12 Oct 2018 11:00
ABERDEEN NEW THAI INVESTMENT TRUST PLC
Legal Entity Identifier (LEI): 213800LUTHTZ8LS5UK85
12 October 2018
HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 AUGUST 2018
The following is the unaudited Interim Board Report for the six months ended 31 August 2018.
PERFORMANCE (CAPITAL RETURN PLUS DIVIDENDS REINVESTED) | ||
Six months ended | Yearended | |
31 August2018 | 28 February 2018 | |
Ordinary share price total return {A} | +0.1% | +18.4% |
Net asset value total return {A} | -0.6% | +17.7% |
Stock Exchange of Thailand ("SET") Index (Sterling adjusted, total return) | -2.2% | +21.6% |
{A} Considered to be an Alternative Performance Measure. | ||
Source: Standard Life Aberdeen Group, Morningstar & Lipper | ||
FINANCIAL HIGHLIGHTS
31 August 2018 | 28 February 2018 | % change | |
Total assets {A} (£'000) | 118,484 | 122,818 | -3.5 |
Equity shareholders' funds (net assets) (£'000) | 112,834 | 117,168 | -3.7 |
Ordinary share price (mid-market) | 581.00p | 592.00p | -1.9 |
Net asset value per Ordinary share {A,B} | 679.11p | 694.80p | -2.3 |
Discount to net asset value {A,B} | 14.4% | 14.8% | |
Stock Exchange of Thailand ("SET") Index (Sterling adjusted, capital return) | 40.47 | 42.31 | -4.3 |
Interim dividend per share {C} | 7.00p | - | |
Net gearing {A,D} | 4.13% | 2.89% | |
Ongoing charges ratio {A} | 1.26% | 1.35% | |
{A} Considered to be an Alternative Performance Measure. | |||
{B} Calculated including undistributed net revenue for the period. | |||
{C} Interim dividend relating to the first six months of the financial year. | |||
{D} Calculated in accordance with AIC recommended practice by dividing total assets less cash or cash equivalents by shareholders' funds expressed as a percentage (a different basis of calculation from that used for prior periods; the figure for 28 February 2018 has therefore been restated). | |||
INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT
Introduction
In May 2018, the Board announced, after consultation with the Manager, that changes would be made to the Company to improve returns for shareholders and these are summarised as follows:
- increase the exposure to small-capitalisation companies ("Small-Caps")
- allow limited investments in unquoted Thai companies
- allocate a greater proportion of operating costs to capital
- introduce an interim dividend, commencing in October 2018
- employ gearing more proactively.
The Board is pleased to report that these initiatives are being implemented and looks forward to seeing the long-term benefits for shareholders.
The case for investment in Thailand remains compelling, in the Board's view, given its enduring strength through political and other uncertainties, the appeal of its companies and its position as a gateway to the wider region with first-rate economic growth potential.
Investment Objective
The investment objective of the Company is to provide shareholders with a high level of long-term, above average capital growth through investment in Thailand.
Performance
Thai equities endured a challenging half-year to 31 August 2018. The Stock Exchange of Thailand Index ("SET Index" or the "Benchmark") fell by 2.2% on a Sterling-adjusted total-return basis. By comparison, your Company's net asset value outperformed declining by 0.6%, while the Ordinary share price rose by 0.1% to end the period at 581.00p (all figures in total return terms).
Overview
The Thai equity market succumbed to worsening external risks over the six-month period, following a steady two-year climb that reached a record high at the end of January 2018. For some time, domestic stocks were relatively unaffected by the challenges afflicting other emerging market equities. However, this proved unsustainable as global trade tensions ratcheted higher, hurting sentiment worldwide. Thai stocks witnessed particularly steep falls in May and June as US President Donald Trump intensified his protectionist rhetoric, which in turn elicited retaliation from key trading partners, notably China.
Market volatility was also exacerbated by concerns over the impact of continued monetary policy normalisation by the US Federal Reserve. Emerging economies with high inflation, deteriorating current account deficits, dwindling foreign-exchange reserves and substantial US-dollar debt appeared particularly vulnerable to rising US yields and the strength of the dollar. An acceleration in foreign capital outflows from these markets, particularly Argentina and Turkey, sparked contagion fears.
Against this backdrop, the SET Index's decline over the review period was relatively benign compared with the larger falls suffered by other Southeast Asian peers as well as the broader emerging markets. This was helped by the local market's late rebound in July and August. Robust fundamentals played a large part in the better relative performance, underscored by the Baht's strength against Sterling. Unlike some of its neighbours, Thailand has a consistently healthy current account surplus. Foreign-exchange reserves stand at an impressive US$200 billion, while annual inflation at 1.6% in August is near the low end of the central bank's target range. Economic growth remains healthy despite a moderation to 4.6% year-on-year in the April - June quarter.
On the policy front, low inflation has allowed the Bank of Thailand to keep interest rates steady, and at near record lows, since April 2015. While the period of neutral policy may be drawing to a close as price pressures have started to build, albeit from a low base, the central bank's policy stance for the medium term should remain accommodative.
Portfolio
Referring to my introduction earlier, the Manager has begun to implement a number of structural portfolio changes. While the net position in Small-Caps has increased only marginally, from approximately 35% to 36% over the period (the Manager having bought and sold a number of Small-Caps in the period), a cornerstone pre-IPO investor pipeline has been developed and net gearing has been increased to 4.1%.
An example of a new Small-Cap holding is Mega Lifesciences which produces health supplements and vitamins. The company has competent management and is backed by a strong balance sheet, aiding its forays into fast growing frontier markets such as Vietnam and Myanmar. Other Small-Caps introduced in the period were Interhides and Krungthai Car Rent & Lease which both target the rising demand for automobiles and related services. The former, which makes leather coverings used in cars, has benefited from the clampdown on leather tanning in China, which has allowed regional competitors, such as Thailand, to fill the supply gap. The latter is engaged in the car rental business and offers an attractive dividend yield sustained by solid profits and margins.
A position has also been initiated in PTT, Thailand's national oil company and the parent of PTT Exploration and Production ("PTTEP"), a major constituent of the portfolio. PTT's solid position within the domestic market, improving governance and its prospects prompted us to buy shares. Conversely, your Manager reduced its positions in both BEC World and MFC and sold completely the stake in Prakit Holdings.
The Company's performance outpaced the Benchmark over the reporting period. The lack of any exposure to CP All was a major contributor. The convenience store operator was weighed down by slowing quarterly profit growth and concerns over start-up costs at Siam Makro, a majority-owned subsidiary that is expanding internationally with new cash and carry stores in Vietnam, Cambodia and China.
The outperformance was also due to your Manager's selection of holdings in the resources, services and industrial sectors. The holding in PTTEP was a key contributor as the oil and gas major rallied on the back of buoyant energy markets and higher selling prices. Additionally, PTTEP's acquisition of a 22% stake in the Bongkot field from Shell is expected to boost its reserves and support long-term consumption growth. In the industrial sector, Thai Stanley Electric, a maker of lamps and bulbs for automobiles and motorcycles, gained from a recovery in domestic auto sales after a prolonged lull. In the services sector, Home Product Center, a home improvement retailer, was supported by its new smaller-format stores and good product mix targeted at middle to high-income customer segments in Bangkok and other large cities, which buttressed margins.
In other sectors, developer Land and Houses benefited from solid quarterly results which were helped by recurring income from its malls and an optimistic outlook that takes into consideration planned condominium launches. The stock's surprise inclusion in the MSCI indices also boosted its share price. Non-bank financial services provider Aeon Thana Sinsap enjoyed a pickup in personal loans, lower credit costs and improving asset quality, which led to a re-rating of the stock. This mitigated the declines seen in the Company's bank holdings.
Big domestic banks, including Bangkok Bank, Kasikornbank and Siam Commercial Bank, were hurt by concerns that fee income would be hampered by intense competition, which forced them to waive digital transaction fees. This was despite generally good second-quarter results.
Elsewhere, coal miner Banpu's share price fell despite robust interim results that reflected increases in both operating profit and EBITDA (earnings before interest, tax, depreciation and amortisation). A one-off compensation payment settled a long-standing court case and removed uncertainty regarding a Laos power project. Meanwhile, not holding Indorama Ventures detracted from performance as the petrochemical producer rallied after management raised earnings prospects.
Earnings, Dividend and Ongoing Charges
The Company's revenue return for the six months ended 31 August 2018 was 15.1p per share (2017 - 10.45p). The increase in the earnings per share 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.
The Board also announced previously that it would introduce an interim dividend in order to accelerate the distribution of earnings per share to shareholders. Accordingly, the Board is declaring a first interim dividend of 7.00p per share to be paid on 23 November 2018 to shareholders on the register as at 26 October 2018. The ex-dividend date will be 25 October 2018.
The Board is pleased with the decline in ongoing charges, to 1.26% from 1.35% over the period, and continues to monitor operating costs closely.
Share Buybacks
The Board continues to monitor the share price discount to NAV and will continue to pursue a policy of selective buybacks of shares where to do so would be in the best interests of shareholders.
During the six months ended 31 August 2018 the Company bought back and cancelled 248,557 Ordinary shares (2017 - 533,600). As at 31 August 2018, the Company's issued share capital consisted of 16,614,956 Ordinary shares with voting rights. Between 1 September 2018 and the date of approval of this Report, the Company bought back for cancellation a further 5,000 Ordinary shares leaving 16,609,956 shares with voting rights in issue.
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 Annual General Meeting that the Company be put into voluntary liquidation.
Outlook
External risks remain foremost on investors' minds. The escalation of retaliatory measures in response to US protectionist policies is already having repercussions, with businesses in Asia adopting a more cautious stance in terms of capital expenditure. Rising borrowing costs, while beneficial for banks' margins and bottom lines, may hamper earnings as well as dampen end demand for real estate and consumer discretionary goods. With rising US Treasury yields and fears about a US dollar liquidity crunch, further fund outflows from emerging market equities remain a significant risk. On the domestic front, the recent boat accident in Phuket that claimed the lives of dozens of Chinese holidaymakers has hurt visitor numbers and this may have some impact on Gross Domestic Product growth.
On a positive note, public spending is expected to accelerate as the government plans to launch infrastructure funds to raise cash for road and highway construction without having to add to public debt. Additionally, a general election during the first half of 2019 could provide tailwinds to growth in terms of policies that are beneficial to provincial voters. At the time of writing, His Majesty the King passed the last two bills required to hold a general election, removing a long-standing uncertainty that may usher in again the right to vote as early as February 2019.
With Thai exports still holding strong, the outlook for corporate earnings growth in 2018 looks set to improve from mid to high-single digits. All this may trigger greater capital inflows, which could receive further impetus from a possible central bank rate hike over the next six months, although this is unlikely to be the start of a tightening cycle.
Nicholas Smith
Chairman
12 October 2018
INTERIM BOARD REPORT - OTHER MATTERS
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
- the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);
- the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and
- the Half-Yearly Board Report includes a fair review of the information required by 4.2.8R of the Disclosure Guidance and Transparency Rules (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).
The Half-Yearly Financial Report for the six months ended 31 August 2018 comprises the Interim Board Report, including the Statement of Directors' Responsibilities, and a condensed set of Financial Statements.
Principal Risks and Uncertainties
The principal risks and uncertainties associated with the Company are set out in detail on pages 10 to 12 of the Annual Report for the year ended 28 February 2018, which is published on the Company's website, and which are applicable for the remaining six months of the Company's financial year ended 28 February 2019 as they have been for the period under review.
Going Concern
The Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's assets consist entirely of equity shares in companies listed on the Stock Exchange of Thailand which are, in most circumstances, realisable within a short timescale.
The Directors are mindful of the principal risks and uncertainties disclosed on pages 10 to 12 and in Note 15 to the financial statements of the Annual Report for the year ended 28 February 2018.
The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with banking covenants.
The Company's £10m revolving credit facility with Scotiabank Ireland Limited, of which £5.65m was drawn down as at 31 August 2018, was repaid in October 2018 and replaced with a £15m three-year multi-currency revolving loan facility ("the Facility") with Industrial and Commercial Bank of China Limited, London Branch. £5.65m was drawn down under the Facility on 11 October 2018.
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.
For and on behalf of the Board
Nicholas Smith
Chairman
12 October 2018
INVESTMENT PORTFOLIO | |||
As at 31 August 2018 | |||
Valuation | Total assets | ||
Company | Sector (Thai SET) | £'000 | % |
Central Pattana | Property Development | 5,780 | 4.9 |
Advanced Info Service | Information & Communication Technology | 5,771 | 4.9 |
PTT Exploration & Production | Energy & Utilities | 5,672 | 4.8 |
Bangkok Insurance | Insurance | 5,416 | 4.6 |
Home Product Center | Commerce | 5,259 | 4.4 |
Aeon Thana Sinsap | Finance & Securities | 4,987 | 4.2 |
Siam Cement | Construction Materials | 4,944 | 4.2 |
Kasikornbank | Banking | 4,794 | 4.0 |
Thai Stanley Electric{A} | Automotive | 4,756 | 4.0 |
Land & Houses{A} | Property Development | 4,390 | 3.7 |
Top ten investments | 51,769 | 43.7 | |
Siam Commercial Bank | Banking | 3,708 | 3.1 |
Hana Microelectronics | Electronic Components | 3,571 | 3.0 |
Minor International | Food & Beverage | 3,457 | 2.9 |
Electricity Generating | Energy & Utilities | 3,379 | 2.9 |
Banpu | Energy & Utilities | 3,371 | 2.8 |
Bangkok Dusit Medical Services | Health Care Services | 3,283 | 2.8 |
Siam City Cement | Construction Materials | 3,174 | 2.7 |
Bangkok Bank | Banking | 3,105 | 2.6 |
Eastern Water Resources Development & Management | Energy & Utilities | 2,925 | 2.5 |
Tisco Financial Group | Banking | 2,712 | 2.3 |
Top twenty investments | 84,454 | 71.3 | |
Toa Paint | Construction Materials | 2,686 | 2.3 |
Tesco Lotus Retail Growth Freehold & Leasehold Property Fund (Local market shares) | Property Fund & REITS | 2,550 | 2.2 |
Kiatnakin Bank | Banking | 2,538 | 2.1 |
Dynasty Ceramic{B} | Construction Materials | 2,355 | 2.0 |
LPN Development | Property Development | 2,300 | 1.9 |
Bumrungrad Hospital | Health Care Services | 2,052 | 1.7 |
Mega Lifesciences | Commerce | 2,026 | 1.7 |
PTT Public Company | Energy & Utilities | 1,916 | 1.6 |
Banpu Power | Energy & Utilities | 1,785 | 1.5 |
Interhides | Automotive | 1,766 | 1.5 |
Top thirty investments | 106,428 | 89.8 | |
Krungthai Car Rent & Lease | Finance & Securities | 1,625 | 1.4 |
Muang Thai Insurance | Insurance | 1,512 | 1.3 |
Alucon | Packaging | 1,477 | 1.2 |
Thaire Life Assurance | Insurance | 1,355 | 1.1 |
Goodyear (Thailand) | Automotive | 1,301 | 1.1 |
Sammakorn | Property Development | 1,165 | 1.0 |
Haad Thip | Food & Beverage | 1,026 | 0.9 |
Thai Reinsurance | Insurance | 1,023 | 0.9 |
BEC World | Media & Publishing | 241 | 0.2 |
Total investments | 117,153 | 98.9 | |
Net current assets{C} | 1,331 | 1.1 | |
Total assets | 118,484 | 100.0 | |
{A} Holding includes investment in both common stock and non-voting depositary receipts. | |||
{B} Holding includes investment in both common stock and warrants. | |||
{C} Excludes bank loans of £5,650,000. | |||
Note: Unless otherwise stated, foreign stock is held. | |||
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Six months ended | ||||
31 August 2018 | ||||
Revenue | Capital | Total | ||
Notes | £'000 | £'000 | £'000 | |
(Losses)/gains on investments | - | (3,179) | (3,179) | |
Income | 2 | 3,167 | - | 3,167 |
Management fee | (124) | (371) | (495) | |
Administrative expenses | (212) | - | (212) | |
Currency losses | - | (9) | (9) | |
_________ | _________ | _________ | ||
Net return before finance costs and taxation | 2,831 | (3,559) | (728) | |
Finance costs | (13) | (39) | (52) | |
_________ | _________ | _________ | ||
Net return before taxation | 2,818 | (3,598) | (780) | |
Taxation | 3 | (293) | - | (293) |
_________ | _________ | _________ | ||
Return after taxation | 2,525 | (3,598) | (1,073) | |
_________ | _________ | _________ | ||
Return per Ordinary share (pence) | 4 | 15.11 | (21.53) | (6.42) |
_________ | _________ | _________ | ||
The total column of the Condensed Statement of Comprehensive Income 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. | ||||
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Six months ended | ||||
31 August 2017 | ||||
Revenue | Capital | Total | ||
Notes | £'000 | £'000 | £'000 | |
(Losses)/gains on investments | - | 6,043 | 6,043 | |
- | ||||
Income | 2 | 2,999 | - | 2,999 |
Management fee | (563) | - | (563) | |
Administrative expenses | (218) | - | (218) | |
Currency losses | - | (50) | (50) | |
_________ | _________ | _________ | ||
Net return before finance costs and taxation | 2,218 | 5,993 | 8,211 | |
Finance costs | (29) | - | (29) | |
_________ | _________ | _________ | ||
Net return before taxation | 2,189 | 5,993 | 8,182 | |
Taxation | 3 | (280) | - | (280) |
_________ | _________ | _________ | ||
Return after taxation | 1,909 | 5,993 | 7,902 | |
_________ | _________ | _________ | ||
Return per Ordinary share (pence) | 4 | 10.45 | 32.81 | 43.26 |
_________ | _________ | _________ | ||
CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
As at | As at | ||
31 August2018 | 28 February 2018 | ||
Notes | £'000 | £'000 | |
Non-current assets | |||
Investments at fair value through profit or loss | 117,153 | 120,643 | |
_________ | _________ | ||
Current assets | |||
Debtors and prepayments | 497 | 605 | |
Money market funds | 6 | 701 | 3,376 |
Cash at bank and in hand | 328 | 488 | |
_________ | _________ | ||
1,526 | 4,469 | ||
_________ | _________ | ||
Creditors: amounts falling due within one year | |||
Bank loans | (5,650) | (5,650) | |
Other creditors | (195) | (2,294) | |
_________ | _________ | ||
(5,845) | (7,944) | ||
_________ | _________ | ||
Net current liabilities | (4,319) | (3,475) | |
_________ | _________ | ||
Net assets | 112,834 | 117,168 | |
_________ | _________ | ||
Share capital and reserves | |||
Called-up share capital | 8 | 4,154 | 4,216 |
Share premium account | 19,391 | 19,391 | |
Capital redemption reserve | 1,381 | 1,319 | |
Capital reserve | 9 | 83,102 | 88,105 |
Revenue reserve | 4,806 | 4,137 | |
_________ | _________ | ||
Equity shareholders' funds | 112,834 | 117,168 | |
_________ | _________ | ||
Net asset value per Ordinary share (pence) | 10 | 679.11 | 694.80 |
_________ | _________ |
CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Six months ended31 August 2018 | |||||||
Share | Capital | ||||||
Share | premium | redemption | Capital | Revenue | |||
capital | account | reserve | reserve | reserve | Total | ||
Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 28 February 2018 | 4,216 | 19,391 | 1,319 | 88,105 | 4,137 | 117,168 | |
Purchase of own shares for cancellation | (62) | - | 62 | (1,405) | - | (1,405) | |
Return after taxation | - | - | - | (3,598) | 2,525 | (1,073) | |
Dividend paid | 5 | - | - | - | - | (1,856) | (1,856) |
_____ | ______ | ______ | ______ | ______ | ______ | ||
Balance at 31 August 2018 | 4,154 | 19,391 | 1,381 | 83,102 | 4,806 | 112,834 | |
_____ | ______ | ______ | ______ | ______ | ______ | ||
Six months ended31 August 2017 | |||||||
Share | Capital | ||||||
Share | premium | redemption | Capital | Revenue | |||
capital | account | reserve | reserve | reserve | Total | ||
Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 28 February 2017 | 4,632 | 19,391 | 903 | 82,260 | 4,026 | 111,212 | |
Purchase of own shares for cancellation | (133) | - | 133 | (2,774) | - | (2,774) | |
Return after taxation | - | - | - | 5,993 | 1,909 | 7,902 | |
Dividend paid | 5 | - | - | - | - | (1,876) | (1,876) |
_____ | ______ | ______ | ______ | ______ | ______ | ||
Balance at 31 August 2017 | 4,499 | 19,391 | 1,036 | 85,479 | 4,059 | 114,464 | |
_____ | ______ | ______ | ______ | ______ | ______ |
CONDENSED STATEMENT OF CASHFLOWS (UNAUDITED)
Six months ended | Six months ended | |
31 August 2018 | 31 August 2017 | |
£'000 | £'000 | |
Operating activities | ||
Net return before finance costs and taxation | (728) | 8,211 |
Adjustment for: | ||
Losses/(gains) on investments | 3,179 | (6,043) |
Currency losses | 9 | 50 |
Increase in accrued dividend income | (333) | (113) |
Increase in other debtors excluding cash | (6) | - |
Decrease in other creditors | (116) | (94) |
Stock dividends included in investment income | - | (50) |
Overseas withholding tax | (260) | (269) |
_________ | _________ | |
Net cash flow from operating activities | 1,745 | 1,692 |
Investing activities | ||
Purchases of investments | (11,777) | (1,933) |
Sales of investments | 10,518 | 5,501 |
_________ | _________ | |
Net cash (used in)/from investing activities | (1,259) | 3,568 |
Financing activities | ||
Interest paid | (51) | (22) |
Equity dividend paid | (1,856) | (1,876) |
Buyback of Ordinary shares | (1,405) | (2,494) |
_________ | _________ | |
Net cash used in financing activities | (3,312) | (4,392) |
_________ | _________ | |
(Decrease)/increase in cash and cash equivalents | (2,826) | 868 |
_________ | _________ | |
Analysis of changes in cash during the period | ||
Opening balance | 3,864 | 779 |
Effect of exchange rate fluctuations on cash held | (9) | (50) |
(Decrease)/increase in cash and cash equivalents as above | (2,826) | 868 |
_________ | _________ | |
Closing balance | 1,029 | 1,597 |
_________ | _________ |
NOTES TO THE ACCOUNTS:
1. | Accounting policies |
Basis of preparation | |
The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. 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. | |
With effect from 1 March 2018, management fees and finance costs are charged 25% to revenue and 75% to capital. Other than this, the Half Yearly financial statements have been prepared using the same accounting policies applied as the preceding Annual financial statements, which were prepared in accordance with Financial Reporting Standard 102. |
Six months ended | Six months ended | ||
31 August 2018 | 31 August 2017 | ||
2. | Income | £'000 | £'000 |
Income from investments | |||
Overseas dividends | 3,164 | 2,947 | |
Stock dividends | - | 50 | |
_________ | _________ | ||
3,164 | 2,997 | ||
_________ | _________ | ||
Other income | |||
Interest from money market funds | 3 | 2 | |
_________ | _________ | ||
Total income | 3,167 | 2,999 | |
_________ | _________ |
3. | Taxation |
The taxation charge for the period represents withholding tax suffered on overseas dividend income. |
Six months ended | Six months ended | ||
31 August 2018 | 31 August 2017 | ||
4. | Return per Ordinary share | p | p |
Revenue return | 15.11 | 10.45 | |
Capital return | (21.53) | 32.81 | |
_________ | _________ | ||
Total return | (6.42) | 43.26 | |
_________ | _________ | ||
The return per share is based on the following figures: | |||
£'000 | £'000 | ||
Revenue return | 2,525 | 1,909 | |
Capital return | (3,598) | 5,993 | |
_________ | _________ | ||
Total return | (1,073) | 7,902 | |
_________ | _________ | ||
Weighted average number of Ordinary shares in issue | 16,712,154 | 18,264,554 | |
_________ | _________ |
Six months ended | Six months ended | ||
31 August 2018 | 31 August 2017 | ||
5. | Dividends | £'000 | £'000 |
2017 final dividend - 10.30p | - | 1,876 | |
2018 final dividend - 11.10p | 1,856 | - | |
_________ | _________ | ||
1,856 | 1,876 | ||
_________ | _________ | ||
The Company has declared an interim dividend for the year ended 28 February 2019 of 7.00p (2017 - nil). The interim dividend will be paid on 23 November 2018 to shareholders on the register on 26 October 2018. The ex-dividend date will be 25 October 2018. | |||
6. | Money market funds |
At the period end the Company had £701,000 (28 February 2018 - £3,376,000) invested in a zero-fee share class of the Aberdeen Liquidity Fund (Lux) - Sterling Fund. |
7. | Transaction costs | ||
During the period 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 Condensed Statement of Comprehensive Income. The total costs were as follows: | |||
Six months ended | Six months ended | ||
31 August 2018 | 31 August 2017 | ||
£'000 | £'000 | ||
Purchases | 12 | 1 | |
Sales | 13 | 5 | |
_________ | _________ | ||
25 | 6 | ||
_________ | _________ | ||
8. | Called-up share capital |
During the six months ended 31 August 2018 the Company purchased 248,557 Ordinary shares for cancellation at a cost of £1,405,000. During the six months ended 31 August 2017 the Company purchased 533,600 Ordinary shares for cancellation at a cost of £2,774,000. | |
Between the period 1 September 2018 and the date of approval of this Report, the Company bought back for cancellation a further 5,000 Ordinary shares at a cost of £30,000. |
9. | Capital reserve |
The capital reserve reflected in the Condensed Statement of Financial Position at 31 August 2018 includes gains of £48,842,000 (28 February 2018 - gains of £56,038,000) which relate to the revaluation of investments held at the reporting date. |
As at | As at | ||
10. | Net asset value per Ordinary share | 31 August 2018 | 28 February 2018 |
Net assets attributable (£'000) | 112,834 | 117,168 | |
Number of Ordinary shares in issue | 16,614,956 | 16,863,513 | |
Net asset value per Ordinary share (p) | 679.11 | 694.80 |
11. | 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 (i.e. developed using market data) for the asset or liability, either directly or indirectly. | |||||
Level 3: | inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability. | |||||
The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows: | ||||||
Level 1 | Level 2 | Level 3 | Total | |||
As at 31 August 2018 | £'000 | £'000 | £'000 | £'000 | ||
Financial assets at fair value through profit or loss | ||||||
Quoted equities | 115,676 | 1,477 | - | 117,153 | ||
_________ | _________ | _________ | _________ | |||
Net fair value | 115,676 | 1,477 | - | 117,153 | ||
_________ | _________ | _________ | _________ | |||
Level 1 | Level 2 | Level 3 | Total | |||
As at 28 February 2018 | £'000 | £'000 | £'000 | £'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. During the period the Company's holding in Alucon of £1,477,000 has been classified as Level 2 due to the lack of active trading in the stock, and the Company's holding in Goodyear (Thailand) of £1,301,000 has been reclassified as Level 1, following its holding at 28 February 2018 of £1,517,000 being classed as Level 2 due to the lack of active trading in the stock at that time. | ||||||
12. | Related party and transactions with Manager |
The Company has agreements with Standard Life Aberdeen Group (the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activity services. | |
The management fee is payable monthly in arrears based on an annual amount of 0.9% (2017 - 1.0%) of the net asset value of the Company valued monthly. The management agreement is terminable on no less than one year's notice. During the period £495,000 (31 August 2017 - £563,000) of investment management fees were earned by the Manager, with a balance of £85,000 (31 August 2017 - £95,000) being payable to the Manager at the period end. From 1 March 2018, management fees are charged 25% to revenue and 75% to capital (2017 - 100% to revenue). | |
The promotional activities fee is based on a current annual amount of £66,000, payable quarterly in arrears. During the period £33,000 (31 August 2017 - £33,000) of fees were paid, with a balance of £11,000 (31 August 2017 - £11,000) being payable to the Manager at the period end. | |
During the course of the period, the Company has held an investment in another fund managed by the same Manager. Details of this holding are disclosed in note 6. |
13. | Segmental information |
The Company is engaged in a single segment of business, which is to invest in equity securities. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment. |
14. | The financial information contained in this Half Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 August 2018 and 31 August 2017 has not been reviewed or audited by the Company's external auditor. |
The financial information for the year ended 28 February 2018 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the Independent Auditor on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006. |
15. | This Half Yearly Financial Report was approved by the Board on 12 October 2018. |
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, including the performance measures noted below, which are viewed as particularly relevant for closed-end investment companies. | |||
Total assets | |||
Defined as total assets per the Statement of Financial Position less current liabilities (before deduction of bank loans). | |||
31 August | 28 February | ||
2018 | 2018 | ||
Total assets calculation
| £'000 | £'000 | |
Total assets less current liabilities | 112,834 | 117,168 | |
Bank loans | 5,650 | 5,650 | |
_________ | _________ | ||
118,484 | 122,818 | ||
_________ | _________ | ||
Total return | |||
NAV total return involves investing the same net dividend in the NAV of the Company with debt at fair value at the time the shares were quoted ex-dividend. 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 six months ended 31 August 2018 and the year ended 28 February 2018. | |||
Dividend | Share | ||
Six months ended 31 August 2018 | rate | NAV{A} | price |
28 February 2018 | N/A | 694.80p | 592.00p |
31 May 2018 | 11.10p | 659.94p | 565.00p |
31 August 2018 | N/A | 679.11p | 581.00p |
_________ | _________ | ||
Total return | -0.6% | +0.1% | |
_________ | _________ | ||
Dividend | Share | ||
Year ended 28 February 2018 | rate | NAV{A} | 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% | |
_________ | _________ | ||
{A} Cum-income NAV with debt at fair value | |||
Share price discount to net asset value per share | |||
The discount is the amount by which the market price per share of an Investment Trust is lower than the net asset value per share. The discount is normally expressed as a percentage of the net asset value per share. | |||
31 August | 28 February | ||
2018 | 2018 | ||
NAV per Ordinary share (p) | a | 679.11 | 694.80 |
Share price (p) | b | 581.00 | 592.00 |
Discount | (a - b) ÷ a | 14.4% | 14.8% |
Ongoing charges | |||
Ongoing charges ratio is calculated in accordance with guidance issued by the AIC and represents the total of the investment management fee and administrative expenses (annualised) divided by the average cum income net asset value throughout the period. The ratio for 31 August 2018 is based on forecast ongoing charges for the year ending 28 February 2019. The ratio for 28 February 2018 is based on ongoing charges for the year ended 28 February 2018. | |||
31 August | 28 February | ||
2018 | 2018 | ||
£'000 | £'000 | ||
Investment management fees | 1,003 | 1,132 | |
Administrative expenses | 413 | 400 | |
Less: non-recurring charges | (4) | (1) | |
_________ | _________ | ||
Ongoing charges | a | 1,412 | 1,531 |
_________ | _________ | ||
Average net assets | b | 111,644 | 113,362 |
_________ | _________ | ||
Ongoing charges ratio | (a ÷ b) | 1.26% | 1.35% |
_________ | _________ | ||
Gearing | |||
Net gearing is calculated by dividing total borrowings less cash and cash equivalents by shareholders' funds, expressed as a percentage. | |||
31 August | 28 February | ||
2018 | 2018 | ||
Net gearing calculation | £'000 | £'000 | |
Bank loans | 5,650 | 5,650 | |
Cash and cash equivalents | (1,029) | (2,258) | |
a | 4,621 | 3,392 | |
_________ | _________ | ||
Shareholders' funds | b | 112,834 | 117,168 |
_________ | _________ | ||
Net gearing | (a ÷ b) | 4.1% | 2.9% |
_________ | _________ | ||
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.
For Aberdeen New Thai Investment Trust plc
Aberdeen Asset Management PLC, Secretaries
END