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RNS

Annual Financial Report

Released 07:00 20-Jun-2017

RNS Number : 5229I
Aberdeen New Dawn Invest Trust PLC
20 June 2017
 

ABERDEEN NEW DAWN INVESTMENT TRUST PLC

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 APRIL 2017

 

Legal Entity Identifier (LEI): 5493002K00AHWEME3J36

Information disclosed in accordance with Section 4.1.3 of the FCA's Disclosure Guidance and Transparency Rules ("DTR")

 

 

Investment Objective

To provide shareholders with a high level of capital growth through equity investment in the Asia Pacific countries ex Japan.

 

Investment Policy

The Company's assets are invested in a diversified portfolio of securities in quoted companies spread across a range of industries and economies in the Asia Pacific region excluding Japan. Investments may also be made through collective investment schemes and in companies traded on stock markets outside the Asia Pacific region.

 

Gearing

The Board is responsible for determining the gearing strategy for the Company. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. At the year end the Company had net gearing of 9.7% which compares with a current maximum limit set by the Board of 25%. Borrowings are short to medium term and particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy.

 

Investment in Other Listed Investment Companies

In addition, it is the investment policy of the Company to invest no more than 15% of its gross assets in other listed investment companies (including investment trusts). As at 30 April 2017, 2.7% of the Company's gross assets were invested in listed investment companies.

 

Benchmark

Currency-adjusted MSCI All Countries Asia Pacific ex Japan Index.

 

Management

The investment management of the Company has been delegated by Aberdeen Fund Managers Limited ("AFML", the "AIFM" or the "Manager") to Aberdeen Asset Management Asia Limited ("AAM Asia" or the "Investment Manager"). Both companies are wholly owned subsidiaries of Aberdeen Asset Management PLC.

 

Website

Up to date information can be found on the Company's website: www.newdawn-trust.co.uk 

 

COMPANY OVERVIEW - FINANCIAL HIGHLIGHTS

 

Share price total returnA



Net asset value total return A


2017

+38.8%


2017

 +39.0%

2016

-15.1%


2016

-15.4%






Index total returnA



Ongoing charges


2017

+36.4%


2017

 0.9%

2016

-12.2%


2016

1.1%




Revenue return per share



Dividend per Ordinary share


2017

 4.05p


2017

 4.00p

2016

4.06p


2016

3.90p

A Total return represents capital return plus dividends reinvested

 

For further information, please contact:

 

Andrew Leigh

Aberdeen Asset Managers Limited            0207 463 6312

 

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested.



COMPANY OVERVIEW - CHAIRMAN'S STATEMENT

 

Results and Dividend

I am pleased to report a strong performance for your Company for the year ended 30 April 2017. The net asset value ("NAV") total return for the year was 39.0%, ahead of the total return of 36.4% from the MSCI All Countries Asia Pacific ex Japan Index. The share price total return was 38.8%, with the share price of 212.0p at the end of the year representing a discount of 12.3% to the NAV per share (excluding current year income).

 

The Board is also pleased to announce a final dividend of 3.0p per share (2016: 2.9p), making a total dividend for the year of 4.0p per share (2016: 3.9p), an increase of 2.6% on last year. If approved by shareholders at the Annual General Meeting, the final dividend will be paid on 1 September 2017 to shareholders on the register on 4 August 2017.

 

Overview

Asian equities rose sharply during the year in Sterling terms, despite intermittent volatility with heightened political uncertainty playing a pivotal role in investor sentiment. This included the UK's vote to leave the European Union which was followed by a sharp fall in Sterling, thereby boosting the value of foreign-currency denominated assets such as those held by the Company. Risk appetites were tested again in the lead-up to, and aftermath of, Donald Trump's victory in the US presidential election. However, once the initial shock receded, Asian markets found considerable support as hopes that the Trump Presidency would usher in a series of reflationary and growth-focused policies outweighed fears around his protectionist stance.

 

In this environment, the Company's portfolio performed well compared to the benchmark, most notably in Hong Kong, Singapore and Korea. Within these markets, the Company has a particular focus on businesses with wide regional exposure, including Jardine Strategic and ASM Pacific Technology, rather than those that are dependent on their domestic economies. The Company was duly rewarded for this strategy.

 

Meanwhile, a series of political successes for Prime Minister Narendra Modi drove the overall positive momentum in Indian equities, which account for a large portion of the Company's underlying portfolio. The well-intentioned but poorly executed demonetisation induced a knee-jerk reaction, affecting consumption almost immediately, while also sparking a stockmarket correction. However, this was mitigated by the passage of the much-anticipated GST bill, which should help simplify the costs of doing business, as well as aid export competitiveness over the longer term. Investors also celebrated the ruling party's election win in Uttar Pradesh, the country's largest state, on hopes that an emboldened Modi would press ahead with his reform agenda.

 

China was one of the region's best-performers as signs of a stabilising economy and government stimulus attracted a steady flow of capital, some of which also found its way to neighbouring markets with trade links to the mainland. The Company's relatively light direct exposure to China weighed on performance. The Manager has, in the past, been wary of investing too heavily here, due to concerns around corporate governance and often opaque company ownership structures. However, given gradual improvements in these areas, the Manager has been steadily increasing exposure to the mainland through the Aberdeen Global - China A Share Fund, which offers good access to China's domestic market with less stock-specific risk.

 

At the sector level, commodity-related stocks were particularly buoyant given the rebound in oil prices following Opec's deal to cut output and hopes of increased US infrastructure spending which helped the share price performance of a number of holdings in the portfolio. The Company also benefited from the performance of a number of its technology companies. 

 

The Investment Manager's Review gives a more detailed insight into performance during the period.

 

Gearing

With the Company's borrowings mostly denominated in US and Hong Kong Dollars, the depreciation of Sterling resulted in the value of its loans rising from £27.0 million to £29.5 million during the year. However, the portfolio's appreciation meant that gearing (net of cash) fell to 9.7%, compared to 11.4% at the start of the year.

 

Details of the Company's loans are provided in note 12 to the financial statements.

 

Share Buybacks and Treasury Shares 

In line with many other investment trusts, the Company has bought back shares, with the aim of providing a degree of liquidity to the market at times when the discount to the NAV has widened in normal market conditions. It is the view of the Board that this policy is in the interests of shareholders and we review its operation at each Board meeting. The Board will seek to renew the Company's share buyback authority at the Annual General Meeting.

 

During the year, the Company bought back 3.7 million shares, representing 3.0% of the issued share capital. These shares are held in treasury and, in line with the Company's stated policy on treasury shares, can only be re-issued to the market at a premium to the NAV per share at that time. Shares held in treasury do not qualify to receive dividends. At the end of the year, the Company held 10.1 million shares in treasury, representing 8.6% of the issued share capital (excluding treasury shares).

 

Since the year end, the Company has bought back a further 565,000 shares to hold in treasury and, as at the date of this Report, there are 10.6 million shares in treasury representing 9.1% of the issued share capital.

 

In the event of the share price trading at a premium to the NAV per share, Ordinary shares can be re-issued out of treasury more efficiently than new Ordinary shares can be issued. The Board therefore believes that it is appropriate for shares bought back to be held in treasury. Although shares may be held in treasury indefinitely the Board is mindful of the total number of shares held in this way. We have, therefore, decided to adopt a new policy such that, in the event that the number of treasury shares represents more than 10% of the Company's issued share capital (excluding treasury shares) at the end of any financial year, the Company will cancel a proportion of its treasury shares such that the remaining balance will equal 7.5% of the issued share capital. The Board believes that, given the Company's annual 10% share issuance authority, this is a prudent way of managing the Company's capital base. This policy will apply with immediate effect and does not require shareholder approval. 

 

Aberdeen Asset Management

The Board notes the announcements regarding the proposed recommended merger between the parent company of the Company's Manager, Aberdeen Asset Management PLC, and Standard Life PLC. The transaction is subject to regulatory approvals, with an expected completion date in August this year.  While Aberdeen has put in place teams to handle the integration, the Board will monitor developments closely to ensure that the existing management team remains focused upon the interests of the Company and its shareholders.

 

Annual General Meeting

The Annual General Meeting will be held on Wednesday 30 August 2017 at 12 noon at the offices of Aberdeen Asset Management PLC, Bow Bells House, 1 Bread Street, London EC4M 9HH.

 

Outlook

In the near term, there are grounds for cautious optimism about the Asia Pacific region. Although the so-called 'Trump trade' that has supported global equities for the past few months now seems to be on shakier ground as doubts have grown about the US President's ability to push through promised reforms, Asian markets have taken the bouts of volatility in their stride. Improving corporate earnings, healthier exports and favourable policy-making have been equally instrumental in lifting investor sentiment. The possibility that economic momentum is gaining pace in China has proven a source of comfort, given its fortunes are so crucial to the wider region.

 

The long term investment case for Asia Pacific remains attractive, underpinned by good demographics, rising wealth and political reform. The Manager continues to have confidence in the Company's underlying holdings, which have been carefully selected for their skilled management, strong balance sheets and good growth prospects through the cycle.

 

David Shearer

Chairman

19 June 2017

 

 



STRATEGIC REPORT - OVERVIEW OF STRATEGY

 

Business Model

The business of the Company is that of an investment company which seeks to qualify as an investment trust for  tax purposes.  The Directors do not envisage any change in this activity in the foreseeable future.

 

Investment Objective

The Company's investment objective is to provide shareholders with a high level of capital growth through equity investment in the Asia Pacific countries ex Japan.

 

Investment Policy

The Company's assets are invested in a diversified portfolio of securities in quoted companies spread across a range of industries and economies in the Asia Pacific region excluding Japan. Investments may also be made through collective investment schemes and in companies traded on stock markets outside the Asia Pacific region provided that over 75% of their consolidated revenue is earned from trading in the Asia Pacific region or they hold more than 75% of their consolidated net assets in the Asia Pacific region.

 

Gearing

The Board is responsible for determining the gearing strategy for the Company. Gearing is used selectively to leverage the Company's portfolio in order to enhance returns where and to the extent this is considered appropriate to do so. At the year end the Company had net gearing of 9.7% which compares with a current maximum limit set by the Board of 25%. Borrowings are short to medium term and particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy.

 

Investment in Other Listed Investment Companies

In addition, it is the investment policy of the Company to invest no more than 15% of its gross assets in other listed investment companies (including investment trusts). As at 30 April 2017, 2.7% of the Company's gross assets were invested in listed investment companies.

 

Delivering the Investment Policy

The Directors are responsible for determining the Company's investment objective and investment policy. Day-to-day management of the Company's assets has been delegated, via the AIFM, to the Investment Manager.

 

Investment Process

The Investment Manager invests in a diversified range of companies throughout the Asia Pacific region in accordance with the investment policy. The Investment Manager follows a bottom-up investment process based on a disciplined evaluation of companies through direct visits by its fund managers. Stock selection is the major source of added value. No stock is bought without the fund managers having first met management. The Investment Manager estimates a company's worth in two stages: quality then price. Quality is defined by reference to management, business focus, the balance sheet and corporate governance. Price is calculated by reference to key financial ratios, the market, the peer group and business prospects. Top-down investment factors are secondary in the Investment Manager's portfolio construction, with diversification rather than formal controls guiding stock and sector weights. Little attention is paid to market capitalisation.

 

Benchmark

The Company compares its performance to the currency-adjusted MSCI All Countries Asia Pacific ex Japan Index. 

 

Key Performance Indicators ("KPIs")

The Board uses a number of financial performance measures to assess the Company's success in achieving its objective and determining the progress of the Company in pursuing its investment policy.  The main KPIs, which are considered at each Board meeting, are shown in the following table

 

Performance of net asset value ("NAV")

The Board considers the Company's NAV total return figures to be the best indicator of performance over time and this is therefore the main indicator of performance used.

Performance against benchmark index

The Board measures performance against the benchmark index - the currency-adjusted MSCI All Countries Asia Pacific ex Japan Index.

Revenue return per Ordinary share

The Board monitors the Company's net revenue return.

Dividends per share

The Board monitors the Company's annual dividends per Ordinary share.

Share price performance

The Board monitors the performance of the Company's share price on a total return basis.

Discount/premium to NAV

The discount/premium of the share price relative to the NAV per share is closely monitored by the Board.

Ongoing charges

The Board monitors the Company's operating costs carefully.

 

Principal Risks and Uncertainties

The Company's principal risks and uncertainties form part of this Overview of Strategy and are included in the separate statement below.

 

Promoting the Company

The Board recognises the importance of promoting the Company to prospective investors both for improving liquidity and enhancing the value and rating of the Company's shares. The Board believes an effective way to achieve this is through subscription to and participation in the promotional programme run by the Aberdeen Group on behalf of a number of investment trusts under its management. The Company's financial contribution to the programme is matched by the Aberdeen Group.  The Aberdeen Group Head of Brand reports to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the make up of that register.

 

The purpose of the programme is both to communicate effectively with existing shareholders and to gain new shareholders with the aim of improving liquidity and enhancing the value and rating of the Company's shares. Communicating the long-term attractions of the Company is key and therefore the Company also supports the Aberdeen Group's investor relations programme which involves regional roadshows, promotional and public relations campaigns. 

 

Board Diversity

The Board recognises the importance of having a range of skilled, experienced individuals with relevant knowledge in order to allow it to fulfill its obligations. The Board also recognises the benefits and is supportive of the principle of diversity in its recruitment of new Board members. However, in making new appointments, the Board's overriding priority is to appoint the most appropriate candidates, regardless of gender or other forms of diversity. The Board has not therefore set any measurable objectives in relation to its diversity.  At 30 April 2017, there were three male Directors and two female Directors.

 

Environmental, Social and Human Rights Issues

The Company has no employees as the Board has delegated the day-to-day management and administrative functions to the Manager. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is set out below.

 

Socially Responsible Investment Policy

The Directors, through the Manager, encourage companies in which investments are made to adhere to best practice in the area of corporate governance and socially responsible investing. They believe that this can best be achieved by entering into a dialogue with company management to encourage them, where necessary, to improve their policies in both areas.

 

The Manager's ultimate objective, however, is to deliver superior investment returns for its clients. Accordingly, whilst the Manager will seek to favour companies which pursue best practice in these areas, this must not be to the detriment of the return on the investment portfolio.

 

UK Stewardship Code and Proxy Voting as an Institutional Shareholder

Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager.

 

The full text of the Company's response to the Stewardship Code may be found on its website.

 

Modern Slavery Act

Due to the nature of the Company's business, being a company that does not offer goods and services to customers, the Board considers that it is not within the scope of the Modern Slavery Act 2015 because it has no turnover. The Company is therefore not required to make a slavery and human trafficking statement. In any event, the Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

 

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

 

Duration

The Company does not have a fixed life. However, under its Articles of Association, if, in the 90 days preceding the Company's financial year end (30 April), the Ordinary shares have been trading, on average, at a discount in excess of 15% to the underlying NAV (excluding current year income, and with borrowings stated at market value) over the same period, notice will be given of an ordinary resolution to be proposed at the following Annual General Meeting to approve the continuation of the Company.  If the resolution for the continuation of the Company is not passed at that Annual General Meeting or any adjournment thereof, the Directors will convene a general meeting to be held not more than three months after the Annual General Meeting at which a special resolution for the winding-up of the Company will be proposed.  In the 90 days to 30 April 2017 the average discount to underlying NAV (excluding current year income, and with borrowings stated at market value) of the Ordinary shares was 13.0% and therefore no continuation resolution will be put to the Company's shareholders at this year's Annual General Meeting.

 

Viability Statement

The Board considers the Company, with no fixed life, to be a long term investment vehicle and it intends to maintain the current mandate. For the purposes of this viability statement, the Board has decided that three years is an appropriate period over which to report. The Board considers that this period reflects a balance between looking out over a long term horizon and the inherent uncertainties of looking out further than three years.

 

In assessing the viability of the Company over the review period, the Directors have focused upon the following factors:

 

·   The principal risks and uncertainties detailed below, in particular those relating to investment in Asia Pacific countries, and the steps taken to mitigate these risks.

·   The role of the Audit and Risk Committee in reviewing and monitoring the Company's internal control and risk management systems.

·   The ongoing relevance of the Company's investment objective.

·   The liquidity of the Company's portfolio. All of the Company's investments are in quoted equities actively traded on recognised stock exchanges.

·   The closed-ended nature of the Company which means that it is not subject to redemptions.

·   The use of the Company's share buy back and share issuance policies to help address any imbalance of supply and demand for the Company's shares.

·   The current and maximum levels of gearing, compliance with loan covenants and level of headroom within the financial covenants (see note 12 to the financial statements for details of loan covenants).

·   The ability of the Company to repay or refinance its £35 million loan facility on, or before, its maturity in October 2019.

·   The potential requirement of the Board to propose a resolution to approve the continuation of the Company at future Annual General Meetings. As explained above, this is dependent upon the level of discount in the 90 days preceding the Company's financial year end and there is no requirement for such a resolution to be proposed at the forthcoming Annual General Meeting.  

 

In making its assessment, the Board has considered that there are other matters that could have an impact on the Company's prospects or viability in the future, including a large economic shock, significant stock market volatility, and changes in regulation or investor sentiment.

 

Taking into account the Company's current position and the potential impact of its principal risks and uncertainties, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of this Report.

 

Future

The majority of the region's economies have high rates of growth relative to developed markets, strong trade and fiscal surpluses and rapidly developing capital markets. Nevertheless, the past has demonstrated that there can be specific risks associated with the region. Many of the non-performance related trends likely to affect the Company in the future are common across all closed-ended investment companies, such as the attractiveness of investment companies as investment vehicles, the impact of regulatory changes (including MiFID II and the Packaged Retail Investment and Insurance Products regulations) and the recent changes to the pensions and savings market in the UK. These factors need to be viewed alongside the outlook for the Company, both generally and specifically, in relation to the portfolio. The Board's view on the general outlook for the Company can be found in the Chairman's Statement whilst the Investment Manager's views on the outlook for the portfolio are included in its statement below.  

 

On behalf of the Board

David Shearer

Chairman

19 June 2017

 

 



STRATEGIC REPORT - RESULTS

 

Financial Highlights (capital return)

 


30 April 2017

30 April 2016

% change

Total assets

£315,715,000

£243,229,000

+29.8

Total equity shareholders' funds (net assets)

£286,191,000

£216,243,000

+32.3

Market capitalisation

£247,748,000

£188,010,000






Net asset value per share (including current year income)

244.90p

179.43p

+36.5

Net asset value per share (excluding current year income)

241.79p

176.30p

+37.1

Share price (mid market)

212.00p

156.00p

+35.9

Discount to net asset value (including current year income)

13.4%

13.1%


Discount to net asset value (excluding current year income)

12.3%

11.5%










MSCI AC Asia Pacific ex Japan Index (currency adjusted, capital gains basis)

703.67

531.87

+32.3





Net gearing A

9.72%

11.38%






Dividend and earnings




Revenue return per share B         

4.05p

4.06p

-0.2

Dividends per share C    

4.00p

3.90p

+2.6

Dividend cover

1.01

1.04


Revenue reserves D       

£12,582,000

£12,417,000






Operating costs




Ongoing charges ratio E

0.91%

1.08%


 

A    Calculated in accordance with AIC guidance "Gearing Disclosures post RDR".

B    Measures the total earnings for the year divided by the weighted average number of Ordinary shares in issue (see Statement of Comprehensive Income).

C    The figures for dividends reflect the years in which they were earned (see note 8) and assume approval of the final dividend.

D    Prior to payment of proposed final dividend.

E    Ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of the management fee and administrative expenses divided by the average cum income net asset value throughout the year.

 

 



STRATEGIC REPORT - PERFORMANCE

 

 

Performance (total return)

 


1 year return

3 year return

5 year return


%

%

%

Net asset value

+39.0

+37.6

+48.8

Share price

+38.8

+34.7

+46.1

MSCI AC Asia Pacific ex Japan Index (currency adjusted)

+36.4

+47.0

+62.1

 

Dividends

 


Rate

xd date

Record date

Payment date

Interim 2017

1.00p

5 January 2017

6 January 2017

27 January 2017

Proposed final 2017

3.00p

3 August 2017

4 August 2017

1 September 2017


_______




Total 2017

4.00p





_______




Interim 2016

1.00p

7 January 2016

8 January 2016

29 January 2016

Final 2016

2.90p

4 August 2016

5 August 2016

2 September 2016


_______




Total 2016

3.90p





_______




 

 

Ten Year Financial Record

 

Year to 30 April

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Total revenue (£'000)

4,301

4,734

4,372

5,752

6,799

6,562

6,819

7,412

7,004

6,922

Per share (p) A











Net revenue return

1.63

2.10

2.37

3.17

3.97

3.89

3.79

4.18

4.06

4.05

Total return

20.30

(30.64)

66.34

26.44

(2.72)

33.49

(18.68)

31.74

(34.72)

68.66

Net dividends paid/proposed

1.20

1.60

2.00

2.50

3.30

3.40

3.60

3.80

3.90

4.00

Net asset value

129.26

97.42

162.16

186.60

181.38

210.57

188.49

216.67

179.43

244.90


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

Shareholders' funds (£'000)

160,993

121,339

201,969

232,406

225,908

262,263

234,762

269,398

216,243

286,191


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____












A Figures for 2008-2013 have been restated to reflect the 5:1 sub-division on 3 September 2013.

 

 



STRATEGIC REPORT - INVESTMENT MANAGER'S REVIEW

 

Market Review

Equities in the Asia Pacific region achieved significant gains in the year under review, supported by renewed interest from global investors. In particular, those UK investors with overseas assets benefited from the fall in Sterling to 30 year lows following the result of the UK's referendum on European Union membership.

 

Meanwhile, the strengthening global economy and a recovery in commodity prices, especially that of oil, bolstered investors' appetite for risk. Despite a hesitant start, Asia-Pacific equities were buoyed by the liquidity-driven run-up as investors from developed markets turned their attention to the region. In the latter part of the year, stockmarkets continued to do well on hopes that Donald Trump's unexpected election as US President would herald expansionary government spending on defence and infrastructure, along with corporate tax cuts.

 

Portfolio Review

The Company's net asset value total return for the year was 39.0%, which compared to 36.4% for the MSCI All Countries Asia Pacific ex Japan Index. This performance was particularly encouraging as it appears to reflect the markets' return to focusing on corporate fundamentals, which has played well to the bottom-up, stock-picking approach that we favour.

 

The portfolio's holdings in Hong Kong and Korea were notable contributors to performance. In Hong Kong, Jardine Strategic's share price was supported by expectations that the outlook for its subsidiaries will continue to improve. In particular, its Indonesian unit, Astra International, should benefit from the recovery in its mining services, plantations and financial services businesses. At the same time, its retail arm, Dairy Farm, has achieved higher profit margins by shutting down non-performing stores, while also expanding its more lucrative fresh food segment. In addition, Jardine Strategic's inclusion into the MSCI AC World Index helped its share price. The portfolio also benefited from the performance of HSBC Holdings, which is experiencing an improvement in net interest margins as well as its management's commitment to returning capital to shareholders via a series of share buybacks. ASM Pacific Technology also performed well. We continue to like the company for its market leadership, robust balance sheet and commitment to investing through the business cycle that has helped it maintain its market-leading position.

 

In Korea, the holding in Samsung Electronics was aided by its share buyback and cancellation programme. We have engaged with management over the need to return excess cash to shareholders, and were pleased when it announced a substantial share buyback programme and agreed to return a portion of its free cashflow to shareholders on an ongoing basis. Samsung also cancelled shares held in treasury, removing the risk of potential dilution.

 

On the downside, the portfolio's underweight exposure to China and Taiwan was detrimental to performance. The lack of direct exposure to Chinese internet companies, Tencent and Alibaba, in addition to the tech-heavy Taiwanese stockmarket, impacted performance. Chinese equities, along with those in the technology sector, rebounded on the back of improved market stability. However, in the first half of the year, we initiated a position in the Aberdeen Global - China A Share Fund which rose over the course of the year. The A Share Fund provides the portfolio with an exposure to China, while offering some measure of diversification. The introduction of this position reflects our increased comfort with holding mainland companies, having seen improvements in both their quality of earnings and corporate governance standards. This also allowed us to initiate a direct holding in newly-listed Yum China in the second half of the year. A spin off from Yum Brands, it offers direct exposure to the Chinese consumer. It is one of the largest restaurant operators on the mainland, running the KFC, Pizza Hut, East Dawning and Little Sheep chains. Its 7,200 outlets generate US$6.9 billion in revenue. It is backed by a strong balance sheet and high cashflow.

 

In addition to the portfolio changes referred to in the Half-Yearly Report, we recently initiated a holding in Singapore-based hospital operator Raffles Medical Group. Its long-term growth prospects appear attractive, with healthcare spending in Asia expected to grow for the foreseeable future. Raffles Medical has established itself as an efficient healthcare provider in the domestic market, where it has a solid operational history and a well-recognised brand. The group is not only expanding capacity at home but also venturing abroad, with a focus on China where it has invested in two hospital projects - in Shanghai and Chongqing. Together, these will add 1,100 beds to the group's overall capacity and should contribute to profits from 2018.

 

Corporate Governance and Engagement

As active managers, we seek to share with the management of investee companies the insight and experiences that we have accrued through decades of engaging with companies throughout the region. We believe that, ultimately, this has allowed us to become better stewards of capital. Key examples of our efforts in the second half of the year include discussions with DBS Bank on topics such as board governance and time commitment; meeting with Keppel's new in-house asset management subsidiary, Keppel Capital, to exchange views on strategy; communicating with Naver about capital allocation and corporate structure; and discussions with AmorePacific on how to improve quality following product recalls.

 

Corporate governance is one of Aberdeen's cornerstones. In trying to align the interest of the underlying holdings with that of your Company, it also allows us to unlock the value of these companies, which have conservatively managed balance sheets. We believe it is the right approach to investing in Asia as markets across the region are unique, each jurisdiction with its own set of rules and standards, as well as risks. Regular and active engagement allows us to encourage companies to become even better at what they do. To achieve our goal, we try to use persuasion, not confrontation. The best companies will welcome us, and have a natural interest in value creation. This is something that we will continue to do to ensure that the companies maintain their solid fundamentals, and that their long-term growth potential remains undiminished over the long term.

 

Outlook

Prospects for the global economy appear generally upbeat, supported by economic growth in Europe and the US.  The outlook for the Asia Pacific region is also improving, especially the reform-fuelled growth in India. China appears relatively stable, although elevated debt levels are a cause for concern. From a stock market perspective, valuations in the region are undemanding and we remain satisfied that the portfolio's holdings are focused on stringent cost controls. They are also frontrunners in their respective fields and invest to maintain their lead, through product innovation, as well as research and development. In addition, they are led by experienced management and armed with considerable financial muscle. These efforts should stand them in good stead over the longer term.

 

Aberdeen Asset Management Asia Limited

19 June 2017

 

 



STRATEGIC REPORT - PRINCIPAL RISKS AND UNCERTAINTIES

 

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The risks and uncertainties faced by the Company are reviewed by the Audit and Risk Committee in the form of a risk matrix, and the principal risks and uncertainties facing the Company at the current time, together with a description of the mitigating actions the Board has taken, are set out in the table below. The Board has carried out a robust assessment of these risks, which include those that would threaten its business model, future performance, solvency or liquidity. The principal risks associated with an investment in the Company's shares are published monthly on the Company's factsheet and they can be found in the pre-investment disclosure document ("PIDD") published by the Manager, both of which are available on the Company's website.

 

Risk

Mitigating Action

Investment strategy and objectives - the setting of an unattractive strategic proposition to the market and the failure to adapt to changes in investor demand may lead to the Company becoming unattractive to investors, a decreased demand for its shares and a widening discount.

 

The Board keeps the level of discount at which the Company's shares trade, as well as the investment objective and policy under review and holds an annual strategy meeting where it reviews investor relations reports and updates from the Investment Manager and the Company's Broker.

 

The Directors are updated at each Board meeting on the composition of, and any movements in, the shareholder register. 

Investment management - investing outside of the investment restrictions and guidelines set by the Board could result in poor performance and an inability to meet the Company's objectives, as well as a widening discount.

 

The Board meets the Manager on a regular basis and keeps investment performance under close review. Representatives of the Investment Manager attend all Board meetings and a detailed formal appraisal of the Aberdeen Group is carried out annually by the Management Engagement Committee.

 

The Board sets, and monitors, the investment restrictions and guidelines, and receives regular reports which include performance reporting on the implementation of the investment policy, the investment process and application of the guidelines. The Board also monitors the Company's share price relative to the net asset value per share.

 

Investment limits

In addition to the limits set out in the investment policy, the Investment Manager is authorised by the Board to invest up to 15% of the Company's gross assets in any single stock, calculated at the time an investment is made.

 

Income/dividends - the level of the Company's dividends and future dividend growth will depend on the performance of the underlying portfolio. Any change in the tax treatment of dividends or interest received by the Company may reduce the level of net income available for the payment of dividends to shareholders.

 

The Directors review detailed income forecasts at each Board meeting. The Company has built up significant revenue reserves which can be drawn upon if required should there be a shortfall in revenue returns.

 

 

Financial - the financial risks associated with the portfolio could result in losses to the Company.

The financial risks associated with the Company include market risk, liquidity risk and credit risk, all of which are mitigated by the Investment Manager. Further details of the steps taken to mitigate the financial risks associated with the portfolio are set out in note 16 to the financial statements.

Gearing - a fall in the value of the Company's investment portfolio could be exacerbated by the impact of gearing. It could   also result in a breach of loan covenants.

 

The Board sets the gearing limits within which the Investment Manager can operate. Gearing levels and compliance with loan covenants are monitored on an ongoing basis by the Manager and at regular Board meetings. In the event of a possible impending covenant breach, appropriate action would be taken to reduce borrowing levels.

 

In addition, AFML, as alternative investment fund manager, has set overall leverage limits.

Regulatory - failure to comply with relevant laws and regulations (including the Companies Act, The Financial Services and Markets Act, The Alternative Investment Fund Managers Directive, accounting standards, Investment Trust regulations, the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules) could result in fines, loss of reputation and potentially loss of an advantageous tax regime.

 

The Board and Manager monitor changes in government policy and legislation which may have an impact on the Company, and the Audit and Risk Committee monitors compliance with regulations by reviewing internal control reports from the Manager. From time to time the Board employs external advisers to advise on specific matters.

Operational - the Company is dependent on third parties for the provision of all systems and services (in particular, those of the Aberdeen Group) and any control failures and gaps in their systems and services could result in fraudulent activities or a loss or damage to the Company.

Written agreements are in place with all third party service providers.

 

The Board receives reports from the Manager on its internal controls and risk management throughout the year and receives assurances from all its other significant service providers on at least an annual basis.

 

The Manager monitors closely the control environments and quality of services provided by third parties, including those of the Depositary and Custodian, through service level agreements, regular meetings and key performance indicators.

 

 

In addition to the risks stated above, the Board is conscious that investment in Asia Pacific securities, or in companies that derive significant revenue or profit from the Asia Pacific region, involves a greater degree of risk than that usually associated with investment in the securities in developed markets, which may have an adverse effect on economic returns or restrict investment opportunities. These risks include:

 

·   greater risk of social, political and economic instability; the small size of the markets for securities of emerging markets issuers and associated low volumes of trading give rise to price volatility and a lack of liquidity;

·   certain national policies which may restrict the investment opportunities available in respect of a fund, including restrictions on investing in issuers or industries deemed sensitive to national interests; changes in taxation laws and/or rates which may affect the value of the Company's investments;

·   the absence in some markets of developed legal structures governing private or foreign investment and private property leading to supervision and regulation; and changes in government which may have an adverse effect on economic reform. Companies in the Asia Pacific region are not, in all cases, subject to the equivalent accounting, auditing and financial standards of those in the United Kingdom; and

·   currency fluctuations which may affect the value of the Company's investments and the income derived therefrom.

 

 



PORTFOLIO - TEN LARGEST INVESTMENTS

As at 30 April 2017

 




Valuation

Total

Valuation




2017

Assets

2016

Company

Industry

Country

£'000

%

£'000

Aberdeen Global - Indian Equity FundB



39,165

12.4

24,674

A tax-efficient pooled India fund with a long-term investment approach managed by the same team managing the Company.

Collective Investment Scheme

India




Jardine Strategic Holdings



16,379

5.2

11,247

A Hong Kong conglomerate with regional interests in retail, property, hotels and auto distribution. It provides the Company with a diversified exposure to the Asian consumer, backed by good distribution networks, established franchises and a decent valuation.

Industrial Conglomerates

Hong Kong




Samsung Electronics Pref



16,151

5.1

12,415

A leading semiconductor company which is also a major player in mobile phones and TFT-LCDs. The Company owns the preferred shares, which trade at a discount to the ordinary shares.

Technology Hardware Storage & Peripherals

South Korea




Oversea-Chinese Banking Corporation



13,325

4.2

10,714

A Singapore lender that is evolving into a regional financial services firm, with a meaningful presence in Southeast Asia. Its acquisition of Wing Hang Bank, subject to regulatory approval, will also give it access to greater China and the offshore yuan market, augmented by its stake in Bank of Ningbo.

Banks

Singapore




Taiwan Semiconductor Manufacturing Company



11,660

3.7

8,689

The world's largest dedicated semiconductor foundry, it provides wafer manufacturing, wafer probing, assembly and testing, mask production and design services.

Semiconductors & Semiconductor Equipment

Taiwan




Aberdeen Global - China A Share Equity Fund B



11,354

3.6

-

The Fund offers a selection of Chinese companies that benefits from rising consumption and incomes of a growing middle class. However, investing in the A-share market remains challenging and we believe it is more prudent to do so via a pooled vehicle offering diversification with lower stock-specific risk and volatility.

Collective Investment Scheme

China




AIA Group



10,604

3.4

9,012

A leading pan-Asian life insurance company, it is poised to take advantage of Asia's growing affluence, backed by an effective agency force and solid fundamentals.

Insurance

Hong Kong




Ayala Land



9,447

3.0

8,233

A leading property developer in the Philippines with an attractive land bank, well-respected brand and expertise across residential, commercial and retail sectors.

Real Estate Management & Development

Philippines




City Developments



9,294

2.9

7,726

A leading Singapore-based property developer with seasoned management. We see value in the company, not just from its sizeable low-cost land bank but also from its holding in the global Millennium & Copthorne hotel chain.

Real Estate Management & Development

Singapore




CSL



9,173

2.9

5,179

The vertically-integrated biopharmaceutical company has a portfolio of plasma products that has both breadth and depth, and is backed by a steady balance sheet. There is potential to grow its recently acquired vaccine business, while prospects for its more mature Albumin business is likely to come from the increasingly affluent emerging markets.

Biotechnology

Australia




Top ten investments



146,552

46.4



 

 



PORTFOLIO - OTHER INVESTMENTS  

As at 30 April 2017

 




Valuation

Total

Valuation




2017

Assets

2016

Company

Industry

Country

£'000

%

£'000

Siam Cement (Foreign)

Construction Materials

Thailand

8,100

2.6

7,725

Rio Tinto (London Listing)

Metals & Mining

Australia

7,935

2.5

7,106

Singapore Telecommunication

Diversified Telecommunication Services

Singapore

7,342

2.3

6,942

China Mobile

Wireless Telecommunication Services

China

7,296

2.3

6,924

Bank Central Asia

Banks

Indonesia

6,752

2.2

2,202

Singapore Technologies Engineering

Aerospace & Defence

Singapore

6,400

2.0

6,559

HSBC Holdings

Banks

Hong Kong

6,371

2.0

7,096

Swire Pacific B Shares C

Real Estate Management & Development

Hong Kong

6,278

2.0

6,828

Aberdeen New India Inv. Trust

Investment Trusts

India

5,730

1.8

4,143

Standard Chartered (London listing)

Banks

United Kingdom

5,527

1.8

5,798

Top twenty investments



214,283

67.9


Keppel Corporation

Industrial Conglomerates

Singapore

5,481

1.7

4,119

Naver Corporation

Internet Software & Services

South Korea

5,291

1.7

1,254

BHP Billiton (London listing)

Metals & Mining

Australia

5,051

1.6

4,860

Swire Properties

Real Estate Management & Development

Hong Kong

4,882

1.6

3,363

Taiwan Mobile

Wireless Telecommunication Services

Taiwan

4,727

1.5

4,475

M.P. Evans Group

Food Products

United Kingdom

4,212

1.3

2,557

Venture Corp

Electronic Equipment, Instruments & Components

Singapore

4,116

1.3

2,594

Hong Kong Exchanges & Clearing

Capital Markets

Hong Kong

3,990

1.3

2,427

United Overseas Bank

Banks

Singapore

3,799

1.2

7,420

Yum China Holdings

Hotels, Restaurants & Leisure

China

3,612

1.1

-

Top thirty investments



259,444

82.2


DBS Group Holdings

Banks

Singapore

3,581

1.1

2,495

ASM Pacific Technology

Semiconductors & Semiconductor Equipment

Hong Kong

3,482

1.1

1,488

Vietnam Dairy Products

Food Products

Vietnam

3,406

1.1

1,048

CIMB Group Holdings

Banks

Malaysia

3,164

1.0

2,419

Unilever Indonesia

Household Products

Indonesia

3,159

1.0

2,697

John Keells Holdings D

Industrial Conglomerates

Sri Lanka

3,095

1.0

2,326

Anhui Conch Cement H Shares

Construction Materials

China

2,976

0.9

1,109

E-Mart

Food & Staples Retailing

South Korea

2,963

0.9

3,327

Hang Lung Group

Real Estate Management & Development

Hong Kong

2,838

0.9

1,847

Aberdeen Asian Smaller Companies Inv. Trust D E

Investment Trusts

Other Asia

2,786

0.9

2,663

Top forty investments



290,894

92.1


Hang Lung Properties

Real Estate Management & Development

Hong Kong

2,665

0.8

1,795

Dairy Farm International

Food & Staples Retailing

Hong Kong

2,611

0.8

2,664

Public Bank Berhad

Banks

Malaysia

2,562

0.8

2,353

Amorepacific Corporation F

Personal Goods

South Korea

2,521

0.8

1,118

PetroChina H Shares

Oil, Gas & Consumable Fuels

China

2,483

0.8

4,645

MTR Corporation

Road & Rail

Hong Kong

2,192

0.7

1,627

Astra International

Automobiles

Indonesia

1,928

0.6

1,297

Raffles Medical

Health Care Providers & Services

Singapore

1,543

0.5

-

Kerry Logistics Network

Air Freight & Logistics

Hong Kong

1,406

0.5

-

Aitken Spence & Co.

Industrial Conglomerates

Sri Lanka

1,261

0.4

1,673

Top fifty investments



312,066

98.8


DFCC Bank

Banks

Sri Lanka

1,113

0.4

1,206

Bangkok Dusit Medical Services

Health Care Providers & Services

Thailand

351

0.1

-

Total investments



313,530

99.3


Net current assets G



2,185

0.7


Total assets



315,715

100.0



B       No double-charging of management fees by Aberdeen.

C       2016 holding merged two equity holdings, with values split as follows: A shares £475,000 and B shares £6,353,000.

D       2016 holding comprised equity and warrant £2,318,000 and £8,000.

E       2016 holding comprised equity and convertible unsecured loan stock split £2,177,000 and £486,000.

F       Holding merges two equity holdings with values split as follows: Ordinary shares £299,000 and Preference shares £2,222,000 (2016 - £1,118,000).

G       Excluding bank loans of £29,524,000.

Note: Unless otherwise stated, foreign stock is held and all investments are equity holdings.



PORTFOLIO - CHANGES IN ASSET DISTRIBUTIONS

 


Value at


Sales

Appreciation/

Value at


30 April 2016

Purchases

proceeds

(depreciation)

30 April 2017

Country

£'000

£'000

£'000

£'000

Australia

24,006

3,580

12,212

6,785

22,159

China

12,678

14,300

2,430

3,173

27,721

Hong Kong

49,394

3,217

8,329

19,416

63,698

India

28,817

5,620

-

10,458

44,895

Indonesia

6,196

2,908

-

2,735

11,839

Malaysia

4,772

111

-

843

5,726

Other Asia

2,663

-

524

647

2,786

Philippines

8,233

426

-

788

9,447

Singapore

48,569

3,502

10,463

13,273

54,881

South Korea

18,114

5,405

6,988

10,395

26,926

Sri Lanka

6,175

127

1,139

306

5,469

Taiwan

13,164

-

2,476

5,699

16,387

Thailand

7,725

362

1,455

1,819

8,451

United Kingdom

8,355

-

2,010

3,394

9,739

Vietnam

1,048

1,887

-

471

3,406


_________

_________

_________

_________

_________

Total investments

239,909

41,445

48,026

80,202

313,530

Net current assets A

3,320

-

-

(1,135)

2,185


_________

_________

_________

_________

_________

Total assets less current liabilities

243,229

41,445

48,026

79,067

315,715


_________

_________

_________

_________

_________







A Excluding bank loans of £29,524,000.




 

 



DIRECTORS' REPORT (EXTRACT)

 

The Directors present their report and the audited financial statements for the year ended 30 April 2017.

 

Results and Dividends

The financial statements for the year ended 30 April 2017 are contained below. An interim dividend of 1.0p per Ordinary share was paid on 27 January 2017 and the Board recommends a final dividend of 3.0p per Ordinary share, payable on 1 September 2017 to shareholders on the register on 4 August 2017. The relevant ex-dividend date is 3 August 2017. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.

 

Investment Trust Status

The Company is registered as a public limited company (registered in England and Wales No. 02377879) and is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company has been approved by HM Revenue & Customs as an investment trust subject to it continuing to meet the relevant eligibility conditions of Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements of Part 2 Chapter 3 Statutory Instrument 2011/2999 for all financial years commencing on or after 1 May 2012. The Directors are of the opinion that the Company has conducted its affairs for the year ended 30 April 2017 so as to enable it to comply with the ongoing requirements for investment trust status.

 

Individual Savings Accounts

The Company has conducted its affairs in such a way as to satisfy the requirements as a qualifying security for Individual Savings Accounts. The Directors intend that the Company will continue to conduct its affairs in this manner.

 

Capital Structure

The issued Ordinary share capital at 30 April 2017 consisted of 116,862,098 Ordinary shares of 5p and 10,073,567 shares held in treasury. During the year the Company purchased 3,656,912 Ordinary shares to be held in treasury and, since the end of the year, it has purchased a further 565,000 Ordinary shares to be held in treasury. At the date of approval of this Report there were 116,297,098 Ordinary shares of 5p in issue and 10,638,567 shares held in treasury.

 

Voting Rights

Each Ordinary shareholder is entitled to one vote on a show of hands at general meetings of the Company and, on a poll, to one vote for every share held. The Ordinary shares, excluding treasury shares, carry a right to receive dividends.  On a winding up or other return of capital, after meeting the liabilities of the Company, the surplus assets will be paid to Ordinary shareholders in proportion to their shareholdings.

 

There are no restrictions on the transfer of Ordinary shares in the Company other than certain restrictions which may from time to time be imposed by law.

 

Management Agreement

The Company has appointed Aberdeen Fund Managers Limited, a wholly owned subsidiary of Aberdeen Asset Management PLC, as its alternative investment fund manager. AFML has been appointed to provide investment management, risk management, administration and company secretarial services to the Company as well as promotional activities.  The Company's portfolio is managed by Aberdeen Asset Management Asia Limited by way of a group delegation agreement in place between AFML and AAM Asia.  In addition, AFML has sub-delegated promotional activities to Aberdeen Asset Managers Limited and administrative and secretarial services to Aberdeen Asset Management PLC. 

 

Details of the management fee and fees payable for promotional activities are shown in notes 4 and 5 to the financial statements. The management agreement is terminable on not less than 12 months' notice. In the event of termination by the Company on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period.

 

Substantial Interests

At 30 April 2017 the following interests in the issued Ordinary share capital of the Company had been disclosed in accordance with the requirements of the FCA's Disclosure Guidance and Transparency Rules:

 

Shareholder

Number of Ordinary shares held

% heldB

Aberdeen Investment Trust Share PlansA

9,308,579

7.9

Funds managed by Rathbones

8,443,851

7.2

Old Mutual Plc

6,848,084

5.8

Derbyshire County Council

6,350,000

5.4

City of London Investment Management Company Ltd

6,017,273

5.1

Wells Capital Management Inc

5,947,051

5.0

 

A Non-beneficial interest

Based on 116,862,098 Ordinary shares in issue as at 30 April 2017

 

There have been no changes notified to the Company since the year end as at the date of approval of this Report.

 

Corporate Governance

The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good governance and this statement describes how the Company has applied the principles identified in the UK Corporate Governance Code (the "UK Code"), as published in September 2014 and effective for financial years commencing on or after 1 October 2014,  which is available on the Financial Reporting Council's website: frc.org.uk.

 

The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance (the "AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies (the "AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to investment trusts. The AIC Code and AIC Guide are available on the AIC's website: theaic.co.uk.

 

The Board considers that reporting in accordance with the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide better information to shareholders. The Board confirms that, during the year, the Company complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except as set out below.

 

The UK Code includes provisions relating to:

 

·   the role of the chief executive (A.1.2);

·   executive directors' remuneration (D.1.1 and D.1.2); and

·   the need for an internal audit function (C.3.6).

 

For the reasons set out in the AIC Guide, and as explained in the UK Code, the Board considers that these provisions are not relevant to the position of the Company, being an externally managed investment company. In particular, all of the Company's day-to-day management and administrative functions are outsourced to third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not reported further in respect of these provisions. The Company is also non-compliant with Provision A.4.1 of the UK Code which states that the Board should appoint a Senior Independent Director. The Board has considered whether a Senior Independent Director should be appointed and has concluded that, given the current size of the Board and the fact that it is comprised entirely of non-executive Directors, this is unnecessary at the present time.

 

The full text of the Company's Corporate Governance Statement can be found on its website.

 

Directors

The Board comprise five Directors, consisting of an independent non-executive Chairman and four non-executive Directors. Ms Sears was appointed as a Director on 1 August 2016 and stood for election at the Annual General Meeting on 31 August 2016. All Directors, with the exception of Mr Young, are considered by the Board to be independent and free of any material relationship with the Aberdeen Group. Mr Young is a Director of various entities connected with, or within, the Aberdeen Group and, as such, is not considered to be independent.

 

Directors attended scheduled Board and Committee meetings during the year ended 30 April 2017 as shown in the table below (with their eligibility to attend the relevant meeting in brackets).

 

 

Director



Board

Meetings



Audit and Risk Committee Meetings


Nomination Committee

Meetings

Manage-ment
 Engagement
 Committee
Meetings

D ShearerA

6 (6)

2 (2)

1 (1)

1 (1)

J Lorimer

6 (6)

2 (2)

1 (1)

1 (1)

S Rippingall

6 (6)

2 (2)

1 (1)

1 (1)

M SearsB

5 (5)

1 (1)

1 (1)

- (-)

H YoungC

6 (6)

- (-)

1 (1)

- (-)

 

A Mr Shearer is not a member of the Audit and Risk Committee, although attends by invitation.

B Appointed on 1 August 2016.

C Mr Young is not a member of the Audit and Risk or Management Engagement Committees.

 

The Board meets more frequently when business needs require.

 

The Company's Articles of Association require that one third of the Directors retire by rotation at each Annual General Meeting, and that any Director who was not elected or re-elected at one of the preceding two Annual General Meetings also retires by rotation at the Annual General Meeting.  However, the Board has decided that, notwithstanding the provisions of the Articles of Association, all Directors will retire at each Annual General Meeting and, if eligible, may seek re-election. Messrs Shearer, Lorimer and Young, Ms Rippingall and Ms Sears will therefore retire and seek re-election at the Annual General Meeting.

 

The Board believes that, except for Mr Young, all Directors remain independent of the Manager and free from any relationship which could materially interfere with the exercise of their judgement on issues of strategy, performance, resources and standards of conduct. In addition, the Board confirms that, following a formal performance evaluation, the performance of all Directors continues to be effective and demonstrates commitment to the role. The Board therefore recommends the re-election of each of the Directors at the Annual General Meeting.

 

Directors' and Officers' Liability Insurance

The Company's Articles of Association indemnify each of the Directors out of the assets of the Company against any liabilities incurred by them as a Director of the Company in defending proceedings, or in connection with any application to the Court in which relief is granted. In addition, the Directors have been granted qualifying indemnity provisions by the Company which are currently in force. Directors' and Officers' liability insurance cover has been maintained throughout the year at the expense of the Company.

 

Management of Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest. As part of this process, each Director prepares a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his or her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his or her wider duties is affected. Each Director is required to notify the Company Secretary of any potential or actual conflict situations that will need authorising by the Board. Authorisations given by the Board are reviewed at each Board meeting. No Director has a service contract with the Company although all Directors are issued with letters of appointment.

 

The Board takes a zero-tolerance approach to bribery and has adopted appropriate procedures designed to prevent bribery. The Manager also takes a zero-tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption.

 

Going Concern

The Company's assets consist substantially of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short timescale.  The Board has set limits for borrowing and regularly reviews cash flow projections and compliance with banking covenants. The Directors believe that, after making enquiries, the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of this Report.  Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

Accountability and Audit

Each Director confirms that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and they have taken all the steps that they could reasonably be expected to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

 

Independent Auditor

The Company's Auditor, KPMG LLP, has indicated its willingness to remain in office. The Board will place resolutions before the Annual General Meeting to re-appoint KPMG LLP as Auditor for the ensuing year and to authorise the Directors to determine its remuneration.

 

Relations with Shareholders

The Directors place a great deal of importance on communication with shareholders. Shareholders and investors may obtain up to date information on the Company through its website and the Manager's information service.

 

The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of the management group (including the Company Secretary or the Manager) in situations where direct communication is required, and representatives from the Board meet with major shareholders on an annual basis in order to gauge their views.

 

In addition, the Company Secretary only acts on behalf of the Board, not the Manager, and there is no filtering of communication. At each Board meeting the Board receives full details of any communication from shareholders to which the Chairman responds personally as appropriate.

 

The Notice of the Annual General Meeting is sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Manager at the meeting.

 

The Company has adopted a nominee code, which ensures that, when shares in the Company are held in the name of nominee companies and notification has been received in advance, nominee companies will be provided with copies of shareholder communications for distribution to their investors. Nominee investors may attend and speak at general meetings.

 

Participants in the Aberdeen Investment Trust Share Plan and ISA, whose shares are held in the nominee name of the plan administrator, are given the opportunity to vote at the Annual General Meeting by means of a Letter of Direction enclosed with the Annual Report. When forwarded to the plan administrator, the voting instructions given in the Letter of Direction will in turn be reflected in the proxy votes lodged by the plan administrator.

 

Electronic Communications

The Company's Articles of Association allow shareholders to elect to receive communications from the Company and allow voting in electronic format. If shareholders would like to receive future communications in electronic format they should contact the Company's registrar, Equiniti Limited. If shareholders wish to continue to receive Annual Reports and other communications in hard copy format only they need take no further action.

 

Annual General Meeting

The Annual General Meeting will be held at the offices of Aberdeen Asset Management PLC, Bow Bells House, 1 Bread Street, London EC4M 9HH on 30 August 2017 at 12 noon.

 

By order of the Board

Aberdeen Asset Management PLC

Company Secretary

19 June 2017

 

 



STATEMENT OF COMPREHENSIVE INCOME

 



Year ended 30 April 2017

Year ended 30 April 2016



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Gains/(losses) on investments held at fair value through profit or loss

10

80,202

80,202

(45,629)

(45,629)

Income

3

6,922

6,922

7,004

7,004

Management fee

4

(810)

(810)

(1,620)

(829)

(829)

(1,658)

Administrative expenses

5

(766)

(766)

(734)

(734)

Exchange losses


(2,477)

(2,477)

(959)

(959)



_______

_______

______

_______

______

_______

Net return before finance costs and taxation


5,346

76,915

82,261

5,441

(47,417)

(41,976)









Interest payable and similar charges

6

(257)

(257)

(514)

(227)

(227)

(454)

Return before taxation


5,089

76,658

81,747

5,214

(47,644)

(42,430)









Taxation

7

(279)

(279)

(226)

(226)



_______

_______

______

_______

______

_______

Return after taxation


4,810

76,658

81,468

4,988

(47,644)

(42,656)



_______

_______

______

_______

______

_______









Return per Ordinary share (pence)

9

4.05

64.61

68.66

4.06

(38.78)

(34.72)



_______

_______

______

_______

______

_______








The total column of this statement represents the profit and loss account of the Company.

The Company does not have any income or expense that is not included in "Return after taxation" and therefore this represents the "Total comprehensive income for the year".

All revenue and capital items are derived from continuing operations.

The accompanying notes are an integral part of the financial statements.

 

 



STATEMENT OF FINANCIAL POSITION

 



As at

As at



30 April 2017

30 April 2016


Notes

£'000

£'000

Fixed assets




Investments at fair value through profit or loss

10

313,530

239,909



_________

_________

Current assets




Debtors

11

1,052

1,319

Cash at bank and in hand


1,719

2,369



_________

_________



2,771

3,688



_________

_________

Creditors: amounts falling due within one year

12



Loans


(24,524)

(21,986)

Other creditors


(586)

(368)



_________

_________



(25,110)

(22,354)



_________

_________

Net current liabilities


(22,339)

(18,666)



_________

_________

Total assets less current liabilities


291,191

221,243





Non-current creditors

12



Loans


(5,000)

(5,000)



_________

_________

Net assets


286,191

216,243



_________

_________





Share capital and reserves




Called-up share capital

13

6,347

6,347

Share premium account


17,955

17,955

Special reserve


5,411

Capital redemption reserve


10,207

10,207

Capital reserve

14

239,100

163,906

Revenue reserve


12,582

12,417



_________

_________

Equity shareholders' funds


286,191

216,243



_________

_________





Net asset value per Ordinary share (pence)

15

244.90p

179.43p



_________

_________

 

The accompanying notes are an integral part of the financial statements.

STATEMENT OF CHANGES IN EQUITY

 

For the year ended 30 April 2017










Share


Capital





Share

premium

Special

redemption

Capital

Revenue



capital

account

reserve

reserve

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 30 April 2016

6,347

17,955

5,411

10,207

163,906

12,417

216,243

Buy back of Ordinary shares for treasury

-

-

(5,411)

-

(1,464)

-

(6,875)

Return after taxation

-

-

-

-

76,658

4,810

81,468

Dividends paid (see note 8)

-

-

-

-

-

(4,645)

(4,645)


______

______

______

______

______

______

______

Balance at 30 April 2017

6,347

17,955

-

10,207

239,100

12,582

286,191


______

______

______

______

______

______

______










For the year ended 30 April 2016










Share


Capital





Share

premium

Special

redemption

Capital

Revenue



capital

account

reserve

reserve

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 30 April 2015

6,347

17,955

11,218

10,207

211,550

12,121

269,398

Buy back of Ordinary shares for treasury

-

-

(5,807)

-

-

-

(5,807)

Return after taxation

-

-

-

-

(47,644)

4,988

(42,656)

Dividends paid (see note 8)

-

-

-

-

-

(4,692)

(4,692)


______

______

______

______

______

______

______

Balance at 30 April 2016

6,347

17,955

5,411

10,207

163,906

12,417

216,243


______

______

______

______

______

______

______









The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.

The accompanying notes are an integral part of the financial statements.

 

 



STATEMENT OF CASHFLOWS

 



Year ended

Year ended



30 April 2017

30 April 2016


Notes

£'000

£'000

Operating activities




Net return before finance costs and taxation


82,261

(41,976)

Adjustment for:




(Gains)/losses on investments


(80,202)

45,629

Currency losses


2,477

959

Decrease in accrued dividend income


244

619

Decrease/(increase) in other debtors


16

(7)

Increase/(decrease) in other creditors


160

(261)

Stock dividends included in investment income


(871)

(521)

Overseas withholding tax


(271)

(205)



_______

_______

Net cash flow from operating activities


3,814

4,237





Investing activities




Purchases of investments


(40,574)

(16,549)

Sales of investments


48,026

23,078



_______

_______

Net cash from investing activities


7,452

6,529





Financing activities




Equity dividends paid

8

(4,645)

(4,692)

Interest paid


(509)

(453)

Buy back of Ordinary shares for treasury

13

(6,821)

(5,807)



_______

_______

Net cash used in financing activities


(11,975)

(10,952)



_______

_______

Decrease in cash


(709)

(186)



_______

_______

Analysis of changes in cash during the year




Opening balance


2,369

2,614

Effect of exchange rate fluctuations on cash held


59

(59)

Decrease in cash as above


(709)

(186)



_______

_______

Closing balances


1,719

2,369



_______

_______

 

The accompanying notes are an integral part of the financial statements.



NOTES TO THE FINANCIAL STATEMENTS:

For the year ended 30 April 2016

 

1.

Principal activity


The Company is a closed-end investment company, registered in England & Wales No 02377879, with its Ordinary shares being listed on the London Stock Exchange.

 

2.

Accounting policies


(a)

Basis of accounting



The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 and updated in January 2017 with consequential amendments. The financial statements are prepared in sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.






The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.





(b)

Valuation of investments



Listed investments have been designated upon initial recognition as fair value through profit or loss. Investments are recognised and de-recognised on the trade date at cost. Subsequent to initial recognition, investments are valued at fair value which for listed investments is deemed to be bid market prices. Gains and losses arising from changes in fair value are included as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserve.





(c)

Income  



Dividends, including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time apportioned basis so as to reflect the effective yield on shares. Other returns on non-equity shares are recognised when the right to return is established. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the scrip dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is dealt with on an accruals basis.





(d)

Expenses



All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Statement of Comprehensive Income except as follows:



-     expenses directly relating to the acquisition or disposal of an investment, in which case, they are added to the cost of the investment or deducted from the sale proceeds. Such transaction costs are disclosed in accordance with the SORP. These expenses are charged to the capital column of the Statement of Comprehensive Income and are separately identified and disclosed in note 9; and



-     the Company charges 50% of investment management fees and finance costs to the capital column of the Statement of Comprehensive Income, in accordance with the Board's expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company.





(e)

Taxation



The tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the  Statement of Comprehensive Income because it excludes items of income or expenditure that are taxable or deductible in other years and it further excludes items that are never taxable or deductible (see note 7 for a more detailed explanation). The Company has no liability for current tax.






Deferred taxation is provided on all timing differences, that have originated but not reversed at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Statement of Financial Position date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to obtain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.





(f)

Foreign currencies



Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Statement of Financial Position date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on the realisation of foreign currencies are recognised in the Statement of Comprehensive Income and are then transferred to the capital reserve.






The Company's investments and borrowings are made in a number of currencies, however the Board considers the Company's functional currency to be Sterling. In arriving at this conclusion, the Board considered that the shares of the Company are listed on the London Stock Exchange, it is regulated in the United Kingdom, principally having its shareholder base in the United Kingdom, pays dividends and expenses in Sterling. Consequently, the Board also considers the Company's presentational currency to be Sterling.





(g)

Dividends payable



Dividends are recognised from the date on which they are declared and approved by shareholders. Interim dividends are recognised when paid.





(h)

Nature and purpose of reserves



Called up share capital



The Ordinary share capital on the Statement of Financial Position relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, is a transfer made to the capital redemption reserve.






Share premium account



The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising ordinary shares of 5p.






Special reserve



The special reserve arose following Court approval in 1999 to transfer £50m from the share premium account. This reserve was distributable and has been extinguished to fund share buy backs to be held in treasury by the Company.






Capital redemption reserve



The capital redemption reserve is used to record the amount equivalent to the nominal value of any of the Company's own shares purchased and cancelled in order to maintain the Company's capital.






Capital reserve



Gains or losses on disposal of investments and changes in fair values of investments are transferred to the capital reserve. The capital element of the management fee and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. During the year the costs of share buybacks to be held in treasury have also been deducted from this reserve as the special reserve has now been extinguished.






Revenue reserve



This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.

 



2017

2016

3.

Income

£'000

£'000


Income from investments




UK dividend income

877

1,434


UK investment income

8

16


Overseas dividends

5,164

5,029


Scrip dividends

871

521



_______

_______



6,920

7,000



_______

_______


Other income




Deposit interest

2

4



_______

_______


Total income

6,922

7,004



_______

_______

 



2017

2016



Revenue

Capital

Total

Revenue

Capital

Total

4.

Management fee

£'000

£'000

£'000

£'000

£'000

£'000


Management fee

810

810

1,620

829

829

1,658



_______

_______

_______

_______

_______

_______










Management and secretarial services are provided by Aberdeen Fund Managers Limited ("AFML").




With effect from 1 July 2016, the Board and the Manager agreed a new rate for calculating the Company's management fees payable to AFML. The management fee is payable monthly in arrears based on an annual rate of 0.85%, previously 1%, of the net asset value of the Company valued monthly, with the following provisions for commonly managed funds:


-     the Company's investments in Aberdeen Global - Indian Equity Fund, Aberdeen Asian Smaller Companies Investment Trust PLC and Aberdeen New India Investment Trust PLC are excluded from the calculation of the investment management fee. The total value of such commonly managed funds, on a bid price basis (basis on which management fee is calculated), at the year end was £47,681,000 (2016 - bid basis - £31,481,000).


-     the Company receives a rebate from the Manager for the amount of fees in excess of 0.85%, previously 1%, of net assets charged by the Manager for any commonly managed fund.




The balance due to AFML at the year end, net of any rebates was £278,000 (2016 - £138,000).




The agreement is terminable by either party on not less than twelve months' notice to the other.In the event of termination by the Company on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period.

 



2017

2016

5.

Administrative expenses

£'000

£'000


Promotional activities

158

158


Directors' fees

131

136


Safe custody fees

130

111


Auditor's remuneration:




-     fees payable to the Company's auditor for the audit of the Company's annual accounts

15

15


-     fees payable to the Company's auditor for the review of the Company's half yearly accounts

4

4


Other administration expenses

328

310



_______

_______



766

734



_______

_______






The Company has an agreement with AFML for the provision of promotional activities. The total fees payable during the year were £158,000 (2016 - £158,000) and the sum due to AFML at the year end was £53,000 (2016 - £13,000).




No pension contributions were made in respect of any of the Directors.




The Company does not have any employees.

 



2017

2016



Revenue

Capital

Total

Revenue

Capital

Total

6.

Interest payable and similar charges

£'000

£'000

£'000

£'000

£'000

£'000


On bank loans

257

257

514

227

227

454



_______

_______

_______

_______

_______

_______

 



2017

2016



Revenue

Capital

Total

Revenue

Capital

Total

7.

Taxation

£'000

£'000

£'000

£'000

£'000

£'000


(a)

Analysis of charge for the year







 



Overseas tax

339

339

278

278

 



Overseas tax reclaimable

(60)

(60)

(52)

(52)

 



Total tax charge for the year

279

279

226

226

 










 


(b)

Factors affecting the tax charge for the year

 



The tax assessed for the year is lower than the current standard rate of corporation tax in the UK.

 




 




2017

2016

 




Revenue

Capital

Total

Revenue

Capital

Total

 




£'000

£'000

£'000

£'000

£'000

£'000

 



Net return on ordinary activities before taxation

5,089

76,658

81,747

5,214

(47,644)

(42,430)

 




_______

_______

______

_______

_______

______

 



Net return on ordinary activities multiplied by effective standard rate of corporation tax in the UK of 19.92% (2016 - 20%)

1,014

15,270

16,284

1,043

(9,529)

(8,486)

 



Effects of:







 



Non-taxable UK dividend income

(253)

(253)

(290)

(290)

 



Non-taxable overseas dividends

(1,103)

(1,103)

(1,066)

(1,066)

 



Overseas tax suffered

279

279

226

226

 



Surplus management expenses and loan relationship deficits not relieved

342

213

555

313

211

524

 



Non-taxable exchange losses

493

493

192

192

 



Non-taxable (gains)/losses on investments

(15,976)

(15,976)

9,126

9,126

 




_______

_______

______

_______

_______

_______

 



Total tax charge

279

279

226

226

 




_______

_______

______

_______

_______

_______

 










 


(c)

Provision for deferred taxation

 



No provision for deferred taxation has been made in the current year or in the prior year.

 




 



The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust company.

 




 


(d)

Factors that may affect future tax charges

 



At the year end, the Company has an unrecognised deferred tax asset of £3,429,000 (2016 - £3,392,000) arising as a result of excess management expenses and non-trade loan relationship deficits. These expenses will only be utilised if the Company has profits chargeable to corporation tax in the future.

 



2017

2016

8.

Dividends

£'000

£'000


Amounts recognised as distributions to equity holders in the period:




Final dividend for 2016 - 2.9p (2015 - 2.8p)

3,464

3,469


Interim dividend for 2017 - 1.0p (2016 - 1.0p)

1,181

1,223



_______

_______



4,645

4,692



_______

_______






The proposed final dividend in respect of the year ended 30 April 2017 is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.




The table below sets out the proposed final dividend, together with the interim dividend paid, in respect of the financial year, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £4,810,000 (2016 - £4,988,000).







2017

2016



£'000

£'000


Interim dividend for 2017 - 1.0p (2016 - 1.0p)

1,181

1,223


Proposed final dividend for 2017 - 3.0p (2016 - 2.9p)

3,489

3,475



_______

_______



4,670

4,698



_______

_______






Subsequent to the year end the Company has purchased for treasury a further 565,000 Ordinary shares. Therefore the amounts reflected above for the cost of the proposed final dividend for 2017 are based on 116,297,098 Ordinary shares in issue, being the number of Ordinary shares in issue at the date of this Report.

 



2017

2016

9.

Return per Ordinary share

£'000

p

£'000

p


Revenue return

4,810

4.05

4,988

4.06


Capital return

76,658

64.61

(47,644)

(38.78)



_______

_______

_______

_______


Total return

81,468

68.66

(42,656)

(34.72)



_______

_______

_______

_______


Weighted average number of Ordinary shares in issue A

118,657,145


122,842,641


A Calculated excluding shares held in treasury.


__________


__________

 



Listed

Listed




overseas

in UK

Total

10.

Investments

£'000

£'000

£'000


Fair value through profit or loss:





Opening book cost

119,708

30,165

149,873


Opening fair value gains/(losses) on investments held

93,074

(3,038)

90,036



_______

_______

_______


Opening valuation

212,782

27,127

239,909


Movements in the year:





Purchases at cost

39,592

1,853

41,445


Sales - proceeds

(40,271)

(7,755)

(48,026)


Sales - realised gains/(losses)

14,743

(602)

14,141


Current year fair value gains on investments held

55,442

10,619

66,061



_______

_______

_______


Closing valuation

282,288

31,242

313,530



_______

_______

_______


Closing book cost

133,772

23,661

157,433


Closing fair value gains on investments held

148,516

7,581

156,097



_______

_______

_______



282,288

31,242

313,530



_______

_______

_______









2017

2016




£'000

£'000


Investments listed on an overseas investment exchange


282,288

212,782


Investments listed on the UK investment exchange


31,242

27,127




_______

_______




313,530

239,909




_______

_______









2017

2016


Gains/(losses) on investments held at fair value through profit or loss

£'000

£'000


Realised gains on sales


14,141

4,701


Increase/(decrease) in fair value gains on investments held


66,061

(50,330)




_______

_______




80,202

(45,629)




_______

_______







Transaction costs





During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains/(losses) on investments held at fair value through profit or loss in the Statement of Comprehensive Income. The total costs were as follows:





2017

2016



£'000

£'000


Purchases

46

32


Sales

85

34



_______

_______



131

66



_______

_______

 



2017

2016

11.

Debtors

£'000

£'000


Prepayments and accrued income

980

1,244


Other loans and receivables

72

75



_______

_______



1,052

1,319



_______

_______

 



2017

2016

12.

Creditors

£'000

£'000

 


Amounts falling due within one year:



 


a)

Loans



 



Foreign currency loans

22,024

19,486

 



Sterling loan

2,500

2,500

 




_______

_______

 




24,524

21,986

 




_______

_______

 






 




2017

2016

 


b)

Other

£'000

£'000

 



Amounts due to brokers

117

63

 



Other creditors

469

305

 




_______

_______

 




586

368

 




_______

_______

 






 




2017

2016

 


Non-current creditors:

£'000

£'000

 


Sterling loan

5,000

5,000

 



_______

_______






At the year end the Company's secured floating rate bank loans of HK$154,100,000 (2016 - HK$154,100,000), equivalent to £15,315,000 (2016 - £13,561,000), US$8,680,000 (2016 - US$8,680,000), equivalent to £6,709,000 (2016 - £5,925,000), £2,500,000 (2016 - £2,500,000), with a maturity date of 24 May 2017 (2016 - 25 May 2016), and fixed rate bank loan of £5,000,000 (2016 - £5,000,000), were drawn down from the £35,000,000 facility with The Royal Bank of Scotland at interest rates of 1.41%, 1.99%, 1.26% and 2.75% (2016 - 1.23%, 1.44%, 1.51% and 2.75%) respectively.

 



 


As of the latest date prior to the signing of this Report the HK$154,100,000, US$8,680,000 and £2,500,000 loans had been drawn down to 23 June 2017 at interest rates of 2.02004%, 1.36339% and 1.25101% respectively.

 



 


The terms of the bank loan with The Royal Bank of Scotland state that:

 


-     the net tangible assets of the Company must be not less than £125 million at all times;

 


-     the ratio of gross borrowings to adjusted assets must be less than 25% at all times (adjusted assets are total gross assets less (i) the value of any unlisted investment; (ii) the value in excess of 10% of total gross assets invested in the largest single security or asset; (iii) the value of any single security or asset (other than the largest security or asset referred to above) exceeds 5% of gross assets; (iv) the value in excess of 60% of total gross assets invested in the top twenty largest investments; (v) the extent to which the value of securities in collective investment schemes exceeds 30% of gross assets; and (vi) the extent to which the aggregated value of securities or assets in countries with a Standard and Poor's foreign sovereign debt rating lower than BBB exceeds 30% of gross assets.)

 


-     the facility, under which the loans are made, will expire on 7 October 2019.

 



 


The Company has met all financial covenants throughout the period and up to the date of this Report.

 

 



2017

2016

13.

Called-up share capital

£'000

£'000


Allotted, called up and fully paid:




116,862,098 (2016 - 120,519,010) Ordinary shares of 5p each

5,843

6,026






Held in treasury:




10,073,567 (2016 - 6,416,655) Ordinary shares of 5p each

504

321



_______

_______



6,347

6,347



_______

_______






During the year 3,656,912 (2016 - 3,814,000) Ordinary shares of 5p each were repurchased by the Company at a total cost, including transaction costs, of £6,875,000 (2016 - £5,807,000). All of the shares were placed in treasury. Shares held in treasury represent 8.62% of the Company's total issued share capital at 30 April 2017. Shares held in treasury do not carry a right to receive dividends.




Subsequent to the year end the Company bought back for treasury a further 565,000 Ordinary shares for a total consideration of £1,238,000.




The investment objective of the Company is to provide shareholders with a high level of capital growth through equity investment in the Asia Pacific countries ex Japan.




The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.




The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:   


-     the planned level of gearing which takes account of the Manager's views on the market;


-     the level of equity shares in issue; and


-     the extent to which revenue in excess of that which is required to be distributed should be retained.




The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.




The Company does not have any externally imposed capital requirements.

 



2017

2016

14.

Capital reserve

£'000

£'000


At 1 May 2016

163,906

211,550


Movement in fair value gains/(losses)

80,202

(45,629)


Foreign exchange movement

(2,477)

(959)


Buy back of Ordinary shares for treasury

(1,464)

-


Expenses allocated to capital

(1,067)

(1,056)



_______

_______


At 30 April 2017

239,100

163,906



_______

_______






The capital reserve includes investment holding gains amounting to £156,097,000 (2016 - £90,036,000), as disclosed in note 10.

 

15.

Net asset value per share


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







2017

2016


Net assets attributable (£'000)

286,191

216,243


Number of Ordinary shares in issue (excluding shares held in treasury)

116,862,098

120,519,010


Net asset value per share (p)

244.90

179.43

 

16.

Financial instruments

 


Risk management

 


The Company's investment activities expose it to various types of financial risk associated with the financial instruments and markets in which it invests. The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income.

 



 


The Board has delegated the risk management function to AFML under the terms of its management agreement with AFML (further details of which are included under note 4). The Board regularly reviews and agrees policies for managing each of the key financial risks identified with the Manager. The types of risk and the Manager's approach to the management of each type of risk, are summarised below. Such approach has been applied throughout the year and has not changed since the previous accounting period.

 



 


Risk management framework

 


The directors of Aberdeen Fund Managers Limited collectively assume responsibility for AFML's obligations under the AIFMD including reviewing investment performance and monitoring the Company's risk profile during the year.

 



 


AFML is a fully integrated member of the Aberdeen Group, which provides a variety of services and support to AFML in the conduct of its business activities, including in the oversight of the risk management framework for the Company. The AIFM has delegated the day to day administration of the investment policy to Aberdeen Asset Management Asia Limited, which is responsible for ensuring that the Company is managed within the terms of its investment guidelines and the limits set out in its pre-investment disclosures to investors (details of which can be found on the Company's website). The AIFM has retained responsibility for monitoring and oversight of investment performance, product risk and regulatory and operational risk for the Company.

 



 


The Manager conducts its risk oversight function through the operation of the Group's risk management processes and systems which are embedded within the Group's operations. The Group's Risk Division supports management in the identification and mitigation of risks and provides independent monitoring of the business. The Division includes Compliance, Business Risk, Market Risk, Risk Management and Legal. The team is headed up by the Group's Head of Risk, who reports to the Chief Executive Officer of the Group. The Risk Division achieves its objective through embedding the Risk Management Framework throughout the organisation using the Group's operational risk management system ("SWORD").

 



 


The Group's Internal Audit Department is independent of the Risk Division and reports directly to the Group CEO and to the Audit Committee of the Group's Board of Directors. The Internal Audit Department is responsible for providing an independent assessment of the Group's control environment.

 



 


The Group's corporate governance structure is supported by several committees to assist the board of directors of Aberdeen, its subsidiaries and the Company to fulfil their roles and responsibilities. The Group's Risk Division is represented on all committees, with the exception of those committees that deal with investment recommendations. The specific goals and guidelines on the functioning of those committees are described on the committees' terms of reference.

 



 


Risk management

 


The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, currency risk and price risk), (ii) liquidity risk and (iii) credit risk.

 



 


(i) Market risk

 


The fair value of, or future cash flows from a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and other price risk. 

 



 


Interest rate risk

 


Interest rate movements may affect:

 


-     the level of income receivable on cash deposits; and,

 


-     interest payable on the Company's variable rate borrowings.

 



 


Management of the risk

 


The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

 



 


The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise fixed rate, revolving, and uncommitted facilities. The fixed rate facilities are used to finance opportunities at low rates and, the revolving and uncommitted facilities to provide flexibility in the short-term. Current bank covenant guidelines state that the total borrowings will not exceed 25% of the adjusted net assets of the Company as defined in note 12.

 



 


Interest risk profile

 


The interest rate risk profile of the portfolio of the Company's financial assets and liabilities, excluding equity holdings which are all non-interest bearing, at the Statement of Financial Position date was as follows:

 



 



Weighted average

Weighted


 



period for which

average

Fixed

 



rate is fixed

interest rate

rate

 


At 30 April 2017

Years

%

£'000

 


Assets




 


Sterling

-

-

-

 


Taiwan Dollar

-

-

-

 


US Dollar

-

-

-

 


Vietnam Dong

-

-

-

 





_______

 





-

 





_______

 






 



Weighted average

Weighted


 



period for which

average

Fixed

 



rate is fixed

interest rate

rate

 



Years

%

£'000

 


Liabilities




 


Bank loan - £2,500,000

0.08

1.26

2,500

 


Bank loan - £5,000,000

2.44

2.75

5,000

 


Bank loan - HK$154,100,000

0.08

1.41

15,315

 


Bank loan - US$8,680,000

0.08

1.99

6,709

 





_______

 





29,524

 





_______

 






 



Weighted average

 Weighted


 



period for which

average

Fixed

 



rate is fixed

interest rate

rate

 


At 30 April 2016

Years

%

£'000

 


Assets




 


Indonesian Rupiah

-

-

-

 


Sterling

-

0.20

-

 


Taiwan Dollar

-

-

-

 





_______

 





-

 





_______

 






 



Weighted average

Weighted


 



period for which

average

Fixed

 



rate is fixed

interest rate

rate

 



Years

%

£'000

 


Liabilities




 


Bank loan - £2,500,000

0.08

1.51

2,500

 


Bank loan - £5,000,000

3.44

2.75

5,000

 


Bank loan - HK$154,000,000

0.08

1.23

13,561

 


Bank loan - US$8,680,000

0.08

1.44

5,925

 





_______

 





26,986

 





_______

 






 


The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on bank loans is based on the interest rate payable, weighted by the total value of the loans. The maturity date of the Company's loans are shown in note 12.

 


The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.

 


The Company's equity portfolio and short-term debtors and creditors (excluding bank loans) have been excluded from the above tables.

 




Interest rate sensitivity

 


Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profit.

 



 


Foreign currency risk

 


All of the Company's investment portfolio is invested in overseas securities and the Statement of Financial Position, therefore, can be significantly affected by movements in foreign exchange rates.

 



 


Management of the risk

 


It is not the Company's policy to hedge this risk on a continuing basis but the Company may, from time to time, match specific overseas investment with foreign currency borrowings. The Company's borrowings, as detailed in note 12, are also in foreign currency.

 



 


The revenue account is subject to currency fluctuation arising on dividends paid in foreign currencies. The Company does not hedge this currency risk.

 



 


Foreign currency exposure by currency of denomination:

 



 



30 April 2017

30 April 2016

 




Net

Total


Net

 




monetary

currency


monetary

 



Investments

assets

exposure

Investments

assets

 



£'000

£'000

£'000

£'000

£'000

 


Australian Dollar

9,173

-

9,173

12,040

-

 


Hong Kong Dollar

57,463

(15,315)

42,148

48,161

(13,561)

 


Indonesian Rupiah

11,839

-

11,839

6,196

15

 


Malaysian Ringgit

5,726

-

5,726

4,772

-

 


Philippine Peso

9,447

-

9,447

8,233

-

 


Singapore Dollar

54,882

-

54,882

48,569

-

 


South Korean Won

26,925

-

26,925

18,114

-

 


Sri Lankan Rupee

5,469

-

5,469

6,175

-

 


Sterling

70,406

(5,848)

64,558

51,801

(5,149)

 


Taiwanese Dollar

16,387

5

16,392

13,164

3

 


Thailand Baht

8,451

-

8,451

7,725

-

 


US Dollar

33,956

(6,653)

27,303

13,911

(5,925)

 


Vietnam Dong

3,406

6

3,412

1,048

-

 



_______

_______

_______

_______

_______

_______

 


Total

313,530

(27,805)

285,725

239,909

(24,617)

215,292

 



_______

_______

_______

_______

_______

 








 


Foreign currency sensitivity

 


The following table details the Company's sensitivity to a 10% increase and decrease in sterling against the foreign currencies in which the Company has exposure. The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.

 





 



2017

2016

 



£'000

£'000

 


Australian Dollar

917

1,204

 


Hong Kong Dollar

4,215

3,460

 


Indonesian Rupiah

1,184

621

 


Malaysian Ringgit

573

477

 


Philippine Peso

945

823

 


Singapore Dollar

5,488

4,857

 


South Korean Won

2,693

1,811

 


Sri Lankan Rupee

547

618

 


Taiwanese Dollar

1,639

1,317

 


Thailand Baht

845

773

 


US Dollar

2,730

799

 


Vietnam Dong

341

105

 



_______

_______

 



22,117

16,865

 



_______

_______

 



 


Price risk

 


Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.

 



 


Management of the risk

 


It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. Both the allocation of assets and the stock selection process act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on various stock exchanges worldwide.

 



 


Price risk sensitivity

 


If market prices at the Statement of Financial Position date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 30 April 2017 would have increased/(decreased) by £31,353,000 (2016 - increased/(decreased) by £23,991,000) and equity reserves would have increased/(decreased) by the same amount.

 



 


(ii) Liquidity risk

 


This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

 



 


Management of the risk

 


The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise a revolving multi-currency credit facility, which expires on 7 October 2019. The Board has imposed a maximum gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of 25%. Details of borrowings at 30 April 2017 are shown in note 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 the loan facility, details of which can be found in note 11. Under the terms of the loan facility, the Manager provides the lender with loan covenant reports on a monthly basis, to provide the lender with assurance that the terms of the facility are not being breached. The Manager will also review the credit rating of a lender on a regular basis. Details of the Board's policy on gearing are shown in the interest rate risk section of this note.

 



 


Liquidity risk exposure

 


At 30 April 2017 and 30 April 2016 the Company's floating rate bank loans, amounting to £24,524,000 and £21,986,000 respectively, were due for repayment or roll-over within one month of the year end.

 



 


(iii) Credit risk

 


This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.

 



 


Management of the risk

 


Investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker. Cash is held only with reputable banks with high quality external credit enhancements.

 



 


Credit risk exposure

 


In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 30 April was as follows:

 



 



2017

2016

 



Statement of


Statement of


 



Financial

Maximum

Financial

Maximum

 



Position

exposure

Position

exposure

 



£'000

£'000

£'000

£'000

 


Fixed assets





 


Investments at fair value through profit or loss

313,530

313,530

239,909

239,909

 







 


Current assets





 


Loans and receivables

1,052

1,052

1,319

1,319

 


Cash at bank and in hand

1,719

1,719

2,369

2,369

 



_______

_______

_______

_______

 



316,301

316,301

243,597

243,597

 



_______

_______

_______

_______

 







 


None of the Company's financial assets is past due or impaired.

 



 


Fair values of financial assets and financial liabilities

 


For the floating rate HK$ loan, the fair value of borrowings has been calculated at £15,311,000 as at 30 April 2017 (2016 - £13,561,000) compared to an accounts value in the financial statements of £15,315,000 (2016 - £13,561,000) (note 12). For the floating rate US$ loan, the fair value of borrowings has been calculated at £6,710,000 as at 30 April 2017 (2016 - £5,926,000) compared to an accounts value in the financial statements of £6,709,000 (2016- £5,925,000) (note 12). For the floating rate GBP loan, the fair value of borrowings has been calculated at £2,500,000 as at 30 April 2017 (2016 - £2,500,000) compared to an accounts value in the financial statements of £2,500,000 (2016 - £2,500,000) (note 12). For the fixed rate GBP loan, the fair value of borrowings has been calculated at £5,163,000 as at 30 April 2017 (2016 - £5,167,000) compared to an accounts value in the financial statements £5,000,000 (2016 - £5,000,000) (note 12). The fair value of each loan is determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time and currency. All other assets and liabilities of the Company are included in the Statement of Financial Position at fair value.

 

 

17.

Fair value hierarchy


FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:




Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.


Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or undirectly.


Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.




The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:








Level 1

Level 2

Level 3

Total


As at 30 April 2017

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss


Quoted equities

263,011

-

-

263,011


Collective investment schemes

-

50,519

-

50,519


Total fair value

263,011

50,519

-

313,530








Level 1

Level 2

Level 3

Total


As at 30 April 2016

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss


Quoted equities

215,235

-

-

215,235


Collective investment schemes

-

24,674

-

24,674


Total fair value

215,235

24,674

-

239,909








Quoted Equities


The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.




Collective Investment Schemes


The fair value of the Company's investments in collective investment schemes has been determined by reference to their quoted net asset values at the reporting date and hence are categorised in Fair Value Level 2.

 

18.

Related party transactions and transactions with the Manager


Fees payable during the period to the Directors and their interests in shares of the Company will be disclosed within the Directors' Remuneration Report.




Mr H Young is a director of Aberdeen Asset Management PLC, of which Aberdeen Fund Managers Limited ("AFML") is a subsidiary. Management, promotional activities and secretarial and administration services are provided to the Company by AFML. Details of transactions during the year and balances outstanding at the year end disclosed in notes 4 and 5.

 

Additional Notes to the Annual Financial Report

The Annual General Meeting will be held at 12 noon on 30 August 2017 at Bow Bells House, 1 Bread Street, London EC4M 9HH.

 

If approved at the Annual General Meeting, the final dividend of 3.0p per share will be paid on 1 September 2017 to holders of Ordinary shares on the register at the close of business on 4 August 2017. The relevant ex-dividend date is 3 August 2017.

 

The Annual Financial Report Announcement is not the Company's statutory accounts. The above results for the year ended 30 April 2017 have been agreed with the auditor and are an abridged version of the Company's full accounts, which have been approved and audited with an unqualified report. The 2016 and 2017 statutory accounts received unqualified reports from the Company's auditor and did not include any reference to matters to which the auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498(2) or 498(3) of the Companies Act 2006.  The financial information for 2016 is derived from the statutory accounts for 2016 which have been delivered to the Registrar of Companies. The 2017 accounts will be filed with the Registrar of Companies in due course.

 

The Annual Report and Accounts will be posted to shareholders in July 2017. Copies will be available during normal business hours from the Secretary, Aberdeen Asset Management PLC, 40 Princes Street, Edinburgh EH2 2BY or from the Company's website, www.newdawn-trust.co.uk*.

 

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements.  Investors may not get back the amount they originally invested.

 

By order of the Board

Aberdeen Asset Management PLC

Company Secretary

19 June 2017

 

 

* Neither the Company's website nor the content of any website accessible from hyperlinks on it (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.


This information is provided by RNS
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Annual Financial Report - RNS