1、Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015A member of the Association of Investment CompaniesPerivan Financial Print 239187Fundsmith Emerging Equities Trust plc33 Cavendish Square,London W1G 0PWwww.feetplc.co.ukFundsmith Emerging Equities Trust plcAnnual
2、Report for the year ended 31 December 2015239187 Fr ost r ow FEET Cover 5mm spine 18/03/2016 21:51 Page 1Disability ActCopies of this annual report and other documents issued by the Company are available from the Company Secretary.If needed,copies can bemade available in a variety of formats,includi
3、ng braille,audio tape or larger type as appropriate.You can contact the Registrar to the Company,Capita Registrars,which has installed telephones to allow speech and hearing impaired people who have their own telephone to contact themdirectly,without the need for an intermediate operator,for this se
4、rvice please call 0800 731 1888.Specially trained operators are available duringnormal business hours to answer queries via this service.Alternatively,if you prefer to go through a typetalk operator(provided by RNID)youshould dial 18001 from your textphone followed by the number you wish to dial.Thi
5、s report is printed on Amadeus 100%White Silk a totally recycled paper produced using 100%recycled waste at a mill that has been awardedthe ISO 14001 certificate for environmental management.The pulp is bleached using a totally chlorine free(TCF)process.239187 Fr ost r ow FEET Cover 5mm spine 18/03/
6、2016 21:51 Page 21Strategic Report2Company Summary 3Financial Highlights4Chairmans Statement6Overview of Strategy11Investment Portfolio13Investment Managers Review16Investment Philosophy2Governance19Board of Directors21Report of the Directors24Statement of DirectorsResponsibilities25Corporate Govern
7、ance33Audit Committee Report35Directors Remuneration Report37Directors RemunerationPolicy Report3Financial Statements38Independent Auditors Report44Statement of ComprehensiveIncome45Statement of Financial Position46Statement of Changes in Equity47Statement of Cash Flows 48Notes to the Financial Stat
8、ements4Further Information62Shareholder Information63Alternative Investment FundManagers Directive Disclosures65Glossary of Terms67How to Invest69Notice of Annual General Meeting74Explanatory Notesto the Resolutions76Company InformationContents Fundsmith Emerging Equities Trust plc Annual Report for
9、 the year ended 31 December 2015|1239187 Fr ost r ow FEET pp01 18/03/2016 21:51 Page 1Company Summary2|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 Company SummaryThe CompanyThe Company is an investment trust and its shares arepremium listed on the Official
10、 List and traded on the mainmarket of the London Stock Exchange.The Company is amember of the Association of Investment Companies.Total assets less current liabilities as at 31 December 2015were 179.3 million(2014:192.8 million)and the marketcapitalisation was 184.7 million(2014:207.3 million).Manag
11、ementThe Company employs Fundsmith LLP(Fundsmith)asInvestment Manager and Alternative Investment FundManager(AIFM).Further details of the terms of theseappointments are provided on page 21.Performance is measured against the MSCI Emerging andFrontier Markets Index measured on a net sterling adjusted
12、basis.Capital StructureThe Companys capital structure is composed of OrdinaryShares.Further details are given in note 11 to the financialstatements on page 56.ISA StatusThe Companys shares are eligible for Individual SavingsAccounts(ISAs)and for Junior ISAs.Retail Investors advised by IFAsThe Compan
13、y currently conducts its affairs so that itsshares can be recommended by Independent FinancialAdvisers(IFAs)in the UK to ordinary retail investors inaccordance with the Financial Conduct Authority(FCA)rulesin relation to non-mainstream investment products andintends to continue to do so.The shares a
14、re excluded fromthe FCAs restrictions which apply to non-mainstreaminvestment products because they are shares in aninvestment trust.Strategic ReportFundsmith Emerging Equities Trust plc aims to provide shareholders with anattractive return by investing in a portfolio of shares issued by listed or t
15、radedcompanies which have the majority of their operations in,or revenue derivedfrom,Developing Economies*and which provide direct exposure to the rise ofthe consumer classes in those countries.*See Fundsmiths Investment Philosophy on page 16 for further information.Further details of the Companys i
16、nvestment policy are set out in the Strategic Report on page 6.239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 2Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|3Financial HighlightsPerformance Summary1MSCI Emerging and Frontier Markets Index(measured o
17、n a net sterling adjusted basis)As atAs at31 December 201531 December 2014Share Price955.0p1072.0pNet asset value per share927.4p997.0pPremium of the share price to the net assetvalue per share3.0%7.5%Ongoing charges ratio1.7%1.7%From the launch of theFor the year endedCompany on 25 June 201431 Dece
18、mber 2015to 31 December 2014Net asset value per share-7.0%-6.8%Share price-10.9%-4.5%Benchmark1-10.0%+0.5%239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 3IntroductionI am pleased to present our second Annual Report since the launch of the Company inmid-2014.It covers the year ended 31 Decem
19、ber 2015;the Companys first full year.Chairmans Statement4|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 The Companys share pricedecreased by 10.9%in the yearPerformanceIn the Investment Managers report(beginning on page 13),they describe how the proceeds ha
20、ve been fully invested andthe development of the portfolio over the year.The stockmarkets of countries in which the Company invests haveperformed poorly in 2015.The MSCI Emerging and FrontierMarkets Index,measured on a net sterling adjusted basis,fell by 10.0%over the year.The Companys net asset val
21、ueper share outperformed the benchmark but fell by 7.0%itself(after expenses).However,shareholders should bereassured by the positive returns on capital and profitmargins in the underlying investee companies,outlined inmore detail on page 15.Your Board notes the InvestmentManagers confidence in thes
22、e high quality companies withstrong underlying characteristics,which is crucial in thelong-term.The Companys share price also fell,by 10.9%to955.0 pence per share over the year,but remained at apremium to the Companys net asset value per share at theend of the year,being 3.0%.The Board keeps the sha
23、reprice premium under review.Share CapitalThe Company has had 19,337,921 ordinary shares in issuesince its launch.It is the Boards view that the ability toissue new shares at a small premium to net asset value pershare plays an important part in ensuring that the level ofpremium at which the Company
24、s shares trade does notreach excessive levels.In addition,growing the total assetsunder management through share issuance will reduce on-going costs per share and potentially enhance thesecondary market liquidity of the Companys shares,bothof which are attractive to all shareholders.As the Company i
25、s now fully invested and has consistentlytraded at a premium to net asset value,the Board has beenconsidering a share issuance programme to increase thecapital of the Company and will utilise the existingshareholder authority to issue up to 10%of the Companysissued share capital,which was obtained a
26、t the CompanysAnnual General Meeting in 2015,to commence thisprocess.The Board will seek a renewal of this authority atthe forthcoming Annual General Meeting and in addition,with regard to the potential benefits of increasing the scaleof the Company further,we will also seek shareholderauthority to
27、issue a further 15%of the Companys issuedshare capital.We will only issue shares under these authorities where theissue price per share(after taking into account the costs ofthe issue)is not less than the prevailing net asset value pershare.In doing so,any share issues are expected to beaccretive to
28、 the Companys net asset value per share.Strategic Report239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 4Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|5Following discussions with the Companys investmentmanager,Fundsmith LLP,the Board is satisfied tha
29、t suitableinvestment opportunities are available to absorb anyadditional capital raised and shares will only be issued whenthis remains the case.We have also limited the authoritysuch that it can only be used when the result of thefundraising would not result in the Company having morethan 10%of its
30、 assets in cash,which is a discipline that wefeel is sensible to protect investors from so-called“cashdrag”i.e.the negative impact on equity returns of havinguninvested cash in a rising equity market.In addition to the specific restrictions placed on theadditional shareholder authority,any issue of
31、shares underthis authority,should market conditions and investordemand permit,will be subject to the subsequentpublication of a prospectus.We look forward to receiving shareholder support for theseresolutions which your Board unanimously believes to be inthe best interests of shareholders.DividendsT
32、he Board has not recommended a dividend this year,andmay not do so for some time.The Companys principalinvestment objective is to provide capital growth rather thanincome.The Company will comply with the United Kingdomsinvestment trust rules regarding distributable income whichrequire that expenses
33、are allocated to revenue or capitaldepending on where the split of long-term returns isexpected.At present all costs have been allocated againstrevenue as the Company has only just become fully investedand capital returns have been negative since inception.Ourexpectation is that this split will be r
34、eviewed next year andif it were to change,it would increase the chance of adividend being paid although this is by no means certain.Any dividends and distributions will be at the discretion ofthe Board from time to time.OutlookOur Investment Manager continues to be cautious withregard to the short-t
35、erm prospects for the target developingeconomies,but remains confident in the quality of theunderlyinginvesteecompanies.Whilst DevelopingEconomies continue to experience volatility,their domesticdemand-led growth is evident.Stock selection continues tobe key and your Board believes that our Investme
36、ntManagers strategy of focusing on well-managed companiesthat own long established and cash generative consumerbrands will provide attractive returns for our shareholders inthe long-term.Annual General MeetingThe Companys AGM which will be held on Thursday,26 May 2016 at 1.00pm at Saddlers Hall,40 G
37、utter Lane,London EC2V 6BR provides shareholders with anopportunity to meet the Board and to hear a presentationfrom our Investment Manager.I look forward to meeting asmany shareholders as possible at that time,together withmy Board colleagues.Martin BralsfordChairman18 March 2016239187 Fr ost r ow
38、FEET pp02-pp20 18/03/2016 21:52 Page 56|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 Strategic ReportOverview of StrategyInvestment objective AimTo provide shareholders with an attractive return by investingin a portfolio of shares issued by listed or trade
39、d companieswhich have the majority of their operations in,or revenuederived from,Developing Economies*and which providedirect exposure to the rise of the consumer classes in thosecountries.Investment Approach and PolicyThe Company maintains a portfolio diversified by issuerconcentration and the Comp
40、anys portfolio will normallycomprise 35 to 55 investments.The Company complies with the following restrictions at thetime each investment is made:(i)not more than 5%of the Companys gross assets canbe invested in shares issued by any single company.This limit rises to 10%in respect of up to 40%of gro
41、ssassets;(ii)not more than 40%of the Companys gross assets canbe invested in shares issued by companies domiciledin any single jurisdiction;(iii)not more than 20%of the Companys gross assets canbe in deposits held with a single bank or financialinstitution.In applying this limit all uninvested cash(
42、except cash representing distributable income orcredited to a distribution account that the Depositaryholds)should be included;(iv)not more than 20%of the Companys gross assets canconsist of shares and approved money marketinstruments issued by the same group.When applyingthe limits set out in(i)thi
43、s provision would allow theCompany to invest not more than 5%in the shares ofeach of four group member companies,or 10%in twoof them(if applying the 40%limit);(v)the Companys holdings in any combination of sharesor deposits issued by a single company or fund mustnot exceed 20%of the Companys gross a
44、ssets overall;(vi)the Company must not acquire shares issued by acompany and carrying rights to vote at a generalmeeting of that company if the Company has the powerto influence significantly the conduct of business of thatcompany(or would be able to do so after the acquisitionof the shares).The Com
45、pany is to be taken to havepower to influence significantly if it exercises or controlsthe exercise of 20%or more of the voting rights in thatcompany;and(vii)the Company must not acquire shares which do notcarry a right to vote on any matter at a general meetingof the company that issued them and re
46、present morethan 10%of these securities issued by that company.Uninvested cash or surplus capital or assets may beinvested on a temporary basis in:cash or cash equivalents,money market instruments,bonds,commercial paper or other debt obligations withbanks or other counterparties having a single-A(or
47、equivalent)or higher credit rating as determined by aninternationally recognised rating agency;or any“government and public securities”as defined forthe purposes of the FCA rules.In general,the Company will not use portfolio managementtechniques such as interest rate hedging and credit defaultswaps.
48、However,the Company may use currency hedging,through derivatives if necessary,as a portfolio managementtechnique.Whilst the Company,generally,will not hedge itscurrency exposure,it does reserve the right to do so in thecircumstances where,in the opinion of the InvestmentManager,a significant depreci
49、ation of a currency hasbecome likely but the Investment Manager wishes tocontinue owning the companies in the portfolio denominatedin that currency and where the cost of hedging that currencyis unlikely,in the opinion of the Investment Manager,toextinguish any gains from hedging.*See Fundsmiths Inve
50、stment Philosophy on page 16 for further information239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 6Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|7Investment Strategy andBusiness ModelKey Performance Indicators The Companys Board of Directors meets
51、regularly and ateach meeting reviews performance against a number of keymeasures,as follows:Net asset value return against the MSCI Emerging andFrontier Markets Index measured on a net sterlingadjusted basis;Share price return;Premium/discount of share price to net asset value pershare;and Ongoing c
52、harges ratio.Net asset value return against thebenchmarkThe Directors regard the Companys net asset value returnas being the overall measure of value delivered toshareholders over the long-term.Fundsmiths investmentstyle is such that performance is likely to deviate from thatof the benchmark index.T
53、he Board considers the mostimportant comparator to be the MSCI Emerging and FrontierMarkets Index measured on a net sterling adjusted basis.During the year under review the Companys net asset valueper share return was-7.0%,outperforming the benchmarkby 3.0%.A full description of performance during t
54、he year underreview and the investment portfolio is contained in theInvestment Managers Review commencing on page 13 ofthis annual report.Share price returnThe Directors also regard the Companys share price returnto be a key indicator of performance.This is monitoredclosely by the Board.During the y
55、ear under review the Companys share pricereturn was-10.9%,underperforming the benchmark by0.9%.Premium/discount of share price to netasset value per shareThe Board undertakes a regular review of the level ofpremium/discount and consideration is given to ways inwhich share price performance may be en
56、hanced,includingthe effectiveness of marketing,share issuance and buy-backs,where appropriate.The making and timing of anyshare issuance and buy-backs is at the absolute discretionof the Board.It is the Boards view that the ability to issue new shares ata premium to net asset value plays an importan
57、t part inensuring that the level of premium does not reach excessivelevels.To this end,the Board has been considering issuingnew shares at an appropriate time.Further details areprovided in the Chairmans Statement on pages 4-5.Ongoing charges ratioThe Board continues to be conscious of expenses and
58、workshard to maintain a sensible balance between good qualityservice and costs.As at 31 December 2015 the ongoingcharges ratio was 1.7%.Ongoing charges ratio31 December 2015 2014 1.7%1.7%Premium of the Companys share price to net assetvalue per share on31 December 2015 2014 3.0%7.5%Number of Ordinar
59、y Shares in issue31 December 2015 2014 19,337,921 19,337,921239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 78|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 Strategic ReportOverview of StrategyRisk ManagementThe Board is responsible for the ongoing i
60、dentification,evaluation and management of the principal risks faced bythe Company and the Board regularly reviews these risksand how each risk is mitigated.The Directors have carriedout a robust assessment of the principal risks facing theCompany,including those that would threaten its solvencyand
61、liquidity.The Board has categorised the risks faced bythe Company under five headings as follows:A summary of these risks and their mitigation is describedbelow:Investment activity and strategy Financial Shareholder relations and corporate governance Operational Accounting,legal and regulatoryInvest
62、ment Activity andStrategyAn unsuccessful investment strategy,including asset allocation,may lead tounderperformance against the Companysbenchmark index and peer companies,andmay result in a widening of the Companysshare price discount to net asset value pershare.The Board regularly reviews the Compa
63、nys investment mandate andits long-term investment strategy in relation to market and economicconditions,and the operation of the Companys peers,therebymonitoring whether the Company should continue in its present form.Fundsmith provides an explanation of stock selection decisions and anoverall rati
64、onale for the make-up of the portfolio.Fundsmith discussescurrent and potential investment holdings with the Board on a regularbasis in addition to new initiatives,which may enhance shareholderreturns.The Board sets appropriate investment restrictions andguidelines.Additional reports and presentatio
65、ns are made regularly toinvestors by Fundsmith and also by Investec Bank plc,the CompanysCorporate Stockbroker.In consultation with its advisers the Board also undertakes a regularreview of the level of share price premium or discount to net assetvalue per share and consideration is given to ways in
66、 which share priceperformance may be enhanced,including the effectiveness ofmarketing,share issuance and share buy-backs,where appropriate.Principal Risks and Uncertainties Mitigation239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 8Fundsmith Emerging Equities Trust plc Annual Report for the
67、year ended 31 December 2015|9OperationalDisruption to,or failure of,accounting,dealingor payments systems in place at theCompanys service providers,includingcustodian and appointed sub-custodians andthe depositary could prevent accuratereporting and monitoring of the Companysfinancial position.The B
68、oard 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 reportsfrom the AIFM and the Registrar.The Audit Committee also reviews asummary of the SOC1(or ISAE 34
69、02)report from the Companyscustodian.These reviews include consideration of the associated cybersecurity risks facing the Company.Further details of the Boards internalcontrols are set out in the Audit Committee Report on page 34.Shareholder Relations andCorporate GovernanceShareholder unrest could
70、arise if there is pooradherence to best practice in corporategovernance,which could result in reputationaldamage 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
71、Companys compliance with corporategovernance best practice,including information on relations withshareholders,are set out in the Corporate Governance Statementbeginning on page 25.FinancialThe financial risks associated with theCompany include market risk(includingcounterparty risk),liquidity risk,
72、foreignexchange risk and credit risk.The Companys assets comprise mainly of readily realisable liquidsecurities,which can be sold to meet funding requirements,if necessary.Further information on financial instruments and risk can be found innote 14 to the financial statements beginning on page 56.Th
73、e Company is also exposed to the risk that the custodian and/orcounterparties may fail and that title to stocks does not survive anensuing liquidation.The Companys Investment Manager is responsiblefor undertaking reviews of the credit worthiness of the counterpartiesthat it uses.The Board regularly
74、reviews the Investment Managersapproved list of counterparties.As the Companys shares are denominated and traded in sterling,thereturn to shareholders will be affected by changes in the value of sterlingrelative to those foreign currencies.Whilst the Company,generally,willnot hedge its currency expo
75、sure,it does reserve the right to do so inthe circumstance where,in the opinion of the Investment Manager,asignificant depreciation of a currency has become likely but theInvestment Manager wishes to continue owning the companies in theportfolio denominated in that currency and where the cost of hed
76、gingthat currency is unlikely in the opinion of the Investment Manager,toextinguish any gains from hedging.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.T
77、he Board isaware of changes to the regulatory 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.Accounting,Le
78、gal and RegulatoryFailure to comply with appropriate law andregulations could expose the Company toserious financial loss and reputationaldamage.Principal Risks and Uncertainties Mitigation239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 910|Fundsmith Emerging Equities Trust plc Annual Report
79、 for the year ended 31 December 2015 Strategic ReportOverview of StrategyDirector,Social,Economicand Environmental Mattersand Looking to the FutureDirectorsThe Directors of the Company,who served during the year,are shown below.Further information on the Directors canbe found on page 19.Martin Brals
80、ford(Chairman)David PotterJohn SpencerAll Directors seek re-election by shareholders at each AnnualGeneral Meeting.Board DiversityThe Company is supportive of the recommendations of LordDavies Report that the performance of corporate boardscan be improved by encouraging the appointment of the bestpe
81、ople from a range of differing perspectives andbackgrounds.The Company recognises the benefits ofdiversity on the Board,including gender,and takes this intoaccount in its Board appointments.The Company iscommitted to ensuring that any Director search processactively seeks persons with the right qual
82、ifications so thatappointments can be made on the basis of merit againstobjective criteria from a diverse selection of candidates.Tothis end the Board will consider diversity during any Directorsearch process.Social,Economic and EnvironmentalMattersThe Directors,through the Companys Investment Manag
83、er,do their best to encourage companies in which investmentsare made to adhere to best practice with regard to CorporateGovernance.In light of the nature of the Companysbusiness there are no relevant human rights issues and theCompany does not have a human rights policy.The Company recognises that s
84、ocial and environmentalissues can have an effect on some of its investeecompanies.The Company is an investment trust and so its own directenvironmental impact is minimal.The Board of Directorsconsists of three Directors,one of whom is resident in theUK,one is resident in the US and one in the Channe
85、lIslands.The Board holds all of its regular meetings in theUK each year.The Company does not have any employees.Therefore thereis no employee information to disclose.Looking to the FutureThe Board concentrates its attention on the Companysinvestment performance,and the Investment Managersinvestment
86、approach,and on factors that may have aneffect on this approach.The Board is regularly updated onwider investment trust industry issues and discussions areheld at each Board meeting concerning the Companysfuture development and strategy.An overview of the main trends and factors affecting theperform
87、ance of the Company is set out in the InvestmentManagers Review beginning on page 13.The Companys overall strategy remains unchanged.239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 10Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|11Investment Portfoli
88、oInvestments held as at 31 December 2015Security Country of incorporation Fair value 000%of investmentsGodrej Consumer Products Ltd India 6,1443.4%Vitasoy International Holdings Ltd Hong Kong 6,0323.4%Universal Robina Corp Philippines 5,2893.0%Colgate Palmolive(India)Ltd India 5,0742.8%Britannia Ind
89、ustries Ltd India 4,7492.7%Foshan Haitian Flavouring China 4,7232.7%Jollibee Foods Corp Philippines 4,6172.6%Grupo Lala SAB De CV Mexico 4,4802.5%Hindustan Unilever Ltd India 4,4032.5%East African Breweries Ltd Kenya 4,4022.5%Top 10 Investments 49,91328.1%Emami Ltd India 4,3862.5%Dabur India Ltd Ind
90、ia 4,3102.4%Eastern Tobacco Egypt 4,1922.4%Asian Paints Ltd India 4,1592.3%Philippine Seven Corp Philippines 4,0732.3%Glaxosmithkline Consumer Healthcare Ltd India 3,9902.2%Edita Food Industries Reg Egypt 3,8682.2%HM Sampoerna Tbk PT Indonesia 3,8352.2%Nigerian Breweries Plc Nigeria 3,8292.1%Bim Bir
91、lesik Magazalar AS Turkey 3,7572.1%Top 20 Investments 90,31250.8%Nestl India Ltd India 3,7152.1%Mr Price Group Ltd South Africa 3,6882.1%Indofood CBP Sukses Makmur Tbk Indonesia 3,6222.0%Famous Brands Ltd South Africa 3,5802.0%Shoprite Holdings Ltd South Africa 3,5252.0%Spur Corp Ltd South Africa 3,
92、4842.0%Sun Art Retail Group Ltd Hong Kong 3,4331.9%Procter+Gamble Hygiene India 3,4291.9%Magnit PJSC Spon GDR Regs Russian Federation 3,4151.9%Ceylon Tobacco Co Plc Sri Lanka 3,3301.9%Top 30 Investments 125,53370.6%Nestl Lanka Plc Sri Lanka 3,2921.9%Big C Supercenter Pcl Thailand 3,2711.8%Guinness N
93、igeria Plc Nigeria 3,2211.8%Nestl Nigeria Plc Nigeria 3,1831.8%Tiger Brands Ltd South Africa 3,1661.8%Unilever Indonesia Tbk PT Indonesia 3,1361.8%Forus SA Chile 3,0681.7%Ambev SA Brazil 3,0521.7%Tanzania Breweries Ltd Tanzania 3,0131.7%Hengan Intl Group Co Ltd Cayman Islands 2,9641.7%Top 40 Investm
94、ents 156,89988.3%239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 1112|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 Strategic ReportInvestment PortfolioInvestments held as at 31 December 2015 continuedSecurity Country of incorporation Fair value 000%
95、of investmentsWant Want China Holdings Ltd Cayman Islands 2,9411.7%Bajaj Corp Ltd India 2,9391.7%Marico Ltd India 2,8721.6%Marico Ltd(Placing)India 2,8581.6%Hypermarcas SA Brazil 2,7041.5%Unilever Nigeria Plc Nigeria 2,1741.2%Nestl Pakistan Ltd Pakistan 1,3000.7%Fan Milk Ltd Ghana 1,1580.7%British A
96、merican Tobacco Bangladesh Co Ltd Bangladesh 1,1370.6%Walmart De Mexico SAB de CV Mexico 7240.4%Top 50 Investments 177,706100.0%Portfolio Distributionas at 31 December 2015 41%6%7%2%2%16%26%Food&Beverage Fast Moving Consumer Goods Retail Tobacco Fast food Chemicals&Industrials CashBy Sector(based on
97、 net asset value)32%8%30%30%Eastern Europe,Middle East and Africa Asia(ex India)India Latin AmericaBy Geography(by Country of Incorporation)Top 10 Purchases and Sales in 2015Top 10 PurchasesTop 10 SalesSecurityCountry of incorporationSecurityCountry of incorporation1.Foshan Haitian FlavouringChina1.
98、Kroton Educacional SABrazil2.Procter&Gamble HygieneIndia2.Pidilite Industries LtdIndia3.Asian Paints LtdIndia3.Grupo Nutresa SAColumbia4.Glaxosmithkline Consumer HealthcareIndia4.ITC LtdIndia5.Spur Corp LtdSouth Africa5.Souza Cruz SABrazil6.Edita Food Industries RegEgypt6.Wynn Macau LtdCayman Island
99、s7.Mr Price Group LtdSouth Africa7.Havells India LtdIndia8.Nestl India LtdIndia8.Sa Sa International HldgsCayman Islands9.Nestl Lanka LtdSri Lanka9.Natura Cosmeticos SABrazil10.Dabur India LtdIndia10.Alicorp SAAPeru239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 12Fundsmith Emerging Equities
100、 Trust plc Annual Report for the year ended 31 December 2015|13Investment Managers Review2015 was the first full year that Fundsmith EmergingEquities Trust plc(“FEET”)has been in existence.To recap once again on our original investment propositionwhen we launched may seem like the old Yogi Berra(the
101、American baseball player and coach who was known for hisdeceptively simple sayings and who died in 2015)aphorism:“Its dj vu all over again”,but in my view it is wise to keepyour original thesis in mind when investing,and checkperiodically to see whether it appears to be correct.This had two elements
102、:Investment Proposition 1FEET was to be invested using the same strategy as theFundsmith Equity Fund but with one added dimension:thecompanies invested in by FEET would have the majority oftheir operations in,or revenues derived from,DevelopingEconomies and provide direct exposure to the rise of the
103、consumer classes in those countries.This rise is a well-established trend with a predictable pattern ofdevelopment and has a long way to run.Investment Proposition 2A favourable entry point for our strategy of investing inconsumer stocks in Developing Economies lies ahead as aresult of two major dev
104、elopments:The end of Quantitative Easing(“QE”)in the United Stateswhich might lessen the flow of funds into Emerging Marketsand even lead funds to return to the United States.The economic slowdown in China and its knock-on effect incountries which are dominated by commodity exports,mostof which are
105、also Developing Economies.I think we can now say that Proposition 2 has now largelycome true in spades with turmoil in Chinese markets,andpoor economic performance in those economies which weredriven by the commodity bubble caused at least in part byChina,such as Brazil and other Latin American coun
106、tries,and parts of Africa such as Nigeria and South Africa.As at 31 December 2015 FEET was 98%invested.Althoughwe held off investing the cash raised by FEET as we awaitedthe negative impact on emerging markets,spot landings ininvestment are close to impossible and developments sincethe year end sugg
107、est that at the very least there will be moreturmoil to endure before the good characteristics of thecompanies in which we have invested can shine through inthe form of investment performance.Or in plain English:please keep your seat belt fastened.How did FEET perform in 2015?FEET Net Asset Value pe
108、r share(“NAV”)-7.0%FEET share price-10.9%MSCI E+FM Index(the Companys benchmark)-10.0%MSCI Emerging Markets Index-10.0%MSCI Frontier Markets Index-9.5%In terms of NAV per share,we have outperformed thebenchmark of the MSCI Emerging and Frontier MarketsIndex,measured on a net sterling adjusted basis,
109、althoughof course this merely means that FEETs NAV and shareprice went down less than the relevant index.What are we invested in?The regional split is shown on page 12.It is worth noting that just 6%of the portfolio was investedin companies operating in China and a further 5%in HongKong.This is a mu
110、ch lower percentage than the exposureto China and Hong Kong in the Emerging and FrontierMarkets Index which is approximately 24%.Similarly,wehave a relatively low exposure to Latin America,and Brazilin particular,at 3%,compared with theindexatapproximately 6%.This reflects our dim view of theprospec
111、ts for China and Brazil for some while at least.We only own stocks which provide non-durable consumernecessities or small ticket luxuries such as confectioneryand cosmetics.The holding in the Chemicals and Industrialssector is Indias leading supplier of paint,mostly toconsumers.239187 Fr ost r ow FE
112、ET pp02-pp20 18/03/2016 21:52 Page 1314|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 Strategic ReportInvestment Managers ReviewTop Five Contributors Country of Incorporation%Top Five Detractors Country of Incorporation%Vitasoy International Want WantHolding
113、s Ltd Hong Kong +1.1 China Holdings Ltd Cayman Islands*-1.0Godrej Consumer ShopriteProducts Ltd India +1.0 Holdings Ltd South Africa-0.8Marico Ltd India +0.9 Forus SA Chile-0.8Britannia Industries Ltd India +0.7 Guinness Nigeria Plc Nigeria-0.7Grupo Lala SAB De CV Mexico +0.5 Nigerian Breweries Plc
114、Nigeria-0.7 *principal place of business in ChinaIt seems obvious that things to avoid were China andcompanies in countries which have been adversely affectedby the bursting of the commodity bubble Chile,Nigeria andSouth Africa.However,as ever in investment,things arerarely that straightforward,and
115、our best performer is basedin Hong Kong.India has equally obviously been a happierhunting ground but whilst some of the Indian stocks haveperformed well we remain wary of the fact that their ratingshave run ahead of their immediate prospects as growth inconsumer demand in India remains subdued,and P
116、rimeMinister Narendra Modi is struggling to bring elements ofhis reform programme such as a national Goods andServices Tax to fruition.In terms of currencies,the largest negative impacts uponthe portfolio were from the Brazilian real and the SouthAfrican rand.The portfolio turnover during 2015 was 6
117、7%which is higherthan we would like or expect in the long-term.The mainreason for this is that we were 55%uninvested at the startof the year,and so our portfolio turnover was always goingto be over 50%if we invested the cash.It also thereforemakes no sense to provide a Total Cost of Investingincludi
118、ng the cost of dealing at this stage although we willexpect to do so in future now that FEET is fully invested.TheOngoing Charges figure for 2015 was 1.7%of assetscompared with 1.7%last year.The top ten sales of stocks during the year(in order of size)are listed on page 12 of this Annual Report.The
119、themeswhich link these sales were reducing our exposure tocountries and companies which we were not confident wouldfare satisfactorily in the downturn Brazil,Colombia,Peru,and Greater China(Hong Kong and Macau),and to somecompanies where we were not convinced that themanagement was reinvesting on ou
120、r behalf wisely.In thecase of Souza Cruz we were on the receiving end of a bidfrom the multinational parent company BAT.The top ten purchases are also listed on page 12 of thisAnnual Report.In most cases we were simply adding toexisting holdings.New holdings during the year were:Asian Paints Ltd Ind
121、ias leading supplier of paint toconsumers EDITA Food Industries Reg a leading Egyptian foodcompany Foshan Haitan Flavouring the leading supplier ofsauces and flavourings in ChinaIn line with Investment Proposition 1 above(it is,by the way,no coincidence that we place this Proposition first)we arekee
122、n to ensure that FEET owns shares not only in theconsumer sector but also in good companies companieswhich have returns on capital and profit margins which arevastly superior to the companies in the benchmark index andwhich convert far more of their profits into cash.Theyaccomplish this with much lo
123、wer resort to debt or leveragethan the companies in the benchmark index.If thesecharacteristics persist then sooner or later they will bereflected in the share prices.In terms of contribution to performance,the table below shows the top five contributors to and detractors from ourperformance by stoc
124、k:239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 14Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|15The characteristics of the FEET portfolio as at 31 December2015 compared with the companies in the Emerging andFrontier Markets Index were:FEET Compan
125、ies Index CompaniesLTM ROCE43.4%0.8%LTM ROCE(ex goodwill)48.2%N/ALTM Gross margin43.6%23.5%LTM Operating margin16.7%1.2%LTM NFCF conversion110.1%N/ALFY Revenue growth11.4%-4.2%LFY EPS growth11.3%-91.7%This would seem to demonstrate that FEET owns stakes incompanies which are at least superior to the
126、 benchmark interms of their financial characteristics.However,whilst we wait for those superior operatingcharacteristics to be reflected in share price performanceand through that the NAV and share price of FEET,we willcontinue to take advantage of any opportunities presentedby the current volatile
127、conditions to upgrade the portfolio.Terry SmithFundsmith LLPInvestment Manager18 March 2016Abbreviations:LTM Last Twelve MonthsLFY Last Full YearROCE*Return on Capital EmployedNFCF*Neutral Free Cash FlowEPS*Earnings Per Share*please refer to the Glossary of Terms on page 65 forfurther details239187
128、Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 1516|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 Strategic ReportFundsmith Emerging Equities Trust plc(FEET)invests incompanies which have the majority of their operations in,orrevenue derived from,Developin
129、g Economies*and whichprovide direct exposure to the rise of the consumer classesin those countries.We apply a three step investment process to implement thatstrategy:1.We aim to invest in high quality businessesIn our view,a high quality business is one which can sustaina high return on operating ca
130、pital employed in cash.We are seeking a sustainable high rate of return.Animportant contributor to this is repeat business,usually fromconsumers.A company that sells many small items eachday is better able to earn consistent returns over the yearsthan a company whose business is cyclical,like a stee
131、lmanufacturer,or“lumpy”,like a property developer,a moviestudio or even a drugs company.This approach rules outmost businesses that do not sell directly to consumers orwhich make goods which are not consumed at short andregular intervals.Capital goods companies and industrial suppliers makecomponent
132、s,ingredients and packaging to sell tobusinesses.Business buyers are able to defer purchasesof such products when the business cycle turns down.Moreover,business buyers employ staff whose sole raisondtreis to drive down the cost of purchase and lengthentheir payment terms.In contrast we as consumers
133、 have nodirect bargaining power.An important contributor to resilience is a resistance toproduct obsolescence.This means that we try not to investin industries which are subject to rapid technologicalinnovation.Innovation is often sought by investors but doesnot always produce lasting value for them
134、.Developmentssuch as canals,railroads,aviation,microchips and theinternet have transformed industries and peoples lives.They have created value for some investors,but a lot ofcapital gets destroyed for others,just as the internet hasdestroyed the value of many traditional media industries,most notab
135、ly newspapers,as well as quite a lot of capitalinvested in the internet companies that didnt make it andat the peak of bubbles such as the Dotcom boom.Even when a company sells to consumers,it is unlikely tofit our criteria if its products have a life which can beextended.When consumers hit hard tim
136、es,they can deferreplacing their cars,houses and appliances,but not food,toiletries,cosmetics and cleaning products.Hence we donot intend to invest in manufacturers of consumer durables.We seek to invest in businesses whose assets areintangible and difficult to replicate.It may seem counter-intuitiv
137、e to seek businesses which do not rely upon tangibleassets.The businesses we seek to invest in do somethingvery unusual:they break the rule of mean reversion thatstates returns must revert to the average as new capital isattracted to business activities earning above-averagereturns.They can do this
138、because their most important assets arenot physical assets,which can be replicated by anyone withaccess to capital,but intangible assets which can be verydifficult to replicate,no matter how much capital acompetitor is willing to spend.Moreover,its hard forcompanies to replicate these intangible ass
139、ets usingborrowed funds,as banks tend to favour the(often illusory)comfort of tangible collateral.This means that the businessdoes not suffer from economically irrational(or at leastinnumerate)competitors when credit is freely available.Tobe fair,during equity market“bubbles”,some irrationalcompetit
140、ion can be funded by equity which seems to requireno foreseeable return,but such Dotcom style phenomenamostly seem to attract capital to technology,biotech,socialnetworking,e-tailing and online businesses and not the lessglamorous world of consumer non-durables.The kinds of intangible assets we seek
141、 are brand names,trademarks,dominant market shares,patents,licenses,franchises,intellectual property or know how,distributionnetworks,supply chains,client relationships and installedbases of equipment or software that lock in clients forservice,spares,repairs,renewals,consumables andtransactions.Som
142、e combination of such intangibles definesa companys franchise.Since stock markets typically valuecompanies on the not unreasonable assumption that theirreturns will regress to the mean,businesses whose returnsdo not do this can become undervalued.Therein lies ouropportunity as investors.We avoid com
143、panies that have to use leverage to make anadequate return on equity.We only invest in companies thatearn a high return on their capital on an unleveraged basis.The companies we invest in may well have leverage,but theydont require borrowed money to function.For example,*Where we refer to our invest
144、ments in Developing Economies or Emerging Markets we mean countries other than thoseincluded in the MSCI World Index,i.e.in the widest possible sense.Clearly when referring to others references to emergingmarkets,developing economies or the developing world their own definition applies.Investment Ph
145、ilosophy 239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 16Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|17financial companies(such as banks,investment banks,credit card lenders or leasing companies)typically earn alow unleveraged return on their ass
146、ets.They then have tolever up that capital several times over with money fromlenders and depositors in order to earn what they deem tobe an acceptable return on their shareholders equity.Thismeans that not only are their unlevered equity returnsinadequate,but periodically the supply of credit iswith
147、drawn,often with disastrous consequences given theilliquidity of their asset base.In assessing leverage,weinclude off-balance sheet finance in the form of operatingleases,which are common in some sectors,such asretailing.The businesses we seek must have growth potential.It isnot enough for companies
148、 to earn a high unlevered rate ofreturn.Our definition of growth is that they must also be ableto reinvest at least a portion of their excess cash flow backinto the business to grow,while generating a high return onthe cash thus reinvested.Over time,this should compoundshareholders wealth by generat
149、ing more than a pound ofstock-market value for each pound reinvested.In our view,growth cannot be thought about sensibly in isolation fromreturns.Rapid growth may be good news or it may be badnews.It depends on how much capital you have to invest togenerate that growth.The source of growth is also a
150、 factor to consider.Growth inprofits from increasing prices can simply build an umbrellabeneath which competitors can flourish.We are moreinterested in companies which have physical growth in themerchandise or service sold than simply pricing power,although having both is nice.2.We try not to overpa
151、y for shares when investingWe only invest when we believe the valuation is attractive.We estimate the free cash flow of every company after taxand interest,but before dividends and other distributions,and after adding back any discretionary capital expenditurewhich is not needed to maintain the busi
152、ness.Otherwise wewould penalise companies which can invest in order to grow.Our aim is to invest only when free cash flow per share as apercentage of a companys share price(the free cash flowyield)is high relative to long-term interest rates and whencompared with the free cash flow yields of other i
153、nvestmentcandidates both within and outside the portfolio.Our goalis to buy securities that we believe will grow and compoundin value,which bonds cannot,at yields that are similar to orbetter 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
154、 seek toown only stocks that will compound in value over the years.Accordingly,we try to be very careful about the stocks wepick.We do not have a good new investment idea every day,or indeed,not even every year.Even when we are able tofind a new company we would like to invest in,we have towait,some
155、times forever,for a price and valuation at whichwe can justify investing.The resulting low level of dealingactivity also minimises the frictional costs of trading,a costwhich is often overlooked by investors as it is not normallydisclosed as part of the costs of running fundsOur investment philosoph
156、y is also defined by a number ofthings we dont do:(A)We try never to engage in so-called“Greater FoolTheory”We really want to own all of the companies that we investin.We do not buy them knowing that they are not goodbusinesses or are over-valued in the hope that someonemore gullible will come along
157、 and pay an even higher pricefor them.We assume that there is no greater fool than us.(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 portfolioconstruction.The simplest reason for this is that we wish to
158、 performbetter than the relevant indices and the majority of fundmanagers who hug the index composition with their portfolioselections.As the legendary investor Sir John Templetonsaid“If you want to have a better performance than thecrowd,you must do things differently from the crowd.”There is also
159、the problem that the MSCI Emerging MarketsIndex is dominated by companies of a sort that we wouldnever own.The top ten companies in the MSCI Emerging Markets Indexare all in the banking,energy,technology and telecomssectors.They all fall into sectors which we would neverinvest in because they are cy
160、clical,rely on leverage to deliveran adequate return,are subject to rapid and unpredictablechange and/or have returns controlled by governments.In contrast,under 10%of the Index is in Consumer Staples,which is the bedrock of the Fundsmith strategy and aconsistent producer of shareholder value with h
161、igh unleveredreturns on capital in cash.239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 1718|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 Strategic Report(C)We do not attempt market timingOnce we are fully invested we will not attempt to managethe p
162、ercentage invested in equities in our portfolio to reflectany view of market levels,timing or developments.Gettingmarket timing right is a skill we do not possess.We assumethat if you own shares in FEET you have already taken thedecision to invest that portion of your portfolio in EmergingMarket equ
163、ities,managed in the manner we describe.Our inability and unwillingness to try to make market timingcalls is one factor which prevents us from investing insectors which are highly cyclical.It is possible to deliverperformance from such investments,but it requires a goodsense of timing for the econom
164、ic cycle and how the marketcycle relates to it.It also requires strong nerves,becausesuch investments are often counter-intuitive,as exemplifiedin the investment adage“Only buy cyclicals when they lookexpensive”.This is because when they have little or noearnings,and so look expensive on the basis o
165、f theirprice/earnings ratio,they are at,or close,to the bottom ofthe cycle.The converse applies:you should sell them whenthey look cheap,as they are then at,or close,to peakearnings.We are not sure we have either the skill set or theconstitution for such investing.In any event,investing incyclical b
166、usinesses has one big disadvantage.They aremostly poor quality businesses which struggle to makeadequate returns on their capital.Whilst you wait to seewhether you have got your timing right,the underlying valueof your investment is more likely to erode than compoundwhilst you await the upturn,and o
167、f course occasionally theydo not survive a cycle at all.(D)Corporate GovernanceInvestment in Emerging Markets has dangers which mightloosely be labelled as problems of corporate governance.There are examples of companies which have had assetsconfiscated by governments,which have had their know-howta
168、ken by a local joint venture partner who has set up incompetition with them,of minority investment in businesscontrolled by local families which have gone awry.We do not intend to bring enlightenment to EmergingMarkets in the form of improved corporate governance viaour investments.We are minority i
169、nvestors and we willassume that the corporate governance landscape we see isthe one we have to deal with rather than assuming we canchange it.Then we will select investments in thatenvironment the same way that porcupines make love carefully.We are helped in this regard by the fact that about a fift
170、h ofthe companies in our Investable Universe and about aquarter of the portfolio for FEET are quoted subsidiaries,associates or franchisees of the multinational companies.This certainly helps from a due diligence/corporategovernance standpoint.(E)CurrenciesOur policy is generally not to hedge FEETs
171、currencyexposure.The exception in FEET would be in thecircumstances where we believe significant depreciation ofa currency has become likely but we wish to continue owningthe companies in FEET denominated in that currency and weare comfortable that we can put in place a hedge the costof which will n
172、ot extinguish any gains from hedging.Such acombination of circumstances is unusual.Terry SmithFundsmith LLPInvestment Manager18 March 2016Investment Philosophy 239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 18Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December
173、 2015|19GovernanceBoard of DirectorsThe Board of Directors,all of whom are non-executive,supervise the management of the Company and look after the interestsof shareholders.The Board considers that all the Directors are independent and there are no relationships or circumstanceswhich are likely to a
174、ffect or could appear to affect their judgement.Martin BralsfordChairman Martin was articled with Pannell Kerr Forster&Co,London,qualifying as a charteredaccountant in 1970 and obtained a masters degree at the London Business School in 1974.Until July 2007 he was Chief Executive of C.I.Traders,takin
175、g up this role in August 2002when it acquired Le Riche Group.Prior to this he had been Chairman of Premier Brands andheld a number of financial and general management appointments in Calor Gas,Rank Group,SmithKline Beecham and Cadbury Schweppes.He has served as an independent memberof the boards of
176、a number of commercial,banking and investment companies includingGartmore Capital Strategy Fund Limited and Acorn Income Fund Limited.He is a trustee ofa number of charitable trusts;including the Durrell Wildlife Conservation Trust of which heis a Life Trustee.David PotterAfter 35 years in the City(
177、CSFB,Montagu,Midland,Guinness Mahon,Investec)David hasspent the last 16 years as a chairman,non-executive director and trustee in a wide rangeof companies and institutions.He is currently Chairman of Gresham House Strategic PLCand Illustrated London News Limited,a member of the Council of The Centre
178、 for the Studyof Financial Innovation,Chairman of the Bryanston and National Film&TV SchoolFoundations and a member of The Kings College London Investment Board.David isChairman of the Management Engagement Committee.John SpencerJohn Spencer qualified as a chartered accountant in 1966 and worked wit
179、h KPMG from 1966to 1969.He joined Barclays Bank in 1969 and held a variety of posts,including Presidentof Barclays Bank of New York and chief executive of the USA Banking division.He returnedto the UK in 1990 as deputy chief executive of BZW and chief executive of the Global Marketsdivision and was
180、appointed a member of the Group Executive Committee.He wasNon-Executive Chairman of Regent Inns plc from 1995 to 1998 and served as Non-ExecutiveChairman of S plc,a director of Numerica Group plc and Chief Executive ofSnell&Wilcox Limited,a private company.He was appointed Director of Tullett Prebon
181、(originally Collins Stewart)in 2000 until 2007 where he was the Senior IndependentNon-executive Director and a member of the Audit,Remuneration and NominationsCommittees.He is a Non-Executive Director of tpSEF Inc.John is Chairman of the AuditCommittee.All Directors are members of the Audit and Mana
182、gement Engagement Committees.239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 19Meeting AttendanceThe number of Board and Committee meetings held during the year to 31 December 2015,and each Directorsattendance level,is shown below:ManagementEngagementType and number of meetingsBoardAudit Com
183、mitteeCommitteeheld during the year ended 31 December 2015(4)(2)(1)Martin Bralsford421David Potter421John Spencer421Directors InterestsThe beneficial interests of the Directors and their families in the Company were as set out below:Shares of 1p each31 December 2015Martin Bralsford100,000David Potte
184、r 7,908John Spencer5,000There have been no changes in the above Directors interests as at 18 March 2016.Board of DirectorsGovernance20|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 239187 Fr ost r ow FEET pp02-pp20 18/03/2016 21:52 Page 20Report of the Direc
185、torsFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|21The Directors present their annual report on the affairs ofthe Company together with the audited financial statementsand the Independent Auditors Report for the year ended31 December 2015.Business and Statu
186、s of the CompanyThe Company is registered as a public limited company inEngland and Wales(Registered Number 08756681)and isan investment company within the terms of Section 833 ofthe Companies Act 2006(the Act).Its shares are listed onthe Official List of the UK Listing Authority and traded on thema
187、in market of the London Stock Exchange,which is aregulated market as defined in Section 1173 of the Act.The Company has applied for and been accepted as anapproved investment trust under sections 1158 and 1159of the Corporation Taxes Act 2010 and Part 2 Chapter 1 ofStatutory Instrument 2011/2999.Thi
188、s approval relates toaccounting periods commencing on or after 25 June 2014.The Directors are of the opinion that the Company hasconducted its affairs so as to be able to retain suchapproval.Investment PolicyIn order to achieve its investment objective,the Companyinvests in a portfolio of shares iss
189、ued by listed or tradedcompanies which have the majority of their operations in,orrevenue derived from,developing economies and whichprovide direct exposure to the rise of the consumer classesin those countries.Further details concerning the Companys investment policyand strategy can be found in the
190、 Strategic Report on page 6and the Investment Philosophy on page 16.ResultsThe results attributable to shareholders for the year areshown on page 3.Gearing The Company has the power to borrow using short-termbanking facilities to raise funds for short-term liquiditypurposes or for discount managemen
191、t purposes includingthe purchase of its own shares,provided that the maximumgearing represented by such borrowings shall be limited to15%of the Companys net assets at the time of the drawdown of such borrowings.The Company is not currentlygeared.LeverageFor the purposes of the Alternative Investment
192、 FundManagers(AIFM)Directive,leverage is any method whichincreases the Companys exposure,including the borrowingof cash and the use of derivatives.It is expressed as a ratiobetween the Companys exposure and its net asset valueand can be calculated on a Gross and a Commitmentmethod.The current maximu
193、m permitted limit under theGross and Commitment methods is 115%.Up to dateinformation is available in the Investor Disclosure Documenton the Companys website www.feetplc.co.uk.Furtherinformation can be found in the Alternative Investment FundManagers Directive Disclosures on page 63.Investment Manag
194、ement and AlternativeInvestment Fund Manager(“AIFM”)Fundsmith LLP(“Fundsmith”)under the terms of theInvestment Management Agreement provides,inter alia,thefollowing services:seeking out and evaluating investment opportunities;recommending the manner by which monies should beinvested,disinvested,reta
195、ined or realised;advising on how rights conferred by the investmentsshould be exercised;analysing the performance of investments made;advising the Company in relation to trends,marketmovements and other matters which may affect theinvestment policy of the Company;and acting as AIFM to the Company.Fu
196、ndsmith 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 noticeof not less than 12 months.Continuing Appointment of theInvestment Manager and AIFMThe Board has concluded that it is in shareholders int
197、ereststhat Fundsmith acting as both the Investment Manager andAIFM continues in its roles.The review undertaken by theBoard considered the Companys investment performancetogether with the quality and adequacy of other servicesprovided.The Board also reviewed the appropriateness of the termsof the In
198、vestment Management Agreement in particular thelength of notice period and the fee structure.239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 2122|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015GovernanceReport of the DirectorsGoing ConcernThe content o
199、f the investment portfolio,trading activity,theCompanys cash balances and revenue forecasts,and thetrends and factors likely to affect the Companysperformance are reviewed and discussed at each Boardmeeting.The Directors,having made relevant enquiries,aresatisfied that it is appropriate to continue
200、to adopt the goingconcern basis in preparing the financial statements as theassets of the Company consist mainly of securities that arereadily realisable and,accordingly,the Company hasadequate financial resources to continue in operationalexistence for the foreseeable future.Viability StatementIn a
201、ccordance with the UK Corporate Governance Code andthe Listing Rules,the Directors have assessed theprospects of the Company over a longer period than the12 months required by the Going Concern provision.TheBoard asked the Audit Committee to address this newrequirement,which should take account of t
202、he Companyscurrent position and the principal risks as set out on page 8to 9 so that the Board may state that they have a reasonableexpectation that the Company will be able to continue inoperation and meet its liabilities as they fall due over theperiod of their assessment.To provide this assessmen
203、t the Audit Committee consideredthe Companys financial position as described above and itsability to liquidate its portfolio and meet its expenses asthey fall due:The portfolio comprises of investments traded oninternational stock exchanges and there is a spread ofinvestments by size of company.The
204、current portfoliocould be liquidated to the extent of 61%within seventrading days assuming 30%participation and there isno expectation that the nature of the investments heldwithin the portfolio will be materially different in future;The expenses of the Company are predictable andmodest in compariso
205、n with the assets and there are nocapital commitments foreseen which would alter thatposition;and The Company has no employees with only non-executiveDirectors and consequently does not have redundancyor other employment related liabilities orresponsibilities.The Audit Committee as well as consideri
206、ng the principalrisks on pages 8 to 9 and the financial position of theCompany as set out above,has also made the followingassumptions in considering the longer-term viability:The Board and the Investment Manager will continue toadopt a long-term view when making investments,andanticipated holding p
207、eriods can be at least four years;The Company invests principally in the securities oflisted companies in emerging markets to whichinvestors will wish to continue to have exposure;There will continue to be demand for investment trusts;Regulation will not increase to a level that makes therunning of
208、the Company uneconomical;and The performance of the Company will continue to besatisfactory.Based on the results of this review,the Directors have areasonable expectation that the Company will be able tocontinue its operations and meet its expenses and liabilitiesas they fall due over the next four
209、years.Directors&Officers Liability InsuranceCoverDirectors&officers liability insurance cover wasmaintained by the Company during the year ended 31 December 2015.It is intended that this policy willcontinue for the year ending 31 December 2016 andsubsequent years.Substantial Shares InterestThe Compa
210、ny was aware of the following substantial interests in the voting rights of the Company:2 March 2016*31 December 2015Number of%of issuedNumber of%of issuedShareholdersharesshare capitalsharesshare capitalMr Simon Justin Nixon2,000,00010.342,000,00010.34Hargreaves Lansdown1,360,7227.041,300,0216.72Mr
211、 Duncan Russell Cameron1,000,0005.171,000,0005.17Brewin Dolphin648,5143.35640,1623.31As at 31 December 2015 the Company had 19,337,921 shares in issue.As at 2 March 2016 the Company had 19,337,921shares in issue.*2 March 2016 being the latest practicable date before publication of the Annual Report.
212、239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 22Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|23Directors IndemnitiesAs at the date of this report,indemnities are in force betweenthe Company and each of its Directors under which theCompany has agre
213、ed to indemnify each Director,to the extentpermitted by law,in respect of certain liabilities incurred as aresult of carrying out his or her role as a Director of theCompany.The Directors are also indemnified against thecosts of defending any criminal or civil proceedings or anyclaim by the Company
214、or a regulator as they are incurredprovided that where the defence is unsuccessful the Directormust repay those defence costs to the Company.Theindemnities are qualifying third party indemnity provisions forthe purposes of the Companies Act 2006.A copy of each deed of indemnity is available for insp
215、ectionat the Companys registered office during normal businesshours and will be available for inspection at the AnnualGeneral Meeting.Beneficial Owners of Shares InformationRightsBeneficial owners of shares who have been nominated by theregistered holder of those shares to receive informationrights
216、under section 146 of the Companies Act 2006 arerequired to direct all communications to the registered holderof their shares rather than to the Companys registrar,CapitaAsset Services,or to the Company directly.Share CapitalAt the Companys first annual general meeting held onTuesday,26 May 2015,auth
217、ority to allot up to 933,792ordinary shares of 1 penny each on a non pre-emptive basiswas granted.Authority to repurchase up to 2,898,754shares was also granted.The authorities remained in placeat 31 December 2015 and to the date of this report:noshares were issued or repurchased during the year.Res
218、olutions to renew these authorities will be put toshareholders at the next AGM on Thursday,26 May 2016.S.I.2007/1093 C.49 CommencementNo.2 Order 2007The following disclosures are made in accordance with S.I.2007/1093 C.49 Commencement No.2 Order 2007.Capital StructureThe Companys capital structure i
219、s summarised in note 11on page 56.Voting Rights in the Companys sharesDetails of the voting rights in the Companys shares at thedate of this Annual Report are given in note 9 to the Noticeof Annual General Meeting on page 72.There are no restrictions concerning the transfer of securitiesin the Compa
220、ny;no special rights with regard to controlattached to securities;no restrictions on voting rights,noagreements between holders of securities regarding theirtransfer which are known to the Company;and noagreements which the Company is party to that might affectits control following a successful take
221、over bid.Political DonationsThe Company has not and does not intend to make anypolitical donations.Global Greenhouse Gas EmissionsThe Company has no greenhouse gas emissions to reportfrom its operations,nor does it have responsibility for anyother emissions producing sources under the Companies Act2
222、006(Strategic Reports and Directors Reports)Regulations2013,including those within its underlying investmentportfolio.Listing Rule 9.8.4Listing Rule 9.8.4 requires the Company to include certaininformation in a single identifiable section of the AnnualReport or a cross reference table indicating whe
223、re theinformation is set out.The Directors confirm that there areno disclosures to be made in this regard.By order of the BoardFrostrow Capital LLPCompany Secretary18 March 2016239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 2324|Fundsmith Emerging Equities Trust plc Annual Report for the ye
224、ar ended 31 December 2015GovernanceStatement of Directors ResponsibilitiesThe Directors are responsible for preparing the AnnualReport and the financial statements in accordance withapplicable law and regulations.Company law requires the directors to prepare financialstatements for each financial ye
225、ar.Under that law theDirectors have elected to prepare the financial statementsin accordance with International Financial ReportingStandards(IFRSs)as adopted by the European Union.Under company law the directors must not approve thefinancial statements unless they are satisfied that they givea true
226、and fair view of the state of affairs of the companyand of the profit or loss of the company for that period.Inpreparing these financial statements,InternationalAccounting Standard 1 requires that directors:properly select and apply accounting policies;present information,including accounting polici
227、es,in amanner that provides relevant,reliable,comparable andunderstandable information;provide additional disclosures when compliance with thespecific requirements in IFRSs are insufficient to enableusers to understand the impact of particulartransactions,other events and conditions on theentitys fi
228、nancial position and financial performance;and make an assessment of the Companys ability tocontinue as a going concern.The Directors are responsible for keeping adequateaccounting records that are sufficient to show and explainthe Companys transactions and disclose with reasonableaccuracy at any ti
229、me the financial position of the Companyand enable them to ensure that the financial statementscomply with the Companies Act 2006.They are alsoresponsible for safeguarding the assets of the Company andhence for taking reasonable steps for the prevention anddetection of fraud and other irregularities
230、.The Directors are responsible for the maintenance andintegrity of the corporate and financial information includedon the companys website.Legislation in the UnitedKingdom governing the preparation and dissemination offinancial statements may differ from legislation in otherjurisdictions.Disclosure
231、of Information to the AuditorSo far as the Directors are aware,there is no relevantinformation of which the Auditor is unaware.The Directorshave taken all steps they ought to have taken to makethemselves aware of any relevant audit information and toestablish that the Auditor is aware of such inform
232、ation.Responsibility Statement of the Directorsin respect of the annual financial report The Directors,whose details can be found on page 19,confirm to the best of their knowledge that:the financial statements within this Annual Report havebeen prepared in accordance with applicable accountingstanda
233、rds and give a true and fair view of the assets,liabilities,financial position and the return for the yearended 31 December 2015;the Strategic Report and the Report of the Directorsinclude a fair review of the information required by4.1.8R to 4.1.11R of the FCAs Disclosure andTransparency Rules;and
234、the Annual Report and financial statements taken as awhole are fair,balanced and understandable andprovide the information necessary to assess theCompanys position,performance,business model andstrategy.On behalf of the BoardMartin BralsfordChairman18 March 2016239187 Fr ost r ow FEET pp21-pp30 18/0
235、3/2016 21:53 Page 24Corporate GovernanceFundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|25Corporate GovernanceThe Board is accountable to shareholders for the governance of the Companys affairs.As an investment trust,theCompanys day-to-day responsibilities are
236、 delegated to third parties;the Company has no employees and the Directors areall non-executive.Therefore not all the provisions of the UK Corporate Governance Code(the UK Code)issued by theFinancial Reporting Council(FRC)are directly applicable to the Company.The Board has therefore considered the
237、principlesand recommendations of the Code of Corporate Governance published by the Association of Investment Companies inFebruary 2015(the AIC Code)by reference to the AIC Corporate Governance Guide for Investment Companies(the AICGuide).The AIC Code,as explained by the AIC Guide,addresses all the a
238、pplicable principles set out in the UK Code as wellas setting out additional principles and recommendations on issues that are of specific relevance to investment companies.The FRC has confirmed that,by following the AIC Guide,boards of investment companies meet their obligations in relationto the U
239、K Code and paragraph 9.8.6 of the Listing Rules.Copies of the AIC Code,the AIC Guide and the UK Code can be found on the respective organisations websites:www.theaic.co.uk and www.frc.org.uk.Statement of ComplianceThe Directors believe that the Company has complied with the recommendations of the AI
240、C Code that are applicable tosmaller companies(those below the FTSE 350)during the year under review and up to the date of this report and therebythe provisions of the UK Code except as set out below.The UK Code includes provisions relating to:the role of the chief executive;executive Directors remu
241、neration;and the need for an internal audit function.For the reasons set out in the AIC Guide,and as explained in the UK Code,the Board considers these provisions are notrelevant to the position of the Company as it is an externally managed investment company.In addition,all of the Companysday-to-da
242、y management and administrative functions are outsourced to third parties.The Company has no executiveDirectors,employees or internal operations.The Principles of the AIC CodeThe AIC Code is made up of 21 principles split into threesections covering:The Board Board Meetings and relations with Fundsm
243、ith Shareholder CommunicationsThe BoardAIC Code PrincipleCompliance StatementThe Chairman,Martin Bralsford,is independent of Fundsmith.There is a clear division ofresponsibility between the Chairman,the Directors,Fundsmith and the Companys otherthird party service providers.The Chairman is responsib
244、le for the leadership of the Boardand for ensuring its effectiveness in all aspects of its role.The Board consists of three non-executive Directors,each of whom is independent ofFundsmith.No member of the Board is a Director of another investment company managedby Fundsmith,nor has any Board member
245、been an employee of the Company,Fundsmith orany of its service providers.1.The Chairman should beindependent.2.A majority of the Boardshould be independent of themanager.239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 2526|Fundsmith Emerging Equities Trust plc Annual Report for the year ende
246、d 31 December 2015GovernanceCorporate GovernanceThe BoardcontinuedAIC Code PrincipleCompliance StatementAll Directors will submit themselves for annual re-election by shareholders.The individual performance of each Director standing for re-election is evaluated annuallyby the remaining members of th
247、e Board and,if considered appropriate,a recommendationis made that shareholders vote in favour of their re-election at the Annual General Meeting.The Board considers its structure and recognises the need for progressive refreshments.The Board subscribes to the view expressed within the AIC Code that
248、 long-serving directorsshould not be prevented from forming part of an independent majority.It does not considerthat a directors tenure necessarily reduces his ability to act independently and,followingformal performance evaluations,believes that each of those directors is independent incharacter an
249、d judgement and that there are no relationships or circumstances which arelikely to affect their judgement.The Boards policy on tenure is that continuity andexperience are considered to add significantly to the strength of the Board and,as such,no limit on the overall length of service of any of the
250、 Companys Directors,including theChairman,has been imposed.In view of its non-executive nature,the Board considers thatit is not appropriate for the Directors to be appointed for a specified term,although newDirectors are appointed with the expectation that they will serve for a minimum period ofthr
251、ee years subject to shareholder approval.The terms and conditions of the Directors appointments are set out in letters ofengagement which are available for inspection on request at the office of Frostrow CapitalLLP,the Company Secretary,and at the Annual General Meeting.The Directors biographical de
252、tails,set out on page 19 demonstrate the wide range of skillsand experience that they bring to the Board.Details of the Boards Committees and their composition are set out below and on page 31.The Audit Committee membership comprises the whole Board under the Chairmanship ofJohn Spencer.The Chairman
253、 of the Company is a member of the Audit Committee,butdoes not chair it.His membership of the Audit Committee is considered appropriate giventhe Chairmans extensive business experience.The Management Engagement Committee is comprised of the whole Board under theChairmanship of David Potter.The Board
254、 considers annually the skills possessed by the Directors and identifies any skillshortages to be filled by new directors.When considering new appointments,the Board reviews the skills of the Directors andseeks to add persons with complementary skills or who possess the skills and experiencewhich fi
255、ll any gaps in the Boards knowledge or experience and who can devote sufficienttime to the Company to carry out their duties effectively.The experience of the current Directors is detailed in their biographies set out on page 19.The Company is committed to ensuring that any vacancies arising are fil
256、led by the mostqualified candidates and recognises the value of diversity in the composition of the Board.When Board positions become available as a result of retirement or resignation,theCompany will ensure that a diverse group of candidates is considered.5.There should be fulldisclosure of informa
257、tion aboutthe Board.6.The Board should aim tohave a balance of skills,experience,length of serviceand knowledge of thecompany.3.Directors should besubmitted for re-election atregular intervals.Nominationfor re-election should not beassumed but be based ondisclosed procedures andcontinued satisfactor
258、yperformance.4.The Board should have apolicy on tenure,which isdisclosed in the annual report.239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 26Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|27The BoardcontinuedAIC Code PrincipleCompliance StatementDu
259、ring the course of 2015 the performance of the Board,its committees and individualDirectors(including each Directors independence)was evaluated through a formalassessment process led by the Chairman.The Board is satisfied that the structure,mix of skills and operation of the Board continuesto be eff
260、ective and relevant for the Company.The Board annually reviews the fees paid to the Directors and compares these with thefees paid by the Companys peer group and the investment trust industry generally,takinginto account the level of commitment and responsibility of each Board member.Details onthe r
261、emuneration arrangements for the Directors of the Company can be found in theDirectors Remuneration Policy Report and Directors Remuneration Report on pages 35to 37 and in note 5 on page 51.As all of the Directors are non-executive,the Board considers that it is acceptable for theChairman of the Com
262、pany to chair meetings when discussing Directors fees.The Chairmantakes no part in discussions regarding his own remuneration.The Board may periodicallytake advice from external independent advisers on Directors remuneration.Subject to there being no conflict of interest,all Directors are entitled t
263、o vote on candidatesfor the appointment of new Directors and on the recommendation for shareholders approvalof the Directors seeking re-election at the Annual General Meeting.New appointees to the Board will be provided with a full induction programme.The programmewill cover the Companys investment
264、strategy,policies and practices.The Directors are alsogiven key information on the Companys regulatory and statutory requirements as they ariseincluding information on the role of the Board,matters reserved for its decision,the terms ofreference for the Board committees,the Companys corporate govern
265、ance practices andprocedures and the latest financial information.It is the Chairmans responsibility to ensurethat the Directors have sufficient knowledge to fulfil their role and Directors are encouraged toparticipate in training courses where appropriate.The Directors have access to the advice and
266、 services of a Company Secretary through itsappointed representative which is responsible to the Board for ensuring that Boardprocedures are followed and that applicable rules and regulations are complied with.TheCompany Secretary is also responsible for ensuring good information flows between allpa
267、rties.Principle 11 applies to the launch of new investment companies and is therefore notapplicable to the Company.7.The Board shouldundertake a formal andrigorous annual evaluation ofits own performance and thatof its committees andindividual directors.8.Director remunerationshould reflect their du
268、ties,responsibilities and the valueof their time spent.9.The Independent Directorsshould take the lead in theappointment of new Directorsand the process should bedisclosed in the annual report.10.Directors should beoffered relevant training andinduction.11.The Chairman(and theBoard)should be brought
269、 intothe process of structuring anew launch at an early stage.239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 2728|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015GovernanceCorporate GovernanceBoard Meetings and relations with FundsmithAIC Code Principl
270、eCompliance StatementThe Board meets regularly throughout the year and a representative of Fundsmith is inattendance at each Board meeting.The Chairman encourages open debate to foster asupportive and co-operative approach for all participants.The Board has agreed a schedule of matters specifically
271、reserved for decision by the Board.This includes establishing the investment objectives,strategy and benchmarks,the permittedtypes or categories of investments,the markets in which transactions may be undertaken,the amount or proportion of the assets that may be invested in any category of investmen
272、tor in any one investment,and the Companys share issuance and share buyback policies.The Board,at its regular meetings,undertakes reviews of key investment and financialdata,revenue projections and expenses,analyses of asset allocation,transactions andperformance comparisons,share price and net asse
273、t value performance,marketing andshareholder communication strategies,the risks associated with pursuing the investmentstrategy,peer group information and industry issues.The Audit Committee reviews the Companys risk matrix and the Management EngagementCommittee reviews the performance and cost of t
274、he Companys third party service providers.The Board is responsible for strategy and has established an annual programme of agendaitems under which it reviews the objectives and strategy for the Company at each meeting.The Management Engagement Committee meets at least once a year.It reviews annually
275、the performance of Fundsmith(the Companys Investment Manager and AIFM)and theCompanys other principal service providers.The Committee considers the quality,cost andremuneration method of the service provided by Fundsmith against their contractualobligations and the Board receives regular reports on
276、compliance with the InvestmentRestrictions which it has set.The Audit Committee reviews the compliance and control systems of Fundsmith in operationinsofar as they relate to the affairs of the Company and the Board undertakes periodicreviews of the arrangements with and the services provided by the
277、custodian,and thedepositary to ensure that the safeguarding of the Companys assets and security of theshareholders investment is being maintained.The Investment Management Agreement between the Company and Fundsmith sets outthe limits of Fundsmiths authority,beyond which Board approval is required.T
278、he Boardhas also agreed detailed investment guidelines with Fundsmith,which are considered ateach Board meeting.A representative from Fundsmith attends each meeting of the Board to address questionson specific matters and to seek approval for specific transactions which Fundsmith isrequired to refer
279、 to the Board.The Board has delegated discretion to Fundsmith to exercise voting powers on its behalf,other than for contentious or sensitive matters which are to be referred to the Board forconsideration.The Board has reviewed Fundsmiths Stewardship Policy,which includes its CorporateGovernance and
280、 Voting Guidelines.Reports on commissions paid by Fundsmith are submitted to the Board regularly.12.Boards and managersshould operate in a supportive,co-operative and openenvironment.13.The primary focus atregular board meetings shouldbe a review of investmentperformance and associatedmatters,such a
281、s gearing,asset allocation,marketing/investor relations,peer group information andindustry issues.14.Boards should givesufficient attention to overallstrategy.15.The Board should regularlyreview both the performanceof,and contractualarrangements with,theinvestment manager and themanager(or executive
282、s of aself-managed company).16.The Board should agreepolicies with the investmentmanager and the managercovering key operationalissues.239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 28Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|29Board Meetings an
283、d relations with Fundsmith continuedAIC Code PrincipleCompliance StatementThe Board considers any imbalances in the supply of and the demand for the Companysshares in the market and takes appropriate action when considered necessary.The Board considers the discount or premium to net asset value per
284、share of theCompanys share price at each Board meeting.At each meeting the Board reviews reports from Fundsmith on marketing and shareholdercommunication strategies.It also considers their effectiveness as well as measures ofinvestor sentiment and any recommendations on share buy-backs and issuance.
285、The Management Engagement Committee reviews,at least annually,the performance ofall the Companys third party service providers,including the level and structure of feespayable and the length of the notice period,to ensure that they remain competitive and inthe best interests of shareholders.The Audi
286、t Committee reviews reports from the principal service providers on complianceand the internal and financial control systems in operation and relevant independent auditreports thereon,as well as reviewing service providers anti-bribery and corruption policiesto address the provisions of the Bribery
287、Act 2010.Shareholder CommunicationsAn analysis of the shareholder register of the Company is provided to the Directors at eachBoard meeting.Representatives of Fundsmith regularly meet with institutional shareholdersand private client asset managers to discuss strategy and to understand their issues
288、andconcerns and,if applicable,to discuss corporate governance issues.The results of suchmeetings are reported at the following Board meeting.Reports from the Companys broker are submitted to the Board on investor sentiment andindustry issues.Shareholders wishing to communicate with the Chairman,or a
289、ny other member of theBoard,may do so by writing to the Company,for the attention of the Company Secretary atthe offices of Frostrow.All shareholders are encouraged to attend the Annual GeneralMeeting,where they are given the opportunity to question the Chairman,the Board andrepresentatives of Funds
290、mith.Fundsmith will make a presentation to shareholders coveringthe investment performance and strategy of the Company at the forthcoming AnnualGeneral Meeting.The Directors welcome the views of all shareholders and placeconsiderable importance on communications with them.All substantive communicati
291、ons regarding any major corporate issues are discussed by theBoard taking into account representations from Fundsmith,the Auditor,legal advisers andthe Corporate Stockbroker.17.Boards should monitor thelevel of the share pricediscount or premium(if any)and,if desirable,take action toreduce it.18.The
292、 Board should monitorand evaluate other serviceproviders.19.The Board should regularlymonitor the shareholder profileof the company and put inplace a system for canvassingshareholder views and forcommunicating the Boardsviews to shareholders.20.The Board should normallytake responsibility for,andhav
293、e a direct involvement in,the content of communicationsregarding major corporateissues even if the manager isasked to act as spokesman.239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 29Shareholder Communications continuedAIC Code PrincipleCompliance StatementThe Company places great importan
294、ce on communication with shareholders and aims toprovide them with a full understanding of the Companys investment objective,policy andactivities,its performance and the principal investment risks by means of informativeAnnual and Half Year reports.This is supplemented by the daily publication,throu
295、gh theLondon Stock Exchange,of the net asset value of the Companys shares.The Annual Report provides information on Fundsmiths investment performance,investmentportfolio risk and operational and compliance issues.Further details on the risk/rewardbalance are set out in the Strategic Report under Ris
296、k Management on pages 8 and 9 andin note 14 beginning on page 56.The investment portfolio is listed on pages 11 and 12.The Companys website,www.feetplc.co.uk,is regularly updated with monthly factsheetsand provides useful information about the Company including the Companys financialreports and anno
297、uncements.21.The Board should ensurethat shareholders are providedwith sufficient information forthem to understand therisk/reward balance to whichthey are exposed by holdingthe shares.Governance30|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015Corporate Gover
298、nance239187 Fr ost r ow FEET pp21-pp30 18/03/2016 21:53 Page 30Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015|31Committees of the BoardDuring the year ended 31 December 2015 the Boarddelegated certain responsibilities and functions tocommittees.Copies of the
299、full terms of reference,whichclearly define the responsibilities of each Committee,canbe obtained from the Company Secretary,will be availablefor inspection at the Annual General Meeting,and can befound on the Companys website at www.feetplc.co.uk.Themembership of the Companys committees comprises a
300、ll ofthe Companys Directors.The Audit Committee is chaired byJohn Spencer,the Management Engagement Committee byDavid Potter.The table on page 20 details the number of Board andCommittee meetings attended by each Director.During theyear there were four Board meetings,two Audit Committeemeetings and
301、one meeting of the Management EngagementCommittee.Management Engagement CommitteeThis committee meets at least once a year and reviews theterms of engagement of the AIFM and Investment Managerand the Companys other service providers.Audit CommitteeThe Audit Committee meets at least twice a year and
302、isresponsible for the review of the half-year and annualfinancial statements,the nature and scope of the externalaudit and the findings there from and the terms ofappointment of the Auditor,including their remuneration andthe provision of any non-audit services by them.The Audit Committee meets repr
303、esentatives of the AIFM andInvestment Manager and their Compliance Officer whoreport as to the proper conduct of business in accordancewith the regulatory environment in which the Company andInvestment Manager operate.The Companys externalAuditor also attend meetings of this Committee at itsrequest
304、and report on their work procedures and theirfindings in relation to the Companys statutory audit.Theyalso have the opportunity to meet with the Committeewithout representatives of the Investment Manager andAIFM being present.The Audit Committee reviews the needfor non-audit services to be provided
305、by the Auditor andauthorises such on a case by case basis,havingconsideration to the cost effectiveness of the services andthe independence and objectivity of the Auditor.Details ofthe fees(both audit and non-audit related)paid to DeloitteLLP can be found on page 52.The Board has concluded,onthe rec
306、ommendation of the Audit Committee,that theAuditor continues to be independent.Anti-Bribery and Corruption PolicyThe Board has adopted a zero tolerance approach toinstances of bribery and corruption.Accordingly it expresslyprohibits any Director or associated persons when acting onbehalf of the Comp
307、any,from accepting,soliciting,paying,offering or promising to pay or authorise any payment,publicor private in the UK or abroad to secure any improper benefitfor themselves or for the Company.The Board applies the same standards to its serviceproviders in their activities for the Company.A copy of t
308、he Companys Anti Bribery and Corruption Policycan be found on its website at www.feetplc.co.uk.The policyis reviewed regularly by the Audit Committee.Relations with ShareholdersThe Board considers the shareholder register at each Boardmeeting.Fundsmith has regular contact with the Companysinstitutio
309、nal shareholders.The Board supports the principlethat the Annual General Meeting be used to communicatewith private investors.It is the intention that the full Boardwill attend the Annual General Meeting under theChairmanship of the Chairman of the Board.Details of proxyvotes received in respect of
310、each resolution will be madeavailable to shareholders at the meeting and will also bepublished on the Companys website at www.feetplc.co.uk.Representatives from the Investment Manager will attendthe Annual General Meeting and give a presentation oninvestment matters to those present.The Company hasa
311、dopted a nominee share code which is set out overleaf.The Board receives marketing and public relations reportsfrom Fundsmith.The Board reviews and considers themarketing plans on a regular basis.The annual and half-year financial reports and a monthly factsheet are available to all shareholders.The
312、 Board considersthe format of the annual and half-year financial reports toensure they are useful to all shareholders and others takingan interest in the Company.In accordance with bestpractice,the Annual Report,including the Notice of theAnnual General Meeting,is sent to shareholders at least20 wor
313、king days before the meeting.Separate resolutionsare proposed for substantive issues.239187 Fr ost r ow FEET pp31-pp37 18/03/2016 21:54 Page 31Corporate Governance32|Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 December 2015 Exercise of Voting PowersThe Board has delegat
314、ed authority to Fundsmith(as AIFMand Investment Manager)to vote the shares owned by theCompany that are held on its behalf by its custodian,StateStreet Bank and Trust Company.The Board has instructedthat Fundsmith submit votes for such shares whereverpossible.This accords with current best practice
315、whilstmaintaining a primary focus on financial returns.Fundsmithmay refer to the Board on any matters of a contentiousnature.Conflicts of InterestIn line with the Companies Act 2006,the Board has thepower to authorise any potential conflicts of interest thatmay arise and impose such limits or condit
316、ions as it thinksfit.A register of interests and potential conflicts ismaintained and is reviewed at every Board meeting toensure all details are kept up to date.It was resolved ateach Board meeting during the year that there were no director indirect interests of a Director that conflicted with the
317、interests of the Company.Appropriate authorisation will besought prior to the appointment of any new director or if anyconflicts or potential conflicts arise.Nominee Share CodeWhere shares are held in a nominee company name,theCompany undertakes:to provide the nominee company with multiple copies of
318、shareholder communications,so long as an indicationof quantities has been provided in advance;and to allow investors holding shares through a nomineecompany to attend general meetings,provided thecorrect authority from the nominee company isavailable.Nominee companies are encouraged to provide thene
319、cessary authority to underlying shareholders to attend theCompanys general meetings.By order of the BoardFrostrow Capital LLPCompany Secretary18 March 2016 Governance239187 Fr ost r ow FEET pp31-pp37 18/03/2016 21:54 Page 32Fundsmith Emerging Equities Trust plc Annual Report for the year ended 31 De
320、cember 2015|33Audit Committee Reportfor the year ended 31 December 2015The Committee,which comprises all of the Directors,mettwice during the year.Attendance by each Director is shownin the table on page 20.The Committee also met on25 February 2016 to consider this report.ResponsibilitiesThe Committ
321、ees main responsibilities during the year were:1.To review the Companys half-year and annual financialstatements.In particular,the Committee consideredwhether the annual financial statements are fair,balanced and understandable,allowing shareholders tomore easily assess the Companys strategy,investm
322、entpolicy,business model and financial performance.2.To review the risk management and internal controlprocesses of the Company and its key serviceproviders.As part of this review the Committee againreviewed the appropriateness of the Companys anti-bribery and corruption policy.3.To recommend the ap
323、pointment of an external auditorand agree the scope of its work and its remuneration,reviewing its independence and the effectiveness of theaudit process.4.To consider any non-audit work to be carried out by theauditor.The Audit Committee has considered the extentand nature of non-audit work perform
324、ed by the Auditorand is satisfied that this did not impinge on theirindependence and is a cost effective way for theCompany to operate.5.To consider the need for an internal audit function.Sincethe Company delegates its day-to-day operations to thirdparties and has no employees,the Committee hasdete
325、rmined there is no requirement for such a function.The Committees terms of reference are available for reviewon the Companys website at www.feetplc.co.uk.Meetings and BusinessThe following matters were dealt with at the Committeesmeetings:February 2015 Review of the Committees terms of reference Rev
326、iew of the Companys results Approval of the annual report and financial statements Review of risk management,internal controls andcompliance Review the outcome of the audit and discuss mattersarisingAugust 2015 Review of the Committees terms of reference Review of the Auditors plan for the 2015 audi
327、t Review of risk management,internal controls andcompliance Review of the Companys anti bribery and corruptionpolicy and the measures put in place by the Companysservice providers Review of the Companys half-year results Approval of the half-year reportFinancial StatementsThe Board has requested the
328、 Committee to confirm that inits opinion the Board can make the required statement thatthe Annual Report taken as a whole is fair,balanced andunderstandable and provides the information necessary forshareholders to assess the Companys financial position,performance,business model and strategy.The Co
329、mmitteehas given this confirmation on the basis of its review of thewhole document,underpinned by involvement in theplanning for its preparation and review of the processes toassure the accuracy of factual content.Significant Reporting MattersThe Committee considered key accounting issues,mattersand
330、 judgements in relation to the Companys financialstatements and disclosures relating to:Valuation of the Companys InvestmentsThe Committee reviews the valuation and existence ofinvestments every six months.Recognition of Revenue from InvestmentsThe Committee took steps to gain an understanding of th
331、eprocesses in place to record investment income andtransactions.The Committee sought confirmation that alldividends receivable have been accounted for correctly.Accounting PoliciesThe current accounting policies,as set out on pages 48 to50,have been applied consistently throughout the year andthe pr
332、ior period.In light of there being no unusualtransactions during the year or other possible reasons,theCommittee has found no reason to change the policies.239187 Fr ost r ow FEET pp31-pp37 18/03/2016 21:54 Page 33Audit Committee Report34|Fundsmith Emerging Equities Trust plc Annual Report for the y
333、ear ended 31 December 2015 Going ConcernHaving reviewed the Companys financial position andliabilities,the Committee is satisfied that it is appropriatefor the Board to prepare the financial statements on thegoing concern basis.Further detail is provided on page 22.Internal Controls and Risk ManagementThe Directors have identified(Strategic Report pages 8 and9)five main areas of risk:Investment Ac
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