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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Martin Currie Asia Unconstrained Trust Plc | LSE:MCP | London | Ordinary Share | GB0005695126 | ORD 50P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 414.00 | 414.00 | 419.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMMCP
RNS Number : 1446Z
Martin Currie Asia Uncnst Trust PLC
24 May 2016
MARTIN CURRIE ASIA UNCONSTRAINED TRUST PLC (the "company")
Annual Financial Results
Year to 31 March 2016
The financial information set out below does not constitute the company's statutory accounts for the year ended 31 March 2016 or financial period ended 31 March 2015 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the company's annual general meeting.
The auditor's have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.
A copy of the annual report and accounts has also been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do
The annual general meeting of the company will be held at the offices of Martin Currie, 1 Bartholomew Lane, London, EC2N 2AX on Wednesday, 6 July 2016 at 12.30pm. Full notice of the meeting can be found on the company's website (www.martincurrieasia.com).
The unedited full text of those parts of the annual report and accounts for the year ended 31 March 2016, which are required to be published are set out on the following pages.
Financial Highlights
Key data
As at As at % change 31 March 31 March 2016 2015 --------------------- --------- --------- -------- Net asset value per share (cum income) 326.8p 361.2p (9.5) --------------------- --------- --------- -------- Net asset value per share (ex income) 322.5p 358.7p (10.1) --------------------- --------- --------- -------- Share price 280.0p 320.8p (12.7) --------------------- --------- --------- -------- Discount(++) 14.3% 11.2% --------------------- --------- --------- --------
Total returns (including reinvested dividends)
Year ended Year ended 31 March 2016 31 March 2015 --------------------- -------------- -------------- Net asset value per share(#) (7.9%) 19.3% --------------------- -------------- -------------- Share price (10.3%) 24.8% --------------------- -------------- --------------
Income
Year ended Year ended % change 31 March 2016 31 March 2015 -------------------- --------------- ------------- --------- Revenue return per share 6.68p 4.82p 38.6 -------------------- --------------- ------------- --------- Dividend per share 7.75p 7.50p 3.3 -------------------- --------------- ------------- --------- Gross income from investments GBP3,526,000 GBP2,983,000 18.2 -------------------- --------------- ------------- --------- Yield* 2.77% 2.34% -------------------- --------------- ------------- ---------
Ongoing charges(**)
Year ended Year ended 31 March 31 March 2016 2015 ----------------- ----------- ----------- Ongoing charges 1.2% 1.2% ----------------- ----------- -----------
Source: Martin Currie Investment Management Limited.
++ Figures are inclusive of income in line with the Association of Investment Companies ('AIC') guidance.
The combined effect of the rise or fall in the net asset value or share price, together with any dividends paid.
# The net asset value is exclusive of income with dividends re-invested.
* The yield is calculated using the dividend per share divided by the year end share price.
** Ongoing charges are calculated as a percentage of shareholders' funds using average net assets over the year and calculated in line with AIC's recommended methodology.
Chairman's statement
Performance
Asian stock markets have not produced any consistent returns since 2013. 2016 was no exception with the brutal sell-off in Chinese equities from April 2015 taking centre stage after a sharp bull run. Over the year to 31 March 2016, the net asset value ('NAV') of the company fell by 7.9% on a total return basis, while the share price dropped 10.3%. By comparison, the MSCI Asia ex- Japan index fell 8.7%. Andrew Graham describes the year as 'torrid' and the indiscriminate sell-off in quality names was a notable feature of last summer's extreme falls with extensive liquidation on fund redemption, particularly after the attempt by the Chinese authorities in August to achieve a 'managed realignment' of the renminbi, which was construed by markets, perhaps unfairly, as outright devaluation.
We have seen a 12.2% recovery in the cum income net asset value ('NAV') in the second half of our financial year, while the share price increased 10.7% recovering some of the damage done in the first six months. Indeed, performance over the last six months of the period has been one of the strongest in the Association of Investment Companies ('AIC') Asia ex Japan sector.
Although the annual results are disappointing, the Asia Long- Term Unconstrained ('ALTU') portfolio is fully representative of a strategy which has emphasis on quality companies with sound business models targeting long-term, sustainable growth. The manager has also avoided the worst performing sectors in the commodity and energy sectors which have experienced such massive declines in the past year.
Current markets
The Bank of Japan's move to a Negative Interest Rate Policy ('NIRP') in January 2016, one of five central banks to do so, highlights unprecedented global monetary conditions with a high proportion of sovereign bonds trading at negative yields. This is symptomatic of powerful deflationary forces emanating largely from the shrinkage of bloated Chinese capacity after a generation of stellar growth. World trade indicators are not indicative of a new growth cycle. Equally, the US recovery has so far had insufficient traction for the Federal Reserve to consider further rate hikes. The debate in developed economies has now moved on towards the deployment of neo- Keynesian fiscal policies by central banks as monetary policy alone appears to have lacked the efficacy and channels for reflation.
Of immediate concern is the return to fiscal stimulus and credit creation by the Chinese authorities. This has appeared temporarily to stabilise the economy. However, this renewed stimulus is only exacerbating the already heavy debt position evident in manufacturing, real estate, State Owned Enterprise ('SOE'), local government and the banks. Hence in turn, this could potentially lead to yet more global deflation as the debt overhang needs to be worked out of the system. At least capital outflows appear to have ameliorated for now with the rush to pay down US dollar borrowings slowing and hence the currency and the level of foreign exchange reserves have stabilised for the time being.
Geopolitical tensions still simmer around the region which inevitably engenders uncertainty affecting market confidence. Still, one must not forget that Asian countries are growing at far superior nominal rates of economic growth compared to Western economies. Asian governments are in a much sounder position to initiate fiscal stimulus through infrastructure and urbanisation programmes, while disposable per capita incomes are generally rising, underpinning consumption. Consequently, there are always opportunities to source investment returns in well-managed businesses especially as equity valuations in the region are not stretched. All this bodes well for secular growth over time although accompanied by inevitable volatility.
Revenue and dividends
The board and the managers consider that income is an important part of the company's total return. This is evident in any study over any period in Asia. It is thus heartening to report that the revenue return per share grew by 38.6% during the year which allows an increase in the dividend after an unchanged pay out last year, albeit partly funded by revenue reserve.
Subject to shareholders' approval, a final dividend of 5.25p will be paid on 12 August 2016 to shareholders on the register at 22 July 2016. This brings the total dividend for the year to 7.75p, an increase of 3.3% over the previous year.
The level of dividend equates to a yield of 2.77%, representing the highest yield in the AIC Asia ex Japan sector for a company without an income mandate. Despite the flat pay out last year, the dividend has grown by 72% since 2011, or 11.5% per annum.
Discount
It is frustrating to report that discounts in the investment trust sector were generally under pressure throughout the year, reflecting the general malaise in markets and the lack of investor engagement with Asia. The company's shares closed the year at 280p representing a 14.3% discount to NAV. This is disappointing. The board has been active in exercising powers granted by shareholders and we have bought back over 1.3 million shares into treasury, representing just over GBP3.7 million, during the year and a further 207,734 shares at a cost of GBP571,000 since the year end. I have previously stated that the board resists having a hard discount control policy believing that buying back shares per se does not improve liquidity in the long term and impinges upon the potential compounding qualities of the investment strategy by taking money off the table. Nevertheless, in uncertain markets, the board also believes that it is right to intervene in the interests of an orderly market and the level of purchases at a deep discount is accretive to shareholders. The key to improving
the discount is underlying investment performance and the attraction of the company's shares and, in that respect, the level of the income yield should be noted.
Gearing
The board approved GBP5 million of structural gearing which I reported on in my statement in the half-yearly accounts. This has been applied across the portfolio and can be drawn down in local currencies applying a modicum of natural currency hedging. We renewed a GBP10 million revolving bank facility and the balance is available for use as tactical gearing by the managers.
Regulation
These accounts have been prepared under FRS 102 for the first time although the changes are essentially presentational. The EU's MIFID II legislation unhelpfully labelling investment trusts as 'complex instruments' has been delayed until January 2018 but another wave of directives including the Market Abuse Regulation II and Common Reporting Standards besides PRIIPs Key Investor Documents ('KIDs') are due to go live at a cost but very little or no additional protection for shareholders.
Outlook
World markets have experienced wide gyrations over the last year and currency and commodity volatility has played a part in undermining confidence in equities. Despite the challenges in the current investment environment, there is still scope from a stock picking perspective to exploit some significant opportunities and secular themes, not least enabling technologies and the insatiable rise of digital commerce. Importantly, Asia is also not all about China and the likes of India and Indonesia are important and growing markets in their own right, while interregional trade continues to grow.
Asian markets and valuations may be cheap from an historical perspective, but they need catalysts. There is significant potential for a rebound with any changes in perception suggesting a recovery in global trade and growth. Even without that, the consumption metrics still underpin the indigenous Asian growth story.
Is the ALTU strategy performing?
The NAV has grown by 9.9% in total return terms over the two years from 31 March 2014, but pertinently by only 3.4% since the implementation of the ALTU mandate on 1 August 2014. This falls short of the objective of matching Asian regional nominal GDP growth which has grown by an estimated 15% over that period based on a sterling composite adjusted figure for our Asian universe.
After last year's AGM at which shareholders gave overwhelming support for continuation, I promised to give an update on the execution of the mandate at this time. The board considers that the long-term attributes of the ALTU strategy are largely intact and that performance suffered from disorderly markets during the first half of our financial year. It would also be unfair to judge a long-term investment strategy on the basis of only a 19 month track record during a profoundly volatile period.
The portfolio manager has a long-term strategy of investing in high quality companies and employs rigorous discipline in his stock selection. The investment process is not about market timing or asset allocation by country or sector. The board will continue to monitor performance noting the recent improvement and hoping that this can be translated into decent returns for shareholders in line with the historical success of the ALTU open-ended strategy which has returned 12.7% p.a. since launch in 2008.
It should also be noted that the company's level of dividend allows shareholders an income cushion in expectation of better capital returns in future.
Website
Considerable efforts have been made to upgrade the content and presentation of the website. If you visit www.martincurrieasia.com, you can register for monthly email bulletins and news alerts as well as view video interviews and updates with the managers.
I would like to thank you for your continued support. Please contact me if you have any questions regarding the company.
Harry Wells
24 May 2016
Manager's review
Market review
The year to the end of March 2016 was a torrid one for Asian equities. The opening months of our fiscal year coincided with the upper end of a rally in Chinese equities, which had become increasingly speculative, followed by an equally spectacular selloff. While the worst excesses of the sell-off were confined to the local markets in China, there was collateral damage across the region and the Chinese government's attempts to handle the situation were misinterpreted by the market. This led to greater scrutiny of the state of Chinese finances and a particular focus on rising capital outflows from the country. More recently, the softening of the US dollar and stabilisation of the yuan, amid signs of oil price recovery, have combined to buoy regional markets. While Asian equities, as measured by the MSCI Asia ex Japan index, declined 11.1% in sterling terms for the year to the end of March, they ended the period up 15.7% from the mid-February lows. In total return terms (that is, with dividends reinvested), regional equity returns saw a somewhat less painful 8.7% decline for the 12 months.
China
Despite the recent rebound in Asian markets, sentiment towards China's currency remains fragile. Although the pace of decline in foreign reserves has slowed, and the renminbi appears to be trading in a much tighter band, we still think that the Chinese authorities want a managed decline of the renminbi versus the US dollar. Meanwhile, indicators of improvement in China's economy are patchy. As I write this report, China has released preliminary real GDP data for the quarter to the end of March, showing 6.7% growth. This is in line with the expectations of most economists and the growth target of the Chinese leadership. However, it has been supported by the creation of substantial amounts of new credit with total aggregate financing of CNY6.52 trillion (just over US$1 trillion) in the quarter. As a result, we saw fixed asset investment growth of almost 11% year on year; it would appear, therefore, that the government has returned to using some of its favoured levers from the past to boost growth.
India
In India, the pace of growth has fallen short of the high expectations set by the post-election Modi hype. Disappointing economic activity, lower-than-expected headline inflation, and tight liquidity conditions all provide potential reasons for the Reserve Bank of India (RBI) to ease monetary policy. Further rate cuts are possible before the year end. However, the RBI could wait to gauge monsoon patterns before acting. India has suffered two consecutive years of drought, so a good monsoon this year would be a welcome relief, with immediate benefits to rural consumption. The early indication from India's meteorological office is that the monsoon will be above normal.
ASEAN
Elsewhere in the region, the Association of Southeast Asian Nations ('ASEAN') markets have been subdued against a backdrop of sluggish export recovery. On the plus side, the region's central banks are expected to maintain accommodative stances, which should be supported by additional fiscal measures in several countries. Indonesia, in particular, cut its policy rates in the first quarter of 2016, taking advantage of the breathing space afforded by the delay of further US interest rate increases. The rupiah has stabilised and President Joko Widodo appears to be regaining political credibility, which has filtered through into improved business confidence. Deployment of public infrastructure spending, combined with the declining cost of capital as rates fall, is feeding a revival in private investment growth.
Looking at the region as a whole, it has been dealing with the challenges of excess capacity and the loss of corporate pricing power for some time. We expect these challenges, and subsequent disinflationary pressures, to persist in the near term.
Commodity prices have bounced from their lows but, with physical markets still over supplied, there is scope for prices to fall again, representing a hindrance to growth in markets dependent on commodity receipts. For the past eight months, outflows from emerging market exchange-traded funds (ETFs) and mutual funds have been substantial, which has negatively affected Asian equities. Analysis of investment fund positioning in Asia paints a similar picture of reduced exposure. However, in both cases, the most recent data suggests this trend appears to have been arrested.
Performance
For the year under review, the company's NAV total return was a negative 7.9%. Although the company has fared better than the broader market, this is not a performance from which your manager draws any satisfaction. The full impact of the anti-corruption crackdown in China, as well as other cyclical pressures on some of our businesses, was very costly in performance terms and obscured the good returns earned on other investments. A positive impact on returns, beyond stock selection, came from the return of funds following the release of tax provisions from the company's previous ownership of the China A share fund. These had previously been written off due to the great uncertainty surrounding the likelihood of future payments.
At the stock level, Taiwan Semiconductor ('TSMC'), the single largest contributor to performance, enhanced its competitive advantage in the foundry sector by taking a large market share in new technologies for which it can charge premium prices. Throughout the year, growth and margins for TSMC have been better than expected. The Indian IT consultancy, Infosys, also fared well. Recent new client wins, as well as increased penetration with existing customers, has lent credence to the optimism management has for future business prospects - at the same time it has been clear that profit margins remain robust. Meanwhile, its future product offerings, including its digital and cloud service strategies, have been clearly articulated. Elsewhere, Indian motorcycle and scooter manufacturer, Hero MotoCorp's most recent quarterly results showed better sales momentum thanks to a pick up in volume growth as well as a rise in average selling prices. At the same time, the much anticipated launch of two new scooter models has been a success, with both being well received, resulting in an increase in market share. These products are now being rolled out nationwide.
Weaker-than-expected first-half results for Television Broadcasts Ltd, resulted in a sharp fall in its share price. Since then, there has been a modest recovery in the stock. We anticipate results remaining weak in the near term, although the TV operator has sufficient excess cash resources to maintain its current level of dividend until the advertising cycle recovers in Hong Kong. HSBC Holdings, which has a large weighting in the portfolio, was the second-greatest detractor from performance over the year. This financial multinational has incurred substantial remediation costs and regulatory fines stemming from past operational and compliance failings. The present management team took control in 2011 in the knowledge that a difficult digestion period lay ahead. What we underestimated is the scale and duration of the costs associated with the new regulatory regime. In our view, many of these issues are running their course and the current valuation is unduly pessimistic. Tsingtao Brewery has been another poor performer and has been negatively affected by the Chinese government's anti-corruption drive, specifically by the impact on the Chinese restaurant and catering sector, a key channel for the core brand. This has been exacerbated by competition from AB InBev, which is seeking to expand its presence in the premium segment.
Activity
Apart from taking advantage of the summer sell-off to add to some existing holdings, and the implementation of the strategic gearing agreed with the board of the company in October, portfolio activity has been relatively light. We have considered many stocks, but have more confidence in existing holdings. At the time of writing, we have almost completely exited our holding of M1 Ltd. Although, this is an exceptionally well managed wireless telecom service operator in Singapore and management has been effective, we have sold the holding because of competition and disruption to the industry from a fourth operator coming into the market in 2017. We also trimmed Maruti Suzuki and Jardine Matheson on valuation grounds. We believe both firms have excellent long-term prospects and we would be keen to repurchase the shares at a lower level.
Outlook
As we begin the new financial year, we have many concerns, including uncertainty regarding US monetary policy, Chinese economic adjustment, and the vulnerability of exchange rates. In particular, we will also be elevating the degree of attention we pay to the corporate credit market this year.
There are two reasons for this. Firstly, across the major three ratings agencies, the ratio of downgrades to upgrades in Asia has deteriorated to a level last seen during 2009. Secondly, we are keenly aware that after the rather light maturity schedule of the past couple of years, the amount of emerging market debt maturing over the next five years is going to be substantially higher. Maturities in 2016 will be approximately 25% greater than in 2015, and 2017 will be higher again, with the level remaining elevated through to 2020. We have noted the manner in which liquidity appeared to vanish from the US high yield credit market last year and are aware that dealers have been much less willing and/or able than in the past to carry the inventory needed to support effective market making in bonds. We think there could be strong implications for the refinancing of Asian and emerging market corporate debt leading to much higher cost of capital for companies which could in turn result in more cash calls from regional equity markets.
Despite these headwinds, there are reasons for cautious optimism. In fact, management teams of many of the Martin Currie Asia Unconstrained Trust portfolio holdings might welcome such an environment. These companies generally have very conservative balance sheets, indeed they are collectively in a substantial net cash position. In the past, strong balance sheets have been a source of formidable competitive advantage, enabling our firms to invest in growth, or to make well-timed acquisitions at attractive prices while weaker competitors are either unwilling or unable to do so. Furthermore, at the broader market level, valuations also look reasonable. On a prospective price-to-book value (p/b) basis, Asia is trading at 1.3x which is towards the low end of its long-term historic range and less than 10% above the early 2009 trough during the global financial crisis. Additionally, 2016 should provide a base from which revisions should start to improve. Consensus expectations for earnings growth this year are for low-single-digit growth which would be below consensus GDP growth expectations for the region. This does not seem unrealistic, but if earnings were to exceed expectations for the first time since 2010, that alone could help market returns, especially given the valuation levels - even against a difficult economic backdrop. The team has continued to pursue new investment ideas. There are several companies that we would like to own in the portfolio, but we are unwilling to pay current market prices for them. Nonetheless, through our forensic accounting process, we have been engaging with several other potential candidates and we would anticipate acquiring some of these names in the months ahead. These will complement existing portfolio holdings. Regarding the latter, while many of these companies are to varying degrees subject to their own unique business cycles, collectively we anticipate them making further progress in the new financial year and expect many of them to grow both earnings and the income distributions they make to shareholders.
Andrew Graham
24 May 2016
Portfolio Summary
Portfolio distribution as at 31 March 2016 (%)
China India Singapore Taiwan South Malaysia Thailand Total & Hong Korea Kong -------------------- -------- ------ ---------- ------- ------- --------- --------- ------ Financials 11.6 - 7.1 - - - 3.5 22.2 Consumer goods 6.4 7.6 - - 6.6 1.5 - 22.1 Technology - 12.0 - 6.9 - - - 18.9 Consumer services 6.4 - 1.8 - - 4.4 - 12.6 Telecommunications 5.7 - 5.3 - - - - 11.0 Industrials 4.0 - 3.3 - - - - 7.3 Utilities 5.9 - - - - - - 5.9 Total portfolio 40.0 19.6 17.5 6.9 6.6 5.9 3.5 100.0 Total portfolio (31.03.2015) 42.3 16.5 20.2 5.5 6.1 5.4 4.0 100.0 -------------------- -------- ------ ---------- ------- ------- --------- --------- ------
By asset class
31 March 2016 31 March 2015 ------------ -------------- -------------- Equities 103.0% 94.0% Cash 1.2% 6.0% Borrowings (4.2%) 0.0% ------------ -------------- -------------- 100.0% 100.0% ------------ -------------- --------------
Top ten holdings
31 March 31 March 31 March 31 March 2016 2016 2015 2015 Market % of total Market % of total value value GBP000 portfolio GBP000 portfolio ------------------------------ --------- ------------- --------- ------------ AIA Group Ltd 9,249 7.5 9,960 7.7 Taiwan Semiconductor Manufacturing Co Ltd 8,511 6.9 7,134 5.5 Infosys Ltd 8,082 6.5 7,127 5.5 China Mobile Ltd 7,049 5.7 7,529 5.8 Tata Consultancy Services Limited 6,749 5.5 6,166 4.8 Samsung Electronics Co Ltd 5,996 4.9 6,231 4.8 Samsonite International S.A. 5,970 4.8 5,672 4.4 Hero Motocorp Ltd 5,842 4.7 4,284 3.3 Singapore Telecommunications Limited 5,415 4.4 5,597 4.3 Genting Berhad 5,406 4.4 4,773 3.7
------------------------------ --------- ------------- --------- ------------ Total 68,269 55.3 64,473 49.8 ------------------------------ --------- ------------- --------- ------------
Portfolio holdings
Market value % of total GBP000 portfolio ------------------------------ ------------- ----------- China & Hong Kong 49,571 40.0 AIA Group Ltd 9,249 7.5 China Mobile Ltd 7,049 5.7 Samsonite International S.A. 5,970 4.8 HSBC Holdings plc 5,114 4.1 Johnson Electric Holdings Limited 4,995 4.0 ENN Energy Holding Ltd 4,750 3.8 Television Broadcasts Limited 3,803 3.1 Hong Kong & China Gas Company Ltd 2,614 2.1 Café de Coral Holdings Limited 2,376 1.9 Tsingtao Brewery Co Ltd 1,974 1.6 SJM Holdings Limited 1,677 1.4 India 24,240 19.6 Infosys Ltd 8,082 6.5 Tata Consultancy Services Limited 6,749 5.5 Hero Motocorp Ltd 5,842 4.7 Maruti Suzuki India Ltd 3,567 2.9 ------------------------------ ------------- ----------- Singapore 21,721 17.5 ------------------------------ ------------- ----------- Singapore Telecommunications Limited 5,415 4.4 United Overseas Bank Ltd 4,856 3.9 Jardine Matheson Holdings Ltd 4,118 3.3 Global Logistic Properties Ltd 3,958 3.2 Dairy Farm International Holdings Ltd 2,210 1.8 M1 Limited 1,164 0.9 ------------------------------ ------------- ----------- Taiwan 8,511 6.9 Taiwan Semiconductor Manufacturing Co Ltd 8.511 6.9 South Korea 8,039 6.6 Samsung Electronics Co Ltd 5,996 4.9 LG Household & Health Care Ltd 2,043 1.7 ------------------------------ ------------- ----------- Malaysia 7,233 5.9 Genting Berhad 5,406 4.4 British American Tobacco (Malaysia) Berhad 1,827 1.5 ------------------------------ ------------- ----------- Thailand 4,287 3.5 Siam Commercial Bank Public Company Limited 4,287 3.5 ------------------------------ ------------- ----------- Total portfolio 123,602 100.0 ------------------------------ ------------- -----------
Principal risks and uncertainties
Risk and mitigation
The company's business model is longstanding and resilient to most of the short term uncertainties that it faces, which the board believes are effectively mitigated by its internal controls and the oversight of the investment manager, as described below. The principal risks and uncertainties are therefore largely longer term and driven by the inherent uncertainties of investing in equity markets. The board believes that it is able to respond to these longer term risks and uncertainties with effective mitigation so that both the potential impact and the likelihood of these seriously affecting shareholders' interests are materially reduced.
Risks are regularly monitored at board meetings and the board's planned mitigation measures are described below.
The board has identified the following principal risks to the company:
Risk Mitigation --------------------------- ----------------------------------------- Loss of S1158-9 Loss of S1158-9 tax status would tax status have serious consequences for the attractiveness of the company's shares. The board considers that, given the regular oversight of this risk carried out by the investment manager and reviewed by it, the likelihood of this risk occurring is minimal. --------------------------- ----------------------------------------- Failure to manage The board recognises the importance shareholder relations of managing shareholder relations. At each meeting, the board reviews the list of key shareholders. The board also receives feedback from the investment manager based on the outcome of its meetings with shareholders. Shareholders are encouraged to give their views by using the email address noted on the back page of the annual report. --------------------------- ----------------------------------------- The investment The board reviews the performance manager ceases and continued appointment of the effectively to investment manager on a regular manage investment basis, via the management engagement trusts or its committee. reputation fails The board is independent of the investment manager and so, if the continued appointment of Martin Currie was not in the best interest of shareholders, a new investment manager would be appointed. --------------------------- ----------------------------------------- Investment underperformance The board manages the risk of investment underperformance by relying on the integrity of the investment manager's investment process. The board monitors the implementation and results of the investment process with the manager, who attends all board meetings, and reviews data that shows statistical measures of the company's risk profile. Please see the chairman's statement and manager's review for further details on investment performance, processes and risks. --------------------------- ----------------------------------------- Gearing/interest From time to time the company finances rate risk its operations through bank borrowings. The board monitors such borrowings (gearing) closely. Details of the current gearing are provided in notes 11, 13 and 14 to the financial statements set out below. There were no debt securities held at 31 March 2016 and the company's investment portfolio is only indirectly exposed to interest rate risk. --------------------------- ----------------------------------------- Foreign currency Although the company is based in risk the UK, its portfolio of investments principally consists of overseas stocks. In addition to the overseas investments, during the year the company also had non-sterling cash deposits and a multi-currency loan facility. At 31 March 2016 the company held a balance of GBP4,000 in Taiwanese dollars (31 March 2015 of GBP14,000 in Taiwanese dollars). As at 31 March 2016 the company had borrowings in Hong Kong dollars and Singapore dollars. Details are given in note 11 below. As a result, the company's sterling statement of financial position and statement of comprehensive income can be significantly affected by movements in the local currencies of these stocks. Currency risk is inherent in all investment decisions and the manager applies his skills and experience to mitigate this risk within tolerances. --------------------------- -----------------------------------------
Operational risk The company has outsourced its entire operational infrastructure to third party providers. Please see the company's annual report for a list of the company's advisers. Contracts and service level agreements have been defined to ensure that the service provided by each third party provider is of a sufficiently professional and technically high standard. The board carries out an annual evaluation of the investment manager and gives feedback to the investment manager through the management engagement committee. Periodically the board requests that representatives from other third party service providers also attend board meetings to give the board the opportunity to ensure controls are in place so that service standards are delivered to meet the company's requirements. --------------------------- ----------------------------------------- Counterparty Most transactions are made delivery risk versus payment on recognised exchanges. The risk to the company of default is therefore minimised. Investment transactions are only carried out with approved brokers. Counterparty risk indicators are regularly reviewed by the investment manager and appropriate action taken, including, if necessary, removing brokers from the approved list. Cash is held only with approved counterparties. --------------------------- -----------------------------------------
Directors' Responsibilities
Statement of directors' responsibilities
The directors of the company 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 United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law) including FRS 102 'The Financial Reporting Standard applicable to 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 assets, liabilities, financial position and performance of the company for that year.
In preparing those 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 are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Each of the directors confirms that, to the best of their knowledge:
-- the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and performance of the company; and
-- the strategic review, the report of the directors and manager's review includes 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 it faces.
Going concern status
The company's business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman's statement, manager's review, strategic report and the report of the directors.
The financial position of the company as at 31 March 2016 is shown on the statement of financial position. The statement of cashflow of the company and the statement of comprehensive income are also set out below.
Note 14 below sets out the company's risk management policies, including those covering market risk, liquidity risk and credit risk.
The company has a loan facility of GBP10,000,000 which expires on 31 August 2018, of which GBP5,100,000 was drawn down at the year-end date. The purpose of the facility is to enable the manager to enhance the return for shareholders by borrowing and investing where the return is expected to exceed the cost of borrowing. The company has adequate financial resources in the form of readily realisable listed securities and as a result the directors assess that the company is able to continue in operational existence without the facility.
In accordance with the Financial Reporting Council's guidance on going concern and liquidity risk issued in October 2009, the directors have undertaken a rigorous review of the company's ability to continue as a going concern. The company's assets consist of a diversified portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale.
The directors are mindful of the principal risks and uncertainties set out above and have reviewed revenue forecasts and they believe that the company has adequate financial resources to continue its operational existence for the foreseeable future and for at least one year from the date of this annual report. As required by the company's articles of association, an ordinary resolution will be proposed at the AGM in 2018 and every third year thereafter for the continuation of the company. Accordingly, the directors continue to use the going concern basis in the preparation of the accounts.
Viability Statement
The company's business model is designed to achieve returns commensurate with Asia ex Japan nominal GDP growth through investing in companies across the Asian region that are capable of producing high and sustainable returns. In accordance with the company's articles of association, a continuance resolution is proposed to shareholders every three years, with the next continuation vote due to take place in 2018.
The board has assessed its viability in accordance with provision C.2.2 of the 2014 UK Corporate Governance Code. The board considers that three years is the minimum period which should be considered in the context of its long term objective but one which is limited by the inherent and increasing uncertainties involved in assessment over a longer period. This longer-term viability statement is contingent upon shareholders voting to support the continuation vote in 2018.
In making this assessment the directors have considered the following risks to its ongoing viability:
-- The principal risks and uncertainties and the mitigating actions set out above; -- The ongoing relevance of the company's investment objective in the current environment;
-- The level of income forecast to be generated by the company and the liquidity of the company's portfolio;
-- The level of fixed costs and limited debt relative to its liquid assets;
-- The current loan facility is due to expire on 31 August 2018. The board is not aware of any reason why it would not be able to renew the loan facility at that date or indeed repay the loan if preferred; and
-- The expectation is that the current portfolio could be liquidated to the extent of 96% within 7 days.
Based on the results of their analysis and the company's processes for monitoring each of the factors set out above, the directors have a reasonable expectation that the company will be able to continue in operation and meet its liabilities over the next three years.
Statement of Comprehensive Income
Year ended 31 Year ended 31 March March 2016 2015 Note Revenue Capital Total Revenue Capital Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 -------------------------- ----- -------------- ----------- ----------- -------------- ----------- --------- Dividend income 2 3,526 - 3,526 2,983 - 2,983 Interest on deposits 2 7 - 7 16 - 16 Net (losses)/gains on investments 8 - (12,624) (12,624) - 19,997 19,997 Net currency (losses)/gains (19) (249) (268) (54) 60 6 -------------------------- ----- -------------- ----------- ----------- -------------- ----------- --------- 3,514 (12,873) (9,359) 2,945 20,057 23,002 Investment management fee (295) (591) (886) (328) (657) (985) Other expenses 4 (557) 3 (554) (549) - (549) -------------------------- ----- -------------- ----------- ----------- -------------- ----------- --------- Net return on ordinary activities before finance costs and taxation 2,662 (13,461) (10,799) 2,068 19,400 21,468 Interest expense and similar charges 3 (42) (84) (126) (34) (68) (102) -------------------------- ----- -------------- ----------- ----------- -------------- ----------- --------- Net return on ordinary activities before taxation 2,620 (13,545) (10,925) 2,034 19,332 21,366 Taxation on ordinary activities 5 (100) - (100) (138) - (138) -------------------------- ----- -------------- ----------- ----------- -------------- ----------- --------- Net returns attributable to shareholders 2,520 (13,545) (11,025) 1,896 19,332 21,228 Net returns per ordinary share 7 6.68p (35.93p) (29.25p) 4.82p 49.15p 53.97p -------------------------- ----- -------------- ----------- ----------- -------------- ----------- ---------
The total columns of this statement are the profit and loss accounts of the company.
The revenue and capital items are presented in accordance with the Association of Investment Companies Statement of Recommended Practice ('SORP') 2014.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued in the financial year.
The notes below form part of these financial statements.
The net return is the profit/(loss) for the financial year and there was no other comprehensive income.
Statement of Financial Position
As at 31 March As at 31 March 2016 2015 Note GBP000 GBP000 GBP000 GBP000 ---------------------------------- ----- -------- -------- -------- -------- Fixed assets Investments at fair value through profit or loss 8 123,602 129,094 Current assets Receivables 9 427 371 Cash at bank 10 1,479 8,278 ---------------------------------- ----- -------- -------- -------- -------- 1,906 8,649 Current liabilities Payables 11 (5,750) (403) ---------------------------------- ----- -------- -------- -------- -------- Net current (liabilities)/assets (3,844) (8,246) ---------------------------------- ----- -------- -------- -------- -------- Total assets less current liabilities 119,758 137,340 ---------------------------------- ----- -------- -------- -------- -------- Share capital and reserves Called-up share capital 12 19,753 19,753 Share premium account 6,084 6,084 Capital redemption reserve 3,428 3,428 Capital reserve* 88,130 105,400 Revenue reserve* 2,363 2,675 ---------------------------------- ----- -------- -------- -------- -------- Total shareholders' funds 119,758 137,340 Net asset value per ordinary share of 50p 7 326.8p 361.2p ---------------------------------- ----- -------- -------- -------- --------
* These reserves are distributable.
Martin Currie Asia Unconstrained Trust plc is registered in Scotland, company number SCO92391.
The notes below form part of these financial statements.
The financial statements were approved by the board of directors on 24 May 2016 and signed on its behalf by Harry Wells, Chairman
Statement of Changes in Equity
Year ended 31 Called Capital Share Capital Revenue Total March 2016 up redemption premium reserve* reserve* GBP000 share reserve account GBP000 GBP000 Note capital GBP000 GBP000 GBP000 ---------------------- ------- --------- ------------ --------- ---------- ---------- --------- At 1 April 2015 19,753 3,428 6,084 105,400 2,675 137,340 Gains on realisation of investments at fair value 8 - - - 128 - 128 Movement in unrealised fair value losses on investments 8 - - - (12,752) - (12,752) Movement in currency losses during the year - - - (249) - (249) Capital expenses - - - (672) - (672) Ordinary shares bought back into treasury 12 - - - (3,725) - (3,725) Transfer to revenue reserve for year - - - - 2,520 2,520 Dividends paid - - - - (2,832) (2,832) ---------------------- ------- --------- ------------ --------- ---------- ---------- --------- At 31 March 2016 19,753 3,428 6,084 88,130 2,363 119,758 ---------------------- ------- --------- ------------ --------- ---------- ---------- --------- Year ended 31 March 2015 ---------------------- ------- --------- ------------ --------- ---------- ---------- --------- At 1 April 2014 21,865 1,316 6,084 99,525 3,631 132,421 Gains on realisation of investments at fair value - - - 7,343 - 7,343 Movement in unrealised fair value losses on investments - - - 12,654 - 12,654 Movement in currency gains during the year - - - 60 - 60 Capital expenses - - - (725) - (725) Ordinary shares bought back for cancellation (2,112) 2,112 - (13,457) - (13,457) Transfer to revenue reserve for year - - - - 1,896 1,896 Dividends paid - - - - (2,852) (2,852) ---------------------- ------- --------- ------------ --------- ---------- ---------- --------- At 31 March 2015 19,753 3,428 6,084 105,400 2,675 137,340 ---------------------- ------- --------- ------------ --------- ---------- ---------- ---------
* These reserves are distributable.
The notes below form part of these financial statements.
Statement of Cashflow
Note Year ended Year ended 31 March 2016 31 March 2015 GBP000 GBP000 GBP000 GBP000 ------------------------------- ----- --------- --------- ---------- --------- Cash flows from operating activities (Loss)/profit before tax (10,925) 21,366 Adjustments for: Loss/(gains) on investments 8 12,624 (19,997) Purchases of investments* (11,987) (102,936) Sales of investments* 4,855 128,201 Dividend revenue 2 (3,526) (2,969) Stock dividend revenue 2 - (14) Interest revenue 2 (7) (16) Dividend received 3,479 3,339 Stock dividend received - 14 Interest received 7 16 (Increase)/decrease in other receivables (9) 81 Increase/(decrease) in other payables 86 (10) Overseas withholding tax suffered 5 (100) (138) 5,422 5,571 ------------------------------- ----- --------- --------- ---------- --------- Net cash flows from operating activities (5,503) 26,937 ------------------------------- ----- --------- --------- ---------- --------- Cash flows from financing activities Repurchase of ordinary share capital (3,459) (13,457) Net movement in revolving bank loan 5,014 (4,007) Exchange movement on revolving bank loan 105 35 Interest paid on borrowings (124) (103) Equity dividends paid (2,832) (2,852) ------------------------------- ----- --------- --------- ---------- --------- Net cash flows from financing activities (1,296) (20,384) ------------------------------- ----- --------- --------- ---------- --------- Net (decrease)/increase in cash and cash equivalents (6,799) 6,553 Cash and cash equivalents at the start of the year 8,278 1,725 ------------------------------- ----- --------- --------- ---------- --------- Closing cash and cash equivalents 1,479 8,278 ------------------------------- ----- --------- --------- ---------- ---------
*Receipts from the sale of, and payments to acquire investment securities have been classified as components of cash flows from operating activities because they form part of the company's dealing operations.
The notes below form part of these financial statements.
Notes to the Financial Statements
Note 1. Accounting policies
(a) Basis of preparation - These financial statements have been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, FRS102 issued by the FRC in August 2014 and the revised Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (SORP) issued by the AIC in November 2014.
For the year ended 31 March 2016, the company is applying for the first time, Financial Reporting Standard (FRS 102) applicable in the UK and Republic of Ireland, which forms part of the revised Generally Accepted Accounting Practice (New UK GAAP) issued by the Financial Reporting Council (FRC) in 2012 and 2013.
As a result of the first time adoption of New UK GAAP and the revised SORP, comparative amounts and presentation formats have been amended where required. The net return attributable to ordinary shareholders and total shareholders' funds remain unchanged from the old UK GAAP basis, as reported in the preceding annual and interim reports. The statement of cashflow has been restated to reflect presentational changes required under FRS 102 and does not include any other material changes. There are no changes to the financial performance or position as a result of the fund adopting FRS 102.
Functional currency - the company is required to nominate a functional currency, being the currency in which the company predominately operates. The board has determined that GBP sterling is the company's functional currency, which is also the currency in which these financial statements are prepared.
Statement of estimation uncertainty - in the application of the company's accounting policies, the board is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not always readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may vary from these estimates. Except the valuation of China A Share Fund holding, there have been no significant judgements, estimates or assumptions for the year.
(b) Income from investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend, or where no ex-dividend date is quoted, when the company's right to receive payment is established. Franked investment income is stated net of the relevant tax credit. Other income includes any taxes deducted at source. Special dividends are credited to capital or revenue, according to the circumstances. Scrip dividends are treated as unfranked investment income; any excess in value of the shares received over the amount of the cash dividend is recognised as a capital item in the statement of comprehensive income.
(c) The management fee and finance costs in relation to debt are recognised two-thirds as a capital item and one-third as a revenue item in the statement of comprehensive income in accordance with the board's expected long-term split of returns in the form of capital gains and income, respectively. Interest receivable and payable, and management expenses are treated on an accruals basis. All expenses are charged to revenue except where they directly relate to the acquisition or disposal of an investment, in which case, they are treated as described in note 1(e) below.
(d) Investments - Investments have been designated upon initial recognition as at fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured at fair value. Subsequent to initial recognition, investments are valued at fair value. Movements in the fair value of investments and gains/losses on the sale of investments are taken to the statement of comprehensive income as a capital item.
The company's listed investments are valued at bid price. Further details on investments are disclosed in note 8 below.
(e) Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the statement of comprehensive income.
(f) Foreign currencies are translated at the rates of exchange ruling on the reporting date. Most investors are resident in the UK therefore GBP sterling is believed to be the functional currency as it is the reporting currency. Revenue received and interest paid in foreign currencies are translated at the rates of exchange ruling at the transaction date.
(g) All financial assets and liabilities are recognised in the financial statements at fair value, with loans valued at amortised costs.
(h) Dividends payable - Interim and final dividends are recognised in the period in which they are paid as disclosed in note 6 below.
(i) Capital reserve - capital expenses, gains or 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. Share buy backs are funded through the capital reserve, with details of buy backs disclosed in note 12 below.
Revenue reserve - the net revenue for the year is transferred to the revenue reserve and dividends paid are deducted from the revenue reserve.
Capital redemption reserve - the nominal value of the shares bought back are transferred to the capital redemption reserve.
Share premium account - this represents the surplus of subscription monies after expenses over the nominal value of the issued share capital.
(j) Taxation - the tax effect of different items of income/gains and expenditure/losses is allocated between revenue and capital on the same basis as the particular item to which it relates, under the marginal method, using the company's effective rate of tax. Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the reporting date where transactions of events that result in an obligation to pay more or a right to pay less tax in future have occurred at the reporting 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 of more subsequent periods.
Note 2. Revenue from listed investments
Year ended 31 Year ended 31 March 2016 March 2015 GBP000 GBP000 ------------------------- -------------- -------------- Overseas equities 3,526 2,969 Stock dividends - 14 ------------------------- -------------- -------------- 3,526 2,983 Other revenue Interest on deposits 7 16 ------------------------- -------------- -------------- 3,533 2,999 ------------------------- -------------- -------------- Total income comprises: Dividends 3,526 2,983 Interest 7 16 ------------------------- -------------- -------------- 3,533 2,999 ------------------------- -------------- --------------
The company received capital distributions of GBP289,000 during the year end 31 March 2016 (31 March 2015: GBPnil).
Note 3. Interest payable and similar charges
Year ended Year ended 31 March 2016 31 March 2015 Revenue Capital Total Revenue Capital Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 -------------------- -------- -------- -------- -------- -------- -------- Interest payable on bank loans and overdrafts 42 84 126 34 68 102 -------------------- -------- -------- -------- -------- -------- --------
Note 4. Other expenses
Year ended Year ended 31 March 31 March 2016 2015 GBP000 GBP000 --------------------------------- ----------- ----------- Bank charges 68 72 Directors' fees 108 119 Legal and professional fees 25 45 Printing and postage 17 15 Public relations 75 53 Registration fees 21 27 Secretarial fee 91 101 AIFMD Depositary fees 38 24 Miscellaneous revenue expenses 93 69 --------------------------------- ----------- ----------- 536 525 Auditor's remuneration Payable to Ernst & Young LLP for the audit of the company's annual financial statements 19 21 Payable to Ernst & Young LLP for non-audit services 2 3 --------------------------------- ----------- ----------- 21 24 Miscellaneous capital expenses* (3) - --------------------------------- ----------- ----------- 554 549 --------------------------------- ----------- -----------
Details of the contract between the company and Martin Currie for provision of investment management and secretarial services are given in the report of the directors.
The non-audit services relate to the assessment of 'ready to tag' accounts and design process for IXBRL purposes.
* Miscellaneous capital expenses relate to a write off of accruals relating to tender offer expenses.
Note 5. Taxation on ordinary activities
Year ended Year ended 31 March 2016 31 March 2015 Revenue Capital Total Revenue Capital Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 ------------------------ -------- -------- -------- -------- -------- -------- Irrecoverable overseas tax 100 - 100 138 - 138 ------------------------ -------- -------- -------- -------- -------- --------
The effective UK corporation tax rate was 20% (31.03.2015: 21%). The tax charge for the year differs from the charge resulting from applying the standard rate of corporation tax in the UK for an investment trust company. The differences are explained below.
Year ended Year ended 31 March 31 March 2015 2016 GBP000 GBP000 --------------------------------- ----------- --------------- Net return before taxation (10,925) 21,366 --------------------------------- ----------- --------------- UK corporation tax at effective rate of 20% (31.03.2015: 21%) (2,185) 4,486 Adjustments: Franked investment income (1) (3) Currency losses/(gains) not taxable 54 (1) Non taxable stock dividends - (3) Losses / (gains) on investments not taxable 2,525 (4,199) Non taxable overseas dividends (706) (614) Overseas tax suffered 100 138 Excess management expenses not utilised 313 344 Revenue taxable in different periods - (10) --------------------------------- ----------- --------------- Total tax charge 100 138 --------------------------------- ----------- ---------------
At the year end, after offset against income taxable on receipt, there is a potential deferred tax asset of GBP2,031,000 (31 March 2015: GBP1,826,000) in relation to surplus tax reliefs. It is unlikely that the company will generate sufficient taxable profits in the future to utilise these amounts and therefore no deferred tax asset has been recognised.
Due to the company's status as an investment trust and the intention to continue to meet the conditions required to obtain approval in the foreseeable future, the company has not provided deferred tax on capital gains and losses arising on the revaluation or disposal of investments.
Note 6. Equity dividends
Year ended Year ended 31 March 31 March 2015 2016 GBP000 GBP000 --------------------------------- ----------- --------------- Year ended 31 March 2016 - 943 - interim dividend of 2.50p Year ended 31 March 2015 - 1,889 - final dividend of 5.00p Year ended 31 March 2014 - interim dividend of 2.50p - 951 13-month period ended 31 March 2014 - final dividend of 5.00p - 1,901 --------------------------------- ----------- --------------- 2,832 2,852 --------------------------------- ----------- ---------------
Set out below are the total dividends payable in respect of the financial period which forms the basis on which the requirements of s1158-9 of the Corporation Taxes Act 2010 are considered.
Year to Year to 31 March 31 March 2016 2015 GBP000 GBP000 ------------------------------- ---------- ---------- Proposed final dividend of 1,913 - 5.25p for the year ended 31 March 2016 Interim dividend of 2.50p for 943 - the year ended 31 March 2016 Final dividend of 5.00p for the year ended 31 March 2015 - 1,901 Interim dividend of 2.50p for the year ended 31 March 2015 - 951 ------------------------------- ---------- ---------- 2,856 2,852 ------------------------------- ---------- ----------
The company has bought back 207,734 shares between 1 April 2016 and 19 May 2016 to be held in treasury; therefore the final dividend for 2016 is based on 36,436,445 ordinary shares in issue.
Note 7. Returns and net asset value
Year ended Year ended 31 March 31 March 2016 2015 -------------------------------- ---------------- -------------- The return and net asset value per ordinary share are calculated with reference to the following figures: Revenue return Revenue return attributable GBP2,520,000 GBP1,896,000 to ordinary shareholders -------------------------------- ---------------- -------------- Weighted average number of shares in issue during year* 37,703,265 39,333,104 Return per ordinary share 6.68p 4.82p -------------------------------- ---------------- -------------- Capital return Capital return attributable (GBP13,545,000) GBP19,332,000 to ordinary shareholders -------------------------------- ---------------- -------------- Weighted average number of shares in issue during year* 37,703,265 39,333,104 Return per ordinary share (35.93p) 49.15p -------------------------------- ---------------- -------------- Total return Total return per ordinary share (29.25p) 53.97p -------------------------------- ---------------- -------------- As at As at 31 March 31 March 2016 2015 ---------------------------- --------------- --------------- Net asset value per share Net assets attributable to GBP119,758,000 GBP137,340,000 shareholders Number of shares in issue at the year end* 36,644,179 38,025,087 Net asset value per share 326.8p 361.2p ---------------------------- --------------- ---------------
*Calculated excluding shares held in treasury.
Note 8. Investments at fair value through profit and loss
As at As at 31 March 31 March 2016 GBP000 2015 GBP000 ------------------------------- ------------- ------------- Opening valuation 129,094 135,617 Opening unrealised fair value gains on investments (23,492) (10,838) ------------------------------- ------------- ------------- Opening cost 105,602 124,779 Add: additions at cost 11,987 101,306 ------------------------------- ------------- ------------- 117,589 226,085 Less: disposals at cost (4,727) (120,483) ------------------------------- ------------- ------------- Closing cost 112,862 105,602 Closing unrealised fair value gains on investments 10,740 23,492 ------------------------------- ------------- ------------- Closing valuation 123,602 129,094 ------------------------------- ------------- -------------
Further details of the portfolio holdings are set out above. Interest rate and currency risk analyses are set out below. The valuation of listed investments is at bid value and this represents fair value.
(Losses)/gains on investments Year ended Year ended 31 March 31 March 2016 2015 GBP000 GBP000 -------------------------------- ----------- ----------- Realised gains for the current year 128 7,343 Movement in unrealised fair value (losses)/gains on investments (12,752) 12,654 -------------------------------- ----------- ----------- (Losses)/gains on investments (12,624) 19,997 -------------------------------- ----------- -----------
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 net (losses)/gains on investments in the statement of comprehensive income. The total costs were as follows:
Year ended Year ended 31 March 2016 31 March GBP000 2015 GBP000 ----------- --------------- ----------- Purchases 22 140 Sales 8 262 ----------- --------------- ----------- 30 402 ----------- --------------- -----------
Note 9. Receivables: amounts falling due within one year
As at 31 March As at 31 2016 March 2015 GBP000 GBP000 ---------------------- --------------- ------------ Dividends receivable 387 340 Other receivables 40 31 ---------------------- --------------- ------------ 427 371 ---------------------- --------------- ------------
Note 10. Cash at bank
As at 31 March As at 31 2016 March 2015 GBP000 GBP000 ------------------ --------------- ------------ Sterling 1,475 8,264 Taiwanese dollar 4 14 ------------------ --------------- ------------ 1,479 8,278 ------------------ --------------- ------------
Note 11. Payables - amounts falling due within one year
As at 31 March As at 31 2016 March 2015 GBP000 GBP000 --------------------------------- --------------- ------------ Interest expense and similar charges 16 14 Due to brokers for repurchase 266 - of ordinary shares Due to Martin Currie Investment Management Ltd 224 255 Revolving bank loan 5,119 - Other payables 125 134 --------------------------------- --------------- ------------ 5,750 403 --------------------------------- --------------- ------------
With the exception of management fees, directors' fees, directors' shareholdings and secretarial fees, there were no related party transactions to report throughout the financial year. For interest rate risk analysis in respect of receivables and payables refer to note 14 below.
The company has a GBP10,000,000 (31.03.15: GBP20,000,000 which expired on 31 October 2015) loan facility with the Royal Bank of Scotland, which expires on 31 August 2018.
As at 31 March 2016 (31.03.15: Nil), the drawdowns were as shown below, with a maturity date of 5 May 2016.
Currency Interest rate ----------------- --------- GBP1,400,000 1.34% HKD 23,618,070 (GBP2,100,000) 1.42% SGD 3,096,900 (GBP1,600,000 1.99% ----------------- ---------
On 5 May 2016 the loans were rolled over with a maturity date of 5 August 2016.
Currency Interest rate ----------------- --------- GBP1,400,000 1.34% HKD 23,618,070 (GBP2,118,500) 1.30% SGD 3,096,900 (GBP1,600,000 1.76% ----------------- ---------
On 9 May 2016 a further HKD 22,479,000 (GBP2,000,000) was drawn down at a rate of 1.27% with a maturity date of 5 August 2016.
All payables are due within three months.
Note 12. Called up share capital
As at As at 31 March 31 March 2016 2015 GBP000 GBP000 --------------------------------------- ---------- ---------- Authorised: 66,000,000 (2015 - 66,000,000) ordinary shares of 50p each - equity 33,000 33,000 --------------------------------------- ---------- ---------- Allotted, called up and fully paid: 36,644,179 (2015 - 38,025,087) ordinary shares of 50p each - equity 18,322 19,013 --------------------------------------- ---------- ---------- Treasury shares: 2,861,693 (2015 - 1,480,785) ordinary shares of 50p each - equity 1,431 740 --------------------------------------- ---------- ---------- Total 19,753 19,753 --------------------------------------- ---------- ----------
The company has bought back 1,380,908 shares of 50p each during the year to 31 March 2016 at a cost of GBP3,725,000 to be held in treasury. During the year to 31 March 2015 4,225,010 shares were bought back for cancellation at a cost of GBP13,457,000 through the tender offer approved by shareholders on 6 July 2014.
The company has an authorised share capital of 66,000,000 ordinary shares of 50p each, which rank equally. Shareholders are entitled to dividends, which are paid bi-annually, and to attend and vote at all general meetings of the company. On a winding-up, and after satisfying all liabilities of the company, shareholders will be entitled to all the remaining assets of the company.
Note 13. Analysis of net debt
At 1 April Cash flows Exchange At 31 2015 GBP000 movements March GBP000 GBP000 2016 GBP000 ------------------ ----------- ----------- ----------- -------- Analysis of net debt Cash at bank and in hand 8,278 (6,531) (268) 1,479 Revolving bank loan - (5,014) (105) (5,119) ------------------ ----------- ----------- ----------- -------- 8,278 (11,545) (373) (3,640) ------------------ ----------- ----------- ----------- --------
For interest rate risk and currency risk analyses refer to note 14 below.
Note 14. Financial instruments
The company's financial instruments comprise securities and other investments, cash balances, loans and receivables and payables that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and receivables for accrued income. The company also has the ability to enter into derivative transactions in the form of forward foreign currency contracts, futures and options, for the purpose of managing currency and market risks arising from the company's activities. No derivative transactions were undertaken during the year. As at the year end, the company held no derivatives (31.03.15: None held).
The main risks the company faces from its financial instruments are (i) market price risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk.
The board regularly reviews and agrees policies for managing each of these risks. The investment manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term receivables and payables, other than for currency disclosures as they are deemed immaterial.
(i) Market price risk
The fair value of future cash flows of a financial instrument held by the company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk.
Interest rate risk
Interest rate movements may affect the level of income receivable on cash deposits/payable on short term borrowings.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
Interest risk profile
The interest rate risk profile of the portfolio of financial assets and liabilities at the statement of financial position date was as follows:
As at 31 March Interest Local currency Foreign Sterling 2016 rate '000 exchange equivalent % rate GBP000 ------------------ --------- --------------- ---------- ------------ Assets Sterling 0.25 1,475 1.000 1,475 Taiwanese dollar n/a 192 46.258 4 ------------------ --------- --------------- ---------- ------------ Total 1,479 ------------------ --------- --------------- ---------- ------------ Liabilities Loan - Hong Kong dollar 1.99 23,618 11.148 2,119 Loan - Singapore dollar 1.42 3,097 1.935 1,600 Loan - GBP sterling 1.34 1,400 1.000 1,400 ------------------ --------- --------------- ---------- ------------ Total 5,119 ------------------ --------- --------------- ---------- ------------ As at 31 March Interest Local currency Foreign Sterling 2015 rate '000 exchange equivalent % rate GBP000 ------------------ --------- --------------- ---------- ------------ Assets Sterling 0.25 8,264 1.000 8,264 Taiwanese dollar n/a 627 46.450 14 ------------------ --------- --------------- ---------- ------------ Total 8,278 ------------------ --------- --------------- ---------- ------------ Liabilities Loan n/a n/a n/a n/a ------------------ --------- --------------- ---------- ------------
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates for financial instruments at the statement of financial position date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the company's profit or loss for the year to 31 March 2016 would increase/decrease by GBP15,000 (31 March 2015: increase/decrease by GBP83,000). This is mainly attributable to the company's exposure to interest rates on its floating rate cash balances.
Foreign currency risk
The company's investment portfolio is invested mainly in foreign securities and the statement of financial position can be significantly affected by movements in foreign exchange rates. It is not the company's policy to hedge this risk on a continuing basis but the company may, from time to time, match specific overseas investment with foreign currency borrowings.
The statement of comprehensive income is subject to currency fluctuation arising on overseas income.
Foreign currency risk exposure by currency of denomination:
As at 31 March 2016 As at 31 March 2015 Investment Net Total Investment Net Total exposure monetary currency exposure monetary currency GBP000 exposure exposure GBP000 exposure exposure GBP000 GBP000 GBP000 GBP000 -------------- ----------- ---------- ---------- ----------- ---------- ---------- Hong Kong dollar 49,571 (2,122) 47,449 54,466 - 54,466 Indian rupee 24,241 - 24,241 21,312 - 21,312 Korean won 8,038 88 8,126 7,945 72 8,017 Malaysian ringgit 7,233 - 7,233 6,991 - 6,991 Singaporean dollar 15,393 (1,605) 13,788 18,150 - 18,150 Taiwanese dollar 8,511 4 8,515 7,134 14 7,148 Thai baht 4,287 - 4,287 5,128 1 5,129 US dollar 6,328 299 6,627 7,968 267 8,235 -------------- ----------- ---------- ---------- ----------- ---------- ---------- Total 123,602 (3,336) 120,266 129,094 354 129,448 -------------- ----------- ---------- ---------- ----------- ---------- ----------
The asset allocation between specific markets can vary from time to time based on cumulative invested positions of the portfolio of equity holdings listed in special stock markets.
Foreign currency sensitivity
The following table details the company's sensitivity to a 10% increase and decrease in sterling against the relevant foreign currencies and the resultant impact that any such increase or decrease would have on net return before tax and equity shareholders' funds. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates.
2016 2015 GBP000 GBP000 ------------------ --------- -------- Taiwanese dollar - 1 ------------------ --------- -------- Total - 1 ------------------ --------- --------
Other price risk
Other price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.
It is the board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular country or sector. Both the allocation of assets to international markets set out above, and the stock selection process act to reduce market risk. The manager actively monitors market prices throughout the year and reports to the board, which meets regularly in order to review investment strategy. The investments held by the company are listed on various stock exchanges worldwide.
Other price risk sensitivity
If market prices at the statement of financial position date had been 15% higher or lower while all other variables remained constant, the return attributable to ordinary shareholders at the year to 31 March 2016 would have increased/decreased by GBP18,540,000 (31.03.2015: increase/decrease of GBP19,364,000) and capital reserves would have increased/decreased by the same amount. These calculations are based on the portfolio valuations, as at the respective statement of financial position dates, and are not representative of the year as a whole.
(ii) Liquidity risk
This is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities. All payables are due within three months.
Liquidity risk is not considered to be significant as the company's assets mainly comprise readily realisable securities, which can be sold to meet funding commitments if necessary.
(iii) Credit risk
This is the risk of failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the company suffering a loss.
The risk is managed as follows:
-- Investment transactions are carried out with a large number of brokers, whose credit ratings are reviewed periodically by the portfolio manager. Limits are set on the exposure to any one broker. The risk to the company of default is therefore minimised.
-- Most transactions are made delivery versus payment on recognised exchanges. -- Cash is held only with reputable banks.
None of the company's financial assets are secured by collateral or other credit enhancements.
The maximum credit risk exposure as at 31 March 2016 was GBP1,906,000 (31.03.2015: GBP8,649,000). This was due to receivables and cash as per notes 9 and 10 above.
Fair values of financial assets and financial liabilities
All assets and liabilities are included in the balance sheet at fair value, with loans valued at amortised cost.
Note 15. Capital management policies and procedures
The company's capital management objectives are:
-- to ensure that the company will be able to continue as a going concern; and
-- to maximise the revenue and capital return to its equity shareholders through an appropriate balance of equity capital and debt.
The company's capital as at 31 March 2016 comprised:
2016 2015 GBP000 GBP000 ----------------------------- -------- -------- Equity share capital 19,753 19,753 Retained earnings and other reserves 100,005 117,587 Total 119,758 137,340 ----------------------------- -------- --------
The board, with the assistance of the investment manager and the AIFM, monitors and reviews the broad structure of the company's capital on an ongoing basis. These reviews include:
-- the planned level of gearing, which takes account of the manager's views on the market;
-- the need to buy back equity shares for cancellation or to hold in treasury, which takes account of the difference between the net asset value per share and the share price (i.e. the level of share price discount or premium);
-- the need for new issues of equity shares; and
-- the extent to which revenue in excess of that which is required to be distributed should be retained.
The company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
The company had 103% net gearing at the year end (31.03.15: GBPnil).
Note 16. Fair value hierarchy
The company has early adopted the amendments to FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' where an entity is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2: other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc); and
-- Level 3: significant unobservable inputs (including the company's own assumptions in determining the fair value of investments).
The financial assets and liabilities measured at fair value through the profit and loss in the financial statements are grouped into the fair value hierarchy as follows:
At 31 March 2016 Level Level Level Total 1 2 3 GBP000 GBP000 GBP000 GBP000 -------------------------- -------- -------- -------- -------- Financial assets at fair value through profit or loss Quoted Equities 123,602 - - 123,602 -------------------------- -------- -------- -------- -------- Net fair value 123,602 - - 123,602 -------------------------- -------- -------- -------- -------- At 31 March 2015 -------- Level Level Level Total 1 2 3 GBP000 GBP000 GBP000 GBP000 --------------------------- -------- -------- -------- -------- Financial assets at fair value through profit or loss Quoted equities 129,094 - - 129,094 --------------------------- -------- -------- -------- -------- Net fair value 129,094 - - 129,094 --------------------------- -------- -------- -------- --------
The company's holding in the China 'A' share fund S2 Shares has been determined using unobservable market inputs other than quoted prices and is therefore categorised as level 3, this holding has been valued at GBPnil as at 31 March 2016 (31.03.15: GBPnil).
Note 17. Post balance sheet event
As at 19 May 2016, the company had bought back a further 207,734 ordinary shares at a cost of GBP571,000. On 9 May 2016, a further HKD 22,479,000 (GBP2,000,000) was drawn down under the loan facility.
Note 18. Alternative Investment Fund Managers ('AIFM') Directive
In accordance with the AIFM Directive, information in relation to the company's leverage and the remuneration of the company's AIFM, Martin Currie Fund Management ('MCFM'), is required to be made available to investors. In accordance with the Directive, the AIFM's remuneration policy is available from MCFM on request. The numerical remuneration disclosures in relation to the AIFM's first relevant accounting period (year ended 31 March 2016) are also available from MCFM on request.
The company's maximum and actual leverage levels at 31 March 2016 are shown below:
Leverage Exposure Gross method Commitment method ------------------- ------------- ----------------------------- Maximum permitted limit 275% 175% Actual 103% 104% ------------------- ------------- -----------------------------
The leverage limits are set by the AIFM and approved by the board and are in line with the maximum leverage levels permitted in the company's articles of association. The AIFM is also required to comply with the gearing parameters set by the board in relation to borrowings.
Website
Martin Currie Asia Unconstrained Trust has its own dedicated website at www.martincurrieasia.com. This offers shareholders, prospective investors and their advisers a wealth of information about the company. Updated daily, it includes the following: latest prices, performance data, portfolio information, manager videos, latest monthly update, research, press releases and articles, and annual and half yearly reports.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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(END) Dow Jones Newswires
May 24, 2016 06:51 ET (10:51 GMT)
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