Information for investors Martin Currie Asia Unconstrained Trust plc changed its name on 31 July 2015 having previously been known as Martin Currie Pacific Trust. This followed a vote by shareholders at the company s annual general meeting (AGM). The name change better reflects the company s investment mandate and geographic positioning following adoption of the Asia Long-Term Unconstrained strategy (ALTU) in July 2014. Martin Currie Asia Unconstrained Trust plc is an investment trust and is a public limited company, with shares listed on the London Stock Exchange. It invests in the shares of other companies. Investment trusts are known as collective investment vehicles because they pool investors money, spreading the risk of stockmarket investment. Their objectives vary, but most investment trusts invest for income or growth, or a combination of the two. An investment trust has a board of directors (the Board) to represent the interests of shareholders and like any other company, it holds an annual general meeting at which shareholders can vote. The Board appoints a professional investment manager to manage the assets of the trust. In the case of Martin Currie Asia Unconstrained Trust plc (the Company ) this is Martin Currie Fund Management Limited (the Manager). The Board sets out an investment objective for the Manager and agrees the strategy and risk parameters within which the objective must be pursued. Any material changes to the mandate of the Company require investor approval in line with the listing rules. Investment Objective Unconstrained by any benchmark the Company s objective is to achieve returns commensurate to Asian ex Japan nominal GDP growth through investment principally in listed Asian (ex Japan and Australasia) equities and related instruments. The Company may however utilise the ability within the Association of Investment Companies definition of the Asia Pacific ex-japan sector, to invest up to 20% of its assets in companies listed outside the sector where such investments are consistent with the objective of capturing growth in the Asia Pacific region. Investment Strategy and Risk Parameters The strategy invests primarily in equities, with no reference to an equity market benchmark; the Manager is not constrained by any market cap, sector or country allocations; The strategy invests primarily in equities and related instruments with a long term absolute return mind set. The Manager is not constrained by any market cap, sector or country allocations. Investing principally in equities including ordinary and fully paid, partly paid and nil paid, warrants convertible preference shares, depositary receipts, investment trusts and REITs. Stock selection across the region will aim to provide returns commensurate with Asia ex Japan nominal GDP growth measured on a 3 year rolling basis. The use of gearing is permitted. Controlled use of stock options and futures contracts. Currency management, aimed at protecting the value of investments, is permitted. Net gearing should operate within current parameters of between 85% and 120% invested, and the Manager should use its own discretion as to the appropriate level of gearing within those parameters. Any change in debt facilities is solely at the discretion of the Board. 1 of 8
Whilst the maximum leverage for investment purposes is agreed by the Board, the Manager must set a maximum level of leverage in accordance with the two prescribed regulatory calculation methods. The Manager has set a maximum level of leverage of 275% using the Gross method and 175% using the Commitment method. This indicates the highest level that exposure could reach using these calculations if all available instruments introducing leverage were used to the maximum permitted level at the same time. Guidelines and Restrictions on Portfolio Construction In order that the Company benefits from the tax efficiencies of operating as an investment trust it is required to be managed in order to comply with certain restrictions set out by Her Majesty s Revenue and Customs (HMRC). Section 1158 of the Corporation Taxes Act 2010 contains three conditions which must be satisfied before a company can be approved as an investment trust. The company s business must consist of investing in shares, land or other assets with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds. The company s ordinary shares must be admitted to trading on a regulated market. The company must not be a Venture Capital Trust or a UK REIT. The requirements which must continue to be met by an approved investment trust include: The close company test the company must comply with the close company test as set out in section 439 of the Corporation Taxes Act 2010. The 15% income retention test the company must not retain, from any accounting period, an amount which is greater than 15% of its income for the accounting period, and the relevant distribution must be distributed before the filing date for the company s tax return for the relevant period. Investment policy any changes to this investment policy must be notified to HMRC. Breaches any breaches of the regulations or eligibility conditions must be notified to HMRC, along with details of any action taken. All the above conditions must be satisfied before s1158-1159 status is given. S1158-1159 status exempts the Company from any capital gains tax liability. The Board have set additional guidelines and restrictions for the Manager in order to ensure that the Company is invested in accordance with the mandate agreed: Ensuring that the Company retains investment trust status under s1158-1159 of the Corporations Taxes Act 2010 (as set out above). Ensuring that the Company complies with its Articles of Association. Currency hedging against the weakness of an investment currency to be limited to the of the existing portfolio exposure to that currency, and only into sterling. No more than 15% of its assets in the shares and securities of any one company. extent No more than 5% of the Company s NAV to be invested in Martin Currie associated funds, at time of purchase. No more than 10% of the Company s Total Asset Value (TAV) to be invested in a security at the time of purchase. It is the policy of the Manager to hold no more than 10% of the issued shares of any class of equity security of an issuer. There are no limitations on sector or country weightings. Portfolio will generally hold 20-30 stocks. No unlimited liability investments e.g. general partnerships. 2 of 8
No commodity or direct property investments. No lending of securities. No acquisitions for the purposes of exercising control or management. Voting rights may be exercised at the Manager s discretion, subject to the Board s instruction for specific voting issues. Material changes to investment policy may only be made with the prior approval of shareholders as required by the Listing Rules. Minor changes may be made by the Board from time to time. In each case changes will be disclosed to the market in accordance with applicable regulation. Alternative investment fund managers directive (AIFMD) The Company has appointed the Manager as its Alternative Investment Fund Manager (AIFM). The Manager is an associated company of Martin Currie Investment Management Limited (MCIM), the Company s previous investment manager, which will continue to act as portfolio manager under delegated authority from the Manager and as company secretary. No changes are proposed to the way the Company s assets are invested as a result of the implementation of the AIFMD. Ongoing charges The ongoing charges for the period end 31st March 2014 were 1.3%, calculated in line with the Association of Investment Companies recommended methodology. The ongoing charges include the management fees, the management fee rate was reduced from 1.0% to 0.75% with effect from 1 January 2014. Service providers The Company has appointed service providers to assist the Board and the Manager in meeting regulatory requirements and the needs of investors: Risk factors General The Company s statutory auditor is Ernest & Young LLP, who audit the Company s Annual Financial Report and report to shareholders thereon. The Company s depositary is State Street Trustees Limited (the Depositary), which is responsible for safe-keeping of the Company s financial assets and for monitoring its cash flows. The Company s registrar is Capita Registrars, which is responsible for maintaining and updating the register of members. An investment in the Company is only suitable for investors who are capable of evaluating the merits and risks of such an investment and who have sufficient resources to bear any loss which might result from such an investment. The Shares in the Company (the Shares) are designed to be held over the long-term and may not be suitable as short-term investments. There can be no guarantee that any appreciation of the Company s investments will occur and therefore investors may not get back the full value of their investment. There can be no guarantee that the investment objective of the Company will be met. The past performance of the Company is not a guide to the future performance of the Company. Depending on market conditions and market sentiment, the spread between purchase and sale price can be wide. As with all stock exchange investments the value of investment trust shares purchases will immediately fall by the difference between the buying and selling prices, the bid-offer spread. The value of investments and the income from them may go down as well as up and is not guaranteed. An investor 3 of 8
may not get back the amount originally invested. Investment Trusts may borrow money in order to make further investments. This is known as 'gearing' and can enhance shareholder returns in rising markets but, conversely, can reduce them in falling markets. The majority of charges will be deducted from the capital of the Company. This will constrain capital growth of the Company in order to maintain the income streams. High exposure to a single country carries a greater degree of risk than a portfolio which is diversified across a number of markets. Investing in smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile. The Company is exposed to and can hold currencies other than its base currency. As a result, exchange rate movements may cause the value of investments to decrease or increase. The Company may have a concentrated portfolio of assets. Such concentration can give rise to more risk than where investments are spread over a large number of companies. Whilst this may increase the potential gains, this concentration of exposure and lack of diversification may also substantially increase the risk of loss to the Company. Given the unconstrained nature of the strategy proposed and the investment philosophy of the Manager, performance may vary considerably relative to the traditional market indices for the region in which the Company plans to invest. Emerging markets tend to be more volatile than more established stock markets and therefore your money is at greater risk. Other risk factors such as political and economic conditions should also be considered. Restrictive dealing, custody and settlement practices may be prevalent. A counterparty may not pay or deliver on time or as expected. As a result, settlement may be delayed and the cash or securities could be disadvantaged. Securities of many companies in emerging markets are less liquid and their prices more volatile than securities of comparable companies in more sizeable markets. Economic Conditions Changes in economic conditions (for example, interest rates, rates of inflation, industry conditions, competition and political and other factors) could substantially and adversely affect the Company s prospects and the value of its investments. These are changes which are outside the Company s control and which may affect the volatility of underlying asset values and the liquidity and value of the Company s portfolio. The Shares The market value of, and the income derived from, the Shares can fluctuate and, notwithstanding any measures that may be taken by the Company to control the Company s discount and premium. The market value of Shares may not always reflect the Net Asset Value per Share. No assurance can be given that any sale of the Company s investments would realise proceeds which would be sufficient to repay any borrowings or provide funds for any capital repayment to Shareholders. Shareholders will bear the rewards and risks of the success or otherwise of the Company s investments. The market value of the Shares, as well as being affected by their Net Asset Value, also takes into account their dividend yield and prevailing interest rates, supply and demand for the Shares, market conditions and general investor sentiment. As such, the market value of a Share may vary considerably from its underlying Net Asset Value. Borrowing From time to time the Company finances its investment operations though bank borrowings. Due to the gearing effect of any borrowing undertaken by the Company, Shareholders will, to an exaggerated extent, suffer from any underperformance of the Company s assets, compared to the cost of any borrowing (both in Net Asset Value and market price depreciation) and conversely will benefit from any outperformance relative to any borrowing cost. Whilst the use of borrowings should enhance the total return on the Shares where the return on the Company s underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is falling, further reducing the total return on the Shares. As a result, the use of borrowings by the Company may increase the volatility of the Net Asset Value per Share. There is no guarantee that any borrowings of the Company would be refinanced on their maturity either at all or on terms that are acceptable to the Company. 4 of 8
Dividends The Company s dividend policy aims to pay dividends to Shareholders twice a year, but there is no guarantee that dividends will be paid in respect of any financial period. The ability to pay dividends is dependent on a number of factors (including available profits) and there can be no assurance that these will all be met. Investment objective and strategy The Company manages the risk of investment underperformance by relying on the Manager s stock selection skills within a framework of diversification and other investment restrictions and guidelines. Corporate bonds Corporate bonds are subject to credit, liquidity, duration and interest rate risks. Adverse changes in the financial position of an issuer of corporate bonds or in general economic conditions may impair the ability of the issuer to make payments of principal and interest or may cause the liquidation or insolvency of an issuer. There can be no assurance as to the levels of default and/or recoveries that may be experienced with respect to corporate bonds. 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. As such, the Company is exposed to market risk due to fluctuations in the prevailing market rates and this may increase the volatility of the Net Asset Value per Share. It is the Company 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 sector. The allocation of assets and the stock selection process are both intended to reduce market risk. Interest rate risk The Company is exposed to interest rate risk due to fluctuations in the prevailing market rates. Interest rate movements may impact the fair value of the Company s investments in fixed interest rate securities, the level of income receivable on cash deposits and the level of interest payable on borrowings. 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. Foreign currency risks A significant proportion of the Company s investment portfolio is invested in overseas securities and the balance sheet can be significantly affected by movements in foreign exchange rates. It is not the Company s policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. Where the Company does not hedge its currency exposure, the movement of exchange rates may have a favourable or unfavourable effect on the gains and losses experienced on investments which are made or realised in currencies other than pounds sterling. Discount and premium management The Company may from time to time seek to manage any discount or premium. While the Company may decide to issue new Shares and to resell Shares held in treasury at a small premium to the Net Asset Value per Share where demand exceeds supply, this will be dependent upon the Company being able to issue New Shares and to resell Shares held in treasury at a premium, on market conditions generally at the relevant time, upon Shareholders in general meeting conferring appropriate authorities on the Board to issue further Shares and, where required under the Prospectus Rules, upon a prospectus having been approved by the UK Financial Conduct Authority and published. The Board will seek renewal of this authority from shareholders annually and at other times should this prove necessary. However, there can be no guarantee that requisite Shareholder approvals will be obtained. The ability of the Company to seek to manage any discount, should it decide to do so, will depend on the Company being able to buy back Shares, which will be dependent upon Shareholders in general meeting conferring authority on the Board to buy back Shares. The Board will seek renewal of this authority from shareholders annually and at other times should this prove necessary. However, there can be no guarantee that requisite Shareholder approvals will be obtained. Seeking to manage any discount could lead to a significant reduction in the size of the Company over time, which would increase the Company s Ongoing Charges Ratio and prejudice the ability of the Company to 5 of 8
maintain its target dividend yield. In accordance with the Listing Rules and applicable corporate governance guidance, the extent of each buy-back authority which will be sought by the Company from Shareholders in general meeting will be limited to 14.99 per cent. of the Company s issued share capital as at the date on which the authority would be granted. In order to continue buying back Shares once any such authority has been exhausted, the Company would require to seek a renewed buy-back authority from Shareholders in general meeting. The ability of the Company to buy back Shares will be subject to the UK Companies Act 2006 and all other applicable legislation, rules and regulations of any government, regulatory body or market applicable to the Board or the Company and, in particular, will be dependent on the availability of distributable reserves. Market liquidity The Company is required to satisfy the liquidity test criteria specified by the FTSE at each annual review to maintain its place in the FTSE All-Share Index. The liquidity of the Company is monitored by the Board, the Manager and the Company s broker with a report being reviewed at every Board meeting. Inclusion in the FTSE All-Share Index supports a company s liquidity and capital raising, as well as being an important comparator of performance. Failure to meet the criteria for inclusion could lead to reduced liquidity of the Shares. Counterparty and operational risk The Company has outsourced its operational infrastructure to third party organisations. The Company therefore relies on the performance of third party service providers to perform its functions and, in particular, on the Manager and Depositary who perform services which are integral to the Company s operations and financial performance. Contracts and service level agreements have been defined to ensure that the service provided by each third party organisation is of a sufficiently professional and technically high standard. Periodically the Board requests that representatives from other third party service providers (such as the Auditors and Depositary) attend Board meetings to give the Board the opportunity to ensure service standards continue to meet the Company s requirements. That said, failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment, to exercise due care and skill, or to perform its obligations to the Company at all as a result of insolvency, bankruptcy or other causes could have a material adverse effect on the Company s performance and returns to Shareholders. The termination of the Company s relationship with any third party service provider or any delay in appointing a replacement for such service provider, could disrupt the business of the Company materially and could have a material adverse effect on the Company s performance and returns to Shareholders. Cessation of investment trust status The Company attempts to conduct its business so as to satisfy the conditions for approval as an investment trust under s1158 1159 of the Corporation Tax Act 2010. S1158 1159 qualification criteria are continually monitored. Breach of the tests that a company must meet to gain approval as an investment trust company could lead to the Company being subject to tax on capital gains. Tax and accounting Any change in the Company s tax status or in taxation legislation or accounting practice could affect the value of the investments held by the Company, affect the Company s ability to provide returns to Shareholders or alter the posttax returns to Shareholders. Representations in this document concerning the taxation of investors are based upon current tax law and practice which are, in principle, subject to change. Any change in accounting standards may adversely affect the total value of the Company s net assets in its books of account or restrict the ability of the Company to pay dividends. Regulation The Company is subject to a range of legal, regulatory and other requirements and standards. Failure to comply with these requirements and standards could adversely affect the returns available to Shareholders and/or the ability of investors to hold or deal in the Shares. 6 of 8
Detailed requirements FUND 3.2.2 R 1. Investment strategy See the Company s Investment policy and strategy set out in page 1 above. 2. Changes to investment strategy 3. Legal consequences of investment Material changes to investment policy may only be made with the prior approval of shareholders as required by the Listing Rules. Minor changes may be made by the Board from time to time. In each case changes will be disclosed to the market in accordance with applicable regulation. Purchase of shares in the Company by an investor does not give rise to any contractual relationship between the investor and the Company. 4. Service providers A list of the Company s principal service providers and their respective duties is set out in page 3 above. 5. Professional liability The AIFM covers its professional liability risks by maintaining an amount of own funds and also complies with qualitative requirements relating to such risks, in each case in accordance with AIFMD level 2 regulations. 6. Delegation (a) The Manager delegates the Company s portfolio management to MCIM as set out in page 3 above. (b) The Depositary for the Company is State Street Trustees Limited. The Depositary may from time to time delegate safe keeping/custody of the Company s assets to local custody providers. (c) The Manager and MCIM have delegated fund accounting and pricing/valuation functions to State Street Bank & Trust Company. 7. Valuation The majority of the Company s investments are quoted on one or more exchanges and are valued using prices sourced from third party vendors of market data. Unquoted investments are held at Directors valuation. 8. Liquidity risk The Company s Ordinary Shares are not ordinary redeemable. The Company s liquidity risk is measured and monitored daily. 9. Fees and expenses The AIFM is entitled to a management fee as set out in page 3 above. In addition the Company will incur annual fees and expenses including fees for: secretarial and administration services, depositary, registration services, directors and other operating expenses. Such expenses are all paid by the Company and this indirectly borne by its shareholders. 10. Fair treatment The Listing Rules set out Principles and Rules, to which the Company is subject, for the fair treatment of investors, notably Listing Principles 3 and 5. 11. Preferential treatment 12. Issue and sale of shares Not applicable. The Company s shares are not generally available for subscription by investors, but are available for investment on the Main market of the London Stock Exchange. From time to time the Company is permitted to issue shares subject to applicable limits and regulation including the Listing Rules and Prospectus Rules. 13. NAV The Company s net asset value per share is announced daily to the market. Its shares are quoted on market and news and prices are available through a wide range of market data sources. 14. Annual report The Company s most recent Annual Reports are available on the Manager s website at www.martincurrieasia.com. 15. Performance Factsheets, including data relating to the Company s performance, are available on the Manager s website at www.martincurrieasia.com. 7 of 8
16. Prime broker Not applicable. 17. Periodic reporting The Manager will, at least as often as the annual report is made available to shareholders, make the following information available to shareholders: any changes to (i) the maximum level of leverage that the Manager may employ on behalf of the Company and (ii) any right of reuse of collateral or any guarantee granted under any leveraging arrangement; the total amount of leverage employed by the Company; the percentage of the Company s investments which are subject to special arrangements resulting from their illiquid nature; the current risk profile of the Company outlining (i) measures to assess the sensitivity of the Company to the most relevant risks to which the Company is or could be exposed and (ii) if risk limits set by the Manager have been or are likely to be exceeded and where these risk limits have been exceeded, a description of the circumstances and, the remedial measures taken; the risk management systems employed by the Manager outlining the main features of the risk management systems employed by the Manager to manage the risks to which the Company is or may be exposed. In the case of a change, information relating to the change and its anticipated impact on the Company and the shareholders will be made available. The Manager will inform shareholders as soon as practicable after making any material changes to its liquidity management system and procedures. Periodic reporting of information relating to liquidity and leverage will be made to the market through a Regulatory Information Service and will be available through a wide range of market data sources. 8 of 8