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
FR USSRRNWAVUAR
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May 24, 2016 06:51 ET (10:51 GMT)
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