Annual Financial Report
ABERDEEN ASIAN INCOME FUND LIMITED
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013
Strategic Report - Company Summary and Financial Highlights
The Company
Aberdeen Asian Income Fund Limited (the "Company") is a Jersey-incorporated, closed-end investment company and its Ordinary shares of No Par Value ("Ordinary Shares") are listed on the London Stock Exchange. The Company is a member of the Association of Investment Companies.
Investment Objective
The investment objective of the Company is to provide investors with a total return primarily through investing in Asian Pacific securities, including those with an above average yield. Within its overall investment objective, the Company aims to grow its dividends over time.
Manager
The investment management of the Company has been delegated by Aberdeen Private Wealth Management Limited (the "Manager"), to Aberdeen Asset Management Asia Limited ("AAM Asia" or the "Investment Manager"). AAM Asia is based in Singapore and is a wholly-owned subsidiary, and the Asia Pacific headquarters, of Aberdeen Asset Management PLC (the "Aberdeen Group"), a publicly-quoted company on the London Exchange.
Website
Up-to-date information can be found on the Company's website www.asian-income.co.uk.
Financial Highlights
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2013 |
2012 |
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Ordinary share price total return{A} |
-9.2% |
+37.3% |
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Net asset value total return{A}{B} |
-2.6% |
+28.5% |
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MSCI AC Asia Pacific ex Japan Index (currency adjusted){A} |
+1.7% |
+17.2% |
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Earnings per Ordinary share - basic (revenue) |
8.23p |
8.31p |
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Dividends per Ordinary share |
7.90p |
7.15p |
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Ongoing charges |
1.24% |
1.27% |
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|
|
|
|
{A} 1 year return |
|
|
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{B} Return for 2012 was based on the diluted net asset value. |
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Strategic Report - Overview of Strategy
Introduction
The Company aims to attract long term private and institutional investors wanting to benefit from the growth prospects of Asian companies including those with above average yields.
The business of the Company is that of an investment company and the Directors do not envisage any change in this activity in the foreseeable future. The Company's overall objective and key results are shown above. A review of the Company's activities is given in the Chairman's Statement and the Investment Manager's Review. This includes a review of the business of the Company and its principal activities, likely future developments of the business and details of any changes in the issued Ordinary Share capital.
Duration
The Company does not have a fixed life.
MSCI AC Asia Pacific (ex Japan) Index
The Company compares its performance against the currency-adjusted MSCI AC Asia Pacific (ex Japan) Index. The Company's portfolio is constructed without reference to any stockmarket index. It is likely, therefore, that there will be periods when the Company's performance will be quite unlike that of any index and there can be no assurance that such divergence will be wholly or even primarily to the Company's advantage.
Key Performance Indicators (KPIs)
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. Below are the main KPIs which have been identified by the Board for determining the progress of the Company and a record of these measures is also disclosed in the Financial Highlights table below:
- Net Asset Value
- Ordinary Share Price
- Discount/Premium
- Dividends
- Ongoing Charges
Business Model - Investment Policy
The Company primarily invests in the Asia Pacific region through investment in:
- companies listed on stock exchanges in the Asia Pacific region;
- Asian Pacific securities, such as global depositary receipts (GDRs), listed on other international stock exchanges;
- companies listed on other international exchanges that derive significant revenues or profits from the Asia Pacific region; and
- debt issued by governments or companies in the Asia Pacific region or denominated in Asian Pacific currencies.
The Company's investment policy is flexible, enabling it to invest in all types of securities, including equity shares, preference shares, debt, convertible securities, warrants and other equity-related securities.
The Company is free to invest in any particular market segments or any particular countries in the Asia Pacific region.
The Company invests in small, mid and large capitalisation companies. The Company's policy is not to acquire securities that are unquoted or unlisted at the time of investment (with the exception of securities which are about to be listed or traded on a stock exchange). However, the Company may continue to hold securities that cease to be quoted or listed if the Investment Manager considers this to be appropriate.
Typically, the portfolio will comprise 30 to 50 holdings (but without restricting the Company from holding a more or less concentrated portfolio in the future).
The Company will not invest more than 10 per cent., in aggregate, of the value of its total assets in other investment trusts or investment companies admitted to the Official List, provided that this restriction does not apply to investments in any such investment trusts or investment companies which themselves have stated investment policies to invest no more than 15 per cent. of their total assets in other investment trusts or investment companies admitted to the Official List. In any event, the Company will not invest more than 15 per cent. of its total assets in other investment trusts or investment companies admitted to the Official List.
In addition, the Company will not:
- invest, either directly or indirectly, or lend more than 20 per cent. of its total assets to any single underlying issuer (including the underlying issuer's subsidiaries or affiliates), provided that this restriction does not apply to cash deposits awaiting investment;
- invest more than 20 per cent. of its total assets in other collective investment undertakings (open-ended or closed-ended);
- expose more than 20 per cent. of its total assets to the creditworthiness or solvency of any one counterparty (including the counterparty's subsidiaries or affiliates);
- invest in physical commodities;
- enter into derivative transactions for speculative purposes;
- take legal or management control of any of its investee companies; or
- conduct any significant trading activity.
The Company may invest in derivatives, financial instruments, money market instruments and currencies solely for the purpose of efficient portfolio management (i.e. solely for the purpose of reducing, transferring or eliminating investment risk in the Company's investments, including any technique or instrument used to provide protection against exchange and credit risks).
The Investment Manager expects the Company's assets will normally be fully invested. However, during periods in which changes in economic conditions or other factors so warrant, the Company may reduce its exposure to securities and increase its position in cash and money market instruments.
The Board is responsible for determining the gearing strategy for the Company. The Board has restricted the maximum level of gearing to 25 per cent. of net assets although, in normal market conditions, the Company is unlikely to take out gearing in excess of 10 per cent. of net assets. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. Borrowings are short term and particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy.
The percentage investment and gearing limits set out under this sub-heading "Investment Policy" are only applied at the time of the relevant investment is made or borrowing is incurred.
In the event of any breach of the Company's investment policy, shareholders will be informed of the actions to be taken by the Investment Manager by an announcement issued through a Regulatory Information Service or a notice sent to shareholders at their registered addresses in accordance with the Articles.
The Company may only make material changes to its investment policy (including the level of gearing set by the Board) with the approval of shareholders (in the form of an ordinary resolution). In addition, any changes to the Company's investment objective or policy will require the prior consent of the Jersey Financial Services Commission ("JFSC") to the extent that they materially affect the import of the information previously supplied in connection with its approval under Jersey Funds Law or are contrary to the terms of the Jersey Funds Codes.
Principal Risks and Uncertainties
An investment in the Ordinary Shares is only suitable for investors capable of evaluating the risks (including the potential risk of capital loss) and merits of such investment and who have sufficient resources to bear any loss which may result from such investment. Furthermore, an investment in the Ordinary Shares should constitute part of a diversified investment portfolio.
The risks described below are those risks that the Directors considered at the date of this Annual Report to be material but are not the only risks relating to the Company or its Ordinary Shares. If any of the adverse events described below actually occur, the Company's financial condition, performance and prospects and the price of its Ordinary Shares could be materially adversely affected and shareholders may lose all or part of their investment. Additional risks which were not known to the Directors at the date of this Annual Report, or that the Directors considered at the date of this Annual Report to be immaterial, may also have an effect on the Company's financial condition, performance and prospects and the price of the Ordinary Shares.
If shareholders are in any doubt as to the consequences of their acquiring, holding or disposing of Ordinary Shares in the Company or whether an investment in the Company is suitable for them, they should consult their stockbroker, banker, solicitor, accountant or other independent financial adviser authorised under FSMA or, in the case of prospective investors outside the United Kingdom, another appropriately authorised independent financial adviser.
Investment Objective
There is no guarantee that the Company will achieve its investment objective as its ability to do so is largely dependent on:
- market conditions and responses to market conditions that are subject to uncertainties due to possible changes in economic or industry conditions, competition, political and diplomatic events, natural disasters, changes in laws (including taxation and regulation) and other factors beyond the control of the Company or the Investment Manager; and
- the performance of the Investment Manager in acquiring, managing and disposing of investments for the Company in accordance with the Company's investment policy (and, whilst the Investment Manager applies investment techniques and risk analyses in making investment decisions for the Company, there can be no guarantee that these will produce the desired results).
Ordinary Shares
- The Directors intend to operate an active discount management policy through the use of Ordinary Share buy-backs to seek to maintain the price at which the Ordinary Shares trade relative to their prevailing NAV at a discount of no more than 5 per cent. The making and timing of Ordinary share buy-backs is subject to a number of legal and regulatory restrictions and other factors and remains at the absolute discretion of the Board. Accordingly, there is no guarantee that the Board's discount management policy will achieve its objective or always be, or be capable of being, implemented.
General
- The value of the Ordinary Shares, and the income derived from them (if any), can fluctuate and may go down as well as up. An investment in shares should be regarded, therefore, as medium to long-term in nature and may not be suitable as a short-term investment.
- An investment in Ordinary Shares represents an indirect investment in the securities owned by the Company and attributable to those shares. The value of those securities, like other market investments, may go down as well as up, sometimes rapidly and unpredictably. Changes in the value of the Company's investments will affect the NAV of the Ordinary Shares to which they are attributable. Accordingly, the NAV of an Ordinary Share may go down as well as up, sometimes rapidly and unpredictably, and at any point in time may be worth less than the original investment, even after taking into account dividends paid by the Company in respect of that. As a result, investors in the Ordinary Shares may not be able to realise the full amount of their original investment.
- The price of an Ordinary Share, as well as being affected by its NAV, also takes into account its dividend yield, prevailing interest rates, the interaction of supply and demand for them in the market, market conditions generally and general investor sentiment. As a result, and notwithstanding the existence of powers to buy back Ordinary Shares through the market and the Board's discount management policy, the price of an Ordinary Share may vary considerably from its NAV (representing either a discount or a premium to that NAV) and may fall when the NAV is rising, or vice versa.
- The published price of an Ordinary Share is typically its mid-market price. Due to the potential difference between the mid-market price of an Ordinary Share and the price at which it can be sold, there is no guarantee that the realisable value of an Ordinary Share will reflect its published price.
- The Company does not have a fixed life and shareholders have no right to have their Ordinary Shares repurchased or redeemed by the Company. Accordingly, shareholders wishing to realise their investment in the Company will be required to dispose of their Ordinary Shares through the stockmarket. Market liquidity in the shares of London-listed closed-end investment companies is frequently inferior to the market liquidity in shares issued by larger companies traded on the London Stock Exchange. There can be no guarantee that a liquid market in the Ordinary Shares will exist or be maintained. Accordingly, Ordinary Shareholders may be unable to realise their Ordinary Shares at their published or quoted price.
Dividends
- The Directors have absolute discretion in determining the level of dividends payable by the Company. The Company will only pay dividends on the Ordinary Shares to the extent that it has sufficient financial resources available for that purpose in accordance with Jersey Company Law. The ability of the Company, therefore, to pay dividends in respect of the Ordinary Shares and any future dividend growth will depend primarily on the level of income received from its investments (which may be affected by, amongst others, exchange controls or withholding taxes imposed by jurisdictions in which the Company invests) and the timing of receipt of such income by the Company. Accordingly, there is no guarantee that the Company's dividend objective will continue to be met and the amount of the dividends paid to Ordinary shareholders may fluctuate and may go down as well as up.
Investment Risks
General Market Risks
- Stockmarket movements and changes in economic conditions (including, for example, interest rates, foreign exchange rates and rates of inflation), changes in industry conditions, competition, political and diplomatic events, natural disasters, changes in laws (including taxation and regulation), investors' perceptions and other factors beyond the control of the Company or the Investment Manager can substantially and either adversely or favourably affect the value of the securities in which the Company invests and, therefore, the Company's financial condition, performance and prospects.
- There can be no guarantee that any realisation of an investment will be on a basis which necessarily reflects the Company's valuation of that investment for the purposes of calculating the NAV of an Ordinary Share and the sale of any investment at a price below the Company's valuation of that investment will result in a diminution of the relevant NAV.
Emerging Market Risks
Investment in certain emerging securities markets of the Asia Pacific region may involve a greater degree of risk than that usually associated with investment in more developed securities markets. In particular, in certain countries in which the Company invests:
- liquidity and settlement risks may be greater;
- accounting standards may not provide the same degree of transparency or consistency of valuation;
- national policies may restrict the investment opportunities available to foreign investors, including restrictions on investing in issuers or industries deemed sensitive to relevant national interests;
- the fiscal and monetary systems remain relatively undeveloped and this may affect the stability of the economic and financial markets of these countries;
- substantial limitations may exist with respect to the Company's ability to repatriate investment income, capital or the proceeds of sales of securities by foreign investors; and
- assets may be subject to increased political and/or regulatory risk.
Debt Securities
- Any debt securities that may be held by the Company will be affected by general changes in interest rates that will in turn result in increases and decreases in the market value of those instruments. When interest rates decline, the value of the Company's investments in fixed rate debt obligations can be expected to rise and, when interest rates rise, the value of those investments may decline.
- Adverse changes in the financial position of an issuer of debt securities or general economic conditions may impair the ability of the issuer to meet interest payments and repayments of principal. Accordingly, debt securities that may be held by the Company will also be subject to the inherent credit or default risks associated with the debt securities and there can be no assurance as to the levels of default and/or recovery that may be experienced by the Company with regard to such securities.
- To the extent that the Company invests in sub-investment grade debt and other securities the Company may realise a higher current yield than the yield offered by investment grade securities, but investment in such securities involves a greater volatility of price and a greater probability of default by the issuers of such securities with consequent loss of interest payments and repayments of principal. Sub-investment grade securities will have, in the judgement of a rating agency, uncertainties or risk exposures to adverse conditions, and are speculative with respect to an issuer's capacity to meet interest payments and repay principal in accordance with the terms of the obligation.
Cash and Cash-equivalent Investments
A proportion of the Company's portfolio may be held in cash or cash-equivalent investments from time to time. When assets are held in cash or cash-equivalent investments, they will be out of the market and will not benefit from positive stockmarket movements (but may give some protection against negative stockmarket movements).
Illiquid Securities
The Company may invest in securities that are not readily tradable or may accumulate investment positions that represent a significant multiple of the normal trading volumes of an investment, which may make it difficult for the Company to sell its investments and may lead to volatility in the Ordinary Share price of the shares. Investors should not expect that the Company will necessarily be able to realise, within a period which they would otherwise regard as reasonable, its investments and any such realisations that may be achieved may be at a considerably lower price than prevailing indicative share prices.
Derivatives
- The Company may invest in derivatives for efficient portfolio management purposes. There may not be a price correlation between price movements in the underlying securities, currency or index, on the one hand, and price movements in the investments which are the subject of the derivative, on the other hand, and accordingly, such instruments may not always achieve the intended effect under all or any market conditions. In addition, an active market may not exist for a particular derivative instrument at any particular time.
- The Company will be exposed to credit risk on the counterparties with which it trades in respect of derivative instruments. The Company will seek to transact only with major established counterparties but there can be no guarantee that counterparty defaults will not occur.
General
As the Company's portfolio is constructed without reference to the composition of any stockmarket index or benchmark, there is a risk that the portfolio will underperform by a significant amount certain regional benchmarks, such as the MSCI AC Asia Pacific (ex-Japan) Index, as no attempt is made to track their performance.
Stock Lending
Although it has not done so since its launch, the Company may enter into stock lending contracts which expose the Company to the risk that a counterparty may default in its obligations under such a contract, whether because of a dispute over the terms of the contract or because of a counterparty's liquidation. Such counterparty risk is accentuated for contracts with longer maturities where events may intervene to prevent settlement.
Borrowings
- Pursuant to the level of gearing set by the Board, the Company may borrow up to an amount equal to 25 per cent. of its NAV. Whilst the use of borrowings should generally enhance the total return on the Ordinary Shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is falling, further reducing the total return on the Ordinary Shares. Accordingly, the use of borrowings by the Company may increase the volatility of the NAV of the Ordinary Shares, and the price of the Ordinary Shares.
- Interest rate movements may affect the interest payable on any variable rate cash borrowings drawn down by the Company. A significant increase in interest rates could result in a substantial reduction in the Company's revenue profits available to fund dividend payments on the Ordinary Shares.
Foreign Exchange
- The Company accounts for its activities, reports its results and the NAV per Ordinary Share and declares and pays dividends in sterling while its investments are made and realised in other currencies. Where the Company does not hedge its currency exposure, the movement of exchange rates between sterling and the other currencies in which the Company's investments are denominated or its borrowings are drawn down may have a material effect, unfavourable or favourable, on the returns otherwise experienced on the investments made by the Company and may affect the Company's ability to pay dividends. Accordingly, this foreign exchange risk may increase the volatility of the NAV and price of the Ordinary Shares.
- Although the Investment Manager may seek to manage all or part of the Company's foreign exchange exposure, there is no assurance that this can be performed effectively. Where the Company does hedge all or part of its currency exposure, there is no guarantee that such arrangements will be successful in reducing exchange risks and such arrangements may result in the Company incurring additional costs.
- Movements in the foreign exchange rate between sterling and the currency applicable to a particular shareholder may have an impact upon that shareholder's returns in their own currency of account.
Taxation and Exchange Controls
- Any change in the Company's tax status, in tax treaty rates, in taxation legislation, the interpretation of taxation legislation or the tax treatment of dividends, interest or other investment income received by the Company could affect the value of the investments held by the Company, affect the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders.
- To maintain its non-UK tax resident status, the Company is required to be managed and controlled from outside the United Kingdom. The composition of the Company's Board of Directors, the place of residence of the individual members of the Board and the location in which the Board makes and executes its decisions will be important in determining and maintaining the non-UK tax residence status of the Company. In the event that the Board is regarded by HM Revenue & Customs as having made strategic decisions, or executed important documents, in the United Kingdom, the Company may lose its non-UK tax resident status, which could negatively affect the Company's financial condition, performance and prospects, affect the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders.
- The Company may purchase investments that may be subject to exchange controls or withholding taxes in various jurisdictions. In the event that exchange controls or withholding taxes are imposed with respect to any of the Company's investments, the effect will generally be to reduce the capital value of the affected investments and the income received by the Company on affected investments.
Accounting Practices and Policies
- Any change in financial reporting standards or accounting practices could affect the reported value of the investments held by the Company, affect the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders.
- A proportion of the expenses of managing the Company, including the investment management fee and any financing costs, are charged to the Company's capital account. In the absence of capital growth in the Company's assets in excess of the aggregate value of such expenses charged to the capital account, this practice will result in a diminution in the Company's capital account and a corresponding reduction in the NAV per Ordinary Share. However, this practice will also, all other things being equal, result in the short term in an increased amount of net revenue being available for distribution to shareholders.
Reliance on Third-party Service Providers
- The Company has no employees and relies on the performance of third-party service providers to perform its executive functions. In particular, the Company is reliant on the Investment Manager, which has significant discretion as to the implementation of the Company's investment policy. Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment without exercising due care and skill could have a material adverse effect on the Company's financial condition, performance and prospects and, accordingly, on returns to shareholders.
- The Company's third party service providers are themselves subject to operational risks, which can arise from inadequate or failed processes, systems or resources or from external factors affecting these. The information technology and other systems of such service providers, or their business processes and procedures on which the Company may depend, may not perform as expected, including recovery from unanticipated disruptions to their business. Any such inadequacies of failures could have a material adverse effect on the Company's financial condition, performance and prospects and, accordingly, on returns to shareholders.
- The termination of the Company's relationship with any third-party service provider (and, in particular, the Manager or the Investment Manager), or any delay in appointing a replacement for any such service provider, could materially disrupt the Company's business and could have a material adverse effect on the Company's financial condition, performance and prospects and, accordingly, on returns to shareholders.
Potential Conflicts of Interest
The Aberdeen Group may be involved in other investment activities that may on occasion give rise to conflicts of interest with the Company. In particular, it currently does, and may continue to, provide investment management, investment advice or other services in relation to a number of other companies, funds or accounts that may have similar investment objectives and/or policies, to that of the Company and may receive ad valorem and/or performance-related fees for doing so. As a result, the Investment Manager may have conflicts of interest in allocating investments among the Company and other clients and in effecting transactions between the Company and other clients. The Aberdeen Group may give advice or take action with respect to such other clients that differs from the advice given or actions taken with respect to the Company. The Board is satisfied that the Investment Manager has adequate policies in place to ensure that it is able to manage and resolve potential or actual client conflicts.
Past Performance
The past performance of the Company is not, and should not be relied on as, a guide to the future performance of the Company.
Alternative Investment Fund Managers Directive ("AIFMD")
The AIFM Directive came into force on 21 July 2011 and was implemented through secondary legislation in the UK in July 2013. Under the Directive the Company constitutes a 'third country' or non-EU domiciled alternative investment fund as it is incorporated in Jersey which is not part of the EU. The AIFMD places restrictions on the marketing of shares, including shares issued by non-EU domiciled funds, to investors in the EU. In particular, under the UK's AIFMD legislation, the marketing of the Company's shares within the UK after 22 July 2014 will require registration on the UK's private placement register before any marketing may take place. It is expected that an EU wide marketing passport will be introduced in 2015, but there is no guarantee this will be available to non-EU domiciled funds. The costs for the Company of complying with the AIFMD are likely to increase, potentially by a material amount, the Company's governance and administration expenses, particularly should the Company wish to take advantage of the proposed marketing "passport" once it is introduced. The Board and the Company's advisers will continue to monitor the progress and likely implications of the AIFM Directive for the Company and, in particular, costs.
Foreign Account Tax Compliance Act ("FATCA")
The States of Jersey signed an Intergovernmental Agreement ("IGA") with the United States on 13 December 2013 in a bid to improve tax compliance and implement FATCA. Jersey also signed an IGA with the UK on 22 October 2013. Companies that are classified as Financial Institutions will have an obligation to report on any UK or US Specified persons identified during their due diligence. As a result of the IGAs, Jersey companies must report to the Comptroller of Taxes at the Jersey Taxes Office, and not directly to the IRS. Under US FATCA, Companies may suffer a withholding tax at an effective rate of 30% as a result of non-compliance.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge in order to allow the Board to fulfill its obligations. At 31 December 2013, there were five male Directors and one female Director. The Company has no employees. The Board's statement on diversity is set out in the Annual Report.
Environmental, Social and Human Rights Issues
The Company has no employees as it is managed by Aberdeen Private Wealth Management Limited. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined in the Annual Report.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources.
Peter Arthur
Chairman
27 March 2014
Strategic Report - Chairman's Statement
Background and Overview
In what was a challenging time for Asian equities, your Company's net asset value total return fell by 2.55% for the year ended 31 December 2013, trailing the 1.73% increase in the MSCI AC Asia Pacific ex-Japan Index. The Ordinary Share price total return fell by 9.2% over the period. The premium over net asset value per Ordinary Share narrowed from 8.1% to 1.8%, and at the time of writing stands at a discount of 3.0%. Total dividends for the year amounted to 7.9p representing an increase of 10.5%. Notwithstanding this disappointing result, the longer term performance record remains strong, with the NAV total return having increased by 134.4% as opposed to 92.0% for the Index for the five years to 31 December 2013.
2013 certainly kept investors on tenterhooks, with the first half seeing markets lifted by continued liquidity injections from major central banks. The big scare for Asia came in May, when the mere suggestion of the introduction of tapering (a reduction in the level of quantitative easing) in the US prompted a dramatic capital flight from ostensibly riskier asset classes. Emerging markets ended the year significantly lower than their developed counterparts. Structurally weaker nations, such as India and Indonesia, bore the brunt of the selling, buffeted by concerns that a reduction in foreign inflows would exacerbate their current account deficits. The prospect of higher interest rates also weighed on bond markets. As a result, your Company's substantial exposure to Southeast Asia, hampered returns in 2013. This exposure had previously driven outperformance in an environment where unusually low interest rates led investors on a hunt for yield. A detailed look at overall performance is contained within the Investment Manager's Review.
While the US looked to reduce stimulus, Japan was on the opposite track. Its bond-buying plan was unmatched in scope, as it sought to haul itself from decades of malaise. Premier Shinzo Abe's three-pronged strategy to combat economic stagnation and persistent deflation also appeared to bear fruit. Exporters were buoyed by the yen's continued decline, and inflation rose to a five-year high.
In China, investors greeted policy developments with cautious optimism, despite concerns about a growth slowdown and mounting credit risk: short-term money market rates spiked in December but eased following liquidity injections by the central bank. The new leadership headed up by Xi Jinping reiterated its commitment to rebalance the economy towards consumption-led growth, and unveiled ambitious reforms involving a more liberalised financial sector and less intervention in the currency markets.
Dividend
Four quarterly dividends were declared over 2013. The first three dividends were paid at the rate of 1.8p totalling 5.4p (2012 - 4.65p) which, when added to the fourth dividend of 2.50p (2012 - 2.5p), amounted to a total dividend of 7.9p, representing an increase of 10.5%. Following the payment of the fourth dividend, the Company's revenue reserves were £6.8m (which represents approximately 3.5p per Ordinary Share).
Looking ahead, while resilient balance sheets should be supportive for the dividend outlook, your Manager does not see substantial increases in absolute dividends as being likely in the year ahead. Volatility is set to continue during 2014. Your Investment Manager has factored a tougher operating environment into earnings forecasts, and expects only single digit earnings growth from the Company's portfolio over the course of the year.
Ordinary Share Issuance and Gearing
During the year, there was strong demand for the Company's Ordinary Shares and over 8.4 million new Ordinary Shares were issued at a premium to the prevailing NAV. Such issues enhance the NAV (albeit marginally) for existing shareholders. In May we saw the final exercise date for the Warrants resulting in the issue of 3,574,043 new Ordinary Shares.
The Company's £15 million senior secured multicurrency revolving bank facility with Scotia Bank is due to mature on 17 April 2014 and the Board is in the process of agreeing a new £30 million unsecured multicurrency revolving bank facility to replace it. During the year the level of drawings under the facility increased marginally to stand at £14.6 million (drawn in Hong Kong and US Dollars) at the time of writing at interest rates of 1.56% and 1.50% respectively, representing gearing of 4.0% of net assets.
Outlook
Asian financial markets started 2014 on an anxious note, owing to ongoing worries that include an additional cut in Fed stimulus, concerns about slowing growth in China, and a broad sell-off in emerging market currencies. In January, the Argentine peso's 15% tumble within a single day spread rapidly across the rest of the developing world. Indeed, we would not be surprised to see more instances of contagion, given the interconnectedness of global markets and widespread investor concern. Political developments will also be closely followed; although the deep-seated ideological divide in Thailand is nothing new, the equity market may be destabilised if the power stalemate drags on and violence escalates. Elsewhere, upcoming elections in India and Indonesia may delay the implementation of sorely-needed structural reforms.
In our view, however, the intense pessimism is not entirely warranted. The Fed continues to taper at a modest pace, and US interest rates are likely to remain near zero for some time owing to below-target inflation there and a lacklustre pace of job creation. And while unsustainable credit growth continues to pose a risk in China, its closed capital account and vast foreign reserves make a collapse in the banking system improbable. As an investor with a long-term time horizon, your Investment Manager is confident that Asia is still poised to be a main engine of global growth. The region's economic expansion will continue to be underpinned by a rising consumer class, as well as improving fiscal and corporate fundamentals.
With regards to the Company's holdings, expectations of rising interest rates may see dividend-paying stocks finding less favour with investors. Higher-yielding stocks are no longer as attractive as they were when it appeared that abnormally low interest rates would be part of the financial landscape indefinitely. However, your Investment Manager is of the view that there is significant value to be found in the asset class. Your Company's holdings boast solid balance sheets which should support good dividend growth over the longer-term, regardless of the interest rate environment. Indiscriminate selling will provide your Manager with opportunities to add to high-conviction holdings where they believe them to be trading at compelling valuations.
Annual General Meeting
The Company's Annual General Meeting ("AGM") will be held at 10.30 a.m. on Thursday 8 May 2014 at your Company's new registered office, 1st Floor, Sir Walter Raleigh House, 48 - 50 Esplanade, St Helier JE2 3QB.Your Board looks forward to meeting as many shareholders as possible. If you are unable to attend the AGM, I would encourage you to vote by returning your proxy (or letter of directions if you invest via the Aberdeen Plans) which is enclosed with the Annual Report and financial statements. If you intend to attend the AGM, I would also be grateful if you would tick the relevant box when voting.
I look forward to reporting to you again with the Half Yearly Report to 30 June 2014, which will be issued to shareholders around the end of August 2014. Those shareholders who wish to keep up to date with developments between formal reports may wish to view the monthly factsheet at
http://www.asian-income.co.uk/doc.nsf/Lit/FactsheetUKClosedAAIF.
Peter Arthur
Chairman
27 March 2014
Strategic Report - Investment Manager's Review
Overview
Asia and emerging economies played second fiddle to their developed market peers in 2013. While Asia was hobbled by worries over when the Federal Reserve would turn off the stimulus tap and how this would hurt the region, developed markets were lifted by prospects of a US recovery, a stronger US dollar and rising yields. Asia's moderating growth also contrasted with improving economies in Europe and the US. China's slowdown was a major concern. It was not surprising then that capital flowed from Asia and emerging markets back to the West, reinforcing the outperformance of developed markets since 2011.
Performance Review
During the review period, the Company's diluted net asset value total return fell 2.55% and the Ordinary Share price weakened by 9.20%, compared to the MSCI AC Asia Pacific ex Japan Index's gain of 1.73% (on a total return basis). Corporate sentiment remained understandably cautious in 2013, given the uncertainty in global markets. Earnings growth, while steady, was not outstanding. On a positive note, our core holdings stayed in good shape, and cash flow generation held up well. At this point, it is worth reiterating that our exposure to individual markets results from where we find the best companies.
The portfolio underperformed because of a few key factors. First, we have heavy exposure to Southeast Asia but are underweight to North Asia. Markets in China, Korea and Taiwan performed better than their Southeast Asian counterparts because they appeared more geared towards a US recovery.
Second, we favour the consumer sector because we are positive about the outlook, which is one of low debt, credit expansion and rising wealth. We have found some quality companies there, many of which are well-managed, conservative in approach and have low borrowing levels. This often translates to a net cash position and solid returns on equity and assets. During the year, our overweight to this more defensive sector detracted from performance, as cyclical industries, such as information technology, outperformed.
Third, a Fed tapering and the prospect of rising interest rates hurt high-yielding stocks in the region. This affected our property holdings, particularly real estate investment trusts (REITs), and utilities stocks.
Thailand best exemplified the confluence of these negative factors. Our exposure, and the stocks we hold there, was the biggest detractor of performance. Aside from the broader weakness in Southeast Asia, the stockmarket languished amid a deepening political quagmire, with a resolution proving elusive. Among our holdings, media group BEC World, utilities companies Electricity Generating and Ratchaburi as well as Tesco Lotus Retail Growth Freehold and Leasehold Property Fund (TLGF) lagged. BEC World's share price fell despite the company posting record earnings. The two utilities companies were sluggish in line with the industry. Despite improved earnings, TLGF suffered a pullback along with the broader sectoral weakness.
In Singapore, we continue to find many well-run businesses, with high standards of corporate governance and scope to expand across Asia. Our overweight detracted, as the market's flat performance trailed the region. Again, our exposure to real estate investment trusts - through Ascendas Hospitality Trust, Far East Hospitality Trust, CDL Hospitality Trusts and Keppel REIT - proved costly. Sentiment in the property sector also suffered from a slew of tightening measures. But this was offset by other holdings, which did well. Singapore Post announced that it would maintain its dividend payment. SingTel raised its payout ratio; its underlying net profits met our expectations. The three banks, OCBC, UOB and DBS, continued to do well with double-digit loan and fee income growth coupled with sound cost discipline. Asset quality was also stable.
Turning to North Asia, we remain unconvinced of the quality of companies in China. We have only two holdings there, PetroChina and China Mobile. PetroChina's results met our expectations, as its refining division returned to profitability. Its share price was, however, affected by a corruption probe centred on some senior managers. The company itself remains unblemished, while its business operations and strategy have not been affected. We view PetroChina as a restructuring play. With Beijing's emphasis on reform, we believe it stands to benefit significantly from the deregulation of the energy sector. China Mobile posted disappointing third-quarter earnings, amid rising network costs and intensifying competition. Encouragingly, it has continued to consolidate its customer base and is focusing on developing its mobile data business. China Mobile was recently awarded both 4G and fixed-line licences. At the end of the period, it also announced a lucrative deal with Apple to sell iPhones through its stores.
While we have been doing an increasing amount of groundwork in Korea and Taiwan, we have yet to unearth new companies that meet our quality criteria. We have nothing in Korea because of either a low dividend paying culture or poor corporate governance. In Taiwan, we hold Taiwan Mobile and Taiwan Semiconductor Manufacturing Co (TSMC). Taiwan Mobile's earnings met our expectations, as it posted steady growth in mobile service revenues. Its share price, however, was weighed down by concerns over intensifying competition, owing to new rivals following the 4G spectrum auction in October, and rising capital expenditure on 4G. We think that the impact of these entrants is unlikely to be too disruptive and expect tiered 4G data pricing to be positive for the company. We believe that it should continue to provide a stable dividend payout. TSMC's results were supported by healthy demand for mobile-related applications. The company is the world's largest semiconductor foundry. Despite being in a commoditised industry, TSMC benefits from its scale and technological advantage. It also has a good track record of managing its balance sheet and capital efficiently.
Mitigating the portfolio's underperformance was the non-benchmark exposure to Japan, which was the largest positive contributor. The stockmarket was Asia's star performer, owing to new-found optimism over prime minister Shinzo Abe's aggressive stimulus efforts. In 2012, we had significantly raised our weighting there because the stockmarket was offering decent yields for the first time in years. We also discovered more companies there that we liked. Our decision benefited the portfolio in 2013. Resorttrust was the top performer. The group has held the lion's share of the members-only resorts market over the past two decades in Japan. Its share price more than doubled in 2013, as growth in core memberships and the medical business underpinned solid earnings. We sold Resorttrust in December, given that the rapid run-up in its stock had compressed the dividend yield substantially.
Elsewhere, the lack of exposure to India and Indonesia also aided the portfolio. The two countries were among the worst regional performers, as they were perceived as more susceptible to liquidity tightening and capital flight. We do not hold any Indian companies because their dividend yields are relatively unappealing. In Indonesia, companies with good dividend yields tend to be concentrated in the telecommunications sector, which is a highly competitive segment where pricing can be irrational. We remain comfortable avoiding such companies.
Portfolio Activity
Over the year, we introduced several good-quality companies, as their valuations reached attractive levels during bouts of market weakness. These new holdings included Malaysia-listed Star Publications, a cash-generative media group with a steady income yield, and Japan's Okinawa Cellular, the island's dominant mobile operator, which has a healthy balance sheet and is committed to a progressive dividend policy. We also initiated positions in Singapore companies, such as Keppel REIT, given its prospects and good portfolio of commercial properties, and DBS Group, Singapore's largest bank, which is well capitalised and has consistently delivered good results in recent quarters. Both offer decent dividend yields.
With the proceeds from the Resorttrust divestment, we introduced Singapore-listed Jardine Cycle & Carriage, whose earnings are driven by Astra International, a conglomerate with a leading presence in automotive distribution, palm oil plantation and coal mining contracting in Indonesia. The stock is attractively valued, given the price weakness in the past year, and offers a sustainable yield of at least 4%.
We also subscribed to Yingde Gases' Hong Kong dollar-denominated bond issue. Yingde Gases is China's largest independent industrial gas producer, which is well managed and poised to benefit from the industrial sector's expansion. In addition, we invested in DFCC Bank's US dollar-denominated 5-year bonds issued at an attractive yield of 9.625%. The Sri Lankan bank is conservatively run and management has an established track record of navigating through volatile periods.
Outlook
We expect single-digit earnings growth for Asian companies in 2014. Dividend payments are likely to reflect that outlook. Valuations, however, are looking more attractive. While the operating environment remains challenging, our holdings have what it takes to grow their businesses and deliver good dividends over the long term. Quality companies stand out, and even more when times are tough.
Aberdeen Asset Management Asia Limited
27 March 2014
Strategic Report - Results
Financial Highlights
|
|
31 December 2013 |
31 December 2012 |
% |
|
Total assets{A} (The total assets less current liabilities as shown on the Balance Sheet with the addition of Prior Charges) |
£384,136,000 |
£386,232,000 |
-0.5 |
|
Total equity shareholders' funds (net assets){A} |
£371,117,000 |
£372,964,000 |
-0.5 |
|
Market capitalisation{A} |
£377,780,000 |
£402,231,000 |
|
|
Share price Ordinary share (mid market) |
195.00p |
222.50p |
-12.4 |
|
Net asset value per Ordinary share (basic) |
191.56p |
205.90p |
-7.0 |
|
Net asset value per Ordinary share (diluted) |
n/a |
203.92p |
|
|
Premium to net asset value per Ordinary Share |
1.8% |
8.1% |
|
|
MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis) |
528.87 |
536.42 |
-1.4 |
|
Net gearing{B} |
2.6% |
2.8% |
|
|
|
|
|
|
|
Dividend and earnings |
|
|
|
|
Total return per Ordinary share{C} |
(6.69p) |
46.87p |
|
|
Revenue return per Ordinary share{C} |
8.23p |
8.31p |
-1.0 |
|
Dividends per Ordinary share{D} |
7.90p |
7.15p |
+10.5 |
|
Dividend cover per Ordinary share |
1.04 |
1.16 |
|
|
Revenue reserves{E} |
£6.81m |
£6.58m |
|
|
|
|
|
|
|
Ongoing charges{F} |
|
|
|
|
Ongoing charges Ordinary share |
1.24% |
1.27% |
|
|
|
|||
|
{A} The figure for the 2012 year end consolidates the value of both the Ordinary and C shares in issue at that time to provide a more accurate comparison with the current year. |
|||
|
{B} Calculated in accordance with AIC guidance "Gearing Disclosures post RDR |
|||
|
{C} Measures the relevant earnings for the year divided by the weighted average number of Ordinary shares in issue (see Statement of Comprehensive Income). |
|||
|
{D} The figure for dividends reflects the years in which they were earned (see note 8). |
|||
|
{E} The revenue reserves figure takes account of the fourth interim dividend amounting to £4,843,000 (2012 - fourth interim amounting to £3,780,000). |
|||
|
{F} Ongoing charges has been calculated in accordance with guidance issued by the AIC as the total of investment management fees (excluding performance fees) and administrative expenses divided by the average cum income net asset value throughout the year. |
|||
Performance (total return)
|
|
1 year |
3 year |
5 year |
Since launch{A} |
|
|
% return |
% return |
% return |
% return |
|
Share price (Ordinary) |
-9.2 |
+28.0 |
+134.4 |
+158.5 |
|
Net asset value (diluted) |
-2.6 |
+28.0 |
+118.1 |
+159.1 |
|
MSCI AC Asia Pacific ex Japan Index (currency adjusted) |
+1.7 |
+1.7 |
+92.0 |
+107.8 |
|
|
||||
|
All figures are for total return and assume re-investment of net dividends. |
||||
|
{A} Launch being 20 December 2005. |
||||
Dividends per Ordinary Share
|
|
Rate |
xd date |
Record date |
Payment date |
|
First interim 2013 |
1.80p |
24 April 2013 |
26 April 2013 |
17 May 2013 |
|
Second interim 2013 |
1.80p |
17 July 2013 |
19 July 2013 |
23 August 2013 |
|
Third interim 2013 |
1.80p |
23 October 2013 |
25 October 2013 |
15 November 2013 |
|
Fourth interim 2013 |
2.50p |
15 January 2014 |
17 January 2014 |
18 February 2014 |
|
2013 |
7.90p |
|
|
|
|
First interim 2012 |
1.55p |
25 April 2012 |
27 April 2012 |
18 May 2012 |
|
Second interim 2012 |
1.55p |
18 July 2012 |
20 July 2012 |
24 August 2012 |
|
Third interim 2012 |
1.55p |
24 October 2012 |
26 October 2012 |
16 November 2012 |
|
Fourth interim 2012 |
2.50p |
16 January 2013 |
18 January 2013 |
18 February 2013 |
|
2012 |
7.15p |
|
|
|
Directors' Report
Introduction
The current Directors, Messrs P Arthur, D Baxter, A Berzins, C Clarke, H Young and Dr A Armstrong held office throughout the year and were the only Directors in office during the year.
The Directors present their Report and the audited financial statements for the year ended 31 December 2013.
The Company and its Objective
The business of the Company is that of an investment company investing in the Asia Pacific region. The objective of the Company is set out above. The primary aim of the Company is to provide investors with a total return primarily through investing in Asian Pacific securities, including those with an above average yield. Within its overall investment objective, the Company aims to grow its dividends over time.
A review of the Company's activities is given in the Strategic Report. This includes the overall strategy of the business of the Company and its principal activities, main risks faced by the Company, likely future developments of the business and any details of acquisition of its own Ordinary Shares by the Company.
Status
The Company is registered with limited liability in Jersey as a closed-end investment company under the Companies (Jersey) Law 1991 with registered number 91671. In addition, the Company constitutes and is regulated as a collective investment fund under the Collective Investment Funds (Jersey) Law 1988. The Company has no employees and the Company makes no political donations. The Ordinary Shares are admitted to the Official List in the premium segment and are traded on the London Stock Exchange's Main Market.
The Company is a member of the Association of Investment Companies ("AIC").
The Company intends to manage its affairs so as to be a qualifying investment for inclusion in the stocks and shares component of an Individual Savings Account ('ISA') and it is the Directors' intention that the Company should continue to be a qualifying trust.
Results and Dividends
Details of the Company's results and dividends are shown in the Annual Report and in note 8 to the Financial Statements. Interim dividends were paid on a quarterly basis in May, August, November and February 2014. The Board believes that it is preferable for shareholders to receive regular interim dividend payments on a quarterly basis and accordingly no final dividend is declared and shareholders are not required to wait until approval is given at the AGM for any payments. Dividends are paid to the extent that they are covered by the income received from the Company's underlying investments. As at 31 December 2013 the Company's revenue reserves (adjusted for the payment of the fourth interim dividend) amounted to £6.8m (approximately 3.5p per Ordinary Share).
Management Arrangements
The Company has an agreement with Aberdeen Private Wealth Management Limited for the provision of management services, details of which are shown in note 5 to the financial statements and in the Strategic Report. The Directors review the terms of the Management Agreement on a regular basis and have confirmed that, due to the investment skills, experience and commitment of the Investment Manager, in their opinion the continuing appointment of Aberdeen Private Wealth Management Limited, on the terms agreed, is in the interests of shareholders as a whole.
Issue of C Shares
The Company published a Prospectus on 22 October 2012 setting out the terms of a placing and offer for subscription of up to 50,000,000 C shares at an issue price of 100p per C share (the "Prospectus"). On 12 November 2012 the Company announced that commitments to apply for 43,809,271 C shares pursuant to the Placing and applications to subscribe for 16,190,729 C shares pursuant to the Public Offer had been received. Accordingly, the Issue was over-subscribed. As stated in the Prospectus, the Directors reserved the right to increase the number of C shares available pursuant to the Issue and in light of the substantial demand through the Public Offer, including a large number of new private investors in the Company, and following consultation with a number of existing and new institutional investors, the Board decided to increase the maximum number of C shares available for issue to 60,000,000. Dealings in the C shares on the Main Market commenced on Friday, 16 November 2012.
On 23 January 2013 the Company announced that the net asset values attributable to the Ordinary Shares and the C shares as at the Calculation Date of 11 January 2013 were 206.2051361p per share and 105.0082143p per share respectively. The NAVs were calculated including income and after providing for, in the case of the Ordinary Shares, the fourth interim dividend that was declared on 10 January 2013 and payable to holders of Ordinary Shares on the register at the close of business on 18 January 2013. Accordingly, the Conversion Ratio, as calculated in accordance with the Company's prospectus dated 22 October 2012 was 0.5092 Ordinary Shares for every one C share held as at close on the conversion record date of 1 February 2013. On the basis of the Conversion Ratio, a holder of 1,000 C shares received 509 Ordinary Shares ("new shares") upon Conversion. Entitlements to new Shares were rounded down to the nearest whole share and all fractional entitlements were aggregated and sold in the market for the benefit of the Company. The new shares arising on Conversion ranked pari passu with, and have the same rights as, the Ordinary Shares already in issue, including all dividends declared in respect of the Ordinary Shares after the Calculation Date. On the basis of the Conversion Ratio, 30,552,000 new shares were created and admitted to the premium segment of the Official List and admitted to trading on the Main Market London Stock Exchange on 4 February 2013. On that date the C shares were permanently removed from trading on the London Stock Exchange.
Ordinary Share Capital
As at 31 December 2013 there were 193,733,389 Ordinary Shares in issue. During the year the Company issued a total of 8,425,000 new Ordinary Shares for cash at a premium to the prevailing NAV at the time of issue. On 4 February 2013, 30,552,000 new Ordinary Shares were issued to converting C shareholders. The final exercise date for the Company's Warrants was 8 May 2013 and Warrantholders elected to exercise a total of 2,648,070 Warrants resulting in the issue of 2,648,070 new Ordinary Shares of no par value on 17 May 2013. The remaining 925,973 Warrants were exercised on behalf of the Warrantholders by a specially appointed trustee resulting in the issue of 925,973 new Ordinary Shares also on 17 May 2013.
Directors
The Directors' beneficial holdings are disclosed in the Directors' Remuneration Report. No Director has a service contract with the Company. The Directors' interests in contractual arrangements with the Company are as shown in note 18 to the financial statements. No other Directors were interested in contracts with the Company. Details of the Directors retiring by rotation at the Annual General Meeting are disclosed in the Statement of Corporate Governance.
New Registered Office
Subsequent to the year end the Company's Manager and Secretary moved its office in Jersey and the Company's registered office is now located at 1st Floor, Sir Walter Raleigh House, 48 - 50 Esplanade, St Helier JE2 3QB.
Directors' Authority to Allot Relevant Securities
There are no provisions under Jersey law which confer rights of pre-emption upon the issue or sale of any class of shares in the Company. However, the Company is listed on the London Stock Exchange with a premium listing, and is required to offer pre-emption rights to its shareholders and the Articles of Association were amended in 2010 to reflect this. Ordinary Shares will only be issued at a premium to the prevailing net asset value per Ordinary Share and, therefore, will not be disadvantageous to existing shareholders. Any future issues of Ordinary Shares will be carried out in accordance with the Listing Rules.
Unless previously disapplied by special resolution, in accordance with the Listing Rules, the Company is now required to first offer any new Ordinary Shares or securities (or rights to subscribe for, or to convert or exchange into, Ordinary Shares) proposed to be issued for cash to shareholders in proportion to their holdings in the Company. In order to continue with such Ordinary Share issues, your Board is therefore also proposing that an annual disapplication of the pre-emption rights is given to the Directors so that they may continue to issue Ordinary Shares as and when appropriate. Accordingly, Resolution 10, a Special Resolution, proposes a disapplication of the pre-emption rights in respect of 10% of the Ordinary Shares in issue, set to expire on the earlier of eighteen months from the date of the resolution or at the conclusion of the Annual General Meeting to be held in 2015.
Purchase of the Company's Securities
The Directors operate an active discount management policy through the use of Ordinary Share buy backs, the objective being to maintain the price at which the Ordinary Shares trade relative to their underlying net asset value at a discount of no more than 5 per cent. Purchases of Ordinary Shares will only be made through the market for cash at prices below the prevailing net asset value per Ordinary Share (which, subject to shareholder approval at the AGM will be the latest estimated net asset value per Ordinary Share) where the Directors believe such purchases will enhance shareholder value and are likely to assist in narrowing any discount to net asset value at which the Ordinary Shares may trade.
Resolution 8, a Special Resolution, will be proposed to renew the Directors' authority to make market purchases of the Company's Ordinary Shares in accordance with the provisions of the Listing Rules of the Financial Conduct Authority. Accordingly, the Company will seek authority to purchase up to a maximum of 29,040,635 Ordinary Shares (representing 14.99 per cent. of the current issued Ordinary Share capital). The authority being sought shall expire at the conclusion of the Annual General Meeting in 2015 unless such authority is renewed prior to such time. Any Ordinary Shares purchased in this way will be cancelled and the number of Ordinary Shares will be reduced accordingly, or the Ordinary Shares will be held in treasury, in accordance with Resolution 9. During the year and subsequent to the period end no Ordinary Shares have been purchased in the market for cancellation or treasury.
Following changes made to Jersey company law in 2008, Jersey companies can now either cancel shares or hold them in treasury following a buy-back of shares. These powers will give Directors additional flexibility going forward and the Board considers that it will be in the interest of the Company that such powers be available, including the powers to hold treasury shares. Such powers will only be implemented when, in the view the Directors, to do so will be for the benefit of all shareholders. Any future sales of Ordinary Shares from treasury will only be undertaken at a premium to the prevailing net asset value per Ordinary Shares.
Recommendation
Your Board considers Resolutions 8, 9 and 10 to be in the best interests of the Company and its members as a whole. Accordingly, your Board recommends that shareholders should vote in favour of Resolutions 8, 9 and 10 to be proposed at the Annual General Meeting, as they intend to do in respect of their own beneficial shareholdings which amount to 96,990 Ordinary Shares.
Directors' & Officers' Liability Insurance
The Company maintains insurance in respect of Directors' & Officers' liabilities in relation to their acts on behalf of the Company. Furthermore, each Director of the Company shall be entitled to be indemnified out of the assets of the Company to the extent permitted by law against all costs, charges, losses, expenses and liabilities incurred by him in the actual or purported execution and/or discharge of his duties and/or the exercise or purported exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or office. These rights are included in the Articles of Association of the Company and the Company has granted indemnities to the Directors on this basis.
Additional Information
There are no restrictions on the transfer of Ordinary Shares in the Company other than certain restrictions which may from time to time be imposed by law (for example, insider trading law).
The Company is not aware of any agreements between shareholders that may result in restriction on the transfer of securities and/or voting rights.
The rules governing the appointment of Directors are set out in the Statement of Corporate Governance. The Company's Articles of Association may only be amended by a special resolution at a general meeting of shareholders.
The Company is not aware of any significant agreements to which it is a party that take effect, alter or terminate upon a change of control of the Company following a takeover.
Other than the management and administration contracts with the Investment Manager, set out earlier in the report, the Company is not aware of any contractual or other agreements which are essential to its business which ought to be disclosed in the Directors' Report.
Corporate Governance
The Statement of Corporate Governance contained in the Annual Report covers the Company's compliance with the UK Corporate Governance Code.
Going Concern
In accordance with the Financial Reporting Council's guidance on Going Concern and Liquidity Risk issued in October 2009 the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Company's assets consist primarily of a diverse portfolio of listed equity shares which in most circumstances are realisable within a very short timescale.
The Directors are mindful of the principal risks and uncertainties disclosed in the Strategic Report and have reviewed forecasts detailing revenue and liabilities and the Directors believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future and at least 12 months from the date of this Annual Report. Accordingly, the Directors continue to adopt the going concern basis in preparing these accounts.
Accountability and Audit
The respective responsibilities of the Directors and the Auditor in connection with the financial statements are set out in the Annual Report.
Each Director confirms that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and he or she has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. Additionally there are no important events since the year end other than as disclosed in the notes to the financial statements.
Independent Auditor
Our Auditor, Ernst & Young LLP, has indicated its willingness to remain in office. The Directors will place a Resolution before the Annual General Meeting to re-appoint them as independent Auditor for the ensuing year, and to authorise the Directors to determine their remuneration.
Declaration
The Directors, being the persons responsible, hereby confirm to the best of their knowledge:
- that the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
- that in the opinion of the Directors, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and
- the Strategic Report, Investment Manager's Review, Performance statement, Currency/Market Performance and Investment Process includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.
Peter Arthur
Chairman
27 March 2014
1st Floor, Sir Walter Raleigh House
48 - 50 Esplanade
Jersey JE2 3QB
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Jersey Company law requires the Directors to prepare financial statements for each financial period in accordance with any generally accepted accounting principles. The financial statements of the Company are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors should:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- specify which generally accepted accounting principles have been adopted in their preparation;
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. and,
- assess whether the Annual Report and financial statements, taken as a whole, is 'fair, balanced and understandable'.
The Directors are responsible for keeping accounting records which are sufficient to show and explain its transactions and are such as to disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements prepared by the Company comply with the requirements of the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Peter Arthur
Chairman
27 March 2014
1st Floor, Sir Walter Raleigh House
48 - 50 Esplanade
Jersey JE2 3QB
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions
STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year ended |
Year ended |
||||
|
|
|
31 December 2013 |
31 December 2012 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Investment income |
4 |
|
|
|
|
|
|
|
Dividend income |
|
17,544 |
- |
17,544 |
14,231 |
55 |
14,286 |
|
Interest income |
|
1,192 |
- |
1,192 |
821 |
- |
821 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
18,736 |
- |
18,736 |
15,052 |
55 |
15,107 |
|
(Losses)/gains on investments designated at fair value through profit or loss |
10 |
- |
(23,927) |
(23,927) |
- |
60,351 |
60,351 |
|
Net currency gains |
|
- |
98 |
98 |
- |
599 |
599 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
|
|
18,736 |
(23,829) |
(5,093) |
15,052 |
61,005 |
76,057 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Investment management fee |
5 |
(1,578) |
(2,368) |
(3,946) |
(1,127) |
(1,691) |
(2,818) |
|
Other operating expenses |
6 |
(995) |
- |
(995) |
(827) |
(3) |
(830) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
Profit/(loss) before finance costs and tax |
|
16,163 |
(26,197) |
(10,034) |
13,098 |
59,311 |
72,409 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
Finance costs |
7 |
(88) |
(133) |
(221) |
(88) |
(133) |
(221) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
Profit/(loss) before tax |
|
16,075 |
(26,330) |
(10,255) |
13,010 |
59,178 |
72,188 |
|
|
|
|
|
|
|
|
|
|
Tax expense |
2(d) |
(805) |
(2) |
(807) |
(580) |
- |
(580) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
Profit/(loss) for the year |
|
15,270 |
(26,332) |
(11,062) |
12,430 |
59,178 |
71,608 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
Profit/(loss) for the year analysed as follows: |
|
|
|
|
|
|
|
|
Attributable to equity shareholders |
|
15,270 |
(27,696) |
(12,426) |
12,240 |
56,764 |
69,004 |
|
Attributable to C shares |
|
- |
1,364 |
1,364 |
190 |
2,414 |
2,604 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
Total |
|
15,270 |
(26,332) |
(11,062) |
12,430 |
59,178 |
71,608 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
|
|
|
|
|
|
|
|
|
Earnings per Ordinary share (pence): |
9 |
|
|
|
|
|
|
|
Basic |
|
8.23 |
(14.92) |
(6.69) |
8.31 |
38.56 |
46.87 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
Diluted |
|
n/a |
n/a |
n/a |
8.21 |
38.07 |
46.28 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
Earnings per C share (pence): |
9 |
|
|
|
|
|
|
|
Basic and diluted |
|
n/a |
2.27 |
2.27 |
0.32 |
4.02 |
4.34 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
______ |
|
|
|||||||
|
The Company does not have any income or expense that is not included in profit/(loss) for the year, and therefore the "Profit/(loss) for the year" is also the "Total comprehensive income for the year", as defined in IAS 1 (revised). |
|||||||
|
All of the profit/(loss) and total comprehensive income is attributable to the equity holders of Aberdeen Asian Income Fund Limited (2012 - equity holders and C share holders of Aberdeen Asian Income Fund). There are no non-controlling interests. |
|||||||
|
The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. |
|||||||
|
The accompanying notes are an integral part of the financial statements. |
|||||||
BALANCE SHEET
|
|
|
As at |
As at |
|
|
|
31 December |
31 December |
|
|
|
2013 |
2012 |
|
|
Notes |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Investments designated at fair value through profit or loss |
10 |
380,554 |
381,705 |
|
|
|
_________ |
_________ |
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
3,463 |
4,532 |
|
Other receivables |
11 |
983 |
884 |
|
|
|
_________ |
_________ |
|
|
|
4,446 |
5,416 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Bank loans |
12 |
(13,019) |
(13,268) |
|
Other payables |
12 |
(864) |
(889) |
|
C shares |
13 |
- |
(61,677) |
|
|
|
_________ |
_________ |
|
|
|
(13,883) |
(75,834) |
|
|
|
_________ |
_________ |
|
Net current liabilities |
|
(9,437) |
(70,418) |
|
|
|
_________ |
_________ |
|
Net assets |
|
371,117 |
311,287 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
Stated capital and reserves |
|
|
|
|
Stated capital |
13 |
193,733 |
151,182 |
|
Warrant reserve |
|
- |
357 |
|
Capital redemption reserve |
|
1,560 |
1,560 |
|
Capital reserve |
14 |
164,176 |
147,830 |
|
Revenue reserve |
14 |
11,648 |
10,358 |
|
Equity shareholders' funds |
|
371,117 |
311,287 |
|
|
|
_________ |
_________ |
|
Net asset value per Ordinary share (pence): |
15 |
|
|
|
Basic |
|
191.56 |
205.90 |
|
|
|
_________ |
_________ |
|
Diluted |
|
n/a |
203.92 |
|
|
|
_________ |
_________ |
|
Net asset value per C share (pence): |
15 |
|
|
|
Basic |
|
n/a |
102.80 |
|
|
|
_________ |
_________ |
STATEMENT OF CHANGES IN EQUITY
|
For the year ended 31 December 2013 |
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
Stated |
Warrant |
redemption |
Capital |
Revenue |
Retained |
|
|
|
capital |
reserve |
reserve |
reserve |
reserve |
earnings |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Opening balance |
151,182 |
357 |
1,560 |
147,830 |
10,358 |
- |
311,287 |
|
Issue of Ordinary shares via conversion of C shares |
30,552 |
- |
- |
32,453 |
- |
- |
63,005 |
|
Issue of Ordinary shares |
8,425 |
- |
- |
10,517 |
- |
- |
18,942 |
|
Exercise of warrants |
3,574 |
(357) |
- |
1,072 |
- |
- |
4,289 |
|
Loss for the year |
- |
- |
- |
- |
- |
(12,426) |
(12,426) |
|
Transferred from retained earnings to capital reserve{A} |
- |
- |
- |
(27,696) |
- |
27,696 |
- |
|
Transferred from retained earnings to revenue reserve |
- |
- |
- |
- |
15,270 |
(15,270) |
- |
|
Dividends paid |
- |
- |
- |
- |
(13,980) |
- |
(13,980) |
|
|
______ |
______ |
______ |
_______ |
______ |
______ |
______ |
|
Balance at 31 December 2013 |
193,733 |
- |
1,560 |
164,176 |
11,648 |
- |
371,117 |
|
|
______ |
______ |
______ |
_______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December 2012 |
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
Stated |
Warrant |
redemption |
Capital |
Revenue |
Retained |
|
|
|
capital |
reserve |
reserve |
reserve |
reserve |
earnings |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Opening balance |
139,084 |
615 |
1,560 |
82,523 |
8,164 |
- |
231,946 |
|
Issue of Ordinary shares |
9,517 |
- |
- |
7,769 |
- |
- |
17,286 |
|
Exercise of warrants |
2,581 |
(258) |
- |
774 |
- |
- |
3,097 |
|
Profit for the year |
- |
- |
- |
- |
- |
69,004 |
69,004 |
|
Transferred from retained earnings to capital reserve{A} |
- |
- |
- |
56,764 |
- |
(56,764) |
- |
|
Transferred from retained earnings to revenue reserve |
- |
- |
- |
- |
12,240 |
(12,240) |
- |
|
Dividends paid |
- |
- |
- |
- |
(10,046) |
- |
(10,046) |
|
|
______ |
______ |
______ |
_______ |
______ |
______ |
______ |
|
Balance at 31 December 2012 |
151,182 |
357 |
1,560 |
147,830 |
10,358 |
- |
311,287 |
|
|
______ |
______ |
______ |
_______ |
______ |
______ |
______ |
|
|
|||||||
|
{A} Represents the capital profit attributable to equity shareholders per the Statement of Comprehensive Income. |
|||||||
|
|
|||||||
|
The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. |
|||||||
|
The accompanying notes are an integral part of the financial statements. |
|||||||
CASH FLOW STATEMENT
|
|
|
Year ended |
Year ended |
||
|
|
|
31 December 2013 |
31 December 2012 |
||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
(Loss)/profit for the year |
|
|
(11,062) |
|
71,608 |
|
Add back finance costs |
7 |
|
221 |
|
221 |
|
Add back taxation paid |
|
|
807 |
|
580 |
|
Losses/(gains) on investments held at fair value through profit or loss |
10 |
|
23,927 |
|
(60,351) |
|
Net currency gains |
14 |
|
(98) |
|
(599) |
|
Increase in other receivables |
|
|
(84) |
|
(146) |
|
Increase in other payables |
|
|
303 |
|
176 |
|
|
|
|
_______ |
|
_______ |
|
Net cash inflow from operating activities before finance costs and tax{A} |
|
|
14,014 |
|
11,489 |
|
|
|
|
|
|
|
|
Bank and loan interest paid |
|
|
(220) |
|
(201) |
|
|
|
|
|
|
|
|
Overseas taxation paid |
|
|
(822) |
|
(580) |
|
|
|
|
_______ |
|
_______ |
|
Net cash inflow from operating activities |
|
|
12,972 |
|
10,708 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Purchases of investments |
|
(41,544) |
|
(134,470) |
|
|
Sales of investments |
|
18,404 |
|
50,089 |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash outflow from investing activities |
|
|
(23,140) |
|
(84,381) |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Proceeds from issue of Ordinary shares |
13 |
18,942 |
|
17,286 |
|
|
C share issue proceeds net of expenses |
13 |
- |
|
59,073 |
|
|
Proceeds from exercise of warrants |
13 |
4,289 |
|
3,097 |
|
|
Dividends paid |
8 |
(13,980) |
|
(10,046) |
|
|
Loans drawn down |
|
- |
|
2,767 |
|
|
|
|
|
_______ |
|
_______ |
|
Net cash inflow from financing activities |
|
|
9,251 |
|
72,177 |
|
|
|
|
_______ |
|
_______ |
|
Net decrease in cash and cash equivalent |
|
|
(917) |
|
(1,496) |
|
Cash and cash equivalents of the start of the year |
|
|
4,532 |
|
5,930 |
|
Effect of foreign exchange rate changes |
|
|
(152) |
|
98 |
|
|
|
|
_______ |
|
_______ |
|
Cash and cash equivalents at the end of the year |
2,16 |
|
3,463 |
|
4,532 |
|
|
|
|
_______ |
|
_______ |
|
|
|||||
|
{A} Includes income from dividends of £17,444,000 gross (2012 - £13,821,000 gross) and interest income of £944,000 (2012 - £965,000). |
|||||
|
|
|||||
|
The accompanying notes are an integral part of the financial statements. |
|||||
NOTES TO THE FINANCIAL STATEMENTS
|
For the year ended 31 December 2013 |
|
|
|
|
|
1. |
Principal activity |
|
|
The Company is a closed-end investment company incorporated in Jersey, with its Ordinary shares being listed on the London Stock Exchange. |
|
2. |
Accounting policies |
|
|
|
(a) |
Basis of preparation |
|
|
|
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Reporting Interpretations Committee of the IASB (IFRIC). All of the IFRS which took effect during the year were adopted by the Company and did not have a material impact on the financial results. Included within the IFRS taking effect during the year is IFRS 13 'Fair Value Measurement' which aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS. If an asset or a liability measured at fair value has a bid price and an ask price, the standard requires valuation to be based on a price within the bid-ask spread that is most representative of fair value and allows the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value measurement within a bid-ask spread. On adoption of the standard, the Company elected to use bid price for valuing quoted investments. |
|
|
|
|
|
|
|
The Company's assets consist substantially of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short timescale. The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants. The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and, for the above reasons, they continue to adopt the going concern basis in preparing the financial statements. |
|
|
|
|
|
|
|
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates which requires management to exercise its judgement in the process of applying the accounting policies. Actual results may differ from these estimates. |
|
|
|
|
|
|
|
The financial statements are prepared on a historical cost basis, except for investments that have been measured at fair value through profit or loss and financial liabilities that have been measured at amortised cost. |
|
|
|
|
|
|
|
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2013. |
|
|
|
|
|
|
|
The financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated. |
|
|
|
|
|
|
|
Where guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") is consistent with the requirement of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. |
|
|
|
|
|
|
|
Changes in accounting policy and disclosures |
|
|
|
At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective: |
|
|
|
IFRS 9 - Financial Instruments: Classification and Measurement (current proposed effective date for implementation 1 January 2018). |
|
|
|
Amendments to IFRS 10, IFRS 12 and IAS 27 - Definition of Investment Entity (early adoption permitted) (effective for annual periods beginning on or after 1 January 2014). |
|
|
|
Amendments to IAS 32 - Offsetting Financial Assets and Financial Liabilities (effective for annual periods beginning on or after 1 January 2014). |
|
|
|
|
|
|
|
The Directors do not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the Company's financial results in the period of initial application although there will be revised presentations to the Primary Financial Statements and additional disclosures. The Company intends to adopt the Standards in the reporting period when they become effective. |
|
|
|
|
|
|
(b) |
Income |
|
|
|
Dividends receivable on equity shares are brought into account on the ex-dividend date. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Where the Company has elected to receive dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Special dividends are credited to capital or revenue according to their circumstances. Dividend revenue is presented gross of any non-recoverable withholding taxes, which are disclosed separately in the Statement of Comprehensive Income. |
|
|
|
|
|
|
|
The fixed returns on debt securities and non-equity shares are recognised using the effective interest rate method. |
|
|
|
|
|
|
|
Interest receivable from cash and short-term deposits is accrued to the end of the financial period. |
|
|
|
|
|
|
(c) |
Expenses |
|
|
|
All expenses, with the exception of interest expenses, which are recognised using the effective interest method, are accounted for on an accruals basis. Expenses are charged through the revenue column of the Statement of Comprehensive Income except as follows: |
|
|
|
expenses which are incidental to the acquisition or disposal of an investment are treated as capital and separately identified and disclosed in note 10; |
|
|
|
expenses (including share issue costs) are treated as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated; and |
|
|
|
the Company charges 60% of investment management fees and finance costs to capital, in accordance with the Board's expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company. |
|
|
|
|
|
|
(d) |
Taxation |
|
|
|
Profits arising in the Company for the year ended 31 December 2013 will be subject to Jersey income tax at the rate of 0% (2012 - 0%). |
|
|
|
|
|
|
|
However, in some jurisdictions, investment income and capital gains are subject to withholding tax deducted at the source of the income. The Company presents the withholding tax separately from the gross investment income in the Statement of Comprehensive Income. For the purpose of the Cash Flow Statement, cash inflows from investments are presented net of withholding taxes, when applicable. |
|
|
|
|
|
|
(e) |
Investments |
|
|
|
All investments have been designated upon initial recognition at fair value through profit or loss. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis. |
|
|
|
|
|
|
|
Purchases of investments are recognised on a trade date basis and designated upon initial recognition at fair value through profit or loss. Sales of assets are also recognised on a trade date basis. Proceeds are measured at fair value, which are regarded as the proceeds of sale less any transaction costs. |
|
|
|
|
|
|
|
The fair value of the financial assets is based on their quoted bid price at the reporting date, without deduction for any estimated future selling costs. |
|
|
|
|
|
|
|
Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Statement of Comprehensive Income as "(Losses)/gains on investments designated at fair value through profit or loss". Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase price of an investment and its bid price at the date of purchase. |
|
|
|
|
|
|
(f) |
Cash and cash equivalents |
|
|
|
Cash comprises cash held at banks. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in values. |
|
|
|
|
|
|
|
For the purposes of the Cash Flow Statement, cash and cash equivalents comprise cash at bank net of any outstanding bank overdrafts. |
|
|
|
|
|
|
(g) |
Other receivables and payables |
|
|
|
Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their recoverable amount. Other payables are non interest bearing and are stated at their payable amount. |
|
|
|
|
|
|
(h) |
Dividends payable |
|
|
|
Dividends are recognised in the financial statements in the period in which they are declared. |
|
|
|
|
|
|
(i) |
Nature and purpose of reserves |
|
|
|
Warrant reserve |
|
|
|
The Warrant reserve was created on the issue of 22,000,000 Warrants at the launch of the Company. Each Warrant issued entitled the holder to subscribe in cash for one Ordinary share on the terms contained in note 13. At 31 December 2013 all Warrants had been exercised. The reserve as at 31 December 2012 reflects the issue price of unexercised Warrants as at the previous year end. |
|
|
|
|
|
|
|
Capital redemption reserve |
|
|
|
The capital redemption reserve arose when Ordinary shares were redeemed, at which point an amount equal to the par value of the Ordinary share capital was transferred from the Statement of Comprehensive Income to the capital redemption reserve. Following a law amendment in 2008, the Company is no longer required to transfer the par value of the Ordinary share capital. Although the transfer from the Statement of Comprehensive Income is no longer required, the amount remaining in the capital redemption reserve is not distributable in accordance with the undertaking provided by the Board in the launch Prospectus. |
|
|
|
|
|
|
|
Capital reserve |
|
|
|
This reserve reflects any gains or losses on investments realised in the period along with any increases and decreases in the fair value of investments held that have been recognised in the Statement of Comprehensive Income. |
|
|
|
|
|
|
|
Revenue reserve |
|
|
|
This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. |
|
|
|
|
|
|
(j) |
Foreign currency |
|
|
|
Monetary assets and liabilities denominated in foreign currencies are converted into sterling at the rate of exchange ruling at the reporting date. The financial statements are presented in sterling, which is the Company's functional and presentation currency. The Company's performance is evaluated and its liquidity is managed in sterling. Therefore sterling is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Gains or losses arising from a change in exchange rates subsequent to the date of a transaction are included as an exchange gain or loss in revenue or capital in the Statement of Comprehensive Income, depending on whether the gain or loss is of a revenue or capital nature. |
|
|
|
|
|
|
(k) |
Borrowings |
|
|
|
Borrowings are stated at the amount of the net proceeds immediately after draw down plus cumulative finance costs less cumulative payments. The finance cost of borrowings is allocated to years over the term of the debt at a constant rate on the carrying amount and charged 40% to revenue and 60% to capital to reflect the Company's investment policy and prospective revenue and capital growth. |
|
|
|
|
|
|
|
Borrowings are measured at amortised cost using the effective interest rate method. |
|
|
|
|
|
|
(l) |
Share capital |
|
|
|
The Company's Ordinary shares are classified as equity as the Company has full discretion on repurchasing the Ordinary shares and on dividend distributions. |
|
|
|
|
|
|
|
Issuance, acquisition and resale of Ordinary shares are accounted for as equity transactions. Upon issuance of Ordinary shares, the consideration received is included in equity. |
|
|
|
|
|
|
|
Transaction costs incurred by the Company in acquiring or selling its own equity instruments are accounted for as a deduction from equity to the extent that they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. |
|
|
|
|
|
|
|
Own equity instruments which are acquired (treasury shares) are deducted from equity and accounted for at amounts equal to the consideration paid, including any directly attributable incremental costs. |
|
|
|
|
|
|
|
No gain or loss is recognised in the Statement of Comprehensive Income on the purchase, sale issuance or cancellation of the Company's own instruments. |
|
|
|
|
|
|
|
In accordance with paragraph 11 of IAS 32 (Financial Instruments: Presentation), the C shares were classified as a liability prior to conversion due to the inherent variability of the number of Ordinary shares attributable to C shareholders on conversion. |
|
3. |
Segment information |
||
|
|
For management purposes, the Company is organised into one main operating segment, which invests in equity securities and debt instruments. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole. |
||
|
|
|
||
|
|
The following table analyses the Company's operating income per geographical location. The basis for attributing the operating income is the place of incorporation of the instrument's counterparty. |
||
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|
|
|
31 December 2013 |
31 December 2012 |
|
|
|
£'000 |
£'000 |
|
|
Asia Pacific region |
17,650 |
14,321 |
|
|
United Kingdom |
1,086 |
731 |
|
|
|
_______ |
_______ |
|
|
|
18,736 |
15,052 |
|
|
|
_______ |
_______ |
|
|
|
Year ended |
Year ended |
|
|
|
31 December 2013 |
31 December 2012 |
|
4. |
Income |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
Overseas dividends |
16,466 |
13,522 |
|
|
Franked income |
1,078 |
709 |
|
|
|
_______ |
_______ |
|
|
|
17,544 |
14,231 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
Interest income |
|
|
|
|
Bond interest |
1,184 |
799 |
|
|
Deposit interest |
8 |
22 |
|
|
|
_______ |
_______ |
|
|
|
1,192 |
821 |
|
|
|
_______ |
_______ |
|
|
Total income |
18,736 |
15,052 |
|
|
|
_______ |
_______ |
|
|
|
Year ended |
Year ended |
||||
|
|
|
31 December 2013 |
31 December 2012 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
5. |
Investment management fee |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment management fee |
1,578 |
2,368 |
3,946 |
1,127 |
1,691 |
2,818 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
||||||
|
|
The Company has an agreement with Aberdeen Private Wealth Management Limited ("APWM") for the provision of management services. This agreement has been sub-delegated to Aberdeen Asset Management Asia Limited ("AAM Asia"). |
||||||
|
|
|
||||||
|
|
During the year the management fee was payable monthly in arrears and was based on an annual amount of 1% of the net asset value of the Company valued monthly. The balance due to APWM at the year end was £636,000 (2012 - £309,000). The investment management fees are charged 40% to revenue and 60% to capital. |
||||||
|
|
|
Year ended |
Year ended |
||||
|
|
|
31 December 2013 |
31 December 2012 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
6. |
Other operating expenses |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Directors' fees |
160 |
- |
160 |
142 |
- |
142 |
|
|
Marketing contribution |
239 |
- |
239 |
192 |
- |
192 |
|
|
Auditor's remuneration: |
|
|
|
|
|
|
|
|
statutory audit |
25 |
- |
25 |
23 |
- |
23 |
|
|
interim accounts review |
6 |
- |
6 |
5 |
- |
5 |
|
|
Custodian charges |
134 |
- |
134 |
109 |
- |
109 |
|
|
Secretarial and administration fee |
127 |
- |
127 |
123 |
- |
123 |
|
|
Other |
304 |
- |
304 |
233 |
3 |
236 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
995 |
- |
995 |
827 |
3 |
830 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
The Company has an agreement with Aberdeen Asset Managers Limited ("AAM") for the provision of marketing services in relation to the Company's participation in the Aberdeen Investment Trust share plan and ISA. The total fees paid are based on an annual rate of £250,000 (2012 - £207,000). A balance of £63,000 (2012 - £52,000) was payable to AAM at the year end. |
||||||
|
|
|
||||||
|
|
In addition, APWM is entitled to an annual company secretarial and administration fee of £127,000 (2012 - £123,000), which increases annually in line with any increases in the Retail Price Index. A balance of £32,000 (2012 - £31,000) was payable to APWM at the year end. |
||||||
|
|
|
||||||
|
|
No fees have been paid to Ernst & Young LLP during the period other than those reflected in the table above. |
||||||
|
|
|
Year ended |
Year ended |
||||
|
|
|
31 December 2013 |
31 December 2012 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
7. |
Finance costs |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
On bank loans |
88 |
133 |
221 |
88 |
133 |
221 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
||||||
|
|
Finance costs are charged 40% to revenue and 60% to capital as disclosed in the accounting policies. |
||||||
|
|
|
Year ended |
Year ended |
|
|
|
31 December 2013 |
31 December 2012 |
|
8. |
Dividends on Ordinary equity shares |
£'000 |
£'000 |
|
|
Amounts recognised as distributions to equity holders in the year: |
|
|
|
|
Fourth interim dividend for 2012 - 2.5p per Ordinary share (2011 - 2.25p) |
3,780 |
3,138 |
|
|
First interim dividend for 2013 - 1.80p per Ordinary share (2012 - 1.55p) |
3,319 |
2,241 |
|
|
Second interim dividend for 2013 - 1.80p per Ordinary share (2012 - 1.55p) |
3,434 |
2,324 |
|
|
Third interim dividend for 2013 - 1.80p per Ordinary share (2012 - 1.55p) |
3,447 |
2,343 |
|
|
|
_______ |
_______ |
|
|
|
13,980 |
10,046 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The fourth interim dividend for 2013, amounting to £4,843,000 (2012 - fourth interim dividend of £3,780,000), has not been included as a liability in these financial statements as it was announced and paid after 31 December 2013. |
||
|
|
|
||
|
|
The table below sets out the total dividends paid in respect of the financial year. The revenue available for distribution by way of dividend for the year is £15,270,000 (2012 - £12,430,000). |
||
|
|
|
|
|
|
|
|
2013 |
2012 |
|
|
|
£'000 |
£'000 |
|
|
First interim dividend for 2013 - 1.80p per Ordinary share (2012 - 1.55p) |
3,319 |
2,241 |
|
|
Second interim dividend for 2013 - 1.80p per Ordinary share (2012 - 1.55p) |
3,434 |
2,324 |
|
|
Third interim dividend for 2013 - 1.80p per Ordinary share (2012 - 1.55p) |
3,447 |
2,343 |
|
|
Fourth interim dividend for 2013 - 2.50p per Ordinary share (2012 - 2.50p) |
4,843 |
3,780 |
|
|
|
_______ |
_______ |
|
|
|
15,043 |
10,688 |
|
|
|
_______ |
_______ |
|
9. |
Earnings per share |
|||||||
|
|
Ordinary shares |
|||||||
|
|
The earnings per Ordinary share is based on the net loss after taxation of £12,426,000 (2012 - profit of £69,004,000) and on 185,624,584 (2012 - 147,219,055) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year. |
|||||||
|
|
|
|||||||
|
|
The earnings per Ordinary share detailed above can be further analysed between revenue and capital as follows: |
|||||||
|
|
|
|
||||||
|
|
|
Year ended |
Year ended |
|||||
|
|
|
31 December 2013 |
31 December 2012 |
|||||
|
|
Basic |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
Net profit/(loss) (£'000) |
15,270 |
(27,696) |
(12,426) |
12,240 |
56,764 |
69,004 |
|
|
|
Weighted average number of Ordinary shares in issue |
|
|
185,624,584 |
|
|
147,219,055 |
|
|
|
Return per Ordinary share (pence) |
8.23 |
(14.92) |
(6.69) |
8.31 |
38.56 |
46.87 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|||||
|
|
|
Year ended |
Year ended |
|||||
|
|
|
31 December 2013 |
31 December 2012 |
|||||
|
|
Diluted |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
Net profit/(loss) (£'000) |
15,270 |
(27,696) |
(12,426) |
12,240 |
56,764 |
69,004 |
|
|
|
Weighted average number of Ordinary shares in issue if Warrants converted |
|
|
n/a |
|
|
149,100,417 |
|
|
|
Return per Ordinary share (pence) |
n/a |
n/a |
n/a |
8.21 |
38.07 |
46.28 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|||||||
|
|
The calculation of the diluted earnings per Ordinary share is based on the average traded share price over the period and the weighted average number of Warrants up to the final exercise date of 17 May 2013. There were no potentially dilutive Ordinary shares in issue at 31 December 2013. |
|||||||
|
|
|
|
||||||
|
|
|
Year ended |
Year ended |
|||||
|
|
|
31 December 2013 |
31 December 2012 |
|||||
|
|
C shares |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
Net profit (£'000) |
n/a |
1,364 |
1,364 |
190 |
2,414 |
2,604 |
|
|
|
Weighted average number of C shares in issue |
|
|
60,000,000 |
|
|
60,000,000 |
|
|
|
Return per C share (pence) |
n/a |
2.27 |
2.27 |
0.32 |
4.02 |
4.34 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
||
|
|
All of the 60,000,000 C shares were converted into Ordinary shares on 4 February 2013. |
|||||||
|
|
|
Year ended |
Year ended |
|
|
|
31 December 2013 |
31 December 2012 |
|
10. |
Investments designated at fair value through profit or loss |
£'000 |
£'000 |
|
|
Opening valuation |
381,705 |
236,609 |
|
|
Movements in the year: |
|
|
|
|
Purchases at cost |
41,180 |
134,834 |
|
|
Sales - proceeds |
(18,404) |
(50,089) |
|
|
Sales - realised gains |
7,124 |
21,865 |
|
|
(Decrease)/increase in investment holdings fair value |
(31,051) |
38,486 |
|
|
|
_______ |
_______ |
|
|
Closing valuation at 31 December 2013 |
380,554 |
381,705 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
£'000 |
£'000 |
|
|
Closing book cost |
316,660 |
286,760 |
|
|
Closing investment holdings fair value gains |
63,894 |
94,945 |
|
|
|
_______ |
_______ |
|
|
|
380,554 |
381,705 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The portfolio valuation |
£'000 |
£'000 |
|
|
Listed on recognised stock exchanges at market valuation: |
|
|
|
|
Equities - UK |
11,046 |
10,988 |
|
|
Equities - overseas |
350,248 |
361,989 |
|
|
Bonds - overseas |
19,260 |
8,728 |
|
|
|
_______ |
_______ |
|
|
Total |
380,554 |
381,705 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|
|
|
31 December 2013 |
31 December 2012 |
|
|
(Losses)/gains on held-at-fair-value investments |
£'000 |
£'000 |
|
|
Realised gains on sales of investments |
7,124 |
21,865 |
|
|
(Decrease)/increase in investment holdings fair value |
(31,051) |
38,486 |
|
|
|
_______ |
_______ |
|
|
|
(23,927) |
60,351 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|
|
|
31 December 2013 |
31 December 2012 |
|
|
(Decrease)/increase in investment holdings fair value |
£'000 |
£'000 |
|
|
Ordinary shareholders |
(32,415) |
36,101 |
|
|
C shareholders |
1,364 |
2,385 |
|
|
|
_______ |
_______ |
|
|
|
(31,051) |
38,486 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
All investments are categorised as held at fair value through profit or loss. |
||
|
|
|
||
|
|
Transaction costs |
||
|
|
During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within (losses)/gains on financial assets designated at fair value through profit or loss in the Statement of Comprehensive Income. The total costs were as follows: |
||
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|
|
|
31 December 2013 |
31 December 2012 |
|
|
|
£'000 |
£'000 |
|
|
Purchases |
71 |
329 |
|
|
Sales |
21 |
93 |
|
|
|
_______ |
_______ |
|
|
|
92 |
422 |
|
|
|
_______ |
_______ |
|
|
|
2013 |
2012 |
|
11. |
Debtors: amounts falling due within one year |
£'000 |
£'000 |
|
|
Prepayments and accrued income |
968 |
884 |
|
|
Overseas withholding tax recoverable |
15 |
- |
|
|
|
_______ |
_______ |
|
|
|
983 |
884 |
|
|
|
_______ |
_______ |
|
|
None of the above assets are past their due date or impaired. |
|
|
|
|
|
2013 |
2012 |
|
|
12. |
Creditors: amounts falling due within one year |
£'000 |
£'000 |
|
|
|
(a) |
Bank loans |
13,019 |
13,268 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
At the year end, the Company's secured bank loans of HK$81,842,000 (2012 - HK$81,842,000) and US$11,008,000 (2012 - US$11,008,000) equivalent to £6,373,000 (2012 - £6,496,000) and £6,646,000 (2012 - £6,772,000) respectively were drawn down from the £15 million facility with Scotiabank Europe PLC at fixed interest rates of 1.670% (2012 - 1.720%) and 1.559% (2012 - 1.609%) respectively. Subsequent to the year end, loans of HK$102,842,000 and US$11,008,000 were rolled forward to 17 April 2014 at fixed interest rates of 1.55966% and 1.50173% respectively. |
||
|
|
|
|
||
|
|
|
The bank loans outstanding at 31 December 2013 are valued at the closing exchange rate at the year end, resulting in a cumulative foreign exchange gain of £336,000 (2012 - gain of £259,000) against the original book cost of these loans. |
||
|
|
|
|
|
|
|
|
|
|
2013 |
2012 |
|
|
(b) |
Other payables |
£'000 |
£'000 |
|
|
|
Amounts due to brokers |
- |
364 |
|
|
|
Other amounts due |
864 |
525 |
|
|
|
|
_______ |
_______ |
|
|
|
|
864 |
889 |
|
|
|
|
_______ |
_______ |
|
|
|
2013 |
2012 |
||||||
|
13. |
Stated capital and C shares |
Number |
£'000 |
Number |
£'000 |
||||
|
|
Ordinary shares of no par value |
|
|
|
|
||||
|
|
Authorised |
Unlimited |
Unlimited |
Unlimited |
Unlimited |
||||
|
|
|
|
|
|
|
||||
|
|
Issued and fully paid |
|
|
|
|
||||
|
|
Balance brought forward |
151,182,346 |
151,182 |
139,083,871 |
139,084 |
||||
|
|
Ordinary shares issue via conversion of C shares |
30,552,000 |
30,552 |
- |
- |
||||
|
|
Ordinary shares issued in the year |
8,425,000 |
8,425 |
9,517,388 |
9,517 |
||||
|
|
Warrants exercised |
3,574,043 |
3,574 |
2,581,087 |
2,581 |
||||
|
|
|
_________ |
_______ |
_________ |
_______ |
||||
|
|
At 31 December |
193,733,389 |
193,733 |
151,182,346 |
151,182 |
||||
|
|
|
_________ |
_______ |
_________ |
_______ |
||||
|
|
|
||||||||
|
|
During the year 8,425,000 (2012 - 9,517,388) Ordinary shares were issued by the Company at a total consideration received, including transaction costs, of £18,942,000 (2012 - receipt of £17,286,000). The conversion of C shares in the period resulted in the issue of 30,552,000 Ordinary shares. |
||||||||
|
|
|
||||||||
|
|
For each Ordinary share issued £1 is allocated to stated capital, with the balance taken to the capital reserve. |
||||||||
|
|
|
||||||||
|
|
The Ordinary shares give shareholders the entitlement to all of the capital growth in the Company's assets and to all the income from the Company that is resolved to be distributed. |
||||||||
|
|
|
||||||||
|
|
During the year 3,574,043 (2012 - 2,581,087) Warrants were exercised into Ordinary shares at a total consideration received of £4,289,000 (2012 - £3,097,000). At 31 December 2013 there were no Warrants in issue (2012 - 3,574,043). |
||||||||
|
|
|
||||||||
|
|
Following the Ordinary share issues and warrant exercise 193,733,389 (2012 - 151,182,346) Ordinary shares remain in issue. Further details of the Ordinary share issues are contained in the Directors' Report. |
||||||||
|
|
|
||||||||
|
|
|
2013 |
2012 |
||||||
|
|
C shares |
Number |
£'000 |
Number |
£'000 |
||||
|
|
Issued and fully paid |
|
|
|
|
||||
|
|
Balance brought forward |
60,000,000 |
59,073 |
- |
- |
||||
|
|
C shares issued in the year |
- |
- |
60,000,000 |
60,000 |
||||
|
|
Converted into Ordinary shares |
(60,000,000) |
(59,073) |
- |
- |
||||
|
|
Issue expenses |
- |
- |
- |
(927) |
||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||
|
|
At 31 December |
- |
- |
60,000,000 |
59,073 |
||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||
|
|
|
||||||||
|
|
Following a Placing and Offer for Subscription of C shares, the Company issued 60,000,000 C shares which were admitted to the Official List, and commenced trading on the main market of the London Stock Exchange on 16 November 2012. |
||||||||
|
|
|
||||||||
|
|
Under the terms of the C share prospectus, issued on 22 October 2012, the C shares would be converted to Ordinary shares once 80% of the issue proceeds had been invested. The Directors determined that the conversion ratio would be calculated on 11 January 2013 with the conversion date of 4 February 2013. |
||||||||
|
|
|
||||||||
|
|
On 4 February 2013, the Company converted 60,000,000 C shares into 30,552,000 Ordinary shares at a conversion ratio of 0.5092 Ordinary shares to every 1.0000 C share held. The calculation ratio was based on the respective net asset values of the C shares and the Ordinary shares at close of business on the calculation date, 11 January 2013, and on this date the financial liability in respect of the C shares was deemed to have been extinguished. The premium of £32,453,000 arising on the issue of Ordinary shares has been allocated to the capital reserve. The C shares were permanently removed from trading on 4 February 2013. |
||||||||
|
|
|
||||||||
|
|
Voting and other rights |
||||||||
|
|
In accordance with the Articles of Association of the Company, on a show of hands, every member (or duly appointed proxy) present at a general meeting of the Company has one vote; and, on a poll, every member present in person or by proxy shall have one vote for each Ordinary share held. In ordinary circumstances warrantholders do not have the right to attend or vote at General Meetings of the Company. Holders of C shares were entitled to attend and vote at all general meetings of the Company and, on a poll, to one vote for each C share held. |
||||||||
|
|
|
||||||||
|
|
The Ordinary shares carry the right to receive all dividends declared by the Company or the Directors, subject to the rights of any C shares in issue. C shares carried the right to receive all dividends resolved by the Directors to be paid out of the pool of assets attributable to those C shares. |
||||||||
|
|
|
||||||||
|
|
On a winding-up, provided the Company has satisfied all of its liabilities and subject to the rights conferred by any Warrants and C shares in issue at that time to participate in the winding-up, holders of Ordinary shares are entitled to all of the surplus assets of the Company. Holders of C shares were entitled to any surplus assets of the Company attributable to those C shares. |
||||||||
|
|
|
||||||||
|
|
Each of the Company's Warrants conferred the right to subscribe in cash for one Ordinary share at a price of 120p on the twentieth business day after despatch of the Company's Annual or Half-Yearly Reports each year ending on the twentieth business day after despatch of the Annual Report for the year ending 31 December 2013. |
||||||||
|
|
|
2013 |
2012 |
|
14. |
Retained earnings |
£'000 |
£'000 |
|
|
Capital reserve |
|
|
|
|
At 1 January 2013 |
147,830 |
82,523 |
|
|
Loans - movement in unrealised currency gain |
77 |
358 |
|
|
Currency gain |
21 |
165 |
|
|
Movement in unrealised fair value |
(32,415) |
36,101 |
|
|
Gain on realisation of investments |
7,124 |
21,865 |
|
|
Conversion of C shares |
32,453 |
- |
|
|
Capital dividends |
- |
55 |
|
|
Costs charged to capital |
(2,503) |
(1,780) |
|
|
Issue of Ordinary shares |
10,517 |
7,769 |
|
|
Warrant exercise |
1,072 |
774 |
|
|
|
_______ |
_______ |
|
|
At 31 December 2013 |
164,176 |
147,830 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
Revenue reserve |
|
|
|
|
At 1 January 2013 |
10,358 |
8,164 |
|
|
Revenue |
15,270 |
12,240 |
|
|
Dividends paid |
(13,980) |
(10,046) |
|
|
|
_______ |
_______ |
|
|
At 31 December 2013 |
11,648 |
10,358 |
|
|
|
_______ |
_______ |
|
15. |
Net asset value per share |
||||
|
|
Ordinary shares |
||||
|
|
The basic net asset value per Ordinary share and the net asset values attributable to Ordinary shareholders at the year end calculated in accordance with the Articles of Association were as follows: |
||||
|
|
|
|
|
|
|
|
|
|
Net asset value |
Net asset values |
Net asset value |
Net asset values |
|
|
|
per share |
attributable |
per share |
attributable |
|
|
|
2013 |
2013 |
2012 |
2012 |
|
|
Basic |
p |
£'000 |
p |
£'000 |
|
|
Ordinary shares |
191.56 |
371,117 |
205.90 |
311,287 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
The basic net asset value per Ordinary share is based on 193,733,389 (2012 - 151,182,346) Ordinary shares, being the number of Ordinary shares in issue at the year end. |
||||
|
|
|
|
|
|
|
|
|
|
Net asset value |
Net asset values |
Net asset value |
Net asset values |
|
|
|
per share |
attributable |
per share |
attributable |
|
|
|
2013 |
2013 |
2012 |
2012 |
|
|
Diluted |
p |
£'000 |
p |
£'000 |
|
|
Ordinary shares |
n/a |
n/a |
203.92 |
315,576 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
All of the remaining warrants were exercised on 17 May 2013 at 120p per share, giving rise to an additional 3,574,043 Ordinary shares in issue. The calculation of the diluted net asset value per Ordinary share for previous periods is based on the total number of Ordinary shares in issue at the period end and on the assumption that those Warrants which were not exercised at the period end (31 December 2012 - 3,574,043 Warrants) were exercised on the first day of the financial year at 120p per share. There were no potentially dilutive shares in issue at the year end. |
||||
|
|
|
||||
|
|
C shares |
||||
|
|
The basic net asset value per C share and the net asset values attributable to C share shareholders at the year end calculated in accordance with the Articles of Association were as follows: |
||||
|
|
|
|
|
|
|
|
|
|
Net asset value |
Net asset values |
Net asset value |
Net asset values |
|
|
|
per share |
attributable |
per share |
attributable |
|
|
|
2013 |
2013 |
2012 |
2012 |
|
|
|
p |
£'000 |
p |
£'000 |
|
|
C shares |
n/a |
n/a |
102.80 |
61,677 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
All of the 60,000,000 C shares were converted into Ordinary shares on 4 February 2013. |
||||
|
16. |
Financial instruments |
||||||||||
|
|
The Company's financial instruments comprise securities, other investments, cash balances and bank loans. |
||||||||||
|
|
|
||||||||||
|
|
The main risks arising from the Company's financial instruments are (i) market risk (comprising interest rate risk, currency risk and equity price risk), (ii) liquidity risk, (iii) credit risk and (iv) gearing risk. |
||||||||||
|
|
|
||||||||||
|
|
The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing each of these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors. |
||||||||||
|
|
|
||||||||||
|
|
(i) Market risk |
||||||||||
|
|
The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and equity price risk. |
||||||||||
|
|
|
||||||||||
|
|
Interest rate risk |
||||||||||
|
|
Interest rate movements may affect: |
||||||||||
|
|
the fair value of the investments in fixed interest rate securities; |
||||||||||
|
|
the level of income receivable on cash deposits; |
||||||||||
|
|
interest payable on the Company's variable rate borrowings. |
||||||||||
|
|
|
||||||||||
|
|
Financial assets |
||||||||||
|
|
Although the majority of the Company's financial assets comprise equity shares which neither pay interest nor have a stated maturity date, at the year end the Company had three holdings in fixed rate overseas corporate bonds, Yanlord Land Group, of £8,302,000, Yingde Gases, of £2,261,000 and DFCC Bank, of £8,697,000 (2012 - Yanlord Land Group Overseas Corporate Bond, valued at £8,728,000). Bond prices are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short-term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee entity. |
||||||||||
|
|
|
||||||||||
|
|
Returns from bonds are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. This means that if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond the market price at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred. |
||||||||||
|
|
|
||||||||||
|
|
Financial liabilities |
||||||||||
|
|
The Company primarily finances its operations through use of equity, retained profits and bank borrowings. On 20 March 2012 the credit facility for £15 million was extended until 20 March 2014 and details of the terms and conditions of the loan are disclosed in note 12. At the year end the Company drawdowns from the facility amounted to HK$81,842,000 (2012 - HK$81,842,000), (equivalent to £6,373,000 at 31 December 2013; 2012 - £6,496,000) at an all-in rate of 1.670% (2012 - 1.720%) per annum and US$11,008,000 (2012 - US$11,008,000), (equivalent to £6,646,000 at 31 December 2013; 2012 - £6,772,000) at an all-in rate of 1.559% (2012 - 1.609%) per annum. Both tranches are secured. Interest is due on both tranches at the maturity date, being 24 January 2014. The loans are included in creditors falling due within one year. |
||||||||||
|
|
|
||||||||||
|
|
The Board actively monitors its bank borrowings. A decision on whether to roll over its existing borrowings will be made prior to their maturity dates, taking into account the Company's policy of not having any fixed, long-term borrowings. |
||||||||||
|
|
|
||||||||||
|
|
The interest rate profile of the Company (excluding short term debtors and creditors as stated previously) was as follows: |
||||||||||
|
|
|
||||||||||
|
|
|
Weighted average |
|
|
|
||||||
|
|
|
period for which |
Weighted average |
Floating |
Fixed |
||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
||||||
|
|
At 31 December 2013 |
Years |
% |
£'000 |
£'000 |
||||||
|
|
Assets |
|
|
|
|
||||||
|
|
Chinese Overseas Corporate Bonds |
4.26 |
10.09 |
- |
10,563 |
||||||
|
|
Sri Lankan Overseas Corporate Bond |
4.83 |
9.63 |
- |
8,697 |
||||||
|
|
Cash at bank - Sterling |
- |
- |
3,369 |
- |
||||||
|
|
Cash at bank - Singapore Dollar |
- |
- |
84 |
- |
||||||
|
|
Cash at bank - Taiwan Dollar |
- |
- |
10 |
- |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
3,463 |
19,260 |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
|
|
||||||
|
|
|
Weighted average |
|
|
|
||||||
|
|
|
period for which |
Weighted average |
Floating |
Fixed |
||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
||||||
|
|
|
Years |
% |
£'000 |
£'000 |
||||||
|
|
Liabilities |
|
|
|
|
||||||
|
|
Bank loan - Hong Kong Dollar |
0.07 |
1.67 |
- |
(6,373) |
||||||
|
|
Bank loan - US Dollar |
0.07 |
1.56 |
- |
(6,646) |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
- |
(13,019) |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
|
|
||||||
|
|
|
Weighted average |
|
|
|
||||||
|
|
|
period for which |
Weighted average |
Floating |
Fixed |
||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
||||||
|
|
At 31 December 2012 |
Years |
% |
£'000 |
£'000 |
||||||
|
|
Assets |
|
|
|
|
||||||
|
|
Chinese Overseas Corporate Bond |
5.24 |
10.63 |
- |
8,728 |
||||||
|
|
Cash at bank - Sterling |
- |
- |
4,241 |
- |
||||||
|
|
Cash at bank - Australian Dollar |
- |
- |
3 |
- |
||||||
|
|
Cash at bank - Malaysian Ringitt |
- |
- |
93 |
- |
||||||
|
|
Cash at bank - Japanese Yen |
- |
- |
113 |
- |
||||||
|
|
Cash at bank - Singapore Dollar |
- |
- |
40 |
- |
||||||
|
|
Cash at bank - Taiwan Dollar |
- |
- |
34 |
- |
||||||
|
|
Cash at bank - US Dollar |
- |
- |
8 |
- |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
4,532 |
8,728 |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
|
|
||||||
|
|
|
Weighted average |
|
|
|
||||||
|
|
|
period for which |
Weighted average |
Floating |
Fixed |
||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
||||||
|
|
|
Years |
% |
£'000 |
£'000 |
||||||
|
|
Liabilities |
|
|
|
|
||||||
|
|
Bank loan - Hong Kong Dollar |
0.07 |
1.72 |
- |
(6,496) |
||||||
|
|
Bank loan - US Dollar |
0.07 |
1.61 |
- |
(6,772) |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
- |
(13,268) |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
||||||||||
|
|
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. |
||||||||||
|
|
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates. |
||||||||||
|
|
All financial liabilities are measured at amortised cost using the effective interest rate method. |
||||||||||
|
|
|
||||||||||
|
|
Interest rate sensitivity |
||||||||||
|
|
The sensitivity analyses demonstrate the sensitivity of the Company's profit/(loss) for the year to a reasonably possible change in interest rates, with all other variables held constant. |
||||||||||
|
|
|
||||||||||
|
|
The sensitivity of the profit/(loss) for the year is the effect of the assumed change in interest rates on: |
||||||||||
|
|
the net interest income for one year, based on the floating rate financial assets held at the Balance Sheet date; and |
||||||||||
|
|
changes in fair value of investments for the year, based on revaluing fixed rate financial assets at the Balance Sheet date. |
||||||||||
|
|
|
||||||||||
|
|
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company profit for the year ended 31 December 2013 would decrease / increase by £97,000 (2012 - decrease / increase by £nil). This is attributable to the Company's exposure to interest rates on its floating rate cash balances, fixed interest securities and bank loans. |
||||||||||
|
|
|
||||||||||
|
|
The Company holds no financial instruments that will have an equity reserve impact. |
||||||||||
|
|
|
||||||||||
|
|
In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. |
||||||||||
|
|
|
||||||||||
|
|
Foreign currency risk |
||||||||||
|
|
A significant proportion of the Company's investment portfolio is invested in overseas securities and the Balance Sheet can be significantly affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk on a continuing basis. All of the Company's borrowings, as detailed in note 12, are in foreign currency as at 31 December 2013. |
||||||||||
|
|
|
||||||||||
|
|
The revenue account is subject to currency fluctuation arising on overseas income. The Company does not hedge this currency risk. |
||||||||||
|
|
|
||||||||||
|
|
The fair values of the Company's monetary items that have foreign currency exposure at 31 December are shown below. Where the Company's equity investments (which are non monetary items) are priced in a foreign currency, they have been included within the equity price risk sensitivity analysis so as to show the overall level of exposure. |
||||||||||
|
|
|
||||||||||
|
|
|
31 December 2013 |
31 December 2012 |
||||||||
|
|
|
|
Net |
|
|
Net |
|
||||
|
|
|
|
monetary |
Total |
|
monetary |
Total |
||||
|
|
|
Equity |
assets |
currency |
Equity |
assets |
currency |
||||
|
|
|
investments |
/(liabilities) |
exposure |
investments |
/(liabilities) |
exposure |
||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||
|
|
Australian Dollar |
68,435 |
- |
68,435 |
68,626 |
3 |
68,629 |
||||
|
|
Hong Kong Dollar |
51,182 |
(6,373) |
44,809 |
55,349 |
(6,496) |
48,853 |
||||
|
|
Japanese Yen |
19,102 |
- |
19,102 |
27,258 |
113 |
27,371 |
||||
|
|
Malaysian Ringgit |
36,800 |
- |
36,800 |
31,978 |
93 |
32,071 |
||||
|
|
Singapore Dollar |
114,805 |
84 |
114,889 |
103,744 |
40 |
103,784 |
||||
|
|
Taiwanese Dollar |
23,048 |
10 |
23,058 |
24,046 |
34 |
24,080 |
||||
|
|
Thailand Baht |
36,876 |
- |
36,876 |
50,988 |
- |
50,988 |
||||
|
|
US Dollar |
- |
12,614 |
12,614 |
- |
1,964 |
1,964 |
||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||||
|
|
Total |
350,248 |
6,335 |
356,583 |
361,989 |
(4,249) |
357,740 |
||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
||||
|
|
|
|
|
|
|
|
|
||||
|
|
The above year end amounts are not representative of the exposure to risk during the year, because the levels of monetary foreign currency exposure change significantly throughout the year. |
||||||||||
|
|
|
||||||||||
|
|
Foreign currency sensitivity |
||||||||||
|
|
The following table details the Company's sensitivity to a 10% increase and decrease in sterling against the foreign currencies in which the Company has exposure. The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. |
||||||||||
|
|
|
|
|
||||||||
|
|
|
2013 |
2012 |
||||||||
|
|
|
£'000 |
£'000 |
||||||||
|
|
Australian Dollar |
6,844 |
6,863 |
||||||||
|
|
Hong Kong Dollar |
4,481 |
4,885 |
||||||||
|
|
Japanese Yen |
1,910 |
2,737 |
||||||||
|
|
Malaysian Ringgit |
3,680 |
3,207 |
||||||||
|
|
Singapore Dollar |
11,489 |
10,379 |
||||||||
|
|
Taiwanese Dollar |
2,306 |
2,408 |
||||||||
|
|
Thailand Baht |
3,688 |
5,099 |
||||||||
|
|
US Dollar |
1,261 |
196 |
||||||||
|
|
|
_______ |
_______ |
||||||||
|
|
Total |
35,659 |
35,774 |
||||||||
|
|
|
_______ |
_______ |
||||||||
|
|
|
|
|||||||||
|
|
Equity price risk |
||||||||||
|
|
Equity price risk (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the Company's quoted equity investments. |
||||||||||
|
|
|
||||||||||
|
|
Management of the equity risk |
||||||||||
|
|
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and the stock selection process, both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges worldwide. |
||||||||||
|
|
|
||||||||||
|
|
Concentration of exposure to equity price risks |
||||||||||
|
|
A geographic analysis of the Company's investment portfolio is shown below, which shows that all of the investments' value is in the Asia Pacific region. It should be recognised that an investment's country of domicile or of listing does not necessarily equate to its exposure to the economic conditions in that country. |
||||||||||
|
|
|
||||||||||
|
|
Equity price risk sensitivity |
||||||||||
|
|
The following table illustrates the sensitivity of the profit after taxation for the year and the equity to an increase or decrease of 10% in the fair values of the Company's equities. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the Company's equities at each Balance Sheet date, with all other variables held constant. |
||||||||||
|
|
|
||||||||||
|
|
The equity price risk sensitivity incorporates the equity foreign exchange sensitivity analysis. |
||||||||||
|
|
|
||||||||||
|
|
|
2013 |
2012 |
||||||||
|
|
|
Increase in |
Decrease in |
Increase in |
Decrease in |
||||||
|
|
|
fair value |
fair value |
fair value |
fair value |
||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||
|
|
Statement of Comprehensive Income - profit after taxation |
|
|
|
|
||||||
|
|
Revenue return - increase /(decrease) |
- |
- |
- |
- |
||||||
|
|
Capital return - increase /(decrease) |
35,025 |
(35,025) |
36,199 |
(36,199) |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
Total profit after taxation - increase /(decrease) |
35,025 |
(35,025) |
36,199 |
(36,199) |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
Equity |
35,025 |
(35,025) |
36,199 |
(36,199) |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
|
|
||||||
|
|
(ii) Liquidity risk |
|
|||||||||
|
|
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities, which stood at £13,883,000 (2012 - £75,834,000 of which £61,677,000 was in respect of the C shares, classified as a financial liability under IAS 32 and which was subsequently converted into Ordinary shares). |
||||||||||
|
|
|
||||||||||
|
|
Liquidity risk is not considered to be significant as the Company's assets comprise mainly cash and readily realisable securities, which can be sold to meet funding commitments if necessary and these amounted to £3,463,000 and £380,554,000 (2012 - £4,532,000 and £381,705,000) at the year end respectively. Short-term flexibility is achieved through the use of loan and overdraft facilities. |
||||||||||
|
|
|
||||||||||
|
|
Maturity profile |
||||||||||
|
|
The following table sets out the carrying amount, by maturity, of the Company's financial instruments that are exposed to interest rate risk at the Balance Sheet date: |
||||||||||
|
|
|
|
|
|
|
|
|||||
|
|
|
Within |
Within |
Within |
More than |
|
|||||
|
|
|
1 year |
2-3 years |
4-5 years |
5 years |
Total |
|||||
|
|
At 31 December 2013 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
|
Fixed rate |
|
|
|
|
|
|||||
|
|
Bonds |
- |
- |
19,260 |
- |
19,260 |
|||||
|
|
Bank loans |
(13,019) |
- |
- |
- |
(13,019) |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
(13,019) |
- |
19,260 |
- |
6,241 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|||||
|
|
Floating rate |
|
|
|
|
|
|||||
|
|
Cash |
3,463 |
- |
- |
- |
3,463 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
|
|
|
|
|
|||||
|
|
|
Within |
Within |
Within |
More than |
|
|||||
|
|
|
1 year |
2-3 years |
4-5 years |
5 years |
Total |
|||||
|
|
At 31 December 2012 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
|
Fixed rate |
|
|
|
|
|
|||||
|
|
Bonds |
- |
- |
- |
8,728 |
8,728 |
|||||
|
|
Bank loans |
(13,268) |
- |
- |
- |
(13,268) |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
(13,268) |
- |
- |
8,728 |
(4,540) |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
|
|
|
|
|
|||||
|
|
Floating rate |
|
|
|
|
|
|||||
|
|
Cash |
4,532 |
- |
- |
- |
4,532 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
|
|
|
|
|
|||||
|
|
(iii) Credit risk |
||||||||||
|
|
This is failure of the counter party to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. |
||||||||||
|
|
|
||||||||||
|
|
The risk is not significant, and is managed as follows: |
||||||||||
|
|
where the investment manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default. The Company has the following holdings: |
||||||||||
|
|
- a Chinese overseas corporate bond issued by Yanlord Land Group. The issuers current credit rating at Moody's is Ba3; |
||||||||||
|
|
- a Chinese overseas corporate bond issued by Yingde Gases. The issuers current credit rating at S&P is B; and |
||||||||||
|
|
- a Sri Lankan overseas corporate bond issued by DFCC Bank. The issuers current credit rating at Moody's is Ba3. |
||||||||||
|
|
investment transactions are carried out with a large number of brokers, whose credit rating of which is taken into account so as to minimise the risk to the Company of default; |
||||||||||
|
|
the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the custodian's records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. The Manager's Compliance department carries out periodic reviews of the custodian's operations and reports its finding to the Manager's Risk Management Committee. It is the Manager's policy to trade only with A- and above (Long Term rated) and A-1/P-1 (Short Term rated) counterparties; |
||||||||||
|
|
cash is held only with reputable banks with high quality external credit ratings. |
||||||||||
|
|
|
||||||||||
|
|
None of the Company's financial assets are secured by collateral or other credit enhancements. |
||||||||||
|
|
|
||||||||||
|
|
Credit risk exposure |
||||||||||
|
|
In summary, compared to the amounts included in the Balance Sheet, the maximum exposure to credit risk at 31 December was as follows: |
||||||||||
|
|
|
||||||||||
|
|
|
2013 |
|
2012 |
|
||||||
|
|
|
Balance |
Maximum |
Balance |
Maximum |
||||||
|
|
|
Sheet |
exposure |
Sheet |
exposure |
||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||
|
|
Non-current assets |
|
|
|
|
||||||
|
|
Investments designated at fair value through profit or loss |
380,554 |
19,260 |
381,705 |
8,728 |
||||||
|
|
|
|
|
|
|
||||||
|
|
Current assets |
|
|
|
|
||||||
|
|
Cash at bank |
3,463 |
3,463 |
4,532 |
4,532 |
||||||
|
|
Other receivables |
983 |
983 |
884 |
884 |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
385,000 |
23,706 |
387,121 |
14,144 |
||||||
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||
|
|
|
|
|
|
|
||||||
|
|
None of the Company's financial assets are past due or impaired. |
||||||||||
|
|
|
||||||||||
|
|
(iv) Gearing risk |
||||||||||
|
|
The Company's policy is to increase its exposure to equity markets through the judicious use of borrowings. When borrowings are invested in such markets, the effect is to magnify the impact on shareholders' funds of changes, both positive and negative, in the value of the portfolio. |
||||||||||
|
|
|
||||||||||
|
|
During the year the Company's borrowings were short-term loans, details of which can be found in note 12. |
||||||||||
|
|
|
||||||||||
|
|
The loans are carried at amortised cost, using the effective interest rate method in the financial statements. The Board regulates the overall level of gearing by raising or lowering cash balances. |
||||||||||
|
|
|
||||||||||
|
|
Fair value of financial assets |
||||||||||
|
|
Investments held at fair value through profit or loss are valued at their quoted bid prices which equate to their fair values. The Directors are of the opinion that the financial assets are stated at fair value in the Balance Sheet and considers that this is equal to the carrying amounts disclosed in note 20. |
||||||||||
|
|
|
||||||||||
|
|
Fair values of financial liabilities |
||||||||||
|
|
The fair value of borrowings as at the 31 December 2013 has been estimated at £13,019,000 which is the same as the carrying value due to their short term nature. At 31 December 2012 the fair value was £13,268,000 which was the same as the carrying value. Under the fair value hierarchy in accordance with IFRS 13, these borrowings would be classed as Level 2 inputs. |
||||||||||
|
17. |
Capital management policies and procedures |
||
|
|
The Company's capital management objectives are: |
||
|
|
to ensure that the Company will be able to continue as a going concern; and |
||
|
|
to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The policy is that debt should not exceed 25% of net assets. |
||
|
|
|
||
|
|
The Company's capital at 31 December comprises: |
|
|
|
|
|
2013 |
2012 |
|
|
|
£'000 |
£'000 |
|
|
Debt |
|
|
|
|
Borrowings under the multi-currency loan facility |
13,019 |
13,268 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
2013 |
2012 |
|
|
|
£'000 |
£'000 |
|
|
Equity |
|
|
|
|
Equity share capital |
193,733 |
151,182 |
|
|
Retained earnings and other reserves |
177,384 |
160,105 |
|
|
|
_______ |
_______ |
|
|
|
371,117 |
311,287 |
|
|
|
_______ |
_______ |
|
|
Debt as a % of net assets{A} |
3.51 |
4.26 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
{A} The calculation above differs from the AIC recommended methodology, where debt levels are shown net of cash and cash equivalents held. |
||
|
|
|
||
|
|
The Board, with the assistance of the Investment Manager monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes: |
||
|
|
the planned level of gearing, which takes account of the Manager's views on the market; |
||
|
|
the need to buy back equity shares for cancellation, which takes account of the difference between the net asset value per Ordinary share and the Ordinary share price (ie the level of share price discount or premium); |
||
|
|
the need for new issues of equity shares; and |
||
|
|
the extent to which revenue in excess of that which is required to be distributed should be retained. |
||
|
|
|
||
|
|
The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. |
||
|
18. |
Transactions with the Manager |
|
|
Mr H Young is a director of Aberdeen Asset Management Asia Limited ("AAM Asia") and Aberdeen Asset Management PLC ("AAM"). AAM Asia is a subsidiary of AAM. Aberdeen Private Wealth Management Limited has an agreement to provide management services to the Company, which it has sub-delegated to AAM Asia. AAM has an agreement to provide administration and company secretarial services to the Company. The terms of these agreements are outlined in notes 5 and 6. |
|
19. |
Controlling party |
|
|
In the opinion of the Directors on the basis of shareholdings advised to them, the Company has no immediate or ultimate controlling party. |
|
20. |
Fair value hierarchy |
|||||
|
|
IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making measurements. The fair value hierarchy has the following levels: |
|||||
|
|
|
|||||
|
|
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
|||||
|
|
Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and |
|||||
|
|
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
|||||
|
|
|
|||||
|
|
The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy as follows: |
|||||
|
|
|
|||||
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
At 31 December 2013 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
Quoted equities |
a) |
361,294 |
- |
- |
361,294 |
|
|
Quoted bonds |
b) |
19,260 |
- |
- |
19,260 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Net fair value |
|
380,554 |
- |
- |
380,554 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
At 31 December 2012 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
Quoted equities |
a) |
372,977 |
- |
- |
372,977 |
|
|
Quoted bonds |
b) |
8,728 |
- |
- |
8,728 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Net fair value |
|
381,705 |
- |
- |
381,705 |
|
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
a) Quoted equities |
|||||
|
|
The fair value of the Company's investments in quoted equities have been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges. |
|||||
|
|
|
|||||
|
|
b) Quoted bonds |
|||||
|
|
The fair value of the Company's investments in corporate quoted bonds have been determined by reference to their quoted bid prices at the reporting date. |
|||||
|
21. |
Events after the reporting period |
|
|
On 24 January 2014 both bank loans were rolled over. At the signing of this report HK$102,842,000 and US$11,008,000 remained drawn down from the £15,000,000 facility with Scotiabank Europe PLC at fixed interest rates of 1.55966% and 1.50173% respectively. Both are repayable on 17 April 2014. |
Additional Notes:
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 December 2013 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2012 and 2013 statutory accounts received unqualified reports from the Company's auditors and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying the reports. The financial information for 2012 is derived from the statutory accounts for 2012 which have been delivered to the Registrar of Companies. The 2013 accounts will be filed with the JFSC in due course.
The Annual Report will be posted to Shareholders in April and further copies may be obtained from the registered office, 1st Floor, Sir Walter Raleigh House, 48 - 50 Esplanade, St Helier, Jersey JE2 3QB and on the Company's website* www.asian-income.co.uk.
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.
* Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
Aberdeen Private Wealth Management Limited
Secretary
27 March 2014
CONSOLIDATED INVESTMENT PORTFOLIO - TEN LARGEST INVESTMENTS
|
As at 31 December 2013 |
|
|
|
|
|
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2013 |
assets{A} |
2012{B} |
|
Company |
Sector |
Country |
£'000 |
% |
£'000 |
|
Taiwan Semiconductor Manufacturing Corporation |
|
|
|
|
|
|
The world's largest dedicated semiconductor foundry, it provides wafer manufacturing, wafer probing, assembly and testing, mask production and design services. |
Semiconductors & Semiconductor Equipment |
Taiwan |
13,353 |
3.5 |
12,887 |
|
HSBC Holdings |
|
|
|
|
|
|
One of the world's largest banking and financial services institutions. Its international network comprises more than 5,000 offices in 80 countries and territories, operating in the Asia Pacific region, Europe, the Americas, the Middle East and Africa. The diversity of HSBC's business and exposure to faster growing regions of the world should enable it to deliver superior long-term growth. |
Commercial Banks |
Hong Kong |
12,964 |
3.4 |
14,031 |
|
Singapore Telecommunications |
|
|
|
|
|
|
A regional telecommunications company, with a combined mobile subscriber base of more than 285 million customers from its own operations in Singapore and Australia, and regional associates in India, Philippines, Thailand, Indonesia, Pakistan and Bangladesh. |
Diversified Telecommunication Services |
Singapore |
11,869 |
3.1 |
11,302 |
|
Oversea-Chinese Banking Corporation |
|
|
|
|
|
|
A well-managed Singapore bank with a strong capital base and impressive cost-to-income ratio. It has also embarked on a selective regional expansion. |
Commercial Banks |
Singapore |
11,661 |
3.0 |
11,716 |
|
BHP Billiton |
|
|
|
|
|
|
The world's largest diversified resources group with a global portfolio of high quality assets. Core activities comprise production and distribution of minerals, mineral products and petroleum. |
Metals & Mining |
Australia{C} |
11,046 |
2.9 |
10,988 |
|
Keppel Corporation |
|
|
|
|
|
|
A diversified conglomerate, with core business in offshore and marine rig building, property investment and development, and utilities infrastructure. |
Industrial Conglomerates |
Singapore |
10,683 |
2.8 |
7,860 |
|
British American Tobacco Malaysia |
|
|
|
|
|
|
Manufacturer & marketer of tobacco products in Malaysia through BAT's international brands such as Dunhill and Lucky Strike. |
Tobacco |
Malaysia |
10,399 |
2.7 |
10,919 |
|
Venture Corporation |
|
|
|
|
|
|
Provides contract manufacturing services to electronic companies. The company's major segments include Printing & Imaging and Networking & Communications and it has been increasing its revenue contribution from Original Design Manufacturing. |
Electronic Equipment, Instruments & Components |
Singapore |
10,238 |
2.7 |
11,275 |
|
Guinness Anchor |
|
|
|
|
|
|
The market leader in Malaysia's beer and stout industry, with brand names including Tiger, Guinness and Heineken. |
Beverages |
Malaysia |
10,103 |
2.6 |
11,474 |
|
Singapore Post |
|
|
|
|
|
|
The national postal service provider in Singapore. Also provides e-commerce logistics services. |
Air Freight & Logistics |
Singapore |
10,062 |
2.6 |
9,158 |
|
Top ten investments |
|
|
112,378 |
29.3 |
|
CONSOLIDATED INVESTMENT PORTFOLIO - OTHER INVESTMENTS
|
As at 31 December 2013 |
|
|
|
|
|
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2013 |
assets{A} |
2012{B} |
|
Company |
Sector |
Country |
£'000 |
% |
£'000 |
|
China Mobile |
Wireless Telecommunication Services |
China |
9,811 |
2.6 |
9,635 |
|
Taiwan Mobile |
Wireless Telecommunication Services |
Taiwan |
9,695 |
2.5 |
11,159 |
|
Telstra |
Diversified Telecommunication Services |
Australia |
9,623 |
2.5 |
9,468 |
|
Singapore Technologies Engineering |
Aerospace & Defence |
Singapore |
9,603 |
2.5 |
9,805 |
|
United Overseas Bank |
Commercial Banks |
Singapore |
9,547 |
2.5 |
9,378 |
|
Woolworths |
Food & Staples Retailing |
Australia |
9,370 |
2.4 |
9,612 |
|
Swire Pacific (Class A and Class B shares) |
Real Estate Management & Development |
Hong Kong |
9,353 |
2.4 |
9,833 |
|
Canon |
Office Electronics |
Japan |
9,264 |
2.4 |
11,526 |
|
SP Ausnet |
Electric Utilities |
Australia |
9,254 |
2.4 |
9,535 |
|
Pos Malaysia |
Air Freight & Logistics |
Malaysia |
9,243 |
2.4 |
6,301 |
|
Top twenty investments |
|
|
207,141 |
53.9 |
|
|
DFCC Bank |
Commercial Banks (Corporate Bond) |
Sri Lanka |
8,697 |
2.3 |
- |
|
Yanlord Land Group |
Real Estate Management & Development (Corporate Bond) |
China |
8,302 |
2.2 |
8,728 |
|
Australia & New Zealand Bank Group |
Commercial Banks |
Australia |
8,227 |
2.1 |
7,553 |
|
Jardine Cycle & Carriage |
Distributors |
Singapore |
8,149 |
2.1 |
- |
|
Commonwealth Bank of Australia |
Commercial Banks |
Australia |
8,064 |
2.1 |
7,624 |
|
Tesco Lotus Retail Growth |
Real Estate Investment Trusts |
Thailand |
7,974 |
2.1 |
10,699 |
|
Giordano International |
Speciality Retail |
Hong Kong |
7,373 |
1.9 |
8,114 |
|
DBS Group |
Commercial Banks |
Singapore |
7,338 |
1.9 |
5,598 |
|
Takeda Pharmaceutical |
Pharmaceuticals |
Japan |
7,199 |
1.9 |
7,131 |
|
Electricity Generating |
Independent Power Producers & Energy Traders |
Thailand |
7,090 |
1.8 |
9,566 |
|
Top thirty investments |
|
|
285,554 |
74.3 |
|
|
QBE Insurance Group |
Insurance |
Australia |
6,732 |
1.8 |
9,410 |
|
CDL Hospitality Trust |
Real Estate Investment Trusts |
Singapore |
6,001 |
1.6 |
7,267 |
|
BEC World |
Media |
Thailand |
5,860 |
1.5 |
9,018 |
|
Telecom Corp of New Zealand (Australia Listing) |
Diversified Telecommunication Services |
New Zealand |
5,796 |
1.5 |
5,596 |
|
Advanced Information Services |
Wireless Telecommunication Services |
Thailand |
5,498 |
1.4 |
6,305 |
|
Singapore Press Holdings |
Media |
Singapore |
5,208 |
1.4 |
5,365 |
|
Li & Fung |
Textiles, Apparel & Luxury Goods |
Hong Kong |
4,984 |
1.3 |
5,972 |
|
Westfield Group |
Real Estate Investment Trusts |
Australia |
4,758 |
1.2 |
5,885 |
|
Ascendas Hospitality Trust |
Real Estate Investment Trusts |
Singapore |
4,660 |
1.2 |
5,639 |
|
PetroChina |
Oil, Gas & Consumable Fuels |
China |
4,628 |
1.2 |
6,078 |
|
Top forty investments |
|
|
339,679 |
88.4 |
|
|
Siam Cement |
Construction Materials |
Thailand |
4,485 |
1.2 |
8,425 |
|
Far East Hospitality Trust |
Real Estate Investment Trusts |
Singapore |
4,374 |
1.1 |
5,485 |
|
Star Publications |
Media |
Malaysia |
4,312 |
1.1 |
- |
|
Hong Leong Finance |
Consumer Finance |
Singapore |
4,022 |
1.1 |
3,896 |
|
Shopping Centres Australasia |
Real Estate Investment Trusts |
Australia |
3,424 |
0.9 |
98 |
|
Westfield Retail Trust |
Real Estate Investment Trusts |
Australia |
3,187 |
0.8 |
3,845 |
|
Ratchaburi Electricity |
Independent Power Producers & Energy Traders |
Thailand |
3,046 |
0.8 |
4,086 |
|
Hana Microelectronics |
Electronic Equipment, Instruments & Components |
Thailand |
2,923 |
0.8 |
2,889 |
|
Lafarge Malaysia |
Construction Materials |
Malaysia |
2,743 |
0.7 |
3,284 |
|
Okinawa Cellular Telephone |
Wireless Telecommunication Services |
Japan |
2,639 |
0.7 |
1,968 |
|
Top fifty investments |
|
|
374,834 |
97.6 |
|
|
Yingde Gases |
Chemicals (Corporate Bond) |
China |
2,261 |
0.6 |
- |
|
Keppel REIT |
Real Estate Investment Trusts |
Singapore |
1,390 |
0.4 |
- |
|
Kingmaker Footwear |
Textiles, Apparel & Luxury Goods |
Hong Kong |
1,203 |
0.3 |
898 |
|
Texwinca Holdings |
Textiles, Apparel & Luxury Goods |
Hong Kong |
866 |
0.2 |
788 |
|
Total value of investments |
|
|
380,554 |
99.1 |
|
|
Net current assets{D} |
|
|
3,582 |
0.9 |
|
|
Total assets{A} |
|
|
384,136 |
100.0 |
|
|
|
|||||
|
{A} The total assets less current liabilities as shown on the Balance Sheet with the addition of Prior Charges. |
|||||
|
{B} Purchases and/or sales effected during the year will result in 2012 and 2013 values not being directly comparable. |
|||||
|
{C} Incorporated in and listing held in United Kingdom. |
|||||
|
{D} Excluding bank loans of £13,019,000. |
|||||
This information is provided by RNS
COMPANIES COVERED:
Latest directors dealings
- 1 day ago Cerillion
- 1 day ago Associated British Foods
- 1 day ago B&M European Value Retail S.A. (DI)
- 1 day ago B&M European Value Retail S.A. (DI)
- 1 day ago Haleon