth style leadership
within that.
• Equity valuations remain more supportive in Europe and Asia, although a
selective approach remains key, given specific geographic and geopolitical
risks.
• The equity market is likely to favour companies with resilient earnings
growth, exposed to long-term structural growth themes, that have pricing power
and solid balance sheets, given the uncertain macro and inflation environment
and the low overall economic growth prospects.
• Thematic opportunities for long-term investors still abound, notably in
the areas of energy transition, ageing population and artificial intelligence.
• Disruption rates for corporates are likely to accelerate given the seismic
shift brought by AI across all areas of the economy and all sectors.
• An ever more disruptive decade is accelerating in 2024 and beyond.
Key investment risks
The challenges that we face as investment managers are summarised in the ten
key risks that we have identified:
Monetary policies risk - the risk of over-tightening in interest rates creates
a higher potential risk of policy mistakes for markets and economies
Fiscal policies risk - the risk of lack of follow-through in stated
infrastructure spending programmes could put more downside risk to economic
momentum
Persistence in inflation - due to higher wage inflation, the risk of stronger
and longer lasting inflation could fuel a need for more tightening or a delay
in loosening monetary policies
Corporate margin pressure - more persistent and more elevated inflation could
lead to more pressure on margins for companies lacking pricing power
Market volatility and Style leadership volatility - shifting expectations in
monetary policies could lead to ongoing volatility in markets, and in
leadership between the Value and Growth styles
Lower long-term growth - growing indebtedness is likely to reduce long-term
growth in our view, and make individual growth opportunities more scarce
Higher taxation - due to higher indebtedness, there is a likelihood of higher
tax rates, both for households and for corporates
Geopolitical risks flare ups - The Israel/Hamas conflict adds to global
tension already heightened by the Russia/Ukraine war. Escalation and
broadening of these conflicts are key to areas to monitor. Other geopolitical
hotspots are Taiwan/China, North Korea, Iran-Israel, and China/USA. Some of
these geopolitical risks will be military, others will materialise into
ongoing technological conflicts, such as that between China and the USA. Cyber
attacks are also a part of that risk.
US presidential elections - at this stage, the outcome of the US presidential
elections remains highly unclear. This will bring an element of uncertainty as
the market focus shifts to that event in the second half of 2024.
Climate disasters - climate change related disasters are likely to continue to
take their toll on various regions, with the risk of impact on societies, but
also on corporates in terms of risk to productive capacities and to assets in
general.
Mid-term opportunities - energy transition, geopolitical & technological
fragmentation, and AI are the key themes to focus on
We continue to see opportunities in the eight mid-term thematic opportunities
that we have described in recent years and which are listed below:
· Green and alternative energy
· Energy efficient infrastructure
· Electric transportation - both EV and high speed railways
· Healthcare infrastructure
· Technological and geopolitical fragmentation
· Cloud computing and cyber security
· AI, robotics and automation
· Metaverse and quantum computing
All of these themes benefit from significant investment support, from the
private and/or public sectors, with some of these investments being very long
duration, making them attractive over the long-term time horizon that we focus
on.
Three particular themes that we believe are important for investors to focus
on currently, amongst the eight listed above, are energy transition, AI, and
ageing population.
Energy transition captures the first three themes on our list, namely green
and alternative energy, energy efficient infrastructure, and electric
transportation.
AI received a significant boost in 2023, both from the excitement triggered by
ChatGPT, an app that reached 100m users at the fastest pace ever achieved by
any app, and from the outsized earnings achieved by Nvidia in the first
quarter of 2023. Nvidia then continued to beat analysts' consensus
expectations in each of its subsequent quarterly reports, leading the market
to realise that the demand for AI has been significantly under-appreciated. We
believe that the focus on AI will remain significant going forward. We also
believe that the potential for AI remains under-appreciated by the market
fundamentally, but are also cognisant that themes such as this can generate
outsized excitement, which can lead to valuations becoming disconnected from
fundamentals. It is therefore critical, as always, to ensure that investors
maintain valuation discipline, based on detailed fundamental assessments.
The AI mega-theme captures the last four themes that we highlight above,
namely technological and geopolitical fragmentation, cloud computing and cyber
security, robotics, automation and AI, and metaverse and quantum computing.
The final mega-theme, ageing population, encompasses and highlights the need
for increased healthcare infrastructure, as the need for more healthcare
grows.
These three mega-themes are bringing seismic changes to the economy, and have
the potential to bring more innovation and disruption. They are captured in
our mega-trends framework, which is illustrated in the annual report and
accounts, along with the themes that run through the portfolio.
Quality growth style should continue to be more supported in 2024 and beyond
We believe that in uncertain macroeconomic conditions such as the ones which
we face, the quality growth style should be supported in 2024 and beyond.
There is a lot of uncertainty due to the broad range of possible outcomes in
inflation, monetary policies, the economic cycle and the corporate profits
cycle, as we detail above. Quality growth stocks, ie profitable growth stocks,
generating high returns on invested capital and with strong balance sheets,
should fare well in such an uncertain environment, in our view.
All in all, we believe that it remains important in such an uncertain
environment to continue to focus on companies with (i) earnings resilience,
given the risk of ongoing earnings downgrades, (ii) pricing power, in order to
protect margins in this stickier inflation environment, (iii) solid balance
sheets, to give better protection in case of recession, and (iv) structural
growth opportunities.
Zehrid Osmani
Portfolio Manager, Martin Currie Global Portfolio Trust plc
Head of Global Long-Term Unconstrained Equities,
Martin Currie
23 April 2024
PORTFOLIO SUMMARY
By sector
31 January 2024 31 January 2023 MSCI All Country World index %
31 January 2024 MSCI All Country World index % 31 January 2023
Company % Company %
Information Technology 30.8 23.5 31.5 20.6
Health Care 22.8 11.4 26.5 12.5
Industrials 12.2 10.6 9.7 10.0
Consumer Discretionary 12.0 10.8 15.3 11.1
Materials 7.7 4.2 7.4 5.1
Consumer Staples 7.3 6.7 5.9 7.3
Financials 7.2 16.0 3.7 15.3
Communication Services - 7.5 - 7.1
Energy - 4.5 - 5.4
Utilities - 2.5 - 3.0
Real Estate - 2.3 - 2.6
100.0 100.0 100.0 100.0
By asset class
31 January 2024 % 31 January 2023 %
Equities 103.1 111.1
Cash 0.8 0.9
Less borrowings (3.9) (12.0)
100.0 100.0
Portfolio distribution by region
31 January 2024 31 January 2023 MSCI All Country World index %
31 January 2024 MSCI All Country World index % 31 January 2023
Company % Company %
North America 52.2 66.0 47.1 63.1
Developed Europe 44.4 15.6 41.9 16.6
Developed Asia Pacific ex Japan 3.4 2.6 7.7 3.3
Global Emerging Markets - 10.0 3.3 11.3
Japan - 5.6 - 5.5
Middle East - 0.2 - 0.2
100.0 100.0 100.0 100.0
Portfolio holdings as at 31 January 2024
Market value % of total
Sector Country £000 portfolio
North America 138,361 52.2
Nvidia Information Technology United States 24,357 9.2
Microsoft Information Technology United States 17,136 6.5
Linde Materials United States 13,818 5.2
Mastercard Financials United States 11,341 4.3
Illumina Health Care United States 11,035 4.2
ResMed Health Care United States 8,925 3.4
Zoetis Health Care United States 6,437 2.4
Cadence Design Systems Information Technology United States 6,364 2.4
Mettler Toledo Industrials United States 6,280 2.4
Autodesk Information Technology United States 6,188 2.3
Adobe Information Technology United States 6,109 2.3
Veeva Systems Health Care United States 5,918 2.2
Nike Consumer Discretionary United States 5,107 1.9
IDEXX Laboratories Health Care United States 4,858 1.8
Estee Lauder Consumer Staples United States 4,488 1.7
Developed Europe 117,527 44.4
ASML Holding Information Technology Netherlands 14,074 5.3
Ferrari Consumer Discretionary Italy 11,792 4.5
Atlas Copco Industrials Sweden 10,576 4.0
Moncler Consumer Discretionary Italy 10,341 3.9
L'Oreal Consumer Staples France 10,212 3.9
Kingspan Group Industrials Ireland 9,073 3.4
Adyen Financials Netherlands 7,794 2.9
Sartorius Stedim Biotech Health Care France 7,645 2.9
Hexagon Information Technology Sweden 7,454 2.8
Coloplast B Health Care Denmark 6,645 2.5
Croda International Materials United Kingdom 6,644 2.5
Assa Abloy Industrials Sweden 6,325 2.4
Pernod Ricard Consumer Staples France 4,589 1.7
Kering Consumer Discretionary France 4,363 1.7
Developed Asia Pacific ex Japan 8,899 3.4
CSL Health Care Australia 8,899 3.4
Total portfolio holdings 264,787 100.0
LARGEST 10 HOLDINGS
31 January 2024 31 January 2024 31 January 2023 31 January 2023
Market value % of total Market value % of total
£000 portfolio £000 portfolio
Nvidia 24,357 9.2 12,745 4.6
Microsoft 17,136 6.5 14,228 5.1
ASML Holding 14,074 5.3 14,223 5.1
Linde 13,818 5.2 15,041 5.4
Ferrari 11,792 4.5 11,164 4.0
Mastercard 11,341 4.3 - -
Illumina 11,035 4.2 5,991 2.2
Atlas Copco 10,576 4.0 10,325 3.7
Moncler 10,341 3.9 13,190 4.8
L'Oreal 10,212 3.9 11,623 4.2
As at 31 January 2024 the largest 10 holdings accounted for 51.0% of the
portfolio (46.4% as at 31 January 2023).
Largest 10 holdings in detail
Nvidia
Information Technology, United States
The company designs graphics processing units for gaming and professional
markets. We see long-term upside optionality in several secular growth areas,
including Gaming, Cloud, AI and Autonomous Vehicles. We believe the market is
missing the longevity of growth at Nvidia - specifically from referencing and
Edge AI.
Microsoft
Information Technology, United States
US software company Microsoft, best known for its Windows operating system,
the Xbox gaming console and cloud computing service Azure, is in a prime
position to benefit from a new 'golden era' of investment in technology. IT
investment is becoming crucial for every aspect of corporate life -
infrastructure, marketing, sales and commerce - and Microsoft stands to
capture a significant share of this double-digit-growing expenditure.
Furthermore, a progressive move towards a subscription-based model is
improving the company's pricing power and its competitive position in the
market.
ASML Holding
Information Technology, Netherlands
This semiconductor equipment company enjoys a very strong market position and
close relationships with customers. In addition the company is benefiting from
the trend of on-shoring of semiconductor production. The company is critical
in enabling innovation and development in the semiconductor industry. This
backdrop, coupled with strong structural growth in semiconductor volume, gives
the company a very attractive long-term growth and profitability outlook.
Linde
Materials, United States
A resilient and geographically diverse business, it has high exposure to
fast-growing emerging markets, combined with a solid base in the Americas.
Linde exerts strong pricing power from its leading positions in the regions in
which it operates. Although revenue growth is correlated to global industrial
production, the structure of client contracts using 'take-or-pay' and
'facility fees' means that revenues are relatively cushioned during economic
downturns. Further, the merger with Praxair has accelerated a strategy of
focusing on less economically sensitive customers in the healthcare and food
and beverage sectors.
Ferrari
Consumer Discretionary, Italy
The Italian sports car manufacturer provides a unique play on the global
growth of high-net-worth individuals and their passion for speed. It has
enviable pricing power, with huge scope for average selling prices to increase
through greater use of the Special Series and Icona platforms - already a
sizeable premium to other luxury car manufacturers. Growth potential is
further enhanced by electrification as they launch new hybrid and electric
models.
Mastercard
Financials, United States
The migration from cash and cheque to electronic payment is a multi-year
secular trend that is still far from mature. While this is a seemingly
consensual proposition, the market tends to underestimate this trend. The
company's ROIC is highly attractive, even though the electronic payment space
is competitive, its transition from a pure card network to a multi-rail
provider of payment solutions proves how the company can face these challenges
from a position of strength.
Illumina
Healthcare, United States
This company has developed a near-monopoly in next-generation sequencing
(NGS). Lower costs, time and complexity of the historically high-end
characterisation methodology means that Illumina's product should become not
only sought after, but ubiquitous in new multi-sector applications that were
historically out of reach.
Atlas Copco
Industrials, Sweden
The Swedish industrial tools and equipment manufacturer is very well-run and
has one of the best - and most consistent - return
profiles among European capital goods stocks. Atlas' value proposition in air
compressors is a compelling one, which will allow it to maintain a high market
share and a pricing premium. The stock is also underpinned by an
accommodative cash distribution policy, which is highly attractive in Sweden's
low interest-rate environment.
Moncler
Consumer Discretionary, Italy
Moncler is the undisputed global leader in super premium down jackets and has
a rich heritage and strategic focus on long-term sustainable and responsible
growth. The market is aware that the business is still expanding its
distribution and that the total available market is very large relative to its
current revenues (20% of total luxury and personal goods is apparel). However,
the market seems focused on short-term concerns around trade and a slowdown in
China, and seems to be missing the attractive long-term growth opportunity and
the management's exemplary execution within the category. We believe that the
structural growth potential of the company is compelling, and its ability to
continue to innovate remains strong.
L'Oreal
Consumer Staples, France
Based in France, L'Oreal is number one in global beauty, outgrowing a market
which grows 3-5% annually. The company's R&D, marketing capability,
logistics platform and global expertise in the space gives us conviction in
the sustainability of this outperformance. Thanks to sensible capital
allocation, L'Oreal has a long history of value creation through bolt-on
acquisitions. Further to this, the balance sheet is highly underutilised,
giving significant opportunity to further beat expectations.
Key Performance Indicators and Performance
The Board uses certain key performance indicators ('KPIs') to monitor and
assess its performance in achieving the Company's objectives. The Board have
made no changes to the KPI targets in the financial year to 31 January 2023.
KPI Target 2024 Achieved 2023 Achieved
1. Net asset value performance
relative to benchmark (over 3 years) Outperform -24.41% No -17.72% No
2. Performance against Company's peers (over 3 years)
Top third performance 9 out of 13 No 10 out of 14 No
3. Ongoing charges Less than 0.70% 0.64% Yes 0.61% Yes
1. Net asset value performance relative to benchmark
The Board assessed the net asset value total return compared to the benchmark.
It is measured on a financial year basis and assessed over a rolling three
year period. The benchmark with effect from 1 February 2020 is the MSCI All
Country World index. Prior to this, the benchmark was the FTSE World index.
The KPI was not achieved for the period. The return of the Company was 4.4%
and the benchmark 28.8% for the three years to 31
January 2024.
2. Performance against the Company's peers
The Board monitors the share price total return performance versus all
competitor funds within the AIC Global sector over a rolling three year
period.
The share price total return for the Company was -1.9% over the three years to
31 January 2023 which ranked 9 out of 13 in the AIC Global sector.
3. Ongoing charges
The Board monitors ongoing charges on a regular basis to ensure that it meets
its target by maintaining cost discipline and its focus on value adding
activities. The KPI was met for the year at 0.64%. The ongoing charges
figure has been calculated in line with the Association of Investment
Companies ('AIC') recommended methodology.
Principal and emerging risks and uncertainties
Risk and mitigation
The Company's business model is longstanding and resilient to most of the
short-term operational uncertainties that it faces. The Board believes that
these are effectively mitigated by the internal controls established by the
Board and by the AIFM, Franklin Templeton Investment Trust Management Limited,
and their combined oversight of the investment manager, as described in the
table below. Its principal risks and uncertainties are therefore largely
driven by the inherent uncertainties of investing in global equity markets.
The Board's process seeks to mitigate known risks and to identify new risks as
they emerge.
However, it is recognised that the likelihood and timing of crystallisation of
some risks, known and unknown, cannot be predicted and the Board then relies
on professional management, effective systems and communication to mitigate
and respond to them as and when they arise.
Operational and management risks are regularly monitored by the AIFM and by
the Board at Board meetings. As part of its annual strategy meeting the Board
carries out a robust assessment of the principal and emerging risks facing the
Company, including those that would threaten its business model, future
performance, solvency or liquidity.
The Board's planned mitigation measures for the principal and emerging risks
are described below.
The Board notes that the dominant global macroeconomic risks are geo-political
tensions, inflation, and climate transition. These are however considered to
be risks that have an impact on the identified principal and emerging risks
and are therefore considered and managed in that context and the investment
manager takes full account of these risks in assembling and monitoring the
portfolio of investments.
Principal Risk Mitigation
Sustained investment underperformance The Board oversees the implementation of the investment strategy and monitors
the performance of the
investment portfolio. The portfolio manager attends all Board meetings and
reviews the portfolio with the Board together with data that shows statistical
measures of the Company's risk and return profile. Should there be sustained
investment underperformance despite reasonable mitigation measures taken by
the investment manager, the Board would assess the cause and take appropriate
action to manage this risk. The investment strategy is index ignorant and will
not track indices; it will therefore underperform in certain market conditions
and the Board will assess whether underperformance is due to market
conditions, poor manager performance or whether the strategy itself is
unsustainable.
There is increasing awareness of the challenges and emerging risks posed by
climate change. The investment process incorporates detailed analysis of ESG
issues and, as set out in the Manager's review, this includes an assessment of
the potential impact of climate change. Overall, the specific potential
effects of climate change are difficult, if not impossible, to predict and to
measure and the Board and investment manager will continue to monitor
developments in this important risk area.
Geopolitical risks have always been an input into the investment process. This
risk area continues to be highlighted as a result of the Russian invasion of
Ukraine, with the resultant effects on global trade posed by
supply shocks, higher levels of inflation, and higher interest rates as
central banks seek to contain inflation and volatility in asset prices.
Further information on geopolitical risks is set out in the Outlook section of
the
Manager's review.
Material decline in market capitalisation of the Company The Board recognises that the zero discount policy allows new shareholders to
purchase shares and current shareholders to sell their shares at close to NAV,
in normal market conditions. Although this level of liquidity
encourages investment in the Company, it could also increase the risk of a
material decline in the size of the
Company. The Board monitors the performance and pace of share buybacks and the
Company's shareholder profile. Decline could also come as a consequence of the
Company's failure to meet its investment objective. The Board believes that
good long-term performance will mitigate this likelihood, increase demand for
the Company's shares and, subject to overall market stability, permit the
market capitalisation of the Company to increase.
Loss of s1158-9 tax status Loss of s1158-9 tax status would have serious consequences for the
attractiveness of the Company's shares.
The Board considers that, given the regular oversight of this risk by the
audit committee, the AIFM and the
investment manager, the likelihood of this risk occurring is minimal but as
the consequence of loss of the tax status would be very damaging it is
highlighted as a principal risk. The audit committee regularly reviews the
eligibility conditions and the Company's compliance against each, including
the minimum dividend requirements and shareholder composition for close
company status.
On the basis of its continual and ongoing assessment of the principal and
emerging risks facing the Company, and given its current position, the Board
is confident that the Company will be able to continue in operation and meet
its liabilities as they fall due. The Board believes that the processes of
internal control that the Company has adopted and oversight by the AIFM
continue to be effective.
Going concern status
The Company's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chairman's
statement, Manager's review, Strategic report and the Report of the directors.
The financial position of the Company as at 31 January 2024 is shown in the
statement of financial position. The statement of cash flow of the Company is
included in this announcement. Note 15 sets out the Company's risk management
policies, including those covering market risk, liquidity risk and credit
risk. In accordance with the 2019 AIC Code of Corporate Governance and the
2018 UK Corporate Governance Code, the Directors have undertaken a rigorous
review of the Company's ability to continue as a going concern. The Company's
assets consist of a diverse portfolio of listed equity shares which, in most
circumstances, are realisable within a very short timescale. The Directors
are mindful of the principal and emerging risks and uncertainties.
They have reviewed revenue forecasts for the next two financial years,
including liabilities arising from the loan facility, and believe that the
Company has adequate financial resources to continue its operational existence
for the period to 31 January 2026, which is at least 12 months from the date
on which the financial statements are authorised for issue. Accordingly, the
Directors continue to adopt the going concern basis in preparing these
financial statements.
Viability statement
The Company's business model is designed to deliver long-term returns to its
shareholders through investment in large and liquid stocks in global equity
markets. Its plans are therefore based on having no fixed or limited life
provided that global equity markets continue to operate normally. The Board
has assessed the Company's viability over a three year period in accordance
with provision 31 of the UK Corporate Governance Code as it believes that this
is an appropriate period over which it does not expect there to be any
significant change to the principal risks and adequacy of the mitigating
controls in place. The Board considers that this reflects the minimum period
which should be considered in the context of the Company's long-term objective
but one which is limited by the inherent and increasing uncertainties involved
in assessment over a longer period.
In making this assessment the Directors have considered the following factors:
• the principal and emerging risks and
uncertainties and the mitigating actions, including specifically the current
geopolitical and economic environment;
• the mitigation measures which key service
providers including the AIFM have in place to maintain operational resilience;
• the challenges posed by climate change;
• the ongoing relevance of the Company's investment
objective in the current environment;
• the level of income forecast to be generated by
the Company and the liquidity of the Company's portfolio;
• the low level of fixed costs relative to the
Company's liquid assets;
• the expectation that in normal markets more than
98% of the current portfolio could be liquidated within two trading days; and
• the quantity of debt and the ability of the
Company to make payments of interest and repayments of principal on its debt
on their due dates.
Based on the results of their analysis and the Company's processes for
monitoring each of the factors set out above, the Directors have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over at least the next three years.
Responsibility statement
Each of the Directors confirms that to the best of their knowledge:
· the financial statements, which have been prepared in accordance
with United Kingdom Generally Accepted Accounting Practice, give a true and
fair view of the assets, liabilities, financial position and profit of the
Company; and
· the Report of the directors, Strategic report and Manager's
review include a fair, balanced and understandable review of the development
and performance of the business and the position of the Company, together with
a description of the principal risks and the uncertainties that it faces; and
· the annual report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the Company's performance, business model and strategy.
The Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (and applicable law).
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the
Company for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements respectively; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements and the Directors'
remuneration report comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. The financial statements are published on the Company's
website (www.martincurrieglobal.com) which is maintained by the investment
manager. The Directors are responsible for the maintenance and integrity of
the Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
This responsibility statement was approved by the Board of Directors on 23
April 2024 and is signed on its behalf by the Chair, Christopher Metcalfe.
STATEMENT OF COMPREHENSIVE INCOME
Year to 31 January 2024 Year to 31 January 2023
Revenue Capital Total Revenue Capital Total
Note £000 £000 £000 £000 £000 £000
Net gains/(losses) on investments 7 - 25,631 25,631 - (30,277) (30,277)
Net currency losses - - - - (43) (43)
Revenue 2 2,832 - 2,832 2,889 - 2,889
Investment management fee(1) (226) (904) (1,130) (244) (978) (1,222)
Other expenses 3 (468) - (468) (493) - (493)
Net return/(loss) on ordinary activities before finance costs and taxation
2,138 24,727 26,865 2,152 (31,248) (29,096)
Finance costs 1(d) (101) (400) (501) (71) (284) (355)
Net return/(loss) on ordinary activities before taxation
2,037 24,327 26,364 2,081 (31,532) (29,451)
Taxation on ordinary activities 4 (287) - (287) (300) - (300)
Net return/(loss) attributable to shareholders
1,750 24,327 26,077 1,781 (31,532) (29,751)
Net return/(loss) per Ordinary share
5 2.37p 32.87p 35.24p 2.16p (38.20p) (36.04p)
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 2022.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
The notes below form part of these financial statements.
There is no other comprehensive income and therefore the return attributable
to shareholders is also the total comprehensive income for the period.
(1)The details of the investment management fee are provided in the Report of
the directors in the annual report and accounts.
STATEMENT OF FINANCIAL POSITION
As at 31 January 2024 As at 31 January 2023
Note £000 £000 £000 £000 £000 £000
Non-current assets
Investments at fair value through profit or loss
7 264,787 277,606
Current assets
Trade receivables 8 1,029 1,771
Cash and cash equivalents 9 1,922 1,256
2,951 3,027
Current liabilities
Trade payables 10 (961) (865)
Bank loan 10 (10,000) (30,000)
(10,961) (30,865)
Total net assets 256,777 249,768
Equity
Called up Ordinary share capital 11 4,934 4,934
Share premium account 11,823 11,424
Capital redemption reserve 11,083 11,083
Capital reserve, of which: 12 228,307 221,463
Realised capital reserve (distributable) 156,688 154,191
Unrealised gains on investments (undistributable)
71,619 67,272
Revenue reserve 630 864
Total shareholders' funds 256,777 249,768
Net asset value per Ordinary share 13 360.5p 328.2p
The notes below form part of these financial statements.
Martin Currie Global Portfolio Trust plc is registered in Scotland, company
number SC192761.
The financial statements were approved by the Board of directors on 23 April
2024 and signed on its behalf by Christopher Metcalfe, Chair.
STATEMENT OF CHANGES IN EQUITY
Called up Share Capital Special
Ordinary premium redemption distributable Capital Revenue
share capital account reserve reserve reserve reserve Total
Note £000 £000 £000 £000 £000 £000 £000
As at 31 January 2023 4,934 11,424 11,083 - 221,463 864 249,768
Net return attributable to shareholders
- - - - 24,327 1,750 26,077
Ordinary shares issued 12 - 399 - - 1,940 - 2,339
Ordinary shares bought back 12 - - - - (18,305) - (18,305)
Dividends paid 6 - - - - (1,118) (1,984) (3,102)
As at 31 January 2024 4,934 11,823 11,083 - 228,307 630 256,777
Called up Share Capital Special
Ordinary premium redemption distributable Capital Revenue
share capital account reserve reserve reserve reserve Total
Note £000 £000 £000 £000 £000 £000 £000
As at 31 January 2022 4,934 11,424 11,083 76,297 211,583 513 315,834
Net (loss)/return attributable to shareholders
- - - - (31,532) 1,781 (29,751)
Ordinary shares bought back 12 - - - - (32,848) - (32,848)
Dividends paid 6 - - - (2,037) - (1,430) (3,467)
Transfers between reserves 1 (j) - - - (74,260) 74,260 - -
As at 31 January 2023 4,934 11,424 11,083 - 221,463 864 249,768
The notes below form part of these financial statements.
STATEMENT OF CASH FLOW
Year to 31 January 2024 Year to 31 January 2023
Note £000 £000 £000 £000
Cash flows from operating activities
Net return/(loss) on ordinary activities before taxation 26,364 (29,451)
Adjustments for:
(Gains)/losses on investments 7 (25,631) 30,227
Finance costs 501 355
Dividend income recognised 2 (2,790) (2,885)
Interest income recognised 2 (42) (4)
Decrease/(increase) in receivables 17 (18)
Decrease in payables (26) (75)
Overseas withholding tax suffered 4 (287) (300)
(28,258) 27,300
Net cash flows from operations (1,894) (2,151)
Interest received 42 4
Dividends received 2,732 2,730
2,774 2,734
Net cash flows from operating activities 880 583
Cash flows for investing activities
Purchases of investments (80,424) (39,765)
Sales of investments 119,657 70,029
Net cash flows from investing activities 39,233 30,264
Cash flows from financing activities
Repurchase of Ordinary share capital (18,246) (32,358)
Shares issued for cash 2,339 -
Equity dividends paid 6 (3,102) (3,467)
Draw down of bank loan 10,000 -
Repayment of bank loan (30,000) -
Interest and fees paid on bank loan (438) (355)
Net cash flows from financing activities (39,447) (36,180)
Net increase/(decrease) in cash and cash equivalents 666 (5,333)
Cash and cash equivalents at the start of the year 1,256 6,589
Cash and cash equivalents at the end of the year 1,922 1,256
Analysis of debt
Year to Exchange Year to
31 January 2023 Cash flows movements 31 January 2024
Note £000 £000 £000 £000
Cash at bank 9 1,256 666 - 1,922
Bank loan 10 (30,000) 20,000 - (10,000)
Net debt (28,744) 20,666 - (8,078)
Year to Exchange Year to
31 January 2022 Cash flows movements 31 January 2023
Note £000 £000 £000 £000
Cash at bank 9 6,589 (5,333) - 1,256
Bank loan 10 (30,000) - - (30,000)
Net debt (23,411) (5,333) - (28,744)
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
Note 1: Accounting policies
a) For the reporting period, the Company is applying FRS 102 Financial
Reporting Standard applicable in the UK and Republic of Ireland (FRS 102),
which forms part of the Generally Accepted Accounting Practice ('UK GAAP')
issued by the Financial Reporting Council ('FRC').
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 and emerging risks and
uncertainties including those related to geopolitical risks and climate
considerations.
They have reviewed revenue forecasts for the next two financial years,
including liabilities arising from the loan facility, and believe that the
Company has adequate financial resources to continue its operational existence
for the period to 31 January 2026, which is at least 12 months from the date
the financial statements are authorised for issue. Accordingly, the Directors
continue to adopt the going concern basis in preparing these financial
statements.
These financial statements have been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority,
FRS102 issued by the FRC and the revised Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture Capital
Trusts' (SORP) issued by the AIC in July 2022.
Functional currency - the Company is required to identify a functional
currency, being the currency in which the Company predominately operates. The
Board has determined that sterling is the Company's functional currency, which
is also the currency in which these financial statements are prepared. This is
also the currency in which all expenses and dividends are paid.
The Directors have considered the impact of climate change on the value of the
listed investments that the Company holds. In the view of the Directors, as
the portfolio consists of listed equities, their market prices should reflect
the impact, if any, of climate change and accordingly no adjustment has been
made to take account of climate change in the valuation of the portfolio in
these financial statements.
b) Income from investments (other than capital dividends), including
taxes deducted at source, is included in revenue by reference to the date on
which the investment is quoted ex-dividend, or where no ex-dividend date is
quoted, when the Company's right to receive payment is established. UK
investment income is stated net of the relevant tax credit. Overseas dividends
include any taxes deducted at source. Special dividends are credited to
capital or revenue, according to the circumstances. Stock dividends are
treated as unfranked investment income; any excess in value of the shares
received over the amount of the cash dividend is recognised as a capital item
in the statement of comprehensive income.
c) Interest receivable and payable, investment management fees and
other expenses are measured on an accruals basis.
d) The investment management fee and finance costs in relation to debt
are recognised four-fifths as a capital item and one-fifth as a revenue item
in the statement of comprehensive income in accordance with the Board's
expected long-term split of returns in the form of capital gains and revenue,
respectively. Finance costs relate to interest and fees on bank loans and
overdrafts. All other expenses are charged to revenue except where they
directly relate to the acquisition or disposal of an investment, in which case
they are treated as described in (f) below. Full details of the investment
management fee are included in the Report of the directors in the annual
report and accounts.
e) Investments - investments have been classified upon initial
recognition at fair value through profit or loss. Investments are recognised
and derecognised at trade date where a purchase or sale is under a contract
whose terms require delivery within the time frame established by the market
concerned, and are initially measured at fair value. After initial
recognition, investments are valued at fair value. For listed investments,
this is deemed to be bid market prices. Gains and losses arising from changes
in fair value are included in net profit or loss for the year as a capital
item in the statement of comprehensive income and are ultimately recognised in
the capital reserve.
f) Transaction costs incurred on the purchase and disposal of
investments are recognised as a capital item in the statement of comprehensive
income.
g) Monetary assets and liabilities expressed in foreign currencies are
translated into sterling at rates of exchange ruling at the date of the
statement of financial position.
Non-monetary items expressed in foreign currencies held at fair value are
translated into sterling at rates of exchange ruling at the date the fair
value is measured. Transactions in foreign currency are converted to sterling
at the rate ruling at the date of the transaction. Exchange gains and losses
are taken to the income statement as a capital or revenue item depending on
the nature of the underlying item.
h) Cash and cash equivalents comprise cash and demand deposits which are
readily convertible to a known amount of cash and are subject to insignificant
risk of changes in value.
i) Dividends payable - under FRS102 dividends should not be accrued
in the financial statements unless they have been approved by shareholders
before the statement of financial position date. Dividends to equity
shareholders are recognised in the statement of changes in equity when the
shareholder's right to receive the payment is established. In the case of the
fourth interim dividend, this would be the ex-dividend date of 4 April 2024.
j) Called up ordinary share capital - represents the nominal value
of the issued share capital including shares held in Treasury. This reserve
is non-distributable.
The share premium account - when shares held in Treasury are reissued, the
excess of the sales proceeds over the weighted average price of repurchase is
allocated to the share premium account. This reserve is non-distributable.
The capital redemption reserve - represents the nominal value of the shares
bought back and cancelled. This reserve is non-distributable.
The special distributable reserve - created through the cancellation and
reclassification of the share premium account in 1999 and 2004. Prior to 1
February 2021, the costs of share buybacks and the proceeds of shares
re-issued from Treasury up to the original cost of repurchase, calculated by
applying the weighted average price of shares held in Treasury, were allocated
to the special distributable reserve. Following the Board's decision in the
prior year to simplify the Company's reserves, the balance of the special
distributable reserve of £74,260,000 was transferred in full to the realised
capital reserve on 16 June 2022 (see Statement of changes in equity for more
details on the movement in reserves). Thus, the balance of this reserve as at
31 January 2024 is nil.
The capital reserve - gains or losses on realisation of investments and
changes in fair values of investments are transferred to the realised 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 investment management fee and
relevant finance costs are charged to this reserve. Any associated tax
relief is also credited to this reserve.
With effect from 16 June 2022, the accounting policy has been updated
following the passing of Resolution 18 at the Company's AGM, whereby the new
Articles of Association were adopted which allow the realised portion of the
capital reserve to be distributable by way of dividend in addition to
continuing to be available for distribution by way of share buybacks.
The consolidation of the special distributable reserve and the capital reserve
has had no impact on the Company's cash or net assets.
The revenue reserve - represents net revenue earned that has not been
distributed to shareholders. This reserve is fully
distributable.
k) Taxation - the charge for taxation is based upon the revenue for
the year and is allocated according to the marginal basis between revenue and
capital using the Company's effective rate of corporation tax for the
accounting period.
l) Deferred taxation - deferred taxation is recognised in respect of
all timing differences that have originated but not reversed at the statement
of financial position date where transactions or events that result in an
obligation to pay more or a right to pay less tax in future have occurred at
the statement of financial position date measured on an undiscounted basis and
based on enacted tax rates. This is subject to deferred tax assets being
recognised only if it is considered more likely than not that there will be
suitable profits from which the future reversal of the underlying temporary
differences can be deducted. Timing differences are differences arising
between the Company's taxable profits and its results as stated in the
accounts which are capable of reversal in one or more subsequent periods. Due
to the Company's status as an investment trust, and the intention to continue
meeting the conditions required to obtain approval as an investment trust in
the foreseeable future, the Company has not provided deferred tax on any
capital gains and losses arising on the revaluation or disposal of
investments.
m) Estimates - estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimates are revised and in any future periods affected. There
have been no significant judgements, estimates or assumptions for the year.
n) Bank loans are classified as financial liabilities at amortised cost.
Interest and fees payable on the bank loan are accounted for on an accrual
basis in the statement of comprehensive income.
Note 2: Revenue from investments
Year ended Year ended
31 January 2024 31 January 2023
£000 £000
Dividends from listed investments
UK equities 122 275
International equities 2,668 2,610
Other revenue
Interest on deposits 42 4
2,832 2,889
There were no capital dividends received during the year ended 31 January 2024
(2023: £nil).
Note 3: Other expenses
Year ended 31 January 2024 Year ended 31 January 2023
£000 £000
Directors' fees 147 158
Audit fees 66 56
Advertising and public relations 63 122
Professional, regulatory and listing fees 55 41
Registration fees 43 38
Depositary fees 29 19
Printing and postage 14 19
Directors' and officers' liability insurance 12 12
Custody fees 11 7
Legal fees 1 26
Secretarial fee(1) - 25
VAT recovered (19) (56)
Other 46 26
468 493
All expenses detailed above include VAT where applicable.
(1)With effect from 1 July 2022, the AIFM ceased charging a separate company
secretarial fee.
Note 4: Taxation on ordinary activities
Year ended 31 July 2024 Year ended 31 January 2023
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Overseas tax suffered 287 - 287 300 - 300
The corporation tax rate for the year ended 31 January 2024 was 24.03% (2023:
19.00%). The tax charge for the year differs from the charge resulting from
applying the standard rate of corporation tax in the UK. The differences are
explained below.
Year ended 31 January 2024 Year ended 31 January 2023
£000 £000
Net return before taxation 26,364 (29,451)
Corporation tax at rate of 24.03% (2023: 19.00%) 6,335 (5,596)
Effects of:
UK dividends not taxable (29) (52)
(Gains)/losses on investments not taxable (6,159) 5,751
Overseas dividends not taxable (641) (496)
Overseas tax suffered 287 300
Increase in excess management and loan expenses 494 393
Total tax charge for the year 287 300
As at 31 January 2024, the Company had unutilised management expenses of £46
million (2023: £44 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 for that status in the foreseeable future, the
Company has not provided deferred tax on capital gains and losses arising on
the revaluation or disposal of investments.
Note 5: Returns per share
Year ended 31 January 2024 Year ended 31 January 2023
The returns and net asset value per Ordinary share are calculated with
reference to the following figures:
Revenue return £000 1,750 1,781
Capital return £000 24,327 (31,532)
Total return £000 26,077 (29,751)
Weighted average number of shares in issue during the year 73,994,270 82,551,425
Revenue return per share 2.37p 2.16p
Capital return per share 32.87p (38.20p)
Total return per share 35.24p (36.04p)
Note 6: Dividends
Year ended Year ended
31 January 2024 31 January 2023
£000 £000
Year ended 31 January 2022 - fourth interim dividend of 1.50p - 1,285
Year ended 31 January 2023 - fourth interim dividend of 1.50p 1,118 -
Year ended 31 January 2024 - first interim dividend of 0.90p (2023: 0.90p) 675 752
Year ended 31 January 2024 - second interim dividend of 0.90p (2023: 0.90p) 662 728
Year ended 31 January 2024 - third interim dividend of 0.90p (2023: 0.90p) 647 702
3,102 3,467
Revenue return per share for the year ended 31 January 2024 is 2.37p (2023:
2.16p), refer to note 5 for details of calculation.
The fourth interim dividend for the year ended 31 January 2023 has been
allocated to the realised capital reserve. The first, second and third interim
dividends for the year ended 31 January 2024 have been allocated to the
revenue reserve. The fourth interim dividend for the year ended 31 January
2022 and the first interim dividend for the year ended 31 January 2023 were
allocated to the special distributable reserve.
Set out below are the total dividends paid/payable in respect of the financial
year which forms the basis on which the requirements of s1158-1159 of the
Corporation Taxes Act 2010 are considered.
Year ended Year ended
31 January 2024 31 January 2023
£000 £000
First interim dividend of 0.90p for the year ended 31 January 2024 (2023:
0.90p)
675 752
Second interim dividend of 0.90p for the year ended 31 January 2024 (2023:
0.90p)
662 728
Third interim dividend of 0.90p for the year ended 31 January 2024 (2022:
0.90p)
647 702
Proposed fourth interim dividend of 1.50p for the year ended 31 January 2024
(2023: 1.50p)
1,041 1,115
3,025 3,297
Note 7: Investments at fair value through profit or loss
Year ended 31 January 2024 Year ended 31 January 2023
£000 £000
Opening book cost 210,334 238,463
Opening investment holding gains 67,272 101,072
Opening market value 277,606 339,535
Additions at cost 80,424 39,765
Disposals proceeds received (118,874) (71,467)
Gains/(losses) on investments 25,631 (30,227)
Market value of investments held at 31 January 264,787 277,606
Closing book cost 193,168 210,334
Closing investment holding gains 71,619 67,272
Closing market value 264,787 277,606
The Company received £118,874,000 (2023: £71,467,000) from investments sold
in the year. The book cost of these investments when they were purchased was
£97,590,000 (2023: £67,894,000).
The transaction costs in acquiring investments during the year were £105,000
(2023: £52,000). For disposals, transaction costs were £62,000 (2023:
£37,000).
Year ended 31 January 2024 Year ended 31 January 2023
£000 £000
Net realised gain on investments 21,284 3,573
Net change in unrealised gains/(losses) on investments 4,347 (33,800)
Total capital gains/(losses) 25,631 (30,227)
Note 8: Trade receivables
As at 31 January 2024 As at 31 January 2023
£000 £000
Sales awaiting settlement 655 1,438
Taxation recoverable 296 243
VAT recoverable 11 49
Dividends receivable 27 22
Other debtors 40 19
1,029 1,771
Note 9: Cash and cash equivalents
As at 31 January 2024 As at 31 January 2023
£000 £000
Sterling bank account 1,922 1,256
1,922 1,256
Note 10: Trade payables
As at 31 January 2024 As at 31 January 2023
£000 £000
Amounts falling due within one year:
Ordinary shares bought back awaiting settlement 584 525
Interest accrued on bank loan 130 67
Investment management and secretarial fees 85 83
Other payables 162 190
961 865
Bank loan(1) 10,000 30,000
(1)On 23 November 2020, the Company entered into an unsecured three year £30
million sterling term loan facility agreement with The Royal Bank of Scotland
International Limited ('RBSI') at a fixed interest rate of 1.181%. This
facility was fully drawn down on 24 November 2020 and matured on 23 November
2023. On 22 November 2023, the Company entered into a three year £10m
revolving credit facility agreement with RBSI. The existing facility was
repaid on its maturity and £10m was drawn down under the replacement facility
on the same date and for an initial period of six months. Interest is payable
on drawings under the revolving credit facility at an annual rate of 1.55%
over the Sterling Overnight Index Average ('SONIA'). Due to its maturity in
less than one year, the drawing under the revolving credit facility has been
classified as a current liability.
The revolving credit facility agreement contains covenants that the adjusted
investment portfolio value at each month end should not be less than £120
million, the gross borrowings should not exceed 30% of the Company's adjusted
investment portfolio value and the portfolio must contain at least 22 eligible
investments. The facility is shown at amortised cost.
Finance costs are charged to capital (80%) and revenue (20%) in accordance
with the Company's accounting policies.
Note 11: Ordinary shares of 5p
As at As at
Number of shares 31 January 2024 Number of shares 31 January 2023
£000 £000
Ordinary shares of 5p
Ordinary shares in issue at the beginning of the year 76,105,554 3,804 86,614,404 4,330
Ordinary shares issued from Treasury during the year 675,000 34 - -
Ordinary shares bought back to Treasury during the year (5,551,747) (278) (10,510,850) (526)
Ordinary shares in issue at end of the year 71,228,807 3,560 76,105,554 3,804
As at As at
Number of shares 31 January 2024 Number of shares 31 January 2023
£000 £000
Treasury shares (Ordinary shares of 5p)
Treasury shares in issue at the beginning of the year 22,570,353 1,130 12,059,503 604
Ordinary shares issued from Treasury during the year (675,000) (34) - -
Ordinary shares bought back to Treasury during the year 5,551,747 278 10,510,850 526
Treasury shares in issue at end of the year 27,447,100 1,374 22,570,353 1,130
Total Ordinary shares in issue and in Treasury at the end of the year
98,675,907 4,934 98,675,907 4,934
For the financial year to 31 January 2024, the payments made for shares bought
back to Treasury less proceeds received for shares issued from Treasury was
£15,966,000 (2023: the payments made for shares bought back to Treasury less
proceeds received for shares issued from Treasury was £32,848,000).
Between 1 February 2024 and 12 April 2024, 1,960,058 Ordinary shares of 5p
were bought back to Treasury and no Ordinary shares of 5p were issued from
Treasury.
Note 12: Capital reserves
Unrealised investment holding gains
Realised capital reserve £000 Total capital reserve
£000 £000
As at 31 January 2023 154,191 67,272 221,463
Gains on realisation of investments at fair value 21,284 - 21,284
Movement in fair value gains of investments - 4,347 4,347
Proceeds from the issue of shares from Treasury 1,940 - 1,940
Cost of shares bought back into Treasury (18,305) - (18,305)
Capital expenses (1,304) - (1,304)
Dividends paid (1,118) - (1,118)
As at 31 January 2024 156,688 71,619 228,307
Unrealised investment holding gains
Realised capital reserve £000 Total capital reserve
£000 £000
As at 31 January 2022 110,511 101,072 211,583
Gains on realisation of investments at fair value 3,573 - 3,573
Movement in fair value gains of investments - (33,800) (33,800)
Realised currency losses during the year (43) - (43)
Cost of shares bought back into Treasury (32,848) - (32,848)
Capital expenses (1,262) - (1,262)
Transfer of reserves(1) 74,260 - 74,260
As at 31 January 2023 154,191 67,272 221,463
(1)Refer to Note 1(j): Accounting policies for details on the consolidation of
reserves. Prior to the consolidation, the balance of the special distributable
reserve was reduced by £2,037,000, the amount of the dividends paid during
the period. The realised capital reserve is distributable by way of dividend
and by way of share buybacks. The unrealised investment holding gains is
non-distributable.
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 2022'.
Note 13: Net asset value per share
As at 31 January 2024 As at 31 January 2023
£000 £000
Net assets attributable to shareholders £256,777,000 £249,768,000
Number of shares in issue at the year end 71,228,807 76,105,554
Net asset value per share 360.5p 328.2p
Note 14: Related party transactions
With the exception of the investment management fees (as set out in the annual
report and accounts), secretarial fees up to 1 July 2022 (as set out in the
annual report and accounts), Directors' fees (disclosed in the annual report
and accounts) and Directors' shareholdings (as set out in the annual report
and accounts), there have been no related party transactions during the year,
or in the prior year.
The amounts payable for Directors' fees as at 31 January 2024 are £37,864
(2023: £14,478).
Note 15: Financial instruments
The Company's financial instruments comprise securities and other investments,
cash balances, receivables and payables that arise directly from its
operations; for example, in respect of sales and purchases awaiting
settlement, and receivables for accrued income.
The Company also has the ability to enter into derivative transactions in the
form of forward foreign currency contracts, futures and options, for the
purpose of managing currency and market risks arising from the Company's
activities.
The main risks the Company faces from its financial instruments are (a) market
price risk (comprising (i) interest rate risk, (ii) currency risk and (iii)
other price risk), (b) liquidity risk and (c) credit risk.
The Board regularly reviews and agrees policies for managing each of these
risks. The AIFM's policies for managing these risks are summarised below and
have been applied throughout the year. The numerical disclosures exclude
short-term receivables and payables, other than for currency disclosures.
(a) Market price risk
The fair value or future cash flows of a financial instrument held by the
Company may fluctuate because of changes in market prices. This market risk
comprises three elements - interest rate risk, currency risk and other price
risk.
(i) Market risk arising from interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits.
The possible effects on fair value and cash flows that could arise as a result
of changes in interest rates are taken into account when making investment and
borrowing decisions. The Board imposes borrowing limits to ensure gearing
levels are appropriate 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 net
assets of the Company at the time of drawdown. On 22 November 2023, the
Company entered into a £10 million sterling revolving credit facility
agreement. The facility was fully drawn down on 23 November 2023 and the loan
is shown at amortised cost.
Interest risk profile
The interest rate risk profile of the Company at the reporting date was as
follows:
As at 31 January 2024 As at 31 January 2023
Cash and cash equivalents 1,922 1,256
Bank loan - revolving credit facility (10,000) -
Total net exposure to interest rate risk (8,078) 1,256
Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to
interest rates for non-derivative instruments at the statement of financial
position date and the stipulated change taking place at the beginning of the
financial year and held constant throughout the reporting period in the case
of instruments that have floating rates.
If interest rates had been 1% (2023: 2%) higher or lower and all other
variables were held constant, the Company's profit for the year ended 31
January 2024 would increase/decrease by £81,000 (2023: increase/decrease by
£25,000).
This is mainly attributable to the Company's exposure to interest rates on its
floating rate cash balances and revolving credit facility.
(ii) Market risk arising from foreign currency risk
A significant proportion of the Company's investment portfolio is invested in
overseas securities and the statement of financial position can be
significantly affected by movements in foreign exchange rates. It is not
currently the Company's policy to hedge this risk.
The revenue account is subject to currency fluctuation arising on overseas
income.
Foreign currency risk profile
Foreign currency risk exposure by currency of denomination:
Year ended 31 January 2024 Year ended 31 January 2023
Total currency exposure Total currency exposure
£000 £000
US dollar 138,389 131,244
Euro 80,481 73,668
Swedish kroner 24,521 28,004
Australian dollar 8,945 11,136
Danish krone 6,752 9,330
Hong Kong dollar - 19,590
Total overseas investments 259,088 272,972
Sterling (2,311) (23,204)
Total 256,777 249,768
The asset allocation between specific markets can vary from time to time based
on the portfolio manager's opinion of the attractiveness of individual stocks.
Foreign currency sensitivity
At 31 January 2024, if sterling had strengthened by 5% in relation to all
currencies, with all other variables held constant, total net assets and total
return on ordinary activities would have decreased by the amounts shown below.
A 5% weakening of sterling against all currencies, with all other variables
held constant, would have had an equal but opposite effect on the financial
statement amounts. The level of change is considered to be a reasonable
illustration based on the volatility of exchange rates during the year.
Year ended 31 January 2024 Year ended 31 January 2023
£000 £000
Total net sensitivity to foreign currencies 12,954 13,649
(iii) Market risk arising from other price risk
Other price risks (i.e. changes in market prices other than those arising from
interest rate or currency risk) may affect the value of the quoted
investments.
It is the Board's policy to hold an appropriate spread of investments in the
portfolio in order to reduce the risk arising from factors specific to a
particular country or sector. The allocation of assets to international
markets as detailed above, and the stock selection process both act to reduce
market risk. The investment manager actively monitors market prices throughout
the year and reports to the Board, which meets regularly in order to review
investment strategy. All investments held by the Company are listed on various
stock exchanges worldwide.
Other price risk sensitivity
If market prices at the statement of financial position date had been 30%
(2023: 30%) higher or lower while all other variables remained constant, the
return attributable to Ordinary shareholders at the year ended 31 January 2024
would have increased/decreased by £79,400,000 (2023: increase/decrease of
£83,300,000) and capital reserves would have increased/decreased by the same
amount. This level of change is considered to be reasonably possible based on
observation of market conditions and historic trends.
(b) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting
obligations associated with financial liabilities.
Liquidity risk is not considered to be significant as the Company's assets
comprise mainly readily realisable securities, which can be sold to meet
funding commitments if necessary.
(c) Credit risk
This is the risk of failure of the counterparty to a transaction to discharge
its obligations under that transaction that could result in the Company
suffering a loss.
The risk is managed as follows:
• investment transactions are carried out with a large number of brokers,
whose credit ratings are reviewed periodically by the portfolio manager, and
limits are set on the amount that may be due from any one broker; and
• cash is held only with reputable banks with high-quality external credit
ratings.
The maximum credit risk exposure as at 31 January 2024 was £2,951,000 (2023:
£3,027,000). This was due to trade receivables and cash as per notes 8 and 9.
Fair values of financial assets and financial liabilities
All financial assets and liabilities of the Company are included in the
statement of financial position at fair value or a reasonable approximation of
fair value with no material difference in the carrying amount.
Note 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 net assets at time of drawdown.
The Board monitors and reviews the broad structure of the Company's capital on
an ongoing basis. This review includes the nature and planned level of
gearing, which takes account of the portfolio manager's views on the market
and the extent to which revenue in excess of that which is required to be
distributed under the investment trust rules should be retained.
The capital of the Company consists of the equity reserves as shown on the
equity section of the statement of financial position and the bank loan as
disclosed in the liabilities section.
Note 17: Fair value hierarchy
Under FRS 102, the Company is required to classify fair value measurements
using a fair value hierarchy that reflects the significance of the inputs used
in making the measurements. The fair value hierarchy shall have the following
levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities;
• Level 2: other significant observable inputs (including quoted prices for
similar investments, interest rates, prepayments, credit risk, etc);
• Level 3: significant unobservable input (including the Company's own
assumptions in determining the fair value of investments).
The financial assets measured at fair value through profit and loss are
grouped into the fair value hierarchy as follows:
Year ended 31 January 2024 Year ended 31 January 2023
£000 £000
Level 1 264,787 277,606
Net fair value 264,787 277,606
Note 18: Post balance sheet events
On 27 March 2024, the Board declared a fourth interim dividend of 1.50p per
share.
As at 12 April 2024, the Company had bought back a further 1,960,058 ordinary
shares at an average price of 372.9p per share.
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