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RNS

Annual Financial Report

Released 07:00 27-Apr-2017

RNS Number : 4677D
Aberdeen New Thai Inv Trust PLC
27 April 2017
 

ABERDEEN NEW THAI INVESTMENT TRUST PLC

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 28 FEBRUARY 2017

 

 

STRATEGIC REPORT

 

Financial Highlights

 

Ordinary share price total return

Net asset value per Ordinary share total return

2017

+27.8%

2017

 +26.5%

 

2016

 

-9.2%

 

2016

 

-9.5%





Stock Exchange of Thailand Index total return

Earnings per Ordinary share (revenue)

2017

+36.5%

2017

 10.31p

 

2016

 

-11.6%

 

2016

 

8.89p





Dividend per Ordinary share




2017

10.30p



 

2016

 

8.50p



 

Overview

Launched in 1989, Aberdeen New Thai Investment Trust PLC (the "Company") is an investment trust with its Ordinary shares listed on the premium segment of the London Stock Exchange. The Company is an approved investment trust and aims to provide shareholders with a high level of long-term, above average capital growth through investment in Thailand.

 

The Company is governed by a board of directors, the majority of whom are independent, and has no employees. Like other investment companies, it outsources its investment management and administration to an investment management group, the Aberdeen Group, and other third party providers.

 

The Company does not have a fixed life but there is a discount monitoring period which operates annually during the last 12 weeks of the Company's financial year. In the 12 weeks ending 28 February 2017, the Ordinary shares traded at an average discount of 14.8% to the underlying net asset value per share (including income), therefore no special resolution to wind up the Company will be put to shareholders at the forthcoming AGM.

 

Management

The Company has appointed Aberdeen Fund Managers Limited ("AFML", " Manager", or "AIFM") as its alternative investment fund manager, which has in turn delegated certain responsibilities, including investment management, to Aberdeen Asset Management Asia Limited ("AAMAL" or "Investment Manager").

 

Financial Calendar

27 April 2017

Announcement of results for year ended 28 February 2017

1 June 2017

Ex-dividend date for proposed Final Ordinary dividend

2 June 2017

Record date for proposed Final Ordinary dividend

28 June 2017

Annual General Meeting at 11.30am at Bow Bells House, 1 Bread Street, London EC4M 9HH

3 July 2017

Payment date for proposed Final Ordinary dividend

October 2017

Announcement of results for the six months ending 31 August 2017

April 2018

Announcement of results for year ending 28 February 2018

 

 

CHAIRMAN'S STATEMENT

 

Background and Results

Thai equities fared remarkably well during the 12-month review period, comfortably outperforming most regional peers. Returns in sterling terms were further enhanced by sterling's sharp drop post-Brexit. While historically low interest rates compelled some of the more yield hungry local investors into equities, foreign buyers accounted for the lion's share of inflows, investing over US$2 billion into Thailand's markets in 2016. However, most of this was via passive vehicles, such as exchange-traded or index tracker funds, meaning the larger SET50 companies were the chief beneficiaries, regardless of their fundamentals. While the indiscriminate nature of such inflows over the last twelve months dampened relative performance, your Company still achieved strong absolute returns.

 

Against this backdrop, the Company's net asset value per Ordinary share rose by 26.5% on a total return basis to 600.2p, compared to the sterling-adjusted gain for the benchmark, the Stock Exchange of Thailand Index, of 36.5%. The Ordinary share price rose by 27.8% on a total return basis to 510.0p, reflecting a narrowing of the discount to the net asset value (including income) per Ordinary share from 15.5% to 15.0%.

 

Dividend

The revenue earnings per Ordinary share were 10.3p for the year ended 28 February 2017 (2016 - 8.9p) and the Board is proposing to shareholders an increased final dividend per Ordinary share of 10.3p (2016 - 8.5p), paying out the majority of the Company's earnings in keeping with its dividend policy. If approved at the Annual General Meeting ("AGM") on 28 June 2017, the final dividend will be paid on 3 July 2017 to shareholders on the register as at 2 June 2017. The ex-dividend date will be 1 June 2017.

 

Overview

The defining moment over the last year was the passing of King Bhumibol in October. While not unexpected, the King's demise had widespread ramifications, given the length of his reign and his subjects' deep respect for him. The government imposed a one-year mourning period on the state sector and many private firms chose to follow suit. In the month following his death, domestic activity largely ground to a halt. This weighed heavily on consumption, which was reflected in lacklustre fourth-quarter corporate earnings.

 

The mourning period was not the economy's sole challenge. In particular, sluggish exports were a recurrent bugbear, while domestic consumption continued to struggle amid high household debt. At above 80% of GDP, the unhealthy debt levels were partly induced by previous administrations, which encouraged consumption through borrowing in a bid to spur growth. A prime example was the first-car scheme, in which buyers received a 100,000 baht rebate on certain makes, as long as they kept the car for five years.

 

Against this soft backdrop, the Bank of Thailand stayed its hand, keeping interest rates at a record low of 1.5% over the past 12 months. Tourism remained a crucial support, while the government also chipped in, helping the economy to grow by a relatively respectable 3.2% in 2016. Stimulus measures, such as a one-off shopping tax break during the year-end festive period, also helped lift sagging consumer confidence.

 

Meanwhile, a series of headline-grabbing events overseas reverberated around the world. Concerns over Britain's historic vote to leave the European Union proved relatively short-lived for countries not directly affected. However, Donald Trump's surprise victory in the US Presidential election provoked longer-running fears, given his tough talk on trade relations, while uncertainty over the Federal Reserve's plans for interest rates caused intermittent market volatility. The oil price rebound sparked by OPEC's agreement to cut production proved a welcome relief to the Thai energy sector, which benefited from the significant rise in product prices.

 

Domestic politics remained steadfastly at a status quo, with democratic elections pushed out to 2018 to allow time to enact recommended changes to the constitution. The upshot was a prolonged and stable period of limbo, which seemed to reassure tourists and domestic businesses alike.   

 

Outlook

Thailand's equity markets are unlikely to deliver the same heady returns seen over the last year. However, some investor restraint would not be entirely undesirable and arguably more realistic. After such a protracted rally, companies are beginning to look fully valued and, in many cases, earnings have a fair amount of catching up to do to justify the valuations.

 

Nonetheless, there is cause for measured optimism for the country's prospects. The smooth transfer of power to the Crown Prince, who has assumed the position of head of state as King Rama X, is reassuring from a stability perspective.  And when elections are eventually held, albeit more than a year from now, the new government is unlikely to veer too far from the current regime's business-friendly, investment-driven approach.

 

In the meantime, the economy should benefit from a boost in public infrastructure spending. This might seem a familiar refrain, with previous attempts to pump prime the economy stymied by red-tape and bureaucracy. However, there are promising signs that the wheels might finally be in motion, with several projects having completed the bidding process. This bodes well for otherwise dormant private investment. Meanwhile, with public debt under 50% of GDP, the government still has plenty of ammunition to stimulate growth.

 

Elsewhere, decent rain after a couple of years of severe drought should benefit rural incomes and consumption, as better harvests prop up prices. Broader consumption trends should also gradually recover as personal debt eases, particularly relating to the first-car scheme. Encouragingly, monetary policy is likely to remain accommodative for the foreseeable future too.

 

Of course, sentiment will remain highly alert to global developments, particularly in the West. Further US interest rate hikes could prompt knee-jerk outflows from emerging markets as investors chase opportunities for higher returns. Meanwhile, there should be little direct risk to Thailand's US trade ties from Trump's apparent protectionist bent, given the Kingdom comprises only a small proportion of total US imports. However, any material restrictions on larger trading partners, like China, Korea or Japan could have unfavourable knock-on effects for other economies in the region; Thailand included.

 

Amid this, the disciplined and meticulous stock-picking approach favoured by your Manager remains more valuable than ever. The underlying holdings in your Company's portfolio are fundamentally sound, with decent cash flows and attractive dividend yields, as well as promising outlooks for long-term growth. Periods of market turbulence provide rich opportunities for your Manager to increase its exposure to these kinds of companies at attractive valuations. Further details about your portfolio are available in the Manager's review.

 

Discount

The Board continues to actively monitor the discount of the Ordinary share price to the NAV per Ordinary share (including income) and will continue to pursue a policy of selective buybacks of shares where to do so would be in the best interests of shareholders. During the year ended 28 February 2017 the Company bought back and cancelled 1,331,650 Ordinary shares (2016 - 903,143 Ordinary shares), representing 6.7% of the Company's issued share capital at the start of the year.

 

Promotional Activities

Your Board continues to promote the Company through the Manager's promotional activities and the Company contributed £63,000 (including VAT) during the year ended 28 February 2017 (2016 - £84,000). The Board reviews regularly these promotional activities.

 

Board Changes

Following a recruitment exercise undertaken by an independent search consultancy, I was delighted to welcome Sarah MacAulay to the Board in December 2016. Sarah brings to the Board 20 years of Asian investment experience as a fund manager in London and Hong Kong, including the management and marketing of Thai equity portfolios. More recently she has been involved with risk management, regulation, compliance and governance in the education sector.

 

After over 27 years as a Director, Hugh Young will be stepping down from the Board at the conclusion of the next AGM. The Company was launched in 1989 on Hugh's initiative as one of Aberdeen's earliest Asian equity investment trusts and as a forerunner to Aberdeen's widely-recognised Asian equities business. The current Board, as well as previous Directors, have benefited greatly from Hugh's particular interest in Thailand. Shareholders will be pleased to learn that Hugh will continue to contribute to the investment management of the Company led by Adithep Vanabriksha's team in Bangkok. The Board would like to place on record its thanks to Hugh for his considerable contribution to the Company's development since its launch in1989 and for his services as a Director.

 

Aberdeen

The Board notes the announcement of the proposed recommended merger between Aberdeen and Standard Life. This is subject to shareholder and regulatory approvals. Both companies have committed to set up a highly experienced and dedicated integration team, to ensure that our Manager remains focussed on the best interests of the Company and its shareholders.  The Board will monitor developments closely and ensure that excellent client service is maintained.

 

AGM

The AGM, which will be held at Bow Bells House, 1 Bread Street, London EC4M 9HH from 11.30am on 28 June 2017, provides shareholders with an opportunity to meet the Board and to ask any questions that they may have of either the Board or the Manager. I look forward to meeting as many shareholders as possible at the AGM which will be followed by a buffet lunch.

 

Nicholas Smith

Chairman

 

26 April 2017

 

 

OVERVIEW OF STRATEGY

 

Business Model

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

 

Investment Objective

The Company aims to provide shareholders with a high level of long-term, above average capital growth through investment in Thailand.

 

Investment Policy

The Company's assets are invested in a diversified portfolio of securities (substantially in the form of equities or equity-related securities such as convertible securities and warrants) in companies, spread across a range of industries, which are quoted on the Stock Exchange of Thailand.

 

Risk Diversification

Delivering 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 and, accordingly, stock selection is usually 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, amongst other factors, management, business focus, balance sheet strength and corporate governance. Price is calculated by reference to key financial ratios, the market, the peer group and business prospects. Top-down investment factors are secondary in the Manager's portfolio construction with diversification, rather than formal controls, guiding stock and sector weights. Investments are not limited as to market capitalisation or sector weightings within Thailand.

 

The Investment Manager is authorised to invest up to 10% of the Company's net assets in any single stock although circumstances may occasionally arise when it may be in shareholders' interests to make an investment that exceeds this level.

 

The Company complies with Section 1158 of the Corporation Tax Act 2010 and does not invest more than 15% of its assets in the shares of any one company. The Company invests no more than 15% of its gross assets in other listed investment companies (including listed investment trusts).

 

Gearing

The Company's gearing policy is that borrowings are short-term in nature and particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy. At the year end there was net gearing of 1.7% which compares with a maximum Board-imposed limit of 15%.

 

Benchmark

The Company's benchmark is the Stock Exchange of Thailand Index ("SET Index").

 

Key Performance Indicators ("KPIs")

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

 

KPI

Description

Capital and total return of the Net Asset Value ("NAV") relative to SET Index

 

The Board considers the Company's NAV capital and total return figures, relative to the SET Index, to be the best indicator of performance over time.  The figures for this year and for the past three and five years and a graph showing NAV (including income) capital return performance against the SET Index over the past 10 years may be found in the Annual Report.

 

Discount/premium to NAV

The discount/premium at which the Company's share price trades relative to the NAV per share, including income, is closely monitored by the Board. A graph showing the discount/premium over the last five years is shown in the Annual Report.

 

Ongoing charges

The Board regularly monitors the Company's operating costs and their composition with a view to assessing value-for-money. Ongoing charges for this year and the previous year are disclosed in Results.

 

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial position, performance and prospects. The Board has carried out a robust assessment of these risks, which include those that would threaten its business model, future performance and solvency. The principal risks associated with an investment in the Company's shares are published monthly in the Company's factsheet or they can be found in the pre-investment disclosure document ("PIDD") published by the AIFM, both of which are available from the Company's website: newthai-trust.co.uk.

 

The principal risks and uncertainties faced by the Company are reviewed annually by the Audit and Management Engagement Committee in the form of a detailed risk matrix and heat map and they are described in the table below, together with any mitigating actions.

 

Description

Mitigating Action

Discount volatility - being the risk that the Company's share price may fluctuate and vary considerably from the underlying NAV of the Ordinary shares. External factors which may influence the discount include market conditions, general investor sentiment and the interaction of supply and demand for the Ordinary shares.

 

The Board has agreed with Aberdeen certain parameters within which Aberdeen may buy-back the Company's own shares bearing in mind that the Company's operating costs would be spread across a reduced number of shares. These parameters are reviewed on an ongoing basis. Any shares repurchased may be either cancelled or held in treasury.

 

Dividends - the Company will only pay a dividend on the Ordinary shares to the extent that it has profits or revenue reserves available for that purpose. The ability of the Company to pay a dividend, and any future dividend growth, will depend primarily on the level of income received from its investments. Accordingly, the amount of the dividends paid to Ordinary shareholders may fluctuate.

 

The Board monitors this risk by reviewing, at each meeting, short and longer-term income forecasts prepared by the Manager covering portfolio investment yield as well as the expected operating costs of the Company.

 

The Company benefits from revenue reserves which may be drawn upon to smooth dividends payable to shareholders where there is a shortfall in revenue returns.

 

Financial and Regulatory - the financial risks associated with the portfolio could result in losses to the Company. In addition, failure to comply with relevant regulation (including the Companies Act, the Financial Services and Markets Act, the Alternative Investment Fund Managers Directive, accounting standards, investment trust regulations and the Listing Rules, Disclosure and Transparency Rules and Prospectus Rules) may have an adverse impact on the Company. 

 

Any change in the Company's tax status or in taxation legislation (including the tax treatment of dividends or other investment income received by the Company) could affect the value of the investments held by the Company and the Company's ability to provide returns to shareholders or alter the post-tax returns to shareholders.

 

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 15 to the financial statements. The Board is responsible for ensuring the Company's compliance with applicable regulations. Monitoring of this compliance, and regular reporting to the Board thereon, has been delegated to the Manager. The Board receives updates from the Manager and AIC briefings concerning industry changes. From time to time, the Company also employs external advisers covering specific areas of compliance.

Foreign Exchange Risks - the Company accounts for its activities and reports its results in Pounds Sterling ("sterling") while investments are made and realised in Thai Baht; bank borrowings are presently denominated in sterling. It is not the Company's present intention to engage in currency hedging although it reserves the right to do so. Accordingly, the movement of exchange rates between sterling, Thai Baht and other currencies in which the Company's borrowings may be drawn down from time to time may have a material effect, unfavourable as well as favourable, on the total return otherwise experienced on the investments made by the Company.

 

The Company's multi-currency bank facility permits the borrowings to be drawn down in non-sterling currencies if required. The Board monitors the Thai baht/sterling exchange rate at each meeting.

 

 

 

 

 

 

 

 

 

 

Gearing - whilst the use of gearing should enhance the total return on the Ordinary shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is less than the cost of borrowing, further reducing the total return on the Ordinary shares. A fall in the value of the Company's investment portfolio could result in a breach of bank covenants and trigger demands for early repayment.

 

The Board is responsible for determining the gearing strategy for the Company, with day-to-day gearing decisions being made by the Investment Manager.

 

Borrowings are short term in nature and particular care is taken to ensure that any bank covenants permit maximum flexibility of investment policy. The Board has agreed certain gearing restrictions with the Manager and reviews compliance with these guidelines at each Board meeting. Loan agreements are entered into following review by the Company's lawyers.

 

Investment objective - 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 investment objective and policy under regular review. An annual strategy meeting is held by the Board including the review of reports from the Investment Manager's investor relations team and updates on the market from the Company's broker.

 

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

 

In addition, the Company, and/or its Investment Manager may accumulate investment positions which represent more than normal daily trading volumes which may make it difficult to realise investments quickly.

 

Liquidity risk is not considered to be significant as, whilst liquidity is limited in certain stocks which the Company holds, the majority of the Company's assets comprise readily realisable securities which can be sold to meet funding requirements if necessary.

 

The Board reviews, at each meeting, the liquidity profile of the Company's investment portfolio.

 

Market risk - being the risk that the portfolio, managed by the Investment Manager, suffers a fall in its market value which would have an adverse effect on shareholders' funds. The Company's investments are subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of equity securities and there can be no assurance that appreciation in the value of those investments will occur.

 

The Investment Manager's investment process concentrates on a company's business strategy, management, financial strength, ownership structure as well as corporate governance, with a view to seeking companies that it can invest in for the long term. This quality test means that there are stocks listed on the Stock Exchange of Thailand which the Investment Manager will not invest in due to a perceived lack of transparency or poor corporate governance.

 

The Investment Manager seeks to diversify market risk by investing in a wide variety of companies with strong balance sheets and the earnings power to pay increasing dividends. In addition, investments are made in diversified sectors in order to reduce the risk of a single large exposure; at present the Investment Manager may not invest more than 10% of the Company's net assets in any single stock.

 

The Investment Manager believes that diversification should be looked at in absolute terms rather than relative to the SET Index. The performance of the portfolio relative to the SET Index and the underlying stock weightings in the portfolio against their index weightings are monitored closely by the Board.

 

Operational - the Company has contracted with third parties for the provision of all systems and services (in particular, those of the Aberdeen Group) and any control failures and gaps in these systems and services could result in a loss or damage to the Company.

The Board receives reports from the AIFM throughout the year on internal controls and risk management and receives equivalent assurances from all its other significant service providers on at least an annual basis. This includes monitoring by the Manager, on behalf of the Board, of service providers' planning for business continuity and disaster recovery, together with their policies and procedures designed to address the risk posed to the Company's operations by cyber-crime. Further details of the internal controls which are in place are set out in the Audit and Management Engagement Committee's Report. The depositary, BNP Paribas, presents at least annually on the Company's compliance with AIFMD.

 

Political Risk and Exchange Controls - in common with the majority of Asian stockmarkets, investments in Thailand are subject to a greater degree of political risk than that with which investors might be familiar.

 

In addition, investments purchased by the Company may be subject, in the future, to exchange controls or withholding taxes in the Thai jurisdiction. In the event that exchange controls or withholding taxes are imposed with respect to any of the Company's investments, the effect will generally be to reduce both the income received by the Company from its investments and/or the capital value of the affected investments.

 

 

 

Given the nature of the risks to which the Company's investments are subject, which are those inherently associated with a single-country fund, there are limited options available to the Board for mitigating these risks.  Your Board believes that mitigation is best effected by careful selection of the constituents of the Company's portfolio with high-calibre, financially-sound companies, with good management and excellent growth potential.

 

Investment in Thai equities involves a greater degree of risk than that usually associated with investment in major securities markets. Through regular interaction with the Manager and other commentators, the Board stays up-to-date with the latest political and economic news in Thailand.

 

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 companies under its management. The Company's financial contribution to the programme is matched by the Aberdeen Group.  The Aberdeen Group Head of Brand reports quarterly to the Board giving analysis of the promotional activities as well as updates on the shareholder register and any changes in the composition 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 and experienced individuals with sufficient and appropriate knowledge to allow the Board to fulfill its obligations. As at 28 February 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 day to day management and administrative functions to AFML. There are therefore no disclosures to be made in respect of employees. The Company's socially responsible investment policy is outlined below.

 

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. Notwithstanding this, 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.

 

Socially Responsible Investment Policy

The Board acknowledges that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner and has noted the Aberdeen Group's policy on socially responsible investment. The corporate responsibility programme of the AIFM's parent company, Aberdeen Asset Management PLC, including its environmental policy, can be found on http://www.aberdeen-asset.com/aam.nsf/groupCsr/home.

 

Global Greenhouse Gas Emissions

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

 

Future

The Board expects the Company to continue to pursue its investment objective and accepts that this may involve divergence from the benchmark. The companies which make up the investment portfolio are considered by the Investment Manager to demonstrate resilience in the context of the complicated Thai political situation and to offer opportunities for investors to benefit from the development of the broader Thai economy.

 

In addition, 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 changes to the pensions and savings market in the UK.  These factors need to be considered alongside likely future developments for the Company's investments and the Board's expectations in this regard can be found in the Chairman's Statement whilst the Investment Manager's views are included in its Report.

 

Nicholas Smith

Chairman

 

26 April 2017

 

 

 

INVESTMENT MANAGER'S REPORT

 

Overview

Thai equities rose over the year to 28 February 2017, despite heightened global uncertainty arising from external events, notably the EU referendum, Donald Trump's US election win and the Federal Reserve's plans to accelerate the pace of interest rate hikes. Meanwhile, oil prices rebounded as non-members joined OPEC in curbing output via a Saudi-brokered deal. Macroeconomic performance at home was mixed, although resilient tourism underpinned the economy. To stimulate consumption further, the government introduced tax deductions on purchases of specific community-based products, and tweaked personal income taxes to include larger deductions and widening income brackets to benefit the middle-class. The passing of King Bhumibol overshadowed all other domestic events towards the end of the period, with the prime minister declaring one year of official mourning. However, businesses were encouraged to continue operating within respectful bounds to mitigate the economic impact. Prince Maha Vajiralongkorn was named the Kingdom's 10th monarch, with his coronation to be held after the late king's cremation later in 2017.

 

Portfolio

Over the year ended 28 February 2017, the Thai stockmarket had a bullish run that saw the local benchmark rise by 36.5% in sterling terms. This was partly due to sterling weakness and increased foreign fund flows from passive investment vehicles as a result of Brexit, as well as a rally in the energy sector on the back of recovering oil prices. However, the portfolio lagged the benchmark and returned 26.5% in sterling terms, largely because of stock selection.

 

The portfolio was disadvantaged by a lack of exposure to mainstays of the benchmark that did well on the back of an influx of indiscriminate passive buying. Among these were energy giant PTT and convenience store operator CP All. PTT posted a substantial jump in net profits on the back of a rebound in oil prices, while CP All continued to perform well despite a scandal involving insider trading by top management. We do not hold both PTT and CP All, given transparency and corporate governance issues. Another non-holding was Group Lease, whose shares surpassed the benchmark after attracting funds from Japanese investor J-Trust Co, but subsequently faltered as news of accounting irregularities surfaced. The portfolio's non-exposure to PTT Global Chemical and Indorama also hurt returns as the global chemical sector continued to consolidate. Polyester value chain company Indorama has also been on an aggressive acquisition and expansion path globally.

 

Meanwhile, BEC World suffered from challenging operating conditions, exacerbated by the mourning period for the late King as spending by advertisers plunged. The portfolio continues to hold a relatively small position in the company because we continue to believe in the firm's well-established franchise and are confident that its earnings will start to recover in the near term.

 

Among the key contributors to the portfolio's performance was local mining giant Banpu, which benefited after a production cut in China pushed coal prices up, while its regional power generation operations and recently-launched US shale gas business helped profits. Similarly, utility provider Egco's shares were lifted by robust earnings from increased capacity both at home and abroad.

 

An improving domestic auto industry also had some positive impact on a few of your company's holdings. Thai Stanley Electric gained from better sales and prudent cost management, while Bangkok Insurance's revenue from its motor business, which contributes substantially to its profits, rose.

 

In the financial sector, Kiatnakin Bank did well as one-off divestment gains bolstered earnings, while Tisco Financial Group reported healthy profits, driven by higher margins and lower provisions. Separately, the market cheered its acquisition of Standard Chartered Thailand's consumer loan business for 5.5 billion baht. Another contributor to returns was Aeon Thana Sinsap, which enjoyed better commissions, a reduction in expenses, and good asset quality.

 

DIY retailer Home Product Center was aided by resilient same-store sales, as well as its ongoing expansion in the region. Hana Microelectronics benefited from a cyclical upturn and increased exports to announce decent income. Elsewhere, small-cap holding Alucon's stock rallied on the back of greater demand and efficient cost controls.

 

In portfolio activity, we participated in the initial public offering of Banpu subsidiary Banpu Power, a power-generation company with quality management, robust financials and a decent growth profile. We also introduced Land & Houses, one of Thailand's leading property developers. It has a good land bank, experienced management and seems attractively-valued, with a healthy dividend yield.

 

Against this, we sold Amarin Printing & Publishing, a long-held stock that has suffered from a tough operating environment in recent years. We also exited Ratchaburi Electricity Generating due to concerns over its business direction and strategy.

 

Outlook

Despite the volatility arising from a spate of events, both at home and abroad, Thai equities have largely remained resilient and its stockmarket one of the best-performing, relative to its peers in the region. While we think the protracted rally is likely to taper off and post more modest returns in the year ahead, we maintain our optimism on the country's prospects.

 

Improving exports, along with a robust tourism industry, continue to underpin Thailand's growth, whereas increased public spending should also bode well for the economy. With government debt still manageable, policymakers have the wherewithal to stimulate growth, should the need arise. Meanwhile, the central bank has kept interest rates stable, although it stands ready to loosen monetary policy where necessary, given potential market volatility from rising US rates.

 

On the trade front, we expect Thailand to remain largely unaffected by US president Donald Trump's protectionist trade stance. However, this could change if the US should impose restrictions on more significant trading partners such as China and Japan, which may have a secondary impact on the kingdom. That being said, the portfolio's holdings are mostly market leaders in their respective industries, and we are confident that they possess solid fundamentals that will help them weather any challenges that may arise in the year ahead.

 

Aberdeen Asset Management Asia Limited

Manager

 

26 April 2017

 

 

PERFORMANCE

1 year return

3 year return

5 year return


%

%

%

Total return (capital return plus dividends reinvested)




Share price

+27.8

+53.4

+81.4

Net asset value (basic)

+26.5

+51.0

+68.4

SET Index

+36.5

+63.2

+77.4





Capital return




Share price

+25.0

+44.2

+63.9

Net asset value (basic)

+24.3

+43.4

+54.8

SET Index

+32.2

+48.1

+50.6

Source: Aberdeen Group/Morningstar & Lipper




 

 

FINANCIAL HIGHLIGHTS

 


28 February 2017

28 February 2016

%
change

Total assets

£113,862,000

£98,582,000

+15.5

Equity shareholders' funds (net assets)

£111,212,000

£95,932,000

+15.9

Market capitalisation

£94,496,000

£81,030,000

+16.6





Ordinary share price (mid-market)

510.00p

408.00p

+25.0

Net asset value per Ordinary share

600.22p

483.03p

+24.3





Discount to net asset value (excluding current year income)

13.5%

13.9%


Discount to net asset value (including current year income)

15.0%

15.5%


Stock Exchange of Thailand ("SET") Index

35.90

27.17

+32.1

(Sterling adjusted, capital return)




Net gearing{A}

1.68%

2.20%






Dividends and earnings




Revenue return per share

10.31p

8.89p

+16.0

Proposed final dividend per share

10.30p

8.50p

+21.2

Dividend cover

1.00

1.05


Revenue reserves (prior to payment of proposed final dividend)

£4,026,000

£3,702,000






Operating costs




Ongoing charges ratio{B}

1.39%

1.45%


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

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

 

 

DIVIDENDS


Rate

ex-dividend date

Record date

Payment date

Proposed final dividend 2017

10.30p

01 June 2017

02 June 2017

3 July 2017

Final dividend 2016

8.50p

02 June 2016

03 June 2016

28 June 2016

 

 

TEN YEAR FINANCIAL RECORD

 

Year to 28 February

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Total revenue (£'000)

1,726

1,845

1,766

2,652

2,961

2,934

3,715

3,546

3,573

3,894

Per share (p)











Net revenue return

3.92

4.86

5.15

8.28

8.87

7.39

8.73

8.20

8.89

10.31

Net dividends proposed

2.75

3.50

5.10

8.00

8.00

7.00

8.00

8.20

8.50

10.30

Net asset value - basic

196.18

139.67

222.99

306.57

387.73

569.58

418.64

542.49

483.03

600.22

Ordinary share price

187.00

120.00

171.50

241.25

311.25

537.50

353.75

458.25

408.00

510.00


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

Equity shareholders' funds (£'000)

35,500

25,273

39,835

56,530

72,106

120,873

87,175

112,640

95,932

111,212


_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

 

 



INVESTMENT PORTFOLIO - TEN LARGEST INVESTMENTS

As at 28 February 2017

 



Valuation

Total

Valuation



2017

Assets

2016

Company

Sector

£'000

%

£'000 {A}

Siam Cement





Thailand's largest industrial conglomerate with operations in petrochemicals, cement, paper and building materials.

Construction Materials

6,681

5.9

5,700

Big C Supercenter





One of the two leading hypermarkets in Thailand, a subsidiary of the French Casino Group.

Commerce

5,872

5.1

6,360

Advanced Info Service





Thailand's largest and leading provider of wireless communication services with over 50% revenue market share and 44 million subscribers.

Information & Communication Technology

5,742

5.0

3,473

Bangkok Insurance





One of the country's largest non-life insurance companies, affiliated with Bangkok Bank.

Insurance

5,698

5.0

5,149

Kasikornbank





Fourth largest commercial bank in terms of assets, founded by the Lamsam family. Formerly known as Thai Farmers Bank.

Banking

5,470

4.8

5,084

Siam Commercial Bank





Third largest commercial bank in terms of assets. Crown Property Bureau is a major shareholder.

Banking

5,345

4.7

4,850

Aeon Thana Sinsap





Consumer financial services provider offering hire purchase and personal loans.

Finance & Securities

4,281

3.8

3,363

Home Product Center





Retailer of building materials and home improvement products.

Commerce

4,033

3.5

3,132

PTT Exploration & Production





Exploration & production company arm of PTT Plc with reserves mainly in Thailand.

Energy & Utilities

3,967

3.5

3,697

Hana Microelectronics





Electronics manufacturing service company.

Electronic Components

3,883

3.4

3,062

Top ten investments


50,972

44.7



{A}       Purchases and/or sales effected during the year will result in 2016 and 2017 values not being directly comparable.

 

 



INVESTMENT PORTFOLIO - OTHER INVESTMENTS

As at 28 February 2017

 



Valuation

Total

Valuation



2017

assets{A}

2016

Company

Sector

£'000

%

£'000{B}

Thai Stanley Electric

Automotive

3,594

3.2

2,471

Electricity Generating

Energy & Utilities

3,528

3.1

2,808

Central Pattana

Property Development

3,414

3.0

2,410

Banpu{C}

Energy & Utilities

3,367

3.0

2,147

Eastern Water Resources Development & Management

Energy & Utilities

3,126

2.7

2,935

Siam City Cement

Construction Materials

3,027

2.7

2,664

Tisco Financial Group

Banking

2,954

2.6

2,708

Minor International{C}

Food & Beverage

2,826

2.5

2,270

Bangkok Bank

Banking

2,821

2.5

2,453

Dynasty Ceramic

Construction Materials

2,789

2.4

2,351

Top twenty investments


82,418

72.4


Alucon

Packaging

2,698

2.4

1,610

Bangkok Dusit Medical Services

Health Care Services

2,462

2.2

1,870

BEC World

Media & Publishing

2,422

2.1

3,883

Kiatnakin Bank

Banking

2,225

1.9

1,755

Tesco Lotus Retail Growth Freehold & Leasehold Property Fund (Local market shares)

Property Fund & REITS

2,168

1.9

2,024

Goodyear (Thailand)

Automotive

1,998

1.7

1,804

Thai Reinsurance

Insurance

1,992

1.7

2,386

Bumrungrad Hospital

Health Care Services

1,955

1.7

1,802

Land & Houses{D}

Property Development

1,785

1.6

-

Sammakorn

Property Development

1,675

1.5

1,592

Top thirty investments


103,798

91.1


LPN Development

Property Development

1,663

1.5

1,699

Muang Thai Insurance

Insurance

1,555

1.4

1,590

Banpu Power

Energy & Utilities

1,406

1.2

-

MFC Asset Management{C}

Finance & Securities

1,330

1.2

1,344

Thaire Life Assurance

Insurance

1,247

1.1

1,197

Prakit Holdings

Media & Publishing

1,143

1.0

1,065

Haad Thip

Food & Beverage

1,022

0.9

863

Total investments


113,164

99.4


Net current assets{E}


698

0.6


Total assets{A}


113,862

100.0


{A}      Total Assets defined as per the balance sheet less current liabilities (before deducting prior charges)

{B}       Purchases and/or sales effected during the year will result in 2016 and 2017 values not being directly comparable.

{C}      Holding includes investment in both common and warrant lines.

{D}      Holding includes investment in both common stock and non-voting depositary receipts.

{E}      Excludes bank loans of £2,650,000.

 

Note: Unless otherwise stated, foreign stock is held.

 

 

DIRECTORS' REPORT

 

The Directors present their Report and the audited financial statements of the Company for the year ended 28 February 2017, taking account of any events between the year end and the date of approval of this Report.

 

Results and Dividend

The Directors recommend that a final dividend per share of 10.3p (2016 - 8.5p per share) is paid on 3 July 2017 to shareholders on the register on 2 June 2017. The ex-dividend date is 1 June 2017. A resolution in respect of the final dividend will be proposed at the forthcoming AGM.

 

Investment Trust Status and ISA Compliance

The Company is registered as a public limited company in England & Wales under registration number 02448580 and has been accepted by HM Revenue & Customs as an investment trust for accounting periods beginning on or after 1 March 2012, subject to the Company continuing to meet the eligibility conditions of s1158 of the Corporation Tax Act 2010 (as amended) and S.I. 2011/2099. In the opinion of the Directors, the Company's affairs have been conducted in a manner to satisfy these conditions and enable it to continue to qualify as an investment trust for the year ended 28 February 2017. The Company intends to manage its affairs so that its shares will be qualifying investments for the stocks and shares component of an Individual Savings Account.

 

Capital Structure and Voting Rights

During the year ended 28 February 2017 the Company bought back and cancelled 1,331,650 Ordinary shares (2016 - 903,143 Ordinary shares). As at 28 February 2017, the Company's issued share capital consisted of 18,528,632 Ordinary shares (2016 - 19,860,282 Ordinary shares) with each share holding one voting right in the event of a poll. An additional 164,500 Ordinary shares were bought back between 1 March 2017 and the date of approval of this Annual Report resulting in 18,364,132 Ordinary shares in issue, with voting rights.

 

Ordinary shareholders are entitled to vote on all resolutions which are proposed at general meetings of the Company. The Ordinary shares carry a right to receive dividends. On a winding up, 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 and regulation (for example, the UK Market Abuse Regime).

 

Manager and Company Secretary

The Company has appointed AFML, a wholly-owned subsidiary of Aberdeen Asset Management PLC, as its alternative investment fund manager ("AIFM"). AFML has been appointed to provide the Company with investment management, risk management, administration and company secretarial services as well as promotional activities.  The Company's portfolio is managed by AAMAL by way of a group delegation agreement in place between AFML and AAMAL. 

 

The management fee is charged to the Company on the following basis: a monthly fee, payable in arrears, calculated on an annual rate of 1.0% of total assets less current liabilities, with a rebate to the Company for any fees received in respect of any investments by the Company in investment vehicles managed by the Aberdeen Group. There is no performance fee payable to the Manager.

 

The management agreement is terminable by either party on not less than 12 months' notice. In the event of termination on less than the agreed notice period, compensation is payable in lieu of the unexpired notice period.

 

The fees payable to Aberdeen Group during the year ended 28 February 2017 are disclosed in Notes 4 and 5 to the financial statements. The investment management fees are charged 100% to revenue.

 

The terms and conditions of the Manager's appointment, including an evaluation of performance and fees, are reviewed by the Board on an annual basis. The Board believes that the continuing appointment of the Investment Manager (through the Manager) on the terms agreed is in the interests of shareholders as a whole. The Board also undertakes a review of the management fees in comparison with other funds and believes that the Company's current level of management fees remains competitive.

 

In addition, AFML has sub-delegated promotional activities to Aberdeen Asset Managers Limited ("AAM") and administrative and secretarial services to Aberdeen Asset Management PLC.

 

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, as required by the Listing Rules of the UK Listing Authority, this statement describes how the Company applies the Main Principles identified in the UK Corporate Governance Code published in September 2014 (the "UK Code") and which first applied to the Company's year ended 28 February 2016. The UK Code is available on the Financial Reporting Council's ("the FRC") website: frc.org.uk.

 

The Board has also considered the principles and recommendations of the AIC Code of Corporate Governance as published in February 2015 ("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 against 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 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 full text of the Company's Statement of Corporate Governance can be found on its website: newthai-trust.co.uk

 

Substantial Interests

As at 28 February 2017, the following were registered, or had notified the Company, as being interested in 3% or more of the Company's Ordinary share capital:

 

 

The above share interests were unchanged as at the date of approval of this Report other than notifications to the Company by Lazard Asset Management of a holding of 4,227,907 shares, equivalent to 22.9% of the Company's issued share capital and by City of London of a holding of 3,134,729 shares, equivalent to 17.0% of the Company's issued share capital.

 

Directors

The Board consists of a non-executive Chairman and four non-executive Directors, all of whom held office throughout the year under review other than Sarah MacAulay, who was appointed on 7 December 2016, and James Robinson who retired on 23 June 2016. The Senior Independent Director is Clare Dobie who succeeded James Robinson with effect from 23 June 2016.

 

The names and biographies of each of the Directors are shown in the Annual Report and on the Company's website and indicate their range of experience as well as length of service. Each Director has the requisite high level and range of business and financial experience which enables the Board to provide clear and effective leadership and proper stewardship of the Company.

 

The Directors attended Board and Committee meetings during the year ended 28 February 2017 as follows (with their eligibility to attend the relevant meeting in brackets):

 

Director

Board Meetings

Audit and Management Engagement Committee Meetings

Nomination Committee Meetings

Nicholas Smith

5 (5)

3 (3)

2 (2)

James Robinson A

2 (2)

1 (1)

1 (1

Clare Dobie

5 (5)

3 (3)

2 (2)

Andy Pomfret

5 (5)

3 (3)

2 (2)

Sarah MacAulay B

n/a

n/a

n/a

Hugh Young C

4 (5)

-

-

 

A          James Robinson retired as a Director on 23 June 2016

B           Sarah MacAulay was appointed a Director on 7 December 2016

C        Hugh Young is not a member of either the Audit and Management Engagement Committee or the Nomination Committee

 

One of the five Board Meetings held each year is devoted to strategic matters including review of longer term performance, the relevance to investors of the Company's investment objective and policy, consideration of feedback from retail and institutional shareholders and an assessment of the future prospects for the Company.

 

All of the Directors will retire at the AGM. Hugh Young is not seeking for re-election as a Director. Nicholas Smith, Clare Dobie and Andy Pomfret, being eligible, offer themselves for re-election as Directors of the Company. Sarah MacAulay offers herself for election as a Director of the Company. The Board as a whole believes that each Director standing for election or re-election remains independent of the AIFM and free of any relationship which could materially interfere with the exercise of his or her independent judgement on issues of strategy, performance, resources and standards of conduct and confirms that, following formal performance evaluations, the individuals' performance continues to be effective and demonstrates commitment to the role. The Board therefore has no hesitation in recommending the election of Sarah MacAulay and the re-election as Directors at the AGM of Nicholas Smith, Clare Dobie and Andy Pomfret.

 

Directors' Insurances and Indemnities

The Company maintains insurance in respect of Directors' and Officers' liabilities in relation to their acts on behalf of the Company. Furthermore, each Director of the Company is entitled to be indemnified out of the assets of the Company to the extent permitted by law against all costs, charges, losses, expenses and liabilities incurred by them in the actual or purported execution and/or discharge of their duties and/or the exercise or purported exercise of their powers and/or otherwise in relation to or in connection with their duties, powers or office. These rights are included in the Articles of Association of the Company and the Company has granted indemnities to each Director on this basis.

 

Management of Conflicts of Interest and Anti-Bribery Policy

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, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his/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/her wider duties is affected. Each Director is required to notify the Company Secretaries of any potential, or actual, conflict situations which 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 Directors are issued with letters of appointment upon taking up office. There were no contracts with the Company during, or at the end of the year, in which any Director was interested.

 

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

 

Board Committees

The Directors have appointed a number of Committees as set out below. Copies of their terms of reference, which define the responsibilities and duties of each Committee, are available on the Company's website and from the Company Secretaries, on request.

 

Audit and Management Engagement Committee

The Audit and Management Engagement Committee's Report may be found in the Annual Report.

 

Nomination Committee

All appointments to the Board of Directors are considered by the Nomination Committee which comprises the whole Board and was chaired during the year by Nicholas Smith.

 

The Committee's overriding priority in appointing new Directors to the Board is to identify the candidate with the optimal range of skills and experience to complement the existing Directors. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Directors. As described in the Chairman's Statement, the Board engaged Nurole Limited, an independent search consultancy with no other connection to either the Company or the Manager, to assist with the recruitment of Sarah MacAulay.

 

As the Company has no employees and the Board is comprised wholly of non-executive Directors and, given the size and nature of the Company, the Board has not established a separate Remuneration Committee. Directors' remuneration is determined by the Nomination Committee.

 

Accountability and Audit

The responsibilities of the Directors, in connection with the financial statements, appear below.

 

The Directors who held office at the date of this Report each confirm that, so far as he or she is aware, there is no relevant audit information of which the Company's Auditor is unaware, and that he or she has taken all the steps that he or she could reasonably be expected to have taken as a Director in order to make him or her aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

 

Additionally there have been no important events since the year end which warrant disclosure.

 

The Directors have reviewed the level of non-audit services provided by the Auditor during the year, together with the auditor's procedures in connection with the provision of such services, and remain satisfied that the Auditor's objectivity and independence is being safeguarded.

 

Going Concern

The Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's assets consist entirely of equity shares in companies listed on the Stock Exchange of Thailand which are, in most circumstances, realisable within a short timescale.

 

The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants. On 28 October 2015, the Company entered into a three-year multi-currency revolving loan facility ("the Facility") with Scotiabank (Ireland) Limited for £10m. As at 28 February 2017, £2.65m had been drawn down under the Facility.

 

The Directors are mindful of the principal risks and uncertainties disclosed above and in Note 15 to the financial statements. After making enquiries, including a review of forecasts detailing revenue and liabilities, the Directors have a reasonable expectation that the Company possesses adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

Continuance of the Company

The Company does not have a fixed life. However, under Article 156 of the Articles of Association, if, in the 12 weeks preceding the Company's financial year-end (28 February), the Ordinary shares have been trading, on average, at a discount in excess of 15% to the underlying NAV per share over the same period, notice will be given of a special resolution to be proposed to wind up the Company. In the 12 weeks ended 28 February 2017, the Ordinary shares traded at an average discount of 14.8% to the underlying NAV per share (including income), therefore no such resolution will be put to the Company's shareholders at the forthcoming AGM. In October 2016 the Directors announced that, after consideration, the relevant NAV for these purposes would be calculated including undistributed net revenue for the period.

 

Viability Statement

The Company does not have a formal fixed period strategic plan but the Board does formally consider risks and strategy on at least an annual basis. The Board considers the Company, with no fixed life, to be a long term investment vehicle, but for the purposes of this viability statement has decided that a period of 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.

 

Accordingly, 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. In making this assessment, the Board has considered that matters such as a large economic shock, a period of significant stock market volatility, a significant reduction in the liquidity of the portfolio, or changes in regulations and investor sentiment, could have an impact on its assessment of the Company's prospects and viability in the future.

 

In particular the Board recognises that this assessment makes the assumption that the Company's average discount to the NAV per Ordinary share (including income) for the 12 weeks ended 28 February 2018 and 12 weeks ended 28 February 2019, individually, does not exceed 15% which negates the requirement to put to shareholders at the AGMs to be held in either 2018 or 2019, a special resolution to wind up the Company.

 

The Directors have also considered the maturity of the Company's 3-year, £10 million bank loan facility in October 2018. The Company will enter into negotiations with its bankers in advance of renewal in October 2018. If acceptable terms are available from the existing bankers, or any alternative, the Company would expect to continue to access the Facility. However, should these terms not be forthcoming, any outstanding borrowing will be repaid through the proceeds of equity sales.

 

Independent Auditor

The Directors will place resolutions before the Annual General Meeting to appoint Deloitte LLP as auditor for the year to 28 February 2018, replacing KPMG LLP, and to authorise the Directors to determine Deloitte LLP's remuneration.

 

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 AIFM which has sub-delegated that authority to the Investment Manager.

 

The Investment Manager is responsible for reviewing the annual reports, circulars and other publications issued by portfolio companies and for attending their company meetings. The Investment Manager, in the absence of explicit instruction from the Board, is empowered to use discretion in the exercise of the Company's voting rights. The Investment Manager's policy is to vote on all shares held by the Company. The Board recognises and supports the Aberdeen Group's policy of active engagement with investee companies and the voting of all of the shares held by the Company. The Board receives regular reports on the exercise of the Company's voting rights and discusses any issues arising with the Investment Manager.

 

In exercising the Company's voting rights, the Aberdeen Group follows a number of principles which set out the framework on corporate governance, proxy voting and shareholder engagement in relation to the companies in which the Aberdeen Group has invested or is considering investing. The Board has reviewed these principles together with the Aberdeen Group's Disclosure Response to the UK Stewardship Code, and is satisfied that the exercise of delegated voting powers by the Investment Manager is being properly executed. The Aberdeen Group's Corporate Governance Principles together with the Aberdeen Group's Disclosure Response to the UK Stewardship Code may be found on the Aberdeen Group's website, at: www.aboutus.aberdeen-asset.com/en/aboutus/expertise/equities/stewardship

 

Relations with Shareholders

The Directors place great importance on communication with shareholders. The Annual Report is widely distributed to other parties who have an interest in the Company's performance. Shareholders and investors may obtain up-to-date information on the Company through its website, newthai-trust.co.uk, or via the Aberdeen Group's Customer Services Department. The Company responds to letters from shareholders on a wide range of issues.

 

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

 

In addition, members of the Board accompany the Manager when undertaking a series of meetings with institutional shareholders.

 

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, as appropriate, on behalf of the Board.

 

The Notice of AGM included within the Annual Report is normally sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board and Investment Manager at the Company's AGM.

 

Annual General Meeting

The AGM will be held on 28 June 2017 and the AGM Notice and related notes may be found in the Annual Report. Resolutions relating to the following items of business will be proposed at the forthcoming AGM:-

 

Authority to Allot Relevant Securities

Ordinary Resolution No. 11 in the Notice of AGM will renew the authority to allot the unissued share capital up to 10% of the Company's issued share capital as at the date of the passing of the resolution (equivalent to approximately 1.8m Ordinary shares). Such authority will expire on the date of the next AGM or on 22 August 2018, whichever is earlier. This means that the authority will have to be renewed at the next AGM.

 

Limited Disapplication of Pre-emption Provisions

Resolution 12, which is a Special Resolution, will, if passed, renew the Directors' existing authority to make limited allotments of shares for cash other than according to the statutory pre-emption rights which require all shares issued for cash to be offered first to all existing shareholders provided such allotments are made at a price per Ordinary share above the prevailing NAV per Ordinary share. This authority includes shares that the Company sells or transfers out of Treasury which have been previously bought back into Treasury (if any) pursuant to the authority conferred by Resolution 13 below. The Board will only consider buying in Ordinary shares for cancellation, or for holding in Treasury, at a price which represents a discount to their prevailing NAV. In line with the authority sought under Resolution 11, Resolution 12 will, if passed, give the Directors power to allot, for cash, securities up to 10% of the total issued share capital at the date of the passing of the resolution (equivalent to approximately 1.8m Ordinary shares) other than according to the statutory pre-emption rights.

 

The authorities being sought under Resolutions 11 and 12, which will expire on the date of the earlier of the next AGM in 2018 or 22 August 2018, will give the Board flexibility to take advantage of any opportunities to issue new Ordinary shares within a shorter period than would otherwise be the case.

 

Directors' Authority to Purchase the Company's Ordinary Shares

Resolution 13, a Special Resolution, will be proposed to renew the Directors' authority to make market purchases of the Company's Ordinary shares, in accordance with the provisions contained in the Companies Act and the Listing Rules of the UK Listing Authority.

 

Accordingly, the Company is seeking authority, under Resolution 13, to purchase up to a maximum of approximately 2.8m Ordinary shares, or if less, that number of Ordinary shares equivalent to 14.99% of the issued Ordinary share capital at the date of the passing of the Resolution at a minimum price of not less than 25p per Ordinary share (being the nominal value) and a maximum price of not more than the higher of (i) an amount equal to 5% above the average of the middle market quotation for an Ordinary share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the Ordinary share is purchased; and (ii) the higher of the price of the last independent trade and the current highest independent bid on the stock market where the purchase is carried out.

 

If passed, Resolution 13 will permit the Company to purchase Ordinary shares under the guidelines described above. Any Ordinary shares purchased in this way will either be cancelled, and the number of Ordinary shares in issue reduced accordingly or, under the power granted by Resolution 13, may be held in Treasury. The authority sought under Resolution 13 will expire on the earlier of date of the next AGM in 2018 and 27 August 2018, whichever is earlier, unless renewed prior to such time.

 

Adoption of new Articles of Association

The Company does not have a fixed life. However, under the Articles of Association, if in the 12 weeks preceding the Company's financial year end (28 February) the ordinary shares have been trading, on average, at a discount in excess of 15% to the underlying net asset value over the same period, notice will be given of a special resolution to be proposed at the following Annual General Meeting that the Company be put into voluntary liquidation. In the Company's Half Yearly Report for the six months ended 31 August 2016 it was announced that after consideration, the Directors had determined that, for these purposes, the relevant net asset value will be calculated including undistributed net revenue for the period.  After further consideration, the Directors have proposed that the basis for calculation of the relevant net asset value should be clarified in the Company's Articles of Association. Accordingly, Resolution 14 proposes the adoption of new Articles of Association to reflect that net asset value will be calculated on this basis. The proposed changes to the Articles of Association are in italics as follows:

 

"156.     DURATION OF THE COMPANY

In each year the Directors shall procure that, in the event that the average of the mid-market closing prices of the ordinary shares for each day upon which the London Stock Exchange is open for business in the twelve weeks immediately preceding the Company's accounting reference date (as derived from the Daily Official List of the London Stock Exchange) is more than 15 per cent. below the average underlying net asset value per ordinary share over the same period (as certified by the Auditors), notice will be given of a special resolution to be proposed at the next following annual general meeting that the Company be unitised or put into voluntary liquidation. For these purposes, net asset value per ordinary share will be calculated taking into account the Company's undistributed net revenue for the period as part of the Company's assets. "Unitised" means an arrangement proposed by the Directors under which the Company is placed into voluntary liquidation and holders of ordinary shares in the Company become or may become participants in a collective investment scheme to which the surplus assets of the Company are transferred."

 

As required by the Listing Rules, copies of the existing articles of association and as amended will be available for inspection at the Company's registered office at Bow Bells House, 1 Bread Street, London EC4M 9HH during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) from the date of this document until the conclusion of the Annual General Meeting and at the place of the Annual General Meeting for at least 15 minutes prior to, and during, the Annual General Meeting.

 

Recommendation

The Board considers each of the AGM Resolutions to be in the best interests of the Company and its members as a whole and is likely to promote the success of the Company for the benefit of its members as a whole. Accordingly, the Board unanimously recommends that shareholders should vote in favour of the resolutions to be proposed at the AGM, as they intend to do in respect of their own shareholdings, amounting to 71,264 Ordinary shares.

 

Nicholas Smith

Chairman

 

26 April 2017

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors are responsible for preparing the Annual Report and the financial statements, in accordance with applicable law and regulations. 

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the company for that period.  In preparing these financial statements, the Directors are required to:

 

-      select suitable accounting policies and then apply them consistently; 

-      make judgements and estimates that are reasonable and prudent;

-      state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and 

-      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.  

 

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Responsibility statement of the Directors in respect of the annual financial report

 

We confirm to the best of our knowledge, that:

 

-    the financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

-    the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.

 

We consider that the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

 

For and on behalf of the Directors of Aberdeen New Thai Investment Trust PLC

 

Nicholas Smith

Chairman

 

26 April 2017

 

 



STATEMENT OF COMPREHENSIVE INCOME

 



Year ended 28 February 2017

Year ended 28 February
2016



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Gains/(losses) on investments

10

-

21,390

21,390

-

(13,001)

(13,001)

Income

3

3,894

-

3,894

3,573

-

3,573

Management fee

4

(1,044)

-

(1,044)

(943)

-

(943)

Administrative expenses

5

(427)

-

(427)

(427)

-

(427)

Currency losses


-

(65)

(65)

-

(126)

(126)


______

______

_____

______

______

______

Net return on ordinary activities before finance costs and taxation

2,423

21,325

23,748

2,203

(13,127)

(10,924)









Finance costs

6

(59)

-

(59)

(75)

-

(75)



______

______

_____

______

______

______

Return on ordinary activities before taxation


2,364

21,325

23,689

2,128

(13,127)

(10,999)









Taxation

7

(361)

-

(361)

(332)

-

(332)



______

______

_____

______

______

______

Return on ordinary activities after taxation


2,003

21,325

23,328

1,796

(13,127)

(11,331)



______

______

_____

______

______

______









Return per Ordinary share (pence)

9

10.31

109.78

120.09

8.89

(65.00)

(56.11)



______

______

_____

______

______

______


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

All revenue and capital items in the above statement are derived from continuing operations.

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

 

 



STATEMENT OF FINANCIAL POSITION

 



As at

As at



28 February 2017

28 February 2016


Notes

£'000

£'000

Non-current assets




Investments at fair value through profit or loss

10

113,164

98,079



___________

___________

Current assets




Debtors and prepayments

11

457

310

Money market funds


201

1

Cash at bank and in hand


578

432



___________

___________



1,236

743



___________

___________

Creditors: amounts falling due within one year




Bank loans

12

(2,650)

(2,650)

Other creditors

12

(538)

(240)



___________

___________



(3,188)

(2,890)



___________

___________

Net current liabilities


(1,952)

(2,147)



___________

___________

Net assets


111,212

95,932



___________

___________

Share capital and reserves




Called-up share capital

13

4,632

4,965

Share premium account


19,391

19,391

Capital redemption reserve


903

570

Capital reserve


82,260

67,304

Revenue reserve


4,026

3,702



___________

___________

Equity shareholders' funds


111,212

95,932



___________

___________





Net asset value per Ordinary share (pence)

14

600.22

483.03



___________

___________

 

 



STATEMENT OF CHANGES IN EQUITY

 

Year ended 28 February 2017









Share

Capital





Share

premium

redemption

Capital

Revenue



capital

account

reserve

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

Balance at 28 February 2016

4,965

19,391

570

67,304

3,702

95,932

Purchase of own shares for cancellation

(333)

-

333

(6,369)

-

(6,369)

Return on ordinary activities after taxation

-

-

-

21,325

2,003

23,328

Dividend paid (see note 8)

-

-

-

-

(1,679)

(1,679)


_____

_______

______

______

______

_____

Balance at 28 February 2017

4,632

19,391

903

82,260

4,026

111,212


_____

_______

______

______

______

_____








Year ended 28 February 2016









Share

Capital





Share

premium

redemption

Capital

Revenue



capital

account

reserve

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

Balance at 28 February 2015

5,191

19,391

344

84,139

3,575

112,640

Purchase of own shares for cancellation

(226)

-

226

(3,708)

-

(3,708)

Return on ordinary activities after taxation

-

-

-

(13,127)

1,796

(11,331)

Dividend paid (see note 8)

-

-

-

-

(1,669)

(1,669)


_____

_______

______

______

______

_____

Balance at 28 February 2016

4,965

19,391

570

67,304

3,702

95,932


_____

_______

______

______

______

_____








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



28 February 2017

28 February 2016


Notes

£'000

£'000

Operating activities




Net return on ordinary activities before finance costs and taxation


23,748

(10,924)

Adjustment for:




(Gains)/losses on investments


(21,390)

13,001

(Increase)/decrease in accrued dividend income


(4)

16

Decrease in other debtors


4

4

Increase/(decrease) in other creditors


29

(26)

Stock dividends included in investment income


-

(48)

Overseas withholding tax


(361)

(334)



_______

_______

Net cash flow from operating activities


2,026

1,689





Investing activities




Purchases of investments


(8,057)

(8,966)

Sales of investments


14,485

11,600



_______

_______

Net cash from investing activities


6,428

2,634





Financing activities




Interest paid


(60)

(75)

Equity dividends paid

8

(1,679)

(1,669)

Buyback of Ordinary shares

13

(6,369)

(3,708)



_______

_______

Net cash used in financing activities


(8,108)

(5,452)



_______

_______

Increase/(decrease) in cash and cash equivalents during the year


346

(1,129)



_______

_______

Analysis of changes in cash and cash equivalents during the year




Opening balance


433

1,562

Increase/(decrease) in cash and cash equivalents as above


346

(1,129)



_______

_______

Closing balances


779

433



_______

_______

 

 



NOTES TO THE FINANCIAL STATEMENTS:

 

1.

Principal activity


The Company is a closed-end investment company, registered in England & Wales No 02448580, 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' (the "SORP"). The financial statements are prepared in sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.






The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is included in the Statement of Corporate Governance on the Company's website.





(b)

Investments



Investments have been designated upon initial recognition at 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 the bid market price. 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 (other than special dividends), including taxes deducted at source, are included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and may be credited to capital, if circumstances dictate. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time apportioned basis so as to reflect the effective yield on these shares. Other returns on non-equity shares are recognised when the right to return is established. The fixed return on a debt security, if material, is recognised on a time apportioned basis so as to reflect the effective yield on each security. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital reserves. Interest receivable on bank balances is accounted for on an accruals basis.





(d)

Expenses



Expenses and interest payable are accounted for on an accruals basis. Expenses are charged through the revenue account except where they directly relate 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.





(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)

Nature and purpose of reserves



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 25p.






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 and losses on realisation of investments and changes in fair values of investments which are readily convertible to cash, without accepting adverse terms, are transferred to the capital reserve.






Revenue reserve



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





(g)

Foreign currency



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 are made in Thai Baht, 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 and also pays dividends and expenses in Sterling. Consequently, the Board also considers the Company's presentational currency to be Sterling.





(h)

Dividends payable



Final dividends are dealt with in the period in which they are paid.

 



2017

2016

3.

Income

£'000

£'000


Income from investments




Overseas dividends

3,890

3,521


Stock dividends

-

48



_______

_______



3,890

3,569



_______

_______







2017

2016



£'000

£'000


Other income




Deposit interest

-

1


Interest from money market funds

4

3



_______

_______



4

4



_______

_______


Total income

3,894

3,573



_______

_______

 



2017

2016



Revenue

Capital

Total

Revenue

Capital

Total

4.

Management fee

£'000

£'000

£'000

£'000

£'000

£'000


Management fee

1,044

-

1,044

943

-

943



_______

_______

_______

_______

_______

_______










For the year ended 28 February 2017 management and secretarial services were provided by Aberdeen Fund Managers Limited ("AFML").




The management fee is payable monthly in arrears and was based on an annual amount of 1% of the net asset value of the Company valued monthly. The agreement is terminable on one year's notice. The total of the fees paid and payable during the year to 28 February 2017 was £1,044,000 (2016 - £943,000) and the balance due to AFML at the year end was £184,000 (2016 - £155,000). There were no commonly managed funds held in the portfolio during the year to 28 February 2017 (2016 - none).

 



2017

2016

5.

Administrative expenses

£'000

£'000


Promotional activities

63

84


Directors' fees

104

114


Auditor's fees for:




- Statutory audit

19

19


- Other assurance services

1

1


Custody fees

62

56


Legal & professional fees

69

47


Listing fees

14

14


Directors' and officers' insurance

6

6


Printing and stationery

17

15


Registrar's fees

14

14


Savings scheme expenses

9

11


Other expenses

49

46



_______

_______



427

427



_______

_______






The management agreement with AFML also provides for the provision of promotional activities. The total fees paid and payable under the management agreement in relation to promotional activities were £63,000 (2016 - £84,000) with a balance of £11,000 (2016 - £14,000) being payable to AFML at the year end. The Company has an agreement with AFML for the provision of company secretarial services and administration services; no separate fee is charged to the Company in respect of this agreement.

 



2017 

2016



Revenue

Capital

Total

Revenue

Capital

Total

6.

Finance costs

£'000

£'000

£'000

£'000

£'000

£'000


On bank loans and overdrafts

59

-

59

75

-

75



______

______

______

______

______

______

 



2017

2016



Revenue

Capital

Total

Revenue

Capital

Total

7.

Taxation on ordinary activities

£'000

£'000

£'000

£'000

£'000

£'000


(a)

Analysis of charge for the year









Overseas withholding tax

361

-

361

332

-

332




_______

_______

_____

_______

______

_______



Total tax charge

361

-

361

332

-

332




_______

_______

_____

_______

______

_______











(b)

Factors affecting tax charge for the year



The tax assessed for the year is lower than the effective 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

2,364

21,325

23,689

2,128

(13,127)

(10,999)












Corporation tax at standard rate of 20% (2016 - effective rate of 20.08%)

473

4,265

4,738

427

(2,636)

(2,209)



(Gains)/losses on investments not taxable

-

(4,278)

(4,278)

-

2,611

2,611



Currency losses not taxable

-

13

13

-

25

25



Non-taxable overseas income

(778)

-

(778)

(717)

-

(717)



Overseas withholding tax

361

-

361

332

-

332



Loan relationships not utilised

11

-

11

15

-

15












Excess management expenses not utilised

294

-

294

275

-

275




_______

_______

_____

_______

______

_______



Total tax charge

361

-

361

332

-

332




_______

_______

_____

_______

______

_______











(c)

Factors that may affect future tax charges



At the year end, the Company has an unrecognised deferred tax asset of £1,848,000 (2016 - £1,543,000) arising as a result of accumulated unrelieved management expenses and loan relationship deficits of £9,241,000 (2016 - £7,715,000). A deferred tax asset in respect of this has not been recognised and will only be utilised if the Company has profits chargeable to corporation tax in the future.

 



2017

2016

8.

Dividends on equity shares

£'000

£'000


Amounts recognised as distributions to equity holders in the year:




Final dividend 2016 - 8.50p (2015 - 8.20p)

1,679

1,669



_______

_______





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




We set out below the final dividend proposed in respect of the financial year, which is the basis on which the requirements of Sections 1158-1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £2,003,000 (2016 - £1,796,000).







2017

2016



£'000

£'000


Proposed final dividend 2017 - 10.30p (2016 - 8.50p)

1,892

1,679



_______

_______






Subsequent to the year end the Company has purchased for cancellation a further 164,500 Ordinary shares; therefore the amounts reflected above for the cost of the proposed final dividend for 2017 are based on 18,364,132 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

2,003

10.31

1,796

8.89


Capital return

21,325

109.78

(13,127)

(65.00)



_______

_______

_____

_______


Total return

23,328

120.09

(11,331)

(56.11)



_______

_______

_____

_______








Weighted average number of Ordinary shares in issue


19,424,811


20,194,907




_________


__________

 



2017

2016

10.

Investments at fair value through profit or loss

£'000

£'000


Opening fair value

98,079

113,769


Opening investment holding gains

(34,693)

(53,833)



_______

_______


Opening book cost

63,386

59,936


Movements in the year:




Purchases at cost

8,329

9,013


Sales - proceeds

(14,634)

(11,702)


Sales - realised gains

5,532

6,139



_______

_______


Closing book cost

62,613

63,386


Closing investment holding gains

50,551

34,693



_______

_______


Closing fair value

113,164

98,079



_______

_______


Investments listed on a recognised stock exchange

113,164

98,079



_______

_______


Gains/(losses) on investments




Realised gains on sales

5,532

6,139


Increase/(decrease) in investment holding gains

15,858

(19,140)



_______

_______


Gains/(losses) on investments

21,390

(13,001)



_______

_______






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 in the Statement of Comprehensive Income. The total costs were as follows:







2017

2016



£'000

£'000


Purchases

20

20


Sales

17

12



_______

_______



37

32



_______

_______

 



2017

2016

11.

Debtors: amounts falling due within one year

£'000

£'000


Prepayments and accrued income

195

194


Amounts due from brokers

251

102


Other debtors

11

14



_______

_______



457

310



_______

_______

 



2017

2016

12.

Creditors: amounts falling due within one year

£'000

£'000


Bank loans

2,650

2,650


Amounts due to brokers

272

-


Other creditors

266

240



_______

_______



3,188

2,890



_______

_______






In October 2015 the Company entered into a three year £10,000,000 multi-currency revolving credit facility with Scotiabank (Ireland) Limited. At the year end, £2,650,000 (2016 - £2,650,000) had been drawn down at an all-in rate of 1.28538% (2016 - 1.53288%) which matured on 28 March 2017 (2016 - 29 March 2016). As of the latest date prior to the signing of this Report the £2,650,000 loan has been rolled over to 28 April 2017 at an all-in interest rate of 1.28238%.




The terms of the loan facility with Scotiabank (Ireland) Limited contain a covenant that the borrowings should not exceed 20% of the adjusted net asset value of the Company, where borrowings are defined as debt and other secured liabilities plus net liabilities under all derivatives determined on a mark to market basis. Adjusted net asset value is defined as total net assets less the aggregate value of all excluded assets, excluded assets being, without double counting, the value of any unquoted investments, all investments issued by a single issuer in excess of 10% of total net assets and the aggregate value of all investments in any single MSCI industry in excess of 30% of total net assets of the Company. The loan facility agreement also contains a covenant that the Net Asset Value will not fall below £28 million. The Company met both these covenants throughout the period for which the loan facility was utilised with Scotiabank (Ireland) Limited.

 



2017

2016

13.

Called-up share capital

£'000

£'000


Allotted, called up and fully paid:




Opening balance of 19,860,282 (2016 - 20,763,425) Ordinary shares of 25p each

4,965

5,191


Repurchase of 1,331,650 (2016 - 903,143) Ordinary shares of 25p each for cancellation

   (333)

   (226)


Closing balance of 18,528,632 (2016 - 19,860,282)

4,632

4,965






During the year ended 28 February 2017, the Company bought back and cancelled 1,331,650 Ordinary shares of 25p each (2016 - 903,143) for a total consideration of £6,369,000 (2016 - £3,708,000). This represented 7.2% of the Company's issued Ordinary share capital as at 28 February 2017.




Subsequent to the year end the Company bought back and cancelled a further 164,500 Ordinary shares of 25p each for a total consideration of £842,000.

 

14.

Net asset value per share


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







2017

2016


Net assets attributable (£'000)

111,212

95,932


Number of Ordinary shares in issue

18,528,632

19,860,282


Net assets per share (p)

600.22

483.03

 

15.

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. The numerical disclosures exclude short-term debtors and creditors.




Risk management framework


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




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




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




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




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




Risk management


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




Market risk


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




Interest rate risk


Interest rate movements may affect:


- the level of income receivable on cash deposits;


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




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 short-term fixed 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 20% of the adjusted net assets of the Company as defined in note 12.




Interest risk profile


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





Weighted






 average






period for

Weighted





which rate

average

Fixed

Floating



is fixed

interest rate

rate

rate


At 28 February 2017

Years

%

£'000

£'000


Assets






Sterling

-

-

-

578



_______

_______

_______

_______


Liabilities






Bank loans -  Sterling

0.08

1.29

(2,650)

-



_______

_______

_______

_______









 Weighted






  average






period for

 Weighted





which rate

average

Fixed

Floating



is fixed

interest rate

rate

rate


At 28 February 2016

Years

%

£'000

£'000


Assets






Sterling

-

0.20

-

432



_______

_______

_______

_______


Liabilities






Bank loans -  Sterling

0.09

1.53

(2,650)

-



_______

_______

_______

_______








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 loan is 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 have a material direct impact on net assets attributable to the Company's shareholders and total profit due to the relatively low exposure to cash and bank loans.




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




Risk exposure by currency of denomination:





 28 February 2017

28 February 2016




Net

Total


Net

Total



Overseas

monetary

currency

Overseas

monetary

currency



investments

assets

exposure

investments

assets

exposure



£'000

£'000

£'000

£'000

£'000

£'000


Thailand Baht

113,164

17

113,181

98,079

102

98,181


Sterling

-

(1,969)

(1,969)

-

(2,249)

(2,249)



_______

_______

_______

_______

_______

_______


Total

113,164

(1,952)

111,212

98,079

(2,147)

95,932



_______

_______

_______

_______

_______

_______










Foreign currency sensitivity


There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments, which have been included within the price risk sensitivity analysis so as to show the overall level of exposure.




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 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 all listed on the Stock Exchange of Thailand ("SET").




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 28 February 2017 would have increased/(decreased) by £11,316,000 (2016 - increased/(decreased) by £9,808,000) and equity reserves would have increased/(decreased) by the same amount.




Market prices may indirectly be affected by political instability within Thailand from time to time which constitutes political risk.




Liquidity risk


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




Management of the risk


Liquidity risk is not considered to be significant as, whilst liquidity is limited in certain stocks the Company holds, the majority of the Company's assets comprise readily realisable securities which can be sold to meet funding requirements if necessary.




Short-term flexibility is achieved through the use of loan facilities, details of which can be found in note 12. 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.




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. The Board has imposed a maximum gearing level, after netting off cash equivalents, of 15% of net assets. Details of borrowings at 28 February 2017 are shown in note 12.




Liquidity risk exposure


At each of 28 February 2017 and 28 February 2016 the Company's bank loan, amounting to £2,650,000 was due for repayment or roll-over within one month.




Credit risk


This is the risk of a counterparty to a transaction failing to discharge its obligations under that transaction which 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 Investment Manager, and limits are set on the amount that may be due from any one broker;


- the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the Custodian's records are performed on a daily basis to ensure discrepancies are picked up. The Manager's Compliance department carries out periodic reviews of the Depositary's operations and reports its findings to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held;


- the risk of counterparty exposure due to stock lending (when conducted) is mitigated by the review of collateral positions provided daily by the various counterparties involved; and


- where cash is held on deposit, the institutions concerned are reviewed regularly.


 


In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 28 February was as follows:





2017

2016



Balance

Maximum

Balance

Maximum



Sheet

exposure

Sheet

exposure


Current assets

£'000

£'000

£'000

£'000


Loans and receivables

457

457

310

310


Money market funds

201

201

1

1


Cash at bank and in hand

578

578

432

432



_______

_______

_______

_______



1,236

1,236

743

743



_______

_______

_______

_______




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




Fair values of financial assets and financial liabilities


The fair value of the short term loan is shown in note 12 to the financial statements.  The book value of cash at bank and bank loan included in these financial statements approximate to fair value because of their short-term maturity. The carrying values of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. For all other short-term debtors and creditors, their book values approximate to fair values because of their short-term maturity.

 

16.

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 indirectly.


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 28 February 2017

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss






Quoted equities

113,164

-

-

113,164



_______

_______

_______

_______


Net fair value

113,164

-

-

113,164



_______

_______

_______

_______









Level 1

Level 2

Level 3

Total


As at 28 February 2016

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss






Quoted equities

98,079

-

-

98,079



_______

_______

_______

_______


Net fair value

98,079

-

-

98,079



_______

_______

_______

_______








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.

 

17.

Related party transactions


Directors' fees and interests


Fees payable during the year to the Directors and their interest in shares of the Company are disclosed within the Directors' Remuneration Report in the Annual Report.




Hugh Young is a director of Aberdeen Asset Management PLC, of which Aberdeen Fund Managers Limited ("AFML"), Aberdeen Asset Management Asia Limited and Aberdeen Asset Managers Limited are wholly-owned subsidiaries.




Transactions with the Manager


The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager) for the provision of investment management, secretarial, accounting and administration and promotional activity services. Details of transactions during the year and balances outstanding at the year end are disclosed in notes 4 and 5.

 

18.

Capital management policies and procedures


The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt 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 views on the market;


- the level of equity shares in issue;


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




The Company does not have any externally imposed capital requirements.

 

The Annual Financial Report announcement is not the Company's statutory accounts. The above results for the year ended 28 February 2017 are an abridged version of the Company's full statutory accounts which will be filed with the Registrar of Companies in due course.

 

The statutory accounts for the years ended 28 February 2016 and 28 February 2017 received unqualified reports from the Company's independent auditor and did not include any reference to matters to which the independent auditor drew attention by way of emphasis without qualifying the reports, and did not contain a statement under s.498 of the Companies Act 2006. The financial information for the year ended 28 February 2016 is derived from the statutory accounts which have been filed with the Registrar of Companies.

 

The Annual Report, enclosing the Notice of Annual General Meeting, will be posted to shareholders in May 2017 and will also be available from the Company's website: newthai-trust.co.uk. The Company's Annual General Meeting will be held at 11.30am on 28 June 2017 at Bow Bells House, 1 Bread Street, London EC4M 9HH.

 

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

 

END


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