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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Aberdeen New Thai Investment Trust Plc | LSE:ANW | London | Ordinary Share | GB0000059971 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 398.00 | 396.00 | 400.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMANW
RNS Number : 3071X
Aberdeen New Thai Inv Trust PLC
29 April 2019
ABERDEEN NEW THAI INVESTMENT TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEARED 28 FEBRUARY 2019
STRATEGIC REPORT
Financial Highlights
Hot Features
Premium
Net asset value per
Ordinary share price total Ordinary share total
return{A} -3.7% return{A} -5.1%
2018 +18.4% 2018 +17.7%
Stock Exchange of Thailand Earnings per Ordinary
Index total return -3.9% share (revenue) 18.50p
2018 +21.6% 2018 11.12p
Total dividend per Ordinary
share 18.00p
2018 11.10p
{A}Alternative Performance Measure.
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, which 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, all of whom are independent, and has no employees. Like most other investment companies, it outsources its investment management and other administration to third party providers. The Company has appointed Aberdeen Fund Managers Limited ("AFML", the "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 the "Investment Manager"). AFML and AAMAL are subsidiaries of Standard Life Aberdeen plc.
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 2019, the Ordinary shares traded at an average discount of 13.6% 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.
Financial Calendar
30 May 2019 Ex-dividend date for proposed Final Ordinary
dividend
31 May 2019 Record date for proposed Final Ordinary dividend
25 June 2019 Annual General Meeting at 11.30am at Bow Bells
House, 1 Bread Street, London EC4M 9HH
28 June 2019 Payment date for proposed Final Ordinary dividend
of 11.0p per share
October 2019 Announcement of results for the six months ending
31 August 2019
31 October 2019 Ex-dividend date for Interim Ordinary dividend
1 November 2019 Record date for Interim Ordinary dividend
28 November 2019 Expected payment date for Interim Ordinary dividend
April 2020 Announcement of results for year ending 28 February
2020
CHAIRMAN'S STATEMENT
Introduction
It is my pleasure to write to you in my 6th year as Chairman of Aberdeen New Thai Investment Trust PLC and in the 30th year since the Company's launch.
The Company continues to pursue its investment objective of seeking to provide shareholders with a high level of long term, above average capital growth through investment in Thai companies, accepting that our Investment Manager's investment process may often lead to divergence from the Stock Exchange of Thailand Index ("SET Index"). The companies which make up the investment portfolio are considered by the Investment Manager, and the Board, to demonstrate quality as well as resilience in the context of the complicated Thai political situation. In addition, we continue to see our holdings offering opportunities for investors to benefit from the development of the broader Thai economy and the growing exposure to other regional markets that offer exciting opportunities such as Cambodia, Myanmar and Vietnam.
Long term performance continues to be the yardstick by which the Board measures the Investment Manager's performance. Accordingly, it is particularly pleasing to report that in the twentieth anniversary year of the launch of Individual Savings Accounts ("ISAs") in the UK, the Association of Investment Companies ("AIC") has identified your Company, for the second year running, as one that "if an investor had invested each year's maximum ISA limit from 1999 to 2018 - an investment of GBP206,560 in total - [your Company] would have turned it into a staggering GBP1,070,583" (AIC, 25 February 2019).
During the year, the net asset value ("NAV") per Ordinary share of your Company's portfolio fell by 5.1% on a total return basis, compared to the benchmark SET Index fall of 3.9%. The Ordinary share price fell by 3.7%, in total return terms, while the discount to NAV narrowed from 14.8% to 13.9%. The Thai Baht strengthened by 3.4% against broad Sterling weakness, given ongoing Brexit-related concerns. Further information on performance may be found in the Manager's Report.
Although the past has been volatile at times for Thai equities, I am pleased to report that overall your Company continues to achieve solid long term results with the NAV returning, on an absolute basis, 68.7% and 457.1% over 5 years and 10 years, respectively. Rising global risks and heightened market volatility recently have led to more indiscriminate capital flows in and out of the market than previously.
Your Board continues to monitor and review the impact of the initiatives introduced last year to improve the investment performance, which are being implemented into the portfolio, as appropriate. These included the Company's increased exposure to smaller capitalisation ("Small Cap") companies within the portfolio, the ability to invest in a limited number of unquoted Thai equities, the reallocation of a proportion of operating costs to capital, the introduction of an interim dividend and the potential to utilise more gearing. We expect to be able to observe the impact of these changes over the coming year and more information is set out below.
Details of, and Background to, the Results
During the year under review, Thai equities fell with the SET Index posting a total return of -3.9% in Sterling-adjusted terms. This came on the back of double-digit gains over the previous two financial years. The market's decline was largely in line with the broader Asian region, which was impacted by mounting trade friction between the world's two largest economies, the US and China. The threat of punitive tariffs from both sides took a toll on the world economy. In Asia, this could be seen in weakening exports towards the year end. The other key theme was monetary policy normalisation by the US Federal Reserve ("US Fed"), which spurred capital flows out of emerging markets. Despite healthy fundamentals, Thailand was not spared. As the year progressed, the US Fed switched to a more accommodative stance, driven partly by the deteriorating global environment. Markets were encouraged by this change of direction. Sentiment stabilised further when trade relations appeared to improve after Beijing and Washington returned to the negotiating table.
Investment Policy Changes announced in May 2018
At the AGM on 21 June 2018, shareholders approved a change to the Company's investment policy to permit investments in unquoted Thai equities provided that such investment was limited to 10%, in aggregate, of the Company's net assets at the time an investment is made.
Small Cap exposure
Our agreed investment parameters define Thai Small Cap stocks as those companies with a market capitalisation which is less than 50 billion Thai Baht ("THB"), currently equivalent to GBP1.2 billion. As at 28 February 2019 the proportion of the investment portfolio represented by Small Cap stocks had increased to 37.3%, from 35.2% at the previous year end, representing an overweight position to the SET index Small Cap weighting of 22.6% at the year end.
Gearing
During the year, the Company's GBP10 million loan facility with Scotiabank Ireland Limited was replaced with a competitively priced GBP15m loan facility with Industrial and Commercial Bank of China Limited, London Branch. The Company's drawn down loan was GBP5.65m at 28 February 2019 (2018 - GBP5.65m). As explained in the Investment Manager's Report, with valuations looking less expensive, as and when opportunities arise it is expected that gearing will increase within the overall limits set by the Board.
Earnings, Dividend and Ongoing Charges
As announced in last year's Annual Report, the Board introduced an interim dividend in November 2018 in order to accelerate the distribution of earnings to shareholders, much of which are received by the Company in the first half of the financial year. A first interim dividend of 7.0p per share was declared payable on 23 November 2018 to shareholders on the register as at 26 October 2018 with an ex-dividend date of 25 October 2018.
In total the revenue earnings per Ordinary share were 18.5p for the year ended 28 February 2019 (2018 - 11.1p). This increase partly reflects the Board's decision, announced in May 2018, to charge 75% of investment management fees and bank loan interest to capital with effect from 1 March 2018, better reflecting total return expectations. Previously, 100% of these costs were charged to income.
This year the Board is proposing to shareholders a final dividend per Ordinary share of 11.0p. When taken together with the newly introduced interim dividend paid in November 2018 of 7.0p (2018 - nil), the total dividends per share for the year amount to 18.0p (2018 - final dividend paid only of 11.1p). Paying out the majority of the Company's earnings in keeping with its dividend policy together with the previously communicated move to charge a higher proportion of investment management fees and loan interest to capital means this represents an increase of 62.2% on last year. The total dividend for the year of 18.0p represents a yield of 3.3% using the 28 February 2019 share price of 552.0p. If approved at the Annual General Meeting ("AGM") on 25 June 2019, the final dividend will be paid on 28 June 2019 to shareholders on the register as at 31 May 2019. The ex-dividend date will be 30 May 2019.
It is pleasing to note also the fall in ongoing charges from 1.35% to 1.26% over the year and the Board continues to monitor operating costs closely. The reduced charge reflects, in part, the lower management fee agreed with the Manager with effect from 1 March 2018. From that date the Manager is entitled to a management fee payable monthly in arrears based on an annual amount of 0.9% (previously 1.0%) of the Company's assets less liabilities.
Overview
After a robust 2018, the ripple effects from the China-US tensions are starting to take effect. Anecdotal evidence suggests that residential property sales in Thailand are tapering off because of the weakening purchasing power of Chinese buyers who make up the largest share of foreign buyers in the condominium segment. Thai exports are also sliding, given that 10% of overseas shipments go directly to China and a similar amount to the US. A 6% fall in overseas sales dragged the trade balance into an unexpected deficit of US$4 billion in January 2019, a worrying development. With China's GDP growth moderating to its slowest pace in nearly 30 years and US economic activity also showing signs of cooling, it should not come as a surprise if exports were to fall further.
On the other hand, demand in Thailand remains buoyant. Indeed, it was healthy domestic consumption that powered the economy in 2018. A combination of rising employment and growth in personal loans allowed demand for both non-durable and durable goods, such as automobiles, to rise at a decent pace. This, along with a sturdy current account surplus and ample foreign exchange reserves, aided the Thai Baht's outperformance against other emerging market currencies over the reporting period, even if the local currency did weaken marginally against the US dollar. With inflationary pressures remaining benign, domestic demand may improve further, although elevated household debt remains an issue.
The Baht's relative outperformance could also be attributed to the Bank of Thailand's ("BOT's") December rate hike, its first in over three years. With the Fed raising policy rates three times, the US dollar strengthening and outflows from emerging markets accelerating over the reporting period, the BOT was keen to curb financial risks and protect its currency. Arguably, the BOT need not have been concerned as the Baht proved resilient even before the rate hike, underpinned by solid domestic fundamentals.
Domestically, politics took a backseat to external challenges for much of the reporting period. Nevertheless, markets were jolted in February 2019 by the sudden nomination and then disqualification of King Vajiralongkorn's sister as a prime ministerial candidate in the March election. The opposition party backed by populist ex-premier Thaksin Shinawatra that nominated the princess was subsequently dissolved by the Constitutional Court. Despite this disruptive turn of events, it is heartening to note that, at the time of writing, Thailand held its first election since 2011, presaging an end to military rule. Final results are expected in early May following the coronation celebrations for King Vajiralongkorn.
Board
The Board is conscious of the need for continual refreshment of its membership and initiated the recruitment of a new Director during the year, with assistance from an independent search consultancy. As a consequence the Board was delighted to announce the appointment of Sarah McCarthy as a Director on 1 March 2019. Sarah brings to the Board over twenty years' experience in financial services, fifteen years of which have been focused on investment marketing. She has a wealth of communications and marketing campaign knowledge gained across a wide range of investment products and client types. Sarah will seek formal election as a Director at the AGM and I encourage shareholders to vote in favour of her appointment.
Our Senior Independent Director ("SID"), Clare Dobie, is not standing for re-election as a Director at the AGM and will retire at its conclusion. I, and the other Directors, would like to recognise Clare's considerable contribution to the Board, and to the Company, across many areas but not least through her championing of clearer communications with our shareholders and planholders. We thank her and wish her well. Clare will be succeeded as SID by Andy Pomfret.
Discount and share buybacks
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 whilst also having regard to the overall size of the Company. In pursuit of this objective, during the year ended 28 February 2019 the Company bought back and cancelled 280,612 Ordinary shares (2018 - 1,665,119 Ordinary shares) at a cost of GBP1.6m (2018 - GBP9.0m), representing 1.7% (2018 - 9.0%) of the Company's issued share capital at the start of the year.
Duration
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 NAV (calculated including undistributed net revenue) over the same period, notice will be given of a special resolution to be proposed at the following AGM that the Company be put into voluntary liquidation. Over the 12 weeks ended 28 February 2019, the relevant figure was 13.6% and, accordingly, no special resolution to wind up the Company will be put to the AGM.
Promotional Activities
Your Board continues to promote the Company through the Investment Manager's promotional activities and the Company contributed GBP63,000 (excluding VAT) during the year ended 28 February 2019 (2018 - GBP66,000). The Board reviews regularly these promotional activities.
Electronic communications
The Board is proposing to take advantage of the ability, under the Company's Articles of Association, to communicate electronically with shareholders as well as making documents available on its website instead of sending out paper versions. Increased use of electronic communications will deliver savings to the Company in terms of administration, printing and postage costs, as well as accelerating the provision of information to shareholders. The reduced use of paper will also bring environmental benefits. The Company will therefore be writing to you later in the year seeking your consent to communicate with you electronically noting that shareholders are provided with regular opportunities to request a paper version.
Outlook
The ongoing trade issues are likely to remain uppermost in investors' minds. With negotiators from China and the US scheduling a new round of high-level talks, tensions may ease. Given that economic growth has already been damaged, both sides want the deal to succeed. A more complex dispute over technological advancement may be harder to resolve. It is clear that the US is seeking to constrain China's growing influence in the technology sector, while the latter is unlikely to comply without a fight. Nevertheless, this clash seems relatively contained and does not appear to be detrimental to the broader macroeconomic environment. A more dovish stance from the Fed and the People's Bank of China should also help cushion any slowdown.
However, should a favourable outcome prove elusive, Thai exports, notably to China, may decelerate further. While this would prove disappointing, it is worth considering that the bulk of shipments go to near neighbours, such as Vietnam, Myanmar and Malaysia, and these remain intact. Domestic demand could also take up the slack. Private consumption makes up 50% of GDP. Tourism is still expected to be robust and contribute significantly to growth, given the positive spillover effects on the services sector, including financial services. Credit demand from both consumers and businesses remains firm.
The development of the Eastern Economic Corridor, the government initiative to enhance Thailand's eastern seaboard, a crucial manufacturing base, continues to gain traction. This area attracts the most foreign direct investments. To connect industries, a further expansion of road and rail networks is needed, so spending on construction and infrastructure should increase, giving additional impetus to private investments.
The smooth delivery of government initiatives will depend on a domestic environment that guarantees policy continuity following the conclusion of the election process. The new government will be keen to maintain the solid growth momentum that the military junta had engineered and not to dismantle policies that have been put in place. This should reassure investors.
I am encouraged by Thailand's longer-term prospects, which remain undiminished. Corporate fundamentals are also sound, notably those of your Company's portfolio. The Small Cap holdings, in particular, have great potential to grow in tandem with rising domestic wealth and consumption, coupled with expansion into nearby developing markets. The Investment Manager's Report highlights several of these smaller holdings that have done well. With the recent correction, valuations now appear reasonable and our Investment Manager continues to search for gems to add to the portfolio.
AGM
The AGM, which will be held at Bow Bells House, 1 Bread Street, London EC4M 9HH from 11.30am on 25 June 2019, provides shareholders with an annual opportunity to meet the Board and to ask any questions that they may have of either the non-executive directors or the Investment Manager.
The Board is happy to take general questions on the Annual Report and financial statements at the meeting but would request that questions of a technical nature should be advised to the Company Secretaries by email or by post, in advance.
I look forward to meeting as many shareholders as possible at the AGM which will be followed by a buffet lunch.
Action to be Taken
Shareholders will find enclosed with this Annual Report a Form of Proxy for use in relation to the AGM. Whether or not you propose to attend the AGM, you are encouraged to complete the Form of Proxy in accordance with the instructions printed on it. Please return it in the prepaid envelope as soon as possible but in any event so that it might be received no later than 11.30am on 21 June 2019. Completion of a Form of Proxy does not prevent you from attending and voting in person at the AGM if you wish to do so.
If you hold your shares in the Company via a share plan or a platform and would like to attend and/or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform. For this purpose, investors that hold their shares in the Company via the Aberdeen Standard Investments Children's Plan, Share Plan and/or ISA will find a Letter of Direction enclosed. Shareholders are encouraged to complete and return the Letter of Direction in accordance with the instructions printed thereon.
For holders of shares via share plans and platforms, the website of the Association of Investment Companies (theaic.co.uk/aic/shareholder-voting-consumer-platforms) contains details of how to attend and vote at Company Meetings.
Nicholas Smith
Chairman
26 April 2019
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
At the AGM held on 21 June 2018, shareholders approved changes to the Company's investment policy.
The Company's new investment policy is flexible enabling it to invest in a diversified portfolio of securities (substantially in the form of equities or equity-related securities such as convertible securities and warrants but which may also include debt securities) issued by companies, spread across a range of industries, which are either (i) quoted on the Stock Exchange of Thailand or (ii) that are unquoted and at, or near, initial public offering stage. There are no restrictions on which market segment or geographical region within Thailand that the Company may invest nor whether its investments are in small, mid or large capitalisation companies.
Details of the Company's investment policy prior to 21 June 2018 may be found on page 9 of the Company's Annual Report for the year ended 28 February 2018.
Risk Diversification
The Company's portfolio will comprise no less than 10 holdings and the Investment Manager will at all times have due regard to the spread of investment risk.
The Investment Manager is authorised to invest up to 10% of the Company's net assets in the securities of any single company although circumstances may occasionally arise when it may be in shareholders' interests to make an investment that exceeds this level.
The Investment Manager is authorised to invest in unquoted securities provided that such investment, in aggregate, is limited to 10% of the Company's net assets at the time any investment is made.
The Company complies with Section 1158 of the Corporation Tax Act 2010. The Company will not invest more than 10%, in aggregate, of the value of its gross assets in investment trusts or investment companies admitted to the Official List, provided that this restriction does not apply to investments in any such investment trusts or investment companies which themselves have stated investment policies to invest no more than 15% of their gross assets in other investment trusts or investment companies admitted to the Official List. In any event, the Company invests no more than 15% of its gross assets in other listed investment companies (including listed investment trusts).
In addition, the Company will not:
- invest in physical commodities; - enter into derivative transactions for speculative purposes; - take legal or management control of any of its investee companies; or - conduct any significant trading activity.
Gearing
The Board is responsible for setting the gearing limits in place for the Company subject to a maximum level of 25% of net assets (measured when new borrowings are incurred). It is intended that this power should be used to leverage the Company's portfolio in order to enhance returns when and to the extent that it is considered appropriate to do so. Gearing will be tactical in nature and used in relation to specific opportunities or circumstances. The Directors will take care to ensure that borrowing covenants permit maximum flexibility of investment policy.
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 to determine 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 The Board considers the Company's NAV capital
return of the Net and total return figures, relative to the SET
Asset Value ("NAV") Index, to be the best indicator of performance
relative to SET Index over time. The figures for this financial year
and for the past three and five years are set
out in Performance.
Discount to NAV The discount at which the Company's share price
trades relative to the NAV (including income)
per share is closely monitored by the Board.
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 Manager, 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 are summarised in the table below, together with any mitigating actions.
In addition to these risks, the outcome and potential impact on the Company of the UK Government's ongoing Brexit discussions with the European Union remain unclear at the time of writing. The Company's Thai investments are limited in their direct exposure to the UK market and even a no-deal Brexit would pose an immaterial risk. However, as the Company is priced in Sterling, sharp movements in the Thai Baht/Sterling exchange rate, which may arise from Brexit, could affect the Company's net asset value. Separately, investor sentiment might lead to increased or reduced demand for the Company's shares, in light of Brexit uncertainty, which would be reflected in a narrowing or widening of the discount at which the Company's shares trade relative to their net asset value. Overall, the Board does not expect the Company's business model, over the longer term, to be affected by Brexit. In all other respects, the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the current financial year.
Description Mitigating Action Discount volatility - being the risk The Board has agreed with the that the Company's share price may Manager certain parameters within fluctuate and vary considerably from which the Manager may buy-back the underlying NAV of the Ordinary the Company's own shares bearing shares. External factors which may in mind that the Company's operating influence the discount include market costs would be spread across
conditions, general investor sentiment a reduced number of shares.
and the interaction of supply and These parameters are reviewed
demand for the Ordinary shares. on an ongoing basis. Any shares
repurchased may be either cancelled
or held in treasury.
Dividends - the Company will only The Board monitors this risk
pay a dividend on the Ordinary shares by reviewing and challenging,
to the extent that it has profits at each meeting, short and longer-term
or revenue reserves available for income forecasts prepared by
that purpose. The ability of the the Investment Manager covering
Company to pay a dividend, and any portfolio investment yield as
future dividend growth, will depend well as the expected operating
primarily on the level of income costs of the Company. The Company
received from its investments. Accordingly, benefits from revenue reserves
the amount of the dividends paid which may be drawn upon to smooth
to Ordinary shareholders may fluctuate. dividends payable to shareholders
where there is a shortfall in
revenue returns.
Financial and regulatory - the financial The financial risks associated
risks associated with the portfolio with the Company include market
could result in losses to the Company. risk, liquidity risk and credit
In addition, failure to comply with risk, all of which are mitigated
relevant regulation (including the by the Investment Manager. Further
Companies Act, the Financial Services details of the steps taken to
and Markets Act, the Alternative mitigate the financial risks
Investment Fund Managers Directive, associated with the portfolio
accounting standards, investment are set out in note 15 to the
trust regulations and the Listing financial statements. The Board
Rules, Disclosure Guidance and Transparency is responsible for ensuring
Rules and Prospectus Rules) may have the Company's compliance with
an adverse impact on the Company. applicable regulations. Monitoring
of this compliance, and regular
Any change in the Company's tax status reporting to the Board thereon,
or in taxation legislation (including has been delegated to the Manager.
the tax treatment of dividends or The Board receives updates from
other investment income received the Manager and AIC briefings
by the Company) could affect the concerning industry changes.
value of the investments held by From time to time, the Company
the Company and the Company's ability also employs external advisers
to provide returns to shareholders covering specific areas of compliance.
or alter the post-tax returns to
shareholders.
Foreign exchange risks - the Company The Company's multi-currency
accounts for its activities and reports bank facility permits borrowings
its results in Sterling while investments to be drawn down in certain
are made and realised in Thai Baht; non-Sterling currencies if required.
bank borrowings are presently denominated The Board monitors the Thai
in Sterling. It is not the Company's Baht/Sterling exchange rate
present intention to engage in currency at each meeting.
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,
including the level of investment
income.
Gearing - whilst the use of gearing The Board is responsible for
should enhance the total return on determining the gearing strategy
the Ordinary shares where the return for the Company, with day-to-day
on the Company's underlying assets gearing decisions being made
is rising and exceeds the cost of by the Investment Manager.
borrowing, it will have the opposite
effect where the underlying return Borrowings are short term in
is less than the cost of borrowing, nature and particular care is
further reducing the total return taken to ensure that any bank
on the Ordinary shares. A fall in covenants permit maximum flexibility
the value of the Company's investment of investment policy. The Board
portfolio could result in a breach has agreed certain gearing restrictions
of bank covenants and trigger demands with the Manager and reviews
for early repayment. compliance with these guidelines
at each Board meeting. Loan
agreements are entered into
following review by the Company's
lawyers.
Investment objective - the setting The Board keeps the investment
of an unattractive strategic proposition objective and policy under regular
to the market and the failure to review. An annual strategy meeting
adapt to changes in investor demand is held by the Board including
may lead to the Company becoming the review of reports from the
unattractive to investors, a decreased Investment Manager's investor
demand for its shares and a widening relations team and updates on
discount. the market from the Company's
broker.
Liquidity risk - this is the risk Liquidity risk is not considered
that the Company will encounter difficulty to be significant as, whilst
in meeting obligations associated liquidity is limited in certain
with financial liabilities. In addition, stocks which the Company holds,
the Company, and/or its Investment the majority of the Company's
Manager may accumulate investment assets comprise readily realisable
positions which represent more than securities which can be sold
normal daily trading volumes which to meet funding requirements
may make it difficult to realise if necessary. The Board reviews,
investments quickly. at each meeting, the liquidity
profile of the Company's investment
portfolio.
Market risk - being the risk that The Investment Manager seeks
the portfolio, managed by the Investment to diversify market risk by
Manager, suffers a fall in its market investing in a wide variety
value which would have an adverse of companies with strong balance
effect on shareholders' funds. The sheets and the earnings power
Company's investments are subject to pay increasing dividends.
to normal market fluctuations and In addition, investments are
the risks inherent in the purchase, made in diversified sectors
holding or selling of equity securities in order to reduce the risk
and there can be no assurance that of a single large exposure;
appreciation in the value of those at present the Investment Manager
investments will occur. may not invest more than 10%
of the Company's net assets
The Investment Manager's investment in any single stock. The Investment
process concentrates on a company's Manager is authorised to invest
business strategy, management, financial in unquoted securities provided
strength and ownership structure that such investment, in aggregate,
as well as corporate governance, is limited to 10% of the Company's
with a view to seeking companies net assets at the time any investment
that it can invest in for the long is made.
term. This quality test means that
there are stocks listed on the SET The Investment Manager believes
Index which the Investment Manager that diversification should
will not invest in due to a perceived be looked at in absolute terms
lack of transparency or poor corporate rather than relative to the
governance. 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 The Board receives reports from
with third parties for the provision the Manager throughout the year
of all systems and services (in particular, on internal controls and risk
those of Aberdeen Standard Investments) management and receives equivalent
and any control failures and gaps assurances from all its other
in these systems and services could significant service providers
result in a loss or damage to the on at least an annual basis.
Company. 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
Securities Services, presents
at least annually on the Company's
compliance with AIFMD.
Political risk and exchange controls Given the nature of the risks
- in common with the majority of to which the Company's investments
Asian stockmarkets, investments in are subject, which are those
Thailand are subject to a greater inherently associated with a
degree of political risk than that single-country fund, there are
with which investors might be familiar. limited options available to
the Board for mitigating these
In addition, investments purchased risks. The Board believes that
by the Company may be subject, in mitigation is best effected
the future, to exchange controls by careful selection of the
or withholding taxes in the Thai constituents of the Company's
jurisdiction. In the event that exchange portfolio with high-calibre,
controls or withholding taxes are financially-sound companies,
imposed with respect to any of the with good management and excellent
Company's investments, the effect growth potential.
will generally be to reduce both
the income received by the Company Investment in Thai equities
from its investments and/or the capital involves a greater degree of
value of the affected investments. 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 Aberdeen Standard Investments on behalf of a number of investment companies under its management. The Company's financial contribution to the programme is matched by Aberdeen Standard Investments. Representatives of Aberdeen Standard Investments report quarterly to the Board with 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 Aberdeen Standard Investments investor relations programme which involves regional roadshows as well as promotional and public relations campaigns.
Board Diversity Policy
The Board recognises the importance of having a range of skilled, experienced individuals with the right knowledge represented on the Board in order to allow the Board to fulfil its obligations. The Board also recognises the benefits, and is supportive, of the principle of diversity in its recruitment of new Board members however it does not consider appropriate the setting of diversity targets. As at 28 February 2019 there were two male Directors and two female Directors (2018: two male Directors and two female Directors). Subsequent to the year end, a further female Director was appointed a Director on 1 March 2019.
Environmental, Social and Human Rights Issues
The Company has no employees as the Board has delegated day to day management and administrative functions to ASFML. 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. The Board has noted the corporate stewardship and sustainability programme of Aberdeen Standard Investments, which can be found at -
standardlifeaberdeen.com/corporate-stewardship-and-sustainability
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.
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 2020 and 12 weeks ended 28 February 2021, individually, does not exceed 15% which negates the requirement to put to shareholders at the AGMs to be held in either 2020 or 2021, a special resolution to wind up the Company.
Future
Further details on the Directors' expectations regarding the future, may be found in the Chairman's Statement whilst the Investment Manager's views are included in its Report.
On behalf of the Board
Nicholas Smith
Chairman
26 April 2019
INVESTMENT MANAGER'S REPORT
Overview
Thai equities were volatile in the year under review. Stocks initially rose and fell in tandem with the trade rhetoric between the US and China. As the year progressed, emerging markets came under pressure following comments from a hawkish US Federal Reserve and an appreciating US dollar. However, the Thai market held up well, testament to the economy's robust fundamentals which included a healthy current account surplus and the Baht becoming one of the best performing emerging market currencies over the period. Royal approval of laws to usher in fresh elections in March 2019 also supported investor sentiment.
Over the year, the economy remained robust. Gross Domestic Product (GDP) expanded by 4.1% in 2018, its fastest pace in six years, underpinned by tourism and higher domestic demand. The former was affected temporarily in July by a tragic boating accident in Phuket involving Chinese holidaymakers. Nevertheless, tourist numbers have since recovered, buttressed by the government's move to waive visa fees for two months for certain countries. In macroeconomic policy, the central bank raised rates in December last year, its first hike in over three years. It sought to reduce risks to financial stability and provide a buffer for the next downturn.
Portfolio
For the year ended 28 February 2019, the Stock Exchange of Thailand index (the "Index") fell by 3.9% while your Company's net asset value decreased by 5.1%, both figures in Sterling total return terms.
The portfolio's underlying stocks in the resources sector delivered solid returns, which was especially pleasing given weakness in the broader sector. Electricity Generating (Egco), the second largest local private power supplier, was buoyed by steady earnings growth and expectations that it would harness its solid balance sheet for new investments. The company, for instance, acquired a 49% stake in a new South Korean power plant that would raise its operational capacity, at a reasonable cost of 900 billion won (US$794 million).
At the other end of the energy value chain, PTT Exploration & Production (PTTEP) rode a cyclical oil price uptrend and an appreciating Baht to record higher earnings. It also won auctions for two key offshore natural gas fields in Thailand. Though subsequent concerns over the profitability of these concessions erased some of its gains, we are more optimistic given their longer reserve life and higher sales volume. Meanwhile, shares of its parent, national oil and gas conglomerate PTT, also advanced after its inclusion in the portfolio in July. Sentiment toward the largest stock in the Index improved due to a more positive outlook for oil prices, and the group's lower burden in subsidising fuel prices in Thailand. The proposed listing of its retail arm was another positive catalyst.
Further bolstering the Company's performance was the choice of industrial stocks. In particular, Thai Stanley Electric, posted solid earnings growth amid an automotive car industry recovery that was supported by faster GDP expansion, exports and launches of new car models. The firm, which makes car lightbulbs as well as moulds for automobile parts, is a compelling investment due to its production efficiencies and potential for greater capacity as it builds new factories.
On the flipside, insurance stocks were a major drag on performance, due to heightened competition in the sector and company specific factors. Thai Reinsurance's earnings were dampened by higher than expected claims in its public teachers' portfolio, and difficulties in generating underwriting profits elsewhere. We are monitoring its performance. Thaire Life Assurance was weighed down by heavier claims for its group health policies, while seeing lower margins in its new products. Notwithstanding the short term pressure, we still like the firm's prospects as the sole domestic life insurer in an underpenetrated sector. New players would face high barriers of entry due to strict regulations. Tougher competition hampered Muang Thai, with challenges in both its motor and non motor underwriting business pressuring its share price. The management is trying to phase out the unprofitable motor portfolio, and we remain confident in this reputable insurer which has always struck a sensible balance between profitability and market share.
Property and construction was another weak sector, following the government's move to tighten mortgage requirements for high end homes to curb speculation. Developers LPN and Sammakorn were hit as a result. Nevertheless, as buyers rushed to finalise their purchases ahead of the measures which take effect this April, the two companies could see a boost to their first quarter results. LPN was also hurt by market scepticism about the success of its diversification strategy, from low end condominium projects towards mid end apartments and landed housing. We are confident in the management's ability, given the developer's 30 year track record and its well known brand. The company is also marketing its project management services, a key strength that has enabled it to turn projects around quickly and achieve operational efficiencies. This forms another part of its new strategy that we believe has potential.
New Small and Mid Cap holdings
As in last year's report, we would like to shine the spotlight on two of our newer holdings. This time though it is on small and mid cap holdings following the approval by shareholders of the change to the investment mandate allowing us to increase the Company's exposure to growth companies through investment in companies close to IPO and listing.
The first of these is Osotspa, whose initial public offering we participated in as a cornerstone investor during the year under review. The century old consumer product conglomerate has a good portfolio of energy drinks and personal care products, ranging from baby soap to deodorants. First established in 1891 as a small pharmacy in downtown Bangkok selling traditional Chinese medicine for stomach pain, the group is better known today as the largest energy drinks distributor in the country. It carries flagship brands such as M-150 and Shark.
The family owned business brought in a new management team a few years ago as part of its transformation strategy. This team has years of professional experience under its belt, with many having cut their teeth at an international fast moving consumer goods conglomerate. The firm, which dominates the domestic energy drink market, is keen to defend its market share of over 50% and expand into other product categories where growth prospects are better.
In neighbouring countries such as Myanmar and Laos where rising incomes, improving infrastructure and first mover advantage present considerable growth potential, Osotspa has a good foothold; its M-150 product is a leading energy drink in these markets. The group has formed a joint venture with Burmese beverage manufacturer and distributor Loi Hein Co to tap their deep knowledge of the local market and customers. It is now building a manufacturing plant in Myanmar that will help the firm respond more quickly to market demand and manage its costs better. It also has plans to expand into Vietnam and China.
Another promising small cap holding worth highlighting is TOA Paint, the country's top paint producer. With a share of nearly half the market, the firm has pricing power in a sector that is likely to grow in line with, or even faster than, the country's economic development. TOA has about 200 brands in all, with the majority of it in decorative paint and coating products. However, it plans to raise its market share in the non decorative segment, which includes construction chemicals, heavy duty coatings, wood coatings, hardware and power tools, together with speciality paint. The firm has expanded into the region and, by the end of this year, will have 10 factories spread across Thailand, Cambodia, Vietnam, Laos, Malaysia, Indonesia and Myanmar.
Both these holdings are also among your portfolio's top contributors this past year, an endorsement by investors who believe in their growth prospects. Meanwhile, in other portfolio activity, we sold media company Prakit Holdings, broadcasting company BEC World and MFC Asset Management in favour of the new holdings mentioned earlier which we believe have better growth prospects.
Outlook
Among the many factors that could influence the Thai market in the current year are the elections held in March 2019, the country's first since 2011. At the time of writing, while the votes have been cast, the results are as yet unknown as the Election Commission has 60 days to release them. It is heartening for us to note that major candidates on both sides are pro business and recognise the importance of continued growth in the economy; the main differences are in personality rather than policy. The risk of possible political unrest remains. On the other hand, political stability following the elections would attract more foreign direct investments into the country.
Of course, external uncertainties exist. It remains to be seen whether the US and China can reach a trade deal, and how successful China's stimulus measures will be at perking up its economy again. Domestically, there are signs that slowing external demand could affect growth in its export sector which contributes to about two-thirds of GDP. High household debt is also likely to constrain private consumption.
On the corporate front though, share prices which have been dampened by political uncertainty in the run up to the elections have resulted in valuations appearing fairly cheap relative to historic levels, supported by what we expect to be low double digit earnings growth this year. Amid periods of uncertainty, your Company's quality holdings, which display durable competitive strengths and low debt levels, should stand out. At the same time, with many stocks now trading at attractive valuations, we continue to be on the lookout to acquire, possibly through an increased use of the ICBC loan facility, those with resilient earnings that could bolster future returns and add value for shareholders.
Aberdeen Standard Investments (Asia) Limited
Investment Manager
26 April 2019
PERFORMANCE 1 year 3 year 5 year
return return return
% % %
Total return (capital return plus dividends
reinvested)
Share price{A} -3.7 +45.6 +74.9
Net asset value{A} -5.1 +41.3 +68.7
SET Index -3.9 +59.6 +90.8
Capital return
Share price -6.8 +35.3 +56.0
Net asset value -7.7 +32.8 +53.2
SET Index -6.8 +45.2 +62.7
FINANCIAL HIGHLIGHTS
28 February 28 February % change
2019 2018
Total assets (GBP'000) 112,021 122,818 -8.8
Equity shareholders' funds (net assets)
(GBP'000) 106,371 117,168 -9.2
Market capitalisation (GBP'000) 91,538 99,832 -8.3
Ordinary share price (mid-market) 552.00p 592.00p -6.8
Net asset value per Ordinary share 641.45p 694.80p -7.7
Discount to net asset value per Ordinary
share{A} 13.9% 14.8%
Stock Exchange of Thailand ("SET")
Index (Sterling adjusted, capital return) 39.45 42.31 -6.8
Net gearing{A} 2.79% 2.89%
Dividends and earnings
Revenue return per share 18.50p 11.12p +66.4
Proposed total dividends per share 18.00p 11.10p +62.2
Dividend cover{A} 1.03 1.00
Revenue reserves (prior to payment
of proposed final dividend) (GBP'000) 4,200 4,137
Operating costs
Ongoing charges ratio{A} 1.26% 1.35%
{A} Considered to be an Alternative Performance Measure.
DIVIDS
Rate Ex-dividend Record date Payment date
date
Proposed final dividend 11.00p 30 May 2019 31 May 2019 28 June 2019
2019
Interim dividend 2019 7.00p 25 October 26 October 23 November
2018 2018 2018
------------------------- ------- ------------ ------------ -------------
Total 2019 18.00p
Final dividend 2018 11.10p 31 May 2018 1 June 2018 26 June 2018
------------------------- ------- ------------ ------------ -------------
Total 2018 11.10p
TEN YEAR FINANCIAL RECORD
Year to 28 February 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total revenue
(GBP'000) 1,766 2,652 2,961 2,934 3,715 3,546 3,573 3,894 3,945 4,165
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Per share (p)
Net revenue
return 5.15 8.28 8.87 7.39 8.73 8.20 8.89 10.31 11.12 18.50
Net dividends
paid/proposed 5.10 8.00 8.00 7.00 8.00 8.20 8.50 10.30 11.10 18.00
Net asset value 222.99 306.57 387.73 569.58 418.64 542.49 483.03 600.22 694.80 641.45
Ordinary share
price 171.50 241.25 311.25 537.50 353.75 458.25 408.00 510.00 592.00 552.00
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Equity shareholders'
funds (GBP'000) 39,835 56,530 72,106 120,873 87,175 112,640 95,932 111,212 117,168 106,371
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
INVESTMENT PORTFOLIO - TEN LARGEST INVESTMENTS
As at 28 February 2019
Valuation Total Valuation
2019{A} assets{B} 2018{A}
Company Sector (Thai GBP'000 % GBP'000
SET)
Aeon Thana Sinsap
Consumer financial services
provider offering hire purchase
and personal loans. Finance & Securities 5,110 4.6 5,791
Central Pattana
Thailand's largest developer
of shopping malls, with related
businesses in offices and more
recently residential property
development. It is a unit of
conglomerate Central Group. Property Development 4,767 4.3 5,589
Advanced Info Service
Thailand's largest and leading
provider of wireless communication
services with over 50% revenue Information
market share and 44 million & Communication
subscribers. Technology 4,727 4.2 6,645
Thai Stanley Electric {C}
A Thai-Japanese joint venture
that manufactures automotive
lighting equipment. It has a
well-established domestic presence
as well as a growing regional
business. Automotive 4,491 4.0 4,355
Home Product Center
Retailer of building materials
and home improvement products. Commerce 4,477 4.0 5,844
PTT Public Company
Thailand's national energy company,
with interests in upstream operations
via PTT Exploration and Production
(PTTEP), gas transmission pipelines,
refineries, petrochemicals,
power generation and downstream
oil trading and marketing. Energy & Utilities 4,404 3.9 -
Bangkok Insurance
One of the country's largest
non-life insurance companies,
affiliated with Bangkok Bank. Insurance 4,394 3.9 6,000
Siam Cement
Thailand's largest industrial
conglomerate with operations
in petrochemicals, cement, paper
and building materials with
operations in Bangladesh, Cambodia,
Sri Lanka and Vietnam as well Construction
as in Thailand Materials 4,387 3.9 6,071
Land & Houses{C}
A leading property developer
operating in the real estate
business for residential property
projects, as well as in the
rental and services business
for rental of shopping malls,
hotels and apartments. Property Development 3,874 3.5 3,591
Kasikornbank
Fourth largest commercial bank
in terms of assets, founded
by the Lamsam family. Formerly
known as Thai Farmers Bank. Banking 3,873 3.4 5,890
---------- ----------
Top ten investments 44,504 39.7
{A} Purchases and/or sales effected during the year will result in
2018 and 2019 values not being directly comparable.
{B} Defined as total assets per the balance sheet less current liabilities
(before deducting prior charges).
{C} Holding includes investment in both common stock and non-voting
depositary receipts.
INVESTMENT PORTFOLIO - OTHER INVESTMENTS
As at 28 February 2019
Valuation Total Valuation
2019{A} assets{B} 2018{A}
Company Sector GBP'000 % GBP'000
PTT Exploration & Production Energy & Utilities 3,383 3.0 5,350
Minor International Food & Beverage 3,352 3.0 3,320
Construction
Siam City Cement Materials 3,283 2.9 3,314
Bangkok Bank Banking 3,242 2.9 3,377
Tesco Lotus Retail Growth Freehold
& Leasehold Property Fund (Local Property Fund
market shares) & REITS 2,994 2.7 2,279
Electronic
Hana Microelectronics Components 2,966 2.7 3,310
Tisco Financial Group Banking 2,928 2.6 3,003
Eastern Water Resources Development
& Management Energy & Utilities 2,915 2.6 3,331
Mega Lifesciences Commerce 2,844 2.6 617
Kiatnakin Bank Banking 2,829 2.5 2,528
Top twenty investments 75,240 67.2
Construction
Toa Paint Materials 2,786 2.5 2,532
Osotspa Food & Beverage 2,728 2.4 -
Banpu Energy & Utilities 2,625 2.3 4,253
Health Care
Bangkok Dusit Medical Services Services 2,545 2.3 2,718
Electricity Generating Energy & Utilities 2,300 2.1 3,791
Construction
Dynasty Ceramic {C} Materials 2,282 2.0 2,649
Health Care
Bumrungrad Hospital Services 2,146 1.9 2,287
Siam Commercial Bank Banking 2,022 1.8 5,062
LPN Development Property Development 2,015 1.8 1,853
Banpu Power Energy & Utilities 1,666 1.5 1,823
Top thirty investments 98,355 87.8
Interhides Automotive 1,606 1.4 51
Krungthai Car Rent & Lease Finance & Securities 1,512 1.4 118
Alucon Packaging 1,397 1.3 1,887
Muang Thai Insurance Insurance 1,337 1.2 1,609
Thaire Life Assurance Insurance 1,298 1.2 1,679
Goodyear (Thailand) Automotive 1,257 1.1 1,517
Haad Thip Food & Beverage 1,023 0.9 1,507
Sammakorn Property Development 931 0.8 1,440
Thai Reinsurance Insurance 593 0.5 1,744
Total investments 109,309 97.6
Net current assets{D} 2,712 2.4
Total assets{B} 112,021 100.0
{A} Purchases and/or sales during the year will result in 2018 and
2019 values not being directly comparable.
{B} Defined as total assets per the balance sheet less current liabilities
(before deducting prior charges).
{C} Holding includes investment in both common stock and warrants.
{D} Excludes bank loans of GBP5,650,000.
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 2019, taking account of any events between the year end and the date of approval of this Report.
Results and Dividend
The Directors declared an initial interim dividend per share of 7.0p, payable on 23 November 2018 to shareholders on the register as at 26 October 2018, with an ex-dividend date of 25 October 2018.
The Directors are recommending that a final dividend per share of 11.0p (2018 - 11.1p per share) is paid on 28 June 2019 to shareholders on the register on 31 May 2019. The ex-dividend date is 30 May 2019. A resolution in respect of the final dividend will be proposed at the forthcoming AGM.
Investment Trust Status
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 2019.
Individual Savings Account
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, Buybacks and Voting Rights
During the year ended 28 February 2019 the Company bought back and cancelled 280,612 Ordinary shares (2018 - 1,665,119 Ordinary shares). As at 28 February 2019, the Company's issued share capital consisted of 16,582,901 Ordinary shares (2018 - 16,863,513 Ordinary shares) with each share holding one voting right in the event of a poll. An additional 27,971 Ordinary shares were bought back between 1 March 2019 and the date of approval of this Annual Report resulting in 16,554,930 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.
Manager and Company Secretary
The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML"), part of the Standard Life Aberdeen Group, as its alternative investment fund manager. ASFML 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 Aberdeen Standard Investments (Asia) Limited ("ASIAL"), by way of a group delegation agreement in place between ASFML and ASIAL.
With effect from 1 March 2018, the management fee has been charged to the Company on the following basis: a monthly fee, payable in arrears, calculated at an annual rate of 0.9% (2018: 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 Aberdeen Standard Investments (see note 4 to the financial statements).
The fees payable to Aberdeen Standard Investments during the year ended 28 February 2019 are disclosed in Notes 4 and 5 to the financial statements. The investment management fees and bank loan interest costs were charged 25% to revenue and 75% to capital during the year ended 28 February 2019 (2018 - 100% to revenue).
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. There are no performance fee arrangements.
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 also undertakes a review of the management fees in comparison with other funds and believes that the Company's current level of management fees, as reduced with effect from 1 March 2018, remains competitive. Accordingly, 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.
In addition, ASFML has sub-delegated promotional activities to Aberdeen Asset Managers Limited ("AAM") and administrative and secretarial services to Aberdeen Asset Management PLC (the "Company Secretaries").
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 principles identified in the UK Corporate Governance Code published in April 2016 (the "UK Code") for the year ended 28 February 2019. 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 July 2016 ("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
Directors
The current Board consists of a non-executive Chairman and four non-executive Directors, all of whom held office throughout the year under review with the exception of Sarah McCarthy who was appointed a Director on 1 March 2019. The Senior Independent Director is Clare Dobie.
The names and biographies of each of the Directors are shown on in the published Annual Report 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 formal Committee meetings during the year ended 28 February 2019 as follows (with their eligibility to attend the relevant meeting in brackets):
Director Board Meetings Audit and Management Nomination
Engagement Committee Meetings
Committee Meetings
Nicholas Smith 4 (4) 3 (3) 3 (3)
Clare Dobie 4 (4) 3 (3) 3 (3)
Andy Pomfret 4 (4) 3 (3) 3 (3)
Sarah MacAulay 4 (4) 3 (3) 3 (3)
There were an additional three meetings of a Committee of the Board. One of the Board meetings held during the year included a focus on strategic matters including review of the relevance to investors of the Company's investment objective and policy, consideration of feedback from retail and institutional shareholders, an assessment of the future prospects for the Company and a review of the Company's longer term performance and the associated terms of the management agreement with ASFML.
All of the Directors will retire at the AGM in accordance with corporate governance best practice. Nicholas Smith, Andy Pomfret and Sarah MacAulay, being eligible, offer themselves for individual re-election as Directors of the Company. Sarah McCarthy, being eligible, offers herself for election as a Director of the Company. Clare Dobie has decided not to seek re-election as a Director and will retire at the conclusion of the AGM. Clare will be succeeded as Senior Independent Director by Andy Pomfret. The Board as a whole believes that each Director standing for re-election or election remains independent of the Manager 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, each Director's individual performance continues to be effective and demonstrates commitment to the role. The Board therefore has no hesitation in recommending at the AGM the re-election as Directors of Nicholas Smith, Andy Pomfret and Sarah MacAulay and the election as a Director of Sarah McCarthy.
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.
Substantial Interests
As at 28 February 2019 the following were registered, or had notified the Company, as being interested in 3% or more of the Company's Ordinary share capital:
Shareholder Number of shares held % held City of London 4,219,239 25.4 Funds managed by Aberdeen Standard Investments 3,017,985 18.2 Lazard Asset Management 2,800,393 16.9 Aberdeen Investment Trust ISA and Share Plans (non-discretionary) 1,775,579 10.7 Hargreaves Lansdown (non-discretionary) 586,687 3.5
The above share interests were unchanged as at the date of approval of this Report other than notifications to the Company by Standard Life Aberdeen Group on 3 April 2019 of a holding of 2,913,985 shares, equivalent to 17.7% of the Company's issued share capital at that date, and by City of London on 4 April 2019 of a holding of 4,313,024 shares, equivalent to 26.1% of the Company's issued share capital at that date.
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. Aberdeen Standard Investments also takes a zero tolerance approach and has its own detailed policy and procedures in place to prevent bribery and corruption.
In relation to the corporate offence of failing to prevent tax evasion, it is the Company's policy to conduct all business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion whether under UK law or under the law of any foreign country and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships.
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 published 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 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 and the Auditor, in connection with the financial statements, may be found in the published Annual Report.
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. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2016.
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 investments 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.
In October 2018, the Company entered into a GBP15m three-year multi-currency revolving loan facility ("the Facility") with Industrial and Commercial Bank of China Limited, London Branch of which GBP5.65m was drawn down under the Facility at 28 February 2019.
In advance of expiry of the Facility in October 2021, the Company will enter into negotiations with its bankers. 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.
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.
The Directors are mindful of the principal risks and uncertainties disclosed in the published Annual Report 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 2019, the Ordinary shares traded at an average discount of 13.6% 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 the relevant NAV for these purposes would be calculated including undistributed net revenue for the period.
Independent Auditor
As explained in the Audit and Management Engagement Committee's Report, the Directors will propose resolutions at the AGM to re-appoint Deloitte LLP as auditor for the year to 28 February 2020 and to authorise the Directors to determine Deloitte LLP's remuneration.
Disclosures in Strategic Report
The Company has chosen, in accordance with section 414C(11) of the Companies Act 2016 to include in the Strategic Report, likely future developments in the Company's business as well as information relating to the Company's greenhouse gas emissions, and in the Strategic Report and in note 15 to the financial statements, information concerning the Company's use of financial instruments.
The UK Stewardship Code and Proxy Voting
Responsibility for actively monitoring the activities of portfolio companies has been delegated by the Board to the Manager which has sub-delegated that authority to the Investment Manager. The Directors note the corporate stewardship and sustainability programme of Aberdeen Standard Investments, which can be found at - standardlifeaberdeen.com/corporate-stewardship-and-sustainability
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 Aberdeen Standard Investments Customer Services Department. The Company responds to shareholder correspondence.
The Board's policy is to communicate directly with shareholders and their representative bodies without the involvement of Aberdeen Standard Investments 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.
Special Business at the AGM
The AGM will be held on 25 June 2019 and the AGM Notice and related notes may be found in the published Annual Report. Resolutions relating to the following items of special business will be proposed at the forthcoming AGM:-
Authority to Allot Relevant Securities
Ordinary Resolution No. 10 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 1.6m Ordinary shares). Such authority will expire on the date of the AGM in 2020 or on 27 August 2020, whichever is earlier. This means that the authority will have to be renewed at the AGM in 2020.
Limited Disapplication of Pre-emption Provisions
Resolution 11, 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 12 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 10, Resolution 11 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 1.6m Ordinary shares) other than according to the statutory pre-emption rights.
Such authority, which will expire on the date of the earlier of the AGM in 2020 or 27 August 2020, 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 12, 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 12, to purchase up to a maximum of approximately 2.5m 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 12 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 12, may be held in Treasury. The authority sought under Resolution 12 will expire on the earlier of date of the AGM in 2020 and 27 August 2020, whichever is earlier, unless renewed prior to such time.
Recommendation
The Board considers each of Resolutions 10, 11 and 12 under Special Business at the AGM 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 under Special Business at the AGM, as they intend to do in respect of their own shareholdings, amounting to 16,264 Ordinary shares.
On behalf of the Board
Nicholas Smith
Chairman
26 April 2019
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 but not for the content of any information included on the website that has been prepared or issued by third parties. 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.
On behalf of the Board
Nicholas Smith
Chairman
26 April 2019
STATEMENT OF COMPREHENSIVE INCOME
Year ended 28 February Year ended 28 February
2019 2018
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains on investments 10 - (8,393) (8,393) - 15,033 15,033
Income 3 4,165 - 4,165 3,945 - 3,945
Management fee 4 (246) (736) (982) (1,132) - (1,132)
Administrative expenses 5 (420) - (420) (400) - (400)
Currency losses - (33) (33) - (89) (89)
______ ______ _____ ______ ______ ______
Net return/(loss) before
finance costs and taxation 3,499 (9,162) (5,663) 2,413 14,944 17,357
Finance costs 6 (36) (108) (144) (59) - (59)
______ ______ _____ ______ ______ ______
Return/(loss) before taxation 3,463 (9,270) (5,807) 2,354 14,944 17,298
Taxation 7 (381) (4) (385) (367) - (367)
______ ______ _____ ______ ______ ______
Return/(loss) after taxation 3,082 (9,274) (6,192) 1,987 14,944 16,931
______ ______ _____ ______ ______ ______
Return/(loss) per Ordinary
share (pence) 9 18.50 (55.67) (37.17) 11.12 83.64 94.76
______ ______ _____ ______ ______ ______
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 28 February
2019 2018
Notes GBP'000 GBP'000
Non-current assets
Investments at fair value through
profit or loss 10 109,309 120,643
___________ ___________
Current assets
Debtors and prepayments 11 2,486 605
Money market funds 631 3,376
Cash at bank and in hand 486 488
___________ ___________
3,603 4,469
___________ ___________
Creditors: amounts falling due within
one year
Bank loans 12 (5,650) (5,650)
Other creditors 12 (891) (2,294)
___________ ___________
(6,541) (7,944)
___________ ___________
Net current liabilities (2,938) (3,475)
___________ ___________
Net assets 106,371 117,168
___________ ___________
Share capital and reserves
Called-up share capital 13 4,146 4,216
Share premium account 19,391 19,391
Capital redemption reserve 1,389 1,319
Capital reserve 77,245 88,105
Revenue reserve 4,200 4,137
___________ ___________
Equity shareholders' funds 106,371 117,168
___________ ___________
Net asset value per Ordinary share
(pence) 14 641.45 694.80
___________ ___________
STATEMENT OF CHANGES IN EQUITY
Year ended 28 February
2019
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 28 February
2018 4,216 19,391 1,319 88,105 4,137 117,168
Purchase of own shares
for cancellation (70) - 70 (1,586) - (1,586)
(Loss)/return after taxation - - - (9,274) 3,082 (6,192)
Dividend paid (see note
8) - - - - (3,019) (3,019)
_____ _______ ______ ______ ______ _____
Balance at 28 February
2019 4,146 19,391 1,389 77,245 4,200 106,371
_____ _______ ______ ______ ______ _____
Year ended 28 February
2018
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 28 February
2017 4,632 19,391 903 82,260 4,026 111,212
Purchase of own shares
for cancellation (416) - 416 (9,099) - (9,099)
Return after taxation - - - 14,944 1,987 16,931
Dividend paid (see note
8) - - - - (1,876) (1,876)
_____ _______ ______ ______ ______ _____
Balance at 28 February
2018 4,216 19,391 1,319 88,105 4,137 117,168
_____ _______ ______ ______ ______ _____
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 28 February
2019 2018
Notes GBP'000 GBP'000
Operating activities
Net (loss)/return before finance costs
and taxation (5,663) 17,357
Adjustment for:
Losses/(gains) on investments 8,393 (15,033)
(Increase)/decrease in accrued dividend
income (115) 15
Decrease in other debtors excluding
tax 5 1
(Decrease)/increase in other creditors (13) 7
Stock dividends included in investment
income - (50)
Overseas withholding tax (373) (368)
_______ _______
Net cash flow from operating activities 2,234 1,929
Investing activities
Purchases of investments (21,097) (7,781)
Sales of investments 20,862 17,008
_______ _______
Net cash from investing activities (235) 9,227
Financing activities
Interest paid (141) (58)
Equity dividends paid 8 (3,019) (1,876)
Loan repaid (5,650) -
Loan drawn down 5,650 3,000
Buyback of Ordinary shares 13 (1,586) (9,137)
_______ _______
Net cash used in financing activities (4,746) (8,071)
_______ _______
(Decrease)/increase in cash and cash
equivalents (2,747) 3,085
_______ _______
Analysis of changes in cash and cash
equivalents
Opening balance 3,864 779
(Decrease)/increase in cash and cash
equivalents as above (2,747) 3,085
_______ _______
Closing balances 1,117 3,864
_______ _______
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 28 FEBRUARY 2019
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")
issued in November 2014 and updated in February 2018 with
consequential updates. The financial statements are prepared
in Sterling which is the functional currency of the Company
and rounded to the nearest GBP'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
statement for the reasons outlined in the Directors' Report.
Further detail is included in the Statement of Corporate
Governance on the Company's website.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements requires the use
of certain significant accounting judgements, estimates
and assumptions which requires management to exercise its
judgement in the process of applying the accounting policies
and are continually evaluated. The Board considers that
there are no accounting judgements, estimates and assumptions
which would significantly impact the financial statements.
(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 column of
the Statement of Comprehensive Income except as follows:
* expenses directly relating to the acquisition or
disposal of an investment, in which case, they are
added to the cost of the investment or deducted from
the sale proceeds. Such transaction costs are
disclosed in accordance with the SORP. These expenses
are charged to the capital column of the Statement of
Comprehensive Income and are separately identified
and disclosed in note 10; and
* with effect from 1 March 2018, the Company charges
75% of investment management fees and finance costs
to the capital column of the Statement of
Comprehensive Income, in accordance with the Board's
expected long term return in the form of capital
gains and income respectively from the investment
portfolio of the Company. Previously 100% to revenue.
(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
Dividends are recognised in the financial statements in
the period in which they are paid.
2019 2018
3. Income GBP'000 GBP'000
Income from investments
Overseas dividends 4,156 3,891
Stock dividends - 50
_______ _______
4,156 3,941
_______ _______
Other income
Deposit interest 2 -
Interest from money market funds 7 4
_______ _______
9 4
_______ _______
Total income 4,165 3,945
_______ _______
2019 2018
Revenue Capital Total Revenue Capital Total
4. Management fee GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Management fee 246 736 982 1,132 - 1,132
_______ _______ _______ _______ _______ _______
For the year ended 28 February 2019 management and secretarial
services were provided by Aberdeen Standard Fund Managers Limited
("ASFML").
The management fee is payable monthly in arrears and was based
on an annual amount of 0.9% (2018 - 1.0%) 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 2019 was GBP982,000 (2018 - GBP1,132,000)
and the balance due to ASFML at the year end was GBP161,000
(2018 - GBP193,000). There were no commonly managed funds held
in the portfolio during the year to 28 February 2019 (2018 -
none).
With effect from 1 March 2018, management fees are charged 25%
to revenue and 75% to capital (previously 100% to revenue).
2019 2018
5. Administrative expenses GBP'000 GBP'000
Promotional activities 63 66
Directors' fees 96 103
Auditor's fees for:
audit of the Company's annual accounts 23 23
other assurance services 2 3
Custody fees 59 58
Legal & professional fees 74 36
Listing fees 16 15
Directors' and officers' insurance 6 6
Printing and stationery 18 16
Registrar's fees 14 15
Savings scheme expenses 12 10
Other expenses 37 49
_______ _______
420 400
_______ _______
The management agreement with ASFML also provides for the provision
of promotional activities. The total fees paid and payable under
the management agreement in relation to promotional activities
were GBP63,000 (2018 - GBP66,000) with a balance of GBP10,000
(2018 - GBP11,000) being payable to ASFML at the year end. The
Company has an agreement with ASFML for the provision of company
secretarial services and administration services; no separate
fee is charged to the Company in respect of this agreement.
2019 2018
Revenue Capital Total Revenue Capital Total
6. Finance costs GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
On bank loans 36 108 144 59 - 59
_______ _______ _______ _______ _______ _______
With effect from 1 March 2018, finance costs are charged 25%
to revenue and 75% to capital (previously 100% to revenue).
2019 2018
Revenue Capital Total Revenue Capital Total
7. Taxation GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(a) Analysis of charge
for the year
Overseas withholding
tax 381 4 385 367 - 367
_______ _______ _______ _______ _______ _______
Total tax charge 381 4 385 367 - 367
_______ _______ _______ _______ _______ _______
(b) Factors affecting tax charge for the year
The UK corporation tax rate is 19% (2018 - effective rate
of 19.08%).The tax assessed for the year is lower than the
standard rate of corporation tax in the UK. The differences
are explained below:
2019 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net return before
taxation 3,463 (9,270) (5,807) 2,354 14,944 17,298
Corporation tax
at standard rate
of 19% (2018 -
effective rate
of 19.08%) 658 (1,761) (1,103) 449 2,851 3,300
Losses/(gains)
on investments
not taxable - 1,595 1,595 - (2,868) (2,868)
Currency losses
not taxable - 6 6 - 17 17
Non-taxable overseas
income (790) - (790) (752) - (752)
Expenses not deductible
for tax purposes 3 - 3 - - -
Overseas withholding
tax 381 4 385 367 - 367
Loan relationships
not utilised 5 20 25 10 - 10
Excess management
expenses not utilised 124 140 264 293 - 293
_______ _______ _______ _______ _______ _______
Total tax charge 381 4 385 367 - 367
_______ _______ _______ _______ _______ _______
(c) Factors that may affect future tax charges
At the year end, the Company has an unrecognised deferred
tax asset of GBP2,100,000 (2018 - GBP1,841,000) arising
as a result of accumulated unrelieved management expenses
and loan relationship deficits of GBP12,354,000 (2018 -
GBP10,830,000). 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.
2019 2018
8. Dividends on equity shares GBP'000 GBP'000
Amounts recognised as distributions to equity
holders in the year:
Final dividend 2018 - 11.10p (2017 - 10.30p) 1,857 1,860
Interim dividend 2019 - 7.00p (2018 - nil) 1,162 -
_______ _______
3,019 1,860
_______ _______
The proposed final dividend for 2019 is subject to approval
by shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
Set out below are the proposed final dividend, together with
the interim dividend 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
GBP3,082,000 (2018 - GBP1,987,000).
2019 2018
GBP'000 GBP'000
Interim dividend 2019 - 7.00p (2018 - nil) 1,162 -
Proposed final dividend 2019 - 11.00p (2018
- 11.10p) 1,821 1,860
_______ _______
2,983 1,860
_______ _______
Subsequent to the year end the Company has purchased for cancellation
a further 27,971 Ordinary shares; therefore the amounts reflected
above for the cost of the proposed final dividend for 2019 are
based on 16,554,930 in issue, being the number of Ordinary shares
in issue at the date of approval of this Report.
2019 2018
9. Return per Ordinary share GBP'000 p GBP'000 p
Revenue return 3,082 18.50 1,987 11.12
Capital return (9,274) (55.67) 14,944 83.64
_______ _______ _______ _______
Total return (6,192) (37.17) 16,931 94.76
_______ _______ _______ _______
Weighted average number of Ordinary
shares in issue 16,657,633 17,867,486
________ ________
2019 2018
10. Investments at fair value through profit or GBP'000 GBP'000
loss
Opening fair value 120,643 113,164
Opening investment holding gains (56,038) (50,551)
_______ _______
Opening book cost 64,605 62,613
Movements in the year:
Purchases at cost 19,704 9,616
Sales - proceeds (22,645) (17,170)
Sales - realised gains 9,860 9,546
_______ _______
Closing book cost 71,524 64,605
Closing investment holding gains 37,785 56,038
_______ _______
Closing fair value 109,309 120,643
_______ _______
Investments listed on a recognised stock exchange 109,309 120,643
_______ _______
(Losses)/gains on investments
Realised gains on sales 9,860 9,546
(Decrease)/increase in investment holding gains (18,253) 5,487
_______ _______
(Losses)/gains on investments (8,393) 15,033
_______ _______
Transaction costs
During the year expenses were incurred in acquiring or disposing
of investments classified as fair value through profit or loss.
These have been expensed through capital and are included within
(losses)/gains on investments in the Statement of Comprehensive
Income. The total costs were as follows:
2019 2018
GBP'000 GBP'000
Purchases 44 24
Sales 22 10
_______ _______
66 34
_______ _______
The above transaction costs are calculated in line with the
AIC SORP. The transaction costs in the Company's Key Information
Document are calculated on a different basis and in line with
the PRIIPs regulations.
2019 2018
11. Debtors: amounts falling due within one year GBP'000 GBP'000
Prepayments and accrued income 277 183
Amounts due from brokers 2,196 413
Other debtors 13 9
_______ _______
2,486 605
_______ _______
12. Creditors: amounts falling due within one year
(a) Bank loan
In October 2018 the Company entered into a three year GBP15,000,000
multi-currency revolving credit facility with Industrial
and Commercial Bank of China (ICBC). At the year end, GBP5,650,000
(2018 - GBP5,650,000) had been drawn down at an all-in
rate of 1.58638% (2018 - 1.52338%) which matured on 11
April 2019 (2018 - 23 March 2018). As of the latest date
prior to the signing of this Report the GBP5,650,000 loan
has been rolled over to 11 July 2019 at an all-in interest
rate of 1.5765%.
The terms of the loan facility with ICBC contain a covenant
that the borrowings should not exceed 25% 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 GBP40 million. The Company
met both these covenants throughout the period for which
the loan facility was utilised with ICBC.
For the period from October 2015 to October 2018, the terms
of the former loan facility with Scotiabank (Ireland) Limited
contained a covenant that the borrowings should not exceed
20% of the adjusted net asset value of the Company, where
borrowings were defined as debt and other secured liabilities
plus net liabilities under all derivatives determined on
a mark to market basis. Adjusted net asset value was 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 contained
a covenant that the Net Asset Value would not fall below
GBP28 million. The Company met both these covenants throughout
the period for which the loan facility was utilised with
Scotiabank (Ireland) Limited.
2019 2018
(b) Other creditors GBP'000 GBP'000
Amounts due to brokers 626 2,019
Sundry creditors 265 275
_______ _______
891 2,294
_______ _______
2019 2018
13. Called-up share capital GBP'000 GBP'000
Allotted, called up and fully paid:
Opening balance of 16,863,513 (2018 - 18,528,632)
Ordinary shares of 25p each 4,216 4,632
Repurchase of 280,612 (2018 - 1,665,119) Ordinary
shares of 25p each for cancellation (70) (416)
_______ _______
Closing balance of 16,582,901 (2018 - 16,863,513) 4,146 4,216
_______ _______
During the year ended 28 February 2019, the Company bought back
and cancelled 280,612 Ordinary shares of 25p each (2018 - 1,665,119)
for a total consideration of GBP1,586,000 (2018 - GBP9,099,000).
This represented 1.7% of the Company's issued Ordinary share
capital as at 28 February 2019.
Subsequent to the year end the Company bought back and cancelled
a further 27,971 Ordinary shares of 25p each for a total consideration
of GBP154,000.
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:
2019 2018
Net assets attributable (GBP'000) 106,371 117,168
_______ _______
Number of Ordinary shares in issue 16,582,901 16,863,513
_______ _______
Net asset value per share (p) 641.45 694.80
_______ _______
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 Aberdeen
Standard Fund Managers Limited ("ASFML") under the terms of
its management agreement with ASFML (further details of which
are included under note 4). The Board regularly reviews and
agrees policies for managing each of the key financial risks
identified with the Manager. The types of risk and the Manager's
approach to the management of each type of risk, are summarised
below. Such approach has been applied throughout the year and
has not changed since the previous accounting period. The numerical
disclosures exclude short-term debtors and creditors.
Risk management framework
The directors of ASFML collectively assume responsibility for
ASFML's obligations under the AIFMD including reviewing investment
performance and monitoring the Company's risk profile during
the year.
ASFML is a fully integrated member of the Standard Life Aberdeen
Group, which provides a variety of services and support to ASFML
in the conduct of its business activities, including in the
oversight of the risk management framework for the Company.
The AIFM has delegated the day to day administration of the
investment policy to Aberdeen Standard Investments Asia Limited,
which is responsible for ensuring that the Company is managed
within the terms of its investment guidelines and the limits
set out in its pre-investment disclosures to investors (details
of which can be found on the Company's website). The AIFM has
retained responsibility for monitoring and oversight of investment
performance, product risk and regulatory and operational risk
for the Company.
The Manager conducts its risk oversight function through the
operation of the Group's risk management processes and systems
which are embedded within the Group's operations. The Group's
Risk Division supports management in the identification and
mitigation of risks and provides independent monitoring of the
business. The Division includes Compliance, Business Risk, Market
Risk, Risk Management and Legal. The team is headed up by the
Group's Head of Risk, who reports to the CEO 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 ("SHIELD").
The Group's Internal Audit Department is independent of the
Risk Division and reports directly to the Group's CEO and to
the Audit Committee of the Group's Board of Directors. The Internal
Audit Department is responsible for providing an independent
assessment of the Group's control environment.
The Group's corporate governance structure is supported by several
committees to assist the board of directors of Standard Life
Aberdeen, 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 variable rate, revolving,
and uncommitted facilities. The variable 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 25% 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 Statement of Financial Position date was as
follows:
Weighted
average
period for Weighted
which rate average Fixed Floating
is fixed interest rate rate
rate
At 28 February 2019 Years % GBP'000 GBP'000
Assets
Sterling - 0.47 - 460
Thailand Baht - - - 26
_______
486
_______
Liabilities
Bank loans - Sterling 0.16{A} 1.59 (5,650) -
_______ _______ _______ _______
Weighted
average
period for Weighted
which rate average Fixed Floating
is fixed interest rate rate
rate
At 28 February 2018 Years % GBP'000 GBP'000
Assets
Sterling - 0.22 - 488
_______ _______ _______ _______
Liabilities
Bank loans - Sterling 0.08{B} 1.52 (5,650) -
_______ _______ _______ _______
{A} Equivalent to two months.
{B} Equivalent to one month.
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 2019 28 February 2018
Net Total Net Total
Overseas monetary currency Overseas monetary currency
investments assets exposure investments assets exposure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Thailand Baht 109,309 1,596 110,905 120,643 (1,606) 119,037
Sterling - (4,534) (4,534) - (1,869) (1,869)
_______ _______ _______ _______ _______ _______
Total 109,309 (2,938) 106,371 120,643 (3,475) 117,168
_______ _______ _______ _______ _______ _______
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 2019 would have increased/(decreased)
by GBP10,931,000 (2018 - increased/(decreased) by GBP12,064,000)
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 2019 are shown in note 12.
Liquidity risk exposure
At 28 February 2019 the Company's bank loan, amounting to GBP5,650,000
(2018 - GBP5,650,000), was due for repayment or roll-over within
two (2018 - one) months.
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:
2019 2018
Statement Statement
of of
Financial Maximum Financial Maximum
Position exposure Position exposure
Current assets GBP'000 GBP'000 GBP'000 GBP'000
Loans and receivables 2,486 2,486 605 605
Money market funds 631 631 3,376 3,376
Cash at bank and in
hand 486 486 488 488
_______ _______ _______ _______
3,603 3,603 4,469 4,469
_______ _______ _______ _______
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 Total
3
As at 28 February 2019 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through
profit or loss
Quoted equities 108,052 1,257 - 109,309
_______ _______ _______ _______
Net fair value 108,052 1,257 - 109,309
_______ _______ _______ _______
Level 1 Level 2 Level Total
3
As at 28 February 2018 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through
profit or loss
Quoted equities 119,126 1,517 - 120,643
_______ _______ _______ _______
Net fair value 119,126 1,517 - 120,643
_______ _______ _______ _______
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. The
Company's holding in Goodyear (Thailand) of GBP1,257,000 (2018:
GBP1,517,000) is classified as Level 2 due to the lack of active
trading in the stock.
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.
Transactions with the Manager
The Company has agreements with ASFML 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.
ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are numerical measures of the Company's
current, historical or future performance, financial position or
cash flows, other than financial measures defined or specified in
the applicable financial framework. The Company's applicable financial
framework includes FRS 102 and the AIC SORP. The Directors assess
the Company's performance against a range of criteria which are
viewed as particularly relevant for closed-end investment companies.
Total return
Total return is considered to be an alternative performance measure.
NAV and share price total returns show how the NAV and share price
has performed over a period of time in percentage terms, taking
into account both capital returns and dividends paid to shareholders.
NAV total return involves investing the same net dividend in the
NAV of the Company with debt at fair value on the date on which
that dividend was earned. Share price total return involves reinvesting
the net dividend in the month that the share price goes ex-dividend.
The tables below provide information relating to the NAVs and share
prices of the Company on the dividend reinvestment dates during
the years ended 28 February 2019 and 28 February 2018 and total
return for the year.
Dividend Share
2019 rate NAV price
28 February 2018 N/A 694.80p 592.00p
31 May 2018 11.10p 659.94p 565.00p
25 October 2018 7.00p 647.50p 549.00p
28 February 2019 N/A 641.45p 552.00p
_______ _______
Total return -5.1% -3.7%
_______ _______
Dividend Share
2018 rate NAV price
28 February 2017 N/A 600.22p 510.00p
1 June 2017 10.30p 609.63p 516.25p
28 February 2018 N/A 694.80p 592.00p
_______ _______
Total return +17.7% +18.4%
_______ _______
Discount to net asset value per Ordinary share
The discount is the amount by which the share price of 552.00p (2018
- 592.00p) is lower than the net asset value per share of 641.45p
(2018 - 694.80p), expressed as a percentage of the net asset value.
Dividend cover
Revenue return per share of 18.5p (2018 - 11.1p) divided by total
dividends per share of 18.0p (2018 - 11.1p) expressed as a ratio.
Net gearing
Net gearing measures the total borrowings of GBP5,650,000 (28 February
2018 - GBP5,650,000) less cash and cash equivalents of GBP2,687,000
(28 February 2018 - GBP2,258,000) divided by shareholders' funds
of GBP106,371,000 (28 February 2018 - GBP117,168,000), expressed
as a percentage. Under AIC reporting guidance cash and cash equivalents
includes amounts due and to brokers at the year end as well as cash
and money market funds. These balances can be found in notes 11
and 12.
Ongoing charges
Ongoing charges is considered to be an alternative performance measure.
The ongoing charges ratio has been calculated in accordance with
guidance issued by the AIC as the total of investment management
fees and administrative expenses and expressed as a percentage of
the average net asset values with debt at fair value throughout
the year.
2019 2018
Investment management fees (GBP'000) 982 1,132
Administrative expenses (GBP'000) 420 400
Less: non-recurring charges (GBP'000) (26) (1)
_______ _______
Ongoing charges (GBP'000) 1,376 1,531
_______ _______
Average net assets{A} (GBP'000) 109,519 113,362
_______ _______
Ongoing charges ratio 1.26% 1.35%
_______ _______
{A} During both years net asset values with debt at fair value equated
to net asset value with debt at amortised cost due to the short-term
nature of the bank loans.
The ongoing charges ratio provided in the Company's Key Information
Document is calculated in line with the PRIIPs regulations.
The Annual Financial Report announcement is not the Company's statutory accounts. The above results for the year ended 28 February 2019 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 2018 and 28 February 2019 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 2018 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 2019 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 25 June 2019 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
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR LLFIRSLIRFIA
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