Annual Financial Report
ABERDEEN NEW DAWN INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 APRIL 2016
The Company
Aberdeen New Dawn Investment Trust PLC ("the Company") is an investment trust. Its Ordinary shares are listed on the premium segment of the London Stock Exchange.
Investment Objective
To provide shareholders with a high level of capital growth through equity investment in the Asia Pacific countries ex Japan.
Benchmark
Currency-adjusted MSCI All Countries Asia Pacific ex Japan Index.
Management
The investment management of the Company has been delegated by Aberdeen Fund Managers Limited ("AFML", the "AIFM" or the "Manager") to Aberdeen Asset Management Asia Limited ("AAM Asia" or the "Investment Manager"). Both companies are wholly owned subsidiaries of Aberdeen Asset Management PLC and collectively are referred to as the Aberdeen Group.
Website
Up to date information can be found on the Company's website: www.newdawn-trust.co.uk
COMPANY OVERVIEW - FINANCIAL HIGHLIGHTS
|
Net asset total return A |
|
|
Share price total return A |
|
|
2016 |
-15.4% |
|
2016 |
-15.1% |
|
2015 |
+17.1% |
|
2015 |
+14.3% |
|
ATotal return represents capital return plus dividends reinvested |
|
ATotal return represents capital return plus dividends reinvested |
||
|
Index total return A |
|
|
Revenue return per share |
|
|
2016 2015 |
-12.2% +22.7% |
|
2016 2015
|
4.06p 4.18p |
|
ATotal return represents capital return plus dividends reinvested |
|
|
|
|
|
Dividend per Ordinary share |
|
|
Ongoing charges |
|
|
2016 |
3.90p |
|
2016 |
1.1% |
|
2015 |
3.80p |
|
2015 |
1.1% |
|
|
|
|
|
|
For further information, please contact:
Andrew Leigh
Aberdeen Asset Managers Limited 0207 463 6312
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. Investors may not get back the amount they originally invested.
COMPANY OVERVIEW - CHAIRMAN'S STATEMENT
Background
Over the year ended 30 April 2016 the Company's net asset value ("NAV") fell by 15.4% to 179.4p per share while the share price fell by 15.1% to 156.0p, in each case on a total return basis. The share price discount to NAV (excluding current year income) narrowed slightly during the year to 11.5% but has widened to 13.8% since the year end. During the year the Company's benchmark, the MSCI All Countries Asia Pacific ex Japan Index, fell by 12.2% in total return terms. However the Company's performance in the three months to 30 April 2016 was more encouraging with a NAV total return of 11.2% compared to a return of 7.0% for the index.
The Board is pleased to announce a final dividend of 2.9p per share (2015 - 2.8p) making a total dividend of 3.9p (2015 - 3.8p) an increase of 2.6% on last year. If approved by shareholders at the Annual General Meeting ("AGM") the final dividend will be paid on 2 September 2016.
Overview
Asian Equity markets experienced significant volatility during the year under review. This had a particular impact at the start of the calendar year when global financial markets sold off as investors sought safe haven assets. This was the result of three main factors. Firstly, in China, persistent worries about the economy led to it being the worst performing market during the period. A combination of slowing growth and misunderstood intervention in both the equity and currency markets increased uncertainty which impacted global markets. It was helpful that the Company has a limited direct exposure to China.
The slowing growth in China also curtailed the previously strong demand for commodities, resulting in a significant weakening in prices. This was coupled with a collapse in the global oil prices due to significant oversupply. As a result, energy and resources stocks fell sharply. In response to this your Manager reduced the portfolio's exposure to these sectors by selling both Thailand's PTT Exploration and Production and Australian miner South 32 as well as reducing the position in BHP Billiton.
Finally, there was the impact from the divergence in Global monetary policy with central banks adopting differing policy responses. The US Federal Reserve raised interest rates while its Japanese and European counterparts moved to negative rates with the aim of stimulating bank lending. This policy divergence has had a significant impact on capital flows and currency markets with the US dollar strengthening against most emerging market currencies exacerbating the flow of funds from Asian stock markets.
The Investment Manager's Review gives a more detailed insight into how regional markets have performed during the period but in general the Company benefitted from its large exposure to India and losses were mitigated by a limited direct exposure to China.
Gearing and Share Buybacks
The level of borrowings during the period increased slightly to £27.0 million, representing gearing (net of cash) of 11.4% at the year-end (2015 - 8.7%).
In line with most other Asian Pacific investment trusts, the Company has engaged in buybacks to provide a degree of liquidity to the market at times when the discount to NAV has widened. It is the view of the Board that this policy is in the interests of all shareholders but it will review the operation of this policy on a regular basis going forward. The Board is seeking to renew the Company's share buyback authority at the AGM.
The Company bought back 3.8 million shares in the period representing 3.1% of the issued share capital. These shares are held in Treasury and can only be reissued to the market if and when the shares are trading at a premium to NAV. While shares are held in Treasury they do not qualify to receive dividends. Since the year end the Company has bought back a further 708,000 shares which are held in Treasury.
Management Fee Arrangements
Following its annual review of the terms of appointment of the Manager, the Board has agreed with the Manager that, with effect from 1 July 2016, the management fee will be calculated at 0.85% per annum of net assets. Previously the management fee was calculated at 1.0% per annum of net assets. The Board and the Manager consider that the new fee rate is better aligned to fees charged by the Company's peers and other investment trusts with similar mandates.
Board
We announced that Nick George was standing down from the board on 30 April 2016 after six years as a Director. I would like to extend my thanks to him for his wise counsel and contribution throughout his time with us and wish him well in the future.
I am pleased to announce that Marion Sears will be appointed as an independent non-executive Director with effect from 1 August 2016. Marion had an executive career in stockbroking and investment banking and was latterly a Managing Director of Investment Banking at JPMorgan. She is currently a non-executive director of a number of public companies. She will stand for election at the AGM.
AGM
The AGM will be held on Wednesday 31 August 2016 at 12 noon at the offices of Aberdeen Asset Management PLC, Bow Bells House, 1 Bread Street, London EC4M 9HH. The Board is looking forward to meeting as many shareholders as possible at both the AGM and lunch after the meeting.
Outlook
The Asian Pacific region continues to offer good prospects for long term growth as economies remain underpinned by a young population, growing private wealth and increasing domestic consumer demand. This coupled with the fact that Asian equities are trading at undemanding valuations will create investment opportunities.
Global markets are expected to remain volatile for some time due to both macroeconomic factors and geopolitical uncertainty with elections in the US and the impact of the result in the EU Referendum in the UK.
However the Manager remains focused on fundamentally good businesses with sound balance sheets, strong cash generation and effective governance. These companies are likely to be better placed to deal with short term uncertainties and capitalise on opportunities which may arise.
David Shearer
Chairman
11 July 2016
STRATEGIC REPORT - OVERVIEW OF STRATEGY
Business Model
The business of the Company is that of an investment company which seeks to qualify as an investment trust for tax purposes. The Directors do not envisage any change in this activity in the foreseeable future.
Investment Objective
The Company's investment objective is to provide shareholders with a high level of capital growth through equity investment in the Asia Pacific countries ex Japan.
Investment Policy
The Company's assets are invested in a diversified portfolio of securities in quoted companies spread across a range of industries and economies in the Asia Pacific region excluding Japan. Investments may also be made through collective investment schemes and in companies traded on stock markets outside the Asia Pacific region provided that over 75% of their consolidated revenue is earned from trading in the Asia Pacific region or they hold more than 75% of their consolidated net assets in the Asia Pacific region.
Risk Diversification
In addition, it is the investment policy of the Company to invest no more than 15% of its gross assets in other listed investment companies (including listed investment trusts). As at 30 April 2016, 2.8% of the Company's portfolio was invested in investment companies.
Gearing
The Board is responsible for determining the gearing strategy for the Company. 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. At the year end the Company had net gearing of 11.4% which compares with a current maximum limit set by the Board of 25%. Borrowings are short to medium term and particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy.
Delivering the Investment Policy
The Directors are responsible for determining the investment objective and the investment policy of the Company. Day-to-day management of the Company's assets has been delegated, via the AIFM, to the Investment Manager, Aberdeen Asset Management Asia Limited.
Investment Process
The Investment Manager invests in a diversified range of companies throughout the Asia Pacific region in accordance with the investment policy. The Investment Manager follows a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value. No stock is bought without the fund managers having first met management. The Investment Manager estimates a company's worth in two stages: quality then price. Quality is defined by reference to management, business focus, the balance sheet and corporate governance. Price is calculated by reference to key financial ratios, the market, the peer group and business prospects. Top-down investment factors are secondary in the Investment Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights. Little attention is paid to market capitalisation.
Benchmark
The Company compares its performance to the currency-adjusted MSCI All Countries Asia Pacific ex Japan Index.
Key Performance Indicators ("KPIs")
The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determining the progress of the Company in pursuing its investment policy. The main KPIs identified by the Board in relation to the Company, which are considered at each Board meeting, are shown in the following table:
|
Performance of net asset value ("NAV") |
The Board considers the Company's NAV total return figures to be the best indicator of performance over time and this is therefore the main indicator of performance used by the Board. |
|
Performance against benchmark index |
The Board measures performance against the benchmark index - the currency-adjusted MSCI All Countries Asia Pacific ex Japan Index. |
|
Revenue return per Ordinary share |
The Board monitors the Company's net revenue return. |
|
Dividends per share |
The Board also monitors the Company's annual dividends per Ordinary share. |
|
Share price performance |
The Board monitors the performance of the Company's share price on a total return basis. |
|
Discount/premium to NAV |
The discount/premium relative to the NAV per share represented by the share price is closely monitored by the Board. |
|
Ongoing charges |
The Board monitors the Company's operating costs carefully. |
Promoting the Company
The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective way to achieve this is through subscription to and participation in the promotional programme run by the Aberdeen Group on behalf of a number of investment trusts under its management. The Company's financial contribution to the programme is matched by the Aberdeen Group. The Aberdeen Group Head of Brand reports to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make up of that register.
The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of the Company is key and therefore the Company also supports the Aberdeen Group's investor relations programme which involves regional roadshows, promotional and public relations campaigns.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced individuals with relevant knowledge in order to allow it to fulfill its obligations. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Board members. However, in making new appointments, the Board's overriding priority is to appoint the most appropriate candidates, regardless of gender or other forms of diversity. The Board has not therefore set any measurable objectives in relation to its diversity. At 30 April 2016, there were four male Directors and one female Director.
Employee and Socially Responsible Policies
The Company has no employees as the Board has delegated the day to day management and administrative functions to the Manager. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is set out below.
Socially Responsible Investment Policy
The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner and has noted the Aberdeen Group's policy on social responsibility. The Investment Manager considers social, environmental and ethical factors which may affect the performance or value of the Company's investments as part of its investment process. In particular, the Investment Manager encourages companies in which investments are made to adhere to best practice in the area of Corporate Governance including social, environmental and ethical matters where applicable. It believes that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies in this area. The Directors have asked the Investment Manager not to invest in companies where the majority of their operations are involved in the manufacture or sale of tobacco-related products, although the Directors accept that this restriction cannot be applied to pooled funds into which the Company may invest.
Modern Slavery Act
Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.
Duration
The Company does not have a fixed life. However, under the Articles of Association, if in the 90 days preceding the Company's financial year end (30 April) the Ordinary shares have been trading, on average, at a discount in excess of 15% to the underlying net asset value (excluding current year income, and with borrowings stated at market value) over the same period, notice will be given of an ordinary resolution to be proposed at the following Annual General Meeting to approve the continuation of the Company. If the resolution for the continuation of the Company is not passed at that Annual General Meeting or any adjournment thereof, the Directors will convene a general meeting to be held not more than three months after the Annual General Meeting at which a special resolution for the winding-up of the Company will be proposed. In the 90 days to 30 April 2016 the average discount to underlying net asset value (excluding current year income, and with borrowings stated at market value) of the Ordinary shares was 13.1% and therefore no continuation resolution will be put to the Company's shareholders at this year's Annual General Meeting.
Viability Statement
The Board considers the Company, with no fixed life, to be a long term investment vehicle and it intends to maintain the current mandate. For the purposes of this viability statement, the Board has decided that three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than three years.
In assessing the viability of the Company over the review period, the Directors have focused upon the following factors:
- The principal risks and uncertainties detailed below, in particular those relating to investment in Asia Pacific countries, and the steps taken to mitigate these risks.
- The role of the Audit and Risk Committee in reviewing and monitoring the Company's internal control and risk management systems.
- The ongoing relevance of the Company's investment objective.
- The liquidity of the Company's portfolio. All of the Company's investments are in quoted equities actively traded on recognised stock exchanges.
- The closed-ended nature of the Company which means that it is not subject to redemptions.
- The use of the Company's share buy back and share issuance policies to help address any imbalance of supply and demand for the Company's shares.
- The current and maximum levels of gearing, compliance with loan covenants and level of headroom within the financial covenants (see note 11 to the financial statements for details of loan covenants).
- The ability of the Company to refinance its £35 million loan facility on, or before, its maturity in October 2019.
- The potential requirement of the Board to propose a resolution to approve the continuation of the Company at future Annual General Meetings. As explained above, this is dependent upon the level of discount in the 90 days preceding the Company's financial year end and there is no requirement for such a resolution to be proposed at the forthcoming Annual General Meeting.
In making its assessment, the Board has considered that there are other matters that could have an impact on the Company's prospects or viability in the future, including a large economic shock, significant stock market volatility, and changes in regulation or investor sentiment.
Taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report.
Future
The majority of the region's economies have high rates of growth, strong trade and fiscal surpluses and rapidly developing capital markets. Nevertheless, the past has demonstrated that there can be specific risks associated with the region. Many of the non-performance related trends likely to affect the Company in the future are common across all closed-ended investment companies, such as the attractiveness of investment companies as investment vehicles, the impact of regulatory changes (including MiFID II and the Packaged Retail Investment and Insurance Products regulations) and the recent changes to the pensions and savings market in the UK. These factors need to be viewed alongside the outlook for the Company, both generally and specifically, in relation to the portfolio. The Board's view on the general outlook for the Company can be found in the Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included in its statement.
David Shearer
Chairman
11 July 2016
STRATEGIC REPORT - RESULTS
Financial Highlights
|
|
30 April 2016 |
30 April 2015 |
% change |
|
Total assets |
£243,229,000 |
£295,483,000 |
-17.7 |
|
Total equity shareholders' funds (net assets) |
£216,243,000 |
£269,398,000 |
-19.7 |
|
Market capitalisation |
£188,010,000 |
£234,057,000 |
|
|
Net asset value per share |
179.43p |
216.67p |
-17.2 |
|
Share price (mid market) |
156.00p |
188.25p |
-17.1 |
|
Discount to net asset value (excluding current year income) |
11.5% |
11.8% |
|
|
Discount to net asset value (including current year income) |
13.1% |
13.1% |
|
|
MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis) |
531.87 |
625.15 |
-14.9 |
|
Net gearing A |
11.38% |
8.71% |
|
|
Dividend and earnings |
|
|
|
|
Revenue return per shareB |
4.06p |
4.18p |
-2.9 |
|
Dividends per shareC |
3.90p |
3.80p |
+2.6 |
|
Dividend cover |
1.04 |
1.10 |
|
|
Revenue reservesD |
£12,417,000 |
£12,121,000 |
|
|
Operating costs |
|
|
|
|
Ongoing charges ratioE |
1.08% |
1.08% |
|
|
A Calculated in accordance with AIC guidance "Gearing Disclosures post RDR". |
|||
|
B Measures the total earnings for the year divided by the weighted average number of Ordinary shares in issue (see Statement of Comprehensive Income). |
|||
|
C The figures for dividends reflect the years in which they were earned (see note 7) and assume approval of the final dividend. |
|||
|
D Prior to payment of proposed final dividend. |
|||
|
E Ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of the management fee and administrative expenses divided by the average cum income net asset value throughout the year. |
|||
STRATEGIC REPORT - PERFORMANCE
Performance (total return)
|
|
1 year return |
3 year return |
5 year return |
|
|
% |
% |
% |
|
Net asset value |
-15.4 |
-16.6 |
+5.5 |
|
Share price |
-15.1 |
-16.6 |
-1.5 |
|
MSCI AC Asia Pacific ex Japan Index (currency adjusted) |
-12.2 |
+0.5 |
+9.7 |
Dividends
|
|
Rate |
xd date |
Record date |
Payment date |
|
Interim 2016 |
1.00p |
7 January 2016 |
8 January 2016 |
29 January 2016 |
|
Proposed final 2016 |
2.90p |
4 August 2016 |
5 August 2016 |
2 September 2016 |
|
|
_______ |
|
|
|
|
Total 2016 |
3.90p |
|
|
|
|
|
_______ |
|
|
|
|
Interim 2015 |
1.00p |
8 January 2015 |
9 January 2015 |
30 January 2015 |
|
Final 2015 |
2.80p |
6 August 2015 |
7 August 2015 |
4 September 2015 |
|
|
_______ |
|
|
|
|
Total 2015 |
3.80p |
|
|
|
|
|
_______ |
|
|
|
Ten Year Financial Record
|
Year to 30 April |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
|
Total revenue (£'000) |
4,027 |
4,301 |
4,734 |
4,372 |
5,752 |
6,799 |
6,562 |
6,819 |
7,412 |
7,004 |
|
Per share (p)A |
|
|
|
|
|
|
|
|
|
|
|
Net revenue return |
1.53 |
1.63 |
2.10 |
2.37 |
3.17 |
3.97 |
3.89 |
3.79 |
4.18 |
4.06 |
|
Total return |
10.01 |
20.30 |
(30.64) |
66.34 |
26.44 |
(2.72) |
33.49 |
(18.68) |
31.74 |
(34.72) |
|
Net dividends paid/proposedB |
1.11 |
1.20 |
1.60 |
2.00 |
2.50 |
3.30 |
3.40 |
3.60 |
3.80 |
3.90 |
|
Net asset value per share |
109.77 |
129.26 |
97.42 |
162.16 |
186.60 |
181.38 |
210.57 |
188.49 |
216.67 |
179.43 |
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
Equity shareholders' funds (£'000) |
139,342 |
160,993 |
121,339 |
201,969 |
232,406 |
225,908 |
262,263 |
234,762 |
269,398 |
216,243 |
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
|
|
|
|
|
|
|
|
|
|
|
|
A Figures for 2007-2013 have been restated to reflect the 5:1 sub-division on 3 September 2013. |
||||||||||
|
B The figures for dividends have not been restated and still reflect the dividend for the years in which it was earned. |
||||||||||
STRATEGIC REPORT - INVESTMENT MANAGER'S REVIEW
Market Review
The year to 30 April 2016 was a turbulent period for Asia Pacific equities, although a brief rally towards the year-end helped reduce losses. For most of the year, concerns lingered over a slowdown in China's economy, weakness in commodity prices and an impending rise in US interest rates. A significant correction in Chinese shares reverberated across global equity markets with commodity-related stocks bearing the brunt of the sell-off. The Chinese authorities resorted to a number of quick fixes to support the market, but the weak market sentiment was exacerbated by a poorly-communicated currency devaluation in August. Investors were also cautious prior to the increase in US interest rates which finally happened in December.
The challenging environment continued in early 2016 with volatility in Chinese markets and weak commodity prices. Chinese regulators implemented several measures to try to stabilise the markets, but its unorthodox actions resulted in investors becoming even more nervous. Sentiment eventually improved on the back of a stronger currency and the introduction of an economic stimulus. Meanwhile, hopes that major oil producers, such as Saudi Arabia and Russia, would limit production resulted in a recovery in prices after Brent crude, a major oil benchmark, fell below US$30 a barrel in January. Sentiment was also supported by a raft of monetary stimulus, with the European Central Bank announcing further measures and negative interest rates introduced in Japan. Towards the period end, the US Federal Reserve turned more cautious, triggering weakness in the US dollar and further enhancing the appetite for risk.
Portfolio Review
The Company's net asset value fell by 15.4% in total return terms over the year compared to a decline of 12.2% for the MSCI All Countries Asia Pacific ex Japan Index. The collapse in commodity prices during the year had a negative impact on performance with the corresponding decline in share prices of the portfolio's resource-sector holdings, such as PetroChina, BHP Billiton and Thailand's PTTEP. Keppel Corp, a Singapore-based oil-rig manufacturer, was also negatively affected. BHP Billiton's share price also suffered from the uncertainty associated with the disaster at its Samarco joint venture with Vale in Brazil.
Commodity weakness also had a negative impact on those banks with significant exposure to the sector, such as HSBC and Standard Chartered, which suffered from higher provisions for non-performing loans. The Investment Manager has been actively engaging with the management of both these banks and is encouraged by their efforts to strengthen their capital bases and reduce exposure to riskier assets. At current prices, there is significant upside to the franchise value of both lenders given that their management teams are focused on delivering long-term growth.
The portfolio benefited from its low exposure to China which was the worst-performing market over the reporting period. In addition, the portfolio had a zero holding in the Chinese insurance and banking stocks which fell sharply over the year.
Elsewhere, the portfolio's large position in India also had a positive impact on performance. Although the stock market was not immune to external events, the declines were pared by the positively received budget announcement in late February which promised assistance for beleaguered farmers and a 20% boost to infrastructure spending.
Samsung Electronics was one of the best performing stocks during the year, as its share price rose following the announcement of a share buyback, the first in a decade. The consumer electronics giant also pledged to return 30-50% of its free cash flow to shareholders over the next three years.
The increased market volatility presented opportunities to invest in good quality companies at more attractive valuations. As a result, several new holdings were added to the portfolio. These included Anhui Conch, one of the largest cement producers in China, with a low-cost structure and robust balance sheet; Hong Kong Exchanges and Clearing, which operates the city's stock exchange; and MTR Corp, Hong Kong's rail operator which enjoys strong operating cash flow and a unique rail-and-property mix that means it is one of the largest land owners in the city.
In addition, the portfolio acquired a holding in Astra International, a conglomerate with exposure to a broad range of businesses including automobiles, commodities, financial services and infrastructure that acts as a proxy for the Indonesian economy. Bank Central Asia, one of the country's largest private banks, was also acquired. While there may be short term headwinds for Indonesia's domestic economy, this bank has an impressive track record, conservative management and well-capitalised balance sheet. An initial holding in Vietnam was also purchased. Vietnam Dairy Products is a market leader in the dairy sector in Vietnam with attractive growth prospects in this frontier market.
The portfolio also acquired two new holdings in South Korea. AmorePacific Corp is a leading cosmetics manufacturer with a strong, diversified brand portfolio, which has been successful in growing market share in China. Naver Corp operates the dominant internet search business in South Korea. In contrast to many of its peers, the company is cash generative and has a strong balance sheet, which has enabled further investment in its other related businesses. These include its mobile messaging subsidiary, LINE, which is already a major player in markets such as Japan, Thailand, Taiwan and Indonesia.
In order to fund these purchases, the portfolio reduced its exposure to a number of holdings that had performed well, such as Ayala Land, China Mobile, OCBC and Samsung Electronics. It also sold two retail-related stocks, Li & Fung in Hong Kong and Woolworths in Australia, as both companies suffered from structural changes to the markets in which they operate. Reductions were also made to the portfolio's commodity exposure via the complete sale of PTTEP and South32, and part sale of BHP Billiton, taking advantage of the recent rebound in commodity prices.
Outlook
Against a backdrop of lackluster macroeconomic growth, markets are expected to remain volatile. The recent result of the UK's referendum on its European Union membership and upcoming political events, such as the US elections, could also result in greater uncertainty. Meanwhile, a larger than expected rise in US interest rates could also undermine growth prospects for the global economy. The outlook is further clouded by the divergence in monetary policy, with central banks in Europe and Japan expected to keep rates low or negative for longer. While these headwinds may persist, the longer term prospects for Asia remain positive.
At the corporate level, earnings growth may continue to be subdued but balance sheets and cash flow generation remain strong. In addition, the Company's underlying holdings are characterised by established franchises and high standards of corporate governance and transparency. Valuations remain attractive from both a historical perspective and relative to developed markets.
Aberdeen Asset Management Asia Limited
11 July 2016
STRATEGIC REPORT - PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The risks and uncertainties faced by the Company are reviewed by the Audit and Risk Committee in the form of a risk matrix, and the principal risks and uncertainties facing the Company at the current time, together with a description of the mitigating actions the Board has taken, are set out in the table below. The Board has carried out a robust assessment of these risks, which include those that would threaten its business model, future performance, solvency or liquidity. The principal risks associated with an investment in the Company's shares are published monthly on the Company's factsheet and they can be found in the pre-investment disclosure document ("PIDD") published by the Manager, both of which are available on the Company's website.
|
Risk |
Mitigating Action |
|
Investment strategy and objectives - the setting of an unattractive strategic proposition to the market and the failure to adapt to changes in investor demand may lead to the Company becoming unattractive to investors, a decreased demand for its shares and a widening discount.
|
The Board keeps the level of discount at which the Company's shares trade, as well as the investment objective and policy under review and holds an annual strategy meeting where it reviews investor relations reports and updates from the Investment Manager and the Company's Broker.
The Directors are updated at each Board meeting on the composition of, and any movements in, the shareholder register. |
|
Investment management - investing outside of the investment restrictions and guidelines set by the Board could result in poor performance and an inability to meet the Company's objectives, as well as a widening discount.
|
The Board meets the Manager on a regular basis and keeps investment performance under close review. Representatives of the Investment Manager attend all Board meetings and a detailed formal appraisal of the Aberdeen Group is carried out annually by the Management Engagement Committee.
The Board sets, and monitors, the investment restrictions and guidelines, and receives regular reports which include performance reporting on the implementation of the investment policy, the investment process and application of the guidelines. The Board also monitors the Company's share price relative to the net asset value per share.
Investment limits In addition to the limits set out in the investment policy, the Investment Manager is authorised by the Board to invest up to 15% of the Company's gross assets in any single stock, calculated at the time an investment is made.
|
|
Income/dividends - the level of the Company's dividends and future dividend growth will depend on the performance of the underlying portfolio. Any change in the tax treatment of dividends or interest received by the Company may reduce the level of net income available for the payment of dividends to shareholders.
|
The Directors review detailed income forecasts at each Board meeting. The Company has built up significant revenue reserves which can be drawn upon if required should there be a shortfall in revenue returns.
|
|
Financial - the financial risks associated with the portfolio could result in losses to the Company. |
The financial risks associated with the Company include market risk, liquidity risk and credit risk, all of which are mitigated by the Investment Manager. Further details of the steps taken to mitigate the financial risks associated with the portfolio are set out in note 16 to the financial statements. |
|
Gearing - a fall in the value of the Company's investment portfolio could be exacerbated by the impact of gearing. It could also result in a breach of loan covenants.
|
The Board sets the gearing limits within which the Investment Manager can operate. Gearing levels and compliance with loan covenants are monitored on an ongoing basis by the Manager and at regular Board meetings. In the event of a possible impending covenant breach, appropriate action would be taken to reduce borrowing levels.
In addition, AFML, as alternative investment fund manager, has set overall leverage limits. |
|
Regulatory - failure to comply with relevant laws and regulations could result in fines, loss of reputation and potentially loss of an advantageous tax regime. |
The Board and Manager monitor changes in government policy and legislation which may have an impact on the Company, and the Audit and Risk Committee monitors compliance with regulations by reviewing internal control reports from the Manager. From time to time the Board employs external advisers to advise on specific matters. |
|
Operational - the Company is dependent on third parties for the provision of all systems and services (in particular, those of the Aberdeen Group) and any control failures and gaps in their systems and services could result in a loss or damage to the Company. |
Written agreements are in place with all third party service providers.
The Board receives reports from the Manager on its internal controls and risk management throughout the year and receives assurances from all its other significant service providers on at least an annual basis.
The Manager monitors closely the control environments and quality of services provided by third parties, including those of the Depositary and Custodian, through service level agreements, regular meetings and key performance indicators.
Further details of the internal controls which are in place are set out in the Audit and Risk Committee's Report.
|
In addition to the risks stated above, the Board is conscious that investment in Asia Pacific securities, or in companies that derive significant revenue or profit from the Asia Pacific region, involves a greater degree of risk than that usually associated with investment in the securities in developed markets, which may have an adverse effect on economic returns or restrict investment opportunities. These risks include:
- greater risk of social, political and economic instability; the small size of the markets for securities of emerging markets issuers and associated low volumes of trading give rise to price volatility and a lack of liquidity;
- certain national policies which may restrict the investment opportunities available in respect of a fund, including restrictions on investing in issuers or industries deemed sensitive to national interests; changes in taxation laws and/or rates which may affect the value of the Company's investments;
- the absence in some markets of developed legal structures governing private or foreign investment and private property leading to supervision and regulation; and changes in government which may have an adverse effect on economic reform. Companies in the Asia Pacific region are not, in all cases, subject to the equivalent accounting, auditing and financial standards of those in the United Kingdom; and
- currency fluctuations which may affect the value of the Company's investments and the income derived therefrom.
PORTFOLIO - TEN LARGEST INVESTMENTS
As at 30 April 2016
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2016 |
assets |
2015 |
|
Company |
Industry |
Country |
£'000 |
% |
£'000 |
|
Aberdeen Global - Indian Equity Fund |
|
|
24,674 |
10.1 |
29,920 |
|
A tax-efficient pooled India fund with a long-term investment approach managed by the same team managing the Company. There is no double-charging of management fees. |
Collective Investment Scheme |
India |
|
|
|
|
Samsung Electronics Pref |
|
|
12,415 |
5.1 |
14,244 |
|
A leading semiconductor company which is also a major player in mobile phones and TFT-LCDs. The Company owns the preferred shares, which trade at a discount to the ordinary shares. |
Technology Hardware Storage & Peripherals |
South Korea |
|
|
|
|
Jardine Strategic Holdings |
|
|
11,247 |
4.6 |
12,750 |
|
A Hong Kong conglomerate with regional interests in retail, property, hotels and auto distribution. It provides the Company with a diversified exposure to the Asian consumer, backed by good distribution networks, established franchises and a decent valuation. |
Industrial Conglomerates |
Hong Kong |
|
|
|
|
Oversea-Chinese Banking Corporation |
|
|
10,714 |
4.4 |
12,866 |
|
A Singapore lender that is evolving into a regional financial services firm, with a meaningful presence in Southeast Asia. Its acquisition of Wing Hang Bank, subject to regulatory approval, will also give it access to greater China and the offshore yuan market, augmented by its stake in Bank of Ningbo. |
Banks |
Singapore |
|
|
|
|
AIA Group |
|
|
9,012 |
3.7 |
10,100 |
|
A leading pan-Asian life insurance company, it is poised to take advantage of Asia's growing affluence, backed by an effective agency force and solid fundamentals. |
Insurance |
Hong Kong |
|
|
|
|
Taiwan Semiconductor Manufacturing Company |
|
|
8,689 |
3.6 |
9,858 |
|
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 |
|
|
|
|
Ayala Land |
|
|
8,233 |
3.4 |
9,787 |
|
A leading property developer in the Philippines with an attractive land bank, well-respected brand and expertise across residential, commercial & retail sectors. |
Real Estate Management & Development |
Philippines |
|
|
|
|
City Developments |
|
|
7,726 |
3.2 |
9,238 |
|
A leading Singapore-based property developer with seasoned management. We see value in the company, not just from its sizeable low-cost land bank but also from its holding in the global Millennium & Copthorne hotel chain. |
Real Estate Management & Development |
Singapore |
|
|
|
|
Siam Cement (Foreign) |
|
|
7,725 |
3.2 |
8,605 |
|
Thailand's largest industrial conglomerate with operations in petrochemicals, cement, paper and building materials. |
Construction Materials |
Thailand |
|
|
|
|
United Overseas Bank |
|
|
7,420 |
3.0 |
9,435 |
|
A well-run Singapore lender that enjoys quality loan growth and decent risk management. The bank also looks good in regional terms with a strong capital base and impressive cost-to-income ratio. |
Banks |
Singapore |
|
|
|
|
Top ten investments |
|
|
107,855 |
44.3 |
|
PORTFOLIO - OTHER INVESTMENTS
As at 30 April 2016
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2016 |
assets |
2015 |
|
Company |
Industry |
Country |
£'000 |
% |
£'000 |
|
Rio Tinto (London Listing) |
Metals & Mining |
Australia |
7,106 |
2.9 |
8,911 |
|
HSBC Holdings |
Banks |
Hong Kong |
7,096 |
2.9 |
10,056 |
|
Singapore Telecommunication |
Diversified Telecommunication Services |
Singapore |
6,942 |
2.9 |
7,709 |
|
China Mobile |
Wireless Telecommunication Services |
China |
6,924 |
2.9 |
9,546 |
|
QBE Insurance Group |
Insurance |
Australia |
6,861 |
2.8 |
8,839 |
|
Swire PacificB |
Real Estate Management & Development |
Hong Kong |
6,828 |
2.8 |
8,452 |
|
Singapore Technologies Engineering |
Aerospace & Defence |
Singapore |
6,559 |
2.7 |
7,155 |
|
Standard Chartered (London listing) |
Banks |
United Kingdom |
5,798 |
2.4 |
8,813 |
|
CSL |
Biotechnology |
Australia |
5,179 |
2.1 |
3,031 |
|
BHP Billiton (London listing) |
Metals & Mining |
Australia |
4,860 |
2.0 |
8,921 |
|
Top twenty investments |
|
|
172,008 |
70.7 |
|
|
PetroChina H Shares |
Oil, Gas & Consumable Fuels |
China |
4,645 |
1.9 |
7,704 |
|
Taiwan Mobile |
Wireless Telecommunication Services |
Taiwan |
4,475 |
1.8 |
4,577 |
|
New India Inv. Trust |
Investment Trusts |
India |
4,143 |
1.7 |
4,170 |
|
Keppel Corporation |
Industrial Conglomerates |
Singapore |
4,119 |
1.7 |
6,427 |
|
Swire Properties |
Real Estate Management & Development |
Hong Kong |
3,363 |
1.4 |
4,244 |
|
E-Mart |
Food & Staples Retailing |
South Korea |
3,327 |
1.4 |
3,253 |
|
Unilever Indonesia |
Household Products |
Indonesia |
2,697 |
1.1 |
3,131 |
|
Dairy Farm International |
Food & Staples Retailing |
Hong Kong |
2,664 |
1.1 |
3,441 |
|
Aberdeen Asian Smaller Companies Inv. TrustC |
Investment Trusts |
Other Asia |
2,663 |
1.1 |
2,920 |
|
Venture Corp |
Electronic Equipment, Instruments & Components |
Singapore |
2,594 |
1.1 |
2,902 |
|
Top thirty investments |
|
|
206,698 |
85.0 |
|
|
M.P. Evans Group |
Food Products |
United Kingdom |
2,557 |
1.1 |
2,355 |
|
DBS Group Holdings |
Banks |
Singapore |
2,495 |
1.0 |
3,330 |
|
Hong Kong Exchanges & Clearing |
Diversified Financial Services |
Hong Kong |
2,427 |
1.0 |
- |
|
CIMB Group Holdings |
Banks |
Malaysia |
2,419 |
1.0 |
3,110 |
|
Public Bank Berhad |
Banks |
Malaysia |
2,353 |
1.0 |
2,879 |
|
John Keells HoldingsD |
Industrial Conglomerates |
Sri Lanka |
2,326 |
0.9 |
2,725 |
|
Bank Central Asia |
Banks |
Indonesia |
2,202 |
0.9 |
- |
|
Hang Lung Group |
Real Estate Management & Development |
Hong Kong |
1,847 |
0.8 |
3,033 |
|
Hang Lung Properties |
Real Estate Management & Development |
Hong Kong |
1,795 |
0.7 |
2,899 |
|
Aitken Spence & Co. |
Industrial Conglomerates |
Sri Lanka |
1,673 |
0.7 |
2,209 |
|
Top forty investments |
|
|
228,792 |
94.1 |
|
|
MTR Corporation |
Road & Rail |
Hong Kong |
1,627 |
0.7 |
869 |
|
ASM Pacific Technology |
Semiconductors & Semiconductor Equipment |
Hong Kong |
1,488 |
0.6 |
2,193 |
|
Astra International |
Automobiles & Parts |
Indonesia |
1,297 |
0.5 |
- |
|
Naver Corporation |
Internet Software & Services |
South Korea |
1,254 |
0.5 |
- |
|
DFCC Bank |
Banks |
Sri Lanka |
1,206 |
0.5 |
1,873 |
|
Amorepacific Corporation |
Personal Goods |
South Korea |
1,118 |
0.5 |
- |
|
Anhui Conch Cement H Shares |
Construction Materials |
China |
1,109 |
0.4 |
- |
|
Vietnam Dairy Products |
Food Products |
Vietnam |
1,048 |
0.4 |
- |
|
National Development Bank |
Banks |
Sri Lanka |
970 |
0.4 |
1,166 |
|
Total investments |
|
|
239,909 |
98.6 |
|
|
Net current assetsE |
|
|
3,320 |
1.4 |
|
|
Total assets |
|
|
243,229 |
100.0 |
|
|
|
|||||
|
B Holding merges two equity holdings, with values split as follows: A shares £475,000 (2015 - £562,000) and B shares £6,353,000 (2015 - £7,890,000). |
|||||
|
C Holding comprises equity and convertible unsecured loan stock split £2,177,000 (2015 - £2,413,000) and £486,000 (2015 - £507,000). |
|||||
|
D Holding comprises equity and warrant £2,318,000 (2015 - £2,687,000) and £8,000 (2015 - £23,000). |
|||||
|
E Excluding bank loans of £26,986,000. |
|||||
|
Note: Unless otherwise stated, foreign stock is held and all investments are equity holdings. |
|||||
PORTFOLIO - CHANGES IN ASSET DISTRIBUTIONS
|
|
Value at |
|
Sales |
Appreciation/ |
Value at |
|
|
30 April 2015 |
Purchases |
proceeds |
(depreciation) |
30 April 2016 |
|
Country |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Australia |
33,779 |
2,034 |
4,759 |
(7,048) |
24,006 |
|
China |
19,284 |
1,258 |
3,204 |
(4,660) |
12,678 |
|
Hong Kong |
61,359 |
3,009 |
2,640 |
(12,334) |
49,394 |
|
India |
34,090 |
- |
5,200 |
(73) |
28,817 |
|
Indonesia |
3,131 |
3,241 |
435 |
259 |
6,196 |
|
Malaysia |
5,989 |
56 |
263 |
(1,010) |
4,772 |
|
Other Asia |
2,920 |
- |
- |
(257) |
2,663 |
|
Philippines |
9,787 |
- |
475 |
(1,079) |
8,233 |
|
Singapore |
59,062 |
1,246 |
1,573 |
(10,166) |
48,569 |
|
South Korea |
17,497 |
3,488 |
1,729 |
(1,142) |
18,114 |
|
Sri Lanka |
7,973 |
270 |
- |
(2,068) |
6,175 |
|
Taiwan |
14,435 |
- |
1,181 |
(90) |
13,164 |
|
Thailand |
11,009 |
- |
1,335 |
(1,949) |
7,725 |
|
United Kingdom |
11,168 |
1,504 |
284 |
(4,033) |
8,355 |
|
Vietnam |
- |
1,027 |
- |
21 |
1,048 |
|
Total investments |
291,483 |
17,133 |
23,078 |
(45,629) |
239,909 |
|
Net current assetsA |
4,000 |
- |
- |
(680) |
3,320 |
|
|
_________ |
_________ |
_________ |
_________ |
_________ |
|
Total assets less current liabilities |
295,483 |
17,133 |
23,078 |
(46,309) |
243,229 |
|
|
_________ |
_________ |
_________ |
_________ |
_________ |
|
|
|
|
|
|
|
|
A Excluding bank loans of £26,986,000. |
|||||
DIRECTORS' REPORT (EXTRACT)
The Directors present their report and audited financial statements for the year ended 30 April 2016.
Results and Dividends
An interim dividend of 1.0p per Ordinary share was paid on 29 January 2016 and the Board recommends a final dividend of 2.9p per Ordinary share, payable on 2 September 2016 to shareholders on the register on 5 August 2016. The relevant ex-dividend date is 4 August 2016. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.
Investment Trust Status
The Company is registered as a public limited company (registered in England and Wales No. 02377879) and is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company has been approved by HM Revenue & Customs as an investment trust subject to it continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 May 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 30 April 2016 so as to enable it to comply with the ongoing requirements for investment trust status.
Individual Savings Accounts
The Company has conducted its affairs in such a way as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.
Capital Structure
The issued Ordinary share capital at 30 April 2016 consisted of 120,519,010 Ordinary shares of 5p and 6,416,655 shares held in treasury. During the year the Company purchased 3,814,000 Ordinary shares to be held in treasury and, since the end of the year, has purchased a further 708,000 Ordinary shares to be held in treasury. At the date of approval of this Report there were 119,811,010 Ordinary shares of 5p in issue and 7,124,655 shares held in treasury.
Voting Rights
Each Ordinary shareholder is entitled to one vote on a show of hands at general meetings of the Company and, on a poll, to one vote for every share held. The Ordinary shares, excluding treasury shares, carry a right to receive dividends. On a winding up or other return of capital, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.
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.
Management Agreement
The Company has appointed Aberdeen Fund Managers Limited ("AFML" or the "Manager"), a wholly owned subsidiary of Aberdeen Asset Management PLC, as its alternative investment fund manager ("AIFM"). AFML has been appointed to provide investment management, risk management, administration and company secretarial services to the Company as well as to carry out promotional activities on the Company's behalf. The Company's portfolio is managed by Aberdeen Asset Management Asia Limited ("AAM Asia") by way of a group delegation agreement in place between AFML and AAM Asia. In addition, AFML has sub-delegated promotional activities to Aberdeen Asset Managers Limited and administrative and secretarial services to Aberdeen Asset Management PLC. Fees payable for promotional activities are shown in note 4 to the financial statements.
The management fee, details of which are shown in note 3 to the financial statements, is calculated monthly in arrears at a rate of 1% per annum of the net asset value of the Company excluding funds managed by the Aberdeen Group of companies. The management agreement is terminable on not less than 12 months' notice. In the event of termination by the Company on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period.
As disclosed in the Chairman's Statement, the Board has agreed with the Manager that, with effect from 1 July 2016, the management fee will be calculated at a reduced rate 0.85% per annum of the net asset value of the Company excluding funds managed by the Aberdeen Group of companies. All other terms of the management agreement are unchanged.
The terms and conditions of the Manager's appointment and its performance are reviewed by the Management Engagement Committee on at least an annual basis.
Substantial Interests
At 30 April 2016 the following interests in the issued Ordinary share capital of the Company had been disclosed in accordance with the requirements of the FCA's Disclosure and Transparency Rules:
|
Shareholder |
Number of Ordinary shares held |
% heldB |
|
Funds managed by Rathbones |
11,391,170 |
9.4 |
|
Aberdeen Investment Trust Share PlansA |
9,857,865 |
8.1 |
|
Old Mutual Plc |
8,529,464 |
7.0 |
|
Derbyshire County Council |
6,350,000 |
5.2 |
|
Charles Stanley |
5,204,687 |
4.3 |
|
Clients of Smith & Williamson |
5,034,445 |
4.1 |
|
Investec Wealth & Investment Ltd |
4,931,648 |
4.0
|
A Non-beneficial interest
B Based on 120,519,010 Ordinary shares in issue as at 30 April 2016
Since the end of the year, City of London Investment Management Company Limited has disclosed a holding of 6,017,273 Ordinary shares (5.0% of the issued Ordinary share capital). There have been no other changes notified to the Company as at the date of approval of this Report.
Directors
Throughout the year the Board comprised five Directors, consisting of an independent non-executive Chairman and four non-executive Directors. Mr George retired as a Director on 30 April 2016. All Directors, with the exception of Mr Young, are considered by the Board to be independent, and free of any material relationship with the Aberdeen Group. Mr Young is a Director of various entities connected with, or within, the Aberdeen Group and, as such, is not considered to be independent.
Directors attended scheduled Board and Committee meetings during the year ended 30 April 2016 as shown in the table below (with their eligibility to attend the relevant meeting in brackets).
|
Director |
Board Meetings |
Audit and Risk Committee Meetings |
Nomination Committee Meetings |
Management Engagement Committee Meetings |
|
D ShearerA |
6 (6) |
2 (2) |
2 (2) |
1 (1) |
|
N GeorgeB |
5 (6) |
2 (2) |
0 (1) |
1 (1) |
|
J Lorimer |
6 (6) |
2 (2) |
2 (2) |
1 (1) |
|
S Rippingall |
6 (6) |
2 (2) |
2 (2) |
1 (1) |
|
H YoungC |
6 (6) |
- (-) |
2 (2) |
- (-) |
A Mr Shearer is not a member of the Audit and Risk Committee, although attends by invitation.
B Retired on 30 April 2016.
C Mr Young is not a member of the Audit and Risk or Management Engagement Committees.
The Board meets more frequently when business needs require.
Mr Lorimer retires by rotation at the Annual General Meeting and Mr Shearer, having served for more than nine years, will also retire at the Annual General Meeting. Being eligible, both Messrs Lorimer and Shearer offer themselves for re-election. As a non-independent Director, Mr Young submits himself for annual re-election.
The Board believes that Messrs Lorimer and Shearer remain independent of the Manager and free from any relationship which could materially interfere with the exercise of their judgement on issues of strategy, performance, resources and standards of conduct. In addition, the Board confirms that, following a formal performance evaluation, the performance of all three Directors seeking re-election continues to be effective and demonstrates commitment to the role. The Board therefore recommends the re-appointment of Messrs Lorimer, Shearer and Young at the Annual General Meeting.
Since the end of the year, the Board has announced that Ms Marion Sears will be appointed as an independent non-executive Director with effect from 1 August 2016. The Board considers Ms Sears to have the range of skills and experience needed to complement those of the other Directors and the Board therefore recommends her election at the Annual General Meeting.
Directors' and Officers' Liability Insurance
The Company's Articles of Association indemnify each of the Directors out of the assets of the Company against any liabilities incurred by them as a Director of the Company in defending proceedings, or in connection with any application to the Court in which relief is granted. In addition, the Directors have been granted qualifying indemnity provisions by the Company which are currently in force. Directors' and Officers' liability insurance cover has been maintained throughout the year at the expense of the Company.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, each Director prepares a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his/her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his or her wider duties is affected. Each Director is required to notify the Company Secretary of any potential or actual conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.
No Director has a service contract with the Company although all Directors are issued with letters of appointment.
The Board takes a zero-tolerance approach to bribery and has adopted appropriate procedures designed to prevent bribery. The Manager also takes a zero-tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption.
Corporate Governance
The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code (the "UK Code"), as published in September 2014 and effective for financial years commencing on or after 1 October 2014, which is available on the Financial Reporting Council's website: frc.org.uk
The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance (the "AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies (the "AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment trusts. The AIC Code and AIC Guide are available on the AIC's website: theaic.co.uk
The Board considers that reporting in accordance with the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders.
The Board confirms that, during the year, the Company complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.
The UK Code includes provisions relating to:
- the role of the chief executive (A.1.2);
- executive directors' remuneration (D.1.1 and D.1.2); and
- the need for an internal audit function (C.3.6).
For the reasons set out in the AIC Guide, and as explained in the UK Code, the Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. The Company is also non-compliant with Provision A.4.1 of the UK Code which states that the Board should appoint a Senior Independent Director. The Board has considered whether a Senior Independent Director should be appointed and has concluded that, given the current size of the Board and the fact that it is comprised entirely of non-executive Directors, this is unnecessary at the present time.
The full text of the Company's Corporate Governance Statement will be available on its website.
Going Concern
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 cash flow projections and compliance with banking covenants. The Directors believe that, after making enquiries, the Company has adequate resources to continue its operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of this Report. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.
Accountability and Audit
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 they have taken all the steps that they would reasonably be expected to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
Independent Auditor
The Company's auditor, KPMG LLP, has indicated its willingness to remain in office. The Board will place resolutions before the Annual General Meeting to re-appoint KPMG LLP as auditor for the ensuing year and to authorise the Directors to determine its remuneration.
Stewardship and Proxy Voting
The purpose of the FRC's UK Stewardship Code is to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and assist institutional investors with the efficient exercise of their governance responsibilities. The FRC encourages institutional investors to make a statement of their commitment to the Stewardship Code.
The Board has delegated responsibility for actively monitoring the activities of portfolio companies to the Manager who has in turn delegated this responsibility to the Investment Manager. The Board has reviewed and accepts the Investment Manager's corporate governance principles, which may be found on its website, at: aberdeen-asset.com/doc.nsf/Lit/LegalDocumentationGroupCorporateGovernancePrinciples. These principles set out the Investment Manager's framework on corporate governance, proxy voting and shareholder engagement in relation to the companies in which it has invested or is considering investing. The Board has also reviewed the Investment Manager's Disclosure Response to the UK Stewardship Code, which appears on its website at the web-address given above.
The Investment Manager is responsible for reviewing, on a regular basis, the annual reports, circulars and other publications produced by portfolio companies and for attending company meetings. The Investment Manager, in the absence of explicit instruction from the Board, is empowered to use discretion in the exercise of the Company's voting rights.
The Board recognises and supports the Aberdeen Group's policy of active engagement with investee companies and the voting of all of the shares held by the Company. The Board receives regular reports on the exercise of the Company's voting rights and discusses any issues arising with the Investment Manager. It is the Board's view that having an active voting policy and a process for monitoring the Investment Manager's exercise of those votes, especially in relation to controversial issues, aids the efficient exercise of the Company's governance responsibilities.
Stewardship and ESG
The Board is aware of its duty to act in the interests of the Company. The Board supports the Aberdeen Group, a signatory to the UNPRI (United Nations Principles for Responsible Investment), in considering holistically the material risks posed by each investment, both from a financial and an ESG (environmental, social and corporate governance) perspective. The Investment Manager takes into account all the risks and opportunities presented by potential and current holdings as part of its determination of the quality of each investment. The Investment Manager also considers the extent to which investee companies consider risks and opportunities when setting their targets, remuneration and company strategy. The Investment Manager engages with investee companies on their material risks and opportunities and actively encourages them to adhere to best practice in managing their material issues. The Company's ultimate objective is to deliver superior investment returns for its shareholders and the consideration of the key risks and opportunities of the holdings in the portfolio is a vital part of the Investment Manager's due diligence and stewardship practice.
Relations with Shareholders
The Directors place a great deal of importance on communication with shareholders. Shareholders and investors may obtain up to date information on the Company through its website and the Manager's information service. The Annual Report is widely distributed to other parties who have an interest in the Company's performance.
The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the management group (including the Company Secretary or the Manager) in situations where direct communication is required, and representatives from the Board meet with major shareholders on an annual basis in order to gauge their views.
In addition, the Company Secretary only acts on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds personally as appropriate.
The Notice of the Annual General Meeting included within the Annual Report is sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board or Manager at the meeting. The Company Secretary is available to answer general shareholder queries at any time throughout the year.
The Company has adopted a nominee code, which ensures that, when shares in the Company are held in the name of nominee companies and notification has been received in advance, nominee companies will be provided with copies of shareholder communications for distribution to their investors. Nominee investors may attend and speak at general meetings.
Participants in the Aberdeen Asset Managers Limited Share Plan and ISA, whose shares are held in the nominee name of the plan administrator, are given the opportunity to vote at the Annual General Meeting by means of a Letter of Direction enclosed with the Annual Report. When forwarded to the plan administrator, the voting instructions given in the Letter of Direction will in turn be reflected in the proxy votes lodged by the plan administrator.
Annual General Meeting
The Annual General Meeting will be held at the offices of Aberdeen Asset Management PLC, Bow Bells House, 1 Bread Street, London EC4M 9HH on 31 August 2016 at 12 noon.
By order of the Board
Aberdeen Asset Management PLC
Company Secretary
11 July 2016
STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year ended 30 April 2016 |
Year ended 30 April 2015 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
(Losses)/gains on investments held at fair value through profit or loss |
9 |
- |
(45,629) |
(45,629) |
- |
37,077 |
37,077 |
|
Income |
2 |
7,004 |
- |
7,004 |
7,412 |
- |
7,412 |
|
Management fee |
3 |
(829) |
(829) |
(1,658) |
(954) |
(954) |
(1,908) |
|
Administrative expenses |
4 |
(734) |
- |
(734) |
(835) |
- |
(835) |
|
Exchange losses |
|
- |
(959) |
(959) |
- |
(1,605) |
(1,605) |
|
|
|
_______ |
_______ |
______ |
_______ |
______ |
_______ |
|
Net return on ordinary activities before finance costs and taxation |
|
5,441 |
(47,417) |
(41,976) |
5,623 |
34,518 |
40,141 |
|
|
|
|
|
|
|
|
|
|
Interest payable and similar charges |
5 |
(227) |
(227) |
(454) |
(204) |
(204) |
(408) |
|
|
|
_______ |
_______ |
______ |
_______ |
______ |
_______ |
|
Return on ordinary activities before taxation |
|
5,214 |
(47,644) |
(42,430) |
5,419 |
34,314 |
39,733 |
|
|
|
|
|
|
|
|
|
|
Taxation |
6 |
(226) |
- |
(226) |
(214) |
- |
(214) |
|
|
|
_______ |
_______ |
______ |
_______ |
______ |
_______ |
|
Return on ordinary activities after taxation |
|
4,988 |
(47,644) |
(42,656) |
5,205 |
34,314 |
39,519 |
|
|
|
_______ |
_______ |
______ |
_______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
|
Return per Ordinary share (pence) |
8 |
4.06 |
(38.78) |
(34.72) |
4.18 |
27.56 |
31.74 |
|
|
|
_______ |
_______ |
______ |
_______ |
______ |
_______ |
|
|
|
|
|
|
|
|
|
|
The total column of this statement represents the profit and loss account of the Company. |
|||||||
|
A statement of Total recognised gains and losses has not been prepared and all gains and losses are recognised in the Statement of Comprehensive Income. |
|||||||
|
All revenue and capital items are derived from continuing operations. |
|||||||
|
The accompanying notes are an integral part of the financial statements. |
|||||||
STATEMENT OF FINANCIAL POSITION
|
|
|
As at |
As at |
|
|
|
30 April 2016 |
30 April 2015 |
|
|
Notes |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
9 |
239,909 |
291,483 |
|
|
|
_________ |
_________ |
|
Current assets |
|
|
|
|
Loans and receivables |
10 |
1,319 |
1,952 |
|
Cash at bank and in hand |
|
2,369 |
2,614 |
|
|
|
_________ |
_________ |
|
|
|
3,688 |
4,566 |
|
|
|
_________ |
_________ |
|
Creditors: amounts falling due within one year |
11 |
|
|
|
Loans |
|
(21,986) |
(21,085) |
|
Other creditors |
|
(368) |
(566) |
|
|
|
_________ |
_________ |
|
|
|
(22,354) |
(21,651) |
|
|
|
_________ |
_________ |
|
Net current liabilities |
|
(18,666) |
(17,085) |
|
|
|
_________ |
_________ |
|
Total assets less current liabilities |
|
221,243 |
274,398 |
|
|
|
|
|
|
Non-current creditors |
11 |
|
|
|
Loans |
|
(5,000) |
(5,000) |
|
|
|
_________ |
_________ |
|
Net assets |
|
216,243 |
269,398 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
Share capital and reserves |
|
|
|
|
Called-up share capital |
12 |
6,347 |
6,347 |
|
Share premium account |
|
17,955 |
17,955 |
|
Special reserve |
|
5,411 |
11,218 |
|
Capital redemption reserve |
|
10,207 |
10,207 |
|
Capital reserve |
13 |
163,906 |
211,550 |
|
Revenue reserve |
|
12,417 |
12,121 |
|
|
|
_________ |
_________ |
|
Equity shareholders' funds |
|
216,243 |
269,398 |
|
|
|
_________ |
_________ |
|
|
|
|
|
|
Net asset value per Ordinary share (pence) |
14 |
179.43p |
216.67p |
|
|
|
_________ |
_________ |
The accompanying notes are an integral part of the financial statements.
STATEMENT OF CHANGES IN EQUITY
|
For the year ended 30 April 2016 |
|
|
|
|
|
|
|
|
|
|
|
Share |
|
Capital |
|
|
|
|
|
|
Share |
premium |
Special |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
reserve |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance at 30 April 2015 |
6,347 |
17,955 |
11,218 |
10,207 |
211,550 |
12,121 |
269,398 |
|
|
Buy back of Ordinary shares for treasury |
- |
- |
(5,807) |
- |
- |
- |
(5,807) |
|
|
Return on ordinary activities after taxation |
- |
- |
- |
- |
(47,644) |
4,988 |
(42,656) |
|
|
Dividends paid (see note 7) |
- |
- |
- |
- |
- |
(4,692) |
(4,692) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|
Balance at 30 April 2016 |
6,347 |
17,955 |
5,411 |
10,207 |
163,906 |
12,417 |
216,243 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
For the year ended 30 April 2015 |
|
|
|
|
|
|
|
|
|
|
|
Share |
|
Capital |
|
|
|
|
|
|
Share |
premium |
Special |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
reserve |
reserve |
reserve |
reserve |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance at 30 April 2014 |
6,347 |
17,955 |
11,617 |
10,207 |
177,236 |
11,400 |
234,762 |
|
|
Buy back of Ordinary shares for treasury |
- |
- |
(399) |
- |
- |
- |
(399) |
|
|
Return on ordinary activities after taxation |
- |
- |
- |
- |
34,314 |
5,205 |
39,519 |
|
|
Dividends paid (see note 7) |
- |
- |
- |
- |
- |
(4,484) |
(4,484) |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|
Balance at 30 April 2015 |
6,347 |
17,955 |
11,218 |
10,207 |
211,550 |
12,121 |
269,398 |
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
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. |
||||||||
STATEMENT OF CASHFLOWS
|
|
|
Year ended |
Year ended |
|
|
|
30 April 2016 |
30 April 2015 |
|
|
Notes |
£'000 |
£'000 |
|
Operating activities |
|
|
|
|
Net return on ordinary activities before finance costs and taxation |
|
(41,976) |
40,141 |
|
Adjustment for: |
|
|
|
|
Losses/(gains) on investments |
|
45,629 |
(37,077) |
|
Currency losses |
|
959 |
1,605 |
|
Decrease/(increase) in accrued dividend income |
|
619 |
(460) |
|
(Increase)/decrease in other debtors |
|
(7) |
104 |
|
(Decrease)/increase in other creditors |
|
(261) |
61 |
|
Stock dividends included in investment income |
|
(521) |
(906) |
|
Overseas withholding tax |
|
(205) |
(214) |
|
|
|
_______ |
_______ |
|
Net cash flow from operating activities |
|
4,237 |
3,254 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Purchases of investments |
|
(16,549) |
(24,715) |
|
Sales of investments |
|
23,078 |
23,265 |
|
|
|
_______ |
_______ |
|
Net cash from/(used in) investing activities |
|
6,529 |
(1,450) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Equity dividends paid |
7 |
(4,692) |
(4,484) |
|
Interest paid |
|
(453) |
(412) |
|
Loans drawdown |
|
- |
5,000 |
|
Buy back of Ordinary shares for treasury |
12 |
(5,807) |
(399) |
|
|
|
_______ |
_______ |
|
Net cash used in financing activities |
|
(10,952) |
(295) |
|
|
|
_______ |
_______ |
|
(Decrease)/increase in cash |
|
(186) |
1,509 |
|
|
|
_______ |
_______ |
|
Analysis of changes in cash during the year |
|
|
|
|
Opening balance |
|
2,614 |
1,037 |
|
Effect of exchange rate fluctuations on cash held |
|
(59) |
68 |
|
(Decrease)/increase in cash as above |
|
(186) |
1,509 |
|
|
|
_______ |
_______ |
|
Closing balances |
|
2,369 |
2,614 |
|
|
|
_______ |
_______ |
The accompanying notes are an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS:
For the year ended 30 April 2016
|
1. |
Accounting policies |
|
|
|
(a) |
Basis of accounting |
|
|
|
The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. The financial statements are prepared in sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted. |
|
|
|
|
|
|
|
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is included in the Directors' Report (unaudited). |
|
|
|
|
|
|
|
These financial statements are the first since FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) came into effect for accounting periods beginning on or after 1 January 2015. An assessment of the impact of adopting FRS 102 has been carried out and found that no restatement of balances as at the transition date, 1 May 2014, or comparative figures in the Statement of Financial Position or the Statement of Comprehensive Income is considered necessary. The Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016. |
|
|
|
|
|
|
(b) |
Valuation of investments |
|
|
|
Listed investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised on the trade date at cost. Subsequent to initial recognition, investments are valued at fair value which for listed investments is deemed to be bid market prices. Gains and losses arising from changes in fair value are included as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserve. |
|
|
|
|
|
|
(c) |
Income |
|
|
|
Dividends, including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. 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. Fixed returns on non-equity shares are recognised on a time apportioned basis so as to reflect the effective yield on shares. Other returns on non-equity shares are recognised when the right to return is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the scrip dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis. |
|
|
|
|
|
|
(d) |
Expenses |
|
|
|
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Statement of Comprehensive Income except as follows: |
|
|
|
· expenses directly relating to the acquisition or disposal of an investment, in which case, they are added to the cost of the investment or deducted from the sale proceeds. Such transaction costs are disclosed in accordance with the SORP. These expenses are charged to the capital column of the Statement of Comprehensive Income and are separately identified and disclosed in note 9; and |
|
|
|
· the Company charges 50% of investment management fees and finance costs to the capital column of the Statement of Comprehensive Income, 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. |
|
|
|
|
|
|
(e) |
Deferred taxation |
|
|
|
Deferred taxation is provided on all timing differences, that have originated but not reversed at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Statement of Financial Position date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. |
|
|
|
|
|
|
(f) |
Foreign currencies |
|
|
|
Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Statement of Financial Position date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on the realisation of foreign currencies are recognised in the Statement of Comprehensive Income and are then transferred to the capital reserve. |
|
|
|
|
|
|
(g) |
Dividends payable |
|
|
|
Interim and final dividends are dealt with in the period in which they are paid. |
|
|
|
|
|
|
(h) |
Nature and purpose of reserves |
|
|
|
Called up share capital |
|
|
|
The Ordinary share capital on the Statement of Financial Position relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, is a transfer made to the capital redemption reserve. |
|
|
|
|
|
|
|
Share premium account |
|
|
|
The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising ordinary shares of 5p. |
|
|
|
|
|
|
|
Special reserve |
|
|
|
The special reserve arose following Court approval in 1999 to transfer £50m from the share premium account. This reserve is distributable and its function is to fund any share buy backs to be held in treasury by the Company. |
|
|
|
|
|
|
|
Capital redemption reserve |
|
|
|
The capital redemption reserve is used to record the amount equivalent to the nominal value of any of the Company's own shares purchased and cancelled in order to maintain the Company's capital. |
|
|
|
|
|
|
|
Capital reserve |
|
|
|
Gains or losses on disposal of investments and changes in fair values of investments are transferred to the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. The costs of share buybacks to be held in treasury may also be deducted from this reserve should the special reserve be extinguished. |
|
|
|
|
|
|
|
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. |
|
|
|
|
|
|
(i) |
Accounting judgements |
|
|
|
The Company's investments and borrowings are made in a number of currencies, however the Board considers the Company's functional currency to be Sterling. In arriving at this conclusion, the Board considered that the shares of the Company are listed on the London Stock Exchange, it is regulated in the United Kingdom, principally having its shareholder base in the United Kingdom, pays dividends and expenses in Sterling. Consequently, the Board also considers the Company's presentational currency to be Sterling. |
|
|
|
2016 |
2015 |
|
2. |
Income |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
UK dividend income |
1,434 |
1,575 |
|
|
UK unfranked investment income |
16 |
16 |
|
|
Overseas dividends |
5,029 |
4,912 |
|
|
Scrip dividends |
521 |
906 |
|
|
|
_______ |
_______ |
|
|
|
7,000 |
7,409 |
|
|
|
_______ |
_______ |
|
|
Other income |
|
|
|
|
Deposit interest |
4 |
3 |
|
|
|
_______ |
_______ |
|
|
Total income |
7,004 |
7,412 |
|
|
|
_______ |
_______ |
|
|
|
2016 |
2015 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
3. |
Management fee |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Management fee |
829 |
829 |
1,658 |
954 |
954 |
1,908 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
||||||
|
|
Management and secretarial services are provided by Aberdeen Fund Managers Limited ("AFML"). |
||||||
|
|
|
||||||
|
|
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, with the following provisions for commonly managed funds: |
||||||
|
|
· the Company's investments in Aberdeen Global - Indian Equity Fund, Aberdeen Asian Smaller Companies Investment Trust PLC and New India Investment Trust PLC are excluded from the calculation of the investment management fee. The total value of such commonly managed funds, on a mid price basis (basis on which management fee is calculated), at the year end was £31,490,000 (2015 - £37,016,000). |
||||||
|
|
· the Company receives a rebate from the Manager for the amount of fees in excess of 1% of net assets charged by the Manager for any commonly managed fund. |
||||||
|
|
|
||||||
|
|
The balance due to AFML at the year end, net of any rebates was £138,000 (2015 - £342,000). |
||||||
|
|
|
||||||
|
|
The agreement is terminable by either party on not less than twelve months' notice to the other. |
||||||
|
|
|
2016 |
2015 |
|
4. |
Administrative expenses |
£'000 |
£'000 |
|
|
Promotional activities |
158 |
225 |
|
|
Directors' fees |
136 |
136 |
|
|
Safe custody fees |
111 |
110 |
|
|
Auditor's remuneration: |
|
|
|
|
· fees payable to the Company's auditor for the audit of the Company's annual accounts |
15 |
15 |
|
|
· fees payable to the Company's auditor for the review of the Company's half yearly accounts |
4 |
4 |
|
|
Other administration expenses |
310 |
345 |
|
|
|
_______ |
_______ |
|
|
|
734 |
835 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The Company has an agreement with AFML for the provision of promotional activities in relation to the Company's participation in the Aberdeen Investment Trust Share Plan and ISA. The total fees paid and payable under the agreement were £158,000 (2015 - £225,000) and the sum due to AFML at the year end was £13,000 (2015 - £75,000). |
||
|
|
|
||
|
|
No pension contributions were made in respect of any of the Directors. |
||
|
|
|
||
|
|
The Company does not have any employees. |
||
|
|
|
2016 |
2015 |
|||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
5. |
Interest payable and similar charges |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
On bank loans and overdrafts |
227 |
227 |
454 |
204 |
204 |
408 |
|
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
2016 |
2015 |
||||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
||
|
6. |
Taxation |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
(a) |
Analysis of charge for the year |
|
|
|
|
|
|
|
|
|
|
Overseas tax |
278 |
- |
278 |
258 |
- |
258 |
|
|
|
|
Overseas tax reclaimable |
(52) |
- |
(52) |
(44) |
- |
(44) |
|
|
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
Total tax charge for the year |
226 |
- |
226 |
214 |
- |
214 |
|
|
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
Factors affecting the tax charge for the year
|
|||||||
|
|
|
The tax assessed for the year is the current standard rate of corporation tax in the UK. |
|||||||
|
|
|
|
|||||||
|
|
|
|
2016 |
2015 |
|
||||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
Net profit/(loss) on ordinary activities before taxation |
5,214 |
(47,644) |
(42,430) |
5,419 |
34,314 |
39,733 |
|
|
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
2015 |
|
||||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
Corporation tax at of 20% (2015 - effective rate of 20.92%) |
1,043 |
(9,529) |
(8,486) |
1,134 |
7,178 |
8,312 |
|
|
|
|
Effects of: |
|
|
|
|
|
|
|
|
|
|
Non-taxable UK dividend income |
(290) |
- |
(290) |
(374) |
- |
(374) |
|
|
|
|
Non-taxable overseas dividends |
(1,066) |
- |
(1,066) |
(1,161) |
- |
(1,161) |
|
|
|
|
Overseas tax suffered |
226 |
- |
226 |
214 |
- |
214 |
|
|
|
|
Surplus management expenses and loan relationship deficits not relieved |
313 |
211 |
524 |
401 |
243 |
644 |
|
|
|
|
Non-taxable exchange losses |
- |
192 |
192 |
- |
336 |
336 |
|
|
|
|
Non-taxable losses/(gains) on investments |
- |
9,126 |
9,126 |
- |
(7,757) |
(7,757) |
|
|
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
Total tax charge |
226 |
- |
226 |
214 |
- |
214 |
|
|
|
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
Provision for deferred taxation |
|
||||||
|
|
|
No provision for deferred taxation has been made in the current year or in the prior year. |
|
||||||
|
|
|
|
|
||||||
|
|
|
The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust company. |
|
||||||
|
|
|
|
|
||||||
|
|
(d) |
Factors that may affect future tax charges |
|
||||||
|
|
|
At the year end, the Company has an unrecognised deferred tax asset of £3,392,000 (2015 - £2,903,000) arising as a result of excess management expenses and non-trade loan relationship deficits. These expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. |
|
||||||
|
|
|
2016 |
2015 |
|
7. |
Dividends |
£'000 |
£'000 |
|
|
Amounts recognised as distributions to equity holders in the period: |
|
|
|
|
Final dividend for 2015 - 2.8p (2014 - 2.6p) |
3,469 |
3,238 |
|
|
Interim dividend for 2016 - 1.0p (2015 - 1.0p) |
1,223 |
1,246 |
|
|
|
______ |
______ |
|
|
|
4,692 |
4,484 |
|
|
|
______ |
______ |
|
|
|
|
|
|
|
The proposed final dividend for 2016 is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. |
||
|
|
|
||
|
|
The table below sets out the proposed final dividend, together with the interim dividend paid, in respect of the financial year, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £4,988,000 (2015 - £5,205,000). |
||
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
|
£'000 |
£'000 |
|
|
Interim dividend for 2016 - 1.0p (2015 - 1.0p) |
1,223 |
1,246 |
|
|
Proposed final dividend for 2016 - 2.9p (2015 - 2.8p) |
3,475 |
3,477 |
|
|
|
______ |
______ |
|
|
|
4,698 |
4,723 |
|
|
|
______ |
______ |
|
|
|
|
|
|
|
Subsequent to the year end the Company has purchased for treasury a further 708,000 Ordinary shares. Therefore the amounts reflected above for the cost of the proposed final dividend for 2016 are based on 119,811,010 Ordinary shares in issue, being the number of Ordinary shares in issue at the date of this Report. |
||
|
|
|
2016 |
2015 |
||
|
8. |
Return per Ordinary share |
£'000 |
p |
£'000 |
p |
|
|
Revenue return |
4,988 |
4.06 |
5,205 |
4.18 |
|
|
Capital return |
(47,644) |
(38.78) |
34,314 |
27.56 |
|
|
|
______ |
______ |
______ |
______ |
|
|
Total return |
(42,656) |
(34.72) |
39,519 |
31.74 |
|
|
|
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
Weighted average number of Ordinary shares in issueA |
122,842,641 |
|
124,516,857 |
|
|
|
|
___________ |
|
___________ |
|
|
|
|
|
|
|
|
|
|
A Calculated excluding shares held in treasury. |
||||
|
|
|
Listed |
Listed |
|
|
|
|
overseas |
in UK |
Total |
|
9. |
Investments |
£'000 |
£'000 |
£'000 |
|
|
Fair value through profit or loss: |
|
|
|
|
|
Opening book cost |
120,405 |
30,712 |
151,117 |
|
|
Opening fair value gains on investments held |
134,987 |
5,379 |
140,366 |
|
|
|
________ |
________ |
________ |
|
|
Opening valuation |
255,392 |
36,091 |
291,483 |
|
|
Movements in the year: |
|
|
|
|
|
Purchases at cost |
16,316 |
817 |
17,133 |
|
|
Sales - proceeds |
(22,286) |
(792) |
(23,078) |
|
|
Sales - realised gains/(losses) |
5,273 |
(572) |
4,701 |
|
|
Current year fair value losses on investments held |
(41,913) |
(8,417) |
(50,330) |
|
|
|
________ |
________ |
________ |
|
|
Closing valuation |
212,782 |
27,127 |
239,909 |
|
|
|
________ |
________ |
________ |
|
|
Closing book cost |
119,708 |
30,165 |
149,873 |
|
|
Closing fair value gains on investments held |
93,074 |
(3,038) |
90,036 |
|
|
|
________ |
________ |
________ |
|
|
|
212,782 |
27,127 |
239,909 |
|
|
|
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
|
|
£'000 |
£'000 |
|
|
Investments listed on an overseas investment exchange |
|
212,782 |
255,392 |
|
|
Investments listed on the UK investment exchange |
|
27,127 |
36,091 |
|
|
|
|
________ |
________ |
|
|
|
|
239,909 |
291,483 |
|
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
(Losses)/gains on investments held at fair value through profit or loss |
£'000 |
£'000 |
|
|
|
Realised gains on sales |
|
4,701 |
16,269 |
|
|
(Decrease)/increase in fair value gains on investments held |
|
(50,330) |
20,808 |
|
|
|
|
________ |
________ |
|
|
|
|
(45,629) |
37,077 |
|
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
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 investments held at fair value through profit or loss in the Statement of Comprehensive Income. The total costs were as follows: |
|||
|
|
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
|
|
£'000 |
£'000 |
|
|
Purchases |
|
32 |
47 |
|
|
Sales |
|
34 |
28 |
|
|
|
|
________ |
________ |
|
|
|
|
66 |
75 |
|
|
|
|
________ |
________ |
|
|
|
2016 |
2015 |
|
10. |
Loans and receivables |
£'000 |
£'000 |
|
|
Prepayments and accrued income |
1,244 |
1,871 |
|
|
Other loans and receivables |
75 |
81 |
|
|
|
________ |
________ |
|
|
|
1,319 |
1,952 |
|
|
|
________ |
________ |
|
|
|
2016 |
2015 |
||
|
11. |
Creditors |
£'000 |
£'000 |
|
|
|
|
Amounts falling due within one year: |
|
|
|
|
|
|
a) |
Loans |
|
|
|
|
|
|
Foreign currency loans |
19,486 |
18,585 |
|
|
|
|
Sterling loan |
2,500 |
2,500 |
|
|
|
|
|
________ |
________ |
|
|
|
|
|
21,986 |
21,085 |
|
|
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
|
b) |
Other |
£'000 |
£'000 |
|
|
|
|
Amounts due to brokers |
63 |
- |
|
|
|
|
Other creditors |
305 |
566 |
|
|
|
|
|
________ |
________ |
|
|
|
|
|
368 |
566 |
|
|
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
|
Non-current creditors: |
£'000 |
£'000 |
|
|
|
|
|
________ |
________ |
|
|
|
|
Sterling loan |
5,000 |
5,000 |
|
|
|
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
|
|
At the year end the Company's secured floating rate bank loans of HK$154,100,000 (2015 - HK$154,100,000), equivalent to £13,561,000 (2015 - £12,937,000), US$8,680,000 (2015 - US$8,680,000), equivalent to £5,925,000 (2015 - £5,648,000), £2,500,000 (2015 - £2,500,000), with a maturity date of 25 May 2016 (2015 - 26 May 2015), and fixed rate bank loan of £5,000,000 (2015 - £5,000,000), were drawn down from the £35,000,000 facility with The Royal Bank of Scotland at interest rates of 1.23%, 1.44%, 1.51% and 2.75% (2015 - 1.24%, 1.18%, 1.51% and 2.75%) respectively. |
|
|||
|
|
|
||||
|
|
As of the latest date prior to the signing of this Report the HK$154,100,000, US$8,680,000 and £2,500,000 loans had been drawn down to 24 July 2016 at interest rates of 1.22%, 1.45% and 1.50% respectively. |
|
|||
|
|
|
||||
|
|
The terms of the bank loan with The Royal Bank of Scotland state that: |
|
|||
|
|
· the net tangible assets of the Company must be not less than £125 million at all times; |
|
|||
|
|
· the ratio of gross borrowings to adjusted assets must be less than 25% at all times (adjusted assets are total gross assets less (i) the value of any unlisted investment; (ii) the value in excess of 10% of total gross assets invested in the largest single security or asset; (iii) the value of any single security or asset (other than the largest security or asset referred to above) exceeds 5% of gross assets; (iv) the value in excess of 60% of total gross assets invested in the top twenty largest investments; (v) the extent to which the value of securities in collective investment schemes exceeds 30% of gross assets; and (vi) the extent to which the aggregated value of securities or assets in countries with a Standard and Poor's foreign sovereign debt rating lower than BBB exceeds 30% of gross assets. |
|
|||
|
|
· the facility, under which the loans are made, will expire on 7 October 2019. |
|
|||
|
|
|
||||
|
|
The Company has met all financial covenants throughout the period and up to the date of this Report. |
|
|||
|
|
|
2016 |
2015 |
|
12. |
Called-up share capital |
£'000 |
£'000 |
|
|
Allotted, called up and fully paid: |
|
|
|
|
120,519,010 (2015 - 124,333,010) Ordinary shares of 5p each |
6,026 |
6,217 |
|
|
|
|
|
|
|
Held in treasury: |
|
|
|
|
6,416,655 (2015 - 2,602,655) Ordinary shares of 5p each |
321 |
130 |
|
|
|
6,347 |
6,347 |
|
|
|
|
|
|
|
During the year 3,814,000 (2015 - 214,000) Ordinary shares of 5p each were repurchased by the Company at a total cost, including transaction costs, of £5,807,000 (2015 - £399,000). All of the shares were placed in treasury. Shares held in treasury represent 5.33% of the Company's total issued share capital at 30 April 2016. Shares held in treasury do not carry a right to receive dividends. |
||
|
|
|
||
|
|
Subsequent to the year end the Company bought back for treasury a further 708,000 Ordinary shares for a total consideration of £1,096,000. |
||
|
|
|
||
|
|
The investment objective of the Company is to provide shareholders with a high level of capital growth through equity investment in the Asia Pacific countries ex Japan. |
||
|
|
|
||
|
|
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. |
||
|
|
|
||
|
|
The Board 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 level of equity shares in issue; 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. |
||
|
|
|
||
|
|
The Company does not have any externally imposed capital requirements. |
||
|
|
|
2016 |
2015 |
|
13. |
Capital reserve |
£'000 |
£'000 |
|
|
At 1 May 2015 |
211,550 |
177,236 |
|
|
Movement in fair value (losses)/gains |
(45,629) |
37,077 |
|
|
Foreign exchange movement |
(959) |
(1,605) |
|
|
Expenses taken to capital |
(1,056) |
(1,158) |
|
|
|
________ |
________ |
|
|
At 30 April 2016 |
163,906 |
211,550 |
|
|
|
________ |
________ |
|
|
|
|
|
|
|
The capital reserve includes investment holding gains amounting to £90,036,000 (2015 - £140,366,000), as disclosed in note 9. |
||
|
14. |
Net asset value per share |
||
|
|
The net asset value per 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: |
||
|
|
|
|
|
|
|
|
2016 |
2015 |
|
|
Net assets attributable (£'000) |
216,243 |
269,398 |
|
|
Number of Ordinary shares in issue (excluding shares held in treasury) |
120,519,010 |
124,333,010 |
|
|
Net asset value per share (p) |
179.43 |
216.67 |
|
15. |
Related party transactions and transactions with the Manager |
|
|
Fees payable during the period to the Directors and their interests in shares of the Company are disclosed within the Directors' Remuneration Report. |
|
|
|
|
|
Mr H Young is a director of Aberdeen Asset Management PLC, of which Aberdeen Fund Manages Limited ("AFML") is a subsidiary. Management, promotional activities and secretarial and administration services are provided to the Company by AFML. Details of transactions during the year and balances outstanding at the year end disclosed in notes 3 and 4. |
|
16. |
Financial instruments |
|
|||||||||||||
|
|
Risk management |
|
|||||||||||||
|
|
The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
The Board has delegated the risk management function to AFML under the terms of its management agreement with AFML (further details of which are included under note 3). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period. The numerical disclosures exclude short-term debtors and creditors. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Risk management framework |
|
|||||||||||||
|
|
The directors of Aberdeen Fund Managers Limited collectively assume responsibility for AFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
AFML is a fully integrated member of the Aberdeen Group, which provides a variety of services and support to AFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Asset Management Asia Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Chief Executive Officer of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SWORD"). |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
The Group's corporate governance structure is supported by several committees to assist the board of directors of Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Risk management |
|
|||||||||||||
|
|
The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Market risk |
|
|||||||||||||
|
|
The fair value of, or future cash flows from a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and other price risk. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Interest rate risk |
|
|||||||||||||
|
|
Interest rate movements may affect: |
|
|||||||||||||
|
|
· the level of income receivable on cash deposits; and, |
|
|||||||||||||
|
|
· interest payable on the Company's variable rate borrowings. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Management of the risk |
|
|||||||||||||
|
|
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. The fixed rate facilities are used to finance opportunities at low rates and, the revolving and uncommitted facilities to provide flexibility in the short-term. Current bank covenant guidelines state that the total borrowings will not exceed 25% of the adjusted net assets of the Company as defined in note 11. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Interest risk profile |
|
|||||||||||||
|
|
The interest rate risk profile of the portfolio of the Company's financial assets and liabilities, excluding equity holdings which are all non-interest bearing, at the Statement of Financial Position date was as follows: |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
|
Weighted average |
|
|
|
|
|||||||||
|
|
|
period for which |
average |
Fixed |
Floating |
|
|||||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|
|||||||||
|
|
At 30 April 2016 |
Years |
% |
£'000 |
£'000 |
|
|||||||||
|
|
Assets |
|
|
|
|
|
|||||||||
|
|
Indonesian Rupiah |
- |
- |
|
15 |
|
|||||||||
|
|
Sterling |
- |
0.20 |
- |
2,351 |
|
|||||||||
|
|
Taiwan Dollar |
- |
- |
- |
3 |
|
|||||||||
|
|
|
|
|
________ |
________ |
|
|||||||||
|
|
|
|
|
- |
2,369 |
|
|||||||||
|
|
|
|
|
________ |
________ |
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
Weighted average |
|
|
|
|
|||||||||
|
|
|
period for which |
average |
Fixed |
Floating |
|
|||||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|
|||||||||
|
|
|
Years |
% |
£'000 |
£'000 |
|
|||||||||
|
|
Liabilities |
|
|
|
|
|
|||||||||
|
|
Bank loan - £2,500,000 |
0.08 |
1.51 |
2,500 |
- |
|
|||||||||
|
|
Bank loan - £5,000,000 |
4.91 |
2.75 |
5,000 |
- |
|
|||||||||
|
|
Bank loan - HK$154,100,000 |
0.08 |
1.23 |
13,561 |
- |
|
|||||||||
|
|
Bank loan - US$8,680,000 |
0.08 |
1.44 |
5,925 |
- |
|
|||||||||
|
|
|
|
|
________ |
________ |
|
|||||||||
|
|
|
|
|
26,986 |
- |
|
|||||||||
|
|
|
|
|
________ |
________ |
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
Weighted average |
|
|
|
|
|||||||||
|
|
|
period for which |
average |
Fixed |
Floating |
|
|||||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|
|||||||||
|
|
At 30 April 2015 |
Years |
% |
£'000 |
£'000 |
|
|||||||||
|
|
Assets |
|
|
|
|
|
|||||||||
|
|
Sterling |
- |
0.15 |
- |
2,611 |
|
|||||||||
|
|
Taiwan Dollar |
- |
- |
- |
3 |
|
|||||||||
|
|
|
|
|
________ |
________ |
|
|||||||||
|
|
|
|
|
- |
2,614 |
|
|||||||||
|
|
|
|
|
________ |
________ |
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
Weighted average |
|
|
|
|
|||||||||
|
|
|
period for which |
average |
Fixed |
Floating |
|
|||||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|
|||||||||
|
|
|
Years |
% |
£'000 |
£'000 |
|
|||||||||
|
|
Liabilities |
|
|
|
|
|
|||||||||
|
|
Bank loan - £2,500,000 |
0.08 |
1.51 |
2,500 |
- |
|
|||||||||
|
|
Bank loan - £5,000,000 |
4.91 |
2.75 |
5,000 |
- |
|
|||||||||
|
|
Bank loan - HK$154,000,000 |
0.08 |
1.24 |
12,937 |
- |
|
|||||||||
|
|
Bank loan - US$8,680,000 |
0.08 |
1.18 |
5,648 |
- |
|
|||||||||
|
|
|
|
|
________ |
________ |
|
|||||||||
|
|
|
|
|
26,085 |
- |
|
|||||||||
|
|
|
|
|
________ |
________ |
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
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 maturity date of the Company's loans are shown in note 11.
|
|
|||||||||||||
|
|
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates. |
|
|||||||||||||
|
|
The Company's equity portfolio and short-term debtors and creditors (excluding bank loans) have been excluded from the above tables. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Interest rate sensitivity |
|
|||||||||||||
|
|
Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit. |
|
|||||||||||||
|
|
Foreign currency risk |
|
|||||||||||||
|
|
All of the Company's investment portfolio is invested in overseas securities and the Statement of Financial Position, therefore, can be significantly affected by movements in foreign exchange rates. |
|
|||||||||||||
|
|
Management of the risk |
|
|||||||||||||
|
|
It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. The Company's borrowings, as detailed in note 11, are also in foreign currency. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Foreign currency exposure by currency of denomination: |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
|
30 April 2016 |
30 April 2015 |
||||||||||||
|
|
|
|
Net |
Total |
|
Net |
Total |
||||||||
|
|
|
|
monetary |
currency |
|
monetary |
currency |
||||||||
|
|
|
Investments |
assets |
exposure |
Investments |
assets |
exposure |
||||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||||
|
|
Australian Dollar |
12,040 |
- |
12,040 |
15,947 |
- |
15,947 |
||||||||
|
|
Hong Kong Dollar |
48,161 |
(13,561) |
34,600 |
64,451 |
(12,937) |
51,514 |
||||||||
|
|
Indonesian Rupiah |
6,196 |
15 |
6,211 |
3,131 |
- |
3,131 |
||||||||
|
|
Korean Won |
18,114 |
- |
18,114 |
17,497 |
- |
17,497 |
||||||||
|
|
Malaysian Ringgit |
4,772 |
- |
4,772 |
5,989 |
- |
5,989 |
||||||||
|
|
Philippine Peso |
8,233 |
- |
8,233 |
9,787 |
- |
9,787 |
||||||||
|
|
Singapore Dollar |
48,569 |
- |
48,569 |
59,062 |
- |
59,062 |
||||||||
|
|
Sri Lankan Rupee |
6,175 |
- |
6,175 |
7,974 |
- |
7,974 |
||||||||
|
|
Sterling |
51,801 |
(5,149) |
46,652 |
66,010 |
(4,889) |
61,121 |
||||||||
|
|
Taiwanese Dollar |
13,164 |
3 |
13,167 |
14,435 |
3 |
14,438 |
||||||||
|
|
Thailand Baht |
7,725 |
- |
7,725 |
11,009 |
- |
11,009 |
||||||||
|
|
US Dollar |
13,911 |
(5,925) |
7,986 |
16,191 |
(5,648) |
10,543 |
||||||||
|
|
Vietnam Dollar |
1,048 |
- |
1,048 |
- |
- |
- |
||||||||
|
|
|
________ |
________ |
________ |
________ |
________ |
________ |
||||||||
|
|
Total |
239,909 |
(24,617) |
215,292 |
291,483 |
(23,471) |
268,012 |
||||||||
|
|
|
________ |
________ |
________ |
________ |
________ |
________ |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
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. |
|
|||||||||||||
|
|
|
|
|
|
|||||||||||
|
|
|
2016 |
2015 |
|
|||||||||||
|
|
|
£'000 |
£'000 |
|
|||||||||||
|
|
Australian Dollar |
1,204 |
1,595 |
|
|||||||||||
|
|
Hong Kong Dollar |
3,460 |
5,151 |
|
|||||||||||
|
|
Indonesian Rupiah |
621 |
313 |
|
|||||||||||
|
|
Korean Won |
1,811 |
1,750 |
|
|||||||||||
|
|
Malaysian Ringgit |
477 |
599 |
|
|||||||||||
|
|
Philippine Peso |
823 |
979 |
|
|||||||||||
|
|
Singapore Dollar |
4,857 |
5,906 |
|
|||||||||||
|
|
Sri Lankan Rupee |
618 |
797 |
|
|||||||||||
|
|
Taiwanese Dollar |
1,317 |
1,444 |
|
|||||||||||
|
|
Thailand Baht |
773 |
1,101 |
|
|||||||||||
|
|
US Dollar |
799 |
1,054 |
|
|||||||||||
|
|
Vietnam Dollar |
105 |
- |
|
|||||||||||
|
|
|
________ |
________ |
|
|||||||||||
|
|
|
16,865 |
20,689 |
|
|||||||||||
|
|
|
________ |
________ |
|
|||||||||||
|
|
Price risk |
|
|
|
|||||||||||
|
|
Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Management of the 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. Both the allocation of assets and the stock selection process 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. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Price risk sensitivity |
|
|||||||||||||
|
|
If market prices at the Statement of Financial Position date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 30 April 2016 would have increased/(decreased) by £23,991,000 (2015 - increased/(decreased) by £29,148,000) and equity reserves would have increased/(decreased) by the same amount. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Liquidity risk This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Management of the risk |
|
|||||||||||||
|
|
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise a revolving multi-currency credit facility, which expires on 7 October 2019. The Board has imposed a maximum gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of 25%. Details of borrowings at 30 April 2016 are shown in note 11. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of the loan facility, details of which can be found in note 11. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis. Details of the Board's policy on gearing are shown in the interest rate risk section of this note. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Liquidity risk exposure |
|
|||||||||||||
|
|
At 30 April 2016 and 30 April 2015 the Company's floating rate bank loans, amounting to £21,986,000 and £21,085,000 respectively, were due for repayment or roll-over within one month of the year end. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Credit risk |
|
|||||||||||||
|
|
This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Management of the risk |
|
|||||||||||||
|
|
· investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker; |
|
|||||||||||||
|
|
· cash is held only with reputable banks with high quality external credit enhancements. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Credit risk exposure |
|
|||||||||||||
|
|
In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 30 April was as follows: |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
|
2016 |
2015 |
|
|||||||||||
|
|
|
Statement of |
|
Statement of |
|
|
|||||||||
|
|
|
Financial |
Maximum |
Financial |
Maximum |
|
|||||||||
|
|
|
Position |
exposure |
Position |
exposure |
|
|||||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|||||||||
|
|
Non-current assets |
|
|
|
|
|
|||||||||
|
|
Investments at fair value through profit or loss |
239,909 |
239,909 |
291,483 |
291,483 |
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
Current assets |
|
|
|
|
|
|||||||||
|
|
Loans and receivables |
1,319 |
1,319 |
1,952 |
1,952 |
|
|||||||||
|
|
Cash at bank and in hand |
2,369 |
2,369 |
2,614 |
2,614 |
|
|||||||||
|
|
|
________ |
________ |
________ |
________ |
|
|||||||||
|
|
|
243,597 |
243,597 |
296,049 |
296,049 |
|
|||||||||
|
|
|
________ |
________ |
________ |
________ |
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
None of the Company's financial assets is past due or impaired. |
|
|||||||||||||
|
|
|
|
|||||||||||||
|
|
Fair values of financial assets and financial liabilities |
|
|||||||||||||
|
|
For the floating rate HK$ loan, the fair value of borrowings has been calculated at £13,561,000 as at 30 April 2016 (2015 - £12,940,000) compared to an accounts value in the financial statements of £13,561,000 (2015 - £12,937,000) (note 11). For the floating rate US$ loan, the fair value of borrowings has been calculated at £5,926,000 as at 30 April 2016 (2015 - £5,649,000) compared to an accounts value in the financial statements of £5,925,000 (2015 - £5,648,000) (note 11). For the floating rate GBP loan, the fair value of borrowings has been calculated at £2,500,000 as at 30 April 2016 (2015 - £2,501,000) compared to an accounts value in the financial statements of £2,500,000 (2015 - £2,500,000) (note 11). For the fixed rate GBP loan, the fair value of borrowings has been calculated at £5,167,000 as at 30 April 2016 (2015 - £5,221,000) compared to an accounts value in the financial statements £5,000,000 (2015 - £5,000,000) (note 11). The fair value of each loan is determined by aggregating the expected future cash flows for that 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. All other assets and liabilities of the Company are included in the Statement of Financial Position at fair value. |
|
|||||||||||||
|
17. |
Fair value hierarchy |
||||
|
|
FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016. The fair value hierarchy shall have the following classifications: |
||||
|
|
|
||||
|
|
Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date. |
||||
|
|
Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or undirectly. |
||||
|
|
Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability. |
||||
|
|
|
||||
|
|
The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows: |
||||
|
|
|
||||
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
As at 30 April 2016 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
Quoted equities |
239,909 |
- |
- |
239,909 |
|
|
|
________ |
________ |
________ |
________ |
|
|
Net fair value |
239,909 |
- |
- |
239,909 |
|
|
|
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
As at 30 April 2015 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
Quoted equities |
291,483 |
- |
- |
291,483 |
|
|
|
________ |
________ |
________ |
________ |
|
|
Net fair value |
291,483 |
- |
- |
291,483 |
|
|
|
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
Quoted equities |
|
|
|
|
|
|
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.
|
||||
Additional Notes to the Annual Financial Report
If approved at the Annual General Meeting, the final dividend of 2.9p per share will be paid on 2 September 2016 to holders of Ordinary shares on the register at the close of business on 5 August 2016. The relevant ex-dividend date is 4 August 2016.
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 30 April 2016 have been agreed with the auditor and are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2015 and 2016 statutory accounts received unqualified reports from the Company's auditor and did not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498(2) or 498(3) of the Companies Act 2006. The financial information for 2015 is derived from the statutory accounts for 2015 which have been delivered to the Registrar of Companies. The 2016 accounts will be filed with the Registrar of Companies in due course.
The Annual General Meeting of the Company will be held at 12 noon on 31 August 2016 at Bow Bells House, 1 Bread Street, London EC4M 9HH.
The Annual Report and Accounts will be posted to shareholders in July 2016. Copies may be obtained during normal business hours from the Secretary, Aberdeen Asset Management PLC, 40 Princes Street, Edinburgh EH2 2BY or from the Company's website, www.newdawn-trust.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.
By order of the Board
Aberdeen Asset Management PLC, Secretary
11 July 2016
* Neither the Company's website nor the content of any website accessible from hyperlinks on it (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
This information is provided by RNS
Latest directors dealings
- 56 minutes ago Steppe Cement Ltd
- 14 hours ago Burberry Group
- 15 hours ago Burberry Group
- 15 hours ago Barclays
- 16 hours ago Warehouse Reit