Martin Currie GblPrt - Half-year Report
27/09/2023 10:07
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RNS Number : 8468N Martin Currie Global Portfolio Tst 27 September 2023
Martin Currie Global Portfolio Trust plc
Legal Entity Identifier: 549300RKB85NFVSTBM94
Half-yearly report - six months to 31 July 2023
A copy of the Half-yearly report for the six months to 31 July 2023 has been
submitted to the National Storage Mechanism and will shortly be available for
inspection.
A copy of the Half-yearly report can be downloaded at
www.martincurrieglobal.com (http://www.martincurrieglobal.com) .
FINANCIAL HIGHLIGHTS
Key data Six months ended Six months ended
31 July 2023 31 July 2022
Net asset value per share ('NAV') total return(1,2) 8.9% -8.8%
MSCI All Country World index (benchmark) total return(1) 5.5% -1.0%
Share price total return(1) 10.5% -7.6%
Ongoing charges (as a percentage of shareholders' funds)(4) 0.63% 0.64%
Revenue return per share(5) 1.56p 1.39p
Dividend per share 1.80p 1.80p
Past performance is not a guide to future returns. All returns are total
returns unless otherwise stated.
Source: Martin Currie Investment Management.
(1)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
Half-yearly report for more details on Alternative Performance Measures.
(2)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 Half-yearly report for more
details.
(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
Half-yearly report for more details.
(5)For details of calculation, refer to note 3 in the Half-yearly report.
INTERIM MANAGEMENT REPORT
CHAIRMAN'S STATEMENT
Dear shareholder,
Investment Performance
I am pleased to report that the six months under review were marked by a
period of good investment performance, with our NAV per share increasing by
8.9%(1) on a total return basis, compared with a total return of 5.5%(1) for
the benchmark index. Shareholders will be well aware of the explosion of
interest in artificial intelligence ('AI') and two of our best performing
investments - Nvidia and Adobe - were beneficiaries. This illustrates the
merits of selecting high quality companies in areas of emerging growth and
opportunity.
Income and dividends
Net revenue earnings per share for the six months amounted to 1.56 pence per
share. As we have set out in recent reports to shareholders, capital growth is
the primary focus of the investment manager and the investment strategy is not
constrained by any income target but, recognising the importance of dividends
for many shareholders, the Board intends to maintain the recent level of
distributions where it is prudent to do so. Dividends have historically been
paid quarterly and in recent years the Company has paid three interim
dividends of 0.9 pence per share and a fourth interim dividend of 1.5 pence
per share for each financial year. The Company paid a first interim dividend
for the current financial year of 0.9 pence per share on 28 July 2023 and will
pay a second interim dividend of 0.9 pence per share on 27 October 2023,
maintaining the same level as the last financial year.
Share price
The Manager is very active in promoting the Company, including regular
meetings with major shareholders, a wide variety of online activity designed
to encourage investors to go to our website and regular press coverage of the
portfolio manager's distinctive investment style, which focuses on investing
in companies selected for their long-term growth prospects and sustainable
credentials. The Board was particularly pleased to see some positive national
and trade press coverage over the last few months. 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 1% of
over 7,000 funds in Morningstar's global large cap category for ESG(2). The
Board believes that a 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.
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 six months under review, the Company bought back 2,025,924 shares
which were placed in treasury and issued 675,000 shares from treasury.
Activity under the zero discount policy was in three distinct phases: shares
were bought back in February and March; were issued in April and May and then
were bought back in June and July. The activity reflects levels of market
demand both for the Company's shares and more widely for investment trusts and
other types of collective investment fund. We continued to be successful in
achieving the aims of the zero discount policy, with the share price generally
remaining close to NAV.
The Board
As previously announced, my predecessor as chairman, Gillian Watson, retired
after the Annual General Meeting on 1 June this year. Gillian was first
appointed as a director in 2013 and took over as chairman in February 2021. My
fellow directors and I would like to thank Gillian for her commitment and
diligence over the last ten years on the Board and wish her every success in
her future endeavours. The Board has decided that, at least for the time
being, we will continue to operate with four directors.
Annual General Meeting
Each resolution at this year's AGM was passed by a large majority and I would
like to thank shareholders for their continuing support.
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.
Please contact me if you have any questions regarding your Company by email
at: ftcosec@franklintempleton.com
Outlook
Investors have faced a series of challenges in recent years. The Covid crisis
which started in 2020 caused major disruption and the inflation which started
to take hold then was exacerbated by increased geopolitical conflict: in
particular the Russian war on Ukraine and tension between the United States
and China. At the time of writing, the very high levels of inflation which
appeared around the world in 2022 are showing some signs of abating.
However, it is apparent that central bank interest rates which were hiked to
bring this under control are likely to remain at these more normalised levels
for the foreseeable future. Markets in general have arguably adjusted to this
new world but, as my predecessor said in the last annual report, major events
are likely to trigger further volatility. Against this background it is
encouraging to see the recent strong performance of the fund and we remain of
the view that a portfolio selected for its long-term, sustainable potential
should serve shareholders well.
Christopher Metcalfe
Chairman
27 September 2023
Footnotes:
(1) See Glossary in the Half-yearly Report.
2 Source: July 2023 Morningstar, Inc. © All rights reserved. The information
herein is not represented or warranted to be accurate, complete or timely.
Past performance is no guarantee of future results.
MANAGER'S REVIEW
As we look back at the first six months of the financial year, we cannot help
but think that six months can be a long time in financial markets. Much has
happened in this period, but many of the risks identified at the start of the
year have not crystallised.
We had some localised regional bank failures in the US in March/April, which
led to market concerns of systemic risk and fears of contagion into the
broader global banking sector. We did not share these concerns, believing that
the contagion risk would be limited and failures would be localised. This has
so far has proven accurate, even though Credit Suisse went into a
regulator-imposed takeover by UBS. The market has sighed in relief as these
systemic concerns dissipated. It permitted us to highlight the fundamental
reasons why we do not hold banks in the portfolio. Readers can gain access to
a more detailed report on this on our website www.martincurrieglobal.com
We then had the fear that the US government would default on its debt for the
first time in history, as the debt ceiling negotiations between Democrats and
Republicans threatened to be unproductive in May/June. We believed that a
resolution would be found, albeit late in the day, and when this happened it
ultimately restored some calm and confidence to the market.
At the same time, we had a market that started the year with a quasi-certain
prediction of a recession this year, which went against our central scenario
of a sharp slowdown rather than a recession, both at the Global and the US
levels. So far, waiting for a recession has been like waiting for Godot: it
has not materialised, and might still not do so this year. We continue to
believe that a recession could be averted in 2023, and note that we are now
joined in this prediction by illustrious economists and central bankers, such
as US Treasury Secretary Janet Yellen and Fed Chair Jerome Powell.
Furthermore, the first six months have been marked by ongoing rapid interest
rate hikes by the major Western central banks globally, as inflation has
remained elevated, as summarised in the table below:
January Rate hikes Rate hikes Current
2022 in 2022 in 2023 Rate(1)
US Federal Funds Rate 0%-0.25% +4.25% +1.00% 5.25%-5.50%
European Central Bank 0% +2.50% +1.75% 4.25%
Bank of England 0.25% +3.25% +1.75% 5.25%
Source: United States Federal Reserve/European Central Bank/Bank of England.
Despite the variety of headwinds outlined above, equity markets performed
strongly in the first six months of the Company's financial year, being up by
+5.5%(2) over the period February to July 2023. The strong market performance
was led by the Technology sector and the leaders and laggards are set out in
the table below:
Sector Return 31 January 2023 - 31 July 2023
Technology 21.7%
Telecoms 12.8%
Consumer Discretionary 7.9%
Industrials 6.0%
Utilities (3.0%)
Financials (3.2%)
Energy (3.3%)
Materials (4.1%)
Real Estate (9.3%)
Source: Martin Currie as at 31 July 2023. Data presented for Martin Currie
Global Portfolio Trust plc. Returns may increase or decrease as a result of
changes to foreign exchange rates.
During the course of the six months we also had an initial confirmation that
the Chinese economic recovery is coming through, before some loss of momentum
in the course of the second quarter. This has led the market to doubt the
strength and longevity of the Chinese recovery, which has added to the list of
worries that the market has so far been able to look through.
On the corporate front, the first half was marked by a return to favour of
quality growth stocks, notably in the technology sector. This was fuelled by
the excitement that generative AI has brought to the market, with many names
exposed to that theme performing very strongly. One particular characteristic
of the market performance in the first six months was that the rise in the
index was driven by only seven high growth large technology stocks, of which
Nvidia, the largest holding in our portfolio, was the most prominent.
Corporate earnings momentum has continued to be mixed, but for the moment at
least earnings downgrades have eased. We believe that there is still a risk of
further deterioration, which continues to dictate our focus on earnings
resilience.
In this environment, the Company performed strongly, with the NAV up by
+8.9%(3) in the first six months, outperforming the market by c.+3.5%(2).
Pleasingly, this strong outperformance came on the back of no changes to our
consistent, long-term investment approach 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 as described in
detail below.
Stock Contributors
Nvidia outperformed in the period under review, as the earnings season
uncovered a continued strong investment by "hyperscalers" such as Microsoft
and Google. Additionally, TSMC commented at its second quarter results call
that they expected a 50% CAGR(4) in AI-related demand for the next five years,
which has also provided a positive read across. Nvidia was one of our largest
positions ahead of their key investor event and results announcement in March
and April respectively, and so our NAV benefited from the strong share price
reaction to both of these. Nvidia outperformed the global index by c.+124%
over the period. This was driven by supportive earnings momentum during the
period, with consensus earnings estimates more than doubling for this current
financial year. The company and the market were taken by surprise by the
degree of acceleration in its data centre business: ChatGPT inflected the
demand curve, bringing 'the iPhone moment in the AI industry'. So far in 2023,
we have seen hyperscalers commenting on continued robust investment in AI.
Importantly, customer cohorts at Nvidia have also broadened: the company now
defines three customer categories (cloud service providers, consumer internet
companies and enterprises) compared with only hyperscalers and enterprises
before. We see broadening of the data centre demand (one of the pillars of our
original investment thesis) as supportive of our view that we are observing a
truly secular shift. Specifically, we believe that we are at the start of a
multi-year migration of the data centre infrastructure to accelerated
computing. We think that Nvidia has the potential to claim a higher share of
overall infrastructure spending. Beyond the underlying infrastructure layer,
we also believe that nearly every application will incorporate AI features in
some years from now. In this secular transition, Nvidia would be acting as an
enabler which is an important aspect of its attraction to us.
Adobe's share price also 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.
Ferrari shares were strong in the period. The company launched two new plug-in
hybrid models - the SF90 XX Stradale and the SF90 XX Spider. Both are already
sold out and are priced at a significant premium to the group's average
selling price. In early August Ferrari published interim results which were
modestly higher than expected, together with an upbeat outlook statement. We
continue to see this company as having ongoing strong pricing power,
predictable revenue and profit stream, and an almost staples-like demand
pattern coming from the high-net-worth consumption segment.
Healthcare was the main detractor to performance in the period, with the
bottom three stocks all from that sector: Wuxi Biologics, Masimo, and CSL.
Wuxi Biologics experienced a share price decline amid broader Hong Kong market
weakness and a negative reaction to preliminary commentary in June on results
for the first half of 2023. Despite geopolitical concerns, the company
reiterated its 30% revenue and 27% EPS(5) growth guidance for the full year
and 3-year period, emphasising AI and robotics for efficiency. While revenue
growth in the first half of 2023 was lower than expected, the company
attributed this to maintenance works, and both project progression and
industry dynamics remain positive. We continue to see Wuxi as a
best-in-class drug research, development and manufacturing outsourcing
business, operating strongly within a normal biopharma funding cycle.
Masimo's share price initially rebounded in April but was impacted negatively
again, as a result of activist investor Politan Capital gaining board seats at
the AGM. On the operational side, the company faced challenges in its
healthcare division due to order delays, weak hospital demand trends, and
budget constraints, leading to a 13% revenue and 37% EPS(5) reduction for
2023. We are engaging with management to assess a few aspects related to (i)
potential for a return to normalised trends in 2024, and (ii) whether the
earnings growth potential is further enhanced by a cost cutting exercise.
Management understand the need to return to a level of performance akin to
their historical track record, especially after a large acquisition in 2022,
which appears reflected in various conservative assumptions embedded in the
updated forward guidance.
Early in 2023 CSL was weak on news flow that we consider broadly supportive to
our thesis. In February the company reported half-year results, that were 1%
and 6% ahead of revenue and net profit expectations respectively. In March, we
attended an investor event at CSL's German and Swiss facilities which
reassured on substantial production capacity headroom and new yield uplift
processes which should support gross margin expansion. In June the business
pre-announced that results would fall at the upper end of guidance, despite
worsening currency headwinds. However, the stock sold-off on the unexpected
provision of 2024 net profit guidance of 10% below consensus expectations. We
believe that the company's long-term prospects remain intact and there is no
change to our expectation of a return to prior peaks, but this may take about
12 months longer than previously expected.
Portfolio activity
In the half-year under review we purchased Pernod Ricard and Estée Lauder in
the consumer sector, Mettler Toledo in Healthcare, and Adyen in the Financials
sector. We sold out of Dr. Martens and Kerry in Consumer, and AIA in the
Financials sector. We replaced VISA with Mastercard.
Adyen is a leading global payment company whose growth is supported by
multiple structural trends in payment such as frictionless payments,
omni-channel commerce, and the platform economy. A combination of a high net
revenue CAGR(5), high medium-term EBITDA(5) margin and a projected 100% +
ROIC(5) 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 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(5) 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.
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(5)
improvement and robust earnings results support potential consensus
upgrades. Trading at a 17% discount to its 5-year average PE(5), the stock
has an attractive valuation and in our view is poised to capitalise on
premiumisation trends with strong pricing power.
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, leading to the decision to sell AIA in favour of Estee
Lauder.
Both VISA and Mastercard are leaders in the payment technology industry, both
operate a capital light model with >60% EBITDA(5) margin and deliver low to
mid-teens revenue growth, underpinned by a secular shift to cashless payments.
We have replaced VISA with Mastercard due to the higher ROIC(5) support from
Mastercard (>70%, vs VISA's >40%, with both expanding through time). In
addition, Mastercard offers a slightly better growth outlook due to its higher
exposure to international payments and credits.
During the period, we also exited Kerry to focus on stronger ingredient
options like Croda, as our review indicated better alternatives in the sector.
Despite believing that Kerry's thesis remains intact, its projected rate of
growth is not sufficiently attractive for us. This decision aligns with our
higher conviction in Croda.
We also sold our very small position in Dr. Martens due to concerns about the
management handling of some operational issues related to distribution center
transition in the US, which led us to reassess our conviction in the stock.
Key predictions for our 2023 mid-year outlook update
We recently published our mid-year outlook update, which can be viewed on
www.martincurrieglobal.com. In this, we revisited and reiterated our
predictions for 2023, which were detailed in the annual report, and which we
summarise below.
An important focal point during the second part of the year will remain the
inflation trend, with inflationary pressures likely to continue to ease, but
with the risk of inflation remaining stickier and longer lasting. Inflation is
likely to be driven by technological fragmentation, near-shoring trends which
will increase production costs, and elevated wage inflation. The latter is
likely to be the most important determinant of inflation in the medium term.
Inflation trends will continue to feed into monetary policy expectations - we
predict that the peak in interest rates is getting very close now, which
should in itself be supportive for the quality growth style that we invest in.
However, we do not subscribe to the market view that monetary policies will
reverse in the first half of 2024 because we envisage inflation rates
preventing central banks cutting interest rates.
The economic cycle will continue to be an important focal point with an
ongoing uncertain outlook, given the sizeable interest rate increases that we
have seen in the past 18 months across key geographies. Our central scenario
remains a sharp slowdown rather than recession for the world as a whole and
the US in particular. For Europe, our central scenario remains stagflation. We
maintain our probability of a global recession at 30-35%, despite a broad
consensus view that a recession is a high likelihood in 2023. China's economic
momentum remains key to the global economic cycle and we expect ongoing
recovery in the services sector in China in the remainder of 2023. There is a
rising risk of recession in the US in 2024, however, which could be an
important focal point for investors.
The corporate earnings cycle is already in recession following downgrades and
with the risk of further downgrades in the rest of 2023. Equity valuations are
now less supportive but, within this, EU and Asian equities are relatively
attractive. In this continuing uncertain environment, we believe that focusing
on fundamental assessments and picking undervalued stocks that have strong
fundamentals and operate in industries with favourable dynamics for value
creation will serve our shareholders well over the longer term.
Quality growth style should continue to be supported
We believe that in uncertain macroeconomic conditions such as the ones we
face, the quality growth style should be supported in the remainder of this
year and beyond. Our focus is on profitable growth stocks, generating high
returns on invested capital and with strong balance sheets, which should fare
well in such elevated uncertainty. If inflation remains high, quality growth
stocks typically have stronger pricing power, and therefore should be able to
protect earnings from margin pressure better than other companies. Interest
rates are apparently approaching their peak, which means less headwind for
long duration stocks such as quality growth stocks. Considering the
macroeconomic cycle we believe that quality growth stocks should be able to
weather that economic storm better than other companies. Finally, in an
environment of corporate earnings recession, where growth becomes more scarce,
stocks exposed to structural growth opportunities have a superior profile that
should make them stand out.
Mid-term opportunities - energy transition, geopolitical & technological
fragmentation, and artificial intelligence are key themes to focus on
We continue to see opportunities in the eight mid-term thematic opportunities
that we have discussed in previous reports and
which are listed below:
· Green & Alternative Energy
· Energy Efficient Infrastructure
· Electric Transportation - High Speed Railways & Electric
Vehicles
· Healthcare Infrastructure
· Technological and Geopolitical Fragmentation
· Cloud Computing & Cyber Security
· Artificial Intelligence, Robotics & Automation
· Metaverse & Quantum Computing
All of these themes benefit from significant investment support, from the
private and/or public sectors of the economy, with some investments being very
long duration, making these themes 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 are (i) energy transition as part of tackling the challenges of
climate change, (ii) artificial intelligence, and (iii) technological and
geopolitical fragmentation.
Energy transition captures the first 3 themes on our list above, namely green
and alternative energy, energy efficient infrastructure, and electric
transportation. We typically look at exposure to these themes through
attractively priced quality growth companies across the whole ecosystem of a
given theme. Companies such as ASML and Autodesk in Technology, Atlas Copco
in Industrials, and Kingspan in Construction, give us exposure to the energy
transition, as enablers and beneficiaries of the infrastructure spend.
Artificial intelligence is an important theme in terms of source of risk for
investors, but also potential opportunities. The subject has received a boost
in the first part of this year both from the excitement triggered by ChatGPT,
an app that has reached 100m users at the fastest pace of any app
historically, and from the outsized earnings reported by Nvidia in the first
quarter. This led to the market realising that the demand by corporates for AI
has been significantly under-appreciated. The focus on AI will remain
significant going forward. We believe that the potential for AI remains
under-appreciated by the market fundamentally, but are also cognisant that
themes can generate excessive excitement. This can lead to valuations becoming
disconnected from fundamentals and it is therefore critical, once again and as
always, to ensure that we maintain our valuation discipline based on detailed
fundamental assessments. Companies such as Nvidia and ASML in Technology, or
Atlas Copco in Industrials, give us exposure to this theme, either directly or
indirectly.
The technological and geopolitical fragmentation theme centres around the
trend towards onshoring and nearshoring, as companies bring some of their
production bases closer to their home markets to reduce supply disruption
risks. These risks are driven by tension between China and several other
countries, principally the US. Steps taken by the US to limit access to
leading edge semiconductor technology, and particularly to AI chips, will
likely lead to market fragmentation in high technology components. This will
lead to many ramifications for investors, both in terms of opportunities and
threats. It in part drove our decision 18 months ago to switch our exposure
within the semiconductor industry from TSMC, which we see as potentially
negatively impacted from the China-Taiwan geopolitical uncertainty, into ASML,
which we see as benefiting from this in light of the drive by Western
economies to bring some of the microchip production sites onto their home
territories.
Our approach to investment does not take account of the constituents of a
benchmark index but instead concentrates on a relatively short list of
companies carefully selected for their long-term growth prospects and
sustainable credentials, following detailed fundamental research. This permits
us to focus on the very best ideas that come out of our research and make
meaningful allocations of assets to our chosen investments. We will be
detailing at greater length the benefits of a more concentrated approach for
the benefit of our readers in our next annual report. In summary, we believe
that it remains important, in the current 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 a
difficult 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
27 September 2023
Footnotes:
(1) As at 15 August 2023.
(2) As measured by the MSCI AC World Index, GB£ terms, income reinvested. See
Glossary in the Half-yearly Report.
(3) All return statistics on a total return basis: see Glossary in the
Half-yearly Report.
(4) See Glossary in the Half-yearly Report.
(5) See Glossary in the Half-yearly Report.
PORTFOLIO SUMMARY
By sector
31 July 2023 31 January 2023 MSCI All Country World index %
31 July 2023 MSCI All Country World index % 31 January 2023
Company % Company %
Information Technology 30.3 21.9 31.5 20.6
Healthcare 22.6 11.6 26.5 12.5
Consumer Discretionary 13.7 11.4 15.3 11.1
Industrials 9.4 10.5 9.7 10.0
Consumer Staples 8.7 7.2 5.9 7.3
Materials 8.5 4.6 7.4 5.1
Financials 6.8 15.6 3.7 15.3
Communication Services - 7.5 - 7.1
Energy - 4.7 - 5.4
Utilities - 2.7 - 3.0
Real Estate - 2.3 - 2.6
100.0 100.0 100.0 100.0
By asset class
31 July 2023 % 31 January 2023 %
Equities 110.5 111.1
Cash 0.8 0.9
Less borrowings (11.3) (12.0)
100.0 100.0
Portfolio distribution by region
31 July 2023 31 January 2023 MSCI All Country World index %
31 July 2023 MSCI All Country World index % 31 January 2023
Company % Company %
North America 52.1 64.8 47.1 63.1
Developed Europe 43.3 16.0 41.9 16.6
Developed Asia Pacific ex Japan 2.8 2.8 7.7 3.3
Global Emerging Markets 1.8 10.8 3.3 11.3
Middle East - 0.1 - 0.2
Japan - 5.5 - 5.5
100.0 100.0 100.0 100.0
Largest 10 holdings
31 July 2023 31 July 2023 31 January 2023 31 January 2023
Market value % of total Market value % of total
£000 portfolio £000 portfolio
Nvidia 25,649 8.7 12,745 4.6
Microsoft 16,724 5.7 14,228 5.1
Linde 15,406 5.3 15,041 5.4
Moncler 13,924 4.7 13,190 4.8
ASML Holding 13,499 4.6 14,223 5.1
Ferrari 12,465 4.3 11,164 4.0
ResMed 12,050 4.1 14,270 5.1
Mastercard 11,496 3.9 - -
L'Oreal 11,406 3.9 11,623 4.2
Atlas Copco 10,833 3.7 10,325 3.7
GOVERNANCE
Risk and mitigation
The principal long-term risks facing the Company are unchanged since the date
of the Annual Report for the year to 31 January 2023, as set out on pages 34
and 35 of that report.
The Company's business model is longstanding and resilient to most of the
short-term operational uncertainties that it faces. The Board believes these
are effectively mitigated by the internal controls established by the Board
and by the AIFM(1) and their combined oversight of the investment manager. The
Company's 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. The Board's planned mitigation measures are described in the most
recent annual report. However, it is recognised that the likelihood and timing
of crystallisation of some risks cannot be predicted in advance and the Board
relies on professional management, effective systems and communication to
mitigate these risks as and when they arise.
The Board identified the following principal risks to the Company in the
Annual Report:
• Sustained investment underperformance
• Material decline in market capitalisation of the
Company
• Loss of s1158-9 tax status
Following the ongoing assessment of the principal and emerging risks facing
the Company, and its current position, the Board is confident that the Company
will be able to continue in operation and meet its liabilities as they fall
due. The Board believes that the processes of internal control that the
Company has adopted and oversight by the AIFM(1) continue to be effective.
Footnote
(1) See glossary the Half-yearly report.
Statement of directors' responsibilities
In accordance with Chapter 4 of the Disclosure and Transparency Rules and to
the best of their knowledge, each director of the Company confirms that the
financial statements have been prepared in accordance with the United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law) and with the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts' issued by
the AIC in July 2022.
The directors are satisfied that the financial statements give a true and fair
view of the assets, liabilities, financial position and profit of the Company.
Furthermore, each director certifies that the interim management report
includes an indication of important events that have occurred during the first
six months of the financial year and their impact on the financial statements
together with a description of the principal risks and uncertainties that the
Company faces. In addition, each director of the Company confirms that, with
the exception of management and secretarial fees, directors' fees and
directors' shareholdings, there have been no related party transactions during
the first six months of the financial year.
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 and Manager's review.
The financial position of the Company as at 31 July 2023 is shown on the
unaudited condensed statement of financial position. The unaudited statement
of cash flow of the Company is set out below.
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 disclosed
above. They have reviewed forecasts for the current and following financial
year, including liabilities arising from the loan facility, and believe that
the Company has adequate financial resources to continue its operational
existence for the foreseeable future and for at least one year from the date
of signing these financial statements. Accordingly, the directors continue to
adopt the going concern basis in preparing these financial statements.
Christopher Metcalfe
Chairman
27 September 2023
FINANCIAL REVIEW
UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) Six months ended 31 July 2023 (Unaudited) Six months ended 31 July 2022
Revenue Capital Total Revenue Capital Total
Note £000 £000 £000 £000 £000 £000
Net gains/(losses) on investments - 21,115 21,115 - (29,165) (29,165)
Net currency gains - 13 13 - 7 7
Revenue 1,772 - 1,772 1,841 - 1,841
Investment management fee (117) (466) (583) (134) (536) (670)
Other expenses (237) - (237) (262) - (262)
Net return/(loss) on ordinary activities before finance costs and taxation
1,418 20,662 22,080 1,445 (29,694) (28,249)
Finance costs (35) (141) (176) (36) (141) (177)
Net return/(loss) on ordinary activities before taxation
1,383 20,521 21,904 1,409 (29,835) (28,426)
Taxation on ordinary activities (217) - (217) (227) - (227)
Net return/(loss) attributable to shareholders
1,166 20,521 21,687 1,182 (29,835) (28,653)
Net return/(loss) per Ordinary share
3 1.56p 27.38p 28.94p 1.39p (35.06p) (33.67p)
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 six months.
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.
UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) As at 31 July 2023 (Audited) As at 31 January 2023
Note £000 £000 £000 £000
Non-current assets
Investments at fair value through profit or loss
293,171 277,606
Current assets
Trade receivables 399 1,771
Cash and cash equivalents 1,970 1,256
2,369 3,027
Current liabilities
Trade payables (281) (865)
Bank loan (30,000) (30,000)
(30,281) (30,865)
Total net assets 265,259 249,768
Equity
Called up Ordinary share capital 4,934 4,934
Share premium account 11,823 11,424
Capital redemption reserve 11,083 11,083
Capital reserve, of which: 6 236,064 221,463
Realised capital reserve (distributable)
163,673 154,191
Unrealised gains on investments (non-distributable)
72,391 67,272
Revenue reserve 1,355 864
Total shareholders' funds 265,259 249,768
Net asset value per Ordinary share 354.8p 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 27
September 2023 and signed on its behalf by
Christopher Metcalfe
Chairman
27 September 2023
UNAUDITED STATEMENT OF CHANGES IN EQUITY
Called up Share Capital Special
Ordinary premium redemption distributable Capital Revenue
(Unaudited) for the share capital account reserve reserve reserve reserve Total
period to 31 July 2023 £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
- - - - 20,521 1,166 21,687
Ordinary shares issued during the period
- 399 - - 1,940 - 2,339
Ordinary shares bought back during the period
- - - - (6,742) - (6,742)
Dividends paid - - - - (1,118) (675) (1,793)
As at 31 July 2023 4,934 11,823 11,083 - 236,064 1,355 265,259
Called up Share Capital Special
Ordinary premium redemption distributable Capital Revenue
(Unaudited) for the share capital account reserve reserve reserve reserve Total
period to 31 July 2022 £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
- - - - (29,835) 1,182 (28,653)
Ordinary shares bought back during the period
- - - - (10,587) - (10,587)
Dividends paid - - - (2,037) - - (2,037)
Transfers between reserves - (74,260) 74,260 - -
As at 31 July 2022 4,934 11,424 11,083 - 245,421 1,695 274,557
Called up Share Capital Special
Ordinary premium redemption distributable Capital Revenue
(Audited) for the year share capital account reserve reserve reserve reserve Total
ended 31 January 2023 £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 during the year
- - - - (32,848) - (32,848)
Dividends paid - - - (2,037) - (1,430) (3,467)
Transfers between reserves - - - (74,260) 74,260 - -
As at 31 January 2023 4,934 11,424 11,083 - 211,463 864 249,768
The notes below form part of these financial statements.
UNAUDITED STATEMENT OF CASH FLOW
(Unaudited) (Unaudited)
Six months ended Six months ended
31 July 2022 31 July 2022
£000 £000 £000 £000
Cash flows from operating activities
Net return/(loss) on ordinary activities before taxation 21,904 (28,426)
Adjustments for:
(Gains)/losses on investments (21,115) 29,165
Finance costs 176 177
Dividend income recognised (1,757) (1,841)
Interest income recognised (15) -
Increase in receivables (15) (32)
Decrease in payables (59) (113)
Overseas withholding tax suffered (217) (227)
Net cash outflows from operations (1,098) (1,297)
Dividends received 1,694 1,802
Interest received 15 -
Overseas withholding tax recovered 12 -
Net cash flows from operating activities 623 505
Cash flows from investing activities
Purchases of investments (49,045) (18,900)
Sales of investments 56,033 25,426
Net cash flows from investing activities 6,988 6,526
Cash flows from financing activities
Repurchase of Ordinary share capital (7,267) (10,516)
Shares issued for cash 2,339 -
Equity dividends paid (1,793) (2,037)
Interest and fees paid on bank loan (176) (177)
Net cash flows from financing activities (6,897) (12,730)
Net increase/(decrease) in cash and cash equivalents 714 (5,699)
Cash and cash equivalents at the start of the period 1,256 6,589
Cash and cash equivalents at the end of the period 1,970 890
The notes below form part of these financial statements.
Analysis of debt
(Audited) (Unaudited)
As at 31 January 2023 Cash flows As at 31 July 2023
£000 £000 £000
Cash at bank 1,256 714 1,970
Bank loan (30,000) - (30,000)
Net debt (28,744) 714 (28,030)
(Audited) (Unaudited)
As at 31 January 2022 Cash flows As at 31 July 2022
£000 £000 £000
Cash at bank 6,589 (5,699) 890
Bank loan (30,000) - (30,000)
Net debt (23,411) (5,699) (29,110)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Note 1: Financial statements
The financial information contained in this half-yearly report does not
constitute statutory accounts as defined in s434 (3) of the Companies Act
2006. The financial information for the six months ended 31 July 2023 has not
been audited or reviewed by the Company's independent auditors.
The information for the year ended 31 January 2023 has been extracted from the
latest published audited financial statements which have been filed with the
Registrar of Companies. The report of the auditors on those accounts contained
no qualification or statement under s498 (2), (3) or (4) of the Companies Act
2006.
Note 2: Accounting policies
For the period ended 31 July 2023 (and the year ended 31 January 2023), the
Company is applying Financial Reporting Standard applicable in the UK and
Republic of Ireland ('FRS 102'), which forms part of the revised Generally
Accepted Accounting Practice ('UK GAAP') issued by the Financial Reporting
Council (FRC).
These condensed financial statements have been prepared on a going concern
basis in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority, FRS 102 issued by the FRC in September 2015, FRS
104 Interim Financial Reporting issued by the FRC in March 2015 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.
The accounting policies applied for the condensed set of financial statements
are set out in the Company's annual report for the year ended 31 January 2023.
Note 3: Net returns per Ordinary share
(Unaudited) (Unaudited)
Six months ended 31 July 2023 Six months ended 31 July 2022
£000 £000
Revenue return 1,166 1,182
Capital return 20,521 (29,835)
Total return 21,687 (28,653)
Weighted average number of shares in issue during the period 74,938,623 85,107,006
Revenue return per share 1.56p 1.39p
Capital return per share 27.38p (35.06p)
Total return per share 28.94p (33.67p)
Note 4: Dividends
(Unaudited) (Unaudited)
Six months ended 31 July 2023 Six months ended 31 July 2022
£000 £000
Year ended 31 January 2023 - fourth interim dividend of 1.50p (2022: 1.50p) 1,118 1,285
Year ended 31 January 2024 - first interim dividend of 0.90p (2023: 0.90p) 675 752
1,793 2,037
The fourth interim dividend for the year ended 31 January 2023 has been
allocated to the realised capital reserve and the first interim dividend for
the year ended 31 January 2024 has 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.
Note 5: Ordinary shares of 5p
For the six months to 31 July 2023 For the six months to 31 July 2022
Number of shares £000 Number of shares £000
Ordinary shares of 5p
Ordinary shares in issue at the beginning of the period
76,105,554 3,804 86,616,404 4,330
Ordinary shares issued from Treasury during the period
675,000 34 - -
Ordinary shares bought back to Treasury during the period
(2,025,924) (101) (3,364,066) (168)
Ordinary shares in issue at end of the period 74,754,630 3,737 83,252,338 4,162
For the six months to 31 July 2023 For the six months to 31 July 2022
Number of shares £000 Number of shares £000
Treasury shares (Ordinary shares of 5p)
Treasury shares in issue at the beginning of the period
22,570,353 1,130 12,059,503 604
Ordinary shares issued from Treasury during the period
(675,000) (34) - -
Ordinary shares bought back to Treasury during the period
2,025,924 101 3,364,066 168
Treasury shares in issue at end of the period 23,921,277 1,197 15,423,569 772
Total Ordinary shares in issue and in Treasury at the period end
98,675,907 4,934 98,675,907 4,934
Note 6: Capital reserve
Realised capital reserve Unrealised gains on investments Total capital reserve
£000 £000 £000
As at 31 January 2023 154,191 67,292 221,463
Net gains on realisation of investments at fair value 15,966 - 15,996
Movement in fair value of investments - 5,119 5,119
Realised currency gains during the period 13 - 13
Proceeds from the issue of shares from Treasury 1,940 - 1,940
Cost of shares bought back into Treasury (6,742) - (6,742)
Capital expenses (607) - (607)
Dividends paid (1,118) - (1,118)
As at 31 July 2023 163,673 72,391 236,064
Realised capital reserve Unrealised gains on investments Total capital reserve
£000 £000 £000
As at 31 January 2022 110,511 101,072 211,583
Net gains on realisation of investments at fair value 3,573 - 3,573
Movement in fair value 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 74,260 - 74,260
As at 31 January 2023 154,191 62,272 221,463
Note 7: 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 has 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); and
- 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:
(Unaudited) (Audited)
Six months ended 31 July 2023 Year ended 31 January 2023
£000 £000
Level 1 293,171 277,606
Net fair value 293,171 277,606
Note 8: Post balance sheet events
Between 1 August and 22 September 2023, the Company bought back into Treasury
828,029 ordinary shares at an average price of 325.18p per share.
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