Schroder AsianTR Inv - Half-year Report
10/09/2024 07:00
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RNS Number : 4895D Schroder Asian Total Retn InvCo PLC 10 September 2024
Schroder Asian Total Return Investment Company plc
Half Year Report
Schroder Asian Total Return Investment Company plc (the "Company") hereby
submits its Half Year Report for the six months ended 30 June 2024 as required
by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule
4.2.
Key highlights
· The Company reports a strong period of performance over the six months to 30
June 2024, with NAV producing a total return of 10.1%, ahead of the Reference
Index total return of 9.5%.
· Technology holdings, especially those linked to artificial intelligence, were
the largest contributors to performance and benefitted the technology heavy
Taiwan market, where stocks rose strongly.
· The share price traded below NAV during the six-month period, leading the
Board to repurchase 1,783,206 shares for a total consideration of £ 7.8
million to assist in discount management and to reduce share price
volatility.
· The Portfolio Managers actively utilised gearing throughout the period, with
an average gearing of 6.3%, resulting in a net positive contribution to
returns.
The Half Year Report is also being published in hard copy format and an
electronic copy of that document will shortly be available to download from
the Company's web pages www.schroders.co.uk/satric
(http://www.schroders.co.uk/satric) .
The Company has submitted a copy of its Half Year Report to the National
Storage Mechanism and it will shortly be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Enquiries:
Schroder Investment Management Limited
Kirsty Preston (Press) 020 7658 2000
Kerry Higgins 020 7658 6000
Half year report for the six months ended 30 June 2024
PERFORMANCE SUMMARY
at 30 June 2024 (unaudited)
NAV per share total return* Share price total return* MSCI AC Asia ex-Japan Index (with net income reinvested), sterling adjusted
10.1% 7.5% 9.5%
(Year ended 31 December 2023: 8.8%) (Year ended 31 December 2023: 10.3%) (Year ended 31 December 2023: 1.3%)
Ongoing charges ratio* Gearing* Share price discount to NAV per share*
0.90% 6.5% 7.0%
(Year ended 31 December 2023: 0.87%) (As at 31 December 2023: 7.8%) (As at 31 December 2023: 4.6%)
Share price Revenue return per share Net assets
461.00p 5.41p £473.35m
(As at 31 December 2023: 440.00p) (Year ended 31 December 2023: 10.26p) (As at 31 December 2023: £448.48m)
Some of the financial measures are classified as Alternative Performance
Measures ("APMs"), as defined by the European Securities and Markets Authority
and are indicated with an asterisk (*). Definitions of these performance
measures, and other terms used in this report, are given on pages 22 and 23
together with supporting calculations where appropriate.
CHAIR'S STATEMENT
Performance
I am pleased to report another period of good performance over the six months
to 30 June 2024, with the Company's net asset value ("NAV") total return
outperforming the Reference Index (MSCI AC Asia Pacific ex-Japan). The NAV
produced a total return of 10.1%, ahead of the Reference Index total return of
9.5% over the period. The share price total return was 7.5% as the discount to
NAV widened during the six months. It is also positive to note the
consistently strong long-term track record with the Company's NAV
outperforming the Reference Index over the one, three, five and ten year
periods to 30 June 2024.
During the period, the largest contributors to performance were predominantly
technology holdings, especially those linked to artificial intelligence, and
the Company's overweight position in Taiwan proved advantageous. In particular
Taiwan Semiconductor Manufacturing Company ("TSMC"), the Company's largest
holding, made significant gains but other technology stocks including MediaTek
and Chroma ATE in Taiwan, FPT in Vietnam and MakeMyTrip in India, also
performed well. However, the strength in technology stocks was offset by
weakness in bank holdings in the Philippines, Indonesia and India. The
portfolio also experienced some headwinds from our holdings in Hong Kong, such
as AIA and Galaxy Entertainment, due to concerns regarding the outlook for
Chinese consumption.
Further details on the market and portfolio performance may be found in the
Investment Manager's Review.
Discount management
The share price traded below NAV during the six-month period, with an average
discount of 6.8%. The discount commenced the period at 4.6% but expanded
during the six months, along with the whole of the investment trust sector
which experienced widening discounts. The discount ended the period at 7.0%.
Consequently, the Board made use of its authority to buy back shares to assist
in discount management and to reduce share price volatility. The Board aims to
achieve a discount of no more than 5% in normal market conditions. During the
six-month period to 30 June 2024, a total of 1,783,206 shares were
repurchased at an average discount of 6.6%, for a total consideration of £7.8
million. The shares were placed into treasury for reissuance at a premium to
NAV at a future date. Since the end of the period, the Company has purchased
a further 536,087 shares to be held in treasury.
Gearing
The Portfolio Managers continued to actively utilise gearing during the period
with a range of 4.5% at its lowest and 8.8% at its highest, and an average of
6.3%. Average net debt over the six-month period was £32.1 million. The
Company's gearing has made a net positive contribution to returns over the
period and is an important differentiating feature of the investment trust
structure.
Gearing should be viewed in the context of the use of derivative hedging
instruments as described in the Investment Manager's Review. The Board
maintains oversight of the use of gearing and renewed its £75 million
revolving credit facility during July 2024.
Board composition
The Board continues to review its composition and effectiveness as well as
planning for succession. The Board was delighted to welcome Marion Sears as a
non-executive Director with effect from 24 April 2024. Marion brings a wealth
of City, investor, banking, corporate and investment trust experience.
As stated in the last Annual Report, Caroline Hitch stepped down from the
Board, having reached her nine-year tenure, at the conclusion of the Annual
General Meeting in April 2024.
Outlook
The timing and scale of future interest rate cuts in the US continues to
dominate investor perceptions of equity valuations, leaving global stock
markets sensitive to US economic data and their repercussions for growth and
earnings. Business and consumer confidence in China's economy remains weak as
China's property malaise persists and policy measures to provide short-term
stimulus continue to disappoint. The impending US election continues to
overhang delicate US/China trade relationships with consequences for growth
around the region.
Challenging markets provide ample opportunities for active managers and the
extensive investment experience of our Portfolio Managers, complemented by a
regional research team of 44 analysts, puts them in a strong position to
identify attractive stock opportunities around the region. Stock selection
will continue to be the critical factor in adding value to the portfolio and
securing long term relative outperformance. Our Portfolio Managers have an
impressive long term track record and their experience, supported by
Schroders' extensive resources in Asia, gives the Board confidence in their
ability to navigate regional equity markets.
Sarah MacAulay
Chair
9 September 2024
INVESTMENT MANAGER'S REVIEW
Performance review and outlook
The first half of 2024 was a strong period for Asian stock markets with the
Company's Reference Index (MSCI AC Asia Pacific ex Japan) producing a total
return of 9.5% over the period. The Company benefitted from the rise in the
region's stock markets with the NAV producing a total return of 10.1%,
slightly outperforming the Reference Index (Source: Schroders).
Whilst the overall stock market performance in Asia was strong, there were
some quite divergent trends across the region. There were two notable areas of
strength which contrasted with flat or weak returns elsewhere. The first area
of stock market strength was in the technology sector, which rose strongly
over the first half of 2024, particularly those stocks perceived to have an
artificial intelligence ("AI") angle. This benefitted the technology-heavy
Taiwan market where stocks rose strongly as high levels of retail, or more
speculative, investing became prevalent. Whilst perhaps not a bubble, the
market has certainly become "frothy" with the overall MSCI Taiwan index rising
by 30.5% over the first half of 2024.
The second area of strength in Asia was the Indian stock market. The market
rose strongly on the back of continued good earnings growth and positive
domestic economic momentum. The stock market rallied in the run up to the June
2024 Parliamentary elections, with domestic investors anticipating that the
result would be a large majority for Mr Modi's Bharatiya Janata Party ("BJP").
In the event, Mr Modi's BJP did much worse than expected losing their majority
and having to rely on two coalition partners. After an initial sell-off, the
market rallied strongly as it became clear that there was unlikely to be any
change to pro-business policies and that the relatively poor performance of
the BJP may have the benefit of a dialling back of some of the more aggressive
Hindu nationalist policies. Overall, the MSCI India rose by 17.9% over the
period.
The strong performance in India and Taiwan contrasted with weak performance
across the smaller Asian stock markets. Indonesia, the Philippines, and
Thailand stock markets were all notably weak, falling by 8.7% on average
(Source: MSCI Factset). This was primarily on the back of "stronger for
longer" US interest rate worries. These economies are particularly rate
sensitive, and a strong dollar and higher US rates are likely to keep domestic
activity subdued. This combined with politics, which in all three countries
have become slightly less certain, served to keep both overseas and domestic
investors cautious.
And what of the elephant in the room when it comes to investing in Asia? The
MSCI China rose by 5.6%, slightly underperforming the overall benchmark.
However, this masked considerable volatility within the Chinese stock market,
along with significant underlying divergences in both stock and sector
performance. The beginning of the reporting period saw marked weakness in
Chinese stocks on the back of concerns over the domestic economic outlook and
the deteriorating situation in the property market. The hope of a policy
stimulus and a property rescue package, then led to a strong rally in April
and early May 2024. The announced measures however disappointed and this led
to a weak stock market performance over the month of June 2024. Within the
market consumer stocks, blue chip industrials and exporters generally
performed poorly, whilst Chinese state-owned enterprises in the oil, telecom
and financial sectors did well as investors decided to go for the perceived
"safety" of state backed companies and stocks with high dividend yields. The
strength of the banks was perplexing for your Portfolio Managers given the
weakness of the domestic economy, collapsing property markets and the
unsustainability of their current high dividend yields.
The largest stock level contributors to performance over the period came
predominantly from our technology holdings. In particular, Taiwan
Semiconductor Manufacturing Company ("TSMC"), which continues to be the
largest portfolio holding, performed very strongly. TSMC is the effective
monopoly provider of semiconductors that are required for advanced AI
applications and thus continues to benefit from the very strong capital
expenditure related to this space. With the stock's valuation looking
reasonable and it rising to over 10.0% of NAV, we have started to trim our
position. Other strong performers were Taiwanese technology stocks MediaTek
and Chroma ATE which, like TSMC, are seeing stronger earnings momentum on the
back of AI related expenditure. Two other notable strong performers were FPT
in Vietnam, which is benefitting from a pick-up in Information Technology
("I.T.") services spend in Japan as companies move more rapidly to digitalise
their operations and MakeMyTrip which as the largest on-line travel provider
in India is benefitting from the growth in both international and domestic
travel.
The strength in technology related stocks was however, offset by weakness in
our bank holdings in the Philippines and Indonesia, and the continued weakness
in HDFC Bank in India where the merger with its associate HDFC Limited, a
housing finance provider, has not gone as smoothly as hoped. Other drags on
performance came from our holdings in Hong Kong, where stocks such as AIA and
Galaxy Entertainment were weak given concerns about the gloomy outlook for
Chinese consumption.
The first half of the year was an active period for the Company, with the
divergent performance and volatility across the region triggering
opportunities to reposition some holdings. As mentioned earlier, given the
strong performance in some of our technology holdings and increasingly
aggressive expectations (and hype) in the AI space, we trimmed several of the
technology positions, most notably TSMC. We exited a number of Chinese
consumer related names such as Yum China, Hang Lung Group and LVMH (which was
primarily held due to its exposure to high end Chinese consumption), given
rising competition in the sector at a time of structural consumer weakness.
Proceeds from the technology and China sales were mostly used to add to
existing holdings. The Company was also quite active in India. After a long
review we decided to exit Infosys, given the relatively weak outlook for I.T.
spend in many of its business segments, and we also trimmed HDFC Bank as our
conviction on the stock has fallen due to the merger concerns previously
mentioned. Proceeds from the Indian sales were used to initiate a new position
in Bharat Electronics, which should benefit from rising defence spending and
the need for India to move away from a reliance on Russia for military
hardware. We also used the proceeds from HDFC Bank to initiate a position in
housing lender Five Star Finance and started a small position in high end home
builder Oberoi Realty.
The hedging models, which we use as part of the process within the Company to
determine both the level of gearing(1) to use and whether to deploy capital
preservation strategies, have had some interesting moves over the period. The
longer-term market model, which is mostly based around valuations, started the
period generally neutral to slightly positive on the Asian stock market
outlook. However, following strong market moves and in the case of China/Hong
Kong and the ASEAN markets material downgrades to earnings, the models have
turned more cautious with a limited prospect of positive market returns over
the next 12 to 18 months based on historical trading patterns. The tactical
models which look at the likelihood of short-term returns (3 to 6 months) from
Asian stock markets based on a series of financial, sentiment, economic and
valuation indicators started the period positively (correctly given the first
half market returns). However, current indicators are now decidedly neutral to
cautious with limited scope for material short term positive returns based on
historic trading patterns.
What does this mean in practice? We have reduced gearing down to 5% and we are
now in a modest way adding to capital preservation strategies. At the current
time we have purchased a small position in VIX call(2) options and added a
small position in puts(2) on the Taiwanese, Australian and Indian indices. VIX
options are a derivative of the S&P 500 Volatility Index. As mentioned
earlier we are also trimming some of our technology positions in Taiwan. All
of this should mean the Company is positioned a little more defensively as we
move into the second half of the year.
Past performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up
and investors may not get back the amounts originally invested.
The Investment Manager invests on a discretionary basis and there are no
restrictions on the extent to which the Company's portfolio and performance
may deviate from the Reference Index. The Investment Manager will invest in
companies or sectors not included in the Reference Index in order to take
advantage of specific investment opportunities.
( )
(1)Please refer to section on "Definitions of Terms and Alternative
Performance Measures".
(2)Options: when you buy an option over an asset, you have the right (but not
the obligation) to buy or sell that asset at an agreed price, on or before the
date when the option expires. The buyer of a put option is seeking to profit
in the event that the asset's value drops below the exercise price before the
expiration date, whereas the buyer of a call option is seeking to profit in
the event that the asset's value increases above the exercise price before the
expiration date.
How is the Company positioned for the second half of 2024?
1. Hong Kong/China - index weight c.27%. Company significantly c.10%
underweight
Structurally unattractive markets. There are some good companies, but
valuations are not as low as the optimists claim. Headwinds from the property
sector will keep consumer sentiment weak and policy towards "new productive
forces" is bad for stock market returns as it exacerbates overcapacity.
2. Australia/Singapore - index weight c.19%. Company c.6% overweight
Well-regulated stock markets in countries with good capitalist foundations.
Lower growth but lots of good yield, attractive for total returns. Defensive -
preferred area to add to as we go into the second half of 2024.
3. Korea/Taiwan - index weight c.31%. Company c.5% overweight
Principally technology (semiconductors) based stock markets. Attractive
companies with strong intellectual property and barriers to entry-cyclical but
with growth. Some of the best stocks in Asia but have done well and key names
now approaching reasonable valuation, we are likely to trim into further AI
hyped strength.
4. India and ASEAN - index weight c.23%. Company is overweight ASEAN,
underweight in India
Genuine emerging markets. Strong GDP growth but more volatile politics and
regulation. We like the long term structural outlook in India, the Philippines
and Indonesia. Valuations in the former now expensive, so we have been taking
profits. ASEAN valuations are attractive, especially for financials and
selected consumer names.
Source: Schroders, July 2024.
For illustrative purposes only and does not constitute any recommendation to
buy or sell the above-mentioned security/sector/country. Please note that the
value of investments and the income from them can go down as well as up and
investors may not get back the amounts originally invested.
Robin Parbrook and Lee King Fuei
9 September 2024
INVESTMENT PORTFOLIO
as at 30 June 2024
Investments are classified by the Investment Manager in the country of
listing, except where noted. Stocks in bold are the 20 largest investments,
which by value account for 58.7% (30 June 2023: 53.8% and 31 December 2023:
56.8%) of total investments and derivative financial instruments.
£'000 %
Taiwan
TSMC 59,502 11.8
MediaTek 17,144 3.4
Voltronic Power Technology 9,909 2.0
Chroma ATE 8,325 1.6
ASE Technology 6,821 1.3
United Microelectronics 6,566 1.3
Merida Industry 6,468 1.3
Nien Made Enterprise 6,259 1.2
Advantech 5,846 1.2
Eclat Textile 4,902 1.0
Total Taiwan 131,742 26.1
Australia
CSL 9,170 1.8
Cochlear 9,150 1.8
ResMed 8,955 1.8
Aristocrat Leisure 8,679 1.7
BHP Billiton(1) 7,540 1.5
Medibank Private 6,643 1.3
Brambles 6,126 1.2
Seek 5,336 1.1
Orica 4,988 1.0
James Hardie Industries 4,920 1.0
Incitec Pivot 3,696 0.7
Total Australia 75,203 14.9
India
ICICI Bank 12,304 2.4
HDFC Bank 12,007 2.4
Apollo Hospitals Enterprise 9,744 1.9
MakeMyTrip(2) 9,523 1.9
Bharat Electronics 5,779 1.1
Tata Consultancy Services 5,756 1.1
Five Star Business Finance 4,929 1.0
KPIT Technologies 2,368 0.5
Oberoi Realty 2,293 0.5
Total India 64,703 12.8
South Korea
Samsung Electronics 34,297 6.8
SK Hynix 6,070 1.2
Total South Korea 40,367 8.0
Mainland China
Tencent(3) 20,968 4.1
Shenzhou International Group(3) 7,554 1.5
NetEase(3) 5,877 1.2
New Oriental Education & Technology Group (ADR)(2) 4,944 1.0
Total Mainland China 39,343 7.8
Singapore
DBS 16,321 3.2
United Overseas Bank 7,388 1.5
Singapore Exchange 7,308 1.4
Sheng Siong 4,116 0.8
Venture 2,279 0.4
Total Singapore 37,412 7.3
Hong Kong (SAR)
Swire Pacific 10,570 2.1
AIA 10,469 2.1
Techtronic Industries 8,071 1.6
Galaxy Entertainment 6,567 1.3
Total Hong Kong (SAR) 35,677 7.1
Philippines
International Container Terminal Services 9,730 1.9
Wilcon Depot 7,376 1.5
BDO Unibank 5,260 1.0
Century Pacific Food 4,901 1.0
SM Investments 4,710 0.9
Total Philippines 31,977 6.3
Indonesia
Bank Mandiri 12,068 2.4
Sumber Alfaria Trijaya Tbk PT 2,925 0.6
Bank Negara 2,805 0.6
Total Indonesia 17,798 3.6
Vietnam
FPT 7,814 1.5
Total Vietnam 7,814 1.5
United Kingdom
Rio Tinto 7,700 1.5
Total United Kingdom 7,700 1.5
Thailand
Bangkok Dusit Medical Services 6,153 1.2
Total Thailand 6,153 1.2
United States
Las Vegas Sands 4,905 1.0
Total United States 4,905 1.0
Luxembourg
Samsonite International(3) 4,149 0.8
Total Luxembourg 4,149 0.8
Total Investments(4) 504,943 99.9
Derivative financial instruments
Index call/put options
CBOE Volatility Index (VIX) call option 12 August 2024 439 0.1
CBOE Volatility Index (VIX) call option 12 July 2024 349 -
S&P/ASX 200 put option 7750 August 24 82 -
Total call/put options(5) 870 0.1
Total investments and derivative financial instruments 505,813 100.0
(1)Listed in the UK.
(2)Listed in the USA.
(3)Listed in Hong Kong (SAR).
(4)Total investments comprise the following:
£'000
Equities 499,999
American Depositary Receipts (ADR) 4,944
Total investments 504,943
(5)The options give downside protection to 0.6% of total investments.
INTERIM MANAGEMENT STATEMENT
Principal risks and uncertainties
The principal risks and uncertainties associated with the Company's business
fall into the following categories: macro factors, including the
geopolitical/economic environment and climate change; investment objective and
promotion; investment performance; key person; ESG considerations;
gearing/liquidity; compliance with regulations; oversight of service
providers; information technology resilience and security; and financial. The
Board also considers the development of artificial intelligence to be an
emerging risk. A detailed explanation of the risks and uncertainties in each
of these categories can be found on pages 29 to 31 of the Company's published
annual report and financial statements for the year ended 31 December 2023.
These risks and uncertainties have not materially changed during the six
months ended 30 June 2024. However, the Board undertook a review of the
principal and emerging risks for the Company while reviewing these financial
statements. The Directors noted that geopolitical risk and climate change
risk, in particular, continue to develop. These matters will be closely
monitored and reported on in the next annual report, as appropriate.
Going concern
Having assessed the principal risks and uncertainties, and the other matters
discussed in connection with the viability statement as set out on page 32 of
the published annual report for the year ended 31 December 2023, the
Directors consider it appropriate to adopt the going concern basis in
preparing these financial statements.
Related party transactions
There have been no transactions with related parties that have materially
affected the financial position or the performance of the Company during the
six months ended 30 June 2024.
Directors' responsibility statement
In respect of the half year report for the six months ended 30 June 2024, we
confirm that, to the best of our knowledge:
- this condensed set of Financial Statements has been prepared in accordance
with United Kingdom Generally Accepted Accounting Practice, specifically
adhering to Financial Reporting Standard 104 "Interim Financial Reporting" and
the Statement of Recommended Practice, "Financial Statements of Investment
Companies and Venture Capital Trusts" issued in July 2022. It provides a true
and fair view of the assets, liabilities, financial position and profit and
loss of the Company as at 30 June 2024, as required by the Disclosure Guidance
and Transparency Rule 4.2.4R; and
- the half year report includes a fair review of the information concerning
related party transactions as required by Disclosure Guidance and Transparency
Rule 4.2.8R.
The half year report has not been reviewed or audited by the Company's
auditor.
The half year report for the six months ended 30 June 2024 was approved by the
Board and the above Responsibility Statement has been signed on its behalf.
Sarah MacAulay
Chair
For and on behalf of the Board
9 September 2024
STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2024 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the six months For the six months For the year
ended 30 June 2024 ended 30 June 2023 ended 31 December 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at fair value through profit or loss - 41,602 41,602 - 5,786 5,786 - 28,264 28,264
Net losses on derivative contracts - (672) (672) - (1,718) (1,718) - (1,991) (1,991)
Net foreign currency (losses)/gains - (307) (307) - 2,187 2,187 - 1,846 1,846
Income from investments 6,785 128 6,913 8,113 - 8,113 13,568 1,639 15,207
Other interest receivable and similar income 96 - 96 119 - 119 180 - 180
Gross return 6,881 40,751 47,632 8,232 6,255 14,487 13,748 29,758 43,506
Management fee (392) (1,177) (1,569) (383) (1,150) (1,533) (763) (2,288) (3,051)
Administrative expenses (472) - (472) (424) - (424) (862) - (862)
Net return before finance costs and taxation 6,017 39,574 45,591 7,425 5,105 12,530 12,123 27,470 39,593
Finance costs (248) (744) (992) (342) (1,026) (1,368) (695) (2,084) (2,779)
Net return before taxation 5,769 38,830 44,599 7,083 4,079 11,162 11,428 25,386 36,814
Taxation 3 (562) (280) (842) (648) (133) (781) (931) (505) (1,436)
Net return after taxation 5,207 38,550 43,757 6,435 3,946 10,381 10,497 24,881 35,378
Return per share (pence) 4 5.41 40.07 45.48 6.18 3.79 9.97 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 after
taxation is also the total comprehensive income for the period.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2024 (unaudited)
Called-up Capital
share Share redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
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 - - - - (7,855) - (7,855)
Net return after taxation - - - - 38,550 5,207 43,757
Dividend paid in the period 5 - - - - - (11,036) (11,036)
At 30 June 2024 5,456 114,656 11,646 29,182 293,478 18,932 473,350
For the six months ended 30 June 2023 (unaudited)
Called-up Capital
share Share redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
Note £'000 £'000 £'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 - - - - (9,254) - (9,254)
Net return after taxation - - - - 3,946 6,435 10,381
Dividend paid in the period 5 - - - - - (11,432) (11,432)
At 30 June 2023 5,456 114,656 11,646 29,182 265,530 20,699 447,169
For the year ended 31 December 2023 (audited)
Called-up Capital
share Share redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
Note £'000 £'000 £'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 5 - - - - - (11,432) (11,432)
At 31 December 2023 5,456 114,656 11,646 29,182 262,783 24,761 448,484
STATEMENT OF FINANCIAL POSITION
at 30 June 2024 (unaudited)
(Unaudited) (Unaudited) (Audited)
30 June 30 June 31 December
2024 2023 2023
Note £'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 504,943 475,994 484,012
Current assets
Debtors 1,103 5,839 1,194
Cash and cash equivalents 464 15,968 2,527
Derivative financial instruments held at fair value through profit or loss 1,378 484 178
2,945 22,291 3,899
Current liabilities
Creditors: amounts falling due within one year 6 (24,754) (50,983) (38,841)
Bank overdraft (8,913) - -
(33,667) (50,983) (38,841)
Net current liabilities (30,722) (28,692) (34,942)
Total assets less current liabilities 474,221 447,302 449,070
Non current liabilities
Deferred taxation (871) (133) (586)
Net assets 473,350 447,169 448,484
Capital and reserves
Called-up share capital 7 5,456 5,456 5,456
Share premium 114,656 114,656 114,656
Capital redemption reserve 11,646 11,646 11,646
Special reserve 29,182 29,182 29,182
Capital reserves 293,478 265,530 262,783
Revenue reserve 18,932 20,699 24,761
Total equity shareholders' funds 473,350 447,169 448,484
Net asset value per share (pence) 8 495.91 433.74 461.24
Registered in England and Wales
Company registration number: 02153093
CASH FLOW STATEMENT
For the six months ended 30 June 2024 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months months year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
Note £'000 £'000 £'000
Net cash inflow from operating activities 9 3,579 3,662 10,928
Investing activities
Purchase of investments (38,077) (63,487) (115,573)
Sales of investments 60,856 94,544 158,529
Net cash flows on derivative instruments (1,872) (2,203) (2,169)
Net cash inflow from investing activities 20,907 28,854 40,787
Net cash inflow before financing 24,486 32,516 51,715
Financing activities
Dividends paid (11,036) (11,432) (11,432)
Interest paid (1,073) (1,365) (2,732)
Bank loans repayment (15,485) - (6,530)
Repurchase of the Company's own shares into treasury (7,857) (8,615) (33,222)
Net cash outflow from financing activities (35,451) (21,412) (53,916)
Net cash (outflow)/inflow in the period (10,965) 11,104 (2,201)
Cash and cash equivalents at the beginning of the period 2,527 5,161 5,161
Change in cash and cash equivalents (10,965) 11,104 (2,201)
Exchange movements (11) (297) (433)
Cash and cash equivalents at the end of the period (8,449) 15,968 2,527
NOTES TO THE FINANCIAL STATEMENTS
1. Financial statements
The information contained within the financial statements in this half year
report has not been audited or reviewed by the Company's independent auditor.
The figures and financial information for the year ended 31 December 2023 are
extracted from the latest published financial statements of the Company and do
not constitute statutory financial statements for that year. Those financial
statements have been delivered to the Registrar of Companies and included the
report of the auditor which was unqualified and did not contain a statement
under either section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
Basis of accounting
The financial statements have been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, in particular with Financial Reporting
Standard 104 "Interim Financial Reporting" and with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" issued by The Association of Investment Companies in
July 2022.
All of the Company's operations are of a continuing nature.
The accounting policies applied to these financial statements are consistent
with those applied in the financial statements for the year ended 31 December
2023.
3. Taxation
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Irrecoverable overseas tax 562 - 562 648 - 648 931 - 931
Overseas capital gains tax - 280 280 - 133 133 - 505 505
Taxation for the year 562 280 842 648 133 781 931 505 1,436
The Company's effective corporation tax rate is nil, as deductible expenses
exceed taxable income.
The overseas capital gains tax relates to the deferred tax liability on
unrealised gains on Indian investments held at the period end.
4. Return per share
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Revenue return 5,207 6,435 10,497
Capital return 38,550 3,946 24,881
Total return 43,757 10,381 35,378
Weighted average number of shares in issue during the period 96,204,894 104,131,132 102,272,753
Revenue return per share (pence) 5.41 6.18 10.26
Capital return per share (pence) 40.07 3.79 24.33
Total return per share (pence) 45.48 9.97 34.59
5. Dividend paid
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
2023 dividend paid of 11.5p (2022: 11.0p) 11,036 11,432 11,432
No interim dividend has been declared in respect of the six months ended 30
June 2024 (2023: nil).
6. Creditors: amounts falling due within one year
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Bank loan 22,150 43,664 37,339
Securities purchased awaiting settlement 1,414 6,167 122
Other creditors and accruals 1,190 1,152 1,380
24,754 50,983 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 of
US$28 million drawn down on the Company's £75 million, 364 day multicurrency
credit facility with The Bank of Nova Scotia, London Branch, expiring July
2025. The facility is secured and subject to covenants and restrictions which
are customary for a facility of this nature, all of which have been complied
with during the period. The facility is reviewed annually, at which point the
Directors can decide to restate and renew the facility for a further year.
7. Called-up share capital
Changes in called-up share capital during the period were as follows:
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Ordinary shares of 5p each, allotted, called-up and fully paid
Opening balance of shares in issue of 5p each, excluding shares held in 4,862 5,263 5,263
treasury
Repurchase of shares into treasury (89) (108) (401)
Subtotal of shares of 5p each, excluding shares held in treasury 4,773 5,155 4,862
Shares held in treasury 683 301 594
Closing balance of shares of 5p each, including shares held in treasury 5,456 5,456 5,456
Changes in the number of shares in issue during the period were as follows:
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 June 30 June 31 December
2024 2023 2023
Ordinary shares of 5p each, allotted, called-up and fully paid
Opening balance of shares in issue, excluding shares held in treasury 97,234,120 105,263,203 105,263,203
Repurchase of shares into treasury (1,783,206) (2,167,985) (8,029,083)
Closing balance of shares in issue, excluding shares held in treasury 95,450,914 103,095,218 97,234,120
Closing balance of shares held in treasury 13,663,737 6,019,433 11,880,531
Closing balance of shares in issue, including shares held in treasury 109,114,651 109,114,651 109,114,651
8. Net asset value per share
(Unaudited) (Unaudited) (Audited)
30 June 30 June 31 December
2024 2023 2023
Total equity shareholders' funds (£'000) 473,350 447,169 448,484
Shares in issue at the period end, excluding shares held in treasury 95,450,914 103,095,218 97,234,120
Net asset value per share (pence) 495.91 433.74 461.24
9. Reconciliation of total return on ordinary activities before finance
costs and taxation to net cash inflow from operating activities
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Total return before finance costs and taxation 45,591 12,530 39,593
Less capital return before finance costs and taxation (39,574) (5,105) (27,470)
(Increase)/decrease in prepayments and accrued income (814) (2,277) 146
Decrease in other debtors 11 6 1
(Decrease)/increase in other creditors (107) 71 258
Special dividend allocated to capital 128 - 1,639
Less stock and accumulation dividends - - (93)
Management fee allocated to capital (1,177) (1,150) (2,288)
Overseas withholding tax deducted at source (479) (413) (858)
Net cash inflow from operating activities 3,579 3,662 10,928
10. 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.
The following table sets out the fair value measurements using the FRS102
hierarchy above:
30 June 2024 (unaudited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial instruments held at fair value through profit or loss
Equity investments 504,943 - - 504,943
Derivative financial instruments - index put and call options 870 - - 870
Total 505,813 - - 505,813
30 June 2023 (unaudited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial instruments held at fair value through profit or loss
Equity investments 475,994 - - 475,994
Derivative financial instruments - index put options 484 - - 484
Total 476,478 - - 476,478
31 December 2023 (audited)
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
11. Events after the interim period that have not been reflected in the
financial statements for the interim
period
The Directors have evaluated the period since the interim date and have not
noted any significant events which have not been reflected in the financial
statements.
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