EUT
27/11/2015 08:30
FLLYR
PRICE SENSITIVE
REL: 0830 HRS The European Investment Trust plc
FLLYR: EUT: Annual Financial Report
THE EUROPEAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 30 September 2015
The full Annual Report and Financial Statements can be accessed via the
Company's website at www.theeuropeaninvestmenttrust.com.
STRATEGIC REPORT
The Strategic Report has been prepared in accordance with Section 414A of the
Companies Act 2006 (the "Act"). Its purpose is to inform members of the
Company and help them assess how the Directors have performed their legal
duty under Section 172 of the Act to promote the success of the Company.
CHAIRMAN'S STATEMENT
Results
After the positive return seen in the prior year, the year under review was a
more challenging period for investing in European equities, with much weaker
markets in the final six months of our year, together with a currency
headwind from a weaker euro. In the year to 30 September 2015, the net asset
value ("NAV") per share of your Company decreased by 7.3% from 800.41p to
742.20p. After taking account of dividends paid in the year of 15.0p, the NAV
total return was -5.5%. This compares with the total return of -1.8% from the
FTSE All-World Europe ex UK Index, adjusted to sterling.
During the year, the Company's share price decreased by 10.1% from 748.75p to
673.00p. The share price discount to NAV per share, which had been over 18%
within the previous two years, rose in the year under review from 6.5% to
9.3%. The share price total return, taking account of the 15.0p dividend paid
in the year, was -8.3%.
From the appointment of Edinburgh Partners as Investment Manager on 1
February 2010, the share price total return to 30 September 2015 was 47.9%
and the NAV total return 38.2%. This compares with the total return of 36.8%
from the FTSE All-World Europe ex UK Index, adjusted to sterling.
Revenue
There was a 1.10p increase in revenue return per share in the year to 30
September 2015 from 14.85p to 15.95p, an increase of 7.4%. The Company
continues to have a low ongoing charges ratio, despite there being an
increase from 0.61% last year to 0.63% in the year to 30 September 2015.
Dividends
The Board recommends a final dividend of 14.0p per share and a special
dividend of 2.0p per share, a total of 16.0p per share. The proposed total
dividend of 16.0p compares with the prior year total dividend of 15.0p. For
the prior year, the final dividend was 14.0p and a special dividend of 1.0p
was paid. Our aim is to pay a final dividend which we regard as likely to be
sustainable and to distribute any further earnings by way of a special
dividend.
Subject to the approval of shareholders at the forthcoming Annual General
Meeting, these dividends will be paid on 29 January 2016 to shareholders on
the register at the close of business on 8 January 2016. The ex-dividend date
will be 7 January 2016.
Share buybacks
The Board has continued to monitor the discount at which the shares trade
relative to the NAV per share. As detailed above in the Results section,
there was an increase in the share price discount to NAV per share during the
year under review. No share buybacks were made during the year.
The Directors will again propose at the forthcoming Annual General Meeting
that the Company's powers to make purchases of up to 14.99% of its shares in
issue be renewed.
Portfolio activity
The most significant sector change was in the consumer goods sector, where
exposure was reduced from 15.9% to 6.6%. There was relatively little change
in the country exposure of the portfolio. The most significant change was in
Norway where, at the prior year-end, there was no exposure and there is now a
4.8% weighting, following the purchases of DNB and Petroleum Geo-Services.
The Company remained almost fully invested throughout the year and cash and
other net assets remained at low levels, marginally increasing from 0.9% to
1.3% of net assets during the year. There was a reduction in the number of
investments held from 41 to 37. For further commentary on portfolio activity,
see the Investment Manager's Report below.
The Board
In reviewing Board composition during the year, the Board agreed that the
appointment of an additional Director would assist with succession planning.
After consideration of potential candidates, the Board is pleased to announce
the appointment of Mr Michael MacPhee with effect from 1 January 2016. Mr
MacPhee was until 2014 an investment partner in Baillie Gifford & Co.,
heading the firm's European Department from 2003 to 2008 and thereafter
co-managing a global investment strategy. Having been called to the English
Bar in 1987, he joined the firm in 1989 and from 1998 to 2014 he was the
manager of Mid Wynd International Investment Trust plc. He therefore has an
extensive knowledge of financial markets and of investment trusts in
particular. The Board recommends a vote in favour of resolution number 5
contained in the Notice of Annual General Meeting for the election of Mr
MacPhee as a Director of the Company.
Annual General Meeting
We hope that as many shareholders as possible will attend the Annual General
Meeting, which will be held at 11.00 am on Tuesday, 26 January 2016 at
Brewers' Hall, Aldermanbury Square, London EC2V 7HR. We look forward to
meeting all shareholders who are able to attend.
Outlook
For much of the year under review, European equity markets favoured companies
which have the lowest perceived earnings risk. The outperformance of these
stocks was fuelled not by any material changes to their profits outlook, but
by their valuations returning to historic relative peaks; this constituted a
headwind for our relative performance. However, the Investment Manager
believes that a significant number of the stocks within the portfolio remain
undervalued and should rebound. We have therefore maintained or added to our
positions in the majority of our underperforming stocks and are close to
being fully invested.
Douglas McDougall
Chairman
25 November 2015
INVESTMENT MANAGER'S REPORT
Economic and Market Overview
A consistent theme of the protracted recovery from the global financial
crisis and the Eurozone crisis has been fragility. Immediately after these
combined crises, the very construct of the Eurozone was vulnerable and it did
not take much, either internally or externally, to damage economic and market
confidence. However, in the first half of 2015, the Eurozone economy achieved
close to trend economic growth at 1.8%. One encouraging aspect of Europe's
economic performance is that, with Greek risks very much to the fore, the
economy appeared to shrug off these concerns and respond to the stimulus
which is in place. This stimulus comes primarily from monetary policy but is
also aided by the lower oil price and currency. There was therefore optimism
that the Eurozone was showing signs of increased resilience to the various
risks it faces.
However, as the year progressed and with equity market valuations becoming
elevated, worries about global economic growth started to appear. Although
these concerns originated with China, they also encompassed the US economy,
by now quite far advanced into its own economic growth cycle. The net effect
of these factors is that Europe will end the year with a reasonable, albeit
slightly sub-trend, year of economic growth. However, there is now more
confidence in its ability to withstand negative influences.
In aggregate, European stock markets responded well to the improving growth
but gave up these gains as the risks to growth became more apparent.
Throughout the year, the markets continued to reward stocks which were
delivering stable, predictable growth with ever higher valuations. This has
led to what we regard as a significant valuation anomaly and, therefore, an
opportunity.
Portfolio Strategy and Activity
At the heart of our investment approach at Edinburgh Partners is a very
strong valuation discipline, an approach based on a traditional style of
investing. In the current European stock market environment, a significant
proportion of the market is trading at a valuation level which we feel is
inconsistent with the profit growth these companies are able to sustain. This
is the opportunity. We continued to rotate your portfolio away from companies
with these characteristics towards companies where we feel expectations have
become too depressed. This is usually due to a lack of visibility over the
immediate future. A number of examples of portfolio activity during the year
are detailed below.
Heineken is a solid company. It has a 60/40 sales exposure to
developing/developed markets. Developed beer markets are not growing, but
developing markets are. All things considered, we think it can grow its sales
at 4% per annum. It operates in competitive markets, not just from other beer
brands but also from spirits manufacturers. The company has been reporting
the highest operating margins in its history. The valuation you are being
asked to pay for this set of factors is a PE ratio of 22x consensus earnings.
Quite simply, we think this is too high and this is why we sold the shares
earlier in the year. During the period of our ownership of Heineken, the
shares rose 99% and contributed 1.6% to the net asset value.
In the year under review, the disposals of BB Biotech, Danske Bank, GEA,
Gerresheimer, Nutreco and Pirelli shared the same characteristics as the
Heineken sale, namely a significant contribution to performance but the
valuation had become too rich for the expected profit growth. As a
consequence of these and other changes, health care sector exposure fell from
17.9% to 10.0% and consumer goods exposure from 15.9% to 6.6% during the
year.
In October 2014, we purchased the shares of Rocket Internet when they became
a public company. Rocket Internet gives the portfolio a diversified exposure
to online consumer companies targeting the disruption of existing
distribution channels. As many of its individual investments are at an early
stage, they are still loss-making. This fact, combined with some poor
communication and reporting to the stock market, contributed to a difficult
year for the shares. However, the constant throughout is that their
underlying businesses grew considerably and thus became more valuable as the
year progressed. By the year-end, the shares were sitting at over a 40%
discount to what we consider to be a conservative asset value. We bought
shares throughout the year and consider the market's assessment of the
company's value to be wrong.
A sector which has been out of favour but which we believe offers a very
attractive risk/reward profile is oil and gas. The heart of the investment
case in this sector is that a supply shortage of oil over the next few years
looks to be possible. This could cause a sharp rise in the oil price and a
rebound in the earnings of most companies operating in the sector. The
reasons why we think this is probable include natural decline rates in oil
wells, significant capital expenditure cuts, withdrawal of funding and the
consequent reduction in productive capacity.
Throughout the year we added to our existing positions in the sector as well
as buying two new oil-related positions, both in Norwegian companies. DNB is
the largest bank in Norway and is a barometer of the health of the
petro-dependent Norwegian economy. Petroleum Geo-Services provides marine
seismic testing services for its clients. This is a cyclical service as
customer spending depends on exploration activity. If the company can recover
its margins back to normalised levels, it would be trading on a PE ratio of
4x potential recovered earnings. These positions will provide indirect and
very direct exposure respectively to any recovery in the oil price and the
Norwegian krone. The combined portfolio exposure to the sector at the
year-end, including DNB, was 14.7%, compared to 8.0% at the previous
year-end. It is worth noting the valuation disparity of Petroleum
Geo-Services to Heineken, as this is illustrative of the valuation
opportunities currently available in European stock markets.
Rocket Internet, our oil and gas sector exposure, and other positions
initiated during the year have some form of nearer-term uncertainty over
their outlook. However, our process compels us to take a longer-term view as
well as providing us with an anchor on the valuation of a company. This gives
us the confidence to keep buying when the market is taking a different
short-term view.
One share where we realised a significant loss during the year was
Volkswagen. As was widely reported, Volkswagen disclosed the fraudulent
manipulation of emissions tests. The implications for the company go far
beyond unquantifiable litigation and regulatory fines. The company will have
to increase its research and development spending, provide additional dealer
support and augment capital in its financial services arm as well as face
challenges with its diesel engine line-up and general brand perception. In
our estimation, the combined effect of these issues will significantly lower
the long-term profit potential of the group and this is why we sold the
shares.
Outlook
Whilst there is still significant monetary stimulus in place around the
world, as well as a significant debt overhang, we expect conditions to be
favourable for growth and the eventual return of inflation. This should be
positive for the performance of the portfolio, which we have positioned for
the value opportunities currently available within European stock markets.
Your portfolio continues to be relatively fully invested.
Dale Robertson
Edinburgh Partners
25 November 2015
Other Statutory Information
Objective
The objective of the Company is to achieve long term capital growth through a
diversified portfolio of Continental European securities.
Strategy and business model
Investment policy
The Board believes that investment in the diverse and increasingly accessible
markets of this region provides opportunities for capital growth over the
long-term. At the same time, it considers the structure of the Company as a
UK-listed investment trust, with fixed capital and an independent Board of
Directors, to be well suited to investors seeking longer term returns.
The Board recognises that investment in some European countries can be
riskier than in others. Investment risks are diversified through holding a
wide range of securities in different countries and industrial sectors. No
more than 10% of the value of the portfolio in aggregate may be held in
securities in those countries which are not included in the FTSE All-World
European indices.
The Board has the authority to hedge the Company's exposure to movements in
the rate of exchange of currencies, principally the euro, in which the
Company's investments are denominated, against sterling, its reporting
currency. However, it is not generally the Board's practice to do this and
the portfolio is not currently hedged.
No investments in unquoted stocks can be made without the prior approval of
the Board. The level of gearing within the portfolio is agreed by the Board
and should not exceed 20% in normal market conditions.
No more than 10% of the total assets of the Company may be invested in other
listed investment companies (including investment trusts) except in such
other investment companies which themselves have stated that they will invest
no more than 15% of their total assets in other listed investment companies,
in which case the limit is 15%.
The Investment Manager's compliance with the limits set out in the investment
policy is monitored by the Board and the AIFM.
Investment strategy
Investments are selected for the portfolio only after extensive research,
which the Investment Manager believes to be key. The whole process through
which an equity must pass in order to be included in the portfolio is very
rigorous. Only a security where the Investment Manager believes that the
price will be significantly higher in the future will pass the selection
process. The Company's Investment Manager believes the key to successful
stock selection is to identify the long term value of a company's shares and
to have the patience to hold the shares until that value is appreciated by
other investors. Identifying long term value involves detailed analysis of a
company's earning prospects over a five-year time horizon. The portfolio will
normally consist of 40 to 50 investments.
Business and status of the Company
The principal activity of the Company is to carry on business as an
investment trust.
The Company is registered as a public limited company and is an investment
company within the terms of Section 833 of the Act. The Company has been
approved by HM Revenue & Customs ("HMRC") as an investment trust under
Sections 1158 and 1159 of the Corporation Tax Act 2010 ("CTA"), subject to
there being no subsequent serious breaches of the regulations. In the opinion
of the Directors, the Company has directed its affairs so as to enable it to
continue to qualify for such approval.
The Company's shares have a premium listing on the Official List of the UK
Listing Authority and are traded on the main market of the London Stock
Exchange. The Company has a secondary listing on the New Zealand Stock
Exchange.
The Company is a member of the AIC, a trade body which promotes investment
companies and also develops best practice for its members.
Portfolio analysis
A detailed review of how the Company's assets have been invested is contained
in the Investment Manager's Report above. A detailed list of all the
Company's investments is contained in the Portfolio of Investments above. The
Portfolio of Investments details that the Company held 37 investments,
excluding cash and other net assets, as at 30 September 2015, with the
largest representing 3.7% of net assets, thus ensuring that the Company has a
suitable spread of investment risk. A sector and geographical distribution of
investments is shown above.
Results and dividends
The results for the year are set out in the Income Statement and the
Reconciliation of Movements in Shareholders' Funds below.
For the year ended 30 September 2015, the net revenue return attributable to
shareholders was ?6.7 million (2014: ?6.2 million) and the net capital return
was -?24.9 million (2014: ?14.8 million). Total shareholders' funds decreased
by 7.3% to ?312.2 million (2014: ?336.7 million).
Details of the dividends recommended by the Board are set out above in the
Chairman's Statement and below.
Key performance indicators
At each Board meeting, the Directors consider a number of performance
measures to assess the Company's success in achieving its objective. The key
performance indicators used to measure progress and performance of the
Company over time are established industry measures and are as follows:
Net asset value
In the year to 30 September 2015, the net asset value per share decreased by
7.3% from 800.41p to 742.20p. After taking account of dividends paid in the
year of 15.0p, the net asset value total return was -5.5%. This compares with
the total return of -1.8% from the FTSE All-World Europe ex UK Index,
adjusted to sterling.
The net asset value total return since the appointment of Edinburgh Partners
as Investment Manager on 1 February 2010 to 30 September 2015 was 38.2%. This
compares with the total return of 36.8% from the FTSE All-World Europe ex UK
Index, adjusted to sterling.
Share price
In the year to 30 September 2015, the Company's share price decreased by
10.1% from 748.75p to 673.00p. The share price total return, taking account
of the 15.0p dividend paid in the year, was -8.3%.
Share price premium/discount to net asset value per share
The share price discount to net asset value per share widened from 6.5% to
9.3% in the year to 30 September 2015.
Revenue return per ordinary share
There was an increase in the revenue per share in the year to 30 September
2015 of 7.4% from 14.85p to 15.95p.
Dividends per ordinary share
The Directors are recommending a final dividend of 14.0p per ordinary share
and a special dividend of 2.0p per ordinary share, making a total dividend of
16.0p per ordinary share. This compares with a prior year total dividend of
15.0p per ordinary share.
Ongoing charges
The Company continues to have low expenses. The ongoing charges ratio was
0.63% (2014: 0.61%) in the year to 30 September 2015.
The longer term records of the key performance indicators are shown in the
Ten Year Record above and in the full Annual Report and Financial Statements.
The Board also takes into consideration how the Company performs compared to
other investment trusts investing in Europe.
Management Agreement
In order to comply with the Alternative Investment Fund Managers' Directive
("AIFMD"), the Company appointed Edinburgh Partners AIFM Limited as its AIFM
with effect from 17 July 2014. Edinburgh Partners AIFM Limited has been
approved as an AIFM by the UK's Financial Conduct Authority ("FCA"). With the
approval of the Directors of the Company, the AIFM appointed Edinburgh
Partners as Investment Manager to the Company pursuant to a delegation
agreement with effect from 17 July 2014.
The AIFM receives a management fee of 0.55% per annum of the Company's equity
market capitalisation, payable monthly in arrears.
The Management Agreement may be terminated by either party giving three
months' written notice. No additional compensation is payable to the AIFM on
the termination of this agreement other than the fees payable during the
notice period. No performance fee will be paid. Further details relating to
the agreement are detailed in note 3 of the Financial Statements below.
The AIFM is required to make remuneration disclosures in respect of the
AIFM's first relevant reporting period, the year ending 29 February 2016, and
these will be made available in the Company's Annual Reports and Financial
Statements issued after that date. The remuneration policy of the AIFM is
available on request.
Continuing appointment of the AIFM
The Board keeps the performance of the AIFM under review through the Audit
and Management Engagement Committee. As the AIFM has delegated the investment
management function to Edinburgh Partners, the performance of the Investment
Manager is also regularly reviewed. It is the opinion of the Directors that
the continuing appointment of the AIFM on the terms agreed is in the
interests of shareholders as a whole. The reasons for this view are that the
long-term investment performance is satisfactory relative to that of the
markets in which the Company invests and the approach of the Investment
Manager is convincing. The remuneration of the AIFM is reasonable both in
absolute terms and compared to that of managers of comparable investment
companies. The Directors believe that by paying the management fee calculated
on a market capitalisation basis, rather than a percentage of assets basis,
the interests of the AIFM are more closely aligned with those of
shareholders.
Risk management by the AIFM
As required under the AIFMD, the AIFM has established and maintains a
permanent and independent risk management function to ensure that there is a
comprehensive and effective risk management policy in place and to monitor
compliance with risk limits. This risk policy covers the risks associated
with the management of the investment portfolio, and the AIFM reviews and
approves the adequacy and effectiveness of the policy on at least an annual
basis, including the risk management processes and controls and limits for
each risk area.
The AIFM sets risk limits that take into account the risk profile of the
Company's investment portfolio, as well as its investment objectives and
strategy. The AIFM monitors the risk limits, including leverage, and
periodically assesses the portfolio's sensitivity to key risks.
The AIFM reviews risk limit reports at regular meetings of its Risk
Committee.
Principal risks and uncertainties
The Board considers that the following are the principal financial risks
associated with investing in the Company: investment and strategy risk,
discount volatility risk, market risk (comprising interest rate risk,
currency risk and price risk), liquidity risk, credit risk and gearing risk.
An explanation of these risks and how they are managed and the policy and
practice with regard to financial instruments are contained in note 18 of the
Financial Statements below.
In addition, the Board also considers the following as principal risks:
Regulatory risk
Relevant legislation and regulations which apply to the Company include the
Act, the CTA, the Listing Rules of the FCA and the AIFMD. A breach of the CTA
could result in the Company losing its status as an investment trust and
becoming subject to capital gains tax, whilst a breach of the Listing Rules
of the FCA might result in censure by the FCA and suspension of the listing
of the Company's shares on the London Stock Exchange.
At each Board meeting the status of the Company is considered and discussed,
so as to ensure that all regulations are being adhered to by the Company and
its service providers.
The Board is not aware of any breaches of laws or regulations during the year
under review and up to the date of this report.
Operational risk
In common with most other investment companies, the Company has no employees;
the Company therefore relies upon the services provided by third parties.
There are a number of operational risks associated with the fact that third
parties undertake the Company's administration, depositary and custody
functions. The main risk is that the third parties may fail to ensure that
statutory requirements, such as compliance with the Act and the Listing Rules
of the FCA, are met.
The Board regularly receives and reviews management information from third
parties which the Company Secretary compiles. In addition, each of the third
parties provides a copy of its report on internal controls (ISAE 3402, SSAE
16 or equivalent) to the Board, through the Audit and Management Engagement
Committee, each year to ensure that adequate controls are in place and are
operating satisfactorily.
Other financial risk
It is possible that inappropriate accounting policies or failure to comply
with current or new accounting standards may lead to a breach of regulations.
The AIFM employs independent administrators to prepare all financial
statements and the Audit and Management Engagement Committee meets with the
independent auditors at least once a year to discuss annual audit issues,
including appropriate accounting policies.
The Board undertakes a robust annual assessment and review of all the risks
stated above and in note 18 of the Financial Statements below, together with
a review of any new risks which may have arisen during the year, including
those that would threaten its business model, future performance, solvency or
liquidity. These risks are formalised within the Company's risk assessment
matrix.
Internal financial control
In accordance with guidance issued to directors of listed companies, the
Directors confirm that they have carried out a review of the effectiveness of
the systems of internal financial control during the year ended 30 September
2015, as set out in the full Annual Report and Financial Statements. There
were no matters arising from this review that required further investigation
and no significant failings or weaknesses were identified.
Leverage
Leverage is defined in the AIFMD as any method by which the Company increases
its exposure, whether through borrowing of cash or securities, or leverage
embedded in derivative positions or by any other means. The Company did not
have any borrowings or use any derivative instruments during the year ended
30 September 2015.
In accordance with the detailed requirements of the AIFMD, leverage has been
measured in terms of the Company's exposure, and is expressed as a ratio of
net asset value. The AIFMD requires this ratio to be calculated in accordance
with both the Gross Method and the Commitment Method. Details of these
methods of calculation can be found by referring to the AIFMD. In summary,
these methods express leverage as a ratio of the exposure of debt,
non-sterling currency, equity or currency hedging and derivatives exposure
against the net asset value. The principal difference between the two methods
is that the Commitment Method enables derivative instruments to be netted off
to reflect hedging arrangements and the exposure is effectively reduced,
while the Gross Method aggregates the exposure.
The AIFMD introduced a requirement for the AIFM to set maximum levels of
leverage for the Company. The Company's AIFM has set a maximum limit of 1.20
for both the Gross and Commitment Methods of calculating leverage. However,
the AIFM anticipates that the figures are likely to be lower than this under
normal market conditions. At 30 September 2015, the Company's Gross ratio was
1.02 and its Commitment ratio was 1.02. In accordance with the AIFMD, any
changes to the maximum level of leverage set by the Company will be
communicated to shareholders.
Depositary Agreement
The Board appointed Northern Trust Global Services Limited to act as its
depositary (the "Depositary") under an agreement dated 22 July 2014 (the
"Depositary Agreement"), to which the AIFM is also a party. The Depositary is
authorised by the Prudential Regulation Authority and regulated by the FCA
and the Prudential Regulation Authority. Custody services are provided by The
Northern Trust Company (as a delegate of the Depositary). A fee of 0.01% per
annum of the net assets of the Company, plus fees in relation to safekeeping
and other activities undertaken to facilitate the investment activity of the
Company, are payable to the Depositary. The Company and the Depositary may
terminate the Depositary Agreement at any time by giving six months' written
notice. The Depositary may only be removed from office when a new depositary
is appointed by the Company.
Main trends and future development
A review of the main features of the year and the outlook for the coming year
is to be found in the Chairman's Statement and the Investment Manager's
Report above. The Board's main focus is on the investment return and
approach, with attention paid to the integrity and success of the investment
approach and on factors which may have an impact on this approach.
Forward-looking statements
This Strategic Report contains "forward-looking statements" with respect to
the Company's plans and its current goals and expectations relating to its
future financial condition, performance and results. By their nature, all
forward-looking statements involve risk and uncertainty because they relate
to future events that are beyond the Company's control. Factors that could
cause actual results to differ materially from those estimated by the forward
looking statements include, but are not limited to:
o Global economic conditions and equity market performance and prices,
particularly those in Europe
o Changes in Government policies and monetary and interest rate policies
worldwide, particularly those in Europe
o Changes to regulations and taxes worldwide, particularly in Europe
o Currency exchange rates
o Use of gearing
o The Company's success in managing its assets and business to manage the
above factors.
As a result, the Company's actual future condition, performance and results
may differ materially from the plans set out in the Company's forward-looking
statements. The Company undertakes no obligation to update the
forward-looking statements contained within this review or any other
forward-looking statements it makes.
Employees, human rights and community issues
The Board recognises the requirement under Section 414C of the Act to detail
information about employees, human rights and community issues, including
information about any policies it has in relation to these matters and the
effectiveness of these policies. These requirements do not apply to the
Company as it has no employees, all the Directors are non executive and it
has outsourced all its functions to third party service providers. The
Company has therefore not reported further in respect of these provisions.
Gender diversity
As at 30 September 2015, the Board of Directors of the Company comprised four
male Directors. The appointment of any new Director is made on the basis of
merit.
Social, environmental and ethical policy
The Company seeks to invest in companies that are well-managed, with high
standards of corporate governance, as the Directors believe this creates the
proper conditions to enhance long term value for shareholders. The Company
adopts a positive approach to corporate governance and engagement with
companies.
In pursuit of the above objective, the Directors believe that proxy voting is
an important part of the corporate governance process. It is the policy of
the Company to vote, as far as is practicable, at all shareholder meetings of
investee companies. The Company follows the relevant regulatory and
legislative requirements, with the guiding principles being to make proxy
voting decisions which favour proposals that will lead to maximising
shareholder value while avoiding any conflicts of interest. To this end,
voting decisions take into account corporate governance, including disclosure
and transparency, board composition and independence, control structures,
remuneration, social and environmental issues.
The day-to-day management of the Company's business has been delegated by the
AIFM to the Company's Investment Manager, Edinburgh Partners, which has an
Environmental, SRI and Corporate Governance ("ESG") policy in place, which
can be found on its website at www.edinburghpartners.com.
The assessment of the quality of investee companies in relation to
environmental considerations, socially responsible investment and corporate
governance is embedded in the Investment Manager's stock selection process.
On behalf of the Board
Douglas McDougall
Chairman
25 November 2015
A copy of the Annual Financial Report for the year ended 30 September 2015 is
attached.
End CA:00274184 For:EUT Type:FLLYR Time:2015-11-27 08:31:06
