TIDMATR
RNS Number : 5373X
Asian Total Return Invest Co PLC
28 August 2015
Half Year Report
Asian Total Return Investment Company plc (the "Company") hereby
submits its Half Year Report for the period ended 30 June 2015 as
required by the UK Listing Authority's Disclosure and Transparency
Rule 4.2.
The Half-Year Report is also being published in hard copy format
and an electronic copy of that document will shortly be available
to download from the Company's website
www.asiantotalreturninvestmentcompany.com. Please click on the
following link to view the document:
The Company has submitted a pdf of the hard copy format of its
Half Year Report to the National Storage Mechanism and it will
shortly be available for inspection at
www.morningstar.co.uk/uk/NSM.
Enquiries:
John Spedding
Schroder Investment Management Limited Tel: 020 7658 3206
28 August 2015
Half Year Report for the Six Months Ended 30 June 2015
Interim Management Report
Chairman's Statement
Performance
In my first report as Chairman, having succeeded David Robins on
29 April 2015, I am pleased to report that positive performance
continued during the six months to 30 June 2015. The Company
produced a net asset value ("NAV") total return of 2.7% over the
period, outperforming by 0.2% both the Reference Index and the
average peer group NAV return.
Asian markets have fallen sharply since the end of the period,
dragged down by China. Although our portfolio has only selective
exposure to Chinese companies listed offshore, it has inevitably
been impacted by the declines in markets.
Promotion and discount management
The discount management policy continues to target a discount to
net asset value of 5% in normal market conditions, using the
Company's share buyback authority when required. In the six months
to 30 June 2015, the average discount to ex income NAV was 6.1% and
a total of 100,000 shares was purchased by the Company to be held
in Treasury in support of the discount policy.
The Board remains focused on promotion of the Company's shares
based on the distinctive characteristics of the Company's strategy
and the differentiation of the opportunities offered by the Company
from those offered by the peer group. To this end, the discount has
remained narrower than the peer group average.
Gearing and the Use of Derivatives
The Company may use gearing to enhance performance but net
gearing will not exceed 30% of net asset value. The Board has
agreed a disciplined framework for gearing, based on a number of
valuation indicators.
Having begun to use gearing at the start of the year, the
portfolio managers continued to use gearing during the period and
at 30 June 2015, net gearing stood at 7.6%. The combination of the
use of gearing alongside the implementation of the portfolio
managers' investment strategy, seeks to offer a degree of capital
preservation through the tactical use of derivatives while allowing
for upside potential in recovering markets.
New Zealand listing and Branch Register
As reported in the Annual Report, the Company's shares were
delisted from the New Zealand Stock Exchange on 8 May 2015. The
shares held on the Company's New Zealand Branch Register were
transferred to the Company's UK Register and the New Zealand Branch
was de-registered on 29 July 2015. The Company's shares are now
quoted solely on the London Stock Exchange.
Retirement of Chairman
As outlined in the Annual report, the refreshment of the Board
continued with the retirement of the former Chairman, David Robins
on 29 April 2015. On behalf of the Board, I would like to thank Mr
Robins for his invaluable contribution to the Company over twelve
years as a Director, and in particular for his leadership of the
Board during eleven years as Chairman.
Outlook
The Chinese domestic stockmarket has collapsed over the summer
and cast a pall over the rest of Asian and indeed world markets.
Our strategy is aimed at mitigating some of the losses in such
conditions through hedging strategies and this has come through in
our continued outperformance of the Reference Index and the average
peer group NAV return since the end of the period. As markets fall,
our portfolio managers are starting to see attractively priced
companies and they have the ability to increase gearing to profit
from these opportunities as valuations improve. The priority now is
to look for the investments that will provide the high rates of
return we are targeting over the longer term.
David Brief
Chairman
28 August 2015
Portfolio Managers' Review
Performance Analysis
Asian equity markets saw extremely mixed returns in the first
half of the year as the China market recorded outsized gains
against broader falls across the rest of the region. Underlying the
moves however were sharp swings in price action in the China
A-share market, where the initial euphoric sentiment which fuelled
a massive retail-driven bubble unravelled rapidly after peaking in
mid-June. The subsequent panic selling and widespread margin calls
triggered a violent correction in the A-share market, leading to
sharp falls across regional equity markets.
The Reference Index-MSCI AC Asia Pacific ex Japan Index-returned
2.5% in sterling terms over the period. Outside of China and Hong
Kong markets which delivered positive returns, sentiment towards
the rest of the regional markets was relatively subdued. India and
most ASEAN markets lagged as local economic data disappointed and
scepticism increased over the likelihood of meaningful reforms from
new governments in countries such as Indonesia, Thailand and India.
Most Asian currencies weakened against the US dollar as worries
over the outlook for economic growth in Asia rose.
Against this backdrop, the portfolio delivered an NAV return of
2.7% in the first half of 2015. The portfolio was up strongly in
the first quarter, but gave back gains in the second as
deteriorating market sentiment weighed on equity markets across the
region. Chinese stocks, despite heightened volatility in June, were
the biggest outperformers over the period. Whilst the zero weight
in Chinese financials and state-owned enterprises meant that the
portfolio did not participate in the initial stages of the China
rally, the bullish sentiment quickly spilled over to Hong Kong and
US-listed China stocks, with two of the portfolio's Chinese ADRs up
strongly following news of privatisation offers.
Pacing gains in the China market, Hong Kong stocks also
delivered modest outperformance as property companies were buoyed
by rising optimism over a pick-up in financial activity and
increasing evidence of a renewed upcycle in the office market.
Amongst the top contributors was conglomerate Hutchison Whampoa
which surged following the announcement of a group restructuring
and the acquisition of UK telecom operator O2. Elsewhere across the
region, Indian banks HDFC and Indusind extended gains, while solid
growth momentum for some of the small to mid-cap names such as
Pacific Textiles, Bumrungrad Hospital and iFast also contributed to
returns.
In contrast to the optimism in China, most ASEAN stocks saw weak
returns with Thai financials and property companies leading
declines on concerns over a weaker macro backdrop. The sluggish
earnings outlook was also reflected across Indonesian corporates,
which dragged on the share prices of conglomerates Jardine
Strategic and Jardine Matheson given headwinds from their
Indonesian subsidiary Astra International. Other detractors came
from commodity-related names as the continued slide in commodity
prices raised concerns over a sustained slowdown in global
demand.
The portfolio was slightly geared with total equity exposure of
107.1% at the end of the first half of 2015. Including the use of
derivative protection, net exposure was approximately 88.1% (95.3%
delta-adjusted).
Outlook
Whilst valuations are looking more reasonable following the
recent correction in equity markets, we remain cautious on the
outlook for Asia given slowing economic growth and concerns over
more serious structural issues emerging. With deflation likely to
get entrenched we are wary of all companies with high debt,
particularly in commodity and cyclical sectors. For China, we think
the risks have risen following the collapse in the A-share bubble,
and expect further long-term de-rating of the stock market and
slowdown in GDP growth. We will continue to avoid financials and
all state owned enterprises in China, and stick to those stocks
operating in sectors where market forces are broadly allowed to
function, mainly in healthcare, consumer, internet and selected
industrials.
For the rest of the region, we remain comfortable with our
exposures to blue chip domestic and externally focused businesses
listed in Hong Kong, Australia, Taiwan and India. Against a tough
macro backdrop for most regional economies and sectors, we will
remain focused on identifying companies with strong cash flow
generation and sustainable yields, and look to keep on some
downside protection via puts given significant tail risks.
Overall we have made few changes to the portfolio over the
period. We remain cautious on the outlook for Asian stock markets
given the deteriorating macro backdrop and earnings uncertainties.
This means despite weakness in markets we are only slowly
accumulating stocks where we see value, and intend to maintain a
moderate level of protection on the fund so long as pricing remains
reasonable.
Robin Parbrook and King Fuei Lee
Portfolio Managers
28 August 2015
Principal risks and uncertainties
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The principal risks and uncertainties with the Company's
business fall into the following categories: investment activity
and performance; financial and currency risk; strategic risk;
accounting, legal and regulatory risk. A detailed explanation of
the principal risks and uncertainties in each of these categories
can be found on pages 20 and 21 of the Company's published Annual
Report and Accounts for the year ended 31 December 2014. These
risks and uncertainties have not materially changed during the six
months ended 30 June 2015.
Going concern
The Directors believe that, having considered the Company's
investment objectives, risk management policies, capital management
policies and procedures, expenditure projections and the fact that
the Company's assets comprise readily realisable securities which
can be sold to meet funding requirements if necessary, the Company
has adequate resources, an appropriate financial structure and
suitable management arrangements in place to continue in
operational existence for the foreseeable future. For these
reasons, they consider there is reasonable evidence to continue to
adopt the going concern basis in preparing the accounts.
Related party transactions
Details of transactions with related parties, which under the
Financial Conduct Authority's Listing Rules include the Manager,
can be found on pages 54 and 55 of the Company's published Annual
Report and Accounts for the year ended 31 December 2014. There have
been no material transactions with the Company's related parties
during the six months ended 30 June 2015.
Directors' responsibility statement
The Directors confirm that, to the best of their knowledge, this
set of condensed financial statements has been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (UK GAAP) and with the Statement of Recommended Practice,
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" issued in November 2014 and that this Interim
Management Report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's
Disclosure and Transparency Rules.
Income Statement
(Unaudited) (Unaudited) (Audited)
for the six months for the six months for the year
ended 30 June 2015 ended 30 June 2014 ended 31 December
2014
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments
held at fair value
through profit or
loss - 3,506 3,506 - 8,664 8,664 - 20,491 20,491
Net losses on derivative
contracts - (72) (72) - (2,001) (2,001) - (718) (718)
Net foreign currency
losses - (123) (123) - (116) (116) - (78) (78)
Income from investments 2,002 - 2,002 1,569 248 1,817 3,141 440 3,581
Other interest receivable
and similar income 57 - 57 115 - 115 150 - 150
Gross return 2,059 3,311 5,370 1,684 6,795 8,479 3,291 20,135 23,426
Investment management
fee (136) (408) (544) (109) (327) (436) (229) (686) (915)
Administrative expenses (239) - (239) (214) - (214) (604) - (604)
Net return before
finance costs and
taxation 1,684 2,903 4,587 1,361 6,468 7,829 2,458 19,449 21,907
Finance costs (18) (54) (72) - - - - - -
Net return on ordinary
activities before
taxation 1,666 2,849 4,515 1,361 6,468 7,829 2,458 19,449 21,907
Taxation on ordinary
activities (note
3) (123) - (123) (71) - (71) (186) (28) (214)
Net return on ordinary
activities after
taxation 1,543 2,849 4,392 1,290 6,468 7,758 2,272 19,421 21,693
Return per share
(note 4) 2.11p 3.89p 6.00p 1.74p 8.73p 10.47p 3.07p 26.28p 29.35p
The "Total" column of this statement is the profit and loss
account of the Company. The "Revenue" and "Capital" columns
represent supplementary information prepared under guidance issued
by The Association of Investment Companies. The Company has no
recognised gains and losses other than those included in the
results above and therefore no separate statement of total
recognised gains and losses has been presented.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the period.
Statement of Changes in Equity
for the six months ended 30 June 2015 (unaudited)
Called-up Capital
Share Share redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2014 4,260 5 11,646 29,182 97,133 10,116 152,342
Repurchase of shares
into Treasury - - - - (215) - (215)
Net return on ordinary
activities - - - - 2,849 1,543 4,392
Dividend paid in the
period (note 5) - - - - - (2,379) (2,379)
At 30 June 2015 4,260 5 11,646 29,182 99,767 9,280 154,140
for the six months ended 30 June 2014 (unaudited)
Called-up Capital
Share Share redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2013 4,260 5 11,646 29,182 79,894 10,253 135,240
Repurchase of shares
into Treasury - - - - (785) - (785)
Net return on ordinary
activities - - - - 6,468 1,290 7,758
Dividend paid in the
period (note 5) - - - - - (2,409) (2,409)
At 30 June 2014 4,260 5 11,646 29,182 85,577 9,134 139,804
for the year ended 31 December 2014 (audited)
Called-up Capital
Share Share redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2013 4,260 5 11,646 29,182 79,894 10,253 135,240
Repurchase of shares
into Treasury - - - - (2,182) - (2,182)
Net return on ordinary
activities - - - - 19,421 2,272 21,693
Dividend paid in the
year (note 5) - - - - - (2,409) (2,409)
At 31 December 2014 4,260 5 11,646 29,182 97,133 10,116 152,342
Statement of Financial Position
(Unaudited) (Unaudited) (Audited)
30 June 30 June 31 December
2015 2014 2014
GBP'000 GBP'000 GBP'000
Fixed assets
Investments held at fair value through
profit or loss 165,444 139,012 150,260
Current assets
Debtors 546 145 440
Cash at bank and in hand 715 644 1,983
Derivative financial instruments
held at fair value through profit
or loss 789 401 191
2,050 1,190 2,614
Current liabilities
Bank loan (12,399) - -
Creditors: amounts falling due within
one year (955) (395) (478)
Derivative financial instruments
held at fair value through profit
or loss - (3) (54)
(13,354) (398) (532)
Net current (liabilities)/assets (11,304) 792 2,082
Total assets less current liabilities 154,140 139,804 152,342
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