Annual Financial Report
ABERDEEN ASIAN SMALLER COMPANIES INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2014
STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS
The Company
The Company is an investment trust and its Ordinary shares and Convertible Unsecured Loan Stock ("CULS") are listed on the premium segment of the London Stock Exchange. The Company aims to attract long term private and institutional investors wanting to benefit from the growth prospects of Asian smaller companies.
What is an Investment Trust?
Investment trusts are a way to make a single investment that gives you a share in a much larger portfolio. A type of collective investment, they let you spread your risk and access investment opportunities you might not find on your own.
Investment Objective
The investment objective of the Company, approved by shareholders at the General Meeting held on 17 May 2012, is to maximise total return to shareholders over the long term from a portfolio of smaller quoted companies (with a market capitalisation of up to approximately US$1 billion at the time of investment) in the economies of Asia and Australasia, excluding Japan.
Comparative Indices
The Company does not have a benchmark. The Manager utilises two general regional indices, the MSCI AC Asia Pacific ex Japan Index (currency adjusted) and the MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted), as well as peer group comparisons for Board reporting. It is likely that performance will diverge, possibly quite dramatically in either direction, from these or any other indices. The Manager seeks to minimise risk by using in depth research and does not see divergence from an index as risk.
Investment Manager
The Company's Alternative Investment Fund Manager is Aberdeen Fund Managers Limited ("AFML") and day to day management of the portfolio is delegated to Aberdeen Asset Management Asia Ltd ("AAMAL", the "Manager" or the "Investment Manager").
Alternative Investment Fund Manager*
Aberdeen Fund Managers Limited
Authorised and regulated by the Financial Conduct Authority
(* appointed as required by EU Directive 2011/61/EU)
Website
Up-to-date information can be found on the Company's website - www.asian-smaller.co.uk
Pre-investment Disclosure Document (PIDD)
The Alternative Investment Fund Manager Directive ("AIFMD") requires Aberdeen Fund Managers Limited, as the alternative investment fund manager of Aberdeen Asian Smaller Companies Investment Trust PLC, to make available to investors certain information prior to such investors' investment in the Company.
The AIFMD is intended to offer increased protection to investors in investment products that do not fall under the existing European Union regime for regulation of investment products known as "UCITS".
The Company's PIDD is available for viewing at http://www.invtrusts.co.uk/doc.nsf/Lit/PressReleaseUKClosedaascalternativeinvestmentfundmanagersdirectivepidd
Financial Highlights
|
|
2014 |
2013 |
|
Share price total return |
-4.2% |
+36.7% |
|
Net asset value capital return (diluted) |
-4.1% |
+33.0% |
|
Net asset value total return (diluted) |
-2.7% |
+35.0% |
|
Earnings per share (revenue) |
11.4p |
13.8p |
|
Ordinary dividend per share{A} |
10.00p |
10.00p |
|
Special dividend per share{A} |
3.00p |
3.00p |
|
{A} Dividends are subject to shareholder approval at the Annual General Meeting. |
||
Financial Calendar
|
22 October 2014 |
Announcement of annual results for the year ended 31 July 2014 |
|
3 November to |
Period during which holders of the Company's 3.5% Convertible Unsecured Loan Stock 2019 (CULS) can elect to convert into Ordinary shares |
|
30 November 2014 |
CULS Conversion Date |
|
2 December 2014 |
Annual General Meeting at 11.30 a.m. |
|
5 December 2014 |
Payment of final and special dividends for year ended 31 July 2014 |
|
March 2015 |
Announcement of half yearly results for the six months ending 31 January 2015 |
|
4 May to 31 May 2015 |
Period during which holders of the Company's 3.5% Convertible Unsecured Loan Stock 2019 (CULS) can elect to convert into Ordinary shares |
|
31 March 2015 |
CULS Conversion Date |
|
October 2015 |
Announcement of annual results for the year ending 31 July 2015 |
STRATEGIC REPORT - OVERVIEW OF STRATEGY
Strategy
The Company aims to attract long term private and institutional investors wanting to benefit from the growth prospects of Asian smaller companies.
The business of the Company is that of an investment trust and the Directors do not envisage any change in this activity in the foreseeable future. A review of the Company's activities is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities, likely future developments of the business, the recommended dividend and details of any acquisition of its own shares by the Company.
Duration
The Company does not have a fixed life.
Business Model - Investment Policy and Approach
The Company's assets are invested in a diversified portfolio of securities (including equity shares, preference shares, convertible securities, warrants and other equity-related securities) in quoted smaller companies spread across a range of industries and economies in the investment region including Australia, Bangladesh, China, Hong Kong, India, Indonesia, Korea, Malaysia, New Zealand, Pakistan, The Philippines, Singapore, Sri Lanka, Taiwan and Thailand, together with such other countries in Asia as the Directors may from time to time determine, (collectively, the "Investment Region").
Investments may also be made through collective investment schemes and in companies traded on stock markets outside the Investment Region provided that over 75 per cent. of their consolidated revenue is earned from trading in the Investment Region or they hold more than 75 per cent. of their consolidated net assets in the Investment Region.
The Board is responsible for determining the gearing strategy for the Company. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. Gearing is subject to a maximum gearing level of up to 25 per cent. Of adjusted NAV (see note 11 for definition) at the time of draw down.
The Company does not invest more than 15 per cent. of its gross assets at the time of investment either in other listed investment companies (including listed investment trusts), or in the shares of any one company.
Delivering the Investment Policy
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 Aberdeen Asset Management Asia Limited ("AAM Asia"). The Manager invests in a diversified range of companies throughout the Investment Region in accordance with the investment policy. The Manager follows a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value. No stock is bought without the fund managers having first met management. The Manager estimates a company's worth in two stages, quality then price. Quality is defined by reference to management, business focus, the balance sheet and corporate governance. Price is calculated by reference to key financial ratios, the market, the peer group and business prospects. Top-down investment factors are secondary in the Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights. Except for the maximum market capitalisation limit little regard is paid to market capitalisation. The Manager is authorised to invest up to 15% of the Company's gross assets in any single stock.
A detailed description of the investment process and risk controls employed by the Manager is disclosed in the Annual Report. A comprehensive analysis of the Company's portfolio is disclosed below including a description of the ten largest investments, the portfolio investments by value, sector/geographical analysis and currency/market performance. At the year end the Company's portfolio consisted of 75 holdings.
Principal Risk Factors
The following risks could have a material adverse effect on the Company's financial condition, performance and prospects, the NAV of the Ordinary shares, the dividends payable per Ordinary share, the share price or liquidity of the Ordinary shares or the Company's ability to achieve its investment objective. Details on internal controls and risk management and the steps taken to monitor and mitigate the principal risks affecting the Company are disclosed in the Statement of Corporate Governance in the Annual Report.
1. General Market Risks
1.1 Securities issued by the Company are designed to be held over the long-term and may not be suitable as short-term investments. There can be no guarantee that any appreciation in the value of the Company's investments will occur and the value of securities issued by the Company may go down as well as up. Accordingly, investors may not get back the full value of their original investment in any such securities.
1.2 The past performance of the Company is not, and should not be relied upon as, a guide to the future performance of the Company and there can be no guarantee that the Company will achieve its investment objective.
1.3 There can be no guarantee that a liquid market will exist in securities issued by the Company and it may be difficult to realise an investment in such securities at their quoted market price.
1.4 An investment in the Company should constitute part of a diversified investment portfolio and is only suitable for investors capable of evaluating the risks (including the potential risk of capital loss) and merits of such investment and who have sufficient resources to bear any loss which may result from such investment.
2. CULS
2.1 The market price of the CULS will be influenced by a number of factors, including the supply of, and demand for, CULS, the price, NAV and dividend yield of the Ordinary shares, prevailing interest rates, market conditions and investor sentiment, either general or specific to the Company and there can be no guarantee that the market price of the CULS will fully reflect any value inherent in their convertibility into Ordinary shares. Accordingly, the value of an investment in the CULS may go down as well as up and CULS Holders may not be able to realise the amount of their original investment.
2.2 With effect from 31 May 2014, if the middle market price of the Ordinary shares is 20 per cent. or more above the Conversion Price for at least 20 dealing days during a period of 30 consecutive dealing days, the Company has the right to require CULS Holders to redeem their CULS at par. In such event, CULS Holders would be given a final opportunity to convert their CULS into Ordinary shares. Following conversion of 80 per cent. or more of the CULS originally issued, the Company will be entitled to require remaining CULS Holders to convert their outstanding CULS into Ordinary shares after they have been given an opportunity to have their CULS redeemed. With effect from 31 May 2014 if at any time the nominal value of the outstanding CULS represents 30 per cent. or more of the Company's net assets, the Company is entitled to redeem all outstanding CULS at its nominal amount together with accrued interest up to (but excluding) the date of redemption. If any of these situations were to occur, CULS Holders would not be able to hold their CULS until the final maturity date of the CULS of 31 May 2019 and to have their CULS redeemed for cash on that date.
2.3 The CULS Trust Deed does not contain any restriction on borrowings (including borrowings ranking ahead of the CULS), the disposal of assets or the creation of charges by, or changes in, the nature of the business of the Company. Any material increase in the Company's borrowings, material disposal of assets or creation of charges by, or material changes in, the nature of the Company's business could adversely affect the rights of the CULS Holders and the value of the CULS and/or the Ordinary shares.
2.4 On a winding-up of the Company, the nominal amount of the CULS will rank ahead of the Ordinary shares but will be subordinated to the Company's other borrowings and creditors. Therefore, the rights and remedies available to the CULS Trustee and CULS Holders may be limited by applicable winding-up, insolvency, re-organisation, moratorium or similar provisions relating to or affecting creditors' rights generally.
3. Ordinary Shares
3.1 The Company will only pay dividends on the Ordinary shares to the extent that it has profits available for that purpose, which will largely depend on the amount of income that the Company receives on its investments and the timing of such receipt. Accordingly, the amount of dividends payable by the Company may fluctuate.
3.2 The market price and the realisable value of the Ordinary shares as well as being affected by their underlying net asset value, also take into account supply and demand, market conditions and general investor sentiment. As such, the market value and the realisable value of the Ordinary shares may fluctuate and vary considerably from the NAV per Ordinary share and may fall when the underlying NAV per Ordinary share is rising, or vice versa. Accordingly, the value of an investment in the Ordinary shares may go down as well as up and shareholders may not be able to realise the amount of their original investment.
3.3 The Company does not have a fixed winding-up date and shareholders have no right to have their Ordinary shares repurchased by the Company. Accordingly, unless shareholders vote to wind up the Company, shareholders wishing to realise their investment in the Company will be required to dispose of their Ordinary shares through the stock market and they may be unable to realise their Ordinary shares at their quoted market price.
3.4 In the event of a winding-up of the Company, the Ordinary shares will rank behind any creditors or prior ranking capital of the Company, including the CULS.
4. The Company's Investments
4.1 Investment in Far East equities or those of companies that derive significant revenue or profit from the Far East involves a greater degree of risk than that usually associated with investment in the securities in major securities markets. The securities that the Company owns may be considered speculative because of this higher degree of risk.
4.2 The Company's investments are subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of securities and there can be no assurance that appreciation in the value of those investments will occur. Investment in emerging securities markets in the Asia Pacific region involves a greater degree of risk than that usually associated with investment in more developed securities markets including the risk of social, economic and political instability which may have an adverse effect on economic reforms or restrict investment opportunities.
4.3 There are many factors, including changes in economic or industry conditions (including, for example, interest rates, recession, inflation, deflation, foreign exchange rates, demand for or production of commodities and competition), changes in environmental, tax or other laws or regulations, natural disasters, social or political instability, events or trends, acts of terrorism or war and general investor sentiment which could have a material adverse effect on the value of the Company's investments or materially restrict the investment opportunities available to the Company and, therefore, could substantially and adversely affect the Company's performance and prospects.
4.4 The Company invests in smaller capitalisation companies. As smaller companies may not have the financial strength, diversity and resources of larger companies, they may find it more difficult to operate in periods of economic slowdown or recession. In addition, the relatively small capitalisation of such companies could make the market in their shares less liquid and, as a consequence, their share price more volatile than investments in larger companies.
4.5 The Company may invest in securities that are not readily tradable or may accumulate investment positions that represent a significant multiple of the normal trading volumes of an investment, which may make it difficult for the Company to sell its investments and may lead to volatility in the market price of the Ordinary shares. 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 NAV per Ordinary share.
4.6 The Company may purchase investments that may be subject to exchange controls or withholding taxes in various jurisdictions. In the event that exchange controls or withholding taxes are imposed with respect to any of the Company's investments, the effect will generally be to reduce the income received by the Company on affected investments. Any reduction in the income received by the Company may lead to a reduction in the dividends paid on the Ordinary shares.
4.7 A proportion of the Company's portfolio may be held in cash or cash-equivalent investments from time to time. Such proportion of the Company's assets will be out of the market and will not benefit from positive stockmarket movements, but may give some protection against negative stockmarket movements.
5. Gearing
5.1 The CULS provides gearing for the Company. All gearing used by the Company must be in accordance with its investment policy. Whilst the use of gearing should enhance the total return on the Ordinary shares where the return on the Company's underlying assets is rising and exceeds the costs associated with the gearing, it will have the opposite effect where the underlying return is less than the cost of borrowing, further reducing the total return on the Ordinary shares.
5.2 The Company has a £20 million committed unsecured loan facility with State Street. The use of borrowings by the Company may increase the volatility of the NAV and market price of the Ordinary shares and, as a result, the market price of the CULS.
6. Foreign Exchange
The Company accounts for its activities, reports its results and the NAV per Ordinary share and declares and pays dividends in sterling while its investments are made and realised in other currencies. It is not the Company's present intention to engage in currency hedging, although it reserves the right to do so. Accordingly, the movement of exchange rates between sterling and the other currencies in which the Company's investments are denominated or its borrowings are drawn down may have a material effect, favourable or unfavourable, on the returns otherwise experienced on the investments made by the Company.
7. Taxation
7.1 The Company seeks to conduct its business so as to satisfy the conditions for approval as an investment trust under Chapter 4 of Part 24 of the Corporation and Taxes Act 2010. Breach of the tests that the Company must meet to obtain approval as an investment trust could lead to the Company being subject to tax on capital gains and, if that were to occur, would reduce the returns to shareholders.
7.2 Any change in the Company's tax status, tax treaty rates, tax laws (or their interpretation) or in the tax treatment of interest, dividends or other investment income received by the Company could affect the value of the investments held by the Company, affect the Company's ability to provide returns to its shareholders or alter the post-tax returns to its shareholders.
7.3 The Company may purchase investments that may be subject to exchange controls or withholding taxes in various jurisdictions (see item 4.6 above).
8. Accounting Practices and Policies
Any change in financial reporting standards or accounting practices applicable to the Company could affect the reported value of investments held by the Company or the level of profits available for the payment of dividends and, accordingly, could reduce the returns to shareholders.
9. The Manager
9.1 The success of the Company and the achievement of its investment objective are largely dependent on the Aberdeen investment team's expertise in acquiring, managing and disposing of assets in accordance with the Company's investment policy. There can be no guarantee that any individual referred to in this Annual Report will remain with the Manager and the personnel employed by the Investment Manager may change from time to time. The departure of a key fund manager may have an adverse effect on the performance of the Company.
9.2 Although the Manager has been successful in identifying suitable investments for the Company in the past, it may not be able to do so in the future. Any failure to find a sufficient number of attractive investment opportunities for the Company could have a material adverse effect on the Company's performance and prospects.
9.3 The Manager may be involved in other financial, investment or professional activities that may on occasion give rise to conflicts of interest with the Company. In particular, it currently does, and will continue to, provide investment management, investment advice or other services in relation to a number of other clients that may have similar investment objectives and/or policies to that of the Company and may receive ad valorem and/or performance-related fees for doing so. The Manager may give advice or take action with respect to such other clients that differs from the advice given or actions taken with respect to the Company.
Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive (the "Directive"), proposed by the EU to enhance shareholder protection, was fully implemented in the UK on 22 July 2014. This Directive required the Company to appoint an authorised Alternative Investment Fund Manager and a depositary, the latter overlaying the current custody arrangements. The Company appointed Aberdeen Fund Managers Limited ("AFML"), following its authorisation by the FCA, to act as the Company's Alternative Investment Fund Manager, entering a new management agreement with AFML on 14 July 2014. Under this agreement AFML delegates portfolio management services to Aberdeen Asset Management Asia Limited, which continues to act as the Company's Investment Manager. There is no change in the commercial arrangements from the previous investment management agreement which was in place up to 14 July 2014. In addition, the Company entered into a depositary agreement with AFML and BNP Paribas Securities Services on 14 July 2014. The appointment of a depositary is a new requirement under the Directive resulting in increased costs compared with the previous custody arrangements.
Key Performance Indicators (KPIs)
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives. Below are the main KPIs which have been identified by the Board for determining the progress of the Company:
· Net asset value (total return);
· Share price (total return); and,
· Discount/premium to net asset value
Commentary on the Company's performance against its KPIs is contained in the Chairman's Statement and Manager's Review.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge in order to allow the Board to fulfill its obligations. At 31 July 2014, there were six male Directors and one female Director. The Company has no employees. The Board's statement on diversity is set out in the Annual Report.
Environmental, Social and Human Rights Issues
The Company has no employees as the Board has delegated management to Aberdeen Fund Managers Limited. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined in the Annual Report.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the operations of its business, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.
Nigel Cayzer
Chairman
22 October 2014
STRATEGIC REPORT - CHAIRMAN'S STATEMENT
Results
The year ended 31 July 2014 was a tale of two halves. At the time of the Half Yearly Report, the prospect of US tapering had created a withdrawal of funds from Asian equities on hopes of better returns in the developed markets. This led to a fall in both your Company's share price, net asset value and the indices which we use as indicators of performance. The strength of sterling was a significant factor in the decline in NAV during this period.
Since then we have seen a strong recovery with investors tempted back on the promise of growth in Asia, as against static yields in US Treasuries and a dismal short term future for the Euro economies. Your Company outperformed this market rally with an absolute return in the second half of close to 15% as against a rise in the MSCI AC Asia Pacific ex Japan Index of 13.9% and the MSCI AC Asia Pacific ex Japan Small Cap Index rise of 9.9%.
The combination of these two halves led, in the year ended 31 July 2014, to a fall of 2.7% in the diluted net asset value (NAV) on a total return basis with the share price falling 4.2% to 946p as at 31 July 2014, moving from a premium of 0.7% to a discount of 0.7% to the diluted NAV. In the same period, the MSCI AC Asia Pacific ex Japan Index returned 7.3% and the MSCI AC Asia Pacific ex Japan Small Cap Index returned 4.6%. Sterling remained strong during the second half, impacting full year performance by 10.9%.
At the time of writing, the share price was 950.0p and the NAV was 974.5p, with the discount to NAV at 2.5%.
While the decline against the MSCI indices is disappointing, it is the first time in ten years that it has happened and must be viewed in the context of an increase in the diluted NAV during that period of 534% as against an increase of 256% for the MSCI AC Asia Pacific ex Japan Index (there is no comparative data for the MSCI AC Asia Pacific ex Japan Small Cap Index as this is a relatively recently introduced index).
Overview
Your Company continues with its policy of investing in companies with good management, strong balance sheets and good prospects. Notwithstanding the strong track record of Hugh Young and his team in identifying these companies at attractive valuations, markets do, from time to time, look beyond fundamentals and are affected by outside forces. This was a year in point.
Over the last year, there have been three drivers which have affected Asian markets.
The first is the world economy, where policy tools wielded by Central Banks continue to weigh on sentiment. The prospect of tapering by the US Federal Reserve led to outflows in the first half and once tapering had been announced and being less than feared, these outflows were largely reversed.
The second was more localised. Pre-election optimism lifted stocks in India and Indonesia. The landslide win by Narendra Modi raised hopes that India's new prime minister would revive stalled reforms and stimulate the economy by bolstering infrastructure investment and easing bottlenecks. A similar narrative could be applied to Indonesia, where Joko Widodo, a reformist in the eyes of many, was declared the country's seventh president. In Thailand, a bloodless coup restored stability after a prolonged impasse.
The third is China, which remains the key economy in Asia, with sentiment surrounding the mainland also driving expectations elsewhere in the region. In the early part of the year, there were fears over the extent to which Chinese GDP growth would decelerate, given uncertainty over asset quality in the shadow banking sector and the health of the property market. These concerns were assuaged by second-quarter GDP growth that met the government's target, underpinned by a series of mini stimulus measures.
Towards the end of the period, geopolitical flashpoints in Ukraine and the Middle East weighed on sentiment, capping the gains in Asian markets over the year.
Benefits of Investing in Asian Smaller Companies
There remains a persuasive case for investing. Some of the companies in which your company is invested benefit from the domestic demand story across the region. Asia is still growing faster than the rest of the world, although the pace has slowed. Demographics are also in the region's favour. Asia is home to more than half of the world's population and has a middle class that is not only growing in size but also spending power. Another positive is the maturing attitude of governments. Policymakers are focusing on sustained growth, via rebalancing towards consumption-led growth, and reform, particularly in the liberalisation of capital markets and protected sectors.
Equally, some of the companies in the portfolio are market leaders in their field with international revenue streams. Due to their size, they are well poised for rapid growth and during the past year, your Company has supported rights issues for several holdings which were all raising capital to support the organic growth in their businesses. Market liquidity for small-caps is also improving with the total market capitalisation of the MSCI AC Asia Pacific ex Japan Small Cap Index having more than tripled since 2008, while the free float portion has also risen sharply.
This selection process is supported by the Manager's commitment to in-depth research and regular management visits to assess quality and valuations.
Dividend
As I have advised in previous years, subject to market conditions, it is your Company's aim to maintain or increase the Ordinary dividend so that shareholders can rely on a consistent stream of income. Therefore, we are pleased to recommend for this year the payment of a maintained final dividend of 10.0p per Ordinary share (2013: 10.0p) and the payment of a maintained special dividend of 3.0p (2013: 3.0p). The special dividend approximately reflects the level of special dividends that were received from the underlying portfolio during the year. Taken together the final and special dividends will necessitate a transfer from the Company's brought forward revenue reserves of £609,000. If approved by shareholders at the Annual General Meeting of the Company on 2 December 2014, the final and special dividends will be paid on 5 December 2014 to shareholders on the register on 7 November 2014.
Gearing and Share Capital Management
The Company's year-end net gearing was 8.4%. The majority of the gearing is provided by the Convertible Unsecured Loan Stock of which approximately £33.1 million remains outstanding. The Company also has a £20 million loan facility with State Street and £5.0 million was drawn down under the facility at the year end. The Directors monitor the Company's gearing on a regular basis in accordance with the Company's investment policy and under advice from the Manager. During the year the Company issued 300,000 new Ordinary shares for cash at a premium to NAV.
Annual General Meeting
The Annual General Meeting is scheduled to be held on 2 December 2014 at 11.30 a.m. In addition to the usual ordinary business, as special business the Board is seeking to amend the Articles of Association, renew its authority to issue new shares and sell treasury shares for cash at a premium without pre-emption rules applying and to renew its authority to buy back shares and either hold them in treasury for future resale (at a premium to the prevailing net asset value per share) or cancel them. At the conclusion of the AGM there will be an opportunity for shareholders to meet the Board and the Manager over a buffet lunch and your Board looks forward to seeing as many shareholders as possible. The Board is happy to take general questions on the Annual Report and financial statements at the meeting but would advise that questions of a technical nature should be addressed in writing to the Company Secretary, in advance.
Directorate
As I reported at the half year stage, Alan Kemp retired as a Director of the Company at the Annual General Meeting held on 3 December 2013. In January 2014, following a recruitment exercise undertaken in conjunction with an independent search consultancy, the Board was pleased to announce the appointment of Philip Yea as an independent non executive Director of the Company. Philip has extensive executive and non executive board level experience and brings significant further international business and technical experience to the Board.
Alternative Investment Fund Managers' Directive
The Alternative Investment Fund Managers Directive (the "Directive"), proposed by the EU to enhance shareholder protection, was fully implemented in the UK on 22 July 2014. This Directive required the Company to appoint an authorised Alternative Investment Fund Manager and a depositary, the latter replacing the previous custody arrangements. The Company appointed Aberdeen Fund Managers Limited ("AFML"), to act as the Company's Alternative Investment Fund Manager, entering a new management agreement with AFML on 14 July 2014. Under this agreement AFML delegates portfolio management services to Aberdeen Asset Management Asia Limited, which continues to act as the Company's Investment Manager. There were no changes to the commercial arrangements from the previous investment management agreement.
In relation to the Directive requirement to appoint a depositary, the Company entered into a tri-partite agreement with AFML and BNP Paribas Securities Services on 14 July 2014 for the provision of depositary services (including custody of assets) resulting in increased costs compared with the previous custody arrangements. The Board is also seeking to make certain amendments to the Company's Articles following the implementation of the Directive. Further explanatory details are provided in the Directors' Report.
Outlook
Despite geopolitical risks, stock markets appear on a firmer footing compared to conditions in early 2014. Major central banks are committed to expansionary monetary policy, given the mixed global outlook. While the US economy is improving, Europe remains fragile. There are, however, some headwinds that could trigger renewed volatility. The end of US quantitative easing in October comes to mind. That said, Asia has sturdier fundamentals that should reinforce its resilience in tough times. Its favourable demographics also offer long-term opportunities to smaller companies, which are more exposed to domestic consumption. Your Company also has a heavy exposure to the consumer sector in Southeast Asia, which should underpin growth prospects in the long run.
The investment process carried out by the Manager is consistent, rigorous and disciplined. The emphasis is on drilling deep into a company and understanding the management as well as the underlying business. This has produced impressive returns for the Company in the past and I am certain it will stand it in good stead in the years to come.
Nigel Cayzer
Chairman
22 October 2014
STRATEGIC REPORT - MANAGER'S REVIEW
Overview
Asian small cap equities rose in local currency terms in a year marked by contrasting fortunes. The first six months saw markets unsettled by poor economic data and uncertainty over the direction of the Federal Reserve's quantitative easing programme. This contributed to concerns over tighter global liquidity, which in turn, caused a sell-off in emerging market assets in Asia. South East Asian markets were among the main laggards as stock market losses were amplified by the rout in some regional currencies.
However, markets rebounded in the latter half on hopes of growth coming from political change in India and Indonesia, as well as expectations of further reforms in China. In the mainland, rosier economic data allayed fears of a hard landing, while the government's reform drive and targeted easing measures further instilled confidence. India tested new highs as the opposition Bharatiya Janata Party swept into power with new Prime Minister Narendra Modi promising a leaner government and reduced bureaucracy to combat years of slow growth and high inflation. Indonesia also voted in a new leader with similar aims of improving infrastructure and easing bureaucracy to boost investments although the market ended lower in sterling terms over the year. In Thailand, the military coup established calm in the domestic market as the junta started to impose order after months of turmoil.
Portfolio Review
The Company enjoyed a robust recovery in the second half of the year, outperforming the MSCI Asia Pacific ex Japan Small Cap index by 4.7%, benefiting from our long-running belief in the region's good long-term growth potential, supported by rising populations and increasing domestic consumption. The Company's holdings in India, especially those with exposure to infrastructure such as cement manufacturer Ramco Cements, auto paints manufacturer Kansai Nerolac Paints and gas distributor Gujarat Gas, were all solid performers following a lacklustre start to the year. Nevertheless, that was insufficient to offset the weak start to the year when the fund underperformed the index by 8.9% in the first six months. During this period, our conservative and long-term investment style went out of favour as markets were driven by fund flows and macroeconomic factors. Consumer-related stocks, which had been the key drivers of our prior performance, retreated on profit taking. Our Malaysian brewer, Guinness Anchor, is a dominant player in both the mass and premium beer segments in a duopoly, while hypermarket operator Aeon rebounded markedly in the second half as sales improved, supported by its net cash balance sheet and free cash flow funded expansion. The indiscriminate sell-off, however, created an opportunity for us to top up some holdings that had fallen to more attractive valuations. These included our Indian holdings as well as Thai electronic circuit manufacturer Hana Microelectronics, which all subsequently enjoyed better performance towards the end of the year.
Although our overweight to India was a positive contributor to the full-year performance, our total return was dampened by stock selection. The equity market rally accompanying the elections was largely led by low quality companies with high debt levels in capital intensive sectors linked to large turnkey projects, which our investment process avoids. Although share prices have been buoyed by election euphoria, our meetings with Indian companies indicate that there had neither been a significant increase in order backlog nor revenues. We believe valuations have run up disproportionately relative to earnings growth and continue to monitor our holdings. Over the longer term, we are still attracted to India's vast potential, supported by its growing workforce and disposable incomes.
Stock selection was weakest in Hong Kong. The main laggard over the one-year period was our holding in retailer Giordano International, which was affected by slowing consumption in Greater China. Fortunately, the company has a healthy balance sheet and generates good cash flows, which helped it rationalise its China operations and reposition its brand. Signs of a more difficult retail environment emerged last summer and since then, we have met various management personnel from Giordano in different geographies nine times at the time of writing. This underlines one of the key advantages of the Aberdeen investment team's presence across Asia, which allows us to dedicate resources as necessary while performing our regular due diligence and research.
Portfolio Activity
We invested in several new holdings over the year. In Thailand, we initiated a position in Thaire Life via an initial public offering. We are familiar with the company, having dealt with key personnel at Thai Reinsurance from which it was spun off. Thaire Life has a decent share of the under-penetrated but rapidly expanding life reinsurance sector. Demand is rising as more domestic life insurers seek to manage their risks. The business also has strong barriers to entry given foreign companies' poor local knowledge. Another new entrant to the portfolio was Wintermar Offshore Marine, an Indonesian firm that provides offshore support vessels to oil and gas majors. The company is in a sweet spot because of the cabotage law, which requires vessels plying Indonesian waters to be owned by local companies. More recently we initiated a position in United International Enterprises, the parent of United Plantations, which trades at a discount to the value of its underlying entities and we built up our holding in newly-listed First Sponsor Group, a China-focused property development company that we received in-specie from our existing holding in Millennium & Copthorne Hotels New Zealand. We believe this company is trading at a significant discount to its net asset value, given that it has four development projects in its pipeline and its focus is on the mass market segment, which has more resilient demand.
We also supported the rights issues of Hong Kong-listed Dah Sing Financial, Indonesia's Bank OCBC Nisp and Sri Lankan conglomerate John Keells. Dah Sing and Bank OCBC Nisp will use the proceeds to strengthen their capital base and fund their future loan growth, while John Keells is investing in its new integrated resort, which stands to benefit from the country's strong tourism industry.
To fund these opportunities, we sold Regional Container Lines owing to concerns over its weak balance sheet amid a tough industry outlook, and tendered our stake in Siam Makro by accepting CP All's attractive takeover offer. The Thai cash-and-carry store operator had been a consistent outperformer in recent years, based on its rapid domestic expansion.
Outlook
Encouragingly, there has been renewed enthusiasm towards smaller Asian companies. Meanwhile, our fundamental outlook for companies in the asset class remains unchanged. Consumer-oriented companies, which the Trust has a rather heavy exposure to, have been doing well and should continue to benefit from the region's relatively favourable demographics and domestic consumption trends. In particular, companies in the sector are seeing improved margins, aided by cost cuts. Conversely, earnings forecasts for exporters appear mixed and very much dependent on the macroeconomic health of their export destinations. The trend of normalising monetary policy in the developed world could result in lower consumption in the short term, though that should gradually pick up over the longer term.
Overall, our holdings have delivered results in line with our forecasts and we expect their earnings outlook to remain decent over the longer term. Although valuations of smaller Asian companies may be more expensive compared to their large cap counterparts, we prefer to focus on our holdings' fundamentals instead. It is worth highlighting that our holdings have a lower gearing as compared to the index, while return on equity levels are higher than those of the Index. As such, we remain disciplined in our investment approach, focusing on solid companies that can withstand volatile market cycles.
Aberdeen Asset Management Asia Limited
22 October 2014
STRATEGIC REPORT - RESULTS
Financial Highlights
|
|
31 July 2014 |
31 July 2013 |
% change |
|
Total assets |
£405,840,000 |
£414,620,000 |
-2.1 |
|
Total equity shareholders' funds (net assets) |
£369,118,000 |
£382,932,000 |
-3.6 |
|
Net asset value per share (basic) |
968.89p |
1,013.82p |
-4.4 |
|
Net asset value per share (diluted) |
952.52p |
992.81p |
-4.1 |
|
Share price (mid market) |
946.00p |
1,000.00p |
-5.4 |
|
Market capitalisation |
£360,396,000 |
£377,714,000 |
-4.6 |
|
(Discount)/premium to net asset value (diluted) |
(0.7%) |
0.7% |
|
|
MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis) |
564.62 |
543.15 |
+4.0 |
|
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted, capital gains basis) |
1,179.98 |
1,159.26 |
+1.8 |
|
Net gearing{A} |
8.4% |
3.8% |
|
|
|
|
|
|
|
Dividends and earnings |
|
|
|
|
Total return per share (basic){B} |
(31.46)p |
275.43p |
|
|
Revenue return per share (basic) |
11.43p |
13.84p |
-17.4 |
|
Dividends per share{C} |
13.00p |
13.00p |
- |
|
Dividend cover |
0.88 |
1.06 |
-17.0 |
|
Revenue reserves{D} |
£8,568,000 |
£9,152,000 |
-6.4 |
|
|
|
|
|
|
Operating costs |
|
|
|
|
Ongoing charges ratio{E} |
1.44% |
1.25% |
|
|
|
|||
|
{A} Calculated in accordance with AIC guidance "Gearing Disclosures post Retail Distribution Review" |
|||
|
{B} Measures the total earnings for the year divided by the weighted average number of Ordinary shares in issue (see note 8). |
|||
|
{C} The figures for dividends per share reflect the dividends for the year in which they were earned. |
|||
|
{D} Prior to payment of final and special dividends. |
|||
|
{E} Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses divided by the average cum income net asset value throughout the year. Management fees are charged on the basis of the average net asset value of the Company over a rolling 24 month period. |
|||
|
Performance (total return) |
|
|
|
|
|
|
|
1 year |
3 year |
5 year |
10 year |
Since |
|
|
% return |
% return |
% return |
% return |
inception |
|
Share price |
-4.2 |
+47.4 |
+240.1 |
+584.6 |
+1260.2 |
|
Net asset value per Ordinary share - diluted |
-2.7 |
+45.8 |
+189.2 |
+534.9 |
+1162.5 |
|
MSCI AC Asia Pacific ex Japan Index (currency adjusted) |
+7.3 |
+13.4 |
+61.2 |
+255.9 |
+208.3 |
|
MSCI AC Asia Pacific ex Japan Small Cap Index (currency adjusted) |
+4.6 |
+1.4 |
+55.1 |
n/a |
n/a |
|
|
|
||||
|
Source: Aberdeen Asset Management PLC, Fundamental Data, Factset & Russell Mellon |
|||||
Dividends
|
|
Rate |
xd date |
Record date |
Payment date |
|
Proposed final 2014 |
10.00p |
6 November 2014 |
7 November 2014 |
5 December 2014 |
|
Proposed special 2014 |
3.00p |
6 November 2014 |
7 November 2014 |
5 December 2014 |
|
|
13.00p |
|
|
|
|
|
|
|
|
|
|
Final 2013 |
10.00p |
30 October 2013 |
1 November 2013 |
6 December 2013 |
|
Special 2013 |
3.00p |
30 October 2013 |
1 November 2013 |
6 December 2013 |
|
|
13.00p |
|
|
|
Ten Year Financial Record
|
Year to 31 July |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
|
Total revenue (£'000) |
3,473 |
5,080 |
5,485 |
5,021 |
4,954 |
6,103 |
8,380 |
9,168 |
11,512 |
11,427 |
|
Per share (p) |
|
|
|
|
|
|
|
|
|
|
|
Net revenue return |
4.54 |
7.25 |
6.98 |
5.88 |
6.75 |
12.85 |
15.42 |
13.18 |
13.84 |
11.43 |
|
Total return |
95.93 |
31.48 |
108.38 |
(50.80) |
48.21 |
236.82 |
137.91 |
68.56 |
275.43 |
(31.46) |
|
Net ordinary dividends paid/proposed |
3.45 |
3.45 |
3.45 |
4.00 |
5.00 |
8.20 |
9.50 |
9.50 |
10.00 |
10.00 |
|
Net special dividends paid/proposed |
- |
2.70 |
2.70 |
1.00 |
- |
1.90 |
2.80 |
3.00 |
3.00 |
3.00 |
|
Net asset value per share (p) |
|
|
|
|
|
|
|
|
|
|
|
Basic |
287.94 |
306.56 |
404.18 |
347.24 |
390.96 |
619.37 |
686.39 |
746.55 |
1013.82 |
968.89 |
|
Diluted |
251.25 |
276.45 |
364.77 |
316.46 |
355.95 |
562.57 |
n/a |
n/a |
922.81 |
952.52 |
|
Shareholders' funds (£'000) |
83,082 |
98,669 |
131,679 |
109,829 |
121,963 |
192,851 |
239,965 |
260,994 |
382,932 |
369,118 |
|
|
||||||||||
|
The figures for 2005 for Shareholders' Funds and Net Asset Value per share have been restated to reflect the changes in accounting policies. The figures for dividends have not been restated and still reflect the dividends for the years in which they were earned. |
||||||||||
INVESTMENT PORTFOLIO
As at 31 July 2014
Investment Portfolio - Ten Largest Investments
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2014 |
assets |
2013 |
|
Company |
Industry |
Country |
£'000 |
% |
£'000 |
|
AEON Co (M) |
|
|
|
|
|
|
Operator of general merchandise stores, supermarkets and convenience stores. |
Multiline Retail |
Malaysia |
17,358 |
4.3 |
18,312 |
|
Shangri-La Hotels Malaysia |
|
|
|
|
|
|
Operator of hotels, beach resorts, property management and investment, and commercial laundry. |
Hotels, Restaurants & Leisure |
Malaysia |
12,793 |
3.2 |
13,717 |
|
Bukit Sembawang Estates |
|
|
|
|
|
|
Singapore-based residential property developer with a large land bank. |
Real Estate Management & Development |
Singapore |
11,570 |
2.9 |
12,439 |
|
Bank OCBC NISP |
|
|
|
|
|
|
Indonesian subsidiary of Singapore-based OCBC Bank. |
Banks |
Indonesia |
11,351 |
2.8 |
9,030 |
|
AEON Thana Sinsap (Thailand){A} |
|
|
|
|
|
|
Consumer financial services provider offering hire-purchase lending. |
Consumer Finance |
Thailand |
11,201 |
2.8 |
10,950 |
|
LPI Capital Berhad |
|
|
|
|
|
|
Malaysia-based insurance company involved in underwriting fire, motor, marine, aviation, transit and miscellaneous insurance. |
Insurance |
Malaysia |
10,319 |
2.6 |
9,851 |
|
Hana Microelectronics (Foreign) |
|
|
|
|
|
|
Integrated circuit packaging and printed circuit boards assembly contract manufacturer with operations in Thailand and China. |
Electronic Equipment, Instruments & |
Thailand |
9,939 |
2.5 |
6,272 |
|
Multi Bintang Indonesia |
|
|
|
|
|
|
A subsidiary of Asia Pacific Breweries and an affiliate of Heineken in Indonesia. |
Beverages |
Indonesia |
9,488 |
2.4 |
16,663 |
|
AEON Credit Service (M) |
|
|
|
|
|
|
Subsidiary company of Aeon Credit Japan that provides shariah compliant consumer financial services in Malaysia. |
Consumer Finance |
Malaysia |
9,307 |
2.3 |
10,733 |
|
CMC |
|
|
|
|
|
|
A subsidiary of Tata Consultancy Services, it is an IT services provider to global clients. |
IT Services |
India |
8,711 |
2.2 |
5,780 |
|
Top ten investments |
|
|
112,037 |
28.0 |
|
|
|
|
|
|
|
|
|
{A} Holding includes investment in both common and non-voting depositary receipt lines. |
|||||
Investment Portfolio - Other Investments
|
|
|
|
Valuation |
Total |
Valuation |
|
|
|
|
2014 |
assets |
2013 |
|
Company |
Industry |
Country |
£'000 |
% |
£'000 |
|
Dah Sing Financial Holdings |
Banks |
Hong Kong |
8,379 |
2.1 |
6,016 |
|
United Plantations |
Food Products |
Malaysia |
8,020 |
2.0 |
7,956 |
|
Godrej Consumer Products |
Personal Products |
India |
7,974 |
2.0 |
8,622 |
|
Tisco Financial Group{B} |
Banks |
Thailand |
7,898 |
2.0 |
6,871 |
|
First Sponsor Group |
Real Estate Management & Development |
Singapore |
7,895 |
2.0 |
- |
|
Cebu Holdings |
Real Estate Management & Development |
Philippines |
7,606 |
1.9 |
9,660 |
|
Asian Terminals |
Transportation Infrastructure |
Philippines |
7,397 |
1.8 |
9,420 |
|
Thai Stanley Electric (Foreign) |
Auto Components |
Thailand |
7,358 |
1.8 |
7,317 |
|
Giordano International |
Specialty Retail |
Hong Kong |
6,991 |
1.7 |
11,268 |
|
Yoma Strategic Holdings |
Construction & Engineering |
Singapore |
6,878 |
1.7 |
9,405 |
|
Top twenty investments |
|
|
188,433 |
47.0 |
|
|
M.P. Evans Group |
Food Products |
Indonesia |
6,838 |
1.7 |
7,394 |
|
Cabcharge Australia |
Commercial Services & Supplies |
Australia |
6,755 |
1.7 |
6,273 |
|
Green Dragon Gas |
Oil, Gas & Consumable Fuels |
China |
6,459 |
1.6 |
2,054 |
|
Straits Trading Company |
Metals & Mining |
Singapore |
6,332 |
1.6 |
9,147 |
|
Public Financial Holdings |
Banks |
Hong Kong |
6,327 |
1.6 |
5,989 |
|
Gujarat Gas Co |
Gas Utilities |
India |
6,251 |
1.6 |
2,027 |
|
Jollibee Foods Corporation |
Hotels, Restaurants & Leisure |
Philippines |
6,166 |
1.5 |
6,027 |
|
YHN Property |
Real Estate Management & Development |
Malaysia |
6,146 |
1.5 |
4,687 |
|
Thaire Life Assurance (Foreign) |
Insurance |
Thailand |
6,080 |
1.5 |
- |
|
Eastern Water Resources Development and Management (Foreign) |
Water Utilities |
Thailand |
6,049 |
1.5 |
7,916 |
|
Top thirty investments |
|
|
251,836 |
62.8 |
|
|
Linde India |
Chemicals |
India |
5,999 |
1.5 |
4,209 |
|
ARB Corporation |
Auto Components |
Australia |
5,664 |
1.4 |
6,547 |
|
Guinness Anchor |
Beverages |
Malaysia |
5,638 |
1.4 |
8,217 |
|
Convenience Retail Asia |
Food & Staples Retailing |
Hong Kong |
5,593 |
1.4 |
6,564 |
|
Kansai Nerolac Paints |
Chemicals |
India |
5,459 |
1.4 |
4,091 |
|
Ramco Cements |
Construction Materials |
India |
5,439 |
1.4 |
- |
|
Millennium & Copthorne Hotels New Zealand{C} |
Hotels, Restaurants & Leisure |
New Zealand |
5,404 |
1.4 |
7,169 |
|
Pos Malaysia |
Air Freight & Logistics |
Malaysia |
5,365 |
1.3 |
5,449 |
|
Jammu & Kashmir Bank |
Banks |
India |
5,294 |
1.3 |
4,094 |
|
Castrol India |
Chemicals |
India |
5,238 |
1.3 |
5,461 |
|
Top forty investments |
|
|
306,929 |
76.6 |
|
|
Hong Kong Economic Times Holdings |
Media |
Hong Kong |
5,186 |
1.3 |
4,124 |
|
Asia Satellite Telecommunications Holdings |
Diversified Telecommunication Services |
Hong Kong |
5,035 |
1.3 |
6,226 |
|
Tasek Corporation |
Construction Materials |
Malaysia |
4,950 |
1.2 |
5,794 |
|
Sanofi India |
Pharmaceuticals |
India |
4,545 |
1.1 |
3,237 |
|
Wheelock Properties (S) |
Real Estate Management & Development |
Singapore |
4,497 |
1.1 |
4,725 |
|
Commercial Bank of Ceylon |
Banks |
Sri Lanka |
4,458 |
1.1 |
3,898 |
|
United Malacca |
Food Products |
Malaysia |
4,213 |
1.1 |
4,517 |
|
Holcim Indonesia |
Construction Materials |
Indonesia |
4,103 |
1.0 |
4,419 |
|
Eu Yan Sang International |
Pharmaceuticals |
Singapore |
4,001 |
1.0 |
4,030 |
|
United International Enterprises |
Food Products |
Denmark |
3,977 |
1.0 |
- |
|
Top fifty investments |
|
|
351,894 |
87.8 |
|
|
AEON Credit Service (Asia) |
Consumer Finance |
Hong Kong |
3,904 |
1.0 |
4,970 |
|
John Keells Holdings{D} |
Industrial Conglomerates |
Sri Lanka |
3,850 |
1.0 |
3,917 |
|
Chevron Lubricants Lanka |
Oil, Gas & Consumable Fuels |
Sri Lanka |
3,831 |
0.9 |
5,584 |
|
The Hong Kong & Shanghai Hotels |
Hotels, Restaurants & Leisure |
Hong Kong |
3,036 |
0.8 |
3,587 |
|
DFCC Bank |
Banks |
Sri Lanka |
2,919 |
0.7 |
2,477 |
|
DGB Financial Group |
Banks |
South Korea |
2,896 |
0.7 |
2,942 |
|
Wintermar Offshore Marine |
Marine |
Indonesia |
2,797 |
0.7 |
- |
|
AEON Stores Hong Kong |
Multiline Retail |
Hong Kong |
2,570 |
0.6 |
4,160 |
|
Hong Leong Finance |
Consumer Finance |
Singapore |
2,376 |
0.6 |
2,290 |
|
SBS Transit |
Road & Rail |
Singapore |
2,095 |
0.5 |
1,863 |
|
Top sixty investments |
|
|
382,168 |
95.3 |
|
|
CDL Hospitality Trusts |
Real Estate Investment Trusts |
Singapore |
2,035 |
0.5 |
2,112 |
|
Cafe de Coral Holdings |
Hotels, Restaurants & Leisure |
Hong Kong |
2,000 |
0.5 |
2,775 |
|
Kingmaker Footwear Holdings |
Textiles, Apparel & Luxury Goods |
Hong Kong |
1,799 |
0.5 |
2,230 |
|
Goodyear (Foreign) |
Auto Components |
Thailand |
1,762 |
0.5 |
2,160 |
|
Aitken Spence & Co |
Industrial Conglomerates |
Sri Lanka |
1,655 |
0.4 |
- |
|
Haad Thip (Foreign) |
Beverages |
Thailand |
1,654 |
0.4 |
1,780 |
|
National Development Bank |
Banks |
Sri Lanka |
1,624 |
0.4 |
1,392 |
|
Pacific Basin Shipping |
Marine |
Hong Kong |
1,405 |
0.4 |
1,394 |
|
City e-Solutions |
Hotels, Restaurants & Leisure |
Hong Kong |
1,268 |
0.3 |
590 |
|
FJ Benjamin Holdings |
Specialty Retail |
Singapore |
926 |
0.2 |
1,294 |
|
Top seventy investments |
|
|
398,296 |
99.4 |
|
|
ORIX Leasing Pakistan |
Consumer Finance |
Pakistan |
864 |
0.2 |
634 |
|
Hung Hing Printing |
Containers & Packaging |
Hong Kong |
717 |
0.2 |
805 |
|
Riverview Rubber Estates |
Food Products |
Malaysia |
385 |
0.1 |
342 |
|
Mustika Ratu |
Personal Products |
Indonesia |
367 |
0.1 |
609 |
|
Greka Engineering & Technology |
Energy Equipment & Services |
China |
131 |
- |
- |
|
Total investments |
|
|
400,760 |
100.0 |
|
|
Net current assets |
|
|
80 |
- |
|
|
Total assets |
|
|
400,840 |
100.0 |
|
|
|
|
|
|
|
|
|
{B} Holding includes investment in both common and non-voting depositary receipt lines. |
|||||
|
{C} Holding includes investment in both common and preference lines. |
|||||
|
{D} Holding includes investment in both common and convertible warrant lines. |
|||||
|
|
|||||
|
All investments are in equities. |
|||||
DIRECTORS' REPORT
The Directors present their Report and the audited financial statements for the year ended 31 July 2014.
The Company and its Objective
The business of the Company is that of an investment trust investing in the economies of Asia and Australasia excluding Japan. The Directors do not envisage any change in this activity in the foreseeable future. The objective of the Company is set out in the Strategic Report. A review of the Company's activities is given in the Strategic Report. This includes a review of the business of the Company and its principal activities, likely future developments of the business, recommended dividends and details of the issue of new shares during the year by the Company. The major risks associated with the Company are detailed in the Strategic Report and in note 19 to the financial statements. Further details of the risk management objectives and policies are provided in the Statement of Corporate Governance contained in the Annual Report. The Key Performance Indicators for the Company are detailed in the Strategic Report.
The Company does not make political donations and in common with most investment trusts, the Company has no employees. Directors' & Officers' liability insurance cover has been maintained throughout the year at the expense of the Company.
Results and Dividends
Details of the Company's results and dividends proposed are shown under Financial Highlights above.
Status
The Company is registered as a public limited company in England & Wales with registered number 03106339 and is an investment company as defined by Section 833 of the Companies Act 2006. The Company is also a member of the Association of Investment Companies.
The Company has been accepted by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 August 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 July 2014 so as to enable it to comply with the ongoing requirements for investment trust status.
The Company has conducted its affairs so as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.
Capital Structure and Borrowings
At 31 July 2014, there were 38,096,807 fully paid Ordinary shares of 25p each (2013 - 37,771,369 Ordinary shares) in issue with a further 1,076,290 Ordinary shares of 25p held in treasury (2013 - 1,076,290 treasury shares). There were no buybacks of Ordinary shares during the year.
During the period under review 300,000 new Ordinary shares were issued for cash at a premium to the prevailing net asset value per share in order to satisfy demand from the market. No shares were sold from treasury either during the period or up to the date of this report. On 13 December 2013, 192,896 units of Convertible Unsecured Loan Stock ("CULS") were converted into 23,228 new Ordinary shares and on 13 June 2014, 18,397 units of CULS were converted into 2,210 new Ordinary shares. In accordance with the terms of the CULS Issue, the conversion price of the CULS was determined at 830.0 pence nominal of CULS for one Ordinary share.
During the year the Company agreed a new £20 million multi currency loan facility with State Street Bank and Trust Company and at the year end £5.0 million had been drawn down under the facility.
Ordinary Share and CULS Rights
Subject to any suspension or abrogation of rights pursuant to relevant law or the Company's Articles of Association, the Ordinary shares confer on their holders (other than the Company in respect of any treasury shares) the following principal rights:
a) the right to receive out of profits available for distribution such dividends as may be agreed to be paid (in the case of a final dividend in an amount not exceeding the amount recommended by the Board as approved by shareholders in general meeting or in the case of an interim dividend in an amount determined by the Board). All dividends unclaimed for a period of 12 years after having become due for payment are forfeited automatically and cease to remain owing by the Company;
b) the right, on a return of assets on liquidation, reduction of capital or otherwise, to share in the surplus assets of the Company remaining after payment of its liabilities pari passu with the other holders of Ordinary shares; and
c) the right to receive notice of and to attend and speak and vote in person or by proxy at any general meeting of the Company. On a show of hands every member present or represented and voting has one vote and on a poll every member present or represented and voting has one vote for every share of which that member is the holder; the appointment of a proxy must be received not less than 48 hours before the time of the holding of the relevant meeting or adjourned meeting or, in the case of a poll taken otherwise than at or on the same day as the relevant meeting or adjourned meeting, be received after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll.
These rights can be suspended. If a member, or any other person appearing to be interested in shares held by that member, has failed to comply within the time limits specified in the Company's Articles of Association with a notice pursuant to Section 793 of the Companies Act 2006 (notice by company requiring information about interests in its shares), the Company can, until the default ceases, suspend the right to attend and speak and vote at a general meeting and if the shares represent at least 0.25% of their class the Company can also withhold any dividend or other money payable in respect of the relevant shares (without any obligation to pay interest) and refuse to accept certain transfers of the relevant shares.
Shareholders, either alone or with other shareholders, have other rights as set out in the Company's Articles of Association and in company law (principally the Companies Act 2006).
CULS holders have the power by Extraordinary Resolution to sanction any modification, abrogation or compromise of or arrangement in respect of their rights against the Company and to assent to any modification of the provisions of the Trust Deed. CULS holders have the right to receive notice of, but not to attend, Annual General Meetings of the Company.
Management Agreement
The Company's investment management arrangements with the Aberdeen Asset Management Group have been reorganised and the Company has appointed Aberdeen Fund Managers Limited ("AFML"), a wholly owned subsidiary of Aberdeen Asset Management PLC, as its alternative investment fund manager ("AIFM" or "Manager") with effect from 14 July 2014. In order to facilitate this appointment, the Company terminated its existing investment management agreement with Aberdeen Asset Management Asia Limited ("AAMAL") and entered into a new management agreement with AFML. The new management agreement with AFML was agreed on the same commercial terms as the previous agreement with AAMAL and is also compliant with the new regulatory regime under the AIFMD. Under the new arrangements, the Company's portfolio will continue to be managed by AAMAL by way of a group delegation agreement in place between AFML and AAMAL. Company secretarial, accounting and administrative services are provided by Aberdeen Asset Management PLC.
The management agreement may be terminated by either the Company or the Manager on the expiry of twelve months' written notice. On termination, the Manager would be entitled to receive fees which would otherwise have been due to that date. Further details relating to the management, secretarial and marketing fees payable by the Company to Aberdeen Group companies are shown in notes 3 and 4 to the financial statements.
The Directors review the terms of the investment management agreement on a regular basis and have confirmed that, due to the long-term relative performance, investment skills, experience and commitment of the investment management team, in their opinion the continuing appointment of AFML and AAM Asia is in the interests of shareholders as a whole.
Charitable Donation
During the year the Company donated £10,000 to the British Red Cross Typhoon Haiyan Appeal in the Philippines.
Disclosure & Transparency Rules (DTRs)
The following further information is disclosed in accordance with the Companies Act and DTR 7.2.6:
· The Company's capital structure and voting rights are summarised in the Directors' Report;
· Details of the substantial shareholders in the Company are listed in the Annual Report;
· The rules concerning the appointment and replacement of Directors are contained in the Company's Articles of Association and are summarised in the Annual Report;
· Amendment of the Company's Articles of Association and powers to issue or buy back the Company's shares require a special resolution to be passed by shareholders;
· There are no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; no agreements which the Company is party to that might affect its control following a takeover bid; and,
· There are no agreements between the Company and its Directors concerning compensation for loss of office.
Corporate Governance
The Statement of Corporate Governance forms part of this Directors' Report and covers the Company's compliance with the UK Code of Corporate Governance and is shown in the Annual Report.
Directors
The current Directors, Messrs N K Cayzer, Randal McDonnell (Viscount Dunluce), M J Gilbert (alternate H Young), M Hadsley-Chaplin, C S Maude, P Yea (appointed to the Board on 23 January 2014) and Ms H Fukuda, and together with A S Kemp (retired from the Board on 3 December 2013) were the only Directors who served during the year. Messrs Gilbert, Cayzer and Ms Fukuda have each served on the Board for more than nine years and in accordance with corporate governance best practice will retire at the Annual General Meeting ("AGM") on 2 December 2014 and, being eligible, offer themselves for re-election. In accordance with the Articles of Association P Yea having been appointed to the Board during the year, will retire at the AGM and, being eligible, will offer himself for election to the Board.
The Board considers that there is a balance of skills and experience within the Board relevant to the leadership and direction of the Company and that all the Directors contribute effectively.
No Director has a service contract with the Company although Directors are issued with letters of appointment upon appointment. The Directors' interests in contractual arrangements with the Company are as shown in note 18 to the financial statements. No other Directors had any interest in contracts with the Company during the period or subsequently.
Special Business at the Annual General Meeting
Directors' Authority to Allot Relevant Securities
Among the Resolutions being put to the Annual General Meeting as Special Business, Resolution 11 which is an Ordinary Resolution, will, if passed, renew the Directors' existing general power to allot securities but will also, provide a further authority (subject to certain limits), to allot shares pursuant to fully pre-emptive rights issues. Resolution 11 authorises the Directors to generally allot shares up to an aggregate nominal amount of £6,349,647 representing approximately 2/3 of the existing issued capital of the Company, of which a maximum nominal amount of £3,174,733 (approximately 1/3 of the existing issued share capital) may only be applied to fully pre-emptive rights issues. Such authority will expire upon the conclusion of the next Annual General Meeting in 2015. The Board has no present intention to utilise this authority.
Resolution 12 which is a Special Resolution, will, if passed, renew the Directors' existing authority until the conclusion of the next Annual General Meeting to make limited allotments of shares for cash of up to 10% of the issued share capital other than according to the statutory pre-emption rights which require all shares issued for cash to be offered first to all existing shareholders. This authority includes shares that the Company sells or transfers that have been held in treasury (if any) pursuant to the authority conferred by Resolution 13 below. Since the introduction of The Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 on 1 December 2003, a listed company is able to hold shares that it has repurchased in treasury rather than cancel them. The Board has established guidelines for treasury shares and will only consider buying in shares for treasury at a discount to their prevailing NAV and selling them from treasury at or above the then prevailing NAV. New shares issued in accordance with the authority sought in Resolution12 will always be issued at a premium to the net asset value per Ordinary share at the time of issue, as determined by the Directors. The Board intends to actively continue to sell Ordinary shares from treasury or issue new Ordinary shares for cash when it is appropriate to do so, in accordance with its current policy. It is therefore possible that the issued share capital of the Company may change between the date of this document and the Annual General Meeting and therefore the authority sought will be in respect of 10% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document.
Purchase of the Company's Shares
Resolution 13, a Special Resolution, will be proposed to renew the Directors' authority to make market purchases of the Company's shares in accordance with the provisions contained in the Companies Act 2006 and the Listing Rules of the Financial Conduct Authority. The minimum price to be paid per Ordinary share shall be not less than 25p per share (being the nominal value) and the maximum price should not be more than the higher of (i) 5 per cent. above the average of the middle market quotations for the shares for the preceding five business days; and (ii) the higher of the last independent trade and the current highest independent bid on the trading venue where the purchase is carried out. The Directors do not intend to use this authority to purchase the Company's Ordinary shares unless to do so would result in an increase in net asset value per share and would be in the interests of shareholders generally. The authority sought will be in respect of 14.99% of the issued share capital as at the date of the Annual General Meeting rather than the date of this document.
If Resolutions 12 and 13 are passed then an announcement will be made on the date of the Annual General Meeting which will detail the exact number of Ordinary shares to which each of these authorities relate.
The authority being sought in Resolution 13 shall expire at the conclusion of the Annual General Meeting in 2015 unless such authority is renewed prior to such time. Any Ordinary shares purchased in this way will either be cancelled and the number of Ordinary shares will be reduced accordingly or, pursuant to the power granted in Resolution 13 above, may be held in treasury.
These powers will give the Directors additional flexibility going forward and the Board considers that it will be in the interests of the Company that such powers be available. Such powers will only be implemented when, in the view of the Directors, to do so will be for the benefit to shareholders as a whole.
Notice of Meetings
Resolution 14, which is a special resolution, will be proposed to authorise the Directors to call general meetings of the Company (other than Annual General Meetings), on 14 days' notice as permitted by the Companies Act 2006 as amended by the Companies (Shareholders' Rights) Regulations 2009. This approval will be effective until the Company's next Annual General Meeting in 2015. In order to utilise this shorter notice period, the Company is required to ensure that shareholders are able to vote electronically at the general meeting called on such short notice. The Directors confirm that, in the event that a general meeting is called, they will give as much notice as practicable and will only utilise the authority granted by Resolution 14 in limited and time sensitive circumstances.
Compliance with AIFM Rules (Amendments to Articles of Association)
Resolution 15, which is a special resolution, will be proposed to amend the Company's articles of association (the "Amended Articles") to reflect certain changes that the Board wishes to make under the Alternative Fund Managers Regulations 2013.
The Alternative Investment Fund Managers Directive (the "Directive"), proposed by the EU to enhance investor protection, was fully implemented in the UK on 22 July 2014. The Directive has been implemented in the United Kingdom by the Alternative Investment Fund Managers Regulations 2013 (as amended) (the "Regulations" and together with the Directive and the rules issued by the FCA and ESMA from time to time (including any amendments or updates made in relation thereto) the "AIFM Rules").
Following the implementation of the AIFM Rules in the UK, the Board is now proposing to make amendments to the Company's articles of association to reflect the AIFM Rules.
The changes proposed to be introduced in the Amended Articles, and their effect, are set out below:
(i) Net Asset Value
The Amended Articles will provide that the net asset value of the Company is calculated at least annually and disclosed to shareholders from time to time in such manner as may be determined by the Board. The amendment will have no bearing on current practice and simply articulates the minimum requirements of the AIFM Rules.
The Amended Articles provide that valuation of the Company's assets will be performed in accordance with prevailing accounting standards. Again, the amendment will have no bearing on current practice and simply ensures that the Amended Articles are consistent with the minimum requirements of the AIFM Rules.
(ii) Liability for loss of financial assets held in custody
The AIFM Rules require that the Company has a depositary. Under the AIFM Rules, the depositary has strict liability for the loss of the Company's financial assets in respect of which it has safe-keeping duties. This rule applies even where the depositary has delegated the actual custody of an asset to another entity. The Company may wish to hold assets in a
country where the depositary is required to use a local sub-custodian to hold the relevant asset. The depositary may not wish the Company to acquire or retain such an asset, unless it can discharge its strict liability to that local sub-custodian. A discharge of strict liability in these circumstances will only be possible if the Company's "rules of instruments of incorporation" (for example, the articles of association) permit such a discharge.
The Board is cognisant that situations may arise where allowing the depositary to discharge its strict liability will be commercially necessary. An amendment to the existing articles of association is therefore proposed with the effect of enabling the Board, should the need arise and subject to the AIFM Rules, to allow a depositary to discharge its strict liability for loss of certain of the Company's assets. This proposed amendment provides the Company with commercial flexibility, and the Board will exercise its discretion in the usual way in determining whether or not to provide such a discharge.
Copies of the proposed amended articles of association of the Company, including a version showing by tracked changes the alterations from the existing articles, will be available for inspection during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) at the registered office of the Company up to and including the date of the AGM, and for inspection by any person attending the annual general meeting.
Recommendation
Your Board considers Resolutions 11 to 15 to be in the best interests of the Company and its members as a whole and most likely to promote the success of the Company for the benefit of its members as a whole. Accordingly, your Board unanimously recommends that shareholders should vote in favour of Resolutions 11 to 15 to be proposed at the AGM, as they intend to do in respect of their own beneficial shareholdings amounting to 257,291 Ordinary shares.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation where a Director has a conflict of interest, as required by the Companies Act 2006. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his wider duties is affected. Each Director is required to notify the Company Secretary of any potential or actual conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting.
Accountability and Audit
The respective responsibilities of the Directors and the auditor in connection with the financial statements are set out in the Annual Report.
Each Director confirms that, so far as he or she is aware, there is no relevant audit information of which the Company's auditor is unaware, and each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information. Additionally there have been no important events since the year end.
The Directors have reviewed the level of non-audit services provided by the independent auditor during the year, together with the independent auditor's procedures in connection with the provision of such services, and remain satisfied that the auditor's objectivity and independence is being safeguarded.
Independent Auditor
The auditor, Ernst & Young LLP, has indicated its willingness to remain in office. The Directors will place a resolution before the Annual General Meeting to re-appoint Ernst & Young LLP as auditor for the ensuing year, and to authorise the Directors to determine its remuneration.
By order of the Board
Aberdeen Asset Management PLC - Secretaries
Bow Bells House
1 Bread Street
London EC4M 9HH
22 October 2014
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 the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).
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 the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgments and estimates that are reasonable and prudent; and
· state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and which 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 also responsible 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.
DIRECTORS' RESPONSIBILITY STATEMENT
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report including Business Review, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.
The financial statements are published on www.asian-smaller.co.uk which is a website maintained by the Company's Manager. 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.
The Directors listed in the Directors' Report, being the persons responsible, hereby confirm to the best of their knowledge that:
· the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
· that in the opinion of the Directors, the Annual Report and financial statements taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy. In reaching this conclusion the Board has assumed that the reader of the Annual Report and financial statements would have a reasonable level of general investment knowledge, and in particular, of investment trusts; and
· the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
For Aberdeen Asian Smaller Companies Investment Trust PLC
Nigel Cayzer
Chairman
22 October 2014
INCOME STATEMENT
|
|
|
Year ended 31 July 2014 |
Year ended 31 July 2013 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
(Losses)/gains on investments |
9 |
- |
(16,444) |
(16,444) |
- |
95,470 |
95,470 |
|
Income |
2 |
11,427 |
- |
11,427 |
11,512 |
- |
11,512 |
|
Exchange gains/(losses) |
|
- |
103 |
103 |
- |
(186) |
(186) |
|
Investment management fees |
3 |
(3,907) |
- |
(3,907) |
(3,170) |
- |
(3,170) |
|
Administrative expenses |
4 |
(1,147) |
- |
(1,147) |
(1,058) |
- |
(1,058) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Net return on ordinary activities before finance costs and taxation |
|
6,373 |
(16,341) |
(9,968) |
7,284 |
95,284 |
102,568 |
|
Finance costs |
5 |
(1,457) |
- |
(1,457) |
(1,470) |
- |
(1,470) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Return on ordinary activities before taxation |
|
4,916 |
(16,341) |
(11,425) |
5,814 |
95,284 |
101,098 |
|
Taxation |
6 |
(572) |
36 |
(536) |
(766) |
142 |
(624) |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Return on ordinary activities after taxation |
|
4,344 |
(16,305) |
(11,961) |
5,048 |
95,426 |
100,474 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
Return per share (pence): |
|
|
|
|
|
|
|
|
Basic |
8 |
11.43 |
(42.89) |
(31.46) |
13.84 |
261.59 |
275.43 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
Diluted |
8 |
n/a |
n/a |
n/a |
n/a |
234.71 |
249.43 |
|
|
|
_______ |
_______ |
_______ |
_______ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
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. |
|||||||
|
No operations were acquired or discontinued in the year. |
|||||||
|
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement. |
|||||||
|
The accompanying notes are an integral part of the financial statements. |
|||||||
BALANCE SHEET
|
|
|
As at |
As at |
|
|
|
31 July 2014 |
31 July 2013 |
|
|
Notes |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
9 |
400,760 |
398,361 |
|
|
|
__________ |
__________ |
|
Current assets |
|
|
|
|
Debtors and prepayments |
10 |
227 |
488 |
|
Cash and short term deposits |
17 |
5,685 |
17,244 |
|
|
|
__________ |
__________ |
|
|
|
5,912 |
17,732 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
Creditors: amounts falling due within one year |
|
|
|
|
Bank loans |
11 |
(5,000) |
- |
|
Other creditors |
11 |
(832) |
(1,473) |
|
|
|
__________ |
__________ |
|
|
|
(5,832) |
(1,473) |
|
|
|
__________ |
__________ |
|
Net current assets |
|
80 |
16,259 |
|
|
|
__________ |
__________ |
|
Total assets less current liabilities |
|
400,840 |
414,620 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
3.5% Convertible Unsecured Loan Stock 2019 |
12 |
(31,722) |
(31,688) |
|
|
|
__________ |
__________ |
|
Net assets |
|
369,118 |
382,932 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
Called-up share capital |
13 |
9,793 |
9,712 |
|
Capital redemption reserve |
|
2,062 |
2,062 |
|
Share premium account |
|
39,611 |
36,617 |
|
Special reserve |
|
11,715 |
11,715 |
|
Equity component of 3.5% Convertible Unsecured Loan Stock 2019 |
12 |
1,361 |
1,361 |
|
Capital reserve |
14 |
296,008 |
312,313 |
|
Revenue reserve |
14 |
8,568 |
9,152 |
|
|
|
__________ |
__________ |
|
Equity shareholders' funds |
|
369,118 |
382,932 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
Net asset value per share (pence): |
|
|
|
|
Basic |
15 |
968.89 |
1,013.82 |
|
|
|
__________ |
__________ |
|
Diluted |
15 |
952.52 |
992.81 |
|
|
|
__________ |
__________ |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
|
For the year ended 31 July 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
Share |
|
Equity |
|
|
|
|
|
|
Share |
redemption |
premium |
Special |
Component |
Capital |
Revenue |
|
|
|
|
capital |
reserve |
account |
reserve |
CULS 2019 |
reserve |
reserve |
Total |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 1 August 2013 |
|
9,712 |
2,062 |
36,617 |
11,715 |
1,361 |
312,313 |
9,152 |
382,932 |
|
Conversion of 3.5% Convertible Unsecured Loan Stock 2019 |
12 |
6 |
- |
205 |
- |
- |
- |
- |
211 |
|
Issue of own shares |
13 |
75 |
- |
2,789 |
- |
- |
- |
- |
2,864 |
|
Return on ordinary activities after taxation |
|
- |
- |
- |
- |
- |
(16,305) |
4,344 |
(11,961) |
|
Dividends paid |
7 |
- |
- |
- |
- |
- |
- |
(4,928) |
(4,928) |
|
|
|
______ |
_______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
Balance at 31 July 2014 |
|
9,793 |
2,062 |
39,611 |
11,715 |
1,361 |
296,008 |
8,568 |
369,118 |
|
|
|
______ |
_______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 July 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
Share |
|
Equity |
|
|
|
|
|
|
Share |
redemption |
premium |
Special |
Component |
Capital |
Revenue |
|
|
|
|
capital |
reserve |
account |
reserve |
CULS 2019 |
reserve |
reserve |
Total |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 1 August 2012 |
|
9,287 |
2,062 |
14,512 |
8,372 |
1,361 |
216,887 |
8,513 |
260,994 |
|
Conversion of 3.5% Convertible Unsecured Loan Stock 2019 |
12 |
51 |
- |
1,660 |
- |
- |
- |
- |
1,711 |
|
Issue of own shares |
13 |
374 |
- |
14,368 |
- |
- |
- |
- |
14,742 |
|
Issue of own shares from treasury |
13 |
- |
- |
6,077 |
3,343 |
- |
- |
- |
9,420 |
|
Return on ordinary activities after taxation |
|
- |
- |
- |
- |
- |
95,426 |
5,048 |
100,474 |
|
Dividends paid |
7 |
- |
- |
- |
- |
- |
- |
(4,409) |
(4,409) |
|
|
|
______ |
_______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
Balance at 31 July 2013 |
|
9,712 |
2,062 |
36,617 |
11,715 |
1,361 |
312,313 |
9,152 |
382,932 |
|
|
|
______ |
_______ |
______ |
______ |
______ |
______ |
______ |
______ |
CASH FLOW STATEMENT
|
|
|
Year ended |
Year ended |
||
|
|
|
31 July 2014 |
31 July 2013 |
||
|
|
Notes |
£'000 |
£'000 |
£'000 |
£'000 |
|
Net cash inflow from operating activities |
16 |
|
5,725 |
|
7,156 |
|
|
|
|
|
|
|
|
Servicing of finance |
|
|
|
|
|
|
Interest paid |
|
|
(1,212) |
|
(1,288) |
|
|
|
|
|
|
|
|
Financial investment |
|
|
|
|
|
|
Purchases of investments |
|
(34,044) |
|
(58,522) |
|
|
Sales of investments |
9 |
14,933 |
|
43,289 |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash outflow from financial investment |
|
|
(19,111) |
|
(15,233) |
|
|
|
|
|
|
|
|
Equity dividends paid |
7 |
|
(4,928) |
|
(4,409) |
|
|
|
|
_______ |
|
_______ |
|
Net cash outflow before financing |
|
|
(19,526) |
|
(13,774) |
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
Issue of own shares |
13 |
2,864 |
|
24,162 |
|
|
Drawdown of loan |
11 |
5,000 |
|
- |
|
|
|
|
_______ |
|
_______ |
|
|
Net cash inflow from financing activities |
|
|
7,864 |
|
24,162 |
|
|
|
|
_______ |
|
_______ |
|
(Decrease)/increase in cash |
|
|
(11,662) |
|
10,388 |
|
|
|
|
_______ |
|
_______ |
|
|
|
|
|
|
|
|
Reconciliation of net cash flow to movements in net debt |
|
|
|
|
|
|
(Decrease)/increase in cash as above |
|
|
(11,662) |
|
10,388 |
|
Drawdown of loan |
|
|
(5,000) |
|
- |
|
Other non-cash movements |
|
|
(34) |
|
1,475 |
|
Exchange movements |
|
|
103 |
|
(186) |
|
|
|
|
_______ |
|
_______ |
|
Movement in net debt |
|
|
(16,593) |
|
11,677 |
|
Net debt at 1 August |
|
|
(14,444) |
|
(26,121) |
|
|
|
|
_______ |
|
_______ |
|
Net debt at 31 July |
17 |
|
(31,037) |
|
(14,444) |
|
|
|
|
_______ |
|
_______ |
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 31 July 2014
|
1. |
Accounting policies |
|
|
|
(a) |
Basis of preparation and going concern |
|
|
|
The financial statements have been prepared in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. |
|
|
|
|
|
|
|
The financial statements have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. The Directors believe this is appropriate for the reasons outlined in the Directors' Report. |
|
|
|
|
|
|
|
The financial statements, and the net asset value per share figures, have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP). |
|
|
|
|
|
|
(b) |
Valuation of investments |
|
|
|
Listed investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured at cost. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices. Gains and losses arising from changes in fair value and disposals are included in net profit or loss for the period as a capital item in the Income Statement and are ultimately recognised in the capital reserve. |
|
|
|
|
|
|
(c) |
Borrowings |
|
|
|
Interest-bearing bank loans and overdrafts are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. Subsequently, they continue to be valued at fair value, which is determined by aggregating the expected future cash flows for that loan or overdraft at a rate comprising the borrower's margin plus an average of market rates applicable to loans or overdrafts of a similar period of time and currency. Finance charges are accounted for on an accruals basis using the effective interest rate method and are charged 100% to revenue. |
|
|
|
|
|
|
(d) |
Income |
|
|
|
Dividends, including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time apportioned basis so as to reflect the effective yield on shares. Other returns on non-equity shares are recognised when the right to return is established. The fixed return on a debt security, if material, is recognised on a time apportioned basis so as to reflect the effective yield on each security. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis. |
|
|
|
|
|
|
(e) |
Expenses |
|
|
|
All expenses are accounted for on an accruals basis. Expenses, including management fees and finance costs, are charged 100% through the revenue column of the Income Statement with the exception of transaction costs incurred on the purchase and disposal of investments which are charged to the capital column of the Income Statement and are separately identified and disclosed in note 9 within gains on investments. |
|
|
|
|
|
|
(f) |
Taxation |
|
|
|
The charge for taxation is based on the profit for the year. |
|
|
|
|
|
|
|
Deferred tax |
|
|
|
The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred taxation is provided using the liability method on all timing differences, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in future against which the deferred tax asset can be offset. |
|
|
|
|
|
|
(g) |
Capital reserve |
|
|
|
The capital reserve reflects the following: |
|
|
|
gains and losses on the sale of investments and changes in fair values of investments held are transferred to the capital reserve; |
|
|
|
transfers from the warrant reserve on the exercise of warrants; and |
|
|
|
applicable capital tax charges. |
|
|
|
|
|
|
(h) |
Foreign currency |
|
|
|
Overseas monetary assets are converted into Sterling at the rate of exchange ruling at the Balance Sheet date. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or in the revenue account depending on whether the gain or loss is of a capital or revenue nature respectively. |
|
|
|
|
|
|
(i) |
3.5% Convertible Unsecured Loan Stock 2019 |
|
|
|
Convertible Unsecured Loan Stock ("CULS") issued by the Company is 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 fair value of the equity component, representing the option to convert liability into equity, is derived from the difference between the issue proceeds of the CULS and the fair value assigned to the liability. The liability component is subsequently measured at amortised cost using the effective interest rate and the equity component remains unchanged. |
|
|
|
|
|
|
|
Direct expenses associated with the CULS issue are allocated to the liability and equity components in proportion to the split of the proceeds of the issue. Expenses allocated to the liability component are amortised over the life of the instrument using the effective interest rate. |
|
|
|
|
|
|
|
The interest expense on the CULS is calculated according to the effective interest rate method by applying the assumed rate of 4.662% to the liability component of the instrument. |
|
|
|
|
|
|
|
On conversion of CULS, equity is issued and the liability component is derecognised. The original equity component recognised at inception remains in equity. No gain or loss is recognised on conversion. |
|
|
|
|
|
|
|
When CULS is repurchased for cancellation, the fair value of the liability at the redemption date is compared to its carrying amount, giving rise to a gain or loss on redemption that is recognised through profit or loss. The amount of consideration allocated to equity is recognised in equity with no gain or loss being recognised. |
|
|
|
2014 |
2013 |
|
2. |
Income |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
UK dividend income |
- |
109 |
|
|
Overseas dividends |
11,287 |
11,385 |
|
|
Stock dividends |
130 |
- |
|
|
|
__________ |
__________ |
|
|
|
11,417 |
11,494 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
£'000 |
£'000 |
|
|
Other income |
|
|
|
|
Deposit interest |
10 |
18 |
|
|
|
__________ |
__________ |
|
|
Total income |
11,427 |
11,512 |
|
|
|
__________ |
__________ |
|
|
|
2014 |
2013 |
|
3. |
Investment management fees |
£'000 |
£'000 |
|
|
Investment management fees |
3,907 |
3,170 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
The Company has an agreement with Aberdeen Fund Managers Limited for the provision of management services, which has been delegated to Aberdeen Asset Management Asia Limited. |
||
|
|
|
||
|
|
During the year the management fee was payable monthly in arrears and is based on an annual amount of 1.2%, calculated on the average net asset value of the Company over a 24 month period, valued monthly. The management fee is calculated by reference to the value of the Company's net assets (gross assets less liabilities excluding the amount of any loan facilities or overdraft facilities drawn down). The balance due to the Manager at the year end was £347,000 (2013 - £586,000). The agreement is terminable on one year's notice. |
||
|
|
|
2014 |
2013 |
|
4. |
Administrative expenses |
£'000 |
£'000 |
|
|
Administration fees |
84 |
82 |
|
|
Directors' fees |
168 |
129 |
|
|
Promotional activities |
240 |
215 |
|
|
Auditor's remuneration: |
|
|
|
|
fees payable to the auditor for the audit of the annual accounts |
24 |
24 |
|
|
fees payable to the auditor and its associates for other services: |
|
|
|
|
- interim review |
6 |
6 |
|
|
- taxation and iXBRL tagging services (all compliance) |
11 |
9 |
|
|
Custodian charges |
283 |
287 |
|
|
Other expenses |
331 |
306 |
|
|
|
__________ |
__________ |
|
|
|
1,147 |
1,058 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
The Company reorganised its management and administration contractual arrangements during the course of the financial year but with no change to the commercial effect of those arrangements. As a result, the Company has a management agreement with Aberdeen Fund Managers Limited ("AFML") for inter alia the provision of administration services which are, in turn, delegated to Aberdeen Asset Management PLC. The administration fee is payable quarterly in advance and based on an index-linked annual amount of £85,000 (2013 - £82,000) and there was an accrual of £21,000 (2013 - £41,000) at the year end. The agreement is terminable on six months' notice. |
||
|
|
|
||
|
|
Under the management agreement, the Company has also appointed AFML to provide promotional activities to the Company by way of its participation in the Aberdeen Investment Trust Share Plan and ISA. AFML has delegated this role to Aberdeen Asset Managers Limited ("AAML"). The total fee paid and payable under the agreement in relation to promotional activities was £240,000 (2013 - £215,000) and there was a £73,000 (2013 - £21,000) balance due to AAML at the year end. |
||
|
|
|
||
|
|
No pension contributions were made in respect of any of the Directors. |
||
|
|
|
2014 |
2013 |
|
5. |
Finance costs |
£'000 |
£'000 |
|
|
Loans repayable in less than 1 year |
50 |
21 |
|
|
Interest on 3.5% Convertible Unsecured Loan Stock 2019 |
1,162 |
1,213 |
|
|
Notional interest on 3.5% Convertible Unsecured Loan Stock 2019 |
170 |
161 |
|
|
Amortisation of 3.5% Convertible Unsecured Loan Stock 2019 issue expenses |
75 |
75 |
|
|
|
__________ |
__________ |
|
|
|
1,457 |
1,470 |
|
|
|
__________ |
__________ |
|
|
|
2014 |
2013 |
||||||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
||||
|
6. |
Taxation
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||
|
|
(a) |
Analysis of charge for the year |
|
|
|
|
|
|
|||
|
|
|
Overseas taxation |
536 |
- |
536 |
624 |
- |
624 |
|||
|
|
|
Tax relief to revenue |
- |
- |
- |
- |
- |
- |
|||
|
|
|
|
_______ |
_____ |
____ |
_______ |
_____ |
_____ |
|||
|
|
|
Current taxation |
536 |
- |
536 |
624 |
- |
624 |
|||
|
|
|
Movement on deferred taxation |
36 |
(36) |
- |
142 |
(142) |
- |
|||
|
|
|
|
_______ |
_____ |
____ |
_______ |
_____ |
_____ |
|||
|
|
|
Total tax |
572 |
(36) |
536 |
766 |
(142) |
624 |
|||
|
|
|
|
_______ |
_____ |
____ |
_______ |
_____ |
_____ |
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
At 31 July 2014 the Company had surplus management expenses and loan relationship deficits with a tax value of £3,540,000 (2013 - £1,599,000) in respect of which a deferred tax asset has not been recognised. This includes a provision for deferred taxation in respect of the holding in CDL Hospitality Trust. This is due to the Company having sufficient excess management expenses available to cover the potential liability and the Company is not expected to generate taxable income in the future in excess of deductible expenses. CDL is a Singapore based real estate investment trust without distributor or reporting fund status and therefore the realised gains on disposal of its units are subject to corporation tax in the hands of this Company. |
|||||||||
|
|
|
|
|||||||||
|
|
(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 for a large company of 22.33% (2013 - 23.67%). The differences are explained below: |
|||||||||
|
|
|
|
|||||||||
|
|
|
|
2014 |
2013 |
|||||||
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||
|
|
|
Return on ordinary activities before taxation |
4,916 |
(16,341) |
(11,425) |
5,814 |
95,284 |
101,098 |
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Return on ordinary activities multiplied by the effective UK standard tax rate of corporation tax of 22.33% (2013 - 23.67%) |
1,098 |
(3,649) |
(2,551) |
1,376 |
22,554 |
23,930 |
|||
|
|
|
Effects of: |
|
|
|
|
|
|
|||
|
|
|
Losses/(gains) on investments not taxable |
- |
3,672 |
3,672 |
- |
(22,598) |
(22,598) |
|||
|
|
|
Exchange (gains)/losses |
- |
(23) |
(23) |
- |
44 |
44 |
|||
|
|
|
Franked dividend receipts not chargeable to corporation tax |
- |
- |
- |
(26) |
- |
(26) |
|||
|
|
|
Overseas tax |
536 |
- |
536 |
624 |
- |
624 |
|||
|
|
|
Non-taxable dividend income |
(2,525) |
- |
(2,525) |
(2,663) |
- |
(2,663) |
|||
|
|
|
Movement in unutilised management expenses |
1,104 |
- |
1,104 |
969 |
- |
969 |
|||
|
|
|
Movement in unutilised loan relationship deficits |
323 |
- |
323 |
344 |
- |
344 |
|||
|
|
|
|
_______ |
_____ |
____ |
_______ |
_____ |
____ |
|||
|
|
|
Current tax charge for the year |
536 |
- |
536 |
624 |
- |
624 |
|||
|
|
|
|
_______ |
_____ |
____ |
_______ |
_____ |
____ |
|||
|
|
|
2014 |
2013 |
|
7. |
Dividends |
£'000 |
£'000 |
|
|
Final dividend for 2013 - 10.00p (2012 - 9.50p) |
3,791 |
3,351 |
|
|
Special dividend for 2013 - 3.00p (2012 - 3.00p) |
1,137 |
1,058 |
|
|
|
__________ |
__________ |
|
|
|
4,928 |
4,409 |
|
|
|
__________ |
__________ |
|
|
|
||
|
|
Proposed final and special dividends are subject to approval by shareholders at the Annual General Meeting and are not included as a liability in the financial statements. |
||
|
|
|
||
|
|
We set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the current year is £4,344,000 (2013 - £5,048,000). |
||
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
£'000 |
£'000 |
|
|
Proposed final dividend for 2014 - 10.00p (2013 - 10.00p) |
3,810 |
3,791 |
|
|
Proposed special dividend for 2014 - 3.00p (2013 - 3.00p) |
1,143 |
1,137 |
|
|
|
__________ |
__________ |
|
|
Total |
4,953 |
4,928 |
|
|
|
__________ |
__________ |
|
|
|
2014 |
2013 |
||||
|
8. |
Return per Ordinary share |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Basic |
|
|
|
|
|
|
|
|
Return on ordinary activities after taxation (£'000) |
4,344 |
(16,305) |
(11,961) |
5,048 |
95,426 |
100,474 |
|
|
Weighted average number of shares in issue{A} |
|
|
38,020,666 |
|
|
36,478,795 |
|
|
Return per Ordinary share (p) |
11.43 |
(42.89) |
(31.46) |
13.84 |
261.59 |
275.43 |
|
|
|
________ |
______ |
________ |
________ |
______ |
________ |
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
||||
|
|
Diluted |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Return on ordinary activities after taxation (£'000) |
5,314 |
(16,305) |
(10,991) |
5,985 |
95,426 |
101,411 |
|
|
Weighted average number of shares in issue{B} |
|
|
42,016,382 |
|
|
40,656,854 |
|
|
Return per Ordinary share (p) |
n/a |
n/a |
n/a |
n/a |
234.71 |
249.43 |
|
|
|
________ |
______ |
________ |
________ |
______ |
_________ |
|
|
|
|
|
|
|
|
|
|
|
{A} Calculated excluding shares held in treasury. |
||||||
|
|
{B} The calculation of the diluted total, revenue and capital returns per Ordinary share are carried out in accordance with Financial Reporting Standard 22, "Earnings per Share". For the purpose of calculating total, revenue and capital returns per Ordinary share, the number of Ordinary shares used is 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 2019 (CULS). The calculations indicate that the exercise of CULS would result in an increase in the weighted average number of Ordinary shares of 3,995,716 (2013 - 4,178,059) to 42,016,382 (2013 - 40,656,854) Ordinary shares. |
||||||
|
|
|
||||||
|
|
For the period ended 31 July 2014 the assumed conversion for potential Ordinary shares was non-dilutive due to a capital loss being reported and no dilution to the revenue return per Ordinary share. For the period ended 31 July 2013 there was also no dilution to the revenue return per Ordinary share. Where dilution occurs, the net returns are adjusted for items relating to the CULS. Accrued CULS finance costs for the period and unamortised issues expenses are reversed. Total earnings for the period are tested for dilution. Once dilution has been determined individual revenue and capital earnings are adjusted. |
||||||
|
|
|
Listed |
Listed |
|
|
|
|
in UK |
overseas |
Total |
|
9. |
Investments |
£'000 |
£'000 |
£'000 |
|
|
Fair value through profit or loss: |
|
|
|
|
|
Opening book cost |
5,316 |
184,235 |
189,551 |
|
|
Opening fair value gains on investments held |
4,132 |
204,678 |
208,810 |
|
|
Opening fair value |
9,448 |
388,913 |
398,361 |
|
|
Movements in year: |
|
|
|
|
|
Purchases at cost |
944 |
32,832 |
33,776 |
|
|
Sales - proceeds |
(32) |
(14,901) |
(14,933) |
|
|
Sales - gains on sales |
20 |
10,231 |
10,251 |
|
|
Movement in fair value gains on investments held |
3,048 |
(29,743) |
(26,695) |
|
|
|
__________ |
__________ |
__________ |
|
|
Closing fair value |
13,428 |
387,332 |
400,760 |
|
|
|
__________ |
__________ |
__________ |
|
|
Closing book cost |
6,248 |
212,397 |
218,645 |
|
|
Closing fair value gains on investments held |
7,180 |
174,935 |
182,115 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
13,428 |
387,332 |
400,760 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
|
|
|
|
|
(Losses)/gains on investments |
|
|
|
|
|
Gains on sales |
20 |
10,231 |
10,251 |
|
|
Movement in fair value gains on investments held |
3,048 |
(29,743) |
(26,695) |
|
|
|
__________ |
__________ |
__________ |
|
|
|
3,068 |
(19,512) |
(16,444) |
|
|
|
__________ |
__________ |
__________ |
|
|
|
|
|
|
|
|
Transaction costs |
|
|
|
|
|
During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within (losses)/gains on investments in the Income Statement. The total costs were as follows: |
|||
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
|
£'000 |
£'000 |
|
|
|
Purchases |
52 |
103 |
|
|
|
Sales |
23 |
63 |
|
|
|
|
__________ |
__________ |
|
|
|
|
75 |
166 |
|
|
|
|
__________ |
__________ |
|
|
|
|
2014 |
2013 |
|
10. |
Debtors: amounts falling due within one year |
£'000 |
£'000 |
|
|
Other debtors |
30 |
21 |
|
|
Prepayments and accrued income |
197 |
467 |
|
|
|
__________ |
__________ |
|
|
|
227 |
488 |
|
|
|
__________ |
__________ |
|
|
|
2014 |
2013 |
|
11. |
Creditors: amounts falling due within one year |
£'000 |
£'000 |
|
|
Bank loans |
5,000 |
- |
|
|
Amounts due to brokers |
83 |
481 |
|
|
Other creditors |
749 |
992 |
|
|
|
__________ |
__________ |
|
|
|
5,832 |
1,473 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
On 27 May 2014 the £2 million 3 year multi currency revolving advance loan facility the Company had with Royal Bank of Scotland expired. The agreement contained covenants requiring that the on-going gearing ratio (Gross Borrowings divided by Adjusted Assets) shall not exceed 25%. Gross Borrowings are calculated by deducting from the Company's assets (Portfolio Value plus cash) (1) the value of any unquoted investments; (2) the value of any bonds rated below investment grade or which are unrated; (3) the extent to which the value of any single security or asset exceeds 5% of Investment Portfolio Value; (4) the extent to which the aggregate value of the 20 largest securities or assets exceeds 65% of Investment Portfolio Value; (5) the extent to which the aggregate value of securities or assets in any one country exceeds 25% of Investment Portfolio Value; (6) the extent to which the aggregate value of securities or assets in countries with a S&P foreign sovereign debt rating lower than BBB- exceeds 30% of Investment Portfolio Value. The Company met these covenants throughout the period that the facility was in place. |
||
|
|
|
||
|
|
In June 2014 the Company entered into a £20 million multi currency revolving loan facility with State Street Bank and Trust Company. The agreement contains a covenant that total debt shall not exceed 25% of the adjusted net asset value of the Company, where total debt is the sum of total borrowings including loan stock excluding any liabilities under derivative instruments which would otherwise be included on the basis that such a contract or instrument was being closed out on the date of calculation. The adjusted net asset value is defined as the net asset value of the borrower adjusted by deducting: |
||
|
|
market value of any investments not quoted on an internationally recognised exchange; |
||
|
|
total market value of investments in Sub-Investment Grade or Unrated Corporate Bonds; |
||
|
|
amount by which the market value of investments in a single issuer exceeds 5% of the Net Asset Value; |
||
|
|
amount by which the market value of the largest twenty holdings exceeds 65% of the Net Asset Value; |
||
|
|
the amount by which market value of investments in any one country exceeds 25% of the Net Asset Value; or |
||
|
|
the amount by which market value of investments in any Sub-Investment Grade Country exceeds 30%. |
||
|
|
|
||
|
|
The Company met this covenant for the period of which the loan was utilised with State Street. |
||
|
|
|
||
|
|
As at 31 July 2014, £5,000,000 (2013 - Royal Bank of Scotland - nil) had been drawn down at an all-in rate of 1.4% (2013 - Royal Bank of Scotland - nil) which matured on 26 August 2014. On 26 August 2014 the principal amount was rolled over at an all-in interest rate of 1.40094% until maturity on 26 September 2014, when the principal amount was rolled over at an all-in interest rate of 1.40663% until maturity on 27 October 2014. |
||
|
12. |
Non-current liabilities |
|
|
|
|
|
|
Number of units |
Liability component |
Equity component |
|
|
3.5% Convertible Loan Stock 2019 |
£'000 |
£'000 |
£'000 |
|
|
Balance at beginning of year |
33,288 |
31,688 |
1,361 |
|
|
Conversion of 3.5% Convertible Unsecured Loan Stock 2019 |
(211) |
(211) |
- |
|
|
Notional interest on CULS transferred to revenue reserve |
- |
170 |
- |
|
|
Amortisation and issue expenses |
- |
75 |
- |
|
|
|
__________ |
__________ |
__________ |
|
|
Balance at end of year |
33,077 |
31,722 |
1,361 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
|
|
|
|
|
The 3.5% Convertible Unsecured Loan Stock 2019 ("CULS") can be converted at the election of holders into Ordinary shares during the months of May and November each year throughout their life, commencing 30 November 2012 to 31 May 2019 at a rate of 1 Ordinary share for every 830.0p nominal of CULS. Interest is paid on the CULS on 31 May and 30 November each year, commencing 30 November 2012. 100% of the interest is charged to revenue in line with the Board's expected long-term split of returns from the investment portfolio of the Company. |
|||
|
|
|
|||
|
|
The CULS has been constituted as an unsecured subordinated obligation of the Company by the Trust Deed between the Company and the Trustee, the Law Debenture Trust Corporation p.l.c., dated 17 May 2012. The Trust Deed details the CULS holders' rights and the Company's obligations to the CULS holders and the trustee oversees the operation of the Trust Deed. In the event of a winding-up of the Company the rights and claims of the Trustee and CULS holders would be subordinate to the claims of all creditors in respect of the Company's secured and unsecured borrowings, under the terms of the Trust Deed. |
|||
|
|
|
|||
|
|
During the year ended 31 July 2014 the Company converted £211,293 (31 July 2013 - £1,711,586) nominal amount of CULS into 25,438 (31 July 2013 - 206,159) Ordinary shares. |
|||
|
|
|
|||
|
|
As at 31 July 2014, there was £33,077,121 (2013 - £33,288,414) nominal amount of 3.5% Convertible Unsecured Loan Stock 2019 in issue. |
|||
|
|
|
|
2014 |
2013 |
|
|
13. |
Called up share capital |
|
£'000 |
£'000 |
|
|
|
Allotted, called-up and fully paid |
|
|
|
|
|
|
Ordinary shares of 25p |
|
9,524 |
9,443 |
|
|
|
Treasury shares |
|
269 |
269 |
|
|
|
|
|
__________ |
__________ |
|
|
|
|
|
9,793 |
9,712 |
|
|
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
|
|
|
|
Ordinary |
Treasury shares |
|
|
|
|
|
Number |
Number |
Number |
|
|
|
At 31 July 2013 |
37,771,369 |
1,076,290 |
38,847,659 |
|
|
|
Conversion of CULS |
25,438 |
- |
25,438 |
|
|
|
Issue of own shares |
300,000 |
- |
300,000 |
|
|
|
|
__________ |
__________ |
__________ |
|
|
|
At 31 July 2014 |
38,096,807 |
1,076,290 |
39,173,097 |
|
|
|
|
__________ |
__________ |
__________ |
|
|
|
|
|
|
|
|
|
|
During the year 300,000 Ordinary shares of 25p were issued by the Company (2013 - 2,605,000) at a total consideration of £2,864,000 (2013 - £24,162,000), none of which were issued from treasury (2013 - 1,110,000). At the year end 1,076,290 (2013- 1,076,290) shares were held in treasury, which represents 2.75% (2013 - 2.77%) of the Company's total issued share capital at 31 July 2014. During the year there were a further 25,438 Ordinary shares issued as a result of CULS conversion (2013 - 206,159). |
||||
|
|
|
||||
|
|
Capital management policies and procedures |
||||
|
|
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt (comprising bank borrowings and CULS) and equity balance. |
||||
|
|
|
||||
|
|
The Company's capital comprises the following: |
||||
|
|
|
|
|
||
|
|
|
2014 |
2013 |
||
|
|
|
£'000 |
£'000 |
||
|
|
Equity |
|
|
||
|
|
Equity share capital |
9,793 |
9,712 |
||
|
|
Reserves |
359,325 |
382,932 |
||
|
|
Liabilities |
|
|
||
|
|
CULS |
31,722 |
31,688 |
||
|
|
|
__________ |
__________ |
||
|
|
|
400,840 |
424,332 |
||
|
|
|
__________ |
__________ |
||
|
|
|
|
|
||
|
|
The Board's policy is to utilise gearing when the Manager believes it appropriate to do so, up to a maximum of 25% geared at the time of drawdown. Gearing for this purpose is defined as the excess amount above shareholders' funds of total assets (including net current assets/liabilities) less cash/cash equivalents, expressed as a percentage of the shareholders' funds. If the amount so calculated is negative, this is shown as a 'net cash' position. |
||||
|
|
|
|
|
||
|
|
|
2014 |
2013 |
||
|
|
|
£'000 |
£'000 |
||
|
|
Investments at fair value through profit or loss |
400,760 |
398,361 |
||
|
|
Current assets excluding cash |
227 |
488 |
||
|
|
Current liabilities excluding bank loans |
(832) |
(1,473) |
||
|
|
|
__________ |
__________ |
||
|
|
Total assets |
400,155 |
397,376 |
||
|
|
|
__________ |
__________ |
||
|
|
Net assets |
369,118 |
382,932 |
||
|
|
|
__________ |
__________ |
||
|
|
Gearing (%) |
8.4 |
3.8 |
||
|
|
|
__________ |
__________ |
||
|
|
|
||||
|
|
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. The review includes: |
||||
|
|
· the planned level of gearing which takes account of the Manager's views on the market; |
||||
|
|
· the level of equity shares in issue; |
||||
|
|
· the extent to which revenue in excess of that which is required to be distributed should be retained. |
||||
|
|
|
||||
|
|
The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. |
||||
|
|
|
||||
|
|
The Company does not have any externally imposed capital requirements. |
||||
|
|
|
2014 |
2013 |
|
14. |
Retained earnings |
£'000 |
£'000 |
|
|
Capital reserve |
|
|
|
|
At 31 July |
312,313 |
216,887 |
|
|
Movement in investment holdings fair value |
(26,695) |
60,940 |
|
|
Gains on realisation of investments at fair value |
10,251 |
34,530 |
|
|
Foreign exchange movement |
103 |
(186) |
|
|
Capital tax charge |
36 |
142 |
|
|
|
__________ |
__________ |
|
|
At 31 July |
296,008 |
312,313 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
Revenue reserve |
£'000 |
£'000 |
|
|
At 31 July |
9,152 |
8,513 |
|
|
Revenue |
4,344 |
5,048 |
|
|
Dividends paid |
(4,928) |
(4,409) |
|
|
|
__________ |
__________ |
|
|
At 31 July |
8,568 |
9,152 |
|
|
|
__________ |
__________ |
|
15. |
Net asset value per equity share |
2014 |
2013 |
|
|
Basic |
|
|
|
|
Net assets attributable |
£369,118,000 |
£382,932,000 |
|
|
Number of Ordinary shares in issue{A} |
38,096,807 |
37,771,369 |
|
|
Net asset value per Ordinary share |
968.89p |
1,013.82p |
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
Diluted |
|
|
|
|
Net assets attributable |
£400,840,000 |
£414,815,000 |
|
|
Number of Ordinary shares in issue (excluding shares held in treasury){A} |
42,082,002 |
41,782,021 |
|
|
Net asset value per Ordinary share{B} |
952.52p |
992.81p |
|
|
|
|
|
|
|
{A} Calculated excluding shares held in treasury |
||
|
|
{B} The diluted net asset value per Ordinary share has been calculated on the assumption that the 33,077,121 (2013 - 33,288,414) 3.5% Convertible Unsecured Loan Stock 2019 ("CULS") are converted at 830.00p per share, giving a total of 42,082,002 (2013 - 41,782,021) Ordinary shares. Where dilution occurs, the net assets are adjusted for items relating to the CULS. |
||
|
|
|
||
|
|
Net asset value per share - debt converted |
||
|
|
In accordance with the Company's understanding of the current methodology adopted by the AIC, convertible financial instruments are deemed to be 'in the money' if the cum income net asset value ("NAV") exceeds the conversion price of 830.00p per share. In such circumstances a net asset value is produced and disclosed assuming the convertible debt is fully converted. At 31 July 2014 the cum income NAV was 968.89p (31 July 2013 - 1,013.82p) and thus the CULS were 'in the money'. |
||
|
16. |
Reconciliation of net return before finance costs and |
2014 |
2013 |
|
|
taxation to net cash inflow from operating activities |
£'000 |
£'000 |
|
|
Net returns before finance costs and taxation |
(9,968) |
102,568 |
|
|
Adjustments for: |
|
|
|
|
Losses/(gains) on investments |
16,444 |
(95,470) |
|
|
Effect of foreign exchange rate (gains)/losses |
(103) |
186 |
|
|
Decrease in prepayments and accrued income |
270 |
145 |
|
|
Increase in other debtors |
(9) |
(6) |
|
|
(Decrease)/increase in other creditors |
(243) |
357 |
|
|
Overseas withholding tax suffered |
(536) |
(624) |
|
|
Stock dividends included in investment income |
(130) |
- |
|
|
|
__________ |
__________ |
|
|
Net cash inflow from operating activities |
5,725 |
7,156 |
|
|
|
__________ |
__________ |
|
|
|
|
|
|
Other non-cash |
|
|
|
|
2013 |
flow |
movements |
movements |
2014 |
|
17. |
Analysis of changes in net debt |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash and short term deposits |
17,244 |
(11,662) |
103 |
- |
5,685 |
|
|
Debt falling due within one year |
- |
(5,000) |
- |
- |
(5,000) |
|
|
Debt falling due in more than one year |
(31,688) |
- |
- |
(34) |
(31,722) |
|
|
|
________ |
________ |
________ |
________ |
________ |
|
|
Net debt |
(14,444) |
(16,662) |
103 |
(34) |
(31,037) |
|
|
|
________ |
________ |
________ |
________ |
________ |
|
18. |
Transactions with the Manager |
|
|
Mr Gilbert and his alternate Director, Mr Young are both directors of Aberdeen Asset Management PLC ('AAM') and its subsidiary Aberdeen Asset Management Asia Limited ('AAM Asia) which has been delegated, under an agreement with Aberdeen Fund Managers Limited, to provide management services to the Company, the terms of which are outlined in note 3. Neither Mr Gilbert nor Mr Young are directors of AFML. |
|
19. |
Financial instruments |
|||||||||||||||||||
|
|
Risk management |
|||||||||||||||||||
|
|
The Company's financial instruments comprise equities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The Manager has a dedicated investment management process, which ensures that the investment policy explained in the Strategic Report followed. Stock selection procedures are in place based on the active portfolio management and identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by the Manager's investment committee. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The Company's Manager has an independent investment risk department for reviewing the investment risk parameters of the Company's portfolio on a regular basis. The department reports to the Manager's performance review committee which is chaired by the Manager's chief investment officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk and style characteristics using best practice, industry standard multi-factor models. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Additionally, the Manager's compliance department continually monitors the Company's investment and borrowing powers and reports to the Manager's risk management committee. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The main financial risks that the Company faces from its financial instruments are market price risk (comprising interest rate risk, currency risk and other price risk), liquidity risk and credit risk. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
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. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Interest rate risk |
|||||||||||||||||||
|
|
Interest rate movements may affect: |
|||||||||||||||||||
|
|
- the level of income receivable on cash deposits; |
|||||||||||||||||||
|
|
- interest payable on the Company's variable rate borrowings; |
|||||||||||||||||||
|
|
- valuation of debt securities in the portfolio. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
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 rate risk profile |
|||||||||||||||||||
|
|
The interest rate risk profile of the Company's financial assets and liabilities, excluding equity holdings which are all non-interest bearing, at the Balance Sheet date was as follows: |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
|
Weighted average |
|
|
|
|||||||||||||||
|
|
|
period for which |
average |
Fixed |
Floating |
|||||||||||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|||||||||||||||
|
|
At 31 July 2014 |
Years |
% |
£'000 |
£'000 |
|||||||||||||||
|
|
Assets |
|
|
|
|
|||||||||||||||
|
|
Hong Kong Dollar |
- |
- |
- |
184 |
|||||||||||||||
|
|
Sterling |
- |
- |
- |
5,498 |
|||||||||||||||
|
|
Thailand Baht |
- |
- |
- |
3 |
|||||||||||||||
|
|
|
__________ |
__________ |
________ |
________ |
|||||||||||||||
|
|
|
- |
- |
- |
5,685 |
|||||||||||||||
|
|
|
__________ |
__________ |
________ |
________ |
|||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
Weighted average |
|
|
|
|||||||||||||||
|
|
|
period for which |
average |
Fixed |
Floating |
|||||||||||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|||||||||||||||
|
|
|
Years |
% |
£'000 |
£'000 |
|||||||||||||||
|
|
Liabilities |
|
|
|
|
|||||||||||||||
|
|
Bank loan |
0.08 |
1.4 |
5,000 |
- |
|||||||||||||||
|
|
3.5% Convertible Loan Stock 2019 |
4.83 |
3.5 |
31,722 |
- |
|||||||||||||||
|
|
|
__________ |
__________ |
________ |
________ |
|||||||||||||||
|
|
|
- |
- |
36,722 |
- |
|||||||||||||||
|
|
|
__________ |
__________ |
________ |
________ |
|||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
Weighted average |
|
|
|
|||||||||||||||
|
|
|
period for which |
average |
Fixed |
Floating |
|||||||||||||||
|
|
|
rate is fixed |
interest rate |
rate |
rate |
|||||||||||||||
|
|
At 31 July 2013 |
Years |
% |
£'000 |
£'000 |
|||||||||||||||
|
|
Assets |
|
|
|
|
|||||||||||||||
|
|
Indian Rupee |
- |
- |
- |
186 |
|||||||||||||||
|
|
Malaysian Ringgitt |
- |
- |
- |
117 |
|||||||||||||||
|
|
Sterling |
- |
- |
- |
16,758 |
|||||||||||||||
|
|
Thailand Baht |
- |
- |
- |
183 |
|||||||||||||||
|
|
|
__________ |
__________ |
________ |
________ |
|||||||||||||||
|
|
|
- |
- |
- |
17,244 |
|||||||||||||||
|
|
|
__________ |
__________ |
________ |
________ |
|||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
|
|
Liabilities |
|
|
|
|
|||||||||||||||
|
|
3.5% Convertible Loan Stock 2019 |
5.83 |
3.5 |
31,688 |
- |
|||||||||||||||
|
|
|
__________ |
__________ |
________ |
________ |
|||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
|
|
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on interest payable, weighted by the value of the loan. Details of the Company's loan is shown in note 11 to the financial statements. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The Company's equity portfolio and short term debtors and creditors (excluding bank loans) have been excluded from the above tables. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Maturity profile |
|||||||||||||||||||
|
|
The maturity profile of the Company's financial assets and liabilities at 31 July was as follows: |
|||||||||||||||||||
|
|
|
|
|
|||||||||||||||||
|
|
|
2014 |
2013 |
|||||||||||||||||
|
|
|
£'000 |
£'000 |
|||||||||||||||||
|
|
Assets |
|
|
|||||||||||||||||
|
|
In less than one year |
5,685 |
17,244 |
|||||||||||||||||
|
|
|
__________ |
__________ |
|||||||||||||||||
|
|
Liabilities |
|
|
|||||||||||||||||
|
|
In less than one year |
5,000 |
- |
|||||||||||||||||
|
|
In more than one year |
31,722 |
31,688 |
|||||||||||||||||
|
|
|
__________ |
__________ |
|||||||||||||||||
|
|
|
36,722 |
31,688 |
|||||||||||||||||
|
|
|
__________ |
__________ |
|||||||||||||||||
|
|
|
|
|
|||||||||||||||||
|
|
All the other financial assets and liabilities do not have a maturity date. The full contractual liability for the CULS assuming no further conversion is £38,869,000 (2013 - £40,279,000). |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Interest rate sensitivity |
|||||||||||||||||||
|
|
Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Foreign currency risk |
|||||||||||||||||||
|
|
All of the Company's investment portfolio is invested in overseas securities and the Balance Sheet, therefore, can be significantly affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Foreign currency risk exposure by currency of denomination: |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
|
31 July 2014 |
31 July 2013 |
|||||||||||||||||
|
|
|
|
Net |
|
|
Net |
|
|||||||||||||
|
|
|
Overseas |
assets/ |
currency |
Overseas |
assets/ |
currency |
|||||||||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||||||||
|
|
Australian Dollar |
12,419 |
- |
12,419 |
12,820 |
- |
12,820 |
|||||||||||||
|
|
Danish Krona |
3,977 |
- |
3,977 |
- |
- |
- |
|||||||||||||
|
|
Hong Kong Dollar |
54,210 |
- |
54,210 |
60,698 |
- |
60,698 |
|||||||||||||
|
|
Indian Rupee |
54,910 |
184 |
55,094 |
41,687 |
186 |
41,873 |
|||||||||||||
|
|
Indonesian Rupiah |
28,106 |
- |
28,106 |
30,721 |
- |
30,721 |
|||||||||||||
|
|
Korean Won |
2,896 |
- |
2,896 |
2,942 |
- |
2,942 |
|||||||||||||
|
|
Malaysian Ringgit |
84,494 |
- |
84,494 |
89,575 |
117 |
89,692 |
|||||||||||||
|
|
New Zealand Dollar |
5,404 |
- |
5,404 |
7,169 |
- |
7,169 |
|||||||||||||
|
|
Pakistan Rupee |
864 |
- |
864 |
634 |
- |
634 |
|||||||||||||
|
|
Philippine Peso |
21,169 |
- |
21,169 |
25,107 |
- |
25,107 |
|||||||||||||
|
|
Singapore Dollar |
48,605 |
- |
48,605 |
47,305 |
- |
47,305 |
|||||||||||||
|
|
Sri Lankan Rupee |
18,337 |
- |
18,337 |
17,268 |
- |
17,268 |
|||||||||||||
|
|
Thailand Baht |
51,941 |
3 |
51,944 |
52,987 |
183 |
53,170 |
|||||||||||||
|
|
|
_________ |
_________ |
________ |
________ |
________ |
________ |
|||||||||||||
|
|
|
387,332 |
187 |
387,519 |
388,913 |
486 |
389,399 |
|||||||||||||
|
|
Sterling |
13,428 |
(31,224) |
(17,796) |
9,448 |
(14,930) |
(5,482) |
|||||||||||||
|
|
|
_________ |
_________ |
________ |
________ |
________ |
________ |
|||||||||||||
|
|
Total |
400,760 |
(31,037) |
369,723 |
398,361 |
(14,444) |
383,917 |
|||||||||||||
|
|
|
_________ |
_________ |
________ |
________ |
________ |
________ |
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
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 security price risk sensitivity analysis so as to show the overall level of exposure. Due consideration is paid to foreign currency risk throughout the investment process. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
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. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Investment in Far East equities or those of companies that derive significant revenue or profit from the Far East involves a greater degree of risk than that usually associated with investment in the securities in major securities markets. The securities that the Company owns may be considered speculative because of this higher degree of 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 in the Annual Report, 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 Balance Sheet date had been 10% (2013 - 10%) higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 July 2014 would have increased/(decreased) by £40,076,000 (2013 - increased/(decreased) by £39,836,000)) 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. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Gearing comprises both bank loans and convertible unsecured loan stock. The Board has imposed a maximum gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of 25%. Details of borrowings at the 31 July 2014 are shown in notes 11 and 12. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of a loan facility, details of which can be found in note 11. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis. Details of the Board's policy on gearing are shown in the investment policy section in the Strategic Report. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Liquidity risk exposure |
|||||||||||||||||||
|
|
At 31 July 2014 the Company had borrowings in the form of the £33,077,121 (2013 - £33,288,414) nominal of 3.5% Convertible Unsecured Loan Stock 2019. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
At 31 July 2014 the Company's bank loan, amounting to £5,000,000 (2013 - £nil), was due for repayment or roll-over within 1 month. The maximum exposure during the year was £5,000,000 (2013 - £nil) and the minimum exposure during the year was £nil (2013 - £nil). |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
The maturity profile of the Company's existing borrowings is set out in the credit risk profile section of this note. |
|||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
Due |
|
|||||||||||||||
|
|
|
|
Due |
between |
|
|||||||||||||||
|
|
|
Expected |
within |
3 months |
Due after |
|||||||||||||||
|
|
|
cashflows |
3 months |
and 1 year |
1 year |
|||||||||||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|||||||||||||||
|
|
3.5% Convertible Unsecured Loan Stock 2019 |
38,866 |
- |
1,158 |
37,708 |
|||||||||||||||
|
|
Bank loans |
5,000 |
5,000 |
- |
- |
|||||||||||||||
|
|
|
_________ |
_________ |
________ |
________ |
|||||||||||||||
|
|
|
43,866 |
5,000 |
1,158 |
37,708 |
|||||||||||||||
|
|
|
_________ |
_________ |
________ |
________ |
|||||||||||||||
|
|
|
|||||||||||||||||||
|
|
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. The risk is not considered to be significant and is managed as follows: |
|||||||||||||||||||
|
|
- |
investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Investment Manager, and limits are set on the amount that may be due from any one broker. Settlement of investment transactions are also done on a delivery versus payment basis; |
||||||||||||||||||
|
|
- |
the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the third party administrator carries out a stock reconciliation to Custodian records on a monthly basis to ensure discrepancies are picked up on a timely basis. The Manager's compliance department carries out periodic reviews of the Custodian's operations and reports its finding to the Manager's risk management committee. This review will also include checks on the maintenance and security of investments held; and |
||||||||||||||||||
|
|
- |
cash is held only with reputable banks with high quality external credit enhancements. |
||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
None of the Company's financial assets is secured by collateral or other credit enhancements. |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Credit risk exposure |
|||||||||||||||||||
|
|
In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 July was as follows: |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
|
2014 |
2013 |
|||||||||||||||||
|
|
|
Balance |
Maximum |
Balance |
Maximum |
|||||||||||||||
|
|
|
Sheet |
exposure |
Sheet |
exposure |
|||||||||||||||
|
|
Current assets |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||||||||||
|
|
Debtors |
212 |
212 |
465 |
465 |
|||||||||||||||
|
|
Cash and short term deposits |
5,685 |
5,685 |
17,244 |
17,244 |
|||||||||||||||
|
|
|
________ |
_________ |
________ |
________ |
|||||||||||||||
|
|
|
5,897 |
5,897 |
17,709 |
17,709 |
|||||||||||||||
|
|
|
________ |
_________ |
________ |
________ |
|||||||||||||||
|
|
|
|||||||||||||||||||
|
|
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 July 2014 was as follows: |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
|
In |
Between |
In |
||||||||||||||||
|
|
|
less than |
1 and |
more than |
||||||||||||||||
|
|
|
1 year |
3 years |
3 years |
||||||||||||||||
|
|
|
£'000 |
£'000 |
£'000 |
||||||||||||||||
|
|
3.5% Convertible Unsecured Loan Stock 2019 |
- |
- |
33,077 |
||||||||||||||||
|
|
Bank loans |
5,000 |
- |
- |
||||||||||||||||
|
|
|
________ |
_________ |
________ |
||||||||||||||||
|
|
|
5,000 |
- |
33,077 |
||||||||||||||||
|
|
|
________ |
_________ |
________ |
||||||||||||||||
|
|
|
|
|
|
||||||||||||||||
|
|
All the other financial assets and liabilities do not have a maturity date. The full contractual liability for the CULS assuming no further conversion is £38,866,000 (2013 - £40,279,000). |
|||||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
Fair values of financial assets and financial liabilities |
|||||||||||||||||||
|
|
Investments held at fair value through profit or loss are valued at their quoted bid prices which equate to their fair values. The Directors are of the opinion that the other financial assets and liabilities, including CULS which are held at amortised cost, are stated at fair value in the Balance Sheet and considered that this is equal to the carrying amount. |
|||||||||||||||||||
|
20. |
Fair value hierarchy |
|||||
|
|
FRS 29 'Financial Instruments: Disclosures' 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 has the following levels: |
|||||
|
|
|
|||||
|
|
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
|||||
|
|
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and |
|||||
|
|
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
|||||
|
|
|
|||||
|
|
The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at 31 July 2014 as follows: |
|||||
|
|
|
|||||
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
As at 31 July 2014 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Financial assets and liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
Quoted equities |
a) |
400,760 |
- |
- |
400,760 |
|
|
CULS |
b) |
(38,204) |
- |
- |
(38,204) |
|
|
|
|
_______ |
________ |
_______ |
_______ |
|
|
Net fair value |
|
362,556 |
- |
- |
362,556 |
|
|
|
|
_______ |
________ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
As at 31 July 2013 |
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Financial assets and liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
Quoted equities |
a) |
398,361 |
- |
- |
398,361 |
|
|
CULS |
b) |
(40,445) |
- |
- |
(40,445) |
|
|
|
|
_______ |
________ |
_______ |
_______ |
|
|
Net fair value |
|
357,916 |
- |
- |
357,916 |
|
|
|
|
_______ |
________ |
_______ |
_______ |
|
|
|
|
|
|
|
|
|
|
a) Quoted equities |
|||||
|
|
The fair value of the Company's investments in quoted equities have been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges. |
|||||
|
|
|
|||||
|
|
b) Convertible Unsecured Loan Stock ("CULS") |
|||||
|
|
The Company's CULS are actively traded on a recognised stock exchange. The fair value of the CULS have therefore been deemed Level 1. The carrying value of the CULS is disclosed in note 12. |
|||||
|
21. |
Alternative Investment Fund Managers (AIFM) Directive |
||
|
|
In accordance with the AIFM Directive, information in relation to the Company's leverage and the remuneration of the Company's AIFM, Aberdeen Fund Managers Limited, is required to be made available to investors. In accordance with the Directive, the AIFM remuneration policy is available from the Company's Secretaries, Aberdeen Asset Management PLC on request (see contact details in Annual Report) and the numerical remuneration disclosures in respect of the AIFM's first relevant reporting period (year ended 30 September 2015) will be made available in due course. |
||
|
|
|
||
|
|
The Company's maximum and actual leverage levels at 31 July 2014 are shown below: |
||
|
|
|
|
|
|
|
Leverage exposure |
Gross method |
Commitment method |
|
|
Maximum limit |
2.50:1 |
2.00:1 |
|
|
Actual |
1.15:1 |
1.17:1 |
The Annual General Meeting will be held at 11.30 a.m. on 2 December 2014 at Bow Bells House, 1 Bread Street, London EC4M 9HH.
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.
The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 31 July 2014 are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2013 and 2014 statutory accounts received unqualified reports from the Company's auditors and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498(2) or 498(3) of the Companies Act 2006. The financial information for 2013 is derived from the statutory accounts for 2013 which have been delivered to the Registrar of Companies. The 2014 accounts will be filed with the Registrar of Companies in due course.
The audited Annual Report and financial statements will be posted to shareholders at the end of October. Copies may be obtained during normal business hours from the Company's Registered Office, Bow Bells House, 1 Bread Street, London EC4M 9HH or from the Company's website, www.asian-smaller.co.uk*
* Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
By Order of the Board
Aberdeen Asset Management PLC
Secretary
22 October 2014
This information is provided by RNS
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