Annual Financial Report
ASIA DRAGON TRUST PLC (formerly Edinburgh Dragon Trust plc)
ANNUAL FINANCIAL REPORT FOR THE YEAR TO 31 AUGUST 2019
Asia Dragon Trust's objective is long term capital growth through investment in Asia with the exception of Japan and Australasia. Investments are made primarily in stock markets in the region, principally in large companies. When appropriate the Company will utilise gearing to maximise long term returns.
The Company`s benchmark is the MSCI All Country Asia (ex Japan) Index.
- NAV Total Return of 9.8% outperforms benchmark which, in comparison, increased by 0.3% (in sterling terms) over 12 months to 31 August 2019;
- Co-manager, Pruksa Iamthongthong, appointed;
- Change in name to Asia Dragon Trust plc to target individual investors better;
- Enhancements to investment approach contribute to improved performance.
For further information please contact:-
Adrian Lim, Investment Director,
Aberdeen Standard Investments (Asia) Limited 0065 6395 2700
FINANCIAL HIGHLIGHTS
|
Net asset value total return{A} |
+9.8% |
Share price total return{A} 10.0% |
||
|
2018 |
|
+2.3% |
2018 |
+3.4% |
|
Benchmark total return{A} (in sterling terms) |
+0.3% |
Ongoing charges{A} |
0.83% |
|
|
2017 |
|
+2.2% |
2018 |
0.8% |
|
Earnings per share (revenue) |
|
4.87p |
Dividend per share |
4.75p |
|
2018 |
|
5.03p |
2018 |
4.00p |
|
|
|
|||
|
{A} Considered to be Alternative Performance Measure (further details below) |
|
|||
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
Performance
Results
I am pleased to report that, in a challenging environment, your Company's investment performance remained robust during the year to 31 August 2019. On a total return basis, the net asset value per share (NAV) increased by 9.8% in sterling terms. In comparison, the benchmark, the MSCI Asia ex Japan Index, rose by 0.3%. The share price rose by 10% to 402.5p as at 31 August 2019.
This performance attests to your Manager's bottom-up, fundamentals driven approach that seeks out high quality companies with effective management, good cash flow and healthy balance sheets at attractive valuations. The portfolio's holdings are businesses which harness long term growth trends. Such a quality focused style returned to favour amid increasing risk aversion from investors.
During the period Asia was dominated by economic and political uncertainty. Escalating tensions between China and the US weighed on an already slowing global economy. It was also a busy year in politics. Incumbents in India and Indonesia scored decisive election wins, which augured well for reform. Separately, large scale demonstrations in Hong Kong, arising from a controversial bill, hobbled tourism, residential demand and consumer confidence. Your Manager is watchful of further developments and the potential impact upon your Company's exposures there.
Enhancements to Investment Process
The Board is encouraged that the performance has shown a steadily improving trend, one that has continued since the period end, noting in particular that the Company ranked first in its AIC Asia Pacific NAV performance peer group table of investment companies for the one year ended 31 August 2019*. This follows a process of consultation between the Board and the Manager in 2016 and 2017, after a period of underperformance. As previously reported, the Board conducted due diligence visits to the Manager's office in Singapore and engaged a consultant to assist in an evaluation of the Manager. At that time, the Board worked with the Manager to seek to understand the issues behind the period of underperformance, looking at ways that returns could be enhanced. The Manager made three key refinements to its process in relation to deeper sector analysis, broader risk assessment of relative portfolio risks and the buying and selling process. Progress to date has been encouraging.
[*Source: AIC]
Market Background and Portfolio
Despite the benchmark's flat return, markets during the period were anything but calm. Three intertwined themes lay at the root of the swings in sentiment.
The first was the escalating US-China trade war, which sparked rounds of retaliatory tariff hikes. Hopes of a deal spurred markets in early 2019, but volatility spiked again after talks stalled. While negotiations have resumed, both sides still appear unable to agree on key sticking points.
The second concern grew over the impact of the trade war on China and the world economy. The confrontation has hurt both exports and business confidence, and resulted in companies taking a more cautious view of investment spending. Elsewhere, subdued growth in Europe, alongside key bond market signals of an impending downturn in the US, further weighed on the global growth outlook.
The third driver concerned monetary policy. The US Federal Reserve and other major central banks were set on a tightening path in 2018, but mounting economic risks forced a pivot to a more dovish stance this year. Among G10 countries, Australia, New Zealand and the US have loosened policy. In Asia, India is leading the way with five interest rate cuts during the year 2019 so far.
In China, the rift with the US deepened growth worries at the same time as the mainland economy was already slowing as a result of the government's well intentioned deleveraging campaign. While Beijing unveiled targeted measures to boost consumption and stabilise growth, the effects of these are yet to be felt fully. Nonetheless, your Manager continues to be upbeat about the country's longer term potential. Your Trust's holdings there are leveraged to growing domestic demand for luxury items, travel, insurance and healthcare, underpinned by rising wealth and a more sophisticated consumer base.
Your Manager's stock choices were a major driver of the Trust's strong performance. Notably, six of the 10 top performing holdings were from China. Your Manager's preference for domestic oriented consumer names proved rewarding. Several of the portfolio's holdings, which are industry leaders in the travel, liquor, consumer goods and insurance segments, performed better than the wider market. Kweichow Moutai, for example, is a premium distiller of high end spirits, while China International Travel Services and Shanghai International Airport are well placed to capitalise on growing demand for travel.
Also making salient contributions were the portfolio's core financial holdings in India and Indonesia. Among them, Housing Development Finance Corp, a leading Indian financial conglomerate, was resilient despite tighter liquidity conditions, while Bank Central Asia is the domestic market leader in SME lending. Some of the additions to the portfolio this year augmented your Company's exposure to these areas. Bank Rakyat Indonesia specialises in micro lending, SBI Life Insurance is India's biggest private life insurer, while Prestige Estates is a well regarded property developer based in Bangalore.
The Investment Manager's Review provides more details about your Company's performance and portfolio.
Appointment of co-manager
The Board was pleased to welcome Pruksa Iamthongthong's appointment during the year as co-manager alongside Adrian Lim to provide the Company with more dedicated resource. Pruksa is, like Adrian, an investment director of Aberdeen Standard Investments (Asia) Limited.
Marketing - greater focus on individual investors and name refresh
As many individual investors increasingly select their own investments through online platforms, it is becoming important for most investment companies to market themselves effectively to such individuals who have quickly become a significant proportion of those investing across UK investment companies. Approximately a quarter of all share capital issued by the UK investment company sector is held through these online platforms.
While the Company enjoys a strong relationship with many institutions and wealth managers, the Board is of the view that more can be done to raise the Company's profile among, and increase demand from, individual investors. Such investors currently own only around 13% of the Company's issued share capital.
The Company's change of name to Asia Dragon Trust (as from 4 November 2019) will emphasise the Company's geographic focus, particularly to individual investors, giving the Company a fresher identity, while retaining the strong Dragon name. The Board believes that by raising the profile of Asia Dragon Trust and highlighting its differentiation from its peers, combined with greater marketing focus on individuals, there is the opportunity to grow demand from self-directed retail investors.
The Board and the Manager will work closely to develop further the Company's communication with investors, highlighting the resources, heritage and reputation which the Manager enjoys in Asia and how these are to the benefit of investors. The Board believes that reinforcing the Company's essential message, as a long-term, cornerstone investment in Asia aiming for capital growth from world-class Asian companies, should resonate with many long-term individual investors.
Successfully stimulating additional demand for the Company's shares should assist in the reduction of discount volatility and, over time, increase liquidity.
In addition the Company will be increasing its resource in wealth manager engagement and relations. The Manager has expanded both the resource of its UK closed-end sales team and the support from its investment product specialists, while also placing additional emphasis on targeting those smaller and self-determined wealth managers who build client portfolios using investment trusts.
Gearing
The Board continues to believe that the sensible use of modest financial gearing should enhance returns to shareholders over the longer term. On 30 July 2019 the Company's £50 million one year loan facility was replaced with a £50 million three year facility, of which £25 million was fixed and fully drawn down and £25 million was revolving, of which £6 million was drawn down at the year end.
Discounts and Share Buybacks
In December 2018 the Company announced proposals for a tender offer for 30% of the Company's issued shares at a discount of 2% to formula asset value (being net asset value less the costs of the tender offer) which were approved by shareholders in January 2019. This resulted in 112.29 million shares (60.5% of the Company's shares excluding treasury) being validly tendered under the tender offer. As the tender offer was oversubscribed, the basic entitlement of all shareholders was accepted in full and excess tenders were satisfied to the extent of approximately 17.6% of the excess shares tendered. A total of 55.7 million shares (30% of the issued share capital) were repurchased by the Company under the tender offer and cancelled and the appropriate payments were made to shareholders.
The Board has continued to demonstrate its commitment to the buying back of shares in order to minimise Dragon's discount volatility. During the year ended 31 August 2019, 2.5 million shares were bought back into treasury at a cost of £9.35 million. Since the period end, a further 584,535 shares have been bought back into treasury at a cost of £2.38 million. The discount at the end of August 2019 was 12.1% compared to 12.2% at the previous year end. As at 31 October 2019, the discount had narrowed further to 10.8%.
Revenue Account
The Company's revenue return per share marginally decreased to 4.87p for the year to 31 August 2019 (2018 - 5.03p). It remains the Board's policy to pay a final dividend marginally in excess of the minimum required to maintain investment trust status, which may, of course, lead to some volatility in the level of dividend paid. The Board, therefore, recommends the payment of a final dividend of 4.75p per Ordinary share (2018 - 4.0p) which, if approved by shareholders at the Annual General Meeting, will be paid on 17 December 2019.
Review of Manager
The Board continues to review the Manager's operations and performance and is, as I have mentioned above, encouraged with the recovery in the Company's performance which is ahead of the benchmark index over one and three years.
The Board
Allan McKenzie retired as Chairman and from the Board on 3 July 2019. The Company benefited greatly from his knowledge, experience and leadership over many years. On behalf of the Board, I should like to thank Allan for his outstanding contribution.
The Board regularly undertakes a review of its performance and structure to ensure that it has the appropriate mix of relevant skills, diversity and experience for the effective operation of the Company's business. As part of the Board's succession planning, Gaynor Coley was appointed as a non-executive Director on 3 July 2019. Gaynor, a qualified chartered accountant, has over 30 years' experience in private and public sector finance and governance and she will assume the chair of the audit committee following the AGM in December 2019. Iain McLaren, the current chair of the audit committee, has kindly agreed to remain on the Board until after the publication of our interim results in May 2020 to assist with the audit chair transition, at which time he will stand down.
Recognising the benefits of regular Board refreshment, under the Board's updated succession plan, Directors (including the Chairman) will, subject both to annual re-election and renewal of the appointment every three years, normally retire on or shortly after the ninth anniversary of their original appointment.
Outlook
Sentiment will likely remain subdued as the risks confronting Asian equities remain heightened. The most obvious is the US/China conflict over trade and technology. Signals that both sides are battening down the hatches suggest that an immediate resolution is unlikely. Other geopolitical hotspots are emerging, such as the Hong Kong protests, the Japan-Korea dispute arising from Japan's curbs on semiconductor related exports to Korea, as well as rising tensions in the Middle East. These geopolitical anxieties could further hinder the global economy. Near term prospects for both output and investment are softening.
That said, the fundamentals of most Asian economies are resilient, and policymakers have acted to support growth and liquidity. Central banks' tightening measures in 2018 now appear prescient as it enables them to lower rates as and when required from a higher base. Further easing seems likely given the deteriorating outlook for growth over the months ahead.
In these uncertain times, staying disciplined is crucial. For your Manager, this means looking past the noise and maintaining a focus on quality companies that offer good value. The underlying portfolio consists of many such businesses. Their robust financials provide a buffer against shocks and should support continued shareholder returns, as will their ability to tap into structural growth trends that will play out for decades to come. The Board is confident that the Trust is positioned well to continue delivering solid returns for Shareholders.
For Asia Dragon Trust plc
James Will
Chairman
1 November 2019
OVERVIEW OF STRATEGY
Business Model
The business model of the Company is to operate as an investment trust for UK capital gains tax purposes in line with its investment objective. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2019 so as to enable it to comply with the relevant eligibility conditions for investment trust status as defined by Section 1158 of the Corporation Tax Act 2010.
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 and Australasia. The shares that make up the portfolio are selected from companies that have proven management and whose shares are considered to be attractively priced. The Company invests in a diversified range of sectors and countries. Investments are not limited as to market capitalisation, sector or country weightings within the region.
The Company's policy is to invest no more than 15% of gross assets in other listed investment companies (including listed investment trusts).
The Company complies with Chapter 4 of Part 24 of the Corporation Tax Act 2010 and the Investment Trust (Approved Company) (Tax) Regulations 2011 and does not invest more than 15% of its assets in the shares of any one company.
When appropriate the Company will utilise gearing to maximise long-term returns, subject to a maximum gearing level of 20% of net assets imposed by the Board.
The Company does not currently utilise derivatives but keeps this under review.
Company Benchmark
MSCI All Country Asia (ex Japan) Index (sterling adjusted).
Alternative Investment Fund Manager ("AIFM")
The AIFM is Aberdeen Standard Fund Managers Limited ("ASFML" or the "Manager") which is authorised and regulated by the Financial Conduct Authority.
The Company's portfolio is managed on a day-to-day basis by Aberdeen Standard Investments (Asia) Limited ("ASI Asia" or the "Investment Manager") by way of a delegation agreement. ASI Asia and ASFML are both wholly owned subsidiaries of Standard Life Aberdeen plc, formed by the merger of Aberdeen Asset Management PLC and Standard Life plc on 14 August 2017.
Achieving the Investment Policy and Objective
The Directors are responsible for determining the investment policy and the investment objective of the Company. Day-to-day management of the Company's assets has been delegated to the Investment Manager. The Investment Manager follows a bottom-up investment process based on a disciplined evaluation of companies through direct contact by its fund managers. Stock selection is the major source of added value. No stock is bought without the Investment Manager having first met management. The Investment Manager evaluates 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 evaluated by reference to key financial ratios, the market, the peer group and business prospects. Stock selection is key in constructing a diversified portfolio of companies. The Investment Manager is authorised to invest up to 15% of the Company's gross assets in any single stock, calculated at the time an investment is made.
A comprehensive analysis of the Company's portfolio by country and by sector is disclosed below, including a description of the ten largest investments, the full investment portfolio by value and sector/geographical analysis. At 31 August 2019, the Company's portfolio consisted of 66 holdings.
Gearing is used to leverage the Company's portfolio in order to enhance returns when this is considered appropriate to do so. At 31 August 2019, the Company's net gearing was 3.5%.
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 position, performance and prospects. The Board has identified and undertaken a robust review of the principal risks and uncertainties facing the Company below and the appropriate mitigating action. The principal risks associated with an investment in the Company's shares are published monthly on the Company's factsheet or they can be found in the pre-investment disclosure document published by the Manager, both of which are on the Company's website. Further details on the internal control environment can be found in the Statement of Corporate Governance of the published 2019 annual report.
|
Risk* |
Mitigating Action |
|
Investment Performance -The Company's investment performance is the most critical factor to the Company's long term success. Sustained underperformance may result in reduced demand for the Company's shares. |
The Board continually monitors the investment performance of the Company, taking account of stockmarket factors, and reviews the Company's performance compared to its benchmark index and peer group.
In addition to its own due diligence, the Board has used consultants to provide an independent perspective on the Manager's process and performance.
|
|
Concentration Risk - Trading volumes in certain securities of emerging markets can be low. The Investment Manager may accumulate investment positions across all its managed funds that represent a significant multiple of the normal trading volumes of an investment which may result in a lack of liquidity and price volatility. Accordingly, the Company will not necessarily be able to realise, within a short period of time, an illiquid investment and any such realisation that may be achieved may be at considerably lower prices than the Company's valuation of that investment for the purpose of calculating the net asset value ("NAV") per Ordinary share.
|
The Board reviews, on a regular basis, the Manager's total holdings for each stock within the Company's portfolio and the liquidity of these stocks.
|
|
Resource - The Company is an investment trust and has no employees. The responsibility for the provision of investment management, marketing and administration services for the Company has been delegated to the AIFM, Aberdeen Standard Fund Managers Limited, under the management agreement. The terms of the management agreement cover the necessary duties and conditions expected of the Manager. As a result, the Company is dependent on the performance of the AIFM.
|
The Board reviews the performance of the Manager on a regular basis and their compliance with the management contract formally on an annual basis. As part of that review, the Board assesses the Manager's succession plans, risk management framework and marketing activities. |
|
Reliance on Third Party Service Providers -The Company has entered into a number of contracts with third party providers including share registrar and depositary services. Failure by any service provider to carry out its contractual obligations could have a detrimental impact on the Company operations. |
The Board reviews the performance of third party providers on an annual basis. The Manager monitors the quality of services provided through regular reports and due diligence reviews. Third party service providers report periodically on their internal controls which includes confirmation of their business continuity arrangements and procedures to address cyber-crime. |
|
Discount Volatility - The Company's share price can trade at a discount to its underlying net asset value. |
The Board monitors the discount level of the Company's shares and has in place a buyback mechanism whereby the Manager is authorised to buy back shares within certain limits.
|
|
Gearing - As at 31 August 2019 the Company had £31.0 million of bank borrowings. Gearing has the effect of exacerbating market falls and gains.
|
In order to manage the level of gearing, the Board has set a maximum gearing ratio of 20% of net assets and receives regular updates from the Manager on the actual gearing levels the Company has reached together with the assets and liabilities of the Company and reviews these at each Board meeting.
|
|
Regulatory - The Company operates in a complex regulatory environment and faces a number of regulatory risks. Serious breaches of regulations, such as the tax rules for investment companies, the UKLA Listing Rules and the Companies Act, could lead to a number of detrimental outcomes and reputational damage.
The Directors do not anticipate any significant adverse effect on the Company arising from Brexit.
|
The Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager, AIC updates and reports from the Company Secretary.
|
* Further details on other risks relating to the Company's investment activities, including market price, liquidity and foreign currency risks are provided in note 17.
Brexit - The outcome and potential impact of the UK Government's negotiations with the European Union on Brexit is still unclear at the date of this report. This remains an economic risk for the Company, principally in relation to the potential impact of Brexit on currency volatility. As an investment trust with an Asian mandate, the Company's portfolio is unlikely to be adversely impacted as a direct result of Brexit although some currency volatility could arise.
The uncertainty surrounding Brexit could impact investor sentiment and could lead to increased or reduced demand for the Company's shares, which would be reflected in a narrowing or widening of the discount at which the Company's shares trade relative to their net asset value.
The Board will continue to monitor developments as they occur.
Performance
Key Performance Indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. The key performance indicators ("KPIs") are established industry measures, and are as follows:
|
KPI |
Description |
|
Net asset value and share price (total return) |
The Board monitors the NAV and share price performance of the Company over different time periods. Performance figures for one, three and five years are provided in the Results section.
|
|
Performance against benchmark |
Performance is measured against the Company's benchmark, the MSCI All Country Asia (ex Japan) Index (in sterling terms).
The Board also considers peer group comparative performance over a range of time periods, taking into consideration the differing investment policies and objectives employed by those companies.
|
|
Discount/Premium to net asset value |
The discount/premium relative to the NAV represented by the share price is closely monitored by the Board. The objective is to avoid large fluctuations in the discount relative to similar investment companies investing in the region by the use of share buy backs subject to market conditions. A graph showing the share price discount relative to the NAV is shown on page 13 of the published 2019 annual report.
|
Further analysis of the above KPIs is provided in the Chairman's Statement.
Promoting the Company
The Board recognises the importance of promoting the Company and believes an effective way to achieve this is through subscription to, and participation in, the promotional and investor relations programme run by the Manager on behalf of a number of investment trusts under its management. 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. The Company's financial contribution to the programme is matched by the Manager and regular reports are provided to the Board on promotional activities as well as an analysis of the shareholder register.
Duration
The Company does not have a fixed life but shareholders are given the opportunity to vote on the continuation of the Company at every third Annual General Meeting. The next continuation vote will be at the AGM in December 2022.
Board Diversity
The Board's statement on diversity is set out in the Statement of Corporate Governance. At 31 August 2019 there were four male Directors and two female Directors.
Environmental, Social and Human Rights Issues
The Company has no employees and therefore no disclosures are required to be made in respect of employees.
More information on socially responsible investment is set out in the Statement of Corporate Governance.
Viability Statement
In accordance with the provisions of the Listing Rules and UK Corporate Governance Code the Board has assessed the viability of the Company. The Company is a long-term investor and the Board believes it is appropriate to assess the Company's viability over a five year horizon which reflects the Investment Manager's long-term approach. The Directors believe this period reflects a proper balance between the long term horizon and the inherent uncertainties of looking to the future.
In assessing the viability of the Company the Directors have carried out a robust assessment of the following factors:
- the principal risks set out in the Strategic Report above and the steps available to mitigate these risks;
- the liquidity and diversity (in both sector and geography) of the Company's investment portfolio;
- the demand for the Company's shares as evidenced by the level of discount at which the shares trade; and
- the level of gearing and revenue surplus generated by the Company. The Company has the ability to renew or repay its gearing.
When considering the risk of under-performance, the Board reviewed the impact of stress testing on the portfolio, including the effects of any substantial future falls in investment values. The Board has also had regard to matters such as significant economic or stock market volatility, a substantial reduction in the liquidity of the portfolio or changes in investor sentiment, all of which could have an impact on the Company's prospects and viability in the future. The results of the stress tests have given the Board comfort over the viability of the Company.
Taking into account all of these factors, the Company's current position and the potential impact of the principal risks and uncertainties faced by the Company, the Board has concluded that it has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of this assessment to 31 August 2024.
James Will
Chairman
1 November 2019
INVESTMENT MANAGER'S REVIEW
Background/Portfolio review
Asian equities ended flat over the year under review. This belied the big swings in sentiment amid a slowing global economy. The push and pull of US-China trade relations and a sharp pivot in US monetary policy dictated sentiment. Initially, stocks sold off in late 2018, as worsening trade friction and the Federal Reserve's policy tightening unnerved investors. But as the year turned, optimism returned. US-China trade talks progressed, while the Fed changed tack. The rally, however, was cut short by renewed trade tensions, erasing earlier gains.
Against this backdrop, the Trust's net asset value (NAV) total return increased by 9.8% over the year, versus the benchmark MSCI All Country Asia (excluding Japan) Index's return of 0.3%. The share price rose by 10.0% to 402.5p.
The portfolio's pleasing performance was driven by your Company's choice of stocks in China. These holdings tap into the domestic economy and have boosted the portfolio's returns in recent years. Notably, travel-related stocks delivered stellar results. China International Travel Service gained from growing demand for domestic travel and Shanghai International Airport was additionally buoyed by contributions from its duty-free business. Kweichow Moutai, a distiller of high-end spirits, meanwhile benefited increased consumer confidence. It enjoyed healthy earnings growth as it benefited from its status as a premium distiller.
Your Company's financial holdings also proved rewarding. They were resilient despite the macro uncertainty. This is a testament to the quality of their franchise, capable management teams and balance sheet strength. For instance, Bank Central Asia is the largest private lender in Indonesia and leads the market in lending to small and medium enterprises. As an early adopter of technology, it has the broadest deposit franchise. This helps the bank to enjoy the lowest cost of funds compared to its peers even as it offers competitive rates. Its lending margins are consistently high.
Another key contributor was China's biggest insurer Ping An Insurance Group. It is transforming itself from a traditional life insurer into a one-stop shop for financial services. The group harbours ambitions to be a financial-technology (fintech) powerhouse, as its management has invested in future technology needs, securing an early-mover advantage in mobile apps and technologies including artificial intelligence and blockchain technologies.
Elsewhere, Housing Development Finance Corp, a financial services conglomerate in India, held its own despite a liquidity crunch in the Indian financial system. This reflects its well-diversified funding mix and quality loan book.
In contrast, its peer Piramal Enterprises lagged. Investors feared it would be exposed to defaults in the real estate sector, which accounts for the lion's share of its loan book. We take comfort in how it has reduced risks on its loan book and raised enough funds to bolster capital. Vietnamese lender Techcombank also weighed on returns, as lending margins in the sector came under pressure. Nevertheless, we take the long view and believe the bank is well positioned for future growth in Vietnam, an exciting but volatile frontier market.
The internet sector faced a challenging backdrop, but our positioning delivered positive returns for the portfolio. Tencent, which your Company holds, found support from higher profits, although revenue growth slowed. We remain upbeat about Tencent, given encouraging trends from its fintech and cloud segments. The decision to not hold Chinese search giant Baidu benefited your Company, as its shares retreated along with the technology sell-off. Its management also lowered its earnings forecasts, following tighter regulations and growing online advertising competition.
Portfolio activity
We took advantage of attractive valuations to add quality stocks to the portfolio, providing a margin of safety that maximises future returns. We favour companies that are well run with sustainable competitive advantage and solid financials. We found these qualities in Bank Rakyak Indonesia (BRI) SBI Life Insurance and Prestige Estates. State-owned BRI boasts a highly profitable micro-lending franchise and is the market leader in this segment. Its wide reach across the archipelago allows it to penetrate a large underserved rural customer base. Its profitability, already one of the highest in the sector, should improve with its loan portfolio shifting increasingly towards micro-loans. Funding cost pressures are also likely to ease as the interest rate cycle moderates.
In India, we introduced SBI Life, the largest private sector life insurer in the country. It has a solid capital base and access to the extensive branch network of its parent, State Bank of India. It is well-placed to grow, as the expanding middle class switches from public-sector insurers to private ones, which often adopt better customer practices.
We also initiated Bangalore-based property developer Prestige Estates. The bulk of its projects are in the residential segment, though it has also built up a decent property investment portfolio. The government is pushing to reform the fragmented industry, requiring more transparency, better business practices and more rules to protect buyers. This supports Prestige's outlook. The company's established brand, good track record and improving balance sheet give it a further advantage over smaller peers amid tighter financing access.
Against these, we sold mainland holdings Han's Laser Technnology and China Mobile, as well as Hong Kong-listed Hang Lung Properties. We also exited Naver Corp and E-mart in South Korea, and similarly Ayala Corp and Holcim Indonesia in Southeast Asia.
Outlook
Equity markets across Asia remain volatile. Trade tensions persist, alongside an already-slowing global economy. Business and consumer sentiment have been hit by the macro uncertainty. This is affecting earnings momentum. We are seeing weaker results across most sectors and more cautious forecasts by your Company's holdings. Valuations are still reasonable, in part due to the recent market weakness. Benign inflation, meanwhile, gives policymakers elbow room for monetary policy easing. This would provide some support for regional economies.
In such uncertain times, your Company's holdings have solid franchises that should buffer them against near-term weakness and position them to perform well over the longer term. We expect conditions to remain challenging for companies and earnings growth, but we are comfortable with what we hold.
Aberdeen Standard Investments (Asia) Limited*
1 November 2019
* on behalf of Aberdeen Standard Fund Managers Limited. Both companies are subsidiaries of Standard Life Aberdeen plc.
RESULTS
|
|
31 August 2019 |
31 August 2018 |
% |
|
Performance |
|
|
|
|
Equity shareholders' funds (£'000){A} |
589,708 |
788,019 |
-25.2 |
|
Net asset value per share (basic) (p) |
458.03 |
421.54 |
+8.7 |
|
Share price (p) |
402.50 |
370.00 |
+8.8 |
|
Market capitalisation (£'000){A} |
518,214 |
691,672 |
-25.1 |
|
MSCI AC Asia (ex Japan) Index (in sterling terms; capital return basis) |
935.63 |
958.84 |
-2.4 |
|
Revenue return per share (basic) (p) |
4.87 |
5.03 |
-3.2 |
|
Total return per share (basic) (p) |
23.90 |
5.33 |
+348.4 |
|
|
|
|
|
|
Gearing |
|
|
|
|
Net gearing (%){B} |
3.5 |
2.2 |
|
|
|
|
|
|
|
Discount |
|
|
|
|
Discount to net asset value (basic) (%){B} |
12.1 |
12.2 |
|
|
|
|
|
|
|
Operating costs |
|
|
|
|
Ongoing charges ratio{B} |
0.83 |
0.80 |
|
|
{A} The comparison of these measurements was affected by the Tender Offer, see note 14 for further details. |
|||
|
{B} Considered to be an Alternative Performance Measure. Further details can be found on pages 65 and 66 of the published 2019 annual report. |
|||
|
PERFORMANCE (TOTAL RETURN){A} |
|
|
|
|
|
|
|
|
|
|
1 year return |
3 year return |
5 year return |
|
|
% |
% |
% |
|
Share price{A} |
+10.0 |
+37.5 |
+55.6 |
|
Net asset value{AB} |
+9.8 |
+36.6 |
+56.1 |
|
MSCI AC Asia (ex Japan) Index (in sterling terms) |
+0.3 |
+30.3 |
+57.6 |
|
{A} Considered to be an Alternative Performance Measure. Further details can be found on page 65 of the published 2019 annual report. |
|||
|
{B} 1 year return presented on an undiluted basis; 3 and 5 year return presented on a diluted basis as CULS in issue during those periods were "in the money". |
|||
PORTFOLIO
TEN LARGEST INVESTMENTS
As at 31 August 2019
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2019{A} |
assets |
2018 |
|
Company |
Industry |
Country |
£'000 |
% |
£'000 |
|
Tencent Holdings |
|
|
41,885 |
6.7 |
41,686 |
|
The internet giant continues to strengthen its ecosystem, and the Manager sees tremendous potential in Tencent's advertising business as it starts monetising its social media and payment platforms. |
Interactive Media & Services |
China |
|
|
|
|
Samsung Electronics (Pref) |
|
|
36,636 |
5.9 |
48,576 |
|
A leading semiconductor company which is also a major player in mobile phones and consumer electronics. |
Technology Hardware, Storage & Peripherals |
South Korea |
|
|
|
|
Taiwan Semiconductor Manufacturing Company |
|
|
30,907 |
5.0 |
35,748 |
|
As the world's largest pure-play semiconductor manufacturer, TSMC provides a full range of integrated foundry services, along with a robust balance sheet and good cash generation that enables it to keep investing in cutting-edge technology and innovation. |
Semiconductors & Semiconductor Equipment |
Taiwan |
|
|
|
|
Housing Development Finance Corp |
|
|
22,063 |
3.6 |
23,759 |
|
Leading domestic mortgage provider with a leading distribution network, cost structure and balance sheet quality. |
Thrifts & Mortgage Finance |
India |
|
|
|
|
Ping An Insurance 'H' |
|
|
21,641 |
3.5 |
16,937 |
|
China's biggest insurer, which is transforming itself from a traditional life insurer into a one-stop shop for financial services. It harbours ambitions to be a fintech powerhouse. |
Insurance |
China |
|
|
|
|
AIA Group |
|
|
19,580 |
3.2 |
24,922 |
|
The Group offers life insurance, accident insurance, health insurance and wealth management solutions to individuals and businesses in the Asia Pacific region. |
Insurance |
Hong Kong |
|
|
|
|
Bank Central Asia |
|
|
17,749 |
3.0 |
25,236 |
|
Among the largest local private banks in Indonesia, it is well capitalised and has a big and stable base of low-cost deposits that funds its lending, while asset quality has remained solid. |
Banks |
Indonesia |
|
|
|
|
China International Travel Services 'A' |
|
|
17,646 |
2.8 |
16,913 |
|
China's largest duty-free operator, which is poised to benefit from rising consumer spending and growing demand for domestic travel. |
Hotels, Restaurants & Leisure |
China |
|
|
|
|
Oversea-Chinese Banking Corporation |
|
|
17,286 |
2.8 |
24,380 |
|
A leading, well-run Singaporean banking group with assets and operations in South East Asia and China. |
Banks |
Singapore |
|
|
|
|
Tata Consultancy Services |
|
|
15,771 |
2.5 |
15,316 |
|
India's largest information technology company has a diverse global footprint, continues to generate healthy cash flow and has built up a solid balance sheet. |
IT Services |
India |
|
|
|
|
|
|
|
_________ |
______ |
|
|
Top ten investments |
|
|
241,164 |
39.0 |
|
|
|
|
|
_________ |
______ |
|
OTHER INVESTMENTS
As at 31 August 2019
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2019{A} |
assets |
2018 |
|
Company |
Sector |
Country |
£'000 |
% |
£'000 |
|
China Resources Land |
Real Estate Management & Development |
China |
14,947 |
2.4 |
13,780 |
|
ITC |
Tobacco |
India |
12,684 |
2.0 |
19,412 |
|
Jardine Strategic Holdings |
Industrial Conglomerates |
Hong Kong |
12,238 |
2.0 |
22,810 |
|
Kweichow Moutai 'A' |
Beverages |
China |
11,852 |
1.9 |
12,315 |
|
Ayala Land |
Real Estate Management & Development |
Philippines |
11,764 |
1.9 |
13,028 |
|
Swire Properties |
Real Estate Management & Development |
Hong Kong |
11,665 |
1.9 |
15,743 |
|
Siam Cement 'F' |
Construction Materials |
Thailand |
9,487 |
1.5 |
18,152 |
|
City Developments |
Real Estate Management & Development |
Singapore |
9,470 |
1.5 |
14,632 |
|
HDFC Bank |
Banks |
India |
9,390 |
1.5 |
8,267 |
|
Keppel Corp |
Industrial Conglomerates |
Singapore |
9,216 |
1.5 |
12,477 |
|
Top twenty investments |
|
|
353,877 |
57.1 |
|
|
DBS Group |
Banks |
Singapore |
9,214 |
1.5 |
14,926 |
|
Astra International |
Automobiles |
Indonesia |
9,112 |
1.5 |
12,648 |
|
Hong Kong Exchanges & Clearing |
Capital Markets |
Hong Kong |
8,876 |
1.4 |
16,673 |
|
Kotak Mahindra Bank |
Banks |
India |
8,702 |
1.4 |
10,109 |
|
LG Chem |
Chemicals |
South Korea |
8,451 |
1.4 |
9,254 |
|
Hangzhou Hikvision Digital 'A' |
Electronic Equipment, Instruments & Components |
China |
8,413 |
1.4 |
8,802 |
|
John Keells Holdings |
Industrial Conglomerates |
Sri Lanka |
8,093 |
1.3 |
10,270 |
|
SBI Life Insurance |
Insurance |
India |
7,717 |
1.2 |
- |
|
Ultratech Cement |
Construction Materials |
India |
7,714 |
1.2 |
5,476 |
|
CNOOC |
Oil, Gas & Consumable Fuels |
China |
7,617 |
1.2 |
5,521 |
|
Top thirty investments |
|
|
437,786 |
70.6 |
|
|
Shanghai International Airport 'A' |
Transport Infrastructure |
China |
7,571 |
1.2 |
9,510 |
|
Wuxi Biologics (Cayman) |
Life Sciences Tools & Services |
China |
7,254 |
1.2 |
3,981 |
|
Vietnam Dairy Products |
Food Products |
Vietnam |
6,984 |
1.1 |
6,912 |
|
Midea Group 'A' |
Household Durables |
China |
6,913 |
1.1 |
7,974 |
|
ASM Pacific Technology |
Semiconductors & Semiconductor Equipment |
Hong Kong |
6,802 |
1.1 |
5,863 |
|
Huazhu Group ADR |
Hotels, Restaurants & Leisure |
China |
6,586 |
1.1 |
5,215 |
|
Kerry Logistics Network |
Air Freight & Logistics |
Hong Kong |
6,338 |
1.0 |
8,382 |
|
Bank of Philippine Islands |
Banks |
Philippines |
6,321 |
1.0 |
11,909 |
|
Piramal Enterprises |
Pharmaceuticals |
India |
6,175 |
1.0 |
9,862 |
|
Autohome ADR |
Interactive Media & Services |
China |
6,146 |
1.0 |
6,755 |
|
Top forty investments |
|
|
504,876 |
81.4 |
|
|
Bangkok Dusit Medical Services 'F' |
Health Care Providers & Services |
Thailand |
5,996 |
1.0 |
8,920 |
|
China Conch Venture Holdings |
Machinery |
China |
5,703 |
0.9 |
7,855 |
|
Unilever Indonesia |
Household Products |
Indonesia |
5,508 |
0.9 |
5,249 |
|
HSBC Holdings |
Banks |
Hong Kong |
5,405 |
0.9 |
16,857 |
|
Yum China Holdings |
Hotels, Restaurants & Leisure |
China |
5,356 |
0.9 |
11,663 |
|
Singapore Telecommunications |
Diversified Telecommunication Services |
Singapore |
5,294 |
0.9 |
12,049 |
|
Taiwan Mobile |
Wireless Telecommunication Services |
Taiwan |
5,207 |
0.9 |
6,616 |
|
China Merchants Bank 'H' |
Banks |
China |
5,092 |
0.8 |
4,015 |
|
Indocement Tunggal Prakarsa |
Construction Materials |
Indonesia |
5,030 |
0.8 |
3,698 |
|
Hero MotoCorp |
Automobiles |
India |
5,024 |
0.8 |
7,271 |
|
Top fifty investments |
|
|
558,491 |
90.2 |
|
|
Hindustan Unilever |
Household Products |
India |
4,984 |
0.8 |
4,360 |
|
United Overseas Bank |
Banks |
Singapore |
4,856 |
0.8 |
8,368 |
|
Standard Chartered |
Banks |
United Kingdom |
4,595 |
0.7 |
9,832 |
|
Vietnam Technological & Commercial Bank |
Banks |
Vietnam |
4568 |
0.7 |
2,475 |
|
Sunny Optical Technology |
Electronic Equipment Instruments & Components |
China |
4,276 |
0.7 |
4,250 |
|
Public Bank |
Banks |
Malaysia |
4,092 |
0.7 |
8,809 |
|
Raffles Medical Group |
Health Care Providers & Services |
Singapore |
3,994 |
0.6 |
4,316 |
|
Bank Rakyat |
Banks |
Indonesia |
3,206 |
0.5 |
- |
|
Prestige Estate Projects |
Real Estate Management & Development |
India |
3,132 |
0.5 |
- |
|
Koh Young Technology |
Semiconductors & Semiconductor Equipment |
South Korea |
2,852 |
0.5 |
4,041 |
|
Top sixty investments |
|
|
599,046 |
96.7 |
|
|
Saic Motor Corp 'A' |
Automobiles |
China |
2,694 |
0.4 |
3,666 |
|
DFCC Bank |
Banks |
Sri Lanka |
2,646 |
0.4 |
2,137 |
|
Central Pattana Public Co 'F' |
Real Estate Management & Development |
Thailand |
2,636 |
0.4 |
2,404 |
|
Yoma Strategic Holdings |
Real Estate Management & Development |
Myanmar |
2,415 |
0.4 |
2,658 |
|
Grasim Industries |
Construction Materials |
India |
1,476 |
0.2 |
- |
|
Amorepacific Corp (Pref) |
Personal Products |
South Korea |
916 |
0.1 |
4,744 |
|
Total investments |
|
|
611,829 |
98.6 |
|
|
Net current assets{B} |
|
|
8,872 |
1.4 |
|
|
Total assets{C} |
|
|
620,701 |
100.0 |
|
|
{A} The comparison of valuations was affected by the Tender Offer (see note 14 for further details). |
|
{B} Excludes bank loan of £6,000,000. |
|
{C} See definition on page 72 of the published 2019 annual report. |
CHANGES IN ASSET DISTRIBUTIONS
Year Ended 31 August 2019
|
|
Value at |
|
Sales |
Gains/ |
Value at |
|
|
31 August 2018 |
Purchases |
proceeds |
(losses) |
31 August 2019 |
|
Country |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
China |
187,079 |
30,452 |
90,476 |
54,537 |
181,592 |
|
Hong Kong |
124,456 |
23,689 |
55,839 |
(21,402) |
70,904 |
|
India |
115,722 |
28,357 |
39,905 |
658 |
104,832 |
|
Indonesia |
51,525 |
4,846 |
26,626 |
10,860 |
40,605 |
|
Malaysia |
8,809 |
- |
3,907 |
(810) |
4,092 |
|
Myanmar |
2,658 |
- |
547 |
304 |
2,415 |
|
Philippines |
31,375 |
- |
14,987 |
1,697 |
18,085 |
|
Singapore |
91,149 |
2,899 |
35,134 |
416 |
59,330 |
|
South Korea |
89,517 |
9,997 |
36,905 |
(13,754) |
48,855 |
|
Sri Lanka |
12,407 |
569 |
2,564 |
327 |
10,739 |
|
Taiwan |
42,364 |
5,507 |
12,330 |
573 |
36,114 |
|
Thailand |
29,477 |
1,438 |
13,202 |
406 |
18,119 |
|
United Kingdom |
9,832 |
- |
5,074 |
(163) |
4,595 |
|
Vietnam |
9,387 |
4,402 |
- |
(2,237) |
11,552 |
|
|
_________ |
_________ |
_________ |
_________ |
_________ |
|
Total investments |
805,757 |
112,156 |
337,496 |
31,412 |
611,829 |
|
Net current assets |
7,762 |
- |
- |
(1,774) |
5,988 |
|
|
_________ |
_________ |
_________ |
_________ |
_________ |
|
Total assets less current liabilities |
813,519 |
112,156 |
337,496 |
29,638 |
617,817 |
|
|
_________ |
_________ |
_________ |
_________ |
_________ |
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
- the Strategic report /Director's report include a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
For Asia Dragon Trust plc
James Will
Chairman
1 November 2019
GOING CONCERN
The Directors believe that it is appropriate to continue to adopt the going concern basis in the preparation of the financial statements.
The Company's assets consist substantially of equity shares in companies listed on recognised stock exchanges and in normal circumstances are realisable within a short timescale. The Board has set limits for borrowing and regularly reviews compliance with banking covenants. The Directors believe that, after making enquiries, the Company has adequate resources to continue in 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. Shareholders are given the opportunity to vote on the continuation of the Company every three years. The last continuation vote held in December 2018 was passed.
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year ended 31 August 2019 |
Year ended 31 August 2018 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Gains on investments held at fair value through profit or loss |
10 |
- |
31,412 |
31,412 |
- |
2,064 |
2,064 |
|
Currency losses |
|
- |
(1,938) |
(1,938) |
- |
(167) |
(167) |
|
Income |
3 |
14,244 |
- |
14,244 |
18,299 |
- |
18,299 |
|
Investment management fee |
4 |
(4,272) |
- |
(4,272) |
(5,296) |
- |
(5,296) |
|
Administrative expenses |
5 |
(1,040) |
- |
(1,040) |
(1,211) |
- |
(1,211) |
|
Net return before finance costs and taxation |
|
8,932 |
29,474 |
38,406 |
11,792 |
1,897 |
13,689 |
|
|
|
|
|
|
|
|
|
|
Interest payable and similar charges |
6 |
(466) |
- |
(466) |
(1,137) |
- |
(1,137) |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
Return before taxation |
|
8,466 |
29,474 |
37,940 |
10,655 |
1,897 |
12,552 |
|
|
|
|
|
|
|
|
|
|
Taxation |
7 |
(1,045) |
(458) |
(1,503) |
(1,085) |
(1,326) |
(2,411) |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
Return after taxation |
|
7,421 |
29,016 |
36,437 |
9,570 |
571 |
10,141 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
Return per share (pence) |
|
|
|
|
|
|
|
|
Basic |
9 |
4.87 |
19.03 |
23.90 |
5.03 |
0.30 |
5.33 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
Diluted |
9 |
n/a |
n/a |
n/a |
n/a |
0.29 |
5.61 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
The total column of this statement represents the profit and loss account of the Company. |
|||||||
|
All revenue and capital items in the above statement derive from continuing operations. |
|||||||
|
The accompanying notes are an integral part of the financial statements. |
|||||||
STATEMENT OF FINANCIAL POSITION
|
|
|
As at |
As at |
|
|
|
31 August 2019 |
31 August 2018 |
|
|
Notes |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
10 |
611,829 |
805,757 |
|
|
|
____________ |
____________ |
|
Current assets |
|
|
|
|
Debtors and prepayments |
11 |
1,818 |
2,185 |
|
Cash and cash equivalents |
12 |
10,170 |
8,775 |
|
|
|
____________ |
____________ |
|
|
|
11,988 |
10,960 |
|
|
|
____________ |
____________ |
|
Creditors: amounts falling due within one year |
|
|
|
|
Bank loan |
13(a) |
(6,000) |
(25,500) |
|
Other creditors |
13(b) |
(1,332) |
(3,198) |
|
|
|
____________ |
____________ |
|
|
|
(7,332) |
(28,698) |
|
|
|
____________ |
____________ |
|
Net current assets/(liabilities) |
|
4,656 |
(17,738) |
|
|
|
____________ |
____________ |
|
|
|
|
|
|
Creditors: amounts falling due after more than one year |
|
|
|
|
Bank loan |
13(c) |
(24,993) |
- |
|
|
|
____________ |
____________ |
|
Deferred tax liability on Indian capital gains |
13(d) |
(1,784) |
- |
|
|
|
____________ |
____________ |
|
|
|
(26,777) |
- |
|
|
|
____________ |
____________ |
|
Net assets |
|
589,708 |
788,019 |
|
|
|
____________ |
____________ |
|
Share capital and reserves |
|
|
|
|
Called-up share capital |
14 |
31,922 |
43,061 |
|
Share premium account |
|
60,416 |
60,416 |
|
Capital redemption reserve |
|
28,154 |
17,015 |
|
Capital reserve |
15 |
431,945 |
630,239 |
|
Revenue reserve |
|
37,271 |
37,288 |
|
|
|
____________ |
____________ |
|
Equity shareholders' funds |
|
589,708 |
788,019 |
|
|
|
____________ |
____________ |
|
|
|
|
|
|
Net asset value per Ordinary share (pence) |
|
|
|
|
Basic and diluted |
16 |
458.03 |
421.54 |
|
|
|
____________ |
____________ |
STATEMENT OF CHANGES IN EQUITY
|
|
|
|
Share |
Equity |
Capital |
|
|
|
|
|
|
Share |
premium |
component |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
CULS 2018 |
reserve |
reserve |
reserve |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 August 2018 |
|
43,061 |
60,416 |
- |
17,015 |
630,239 |
37,288 |
788,019 |
|
Return after taxation |
|
- |
- |
- |
- |
29,016 |
7,421 |
36,437 |
|
Buyback of Ordinary shares for treasury |
14 |
- |
- |
- |
- |
(9,347) |
- |
(9,347) |
|
Buyback of Ordinary shares for cancellation as a result of the Tender Offer |
13,14 |
(11,139) |
- |
- |
11,139 |
(217,963) |
- |
(217,963) |
|
Dividend paid |
8 |
- |
- |
- |
- |
- |
(7,438) |
(7,438) |
|
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
Balance at 31 August 2019 |
|
31,922 |
60,416 |
- |
28,154 |
431,945 |
37,271 |
589,708 |
|
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 August 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
Equity |
Capital |
|
|
|
|
|
|
Share |
premium |
component |
redemption |
Capital |
Revenue |
|
|
|
|
capital |
account |
CULS 2018 |
reserve |
reserve |
reserve |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 31 August 2017 |
|
40,180 |
18,618 |
238 |
17,015 |
697,550 |
33,729 |
807,330 |
|
Return after taxation |
|
- |
- |
- |
- |
571 |
9,570 |
10,141 |
|
Issue of new Ordinary shares from conversion of 3.5% Convertible Unsecured Loan Stock 2018 |
13 |
2,881 |
41,798 |
- |
- |
- |
- |
44,679 |
|
Buyback of Ordinary shares for treasury |
14 |
- |
- |
- |
- |
(67,882) |
- |
(67,882) |
|
Dividend paid |
|
- |
- |
- |
- |
- |
(6,249) |
(6,249) |
|
Transfer of notional interest element on 3.5% Convertible Unsecured Loan Stock 2018 |
6 |
- |
- |
(238) |
- |
- |
238 |
- |
|
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
Balance at 31 August 2018 |
|
43,061 |
60,416 |
- |
17,015 |
630,239 |
37,288 |
788,019 |
|
|
|
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
|
|
|
|
|
|
|
|
|
|
The capital reserve includes investment holding gains amounting to £199,349,000 (2018 - £265,721,000), as disclosed in note 10. |
||||||||
|
The Revenue reserve and the part of the Capital reserve represented by realised capital gains represent 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 |
|
|
|
31 August 2019 |
31 August 2018 |
|
|
Notes |
£'000 |
£'000 |
|
Operating activities |
|
|
|
|
Net return before taxation |
|
37,940 |
12,552 |
|
Adjustment for: |
|
|
|
|
Gains on investments |
|
(31,412) |
(2,064) |
|
Currency (gains)/losses |
|
(1,353) |
292 |
|
Decrease in accrued dividend income |
|
497 |
1,014 |
|
(Increase)/decrease in other debtors |
|
(27) |
1 |
|
(Decrease)/increase in other creditors |
|
(267) |
802 |
|
Interest payable and similar charges |
6 |
466 |
1,137 |
|
Scrip dividends included in investment income |
|
(548) |
(685) |
|
Overseas withholding tax |
|
(1,163) |
(2,425) |
|
|
|
_______ |
_______ |
|
Cash from operations |
|
4,133 |
10,624 |
|
Interest paid |
6 |
(476) |
(873) |
|
|
|
_______ |
_______ |
|
Net cash inflow from operating activities |
|
3,657 |
9,751 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Purchases of investments |
|
(111,885) |
(176,034) |
|
Sales of investments |
|
337,511 |
214,694 |
|
|
|
_______ |
_______ |
|
Net cash inflow from investing activities |
|
225,626 |
38,660 |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Equity dividends paid |
8 |
(7,438) |
(6,249) |
|
Buyback of Ordinary shares |
|
(9,347) |
(67,882) |
|
Tender Offer for Ordinary shares inclusive of expenses |
|
(217,949) |
- |
|
Repayment of bank loan |
|
(25,500) |
- |
|
Drawdown of bank loan |
|
30,993 |
25,500 |
|
|
|
_______ |
_______ |
|
Net cash used in financing activities |
|
(229,241) |
(48,631) |
|
|
|
_______ |
_______ |
|
Increase/(decrease) in cash and cash equivalents |
|
42 |
(220) |
|
|
|
_______ |
_______ |
|
Analysis of changes in cash and cash equivalents during the year |
|
|
|
|
Opening balance |
|
8,775 |
9,287 |
|
Effect of exchange rate fluctuations on cash held |
|
1,353 |
(292) |
|
Increase/(decrease) in cash and cash equivalents as above |
|
42 |
(220) |
|
|
|
_______ |
_______ |
|
Closing cash and cash equivalents |
|
10,170 |
8,775 |
|
|
|
_______ |
_______ |
NOTES TO THE ACCOUNTS
|
1. |
Principal activity |
|
|
The Company is a closed-end investment company, registered in Scotland No SC106049, with its Ordinary shares being listed on the London Stock Exchange. |
|
2. |
Accounting policies |
|
|
|
(a) |
Basis of accounting |
|
|
|
The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the guidance set out in the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture capital Trusts issued in November 2014 and updated in February 2018 with consequential amendments (applicable for accounting periods beginning on or after 1 January 2019 but adopted early). 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, 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 Statement of Corporate Governance (unaudited) on page 31 of the published 2019 annual report. |
|
|
|
|
|
|
|
Key Accounting Judgements |
|
|
|
The Company's investments 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, draws down borrowings, pays dividends and expenses in Sterling. Consequently, the Board also considers the Company's presentational currency to be Sterling. |
|
|
|
|
|
|
(b) |
Investments |
|
|
|
Listed investments have been designated upon initial recognition as held at fair value through profit or loss. Investments are recognised and de-recognised on the trade date at fair value, which is generally deemed to be the cost of the investment at that point. Subsequent to initial recognition, investments are valued at fair value, which for listed investments is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from the London Stock Exchange. Gains and losses arising from changes in fair value are included as a capital item in the Income Statement and are ultimately recognised in the capital reserve. |
|
|
|
|
|
|
(c) |
Income |
|
|
|
Dividends (other than special 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. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the foregone cash dividend is recognised as income. Any excess in the value of the shares received over the amount of cash dividend foregone 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 with the exception of 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 10. |
|
|
|
|
|
|
(e) |
Taxation |
|
|
|
The tax expense represents the sum of the tax currently payable and deferred tax. Tax payable is based on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date. |
|
|
|
|
|
|
|
Deferred tax is recognised in respect of all temporary differences at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the Statement of Financial Position date. 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 temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise, using enacted tax rates that are expected to apply at the date the deferred tax position is unwound. |
|
|
|
|
|
|
(f) |
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. This reserve is not distributable. |
|
|
|
|
|
|
|
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 20p. This reserve is not distributable. |
|
|
|
|
|
|
|
Capital redemption reserve |
|
|
|
The capital redemption reserve arose when Ordinary shares were redeemed, and subsequently cancelled by the Company, at which point an amount equal to the par value of the Ordinary share capital was transferred from the Ordinary share capital to the capital redemption reserve. This reserve is not distributable. |
|
|
|
|
|
|
|
Capital reserve |
|
|
|
This reserve reflects any gains or losses on investments realised in the period along with any increases and decreases in the fair value of investments held that have been recognised in the Statement of Comprehensive Income. This reserve is not distributable except for the purpose of funding share buybacks to the extent that gains are deemed realised. |
|
|
|
|
|
|
|
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. |
|
|
|
|
|
|
(g) |
Foreign currency |
|
|
|
Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the reporting 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. Unrealised and realised gains and losses on foreign currency movements on investments held through profit or loss are recognised in the capital column of the Statement of Comprehensive Income. |
|
|
|
|
|
|
(h) |
Dividends payable |
|
|
|
Final dividends are dealt with in the period in which they are paid. |
|
|
|
|
|
|
(i) |
3.5% Convertible Unsecured Loan Stock 2018 |
|
|
|
Convertible Unsecured Loan Stock ("CULS") issued by the Company were regarded as a compound instrument, comprising of a liability component and an equity component. At the date of issue, the fair value of the liability component was estimated by assuming that an equivalent non-convertible obligation of the Company would have a coupon rate of 4.662%. The notional uplift in interest from 3.5% to 4.662% is shown in note 6. The fair value of the equity component, representing the option to convert liability into equity, was derived from the difference between the issue proceeds of the CULS and the fair value assigned to the liability. The liability component was subsequently measured at amortised cost using the effective interest rate. |
|
|
|
|
|
|
|
Direct expenses associated with the CULS issue were allocated to the liability and equity components in proportion to the split of the proceeds of the issue. Expenses allocated to the liability component were amortised over the life of the instrument. |
|
|
|
|
|
|
|
The interest expense on the CULS was calculated according to the effective interest rate method by applying the assumed rate of 4.662% at initial recognition to the liability component of the instrument. The difference between this amount and the interest paid was added to the carrying liability of the CULS. |
|
|
|
|
|
|
|
On conversion of CULS, equity was issued and the liability component was derecognised. The original equity component recognised at inception remains in equity. No gain or loss was recognised on conversion. |
|
|
|
|
|
|
|
When CULS were repurchased for cancellation, the fair value of the liability at the redemption date was compared to its carrying amount, giving rise to a gain or loss on redemption that was recognised through profit or loss. The amount of consideration allocated to equity was recognised in equity with no gain or loss being recognised. |
|
|
|
|
|
|
(j) |
Treasury shares |
|
|
|
When the Company purchases its Ordinary shares to be held in treasury, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effect, and is recognised as a deduction from the capital reserve. When these shares are sold subsequently, the amount received is recognised as an increase in equity, and any resulting surplus on the transaction is transferred to the share premium account and any resulting deficit is transferred from the capital reserve. |
|
|
|
|
|
|
(k) |
Cash and cash equivalents |
|
|
|
Cash comprises cash at bank and in hand. Cash equivalents are short-term, highly-liquid investments that are readily convertible to known amounts of cash, and that are subject to an insignificant risk of changes in value. |
|
|
|
2019 |
2018 |
|
3. |
Income |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
UK dividend income |
788 |
1,137 |
|
|
Overseas dividend income |
12,838 |
16,437 |
|
|
Scrip dividends |
_______ |
_______ |
|
|
|
|
|
|
|
|
14,174 |
18,259 |
|
|
|
_______ |
_______ |
|
|
Other income |
|
|
|
|
Deposit interest |
26 |
7 |
|
|
Interest from money market funds |
44 |
33 |
|
|
|
_______ |
_______ |
|
|
|
70 |
40 |
|
|
|
_______ |
_______ |
|
|
Total income |
14,244 |
18,299 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
2019 |
2018 |
|
|
Income from investments |
£'000 |
£'000 |
|
|
Listed UK |
144 |
196 |
|
|
Listed overseas |
14,030 |
18,063 |
|
|
|
_______ |
_______ |
|
|
|
14,174 |
18,259 |
|
|
|
_______ |
_______ |
|
|
|
2019 |
2018 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
4. |
Management fee |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Management fee |
4,272 |
- |
4,272 |
5,296 |
- |
5,296 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
Management fees paid to Aberdeen Standard Fund Managers Limited ("the Manager") are calculated at 0.85% per annum on net assets up to £350 million and 0.50% per annum on net assets over £350 million. Management fees are calculated and payable on a quarterly basis. |
||||||
|
|
|
||||||
|
|
Net assets exclude long term borrowings less (i) the value of any investment funds managed by the Manager and (ii) 50% of the value of any investment funds managed or advised by investment managers other than the Manager. During the year and at the year end, the Company held £1,500,000 (2018 - £nil) in Aberdeen Standard Liquidity Fund (Lux) - Sterling Fund which is managed and administered by ASI. The Company pays a management fee on the value of these holdings but no fee is chargeable at the underlying fund level. |
||||||
|
|
|
||||||
|
|
The balance due to the Manager at the year end was £1,043,000 (2018 - £1,291,000). |
||||||
|
|
|
||||||
|
|
The management agreement is terminable by the Company on three months' notice or in the event of a change of control in the ownership of the Manager. The notice period required to be given by the Manager is six months. |
||||||
|
|
|
2019 |
2018 |
|
5. |
Administrative expenses |
£'000 |
£'000 |
|
|
Promotional activities |
200 |
200 |
|
|
Directors' fees |
180 |
154 |
|
|
Custody fees |
265 |
316 |
|
|
Auditor's remuneration: Fees payable to the Company's auditor for |
|
|
|
|
- audit of the Company's annual report |
20 |
18 |
|
|
- review of the Company's half yearly report |
5 |
5 |
|
|
Other expenses |
370 |
518 |
|
|
|
_______ |
_______ |
|
|
|
1,040 |
1,211 |
|
|
|
_______ |
_______ |
|
|
|
||
|
|
The Company has an agreement with Aberdeen Standard Fund Managers Limited for the provision of promotional activities. The total fees paid and payable under the agreement were £200,000 (2018 - £200,000) and the sum due to the Manager at the year end was £84,000 (2018 - £34,000). |
||
|
|
|
||
|
|
No pension contributions were made in respect of any of the Directors. |
||
|
|
|
||
|
|
The Company does not have any employees. |
||
|
|
|
2019 |
2018 |
|
6. |
Interest payable and similar charges |
£'000 |
£'000 |
|
|
Interest on bank loans |
466 |
227 |
|
|
Interest on 3.5% Convertible Unsecured Loan Stock 2018 |
- |
646 |
|
|
Notional interest of 1.162% on 3.5% Convertible Unsecured Loan Stock 2018 |
- |
238 |
|
|
Amortisation of 3.5% Convertible Unsecured Loan Stock 2018 issue expenses |
- |
26 |
|
|
|
_______ |
_______ |
|
|
|
466 |
1,137 |
|
|
|
_______ |
_______ |
|
|
|
2019 |
2018 |
||||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
||
|
7. |
Taxation |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
(a) |
Analysis of charge for the year |
|
|
|
|
|
|
|
|
|
|
Overseas tax suffered |
1,045 |
- |
1,045 |
1,085 |
- |
1,085 |
|
|
|
|
Total current tax charge for the year |
1,045 |
- |
1,045 |
1,085 |
- |
1,085 |
|
|
|
|
Deferred tax liability on Indian capital gains |
- |
458 |
458 |
- |
1,326 |
1,326 |
|
|
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
|
|
Total tax charge for the year |
1,045 |
458 |
1,503 |
1,085 |
1,326 |
2,411 |
|
|
|
|
|
_______ |
______ |
______ |
_______ |
_____ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On 1 April 2018, the Indian Government withdrew an exemption from capital gains tax on investments held for twelve months or longer. Accordingly, the Company has recognised a deferred tax liability of £1,784,000 (2018 - £1,326,000) on capital gains which may arise if Indian investments are sold. |
|||||||
|
|
|
|
|||||||
|
|
|
The Company has not recognised a deferred tax asset of £14,290,000 (2018 - £13,331,000) arising as a result of excess management expenses and non-trading loan relationship deficits (CULS interest). These expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. |
|
||||||
|
|
|
|
|
||||||
|
|
(b) |
Factors affecting the tax charge for the year |
|
||||||
|
|
|
The tax assessed for the year is lower than the effective rate of corporation tax in the UK. |
|
||||||
|
|
|
|
|
||||||
|
|
|
|
2019 |
2018 |
|
||||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
Return before taxation |
8,466 |
29,474 |
37,940 |
10,655 |
1,897 |
12,552 |
|
|
|
|
|
_______ |
______ |
______ |
_______ |
______ |
_____ |
|
|
|
|
Effective rate of corporation tax at 19.00% (2018 - 19.00%) |
1,609 |
5,600 |
7,209 |
2,024 |
361 |
2,385 |
|
|
|
|
Effects of: |
|
|
|
|
|
|
|
|
|
|
UK dividend income |
(150) |
- |
(150) |
(216) |
- |
(216) |
|
|
|
|
Gains on investments not taxable |
- |
(5,968) |
(5,968) |
- |
(392) |
(392) |
|
|
|
|
Currency losses not taxable |
- |
368 |
368 |
- |
31 |
31 |
|
|
|
|
Other non-taxable income |
(2,543) |
- |
(2,543) |
(3,253) |
- |
(3,253) |
|
|
|
|
Expenses not deductible for tax purposes |
5 |
- |
5 |
3 |
- |
3 |
|
|
|
|
Increase in excess expenses and loan relationship deficit |
1,079 |
- |
1,079 |
1,442 |
- |
1,442 |
|
|
|
|
Movement in deferred tax liability on Indian capital gains |
- |
458 |
458 |
- |
1,326 |
1,326 |
|
|
|
|
Net overseas tax suffered |
1,045 |
- |
1,045 |
1,085 |
- |
1,085 |
|
|
|
|
|
_______ |
______ |
______ |
_______ |
______ |
_____ |
|
|
|
|
Current tax charge for year |
1,045 |
458 |
1,503 |
1,085 |
1,326 |
2,411 |
|
|
|
|
|
_______ |
______ |
______ |
_______ |
______ |
_____ |
|
|
8. |
Dividends |
||
|
|
In order to comply with the requirements of Sections 1158 -1159 of the Corporation Tax Act 2010 and with company law, the Company is required to make a final dividend distribution. |
||
|
|
|
||
|
|
The proposed final dividend 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 total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158 - 1159 are considered. The revenue available for distribution by way of dividend for the year is £7,421,000 (2018 - £9,570,000). |
||
|
|
|
2019 |
2018 |
|
|
|
£'000 |
£'000 |
|
|
Proposed final dividend for 2019 - 4.75p per Ordinary share (2018 - 4.00p) |
6,088 |
7,438 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The amounts reflected above for the cost of the proposed final dividend for 2019 is based on 128,164,313 Ordinary shares in issue, being the number of Ordinary shares in issue at the date of this Report. |
||
|
|
|
||
|
|
The final dividend will be paid on 17 December 2019 to shareholders on the register at the close of business on 22 November 2019. |
||
|
|
|
2019 |
2018 |
||
|
9. |
Return per Ordinary share |
£'000 |
pence |
£'000 |
pence |
|
|
Basic |
|
|
|
|
|
|
Revenue return |
7,421 |
4.87 |
9,570 |
5.03 |
|
|
Capital return |
29,016 |
19.03 |
571 |
0.30 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Total return |
36,437 |
23.90 |
10,141 |
5.33 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Weighted average Ordinary shares in issue |
|
152,439,217 |
|
190,358,754 |
|
|
|
|
__________ |
|
__________ |
|
|
|
|
|
||
|
|
|
2019 |
2018 |
||
|
|
Diluted |
£'000 |
pence |
£'000 |
pence |
|
|
Revenue return |
n/a |
n/a |
10,457 |
n/a |
|
|
Capital return |
n/a |
n/a |
571 |
0.29 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
Total return |
n/a |
n/a |
11,028 |
5.61 |
|
|
|
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
Weighted average Ordinary shares in issue{A} |
|
n/a |
|
196,712,871 |
|
|
|
|
_______ |
|
___________ |
|
|
|
||||
|
|
The Company has no securities in issue that could dilute the return per Ordinary share. Therefore, for the year ended 31 August 2019, no diluted calculation is provided. |
||||
|
|
{A} For the year ended 31 August 2018, the calculation of the diluted total, revenue and capital returns per Ordinary share were carried out in accordance with IAS 33, "Earnings per Share". For the purpose of calculating total, revenue and capital returns per Ordinary share, the number of Ordinary shares used was the weighted average number used in the basic calculation plus the number of Ordinary shares deemed to be issued for no consideration on exercise of all 3.5% Convertible Unsecured Loan Stock 2018 (CULS). The calculations indicated that the exercise of CULS would result in an increase in the weighted average number of Ordinary shares of 14,405,297 to 196,712,916 Ordinary shares. |
||||
|
|
|
||||
|
|
In the year ended 31 August 2018 there was no dilution to the revenue return per Ordinary share. |
||||
|
10. |
|
Listed |
Listed |
|
|
|
|
overseas |
in UK |
Total |
|
|
Investments at fair value through profit or loss |
£'000 |
£'000 |
£'000 |
|
|
Fair value through profit or loss: |
|
|
|
|
|
Opening book cost |
522,411 |
17,625 |
540,036 |
|
|
Opening fair value gains/(losses) on investments held |
273,513 |
(7,792) |
265,721 |
|
|
|
_______ |
_______ |
_______ |
|
|
Opening fair value |
795,924 |
9,833 |
805,757 |
|
|
Movements in year: |
|
|
|
|
|
Purchases at cost |
112,156 |
- |
112,156 |
|
|
Sales - proceeds |
(332,422) |
(5,074) |
(337,496) |
|
|
Sales - gains/(losses) on sales |
102,031 |
(4,247) |
97,784 |
|
|
Current year fair value (gains)/losses on investments held |
(70,455) |
4,083 |
(66,372) |
|
|
|
_______ |
_______ |
_______ |
|
|
Closing fair value |
607,234 |
4,595 |
611,829 |
|
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
Listed |
Listed |
|
|
|
|
overseas |
in UK |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
Closing book cost |
404,176 |
8,304 |
412,480 |
|
|
Closing fair value gains/(losses) on investments held |
203,058 |
(3,709) |
199,349 |
|
|
|
_______ |
_______ |
_______ |
|
|
Closing fair value |
607,234 |
4,595 |
611,829 |
|
|
|
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
2019 |
2018 |
|
|
Gains on investments held at fair value through profit or loss |
|
£'000 |
£'000 |
|
|
Realised gains on sales |
|
97,784 |
94,293 |
|
|
Decrease in fair value gains on investments held |
|
(66,372) |
(92,229) |
|
|
|
|
_______ |
_______ |
|
|
|
|
31,412 |
2,064 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
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 gains on investments in the Statement of Comprehensive Income. The total costs were as follows: |
|||
|
|
|
|
|
|
|
|
|
2019 |
2018 |
|
|
|
|
£'000 |
£'000 |
|
|
|
Purchases |
158 |
304 |
|
|
|
Sales |
629 |
376 |
|
|
|
|
_______ |
_______ |
|
|
|
|
787 |
680 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations. |
|||
|
|
In the year ended 31 August 2019, the transaction costs were higher due to the increased volume of trading ahead of the Tender Offer, see note 13 for further details. |
|||
|
|
|
2019 |
2018 |
|
11. |
Debtors and prepayments |
£'000 |
£'000 |
|
|
Accrued income |
840 |
1,337 |
|
|
Overseas withholding tax recoverable |
484 |
366 |
|
|
Amounts due from brokers |
16 |
31 |
|
|
Other debtors and prepayments |
478 |
451 |
|
|
|
_______ |
_______ |
|
|
|
1,818 |
2,185 |
|
|
|
_______ |
_______ |
|
|
|
2019 |
2018 |
|
12. |
Cash and cash equivalents |
£'000 |
£'000 |
|
|
Cash at bank and in hand |
8,670 |
8,775 |
|
|
Money market funds |
1,500 |
- |
|
|
|
_______ |
_______ |
|
|
|
10,170 |
8,775 |
|
|
|
_______ |
_______ |
|
13. |
Creditors |
|
|
|
|
|
Amounts falling due within one year: |
|
|
|
|
|
|
|
2019 |
2018 |
|
|
(a) |
Bank loans |
£'000 |
£'000 |
|
|
|
Falling due within one year |
6,000 |
25,500 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
The Company had a £50,000,000 Revolving Facility Agreement with Scotiabank (Ireland) Designated Activity Company. This agreement was entered into on 31 January 2018 with a termination date of 31 January 2019. On 17 January 2019, an amendment was signed to extend the termination date to 30 July 2019. This facility was amended and restated on 30 July 2019 into a £25,000,000 multicurrency revolving facility with Scotiabank Europe Plc with a termination date of 29 July 2022. |
||
|
|
|
|
||
|
|
|
At the year end £6,000,000 of this facility had been drawn down at a rate of 1.658% which matured on 30 September 2019. At the date of this Report, £6,000,000 has been rolled over at an interest rate of 1.66413% until maturity on 29 November 2019. |
||
|
|
|
|
|
|
|
|
|
|
2019 |
2018 |
|
|
(b) |
Other creditors |
£'000 |
£'000 |
|
|
|
Amounts due to brokers |
- |
277 |
|
|
|
Deferred tax liability on Indian capital gains |
- |
1,326 |
|
|
|
Other amounts due |
1,332 |
1,595 |
|
|
|
|
_______ |
_______ |
|
|
|
|
1,332 |
3,198 |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
Included within other amounts due is £14,000 outstanding in relation to the Tender Offer for shares, see note 13 for further details. |
||
|
|
|
|
|
|
|
|
Amounts falling due in more than one year: |
|
|
|
|
|
|
|
2019 |
2018 |
|
|
(c) |
Bank loans |
£'000 |
£'000 |
|
|
|
Falling due in more than one year |
25,000 |
- |
|
|
|
Unamortised expenses |
(7) |
- |
|
|
|
|
_______ |
_______ |
|
|
|
|
24,993 |
- |
|
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
|
|
On 30 July 2019, the Company entered into a new fixed loan facility agreement of £25,000,000 at an interest rate of 1.61% with Scotiabank Europe, with a termination date of 29 July 2022. The agreement of this facility incurred an arrangement fee of £7,500, which will be amortised over the life of the loan. |
||
|
|
|
|
||
|
|
|
The agreements contains the following covenants: |
||
|
|
|
- the net asset value of the Company shall not at any time be less than £385 million. |
||
|
|
|
'- the adjusted asset coverage of the Company, as defined in the loan facility agreement, shall not at any time be less than 4.00 to 1.00. |
||
|
|
|
|
|
|
|
|
|
All covenants have been complied with throughout the year. |
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
2018 |
|
|
|
|
£'000 |
£'000 |
|
|
(d) |
Deferred tax liability on Indian capital gains |
1,784 |
- |
|
|
|
|
_______ |
_______ |
|
|
|
2019 |
2018 |
|
14. |
Called-up share capital |
£'000 |
£'000 |
|
|
Allotted, called-up and fully paid: |
|
|
|
|
Ordinary shares of 20p |
|
|
|
|
Opening balance of 215,304,353 (2018 - 200,899,056) shares |
43,061 |
40,180 |
|
|
Tender offer of 55,692,676 Ordinary shares |
(11,139) |
- |
|
|
Conversion of CULS |
- |
2,881 |
|
|
|
_______ |
_______ |
|
|
Closing balance of 159,611,677 (2018 - 215,304,353) shares |
31,922 |
43,061 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
During the year to 31 August 2019 the Company announced a Tender Offer for up to 30% of the Company's Ordinary shares in issue. A total of 55,692,676 Ordinary shares (representing 30% of the issued share capital) were repurchased by the Company under the Tender Offer and cancelled at a cost of £217,963,000 which was taken to the Capital Reserve. The costs of the Tender Offer were wholly incurred by the exiting Ordinary shareholders. |
||
|
|
During the year to 31 August 2018 14,405,297 Ordinary shares were issued as a result of CULS conversion, following this there are no CULS in issue. |
||
|
|
|
||
|
|
During the year 2,496,885 Ordinary shares of 20p each were purchased to be held in treasury by the Company (2018 - 18,208,444) at a total cost of £9,347,000 (2018 - £67,882,000). At the year end 30,862,829 (2018 - 28,365,944) Ordinary shares of 20p each were held in treasury, which represents 19.3% (2018 - 13.2%) of the Company's total issued share capital at 31 August 2019. |
||
|
|
|
||
|
|
Since the year end a further 584,535 Ordinary shares of 20p each have been purchased by the Company at a total cost of £2,380,000 all of which were held in treasury. |
||
|
|
|
2019 |
2018 |
|
15. |
Capital reserve |
£'000 |
£'000 |
|
|
At 1 September 2018 |
630,239 |
697,550 |
|
|
Movement in fair value gains |
31,412 |
2,064 |
|
|
Foreign exchange movement |
(1,938) |
(167) |
|
|
Buyback of Ordinary shares for treasury |
(9,347) |
(67,882) |
|
|
Tender Offer of Ordinary shares for cancellation |
(217,963) |
- |
|
|
Movement in capital gains tax charge |
(458) |
(1,326) |
|
|
|
_______ |
_______ |
|
|
As at 31 August 2019 |
431,945 |
630,239 |
|
|
|
_______ |
_______ |
|
|
|
|
|
|
|
The capital reserve includes investment holding gains amounting to £199,349,000 (2018 - £265,721,000), as disclosed in note 10. |
||
|
16. |
Net asset value per share |
||
|
|
The net asset value per share and the net asset values attributable to the Ordinary shareholders at the year end calculated in accordance with the Articles of Association were as follows: |
||
|
|
|
|
|
|
|
Basic |
2019 |
2018 |
|
|
Net assets attributable (£'000) |
589,708 |
788,019 |
|
|
Number of Ordinary shares in issue {A} |
128,748,848 |
186,938,409 |
|
|
Net asset value per share (p) |
458.03 |
421.54 |
|
|
{A} Excluding shares held in treasury. |
|
|
|
17. |
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, bank 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 ASFML under the terms of its management agreement with ASFML (further details of which are included under note 4). 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 Standard Fund Managers Limited collectively assume responsibility for ASFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year. |
|||||||||
|
|
|
|||||||||
|
|
ASFML is a fully integrated member of the Standard Life Aberdeen Group (the "Group"), which provides a variety of services and support to ASFML 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 Standard Investments 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 Group CEO. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SHIELD"). |
|||||||||
|
|
|
|||||||||
|
|
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 Standard Life Aberdeen Group, 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, currency risk and other price risk. The Company is exposed to gearing risk which has the effect of exacerbating market falls and gains. The level of net gearing is shown above. Details of the loan facilities the Company has in place can be found in note 13. |
|||||||||
|
|
|
|||||||||
|
|
Interest rate risk |
|||||||||
|
|
Interest rate movements may affect the level of income receivable on cash deposits. |
|||||||||
|
|
|
|||||||||
|
|
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. |
|||||||||
|
|
|
|||||||||
|
|
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 reporting date was as follows: |
|||||||||
|
|
|
|||||||||
|
|
|
Weighted average |
Weighted |
|
|
|||||
|
|
|
period for which |
average |
Fixed |
Floating |
|||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|||||
|
|
At 31 August 2019 |
Years |
% |
£'000 |
£'000 |
|||||
|
|
Assets |
|
|
|
|
|||||
|
|
US Dollar |
- |
- |
- |
8 |
|||||
|
|
Sterling |
- |
1.05 |
- |
5,193 |
|||||
|
|
Taiwanese Dollar |
- |
- |
- |
4,826 |
|||||
|
|
Vietnamese Dong |
- |
- |
- |
143 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
Total assets |
n/a |
n/a |
- |
10,170 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
Liabilities |
|
|
|
|
|||||
|
|
Short-term loan - £6,000,000 |
0.08 |
1.66 |
6,000 |
- |
|||||
|
|
Long-term loan - £25,000,000 |
2.91 |
1.61 |
24,993 |
- |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
- |
- |
30,993 |
- |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
|
|
|
|
|||||
|
|
|
Weighted average |
Weighted |
|
|
|||||
|
|
|
period for which |
average |
Fixed |
Floating |
|||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|||||
|
|
At 31 August 2018 |
Years |
% |
£'000 |
£'000 |
|||||
|
|
Assets |
|
|
|
|
|||||
|
|
Hong Kong Dollar |
- |
- |
- |
153 |
|||||
|
|
Sterling |
- |
- |
- |
4,159 |
|||||
|
|
Taiwanese Dollar |
- |
- |
- |
3 |
|||||
|
|
Vietnamese Dong |
- |
- |
- |
4,460 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
Total assets |
n/a |
n/a |
- |
8,775 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
Liabilities |
|
|
|
|
|||||
|
|
Bank loan |
0.42 |
1.41 |
25,500 |
- |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
|
|
|
|
|||||
|
|
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. |
|||||||||
|
|
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 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 |
|||||||||
|
|
The majority 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 investments with foreign currency borrowings. |
|||||||||
|
|
|
|||||||||
|
|
The Statement of Comprehensive Income is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk. |
|||||||||
|
|
|
|||||||||
|
|
Foreign currency risk exposure by currency of listing of incorporation is as follows: |
|||||||||
|
|
|
|||||||||
|
|
|
31 August 2019 |
31 August 2018 |
|||||||
|
|
|
|
Net |
Total |
|
Net |
Total |
|||
|
|
|
Overseas |
monetary |
currency |
Overseas |
monetary |
currency |
|||
|
|
|
investments |
assets |
exposure |
investments |
assets |
exposure |
|||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
|
Chinese Yuan{A} |
181,593 |
- |
181,593 |
179,430 |
- |
179,430 |
|||
|
|
Hong Kong Dollar{A} |
70,904 |
- |
70,904 |
120,442 |
(81) |
120,361 |
|||
|
|
Indian Rupee |
104,831 |
- |
104,831 |
115,721 |
31 |
115,752 |
|||
|
|
Indonesian Rupiah |
40,605 |
- |
40,605 |
51,525 |
- |
51,525 |
|||
|
|
Korean Won |
48,855 |
- |
48,855 |
89,519 |
- |
89,519 |
|||
|
|
Malaysian Ringgit |
4,092 |
- |
4,092 |
8,809 |
- |
8,809 |
|||
|
|
Philippine Peso |
18,085 |
- |
18,085 |
31,376 |
- |
31,376 |
|||
|
|
Singapore Dollar |
61,745 |
- |
61,745 |
93,806 |
- |
93,806 |
|||
|
|
Sri Lankan Rupee |
10,739 |
- |
10,739 |
12,407 |
- |
12,407 |
|||
|
|
Taiwanese Dollar |
36,114 |
4,826 |
40,940 |
42,364 |
3 |
42,367 |
|||
|
|
Thailand Baht |
18,119 |
- |
18,119 |
29,476 |
- |
29,476 |
|||
|
|
US Dollar{A} |
- |
24 |
24 |
11,663 |
(43) |
11,620 |
|||
|
|
Vietnamese Dong |
11,552 |
143 |
11,695 |
9,387 |
4,460 |
13,847 |
|||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||
|
|
|
607,234 |
4,993 |
612,227 |
795,925 |
4,370 |
800,295 |
|||
|
|
Sterling |
4,595 |
5,193 |
9,788 |
9,832 |
4,159 |
13,991 |
|||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||
|
|
Total |
611,829 |
10,186 |
622,015 |
805,757 |
8,529 |
814,286 |
|||
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|||
|
|
|
|
|
|
|
|
|
|||
|
|
{A} If currency denomination of overseas investments is used then exposure for Chinese Yuan is £55,089,000 (2018 - £65,076,000), for Hong Kong Dollar £167,081,000 (2018 - £200,016,000) and for US Dollar £30,326,000 (2018 - £46,443,000). |
|||||||||
|
|
|
|||||||||
|
|
Foreign currency sensitivity |
|||||||||
|
|
There is no sensitivity analysis included, as the Company's significant foreign currency financial instruments are in the form of equity investments, which have been included within the other price risk sensitivity analysis, so as to show the overall level of exposure. |
|||||||||
|
|
|
|||||||||
|
|
Other 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, as detailed above, 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. |
|||||||||
|
|
|
|||||||||
|
|
Other price risk sensitivity |
|||||||||
|
|
If market prices at the reporting date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 August 2019 would have increased/decreased by £61,183,000 (2018 - increased/decreased by £80,576,000) 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 Company's assets mainly comprise readily realisable securities which can be sold to meet funding requirements if necessary. In order to monitor the concentration of Dragon's investee companies with Standard Life Aberdeen, the total percentage holdings of those securities owned by Standard Life Aberdeen-managed funds is reviewed by the Board. |
|||||||||
|
|
|
|||||||||
|
|
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions, and reviews these on a regular basis. The Board has imposed a maximum gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of 20%. Short-term flexibility can be achieved through the use of loan and overdraft facilities. |
|||||||||
|
|
|
|||||||||
|
|
Liquidity risk exposure |
|||||||||
|
|
In the year to 31 August 2019, the Company repaid funds drawn under the £50,000,000 Revolving Facility Agreement with Scotiabank Europe, which matured on 30 July 2019. At 31 August 2019, the Company had drawn down £6,000,000 from a £25,000,000 Revolving Facility Agreement with Scotiabank Europe, which matured on 30 September 2019. There was a further facility of £25,000,000 with Scotiabank Europe due for repayment on 29 July 2022, details of which are disclosed in note 13. |
|||||||||
|
|
|
|||||||||
|
|
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; |
|||||||||
|
|
- the risk of counterparty, including the Depositary, exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, the third party administrators' carries out a stock reconciliation to the Depositary's records on a daily basis to ensure discrepancies are picked up on a timely basis. The Manager's Compliance department carries out periodic reviews of the Depositary's operations and reports its finding to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held; |
|||||||||
|
|
- cash is held only with reputable banks with high quality external credit enhancements. |
|||||||||
|
|
|
|||||||||
|
|
None of the Company's financial assets are secured by collateral or other credit enhancements. |
|||||||||
|
|
|
|||||||||
|
|
Credit risk exposure |
|||||||||
|
|
In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 31 August was as follows: |
|||||||||
|
|
|
|||||||||
|
|
|
2019 |
2018 |
|||||||
|
|
|
Balance |
Maximum |
Balance |
Maximum |
|||||
|
|
|
Sheet |
exposure |
Sheet |
exposure |
|||||
|
|
Current assets |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
|
Loans and receivables |
1,818 |
1,818 |
2,185 |
2,185 |
|||||
|
|
Cash and cash equivalents |
10,170 |
10,170 |
8,775 |
8,775 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
11,988 |
11,988 |
10,960 |
10,960 |
|||||
|
|
|
_______ |
_______ |
_______ |
_______ |
|||||
|
|
|
|||||||||
|
|
None of the Company's financial assets is past due or impaired. |
|||||||||
|
|
|
|||||||||
|
|
Maturity of financial liabilities |
|||||||||
|
|
The maturity profile of the Company's financial liabilities at 31 August was as follows: |
|||||||||
|
|
|
|
|
|||||||
|
|
|
2019 |
2018 |
|||||||
|
|
|
£'000 |
£'000 |
|||||||
|
|
In less than one year |
7,332 |
25,500 |
|||||||
|
|
In more than one year |
24,993 |
- |
|||||||
|
|
|
_______ |
_______ |
|||||||
|
|
|
32,325 |
25,500 |
|||||||
|
|
|
_______ |
_______ |
|||||||
|
|
|
|||||||||
|
|
Fair value of financial assets and liabilities |
|||||||||
|
|
The fair value of the long-term loan has been calculated at £25,145,000 as at 31 August 2019 (2018 - £Nil) compared to an accounts value in the financial statements of £24,993,000 (2018 - £Nil) (note 12). 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. The carrying values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. |
|||||||||
|
18. |
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 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 indirectly. |
|
|
Level 3: |
inputs are unobservable (ie for which market data is unavailable) for the asset or liability. |
|
|
|
|
|
|
All of the Company's investments are in quoted equities (2018 - same) which are actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments as at 31 August 2019 of £611,829,000 (31 August 2018 - £805,757,000) has therefore been deemed as Level 1. |
|
|
19. |
Related party transactions and transactions with the Manager |
|
|
Fees payable during the year to the Directors and their interests in shares of the Company are disclosed within the Directors' Remuneration Report on pages 33 to 35 of the published 2019 annual report. |
|
|
|
|
|
The Company has an agreement in place with Aberdeen Standard Fund Managers Limited for the provision of management and administration services, promotional activities and secretarial services. Details of transactions during the year and balances outstanding at the year end disclosed in notes 4 and 5. |
|
|
|
|
|
At the year end the Company had £1,500,000 (31 August 2018 - £nil) invested in Aberdeen Standard Liquidity Fund (Lux) - Sterling Fund which is managed and administered by ASI. The Company pays a management fee on the value of these holdings but no fee is chargeable at the underlying fund level. |
|
20. |
Capital management policies and procedures |
|
|
The Company's capital management objectives are: |
|
|
- to ensure that the Company will be able to continue as a going concern; and |
|
|
- to maximise the capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Board has imposed a maximum gearing level of 20% of net assets. |
|
|
|
|
|
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Manager's views on the market, and the extent to which revenue in excess of that which is required to be distributed should be retained. |
|
|
|
|
|
The Company has no externally imposed capital requirements. |
21. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 August 2019 or 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the registrar of companies, and those for 2019 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006
The statutory accounts for the financial year ended 31 August 2019 have been approved by the Board and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held at 12 noon on 12 December 2019 at 1 George Street, Edinburgh EH2 2LL.
The Annual Report will be posted to shareholders in November 2019 and copies will be available from the Manager or from the Company's website (www.asiadragontrust.co.uk).
|
ALTERNATIVE PERFORMANCE MEASURES |
|||
|
Alternative Performance Measures ("APMs") are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies. |
|||
|
|
|||
|
Total return |
|||
|
Total return is considered to be an alternative performance measure. NAV and share price total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend. |
|||
|
|
|||
|
The tables below provide information relating to the NAVs and share prices of the Company on the dividend reinvestment dates during the years ended 31 August 2019 and 31 August 2018 and total return for the period. |
|||
|
|
|
|
|
|
|
Dividend |
|
Share |
|
2019 |
rate |
NAV |
price |
|
31 August 2018 |
N/A |
421.54p |
370.00p |
|
22 November 2018 |
4.00p |
387.05p |
347.00p |
|
31 August 2019 |
N/A |
458.03p |
402.50p |
|
|
|
________ |
________ |
|
Total return |
|
+9.8% |
+10.0% |
|
|
|
________ |
________ |
|
|
|
|
|
|
|
Dividend |
|
Share |
|
2018 |
rate |
NAV |
price |
|
31 August 2017 |
N/A |
423.26p |
361.00p |
|
23 November 2017 |
3.30p |
432.67p |
371.50p |
|
31 August 2018 |
N/A |
421.54p |
370.00p |
|
|
|
________ |
________ |
|
Total return |
|
+2.3% |
+3.4% |
|
|
|
________ |
________ |
|
|
|
|
|
|
Discount to net asset value per Ordinary share |
|||
|
The difference between the share price of 402.50p (31 August 2018 - 370.00p) and the net asset value per Ordinary share of 458.03p (31 August 2018 - 421.54p) expressed as a percentage of the net asset value per Ordinary share. The highest and lowest discount during the year is shown on page 12 of the published 2019 annual report. |
|||
|
|
|||
|
Net gearing |
|||
|
Net gearing measures the total borrowings of £30,993,000 (31 August 2018 - £25,500,000) less cash and cash equivalents of £10,186,000 (31 August 2018 - £8,529,000) divided by shareholders' funds of £589,708,000 (31 August 2018 - £788,019,000), expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due to and from brokers at the year end as well as cash and cash equivalents. These balances can be found in notes 11 and 13 to the accounts. |
|||
|
|
|||
|
Ongoing charges |
|||
|
Ongoing charges is considered to be an alternative performance measure. The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average net asset values with debt at fair value throughout the year. |
|||
|
|
|
|
|
|
|
2019 |
2018 |
|
|
Investment management fees (£'000) |
4,272 |
5,296 |
|
|
Administrative expenses (£'000) |
1,040 |
1,211 |
|
|
Less: non-recurring charges (£'000) |
(13) |
(20) |
|
|
|
________ |
________ |
|
|
Ongoing charges (£'000) |
5,299 |
6,487 |
|
|
|
________ |
________ |
|
|
Average net assets (£'000) |
638,726 |
808,836 |
|
|
|
________ |
________ |
|
|
Ongoing charges ratio |
0.83% |
0.80% |
|
|
|
________ |
________ |
|
|
|
|
|
|
|
The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations which among other things, includes the cost of borrowings and transaction costs. |
|||
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 Managers Limited, Secretary
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
COMPANIES COVERED:
Latest directors dealings
- 1 day ago Cerillion
- 1 day ago Associated British Foods
- 1 day ago B&M European Value Retail S.A. (DI)
- 1 day ago B&M European Value Retail S.A. (DI)
- 1 day ago Haleon