For personal use only · During FY11, the Company successfully raised A$22,221,152 through...
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ANNUAL REPORT | FOR THE YEAR ENDED 30 JUNE 2011 L I M I T E D For personal use only
Transcript of For personal use only · During FY11, the Company successfully raised A$22,221,152 through...
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Chairman’s Letter 1
Managing Director’s Report 2
Corporate Governance Statement 8
Directors’ Report 13
Auditor’s Independence Declaration 22
Statement of Comprehensive Income 23
Statement of Financial Position 24
Statement of Changes in Equity 25
Statement of Cash Flows 27
Notes to the Financial Statements 28
Directors’ Declaration 53
Independent Auditor’s Report 54
Stock Exchange Information 56
Investments at Market Value 58
Corporate Directory 59
CONTENTS
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CHAIRMAN’S LETTER
OVERVIEWWelcome to the Annual Report for the Asian Masters Fund (the Company) for the financial year ended 30 June 2011 (FY11).
As at 30 June 2011, the pre-tax NTA of the Company was 95.6 cents per share and the post-tax NTA was 94.8 cents per share. This compares to the pre-tax NTA of 100.6 cents per share and the post-tax NTA of 101.0 cents per share as at 30 June 2010.
During FY11, the Company paid two fully-franked dividends. The first, a 1.5 cents per share fully-franked dividend was paid on 21 October 2010, and the second, a 1 cent per share fully-franked dividend was paid on 2 May 2011.
COMPANY UPDATESDuring FY11, the Company successfully raised A$22,221,152 through placements during August 2010, October 2010, December 2010, March 2011 and June 2011. The Company also raised A$789,523 with two dividend re-investment plans in October 2010 and May 2011. We believe this demonstrates the continued significant investor support for the Company.
In early April 2011, the Company announced its third on-market share buy-back program since listing. The buy-back commenced on 17 May 2011 and was undertaken as an active capital management tool to provide liquidity to existing shareholders should they be seeking to exit their investment at or near net tangible assets. On 7 June the buy-back was suspended indefinitely. During the period within which the buy-back was open, a total of 934,060 shares worth A$904,235 were purchased by the Company from shareholders.
On 23 November 2010 the Company announced the appointment of Mr. Kevin Smith as a new Independent Director. The Company is very fortunate to secure the services of Mr. Smith as an independent director. Mr. Smith has served as the CEO of Standard Life Investments (Asia) Limited as well as the Head of Emerging Markets and Global Head of Stock Selection. He then served as the Equities Chief Investment Officer of ABN AMRO Asset Management responsible for all equity, listed property and alternative investments and was co-chair of the Asset Allocation Committee. Mr. Smith’s appointment will be casual until a formal appointment is sought at the Annual General Meeting to be held later this year.
On 23 November 2010, the Company also announced Mr. Daryl Dixon and Mr. Alan Dixon’s intention to retire as non-executive directors of the Company, effective at the end of the calendar year of 2010. Their resignation was accepted by the board on 15 December 2010. Mr. Daryl Dixon and Mr. Alan Dixon will remain involved with the Company in a managerial capacity through their roles at Dixon Advisory.
We would like to take this opportunity to thank you for your continued support of the Asian Masters Fund.
Yours sincerely,
Mr Maximilian Sean Walsh CHAIRMAN
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MANAGING DIRECTOR’S REPORT
OVERVIEWAsian economic growth remained strong throughout FY11, and our expectation is that Asian markets will continue to be a core driver of global economic growth going forward. Whereas economic growth in Asia ex Japan is forecast by the International Monetary Fund to be 7.9% in both 2011 and 2012, in contrast, advanced economies are forecast to grow at a rate of only 2.2% in 2011 and 2.6% in 2012.
A particularly encouraging aspect of the growth profile of Asia is that consumption growth was robust across the region. The growth of the middle class is an important aspect of the Asian growth story and of emerging markets more broadly. According to the World Bank, the global middle class is forecast to triple from 400 million in 2000 to 1.2 billion in 2030, with China and India accounting for most of that expansion. With the growth in the middle class will come a significant expansion of domestic consumption, which should help underpin future growth in the region.
However, whilst economic growth in Asia was strong this past year, there was a noticeable slowdown in growth momentum as the year progressed. The causes of the slowdown vary, but generally reflect the waning of temporary factors such as inventory build and government stimulus expenditure, actions by the authorities to tighten macro policy conditions, and falling net exports as demand from the industrialised world remains soft.
One of the consequences of strong economic growth is the rising risk of inflation. Not only has growth in Asia returned to the pre-crisis rate, the level of output has regained its pre-crisis path; Asia’s output gaps have closed. The result is an inflation rate which has risen to around 6% in some of the major economies like China, Hong Kong and Singapore. However, while still somewhat elevated, inflation levels are far below the double-digit rates that used to predominate in the region, and inflation expectations have also become more anchored and less volatile as policy makers across the region have demonstrated a willingness to get in front of the curve and tighten monetary policy where necessary.
The Chinese government announced its 12th five-year plan during FY11. The plan includes significant new spending on “soft infrastructure” such as healthcare, education and social security, a continuing campaign to clean up the environment and further initiatives to rebalance the economy by encouraging domestic spending. Although rapid economic growth remains a priority, it is no longer the only one. The focus is now on a more balanced growth profile between the east and the west of the country, between the cities and rural areas and between the export sectors and the domestic sectors.
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PORTFOLIO POSITIONINGAs at 30 June 2011, the country allocation of the portfolio was:
AUF Weight AUF Invested Index Weight Active Weight
Hong Kong 15.3% 17.1% 11.6% 5.5%
Taiwan 14.7% 16.4% 15.6% 0.9%
China International 14.1% 15.7% 23.4% -7.7%
Korea 11.1% 12.4% 20.6% -8.2%
India 10.6% 11.8% 10.3% 1.5%
Singapore 8.6% 9.6% 6.9% 2.6%
Thailand 4.8% 5.3% 2.4% 3.0%
Malaysia 4.2% 4.7% 4.4% 0.3%
Vietnam 1.5% 1.7% 0.0% 1.7%
Australia 1.3% 1.5% 0.0% 1.5%
China Domestic 1.3% 1.5% 0.3% 1.2%
Indonesia 1.2% 1.3% 3.7% -2.3%
Philippines 0.4% 0.5% 0.8% -0.3%
Sri Lanka 0.1% 0.1% 0.0% 0.1%
Pakistan 0.0% 0.0% 0.2% -0.2%
Other 0.4% 0.4% 0.0% 0.4%
Gold 1.2%
Cash* 9.29%
*Cash includes discretionary cash held by AUF as well as cash held by underlying investment managers.
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The company was 92.3% invested with positions in 16 investment funds. These investments are presented below.
Manager Mandate Weight as at 30/06/2011
Value Partners High Dividend Yield Fund Asian region 15.4%
Aberdeen Asian Opportunities Fund Asian Region 11.0%
Comgest Growth Asia EXJPN Class A Asian Region 8.7%
Treasury New Asia Fund Asian Region 7.5%
Value Partners Taiwan Fund Country Specialist 7.4%
Invesco Greater China Fund Country Specialist 7.2%
HSBC India Fund Country Specialist 6.8%
JF Korea Fund Country Specialist 5.0%
Legg Mason Asian Enterprise Fund Asian Region 4.0%
Lion Global Singapore / Malaysia Fund Country Specialist 3.8%
Invesco PRC Fund Country Specialist 3.6%
Prusik Smaller Companies Fund Small Cap specialist 3.3%
Prusik Asia Fund Class O Asian Region 3.2%
The Phillip – Aizawa Fund Country Specialist 3.1%
Aberdeen China Opportunities Fund Country Specialist 2.8%
Lion Global Vietnam Fund Country Specialist 1.5%
Total Cash* 7.7%
*Only includes discretionary cash held by AUF.
MANAGING DIRECTOR’S REPORT CONT.
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The Company’s portfolio is broadly diversified across 14 countries and 10 sectors. The top 50 holdings are presented below:
Asset Name Weight (%)
1 Taiwan Semiconducter Manufacturing Company 1.71%
2 Petrochina Company Ltd 1.53%
3 CNOOC Ltd 1.48%
4 China Mobile Ltd 1.23%
5 Samsung Electronics 1.14%
6 ICBC Ltd 1.14%
7 Overseas Chinese Bank 1.10%
8 President Chain Store 1.08%
9 China Construction Bank 1.07%
10 Hon Hai Precision Co 0.90%
11 Luk Fook Holdings 0.86%
12 Jardine Strategic Holding 0.83%
13 Chow Sang Sang Holding 0.82%
14 Singapore Telecommunications Limited 0.80%
15 CIMB Group Holdings 0.74%
16 Swire Pacific (B) 0.73%
17 Bharti Airtel 0.72%
18 HCL Technologies 0.70%
19 CJ O Shopping Ltd 0.68%
20 China Life Insurance Company 0.64%
21 Siam Cement Co 0.64%
22 Cairn Energy 0.60%
23 Standard Chartered 0.60%
24 Newcrest Mining Limited 0.59%
25 Maruti Udyog 0.58%
26 Genting Bhd 0.56%
27 Techtronic Industries 0.56%
28 United Overseas Bank 0.55%
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Asset Name Weight (%)
29 Tencent Holdings 0.52%
30 Bank of China Ltd 0.52%
31 BOC Hong Kong 0.50%
32 HTC Corporation 0.50%
33 Jindal Steel & Power 0.49%
34 Yuanta Financial Holdings 0.48%
35 ICICI Bank 0.47%
36 State Bk of India 0.46%
37 ASM Pacific Technology 0.45%
38 Kangwon Land Inc 0.43%
39 China Steel Chemical Company 0.42%
40 Cheung Kong (Holdings) 0.42%
41 PCL PH Exploration & Production PCL 0.41%
42 E-Life Mall Corp 0.40%
43 The Link Real Estate 0.39%
44 Sun Hung Kai Properties 0.39%
45 Singapore Technologies 0.38%
46 Samsung F&M Insurance 0.37%
47 Elec & Eltek International 0.37%
48 Boart Longyear Limited 0.36%
49 Dr Reddys Labs 0.36%
50 Hyundai Industrial Development & Construction 0.36%
Top 50 34.03%
Other 616 55.53%
Cash & Gold 10.44%
MANAGING DIRECTOR’S REPORT CONT.
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PERFORMANCE REVIEWThe Company provided a total return to shareholders of -2.6% during the year, comprised of decrease in net asset value per share of 5.0% and two dividends of 1.5 cents per share and 1 cent per share. This compares to a total return of -0.6% for the MSCI Asia ex Japan Index, the Company’s benchmark, resulting in an underperformance of 2.0% for the period of 30 June 2010 to 30 June 2011.
Since inception, the Company has outperformed the benchmark by 23.8%.
During the year, the Company made investments in two new funds, Prusik Asia Fund and Prusik Asian Smaller Companies Fund. Both funds are run by Prusik Investment Management and invest on an Asian regional basis. The Prusik Asian Smaller Companies Fund represents AUF’s first specialist small cap investment. Additional investments were also made in the Treasury New Asia Fund as well as the Comgest Growth Asia Ex Japan Fund.
Post balance date, the Company made several other changes to the underlying manager line up. The investment committee identified the domestic consumption theme in Asia as a sustainable source of growth. To take advantage of this the Company invested in the Arisiag Asian Consumer Fund, a unique consumer staples focused fund. The Company also divested from the Value Partners High Dividend Fund, Value Partners Taiwan Fund, Lion Global Singapore Malaysia Fund and the Aberdeen China Opportunities Fund. A new investment was made in the JF Taiwan Fund run by one of the best resourced locally based Taiwan teams in the industry. Additional funds were also invested in the Invesco PRC Fund.
MARKET OUTLOOKThe strong start to the year in the Asian equity markets was followed by a range bound period from the beginning of calendar 2011, as Asian stock markets have had to contend with three distinct but inter-related headwinds: global cyclical risks, structural impediments in Europe and lastly, the monetary tightening in Asia. This period is typical to that of year three in a four year economic cycle. Year three is generally characterised by rising inflation and interest rates but also strong earnings growth. Across Asia this is indeed the current experience.
In our view this has opened up a contrast between the strong corporate earnings outlook and balance sheets of Asian companies and the currently undemanding valuations for Asian stock markets. While recent developments have increased the probability of a recession in the developed world, Asia, with its attractive demographics, its continued urbanisation and industrialisation, and the beginnings of a shift from export led growth to domestic consumption, will remain a powerful, sustainable driver of global growth for decades to come.
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Asian Masters Fund Limited (the Company) is a listed investment company whose shares are traded on the Australian Securities Exchange (ASX). The Company has no employees and its day-to-day functions and investment activities are managed by Dixon Advisory & Superannuation Services Limited (the Manager) in accordance with the Management Agreement.
The Company’s directors and the Manager’s directors and senior management recognise the importance of good corporate governance. The Company’s corporate governance framework, policies and practices are designed to ensure the effective management and operation of the Company and will remain under regular review.
A description of the Company’s practices in respect of the 8 Principles and Recommendations from the ASX Corporate Governance Council’s Revised Corporate Governance Principles and Recommendations (ASX Recommendations) are set out below; all these practices, unless otherwise stated, were in place for the entire year.
1. LAY SOLID FOUNDATIONS FOR MANAGEMENT & OVERSIGHT
BOARD ROLES AND RESPONSIBILITIES
The Board is responsible for the overall operation, strategic direction, leadership and integrity of the Company and in particular, is responsible for the Company’s growth and success. In meeting its responsibilities, the Board undertakes the following functions:
• ProvidingandimplementingtheCompany’sstrategicdirection;
• Reviewingandoverseeingtheoperationofsystemsofriskmanagementensuringthatthesignificant risks facing the Company are identified, that appropriate control, monitoring and reporting mechanisms are in place and that risk is appropriately dealt with;
• EnsuringtheBoardiscomprisedofindividualswhoarebestabletodischargetheresponsibilities of directors having regard to the law and the best standards of governance;
• Reviewingandoverseeinginternalcomplianceandlegalregulatorycompliance;
• EnsuringcompliancewiththeCompany’sConstitutionandwiththecontinuousdisclosurerequirements of the ASX Listing Rules and the Corporations Act; and
• Communicatingwithandprotectingtherightsandinterestsofallshareholders.
Subject to legal or regulatory requirement and the Company’s Constitution, the Board may delegate any of the above powers to individual directors, committees of the Board or the Manager. Any such delegation shall be in compliance with the law and the Company’s Constitution.
2. STRUCTURE THE BOARD TO ADD VALUE
BOARD COMPOSITION
The composition of the Board is structured to maintain a mix of directors from different backgrounds with complementary skills and experience. Details of each director at the date of this report are given in the Directors’ Report, including the period in office, skills, experience, and expertise relevant to the position of director.
CORPORATE GOVERNANCE STATEMENT
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The directors of the Company at the date of this report are:
Mr Maximilian Walsh (non-executive chairman)
Mr Alex MacLachlan (non-executive director)
Mr John Holland (non-executive director)
Mr Kevin Smith (non-executive director)
The Company’s Constitution provides that there must be a minimum of 3 and a maximum of 10 directors. Having regard to the size of the Company and the nature of its business, the Board has determined that a Board with 4 members is the appropriate composition for the Board and will enable it to continue to effectively discharge its responsibilities to the Company. However, the composition of the Board and its independence will be reviewed periodically.
The Board comprised of two independent non-executive directors, John Holland and Kevin Smith. An independent non-executive director is a non-executive director who is independent of the Manager and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their judgement.
Maximilian Walsh is the non-executive chairperson and is associated with the Manager. The Board has determined that Maximilian Walsh’s experience as a director and chairperson is of benefit to the Company and given the Company’s size there are no immediate plans to appoint an independent non-executive chairperson.
The Company is committed to diversity in the composition of the Board. The current composition is well-balanced and it remains the Company’s objective to maintain diversity as well as including members who can add to the skill set of the Company’s Board. The directors will continue to monitor the composition of the Board.
The Company recognises the ASX Recommendations with respect to establishing remuneration and nomination Committees as good corporate governance. However, considering the size of the Company, the functions that would be performed by these Committees are best undertaken by the Board.
The Board will review its view on Committees in line with the ASX Recommendations and in light of any changes to the size or nature of the Company and if required may establish Committees to assist it in carrying out its functions. At that time the Board will adopt a charter for such Committees in accordance with the ASX Recommendations and industry best practices.
It is the Board’s policy to determine the terms and conditions relating to the appointment and retirement of non-executive directors on a case-by-case basis and in conformity with the requirements of the Listing Rules and the Corporations Act 2001. In accordance with the corporate governance policy, directors are entitled to seek independent advice at the expense of the Company. Written approval must be obtained from the chair prior to incurring any expense on behalf of the Company.
PERFORMANCE EVALUATION
The Board conducts a review of its collective performance and the performance of its directors annually. This process includes consideration of feedback provided by directors via a questionnaire. The Board and individual directors, including the chairperson, were evaluated during the year to 30 June 2011 in accordance with these processes.
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3. PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING
CODE OF CONDUCT
The Company is committed to maintaining ethical standards in the conduct of its business activities. The Company’s reputation as an ethical business organisation is important to its ongoing success and it expects all its officers and employees to be familiar with, and have a personal commitment to meeting these standards. In this regard the directors have adopted a Code of Conduct to define basic principles of business conduct. The Code requires officers and employees to abide by the policies of the Company and the law. The Code is a set of principles giving direction and reflecting the Company’s approach to business conduct and is not a prescriptive list of rules for business behaviour. The Code of Conduct covers ethical operations, compliance with laws, dealings with customers and public officials, conflicts of interest, confidential and proprietary information and insider trading. A copy of the Code is available on the Company website in the corporate governance section.
SHARE TRADING POLICY
The Board of the Company has established a Share Trading Policy to apply to trading in the Company’s shares on the ASX. This policy outlines the permissible dealing of the Company’s shares while in possession of price sensitive information and applies to all directors of the Company.
The Policy places restrictions and notification requirements, including the imposition of blackout periods, trading windows and the need to obtain pre-trade approval.
A copy of the Company’s Share Trading Policy is available on the Company’s website.
In addition, the Manager has also established its own Share Trading Policy, which is applicable to its staff in the Funds Management division. This Policy places restrictions and notification requirements, including the imposition of blackout periods, trading windows and the need to obtain pre-trade approval.
4. SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
AUDIT & RISK COMMITTEE
The Company recognises the ASX Recommendation with respect to establishing an Audit Committee as part of good corporate governance. However, considering the size of the Company, the functions that would be performed by the Committee are best undertaken by the Board. This is also in line with the ASX Recommendations which recognise that “the ultimate responsibility of the integrity of a company’s financial reporting rests with the full board”.
INVESTMENT COMMITTEE
The Investment Committee of the Company comprises Maximilian Walsh, Alex MacLachlan, John Holland and Kevin Smith. Maximilian Walsh, in his capacity as Chairman of the Investment Committee, has a casting vote.
The primary role of the Investment Committee is to:
• Reviewinformation,researchandanalysiscompiledbytheManagerwithrespecttoAsianeconomicconditions,Asian equity markets, and Asian fund managers and funds.
• DeterminetheallocationoftheCompany’scapitalintermsoftheinvestmentinvariousfunds.
CORPORATE GOVERNANCE STATEMENT CONT.
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The Investment Committee meets monthly. Particulars of committee meetings held during the year ended 30 June 2011 and the attendance of each committee member is set out in the accompanying Directors’ Report.
5. MAKING TIMELY AND BALANCED DISCLOSUREThe Company is committed to complying with its continuous disclosure obligations under the Corporations Act 2001 and the Listing Rules and releasing relevant information to the market and shareholders in a timely and direct manner and to promoting investor confidence in the Company and its securities.
The Board has adopted a Continuous Disclosure Policy to ensure the Company complies with its continuous disclosure obligations under the Corporations Act and the Listing Rules.
This policy is administered by the Board of the Company and the Manager as follows:
• theBoardisinvolvedinreviewingsignificantASXannouncementsandensuringandmonitoringcompliancewith this policy;
• theCompanySecretaryisresponsiblefortheoveralladministrationofthispolicyandallcommunications with the ASX;
• SeniormanagementoftheManagerisresponsibleforreportinganymaterialpricesensitiveinformation to the Company Secretary and observing the Company’s no comments policy.
6. RESPECT THE RIGHTS OF SHAREHOLDERS
RIGHTS OF SHAREHOLDERS
The Company promotes effective communication with shareholders. The Board of Directors has developed a strategy within its Continuous Disclosure Policy to ensure that shareholders are informed of all major developments affecting the Company’s performance, activities and state of affairs. This includes using a website to facilitate communication with shareholders via electronic methods. Information is communicated to shareholders through announcements to the ASX, releases to the media and dispatch of financial reports. Shareholders are provided with an opportunity to access such reports and releases electronically; copies of all such ASX announcements are linked to the Company’s website at www.asianmastersfund.com.au.
These include:
• monthlynettangibleassetbackingannouncements;
• quarterlyinvestmentupdates;
• thehalfyearreport;
• thefullyearreport;
• theannualreport;
• thenoticeofannualgeneralmeeting,explanatorymemorandumandtheChairman’saddress;
• occasionalASXannouncementsmadetocomplywiththeCompany’scontinuousdisclosurerequirements;and
• occasionalcorrespondencesenttoShareholdersonmattersofsignificancetotheCompany.
The Board encourages full participation of shareholders at the general meetings to ensure a high level of accountability and identification with the Company’s strategy. The external auditor is also invited to attend the annual general meeting of shareholders and is available to answer any questions concerning the conduct, preparation and content of the auditor’s report.
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7. RECOGNISE AND MANAGE RISK
RISK MANAGEMENT
The Board has accepted the role of identification, assessment, monitoring and managing the significant areas of risk applicable to the Company and its operations. It has not established a separate committee to deal with these matters as the directors consider the size of the Company and its operations does not warrant a separate committee at this time. The Board liaises with the Manager to identify and manage risk. The Board also monitors and appraises financial performance, including the approval of annual and half year financial reports and liaising with the Company’s auditors.
The Board receives a letter half yearly from the Company’s external auditor regarding their procedures and reporting that the financial records have been properly maintained and the financial statements comply with the Accounting Standards.
The Manager provides half yearly the declarations required by Section 295A of the Corporations Act and confirms that in its opinion the financial statements and accompanying notes comply with the Accounting Standards and give a true and fair view, based on its review of the internal control systems, management of risk, the financial statements and the letter from the Company’s external auditor.
Details of the Company’s financial risk management are set out in the notes to the financial statements in the Annual Report.
8. REMUNERATE FAIRLY AND RESPONSIBLY
REMUNERATION POLICIES
Due to the relatively small size of the Company and its operations, the Board does not consider it appropriate, at this time, to form a separate committee to deal with the remuneration of the directors.
In accordance with the Company’s constitution, each director may be paid remuneration for ordinary services performed as a director. Under ASX Listing Rules, the maximum fees payable to directors may not be increased without the prior approval from the Company in general meeting. Directors will seek approval from time to time as deemed appropriate.
The maximum total remuneration of the directors has been set at $300,000 per annum to be divided among them in such proportions as they agree. However, Maximilian Walsh and Alexander MacLachlan have agreed not to be paid any remuneration for the services they perform as directors.
Remuneration of the directors during the year ended 30 June 2011 is set out in the Directors’ Report and in the notes to the financial statements.
OTHER INFORMATIONFurther information relating to the Company’s corporate governance practices and policies has been made publicly available on the Company’s website at www.asianmastersfund.com.au.
CORPORATE GOVERNANCE STATEMENT CONT.
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DIRECTORS’ REPORT
Your directors present their report together with the financial report of Asian Masters Fund Limited (“the Company”) for the financial year ended 30 June 2011.
DIRECTORSThe names of the directors in office at any time during, or since the end of, the year are:
Mr Maximilian Sean Walsh
Mr Alan Cochrane Dixon (resigned 31 December 2010)
Mr Daryl Albert Dixon (resigned 31 December 2010)
Mr Alexander Gen MacLachlan
Mr John Michael Morgan Holland (Appointed 20 July 2010)
Mr Kevin Nigel Smith (Appointed 23 November 2010)
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
COMPANY SECRETARYThe name of the Company Secretary in office at the date of this report is Ms Hannah Chan.
PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN NATURE OF ACTIVITIESThe principal activities of the Company during the financial year were to provide Australian investors the opportunity to gain exposure to leading Asian based fund managers investing in managed funds that have the investment objective of investing in Asian financial markets.
There were no significant changes in the nature of these activities of the Company that occurred during the year.
RESULTS AND REVIEW OF OPERATIONSThe total comprehensive loss of the Company for the financial year after providing for income tax amounted to $4,891,216 (2010: profit of $9,184,474). The loss of the Company for the financial year after providing for income tax amounted to $462,258 (2010: loss of $198,041). The Company is in a strong position with net assets of $116.5 million and no borrowings.
As at 30 June 2011, the NTA of the Company was 94.8 cents per ordinary share after unrealised losses and adjustment for tax. This compares to the NTA of 101.0 cents per ordinary share after unrealised losses and adjustment for tax as at 30 June 2010.
The Company’s Investment Committee has selected and invested in 16 leading funds that provide exposure across a number of Asian markets. As at 30 June 2011, the Company approximately invested 95% of its total funds (excluding cash retained for working capital as well as non cash assets).
During the year, the Company raised $22,221,152 from the issue of 21,320,250 ordinary shares. An additional 818,739 ordinary shares were issued as part of the Company’s Dividend Reinvestment Plan.
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DIVIDENDS PAID OR RECOMMENDEDThe Company paid fully franked dividends of 1.5 cents per share amounting to $1,571,041 on 21 October 2010 and 1 cent per share amounting to $1,216,411 on 2 May 2011.
SIGNIFICANT CHANGES IN STATE OF AFFAIRSThere were no significant changes in the state of affairs of the Company which occurred during the financial year ended 30 June 2011.
AFTER BALANCE DATE EVENTSThere have not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to significantly affect the operations of the Company, the result of those operations, or the state of affairs of the Company, in future financial years.
FUTURE DEVELOPMENTS, PROSPECTS & BUSINESS STRATEGIESThe Company will continue to undertake its activities described in this report.
Likely developments in the operations of the Company and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the Company.
ENVIRONMENTAL ISSUESThe Company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory.
OPTIONSNo options over issued shares or interests in the Company were granted during or since the end of the financial year and there were no options outstanding at the date of this report.
INDEMNIFYING OFFICERS OR AUDITORIndemnities have been given and insurance premiums paid, during or since the end of the financial year, for all of the directors of the Company. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for the auditor of the Company.
DIRECTORS’ REPORT CONT.
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PROCEEDINGS ON BEHALF OF COMPANYNo person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
INFORMATION ON DIRECTORS
MAXIMILIAN SEAN WALSH AM, BECNon-Executive Chairman of Directors and Chairman of the Investment Committee
Maximilian is regarded as one of Australia’s leading economics and business journalists. He has specialised in the areas of business, economics and politics in a journalistic career spanning nearly 50 years. He has been editor and managing editor of The Australian Financial Review and Editor-in-Chief of The Bulletin. He has also served on the board of Northern Star TV (predecessor to Channel Ten) and RuleBurst Holdings Pty Ltd and is presently Deputy Chairman of Dixon Advisory & Superannuation Services Limited. Max is also Chairman of Global Resource Masters Fund Limited and Chairman of its Investment Committee, and Chairman of Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited, Australian Masters Corporate Bond Fund No 4 Limited, Australian Masters Corporate Bond Fund No 5 Limited, Australian Masters Yield Fund No 1 Limited, Australian Masters Yield Fund No 2 Limited and director of Dixon Advisory & Superannuation Services Limited. Dixon Advisory & Superannuation Services Limited is the Manager of Australian Governance Masters Index Fund Limited, Asian Masters Fund Limited, Global Resource Masters Fund Limited, Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited, Australian Masters Corporate Bond Fund No 4 Limited, Australian Masters Corporate Bond Fund No 5 Limited, Australian Masters Yield Fund No 1 Limited, Australian Masters Yield Fund No 2 Limited and the Responsible Entity for US Masters Residential Property Fund.
• Appointedasdirectorandnon-executivechairmanon10October2007.
• Directlyholds1andbeneficiallyholds250,000fullypaidordinarysharesinthecapitaloftheCompany.
• Duringthepastthreeyearshasactedasanon-executivedirectorofthefollowing Australian listed public companies:
- Global Resource Masters Fund Limited since 20 November 2008;
- Australian Masters Corporate Bond Fund No 1 Limited since 18 March 2008;
- Australian Masters Corporate Bond Fund No 2 Limited since 7 August 2008;
- Australian Masters Corporate Bond Fund No 3 Limited since 23 December 2008;
- Australian Masters Corporate Bond Fund No 4 Limited since 23 December 2008;
- Australian Masters Corporate Bond Fund No 5 Limited since 3 September 2009; and
- Australian Governance Masters Index Fund Limited since 30 November 2009.
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ALEXANDER GEN MACLACHLAN BA (CORNELL), MBA (WHARTON)Non-Executive Director and Member of the Investment Committee
Alex MacLachlan is Managing Director, Funds Management of Dixon Advisory Group Limited. Prior to joining Dixon Advisory, Alex was an investment banker specialising in the natural resources sector, most recently serving as Head of Energy, Australasia, for UBS AG in Sydney and prior to that as an investment banker with Credit Suisse First Boston. During his career as an investment banker, Alex advised many of Australia’s and the world’s leading natural resources companies, working on over $100 billion in announced mergers and acquisitions and capital markets transactions for over 30 leading Australian and international natural resources companies including BHP, Woodside and Santos.
Before specialising in natural resources investment banking, Alex worked in the Japanese Government Bond derivatives markets in London, New York and Sydney. Alex has a Bachelor of Arts from Cornell University and a Masters of Business Administration from The Wharton School, University of Pennsylvania.
He is also managing director of Global Resource Masters Fund Limited, director of Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited, Australian Masters Corporate Bond Fund No 4 Limited, Australian Masters Corporate Bond Fund No 5 Limited, Australian Masters Yield Fund No 1 Limited, Australian Masters Yield Fund No 2 Limited and director of Dixon Advisory & Superannuation Services Limited. Dixon Advisory & Superannuation Services Limited is the Manager of Australian Governance Masters Index Fund Limited, Asian Masters Fund Limited, Global Resource Masters Fund Limited, Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited, Australian Masters Corporate Bond Fund No 4 Limited, Australian Masters Corporate Bond Fund No 5 Limited, Australian Masters Yield Fund No 1 Limited, Australian Masters Yield Fund No 2 Limited and the Responsible Entity for US Masters Residential Property Fund.
• Appointedasnon-executivedirectoron23September2009.
• Beneficiallyholds30,308fullypaidordinarysharesinthecapitaloftheCompany.
• Duringthepastthreeyearshasactedasanon-executivedirectorofthefollowingAustralian listed public companies:
- Global Resource Masters Fund Limited since 20 November 2008;
- Australian Masters Corporate Bond Fund No 1 Limited since 18 March 2008;
- Australian Masters Corporate Bond Fund No 2 Limited since 7 August 2008;
- Australian Masters Corporate Bond Fund No 3 Limited since 23 December 2008;
- Australian Masters Corporate Bond Fund No 4 Limited since 23 December 2008;
- Australian Masters Corporate Bond Fund No 5 Limited since 3 September 2009; and
- van Eyk Three Pillars Limited since 29 September 2009.
DIRECTORS’ REPORT CONT.
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JOHN MICHAEL MORGAN HOLLAND BA HONS (OXFORD)Non-Executive Director and Member of the Investment Committee
John Holland commenced his career in 1985 at SG Warburg & Co (now UBS AG) as an Asian equities specialist, where he led UBS’ early expansion into Korea, Taiwan, Thailand, and India, before rising to become Global Head of Asian Equities at UBS. During John’s tenure as Global Head of Asian Equities, UBS achieved the Number 1 ranking for primary Asian equities distribution and held Number 1 non-local market share positions in all key Asian equity markets, including Hong Kong, Korea, and Taiwan. John was also instrumental in UBS’ successful drive to become the first foreign investor into and foreign distributor of China A-shares. Most recently, John served as Joint Head of European Prime Broking and was a member of UBS Investment Bank’s board.
In addition to his notable achievements at UBS, John has had substantial regulatory experience, including as a member of the European Securities Markets Expert Group advising the European Commission where he was Rapporteur (Chair) for the Subcommittees on Non-Equities Market Transparency and Credit Rating Agencies. Furthermore, John has worked closely over many years with the central banks and regulatory authorities of many Asian countries, such as Korea, Taiwan, India and China, particularly in relation to the opening of their markets to direct foreign investment.
John holds a BA with honours from Oriel College Oxford University, majoring in Philosophy, Politics & Economics.
• Appointedasnon-executivedirectoron20July2010.
• HoldsnosharesinthecapitaloftheCompany.
• DuringthepastthreeyearshasnotactedasdirectorofanyotherAustralianlistedpubliccompany.
KEVIN NIGEL SMITH BSC HONS (BRUNEL)Non-Executive Director and Member of the Investment Committee
Kevin Smith commenced his career in 1986 as an economist at J F Chown & Company (now Chown Dewhust LLP), where he provided currency analysis to various financial institutions and contributed to numerous Economist publications. Kevin joined the Asian Equity team at F&C Investment Management in 1993 where he was responsible for managing various equity portfolios for institutional and retail clients and ultimately served as a Director of F&C Emerging Markets Limited, having US$2 billion of assets under his direct management.
In 2000, Kevin joined Standard Life Investments (Asia) Limited, where he served as the Chief Executive Officer with responsibility for all investment and business development activities undertaken in the region.
Between 2004 and 2007, Kevin served as the Chief Investment Officer, Equities for ABN AMRO Asset Management where he was responsible for all equity, listed property and alternative investments, managing in excess of €75 billion. In addition, he co-chaired the Asset Allocation Committee, was a director of ABN AMRO Asset Management NV, and a member of the Global Management Team.
Kevin Smith is currently a member of the Investment Committee of The Royal British Legion in Hong Kong and a senior advisory to Kreab Gavin Anderson.
• Appointedasnon-executivedirectoron23November2010.
• HoldsnosharesinthecapitaloftheCompany.
• DuringthepastthreeyearshasnotactedasdirectorofanyotherAustralianlistedpubliccompany.
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INFORMATION ON COMPANY SECRETARY
HANNAH CHAN BCOM, MCOM, CACompany Secretary
Hannah has a Bachelor of Commerce degree in Finance from the University of NSW and a Master of Commerce degree in Accounting from the University of Sydney. She is also a Chartered Accountant with the Institute of Chartered Accountants in Australia. Prior to joining the Manager, Hannah gained extensive audit experience whilst working with Deloitte Touche Tohmatsu and Ernst & Young. She is also company secretary of Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited, Australian Masters Corporate Bond Fund No 4 Limited, Australian Masters Corporate Bond Fund No 5 Limited, Australian Masters Yield Fund No 1 Limited, Australian Masters Yield Fund No 2 Limited, Global Resource Masters Fund Limited and Australian Governance Masters Index Fund Limited, and joint company secretary of Dixon Advisory & Superannuation Services Limited.
• AppointedasCompanySecretaryon4December2009.
DIRECTORS’ MEETINGSAttendance of individual directors at board meetings held during the year ended 30 June 2011 was as follows:
No. of Meetings Attended No. of Meetings Eligible
Maximilian Walsh 12 12
Daryl Dixon 6 6
Alan Dixon 6 6
Alexander MacLachlan 12 12
John Holland 12 12
Kevin Smith 8 8
In addition meetings of the Investment Committee were attended by directors as follows:
No. of Meetings Attended No. of Meetings Eligible
Maximilian Walsh 12 12
Daryl Dixon 6 6
Alan Dixon 6 6
Alexander MacLachlan 12 12
John Holland 12 12
Kevin Smith 8 8
DIRECTORS’ REPORT CONT.
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REMUNERATION REPORT
A) REMUNERATION POLICY
Under ASX Listing Rules, the maximum fees payable to directors may not be increased without the prior approval from the Company in general meeting. Directors will seek approval from time to time as deemed appropriate.
Under the Company’s constitution, each director may be paid remuneration for ordinary services performed as a director. However, Maximilian Walsh, Daryl Dixon, Alan Dixon and Alexander MacLachlan have agreed not to be paid any remuneration for the services they performed as directors from 1 July 2009.
The two independent directors, John Holland and Kevin Smith received $47,397 and $30,205 respectively in the year ended 30 June 2011 and will receive $50,000 per annum from 1 July 2011.
These fees exclude any additional fee for any service based agreement which may be agreed upon from time to time, and also excludes reimbursement of out of pocket expenses. These fees are inclusive of statutory superannuation.
B) KEY MANAGEMENT PERSONNEL REMUNERATION
Key management personnel include the directors who have authority and responsibility for planning, directing and controlling the activities of the Company. No other executive personnel are employed or remunerated by the Company.
Details of remuneration paid during the year to key management personnel are set out in the table below.
2011
Directors Salary, fees & Commission
Superannuation Contributions
Cash bonus
Non-cash benefits
Other Total
$ $ $ $ $ $
Maximilian Walsh – – – – – –
Daryl Dixon – – – – – –
Alan Dixon – – – – – –
Alex MacLachlan – – – – – –
John Holland 47,397 – – – – 47,397
Kevin Smith 30,205 – – – – 30,205
Total 77,602 – – – – 77,602
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2010
Directors Salary, fees & Commission
Superannuation Contributions
Cash bonus
Non-cash benefits
Other Total
$ $ $ $ $ $
Maximilian Walsh – – – – – –
Daryl Dixon – – – – – –
Alan Dixon – – – – – –
Alexander MacLachlan – – – – – –
Kevin Chin 2,500 – – – – 2,500
Total 2,500 – – – – 2,500
C) SERVICE AGREEMENTS
The Company does not presently have formal service agreements or employment contracts with any key management personnel.
D) DIRECTORS PROTECTION DEEDS
The Company has agreed to provide access to board papers and minutes to current and former directors of the Company while they are directors and for a period of 7 years after they cease to be directors.
The Company has agreed to indemnify, to the extent permitted by the Corporations Act 2001, each officer in respect of certain liabilities, which the director may incur as a result of, or by reason of (whether solely or in part), being or acting as a director of the Company. The Company has also agreed to maintain in favour of each director a directors’ and officers’ policy of insurance for the period that he or she is a director and for a period of 7 years after the officer ceases to be a director.
E) BENEFICIAL AND RELEVANT INTEREST OF DIRECTORS IN SHARES
As at the date of this report, details of Directors who hold shares for their own benefit or who have an interest in holdings through a third party and the total number of such shares held are listed as follows:
Director No. of shares
Maximilian Walsh 250,001
Alexander MacLachlan 30,308
John Holland –
Kevin Smith –
DIRECTORS’ REPORT CONT.
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NON-AUDIT SERVICESDuring the year Deloitte Touche Tohmatsu, the Company’s auditor did not perform any other services in addition to their statutory duties for the Company. Deloitte Private Pty Ltd, a related party of the Company’s auditor, performed tax review services for the Company.
The Board of Directors are satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services did not compromise the external auditor’s independence for the following reasons:
• allnon-auditservicesarereviewedandapprovedbytheBoardofDirectorspriortocommencementtoensurethey do not adversely affect the integrity and objectivity of the auditor; and
• thenatureoftheservicesprovideddonotcompromisethegeneralprinciplesrelatingtoauditorindependencein accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.
The fees paid or payable to Deloitte Touche Tohmatsu and its related parties for tax compliance service during the year ended 30 June 2011 were:
$
Tax compliance 1,500
1,500
AUDITOR’S INDEPENDENCE DECLARATIONA copy of the lead auditor’s independence declaration for the year ended 30 June 2011 as required under Section 307C of the Corporations Act 2001 is set out on page 22.
Signed in accordance with a resolution of the Board of Directors:
Mr Maximilian Sean Walsh CHAIRMAN
Dated this 30th day of August 2011For
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AUDITOR’S INDEPENDENCE DECLARATION
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STATEMENT OF COMPREHENSIVE INCOME
Notes 2011 2010
$ $
Revenue 2 1,054,429 954,644
Net foreign currency exchange loss (64,379) (87)
Auditor's remuneration 3 (61,890) (74,857)
Depreciation and amortisation expenses – (612)
Directors' fees (77,602) (2,500)
Legal costs (21,787) (31,981)
Listing and registry fees (83,193) (85,814)
Management fee expense (1,113,326) (912,829)
Due diligence expense (170,497) (141,477)
Other expenses (136,528) (162,321)
(Loss) before income tax (674,773) (457,834)
Income tax benefit 4 212,515 259,793
(Loss) for the year (462,258) (198,041)
Other comprehensive income
(Loss) / gain on revaluation of investments (6,325,732) 13,410,668
Tax benefit / (expense) on the above 1,896,774 (4,028,153)
Total other comprehensive (loss) / income for the year, net of tax
(4,428,958) 9,382,515
Total comprehensive (loss) / income for the year (4,891,216) 9,184,474
Basic (loss) per share 14 (0.41) cents (0.21) cents
Diluted (loss) per share 14 (0.41) cents (0.21) cents
The Statement of Comprehensive Income is to be read in conjunction with the notes to the financial statements.
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STATEMENT OF FINANCIAL POSITION
Notes 2011 2010
$ $
Assets
Current
Cash and cash equivalents 5 6,099,366 6,143,723
Other receivables 6 2,870,157 122,846
Prepayments 49,203 20,101
Current tax assets 7 46,587 –
Total Current Assets 9,065,313 6,286,670
Non Current
Plant and equipment – 298
Financial assets 8 105,143,343 97,080,348
Deferred tax assets 9 2,460,036 233,252
Total Non-current Assets 107,603,379 97,313,898
Total Assets 116,668,692 103,600,568
Liabilities
Current
Trade and other payables 10 134,365 127,882
Current tax liabilities 11 – 688,795
Total Current Liabilities 134,365 816,677
Total Liabilities 134,365 816,677
Net Assets 116,534,327 102,783,891
Equity
Issued capital 12 117,702,324 96,273,220
Reserves 13 3,306,663 7,735,621
Accumulated losses (4,474,660) (1,224,950)
Total Equity 116,534,327 102,783,891
The Statement of Financial Position is to be read in conjunction with the notes to the financial statements
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STATEMENT OF CHANGES IN EQUITY
Notes Issued capital
Asset revaluation
reserve
Capital profits
reserve
Accumulated Losses
Total
$ $ $ $ $
Balance at 1 July 2009
79,363,588 (1,646,894) – (12,422) 77,704,272
Loss for the year – – – (198,041) (198,041)
Other comprehensive income
Net change in fair value of investments, net of tax
– 9,382,515 – – 9,382,515
Total comprehensive income for the year
– 9,382,515 – (198,041) 9,184,474
Transfer to Capital Profits Reserve of cumulative realised gain on disposal of investments, net of tax
– (1,470,752) 1,470,752 – –
Shares issued 12 17,446,107 – – – 17,446,107
Issue costs (net of tax) 12 (536,475) – – – (536,475)
Dividends paid 15 – – – (1,014,487) (1,014,487)
Balance at 30 June 2010
96,273,220 6,264,869 1,470,752 (1,224,950) 102,783,891
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Notes Issued capital
Asset revaluation
reserve
Capital profits
reserve
Accumulated Losses
Total
$ $ $ $ $
Balance at 1 July 2010
96,273,220 6,264,869 1,470,752 (1,224,950) 102,783,891
Loss for the year – – – (462,258) (462,258)
Other comprehensive income
Net change in fair value of investments, net of tax
– (4,428,958) – – (4,428,958)
Total comprehensive (loss) for the year
– (4,428,958) – (462,258) (4,891,216)
Transfer to Capital Profits Reserve of cumulative realised gain on disposal of investments, net of tax
– (212,525) 212,525 – –
Shares issued 12 23,010,675 – – – 23,010,675
Share buyback 12 (906,552) – – – (906,552)
Issue costs (net of tax) 12 (675,019) – – – (675,019)
Dividends paid 15 – – – (2,787,452) (2,787,452)
Balance at 30 June 2011
117,702,324 1,623,386 1,683,277 (4,474,660) 116,534,327
The Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.
STATEMENT OF CHANGES IN EQUITY CONT.
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STATEMENT OF CASH FLOWS
Notes 2011 2010
$ $
Cash flows from operating activities
Receipts from ATO 230,716 212,194
Payments to suppliers (1,906,845) (1,502,974)
Interest received 243,933 228,941
Other income received 8,224 –
Income tax paid (563,583) (1,163,524)
Net cash flows (used in) operating activities 16 (b) (1,987,555) (2,225,363)
Cash flows from investing activities
Payments for purchase of investments (16,344,820) (64,178,049)
Proceeds from sale of investments – 37,748,019
Net cash flows (used in) investing activities (16,344,820) (26,430,030)
Cash flows from financing activities
Proceeds from shares issues 22,221,152 17,161,561
Payment for share buybacks (906,552) –
Payments of issue costs (964,313) (766,393)
Dividends paid 15 (1,997,890) (729,941)
Net cash flows provided by financing activities 18,352,397 15,665,227
Net increase / (decrease) in cash and cash equivalents 20,022 (12,990,166)
Effects of exchange rate changes on cash and cash equivalents
(64,379) (91,405)
Cash and cash equivalents at beginning of the year 6,143,723 19,225,294
Cash and cash equivalents at end of the year 16 (a) 6,099,366 6,143,723
The Statement of Cash Flows is to be read in conjunction with the notes to the financial statements.
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NOTES TO THE FINANCIAL STATEMENTS
The financial report covers Asian Masters Fund Limited as an individual entity. Asian Masters Fund Limited is a company limited by shares, incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities Exchange (ASX).
The financial report has been approved for issue in accordance with a resolution of the Directors on 30 August 2011.
The following is a summary of the material accounting policies adopted by the Company in the preparation of the financial report.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below and have been consistently applied unless otherwise stated.
The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement of fair value of selected non-current assets, financial assets and financial liabilities.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Standards and Interpretations affecting the reported results of financial position
There are no new and revised Standards and Interpretations adopted in these financial statements affecting the reporting results or financial position.
Accounting Standards and Interpretations issued but not yet effective
Australian Accounting Standards and Interpretations that have recently been issued or amended, and may be applicable to, but are not yet effective and have not been adopted by the Company for the annual reporting period ended 30 June 2011, are outlined in the table below:
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Standard / Interpretation Effective for annual reporting periods beginning on or after
Expected to be initially applied in the financial year ending
AASB 124 Related Party Disclosures (2009), AASB 2009-12 Amendments to Australian Accounting Standards
1 January 2011 30 June 2012
AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement
1 January 2011 30 June 2012
AASB 2010-5 Amendments to Australian Accounting Standards 1 January 2011 30 June 2012
AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets
1 July 2011 30 June 2012
AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets
1 January 2012 30 June 2013
AASB 1054 Australian Additional Disclosures 1 July 2011 30 June 2012
AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project
1 July 2011 30 June 2012
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations were also in issue but not yet effective, although Australian equivalent Standards and Interpretations have not yet been issued.
IFRS 10 Consolidated Financial Statements 1 January 2013 30 June 2014
IFRS 11 Joint Arrangements 1 January 2013 30 June 2014
IFRS 12 Disclosure of Involvement with Other Entities 1 January 2013 30 June 2014
IFRS 13 Fair Value Measurement 1 January 2013 30 June 2014
IAS 19 Employee Benefits 1 January 2013 30 June 2014
IAS 27 Separate Financial Statements (2011) 1 January 2013 30 June 2014
IAS 28 Investments in Associates and Joint Ventures 1 January 2013 30 June 2014For
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A) INCOME TAX
The income tax benefit (expense) for the year comprises current income tax income (expense) and deferred tax income (expense).
Current income tax (expense) charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantively enacted, as at the end of the reporting period. Current tax assets (liabilities) are therefore measured at the amounts expected to be recovered from (paid to) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.
Current and deferred income tax income (expense) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off of current tax assets and liabilities exists and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority.
B) FINANCIAL INSTRUMENTS
Financial Instruments, incorporating financial assets and financial liabilities, are recognised when the Company becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by market place convention.
In the previous year, the Company early adopted “AASB 9 – Financial Instruments”, which was issued on 7 December 2009. AASB 9 includes requirements for the classification and measurement of financial assets. The revised standard was adopted from that date. There were no adjustments required upon initial adoption of the revised standard.
NOTES TO THE FINANCIAL STATEMENTS CONT.
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i) Financial assets
Initial recognition and measurement
When financial assets are recognised initially, they are measured at fair value, plus directly attributable transaction costs.
The Company determines the classification of its financial assets at initial recognition.
Subsequent measurement
The Company has irrevocably elected to present subsequent changes in fair value of equity instruments in other comprehensive income through the asset revaluation reserve, after deducting a provision for the potential deferred capital gains tax liability as these investments are long term holdings of equity instruments.
Gains and losses on all other financial assets at fair value are recognised in profit or loss.
ii) Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
When an investment is disposed, the cumulative gain or loss, net of tax thereon, is transferred from the asset revaluation reserve to the capital profits reserve.
iii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified as derivative and non-derivative instruments, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value.
Subsequent Measurement
Non-derivative instruments are subsequently measured at amortised cost using the effective interest rate method.
iv) Fair value
Fair value is the amount for which an asset could be sold or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
Fair value is determined as the redemption value for investments. When the redemption price is not available, alternative techniques are applied to determine the fair value of these investments, including recent arm’s length transactions, reference to similar instruments and option pricing models.
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C) FOREIGN CURRENCY TRANSACTIONS AND BALANCES
Functional and presentation currency
The functional currency of the entity is measured using the currency of the primary economic environment in which that entity operates. The financial statements are presented in Australian dollars which is the Company’s functional and presentation currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in profit or loss.
D) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
E) REVENUE
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Interest income is recognised in profit or loss using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
Dividend revenue is recognised when the right to receive a dividend has been established.
All revenue is stated net of the amount of goods and services tax (GST).
F) GOODS AND SERVICES TAX (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST.
In most cases, the Company qualifies for Reduced Input Tax Credits (RITCs) at a rate of 75%; hence listing fees, registry fees and other expenses have been recognised in profit or loss net of the amount of GST recoverable from the Australian Taxation Office.
NOTES TO THE FINANCIAL STATEMENTS CONT.
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The net amount of GST recoverable from the Australian Taxation Office is included in Other Receivables in the Statement of Financial Position.
Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.
G) OTHER RECEIVABLES
Other receivables are recorded at amounts due less any allowance for impairment.
H) TRADE AND OTHER PAYABLES
Trade payables and other payables are recognised when the Company becomes obliged to make future payments resulting from the purchase of goods and services. The balance is unsecured and is recognised as a current liability with the amount being normally paid within 30 days of recognition of the liability.
I) PROVISIONS
Provisions are recognised where the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
J) EARNINGS PER SHARE
Basic earnings per share is determined by dividing the profit/(loss) after income tax excluding any cost of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share is the same because there are no dilutive potential ordinary shares.
K) CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data obtained both externally and within the Company.
L) KEY ESTIMATES AND JUDGMENTS
Provision for impairment of receivables
No provision for impairment of receivables has been recognised in the financial statements, on the expectation that all outstanding amounts will be recovered in full.
Fair value of investments
Fair value of investments in equity instruments are determined based on year end published redemption prices of the investments on the basis that the prices reflect the fair value at which the investments could be sold at balance date.
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2. REVENUE
2011 2010
$ $
Operating activities
Dividend revenue 755,996 652,928
Interest revenue 228,159 301,716
Other income 70,274 –
Total revenue 1,054,429 954,644
Dividend revenue from
Investment funds 755,996 652,928
Total dividend revenue 755,996 652,928
Interest revenue from
Cash at Bank 228,159 301,716
Total interest revenue 228,159 301,716
3. AUDITOR’S REMUNERATION
2011 2010
$ $
Audit and review of the financial statements 34,000 43,500
Tax review services performed by related company 1,500 12,500
Tax advisory performed by related company – 18,857
Underprovision prior year – Moore Stephens – Audit 26,390 –
61,890 74,857
The auditor of the Company in 2011 is Deloitte Touche Tohmatsu. The previous auditor of the Company in 2010 was Moore Stephens Sydney.
NOTES TO THE FINANCIAL STATEMENTS CONT.
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4. INCOME TAX BENEFIT
2011 2010
$ $
a) The components of tax benefit comprise
Current tax – (704,665)
Deferred tax 190,419 844,375
Over provision from previous years 22,096 120,083
212,515 259,793
b) Prima facie tax benefit on (loss) from ordinary activities before income tax at 30% (2010: 30%)
202,432 137,350
Add / (less) tax effect of
Realised foreign exchange loss – 2,975
Over provision of prior year income tax 22,096 121,454
Current year capital losses recognised – (1,986)
Foreign tax credits (12,013) –
212,515 259,793
c) Income tax recognised in other comprehensive income
Deferred tax
Fair value movement of equity investments 1,896,774 (4,028,153)
1,896,774 (4,028,153)
5. CASH AND CASH EQUIVALENTS
2011 2010
$ $
Current
Cash at bank 6,099,366 6,143,723
6,099,366 6,143,723
The effective interest rate on short term bank deposits was 4.25% (2010: 3.36%).
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6. OTHER RECEIVABLES
2011 2010
$ $
Current
Deposits paid 560 560
GST refundable 40,419 46,130
Interest receivable 60,382 76,156
Unsettled trades 2,768,796 –
2,870,157 122,846
There are no balances above that contain assets that are impaired and/or past due. All the receivables above are unsecured and non-interest bearing.
7. CURRENT TAX ASSETS
2011 2010
$ $
Current
Current tax assets 46,587 –
46,587 –
NOTES TO THE FINANCIAL STATEMENTS CONT.
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8. FINANCIAL ASSETS
2011 2010
$ $
Non Current Equity Investments – at fair value
Value Partners High Dividend Yield Fund 15,269,949 16,450,490
Aberdeen Asian Opportunities Fund 12,455,874 12,741,008
Value Partners Taiwan Fund 8,393,173 10,677,476
HSBC India Fund 7,766,564 10,074,171
Invesco Greater China Fund 8,225,255 8,244,679
Treasury New Asia Fund 8,583,868 6,155,175
Legg Mason Asian Enterprise Fund 4,572,103 5,056,110
JF Korea Fund 5,695,652 5,049,738
Comgest Growth Asia EXJPN Class A 9,965,026 4,934,798
Invesco PRC Fund 4,101,917 4,550,655
Lion Global Singapore / Malaysia Fund 4,278,997 4,113,493
The Phillip-Aizawa Fund 3,534,017 3,289,882
Aberdeen China Opportunities Fund 3,152,607 3,213,321
Lion Global Vietnam Fund 1,671,356 2,529,351
Prusik Asian Smaller Company Fund 3,793,140 –
Prusik Asian Fund Class O 3,683,845 –
Investments at fair value 105,143,343 97,080,348
Reconciliation
Carrying amount at the beginning of the year 97,080,348 56,180,019
Additions – cost 17,157,523 64,830,976
Revaluation to fair value (6,325,732) 13,410,668
Disposals (2,768,796) (37,341,315)
105,143,343 97,080,348
Financial assets comprise equity investments in the ordinary issued capital of various unlisted funds.
There are no fixed returns or fixed maturity date attached to these investments.
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Fair value at disposal dates
Realised gain on disposals transferred to Capital Profits Reserve
$ $
Investments disposed of during the year
Equity investments 2,768,796 212,525
9. DEFERRED TAX ASSETS
2011 2010
$ $
Non Current
Deferred tax assets comprises
Fair value adjustments (696,143) (2,684,944)
Unrealised foreign currency exposure loss – 31,346
Provisions 6,600 7,350
Transaction costs on equity issue 665,798 699,183
Deemed foreign investment fund income 1,935,051 2,035,743
Capital losses – 167,421
Revenue losses 566,844 –
Interest receivables (18,114) (22,847)
2,460,036 233,252
Movements
Balance at 1 July 233,252 3,187,113
Charged to the profit and loss 190,419 206,977
Credited / (charged) to equity 2,036,365 (3,160,838)
2,460,036 233,252
NOTES TO THE FINANCIAL STATEMENTS CONT.
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10. TRADE AND OTHER PAYABLES
2011 2010
$ $
Current
Other payables 134,365 127,882
134,365 127,882
Trade payables above are unsecured, non-interest bearing and payable on 30 day terms.
11. CURRENT TAX LIABILITIES
2011 2010
$ $
Current
Current tax liabilities – 688,795
– 688,795
12. ISSUED CAPITAL
2011 2010
$ $
122,945,806 fully paid ordinary shares (2010: 101,740,877) 117,702,324 96,273,220
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2011 2010
$ $
a) Issued shares
Balance at beginning of the year 96,273,220 79,363,588
3,968,169 fully paid ordinary shares of $1.00 – 3,968,169
6,735,044 fully paid ordinary shares of $1.01 – 6,802,394
1,912,731 fully paid ordinary shares of $1.05 – 2,008,368
4,255,248 fully paid ordinary shares of $1.03 – 4,382,905
292,159 fully paid ordinary shares of $0.973 (i) – 284,271
2,995,065 fully paid ordinary shares of $1.05 3,144,818 –
2,233,056 fully paid ordinary shares of $ 1.04 2,322,378 –
460,622 fully paid ordinary shares of $ 0.977 (ii) 450,028 –
10,483,398 fully paid ordinary shares of $1.04 10,902,734 –
3,728,071 fully paid ordinary shares of $1.06 3,951,755 –
358,117 fully paid ordinary shares of $0.948 (iii) 339,495 –
1,880,660 fully paid ordinary shares of $1.01 1,899,467 –
Share buybacks (906,552) –
Issue costs (964,313) (766,393)
Tax effect on issue costs 289,294 229,918
Balance at end of the year 117,702,324 96,273,220
i) In respect of the dividend paid on 15 June 2010, 292,159 ordinary shares were issued at $0.973 each.
ii) In respect of the dividend paid on 21 October 2010, 460,622 ordinary shares were issued at $0.977 each.
iii) In respect of the dividend paid on 2 May 2011, 358,117 ordinary shares were issued at $0.948 each.
NOTES TO THE FINANCIAL STATEMENTS CONT.
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2011 2010
No. No.
b) Movement in ordinary shares
Date Details
1 July Opening balance 101,740,877 84,577,526
7 August 2009 Ordinary shares issues – 3,968,169
14 October 2009 Ordinary shares issues – 6,735,044
27 January 2010 Ordinary shares issues – 1,912,731
29 March 2010 Ordinary shares issues – 4,255,248
15 June 2010 Ordinary shares issues (i) – 292,159
11 August 2010 Ordinary shares issues 2,995,065 –
12 October 2010 Ordinary shares issues 2,233,056 –
21 October 2010 Ordinary shares issues (ii) 460,622 –
7 December 2010 Ordinary shares issues 10,483,398 –
1 March 2011 Ordinary shares issues 3,728,071 –
2 May 2011 Ordinary shares issues (ii) 358,117 –
22 June 2011 Ordinary shares issues 1,880,660 –
16 May 2011 Ordinary share buyback (143,830) –
17 May 2011 Ordinary share buyback (118,314) –
18 May 2011 Ordinary share buyback (72,310) –
19 May 2011 Ordinary share buyback (189,392) –
20 May 2011 Ordinary share buyback (145,957) –
23 May 2011 Ordinary share buyback (52,374) –
26 May 2011 Ordinary share buyback (79,481) –
27 May 2011 Ordinary share buyback (66,147) –
27 May 2011 Ordinary share buyback (526) –
30 May 2011 Ordinary share buyback (45,729) –
3 June 2011 Ordinary share buyback (20,000)
30 June Closing balance 122,945,806 101,740,877
i) In respect of the dividend paid on 15 June 2010, 292,159 ordinary shares were issued at $0.973 each.
ii) In respect of the dividend paid on 21 October 2010, 460,622 ordinary shares were issued at $0.977 each.
iii) In respect of the dividend paid on 2 May 2011, 358,117 ordinary shares were issued at $0.948 each.
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Holders of ordinary shares participate in dividends and the proceeds on a winding up of the Company in proportion to the number of shares held.
At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have par value.
CAPITAL MANAGEMENTThe Company’s objective in managing capital is to continue to provide shareholders with dividends and capital appreciation over the longer term.
The Company’s capital may fluctuate with prevailing market movements and it may undertake a buy-back of its shares in the event that they trade at a sizable discount to NTA backing.
The Company’s capital consists of shareholders’ equity plus financial liabilities. The movement in equity is shown in the Statement of Changes in Equity. At 30 June 2011, financial liabilities were $134,365 (2010: $127,882). There are no changes in the Company’s approach to capital management during the year. The Company is not subject to any externally imposed capital requirements.
13. RESERVES
NATURE AND PURPOSE OF RESERVES
ASSET REVALUATION RESERVE
Increments and decrements on the revaluation of long term investments after provision for deferred tax are recorded in this reserve. When an investment has been sold or de-recognised, realised gains or losses (after tax) are transferred from the asset revaluation reserve to capital profits reserve.
CAPITAL PROFITS RESERVE
The capital profits reserve records realised gains and losses (after tax) from sale of investments which are transferred from asset revaluation reserve.
NOTES TO THE FINANCIAL STATEMENTS CONT.
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2011 2010
$ $
Asset revaluation reserve
Balance at the beginning of the year 6,264,869 (1,646,894)
(Loss) / gain on investment revaluations (6,325,732) 13,410,668
Tax on the above 1,896,774 (4,028,153)
Transfer to capital profits reserve (303,607) (2,101,074)
Tax on the above 91,082 630,322
Balance at the end of the year 1,623,386 6,264,869
Capital Profits Reserve
Balance at the beginning of the year 1,470,752 –
Transfers from Asset Revaluation Reserve, net of tax 212,525 1,470,752
Balance at the end of the year 1,683,277 1,470,752
14. EARNINGS PER SHARE
2011 2010
$ $
a) Earnings used in calculating earnings per share
(Loss) from continuing operations used to calculate basic and diluted earnings per share
(462,258) (198,041)
No. No.
b) Weighted average number of ordinary shares
Weighted average number of ordinary shares outstanding during the year used to calculate basic earnings per share
113,389,618 94,814,920
Effect of dilution – –
Weighted average number of ordinary shares adjusted for the effect of dilution
113,389,618 94,814,920
There are no instruments that could potentially dilute basic earnings per share in the future.
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15. DIVIDENDS PAID
2011 2010
$ $
Fully franked dividend of 1 cent per share paid on 15 June 2010 – 1,014,487
Fully franked dividend of 1.5 cent per share paid on 21 October 2010 1,571,041 –
Fully franked dividend of 1 cent per share paid on 2 May 2011 1,216,411 –
2,787,452 1,014,487
Total dividends per share for the year 0.025 0.01
The tax rate at which paid dividends have been franked is 30%.
Franking credit balance
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the financial year at 30% (2010: 30%)
858,040 800,283
Franking (debits) / credits that will arise from (refund) / payment of income tax as at the end of the financial year
(46,587) 688,795
811,453 1,489,078
16. CASH FLOW INFORMATION
A) RECONCILIATION OF CASHFor the purpose of the statement of cash flows, cash includes:
i) cash on hand and at bank, cash on deposit, and
ii) investments in money market instruments with 30 days or less maturity.
Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows:
2011 2010
$ $
Cash at bank 6,099,366 6,143,723
6,099,366 6,143,723
NOTES TO THE FINANCIAL STATEMENTS CONT.
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B) RECONCILIATION STATEMENT
2011 2010
$ $
(Loss) after tax (462,258) (198,041)
Add / (less):
Loss on disposal of assets 298 612
Income reinvested (812,703) (652,928)
Unrealised gain / loss on foreign currency deposit 64,379 91,405
Changes in assets and liabilities:
Decrease / (Increase) in receivables 21,485 (53,181)
(Increase) in prepayments (29,102) (20,101)
(Increase) in deferred tax assets – (844,374)
Increase in trade payables and accruals 6,444 30,188
(Decrease) in deferred tax liabilities (40,716) –
(Decrease) in income tax payable (735,382) (578,943)
Cash flows from operations (1,987,555) (2,225,363)
The Company does not have any formal loan facilities in place at the date of these financial statements.
17. SEGMENT REPORTINGThe Company operates in Australia and has one business segment, that being investing in unlisted managed funds that have the investment objective of investing in Asian financial markets.
18. KEY MANAGEMENT PERSONNELNames and positions held by key management personnel in office at any time during the financial year are:
Mr Maximilian Sean Walsh – non-executive chairman
Mr Daryl Albert Dixon – non-executive director (Resigned 31 December 2010)
Mr Alan Cochrane Dixon – non-executive director (Resigned 31 December 2010)
Mr Alexander Gen MacLachlan – non-executive director
Mr John Michael Holland – non-executive director (Appointed 20 July 2010)
Mr Kevin Nigel Smith – non-executive director (Appointed 23 November 2010)
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KEY MANAGEMENT PERSONNEL REMUNERATION
DirectorsSalary, fees
& CommissionOther
$ $
2011
Maximilian Walsh – –
Alexander MacLachlan – –
John Holland 47,397 –
Kevin Smith 30,205 –
77,602 –
2010
Maximilian Walsh – –
Daryl Dixon – –
Alan Dixon – –
Alexander MacLachlan – –
Kevin Chin 2,500 –
2,500 –
Maximilian Walsh, Daryl Dixon, Alan Dixon and Alexander MacLachlan have agreed not to be paid any remuneration for the services they performed as directors from 1 July 2009.
Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report.
NUMBER OF SHARES HELD BY KEY MANAGEMENT PERSONNEL
DirectorsBalance at 1 July 2010
Received as remuneration
Net change other
Balance at 30 June 2011
No. No. No. No.
Maximilian Walsh 250,001 – – 250,001
Daryl Dixon 520,000 – (520,000) –
Alan Dixon 1,042,500 – (1,042,500) –
Alexander MacLachlan 30,308 – – 30,308
John Holland – – – –
Kevin Smith – – – –
Total 1,842,809 – (1,562,500) 280,309
NOTES TO THE FINANCIAL STATEMENTS CONT.
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19. RELATED PARTY TRANSACTIONSThe names of the persons who were directors of the Company at any time during the year and to the date of these financial statements are:
Mr Maximilian Sean Walsh
Mr Daryl Albert Dixon (resigned 31 December 2010)
Mr Alan Cochrane Dixon (resigned 31 December 2010)
Mr Alexander Gen MacLachlan
Mr John Michael Holland (Appointed 20 July 2010)
Mr Kevin Nigel Smith (Appointed 23 November 2010)
Transactions between related parties are on normal commercial terms and conditions unless otherwise stated and are as follows:
DIXON ADVISORY & SUPERANNUATION SERVICES LIMITEDMr Maximilian Walsh and Mr Alexander MacLachlan are directors of the Company and directors of the Issue Manager, Dixon Advisory & Superannuation Services Limited.
In connection with the provision of services as Issue Manager, the Issue Manager is entitled to receive commission and handling fees of 4% of the total funds raised in share placements. The handling fee and commission on $22,221,152 (2010: $17,161,836) in funds raised for the year ended 30 June 2011 were $977,731 (2010: $686,473), inclusive of GST.
The Company entered into a new Investment Management agreement with Dixon Advisory & Superannuation Services Limited on 9 December 2009 as passed by the shareholders of the Company on 4 December 2009. The Company has effected the change of its investment manager from Orient Pacific Partners Pty limited to Dixon Advisory & Superannuation Services Limited on 9 December 2009.
Dixon Advisory & Superannuation Services Limited received a management fee of 0.08334% of the pre tax value of the Portfolio at the close of the first Business Day of each month (equating to an annualised management fee of 1%). Management fees paid or payable for the year ended 30 June 2011 were $1,216,884 (2010: $588,159), inclusive of GST and the management fee owed by the Company to Dixon Advisory & Superannuation Services Limited at 30 June 2011 was $104,410 (2010: $91,651), inclusive of GST.
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KEY MANAGEMENT PERSONNEL RELATED ENTITY TRANSACTIONKey management personnel and their related entities hold directly, indirectly or beneficially as at the reporting date the following interests in the Company:
Ordinary shares
Direct Indirect
Maximilian Walsh 1 250,000
Alexander MacLachlan – 30,308
John Holland – –
Kevin Smith – –
For key management personnel remuneration, refer to note 18.
20. FINANCIAL RISK MANAGEMENT
A) FINANCIAL RISK MANAGEMENT POLICIESThe Company’s financial instruments consist mainly of deposits with banks and unlisted investments. The main risks the Company is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk.
I) INTEREST RATE RISK
Exposure to interest rate risk arises on financial assets recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. Any variation in short and long term interest rates, particularly in Australia and Asia, could affect the operating results of the Company.
The Company’s exposure to interest rate risk is minimal. At 30 June 2011, approximately 95% of the financial assets is non interest bearing and 5% of the financial assets is at a floating rate.
II) LIQUIDITY RISK
Liquidity risk arises from the financial liabilities of the Company and the Company’s subsequent ability to meet its obligations to repay its financial liabilities as and when they fall due.
The Company’s exposure to liquidity risk is minimal. The Company does not invest in funds that do not have at least a monthly redemption facility. However, to the extent that the underlying funds are invested in illiquid securities that may be difficult to sell at short notice or at desired prices, this can result in diminished redemption prices for the Company, or in declining markets, loss of capital through a decline in the value of the investment in the underlying fund.
NOTES TO THE FINANCIAL STATEMENTS CONT.
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III) CREDIT RISK
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Company does not have any material credit risk exposure to a single receivable or group of debtors under financial instruments entered into by the Company.
There are no amounts of collateral held as security at 30 June 2011.
IV) FOREIGN EXCHANGE RISK
The Company invests internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Company’s functional currency.
The Company does not undertake hedging of its foreign currency exchange risk exposure arising from commercial transactions.
If the currency in which the Company’s investments are denominated changes in value relative to the Australian dollar, the Australian dollar value of the investment will change. For example, a rise in Australian dollar relative to other currencies may negatively impact investment value or returns. Conversely, a decline in Australian dollar relative to other currencies may positively impact investment value or returns.
The Company’s exposure to foreign currency exchange risk at reporting date was USD 75,377,285 and SGD 14,555,408.
V) MARKET PRICE RISK
Market price risk is the risk that changes in market prices such as interest rates and equity prices will affect the Company’s income and the value of its holdings of financial instruments.
Inherently, the Company is not free of market price risk as it invests its capital in securities whose market prices can fluctuate.
Market risk is moderated by ensuring that the Company’s investment portfolio is not overexposed to one company or one particular sector. The relative weightings of the individual funds are reviewed by the Investment Committee frequently.
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B) FINANCIAL INSTRUMENTS
I) FINANCIAL INSTRUMENT COMPOSITION AND MATURITY ANALYSIS
The Company does not hold any fixed period contractual financial instruments at balance date.
Net Fair Values
The net fair values of:
- Term receivables and fixed interest securities are determined by discounting the cash flows, at the market interest rates of similar securities, to their present value.
- Unlisted investments have been valued at the redemption price at balance date. For unlisted investments where there is no organised financial market, the net fair value has been based on a reasonable estimation of the underlying net assets of the investments.
The aggregate net fair values and carrying amounts of financial assets and financial liabilities at balance date are disclosed in the statement of financial position and in the notes to the financial statements.
As of 1 July 2009, the Company has adopted the amendment to AASB 7: Financial Instruments: Disclosures which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2); and
c) inputs for the asset or liabilities that are not based on observable market data (unobservable inputs) (level 3).
Level 1 Level 2 Level 3 Total
$ $ $ $
30 June 2011
Financial assets at fair value through other comprehensive income
Equity investments – 105,143,343 – 105,143,343
30 June 2010
Financial assets at fair value through other comprehensive income
Equity investments – 97,080,348 – 97,080,348
II) SENSITIVITY ANALYSIS
Market Price Risk
The Company has performed sensitivity analysis relating to its exposure to its market price risk at balance date. This sensitivity analysis demonstrates the effect on equity which could result from a change in these risks on financial assets.
NOTES TO THE FINANCIAL STATEMENTS CONT.
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At 30 June 2011, the effect on equity as a result of changes in the value of equity investments, with all other variables remaining constant would be as follows:
2011 2010
$ $
Change in equity
Increase in market price by 5% 5,257,167 4,854,017
Decrease in market price by 5% (5,257,167) (4,854,017)
Change in NTA per share
Increase in market price by 5% 0.04 0.05
Decrease in market price by 5% (0.04) (0.05)
Foreign Exchange Risk
The Company has performed sensitivity analysis relating to its exposure to its foreign exchange risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks on financial assets.
At 30 June 2011, the effect on profit before tax and equity as a result of changes in the foreign exchange risk, with all other variables remaining constant would be as follows:
2011 2010
$ $
Change in profit before tax
Appreciation of AUD to USD by 10% – –
Decline of AUD to USD by 5% – –
Appreciation of AUD to SGD by 10% (48,135) (37,747)
Decline of AUD to SGD by 5% 27,868 21,853
Change in equity
Appreciation of AUD to USD by 10% (4,473,733) (4,012,388)
Decline of AUD to USD by 5% 2,590,056 2,322,962
Appreciation of AUD to SGD by 10% (669,611) (744,479)
Decline of AUD to SGD by 5% 387,669 431,014
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21. CONTINGENT LIABILITIESThe directors are not aware of any potential liabilities or claims against the Company as at the balance date.
22. CAPITAL COMMITMENTSThe Company has no capital commitments at balance date.
23. EVENTS AFTER THE REPORTING PERIODThere has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or recent event of material and unusual nature likely in the opinion of the Company, to significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company, in future financial years.
24. COMPANY DETAILSThe registered office of the Company is: Asian Masters Fund Limited Level 15, 100 Pacific Highway, North Sydney NSW 2060
The principal place of business is: Asian Masters Fund Limited Level 15, 100 Pacific Highway, North Sydney NSW 2060
NOTES TO THE FINANCIAL STATEMENTS CONT.
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DIRECTORS’ DECLARATION
The directors of the Company declare that:
1. The financial report as set out in pages 23 to 52 and the additional disclosures included in the Directors’ Report designated as “Remuneration Report”, as set out on pages 19 and 20, are in accordance with the Corporations Act 2001, including:
a. Giving a true and fair view of the Company’s financial position as at 30 June 2011 and of its performance, as represented by the results of the operations and the cash flows, for the financial year ended on that date;
b. In compliance with International Financial Reporting Standards as stated in note 1 to the financial statements; and
c. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.
2. The directors of the Manager, Dixon Advisory & Superannuation Services Limited have declared that:
a. The financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporation Act 2001;
b. The financial statements and notes for the financial year comply with the Accounting Standards; and
c. The financial statements and notes for the financial year give a true and fair view.
3. As at the date of this declaration, in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors made pursuant to section 295(5) of the Corporations Act 2001:
On behalf of the Directors
Mr Maximilian Sean Walsh CHAIRMAN
Dated this 30th day of August 2011
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INDEPENDENT AUDITOR’S REPORT
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STOCK EXCHANGE INFORMATION
STATEMENT OF QUOTED SECURITIES AS AT 31 JULY 2011• Thereare2,456shareholdersholdingatotal122,945,806ordinaryfullypaidshares.
• The20largestshareholdersbetweenthemhold5.229%ofthetotalsharesonissue.
• Votingrightsareeachordinaryshareisentitledtoonevotewhenapolliscalled,otherwiseeachmemberpresent at a meeting or by proxy has one vote on a show of hands.
DISTRIBUTION OF QUOTED SHARES AS AT 31 JULY 2011
Distribution of Shareholders Category (size of holding)
Number of Shareholders
1 – 1,000 18
1,001 – 5,000 41
5,001 – 10,000 181
10,001 – 100,000 1,941
100,001 – and over 275
Total Holders 2,456
SUBSTANTIAL SHAREHOLDINGS AS AT 31 JULY 2011There are no substantial shareholders pursuant to the provisions of section 671B of the Corporations Act 2001.
DIRECTORS’ SHAREHOLDINGSAs at 30 June 2011 directors of the Company held a relevant interest in the following securities on issue by the Company.
Director Ordinary shares
Maximilian Walsh 250,001 ordinary shares
Alexander MacLachlan 30,308 ordinary shares
John Holland 0 ordinary shares
Kevin Smith 0 ordinary shares
RESTRICTED SECURITIESThere are no restricted securities on issue by the Company.
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TOP 20 HOLDERS OF ORDINARY SHARES AT 31 JULY 2011
Shareholder NameNumber of
Shares Held% of Total
Mr Orange Pty Limited 800,000 0.651
Dixon Family Super A/C 533,553 0.434
Rosenshul S/F A/C 354,520 0.288
Kiers & Mensh S/F A/C 341,000 0.277
Bernard G Renwick S/F A/C 319,000 0.259
Scott Bayton Super Fund A/C 309,546 0.252
Aristides Family Btml A/C 300,000 0.244
M & R Keating Super Fund A/C 300,000 0.244
Heywood Family S/F A/C 284,782 0.232
P & H Russell S/F Account 279,231 0.227
M & E Taylor Super Fund A/C 275,500 0.224
Goodban Family S/Fund A/C 268,852 0.219
Collin Family Super Fund A/C 267,600 0.218
Southwood Super Fund A/C 264,700 0.215
A & P Robinson S/Fund A/C 261,700 0.213
Tim Higgins S/F A/C 260,000 0.211
E Cowan Super Fund A/C 256,941 0.209
The Hoy Family Super A/C 253,073 0.206
Geraldine Walsh Pension A/C 250,000 0.203
Bligh Family S/F A/C 248,700 0.202
Total Held By Top 20 Holders Of Ordinary Shares 6,428,698 5.229
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INVESTMENTS AT MARKET VALUE
Investments at market value as at 30 June 2011
Investment UnitsNet Market
Value%
$
Value Partners High Dividend Yield Fund 279,775.11 15,269,949 14.52%
Aberdeen Asian Opportunities Fund 6,880,177.83 12,455,874 11.85%
Value Partners Taiwan Fund 692,717.76 8,393,173 7.98%
HSBC India Fund 48,247.13 7,766,564 7.39%
Invesco Greater China Fund 215,775.70 8,225,255 7.82%
Treasury New Asia Fund 7,855,650.40 8,583,868 8.16%
Legg Mason Asian Enterprise Fund 2,830,963.52 4,572,103 4.35%
JF Korea Fund 112,382.74 5,695,652 5.42%
Comgest Growth Asia EXJPN Class A 728,819.99 9,965,026 9.48%
Invesco PRC Fund 77,838.82 4,101,917 3.90%
Lion Global Singapore / Malaysia Fund 2,287,109.70 4,278,997 4.07%
The Phillip-Aizawa Fund 23,914.00 3,534,017 3.36%
Aberdeen China Opportunities Fund 2,773,229.30 3,152,607 3.00%
Lion Global Vietnam Fund 6,455,060.89 1,671,356 1.59%
Prusik Asian Smaller Company Fund 27,238.66 3,793,140 3.61%
Prusik Asian Fund Class O 23,039.07 3,683,845 3.50%
Total Portfolio Value 105,143,343 100.00%
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CORPORATE DIRECTORY
DIRECTORSMr Maximilian Sean Walsh (non-executive chairman)
Mr Alexander Gen MacLachlan (non-executive director)
Mr John Michael Morgan Holland (non-executive director)
Mr Kevin Nigel Smith (non-executive director)
SECRETARYMs Hannah Chan
REGISTERED OFFICELevel 15, 100 Pacific Highway North Sydney NSW 2060
T 1300 454 801F 1300 883 159
PRINCIPAL OFFICELevel 15, 100 Pacific Highway North Sydney NSW 2060
T 1300 454 801F 1300 883 159
www.asianmastersfund.com.au
SHARE REGISTERManaged by: Boardroom Limited
Level 7, 207 Kent Street Sydney NSW 2000
T (02) 9290 9600F (02) 9279 0664
www.boardroomlimited.com.au
AUDITORDeloitte Touche Tohmatsu
Grosvenor Place, 225 George Street Sydney NSW 2000
T (02) 9322 7000F (02) 9322 7001
www.deloitte.com.au
SOLICITORWatson Mangioni Lawyers Pty Limited
Level 13, 50 Carrington Street Sydney NSW 2000
T (02) 9262 6666F (02) 9262 2626
www.wmlaw.com.au
BANKSMacquarie Bank
Bank of Queensland
ANZ Bank
UBS
The Company’s shares are quoted on the official list of the Australian Securities Exchange Limited (ASX).
ASX Code is AUF.
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