Fundsmith Emerging Equities Trust plc (FEET) 2016年年度報告「LSE」.pdf

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1、Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016A member of the Association of Investment CompaniesPerivan Financial Print 242931Fundsmith Emerging Equities Trust plc33 Cavendish Square,London W1G 0PWwww.feetplc.co.ukAnnual ReportFundsmith Emerging Equities Tru

2、st plcunnAope Ralut romsdnuFfor the year ended 31 December 2016unnAqg Engiremh Et ifor the year ended 31 December 2016ope Raluc lt psurs Te i t i ufor the year ended 31 December 2016t ro 1Strategic Report 2Governance 3Financial Statements 4Further Information Fundsmith Emerging Equities Trust plc An

3、nual Report for the year ended 31 December 2016Company SummaryStrategic ReportFundsmith Emerging Equities Trust plc aims toprovide shareholders with an attractive return byinvesting in a portfolio of shares issued by listedor traded companies which have the majority oftheir operations in,or revenue

4、derived from,Developing Economies*and which provide directexposure to the rise of the consumer classes inthose countries.Company SummaryThe CompanyThe Company is an investment trust and its shares are premiumlisted on the Official List and traded on the main market of theLondon Stock Exchange.The Co

5、mpany is a member of theAssociation of Investment Companies.Total assets less current liabilities as at 31 December 2016were 238.6 million(2015:179.3 million)and the marketcapitalisation was 242.4 million(2015:184.7 million).ManagementThe Company employs Fundsmith LLP(Fundsmith)asInvestment Manager

6、and Alternative Investment Fund Manager(AIFM).Further details of the terms of these appointments areprovided on page 37.Performance is measured against the MSCI Emerging andFrontier Markets Index measured on a net sterling adjustedbasis.Capital StructureThe Companys capital structure is composed of

7、OrdinaryShares.Further details are given in note 11 to the financialstatements on page 66.ISA StatusThe Companys shares are eligible for Individual SavingsAccounts(ISAs)and for Junior ISAs.Retail Investors advised by IFAsThe Company currently conducts its affairs so that its shares canbe recommended

8、 by Independent Financial Advisers(IFAs)inthe UK to ordinary retail investors in accordance with theFinancial Conduct Authority(FCA)rules in relation to non-mainstream investment products and intends to continue to doso.The shares are excluded from the FCAs restrictions whichapply to non-mainstream

9、investment products because they areshares in an investment trust.Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016*See Fundsmiths Investment Philosophy on page 21 for further information.Further details of the Companys investment policy are set out in the Strat

10、egic Report on page 8.Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Financial HighlightsStrategic ReportPerformance Summary1MSCI Emerging and Frontier Markets Index(measured on a net sterling adjusted basis)As atAs at31 December 201631 December 2015Share Pric

11、e1055.5p955.0pNet asset value per share1039.0p927.4pPremium of the share price to the net assetvalue per share1.6%3.0%Ongoing charges ratio1.7%1.7%For the year endedFor the year ended31 December 201631 December 2015Net asset value per share+12.0%-7.0%Share price+10.5%-10.9%Benchmark1+32.4%-10.0%Perf

12、ormanceThe Companys net asset value per share total return for the yearwas+12.0%(2015:-7.0%)and the share price total return was+10.5%(2015:-10.9%).The MSCI Emerging and FrontierMarkets Index,measured on a net sterling adjusted basis,roseby 32.4%over the same period(2015:-10.0%).Our Investment Manag

13、er explains the reasons for this relativeunderperformance,together with a comprehensive analysis ofthe performance of the Companys portfolio and the significantmacro events during the year,in their report beginning onpage 12.Shareholders should continue to be reassured by the positivereturns on capi

14、tal and profit margins generated by the underlyinginvestee companies;further details can be found in Fundsmithsreport.Your Board shares our Investment Managers confidencein these high quality companies whose strong underlyingcharacteristics will determine the long term growth in net assetvalues.Shar

15、e CapitalThe Company implemented a share issuance programme duringthe year and consistent demand for the Companys shares ledto the issue of a total of 3,624,635 new shares,equating to18.7%of the Companys issued share capital at the start of theyear.The net proceeds received by the Company from the i

16、ssueof these new shares were invested in line with the Companysinvestment objective.The Company raised net proceeds of38.1 million during the year.Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Chairmans StatementIntroductionI am pleased to present our third A

17、nnual Report which covers the yearended 31 December 2016.The share issuance programme allows the Board to manage thepremium at which the Companys shares trade whilst growing thetotal assets under management.It also reduces the annualongoing costs per share and potentially enhances the secondarymarke

18、t liquidity of the Companys shares,both of which areattractive to all shareholders.Indeed,average trading volumesduring the year have almost doubled from their 2015 levels.The Company will only issue shares where the issue price pershare(after taking into account the costs of the issue)is not lessth

19、an the prevailing cum-income net asset value per share.Indoing so,any share issuances are accretive to the Companysnet asset value per share.In addition,the shareholder authoritiesunder which we issue shares are limited so that issuance canonly occur when the result of the fundraising would not caus

20、e theCompany to have more than 10%of its assets in cash,whichprotects investors from so-called“cash-drag”i.e.the negativeimpact on equity returns of having uninvested cash in a risingequity market.At the last Annual General Meeting(“AGM”)in May 2016,theBoard sought authority from shareholders to iss

21、ue up to 10%ofthe Companys issued share capital without pre-emption rightsand,in a separate resolution,an additional authority to issue afurther 15%of the Companys issued share capital without pre-emption rights.Shareholders approved both resolutions,although there was a significant vote against(24.

22、59%)the latterdue to the proposal being outside the limits recommended by thePre-Emption Group(a group which considers the principles to betaken into account when considering the case for dis-applyingpre-emption rights).After discussion with the Investment Manager and the Companysmajor shareholders,

23、the Board is proposing to renew both ofthese authorities at this years AGM,details of which are set outon pages 81 to 89 of this report.The additional 15%authorityhas facilitated the smooth running of the share issuanceprogramme,allowing the Company to continue issuing shareswithout the need to hold

24、 additional general meetings during theyear,which can be costly for shareholders.Accordingly,the Boardwill once again give shareholders the opportunity to voteregarding the granting to the Board of this additional authority inorder to ensure the continued efficient and cost-effectiveadministration o

25、f the share issuance programme.The Board is also proposing that shareholders renew the Boardsauthority to repurchase up to 14.99%of the Companys sharesin the market either for cancellation or to be held in Treasury.Inaddition,this year the Board has proposed a resolution that willallow the Company t

26、o sell any shares bought into Treasury backinto the market at a discount to NAV per share,but only at anarrower discount than that at which they were bought in.Theauthority is also capped at a maximum discount of 5%to the NAVper share.The round trip of buying shares in and then sellingthem out again

27、 at a finer discount would always be asset-accretive to shareholders,but it is the increased liquidity thatthis arrangement permits that would be the real benefit.The Board does not anticipate using these powers as theCompanys shares have traded,on average,at a premium to theNAV per share throughout

28、 the year and since the year end.However,the Board wishes to have the appropriate powers inplace should a significant share price discount emerge.We look forward to receiving shareholder support for theseresolutions which your Board unanimously believes to be in thebest interests of shareholders.Fun

29、dsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Chairmans StatementStrategic Report“Consistent demand for the Companys shares led to the issue of3,624,635 new shares”DividendsShareholders will note that in 2016 the Company made a smallrevenue profit but that this

30、was not large enough to reverse thelosses from previous years.As such,the Board has not declaredor recommended a dividend this year.As stated in the Companys prospectus,the Companys principalinvestment objective is to provide capital growth rather than anyparticular level of dividend.Thus far,the Co

31、mpany has allocatedall of its expenses against revenue which has resulted in therebeing no distributable income to be returned to shareholders.The Board has decided that given three years of operations havepassed,we now have enough information to consider this policyin light of the expected nature o

32、f the returns the Company wouldexpect to make in the long-term.It is our expectation that priorto the half year end we will amend our policy and allocate aproportion of expenses against capital.This will increase thelikelihood of a dividend being declared in future.Any dividends and distributions wi

33、ll continue to be at thediscretion of the Board from time to time.The BoardThere have been no changes to the Board during the year and inaccordance with our policy of all Directors standing for re-electionannually,you will find the appropriate resolutions in the Noticeof Annual General Meeting on pa

34、ge 81.Half Year ReportIn order to reduce the Companys already minimal carbonfootprint and also to produce cost savings for shareholders the Company will no longer be producing hard copies of its HalfYear Report.This document will continue to be available on theCompanys website at www.feetplc.co.uk.T

35、he Companys AnnualReport will continue to be available in hard copy.OutlookA great deal of uncertainty prevails in emerging markets and,asour Investment Manager notes,it is dangerous to try to forecastmacro events or their effects on markets.However,like ourInvestment Manager,the Board is confident

36、in the quality of theCompanys underlying investee companies and whilst developingeconomies may continue to experience volatility,their domesticdemand-led growth remains evident.Stock selection continuesto be key and your Board believes that our Investment Managersstrategy of focusing on well-managed

37、 companies that own long-established and cash generative consumer brands will provideattractive returns for our shareholders in the long term.Annual General MeetingThe Companys AGM,to be held on Wednesday,24 May 2017 at1.00pm,will this year return to the Barber Surgeons Hall,Monkwell Square,Wood Str

38、eet,London EC2Y 5BL.Furtherdetails can be found on pages 81 to 89.The AGM provides shareholders with an opportunity to meet theDirectors and to receive a presentation from our InvestmentManager and we hope as many shareholders as possible willattend.I look forward to meeting you at that time,togethe

39、r withmy Board colleagues.If any shareholders are unable to attendor wish to raise a matter with the Board,please contact methrough the Company Secretary whose details are set out onpage 90.Martin BralsfordChairman28 February 2017Fundsmith Emerging Equities Trust plc Annual Report for the year ended

40、 31 December 2016AimTo provide shareholders with an attractive return by investing ina portfolio of shares issued by listed or traded companies whichhave the majority of their operations in,or revenue derived from,Developing Economies*and which provide direct exposure to therise of the consumer clas

41、ses in those countries.Investment Approach and PolicyThe Company maintains a portfolio diversified by issuerconcentration and the Companys portfolio will normally comprise35 to 55 investments.The Company complies with the following restrictions at the timeeach investment is made:(i)not more than 5%o

42、f the Companys gross assets can beinvested in shares issued by any single company.This limitrises to 10%in respect of up to 40%of gross assets;(ii)not more than 40%of the Companys gross assets can beinvested in shares issued by companies domiciled in anysingle jurisdiction;(iii)not more than 20%of t

43、he Companys gross assets can bein deposits held with a single bank or financial institution.Inapplying this limit all uninvested cash(except cashrepresenting distributable income or credited to adistribution account that the Depositary holds)should beincluded;(iv)not more than 20%of the Companys gro

44、ss assets canconsist of shares and approved money market instrumentsissued by the same group.When applying the limits set outin(i)this provision would allow the Company to invest notmore than 5%in the shares of each of four group membercompanies,or 10%in two of them(if applying the 40%limit);(v)the

45、Companys holdings in any combination of shares ordeposits issued by a single company or fund must notexceed 20%of the Companys gross assets overall;(vi)the Company must not acquire shares issued by a companyand carrying rights to vote at a general meeting of thatcompany if the Company has the power

46、to influencesignificantly the conduct of business of that company(orwould be able to do so after the acquisition of the shares).The Company is to be taken to have power to influencesignificantly if it exercises or controls the exercise of 20%ormore of the voting rights in that company;and(vii)the Co

47、mpany must not acquire shares which do not carry aright to vote on any matter at a general meeting of thecompany that issued them and represent more than 10%ofthese securities issued by that company.Uninvested cash or surplus capital or assets may be invested ona temporary basis in:cash or cash equi

48、valents,money market instruments,bonds,commercial paper or other debt obligations withbanks or other counterparties having a single-A(orequivalent)or higher credit rating as determined by aninternationally recognised rating agency;or any“government and public securities”as defined for thepurposes of

49、 the FCA rules.In general,the Company will not use portfolio managementtechniques such as interest rate hedging and credit defaultswaps.However,the Company may use currency hedging,through derivatives if necessary,as a portfolio managementtechnique.Whilst the Company,generally,will not hedge itscurr

50、ency exposure,it does reserve the right to do so in thecircumstances where,in the opinion of the Investment Manager,a significant depreciation of a currency has become likely but theInvestment Manager wishes to continue owning the companiesin the portfolio denominated in that currency and where the

51、costof hedging that currency is unlikely,in the opinion of theInvestment Manager,to extinguish any gains from hedging.Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Investment Objective and PolicyStrategic Report*See Fundsmiths Investment Philosophy beginning

52、on page 21 for further informationFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Investments held as at 31 December 2016Security Country of incorporation Fair value 000%of investmentsGodrej Consumer Products Ltd India 8,6403.7%Vitasoy International Holdings Lt

53、d Hong Kong 8,3013.6%Marico Ltd India 7,9653.5%Emami Ltd India 7,9263.4%Philippine Seven Corp Philippines 7,8723.4%Britannia Industries Ltd India 7,8093.4%Hypermarcas SA Brazil 7,2443.1%Vietnam Dairy Products JSC Vietnam 6,8243.0%Colgate Palmolive(India)Ltd India 6,6412.9%Dabur India Ltd India 6,175

54、2.7%Top 10 Investments 75,39732.7%Universal Robina Corp Philippines 5,9642.6%Asian Paints Ltd India 5,9022.6%Famous Brands Ltd South Africa 5,8832.5%Nestl India Ltd India 5,3342.3%Hindustan Unilever Ltd India 5,2012.2%Procter+Gamble Hygiene India 5,1642.2%Foshan Haitian Flavouring China 5,0372.2%For

55、us SA Chile 4,8262.1%Bajaj Corp Ltd India 4,7972.1%HM Sampoerna TBK PT Indonesia 4,7902.1%Top 20 Investments 128,29555.6%Investment PortfolioFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportInvestment PortfolioInvestments held as at 31 December 2

56、016 continuedSecurity Country of incorporation Fair value 000%of investmentsIntegrated Diagnostics Holdings Plc Jersey1 4,7862.1%Tanzania Breweries Ltd Tanzania 4,6892.0%Mr Price Group Ltd South Africa 4,6582.0%Ceylon Tobacco Co Plc Sri Lanka 4,5952.0%Spur Corp Ltd South Africa 4,5942.0%Magnit PJSC

57、Spon GDR Regs Russia 4,4701.9%Ambev SA Brazil 4,3721.9%Nestl Nigeria Plc Nigeria 4,2631.9%Nestl Lanka Plc Sri Lanka 4,2401.8%Dr Lal Pathlabs Ltd India 4,1181.8%Top 30 Investments 173,08075.0%East African Breweries Ltd Kenya 4,0381.8%Unilever Indonesia TBK PT Indonesia 4,0241.7%Eastern Tobacco Egypt

58、4,0001.7%British American Tobacco Bangladesh 3,9681.7%GlaxoSmithKline Consumer Healthcare Ltd India 3,8241.7%Kimberly Clark De Mexico SAB de CV Mexico 3,8001.7%Olympic Industries Ltd Bangladesh 3,7851.6%Walmart De Mexico SAB de CV Mexico 3,7421.6%Tiger Brands Ltd South Africa 3,5231.5%Nigerian Brewe

59、ries Plc Nigeria 3,4771.5%Top 40 Investments 211,26191.5%Dali Foods Group Co Ltd China 3,2941.5%Indofood CBP Sukses Makmur TBK Indonesia 3,2161.4%Shoprite Holdings Ltd South Africa 3,1841.4%Nestl Pakistan Ltd Pakistan 2,8441.2%Edita Food Industries Reg Egypt 2,8121.2%Fan Milk Ltd Ghana 2,3781.0%Guin

60、ness Nigeria Plc Nigeria 1,2380.6%Jyothy Laboratories Ltd India 3100.1%Edita Food Industries SAE Egypt 3010.1%Total Investments 230,838100.0%1Principal place of business EgyptFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Portfolio Distributionas at 31 Decembe

61、r 2016 38%3%7%7%4%4%12%25%Fast Food Food&Beverage FMCG Retail Tobacco Chemicals Health Care CashBy Sector(based on net asset value)29.8%10.4%34.6%25.2%Eastern Europe,Middle East and Africa Asia(ex India)India Latin AmericaBy Geography(by Country of Incorporation)Top 10 Purchases and Sales in 2016Top

62、 10 PurchasesTop 10 SalesSecurityCountry of incorporationSecurityCountry of incorporation1.Vietnam Dairy Products JSCVietnam1.Jollibee Foods CorpPhilippines2.Integrated Diagnostic HoldingsJersey*2.Grupo Lala SAB de CVMexico3.Kimberly Clark de Mexico SAB de CVMexico3.Indofood CBP Sukses Makmur TBKInd

63、onesia4.Ambev SA Brazil4.Big C Supercenter PCLThailand5.Walmart de Mexico SAB de CV Mexico5.BIM Birlesik Magazalar ASTurkey6.Tiger Brands LtdSouth Africa6.Tiger Brands LtdSouth Africa7.Indofood CBP Sukses Makmur TBKIndonesia7.Ambev SA Brazil8.Dr Lal Pathlabs LtdIndia8.Sun Art Retail Group LtdChina9.

64、Emami LtdIndia9.Guiness Nigeria PLCNigeria10.Dali Foods Group Co LtdChina10.Want Want China Holdings LtdChina*Principal place of business EgyptFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportInvestment Managers ReviewThe performance of Fundsmith

65、 Emerging Equities Trust plc(“FEET”)in 2016 was distinctly different before and after8 November.The US presidential election which occurred on 8 Novemberproduced a victory for Donald Trump which is usuallyaccompanied by the word“surprise”when being described.“Surprise for some”might be a more accura

66、te description,although it was certainly a surprise for the major pundits,pollsters,mainstream media and anyone who trusted them.Coincidentally,on the same day,Narendra Modi,the Indian PrimeMinister,announced the“demonetisation”of the highestdenomination bank notes,the Rs500 and Rs1,000 notes(roughl

67、y 6 and 12).They were declared no longer to be legaltender.Holders of these notes were left with the choice of payingthem into a bank account,exchanging them for smallerdenomination notes but with a limit of Rs2,000(24)perperson or seeing them become worthless.These two events caused a change in sen

68、timent towardsemerging markets in general and in the performance of ourconsumer stocks in India in particular.On 8 November FEETsshare price was up by+19%year to date and its Net Asset Value(NAV)per share by+21%.It finished the year with the share priceup by+10.5%and the NAV by+12.0%,so both events

69、had animmediate negative impact.Figure 1:Source:BloombergMr Trumps victory has been followed by a strong run in the USstock market and further strengthening of the US dollar ascommentators and analysts anticipated pro-business policiesand an insistence on“fair trade”with Americas trading partnersin

70、the developing world,most notably Mexico and China.Theseevents demonstrate yet again the dangers of trying to useforecasts of so-called macro events as a basis for investmentdecisions.Markets are a second order system.Predicting eventscorrectly is,at best,half the solution.You also need to know what

71、80085090095010001050110011501200Share PriceNat Asset Value(NAV)Dec-15Jan-16Feb-16Mar-16Apr-16May-16Jun-16Jul-16Aug-16Sep-16Oct-16Nov-16Dec-16Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016markets are anticipating in order to guess correctly how they willreact.

72、So we were told by most commentators that markets wouldreact badly to a Trump victory.This turned out to be as reliableas their predictions about his electoral prospects.However,thisabysmal predictive performance has since not stopped themopining on the likely impact of Mr Trumps yet-to-be decided o

73、rannounced policies,including their impact on emerging markets.Whatever these policies may be,their direct impact on the stocksin our portfolio is likely to be small,given that we have less than4%of the portfolio in each of Mexico and China.However,as anold saying goes,“When the police raid a bawdy

74、house even thepiano player gets arrested”and emerging markets in generalsuffered in the wake of the Trump victory,especially as it wasfollowed in December with a second rate rise by the US FederalReserve Bank(the“Fed”).I refuse to use the popular term“hike”to describe the Feds action as it is define

75、d in the dictionary asa sharp or unexpected increase a description which clearly doesnot apply to the Feds decision to raise rates by 0.25%for thesecond time in twelve months from a record low.I have no ideawhen or by how much the Fed or any other central bank willsubsequently increase interest rate

76、s.Neither,I suspect,do anyof the commentators or analysts judging by their track record thusfar.Nevertheless,that will not stop them making predictions andsuggesting that you and I should make investment decisionsbased upon them.Indian“demonetisation”,however,had a more direct impactupon our portfol

77、io.35%of our portfolio was in Indian stocks atthe time of the announcement and we continued to have 35%asat the year end.“Demonetisation”is a bold move intended to try to reduce thesize of Indias“informal”,“black”or“parallel”economy.Over85%of all transactions in India were conducted with notes which

78、have now ceased to be legal tender.Clearly paying the notes intoa bank account brings them into view of the tax authorities.Evenchanging the notes for smaller denomination notes up to theRs2,000 limit required paperwork to be completed to identify thechanger.By forcing at least some of the money hel

79、d in theselarge denomination notes to be declared,the Indian governmentis clearly hoping that it will increase the tax take or at leastspread the tax burden into the black economy and,byencouraging the use of banks,at least partially eliminate theinefficiencies of a cash economy and head towards a d

80、igital one.Cash has to be designed,printed,transported and safeguarded.Bank notes also rapidly deteriorate,can easily be stolen and canbe counterfeited.Digital money in bank accounts is not immuneto all these problems but it can be moved with minimal frictionalcost and can be traced.Moreover,to the

81、extent that the largerdenomination notes were not banked or exchanged,the ReserveBank of India(“RBI”)would have obtained a windfall in that thecancellation of these notes reduces its liability.All of whichshould add up to a greater capacity for government to spend onmuch-needed infrastructure projec

82、ts and spread the tax burdenmore widely and fairly.However,whilst“demonetisation”is a bold attempt at reform,itis by no means certain of success and it certainly has itsdownsides.To start with,it has been tried before in India in1946 and 1978,albeit on a much smaller scale without muchsuccess,althou

83、gh arguably they were just exchanges of newnotes for old and were done without the element of surprisewhich accompanied this latest move.The windfall from notes“These events demonstrate yet again the dangers of trying to use forecastsof so-called macro-events as a basis for investment decisions”Fund

84、smith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportInvestment Managers Reviewwhich were neither banked nor exchanged appears to have beensmall,and the logistics of the move have also been problematic.A large number of notes needed to be changed and Ind

85、ias ruraleconomy is a de facto cash economy without access to bankfacilities note that purchase of seeds was one of the itemsinitially exempted from the ban on the use of the largerdenomination notes.The ultimate effect of demonetisation is still uncertain.But whatwe can say with certainty is that i

86、s has been disruptive to theactivities of our companies and their share prices:Figure 2:Source:BloombergThe chart shows an index of Fast Moving Consumer Goodscompanies quoted on the Bombay Stock Exchange.Note thesharp fall beginning on 8 November.This disruption is hardly surprising given that our c

87、ompaniessupply consumer goods in an economy in which 98%oftransactions by volume and 65%by value were in cash and over85%of the notes by value were“demonetised”,leading to a largeand immediate,albeit probably temporary,shrinkage inpurchasing power.It was exacerbated by the fact that a largeportion o

88、f Indian consumption is from informal retailers(i.e.notmodern supermarkets)who rely upon wholesale distributors andtransact in cash using the high denomination notes and maybehavent been declaring all their income.However,whilst the temporary effect was negative,what do wethink the ultimate outcome

89、will be?Mr Modi is a genuinereformer.In 2016,he managed,after two years of trying,to geta single Goods and Services Tax(“GST”)approved.Theimplementation of the GST in 2017 should lead to significantoperating efficiencies for our companies,which have hitherto hadto cope with different indirect tax re

90、gimes in each Indian state.“Demonetisation”may allow more government spending,lowerinterest rates and a more equitable tax base but it certainlyseems likely to favour the modern retail channel in which brandedgoods are supplied to consumers by manufacturers throughretailers who rely less upon cash p

91、ayments.If so,our portfoliocompanies in India should benefit.If Mr Modis experiment with“demonetisation”proves to be asuccess,it would not be surprising to see attempts to emulateit in other developing countries which have large“shadow”economies such as the Philippines,Turkey and most of LatinAmeric

92、a.700075008000850090009500S&P BSE FMCG IndexDec-15Jan-16Feb-16Mar-16Apr-16May-16Jun-16Jul-16Aug-16Sep-16Oct-16Nov-16Dec-16Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016We had other macro events to contend with in 2016,of whichprobably the most noteworthy was

93、the devaluation of the Nigeriannaira.This was inevitable given the collapse in oil revenues.Butin yet another demonstration of the difficulty of relying upon suchforecasts,we sold what we perceived to be the two weakest ofour four holdings in Nigeria Guinness Nigeria and UnileverNigeria prior to dev

94、aluation.The complete lack of movement inthe Nigerian central bank“queue”for foreign exchangetransactions meant that we were unable to get the nairaproceeds exchanged.We ended up buying back a holding inGuinness Nigeria,taking the view that it was better to hold anequity than a depreciating currency

95、.The whole episode remindsme of a quote from the oft-sacked football manager TommyDocherty:“In life,when one door closes,another slams in yourface.”Anyway,with apologies for the unusually lengthy description ofbackground affairs,how did we do in 2016?1 January 31 DecemberFEET Net Asset Value +12.0%F

96、EET share price +10.5%MSCI Emerging&Frontier Markets Index +32.4%MSCI Emerging Markets Index +32.6%MSCI Frontier Markets Index +22.5%Table 1:Source:MSCI/BloombergThe good news is that in 2016 our portfolio NAV and share pricewere up despite the events we have described but the NAVincrease significan

97、tly underperformed its benchmark of the MSCIEmerging&Frontier Markets Index.“The good news is that FEETs portfolio NAV and share price were updespite the events we describe but the NAV increase significantlyunderperformed the benchmark”Fundsmith Emerging Equities Trust plc Annual Report for the year

98、 ended 31 December 2016Strategic ReportInvestment Managers Review“The distortions caused by ETF inflows can provide opportunities for us tobuy shares in good businesses at fair value or cheaper”Why is this?The index is dominated by countries in which we areunderweight,such as China,which is 25.9%of

99、the MSCIEmerging&Frontier Markets Index at the year end,and industrieswhich we will not own,such as banks,consumer electronicsmanufacturers and resource companies.An increasing amountof money which flowed into emerging markets in 2016 wasplaced in Exchange Traded Funds(“ETFs”)which simply track thei

100、ndices.ETFs and index funds have risen to dominate fund flows,not justin Emerging Markets but in most stock markets.ETFs attractionis that they enable investors to get a wide spread of investmentsrepresented by an index with low fees.In emerging markets,inparticular,the attraction is that they allow

101、 investors to gainexposure to an area of the world with which they may not befamiliar and they provide liquidity with intraday trading.The chartbelow demonstrates how ETFs have increasingly dominated EMfund flows since the first half of 2014,coincidentally when FEETwas launched.In 2016,the period wh

102、ich coincided with thereturn of investor confidence and fund inflows into emergingmarkets,of the$47bn put into emerging market funds,75%wasallocated to ETFs.-80-60-40-200204060Jan-12Feb-12Mar-12May-12Jun-12Aug-12Sep-12Oct-12Dec-12Jan-13Feb-13Apr-13May-13Jul-13Aug-13Sep-13Nov-13Dec-13Jan-14Mar-14Apr-

103、14Jun-14Jul-14Aug-14Oct-14Nov-14Dec-14Feb-15Mar-15May-15Jun-15Jul-15Sep-15Oct-15Dec-15Jan-16Feb-16Apr-16May-16Jun-16Aug-16Sep-16Nov-16Dec-16$bn Cumulative EM fund flows since 2012 ETF onlyNon-ETFFEET IPO Figure 3:Source:EPFR GlobalFundsmith Emerging Equities Trust plc Annual Report for the year ende

104、d 31 December 2016Whilst I am normally a fan of index funds,I would query thewisdom of this for emerging market investors.Using anymechanism to get broad index exposure will,of course,meanthat you get exposure to businesses with poor fundamentalcharacteristics as well as to those which are average o

105、r better.In emerging markets,much more than is the case in developedmarkets,the indices are dominated by low quality businesses.In addition,I would particularly query the assumption that someinvestors seem to have that an ETF provides greater assuranceof liquidity which is often an issue in emerging

106、 markets thanits underlying investments.This will,of course,only be tested ifor when a lot of people try to head for the ETF exit at once.However,whatever my misgivings,so long as the relatively recenttrend of ETFs accounting for the majority of money going intoemerging markets continues,FEETs perfo

107、rmance is likely to lagthe index in the short term.But there is a silver lining to all this.If we hold our nerve,ETF flows are good for us insofar as theysignal a positive change in investor sentiment towards emergingmarkets,yet they leave most of our stocks relatively unaffectedso that we can conti

108、nue to buy at reasonable valuations.There has been a lot of hand wringing about how the growth ofETFs has made the job of active fund managers more difficult.Inthe short term this is undoubtedly true as the share prices of thelarger companies which dominate the index are pushed higherby these inflow

109、s,irrespective of their quality or valuation.But thedistortions caused by these inflows can provide opportunities forus to buy shares in good businesses at fair value or cheaper,andin the long run the share prices will follow the superiorfundamental performance of the companies which we own(seeTable

110、 4 overleaf).Turning to the details of our performance and the positioning ofthe Company,as at 31 December 2016,the FEET portfoliosgeographic breakdown was as follows:Region%Asia(ex India)29Eastern Europe,Middle East and Africa24India 33Latin America10Cash4 100Table 2:Source:FundsmithIt is worth not

111、ing that just 3.5%of the portfolio was invested incompanies domiciled in China.This is a much lower percentagethan the exposure in the MSCI Emerging and Frontier MarketsIndex,which is 26%.Similarly,we have a relatively low exposureto Latin America(10%),compared with the index at 13%.By sector the br

112、eakdown was:Sector%Fast food4Food&Beverage38Fast Moving Consumer Goods25Retail12Tobacco7Healthcare7Chemicals&Industrials3Cash4 100Table 3:Source:FundsmithFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportInvestment Managers ReviewDuring the year o

113、ur holdings in fast food companies were reducedby the sale of our stake in Jollibee,a fast food operator in thePhilippines,and in retail from the takeover of Big C,the Thairetailer,and the sale of our holdings in BIM,the Turkish discountretailer and Sun Art,the Chinese retailer.To some extent thered

114、uction of exposure to the retail sector was compensated forby the accumulation of a stake in Walmart de Mexico.During theyear we also managed to find a way to gain exposure to thehealthcare services sector in the developing world by thepurchase of stakes in diagnostic testing businesses in Egypt(Int

115、egrated Diagnostics Holdings)and India(Dr Lal PathLabs).A list of the top ten holdings which we sold during the year(inorder of size)is on page 11 of this report.The themes which linkthese sales were:Reducing our exposure to China even further,we soldHengan,Sun Art and Want Want,and switching intoco

116、mpanies which we believe have better prospects such asDali Foods;Reducing exposure to Nigeria;and Sales of companies which have engaged in acquisitions indeveloped,mature markets,such as Grupo Lala andJollibee.We finally managed to buy our long-sought-after holding inVinamilk,Vietnams dominant dairy

117、 business,and began buyinga stake in Kimberly-Clark de Mexico,the tissue manufacturersMexican subsidiary.The top ten purchases are also listed on page 11.In most caseswe were simply adding to existing holdings.However,we startedholdings in Olympic Industries,Bangladeshs leading biscuitmanufacturer,a

118、nd in Jyothy Labs,Indias leading manufacturerof fabric whiteners.In three cases we sold and repurchased holdings during the year,which is obviously not our desired modus operandi.Werepurchased Ambev in Brazil where we became persuaded thatit was one of the best companies in Latin America,Indofood in

119、Indonesia when we realised that we had underestimated itsoperating performance and Tiger Brands in South Africa after anew CEO wrote off its disastrous acquisition in Nigeria which hadled to our earlier sale.Hopefully this demonstrates that the besttime to correct a mistake is as soon as you recogni

120、se it whether the mistake is by the company management or by us.It is an essential part of our investment strategy in fact themost important part that FEET owns shares in good companies companies which have returns on capital,profit margins andgrowth which are vastly superior to the companies in the

121、benchmark index and which convert far more of their profits intocash.They accomplish this with much less debt or leverage thanthe companies in the benchmark index.If these characteristicspersist then sooner or later they will be reflected in the shareprices.Fundsmith Emerging Equities Trust plc Annu

122、al Report for the year ended 31 December 2016The characteristics of the FEET portfolio as at 31 Decembercompared with the companies in the Emerging and FrontierMarkets Index were:MSCI EM&FM Index FEET(ex-Financials)LTM ROCE46.7%11.2%LTM ROCE(ex goodwill)52.9%N/ALTM Gross margin48.4%23.4%LTM Operatin

123、g margin19.4%13.2%LTM NFCF conversion105.6%80.3%LFY Revenue growth10.3%3.7%LFY Earnings per share growth17.0%0.3%Table 4:Source:Fundsmith/MSCI/BloombergAbbreviations:LTM:last twelve months,LFY:last full year,ROCE:return on capitalemployed,NFCF:neutral free cash flowThis would seem to demonstrate tha

124、t FEET owns stakes incompanies which are at the very least superior to the index interms of their financial characteristics.What about the valuation of our portfolio?The table below showsthe price/earnings ratio(“PE”),free cash flow yield(actually theneutral free cash flow yield“NFCF”with capital ex

125、penditure takenas equal to depreciation)and dividend yield for the portfolio forthe last twelve months(“LTM”)compared with companies in thebenchmark index:MSCI EM&FM Index FEET(ex-Financials)LTM PE ratio33.8x23.0 xLTM NFCF yield4.0%4.9%LTM Dividend yield2.1%1.3%Table 5:Source:Fundsmith/MSCI/Bloomber

126、gOur stocks are significantly more highly rated than the indexbased upon the PE ratio,but less so based upon neutral freecash flow yield which is our preferred measure,and which webelieve is a better comparator.What is interesting is that theyare only about 10%more expensive on this measure than the

127、stocks in the Fundsmith Equity Fund,yet they are currentlygenerating superior growth with revenues growing 10%last yearand earnings 17%.It seems to us that the extra valuation we are paying for thesestocks is not excessive when we look at how they compare withthe index averages.Revenue growth for th

128、e benchmark indexstocks last year was just 3.7%and there was no earnings growthon average.In terms of contribution to the performance,the table belowshows the top five contributors to and detractors from ourperformance by stock:“It is the most important part of our investment strategy that FEET owns

129、shares in good companies companies which have returns on capital andprofit margins which are vastly superior to the companies in the benchmarkindex”Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportAs already mentioned,the Nigerian currency devalu

130、ation causeda fall in the local price of Nigerian companies.Similarly,twocurrency devaluations in Egypt meant a fall in the share price ofEdita,as we own the dollar-denominated London Internationallisting.This means that the local price movement ends upreflecting the drop in value of the Egyptian po

131、und.In terms of currencies,the largest positive impacts upon ourportfolio after the Indian rupee were from the Brazilian real andthe South African rand which had the largest negative impact theprevious year.Only the Egyptian and Nigerian currencies had anegative impact during the year.Top Five%Botto

132、m Five%India5.3Egypt-1.1South Africa2.7Nigeria-1.1Brazil1.4Mexico0.0Philippines1.1Ghana0.0Indonesia1.0Thailand0.1Table 7:Source:FundsmithOur portfolio turnover during 2016 was 38%,ignoring turnovercaused by inflows from share issues.This is higher than wewould ideally like it to be but the trend wit

133、hin the year is worthnoting it was 30%in the first half and only 10%in the secondhalf.We hope and expect turnover to gravitate towards or belowthe second half level although it is somewhat dependent uponevents.For example,in 2017 we have sold our holding inShoprite,the South African retailer which p

134、erformed well last yearafter it announced a merger with Steinhoff.We could notunderstand the strategic logic of this,although it no doubt madesense for the controlling shareholder in both companies.The ongoing charges figure(“OCF”)for 2016 was 1.7%(2015:1.7%).However,the OCF does not include the cos

135、t ofdealing.The Total Cost of Investment(“TCI”)in 2016 includingtrading commission and taxes was 1.9%.Some of the turnoverwas involuntary insofar as it resulted from the investment offunds raised from shares issued during the period and the spreadincurred from voluntary dealing in which we decided t

136、o buy or sellwithout any inflows was 0.52%.It is our expectation that turnoverlevels and costs will reduce significantly in 2017 as they did inthe second half of 2016.Terry SmithFundsmith LLPInvestment Manager28 February 2017Top Five Contributors Country%Top Five Detractors Country%Hypermarcas Brazi

137、l 1.4 Edita Egypt -1.2Philippine Seven Philippines 1.3 Nestl Nigeria Nigeria -0.6Shoprite South Africa 1.3 Unilever Nigeria Nigeria -0.4Marico India 1.2 Guinness Nigeria Nigeria -0.4Godrej India 1.1 Kimberly Clark de Mexico Mexico -0.3 Table 6:Source:FundsmithInvestment Managers ReviewFundsmith Emer

138、ging Equities Trust plc Annual Report for the year ended 31 December 2016Investment PhilosophyFundsmith Emerging Equities Trust plc(FEET)invests incompanies which have the majority of their operations in,orrevenue derived from,Developing Economies*and which providedirect exposure to the rise of the

139、consumer classes in thosecountries.Fundsmith LLP applies a three step investment process toimplement that strategy:1.We aim to invest in high quality businessesIn our view,a high quality business is one which can sustain ahigh return on operating capital employed in cash.We are seeking a sustainable

140、 high rate of return.An importantcontributor to this is repeat business,usually from consumers.A company that sells many small items each day is better ableto earn consistent returns over the years than a company whosebusiness is cyclical,like a steel manufacturer,or“lumpy”,like aproperty developer,

141、a movie studio or even a drugs company.Thisapproach rules out most businesses that do not sell directly toconsumers or which make goods which are not consumed atshort and regular intervals.Capital goods companies and industrial suppliers makecomponents,ingredients and packaging to sell to businesses

142、.Business buyers are able to defer purchases of such productswhen the business cycle turns down.Moreover,business buyersemploy staff whose sole raison dtre is to drive down the costof purchase and lengthen their payment terms.In contrast we asconsumers have no direct bargaining power.An important co

143、ntributor to resilience is a resistance to productobsolescence.This means that we try not to invest in industrieswhich are subject to rapid technological innovation.Innovation isoften sought by investors but does not always produce lastingvalue for them.Developments such as canals,railroads,aviation

144、,microchips and the internet have transformed industries andpeoples lives.They have created value for some investors,buta lot of capital gets destroyed for others,just as the internet hasdestroyed the value of many traditional media industries,mostnotably newspapers,as well as quite a lot of capital

145、 invested inthe internet companies that didnt make it and at the peak ofbubbles such as the Dotcom boom.Even when a company sells to consumers,it is unlikely to fit ourcriteria if its products have a life which can be extended.Whenconsumers hit hard times,they can defer replacing their cars,houses a

146、nd appliances,but not food,toiletries,cosmetics andcleaning products.Hence we do not intend to invest inmanufacturers of consumer durables.We seek to invest in businesses whose assets are intangible anddifficult to replicate.It may seem counter-intuitive to seekbusinesses which do not rely upon tang

147、ible assets.Thebusinesses we seek to invest in do something very unusual:theybreak the rule of mean reversion that states returns must revertto the average as new capital is attracted to business activitiesearning above-average returns.They can do this because their most important assets are notphys

148、ical assets,which can be replicated by anyone with accessto capital,but intangible assets which can be very difficult toreplicate,no matter how much capital a competitor is willing tospend.Moreover,its hard for companies to replicate theseintangible assets using borrowed funds,as banks tend to favou

149、rthe(often illusory)comfort of tangible collateral.This means thatthe business does not suffer from economically irrational(or atleast innumerate)competitors when credit is freely available.Tobe fair,during equity market“bubbles”,some irrationalcompetition can be funded by equity which seems to requ

150、ire noforeseeable return,but such Dotcom style phenomena mostlyseem to attract capital to technology,biotech,social networking,e-tailing and online businesses and not the less glamorous worldof consumer non-durables.The kinds of intangible assets we seek are brand names,trademarks,dominant market sh

151、ares,patents,licenses,franchises,intellectual property or know how,distributionnetworks,supply chains,client relationships and installed basesof equipment or software that lock in clients for service,spares,repairs,renewals,consumables and transactions.Somecombination of such intangibles defines a c

152、ompanys franchise.*Where we refer to our investments in Developing Economies or Emerging Markets we mean countries other than those includedin the MSCI World Index,i.e.in the widest possible sense.Clearly when referring to others references to emerging markets,developing economies or the developing

153、world their own definition applies.Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportInvestment PhilosophySince stock markets typically value companies on the notunreasonable assumption that their returns will regress to themean,businesses whose r

154、eturns do not do this can becomeundervalued.Therein lies our opportunity as investors.We avoid companies that have to use leverage to make anadequate return on equity.We only invest in companies that earna high return on their capital on an unleveraged basis.Thecompanies we invest in may well have l

155、everage,but they dontrequire borrowed money to function.For example,financialcompanies(such as banks,investment banks,credit cardlenders or leasing companies)typically earn a low unleveragedreturn on their assets.They then have to lever up that capitalseveral times over with money from lenders and d

156、epositors inorder to earn what they deem to be an acceptable return on theirshareholders equity.This means that not only are their unleveredequity returns inadequate,but periodically the supply of credit iswithdrawn,often with disastrous consequences given theilliquidity of their asset base.In asses

157、sing leverage,we includeoff-balance sheet finance in the form of operating leases,whichare common in some sectors,such as retailing.The businesses we seek must have growth potential.It is notenough for companies to earn a high unlevered rate of return.Our definition of growth is that they must also

158、be able to reinvestat least a portion of their excess cash flow back into thebusiness to grow,while generating a high return on the cash thusreinvested.Over time,this should compound shareholderswealth by generating more than a pound of stock-market valuefor each pound reinvested.In our view,growth

159、cannot be thoughtabout sensibly in isolation from returns.Rapid growth may begood news or it may be bad news.It depends on how muchcapital you have to invest to generate that growth.The source of growth is also a factor to consider.Growth in profitsfrom increasing prices can simply build an umbrella

160、 beneath whichcompetitors can flourish.We are more interested in companieswhich have physical growth in the merchandise or service soldthan simply pricing power,although having both is nice.2.We try not to overpay for shares when investingWe only invest when we believe the valuation is attractive.We

161、estimate the free cash flow of every company after tax andinterest,but before dividends and other distributions,and afteradding back any discretionary capital expenditure which is notneeded to maintain the business.Otherwise we would penalisecompanies which can invest in order to grow.Our aim is to

162、investonly when free cash flow per share as a percentage of acompanys share price(the free cash flow yield)is high relativeto long-term interest rates and when compared with the free cashflow yields of other investment candidates both within andoutside the portfolio.Our goal is to buy securities tha

163、t we believewill grow and compound in value,which bonds cannot,at yieldsthat are similar to or better than what we would get from a bond.3.We aim to buy and hold We aim to be long-term,buy-and-hold investors.We seek to ownonly stocks that will compound in value over the years.Accordingly,we try to b

164、e very careful about the stocks we pick.We do not have a good new investment idea every day,or indeed,not even every year.Even when we are able to find a new companywe would like to invest in,we have to wait,sometimes forever,for a price and valuation at which we can justify investing.Theresulting l

165、ow level of dealing activity also minimises the frictionalcosts of trading,a cost which is often overlooked by investors asit is not normally disclosed as part of the costs of running funds.Our investment philosophy is also defined by a number of thingswe dont do:(A)We try never to engage in so-call

166、ed“Greater Fool Theory”We really want to own all of the companies that we invest in.Wedo not buy them knowing that they are not good businesses orare over-valued in the hope that someone more gullible will comealong and pay an even higher price for them.We assume thatthere is no greater fool than us

167、.(B)Indices are not used for portfolio constructionWe are interested in indices in order to benchmark ourperformance but not as a tool to aid our portfolio construction.The simplest reason for this is that we wish to perform betterthan the relevant indices and the majority of fund managers whohug th

168、e index composition with their portfolio selections.As thelegendary investor Sir John Templeton said“If you want to havea better performance than the crowd,you must do thingsdifferently from the crowd.”Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016There is al

169、so the problem that the MSCI Emerging Markets Indexis dominated by companies of a sort that we would never own.The top ten companies in the MSCI Emerging Markets Index areall in the banking,energy,technology and telecoms sectors.Theyall fall into sectors which we would never invest in because theyar

170、e cyclical,rely on leverage to deliver an adequate return,aresubject to rapid and unpredictable change and/or have returnscontrolled by governments.In contrast,under 10%of the Index is in Consumer Staples,which is the bedrock of the Fundsmith strategy and a consistentproducer of shareholder value wi

171、th high unlevered returns oncapital in cash.(C)We do not attempt market timingOnce we are fully invested we will not attempt to manage thepercentage invested in equities in our portfolio to reflect any viewof market levels,timing or developments.Getting market timingright is a skill we do not posses

172、s.We assume that if you ownshares in FEET you have already taken the decision to invest thatportion of your portfolio in Emerging Market equities,managedin the manner we describe.Our inability and unwillingness to try to make market timing callsis one factor which prevents us from investing in secto

173、rs whichare highly cyclical.It is possible to deliver performance from suchinvestments,but it requires a good sense of timing for theeconomic cycle and how the market cycle relates to it.It alsorequires strong nerves,because such investments are oftencounter-intuitive,as exemplified in the investmen

174、t adage“Onlybuy cyclicals when they look expensive”.This is because whenthey have little or no earnings,and so look expensive on thebasis of their price/earnings ratio,they are at,or close,to thebottom of the cycle.The converse applies:you should sell themwhen they look cheap,as they are then at,or

175、close,to peakearnings.We are not sure we have either the skill set or the constitutionfor such investing.In any event,investing in cyclical businesseshas one big disadvantage.They are mostly poor qualitybusinesses which struggle to make adequate returns on theircapital.Whilst you wait to see whether

176、 you have got your timingright,the underlying value of your investment is more likely toerode than compound whilst you await the upturn,and of courseoccasionally they do not survive a cycle at all.(D)Corporate GovernanceInvestment in Emerging Markets has dangers which might looselybe labelled as pro

177、blems of corporate governance.There areexamples of companies which have had assets confiscated bygovernments,which have had their know-how taken by a localjoint venture partner who has set up in competition with them,of minority investment in business controlled by local familieswhich have gone awry

178、.We do not intend to bring enlightenment to Emerging Markets inthe form of improved corporate governance via our investments.We are minority investors and we will assume that the corporategovernance landscape we see is the one we have to deal withrather than assuming we can change it.Then we will se

179、lectinvestments in that environment the same way that porcupinesmake love carefully.We are helped in this regard by the fact that about a fifth of thecompanies in our Investable Universe and about a quarter of theportfolio for FEET are quoted subsidiaries,associates orfranchisees of the multinationa

180、l companies.This certainly helpsfrom a due diligence/corporate governance standpoint.(E)CurrenciesOur policy is generally not to hedge FEETs currency exposure.The exception in FEET would be in the circumstances where webelieve significant depreciation of a currency has become likelybut we wish to co

181、ntinue owning the companies in FEETdenominated in that currency and we are comfortable that wecan put in place a hedge the cost of which will not extinguish anygains from hedging.Such a combination of circumstances isunusual.Terry SmithFundsmith LLPInvestment Manager28 February 2017 Fundsmith Emergi

182、ng Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportBusiness ReviewThe Strategic Report on pages 2 to 28 has been prepared solelyto provide information to shareholders to assess how the Directorshave performed their duty to promote the success of the Company.The St

183、rategic Report contains certain forward-lookingstatements.These statements are made by the Directors in goodfaith based on the information available to them up to the timeof their approval of this report and such statements should betreated with caution due to the inherent uncertainties,includingbot

184、h economic and business risk factors,underlying any suchforward-looking information.Business ModelThe Company is an externally managed investment trust and itsshares are premium listed on the Official List and traded on themain market of the London Stock Exchange.The Company is an alternative invest

185、ment fund(“AIF”)under theEuropean Unions alternative investment fund managersdirective(“AIFMD”)and has appointed Fundsmith LLP as itsalternative investment fund manager(“AIFM”).As an externally managed investment trust,all of the Companysday to day management and administrative functions areoutsourc

186、ed to service providers.As a result,the Company hasno executive directors,employees or internal operations.Key Performance Indicators The Companys Board of Directors meets regularly and at eachmeeting reviews performance against a number of key measures,as follows:Net asset value return against the

187、MSCI Emerging andFrontier Markets Index measured on a net sterling adjustedbasis;Share price return;Premium/discount of share price to net asset value pershare;and Ongoing charges ratio.Net asset value return against the benchmarkThe Companys net asset value per share is shown on theStatement of Fin

188、ancial Position on page 55.The Directors regardthe Companys net asset value return as being the overallmeasure of value delivered to shareholders over the long-term.Fundsmiths investment style is such that performance is likelyto deviate from that of the benchmark index.The Board considersthe most i

189、mportant comparator to be the MSCI Emerging andFrontier Markets Index measured on a net sterling adjusted basis.During the year under review the Companys net asset value pershare return was 12.0%,underperforming the benchmark by20.4%(2015:7.0%,outperforming the benchmark by 3.0%).A full description

190、of performance during the year under review iscontained in the Investment Managers Review commencing onpage 12 of this annual report.Share price returnThe Directors also regard the Companys share price return tobe a key indicator of performance.This is monitored closely bythe Board.During the year u

191、nder review the Companys share price returnwas 10.5%,underperformingthe benchmark by21.9%(2015:10.9%,underperforming the benchmark by 0.9%).Premium/discount of share price to net asset value per shareThe Board undertakes a regular review of the level ofpremium/discount and consideration is given to

192、ways in whichshare price performance may be enhanced,including theeffectiveness of marketing,share issuance and buy-backs,whereappropriate.The making and timing of any share issuance and/orbuy-backs is at the discretion of the Board.As at 31 December 2016 the premium of the Companys shareprice to th

193、e net asset value per share was 1.6%(2015:3.0%).Itis the Boards view that the ability to issue new shares at apremium to net asset value plays an important part in ensuringthat the level of premium does not reach excessive levels.To thisend,the Board has implemented a share issuance programme.Furthe

194、r details are provided in the Chairmans Statement onpages 5 to 7.Ongoing charges ratioThe Board continues to be conscious of expenses and workshard to maintain a sensible balance between good quality serviceand costs.As at 31 December 2016 the ongoing charges ratiowas 1.7%(2015:1.7%).Fundsmith Emerg

195、ing Equities Trust plc Annual Report for the year ended 31 December 2016Risk ManagementThe Board is responsible for the ongoing identification,evaluationand management of the principal risks faced by the Company andthe Board regularly reviews these risks and how each risk ismitigated.The Directors h

196、ave carried out a robust assessmentof the principal risks facing the Company,including those thatwould threaten its solvency and liquidity.The Board hascategorised the risks faced by the Company under five headingsas follows:A summary of these risks and their mitigation is described below:Investment

197、 activity and strategy;Financial;Shareholder relations and corporate governance;Operational;and Accounting,legal and regulatory.Investment Activity and StrategyAn unsuccessful investment strategy,includingasset allocation,may lead to underperformanceagainst the Companys benchmark indexandpeer compan

198、ies,and may result inCompanys shares trading discount to the netasset value per share.The Board regularly reviews the Companys investment mandate and itslong-term investment strategy in relation to market and economicconditions,and the operation of the Companys peers,thereby monitoringwhether the Co

199、mpany should continue in its present form.Fundsmithprovides an explanation of stock selection decisions and an overallrationale for the make-up of the portfolio.Fundsmith discusses current andpotential investment holdings with the Board on a regular basis in additionto new initiatives,which may enha

200、nce shareholder returns.The Board setsappropriate investment restrictions and guidelines.Additional reports andpresentations are made regularly to investors by Fundsmith and also byInvestec Bank plc,the Companys Corporate Stockbroker.In consultation with its advisers the Board also undertakes a regu

201、lar reviewof the level of share price premium or discount to net asset value per shareand consideration is given to ways in which share price performance maybe enhanced,including the effectiveness of marketing,share issuance andshare buy-backs,where appropriate.Principal Risks and Uncertainties Miti

202、gationFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportBusiness ReviewShareholder Relations and CorporateGovernanceShareholder unrest could arise if there is pooradherence to best practice in corporategovernance,which could result in reputational

203、damage to the Company.The Board receives regular reports on shareholder activity and is keptinformed of shareholder sentiment.Regular contact is maintained withmajor shareholders.Details of the Companys compliance with corporategovernance best practice,including information on relations withsharehol

204、ders,are set out in the Corporate Governance report beginningon page 31.FinancialThe financial risks associated with the Companyinclude market risk(including counterparty risk),liquidity risk,foreign exchange risk and creditrisk.The Companys assets comprise liquid securities,which can be sold tomeet

205、 funding requirements,if necessary.Further information on financial instruments and risk can be found innote 14 to the financial statements beginning on page 67.The Company is also exposed to the risk that the custodian and/orcounterparties may fail and that title to stocks does not survive an ensui

206、ngliquidation.The Companys Investment Manager is responsible for undertakingreviews of the credit worthiness of the counterparties that it uses.The Boardregularly reviews the Investment Managers approved list of counterparties.As the Companys shares are denominated and traded in sterling,thereturn t

207、o shareholders will be affected by changes in the value of sterlingrelative to those foreign currencies.Whilst the Company,generally,will nothedge its currency exposure,it does reserve the right to do so in thecircumstance where,in the opinion of the Investment Manager,a significantdepreciation of a

208、 currency has become likely but the Investment Managerwishes to continue owning the companies in the portfolio denominated inthat currency and where the cost of hedging that currency is unlikely in theopinion of the Investment Manager,to extinguish any gains from hedging.Principal Risks and Uncertai

209、nties MitigationFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Accounting,Legal and RegulatoryFailure to comply with appropriate law andregulations could expose the Company toserious financial loss and reputational damage.The regulatory environment in which th

210、eCompany operates may change,affecting theCompanys modus operandi.The Board relies on the services of its external advisers to ensurecompliance with applicable law and regulations including the CompaniesAct,the Corporation Tax Act and the UKLA Listing Rules.The Board is awareof changes to the regula

211、tory environment in the year ahead.The Companys Depositary reports annually to the Audit Committeeconfirming that the Company has been managed in accordance with theAIFMD,the FUND Sourcebook and the Companys Articles of Associationand Prospectus.The Directors attend the conferences and events to kee

212、p up to date onregulatory changes and the Board has appointed a specialist investmenttrust Company Secretary.OperationalDisruption to,or failure of,accounting,dealingor payments systems in place at the Companysservice providers,including custodian andappointed sub-custodians and the depositarycould

213、prevent accurate reporting and monitoringof the Companys financial position.The Board reviews both the internal controls and the disaster recoveryprocedures put in place by its principal service providers on a regularbasis.The Audit Committee receives annually internal control reports fromthe AIFM a

214、nd the Registrar.The Audit Committee also reviews a summaryof the SOC1 report from the Companys custodian.These reviews includeconsideration of the associated cyber security risks facing the Company.Further details of the Boards internal controls are set out in the AuditCommittee Report on page 43.P

215、rincipal Risks and Uncertainties MitigationFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Strategic ReportNon-financial InformationBoard DiversityThe Company is supportive of the recommendations of LordDavies Report that the performance of corporate boards can

216、 beimproved by encouraging the appointment of the best peoplefrom a range of differing perspectives and backgrounds.TheCompany recognises the benefits of diversity on the Board,including gender,and will take this into account in its Boardappointments.The Company is committed to ensuring that anyDire

217、ctor search process actively seeks persons with the rightqualifications so that appointments can be made on the basis ofmerit against objective criteria from a diverse selection ofcandidates.To this end the Board will consider diversity duringany Director search process.The Board is currently compri

218、sedof three male directors.Social,Human Rights and Environmental MattersThe Company is an externally-managed investment trust,with noemployees and three non-executive Directors.Therefore,theCompany has no material,direct impact on the environment orthe community and the Company itself has no environ

219、mental,human rights,social or community policies.In carrying out itsactivities and in relationships with suppliers,the Company aimsto conduct itself responsibly,ethically and fairly.The Directors,through the Investment Manager,encouragecompanies in which investments are made to adhere to bestpractic

220、e with regard to corporate governance.The InvestmentManagers approach to corporate governance in emergingmarkets is set out in their Investment Philosophy beginning onpage 21.Looking to the FutureThe Board concentrates its attention on the Companysinvestment performance and the Investment Managersin

221、vestment approach,and on factors that may have an effect onthis approach.The Board is regularly updated on widerinvestment trust industry issues and discussions are held ateach Board meeting concerning the Companys futuredevelopment and strategy.An overview of the main trends and factors affecting t

222、heperformance of the Company is set out in the InvestmentManagers Review beginning on page 12.The Companys overall strategy remains unchanged.This Strategic Report on pages 2 to 28 has been signed for andon behalf of the Board.Martin BralsfordChairman28 February 2017Business ReviewFundsmith Emerging

223、 Equities Trust plc Annual Report for the year ended 31 December 2016Martin BralsfordChairman Martin was articled with Pannell Kerr Forster&Co,London,qualifying as a chartered accountant in 1970and obtained a masters degree at the London Business School in 1974.Until July 2007 he was ChiefExecutive

224、of C.I.Traders,taking up this role in August 2002 when it acquired Le Riche Group.Prior to thishe had been Chairman of Premier Brands and held a number of financial and general managementappointments in Calor Gas,Rank Group,SmithKline Beecham and Cadbury Schweppes.He has servedas an independent memb

225、er of the boards of a number of commercial,banking and investment companiesincluding Gartmore Capital Strategy Fund Limited and Acorn Income Fund Limited.He is a trustee of anumber of charitable trusts;including the Durrell Wildlife Conservation Trust of which he is a Life Trustee.David PotterChairm

226、an of the Management Engagement CommitteeAfter 35 years in the City(CSFB,Montagu,Midland,Guinness Mahon,Investec)David has spent the last17 years as a chairman,non-executive director and trustee in a wide range of companies and institutions.He is currently Chairman of Gresham House Strategic PLC and

227、 Illustrated London News Limited,a memberof the Council of The Centre for the Study of Financial Innovation,Chairman of the Bryanston and NationalFilm&TV School Foundations and a member of The Kings College London Investment Board.John SpencerChairman of the Audit CommitteeJohn Spencer qualified as

228、a chartered accountant in 1966 and worked with KPMG from 1966 to 1969.Hejoined Barclays Bank in 1969 and held a variety of posts,including President of Barclays Bank of NewYork and chief executive of the USA Banking division.He returned to the UK in 1990 as deputy chiefexecutive of BZW and chief exe

229、cutive of the Global Markets division and was appointed a member of theGroup Executive Committee.He was Non-Executive Chairman of Regent Inns plc from 1995 to 1998 andserved as Non-Executive Chairman of S plc,a director of Numerica Group plc and ChiefExecutive of Snell&Wilcox Limited,a private compa

230、ny.He was appointed Director of Tullett Prebon(originally Collins Stewart)in 2000 until 2007 where he was the Senior Independent Non-executive Directorand a member of the Audit,Remuneration and Nominations Committees.He is a Non-executive Directorof tpSEF Inc.All Directors are members of the Audit a

231、nd Management Engagement Committees.Board of DirectorsGovernanceFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Board of DirectorsGovernanceMeeting AttendanceThe number of Board and Committee meetings held during the year to 31 December 2016,and each Directors

232、attendance level,is shown below:ManagementEngagementType and number of meetingsBoardAudit CommitteeCommitteeheld during the year ended 31 December 2016(4)(2)(1)Martin Bralsford421David Potter421John Spencer421Directors InterestsThe beneficial interests of the Directors and their families in the Comp

233、any were as set out below:Shares of 1p each31 December 2016Martin Bralsford100,000David Potter 13,107John Spencer5,000There have been no changes in the above Directors interests to the date of this report.Managers InterestsAs at the date of this report,Terry Smith of Fundsmith LLP,the Companys Inves

234、tment Manager,held 500,000 shares in the Company.Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Corporate GovernanceCorporate GovernanceThe Board has considered the principles and recommendationsof the Code of Corporate Governance published by theAssociation o

235、f Investment Companies in July 2016(the AICCode)by reference to the AIC Corporate Governance Guide forInvestment Companies(the AIC Guide).The AIC Code,asexplained by the AIC Guide,addresses all the applicableprinciples set out in the UK Corporate Governance Code as wellas setting out additional prin

236、ciples and recommendations onissues that are of specific relevance to the Company.Copies of the AIC Code,the AIC Guide and the UK Code can befound on the respective organisations websites:www.theaic.co.uk and www.frc.org.uk.The Board considers that reporting against the principles andrecommendations

237、 of the AIC Code,and by reference to the AICGuide(which incorporates the UK Corporate Governance Code),will provide better information to shareholders.Statement of ComplianceThe Company has complied with the recommendations of the AICCode and the relevant provisions of the UK Code except as setout b

238、elow.The UK Code includes provisions relating to:the role of the chief executive;executive directors remuneration;and the need for an internal audit function.For the reasons set out in the AIC Guide,and as explained in theUK Code,the Board considers these provisions are not relevantto the position o

239、f the Company as it is an externally managedinvestment company.In particular,all of the Companys day-to-day management and administrative functions are outsourced tothird parties.As a result,the Company has no executivedirectors,employees or internal operations.The Company hastherefore not reported

240、further in respect of these provisions.The Board and CommitteesResponsibility for effective governance lies with the Board.The governance framework of the Company reflects the fact that as aninvestment company,it has no employees and outsources portfolio management,risk management,company management

241、,companysecretarial,administrative and marketing services to third parties.Copies of the full terms of reference,which clearly define the responsibilities of each committee can be obtained from the CompanySecretary,will be available for inspection at the Annual General Meeting,and can be found on th

242、e Companys website at www.feetplc.co.uk.The Directors have decided that,given the size of the Board,it is unnecessary to form separate remuneration and nominationcommittees;the duties that would ordinarily fall to those committees are carried out by the Board as a whole.However,the Chairmantakes no

243、part in discussions involving his own remuneration.Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Corporate GovernanceGovernanceThe BoardChairman Martin BralsfordTwo additional non-executive Directors,both considered independent.Key roles and responsibilities:

244、to provide leadership and set strategy,values and standards within a framework of prudent effective controls which enablerisk to be assessed and managed;to ensure that a robust corporate governance framework is implemented;and to challenge constructively and scrutinise performance of all outsourced

245、activities.Management Engagement CommitteeChairman David PotterAll DirectorsKey roles and responsibilities:to review regularly the contracts,the performance andthe remuneration of the Companys principal serviceproviders.Audit CommitteeChairman John SpencerAll DirectorsKey roles and responsibilities:

246、to review the Companys financial reports;to oversee the risk and control environment and financialreporting;and to review the performance of the Companys externalAuditors.Board of DirectorsDirectors IndependenceThe Board consists of three non-executive Directors,each of whom is independent of Fundsm

247、ith.No member of the Board is aDirector of another investment company managed by Fundsmith,nor has any Board member been an employee of the Company,Fundsmith or any of its service providers.Accordingly,the Board considers that all the Directors are independent and there are norelationships or circum

248、stances which are likely to affect or could appear to affect their judgement.Board EvaluationDuring the course of 2016 the performance of the Board,its committees and individual Directors(including each Directorsindependence)was evaluated through a formal assessment process led by the Chairman.Funds

249、mith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016The Chairman is satisfied that the structure and operation of theBoard continues to be effective and relevant and that there is asatisfactory mix of skills,experience,length of service andknowledge of the Company.All D

250、irectors will submit themselves for annual re-election byshareholders.Following the evaluation process,the Boardrecommends that shareholders vote in favour of their re-electionat the Annual General Meeting.Policy on Director TenureThe Board considers its structure and recognises the need forprogress

251、ive refreshments.The Board subscribes to the view expressed within the AIC Codethat long-serving directors should not be prevented from formingpart of an independent majority.It does not consider that adirectorstenure necessarily reduces his ability to actindependently.The Boards policy on tenure is

252、 that continuity andexperience are considered to add significantly to the strength ofthe Board and,as such,no limit on the overall length of serviceof any of the Directors,including the Chairman,has beenimposed.In view of its non-executive nature,the Board considersthat it is not appropriate for the

253、 Directors to be appointed for aspecified term,although new Directors will be appointed with theexpectation that they will serve for a minimum of three yearssubject to shareholder approval.Appointments to the BoardThe rules governing the appointment and replacement ofdirectors are set out in the Com

254、panys Articles of Association.Where the Board appoints a new director during the year,thatdirector will stand for election by shareholders at the next AnnualGeneral Meeting.The minimum number of directors is two andthe maximum is 10.When considering new appointments,theBoard will review the skills o

255、f the Directors and seek to addpersons with complementary skills or skills and experience whichfill any gaps in the Boards knowledge and who can devotesufficient time to the Company to carry out their dutieseffectively.The Company is committed to ensuring that anyvacancies arising are filled by the

256、most qualified candidates.TheBoard recognises the value of diversity in the composition of theBoard and accordingly,the Board will ensure that a diverse groupof candidates is considered should any vacancies arise.Induction/DevelopmentNew appointees to the board will be provided with a full induction

257、programme.The programme will cover the Companys investmentstrategy,policies and practices.Directors are also given keyinformation on the Companys regulatory and statutoryrequirements as they arise including information on the role ofthe Board,matters reserved for its decision,the terms ofreference f

258、or the Board committees,the Companys corporategovernance practices and procedures and the latest financialinformation.Directors are encouraged to participate in trainingcourses where appropriate.Anti-Bribery and Corruption PolicyThe Board has adopted a zero tolerance approach to instances ofbribery

259、and corruption.Accordingly it expressly prohibits any Directoror associated persons when acting on behalf of the Company,fromaccepting,soliciting,paying,offering or promising to pay or authoriseany payment,public or private in the UK or abroad to secure anyimproper benefit for themselves or for the

260、Company.The Board applies the same standards to its service providersin their activities for the Company.A copy of the Companys Anti Bribery and Corruption Policy canbe found on its website at www.feetplc.co.uk.The policy isreviewed regularly by the Audit Committee.Exercise of Voting PowersThe Board

261、 has delegated authority to Fundsmith(as AIFM andInvestment Manager)to vote the shares owned by the Companythat are held on its behalf by its custodian,State Street Bankand Trust Company.The Board has instructed that Fundsmithsubmit votes for such shares wherever possible.This accordswith current be

262、st practice whilst maintaining a primary focus onfinancial returns.Fundsmith may refer to the Board on anymatters of a contentious nature.Conflicts of InterestIn line with the Companies Act 2006,the Board has the powerto authorise any potential conflicts of interest that may arise andimpose such lim

263、its or conditions as it thinks fit.A register ofinterests and potential conflicts is maintained and is reviewed atevery Board meeting to ensure all details are kept up to date.It was resolved at each Board meeting during the year that therewere no direct or indirect interests of a Director that conf

264、lictedwith the interests of the Company.Appropriate authorisation willbe sought prior to the appointment of any new director or if anyconflicts or potential conflicts arise.Independent Professional AdviceThe Board has formalised arrangements under which theDirectors,in the furtherance of their dutie

265、s,may seekindependent professional advice at the Companys expense.The Company has also arranged Directors and Officers LiabilityInsurance which provides cover for legal expenses under certaincircumstances.This was in force for the entire period underreview and up to the date of this report.Company S

266、ecretaryThe Directors have access to the advice and services of aCompany Secretary through its appointed representative whichis responsible to the Board for ensuring that the Boardprocedures are followed and that the Company complies withapplicable rules and regulations.The Company Secretary is also

267、responsible for ensuring good information flows between allparties.Board Meetings and Relations with theInvestment ManagerThe Board meets regularly throughout the year and arepresentative from Fundsmith is in attendance at each Boardmeeting to address questions on specific matters and to seekapprova

268、l for specific transactions which Fundsmith is required torefer to the Board.The Chairman encourages open debate tofoster a supportive and co-operative approach for all participants.The primary focus at regular Board meetings is the review ofinvestment performance and associated matters,includinggea

269、ring,asset allocation,marketing/investor relations,peergroup information and industry issues.The Board reviews keyinvestment and financial data,revenue and expensesprojections,analyses of asset allocation,transactions,performance comparisons,share price and net asset valueperformance.The Board revie

270、ws the discount or premium to net asset valueper share of the Companys share price at each Board meetingand considers the effectiveness of the Companys marketing andcommunication strategies,as well as any recommendations onshare buybacks and issuance.The Board is responsible for strategy and reviews

271、 the continuedappropriateness of the Companys investment objective,strategyand investment restrictions at each meeting.Shareholder CommunicationsShareholder RelationsRepresentatives of Fundsmith regularly meet with institutionalshareholders and private client asset managers to discussstrategy and to

272、 understand their issues and concerns and,ifapplicable to discuss corporate governance issues.The resultsof such meetings are reported at the following Board meeting.An analysis of the shareholder register of the Company isprovided to the Directors at each Board meeting.Reports fromthe Companys brok

273、er are submitted to the Board on investorsentiment and industry issues.Shareholder CommunicationsThe Company aims to provide shareholders with a fullunderstanding of the Companys investment objective,policy andactivities,its performance and the principal investment risks bymeans of informative annua

274、l and half yearly reports.This issupplemented by the daily publication through the London StockExchange,of the net asset value of the Companys shares.The Companys website(www.feetplc.co.uk)is regularly updatedwith monthly fact sheets and provides useful information aboutthe Company,including the Com

275、panys financial reports andannouncements.All substantive communications regarding any major corporateissues are discussed by the Board taking into accountrepresentations from Fundsmith,the Auditor,legal advisers andthe Corporate Stockbroker.The Board supports the principle that the AGM be used tocom

276、municate with private investors.It is the intention that the fullFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Corporate GovernanceGovernanceFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Board will attend the AGM under

277、 the chairmanship of the Chairmanof the Board.All shareholders are encouraged to attend the AGM,where they are given the opportunity to question the Chairman,the Board and representatives of Fundsmith.Fundsmith will makea presentation to shareholders covering the investmentperformance and strategy o

278、f the Company at the forthcomingAGM.Details of proxy votes received in respect of each resolutionwill be made available to shareholders at the meeting and will alsobe published on the Companys website,www.feetplc.co.uk.The Directors welcome the views of all shareholders and placeconsiderable importa

279、nce on communications with them.Shareholders wishing to communicate with the Chairman,or anyother member of the Board,may do so by writing to the CompanySecretary at the offices of Frostrow.Significant Holdings and Voting RightsDetails of the substantial interests in the Companys shares,theDirectors

280、 authorities to issue and repurchase the Companysshares,and the voting rights of the shares are set out in theReport of the Directors on pages 36 to 39.Nominee Share CodeWhere shares are held in a nominee company name,theCompany undertakes:to provide the nominee company with multiple copies ofshareh

281、older communications,so long as an indication ofquantities has been provided in advance;and to allow investors holding shares through a nomineecompany to attend general meetings,provided the correctauthority from the nominee company is available.Nominee companies are encouraged to provide the necess

282、aryauthority to underlying shareholders to attend the Companysgeneral meetings.By order of the BoardFrostrow Capital LLPCompany Secretary28 February 2017 Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Report of the DirectorsGovernanceThe Directors present thei

283、r annual report on the affairs of theCompany together with the audited financial statements and theIndependent Auditors Report for the year ended31 December 2016.The Corporate Governance report on pages 31 to 35 forms partof this report.Disclosures relating to performance,futuredevelopments and risk

284、 management can be found in theStrategic Report on pages 2 to 28.Business and Status of the CompanyThe Company is registered as a public limited company inEngland and Wales(Registered Number 08756681)and is aninvestment company within the terms of Section 833 of theCompanies Act 2006(the Act).The Co

285、mpany has applied for and been accepted as an approvedinvestment trust under sections 1158 and 1159 of theCorporation Taxes Act 2010 and Part 2 Chapter 1 of StatutoryInstrument 2011/2999.The Directors are of the opinion that theCompany has conducted its affairs so as to be able to retainsuch approva

286、l.Investment PolicyIn order to achieve its investment objective,the Company investsin a portfolio of shares issued by listed or traded companieswhich have the majority of their operations in,or revenue derivedfrom,developing economies and which provide direct exposureto the rise of the consumer clas

287、ses in those countries.Further details concerning the Companys investment policy andstrategy can be found in the Strategic Report on page 8 and theInvestment Philosophy beginning on page 21.Results and DividendThe results attributable to shareholders for the year are shownon page 54.No dividends wer

288、e declared during the year and theDirectors have not recommended a final dividend for the year.Information on the Companys dividend policy is detailed in theChairmans Statement on page 7.Alternative Performance MeasuresThe Financial Statements(on pages 54 to 72)set out therequired statutory reportin

289、g measures of the Companys financialperformance.In addition,the Board assesses the Companysperformance against a range of criteria which are viewed asparticularly relevant for investment trusts,which are summarisedon page 4 and explained in greater detail in the Strategic Report,under the heading Ke

290、y Performance Indicators on page 24.Definitions of the terms used and the basis of calculationadopted are set out in the Glossary on page 77 to 78.Gearing The Company has the power to borrow using short-term bankingfacilities to raise funds for short-term liquidity purposes or fordiscount management

291、 purposes including the purchase of itsown shares,provided that the maximum gearing represented bysuch borrowings shall be limited to 15%of the Companys netassets at the time of the draw down of such borrowings.TheCompany is not currently geared.LeverageFor the purposes of the Alternative Investment

292、 Fund Managers(AIFM)Directive,leverage is any method which increases theCompanys exposure,including the borrowing of cash and theuse of derivatives.It is expressed as a ratio between theCompanys exposure and its net asset value and can becalculated on a Gross and a Commitment method.The currentmaxim

293、um permitted limit under the Gross and Commitmentmethods is 115%.Up to date information is available in theInvestor Disclosure Document on the Companys websitewww.feetplc.co.uk.Further information can be found in theAlternative Investment Fund Managers Directive Disclosuresbeginning on page 74.Funds

294、mith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Investment Management and AlternativeInvestment Fund Manager(“AIFM”)Fundsmith LLP(“Fundsmith”)under the terms of the InvestmentManagement Agreement provides,inter alia,the followingservices:seeking out and evaluating i

295、nvestment opportunities;recommending the manner by which monies should beinvested,disinvested,retained or realised;advising on how rights conferred by the investments shouldbe exercised;analysing the performance of investments made;advising the Company in relation to trends,marketmovements and other

296、 matters which may affect theinvestment policy of the Company;and acting as AIFM to the Company.Fundsmith receives a periodic fee equal to 1.25%p.a.of theCompanys net asset value.The Investment ManagementAgreement may be terminated by either party giving notice of notless than 12 months.Continuing A

297、ppointment of the InvestmentManager and AIFMThe Board has concluded that it is in shareholders interests thatFundsmith,acting as both the Investment Manager and AIFM,continues in its roles.The review undertaken by the Boardconsidered the Companys investment performance together withthe quality and a

298、dequacy of other services provided.The Board also reviewed the appropriateness of the terms of theInvestment Management Agreement,in particular the length ofthe notice period and the fee structure.Going ConcernThe content of the investment portfolio,trading activity,theCompanys cash balances and rev

299、enue forecasts,and the trendsand factors likely to affect the Companys performance arereviewed and discussed at each Board meeting.The Directors,having made relevant enquiries,are satisfied that it isappropriate to continue to adopt the going concern basis inpreparing the financial statements as the

300、 assets of the Companyconsist mainly of liquid securities and,accordingly,the Companyhas adequate financial resources to continue in operationalexistence for at least the next 12 months.Viability StatementIn accordance with the UK Corporate Governance Code and theListing Rules,the Directors have ass

301、essed the prospects of theCompany over a longer period than the 12 months required bythe Going Concern provision.Taking account of the anticipatedinvestment holding periods and the medium term prospects ofthe Companys investment portfolio,the Board decided that afour year period was appropriate for

302、their assessment.In reviewing the Companys viability,the Board considered theCompanys position with reference to its business model,theprincipal risks and uncertainties as detailed on pages 25 to 27of this report,and its present and expected financial position.Inconsidering the Companys financial po

303、sition,the Board reviewedthe liquidity of the Companys portfolio and the Companysforecast expenses and cash flows.In addition,the Boardconsidered the appropriateness of the Companys currentinvestment objective in the prevailing investment market andenvironment.The Board regularly reviews the prospec

304、ts for the Companysportfolio and receives reports from the Investment Manager onthe opportunities for new investments.The Board also reviewsthe Companys financing arrangements at least quarterly toensure that the Company is able to continue to meet its liabilitiesas they fall due.The Directors have

305、assumed that:the Board and the Investment Manager will continue to adopta long-term view when making investments;investors will continue to wish to have exposure to listedcompanies in emerging markets;there will continue to be demand for investment trusts;Fundsmith Emerging Equities Trust plc Annual

306、 Report for the year ended 31 December 2016Report of the DirectorsGovernance regulation will not increase to a level that makes the runningof the Company uneconomical;and the performance of the Company will continue to besatisfactory.Based on the results of this review,the Directors have formed area

307、sonable expectation that the Company will continue in itsoperations and meet its expenses and liabilities as they fall dueover the next four years.DirectorsThe Directors of the Company,who served during the year,areshown below.Further information on the Directors can be foundon page 29.Martin Bralsf

308、ord(Chairman)David PotterJohn SpencerAll Directors seek re-election by shareholders at each AnnualGeneral Meeting.Directors&Officers Liability Insurance CoverDirectors&officers liability insurance cover was maintained bythe Company during the year ended 31 December 2016.It isintended that this polic

309、y will continue for the year ending31 December 2017 and subsequent years.Directors IndemnitiesAs at the date of this report,indemnities are in force betweenthe Company and each of its Directors under which the Companyhas agreed to indemnify each Director,to the extent permittedby law,in respect of c

310、ertain liabilities incurred as a result ofcarrying out his or her role as a Director of the Company.TheDirectors are also indemnified against the costs of defending anycriminal or civil proceedings or any claim by the Company or aregulator as they are incurred provided that where the defenceis unsuc

311、cessful the Director must repay those defence costs tothe Company.The indemnities are qualifying third party indemnityprovisions for the purposes of the Companies Act 2006.A copy of each deed of indemnity is available for inspection atthe Companys registered office during normal business hoursand wi

312、ll be available for inspection at the Annual GeneralMeeting.Substantial Share InterestsThe Company was aware of the following substantial interests in the voting rights of the Company:2 February 2017*31 December 2016Number of%of issuedNumber of%of issuedShareholdersharesshare capitalsharesshare capi

313、talHargreaves Lansdown2,404,09910.322,311,04910.06Mr Simon Justin Nixon2,000,0008.582,000,0008.71Mr Duncan Russell Cameron1,000,0004.291,000,0004.35As at 31 December 2016 the Company had 22,962,556 shares in issue.As at 27 February 2017*the Company had 23,302,556shares in issue.*the latest practicab

314、le date before publication of the Annual Report.Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2016Beneficial Owners of Shares Information RightsBeneficial owners of shares who have been nominated by theregistered holder of those shares to receive information righ

315、tsunder section 146 of the Companies Act 2006 are required todirect all communications to the registered holder of their sharesrather than to the Companys registrar,Capita Asset Services,or to the Company directly.Capital StructureThe Companys capital structure is summarised in note 11 onpage 66.Sha

316、re CapitalAt the start of the year under review,the Directors hadshareholder authority to issue up to 1,933,792 ordinary sharesof 1 penny each on a non-pre-emptive basis.At the Companysannual general meeting held on Thursday,26 May 2016,thisauthority expired and a new authority to allot up to 4,834,

317、480ordinary shares on a non-pre-emptive basis was granted.Authority to repurchase up to 2,898,754 ordinary shares wasalso granted.A prospectus was published during the year in order to complywith the requirements of the EU Prospectus Directive and obtainadmission to the Official List maintained by t

318、he UK ListingAuthority of any shares issued pursuant to the authority obtained.During the year,the Company issued 3,624,635 ordinary sharesat a minimum premium of 1.2%to the last published cum incomenet asset value per share.Details are provided in notes 11 and12 to the Financial Statements on page

319、66.Since the year-endand to the date of this report,a further 340,000 new shareshave been issued under the same issuance criteria.No shares were repurchased during the year and there are noshares held in Treasury.The giving of powers to issue or buy-back the Companys sharesrequires the relevant reso

320、lutions to be passed by Shareholders.Proposals for the renewal of the Boards powers to issue andbuy-back shares are set out in the Notice of Annual GeneralMeeting beginning on page 81.Voting Rights in the Companys sharesDetails of the voting rights in the Companys shares at the dateof this Annual Re

321、port are given in note 9 to the Notice of AnnualGeneral Meeting on page 85.There are no restrictions concerning the transfer of securities inthe Company;no special rights with regard to control attachedto securities;no restrictions on voting rights,no agreementsbetween holders of securities regardin

322、g their transfer which areknown to the Company;and no agreements which the Companyis party to that might affect its control following a successfultakeover bid.Political DonationsThe Company has not and does not intend to make any politicaldonations.Global Greenhouse Gas EmissionsThe Company has no g

323、reenhouse gas emissions to report fromits operations,nor does it have responsibility for any otheremissions producing sources under the Companies Act 2006(Strategic Reports and Directors Reports)Regulations 2013,including those within its underlying investment portfolio.Listing Rule 9.8.4Listing Rul

324、e 9.8.4 requires the Company to include certaininformation in a single identifiable section of the Annual Reportor a cross reference table indicating where the information is setout.The Directors confirm that there are no disclosures to bemade in this regard.By order of the BoardFrostrow Capital LLP

325、Company Secretary28 February 2017 The Directors are responsible for preparing the Annual Reportand the financial statements in accordance with applicable lawand regulations.Company law requires the directors to prepare financialstatements for each financial year.Under that law the Directorshave elec

326、ted to prepare the financial statements in accordancewith International Financial Reporting Standards(IFRSs)asadopted by the European Union.Under company law the directorsmust not approve the financial statements unless they aresatisfied that they give a true and fair view of the state of affairsof

327、the company and of the profit or loss of the company for thatperiod.In preparing these financial statements,InternationalAccounting Standard 1 requires that directors:properly select and apply accounting policies;present information,including accounting policies,in amanner that provides relevant,rel

328、iable,comparable andunderstandable information;provide additional disclosures when compliance with thespecific requirements in IFRSs are insufficient to enableusers to understand the impact of particular transactions,other events and conditions on the entitys financial positionand financial performa

329、nce;and make an assessment of the Companys ability to continueas a going concern.The Directors are responsible for keeping adequate accountingrecords that are sufficient to show and explain the Companystransactions and disclose with reasonable accuracy at any timethe financial position of the Compan

330、y and enable them to ensurethat the financial statements comply with the Companies Act2006.They are also responsible for safeguarding the assets ofthe Company and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.The Directors are responsible for the

331、 maintenance and integrityof the corporate and financial information included on thecompanys website.Legislation in the United Kingdom governingthe preparation and dissemination of financial statements maydiffer from legislation in other jurisdictions.Disclosure of Information to the AuditorThe Dire

332、ctors at the time of approving the Report of the Directorsare listed on page 38.Each Director in office at the date of thisreport confirms that:to the best of each Directors knowledge and belief,there isno information relevant to the preparation of their report ofwhich the Companys Auditor is unawar

333、e;and each Director has taken all the steps a director mightreasonably be expected to have taken to be aware ofrelevant audit information and to establish that theCompanys Auditor is aware of that information.Responsibility Statement of the DirectorsThe Directors,whose details can be found on page 29,confirmto the best of their knowledge that:the financial statements within this Annual Report have