REG - Schroder AsianTR Inv - Final Results
19/03/2025 07:15
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RNS Number : 2025B Schroder Asian Total Retn InvCo PLC 19 March 2025
19 March 2025
LONDON STOCK EXCHANGE ANNOUNCEMENT
SCHRODER ASIAN TOTAL RETURN INVESTMENT COMPANY PLC
(the "Company")
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Information disclosed in accordance with DTR 4.1
The Company's Annual Report and Financial Statements for the year ended 31
December 2024 is being published in hard copy format and an electronic copy
will shortly be available to view and download from the Company's web pages:
www.schroders.co.uk/satric (http://www.schroders.co.uk/satric) .
Key Highlights
· The Company delivered a NAV total return of 13.0%, outperforming the MSCI AC
Asia Pacific ex Japan index. This is the ninth year in the last decade that
the Company has outperformed the Reference Index, which has resulted in double
digit annualised returns for our long-term investors.
· The Company's returns have been consistently ahead of both the peer group and
the Reference Index over the one, three, five and ten-year periods to 31
December 2024.
· The Board has recommended a final dividend of 11.50 pence per share for the
year ended 31 December 2024.
· The Board has committed to put to shareholders a resolution at the AGM that
the Company continue as an investment trust for a further three years.
Investor presentation
There will be a presentation by our Portfolio Managers, at 12.00 noon on
Thursday, 24 April 2025 which will be available to watch online and also for
shareholders to attend, prior to the AGM, at the offices of the Investment
Manager at 1 London Wall Place, London EC2Y 5AU. To sign up to watch the
presentation online please click on this link:
https://schroders.zoom.us/j/82547849490?pwd=P7BEhDzatGWPqYBfclz39zn7bWLdso.1
(https://schroders.zoom.us/j/82547849490?pwd=P7BEhDzatGWPqYBfclz39zn7bWLdso.1)
. Please click here
https://mybrand.schroders.com/m/23fe589407a4be1/original/Schroder-Asian-Total-Return-Investment-Company-AGM_-Portfolio-Manager-Presentation.ics
(https://mybrand.schroders.com/m/23fe589407a4be1/original/Schroder-Asian-Total-Return-Investment-Company-AGM_-Portfolio-Manager-Presentation.ics)
to add this virtual presentation to your calendar.
Sarah MacAulay, Chair, Schroder Asian Total Return Investment Company plc
commented:
"It is positive to note that this is the ninth year in the last decade that
the Company has outperformed the Reference Index, which has resulted in double
digit annualised returns for our long-term investors."
The Company has submitted a copy of its Annual Report and Financial Statements
to the National Storage Mechanism and it will shortly be available for
inspection at: National Storage Mechanism | FCA
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Enquiries:
Schroder Investment Management Limited
Charlotte Banks/Kirsty Preston (Press) 020 7658 2106
Kerry Higgins (Company Secretary) 020 7658 6000
_______________________________________________________________________________________________
CHAIR'S STATEMENT
"The Company's returns were ahead of both the peer group and the Reference
Index over the one, three, five and ten-year periods."
PERFORMANCE AND BACKGROUND
I am pleased to report another year of good performance from your Company
which delivered a NAV total return of 13.0%, outperforming the MSCI AC Asia
Pacific ex Japan Index (the Reference Index) which rose by 12.1%. The share
price total return was 12.6% as the discount widened slightly. It is positive
to note that this is the ninth year in the last decade that the Company has
outperformed the Reference Index, which has resulted in double digit
annualised returns for our long-term investors. The Company's returns were
ahead of both the peer group and the Reference Index over the one, three, five
and ten-year periods to 31 December 2024.
It was a year of two halves for performance, with the majority of the gains
made in the first half of the year. Taiwanese technology stocks, particularly
those linked to artificial intelligence (AI), fared well and the Company's
overweighting to Taiwan was a contributor to outperformance. Taiwan
Semiconductor Manufacturing Company (TSMC), the Company's largest holding,
made substantial gains buoyed by demand for its advanced semiconductors and
stellar performance from Nvidia in the United States. Our Portfolio Managers'
stock selection contributed to performance across most markets, particularly
in Australia and Singapore, while the use of derivatives was also additive.
Further comments on performance and investment policy may be found in the
Investment Manager's review.
ALPHA MANAGER OF THE YEAR WINNER
In recognition of his consistently strong performance, Robin Parbrook was
named 'Alpha Manager of the Year' at the 2024 FE fundinfo awards for active
managers. The Alpha Manager Rating is a quantitative rating that distinguishes
the top UK fund managers based on alpha generation and outperformance across
their career history, allowing investors to instantly identify those managers
who have consistently outperformed their peer group over time.
For further information please visit:
https://www.fefundinfo.com/landing-pages/inst/alpha-manager-of-the-year-awards-2024
(https://www.fefundinfo.com/landing-pages/inst/alpha-manager-of-the-year-awards-2024)
https://www.fefundinfo.com/products/institutions/ratings
(https://www.fefundinfo.com/products/institutions/ratings)
EARNINGS AND DIVIDENDS
Revenue return from the portfolio for the year fell by 6.3% to 9.61 pence per
share, from 10.26 pence per share in 2023. While the Portfolio Managers view
income as an important component of investment return, they focus on total
return, rather than income.
The Board has therefore recommended a final dividend of 11.50 pence per share,
maintaining the dividend at the same level as the previous financial year.
This is in view of the reduction in revenue return for the year, which will
require the final dividend to be part funded from reserves. Subject to
shareholder approval at the Annual General Meeting ("AGM"), the dividend will
be paid on 9 May 2025 to shareholders on the register on 11 April 2025. The
ex-dividend date is 10 April 2025.
DISCOUNT MANAGEMENT
The discount at which the Company's share price trades widened slightly during
the year from 4.6% at the start of the year to 5.1% at the end of December
2024. The year under review has been a challenging time for investment trust
discounts which have widened across the board and currently average 14.7%,
attracting activist investors and encouraging corporate activity in the
sector.
The Board aims to achieve a discount of no more than 5% in normal market
conditions. Consequently, the Board made use of its authority to buy back
shares to assist in discount management and to reduce share price volatility.
A total of 3,709,666 shares were repurchased during 2024, amounting to 3.8% of
the issued share capital at the start of the year. The shares were repurchased
at an average discount of 6.6%, for a total consideration of £17.0 million,
and placed in treasury for possible future reissuance at a premium to NAV.
Buying back shares is accretive to the Company's NAV. The Company's shares
traded at an average discount of 6.8% during the year.
Since the year end and up to 14 March 2025, the latest practicable date prior
to the publication of this report, no shares were bought back by the Company.
On 14 March 2025, the discount at which the Company's share price trades had
narrowed to 3.5%, comparing favourably to the average discount for the
investment company sector and the peer group.
The Board will be seeking approval from shareholders to renew the issuance and
buy back authorities at the AGM to be held on 24 April 2025, further details
of which can be found in the Annual Report and Financial Statements.
GEARING
Gearing continued to be actively utilised by the Portfolio Managers during the
year and ranged between 3.8% at its lowest and 8.8% at its highest. Gearing
made a positive contribution to performance. The Company has started to use
contracts for difference (CFDs) in addition to the loan facility as a flexible
and more cost-effective means of borrowing. Shareholders should be aware that
the use of borrowing must be seen in the context of the use of derivative
hedging instruments.
The Company may use gearing to enhance performance, but net gearing will not
exceed 30% of NAV. The Board has agreed a disciplined framework for using
gearing to increase market exposure, based on a number of valuation
indicators.
FEES
For the first time since 2021 the Company has paid a performance fee in
addition to the management fee of 0.65% of gross assets less cash and cash
equivalents. A performance fee is payable amounting to 10% of any
outperformance of the NAV over an annual hurdle of 7%, provided that the
closing NAV per share exceeds the "high water mark" NAV at the date the last
performance fee was paid. The sum of the base fee and any performance fee
payable is capped at 1.25% of the closing net assets. In addition, the Manager
may only be paid a performance fee when the Company's NAV total return is
equal or greater to the total return of the Reference Index.
Following the outperformance, the Manager generated a performance fee of
£2,767,000 for the year ended 31 December 2024.
THE BOARD
The Board continues to review its composition and effectiveness as well as
planning for succession. The Board was pleased to welcome Marion Sears as a
non-executive Director on 24 April 2024 and as the Company's Senior
Independent Director (SID) with effect from 4 December 2024. Caroline Hitch
stepped down from the Board, having reached her nine-year tenure, at the
conclusion of the AGM in April 2024.
OUTLOOK
Geopolitics continues to dominate headlines as the world reacts to new
policies emanating from the recently elected Trump administration. In
particular, the US President's use of tariffs and the threat of more is
disruptive to global trade and has significant consequences throughout the
region. The expectation of imminent interest rate cuts in the US has dwindled
as inflation remains stubbornly high, putting pressure on Asian currencies.
China's economic growth prospects are hampered by lacklustre domestic
consumption, the long and slow unwinding of the property bubble and excessive
provincial debt. However, much of this is already reflected in Asian
valuations which are at all time relative lows to developed markets.
Our Portfolio Managers continue to find exciting investment ideas in the
region and with an index agnostic investment approach stock selection will
remain critical. Our two Portfolio Managers have decades of collective
investment experience and an excellent long-term track record of delivering
value to shareholders. Schroders has a large, well-resourced team of analysts
in Asia that provides a depth of research across the region with a universe of
900 companies covered and around 2,700 company visits each year. We remain
confident that our Portfolio Managers are well positioned to navigate diverse
and challenging equity markets in the region.
CONTINUATION VOTE
The Board has committed to put to shareholders a resolution at the AGM that
the Company continue as an investment trust for a further three years.
Over the three-year period ended 31 December 2024, the Company's NAV produced
a total return of 2.34% per annum, outperforming the 1.82% per annum total
return of the Reference Index, while our share price produced a total return
of 0.85% per annum. It is worth noting however that the last three years has
been a difficult time for Asian equity markets and that although the Company's
relative return was positive, absolute returns were disappointing. Looking
longer term, over five years, the Company's NAV returned 9.0% per annum and
the share price 7.8%, compared to the Reference Index return of 4.2%. Over ten
years, the NAV returned 11.3% per annum and the share price 11.6%, compared to
the Reference Index return of 7.0%.
The Board believes that the Manager remains well qualified and suitable to
manage the portfolio and to assist the Company in meeting its investment
objective. The Portfolio Managers have extensive investment experience and are
well resourced, with support from a regional research team of 45 analysts. The
Board also believes that the Company is well positioned as an investment
vehicle within its peer group, and that its long-term investment objectives
remain appropriate and the structure beneficial to shareholders.
As previously mentioned, this is the ninth year in the last decade that the
Company has outperformed the Reference Index.
The Board therefore unanimously recommends that the Company continue as an
investment trust, and the Directors intend to vote their shares accordingly.
RESULTS WEBINAR, PRESENTATION AND AGM
There will be a presentation by the Portfolio Managers at 12.00 noon on
Thursday, 24 April 2025 which will be available to watch online and also for
shareholders to attend, prior to the AGM, at the offices of the Investment
Manager at 1 London Wall Place, London EC2Y 5AU.
To sign up to watch the presentation online please click on this link:
https://schroders.zoom.us/j/82547849490?pwd=P7BEhDzatGWPqYBfclz39zn7bWLdso.1
(https://schroders.zoom.us/j/82547849490?pwd=P7BEhDzatGWPqYBfclz39zn7bWLdso.1)
. Please click here
https://mybrand.schroders.com/m/23fe589407a4be1/original/Schroder-Asian-Total-Return-Investment-Company-AGM_-Portfolio-Manager-Presentation.ics
(https://mybrand.schroders.com/m/23fe589407a4be1/original/Schroder-Asian-Total-Return-Investment-Company-AGM_-Portfolio-Manager-Presentation.ics)
to add this virtual presentation to your calendar.
Details on how to watch the presentation are also available on the Company's
web pages: www.schroders.co.uk/satric (http://www.schroders.co.uk/satric) .
The formal business of the AGM will commence at 1.00 pm on Thursday, 24 April
2025 at 1 London Wall Place, London EC2Y 5AU, following the presentation by
the Portfolio Managers. Shareholders are encouraged to attend both the
presentation at 12.00 noon and the AGM at 1.00 pm at the Investment Manager's
offices.
By making the Portfolio Managers' presentation available also as a webinar, I
hope that shareholders, who are unable to attend the presentation and AGM,
along with interested parties, will be able to listen to, and ask questions
of, the Portfolio Managers.
AGM SHAREHOLDER COMMUNICATION AND ENGAGEMENT
The Board understands the significance of having regular access to information
for our shareholders. In addition to our Company web pages, we provide
shareholders with the opportunity to subscribe to Company email updates. These
emails feature updates about the Company, along with news, opinion pieces, and
market insights. Details on how to subscribe can be found on the inside front
cover of this report.
We are pleased to note the strong contributions of all investment trust
shareholders at recent votes, including those holding through retail
platforms, across the sector following extensive proactive shareholder
engagement.
These investors have played a key role in the outcomes of these votes and we
would encourage them to continue to make their voices heard in all AGMs going
forward.
If any of the Company's shareholders are at all unsure of how to vote their
holding, they should contact their nominee for immediate assistance as we,
alongside many others, are keen to see that these improved participation
figures are sustained across all investment trusts, including at this Company.
The Board encourages all shareholders to either attend the AGM or exercise
their voting rights by proxy. Proxy votes can be submitted electronically
through the registrar's portal, by post and also by email. Details are set out
in the Explanatory Notes to the Notice of AGM in this Annual Report.
The Board acknowledges that certain execution-only investment platforms are
now enabling shareholders to vote electronically. We encourage shareholders to
utilise this feature where it is available.
The Board is committed to exercising the highest standard of corporate
governance and accordingly, regularly considers the views of its shareholders,
offering to meet with major shareholders annually. We also seek to engage with
all shareholders where possible and should you wish to contact me, you can do
so via the Company Secretary whose details are set out in the Annual Report
and Financial Statements.
SARAH MACAULAY
Chair
18 March 2025
INVESTMENT MANAGER'S REVIEW
PORTFOLIO MANAGERS' REPORT
2024 began on a promising note for the Company, given its limited exposure to
China's struggling economy and the ongoing regulatory uncertainties, thus
shielding it from stock market volatility there. Significant positions in
Taiwanese technology and shareholder-value-focused companies across Asia
Pacific drove outperformance relative to the Reference Index for most of the
year. However, September 2024 brought surprises in Chinese government policy
that led to a domestic market rally, reducing earlier gains. Additionally,
Samsung Electronics faced scrutiny over its struggles with high-bandwidth
memory (HBM) chips and declining smartphone market share, further weighing on
performance. Despite these challenges, the NAV total return for the year was
13.0%, outperforming the Reference Index which rose by 12.1% (Source:
Schroders, net of fees).
INVESTMENT CLUSTERS OVERVIEW
To evaluate performance, we revisited the four investment clusters that have
long shaped our approach to Asian equities. A brief overview of these clusters
provides context. Cluster One consists of China and Hong Kong, representing
structurally challenged markets in secular bear trends. Here, the investment
focus remained on the best private sector companies rather than state-owned
enterprises (SOEs). Cluster Two comprises Korea and Taiwan, home to
world-class technology companies, albeit with volatility due to their
dominance in the cyclical semiconductor industry. Australia and Singapore make
up Cluster Three, representing well-regulated markets with stable capitalist
foundations. These markets are ideal for reliable dividend plays that generate
attractive total returns over time. Lastly, Cluster Four contains India and
ASEAN (the Association of Southeast Asian Nations)(1), true emerging markets
(EM) with high growth potential tempered by political and regulatory risks.
Together, these clusters offer a balanced framework for us to navigate Asia's
dynamic investment landscape, capturing opportunities while managing risks.
1 ASEAN excluding Singapore.
We view Asian equities not as one coherent asset class but as four disparate
investment clusters
China/Hong Kong Korea/Taiwan
· Structurally challenged, secular bear markets. · Principally technology-heavy (semiconductors) stock markets.
· Some good companies but valuations are not as low as the bulls will claim. · Attractive companies with strong intellectual property and entry barriers -
cyclical but with growth.
· Where some of the best stocks in Asia can be found.
India/ASEAN1 Australia/Singapore
· Genuine emerging markets. · Well-regulated stock markets in countries with strong secular
attractions and good capitalist underpinnings.
· Strong gross domestic product (GDP) growth but more volatile politics and · Lower growth but lots of strong dividend yields and attractive total
regulation.
returns.
· Positive long-term structural outlook in India, the Philippines and Indonesia
but valuations in the former are now expensive.
1 ASEAN excluding Singapore.
Source: Schroders
PERFORMANCE OF INVESTMENT CLUSTERS IN 2024
How did these investment clusters fare compared to the Reference Index in
2024? To answer this, we delve deeper into each cluster, breaking them into
sub-thematic components to understand the key drivers of their performance.
In Cluster One: China/Hong Kong, we differentiate between SOEs and non-SOEs,
as these segments followed distinctly different paths in a structurally
challenged market. For Cluster Two: Korea/Taiwan, we examine the two markets
separately. Korea includes "Value-up"(1) companies, which are part of reform
efforts aimed at closing the "Korean discount", and non-Value-up companies.
Taiwan is analysed by its AI sector, which has been a major thematic driver,
alongside non-AI sectors. In Cluster Three: Australia/Singapore, companies are
categorised into high dividend yielders (DY) that provide steady income
streams and low or no dividend yielders (Non-DY) with lower payout ratios.
Finally, in Cluster Four: India/ASEAN, we consider India and ASEAN as distinct
investment areas.
1 Value-up companies exhibit characteristics such as strong corporate
governance, a focus on innovation and strategic partnerships.
The Reference Index recorded a 12.1% absolute GBP return in 2024, driven by
several standout trends. Leading the gains were Taiwan's AI plays, which saw
exceptional performance fuelled by investor enthusiasm for AI demand and
Nvidia's consistently optimistic forecasts. This segment not only outperformed
domestic peers but also outshone the broader region. Chinese SOEs emerged as a
surprise outperformer. Despite exposure to years of overinvestment in
infrastructure and a struggling property market, tacit government support
during the year bolstered their share prices, resulting in returns that
outpaced their often rapidly weakening underlying fundamentals. India secured
the third spot, benefiting from the "China plus one" diversification trend and
favourable domestic policies, attracting capital from local and international
investors.
At the opposite end, Korea was the biggest disappointment. Political
controversies surrounding President Yoon's administration, weakening demand
for electric vehicles (EVs) that affected Korean battery manufacturers, and a
sharp decline in Samsung Electronics' share price contributed to the market's
underperformance. The lacklustre results in the "Value-up" segment were
particularly notable, as the government's attempts to replicate Japan's
success in closing valuation gaps largely fell short, leading to increasing
scepticism about policy effectiveness. Taiwanese technology stocks outside of
the AI space, along with non-technology segments in Taiwan, also struggled,
further emphasising the concentrated strength of AI-related plays in the
region.
CLUSTER PERFORMANCE
The year's performance review is perhaps best examined through the lens of
these clusters and their sub-thematic components, bringing the Company's
overall strategy and results into sharper focus.
CLUSTER ONE: CHINA/HONG KONG - A CHALLENGING YEAR
Navigating China and Hong Kong proved difficult. While early 2024 saw SOEs
benefiting from government-backed initiatives, the Company's focus on
high-quality private companies still delivered strong results for the first
eight months of the year. However, significant policy stimulus in September
2024 triggered a sharp rally in Chinese markets. The Chinese internet sector,
including JD.com, Alibaba, and Meituan, surged, but limited exposure to these
holdings impacted performance. Traditional Hong Kong-listed companies like
Shenzhou International and AIA underperformed during the rally despite
delivering reasonable earnings. These challenges have prompted internal
discussions about refining buy disciplines to better capitalise on volatile
Chinese markets that are driven more by sentiment and speculation than
fundamentals. Overall, the China/Hong Kong cluster detracted from performance,
underscoring the challenges of navigating markets where fundamentals are not
the primary drivers of short-term performance.
CLUSTER TWO: KOREA/TAIWAN - NET CONTRIBUTOR BUT MIXED RESULTS
Korea and Taiwan delivered contrasting performances. In Korea, contrary to the
widespread optimism on the Corporate Value-Up program at the start of 2024,
the market ended the year as the worst performing market of the region. The
government's Value-up effort has largely failed to materialise amid the
political controversies surrounding President Yoon's administration, leaving
investors increasingly sceptical of the country's political credibility. While
the Company had an underweight exposure to the market, it was insufficient to
offset the drag from our positioning in the country's memory sector. Samsung
Electronics' share price was particularly disappointing as the company faced
intensified competition from Chinese dynamic random access memory (DRAM)
manufacturers, a declining global smartphone market share, and challenges in
the AI memory chip segment. Conversely, Taiwan's contributions were robust.
The long-term position in TSMC outperformed materially, fuelled by surging
demand for AI chips. Additionally, strong stock selection in other Taiwanese
non-AI segments, including Chroma ATE, MediaTek, and Voltronic Power, further
strengthened performance, culminating in a significant net positive
contribution from this investment cluster.
CLUSTER THREE: AUSTRALIA/SINGAPORE - A RELIABLE CONTRIBUTOR
This cluster remained a cornerstone of stability. High-dividend-yielding
stocks such as Singaporean banks DBS Bank and United Overseas Bank performed
well, reinforcing the cluster's reputation for reliable income generation.
Non-dividend-yielding names like ResMed and Aristocrat Leisure also delivered
strong returns, underscoring the often overlooked opportunities in the
Australian market. Overall, this cluster made a meaningful positive
contribution, reflecting its role as a stabilising force within the portfolio.
CLUSTER FOUR: INDIA/ASEAN - POSITIVE BUT UNEVEN
India and ASEAN markets contributed positively to performance. In ASEAN,
strong stock selection in holdings that included port operator, International
Container Terminal Services, and leading banks in Indonesia and the
Philippines added value. However, absence from the outperforming Malaysian
market was a missed opportunity. In India, the underweight position in a
strong-performing market was a minor drag. Nonetheless, good stock selection,
highlighted by MakeMyTrip, helped deliver modest gains. While broader Indian
equity performance was mixed, the cluster remains a promising area for growth
and hopefully alpha generation(1) in 2025.
1 For further details please refer to:
https://www.schroders.com/en-gb/uk/individual/glossary/
(http://www.schroders.com/en-gb/uk/individual/glossary/)
GEARING
The Company continued to deploy gearing during the year as regional valuations
were reasonable and our top-down composite valuation indicator remained in the
neutral territory. At the end of 2024, the Company's gearing was 8.5% obtained
through a combination of the credit facility, and the introduction of CFDs,
which helped to reduce the overall cost of borrowing against a relatively
high-interest rate backdrop. While the use of gearing still involves a
marginal cost to the Company, this flexibility plays a crucial part in
enabling the Company to capture additional market upside, providing an added
source of alpha which should more than offset the cost of gearing over the
long term.
HEDGING STRATEGY - A MODEST CONTRIBUTOR
Despite typically acting as a drag in strong market years like 2024, the
Company's hedging strategy contributed 0.3% to performance in 2024. Notably,
our VIX (Volatility Index)(2) call(3) options performed particularly well,
mitigating downside risks while enhancing returns, and reaffirming the value
of the disciplined approach to hedging in volatile markets.
2 The CBOE Volatility Index (VIX) is a real-time index that represents
the market's expectations for the relative strength of near-term price changes
of the S&P 500 Index (SPX). Because it is derived from the prices of SPX
index options with near-term expiration dates, it generates a 30-day forward
projection of volatility. Volatility, or how fast prices change, is often seen
as a way to gauge market sentiment, and in particular the degree of fear among
market participants.
3 Call options are financial contracts that give the buyer the right,
but not the obligation, to buy a stock, bond, commodity, or other asset or
instrument at a specified price within a specific period. A call seller must
sell the asset if the buyer exercises the call.
CONCLUSION
As we reflect on 2024, it is evident that the year tested the Company's
adaptability and discipline amid dynamic market conditions. Despite some
challenges in certain clusters, the Company delivered reasonable results,
outperforming the Reference Index and reinforcing the strength of its
diversified, long-term approach. Looking ahead to 2025, we remain steadfast in
our commitment to navigating Asia's complex investment landscape with the same
unconstrained, benchmark-agnostic approach to stock selection, as we aim to
build on performance in 2024 and to continue to generate positive results for
our shareholders.
STRATEGY AND POSITIONING FOR THE YEAR OF THE SNAKE
In the second part of our review, we discuss the Company's positioning as we
enter 2025, or in the case of China, the Year of the Snake.
Prospective returns from Asian equities face two significant headwinds as we
enter the New Year. Firstly, uncertainty around Trump 2.0, and what this is
likely to mean for Asian interest rates, exchange rates, and trade flows are a
potential headwind. President Trump's policies as stated are quite negative
for both the economic and earnings outlook in most Asian countries.
Higher-for-longer US interest rates are likely to put pressure on currencies
in the region, leading to higher rates and dampening economic growth. Trade
tariffs, if implemented in the manner suggested by Trump's more aggressive
narrative to date, are expected to be disruptive and potentially negative for
the region's exporters. As Chart 1 in the Annual Report and Financial
Statements shows, Asian stock markets have materially underperformed since the
US election.
The second headwind for the Company's prospective returns is China, given the
economic, regulatory and geopolitical uncertainties. Much like the US policy
outlook, the regulatory and geopolitical outlook in China is effectively
unpredictable. Regardless of this, we see headwinds for Chinese listed stocks
that leave us cautious. However, given current poor sentiment and low
valuations, we can find opportunities despite the fact that without a policy
volte-face, we view Chinese equities as in a secular bear market.
How do we position from here? If the supposed "guardrails" in US institutions
work (thus reducing the worst of the trade tariffs and other threats) then
perhaps we can see a rebound in Asian markets most of which are now
discounting a gloomy scenario. But at the time of writing, we really do not
know. What we can say, however, is that valuations in Asia are now at their
all-time relative lows versus developed markets and at least we should see
some support from high dividend yields in a region that has relatively low
listed company corporate debt levels (Chart 2 in the Annual Report and
Financial Statements).
In absolute terms, valuations in Asia also look reasonable, as shown in Chart
3 in the Annual Report and Financial Statements which has two of the
indicators we use to determine the level of gearing(1) in the Company. Our
top-down value indicator (rolling aggregate of price to earnings ratio, price
to book(2), dividend yield and price to cash flow) shows that Asian valuations
are exactly in-line with the long-term average. Our bottom-up value indicator
(number of stocks our research team cover in Asia with upside to our fair
value) is running at 62%, which is above the long-term average of 55%,
indicating reasonable value and good stock opportunities in the region.
1 Please refer to the "Alternative Performance Measures and Glossary".
2 Price to Book ratio: Price-to-Book (P/B) ratio: Market Share
Price/Book Value. Book value: value of a company's total assets minus its
total liabilities. Useful when comparing similar companies valuations within
the same industry that follow a uniform accounting method for asset valuation.
It can offer a view of how the market values a particular company's stock and
whether that value is comparable to the Book Value Per Share.
Given the indicators, at the time of writing, the Company is running with
moderate gearing of 8.5% reflecting reasonable, albeit not oversold,
valuations. This also means that the Company is running with little hedging as
most of our hedging models also indicate moderate downside risks (a caveat:
quantitative models do not tend to pick up President Trump's tweets). At the
time of writing, the only downside hedges in place are a small position in
puts(1) on the Indian index. So, in summary, we enter 2025 with a very
uncertain market outlook, however a lot of this looks to be reflected in Asian
stock market valuations so, if we avoid the worst of Trump 2.0 and China risks
ease, we can see the prospect for good total returns for the Company in the
coming year.
1 A put is an options contract that gives the owner the right, not the
obligation, to sell a certain amount of the underlying asset, at a set price
within a specified time. The buyer of a put option believes that the
underlying stock will drop below the exercise price before the expiration
date.
How is the Company positioned for the upcoming Year of the Snake? Chart 4 has
the clusters we used in the review section with the current weightings of the
Company and the positioning against the Reference Index.
Chart 4: Asian equities: one coherent asset class?
We view them as primarily four disparate investment clusters with different
drivers
China/Hong Kong Korea/Taiwan
· Structurally challenged, secular bear markets. · Principally technology-heavy (semiconductors) stock markets.
· Some good companies but valuations are not as low as the bulls will claim. · Attractive companies with strong intellectual property and entry barriers -
cyclical but with growth.
· Hong Kong/China exposure 24%,underweight -7% · Some of the best stocks in Asia.
· Exposure: Taiwan 25%/Korea 3%, Taiwan Overweight 6%/Korea Underweight 5%
India/ASEAN1 Australia/Singapore
· Genuine emerging markets. · Well-regulated stock markets in countries with strong secular
attractions and good capitalist underpinnings.
· Strong (GDP) growth but more volatile politics and regulation. · Lower growth but lots of strong dividend yields and attractive total
returns.
· Positive long-term structural outlook in India, the Philippines and Indonesia · Australia/Singapore exposure 25%,
but valuations in the former are now expensive.
overweight +6%
· India exposure 13%, underweight -6%
· ASEAN exposure 13%, overweight +10%
1 ASEAN excluding Singapore
Source: Schroders
Looking at Cluster One, the Company remains underweight Hong Kong/China. As
mentioned earlier, without a change in policy settings, we take the view that
Chinese stock markets are in a secular bear market. We do not believe current,
and hoped for, stimulus packages will reverse this. As shown in Chart 5 in the
Annual Report and Financial Statements, we have had at least eight supposed
economic stimulus packages since 2008, and none have delivered a sustained
rebound in Chinese stock markets.
Why is this? It is principally because stimulus packages do not address the
underlying issues in the Chinese economy. Instead, they often exacerbate
issues by creating more excess overcapacity in industries considered
strategic, focus on building infrastructure of questionable value, and
allowing banks to evergreen bad debts (Chart 6 in the Annual Report and
Financial Statements).
Instead, what we would like to see in China is a reining in of financial
excesses, crystallisation of bad debts, recapitalising banks, and the
introduction of concrete broad-based measures to boost consumption. Dealing
with a financial bubble is always painful, as your Portfolio Managers, who
worked through the Japanese bubble, Asian financial crisis and the global
financial crisis, know. However, without creative destruction and capital
cycles you miss the essence of capitalism and, in our view, end up with a
secular bear market. Charts 7, 8, and 9 in the Annual Report and Financial
Statements explain the issues. The current policy focus in China, like Japan
through the 1990s, is focused on keeping the ship afloat and avoiding taking
pain; this is likely to be deflationary and a headwind for Chinese stock
markets.
So, why have anything in China? Unlike Japan in the 1990s, many of the private
sector companies in China are adaptable and well run. Valuations are
reasonable, though not as cheap as the China bulls claim. As Chart 10 in the
Annual Report and Financial Statements shows, earnings in China have
consistently disappointed and return on equity (ROE) has dropped
precipitously.
Another big difference in China versus Japan in the 1990s is that many of the
listed companies pay dividends or buy back shares, so to meet our total return
targets we do not need to see significant share price appreciation. The
holdings in China are focused on the best private sector companies, ones that
have strong market positions in areas with secular growth and that generate
good cash flow which is being returned to shareholders. These are companies
like Tencent (social media and gaming), Netease (gaming), Tencent Music
(streaming), Trip.com (travel) and in Hong Kong companies like AIA (regional
insurance) and Swire Pacific (airlines, property). In summary, we expect to
remain underweight China and are structurally cautious on the market but as
stockpickers, we find good opportunities and thus are happy to own selective
names.
Looking at our Cluster Two (Korea and Taiwan) the portfolio is slightly
overweight in this investment area. This is primarily coming from a material
overweight in technology as we have no domestically focused stocks in either
Korea or Taiwan as both economies are mature and valuations/fundamentals for
domestic stocks are unattractive. As mentioned earlier in the review section,
we remain cautious on Korean "Value-up" having heard the story of improving
corporate governance in Korea multiple times over the last 30 years. Whilst
not completely sceptical, the proof is very much in the pudding.
Technology is the overriding focus of Cluster Two. This time last year, we
were bullish on technology and significantly overweight. Over the course of
2024, we have reduced exposure. Partly by taking profits from some of our
technology stocks that have done well on AI hopes and are now trading above or
close to reasonable valuations, but also by substantially reducing Samsung
Electronics, which now looks decidedly challenged and return on invested
capital negative.
At this point, we are increasingly cautious on AI-themed stocks. We worry that
we will see a hiatus in AI capital expenditure (the driver of Taiwan AI
stocks) at some point as the reality of AI use cases and monetisation needs to
catch up with the huge expenditure being undertaken by the likes of Microsoft,
Amazon and Alphabet. As Chart 11 in the Annual Report and Financial Statements
shows, on the left-hand chart, semiconductor sales have tended long-term to
grow pretty much at a steady 7% per annum level (with some cyclicality for new
product cycles like PCs in the 1990s, smartphones in 2005-08) and we don't see
AI applications suddenly changing this very consistent long-term trend. As the
right-hand chart shows, any disappointment in semiconductor sales is likely to
feed through to falling prices in Taiwan stocks.
Technology holdings have now been reduced to those we see as key long-term
structural winners given industry changes, or those that we think can take
market share. This means our key technology holdings are now just in a handful
of companies like TSMC (effective monopoly in advanced nodes after Intel and
Samsung failures in the foundry space), Chroma ATE (advanced chip testing),
MediaTek (market share winner in chipsets and application-specific integrated
circuits), Voltronic (increased outsourcing of power supply equipment) and ASE
(requirements for more advanced chip packaging).
Cluster Three (Australia and Singapore) is an area we added to over the course
of 2024 and the portfolio is now materially overweight (vs. the Reference
Index) in what is often considered the most boring part of the Asian
investment universe. From your Portfolio Managers' perspective, boring is
often good - the Australian and Singapore stock markets offer good corporate
governance, lots of dividends and reasonable earnings per share (EPS) growth
(Chart 12 in the Annual Report and Financial Statements). Despite this, they
are nearly always considered the least attractive markets by sell-side
strategists (right-hand graph in Chart 12 in the Annual Report and Financial
Statements) who fixate on top-line growth and false hopes of stimulus and
reform (China and Korea).
Our focus in Australia and Singapore is principally on dividend stocks, and we
are still finding attractive opportunities in this space (Chart 13 in the
Annual Report and Financial Statements). The Company is called the "Schroder
Asian Total Return Investment Company plc" as we are agnostic whether our
total return comes from a 1% dividend and 8% capital gain or a 7% dividend and
2% capital gain - key is that stocks can meet our total return hurdles. We
often tend to feel in Asia many investors forget the importance of dividends
and total returns, instead just focusing on top-line growth and themes - much
to their peril in places like China and, we believe going forward, India.
In Australia we are not just focused on yield; we also own a selection of
global/US centric companies in the healthcare and industrial space like
ResMed, Brambles, CSL, Aristocrat, Cochlear, and James Hardie. Valuations in
Australia are reasonable given the quality of the companies and the strong
positioning many businesses have in their respective segments. As Chart 14 in
the Annual Report and Financial Statements shows, the sluggish domestic
economy in Australia has turned sentiment cautious, and this has led to a
moderate derating. Structurally, with strong demographics, good rule of law,
and excellent social frameworks, we are positive long-term on the Australia
economy and expect it to grow faster than most Asian economies in the
medium-term (Chart 15 in the Annual Report and Financial Statements).
In Singapore, the Company is primarily focused on financials. We continue to
favour Singapore banks given their regional footprints, good transparent
management, and the tailwind they enjoy as the wealth management centre of
Asia moves from Hong Kong to Singapore. As Chart 16 in the Annual Report and
Financial Statements shows, these are businesses that are very well positioned
and continue to compound nicely.
This brings us to our last cluster, the genuine Asian emerging stock markets:
India and ASEAN. Looking at India first, the positive story of improving
economic potential based on better infrastructure, digitisation of the economy
and reduction of red tape has been widely touted and has genuine validity. It
is also true that India, geopolitically is in a better place than many
countries, being neither obviously aligned to the USA or China, and being a
very small exporter of goods, it is less vulnerable to tariffs. However, for
all the positives, structural impediments remain whether it is an education
system that for the majority is poor, difficult business conditions and low
levels of female participation in the workforce (many professions are
effectively still restricted to men). It is also clear that the benefits of
growth are being garnered by the few in India, not the majority. This is why
Prime Minister Modi did poorly in the 2024 elections and also why overall
consumer confidence is falling and consumption in most categories sluggish
(chart 17 in the Annual Report and Financial Statements).
Private capital expenditure and foreign direct investment also continue to
disappoint versus expectations. This is not to say the general environment in
India has not improved; it has. However, not to the extent the bulls proclaim,
and we expect the economic numbers will disappoint compared to high
expectations.
This, we think, leaves the stock market vulnerable. Indian brokers and
domestic investors tend to be extremely optimistic, and in India it is often
considered unpatriotic to be downbeat. The result of this is corporate
earnings nearly always fail to meet consensus expectations, as shown in Chart
18 in the Annual Report and Financial Statements. This chart shows the trend
in stockbrokers' earnings forecasts for the Indian stock market over time -
typically earnings come in 20% or more below the initial forecasts. The
exception was 2023 and 2024 as we saw a post-Covid earnings rebound (financial
year end in India is March). We are currently seeing significant downgrades to
2025 and 2026 earnings and expect this to continue given the
weaker-than-expected economy.
When you combine the potentially disappointing earnings backdrop with high
valuations (Chart 19 in the Annual Report and Financial Statements), which
have been driven up by very active levels of domestic retail participation
often via "thematic" funds, we see material risks to the Indian market. It is
perhaps not surprising that insider selling and private equity exits are
accelerating, historically this has been timed at market peaks (Chart 20 in
the Annual Report and Financial Statements).
This is not to say we can find nothing to own in India; we selectively like
private sector banks where valuations are reasonable, healthcare and
travel-related names. Overall, however, India is the biggest single
underweight in the portfolio, and we would need to see a material correction
(probably driven by an exit of domestic retail money) for us to look to move
overweight.
The smaller ASEAN stock markets (Thailand, Indonesia, the Philippines,
Malaysia, Vietnam) had a poor close to 2024 as they are deemed more vulnerable
to higher US interest rates and a strong dollar. Economically, most are
ticking along at reasonable growth levels (3% to 5%) but at a pace that, like
India, is below expectations, and again like India, the consumer is facing
pressure from rising food prices and higher interest rates. Animal spirits in
the main are very much lacking.
Unlike India, however, this increasingly looks to be reflected in stock market
valuations. As shown in Chart 21 in the Annual Report and Financial
Statements, in Indonesia and the Philippines, despite a good rebound in ROE
from Covid lows, stock markets have remained moribund (as proxied by price to
book or PB).
The Company has reasonable positions across the smaller stock markets in
ASEAN, mostly focused on the financial and consumer sectors. The spectre of
Trump 2.0 and a strong dollar is likely to mean stock markets in ASEAN remain
under pressure near-term and higher interest rates are expected to be a
headwind for both economies and corporate earnings. With valuations close to
historic lows, we do find good stock-level opportunities in the region, and
thus see this as one area of potential positive surprise in 2025 if current
headwinds were to ease.
We hope this report has provided a reasonably comprehensive review on
performance and the positioning of the Company. As ever, Asia remains a large,
a fascinating and disparate region and we see plenty of interesting investment
opportunities at the current time. To recap on our previous comments: we enter
2025 in an uncertain market outlook for Asian stock markets; however a lot of
this looks to be reflected in valuations so, if we avoid the worst of Trump
2.0 and China risks ease, we see the prospect for the Company to make good
total returns in the coming year.
ROBIN PARBROOK AND LEE KING FUEI
Portfolio Managers
SCHRODER INVESTMENT MANAGEMENT LIMITED
18 March 2025
Strategic Report
Risk Report
The Board, through its delegation to the Audit and Risk Committee, is
responsible for the Company's system of risk management and internal control
and for reviewing its effectiveness. The Board has adopted a detailed matrix
of principal, and, where applicable, emerging, risks affecting the Company's
business as an investment trust and has established associated policies and
processes designed to manage and, where possible, mitigate those risks, which
are monitored by the Audit and Risk Committee on an ongoing basis.
This system assists the Board in determining the nature and extent of the
risks it is willing to take in achieving the Company's strategic objectives.
Risk assessment and internal controls review by the Board
Risk assessment includes consideration of the scope and quality of the systems
of internal control operating within key service providers, and ensures
regular communication of the results of monitoring by such providers to the
Audit and Risk Committee, including the incidence of significant control
failings or weaknesses that have been identified at any time and the extent to
which they have resulted in unforeseen outcomes or contingencies that may have
a material impact on the Company's performance or condition. The internal
control environment of the Manager, Investment Manager, the depositary,
custodian, administrator and the registrar are tested annually by independent
external auditors. The full reports are provided to the Audit and Risk
Committee alongside abridged summaries.
Although the Board believes that it has a robust framework of internal
controls in place, this can provide only reasonable, and not absolute,
assurance against material financial misstatement or loss and is designed to
manage, not eliminate, risk. Both the principal and emerging risks and the
monitoring system are also subject to robust review at least annually. The
last assessment took place in March 2025.
During the year, the Board discussed and monitored a number of risks which
could potentially impact the Company's ability to meet its strategic
objectives. The Board receives updates from the Manager, Investment Manager,
Company Secretary and other service providers on emerging risks that could
affect the Company. The Board was mindful during the year of the global
environment including the results of several significant elections in 2024,
notably in the US; the risks posed by volatile markets; and geopolitical
uncertainty which could affect the asset class. However, these were not
considered to be factors which explicitly impacted the Company's performance.
These risks are seen as exacerbating existing risks and have been incorporated
in the macro factors, including the geopolitical/economic environment and
climate change risk section in the table below.
The Board considered in detail whether there were any material emerging risks
and has continued to include the development of AI as an emerging risk in the
table below.
No significant control failings or weaknesses were identified from the Audit
and Risk Committee's ongoing risk assessment which has been in place
throughout the financial year and up to the date of this report. The Board is
satisfied that it has undertaken a detailed review of the risks facing the
Company. A full analysis of the financial risks facing the Company is set out
in note 22 to the financial statements.
Actions taken by the Board and, where appropriate, its Committees, to manage
and mitigate the Company's principal risks and uncertainties are set out in
the table below. The "Change" column on the right highlights, at a glance, the
Board's assessment of any increases or decreases in risk during the year after
mitigation and management. The arrows show the risks as increased, decreased
or unchanged.
Risk Mitigation and management Change
Macro factors, including the geopolitical/economic environment and climate
change
Geopolitical instability, including: Geopolitical risks are an input into the investment process and are monitored The continued increased risk reflects the changing global environment and the
at each Board meeting where there is also an opportunity to discuss key market risks posed by volatile markets and geopolitical uncertainty.
· the Russian/Ukraine and Middle East conflicts and China and risk factors with the Portfolio Managers. Further information on geopolitical
Taiwan tensions; risk is included in the Outlook section of the Chair's Statement.
· changes to the global economic environment; and The Board visited Hong Kong, Macau and the Philippines during the year and met
with investee companies and analysts to understand better the challenges and
· rising tensions following the re-election of Trump and the opportunities in the region.
consequences of new policies
The Manager's investment process includes an assessment of climate related
which might materially affect the ability of the Company to achieve its risks in the evaluation of investee companies.
investment objective.
The impact of climate change on investee companies may also materially affect
investment outcomes.
Investment objective and promotion
The Company's investment objective may become out of line with the The appropriateness of the Company's investment mandate and the long-term
requirements of investors and lead to the Company becoming unattractive to investment strategy is regularly reviewed by the Board and the success of the
investors, decreasing demand for its shares and a widening discount of the Company in meeting its stated objectives is monitored. The Board holds a
share price to the underlying NAV per share. strategy meeting each year to consider the investment objective and policy and
the Company's longer term investment strategy.
The Company is not promoted in a way which generates investor demand.
The share price relative to the NAV per share is kept under review as a key
performance indicator and is considered against the Company's peers on a
regular basis. The use of the buyback authority is also reviewed regularly.
The Investment Manager and corporate broker monitor market feedback and the
Board consider this at each quarterly Board meeting.
Proactive engagement with shareholders takes place via the AGM, feedback from
shareholder presentations, and a formal programme of individual meetings are
offered to major shareholders on an annual basis.
The Manager provides a dedicated, experienced investment trust sales,
marketing and PR team. The marketing programme continued to provide
promotional opportunities for the Company throughout the year and included
advertising, video and podcast content, sponsored research provided by Kepler,
and 'roadshow' events, visiting investors across the UK. The performance of
the Manager is evaluated, at least annually by the Management Engagement
Committee.
Financial
The Company is exposed to a range of financial risks including market, The financial risks associated with the economic environment that might impact
liquidity, interest rate, credit and fair values of financial assets and the Company are mitigated, to some extent, by the Investment Manager. Note 22
financial liabilities. to the financial statements provides further details of the steps taken to
mitigate those risks associated with the portfolio.
Investment strategy and performance
Poor stock selection or investing outside of the investment restrictions and The Investment Manager is experienced and has a long track record in
guidelines set by the Board could result in poor performance. successfully investing in Asian equity holdings.
The Board oversees the implementation of the investment strategy, compliance
with investment restrictions and guidelines and keeps investment performance
under close review. One, or more, of the Portfolio Managers attend all Board
meetings and review the portfolio with the Board using performance data and
KPIs.
A detailed formal appraisal of the performance of the Manager and Investment
Manager is carried out annually by the Management Engagement Committee.
Gearing/liquidity
The Company adopts an inappropriate gearing or derivative strategy. The Board sets gearing limits of 30% of NAV and the Investment Manager reports
to the Board on gearing levels and derivative activity at every Board meeting.
The Company's investments are insufficiently liquid resulting in breach of
loan covenants in the event of a severe fall in valuations. Liquidity stress testing is carried out on a regular basis.
ESG considerations
Failure by the Company to disclose in an appropriate manner how the investment The consideration of material climate change risks, ESG factors and the
process integrates consideration of ESG factors could lead to the Company's Sustainability Disclosure Requirements is integrated into the investment
shares being less attractive to investors as well as potential valuation process and reported at Board meetings.
issues in the underlying investee companies.
The Investment Manager considers and evaluates the approach investee companies
take to recognise and mitigate material climate change risks and also
considers the portfolio's investee companies carbon footprint versus the
Reference Index.
The Manager has implemented a comprehensive ESG policy outlined in detail in
the Annual Report and Financial Statements.
Key person
The retirement or departure of one or more of the Investment Manager's key The Portfolio Managers have a contractual notice period and the Investment
investment professionals could impact the Company's performance. Manager has a compensation and incentive scheme to recruit and retain key
staff including the Portfolio Managers, and has developed a suitable
succession planning programme, which seeks to ease the impact that the loss of
a key investment professional may have on the Company's performance. The
Investment Manager would notify any change in its key professionals to the
Board at the earliest possible opportunity and the Board would be made aware
of all efforts made to fill a vacancy.
The Portfolio Managers are supported by a wider team of experienced portfolio
managers and research analysts, mitigating the impact of the loss of any key
professionals by the Investment Manager on the Company's performance.
Compliance with regulations
Failure to comply with relevant laws and regulations could result in fines, The Board and Manager monitor changes in government policy and legislation
loss of reputation and potentially loss of investment trust status. which may have an impact on the Company, and the Audit and Risk Committee
monitors compliance with regulations by reviewing internal control reports
from the Manager.
From time to time the Board employs external advisers to advise on specific
matters.
Oversight of service providers and control environment
The Company has no employees and has delegated certain functions to a number The Board receives reports from the Manager on its internal controls and risk
of service providers. Failure of controls, including as a result of fraud, and management throughout the year, including those relating to cybersecurity, and
poor performance of any service provider, could lead to disruption, receives assurances from all its other significant service providers on at
reputational damage or loss. least an annual basis.
The Management Engagement Committee reviews the performance of key service
providers at least annually. The Manager also monitors closely the control
environments and quality of services provided by third parties, including
those of the depositary, through service level agreements and regular
meetings.
Directors attend an annual internal controls briefing session, hosted by the
Manager in respect of the internal controls of the Company's key service
providers including the Company's depositary and custodian, HSBC, the
Company's registrar, Equiniti, and Schroders Group Internal Audit team.
Experienced service providers are appointed by the Company subject to due
diligence processes and clearly documented contractual arrangements which
include agreed service level specifications and notice periods for
terminations.
Further details of the internal controls which are in place are set out in the
Audit and Risk Committee's Report in the Annual Report and Financial
Statements.
Information technology resilience and security
Cyber risk such as fraud, sabotage or crime perpetrated against the Company or Cybersecurity is closely monitored by the Audit and Risk Committee as part of
any of its third party service providers could result in data theft, service the review of the internal controls of its service providers.
disruption and reputational damage.
The Manager's IT security team present to the Directors on cybersecurity
controls as part of the annual internal controls briefing session hosted by
Schroders.
Emerging risk
AI
The development of AI presents both potential risks and opportunities to
businesses in almost every sector. The extent of the risk presented by AI is
hard to assess at this point but the Board considers that it is an emerging
risk and together with the Manager and Investment Manager will monitor
developments in this area.
Conclusion
Viability statement
The Directors have assessed the viability of the Company over a five year
period, ending 31 December 2029 taking into account the Company's position at
31 December 2024 and the potential impact of the principal and emerging risks
it faces for the review period. This is further detailed in the Chair's
Statement, Investment Manager's Review and the Risk Report sections of this
report. The Directors have assessed the Company's operational resilience and
they are satisfied that the Company's outsourced service providers will
continue to operate effectively.
The Board believes that a period of five years reflects a suitable time
horizon for strategic planning, taking into account the investment policy,
liquidity of investments, potential impact of economic cycles, nature of
operating costs, dividends and availability of funding.
In preparing these financial statements, the Directors have considered the
impact of the Company's emerging risks as set out in the Annual Report and
Financial Statements and have concluded that there was no further impact to be
taken into account as investments are valued based on market pricing.
The Directors considered the beneficial tax treatment the Company is eligible
for as an investment trust. If changes to these taxation arrangements were to
be made, it would affect the viability of the Company to act as an effective
investment vehicle.
The Directors reviewed a stress test in which the Company's NAV dropped by 50%
and noted that, based on the assumptions in the test, the Company would
continue to be viable over a five year period.
Whilst the Company's Articles of Association require that a proposal for the
continuation of the Company be put forward at the Company's AGM in 2025, the
Directors have no reason to believe that such a resolution will not be passed
by shareholders.
The Directors have also considered the Company's income and expenditure
projections and the fact that the Company's investments comprise readily
realisable securities which can be sold to meet funding requirements if
necessary. Based on the Company's processes for monitoring operating costs,
the Board's view that the Manager has the appropriate depth and quality of
resource to achieve superior returns in the longer term, the portfolio risk
profile, limits imposed on gearing, counterparty exposure, liquidity risk and
financial controls, the Directors have concluded that there is a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the five year period of their
assessment.
Going concern
The Directors have assessed the principal and emerging risks and the matters
referred to in the viability statement, including the continuation vote at the
AGM in April 2025. The Directors noted the Company's portfolio is comprised of
liquid stocks, and the Company's operating expenses are predominantly variable
costs, which would fall pro-rata in the event of a severe market downturn.
Based on the work the Directors have performed, they have not identified any
material events or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as a going concern for
the period assessed by the Directors, being the period to 31 March 2026 which
is at least 12 months from the date the financial statements were authorised
for issue.
BY ORDER OF THE BOARD
SCHRODER INVESTMENT MANAGEMENT LIMITED
Company Secretary
18 March 2025
Governance
Statement of Directors' Responsibilities in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising Financial Reporting
Standard ("FRS") 102 "The Financial Reporting Standard applicable in the UK
and Republic of Ireland" and applicable law). Under company law the Directors
must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and of the
return or loss of the Company for that period. In preparing these financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and accounting estimates that are reasonable
and prudent;
· state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
· prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006.
The Directors are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Manager is responsible for the maintenance and integrity of the web pages
dedicated to the Company. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors' Statement
Each of the Directors, whose names and functions are listed in the Annual
Report and Financial Statements, confirm that to the best of their knowledge:
· the financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting
Standard applicable in the UK and Republic of Ireland" and applicable law),
give a true and fair view of the assets, liabilities, financial position and
net return of the Company;
· the Annual Report and Financial Statements includes a fair
review of the development and performance of the business and the position of
the Company, together with a description of the principal and emerging risks
that it faces; and
· the Annual Report and Financial Statements, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company's position and performance, business
model and strategy.
ON BEHALF OF THE BOARD
SARAH MACAULAY
Chair
18 March 2025
Financial Statements
Income Statement for the year ended 31 December 2024
Note 2024 2024 2024 2023 2023 2023
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Gains on investments held at fair value through profit or loss 2 - 53,179 53,179 - 28,264 28,264
Net gains/(losses) on derivative contracts - 1,338 1,338 - (1,991) (1,991)
Net foreign currency (losses)/gains - (596) (596) - 1,846 1,846
Income from investments 3 12,281 128 12,409 13,568 1,639 15,207
Other interest receivable and similar income 3 106 - 106 180 - 180
--------------- --------------- --------------- --------------- --------------- ---------------
Gross return 12,387 54,049 66,436 13,748 29,758 43,506
========= ========= ========= ========= ========= =========
Management fee 4 (794) (2,382) (3,176) (763) (2,288) (3,051)
Performance fee 4 - (2,767) (2,767) - - -
Administrative expenses 5 (1,025) - (1,025) (862) - (862)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return before finance costs and taxation 10,568 48,900 59,468 12,123 27,470 39,593
Finance costs 6 (494) (1,482) (1,976) (695) (2,084) (2,779)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return before taxation 10,074 47,418 57,492 11,428 25,386 36,814
Taxation 7 (910) (961) (1,871) (931) (505) (1,436)
--------------- --------------- --------------- --------------- --------------- ---------------
Net return after taxation 9,164 46,457 55,621 10,497 24,881 35,378
--------------- --------------- --------------- --------------- --------------- ---------------
Return per share (pence) 8 9.61 48.71 58.32 10.26 24.33 34.59
========= ========= ========= ========= ========= =========
The "Total" column of this statement is the profit and loss account of the
Company. The "Revenue" and "Capital" columns represent supplementary
information prepared under guidance issued by the AIC. The Company has no
other items of other comprehensive income, and therefore the net return/(loss)
after taxation is also the total comprehensive income/(loss) for the year.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The notes in the Annual Report and Financial Statements form an integral part
of these financial statements.
Statement of Changes in Equity for the year ended 31 December 2024
Note Called-up Share Capital Share Capital Revenue Total
share
premium
redemption
purchase
reserves
reserve
£'000
capital
£'000
reserve
reserve
£'000
£'000
£'000
£'000
£'000
At 31 December 2022 5,456 114,656 11,646 29,182 270,838 25,696 457,474
Repurchase of the Company's own shares into treasury - - - - (32,936) - (32,936)
Net return after taxation - - - - 24,881 10,497 35,378
Dividend paid in the year 9 - - - - - (11,432) (11,432)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2023 5,456 114,656 11,646 29,182 262,783 24,761 448,484
========= ========= ========= ========= ========= ========= =========
Repurchase of the Company's own shares into treasury - - - - (16,993) - (16,993)
Net return after taxation - - - - 46,457 9,164 55,621
Dividend paid in the year 9 - - - - - (11,036) (11,036)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2024 5,456 114,656 11,646 29,182 292,247 22,889 476,076
========= ========= ========= ========= ========= ========= =========
The notes in the Annual Report and Financial Statements form an integral part
of these financial statements.
Statement of Financial Position at 31 December 2024
Note 2024 2023
£'000
£'000
Fixed assets
Investments held at fair value through profit or loss 10 506,932 484,012
--------------- ---------------
Current assets
Debtors 11 303 1,194
Cash and cash equivalents 11 1,743 2,527
Derivative financial instruments held at fair value through profit or loss 11 993 178
--------------- ---------------
3,039 3,899
========= =========
Current liabilities
Creditors: amounts falling due within one year 12 (32,344) (38,841)
--------------- ---------------
(32,344) (38,841)
Net current liabilities (29,305) (34,942)
--------------- ---------------
Total assets less current liabilities 477,627 449,070
========= =========
Non current liabilities
Deferred taxation 13 (1,551) (586)
--------------- ---------------
Net assets 476,076 448,484
========= =========
Capital and reserves
Called-up share capital 14 5,456 5,456
Share premium 15 114,656 114,656
Capital redemption reserve 15 11,646 11,646
Special reserve 15 29,182 29,182
Capital reserve 15 292,247 262,783
Revenue reserve 15 22,889 24,761
--------------- ---------------
Total equity shareholders' funds 476,076 448,484
========= =========
Net asset value per share (pence) 16 509.04 461.24
========= =========
These financial statements were approved and authorised for issue by the Board
of Directors on 18 March 2025 and signed on its behalf by:
SARAH MACAULAY
Chair
The notes in the Annual Report and Financial Statements form an integral part
of these financial statements.
Registered in England and Wales as a public company limited by shares.
Company registration number: 02153093.
Cash Flow Statement for the year ended 31 December 2024
Note 2024 2023
£'000
£'000
Net cash inflow from operating activities 17 7,409 10,928
Investing activities
Purchases of investments (106,492) (115,573)
Sales of investments 137,445 158,529
Net cash flows on derivative instruments 1,520 (2,169)
--------------- ---------------
Net cash inflow from investing activities 32,473 40,787
========= =========
Net cash inflow before financing 39,882 51,715
========= =========
Financing activities
Dividends paid (11,036) (11,432)
Interest paid (2,090) (2,732)
Bank loans repayment (15,484) (6,530)
Repurchase of the Company's own shares into treasury (16,736) (33,222)
--------------- ---------------
Net cash outflow from financing activities (45,346) (53,916)
========= =========
Net cash outflow in the year 18 (5,464) (2,201)
========= =========
Cash and cash equivalents at the beginning of the year 2,527 5,161
Change in cash and cash equivalents (5,464) (2,201)
Exchange movements (94) (433)
--------------- ---------------
Cash and cash equivalents at the end of the year (3,031) 2,527
========= =========
Represented by:
Cash at bank and derivative clearing houses 1,743 2,527
Overdraft at bank and derivative clearing houses (4,774) -
--------------- ---------------
Cash and cash equivalents at the end of the year (3,031) 2,527
========= =========
Dividends received during the year amounted to £12,488,000 (2023:
£15,263,000), deposit interest and other income receipts amounted to
£108,000 (2023: £178,000).
The notes in the Annual Report and Financial Statements form an integral part
of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024
1. ACCOUNTING POLICIES
(a) Basis of accounting
Schroder Asian Total Return Investment Company plc ("the Company") is
registered in England and Wales as a public company limited by shares. The
Company's registered office is 1 London Wall Place, London EC2Y 5AU.
The financial statements are prepared in accordance with the Companies Act
2006, United Kingdom Generally Accepted Accounting Practice (UK GAAP), in
particular in accordance with Financial Reporting Standard (FRS) 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland",
and with the Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" (the "SORP") issued by
The Association of Investment Companies in July 2022. All of the Company's
operations are of a continuing nature.
The financial statements have been prepared on a going concern basis under the
historical cost convention, as modified by the revaluation of investments and
derivative financial instruments held at fair value through profit or loss.
The Directors believe that the Company has adequate resources to continue
operating for the period to 31 March 2026, which is at least 12 months from
the date of approval of these financial statements. In forming this opinion,
the Directors have taken into consideration: the controls and monitoring
processes in place; the Company's low level of debt and other payables; the
low level of operating expenses, comprising largely variable costs which would
reduce pro rata in the event of a market downturn; and that the Company's
assets comprise cash and readily realisable securities quoted in active
markets. In forming this opinion, the Directors have also considered any
potential impact of climate change on the viability of the Company. Further
details of Directors' considerations regarding any potential impact of climate
change are given in the Chair's Statement, Investment Managers' Review, Going
Concern Statement, Viability Statement and under the Risk Report heading in
the Annual Report and Financial Statements.
In preparing these financial statements the Directors have also considered the
impact of climate change on the value of the listed investments that the
Company holds. As the portfolio consists of listed equities, which are valued
using quoted bid prices for investments in an active market, then fair value
reflects market participants view of climate change risk.
The financial statements are presented in sterling and amounts have been
rounded to the nearest thousand.
The accounting policies applied to these financial statements are consistent
with those applied in the financial statements for the year ended 31 December
2023.
No significant judgements, estimates or assumptions have been required in the
preparation of the financial statements for the current or prior financial
year.
(b) Valuation of investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth.
This portfolio of financial assets and derivative financial instruments is
managed, and its performance evaluated, on a fair value basis, in accordance
with a documented investment strategy and information is provided internally
on that basis to the Company's Board of Directors. Accordingly, upon initial
recognition the investments are classified by the Company as "held at fair
value through profit or loss". Investments are included initially at
transaction price, excluding expenses incidental to purchase, which are
written off to capital at the time of acquisition. Subsequently, investments
are valued at fair value, which are quoted bid prices at the close of each
market on the accounting date, for investments traded in active markets.
The contracts for difference ("CFD") held in the portfolio are valued based on
the price of the underlying security or index which they are purchased to
reflect. The fair value of the CFDs is the difference between the strike price
and the underlying shares in the contract.
All purchases and sales are accounted for on a trade date basis.
(c) Accounting for reserves
Gains and losses on sales of investments are included in the Income Statement
and in capital reserves within "gains and losses on sales of investments".
Increases and decreases in the valuation of investments held at the year end
are included in the Income Statement and in capital reserves within "holding
gains and losses on investments".
Gains and losses on sales of CFDs and increases and decreases in the valuation
of CFDs are included "in the statement of comprehensive income and in capital
reserves within "net gains on derivative contracts."
Foreign exchange gains and losses on cash and deposit balances and unrealised
exchange gains and losses on foreign currency loans are included in the Income
Statement and in capital reserves.
The cost of repurchasing the Company's own shares for cancellation or to hold
in treasury, including the related stamp duty and transactions costs is
charged to a distributable capital reserve.
(d) Income
Dividends receivable are included in revenue on an ex-dividend basis except
where, in the opinion of the Board, the dividend is capital in nature, in
which case it is included in capital.
Dividends from overseas companies are included gross of any withholding tax.
Where the Company has elected to receive dividends in the form of additional
shares rather than in cash, the amount of the cash dividend foregone is
recognised in revenue. Any excess in the value of the shares received over the
amount of the cash dividend is recognised in capital.
Deposit interest outstanding at the year end is calculated and accrued on a
time apportionment basis using market rates of interest.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are allocated
wholly to the revenue column of the Income Statement with the following
exceptions:
· The management fee is allocated 25% to revenue and 75% to
capital in line with the Board's expected long-term split of revenue and
capital return from the Company's investment portfolio.
· Any performance fee is allocated 100% to capital.
· Expenses incidental to the purchase or sale of an investment
are charged to capital. These expenses are commonly referred to as transaction
costs and mainly comprise brokerage commission. Details of transaction costs
are given in note 10 in the Annual Report and Financial Statements.
(f) Finance costs
Finance costs, including collateral and finance costs paid on CFDs, any
premiums payable on settlement or redemption and direct issue costs, are
accounted for on an accruals basis using the effective interest method in
accordance with FRS 102.
Finance costs are allocated 25% to revenue and 75% to capital in line with the
Board's expected long-term split of revenue and capital return from the
Company's investment portfolio.
(g) Other financial instruments
Cash and cash equivalents may comprise cash, amounts held at derivative
clearing houses and demand deposits which are readily convertible to a known
amount of cash and are subject to insignificant risk of changes in value.
Other debtors and creditors do not carry any interest, are short-term in
nature and are accordingly stated at nominal value, with debtors reduced by
appropriate allowances for estimated irrecoverable amounts.
Bank loans are classified as financial liabilities at amortised cost. They are
initially measured at the proceeds received, net of direct issue costs, and
subsequently measured at amortised cost using the effective interest method.
Forward foreign currency contracts are held at fair value through profit or
loss based on the gain or loss if the contracts had been closed out at the
accounting date, at prevailing market rates.
(h) Taxation
The tax charge for the year includes a provision for all amounts expected to
be received or paid.
Deferred tax is provided on all timing differences that have originated but
not reversed by the balance sheet date.
Deferred tax liabilities are recognised for all taxable timing differences but
deferred tax assets are only recognised to the extent that it is probable that
taxable profits will be available against which those timing differences can
be utilised.
Deferred tax is measured at the tax rate which is expected to apply in the
periods in which the timing differences are expected to reverse, based on tax
rates that have been enacted or substantively enacted at the balance sheet
date and is measured on an undiscounted basis.
(i) Value added tax (VAT)
Expenses are disclosed inclusive of any related irrecoverable VAT.
(j) Foreign currency
In accordance with FRS 102, the Company is required to determine a functional
currency, being the currency in which the Company predominantly operates. The
Board, having regard to the currency of the Company's share capital and the
predominant currency in which its shareholders operate, has determined that
sterling is the functional currency and the currency in which the financial
statements are presented.
Transactions denominated in foreign currencies are converted at actual
exchange rates as at the date of the transaction. Monetary assets, liabilities
and equity investments, denominated in foreign currencies at the year end, are
translated at the rates of exchange prevailing at the year end.
(k) Dividends payable
In accordance with FRS 102, the final dividend is included in the financial
statements in the year in which it is approved by shareholders.
(l) Repurchases of shares into treasury and subsequent reissues
The cost of repurchasing the Company's shares into treasury, including the
related stamp duty and transaction costs is dealt with in the Statement of
Changes in Equity and is charged to capital reserves. Share repurchase
transactions are accounted for on a trade date basis.
The sales proceeds of treasury shares reissued are treated as a realised
profit up to the amount of the purchase price of those shares and is
transferred to capital reserves. The excess of the sales proceeds over the
purchase price is transferred to "share premium".
2. GAINS ON INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
2024 2023
£'000
£'000
Gains on sales of investments based on historic cost 19,679 22,776
Amounts recognised in investment holding gains and losses in the previous year (22,801) (21,733)
in respect of investments sold in the year
--------------- ---------------
(Losses)/gains on sales of investments based on the carrying value at the (3,122) 1,043
previous balance sheet date
Unrealised gains recognised in respect of investments continuing to be held 56,301 27,221
--------------- ---------------
Gains on investments held at fair value through profit or loss 53,179 28,264
========= =========
3. INCOME
2024 2023
£'000
£'000
Income from investments
Overseas dividends 11,922 12,934
Overseas special dividends 359 601
Stock dividend - 33
--------------- ---------------
12,281 13,568
========= =========
Other interest receivable and similar income
Deposit interest 27 180
Other income 79 -
--------------- ---------------
106 180
--------------- ---------------
12,387 13,748
========= =========
Capital
Special dividend allocated to capital 128 1,639
========= =========
4. MANAGEMENT AND PERFORMANCE FEES
2024 2024 2024 2023 2023 2023
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Management fee 794 2,382 3,176 763 2,288 3,051
Performance fee - 2,767 2,767 - - -
--------------- --------------- --------------- --------------- --------------- ---------------
794 5,149 5,943 763 2,288 3,051
========= ========= ========= ========= ========= =========
The bases for calculating the investment management and performance fees are
set out in the Directors' Report in the Annual Report and Financial Statements
and details of all amounts payable to the Manager are given in note 19 in the
Annual Report and Financial Statements.
5. ADMINISTRATIVE EXPENSES
2024 2023
£'000
£'000
Custody fees 243 208
Administration expenses 491 363
Directors' fees(1) 165 164
Secretarial fee 75 75
Auditor's remuneration(2) 51 52
--------------- ---------------
1,025 862
========= =========
1 Details of all amounts payable to Directors are given in the
Directors' Remuneration Report in the Annual Report and Financial Statements.
2 No amounts are payable to the auditor for non-audit services.
6. FINANCE COSTS
2024 2024 2024 2023 2023 2023
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Interest on bank loans and overdrafts 494 1,482 1,976 695 2,084 2,779
========= ========= ========= ========= ========= =========
7. TAXATION
(a) Analysis of tax charge for the year
2024 2024 2024 2023 2023 2023
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Irrecoverable overseas tax 910 - 910 931 - 931
Overseas capital gains tax - 961 961 - 505 505
--------------- --------------- --------------- --------------- --------------- ---------------
Taxation for the year 910 961 1,871 931 505 1,436
========= ========= ========= ========= ========= =========
The Company has no corporation tax liability for the year (2023: nil).
The overseas capital gains tax relates to the deferred tax liability on
unrealised gains on Indian investments held at the year end.
(b) Factors affecting tax charge for the year
The standard rate of corporation tax in the UK is 25%, effective from 1 April
2023. Accordingly, the Company's profits for this accounting year would be
taxed at a rate of 25% (2023: 23.5%). However the corporation tax charge for
the year is nil (2023: nil), as dividends and capital gains are not subject to
corporation tax. The tax charge comprises irrecoverable withholding tax
deducted at source from dividends receivable and overseas capital gains tax.
The table below shows how taxable income is reduced to zero by reconciling the
expected corporation tax due on the net return before tax based on current tax
rates, to the actual tax charge for the year.
2024 2024 2024 2023 2023 2023
Revenue
Capital
Total
Revenue
Capital
Total
£'000
£'000
£'000
£'000
£'000
£'000
Net return on ordinary activities before taxation 10,074 47,418 57,492 11,428 25,386 36,814
Net return on ordinary activities before taxation multiplied by the Company's 2,519 11,855 14,374 2,686 5,966 8,652
applicable rate of corporation tax for the year of 25% (2023: 23.5%)
Effects of:
Capital gains on investments - (13,480) (13,480) - (6,608) (6,608)
Income not subject to taxation (3,049) (32) (3,081) (3,161) (385) (3,546)
Overseas capital gains tax - 961 961 - 505 505
Irrecoverable overseas tax 910 - 910 931 - 931
Unrelieved expenses 530 1,657 2,187 475 1,027 1,502
--------------- --------------- --------------- --------------- --------------- ---------------
Tax on ordinary activities 910 961 1,871 931 505 1,436
========= ========= ========= ========= ========= =========
(c) Deferred taxation
The Company has an unrecognised deferred tax asset of £19,925,000 (2023:
£17,738,000) based on a prospective corporation tax rate of 25% (2023: 25%).
This deferred tax asset has arisen due to the cumulative excess of deductible
expenses over taxable income. Given the composition of the Company's
portfolio, it is not likely that this asset will be utilised in the
foreseeable future and therefore no asset has been recognised in the financial
statements.
Given the Company's intention to meet the conditions required to retain its
status as an investment trust company, no provision has been made for UK
capital gains tax on any capital gains or losses arising on the revaluation or
disposal of investments. Please refer to note 13 for details of the deferred
taxation in relation to overseas capital gains tax.
8. RETURN PER SHARE
2024 2023
£'000
£'000
Revenue return 9,164 10,497
Capital return 46,457 24,881
--------------- ---------------
Total return 55,621 35,378
========= =========
Weighted average number of shares in issue during the year 95,376,796 102,272,753
Revenue return per share (pence) 9.61 10.26
Capital return per share (pence) 48.71 24.33
--------------- ---------------
Total return per share (pence) 58.32 34.59
========= =========
9. DIVIDENDS
(a) Dividends paid and declared
2024 2023
£'000
£'000
2023 final dividend of 11.5p (2022: 11.0p), paid out of revenue profits(1) 11,036 11,432
========= =========
2024 2023
£'000
£'000
2024 final dividend proposed of 11.5p (2023: 11.5p), to be paid out of revenue 10,755 11,182
profits
========= =========
1 The 2023 final dividend amounted to £11,182,000. However the amount
actually paid was £11,036,000, as shares were repurchased into treasury after
the accounting date but prior to the dividend record date.
(b) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010
("Section 1158")
The requirements of Section 1158 are considered on the basis of dividends
declared in respect of the financial year as shown below. The revenue
available for distribution by way of dividend for the year is £9,164,000
(2023: £10,497,000).
2024 2023
£'000
£'000
Final dividend of 11.5p (2023: 11.5p) 10,755 11,182
========= =========
10. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
(a) Movement in investments
2024 2023
£'000
£'000
Opening book cost 370,259 391,040
Opening investment holding gains 113,753 108,265
--------------- ---------------
Opening fair value 484,012 499,305
========= =========
Analysis of transactions made during the year
Purchases at cost 106,370 115,788
Sales proceeds (136,629) (159,345)
Gains on investments held at fair value 53,179 28,264
--------------- ---------------
Closing fair value 506,932 484,012
========= =========
Closing book cost 359,679 370,259
Closing investment holding gains 147,253 113,753
--------------- ---------------
Closing fair value 506,932 484,012
========= =========
Sales proceeds amounting to £136,629,000 (2023: £159,345,000) were
receivable from disposals of investments in the year. The book cost of these
investments when they were purchased was £116,950,000 (2023: £136,568,000).
These investments have been revalued over time and until they were sold any
unrealised gains and losses were included in the fair value of the
investments.
(b) Transaction costs
The following transaction costs, mainly comprising brokerage commissions, were
incurred during the year:
2024 2023
£'000
£'000
On acquisitions 123 170
On disposals 248 264
--------------- ---------------
371 434
========= =========
(c) Contracts for Difference
CFDs held at 31 December: 2024 2024 2023 2023
Asset
Fair
Asset
Fair
exposure
value
exposure
value
£'000
£'000
£'000
£'000
CFD assets 4,013 30 - -
CFD liabilities 11,294 (254) - -
--------------- --------------- --------------- ---------------
15,307 (224) - -
========= ========= ========= =========
The CFDs are held as a cost effective and flexible form of borrowing. The
total market exposure on the CFDs held at the year end is £15,307,000 (2023:
£nil) and the notional value attached to these CFDs is £15,531,000 (2023:
£nil). This resulted in an unrealised loss of £224,000 (2023: £nil).
11. CURRENT ASSETS
Debtors 2024 2023
£'000
£'000
Dividends and interest receivable 275 346
Securities sold awaiting settlement - 816
Taxation recoverable 2 8
Other debtors 26 24
--------------- ---------------
303 1,194
========= =========
The Directors consider that the carrying amount of debtors approximates to
their fair value.
Cash and cash equivalents
2024 2023
£'000
£'000
Cash at bank 627 2,502
Amounts held at derivative clearing houses and brokers 1,116 25
--------------- ---------------
1,743 2,527
========= =========
The carrying amount of cash represents its fair value. No cash equivalents
were held at the year end (2023: same).
Derivative financial instruments held at fair value through profit or loss 2024 2023
£'000
£'000
CFD assets 30 -
Forward currency contracts 458 -
Index put options 505 178
--------------- ---------------
993 178
========= =========
Details of the CFDs, forward currency contracts and index put options held at
the year end are given in the Annual Report and Financial Statements.
12. CURRENT LIABILITIES
Creditors: amounts falling due within one year 2024 2023
£'000
£'000
Bank loan 22,357 37,339
Bank overdraft 4,534 -
Amounts held at derivative clearing houses and brokers 240 -
Derivative financial instruments held at fair value through profit or loss - 254 -
CFD liabilities
Securities purchases awaiting settlement - 122
Amounts payable on settlement of derivatives 743 -
Repurchase of ordinary shares into treasury awaiting settlement 255 -
Other creditors and accruals 3,961 1,380
--------------- ---------------
32,344 38,841
========= =========
The Directors consider that the carrying amount of creditors falling due
within one year approximates to their fair value.
The bank loan comprises USD28 million (2023: USD47.6 million) drawn down on
the Company's £75 million (2023: £75 million), 364 day multicurrency credit
facility with The Bank of Nova Scotia, London Branch, expiring July 2025. The
facility was secured from amendment and restatement on 18 July 2024 and is
subject to covenants and restrictions which are customary for a facility of
this nature, all of which have been complied with during the year.
Further details of this facility are given in note 22(a)(ii) in the Annual
Report and Financial Statements.
13. DEFERRED TAXATION
Deferred taxation comprises the deferred tax liability on the unrealised gains
on Indian investments. Indian capital gains tax crystallises on disposal of
the underlying asset and is charged based on a 12 month holding period of the
asset. The current rate of tax is 12.5% (plus applicable surcharge and cess)
for holdings over 12 months and 20% (plus applicable surcharge and cess) for
holdings under 12 months. At the end of the prior year, the rate of tax was
10% (plus applicable surcharge and cess) for holdings over 12 months or 15%
(plus applicable surcharge and cess) for holdings under 12 months.
The provision for deferred taxation at the year end was £1,551,000 (2023:
£586,000).
14. CALLED-UP SHARE CAPITAL
2024 2023
£'000
£'000
Ordinary shares allotted, called up and fully paid:
Opening balance of 97,234,120 (2023: 105,263,203) shares 4,862 5,263
Repurchase of 3,709,666 (2023: 8,029,083) shares into treasury (186) (401)
Subtotal of 93,524,454 (2023: 97,234,120) shares 4,676 4,862
15,590,197 (2023: 11,880,531) shares held in treasury 780 594
--------------- ---------------
Closing balance(1) 5,456 5,456
========= =========
1 Represents 109,114,651 (2023: 109,114,651) shares of 5p each,
including 15,590,197 (2023: 11,880,531) held in treasury.
During the year, the Company repurchased 3,709,666 of its own shares, nominal
value £186,000, to hold in treasury, representing 3.8% of the shares
outstanding at the beginning of the year. The total consideration paid for
these shares amounted to £16,993,000. The reason for these purchases was to
seek to manage the volatility of the share price discount to NAV per share.
15. RESERVES
Capital reserves
Year ended 31 December 2024 Share Capital Special Gains and Investment Revenue
premium(1) (
redemption
reserve(3) (
losses on
holding
reserve(6) (
) £'000
reserve(2) ( ) £'000
sales of
gains and ) £'000
) £'000
investments(4) (
losses(5) (
) £'000 ) £'000
At 31 December 2023 114,656 11,646 29,182 151,707 111,076 24,761
Losses on sales of investments based on the carrying value at the previous - - - (3,122) - -
balance sheet date
Unrealised gains recognised in respect of investments continuing to be held - - - - 56,301 -
Transfer on disposal of investments - - - 22,801 (22,801) -
Gains on derivatives - - - 497 841 -
Realised exchange losses on cash and short-term deposits - - - (94) - -
Exchange (losses)/gains on foreign currency loans - - - (806) 304 -
Special dividend allocated to capital - - - 128 - -
Repurchase of shares into treasury - - - (16,993) - -
Performance fee allocated to capital - - - (2,767) - -
Management fee and finance costs allocated to capital - - - (3,864) - -
Overseas capital gains tax - - - - (961) -
Dividend paid - - - - - (11,036)
Retained revenue for the year - - - - - 9,164
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2024 114,656 11,646 29,182 147,487 144,760 22,889
========= ========= ========= ========= ========= =========
Capital reserves
Year ended 31 December 2023 Share Capital Special Gains and Investment Revenue
premium(1) (
redemption
reserve(3) (
losses on
holding
reserve(6) (
) £'000
reserve(2) ( ) £'000
sales of
gains and ) £'000
) £'000
investments(4) (
losses(5) (
) £'000 ) £'000
At 31 December 2022 114,656 11,646 29,182 167,204 103,634 25,696
Losses on sales of investments based on the carrying value at the previous - - - 1,043 - -
balance sheet date
Unrealised gains recognised in respect of investments continuing to be held - - - - 27,221 -
Transfer on disposal of investments - - - 21,733 (21,733) -
Losses on derivatives - - - (1,627) (364) -
Realised exchange losses on cash and short-term deposits - - - (433) - -
Exchange (losses)/gains on foreign currency loans - - - (632) 2,911 -
Special dividend allocated to capital - - - 1,639 - -
Repurchase of shares into treasury - - - (32,936) - -
Management fee and finance costs allocated to capital - - - (4,372) - -
Overseas capital gains tax - - - 88 (593) -
Dividend paid - - - - - (11,432)
Retained revenue for the year - - - - - 10,497
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 December 2023 114,656 11,646 29,182 151,707 111,076 24,761
========= ========= ========= ========= ========= =========
1 The share premium is a non distributable reserve and represents the
amount by which the fair value of the consideration received from shares
issued exceeds the nominal value of shares issued.
2 The capital redemption reserve represents the accumulated nominal
value of shares repurchased for cancellation. This reserve is not
distributable.
3 This is a distributable capital reserve arising from the
cancellation of the share premium, and may be distributed as dividends or used
to repurchase the Company's own shares.
4 This is a realised (distributable) capital reserve and a positive
balance may be used to repurchase the Company's own shares or distributed as
dividends.
5 This reserve may include some holding gains on liquid investments
(which may be deemed to be realised) and other amounts which are unrealised.
An analysis has not been made between those amounts that are realised (and may
be distributed as dividends or used to repurchase the Company's own shares)
and those that are unrealised.
6 A positive balance on the revenue reserve may be distributed as
dividends or used to repurchase the Company's own shares.
16. NET ASSET VALUE PER SHARE
2024 2023
£'000
£'000
Total equity shareholders' funds (£'000) 476,076 448,484
Shares in issue at the year end 93,524,454 97,234,120
--------------- ---------------
Net asset value per share (pence) 509.04 461.24
========= =========
17. RECONCILIATION OF TOTAL RETURN ON ORDINARY ACTIVITIES BEFORE FINANCE COSTS
AND TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES
2024 2023
£'000
£'000
Total return on ordinary activities before finance costs and taxation 59,468 39,593
Less capital returns on ordinary activities before finance costs and taxation (48,900) (27,470)
Decrease in prepayments and accrued income 82 146
Decrease in other debtors 4 1
Increase in other creditors 2,694 258
Special dividends allocated to capital 128 1,639
Less stock and accumulation dividends - (93)
Management fee allocated to capital (2,382) (2,288)
Performance fee allocated to capital (2,767) -
Overseas withholding tax deducted at source (918) (858)
--------------- ---------------
Net cash inflow from operating activities 7,409 10,928
========= =========
18. ANALYSIS OF CHANGES IN NET DEBT
2023 Cash flow Exchange 2024
£'000
£'000
movements
£'000
£'000
Cash and cash equivalents 2,527 (692) (92) (1,743)
Bank loan (37,339) 15,484 (502) (22,357)
Overdraft at bank and derivative clearing houses - (4,772) (2) (4,774)
--------------- --------------- --------------- ---------------
Net debt (34,812) 10,020 (596) (25,388)
========= ========= ========= =========
19. TRANSACTIONS WITH THE MANAGER
Under the terms of the Alternative Investment Fund Manager Agreement, the
Manager is entitled to receive management, secretarial and performance fees.
Details of the basis of these calculations are given in the Directors' Report
in the Annual Report and Financial Statements. If the Company invests in funds
managed or advised by the Manager, any fees earned by the Manager are rebated
to the Company. The management fee payable in respect of the year ended 31
December 2024 amounted to £3,176,000 (2023: £3,051,000) of which £799,000
(2023: £775,000) was outstanding at the year end.
The performance fee payable in respect of the year amounted to £2,767,000,
the full amount of which was outstanding at the year end (2023: No performance
fee was payable and outstanding at the year end).
The secretarial fee payable for the year amounted to £75,000 (2023: £75,000)
of which £19,000 (2023: £19,000) was outstanding at the year end.
No Director of the Company served as a Director of any company within the
Schroder Group at any time during the year.
20. RELATED PARTY TRANSACTIONS
Details of the remuneration payable to Directors are given in the Directors'
Remuneration Report in the Annual Report and Financial Statements and details
of Directors' shareholdings are given in the Directors' Remuneration Report in
the Annual Report and Financial Statements. Details of transactions with the
Manager are given in note 19 above. There have been no other transactions with
related parties during the year (2023: nil).
21. DISCLOSURES REGARDING FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The Company's financial instruments within the scope of FRS 102 that are held
at fair value include its investment portfolio and derivative financial
instruments.
FRS 102 requires financial instruments to be categorised into a hierarchy
consisting of the three levels below.
Level 1 - valued using unadjusted quoted prices in active markets for
identical assets.
Level 2 - valued using observable inputs other than quoted prices included
within Level 1.
Level 3 - valued using inputs that are unobservable.
Details of the Company's policy for valuing investments and derivative
instruments are given in note 1(b) in the Annual Report and Financial
Statements.
The following table sets out the fair value measurements using the FRS 102
hierarchy at 31 December:
2024
Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Financial instruments held at fair value through profit or loss
Equity investments 506,932 - - 506,932
Derivative financial instruments - index put options 505 - - 505
Derivative financial instruments - forward currency contracts - 458 - 458
Derivative financial instruments - contracts for difference - CFD assets - 30 - 30
Derivative financial instruments - contracts for difference - CFD liabilities - (254) - (254)
--------------- --------------- --------------- ---------------
Total 507,437 234 - 507,671
========= ========= ========= =========
2023
Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Financial instruments held at fair value through profit or loss
Equity investments 484,012 - - 484,012
Derivative financial instruments - index put options 178 - - 178
--------------- --------------- --------------- ---------------
Total 484,190 - - 484,190
========= ========= ========= =========
22. FINANCIAL INSTRUMENTS' EXPOSURE TO RISK AND RISK MANAGEMENT POLICIES
In pursuing its objective, the Company is exposed to a variety of financial
risks including market risk (comprising currency risk, interest rate risk and
market price risk), liquidity risk and credit risk. The Directors' policy for
managing these risks is set out below.
The process for managing risk is unchanged from the previous year. The
Company's financial instruments may comprise:
· investments in equities and equity related securities which
are held in accordance with the Company's investment objective;
· short-term debtors, creditors and cash arising directly from
its operations;
· a multicurrency overdraft facility with HSBC, the purpose of
which is to assist in financing the Company's operations;
· a multicurrency credit facility with The Bank of Nova Scotia,
the purpose of which is to assist in financing the Company's operations; and
· index put options, which are used to protect the capital
value of the portfolio.
· forward currency contracts, the purpose of which is to manage
the currency risk arising from the Company's investment activities.
· contract for differences, which are used for the purpose to
gain further exposure to Asian markets.
(a) Market risk
Market risk comprises three elements - foreign currency risk, interest rate
risk and market price risk. Information to enable an evaluation of the nature
and extent of these three elements of market risk is given in parts (i) to
(iii) of this note, together with sensitivity analyses where appropriate.
(i) Foreign currency risk
The majority of the Company's assets, liabilities and income are denominated
in currencies other than sterling, which is the Company's functional currency
and the presentational currency of the financial statements. As a result,
movements in exchange rates will affect the sterling value of those items.
Management of foreign currency risk
The Manager monitors the Company's exposure to foreign currencies on a daily
basis and reports to the Board. The Board has authorised the use of derivative
instruments to hedge currency exposure as part of the investment strategy to
protect the capital value of the portfolio, or for efficient portfolio
management.
Foreign currency exposure
The fair value of the Company's monetary items that have foreign currency
exposure at 31 December are shown below. The Company's investments, CFDs and
index put options (which are not monetary items) have been included separately
in the analysis so as to show the overall level of exposure.
2024 South Vietnam Other Total
Hong Kong
US
Taiwan
Korean
Indian
Singapore
Chinese
Australian
Dong
£'000
£'000
Dollars
Dollars
Dollars
Won
Rupees
Dollars
Yuan
Dollars
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Current assets 11 1,495 207 69 2 1 - 8 224 1 2,018
Derivative instruments held at fair value through profit or loss - forward
currency contracts
-
22,216
-
-
-
-
(21,758)
-
-
-
458
Current liabilities - (23,107) - - - - - - - - (23,107)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Foreign currency exposure on net monetary items 11 604 207 69 2 1 (21,758) 8 224 1 (20,631)
========= ========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Investments held at fair value through profit or loss(1) 96,283 15,860 122,237 16,603 53,292 38,670 8,136 79,614 13,376 62,861 506,932
Derivative instruments held at fair value through profit or loss - index put
options and CFDs(1)
-
322
-
-
-
-
-
-
-
322
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total net foreign currency exposure 96,294 16,786 122,444 16,672 53,294 38,671 (13,622) 79,622 13,600 62,862 486,623
========= ========= ========= ========= ========= ========= ========= ========= ========= ========= =========
2023 South
Hong Kong
US
Taiwan
Korean
Indian
Singapore
Chinese
Australian
Vietnam
Dollars
Dollars
Dollars
Won
Rupees
Dollars
Yuan
Dollars
Dong
Other
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Current assets 11 1,256 302 137 86 1 - 9 41 123 1,966
Current liabilities - (38,327) - - - - - - - (122) (38,449)
Non current liabilities - - - - (586) - - - - - (586)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Foreign currency exposure on net monetary items 11 (37,071) 302 137 (500) 1 - 9 41 1 (37,069)
========= ========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Investments held at fair value through profit or loss(1) 76,860 23,415 112,071 35,009 46,379 38,300 - 80,256 6,589 55,733 474,612
Derivative instruments held at fair value through profit or loss - index put
options
-
-
178
-
-
-
-
-
-
-
178
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total net foreign currency exposure 76,871 (13,656) 112,551 35,146 45,879 38,301 - 80,265 6,630 55,734 437,721
========= ========= ========= ========= ========= ========= ========= ========= ========= ========= =========
1 Excluding any stocks or CFDs priced in sterling.
The above year end amounts are broadly representative of the exposure to
foreign currency risk during the current and prior year.
Foreign currency sensitivity
The following tables illustrate the sensitivity of net profit for the year and
net assets with regard to the Company's monetary financial assets and
financial liabilities and exchange rates. The sensitivity analysis is based on
the Company's monetary currency financial instruments held at each balance
sheet date and assumes a 10% (2023: 10%) appreciation or depreciation in
sterling against the currencies to which the Company is exposed, which is
considered to be a reasonable illustration based on the volatility of exchange
rates during the year.
If sterling had weakened by 10% this would have had the following effect:
Income Statement - return after taxation 2024 2023
£'000
£'000
Revenue return 1,090 1,212
Capital return (2,199) (3,802)
--------------- ---------------
Total return after taxation (1,109) (2,590)
--------------- ---------------
Net assets (1,109) (2,590)
========= =========
Conversely if sterling had strengthened by 10% this would have had the
following effect:
Income Statement - return after taxation 2024 2023
£'000
£'000
Revenue return (1,090) (1,212)
Capital return 2,199 3,802
--------------- ---------------
Total return after taxation 1,109 2,590
--------------- ---------------
Net assets 1,109 2,590
========= =========
In the opinion of the Directors, the above sensitivity analysis with respect
to monetary financial assets and liabilities is broadly representative of the
whole of the current and comparative year. The sensitivity with regard to the
Company's investments, and any derivative instruments held, to changes in
foreign currency exchange rates is subsumed into market price risk sensitivity
below.
(ii) Interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits and the interest payable on variable rate borrowings when rates are
re-set.
Management of interest rate risk
Liquidity and borrowings are managed with the aim of increasing returns to
shareholders. The Company may use gearing to enhance performance (including
the use of CFDs). The Board would not expect net gearing to exceed 30% where
gearing is defined as borrowings including CFDs used for investment purposes,
less cash, expressed as a percentage of net assets.
Interest rate exposure
The possible effects on cash flows that could arise as a result of changes in
interest rates are taken into account when the Company draws on its overdraft
facility or its credit facility.
The exposure of financial assets and financial liabilities to floating
interest rates, giving cash flow interest rate risk when rates are re-set, is
shown below:
Exposure to floating interest rates 2024 2023
£'000
£'000
Cash and cash equivalents 1,743 2,527
Bank overdraft (4,534) -
Amounts held at derivative clearing houses and brokers (240) -
Creditors: amounts falling due within one year:
Bank loan (22,357) (37,339)
--------------- ---------------
Total exposure (25,388) (34,812)
========= =========
Interest receivable on cash balances, or paid on overdrafts, is at a margin
below or above the applicable risk free reference rates, respectively (2023:
same).
During the year, the Company amended and restated its £75 million
multicurrency credit facility with The Bank of Nova Scotia, London Branch, to
17 July 2025.
Amounts are normally drawn down on the facility for one month periods.
Interest is payable at a rate based on the secured overnight financing rate,
plus a margin, plus the credit adjustment spread. At 31 December 2024, the
Company had drawn down USD28million (£22.4million) at an interest rate of
5.36%, repayable on 31 January 2025.
At 31 December 2023, the Company had drawn down USD47.6 million
(£37.3million) at an interest rate of 6.61%.
The above year end amounts are not representative of the exposure to interest
rates during the year as the level of cash balances and drawings on the credit
facility have fluctuated. The maximum and minimum net debt balances during the
year are as follows:
2024 2023
£'000
£'000
Maximum debit interest rate exposure during the year - net debt (40,790) (47,462)
Minimum debit interest rate exposure during the year - net debt (21,641) (22,561)
========= =========
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 1.5% (2023: 1.5%) increase or decrease in
interest rates in regards to the Company's monetary financial assets and
financial liabilities. This level of change is considered to be a reasonable
illustration based on observation of current market conditions. The
sensitivity analysis is based on the Company's monetary financial instruments
held at the balance sheet date with all other variables held constant.
Income Statement - return after taxation 2024 2024 2023 2023
1.5%
1.5%
1.5%
1.5%
increase
decrease
increase
decrease
in rate
in rate
in rate
in rate
£'000
£'000
£'000
£'000
Revenue return (76) 76 (102) 102
Capital return (305) 305 (420) 420
--------------- --------------- --------------- ---------------
Total return after taxation (381) 381 (522) 522
========= ========= ========= =========
Net assets (381) 381 (522) 522
========= ========= ========= =========
In the opinion of the Directors, this sensitivity analysis may not be
representative of the Company's future exposure to interest rate changes due
to fluctuations in the level of cash balances and drawings on the credit
facility.
(iii) Market price risk
Market price risk includes changes in market prices, other than those arising
from interest rate risk, which may affect the value of equity investments.
Management of market price risk
The Board meets on at least four occasions each year to consider the asset
allocation of the portfolio and the risk associated with particular countries
and industry sectors. The Board has authorised the Manager to enter derivative
transactions as a means of seeking capital preservation, subject to limits on
the percentage of the portfolio hedged and the duration of derivatives used.
Market price risk exposure
The Company's total exposure to changes in market prices at 31 December
comprises the following investments:
2024 2023
£'000
£'000
Investments held at fair value through profit or loss 506,932 484,012
Derivative financial instruments held at fair value through profit or loss:
Index put options 505 178
CFD (224) -
--------------- ---------------
507,213 484,190
========= =========
The above data is broadly representative of the exposure to market price risk
during the year.
Concentration of exposure to market price risk
An analysis of the Company's investments is given in the Annual Report and
Financial Statements. This shows that the portfolio mainly comprises
investments quoted on Asian stock markets, index put options and CFDs.
Accordingly there is a concentration of exposure to that region.
However it should be noted that an investment may not be entirely exposed to
the economic conditions in its country of classification.
Market price risk sensitivity
The following table illustrates the sensitivity of net return after taxation
for the year and net assets to an increase or decrease of 10% (2023: 10%) in
the fair values of the Company's investments. This level of change is
considered to be a reasonable illustration based on observation of current
market conditions. The sensitivity analysis is based on the Company's
investments, adjusting for the hedging effect of the index put options and
including the resulting effect on the management fee, but with all other
variables held constant. The sensitivity analysis also takes account of the
"beta coefficient" of the portfolio. This is a measure of the volatility of
the portfolio compared with the systemic risk of the entire market. As a
result, the percentages in the table below represent a 8.67% (2023: 8.05%)
increase in fair value and a 8.67% (2023: 7.87%) decrease in fair value.
Income Statement - return after taxation 2024 2024 2023 2023
10%
10%
10%
10%
increase
decrease
increase
decrease
in fair value
in fair value
in fair value
in fair value
£'000
£'000
£'000
£'000
Revenue return (71) 71 (63) 62
Capital return 43,719 (43,719) 38,774 (37,906)
--------------- --------------- --------------- ---------------
43,648 (43,648) 38,711 (37,844)
========= ========= ========= =========
Percentage change in net asset value 9.2 (9.2) 8.6 (8.4)
========= ========= ========= =========
(b) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or another financial asset.
Management of the risk
Liquidity risk is not significant as the Company's assets comprise mainly
readily realisable securities, which can be sold to meet funding requirements
if necessary. Short-term flexibility is achieved through the use of overdraft
and credit facilities.
Liquidity risk exposure
Contractual maturities of financial liabilities, based on the earliest date on
which payment can be required are as follows:
2024 2023
Three
Three
months
months
or less
or less
£'000
£'000
Creditors: amounts falling due within one year
Bank loan - including interest 22,459 37,546
Bank overdraft 4,534 -
Amounts held at derivative clearing houses and brokers 240 -
Derivative financial instruments held at fair value through profit or loss - 254 -
CFD liabilities
Securities purchased awaiting settlement - 122
Amounts payable on settlement of derivatives 743 -
Repurchase of ordinary shares into treasury awaiting settlement 255 -
Other creditors and accruals 3,961 1,208
--------------- ---------------
32,446 38,876
========= =========
(c) Credit risk
Credit risk is the risk that the failure of the counterparty to a transaction
to discharge its obligations under that transaction could result in loss to
the Company.
Management of credit risk
This risk is not significant and is managed as follows:
Portfolio dealing
The Company invests almost entirely in markets that operate a "Delivery Versus
Payment" settlement process which mitigates the risk of losing the principal
of a trade during settlement. This approach extends to various investment
instruments, while CFDs are settled through cash payments based on the
difference between the opening and closing prices, rather than physical
delivery of the underlying assets. The Manager continuously monitors dealing
activity to ensure best execution, which involves measuring various indicators
including the quality of trade settlement and incidence of failed trades.
Counterparties must be pre-approved by the Manager's credit committee.
In relation to CFDs, counterparty risk is limited to the profit on a contract,
not the notional value.
Exposure to the custodian
The custodian of the Company's assets is HSBC Bank plc which has long-term
credit ratings of AA- with Fitch and Aa3 with Moody's.
The Company's investments are held in accounts which are segregated from the
custodian's own trading assets. If the custodian were to become insolvent, the
Company's right of ownership of its investments is clear and they are
therefore protected. However the Company's cash balances are all deposited
with the custodian as banker and held on the custodian's balance sheet.
Accordingly, in accordance with usual banking practice, the Company will rank
as a general creditor to the custodian in respect of cash balances.
Credit risk exposure
The amounts shown in the balance sheet under debtors, derivative financial
instruments held at fair value through profit or loss and cash at bank and in
hand represent the maximum exposure to credit risk at the current and
comparative year ends. No debtors are past their due date and none have been
provided for. There has been no stock lending during the year, or prior year.
(d) Fair values of financial assets and financial liabilities
All financial assets and liabilities are either carried in the balance sheet
at fair value, or the balance sheet amount is a reasonable approximation of
fair value.
23. CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Company's capital is represented by its net assets and borrowings, which
are managed to achieve the Company's investment objective, as set out in the
Annual Report and Financial Statements.
The Company's capital management objectives are to ensure that it will
continue as a going concern and to maximise the capital return to shareholders
through an appropriate level of gearing. The Company has overdraft and credit
facilities in place which may be used to maximise the return to shareholders
through an appropriate level of gearing. The Company uses CFDs as a cost
effective and flexible form of borrowing.
The Board's policy is to limit the level of net gearing to 30%, where net
gearing is defined as borrowings including CFDs used for investment purposes,
less cash, expressed as a percentage of net assets.
2024 2023
£'000
£'000
Borrowings used for investment purposes, less cash (£,000)(1) 40,695 34,812
Net assets (£,000) 476,076 448,484
Net gearing (%) 8.5 7.8
========= =========
(1) Included within borrowings for 2024 is an amount of £15,307,000, being
the total market exposure on the CFDs held at the year end (2023: nil).
The Board, with the assistance of the Manager, monitors and reviews the broad
structure of the Company's capital on an ongoing basis. This review includes:
· the planned level of gearing, which takes into account the
Manager's views on the market;
· the need to buy back the Company's own shares for
cancellation or to hold in treasury, which takes into account the share price
discount;
· the opportunities for issues of new shares or to reissue
shares out of treasury; and
· the amount of dividend to be paid, in excess of that which is
required to be distributed.
Status of results announcement
2024 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Financial Statements for the year ended 31 December 2024 and do not
constitute the statutory accounts for that year. The Annual Report and
Financial Statements include the Report of the Independent Auditors which is
unqualified and does not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The Annual Report and Accounts will
be delivered to the Registrar of Companies in due course.
2023 Financial Information
The figures and financial information for 2023 are extracted from the
published Annual Report and Financial Statements for the year ended 31
December 2023 and do not constitute the statutory accounts for the year. The
Annual Report and Financial Statements have been delivered to the Registrar of
Companies and included the Report of the Independent Auditors which was
unqualified and did not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006.
Neither the contents of the Company's web pages nor the contents of any
website accessible from hyperlinks on the Company's web pages (or any other
website) is incorporated into, or forms part of, this announcement.
18 March 2025
For further information:
Kerry Higgins
Schroder Investment Management Limited
E-mail: AMCompanySecretary@Schroders.com
(mailto:AMCompanySecretary@Schroders.com)
Issued by Schroder Investment Management Limited. Registration No 1893220
England.
Authorised and regulated by the Financial Conduct Authority. For regular
updates by e-mail please register online at www.schroders.com
(https://url.uk.m.mimecastprotect.com/s/t7puCxn15T1LlkKtvh4FyxHrZ?domain=schroders.com/)
for our alerting service.
ENDS
A copy of the 2024 Annual Report will shortly be submitted to the FCA's
National Storage Mechanism and will be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The 2024 Annual Report will shortly be available on the Company's web pages at
www.schroders.co.uk/satric (http://www.schroders.co.uk/satric) where
up-to-date information on the Company, including daily NAV and share prices,
factsheets and portfolio in formation can also be found.
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