Chairman's view

Working to promote the interests of the shareholders

Keith Falconer, Non-Executive Chairman of Aberdeen New Thai Investment Trust, explains how he achieves this.

• Introduction
• Experience and enthusiasm
• Potential rewards enormous
• Progressively grown dividend
• Good communication is key
• An enviable long-term record

 Introduction

I joined the Board in 2004 after finding myself on a long list of candidates compiled by a specialist search firm.

The board was looking for someone with extensive experience of Asia, investment trusts and the marketing of investment trusts within the UK. I ticked all these boxes and began to assemble my CV – something I had not had to do for 25 years, as I had been a director of Martin Currie since completing my investment training in 1979.

Appearing at the first interview, I had to convince the board that not only did I have the right experience, but that I would work enthusiastically to promote the interests of the shareholders. This, in particular, meant working with Aberdeen to grow the trust and thereby expand the audience who would consider it for investment. This remains a challenge for a single country trust with a volatile economic and political backdrop!

I was immediately impressed by the independence of the board who interviewed me on two occasions. If Aberdeen were uncomfortable at the prospect of having an erstwhile competitor as Chairman of one of their trusts, they did not and have never shown it. For many years, I had been responsible for Martin Currie’s investment trust team and I think quickly proved I would work well with them and the board in squaring up to the challenges.

 Experience and enthusiasm

Following the retirement of two directors we needed two experienced, keen and enthusiastic replacements. As a small trust we could only enjoy a small board, so we had to cover all the bases with just four directors, including Hugh Young. Whilst some might disagree, I believe having one director from within the investment team is necessary to ensure “joined up thinking” between the board and the managers. Don’t get me wrong – we are fiercely independent but there is a danger that too much independence can result in a bipartisan stand-off which is in no-one’s interest. We first chose Peter Bristowe, a former stockbroker in Asia, to replace John Rickards. James Robinson a highly experienced Investment manager, previously with Henderson Global Investors, was recruited in place of Alan Henderson. That way we ensured continuity during a period of change and accumulated experience was not lost.

 Potential rewards enormous

The new board decided that a bi-annual visit to Thailand was necessary to understand the challenges faced by Aberdeen. Our job is to set the investment parameters such as performance, gearing and investment restrictions but certainly not to interfere with the investment decisions. However, we do need to assess the quality of the investment team on the ground and experience the challenges they face if we are to be effective at supporting them in achieving the aspirations of the shareholders.

Our first visit served to confirm two things. Firstly, that the shareholders are well served by an excellent investment team and process lead by Hugh Young in Singapore and his team in Bangkok. Secondly, the potential investment rewards from the Thai stock market could be enormous, although the realisation of such is held back by disappointing levels of corruption and the political struggles of which investors will be only too aware. I do not believe that either of these obstacles will be removed quickly or completely. They are, if you like, part of the investment landscape.

 Progressively grown dividend

While we invest primarily to achieve capital growth, our income record is astonishingly good. The chart below shows how we’ve progressively grown the dividend every year and we have strong revenue reserves.

The ideal size of an investment trust board is one that delivers a complete suite of experience and skills, with the minimum number of people. In my experience, the appropriate number lies between five and seven, so with just four, we are an outlier.

A small board does, however, allow the individual directors to contribute more than would be possible with a bigger number and the discussions are usually animated and challenging but we all enjoy a good sense of humour which means the meetings are both lively and fun. I encourage the board to think that they are not at the meeting to review the board papers. They are there to actively make a difference and we try our hardest to ensure the outlook for shareholders is better after the meeting than it was at the start.

We have seven meetings each year, plus every second year we spend one week in Thailand where we visit about 30% of the portfolio in which the trust is invested and meet with senior members of the government, opinion-formers and local businessmen. Whilst we are not there to manage the investments, we cannot monitor the activities of the manager without understanding for ourselves the risks and opportunities.

 Good communication is key

Communication is important at all levels. The board are expected to be abreast of developments at all times. So, in addition to the board meetings, we receive monthly board papers summarising developments and we have regular email contact with the managers and each other, as well as regular telephone conferences. I live part of the time in Beijing, Hugh (based in Singapore) travels incessantly and my fellow directors are often on the move, so getting everyone to a phone at a time that does not conflict with sleep and travel is always an interesting challenge.

Aberdeen, I believe, works very hard and effectively to help us communicate with our shareholders. This is a challenge, as some are very large global institutions and some are personal investors. The internet has helped in the timely distribution of information, but it remains a challenge to get the right information at the right time to everyone in a form that is most useful to them.

 An enviable long-term record

The Aberdeen website goes from strength to strength winning Best Investment Trust Website for five years running. Indeed, this award-winning newsletter and the factsheets all help to get the message out there. In addition to our well-attended AGM, we do bring to the UK members of the Bangkok team to address shareholders and prospective investors to re-enforce the investment case

Finally, what is the outlook for Thailand? Despite concerns over the health of their much-revered King and the considerable difficulties within the constitutional and electoral processes, the stock market offers reasonable value and has, despite appearances to the contrary, an enviable long-term record, which the board feels augurs well for the future.