Half-year Report

RNS Number : 3542H
Aberdeen Asian Income Fund Limited
16 August 2016
 

ABERDEEN ASIAN INCOME FUND LIMITED

UNAUDITED HALF YEARLY REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

Interim Board Report - Chairman's Statement

 

Background

The Company's net asset value ("NAV") returned 16.9% in sterling terms over the six months to 30 June 2016, outperforming the MSCI AC Asia Pacific ex Japan Index, which returned 13.0%. Against this backdrop, the Ordinary Share price total return rose by 16.6% and the discount over NAV per Ordinary share widened from 6.8% at the start of the year to 7.3%. At the time of writing the current discount is 7.2%. Over the last five years, your Company's NAV total return was 36.3% versus the MSCI AC Asia Pacific ex Japan Index return of 21.6%. This performance, against the backdrop of slowing economic activity in the region, reflects your Manager's ability to add value across Asian markets through investing in companies with strong fundamentals and a commitment to shareholder value over the longer term.

 

Overview

Asian equities rose over an eventful six months, beginning with a bumpy New Year precipitated by global growth concerns and tumbling oil prices. Following the first US Federal Reserve rate hike in almost a decade in mid-December, equities sold off in January, largely on the back of fears around China. Accelerating capital outflows, a depreciating renminbi and concerns about the general health of the Chinese financial system all added to the concerns. The imposition of negative interest rates in Europe and Japan fuelled uncertainty that triggered a sell-off in banking-related stocks.

 

However, sentiment improved thereafter, as economic data and the currency stabilised in China. Commodities, from steel to iron-ore, rebounded and the oil-price climbed back above US$50 a barrel. In summer, financial markets reeled at the UK's decision to leave the European Union, but subsequently recovered on expectations that interest rates will remain lower for longer. As a result, demand for higher yield investments returned.

 

Southeast Asian stockmarkets were among the region's top performers, led by Thailand which was cheered by signs of economic recovery on the back of government spending. Indonesia was boosted by monetary policy easing and optimism over a tax amnesty law.

 

Performance review

In spite of market gyrations, your Company posted a solid outperformance.

 

The low exposure to China was a key contributor to performance. Your Manager maintained the underweight position, and this proved beneficial as the market lagged the broader regional markets/indices after the sharp sell-off in the first two months of the year. The lack of exposure to Chinese financials was particularly helpful. Stocks, such as China Life Insurance, Ping An Insurance and Bank of China, none of which the Company holds, were hampered by concerns about the resilience of the financial system.

 

The portfolio's underlying holdings in Australia also aided relative returns. AusNet Services, which operates the largest network of electricity and gas infrastructure in Victoria, was boosted by better-than-expected results and an upbeat dividend outlook. Diversified commodity producer South32 recorded an improvement in tandem with the recovery in commodity prices.

 

Singapore was another contributor, aided by your Manager's preference for defensive high-yielding companies. Singapore Telecommunications benefited from its diversified operations across the region, which continue to be aided by higher data consumption. The strength of its cash flow supports an attractive dividend yield. Venture Corporation reported solid earnings growth and maintained its absolute dividend. Meanwhile, Jardine Cycle & Carriage's recovery was supported by the share price rally of its Indonesian subsidiary Astra International, which was buoyed by the rise in the broader stockmarket.

 

On the other hand, Hong Kong was the main detractor from performance, led lower by HSBC and Texwinca. HSBC continued to be dampened by higher provisions. That said, the lender has continued to strengthen its capital position by reducing exposure to riskier assets and streamlining its balance sheet, supported by focused, competent and professional management. It also offers an attractive dividend yield. Textile manufacturer Texwinca was weighed down by weak results, but it maintains robust cash flows and its dividend yield remains decent. 

 

Turning to portfolio activity, your Manager introduced Hong Kong developer Hang Lung Properties because of attractive valuations and a good yield. A position was also initiated in Samsung Electronics, which is looking to improve shareholder returns and has announced its commitment to paying out 30-50% of its free cash flow. The company also boasts a strong balance sheet, backed by cash. In Japan, Amada, a market leader in laser sheet-cutting technology, a vital part of the factory automation process was added to the portfolio. About a quarter of Amada's balance sheet is backed by cash, while management is committed to a capital structure that is more suited to its business.

 

Against this, your Manager sold China National Offshore Oil Corporation (CNOOC), Keppel and POS Malaysia on concerns over the sustainability of their dividend payouts, while Li & Fung was divested on worries about management's ability to improve margins amid the challenging operating environment. Your Manager also sold the holding of Yanlord bonds, which has been a profitable position for the Company, and exited BHP Billiton, on concerns that the company will abandon its progressive dividend policy.

 

Dividend

On 12 July 2016, your Board declared a second quarterly interim dividend of 2.0p per Ordinary share in respect of the year ending 31 December 2016, which will be paid on 19 August 2016 to shareholders on the register on 22 July 2016.  The first two quarterly dividends, covering the six months to 30 June 2016 therefore total 4.0p (2015 - 4.0p). As indicated at the time of the first and second interim dividend announcements, in the absence of unforeseen circumstances, the Board expects to pay four interim dividends for the year ending 31 December 2016 totalling at least 8.5p per Ordinary share (2015: four quarterly dividends paid totalling 8.5p).

 

Your Manager took advantage of the volatile environment to add to quality companies at attractive valuations, and trim those that appeared overvalued, whilst improving the yield of the portfolio. While uncertainty continues to cloud the earnings outlook, your Company's holdings are expected to maintain steady dividend yields, given their robust operating cash flows.

 

Gearing and Share Repurchases

The Company's total gearing at the period end amounted to the equivalent of £39.2 million or 9.0% of the net assets with £10m, HKD 241m and USD 7.9m drawn under the Company's facilities with Scotiabank.

 

Over the first half of the year, the Ordinary Shares have continued to trade at a discount to the NAV and the Company has been active in the market when the discount (excluding income) has exceeded 5% with a view to minimising volatility due to a widening discount. During the period under review, your Company bought in 4.2m shares for treasury.  Subsequent to the period end a further 875,000 Ordinary shares have been acquired for treasury. 

 

Directorate

As part of the Board's on-going succession planning, Mr Baxter retired from the Board at the AGM held in May 2016 and I would like to reiterate the Board's sincere thanks to him for his service and contribution to the Company since its launch.  I am pleased to report that Mr Ian Cadby has been appointed as an independent non executive Director with effect from 11 May 2016.  Ian is a Jersey resident  investment professional  with over 27 years' experience within the hedge fund and derivatives trading industry spanning a number of jurisdictions including Asia, USA, UK and Jersey and has extensive experience in board strategy, corporate governance and risk management.

 

Going forward Mr Berzins has indicated his intention to retire from the Board at the 2017 AGM and I, in turn, will then retire at the AGM to be held in 2018, thus completing the refreshment of the independent Directors that were originally appointed at the launch of the Company back in 2005.  The Nomination Committee will oversee the completion of this process of change and undertake the necessary search for new non executive Directors in due course.

 

Management Fee Arrangements

The Board is currently in the process of updating the Management Agreement which was largely unchanged since the launch of the Company in 2005.  As part of the process I am pleased to report that an amendment to the management fee has been agreed with effect from 1 June 2016.  From that date the Manager is entitled to a management fee payable quarterly in arrears based on an annual amount of 0.85% (previously 1.0%) of the net asset value of the Company valued monthly and on the average of the previous five monthly valuation points. Also from that date the annual RPI uplift applicable on the company secretarial and administration fee has been discontinued.

 

Outlook

Investors continue to proceed with caution. While it is early days yet to ascertain the full extent of Brexit's impact, your Manager's preliminary assessment is that the effect on Asia is fairly limited, although, since the referendum, the weakness of sterling has proved beneficial to the Company's NAV. Asian currencies have been much less volatile than their continental counterparts, and fundamentals remain relatively sound. The region's central banks showed commitment by keeping monetary policy accommodative and some are coordinating fiscal policy and pursuing structural reforms to encourage growth. China continues to be a source of some anxiety and along with it, fears of market imbalances in commodities. The oil-price recovery has benefited manufacturers and exporters after a prolonged rout, but it is unclear if oil prices will continue to languish over the longer term.

 

That said, the long-term drivers of growth and potential in Asia remain persuasive. Although profit growth has yet to turn the corner, your Manager has carefully selected a solid portfolio of companies that have proven management, solid fundamentals and cash generative abilities. With robust balance sheets and sustainable operations, these businesses have the capacity to provide dividends and support growth in the long run.

 

I look forward to reporting to you again with the Annual Report for the year to 31 December 2016, which will be issued in April 2017. In the meantime, shareholders can find regular updates from your Investment Manager, and copies of all Stock Exchange announcements on your Company's website asian-income.co.uk. Also on the website there are NAV and share price feeds which are updated on a daily basis.

 

 

 

Peter Arthur

Chairman

16 August 2016

 

 

Interim Board Report - Disclosures

 

Principal Risk Factors

The principal risks and uncertainties affecting the Company are set out in detail on page 10 of the Annual Report and Financial Statements for the year ended 31 December 2015 and have not changed.

 

The risks outlined below are those risks that the Directors considered at the date of this Half Yearly Report to be material but are not the only risks relating to the Company or its shares. If any of the adverse events described below actually occur, the Company's financial condition, performance and prospects and the price of its 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 Half Yearly Report, or that the Directors considered at the date of this Report to be immaterial, may also have an effect on the Company's financial condition, performance and prospects and the price of the shares.

 

If shareholders are in any doubt as to the consequences of their acquiring, holding or disposing of shares in the Company or whether an investment in the Company is suitable for them, they should consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Securities and Markets Act 2000 (as amended by the Financial Services Act 2012) or, in the case of prospective investors outside the United Kingdom, another appropriately authorised independent financial adviser.

 

The risks can be summarised under the following headings:

 

  1.   Investment strategy and objectives

  2.   Investment portfolio, investment management

  3.   Financial obligations

  4.   Financial and regulatory

  5.   Operational

 

An explanation of other risks relating to the Company's investment activities, specifically market price, liquidity and credit risk, and a note of how these risks are managed, are contained in note 16 on pages 60 to 67 of the Annual Report for the year ended 31 December 2015.

 

The Board is aware that there is now an additional risk to those outlined above. The United Kingdom decision in the EU referendum held on 23 June 2016 to leave the EU may affect the Company's risk profile by introducing potentially significant new uncertainties and instability in financial markets as the United Kingdom negotiates its exit from the EU. These uncertainties could have a material direct or indirect effect on the Company, its financial condition and operations although the extent is not quantifiable at this time.

 

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014, the Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's assets consist primarily of a diverse portfolio of listed securities which, in most circumstances, are realisable within a very short timescale. Therefore, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Half Yearly Report.

 

Directors' Responsibility Statement

The Directors are responsible for preparing this Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

 

-     the condensed set of interim financial statements contained within the Half Yearly Financial Report which have been prepared in accordance with IAS 34 "Interim Financial Reporting", give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-     the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

-     the Half-Yearly Board Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

 

For and on behalf of the Board of Aberdeen Asian Income Fund Limited

 

Peter Arthur

Chairman

16 August 2016

 

 

Condensed Statement of Comprehensive Income

 

 

______

______

______

______

______

______

______

______

______

Profit/(loss) for the period (note 3)

9,321

43,119

52,440

9,684

(18,297)

(8,613)

17,729

(54,441)

(36,712)

Earnings per Ordinary share (pence) (note 3)

4.90

22.66

27.56

4.98

(9.41)

(4.43)

9.11

(27.97)

(18.86)

The Company does not have any income or expense that is not included in profit/(loss) for the period, and therefore the "Profit/(loss) for the period" is also the "Total comprehensive income for the period".

The total columns of this statement represent the Condensed Statement of Comprehensive Income, 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.

All of the profit/(loss) and total comprehensive income is attributable to the equity holders of Aberdeen Asian Income Fund Limited.  There are no non-controlling interests.

 

 

Condensed Balance Sheet

 


______

______

______

Net assets


366,859

367,306

329,432



______

______

______

Equity shareholders' funds


366,859

367,306

329,432

 

 

Condensed Statement of Changes in Equity

 

Six months ended 30 June 2016 (unaudited)









Capital






______

______

______

______

______

______

Balance at 30 June 2016

194,933

1,560

156,339

14,027

-

366,859


______

______

______

______

______

______

Balance at 30 June 2015

194,533

1,560

158,166

13,047

-

367,306


______

______

______

______

______

______

Balance at 31 December 2015

194,933

1,560

119,637

13,302

-

329,432


______

______

______

______

______

______








 

 

Condensed Cash Flow Statement

 

Six months ended

Six months ended

Year ended


 30 June 2016

 30 June 2015

 31 December 2015


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

Cash flows from operating activities




Dividend income received

8,207

8,041

16,662

Interest income received

1,634

1,492

2,954

Investment management fee paid

(1,343)

(1,942)

(3,658)

Other paid expenses

(506)

(191)

(1,008)


______

______

______

Cash generated from operations

7,992

7,400

14,950

Interest paid

(327)

(244)

(490)

Overseas taxation suffered

(548)

(458)

(904)





Cash flows from investing activities




Purchases of investments

(21,817)

(20,257)

(29,227)

Sales of investments

29,362

12,579

32,553


______

______

______

Net cash inflow/(outflow) from investing activities

7,545

(7,678)

3,326





Cash flows from financing activities




Proceeds from issue of Ordinary shares

-

-

945

Purchase of own shares to treasury

(6,631)

-

(2,566)

Purchase of own shares for cancellation

-

-

(150)

Dividends paid

(8,596)

(8,949)

(16,739)

Loans drawn down

-

10,000

10,000

Loans repaid

(3,391)

(1,450)

(1,450)


______

______

______

Net cash outflow from financing activities

(18,618)

(399)

(9,960)


______

______

______

Net (decrease)/increase in cash and cash equivalents

(3,956)

(1,379)

6,922

Cash and cash equivalents at the start of the period

10,504

3,671

3,671

Effect of foreign exchange rate changes

(355)

(26)

(89)


______

______

______

Cash and cash equivalents at the end of the period

6,193

2,266

10,504


______

______

______

 

 

Notes to the Financial Statements

For the period ended 30 June 2016

 

The Annual Report is prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). The condensed Half Yearly Report has been prepared in accordance with International Accounting Standards (IAS) 34 - 'Interim Financial Reporting'. It has also been prepared using the same accounting policies applied in the annual report for the year ended 31 December 2015.


The financial statements have been prepared on a going concern basis. In accordance with the Financial Reporting Council's guidance on 'Going Concern and Liquidity Risk' the Directors have undertaken a review of the Company's assets which primarily consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale.


- IAS 1 Presentation of Financial Statements - Amendment for Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016) covering (i) clarification on materiality (ii) permitting disaggregation of certain items in statements of profit or loss, other comprehensive income and balance sheet (iii) structure of the notes to the financial statements (iv) accounting policies disclosure that are significant and (v) equity accounted items in other comprehensive income.


- Annual Improvements to IFRSs 2012 - 2014 Cycle (effective for annual periods beginning on or after 1 January 2016) covering (i) IAS 34 Interim Financial Reporting clarifying what is disclosed in the notes if not disclosed elsewhere in the interim report and (ii) IFRS 7 Financial instruments: Disclosures regarding the applicability of the amendments to condensed interim financial statements.

 

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 basic net asset value per Ordinary share and the net asset values attributable to Ordinary shareholders at the period end calculated in accordance with the Articles of Association were as follows:


Net asset value per Ordinary share (p)

194.19

188.81

170.58

 


______

______

______



523

515

969



______

______

______

 


______

______

______



8,596

8,949

16,739


A second interim dividend of 2.00p for the year to 31 December 2016 will be paid on 19 August 2016 to shareholders on the register on 22 July 2016. The ex-dividend date was 21 July 2016.

 

During the period 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 gains/(losses) on financial assets at fair value through profit or loss in the Condensed Statement of Comprehensive Income. The total costs were as follows:



______

______

______



56

41

79



______

______

______

 

In April 2014, the Company entered into an unsecured three year £30 million multi-currency facility agreement with Scotiabank (Ireland) Limited which replaced a £15 million secured facility. At the period end approximately USD 7.9 million and HKD 241 million, equivalent to £29.2 million was drawn down from the £30 million facility. The interest rates attributed to the USD and HKD loans at the period end were 1.402% and 1.174% respectively.


Additionally, in March 2015, the Company entered into a new fixed three year £10 million credit facility with Scotiabank Europe PLC at an all-in interest rate of 2.2175% which will mature on 2 March 2018.


At the period end, bank loans totalled £39,154,000 (30 June 2015 - £37,987,000; 31 December 2015 - £39,853,000).

 


 30 June 2016

 30 June 2015

 31 December 2015

9.

Stated capital

Number

£'000

Number

£'000

Number

£'000


Ordinary shares of no par value

















_________

________

_________

________

_________

________



194,933,389

194,933

194,533,389

194,533

194,933,389

194,933


During the period 4,213,000 ordinary shares were bought back by the Company for holding in treasury at a cost of £6,417,000 (30 June 2015 - no shares were issued or bought back during the period; 31 December 2015 - 500,000 shares issued for a net receipt of £945,000, 100,000 shares bought back for cancellation at a cost of £150,000 and 1,807,000 shares were bought back for holding in treasury at a cost of £2,780,000). As at 30 June 2016 6,020,000 (30 June 2015 - nil; 31 December 2015 - 1,807,000) Ordinary shares were held in treasury.


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.

 

10.

Related party disclosures and transactions with the Manager


Related party disclosures


Following a review after the period end, a restructuring of the management fee arrangements for the Company has been agreed between the Board and the Manager.




Previously, the management fee was payable monthly in arrears based on an annual amount of 1% of the net asset value of the Company valued monthly. From 1 June 2016 onwards the annual fee will be payable quarterly in arrears based on an annual amount of 0.85% of the net asset value of the Company valued monthly and on the average of the previous five monthly valuation points.




With respect to the company secretarial and administration fee the annual revision for changes in RPI has been discontinued with effect from 1 June 2016.




Transactions with the Manager


Mr H Young is a director of Aberdeen Asset Management PLC ("AAM") and its subsidiary Aberdeen Asset Management Asia Limited ("AAM Asia"). Aberdeen Private Wealth Management Limited ('APWM') is also a subsidiary of AAM and it has an agreement to provide management services to the Company, which it has sub-delegated to AAM Asia. APWM has an agreement to provide company secretarial and administration and promotional activity services to the Company.




From 1 January 2016 until 31 May 2016, the management fee was payable monthly in arrears based on an annual amount of 1% of the net asset value of the Company valued monthly. From 1 June 2016 onwards the management fee is payable quarterly in arrears, based on an annual amount of 0.85% of the net asset value of the Company valued monthly and on the average of the previous five monthly valuation points. During the period £1,616,000 (30 June 2015 - £1,943,000; 31 December 2015 - £3,607,000) of management fees were paid and payable, with a balance of £544,000 (30 June 2015 - £637,000; 31 December 2015 - £271,000) being payable to AAM Asia at the period end.




The company secretarial and administration fee is based on an annual amount of £134,000 (30 June 2015 - £133,000;  31 December 2015 - £133,000), payable quarterly in arrears. The link to increasing the fee in line with annual increases in RPI was discontinued with effect 1 June 2016. During the period £67,000 (30 June 2015 - £66,000; 31 December 2015 - £131,000) of fees were paid and payable, with a balance of £33,000 (30 June 2015 - £33,000; 31 December 2015 - £34,000) being payable to APWM at the period end.




The promotional activities fee is based on a current annual amount of £250,000 (30 June 2015 - £250,000; 31 December 2015 - £250,000), payable quarterly in arrears. During the period £125,000 (30 June 2015 - £116,000; 31 December 2015 - £250,000) of fees were payable, with a balance of £63,000 (30 June 2015 - £63,000; 31 December 2015 - £63,000) being payable to APWML at the period end.

 

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 (i.e. as prices) or indirectly (i.e. 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 Condensed Balance Sheet are grouped into the fair value hierarchy as follows:


The fair value of the Company's investments in quoted equities has 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.


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. Quoted corporate bonds included in Fair Value Level 1 are actively traded on recognised stock exchanges.


Fair values of financial liabilities


The fair value of the loan is determined by aggregating the expected future cash flows for the loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency.


The fair value of borrowings as at 30 June 2016 has been estimated at £39,216,000. At 30 June 2015 and 31 December 2015 the fair value was £38,049,000 and £39,899,000 respectively which was the same as the carrying values due to the short-term nature of the loans. Under the fair value hierarchy in accordance with IFRS 13, these borrowings can be classified as Level 2 inputs.

 

A further 875,000 Ordinary shares have been bought back by the Company for holding in treasury, subsequent to the reporting period end, at a cost of £1,654,000.  Following the share buybacks there were 188,038,389 Ordinary shares in issue.


As referred to in note 10, following the period end a restructuring of the management fee arrangements for the Company has been agreed between the Board and the Manager.

 

The financial information for the six months ended 30 June 2016 and 30 June 2015 has not been audited.

 

This Half Yearly Financial Report was approved by the Board on 16 August 2016.

 

The Half Year Report will be posted to shareholders in late August 2016 and copies will be available on the Company's website (asian-income.co.uk*) or in hard copy format from the Company's registered office, Sir Walter Raleigh House, 48 - 50 Esplanade, St Helier, Jersey JE2 3QB.

 

*Neither the Company's website nor the content of any website accessible from hyperlinks on that 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

Company Secretary

16 August 2016

 

 

Independent Review Report to Aberdeen Asian Income Fund Limited

 

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 30 June 2016 which comprises the Condensed Statement of Comprehensive Income, the Condensed Balance Sheet, the Condensed Statement of Changes in Equity, the Condensed Cash Flow Statement and the related explanatory notes 1 to 14. We have read the other information contained in the Half Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

 

Directors' Responsibilities

The Half Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards (IFRS). The condensed set of financial statements included in this Half Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half Yearly Financial Report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Ernst & Young LLP

Jersey

Channel Islands

16 August 2016

 

 

Investment Portfolio

As at 30 June 2016

 

 


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