Schroder AsiaPacific - Final Results
06/12/2023 07:00
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RNS Number : 7918V Schroder AsiaPacific Fund PLC 06 December 2023
Schroder AsiaPacific Fund plc
FINAL RESULTS
Schroder AsiaPacific Fund Limited (the "Company") hereby submits its final
results for the year ended 30 September 2023.
The Company's annual report and accounts for the year ended 30 September 2023
are also being published in hard copy format and an electronic copy will
shortly be available to download from the Company's webpages
schroders.co.uk/asiapacific.
The annual report and accounts, containing the notice of annual general
meeting, and the form of proxy will shortly be uploaded to the Financial
Conduct Authority's National Storage Mechanism, and a separate announcement
will be released once this has taken place.
Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/7918V_1-2023-12-5.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7918V_1-2023-12-5.pdf)
Page numbers and cross references in the following announcement refer to page
numbers and cross references in the annual report and accounts for the year
ended 30 September 2023.
Enquiries:
Kerry Higgins
Schroder Investment Management Limited
Tel: 020 7658 6000
Annual report and accounts for the year ended 30 September 2023
Performance Summary Share price total return* Benchmark total return(1)
Net Asset Value ("NAV")
per share total return*
+2.9% +2.3% +1.5%
(2022: -13.6%) (2022: -14.5%) (2022: -13.9%)
Some of the financial measures above are classified as Alternative Performance
Measures, 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 76 and 77 together with
supporting calculations where appropriate.
(1)Source: Thomson Reuters.
Ongoing charges ratio*(1) Share price discount to NAV per share*(2) Revenue return per share(1)
0.86% 11.5% 12.06p
(2022: 0.84%) (2022: 10.8%) (2022: 12.04p)
Gearing*(1) Share price(2) Net revenue after taxation(1)
2.1% 486.5p £18,990,000
(2022: 0.2%) (2022: 487p) (2022: £19,673,000)
*Alternative Performance Measure.
(1)Schroders.
(2)Morningstar/Thomson Reuters.
Chairman's Statement
Performance
The year ended 30 September 2023 saw challenging market conditions in Asia,
in common with markets around the world. The Company's NAV produced a total
return of 2.9% for the financial year, outperforming the Benchmark, which
produced a total return of 1.5%, while the share price produced a total return
of 2.3%. This continues the Company's commendable long term record of NAV
total return outperformance of the Benchmark which sits at an annualised 2.4%
over 10 years.
There was a significant divergence of returns across Asian markets. Larger
markets especially China, where our Investment Managers continue to maintain
an under-weight position relative to the Benchmark, and Hong Kong were very
volatile during the financial year, impacted by economic headwinds and
geopolitical risks. Elsewhere, markets such as Korea and Taiwan performed
better. However, Asian currency weakness was a significant drag on
performance.
More detailed comment on performance and investment policy may be found in the
Investment Manager's Review.
Revenue and dividend
The Company's principal investment objective is to achieve capital growth, and
the Directors continue to distribute substantially all of the revenue received
each year. The Company's revenue return increased slightly to 12.06 pence per
share as portfolio companies dividends remained resilient.
The Directors are recommending a final dividend of 12.00 pence per share for
the year ended 30 September 2023, representing the same amount paid in
respect of the previous financial year.
This dividend will be paid on 9 February 2024 to shareholders on the register
on 29 December 2023, subject to approval by shareholders at the Annual
General Meeting ("AGM") on 31 January 2024.
Gearing
During the year ended 30 September 2023, the Company extended its
£75 million one year revolving credit facility with The Bank of Nova Scotia,
London Branch. At 30 September 2023, the Company's net gearing position was
2.1% taking into account cash balances, compared to 0.2% at 30 September
2022.
The Company also has access to an overdraft facility with HSBC.
Discount management
The Company continued to be active in buying back its shares during the year
ended 30 September 2023. A total of 6,000,000 shares were bought back for
cancellation at a cost of £29.8 million (2022: 4,060,000 shares were bought
back and cancelled at a cost of £21.7 million), adding 0.4% to the NAV.
Since the year end, a further 1,335,000 shares have been bought back for
cancellation at a cost of £6.4 million.
The discount at the end of September 2023 was 11.5% compared to 10.8% at the
previous financial year end. The average discount during the year under review
was 11.1%.
Your Board remains focused on limiting discount volatility and helping to
maintain liquidity in the Company's shares, noting that discounts across the
sector widened as interest rates increased and market sentiment deteriorated.
As such, we believe that adopting a rigid discount control mechanism that
seeks to target a defined maximum discount level regardless of market
conditions is not in the best interests of shareholders. Our policy on share
buy backs takes account of the level of discount at which the Company's peer
group trades, prevailing market conditions and activity within our sector.
At the Company's last AGM, authority was given to purchase up to 14.99% of the
issued share capital. We propose that the share buy back authority be renewed
at the forthcoming AGM and that any shares so purchased be cancelled or held
in treasury for potential reissue.
Environmental, social and governance issues ("ESG")
Our Investment Manager has always expressed the view that companies with good
ESG often perform better and potentially deliver superior returns over time.
Our Manager has provided more detail in the Strategic Report on how ESG
considerations are incorporated into the investment process and given details
of the ESG research capability. This year, further information of the
Investment Manager's engagement with portfolio companies, which give further
insight into the application of ESG to the investment process, have been
included in the report for the first time.
Management fee
As previously noted, the management fee was reduced from 0.70% to 0.60% per
annum on net assets in excess of £600 million with effect from 1 April
2023. In respect of the first £600 million of net assets the management fee
is unchanged at 0.75%.
Further details may be found in the Directors' Report on page 34.
Board succession
The Board regularly considers its policy on director tenure, succession
planning and its composition to ensure that it has the appropriate mix of
relevant skills, diversity and experience, and has considered the matter of
Board succession carefully during the year in order to ensure that we
effectively plan for future Board changes in the coming years.
The Board welcomed Rupert Hogg as a non-executive Director with effect from
1 May 2023. Rupert has over 30 years international business experience
gained through senior executive positions, including at a number of large
Asian-based companies, and he will be seeking election at the AGM.
Keith Craig will not be seeking re-election at the AGM and, on behalf of the
Board, I would like to thank Keith for his significant contribution to the
deliberations of the Board over his tenure.
Webinar
On 23 January 2024, the Company's Investment Manager will be presenting to
shareholders at a webinar at 2.00 pm. To register your interest to attend
this webinar please visit www.schroders.events/SDP23
(https://www.schroders.events/SDP23) , where the facility to watch the
recorded webinar afterwards will also be available.
AGM
The AGM will be held on Wednesday, 31 January 2024 at 12.00 noon at the
offices of Schroders at 1 London Wall Place, London EC2Y 5AU. A presentation
from our Investment Managers will be given at the AGM, and attendees will also
be able to ask questions in person and meet the Directors. Details of the
formal business of the meeting are set out in the Notice of Meeting on page 73
of this Annual Report.
All shareholders are recommended to vote by proxy in advance of the AGM and to
appoint the Chairman of the meeting as their proxy. This will ensure that
shareholders' votes will be counted even if they (or any appointed proxy) are
not able to attend.
If shareholders have any questions for the Board, please write, or email using
the details below. The questions and answers will be published on the
Company's webpages before the AGM.
To email, please use: amcompanysecretary@schroders.com or write to us at the
Company's registered office address: Company Secretary, Schroder AsiaPacific
Fund plc, 1 London Wall Place, London, EC2Y 5AU.
For regular news about the Company, shareholders are also encouraged to sign
up to the Manager's investment trusts update, which can be found
at: www.schroders.com/trust-updates/
(https://www.schroders.com/trust-updates/) .
Outlook
It is clear that market conditions in Asia - and indeed globally - will
continue to be volatile. Global growth prospects remain uncertain while
geopolitical tensions in the Middle East, Ukraine and Asia itself weigh
heavily on sentiment.
However, despite or even because, of these challenges there are many
opportunities. Valuations across the region vary markedly by country and in
aggregate do not look expensive versus history, trading below long term
averages on a price to book and forward price to earnings basis. A reversal of
the upwards trajectory in interest rates could have significant positive
implications for Asian assets as equity markets, currencies and liquidity
flows respond.
We therefore believe this is an ideal time for our Manager's investment
strategy which remains focused on companies with structural and sustainable
competitive advantages trading at attractive valuations.
James Williams
Chairman
5 December 2023
Investment Manager's Review
The NAV per share of the Company recorded a total return of 2.9% over the
twelve months to end September 2023. This was ahead of the performance of the
benchmark, the MSCI All Country Asia ex Japan Index, which rose by 1.5% over
the same period. (Source: Morningstar, net of fees, cum income NAV GBP
return).
Asian markets experienced huge swings in sentiment over the 12 months to end
September 2023, largely driven by gyrations in expectations for the Chinese
domestic economy, the impact of geopolitics, including over Ukraine, Taiwan
and US-China relations, and the outlook for the global economy, with the path
of US interest rates of particular importance. Despite this litany of
concerns, the region's markets rose by around 10.5% in local terms, albeit the
strength of Sterling meant they finished up by only 1.5% over the period in
Sterling terms.
However, across the region there were large differences in returns. China and
Hong Kong were very volatile but of the larger markets ended down the most
over the period. We saw large falls in both markets during the fourth quarter
of last year in the run up to, and post, the Communist Party Congress before
seeing a dramatic recovery driven by the Chinese authorities' move away from
'Zero COVID'. However, optimism faded when economic data, whilst generally
showing an improvement, disappointed expectations that had increased after the
ending of the zero COVID policy, leading to a renewed sell-off. High-end
spending and services consumption did much better when compared to the wider
economy but even that was lacklustre. Residential property numbers continued
to disappoint and renewed concerns over the state of the Local Government
Financing Vehicles' (LGFVs) finances, and some of the private residential
developers' liquidity positions, weighed on the market. During July 2023, the
Chinese market recovered on expectations of a sizeable stimulus, but measures
announced thus far have been relatively modest.
US-China relations continued to be a driver of sentiment over the year under
review but, on balance, did see some stabilisation during the year. Positives
included the G-20 meeting in Bali, where presidents Xi and Biden met
face-to-face, and progress from the US PCAOB (Public Company Accounting
Oversight Board) inspection of Chinese accounts where, for now at least, the
US seem happy with the access they had been given, thus likely deferring any
forced de-listings of Chinese companies in the US. Although "balloon gate",
together with more restrictions on the export of high-end technologies to
China, did sour relations we have more recently seen increased dialogue
between the two, with meetings between US and Chinese officials at a number of
levels and the formation of working groups between the two to address specific
issues, which is positive. Furthermore, domestically in China, there was a
shift in tone around regulation towards the internet companies, together with
the approval of several games by leading developers and further announcements
of government support for the private sector, leading to hopes that the worst
of the regulatory tightening had been seen.
The Indian growth story continued through the year with the market acting as a
relative safe haven, doing well when China sold off and vice versa. In the
final quarter of 2022, valuations had started to look very full and we did see
a sell off until March 2023. However, disappointment with China's recovery
and ongoing continued domestic buying saw the market recover, further helped
by an expectation that rates were close to peaking given a moderation in
inflation.
However, the best performing markets over the year under review were Korea and
Taiwan. These are markets that have high weightings in information technology
stocks, which was the best performing sector over the financial year.
Post-COVID, the information technology ("IT") sector had seen a slowdown as
demand for goods faded as people switched to consuming more services. This
slowdown had led to an increase in inventories and acted as an overhang for
the sector. However, this then elicited a supply side response by these
companies to the lower demand, seeing them cut both production and capital
expenditure which has seen the inventory imbalance start to correct, lifting
stock prices. More recently, some of these have benefitted from the hope that
Artificial Intelligence ("AI") would drive a surge in demand for increased
computing power. By July 2023, this had started to drive speculative moves in
some of the Taiwanese server names, in our view, and in Korea retail investors
drove up electric vehicle ("EV") related component suppliers to valuations
that we found, in many areas, difficult to rationalise.
Despite the deteriorating outlook for global growth, inflation pressures
remained elevated for much of the year and financial conditions generally
tightened. Of the other major markets, Singapore proved defensive, with
financials performing relatively well. Looking at the performance of sectors
across the region, aside from the strength in IT, higher interest rates were
supportive of financials. Defensive sectors generally underperformed over the
year under review, as did real estate which was impacted by higher interest
rates and the weakness of residential property in China.
Performance and Portfolio Activity
The Company's NAV total return was 2.9% over the financial year, which
compared favourably to a modest rise in the reference benchmark of 1.5%.
Relative performance over the year under review was helped by the underweight
to, and strong stock selection in, China. Our holding in the insurance company
Ping An, was perceived to be a beneficiary from the move away from zero COVID,
as it would enable sales agents to conduct more face-to-face meetings which
had been constrained during COVID. Other domestic focussed holdings also
helped, including Yum China, the fast food restaurant that operates KFC and
Pizza Hut concessions in China. The stock had proven resilient during COVID,
increasing delivery sales while managing its costs well, and is still seen as
having a runway for growth from the ongoing roll out of restaurants. Shenzhou,
one of the world's largest contract manufacturers of sporting apparel, was
another company that did well on expectations of a pick-up in demand for its
sportswear as multinational players' inventories started to normalise. An
absence of some of the more highly rated names in the e-commerce and
healthcare sectors also helped as they de-rated over the year.
Our stock picks in Taiwan also added value, led by the IT names. These
included 'fabless' semiconductor chip design companies Novatek and MediaTek,
and power electronics company Delta Electronics, whose products have
benefitted from the positive trends in AI and EVs. There was also a positive
contribution from stocks in some of the smaller markets such as Indonesia and
the Philippines. The largest drag on performance came from stock selection in
Korea where the biggest negative came from not owning Posco Holdings, which is
principally an integrated steel maker but whose share price moved up on the
back of excitement around its battery-related materials business. The Hong
Kong overweight was also a drag but was in large part offset by strong
selection there, including from stocks such as Prada, the luxury goods company
that performed well on strong sales growth which more than offset drags from
financials including BOC Hong Kong.
From a sector perspective, our overweight to, and stock selection in IT names
was the biggest positive contributor with holdings in semiconductor stocks,
including memory manufacturer Samsung Electronics and foundry company TSMC,
performing strongly in addition to the names mentioned above. These stocks
benefitted from a perceived bottoming in the IT cycle as outlined above.
Elsewhere, our holdings in Real Estate added value, principally through our
holding in Oberoi Realty, a Mumbai focussed residential developer in India.
The stock has benefitted from a pick up in demand for property after a long
period of under-construction following a multi-year downturn, which had seen
consolidation in the industry. Our underweights to some of the more defensive
sectors, such as healthcare, utilities and staples, all added value. However,
stock picks in the financials sector did detract, with HK names including
insurers AIA and Prudential, in addition to BOC HK, a drag. Indian banks ICICI
and HDFC Bank also lagged following a strong period of performance which more
than offset the strength seen in Bank Mandiri in Indonesia and Singapore names
OCBC and DBS.
The geographic exposure in the Company's portfolio continues to be mainly
spread between China, India, Taiwan, Hong Kong, Korea and Singapore. Over the
year under review, we added to positions in China and Hong Kong, as the pull
back in both markets started to provide opportunities in a number of names.
These included adding to existing positions in companies such as Shenzhou, for
the reasons previously mentioned, and Tencent, the internet platform company.
Its dominant position in messaging via its WeChat service has been
instrumental in allowing it to grow its advertising revenues and market share
in online gaming, an area which had been under regulatory scrutiny but where
we have now started to see games being approved by the authorities. New
holdings include Shenzhen Inovance, a manufacturer of industrial products
including inverters and servos for use in areas such as factory automation,
EVs and robotics. They have been very successful at taking share from foreign
players, competing on service rather than just price, and share price weakness
on the back of macro disappointment gave us an opportunity to start a
position.
A more recent addition has been Wuxi Biologics, a healthcare company that
straddles the CRO (contract research organisation) and CDMO (contract
development manufacturing organisation) biotech industries (outsourced
research, development and manufacturing of biological drugs). The stock had
de-rated materially on concerns over geopolitics, given its exposure to the US
market, and the impact of tighter liquidity on funding for global biotech
companies that use Wuxi Biologics to undertake research and manufacturing for
them. Despite these additions, China remains a substantial underweight but is,
in part, offset by the overweight to Hong Kong. The Hong Kong market, in
general, looks more attractive from a valuation perspective, with several
names set to benefit from the re-opening of the border with the mainland.
These include insurance names, such as AIA, as mainland Chinese visitors once
again come to Hong Kong to buy insurance, having been prevented from doing so
by COVID restrictions. We also bought into a new holding in Macau, gaming
company Galaxy Entertainment, that would also benefit from increased
visitation by Mainland Chinese tourists, and again had de-rated after the
excitement of re-opening had passed.
Elsewhere, we reduced Taiwanese and Korean exposure, principally by cutting
positions in tech names that had done well, including trimming Samsung
Electronics, TSMC and Delta Electronics and selling out of Novatek, which had
performed well following a better-than-expected pace of normalisation in its
inventory. In India, we rotated out of some of the names that had performed
well and were looking relatively expensive, in our view, such as auto company
Maruti Suzuki and logistics plays Container Corporation of India and Gujarat
Pipivav Port. We initiated positions in real estate company Oberoi Realty and
added to IT services, including a new holding in Mphasis, an IT services
provider with exposure to several US mortgage providers. These customers had
seen a slowdown in demand, impacting sentiment on the stock but providing, in
our view, an attractive entry point.
Despite the addition to IT in India, overall we reduced our overweight to IT
due to the sales described above in Taiwan and Korea. Nevertheless, we
continue to like the sector. Although near term earnings have been seeing
downward revisions, we continue to see some strong long-term drivers for
growth around digitisation, AI adoption, and the roll-out of 5G and 'Internet
of Things'. In IT, our focus remains on the Taiwanese and Korean hardware
names and the Indian IT services companies. We also continue to overweight
financials, with valuations still looking relatively attractive given higher
interest rates and subdued credit costs.
Outlook and policy
The euphoria seen in markets at the beginning of 2023 over China's move away
from its "zero COVID" policy feels like a distant memory, as China's long
awaited post-COVID recovery has proved weaker than expected. Economic data out
of China, and a lack of forceful policy response, has been disappointing,
reigniting concerns over local government debts and the wider residential
property sector. This has overshadowed more positive global developments
stemming from more favourable US inflation data, its knock-on to the US
interest rate cycle, and potential for a soft landing in the US. There have
also been some signs that the inventory cycle has started to bottom,
potentially pointing to a more favourable demand outlook. This in turn could
support demand for Asian manufactured product, which historically has been
supportive of Asian markets. However, as already highlighted, geopolitics
remains an overhang to the region with areas of tension including US-China
relations, Taiwan and Ukraine, notwithstanding the recent developments in the
Middle East. The electoral cycle is a likely point of focus with both the US
and Taiwan having elections next year.
Overall earnings have continued to be revised down following a reset to China
and global growth expectations, leaving aggregate valuations broadly in line
with their longer-term averages. However, this masks a large variation across
individual markets where Singapore and Hong Kong, amongst others, look
relatively cheap versus history, and India more expensive.
Although we did not have an optimistic view on the growth outlook for China,
it has still managed to disappoint. This has brought renewed focus back on to
the residential property sector, where private sector developers have seen a
liquidity squeeze, as sales have continued to disappoint, impacting cashflow
for the whole sector. The recent negative headlines around Chinese property
developers such as Country Garden could cause further deterioration in
homebuyers' sentiment and financing capabilities for other private-sector
developers, indirectly raising the risk of more defaults in the industry going
forward. Therefore we expect policy easing, both on the demand and supply
side, in the property sector to intensify to avoid more defaults and any wider
impact on the financial sector. Our long-term concerns around the structural
headwinds for the residential sector remain - property is likely to be less of
a driver for the economy than in the past, given the already high levels of
residential investment combined with an ageing demographic. It should be said
we do not own any of the Chinese private sector developers in the portfolio.
Near term, we believe it is a lack of consumer confidence that is the problem
rather than an inability to spend due to high borrowings. In fact, household
balance sheets have only strengthened over the last two years, due to high
levels of precautionary savings. It is measures to address this, such as
progress on reforms, rather than a massive fiscal stimulus which is needed to
give the consumer greater confidence to spend more. Nevertheless, in our view
it is likely we will see further government stimulus, on top of the piecemeal
measures we have seen so far, to boost growth given the fragility of the
property sector. More positively, the regulatory backdrop does not appear to
be getting worse and there are even tentative signs of reengagement between
the US and China. Despite this, we remain very underweight combined Hong Kong
and China, albeit we have been tentatively looking to add to holdings in both
markets where valuations have come back. We are more positive on Hong Kong,
where valuations are lower, and the SAR should see a recovery now that the
border with the mainland has re-opened. Although visitor numbers to Hong Kong
and Macau have picked-up materially, one needs to remain cognisant of the
potential for tighter capital controls by the Chinese government should
external balances become too wide.
India continues to be a market that offers highly attractive long-term
opportunities but is currently being priced for that in many cases, which
leaves the market looking relatively fully-valued and relatively expensive
versus both its history and other regional markets. Despite this, it has
benefitted from the uncertainty around the outlook for the Chinese market,
together with the local demand driver of strong domestic inflows which have
pushed the small and mid cap names up dramatically. We continue to favour the
IT services names together with the banks but also have exposure to the
fast-growing healthcare sector via Apollo Hospitals.
In the smaller ASEAN markets, we favour Singapore which is benefitting from
its increasing status as a regional wealth management hub, as well as the
growth of its ASEAN neighbours. We also have exposure to Vietnam, Indonesia
and have recently added to our holdings in the Philippines.
Sector-wise, IT stocks, where we have been overweight, have been the bright
spot. The potential for additional demand being generated by increased AI has
seen many companies, however loosely affiliated with the theme, perform well.
Whilst this has seen several companies, in our view, move into more
speculative territory, we believe that a number of our companies are set to
benefit from this additional demand driver over the medium to long term. We
therefore remain overweight - albeit the recent rally has seen us selectively
pare back holdings that we believe have got ahead of themselves. The IT names
remain sensitive to the global economy and the Korean names, such as Samsung
Electronics, are still trading at relatively attractive levels from a
valuation perspective, in our view. While the visibility of demand remains
low, the supply side adjustment is starting to take place as announcements on
production and capex cuts have started to be seen and inventories appear to be
peaking. Otherwise, we remain overweight to financials - a diverse sector
spanning not only banks, but also insurers and exchange companies. Although we
saw concern over banks earlier in the year following the Silicon Valley Bank
and Credit Suisse collapses, the banks we own are generally well-capitalised
with strong deposit franchises and fall into two camps; those that are
benefitting from increased credit penetration, such as in India and Indonesia,
and the more domestically-focussed retail names in more mature markets, such
as Singapore, that in general trade at attractive valuations and decent
dividend yields.
Underweights remain in those areas of the market generally perceived as more
defensive, including consumer staples, health care and utilities, where
valuations, in our view, still remain relatively full. More recently, however,
the market's correction in Chinese healthcare stocks has seen us add to a name
there as described above.
Near term, it is likely that we will see further downward revisions to
earnings as global growth slows, and an ongoing period of inventory adjustment
amongst companies to reflect this slower growth, which will hopefully put them
in a position to start to grow earnings once more when demand recovers.
Positively, we are starting to see early indicators of a potential bottoming
in the global goods cycle with PMIs showing tentative signs of improvement in
inventories and new orders which historically, with a lag, have been a good
lead indicator of exports. The distortion in the goods cycle from COVID was
significant, with goods demand collapsing, post its surge in 2020, as services
recovered, meaning that the goods cycle is much progressed when compared to
that of services. Given overall aggregate valuations for the region are now
trading at or below long-term averages, this does set up a more constructive
backdrop for Asian markets in the coming year, barring a global hard landing
or a more extreme geopolitical risk event.
To conclude, it is worth remembering that as investors we buy companies, not
countries. We are mindful of the impact political and macroeconomic factors
can have on equities and returns, but we are bottom-up stock-pickers first and
foremost, focusing on the company's return prospects and valuation. We do not
try to pick companies which will do well based purely on a particular macro
environment which we have forecast; rather we try to pick well-managed
companies at attractive valuations, which have structural and sustainable
competitive advantages. Therefore, a focus on attractive bottom-up ideas, in
our view, remains essential.
Market Weights - Schroder AsiaPacific Fund plc vs. MSCI AC Asia ex Japan
Index
Net Asset Value Weight (%) Benchmark Index Weight (%)
30-Sep-23 30-Sep-22 30-Sep-23
China 19.1 18.7 34.4
India 18.1 17.0 18.1
Taiwan 15.3 15.0 16.9
Hong Kong 13.0 12.9 6.0
Korea 11.7 12.4 14.0
Singapore 8.7 8.4 3.8
Australia 3.4 3.8 -
Vietnam 3.2 - -
Indonesia 2.8 2.6 2.3
Thailand 2.0 2.2 2.1
Philippines 1.8 0.9 0.7
Malaysia - - 1.6
Other* 3.0 6.3 -
Net cash** (2.1) (0.2) -
Total 100.0 100.0 100.0
Source: Schroders, MSCI, 30 September 2023.
Vietnam has been split out separately for 2023.
*UK, Italy and other net liabilities.
**Cash, less borrowings used for investment purposes.
This information is not an offer, solicitation or recommendation to buy or
sell any financial instrument or to adopt any investment strategy.
Schroder Investment Management Limited
5 December 2023
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. Exchange rate
changes may cause the value of any overseas investments to rise or fall.
Top Ten Investments
at 30 September 2023
1 Samsung Electronics (including preference shares)
Market value: £80,340,000
% of total investments: 9.2% (2022: 8.1%)
Samsung Electronics is a Korean semiconductor and electronics manufacturing
company. Its key products include semiconductors (logic and memory chips),
mobile phone handsets, consumer electronics, and home appliances. As well as
being the leading player in both volatile (DRAM) and non-volatile (NAND)
memory, Samsung is one of only a handful of companies in the world able to
manufacture the most advanced logic chips at scale.
2 Taiwan Semiconductor Manufacturing Corporation
Market value: £76,215,000
% of total investments: 8.7% (2022: 8.1%)
TSMC is a Taiwanese provider of semiconductor manufacturing services, and the
world's largest logic chip contract manufacturer. Its dominant position in the
manufacturing of the most cutting-edge chips is a result of a long track
record of R&D-driven innovation. TSMC's customers include most of the
world's most advanced chip design companies, for applications ranging from
smartphone processors to the most advanced AI chips.
3 Tencent Holdings
Market value: £43,480,000
% of total investments: 5.0% (2022: 3.6%)
Tencent is China's biggest internet company, with leading positions in mobile
gaming, online advertising and mobile payments. Its WeChat app is the leading
instant messaging app in China, and is a key platform for other features, such
as payments and social media content, and third-party services accessed
through "mini-programs" on the platform. In addition to its own operations,
Tencent is a significant shareholder in several other prominent internet
companies, in China and abroad.
4 HDFC Bank
Market value: £33,264,000
% of total investments: 3.8% (2022: 4.0%)
HDFC Bank is an Indian financial services provider, offering banking,
insurance and mutual funds amongst other financial products. Following its
merger with HDFC Ltd, the non-bank financial company, it is now among India's
largest private sector financial companies, serving over 90m customers through
both traditional and digital channels. India is a relatively underpenetrated
market for financial services.
5 ICICI Bank (including ADR)
Market value: £31,513,000
% of total investments: 3.6% (2022: 3.6%)
ICICI Bank is an Indian financial services provider, offering a range of
banking services and other financial products, including retail banking,
wholesale banking and insurance. It is one of India's leading private sector
banks, with around 6,000 branches. India is a relatively underpenetrated
market for financial services.
6 Alibaba
Market value: £29,035,000
% of total investments: 3.4% (2022: 3.1%)
Alibaba is China's largest e-commerce company, operating several domestic
platforms such as Taobao, Tmall and Freshippo, as well as operating
internationally through Lazada and AliExpress. In addition to goods
e-commerce, Alibaba also has operations in segments such as digital media,
local services, logistics, and public and hybrid cloud services. Its
affiliate, Ant Group, is one of China's leading fintech companies.
7 AIA
Market value: £27,188,000
% of total investments: 3.1% (2022: 2.9%)
AIA Group is an insurance company, providing life insurance, accident and
health insurance and savings plans, as well as financial products and services
to corporate clients. Based in Hong Kong, the company operates in 18 markets
across the Asia Pacific region and has sold over 40 million policies.
8 Bank Mandiri
Market value: £23,544,000
% of total investments: 2.7% (2022: n/a)
Bank Mandiri is one of Indonesia's largest banks, serving both retail and
corporate customers. Established in 1998 as part of a restructuring program
for four government-owned banks, Mandiri remains majority government-owned. It
also offers other financial services, such as insurance and securities
brokerage. Indonesia is a relatively underpenetrated market for financial
services.
9 Oversea-Chinese Banking Corp
Market value: £21,791,000
% of total investments: 2.5% (2022: 2.5%)
OCBC is a Singaporean financial services provider, offering banking,
insurance, asset management and stockbroking services. The group operates
across Asia, and also owns a stake in China's Bank of Ningbo. The group offers
private banking services through its Bank of Singapore subsidiary.
10 MediaTek
Market value: £18,021,000
% of total investments: 2.1% (2022: 1.2%)
MediaTek Inc is a Taiwanese company engaged in the design and distribution of
semiconductor chips. Their products focus on mobile connectivity, for example
5G mobile communication chips, as well as bluetooth and Wifi chips, and are
mainly used in mobile phones, digital TVs, PCs, home appliances, wearable
devices and Internet of Things devices.
Investment Portfolio
at 30 September 2023
Investments are classified by the Manager in the region or country of their
main business operations or listing. Stocks in bold are the 20 largest
investments, which by value account for 63.3% (30 September 2022: 60.5%) of
total investments.
Investment Portfolio
at 30 September 2023
£'000 %
Mainland China
Tencent Holdings(1) 43,480 5.0
Alibaba(1) 29,035 3.4
Midea (including A shares and LEPO(2)) 17,966 2.1
Shenzou International(1) 11,954 1.4
Ping An Insurance H(1) 9,861 1.1
Sany Heavy Industry A 9,808 1.1
Yum China(1,3) 9,455 1.1
Contemporary Amperex Technology A 8,271 0.9
Hongfa Technology A 7,624 0.9
Shenzhen Inovance Technology A 7,164 0.8
Wuxi Biologics(1) 6,822 0.8
Meituan Dianping(1) 1,496 0.2
Total Mainland China 162,936 18.8
India
HDFC Bank 33,264 3.8
ICICI Bank (including ADR(3)) 31,513 3.6
Apollo Hospitals Enterprise 17,696 2.0
Tata Consultancy Services 17,630 2.0
Infosys 16,570 1.9
Oberoi Realty 12,446 1.4
Mphasis 10,610 1.2
Reliance Industries 9,919 1.1
Delhivery 4,164 0.5
Total India 153,812 17.5
Taiwan
Taiwan Semiconductor Manufacturing 76,215 8.7
MediaTek 18,021 2.1
Delta Electronics 10,213 1.2
Nien Made Enterprise 9,048 1.0
Giant Manufacturing 8,249 0.9
Hon Hai Precision Industries 8,195 0.9
Total Taiwan 129,941 14.8
Hong Kong (SAR)
AIA 27,188 3.1
BOC Hong Kong 17,475 2.0
Hong Kong Exchanges and Clearing 16,849 1.9
Techtronic Industries 10,634 1.2
Galaxy Entertainment 10,255 1.2
Hang Lung Properties 8,475 1.0
Swire Properties 7,790 0.9
Kerry Properties 7,270 0.8
ASM Pacific Technology 5,070 0.6
Total Hong Kong (SAR) 111,006 12.7
South Korea
Samsung Electronics (including preference shares) 80,340 9.2
Samsung SDI 14,953 1.7
LG H&H 4,547 0.5
Total South Korea 99,840 11.4
Singapore
Oversea-Chinese Banking Corp 21,791 2.5
Singapore Telecommunications 16,276 1.9
DBS 15,980 1.8
Singapore Exchange 13,515 1.5
Sea ADR(3) 6,524 0.7
Total Singapore 74,086 8.4
Australia
Rio Tinto(4) 10,760 1.2
Orica 8,954 1.0
BHP(4) 8,830 1.0
Total Australia 28,544 3.2
Vietnam
Vietnam Enterprise Investments(4) 16,627 1.9
Vietnam Dairy Products 5,691 0.7
Mobile World Investment 5,173 0.6
Total Vietnam 27,491 3.2
Indonesia
Bank Mandiri 23,544 2.7
Total Indonesia 23,544 2.7
United Kingdom
Schroder Asian Discovery Fund Z Acc(5) 14,082 1.6
Prudential 6,664 0.8
Total United Kingdom 20,746 2.4
Thailand
Kasikornbank NVDR 10,666 1.2
Bangkok Dusit Medical Services NVDR 5,986 0.7
Total Thailand 16,652 1.9
Philippines
International Container Terminal Services 9,514 1.1
Bank of the Philippine Islands 6,071 0.7
Total Philippines 15,585 1.8
Italy
Prada(1) 10,351 1.2
Total Italy 10,351 1.2
Total Investments(6) 874,534 100.0
(1)Listed in Hong Kong.
(2)Listed in Luxembourg.
(3)Listed in the USA.
(4)Listed in the United Kingdom.
(5)Predominantly invested in Asia
(6)Total investments comprises the following:
£'000 %
Equities, including ADRs, LEPOs and NVDRs 828,944 94.8
Collective investment funds 30,709 3.5
Preference shares 14,881 1.7
Total investments 874,534 100.0
The following abbreviations have been used above:
ADR: American Depositary Receipt
LEPO: Low Exercise Price Option
NVDR: Non Voting Depositary Receipt
Ten-Year Financial Record
At 30 September 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Shareholders' funds (£'000) 495,527 477,870 658,321 799,942 825,042 822,182 946,146 1,057,941 878,187 851,285
NAV per share, diluted where applicable (pence) 292.82 282.39 392.33 477.38 492.35 490.94 567.16 641.72 546.13 549.92
Share price (pence) 264.00 246.50 343.00 426.00 430.00 435.00 510.00 579.00 487.00 486.50
Share price discount to NAV per share* (%) 9.8 12.7 12.6 10.8 12.7 11.4 10.1 9.8 10.8 11.5
Gearing/(net cash)* (%) (0.6) 2.3 0.4 4.4 2.6 (2.4) 0.2 0.6 0.2 2.1
For the year ended 30 September 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Net revenue return after taxation (£'000)(1) 4,749 7,151 8,040 9,537 16,885 16,590 13,253 16,080 19,673 18,990
Revenue return per share (pence)(1) 2.80 4.23 4.77 5.69 10.08 9.9 7.92 9.66 12.04 12.06
Dividends per share (pence)(1) 2.75 4.2 4.75 5.60 9.50 9.70 8.00 9.70 12.00 12.00
Ongoing charges* (%) 1.08 1.03 1.10 0.99 0.94 0.93 0.90 0.86 0.84 0.86
Performance(2) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
NAV total return (diluted where applicable)* 100.0 110.6 107.6 151.6 186.8 194.8 198.4 233.5 267.6 231.1 237.7
Share price total return* 100.0 111.2 104.9 148.6 186.8 190.9 197.7 236.6 272.2 232.7 238.1
Benchmark 100.0 108.4 101.9 139.3 165.4 172.7 176.4 198.2 217.4 187.1 189.9
(1)With effect from 1 October 2017, the Company adopted an allocation policy
whereby 75% of indirect cost are allocated to the capital account.
(2)Source: Morningstar/Thomson Reuters. Rebased to 100 at 30 September 2013.
*Alternative Performance Measure.
Business Review
Business model
The Company is a listed investment trust, that has outsourced its operations
to third party service providers.
The Board has appointed the Manager, Schroder Unit Trusts Limited, to
implement the investment strategy and to manage the Company's assets in line
with the appropriate restrictions placed on it by the Board, including limits
on the type and relative size of holdings which may be held in the portfolio
and on the use of gearing, cash, derivatives and other financial instruments
as appropriate.
The terms of the appointment are described more completely in the Directors'
Report including delegation to the portfolio managers and their team. The
Manager also promotes the Company using its sales and marketing teams. The
Board and Manager work together to deliver the Company's investment objective,
as demonstrated in the diagram above.
Investment objective
The Company's principal investment objective is to achieve capital growth
through investment primarily in equities of companies located in the continent
of Asia (excluding the Middle East and Japan), together with the Far Eastern
countries bordering the Pacific Ocean. It aims to achieve growth in excess of
the MSCI All Countries Asia excluding Japan Index in sterling terms (Benchmark
Index) over the longer term.
Investment policy
The Company principally invests in a diversified portfolio of companies
located in the continent of Asia (excluding the Middle East and Japan) (for
the purposes of this paragraph the "region"). Such countries include Hong
Kong, China, Singapore, Taiwan, Malaysia, South Korea, Thailand, India, The
Philippines, Indonesia, Pakistan, Vietnam and Sri Lanka and may include other
countries in the region that permit foreign investors to participate in
investing in equities, such as in their stockmarkets or other such investments
in the future. Investments may be made in companies listed on the stock
markets of countries located in the region and/or listed elsewhere but
controlled from within the region and/or with a material exposure to the
region.
The portfolio is predominantly invested in equities, but may also be invested
in other financial instruments such as put options on indices and equities in
the region. The Company does not use derivative contracts for speculative
purposes. The Company may invest up to 5% of its assets in securities which
are not listed on any stock exchange, but would normally not make such an
investment except where the Manager expects that the securities will shortly
become listed on a stock exchange. In order to maximise potential returns,
gearing may be employed by the Company from time-to-time. Where appropriate
the Directors may authorise the hedging of the Company's currency exposure.
Status
The Company's shares are listed and admitted to trading on the premium segment
of the main market of the London Stock Exchange. The Company is a constituent
of the FTSE 250 index and is an investment trust in accordance with section
1158 of the Corporation Tax Act 2010. It is intended that the Company will
continue to conduct its affairs in a manner which will enable it to retain
this status. The Company is not a "close" company for taxation purposes.
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 2026, the
Directors have no reason to believe that such a resolution will not be passed
by shareholders.
Purpose, values and culture
The Company's purpose is to create long-term shareholder value.
The Company's culture is driven by its values: Openness, Responsiveness,
Diligence and the pursuit of Excellence, with collegial behaviour and
constructive challenge at Board level and when engaging with stakeholders. The
values are all centred on achieving returns for shareholders in line with the
Company's investment objective. The Board also promotes the effective
management or mitigation of the potential risks faced by the Company. To the
extent it does not conflict with the investment objective, the Company's
operations are structured with regard to all its stakeholders and take account
of the impact of the Company's operations on the environment and community.
Acting with high standards of integrity and transparency the Board is
committed to encouraging a culture that is responsive to the views of
shareholders and its wider stakeholders.
As the Company has no employees and acts through its service providers, its
culture is represented by the values and behaviour of the Board and third
parties to which it delegates certain activities. The Board aims to fulfill
the Company's investment objective by encouraging a culture of constructive
challenge with all key suppliers and openness with all stakeholders. The Board
is responsible for embedding the Company's culture in the Company's
operations. The Board recognises the Company's responsibilities with respect
to corporate and social responsibility and engages with its outsourced service
providers to safeguard the Company's interests. As part of this ongoing
monitoring, the Board receives reporting from its service providers with
respect to their anti-bribery and corruption policies; Modern Slavery
Act 2015 statements; diversity policies; and greenhouse gas and energy usage
reporting.
Key performance indicators ("KPIs")
The Board reviews performance, using a number of key measures, to monitor and
assess the Company's success in achieving its objective. Further comment on
performance can be found in the Chairman's Statement. Some of the KPIs used
are:
• NAV performance;
• Share price discount/premium management; and
• Ongoing charges ratio.
Some KPIs are Alternative Performance Measures. Further details and
definitions of these can be found on pages 76 and 77.
Investment process
Investment philosophy
- We believe that Asian stock markets are inefficient and provide strong
potential for adding value through active fund management.
- We believe that this value is best extracted using a fundamental, bottom-up
stock selection approach.
- Understanding and addressing ESG issues is important for Asian companies. The
sustainability of earnings and the alignment of our interests with controlling
shareholders are key considerations. Engagement aids understanding and helps
us seek to enhance and protect the value of our investments.
- We believe that applying a systematic, disciplined approach, with a strong
team culture, increases our ability to add value.
Source: Schroders. For illustrative purposes only and should not be viewed as
a recommendation to buy or sell.
Translating philosophy into process
A disciplined investment process, applied systematically by an experienced
team, is important for adding value over the long-term. The Manager's
investment process is informed by their beliefs about Asian markets, based on
the extensive experience they have gained investing in the region for over
50 years.
These beliefs, and their implications, result in stock selection being placed
at the heart of the Company's investment approach, as explained in the diagram
below:
Investment team
A key strength of the Manager is its team of investment professionals based in
the region. The two UK-based portfolio managers, who themselves have well over
four decades of experience between them, are supported by a team of 40 equity
analysts based across 6 offices in Asia Pacific ex-Japan, who have an average
of over 16 years' investment experience(1).
Being based in the region means that the analysts are in regular direct
contact with the companies which they are covering, with the team carrying out
over 2,300 company contacts per year(2). This regular contact allows the team
to gain a thorough understanding of a company's business model and management
culture, the key issues they are facing and their strategies to navigate an
ever-changing business environment. Moreover, since the local investors in
each country are usually the key owners of the local markets, being present on
the ground enables the Manager to understand how those major local investors
perceive and value companies.
It is this knowledge base, paired with the expertise of our investment
professionals, which adds value to our bottom-up approach to stock selection.
The locally-based analyst team is supplemented by other resources across the
Schroders group, including the UK-based Sustainable Investment Team and
Investment Insight Unit, as well as other equity teams focused on Global and
Emerging markets.
(1)Team information as at September 2023. The 40 ex-Japan analysts includes
Schroders' local specialist team of equity analysts in Sydney, as well as a
joint-venture team of Indian equity analysts at Axis Asset Management (Axis
AMC) in Mumbai.
(2)Calendar year 2022. Source: Schroders.
Stock research
The key input into the Investment Manager's stock selection decisions is the
fundamental research carried out by the analyst team, the majority of which is
done using internal research tools and valuation models.
With a universe of around 5,000 potential names to choose from, in what has
historically been a volatile region, the Manager has a bias towards 'quality'
companies. The analysts look to identify those companies which are most likely
to be able to grow shareholder value over the long term, by making assessments
of the financial and non-financial (including sustainability) factors which
influence company returns. The analytical focus is on the future trend in a
company's return on invested capital ("ROIC") relative to its weighted average
cost of capital ("WACC"), in the belief that this reflects the attractiveness
and sustainability of the business model and serves as a predictor of
long-term shareholder returns.
Analysts spend much of their time meeting with companies in their sectors, as
well as with industry experts and colleagues, so that they can evaluate the
"moats" around the businesses they are analysing and ultimately be in a
position to make a recommendation.
The output of this work is usually in the form of research notes and company
models, as well as standard data points - a fair value and recommendation
grade, an assessment of the company's return profile as described above, and
an ESG appraisal and score.
Portfolio construction
Although the Asian team's analysts are the primary source of stock ideas, the
portfolio managers also generate stock ideas through their own research (for
example, by undertaking visits and meetings with company management) and by
drawing on a number of other sources including other investment professionals
within Schroders, quantitative screens, and external research providers.
Using all of these inputs, the portfolio managers will decide which stocks to
hold, and at what weightings. In doing so, they will consider all the outputs
from the analysts' work (such as the upside to fair value), the level of
conviction they have in the investment thesis and any identified risks
(including those relating to ESG) relative to the rest of the opportunity set.
The primary objective of this process is to create a portfolio with an
appropriate level of stock specific risk as the primary driver of returns.
While the portfolio construction process is primarily driven by bottom-up
stock selection, there is also a top-down regional allocation review process,
carried out on a monthly basis, combining the output of an in-house
quantitative model and the qualitative views of the portfolio managers,
informed by data and analysis from both internal and external research teams.
The purpose of this "top-down overlay" is to identify and adjust for any
unwanted systematic risks (or missed opportunities) which have resulted from
the bottom-up process. Top-down factors looked at in this process may include
macroeconomic conditions, inflation and interest rate dynamics,
politics/geopolitics, aggregate market valuations and measures of investor
sentiment. This allows the portfolio managers to construct the portfolio using
the most attractive bottom-up ideas, while helping ensure sufficient
diversification and taking into consideration any important top-down factors.
They will also harness Schroders' proprietary risk management systems to
provide a quantitative view of the characteristics of the portfolio.
This results in a relatively diversified portfolio, typically with a 'quality'
bias.
Integration of ESG into the investment process
This report reflects the ESG views and activities of the Manager in relation
to the Company's portfolio, and more widely. References to "our" or "we" in
this section of the report refer to the views of the Manager.
How are ESG factors incorporated into the Asian investment process?
Schroders has been considering ESG issues, and sustainability generally, for
over 20 years, as detailed in the timeline below.
Sustainability at Schroders
A continuously evolving approach
For a long time, the Manager has incorporated into its decision making a
thorough assessment of management quality, environmental, social and
governance factors, whether implicitly or explicitly. We recognise the
importance of appraising both financial and non-financial factors when
analysing a company and its security. Your Manager believes that integrating
an analysis and evaluation of ESG factors in our security valuation and
selection process is key to enhancing and protecting long-term shareholder
value. The appraisal of non-financial factors, including ESG considerations,
contributes to a better understanding of a company's risk characteristics and
return potential.
As long-term, bottom-up investors, assessing the sustainability of a company's
returns and financial position has always been at the core of our research and
investment decisions in Asia. Consistent with this approach we engage with
company management teams (Schroders conducts over 2,300 meetings (calendar
year 2022) with regional companies a year) as well as voting all our proxies
where practically possible. Our analysts are directly responsible for
assessing ESG risks and opportunities as we believe they are best placed to
understand their companies and determine the impact of ESG issues on the
sustainability of the business.
ESG analysis is an integrated and important part of our investment process
from initial screening through to final portfolio construction. ESG analysis
impacts our investment process in four direct ways:
1. Initial screening - ESG helps determine which companies we
consider to be investable as part of our initial screening.
2. Sustainability of earnings - ESG analysis helps understand the
impact ESG externalities may have on the future earnings power of the business
and with it our assessment of the return on invested capital ("ROIC") and
shareholder return classification ("SRC") of the company.
3. Fair Value and recommendation - ESG is an indirect and direct
input into our fair value estimate of a company. Indirect, to the extent that
a company's SRC may influence the assumptions used in establishing our fair
value estimate of a company; and direct, to the extent that we may apply an
additional explicit discount/premium to that fair value estimate.
4. Portfolio construction - ESG helps shape portfolio construction
and may influence how we size positions. For example, poor ESG performance or
heightened ESG risks may result in a decision to underweight a security, hold
a smaller position size or avoid an investment completely. There is no
automatic rule - each investment opportunity is assessed on a case-by-case
basis, with the focus on the materiality of ESG factors on a company's
valuation and risk profile.
In summary, ESG analysis helps determine which companies we look at, how we
assess their sustainability and, hence, how we value them. And while company
valuations ultimately drive our portfolio construction, our ESG insights play
a crucial role in the investment process and influence how we size positions
within a portfolio. Furthermore, our ESG analysis is broad reaching and we are
not only interested in the potential downside risks that we may identify but
also the upside return implications for stocks we invest in.
Asia ex Japan ESG analysis in practice(1)
Our Asian equity analysts are expected to provide written ESG analysis for all
companies under coverage. This identifies and assesses the potential effect of
ESG issues on the investment case.
For our ESG analysis to be more robust and more integrated, we have drawn on
the proprietary tools developed by Schroders such as Context and SustainEx.
Asia Context, which is the principal tool employed, captures our ESG analysis
in one template using a stakeholder based framework and is a key step in our
overall assessment of a company. In addition to separate rankings for 'E',
'S' & 'G', we generate an overall score for each company's ESG rating.
We have always engaged with the companies that we invest in, and direct
company contact is an important component of the initial due diligence and
ongoing monitoring process. The Asia Context template provides us with a
clearer, and broader roadmap on the issues requiring engagement and enhances
appreciation of the downside and upside risks to a company's business model.
The analysts have the option to apply an explicit discount or premium to their
fair value estimate as a result of their ESG analysis.
One of the Asian Equities team's greatest strengths is our experienced
analysts working hand-in-hand with our experienced fund managers - often
involving discussions from the beginning to the end of the research on a
company. Many of our fund managers are ex-analysts and they are heavily
involved in the discussions that underpin our ESG conclusions - especially
given the inherent subjectivity of how certain ESG considerations will impact
a company. We do not expect our analysts to score our Asia Context templates
in isolation - in many instances we need to build a team consensus on which
issues to address and how to score them.
In addition to the merits of an individual stock idea, portfolio managers will
also take into consideration the overall balance of the portfolio when
selecting stocks and sizing positions - looking, for instance, at overall
sector and country weights. As part of that process a company's ESG
characteristics may influence how portfolio managers size positions within the
portfolio. The portfolio manager may elect to limit, or even rule out,
exposure to a particular stock in view of a specific ESG concern. We assess
each situation on its merits, focusing on the materiality of ESG factors on a
stock's valuation and risk profile.
(1)The above ESG research framework covers investments in companies covered by
our team of locally based Asia ex Japan analysts. The detail of ESG coverage
in other regions where analysts report locally (e.g. Australia, India) may
differ, but is underpinned by the same broad approach.
The context framework:
Understanding how a company manages it relationships with stakeholders
Working with the Schroders Group's Sustainable Investment Team
Schroders has a team of more than 50 dedicated ESG professionals (30 June
2023) who develop proprietary ESG tools and oversee ESG analysis across
Schroders. The ESG specialists will also engage directly with companies,
prioritising those with exposure to higher ESG risk and low ESG ratings. They
can attend company meetings with portfolio managers and analysts to discuss
specific sustainability issues directly with company management, in addition
to financial performance, as well as engaging with company sustainability
experts directly.
Corporate Governance Analysts in the team will also work alongside investors,
and our internal compliance and legal teams, to ensure our voting activities
comply with our ESG policy.
To enhance the Asian team's ESG expertise, we have two members of the
Sustainable Investment team based in Asia, supporting the investment team and
ensuring they are kept fully informed of the relevant output of the
Sustainable Investment team in London. We also have a Sustainable Equity
Analyst on the team who brings additional insight and perspective to our ESG
analysis and engagement.
In addition, the Asian investment team collaborates with the Sustainable
Investment team, both formally and informally participating, for instance, in
a monthly ESG conference call together with other investors globally to
discuss topical issues as well as ESG best practice.
So what is the outcome for the Company?
The process described above in relation to how we approach ESG in our view
results in a portfolio that is likely to be less exposed to areas that could
be deemed 'sensitive' from an ESG perspective and where there is
'sensitivity', it is likely to be to markets that are generally well regulated
with a focus on the better practitioners. It should be noted that the Company
does not screen out all companies in sensitive sectors(1), rather the process
results in a much higher hurdle for stocks to get into the portfolio than
might otherwise be the case. Below is a table that covers some of the more
'sensitive' sectors and our exposure to them. As you can see exposure to the
more sensitive areas is limited.
(1)Schroders applies Group-level exclusions to all Schroders funds that are
directly managed. These Group-level exclusions relate to controversial weapons
and companies that generate more than 20% of their revenues from thermal coal
mining. Details can be found at the following link: Group exclusions |
Schroders global
Sector Reasons for Caution Our Approach Approximate portfolio Exposure
Agribusinesses/ Environmental, Social, Governance, (low barriers of entry, widespread Avoid; small exposure 0.6% (1 stock - branded milk company with some upstream supply)
Aquaculture questionable practices)
Tobacco Social Avoid 0%
Gambling Social, Governance. Licence to operate/ promotional practices Limited exposure to best-in-class players in well-regulated markets 1.2% (1 stock)
(e.g. Australia, Macau)
Utilities (traditional) Environmental, Governance, (national service obligations, uncertain Avoid carbon heavy energy providers, focus on hydro and sustainable energy 0%
regulations/risks of backlash against coal plants, mostly state-owned providers in well-regulated markets
enterprises)
Resources Environmental, Social, Governance (questionable practices such as bribery and Preference for Australian blue chip names, with minimal thermal coal mining 3.2% (3 stocks)*
poor environmental and safety controls concerns in Asia ex Australia) revenues
Oil and Gas Environmental, Governance (regulations, unfavourable taxes, price takers, big Limited exposure to sector ideally with an LNG/gas focus or self-help story 1.1% (1 stock)
carbon producers)
Property Environmental, Social, Governance (bribery issues, flooding, land clearance Prefer well-governed companies in better regulated markets. Exposure is mainly 4.1% (4 stocks)
compensation, labour practices) to Hong Kong listed stocks, plus one Indian company.
Defence Monopsony structure, corruption Avoid 0%
Source: Schroders, as at 30 September 2023.
*Includes mining related stocks
For illustrative purposes only and should not be viewed as a recommendation to
buy or sell.
We take a cautious approach to exposure in those companies which, while they
may be making attractive returns currently, are not always operating in a
sustainable way, which could potentially impact future earnings.
We have tended, therefore, to take our exposure to these industries through
the higher quality names, operating in well regulated markets. For example,
while we believe commodity resources will continue to be necessary in future
(and indeed crucial for a transition to a lower carbon world), our exposure to
this sector is through blue-chip Australian companies, rather than more
marginal miners in emerging countries. Similarly, for the real estate sector,
the majority of our exposure is through companies which have a focus on strong
governance, operating in well-regulated markets. For some sectors
(e.g. tobacco or thermal coal(1)), our requirement for operations to be
sustainable in the long-term is a high hurdle to clear, regardless of the
governance or regulatory frameworks a company is operating under, so we have
tended to have very limited exposure there.
Active ownership at Schroders
Schroders has a long history of engagement and active ownership and we have
engaged with companies on ESG related matters for the past two decades. As
active investors, we have always considered active ownership to be a key
channel of influence on management teams and a mechanism that allows for more
sustainable practices to be properly considered in managing the companies and
assets in which we invest on behalf of our clients. We aim to drive change
that we believe should better protect and enhance the value of our clients'
investments and we are committed to leveraging our influence as an investor to
change how a company operates for the better. These regular engagements form
an important aspect of our role as stewards of our clients' capital and allow
us to deploy capital in businesses with long-term sustainability of returns
and shareholder value creation.
Influencing corporate behaviour and outcomes
Engagement We work with companies to help them to recognise the potential impact of these
challenges and help them take action in the areas where change may be required
Dialogue We speak with companies to understand if and how they are preparing for the
long-term sustainability challenges
Voting We use our voice and rights as shareholders to make sure these changes are
effected
Source: Schroders
Engagement in practice
It should be remembered that we are not an 'activist' investor and that in
general we are looking to buy into companies that are already well-managed
with decent governance and attractive return profiles. However, this does not
mean that there is not still room for engagement, particularly when thinking
about sustainability issues and the evolution of a longer-term investment
thesis. Below is an example of continuous engagement with portfolio holding
Samsung Electronics in Korea. This has been a long-term holding in the
portfolio and engagement has focused on different areas of the 'E', the 'S'
and the 'G'. These include Climate Change, Diversity and Inclusion and
Corporate Governance as per the chart below.
Engaging across our priority engagement themes
Samsung Electronics
Themes Format Objectives Outcome
Aug 2019 Diversity and Inclusion Email Encourage improvement on gender diversity. Company committed to improving culture and launched initiatives for female
employees.
IR
Aug 2020 Email Improve transparency on political lobbying. Communicated expectations on transparency and alignment.
IR The Company recognised that investor trust needs to be earned and it is
something they will work on.
Corporate Governance
Re-election of 3 directors in light of adverse ISS recommendations.
Mar 2021 1x1 call
IR
Oct 2022 Climate Change 1x1 call Communicate climate expectations. Company has set Scope 1 and 2 emission targets and working to develop Scope 3
visibility.
IR
Diversity and Inclusion 1x1 call Improve board diversity. Company recognised the need for more global presence on the board but
highlighted their potential candidates sit on more than two boards, which will
IR likely be opposed by ISS/GL given their maximum two boards over-boarding
policy in South Korea.
Nov 2022 Corporate Governance Email Raise concerns on ROE cash drag. Communicated our analysis and concerns on valuation.
CEO
Aug 2023 1x1 call Improve shareholder return policy. The shareholder return policy is being actively discussed internally. An
update will be available by end-Jan 2024.
IR
Stakeholders addressed in engagements Governance & Management Regulators & Governments Environment
Employees Customers & Suppliers Local communities
Source: Schroders, as at October 2023.
Securities shown are for illustrative purposes only and should not be viewed
as a recommendation to buy or sell. We recognise that success factors may be
subjective, and that Schroders' influence may not have been the sole driving
force for this change. However, we believe it is important to track companies'
progress and measure the outcomes of our engagement.
This form of continuous engagement is fairly typical and, in addition to the
topics mentioned above, would include other areas such as Natural Capital and
Biodiversity, Human Rights and Human Capital Management where appropriate.
Further disclosures
Investment restrictions and spread of investment risk
The key restrictions imposed on the Manager are that:
(a) no more than 15% of the Company's total net assets, at the date
of acquisition, may be invested in any one single company;
(b) no more than 10% of the Company's total net assets, at the date
of acquisition, may be invested in other listed investment companies unless
such companies have a stated investment policy not to invest more than 15% of
their gross assets in other listed investment companies;
(c) the Company will not invest more than 15% of its gross assets in
other listed investment companies or investment trusts;
(d) no more than 15% of the Company's total net assets may be
invested in open-ended funds; and
(e) no more than 25% of the Company's total net assets may be
invested in the aggregate of unlisted investments and holdings representing
20% or more of the equity capital of any company.
No breaches of these investment restrictions took place during the financial
year.
The investment portfolio on page 15 demonstrates that, as at 30 September
2023, the Company held 58 investments spread over multiple countries and in a
range of industry sectors. The two largest investments, Samsung Electronics
and Taiwan Semiconductor Manufacturing, represented 9.2% and 8.7% respectively
of total investments. At the end of the year, the Company did not hold any
unlisted investments and the only holding in an open-ended fund was in
Schroder Asian Discovery Fund Z Acc, which represented 1.6% of total
investments. There was also a holding in Vietnam Enterprise Investments, a
closed-end fund trading on the London Stock Exchange which represented 1.9% of
total investments. The Board believes that the objective of spreading risk has
been achieved.
Use of gearing
On 23 June 2023, the date of expiry of the credit facility, the Company
renewed its one year £75 million revolving credit facility agreement with
The Bank of Nova Scotia, London Branch. Under the facility agreement, the
Company also has the option to increase the revolving facility by a further
£25 million to £100 million. At the year end $30 million of the credit
facility with The Bank of Nova Scotia was drawn down.
In addition, the Company has a £30 million multi-currency overdraft facility
with HSBC, which was not utilised during the year. The Board has set
parameters within which the Manager is authorised to use the credit facilities
and draw down funds. While the articles of association limit the amount of
gearing the Company may have to a maximum of the Company's adjusted capital
and reserves, Directors do not anticipate net effective gearing levels in
excess of 20% of shareholders' funds.
Diversity
The Board has adopted a diversity and inclusion policy. Appointments and
succession plans will always be based on merit and objective criteria and,
within this context, the Board seeks to promote diversity of gender, social
and ethnic backgrounds, cognitive and personal strengths. The Board will
encourage any recruitment agencies it engages to find a range of candidates
that meet the objective criteria agreed for each appointment. Candidates for
Board vacancies are selected based on their skills and experience, which are
matched against the balance of skills and experience of the overall Board
taking into account the criteria for the role being offered.
Statement on Board diversity - gender and ethnic background
The Board has made a commitment to consider diversity when reviewing the
composition of the Board and notes the new Listing Rules requirements (LR
9.8.6R(9) and (11)) regarding the targets on board diversity:
• at least 40% of individuals on the Board are women;
• at least one senior Board position (chairman, chief
executive officer ("CEO"), senior independent director or chief financial
officer ("CFO")) is held by a woman; and
• at least one individual on the Board is from a minority
ethnic background, defined to include those from an ethnic group other than a
white ethnic group, as specified in categories recommended by the Office for
National Statistics.
As required by the Listing Rules the Company's reporting against these
targets is set out in the tables below. The data was collected on a
self-identifying basis.
In respect of the year under review, the Board met the target in relation to
the number of women on the Board until 1 May 2023 when Rupert Hogg was
appointed as a Director as part of the Board's succession planning. Following
the retirement of Keith Craig as a Director at the conclusion of the next AGM
the Board will again meet this target albeit, as at 30 September 2023, the
target was not met. The target will continue to be considered when future
Board appointments are made although for continuity and succession planning
the Directors will always select the best candidate based on objective
criteria and merit.
As at 30 September 2023 and the date of this report, the targets for the
number of senior Board positions which should be held by a woman and for at
least one individual to be from a minority ethnic background have been met.
The Board considers that as an externally managed investment trust, with no
CEO or CFO, the Chair of the Company, the Senior Independent Director and
Chair of the Audit and Risk Committee to be senior positions.
The below tables set out the gender and ethnic diversity composition of the
Board as at 30 September 2023 and at the date of this report.
Gender identity
Number of Percentage of the Number of senior
Board members
Board
positions(1) on the Board
Men 4 66.6% 2
Women 2 33.3% 1
Not specified/prefer not to say - - -
Ethnic background
Number of Percentage Number of senior positions(1) on the Board
Board
of the
members
Board
White British or other White (including minority-white groups) 5 83.3% 2
Mixed/Multiple Ethnic Groups - - -
Asian/Asian British 1 16.7% 1
Black/African/Caribbean/Black British - - -
Other ethnic group, including Arab - - -
Not specified/prefer not to say - - -
(1)The Company considers the positions of Chairman of the Board of Directors,
Senior Independent Director and Chair of the Audit and Risk Committee to be
senior positions of the Board.
The prescribed format for the above tables includes provisions relating to the
role of the CEO, CFO and executive management. The Board considers these
provisions are not relevant to the Company as it is an externally managed
investment company. In particular, all of the Company's day-to-day management
and administrative functions are outsourced to third parties. As a result, the
Company has no CEO, CFO or executive management.
The Board also considers the diversity and inclusion policies of its key
service providers.
Financial crime policy
The Company continues to be committed to carrying out its business fairly,
honestly and openly, and operates a financial crime policy, covering bribery
and corruption, tax evasion, money laundering, terrorist financing and
sanctions, as well as seeking confirmations that the Company's service
providers' policies are operating soundly.
Greenhouse gas emissions and energy usage
As the Company outsources its operations to third parties, it has no
significant greenhouse gas emissions and energy usage to report.
Taskforce for Climate-Related Financial Disclosures
On 30 June 2023, the Company's AIFM produced a product level disclosure
consistent with the Task Force on Climate-Related Financial Disclosures
("TCFD") for the period 1 January 2022 to 31 December 2022. This can be
found
here: https://mybrand.schroders.com/m/6ec452c589d9a1c6/original/TCFD-Schroder-AsiaPacific-Fund-20221231.pdf
(https://mybrand.schroders.com/m/6ec452c589d9a1c6/original/TCFD-Schroder-AsiaPacific-Fund-20221231.pdf)
.
Responsible investment
The Company delegates to its Manager the responsibility for taking ESG issues
into account when assessing the selection, retention and realisation of
investments. The Board expects the Manager to engage with investee companies
on social, environmental and business ethics issues and to promote best
practice. The Board requires the Manager to exercise the Company's voting
rights in consideration of these issues, and receive reporting on them.
Further detail on engagement and stewardship can be found on pages 20 to 23.
In addition to the description of the Manager's integration of ESG into the
investment process and the details in this Business Review, a description of
the Manager's policy on these matters can be found on the Schroders website at
www.schroders.com (https://www.schroders.com) .The Board notes that Schroders
believes that companies with good ESG management often perform better and
deliver superior returns over time. Engaging with companies to understand how
they approach ESG management is an integral part of the investment process.
Schroders has committed to the UN Global Compact, amongst codes and standards,
and information about the application of Schroders' sustainability and
responsible investment policies can be found
at: https://www.schroders.com/en/sustainability/corporate-responsibility/
(https://www.schroders.com/en/sustainability/corporate-responsibility/) .
The Board has received reporting from the Manager on the application of its
policy.
Stakeholder engagement, section 172 of the Companies Act 2006
During the year under review, the Board discharged its duty under section 172
of the Companies Act 2006 to promote the success of the Company for the
benefit of its members as a whole, having regard to the interests of all
stakeholders. As an externally managed investment trust, the Company has no
employees, operations or premises. The Board identified its key stakeholders
as the Company's Shareholders, the Manager, Investment Manager, the Company's
Lender, other service providers and the Investee companies.
The following sections explain how the Directors have engaged with all
stakeholders and outlines stakeholder considerations during the year.
Shareholders
The Board recognises the importance of engaging with shareholders on a regular
basis in order to maintain a high level of transparency and accountability.
The Board receives regular reports from the Investment Manager and broker on
shareholder engagement, and the Investment Manager maintains regular and open
dialogue with shareholders. The Manager also has a dedicated client services
team which maintains regular contact with the Company's shareholders and
reports regularly to the Board. Shareholders can also contact the Chairman and
Directors throughout the year via the Company Secretary or the Corporate
Broker. The Chairman and Senior Independent Director are also available to
meet major shareholders to understand their views and to help inform the
Board's decision making process. The Company maintains webpages from which
copies of the annual and half year reports along with factsheets and other
relevant materials are available. Shareholders are also invited to attend the
AGM at which they have the opportunity to speak directly with Directors and
Investment Manager.
The Manager and Investment Manager
The Board's main working relationship is with the Manager, who is responsible
for the Company's portfolio management (including asset allocation, stock and
sector selection) and risk management, as well as functions such as
secretarial, accounting and marketing services. The Manager has subdelegated
portfolio management to the Investment Manager. The Board maintains a
constructive and collaborative relationship with the Manager and Investment
Manager, encouraging open discussion. The Board invites the Investment Manager
to attend all Board and certain committee meetings and receives regular
reports on the performance of the investments and the implementation of the
investment strategy, policy and objective. The portfolio activities undertaken
by the Investment Manager and the impact of decisions affecting investment
performance are set out in the Investment Manager's Review on pages 6 to 12.
The Management Engagement Committee reviews the performance of the AIFM and
Investment Manager, their remuneration and the discharge of their contractual
obligations at least annually.
The Company's lender
During the year under review, the Board renewed its revolving credit facility
Agreement with The Bank of Nova Scotia, London Branch. The credit facility
provides the option for the Investment Manager to leverage the portfolio, with
the aim of enhancing long term returns to shareholders as opportunities arise.
The Board is responsible for ensuring that the Company adheres to all existing
covenants.
Other service providers, including: depositary and custodian, registrar,
corporate broker, legal counsel, third-party research provider
The Board maintains regular contact with its key service providers, both at
the Board and committee meetings, and through ad hoc communication during the
year. The need to foster business relationships with key service providers is
central to the Directors' decision-making as the Board of an externally
managed investment trust. During the year, the Management Engagement Committee
undertook reviews of the third-party service providers and agreed that their
continued appointment remained in the best interests of the Company and its
Shareholders. The committee periodically reviews the market rates for services
received, to ensure that the Company continues to receive high quality service
at a competitive cost. Where available, the internal controls reports of the
Company's service providers are reviewed by the Audit and Risk Committee and
Directors also attended a meeting during the year to assess the internal
controls of certain service providers including the Company's Depositary and
Custodian HSBC, the registrar, Equiniti, Schroder's Group Internal Audit and
HSBC Securities Services (UK) Limited, as the provider of certain accounting
and administrative services delegated by Schroder Investment Management
Limited. These meetings enable the Board to conduct due diligence on
operations and IT risks amongst service providers; and to receive up to date
information on changes to regulation and market practice in the industry.
Investee companies
The Board recognises the importance of good stewardship and communication with
investee companies in meeting the Company's investment objective and strategy.
The Investment Management team conducts meetings with portfolio companies'
management teams to understand current trading as well as the longer term
prospects for their businesses, and to help understand the ESG risks to the
investment. Additional engagements on ESG areas of concern will also be
undertaken with investee companies. The Investment Manager has discretionary
powers to exercise the Company's voting rights on resolutions proposed by the
investee companies within the Company's portfolio. The Investment Manager
reports to the Board on stewardship (including voting) issues and the Board
has the opportunity to question the rationale for voting decisions made.
Through engagement and exercising voting rights, the Investment Manager
actively works with companies to improve corporate standards, transparency and
accountability.
Additional information is set out in the following table on the Manager's
engagement in respect of portfolio holdings and voting.
As at 30 September
2023
Number of companies engaged with 38
Number of engagement discussion topics 105
Invested companies engaged with (%) 53
Shareholder meetings voted at 80
Number of proposals voted on 661
Number of votes against management 45
Votes against management (%) 6.5
Specific examples of stakeholder consideration during the year
The Directors were particularly mindful of stakeholder considerations in
reaching the following key decisions during the year ended 30 September 2023:
• the Board agreed with the Manager to reduce the management
fee, further details in respect of which are set out in the Directors' Report;
• the Board continued the strategy to buy back shares which
provides a degree of liquidity when the discount widens;
• the Board continued to consider Board succession planning,
as it recognises the benefits of regular Board refreshment. Rupert Hogg was
appointed as a non-executive Director on 1 May 2023;
• the Board entered into an amendment and restatement
agreement in June 2023 in respect of the multicurrency revolving facility
agreement originally dated 23 June 2022. Given the specific requirements of
the Company and various factors, including the interest rate environment, the
Board, when considering the renewal of the facility, concluded that the one
year revolving credit facility remained the most appropriate arrangement and
The Bank of Nova Scotia, London Branch the most appropriate provider of the
facility;
• the Board undertook its annual visit, together with the
Investment Manager, to the region and visited India and Singapore to undertake
due diligence meetings with consultants and investee companies and review
Schroders capabilities in the region; and
• the Board has declared a final dividend of 12.00p per
ordinary share (2022: 12.00p) which, if approved by shareholders at the AGM
on 31 January 2024 will be paid on 9 February 2024.
Following the year end, the Board undertook its annual visit, together with
the Investment Manager, to the region and visited Vietnam and Hong Kong.
Principal and emerging risks and uncertainties
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. 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
November 2023.
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 received updates from the Manager, Company Secretary and
other service providers on emerging risks that could affect the Company. The
Board was mindful of the following risks during the year: the escalating
conflict in Israel, the ongoing conflict in Ukraine, rising inflation and
interest rates, the threat of a global recession and increasing energy prices.
These risks were not seen as new principal or emerging risks but those that
exacerbate existing risks and have been incorporated in the geopolitical and
market sections in the table below.
Geopolitical risk includes the impact of regional tensions, trade wars and
sanctions against companies. The Board continued to monitor events in the
Middle East following Hamas' attack on Israel in early October 2023 and the
Russian invasion of Ukraine, ongoing pressure in the Asia-pacific region,
slowing economic growth in China and supply chains. The Board is also mindful
that changes to financial and public policy could impact the Company in the
future. ESG risk includes climate change risk and how it could affect the
Company's investments, and potentially shareholder returns. ESG
considerations, including climate change are embedded in the investment
process and greater transparency continues to be provided in Board reporting
and the annual report. The Board will continue to monitor this closely.
Further details are provided in respect of geopolitical and ESG risks in the
table below.
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. 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 in the change column show the risks as increased or
decreased or unchanged.
Risk Mitigation and management Change
Strategic The appropriateness of the Company's investment remit is periodically reviewed Stable
and the success of the Company in meeting its stated objectives is monitored.
The requirements of investors change or develop in such a way as to diverge The share price relative to NAV per share is monitored and the use of buy back
from the Company's investment objectives, resulting in a wide discount of the authorities is considered on a regular basis. The marketing and distribution
share price to NAV per share. activity is regularly reviewed. The Company engages proactively with
investors.
The Company's cost base could become uncompetitive, including fees, against
the peer group and against open-ended alternatives. The Management Engagement Committee reviews fees paid to the Manager at least
annually.
The ongoing competitiveness of all service provider fees is subject to
periodic benchmarking against their competitors.
The monitoring of fees charged by other service providers takes place
alongside an annual review of the Company's Ongoing Charges figure.
The Board approves significant non-routine expenses.
Geopolitical The Board continued to monitor key political developments in the Asia Pacific Increased
region, in addition to the Ukraine war and the increasing tension in the
Political developments globally might materially affect the ability of the Middle East as a result of the conflict between Hamas and Israel.
Company to achieve its investment objective.
It was recognised that there continues to be an elevated geopolitical risk
Risks include regional tensions, trade wars and sanctions against companies, relating to the region.
in areas which the Company invests or may invest, that might have consequences
for the Company including an adverse effect on the value of the Company's Subject to shareholder consent, the Board can amend the investment policy and
assets. objective of the Company to mitigate these risks.
Market The Board continues to monitor the market volatility caused by current Increased
geopolitical issues and will continue to do so on an ongoing basis.
A significant fall in regional equity markets could have an adverse impact on
the market value of the Company's underlying investments. The Board recognises that there continues to be a currency / exchange rate
risk relating to the region and monitored it carefully during the period. The
The Company invests predominantly in assets which are denominated in a range Board also monitors macroeconomic and market factors, including the impact of
of currencies. Its exposure to changes in the exchange rate between sterling inflation.
and other currencies has the potential to have significant impact on returns
and the sterling value of dividend income from underlying investments. The Company has no formal policy of hedging currency risk but may use foreign
currency borrowings or forward foreign currency contracts to limit exposure.
The Company does not hedge against sterling.
The risk profile of the portfolio is considered and appropriate strategies to
mitigate any negative impact of substantial changes in markets are discussed
with the Investment Managers.
The Investment Manager seeks to invest in companies with strong balance sheets
and sustainable business models.
Investment Management Regular review of: Stable
The Manager's investment strategy and levels of resourcing, if inappropriate, - investment performance;
may result in the Company underperforming the market and/or peer group
companies, leading to the Company and its objectives becoming unattractive to - NAV and share price performance including discount against the
investors. peer group; and
- whether appropriate strategies are employed to mitigate any
negative impact of substantial changes in markets.
The Manager reports on macro-economic events, including regional policies,
quarterly and more frequently in response to events, if considered necessary.
Annual review of the ongoing suitability of the Manager.
Regular meetings with major shareholders to seek their views with respect to
Company matters.
Custody The depositary reports on the safe custody of the Company's assets, including Stable
cash and portfolio holdings which are independently reconciled with the
Safe custody of the Company's assets may be compromised through control Manager's records. The review of audited internal controls reports covering
failures by the depositary. custodial arrangements is undertaken. An annual report from the depositary on
its activities, including matters arising from custody operations is received.
Gearing and leverage Gearing is monitored and strict restrictions on borrowings are Stable
imposed: gearing continues to operate within pre-agreed limits so as not to
The Company utilises credit facilities. These arrangements increase the funds exceed 20% of the Company's net assets. Generally, gearing is maintained at
available for investment through borrowing. While this has the potential to relatively low levels.
enhance investment returns in rising markets, in falling markets the impact
could be detrimental to performance.
Accounting, legal and regulatory change The Board intends to continue to operate the Company in full compliance with Stable
the requirements of Section 1158 of the Corporation Tax Act 2010, compliance
In order to continue to qualify as an investment trust, the Company must is confirmed by the external auditor.
comply with the requirements of Section 1158 of the Corporation Tax
Act 2010. Breaches of the UK Listing Rules, the Companies Act or other The confirmation of compliance with relevant laws and regulations by key
regulations with which the Company is required to comply, could lead to a service providers is reviewed.
number of detrimental outcomes.
Shareholder documents and announcements, including the annual report, are
subject to stringent review processes. Procedures are established to safeguard
against the disclosure of inside information.
Climate change The consideration of climate change risks and ESG factors is integrated into Stable
the investment process and reported at regular Board meetings.
ESG requirements including climate change and climate-related risks could
impact the Company's business and affect revenue, expenses, asset values or The Investment Manager considers and evaluates the approach investee companies
the cost or availability of capital. take to recognise and mitigate climate change risks.
The Manager has implemented a comprehensive ESG policy which is outlined in
detail on pages 20 to 23.
Third party services Service providers appointments are subject to due diligence processes and with Stable
clearly documented contractual arrangements detailing service expectations.
The Company has no employees and has delegated certain functions to a number
of service providers. Regular reports are provided by key service providers and the quality of their
services is monitored. Monitoring includes an annual presentation to the Chair
Failure of controls, including as a result of fraud, and poor performance of of the Audit and Risk Committee and other Directors from key risk and internal
any service provider, could lead to disruption, reputational damage or loss of controls personnel.
shareholders' assets.
Review of annual audited internal controls reports from key service providers,
including confirmation of business continuity arrangements and IT controls.
Cyber The Company's service providers report on cyber risk mitigation and management Increased
at least annually, which includes confirmation of business continuity
The Company's service providers are all exposed to the risk of cyber-attacks. capability in the event of a cyber-attack.
Cyber-attacks could lead to loss of personal or confidential information,
unauthorised payments or inability to carry out operations in a timely manner.
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.
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 20 to the accounts on pages 65 to 70.
Viability statement
The Directors have assessed the viability of the Company over a five year
period, taking into account the Company's position at 30 September 2023 and
the potential impact of the principal and emerging risks it faces for the
review period. This is further detailed in the Chairman's Statement,
Investment Managers' Review and Principal and Emerging Risks 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 its assessment of the viability of the Company, the Directors have
considered each of the Company's principal and emerging risks detailed on
pages 27 to 29 and in particular the impact of a significant fall in regional
equity markets on the value of the Company's investment portfolio. 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.
The Directors also 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.
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 2026, the
Directors have no reason to believe that such a resolution will not be passed
by shareholders.
The Directors also considered 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.
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 risks, the impact of the emerging
risks, the net current liability position and the matters referred to in the
viability statement. 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 December 2024 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
5 December 2023
Board of Directors
James Williams Keith Craig Julia Goh
Status: Independent non-executive Chairman
Status: Independent non-executive Director
Status: Independent non-executive Director
Length of service: 9 years - appointed a Director in August 2014 and the Length of service: 8 years - appointed a Director in May 2015 Length of service: 2 years - appointed a Director in October 2021 and as
Chairman with effect from 1 February 2021
Experience: Keith Craig served with the British Army after university and the Chair of the Audit and Risk Committee on 1 February 2022
Experience: James Williams has over 30 years' international business subsequently joined the Swire Group in Hong Kong and Manila in the 1980s and
Experience: Julia Goh has broad-based financial services experience in London.
experience, including nearly 20 years in the investment banking industry, early 1990s. He was then a diplomat with the Foreign & Commonwealth She was a Managing Director at Barclays Investment Bank in various senior
having held senior roles in Asia and Europe at ING Barings, ABN AMRO and Office for some years before moving back to Asia as a stockbroker, front-office positions including as Chief Operating Officer of Global Markets,
Commerzbank. Following his departure from Commerzbank, he became a partner at establishing WI Carr's business in the Philippines and subsequently running and was also Chair of the Barclays Women's Initiative Network. Prior to that,
Saginaw Capital LLP until 2008. James is also a non-executive Director of The their global equity sales and trading operation, based in Hong Kong. He she was a Managing Director and the Global Head of Prime Services Risk at
European Smaller Companies Trust PLC and of Net Zero One Ltd. returned to London in 2000 and was CEO of Hakluyt, a strategic intelligence Credit Suisse for 11 years. Julia started her Markets career at Nomura
Committee membership: Audit and Risk, Management Engagement and Nomination company, until 2017, when he founded Westbury Partners. Keith is Chairman of International as a risk manager. A Singaporean, Julia came to London in 1987
Committees the International Advisory Council of PJT Partners and a member of the and obtained her BSc from the London School of Economics and Political Science
Current remuneration: £49,000 (from 1 October 2023) advisory boards of the Bodleian Library and Cancer Research UK. and a MSc from Bayes Business School. She is a fellow of the ICAEW (alumnus
Number of shares held: 20,000*
Committee membership: Audit and Risk, Management Engagement and Nomination PWC in corporate tax) and has a Certificate in Company Direction from the
Committees (Chair of Nomination Committee) Institute of Directors. Julia is an independent non-executive Director of The
Current remuneration: £36,000 per annum (from 1 October 2023) Mercantile Investment Trust plc, Pension Insurance Corporation plc and also
Number of shares held: 12,581* of its parent company, Pension Insurance Corporation Group, and a Director of
the charity, Children of the Mekong.
Committee membership: Audit and Risk, Management Engagement and Nomination
Committees (Chair of Audit and Risk Committee)
Current remuneration: £44,000 per annum (from 1 October 2023)
Number of shares held: 15,000*
Vivien Gould Rupert Hogg Martin Porter
Status: Independent non-executive Director
Status: Independent non-executive Director
Status: Senior Independent non‑executive Director
Length of service: 4 years - appointed a Director in May 2019 Length of service: six months - appointed a Director in May 2023 Length of service: 6 years - appointed a Director in October 2017 and as
Experience: Vivien Gould has worked in the financial services sector since
Experience: Rupert Hogg has more than 30 years international business the Senior Independent Director with effect from 1 February 2022 and
1981. She was a founder Director of River & Mercantile Investment experience gained through senior executive level positions in various large
Experience: Martin Porter joined Robert Fleming Asset Management in 1984, and
Management Limited (1985) and served there as a senior executive and deputy and complex organisations. He joined John Swire & Sons Limited, part of ran equity portfolios in both London and Japan. During his tenure in Japan, he
managing Director until 1994. She then served on the boards of a number of the Swire conglomerate of businesses, in 1986 and worked with the group in became a holding board Director of Jardine Fleming, responsible for the
listed investment trusts, investment management companies and other financial Hong Kong, Southeast Asia, India, Korea, Australia and the United Kingdom. He Japanese business. Returning to the UK in 2000, Martin took up the role of
companies. She also served on the boards of a number of charities, including was Chief Executive Officer of Cathay Pacific Airways Limited and Chairman of Chief Investment Officer, Equity and Balanced of Fleming Asset Management,
the Stroke Association, where she chaired the investment committee. Vivien is Hong Kong Dragon Airlines Limited between May 2017 and August 2019. before becoming Global Head of Equities of JP Morgan Asset Management, a
currently a non- executive Director and Senior Independent Director of The Previously, he had served as Chief Operating Officer of Cathay Pacific Airways position he held from 2003 to 2016 when he retired.
Lindsell Train Investment Trust PLC, a non-executive director of Baring Limited, was a Director of Cathay Pacific and John Swire & Sons (H.K.)
Committee membership: Audit and Risk, Management Engagement and Nomination
Emerging EMEA Opportunities PLC, Third Point Investors Limited, and National Limited, Chairman of AHK Air Hong Kong Limited and a Director and Chairman of Committees (Chair of Management Engagement Committee)
Philanthropic Trust UK. the executive committee of Cathay Dragon. Rupert holds a Master of Arts degree
Current remuneration: £36,000 per annum (from 1 October 2023)
Committee membership: Audit and Risk, Management Engagement and Nomination in History from Edinburgh University.
Number of shares held: 20,000*
Committees
Committee membership: Audit and Risk, Management Engagement and Nomination
Current remuneration: £36,000 per annum (from 1 October 2023) Committees.
Number of shares held: 5,000*
Current remuneration: £36,000 per annum (from 1 October 2023)
Number of shares held: 2,100*
*Shareholdings are as at 5 December 2023, full details of Directors'
shareholdings are set out in the Remuneration Report on page 45
Directors' Report
The Directors submit their report and the audited financial statements of the
Company for the year ended 30 September 2023.
Directors and officers
Chairman
The Chairman is an independent non-executive Director who is responsible for
leadership of the Board and ensuring its effectiveness in all aspects of its
role. The Chairman's biography is detailed on page 32. He has no conflicting
relationships.
Senior Independent Director ("SID")
The SID is responsible for the evaluation of the Chairman, and also serves as
a secondary point of contact for shareholders.
Company Secretary
Schroder Investment Management Limited provides company secretarial support to
the Board and is responsible for assisting the Chairman with Board meetings
and advising the Board with respect to governance. The Company Secretary also
manages the relationship with the Company's service providers, except for the
Manager. Shareholders wishing to lodge questions in advance of the AGM are
invited to do so by writing to the Company Secretary at the address given on
the outside back cover or by email to: amcompanysecretary@schroders.com.
Role and operation of the Board
The Board (of six Directors, listed on pages 32 and 33) is the Company's
governing body; it sets the Company's strategy and is collectively responsible
to shareholders for its long- term success. The Board is responsible for
appointing and subsequently monitoring the activities of the Manager and other
service providers to ensure that the investment objective of the Company
continues to be met. The Board also ensures that the Manager adheres to the
investment restrictions set by the Board and acts within the parameters set by
it in respect of any gearing. The Strategic Report on pages 17 to 30 sets out
further detail of how the Board reviews the Company's strategy, risk
management and internal controls. These sections form part of this Directors'
Report.
A formal schedule of matters specifically reserved for decision by the Board
has been defined and a procedure adopted for Directors, in the furtherance of
their duties, to take independent professional advice at the expense of the
Company.
The Chairman ensures that all Directors receive relevant management,
regulatory and financial information in a timely manner and that they are
provided, on a regular basis, with key information on the Company's policies,
regulatory requirements and internal controls.
Four Board meetings are usually scheduled each year to deal with matters
including: the setting and monitoring of investment strategy; approval of
borrowings and/or cash positions; review of investment performance, the level
of discount of the Company's shares to NAV per share, promotion of the Company
and services provided by third parties. Additional meetings of the Board are
arranged as required. At each scheduled Board meeting the Directors receive
reports from the Manager, other key service providers and the Company's
advisers. Ad hoc reports and information are supplied to the Board as
required.
The Board has approved a policy on Directors' conflicts of interest. Under
this policy, Directors are required to disclose all actual and potential
conflicts of interest to the Board as they arise for consideration and
approval. The Board may impose restrictions or refuse to authorise such
conflicts if deemed appropriate. No Directors have any connections with the
Manager, shared directorships with other Directors or material interests in
any contract which is significant to the Company's business.
Key service providers
The Board has adopted an outsourced business model and has appointed the
following key service providers:
Manager
The Company is an alternative investment fund as defined by the AIFM Directive
and has appointed Schroder Unit Trusts Limited ("SUTL") as the Manager in
accordance with the terms of an alternative investment fund manager ("AIFM")
agreement. The AIFM agreement, which is governed by the laws of England and
Wales, can be terminated by either party on six months' notice or on immediate
notice in the event of certain breaches or the insolvency of either party. As
at the date of this report no such notice had been given by either party.
SUTL is authorised and regulated by the FCA and provides portfolio management,
risk management, accounting and company secretarial services to the Company
under the AIFM agreement. The Manager also provides general marketing support
for the Company and manages relationships with key investors, in conjunction
with the Chairman, other Board members or the Corporate Broker as appropriate.
The Manager has delegated investment management, administrative, accounting
and company secretarial services to another wholly owned subsidiary of
Schroders plc, Schroder Investment Management Limited which delegates certain
accounting and administrative services to HSBC Securities Services (UK)
Limited. The Manager has in place appropriate professional indemnity cover.
The Schroders Group manages £724.3 billion (as at 30 September 2023) on
behalf of institutional and retail investors, financial institutions and high
net worth clients from around the world, invested in a broad range of asset
classes across equities, fixed income, multi-asset and alternatives.
Until 1 April 2023, under the terms of the AIFM agreement, the Manager was
entitled to a fee of 0.75% per annum on the first £600 million of the cum
income net assets, and 0.70% per annum on the cum income net assets in excess
of £600 million.
Under the revised terms of the AIFM agreement, effective from 1 April 2023,
the Manager is entitled to a fee of 0.75% per annum of the first
£600 million of the cum income net assets and 0.60% per annum on the cum
income net assets in excess of £600 million. The company secretarial fee is
fixed at £150,000 per annum.
Chargeable assets represent total assets less current liabilities other than
short-term borrowings, less any cash up to the level of borrowings.
The management fee payable in respect of the year ended 30 September 2023
amounted to £6,208,000 (2022: £6,913,00).
The company secretarial fee paid to the Manager in the year ended
30 September 2023 was £150,000 (2022: £150,000).
Details of amounts payable to the Manager are set out in note 4 on page 59 of
this report.
The Board has reviewed the performance of the Manager during the year under
review and continues to consider that it has the appropriate depth and quality
of resource to deliver superior returns over the longer term. The Manager is
supported by significant depth of knowledge and experience in Asia, with
regional resources and local analysts. Thus, the Board considers that the
Manager's appointment under the terms of the AIFM agreement is in the best
interests of shareholders as a whole.
Depositary
HSBC Bank plc, which is authorised by the Prudential Regulation Authority and
regulated by the FCA and the Prudential Regulation Authority, carries out
certain duties of a depositary specified in the AIFM Directive including, in
relation to the Company, as follows:
- safekeeping of the assets of the Company which are entrusted
to it;
- cash monitoring and verifying the Company's cash flows; and
- oversight of the Company and the Manager.
The Company, the Manager and the depositary may terminate the depositary
agreement at any time by giving 90 days' notice in writing. The depositary
may only be removed from office when a new depositary is appointed by the
Company.
Registrar
Equiniti Limited has been appointed as the Company's registrar. Equiniti's
services to the Company include share register maintenance (including the
issuance, transfer and cancellation of shares as necessary), acting as agent
for the payment of any dividends, management of company meetings (including
the registering of proxy votes and scrutineer services as necessary), handling
shareholder queries and correspondence and processing corporate actions.
Compliance with the AIC Code of Corporate Governance
The Board of the Company has considered the principles and provisions of the
AIC Code of Corporate Governance (the "AIC Code"). The AIC Code addresses the
Principles and Provisions set out in the UK Corporate Governance Code (the "UK
Code"), as well as setting out additional Provisions on issues that are of
specific relevance to the Company. The Board considers that reporting against
the Principles and Provisions of the AIC Code, provides more relevant
information to shareholders.
The AIC Code is available on the AIC website (www.theaic.co.uk
(https://www.theaic.co.uk) ). It includes an explanation of how the AIC Code
adopts the Principles and Provisions set out in the UK Code to make them
relevant for investment companies. The UK Code is available from the Financial
Reporting Council's website at www.frc.org.uk (https://www.frc.org.uk) .
The Financial Conduct Authority requires all UK listed companies to disclose
how they have complied with the provisions of the UK Code. This statement,
together with the Statement of Directors' Responsibilities, viability
statement and going concern statement set out on pages 46 and 30 respectively,
indicates how the Company has complied with the principles of good governance
of the AIC Code and its requirements on internal control. The Strategic Report
and Directors' Report provide further details on the Company's internal
controls (including risk management), governance and diversity policy.
The Board is satisfied that the Company's current governance framework is
compliant with the AIC Code. The Nomination Committee reviews Directors'
remuneration and as such there is no separate remuneration committee.
Revenue, final dividend and dividend policy
The net revenue return for the year, after finance costs and taxation, was
£18,990,000 (2022: £19,673,000), equivalent to a revenue return per
ordinary share of 12.06 pence (2022: 12.04 pence).
The Board has recommended the payment of a final dividend for the year ended
30 September 2023 of 12.00 pence per share (2022: 12.00 pence) payable on
9 February 2024 to shareholders on the register on 29 December 2023, subject
to approval by shareholders at the AGM on 31 January 2024.
The Board's policy is to pay out substantially all the Company's revenue.
Committees
In order to assist the Board in fulfilling its governance responsibilities, it
has delegated certain functions to committees. The roles and responsibilities
of these committees, together with details of work undertaken during the year
under review, is outlined over the next few pages.
The reports of the Audit and Risk Committee, Management Engagement Committee
and Nomination Committee are incorporated into and form part of the Directors'
Report. Each committee's effectiveness was assessed, and judged to be
satisfactory, as part of the Board's annual review of the Board and its
committees.
Other required Directors' Report disclosures under laws, regulations, and the
AIC Code
Status
The Company carries on business as an investment trust. Its shares are listed
and admitted to trading on the premium segment of the main market of the
London Stock Exchange. It has been approved by HM Revenue & Customs as an
investment trust in accordance with section 1158 of the Corporation Tax
Act 2010, by way of a one-off application and it is intended that the Company
will continue to conduct its affairs in a manner which will enable it to
retain this status.
The Company is domiciled in the UK and is an investment company within the
meaning of section 833 of the Companies Act 2006. The Company is not a
"close" company for taxation purposes.
The articles of association contain provisions requiring the Directors to put
a proposal for the continuation of the Company to shareholders at the Annual
General Meeting ("AGM") in 2026 and thereafter at five yearly intervals.
Share capital and substantial share interests
As at the date of this report, the Company had 153,465,716 ordinary shares of
10p in issue. No shares were held in treasury.
During the year under review 6,000,000 ordinary shares with a nominal value of
10p per share, which represented 3.73% of the Company's ordinary shares in
issue at the start of the year, were bought back. All ordinary shares bought
back were subsequently cancelled.
Details of changes to the Company's share capital during the year under review
are given in note 14 to the accounts on page 62. All shares in issue rank
equally with respect to voting, dividends and any distribution on winding up.
The Company has received notifications in accordance with the Financial
Conduct Authority's Disclosure Guidance and Transparency Rule 5.1.2R of the
below interests in 3% or more of the voting rights attaching to the Company's
issued share capital.
As at 30 September 2023 Date of announcement Number of shares in announcement % of voting rights as at 30 September 2023(1)
City of London Investment Management Company Limited 22 September 2023 21,755,032 14.05
Rathbones Investment Management Limited 22 September 2023 18,702,783 12.08
Schroders plc 21 January 2014 8,483,022 5.48
abrdn 3 July 2019 8,299,097 5.36
Allspring Global Investments Holdings, LLC 10 November 2021 8,277,161 5.35
Wells Capital Management 9 November 2017 8,255,649 5.33
Lazard Asset Management LLC 4 November 2022 7,911,876 5.11
(1)Based on the shares included in the announcement.
Following the year end Rathbones Investment Management Limited notified the
Company that their interest in the voting rights attaching to the Company's
issued share capital had changed to 18,477,070 ordinary shares, 12.00% of the
total voting rights.
Directors' attendance at meetings
The number of scheduled meetings of the Board and its committees held during
the financial year and the attendance of individual Directors is shown below.
Whenever possible all Directors attend the AGM. The Board also met for a small
number of additional, ad hoc, meetings during the year to address time
sensitive matters that arose between scheduled quarterly meetings. These
meetings were generally held at short notice and attended by those Directors
available at the time.
Director Board Audit and Risk Management Nomination
Committee
Engagement
Committee
Committee
James Williams 4/4 2/2 1/1 1/1
Keith Craig 4/4 2/2 1/1 1/1
Julia Goh 4/4 2/2 1/1 1/1
Vivien Gould 4/4 2/2 1/1 1/1
Rupert Hogg(1) 2/2 1/1 1/1 1/1
Martin Porter 4/4 2/2 1/1 1/1
(1)Rupert Hogg was appointed on 1 May 2023.
Provision of information to the auditor
The Directors at the date of approval of this report confirm that, so far as
each of them is aware, there is no relevant audit information of which the
Company's auditor is unaware; and each Director has taken all the steps that
he or she ought to have taken as a Director in order to make himself or
herself aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
Directors' and officers' liability insurance and indemnities
Directors' and officers' liability insurance cover was in place for the
Directors throughout the year. The Company's articles of association provide,
subject to the provisions of UK legislation, an indemnity for Directors in
respect of costs which they may incur relating to the defence of any
proceedings brought against them arising out of their positions as Directors,
in which they are acquitted or judgment is given in their favour by the Court.
This is a qualifying third party indemnity policy and was in place throughout
the year under review for each Director and to the date of this report.
By order of the Board
Schroder Investment Management Limited
Company Secretary
5 December 2023
Audit and Risk Committee Report
Ongoing risk review
The responsibilities and work carried out by the Audit and Risk Committee
during the year under review are set out in the following report. The duties
and responsibilities of the committee, which include monitoring the integrity
of the Company's financial reporting and internal controls, are set out in
further detail below, and may be found in the terms of reference which are set
out on the Company's webpages, www.schroders.co.uk/asiapacific
(https://www.schroders.co.uk/asiapacific) .
All Directors are members of the committee. Julia Goh is the Chair of the
Committee. The Board has satisfied itself that at least one of the committee's
members has recent and relevant financial experience and that the committee as
a whole has competence relevant to the sector in which the Company operates.
The AIC Code permits the Chairman of the Board to be a member of the audit
committee of an investment trust. Recognising James Williams' significant
experience, it is considered appropriate for the Chairman to be a member of
the Audit and Risk Committee.
Approach
The committee's key roles and responsibilities are set out in the table below.
Risks and Internal Controls Financial Reports Audit
and Valuation
Principal risks Financial statements Audit results
To establish a process for identifying, assessing, managing and monitoring the To monitor the integrity of the financial statements of the Company and any To discuss any matters arising from the audit and recommendations made by the
principal risks of the Company. formal announcements relating to the Company's financial performance and auditor.
valuation. To review the half year report.
Emerging risks Going concern Auditor appointment, independence and performance
To ensure a robust assessment of the Company's emerging risks and procedures To review the position and make recommendations to the Board in relation to To make recommendations to the Board, in relation to the appointment,
are in place to identify emerging risks, and an explanation of how these are whether it considers it appropriate to adopt the going concern basis of reappointment, effectiveness and removal of the external auditor, to review
being managed or mitigated. accounting in preparing its annual and half-yearly financial statements. their independence, and to approve their remuneration and terms of engagement.
Reviewing and agreeing the audit plan and engagement letter.
The below table sets out how the committee discharged its duties during the
year. The committee met twice during the year. Further details on attendance
can be found on page 36. An evaluation of the committee's effectiveness and
review of its terms of reference was completed during the year.
Significant issues identified during the committee's review of the Company's
principal and emerging risks, and key matters communicated by the auditor
during its reporting are included below.
Application during the year
Risks and Internal Controls Financial Reports and Valuation Audit
Service provider Recognition of investment income Effectiveness of the independent audit process and auditor performance
Evaluated the effectiveness of the independent audit firm and process prior to
controls Considered dividends received against forecast and the allocation of special making a recommendation that it should be re-appointed at the forthcoming AGM.
dividends to income or capital. Evaluated the auditor's performance against agreed criteria
Reviewing the operational controls maintained by the Manager, administrator, including: qualification; knowledge, expertise and resources; independence
depositary and registrar. policies; effectiveness of audit planning; adherence to auditing standards;
and overall competence was considered, alongside feed back from the Manager on
the audit process. The committee noted the auditor had demonstrated its
professional scepticism during the audit.
Internal controls and risk management Calculation of the investment management fee Auditor independence
Consideration of several key aspects of internal control and risk management Consideration of methodology used to calculate the fees, matched against the Ernst & Young LLP has provided audit services to the Company for five
operating within the Manager, depositary, custodian and registrar, including criteria set out in the AIFM agreement. years, since appointment by the Company on 25 July 2019 to audit the
assurance reports and presentations on these controls. financial statements for the year ended 30 September 2019 and subsequent
financial periods. The auditor is required to rotate the senior statutory
auditor every five years. There are no contractual obligations restricting the
choice of external auditor.
This is the fifth year that the senior statutory auditor, Caroline Mercer has
conducted the audit of the Company's financial statements. Accordingly, this
is the last audit for which Ms Mercer will act as the senior statutory auditor
for the Company. The Company is compliant with the provisions of the
September 2014 Competition and Markets Authority Order, which requires that
FTSE 350 companies put their audit out to tender at least every ten years.
Compliance with the investment trust qualifying rules in S1158 of the Overall accuracy of the annual report and accounts Consideration of the draft Audit results
Corporation Tax Act 2010 annual report and accounts and the letter of representation from the Manager
in support of the letter of representation to the auditor. Met with and reviewed a comprehensive report from the auditor which detailed
Consideration of the Manager's report confirming compliance.
the results of the audit, compliance with regulatory requirements, safeguards
that have been established, and on their own internal quality control
procedures.
Principal risks Valuation and existence of holdings Meetings with the auditor
Reviewing the principal risks faced by the Company and the system of internal Quarterly review of portfolio holdings and assurance reports. Met the auditor without representatives of the Manager present.
control. Representatives of the auditor attended the committee meeting at which the
draft annual report and accounts were considered.
Emerging risks Reviewing the emerging risks for the Company. Fair balanced and understandable Provision of non-audit services by the auditor
Reviewed the annual report and accounts to ensure that it was fair, balanced The committee has reviewed the FRCs Guidance on Audit Committees and has
and understandable. formulated a policy on the provision of non‑audit services by the Company's
auditor. The committee has determined that the Company's appointed auditor
will not be considered for the provision of certain non-audit services, such
as accounting and preparation of the financial statements, internal audit and
custody. The auditor may, if required, provide other non-audit services which
will be judged on a case-by-case basis. The auditor did not provide any
non-audit services to the Company during the year.
Going concern and viability Reviewing the impact of risks on going concern and Consent to continue as auditor
longer-term viability.
Ernst & Young LLP indicated to the committee their willingness to
continue to act as auditor.
Recommendations made to, and approved by, the Board:
As a result of the work performed, the committee has concluded that the annual
report for the year ended 30 September 2023, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's position, performance, business model and
strategy, and has reported on these findings to the Board. The Board's
conclusions in this respect are set out in the Statement of Directors'
Responsibilities on page 46.
Having reviewed the performance of the auditors as described above, the
committee considered it appropriate to recommend the firm's re-appointment.
Resolutions to re-appoint Ernst & Young LLP as auditor to the Company,
and to authorise the Directors to determine their remuneration will be
proposed at the AGM.
Julia Goh
Chair of the Audit and Risk Committee
Management Engagement Committee Report
The Management Engagement Committee is responsible for (1) the monitoring and
oversight of the Manager's performance and fees, and confirming the Manager's
ongoing suitability, and (2) reviewing and assessing the Company's other
service providers, including reviewing their fees. All Directors are members
of the committee. Martin Porter is the Chair of the committee. Its terms of
reference are available on the Company's webpages,
www.schroders.co.uk/asiapacific (https://www.schroders.co.uk/asiapacific) .
Approach
The committee's key roles and responsibilities are set out in the table below.
Oversight of the Manager Oversight of other service providers
The committee: The committee reviews the performance and competitiveness of the following
service providers on at least an annual basis:
• reviews the Manager's performance, over the short and long
term, against the Benchmark, peer group and the market; • Depositary and custodian
• considers the reporting it has received from the Manager • Corporate Broker
throughout the year and the reporting from the Manager to the shareholders;
• Registrar
• assesses management fees on an absolute and relative basis,
receiving input from the Company's broker, including peer group and industry • Lender
figures, as well as the structure of the fees;
The committee also receives a report from the Company Secretary on ancillary
• reviews the appropriateness of the Manager's contract service providers, and considers any recommendations.
including terms such as notice period; and
The committee notes the Audit and Risk Committee's review of the auditor.
• assesses whether the Company receives appropriate
administrative, accounting company secretarial and marketing support from the
Manager.
Application during the year
The committee undertook a detailed review of the Manager's performance and The annual review of each of the service providers was satisfactory.
agreed that it has the appropriate depth and quality of resource to deliver
superior returns over the longer term. The committee noted that the Audit and Risk Committee had undertaken a review
of the internal controls of the Company, the Manager, registrar, depositary
The committee reviewed the management fee and agreed a change with the and custodian. Further details are provided in the Audit and Risk Committee
Manager, resulting in a reduction in overall fees, from 1 April 2023, as Report.
detailed in the Chairman's Statement, on page 5.
The committee reviewed the other services provided by the Manager and agreed
they were satisfactory.
Recommendations made to, and approved by, the Board:
• That the ongoing appointment of the Manager on the terms of
the AIFM agreement was in the best interests of shareholders as a whole.
• That the Company's service providers' performance remained
satisfactory.
• That the fee structure be varied, as detailed in the
Chairman's Statement.
Nomination Committee Report
Selection and ongoing assessment of Directors
The Nomination Committee is responsible for (1) the recruitment, selection
and induction of Directors, (2) their assessment during their tenure, and
(3) the Board's succession plans. All Directors are members of the committee.
Keith Craig is the chair of the committee. Its terms of reference are
available on the Company's webpages, www.schroders.co.uk/asiapacific
(https://www.schroders.co.uk/asiapacific) .
Approach
The committee's key roles and responsibilities are set out in the table below.
Selection and induction Board evaluation and Directors' fees Succession
• The committee prepares a job specification for each role, • The committee assesses each Director annually, with the SID • The Board's succession policy is that Directors' tenure,
and an independent recruitment firm is appointed. For the Chairman and the leading the evaluation of the Chairman, and will use an external Board including that of the Chairman, will be for no longer than nine years, except
chairs of committees, the committee considers current Board members too. evaluator every three years. in exceptional circumstances and that each Director will be subject to annual
re-election at the AGM.
• A job specification outlines the knowledge, professional • The evaluation focuses on whether each Director continues to
skills, personal qualities and experience requirements. demonstrate commitment to their role and provides a valuable contribution to • The committee reviews the Board's current and future needs
the Board during the year, taking into account time commitment, independence, at least annually. Should any need be identified the committee will initiate
• Potential candidates are assessed against the Company's conflicts and training needs. the selection process.
diversity policy.
• Following the evaluation, the committee provides a • The committee oversees the handover process for retiring
• The committee discusses the long list, invites a number of recommendation to shareholders with respect to the annual re-election of Directors.
candidates for interview and makes a recommendation to the Board. Directors at the AGM.
• The committee reviews the induction of new Directors. • All Directors retire at the AGM and their re-election is
subject to shareholder approval.
• Any new Director will be proposed for election by
shareholders at the first AGM following appointment. • The committee reviews Directors' fees, taking into account
comparative data and reports to shareholders. No Directors are involved in
making recommendations with respect to their own remuneration.
• Any proposed changes to the remuneration policy for
Directors is discussed and reported to shareholders.
Application during the year
Selection and induction Board evaluation and Directors' fees Succession
• The committee noted that following his appointment Rupert • The annual Board and committee evaluation process was • Rupert Hogg was recommended to the Board for appointment as
Hogg engaged in an induction programme. undertaken during the year, and the evaluation concluded in September 2023. a non-executive Director following the engagement of Cornforth Consulting to
This year the evaluation was undertaken internally by the completion of identify potential candidates for a new board appointment. Cornforth
• Rupert Hogg will be proposed for election as a Director at questionnaires and individual discussions by the Chairman with each Director. Consulting had no connection with the Company or any of the Directors.
the AGM to be held on 31 January 2024, as set out in resolution 5 of the An externally facilitated review is conducted every three years. The next
notice of annual general meeting. external review is due to be carried out in 2024. • The committee reviewed the succession policy and agreed it
was still fit for purpose.
• The committee also reviewed each Directors time commitment
and independence by reviewing a complete list of appointments, including pro • James Williams was appointed as Chairman on 3 February 2021
bono not for profit roles, to ensure that each Director remained free from and it was announced that he would serve a maximum of five years in that role
conflict and had sufficient time available to discharge each of their duties bringing continuity and experience to the position having served on the Board
effectively. The SID led the review of these matters in respect of the since 2014. In light of the Chairman now having served for nine years as a
Chairman. All Directors were considered to be independent in character and Director, his tenure and continued independence were reviewed by the
judgement. Nomination Committee. The Nomination Committee subsequently concluded that it
was appropriate that James Williams continue to serve as Chairman and,
• The committee considered each Director's contributions, and notwithstanding the length of tenure, he remains independent of the Manager in
noted that in addition to extensive experience as professionals and character and judgment. In forming this conclusion, the Nomination Committee
non-executive Directors, each Director had valuable skills and experience, as recognised the Chairman's track record overseeing the Company through a
detailed in their biographies on pages 32 and 33. challenging investment cycle which included the COVID-19 pandemic and the
negotiation of a reduction in the management fee, effective from 1 April
• Based on its assessment the committee provided individual 2023. The Nomination Committee also considered the importance of maintaining
recommendations for each Director's re-election. continuity on the Board following the appointment of Rupert Hogg as a Director
on 1 May 2023 and as Keith Craig will step down from the Board on 31 January
• The committee reviewed Directors' fees, using information on 2024.
fees paid to directors of other investment trusts managed by Schroders and
peer group companies, and recommended that Directors' fees should be increased
with effect from 1 October 2023 for the year ending 30 September 2024.
Further details are provided in the Remuneration Report.
Recommendations made to, and approved by, the Board:
• That Rupert Hogg be appointed as a non-executive Director
with effect from 1 May 2023.
• That Director's fees would be increased with effect from
1 October 2023.
• That all Directors remain independent, continue to
demonstrate commitment to their roles, provide a valuable contribution to the
deliberations of the Board, contribute towards the Company's long-term,
sustainable success, and remain free from conflicts with the Company and its
Directors, so should all be recommended for re-election by shareholders at the
AGM.
Directors' Remuneration Report
Introduction
The following remuneration policy is currently in force and is subject to a
binding vote every three years unless any changes are proposed to the policy
in the meantime. The next vote would ordinarily be at the AGM to be held in
2026. However, it is proposed that a change is made to the remuneration
policy, details of which are provided below, and a resolution to approve the
revised policy will be proposed at the forthcoming AGM. The below Directors'
annual report on remuneration is subject to an annual advisory vote. An
ordinary resolution to approve this report will be put to shareholders at the
forthcoming AGM.
At the AGM held on 1 February 2023 when the policy was last voted on by
shareholders, 99.87% of the votes cast (including votes cast at the Chairman's
discretion) in respect of approval of the Directors' remuneration policy were
in favour, while 0.13% were against. 70,007 votes were withheld.
At the AGM held on 1 February 2023, 99.85% of the votes cast (including votes
cast at the Chairman's discretion) in respect of approval of the Directors'
remuneration report for the year ended 30 September 2022 were in favour,
while 0.15% were against. 76,993 votes were withheld.
Directors' remuneration policy
Following review of the Remuneration Policy by the Nomination Committee, it
was concluded to propose a change to the overall remuneration structure to
enable the SID to receive a higher rate fee than the other Directors. Under
the existing policy only the Chairman and Chair of the Audit and Risk
Committee are entitled to receive a higher fee to reflect their additional
responsibilities. The Nomination Committee considered that the current
remuneration structure did not adequately recognise the additional time
commitment and responsibilities of the SID.
The proposed changes to the policy are highlighted in bold text in the policy
set out below.
The determination of the Directors' fees is a matter dealt with by the
Nomination Committee and the Board.
It is the Board's policy to determine the level of Directors' remuneration
having regard to amounts payable to non-executive directors in the industry
generally, the role that individual directors fulfil in respect of Board and
committee responsibilities, and time committed to the Company's affairs,
taking into account the aggregate limit of fees set out in the Company's
articles of incorporation (currently £300,000). Any increase in the level set
out therein requires approval by the Board and the Company's shareholders.
The Chairman of the Board, and the Chair of the Audit and Risk Committee and
the Senior Independent Director each receive fees at a higher rate than the
other Directors to reflect their additional responsibilities. The fees payable
to Directors are not performance related. They are set at a level to recruit
and retain individuals of sufficient calibre, with the level of knowledge,
experience and expertise necessary to promote the success of the Company in
reaching its short and long-term strategic objectives.
The Board and its committees exclusively comprise non- executive Directors. No
director past or present has an entitlement to a pension from the Company, and
the Company has not, and does not intend to, operate a share scheme for
directors or to award any share options or long-term performance incentives to
any director. No Director has a service contract with the Company, although
Directors have a letter of appointment. Directors do not receive exit payments
and are not provided with any compensation for loss of office. No other
payments are made to Directors other than the reimbursement of reasonable
out-of-pocket expenses incurred in attending to the Company's business.
Implementation of policy
The terms of Directors' letters of appointment are available for inspection at
the Company's registered office address during normal business hours and
during the AGM at the location of such meeting.
The Board did not seek the views of shareholders in setting this remuneration
policy. Any comments on the remuneration policy received from shareholders
would be considered on a case-by-case basis.
As the Company does not have any employees, no employee pay and employment
conditions were taken into account when setting this remuneration policy and
no employees were consulted in its construction.
Directors' fees are reviewed annually and take into account research from
third parties on the fee levels of directors of peer group companies, as well
as industry norms and factors affecting the time commitment expected of the
Directors. New directors are subject to the provisions set out in this
remuneration policy.
Directors' annual report on remuneration
This report sets out how the remuneration policy was implemented during the
year ended 30 September 2023.
Remuneration Report for the year ended 30 September 2023
Fees paid to Directors
The following amounts were paid by the Company to Directors for their services
in respect of the year ended 30 September 2023 and the preceding financial
year. Directors' remuneration is all fixed; they do not receive any variable
remuneration. The performance of the Company over the financial year is
presented on page 16.
Fees Taxable benefits(1) Total Change in annual fee over years ended 30 September
2023 2022 2023 2022 2023 2022 2023 2022 2021
Director £ £ £ £ £ £ % % %
James Williams (Chairman) 45,000 45,000 3,093 484 48,093 45,484 5.7 13.3 31.5
Keith Craig 33,000 33,000 762 539 33,762 33,539 0.7 9.8 1.5
Julia Goh(2) 40,000 35,550 2,043 993 42,043 36,543 15.1 n/a n/a
Vivien Gould 33,000 33,000 3,258 1,568 36,258 34,568 4.9 8.3 (1.9)
Rosemary Morgan(3) - 13,443 - 1,594 - 15,037 n/a n/a 0.6
Martin Porter 33,000 33,000 763 484 33,763 33,484 0.8 10.7 0.5
Rupert Hogg(4) 13,750 - 439 - 14,189 - n/a n/a n/a
197,750 192,993 10,358 5,662 208,108 198,655
(1)Comprise amounts reimbursed for expenses incurred in carrying out business
for the Company, and which have been grossed up to include PAYE and NI
contributions.
(2)Appointed as a Director on 25 October 2021 and Chair of the Audit and Risk
Committee on 1 February 2022.
(3)Retired from the Board on 1 February 2022.
(4)Appointed as a Director on 1 May 2023.
The information in the above table has been audited.
Consideration of matters relating to Directors' remuneration
Directors' remuneration was last reviewed by the Board in September 2023. The
members of the Board at the time that remuneration levels were considered were
as set out on pages 32 and 33. Although no external advice was sought in
considering the levels of Directors' fees, information on fees paid to
directors of investment trusts managed by Schroders and peer group companies
provided by the Manager and corporate broker was taken into consideration.
Following annual review, the Board agreed that fees should be increased with
effect from 1 October 2023 to the following levels: Chairman: £49,000,
chair of the Audit and Risk Committee: £44,000, Director: £36,000. Subject
to the passing of resolution 4, as set out in the notice of meeting, at the
AGM on 31 January 2024 it is proposed, to recognise the additional time
commitment and responsibilities of the SID that, following the AGM, the fee
paid to the SID will increase to £40,000. The Board will continue to review
fee levels on an annual basis.
Expenditure by the Company on remuneration and distributions to shareholders
The table below compares the remuneration payable to Directors to
distributions paid to shareholders during the year under review and the prior
financial year. In considering these figures, shareholders should take into
account the Company's investment objective.
Year ended 30 September Year ended 30 September Change
2023
2022
£000 £000 %
Remuneration payable to Directors 208 199 4.5
Distributions paid to shareholders
- Dividends paid during the year 19,030 15,922
- Share buy backs 29,775 21,653
Total distributions paid to shareholders 48,805 37,575 29.9
The information in the above table has been audited.
Directors' share interests
The Company's articles of association do not require Directors to own shares
in the Company. The interests of Directors, including those of connected
persons, at the beginning and end of the financial year under review are set
out below.
Ordinary Ordinary
shares
shares
of 1p each
of 1p each
30 September
30 September
2023
2022
James Williams 20,000 15,125
Keith Craig 12,581 12,581
Julia Goh 15,000 15,000
Vivien Gould 5,000 5,000
Rupert Hogg* - n/a
Martin Porter 20,000 10,000
*Rupert Hogg was appointed as a Director on 1 May 2023.
The information in the above table has been audited. Following the year end,
Rupert Hogg purchased 2,100 shares. There have been no further changes.
James Williams
Chairman
5 December 2023
Statement of Directors' Responsibilities in respect of the Annual Report and
Accounts
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, comprising
FRS 102, have been followed, subject to any material departures disclosed and
explained in the financial statements;
• notify the Company's shareholders in writing about the use
of disclosure exemptions in FRS 102, used in the preparation of 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. They 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 webpage
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 on pages 32 and
33, 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 and applicable law), give a true and fair view of
the assets, liabilities, financial position and net return of the Company;
• the Strategic Report contained in the report and accounts
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 accounts, 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
James Williams
Chairman
5 December 2023
Independent Auditor's Report
Opinion
We have audited the financial statements of Schroder AsiaPacific Fund plc
("the Company") for the year ended 30 September 2023 which comprise the
Income Statement, the Statement of Changes in Equity, the Statement of
Financial Position and the related notes 1 to 20, including a summary of
significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and United Kingdom
Accounting Standards including FRS 102 "The Financial Reporting Standard
applicable in the UK and Republic of Ireland" (United Kingdom Generally
Accepted Accounting Practice).
In our opinion, the financial statements:
• give a true and fair view of the Company's affairs as at
30 September 2023 and of its profit for the year then ended;
• have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of
the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Company and we remain independent of Company in conducting the
audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors'
assessment of the Company's ability to continue to adopt the going concern
basis of accounting included:
• Confirmation of our understanding of the Company's going
concern assessment process and engagement with the Directors and the Company
Secretary to determine if all key factors were considered in their assessment.
• Inspection of the Directors' assessment of going concern,
including the revenue forecast, for the period to 31 December 2024 which is
at least 12 months from the date these financial statements are authorised
for issue. In preparing the revenue forecast, the Company has concluded that
it is able to continue to meet its ongoing costs as they fall due.
• Review of the factors and assumptions, including the impact
of the current economic environment and other significant events that could
give rise to market volatility, as applied to the revenue forecast and the
liquidity assessment of the investments. We considered the appropriateness of
the methods used to calculate the revenue forecast and the liquidity
assessment and determined, through testing of the methodology and
calculations, that the methods, inputs and assumptions utilised are
appropriate to be able to make an assessment for the Company.
• Consideration of the mitigating factors included in the
revenue forecast that are within the control of the Company. We reviewed the
Company's assessment of the liquidity of investments held and evaluated the
Company's ability to sell those investments in order to cover working capital
requirements should revenue decline significantly.
• In relation to the Company's borrowing arrangements, we
inspected the Directors' assessment of the risk of breaching the debt
covenants as a result of a reduction in the value of the Company's portfolio.
We recalculated the Company's compliance with debt covenants in the scenarios
assessed by the Directors and performed reverse stress testing in order to
identify what factors would lead to the Company breaching the financial
covenants.
• Review of the Company's going concern disclosures included
in the annual report in order to assess that the disclosures were appropriate
and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any material
uncertainties relating to 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 to 31 December 2024. In relation to the
Company's reporting on how they have applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to in relation to the
Directors' statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report. However,
because not all future events or conditions can be predicted, this statement
is not a guarantee as to the Company's ability to continue as a going concern.
Overview of our audit approach
Key audit matters l Risk of incomplete or inaccurate revenue recognition, including the
classification of special dividends as revenue or capital items in the Income
Statement.
l Risk of incorrect valuation or ownership of the investment portfolio.
Materiality l Overall materiality of £8.51m which represents 1% of shareholders' funds.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation
of performance materiality determine our audit scope for the Company. This
enables us to form an opinion on the financial statements. We take into
account size, risk profile, the organisation of the Company and effectiveness
of controls, including controls and changes in the business environment when
assessing the level of work to be performed. All audit work was performed
directly by the audit engagement team.
Climate change
There has been increasing interest from stakeholders as to how climate change
will impact companies. The Company has determined that the most significant
future impacts from climate change could affect the Company's investments and
the overall investment process. This is explained on page 29 in the principal
and emerging risks and uncertainties which form part of the "Other
information," rather than the audited financial statements. Our procedures on
these disclosures therefore consisted solely of considering whether they are
materially inconsistent with the financial statements, or our knowledge
obtained in the course of the audit or otherwise appear to be materially
misstated.
Our audit effort in considering climate change was focused on the adequacy of
the Company's disclosures in the financial statements as set out in
note 1(a) and conclusion that there was no material impact of climate change
on the valuation of the investments. We also challenged the Directors'
considerations of climate change in their assessment of viability and
associated disclosures.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in our opinion thereon, and we do not
provide a separate opinion on these matters.
Risk Our response to the risk Key observations communicated to the Audit and Risk Committee
Risk of incomplete or inaccurate revenue recognition, including the We performed the following procedures: The results of our procedures identified no material misstatements in relation
classification of special dividends as revenue or capital items in the Income
to the risk of incomplete or inaccurate revenue recognition, including
Statement (refer to the Audit and Risk Committee Report set out on pages 37 to classification of special dividends as revenue or capital items in the Income
39 and the accounting policy set out on pages 57 and 58).
Statement.
We obtained an understanding of the Manager's and Administrator's processes
and controls surrounding revenue recognition and classification of special
The total revenue for the year to 30 September 2023 was £24.02 million dividends by performing walkthrough procedures.
(2022: £24.67 million), consisting primarily of dividend income from listed
equity investments.
For all dividends received and accrued, we recalculated the dividend income by
The Company received special dividends amounting to £1.17m million multiplying the investment holdings at the ex-dividend date, traced from the
(2022: £0.67 million), of which £0.87m were classified as revenue and accounting records, by the dividend per share, which was agreed to an
£0.30m were classified as capital (2022: £0.67 million classified as independent data vendor. We also agreed all exchange rates to an external
revenue and £nil classified as capital). source where applicable and, for a sample of dividends received and accrued
dividends, we agreed the amounts to bank statements.
The investment income receivable by the Company during the year directly To test completeness of recorded income, we verified that dividends had been
affects the Company's revenue return. There is a risk of incomplete or recorded for each investee company held during the year with reference to
inaccurate recognition of revenue through the failure to recognise proper investee company announcements obtained from an independent data vendor.
income entitlements or to apply an appropriate accounting treatment.
For all accrued dividends, we reviewed the investee Company announcements to
In addition to the above, the Directors may be required to exercise judgement assess whether the entitlement arose prior to 30 September 2023.
in determining whether income receivable in the form of special dividends
should be classified as 'revenue' or 'capital' in the Income Statement.
For all investments held during the year, we compared the type of dividends
paid with reference to an external data source to identify those which were
'special'. We confirmed seven special dividends, amounting to £1.17 million,
were received during the year. We tested a sample of five special dividends,
by assessing the appropriateness of classification by reviewing the underlying
rationale of the distribution.
Risk of Incorrect valuation or ownership of the investment portfolio We performed the following procedures: The results of our procedures identified no material misstatements in relation
to the risk of incorrect valuation or ownership of the investment portfolio.
(refer to the Audit and Risk Committee Report set out on pages 37 to 39 the
accounting policy set out on pages 57 and 58).
We obtained an understanding of the Administrator's processes and controls
surrounding investment title and the pricing of listed equity investments by
performing walkthrough procedures.
The valuation of the investment portfolio at 30 September 2023 was
£874.53 million (2022: £882.80 million) consisting of listed equity
investments.
For all investments in the portfolio, we compared the market prices and
exchange rates applied to an independent pricing vendor and recalculated the
investment valuations as at the year end.
The valuation of investments held in the investment portfolio is the key
driver of the Company's net asset value and total return. Incorrect investment
pricing, or failure to maintain proper legal title of the investments held by
the Company, could have a significant impact on the portfolio valuation and We reviewed the prices for all investments in the portfolio to identify prices
the return generated for shareholders. that have not changed within five business days from year end to verify
whether the listed price is a valid fair value.
The fair value of listed investments is determined using quoted market bid
prices at close of business on the reporting date. We agreed the Company's investments to the independent confirmations received
directly from the Company's Custodian and Depositary as at 30 September 2023.
There have been no changes to the areas of audit focus raised in the above
risk table from the prior year.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in
evaluating the effect of identified misstatements on the audit and in forming
our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of
the users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Company to be £8.51 million
(2022: £8.78 million), which is 1% (2022: 1%) of shareholders' funds. We
believe that shareholders' funds provides us with materiality aligned to the
key measure of the Company's performance.
Performance materiality
The application of materiality at the individual account or balance level. It
is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our assessment of the
Company's overall control environment, our judgement was that performance
materiality was 75% (2022: 75%) of our planning materiality, namely
£6.38 million (2022: £6.59 million). We have set performance materiality
at this percentage due to our past experience of the audit that indicates that
a lower risk of misstatements, both corrected and uncorrected.
Given the importance of the distinction between revenue and capital for
investment trusts, we have also applied a separate testing threshold for the
revenue column of the Income Statement of £1.04 million
(2022: £1.07 million), being 5% of the net revenue return before taxation.
Reporting threshold
An amount below which identified misstatements are considered as being clearly
trivial.
We agreed with the Audit and Risk Committee that we would report to them all
uncorrected audit differences in excess of £0.43 million
(2022: £0.44 million), which is set at 5% of planning materiality, as well
as differences below that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report
other than the financial statements and our auditor's report thereon. The
Directors are responsible for the other information contained within the
annual report.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in this report, we do
not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors' Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
l the information given in the strategic report and the Directors' report for
the financial year for which the financial statements are prepared is
consistent with the financial statements; and
l the strategic report and Directors' reports have been prepared in accordance
with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its
environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or Directors' report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
l adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us; or
l the financial statements and the part of the Directors' Remuneration Report to
be audited are not in agreement with the accounting records and returns; or
l certain disclosures of Directors' remuneration specified by law are not made;
or
l we have not received all the information and explanations we require for our
audit
Corporate Governance Statement
We have reviewed the Directors' statement in relation to going concern,
longer-term viability and that part of the Corporate Governance Statement
relating to the Company's compliance with the provisions of the UK Corporate
Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each
of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements or our knowledge obtained during the
audit:
l Directors' statement with regards to the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identified set out
on page 30;
l Directors' explanation as to its assessment of the Company's prospects, the
period this assessment covers and why the period is appropriate set out on
page 30;
l Director's statement on whether it has a reasonable expectation that the
Company will be able to continue in operation and meets its liabilities set
out on page 30;
l Directors' statement on fair, balanced and understandable set out on page 46;
l Board's confirmation that it has carried out a robust assessment of the
emerging and principal risks set out on pages 27 to 29;
l The section of the annual report that describes the review of effectiveness of
risk management and internal control systems set out on page 29 and;
l The section describing the work of the audit and risk committee set out on
pages 37 to 39.
Responsibilities of directors
As explained more fully in the Directors' responsibilities statement set out
on page 46, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect irregularities, including fraud. The risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. The
extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud
rests with both those charged with governance of the Company and management.
l We obtained an understanding of the legal and regulatory frameworks that are
applicable to the Company and determined that the most significant are United
Kingdom Generally Accepted Accounting Practice, the Companies Act 2006, the
Listing Rules, UK Corporate Governance Code, the Association of Investment
Companies' Code and Statement of Recommended Practice, Section 1158 of the
Corporation Tax Act 2010 and The Companies (Miscellaneous Reporting)
Regulations 2018.
l We understood how the Company is complying with those frameworks through
discussions with the Audit and Risk Committee and Company Secretary, review of
board minutes and the Company's documented policies and procedures.
l We assessed the susceptibility of the Company's financial statements to
material misstatement, including how fraud might occur by considering the key
risks impacting the financial statements. We identified a fraud risk with
respect to incomplete or inaccurate revenue recognition through incorrect
classification of special dividends as revenue or capital items in the Income
Statement. Further discussion of our approach is set out in the key audit
matter above.
l Based on this understanding we designed our audit procedures to identify
non-compliance with such laws and regulations. Our procedures involved review
of the Company Secretary's reporting to the Directors with respect to the
application of the documented policies and procedures and review of the
financial statements to ensure compliance with the reporting requirements of
the Company.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at
https://www.frc.org.uk/auditorsresponsibilities
(https://www.frc.org.uk/auditorsresponsibilities) . This description forms
part of our auditor's report.
Other matters we are required to address
l Following the recommendation from the Audit and Risk committee, we were
appointed by the Company on 26 July 2019 to audit the financial statements
for the year ending 30 September 2019 and subsequent financial periods.
l The period of total uninterrupted engagement including previous renewals and
reappointments is five years, covering the years ending 30 September 2019 to
30 September 2023.
l The audit opinion is consistent with the additional report to the Audit and
Risk committee.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Caroline Mercer (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor Edinburgh
5 December 2023
Income Statement
for the year ended 30 September 2023
2023 2022
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Gains/(losses) on investments held at fair value through profit or loss 2 - 9,601 9,601 - (154,731) (154,731)
Net foreign currency gains/(losses) - 293 293 - (2,936) (2,936)
Income from investments 3 23,863 304 24,167 24,673 - 24,673
Other interest receivable and similar income 3 153 - 153 12 - 12
Gross return/(loss) 24,016 10,198 34,214 24,685 (157,667) (132,982)
Investment management fee 4 (1,552) (4,656) (6,208) (1,728) (5,185) (6,913)
Administrative expenses 5 (1,409) - (1,409) (1,437) - (1,437)
Net return/(loss) before finance costs and taxation 21,055 5,542 26,597 21,520 (162,852) (141,332)
Finance costs 6 (231) (690) (921) (48) (145) (193)
Net return/(loss) before taxation 20,824 4,852 25,676 21,472 (162,997) (141,525)
Taxation 7 (1,834) (1,939) (3,773) (1,799) 1,145 (654)
Net return/(loss) after taxation 18,990 2,913 21,903 19,673 (161,852) (142,179)
Return/(loss) per share 8 12.06p 1.85p 13.91p 12.04p (99.08)p (87.04)p
The "Total" column of this statement is the profit and loss account of the
Company. The "Revenue" and "Capital" columns represent supplementary
information prepared under guidance issued by The Association of Investment
Companies. The Company has no other items of other comprehensive income, and
therefore the net return after taxation is also the total comprehensive income
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 on pages 57 to 70 form an integral part of these accounts.
Statement of Changes in Equity
for the year ended 30 September 2023
Note Called-up Share Capital Warrant Share Capital Revenue Total
share
premium
redemption
exercise
purchase
reserves
reserve
£'000
capital
£'000
reserve
reserve
reserve
£'000
£'000
£'000
£'000
£'000
£'000
At 30 September 2021 16,486 100,956 3,658 8,704 16,110 894,363 17,664 1,057,941
Repurchase and cancellation of the Company's own shares (406) - 406 - (16,110) (5,543) - (21,653)
Net (loss)/return after taxation - - - - - (161,852) 19,673 (142,179)
Dividend paid in the year 9 - - - - - - (15,922) (15,922)
At 30 September 2022 16,080 100,956 4,064 8,704 - 726,968 21,415 878,187
Repurchase and cancellation of the Company's own shares (600) - 600 - - (29,775) - (29,775)
Net return after taxation - - - - - 2,913 18,990 21,903
Dividend paid in the year 9 - - - - - - (19,030) (19,030)
At 30 September 2023 15,480 100,956 4,664 8,704 - 700,106 21,375 851,285
The notes on pages 57 to 70 form an integral part of these accounts.
Statement of Financial Position
at 30 September 2023
Note 2023 2022
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 10 874,534 882,801
Current assets
Debtors 11 2,812 7,920
Cash at bank and in hand 11 6,785 11,343
9,597 19,263
Current liabilities
Creditors: amounts falling due within one year 12 (28,068) (19,964)
Net current liabilities (18,471) (701)
Total assets less current liabilities 856,063 882,100
Non current liabilities
Deferred taxation 13 (4,778) (3,913)
Net assets 851,285 878,187
Capital and reserves
Called-up share capital 14 15,480 16,080
Share premium 15 100,956 100,956
Capital redemption reserve 15 4,664 4,064
Warrant exercise reserve 15 8,704 8,704
Capital reserves 15 700,106 726,968
Revenue reserve 15 21,375 21,415
Total equity shareholders' funds 851,285 878,187
Net asset value per share 16 549.92p 546.13p
These accounts were approved and authorised for issue by the Board of
Directors on 5 December 2023 and signed on its behalf by:
James Williams
Chairman
The notes on pages 57 to 70 form an integral part of these accounts.
Registered in England and Wales as a public company limited by shares
Company registration number: 03104981
Notes to the accounts
for the year ended 30 September 2023
1. Accounting Policies
(a) Basis of accounting
Schroder AsiaPacific Fund 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 accounts 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 accounts have been prepared on a going concern basis under the historical
cost convention, as modified by the revaluation of investments held at fair
value through profit or loss. The Directors believe that the Company has
adequate resources to continue operating to 31 December 2024, which is at
least 12 months from the date of approval of these accounts. 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 this are given in the
Chairman's Statement, Investment Managers' Review, Going Concern Statement,
Viability Statement and under the Principal and Emerging Risks heading on page
29.
In preparing these financial statements the Directors have considered the
impact of climate change on the value of the Company's investments. The Board
has concluded that, as the investments are all valued using quoted bid prices
in active markets, the fair value reflects market participant's view of
climate change risk.
The Company has not presented a statement of cash flows, as it is not required
for an investment trust which meets certain conditions; in particular that
substantially all of the Company's investments are highly liquid and carried
at market value.
The accounts are presented in sterling and amounts have been rounded to the
nearest thousand.
The accounting policies applied to these accounts are consistent with those
applied in the accounts for the year ended 30 September 2022.
No significant judgements, estimates or assumptions have been required in the
preparation of the accounts for the current or preceding 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 is managed and its performance evaluated on
a fair value basis, in accordance with a documented investment objective and
information is provided internally on that basis to the Company's Board of
Directors. Accordingly, upon initial recognition the investments are
classified 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 the investments are valued at fair value, which are quoted bid
prices for investments traded in active markets.
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".
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 shares, including the related stamp duty and
transactions costs, is charged to "Share repurchase reserve". Once the "Share
repurchase reserve" has been fully utilised the cost of repurchasing shares is
then charged to "Capital reserves".
(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.
Overseas dividends are included gross of any withholding tax.
Where the Company has elected to receive scrip 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.
- 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 on page 61.
(f) Finance costs
Finance costs, including any premiums payable on settlement or redemption and
direct issue costs, are accounted for on an accruals basis using the effective
interest method and in accordance with the provisions of 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) Financial instruments
Cash at bank and in hand may comprise cash 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 and overdrafts are initially measured at the transaction price and
subsequently at amortised cost. They are recorded at the proceeds received net
of direct issue costs.
(h) Taxation
The tax charge for the year is based on amounts expected to be received or
paid.
Deferred tax is provided on all timing differences that have originated but
not reversed by the accounting 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 accounts 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 held at fair value, denominated in foreign currencies
at the year end are translated at the rates of exchange prevailing at
16:00 hours on the accounting date.
(k) Dividends payable
In accordance with FRS 102, the final dividend is included in the accounts in
the year in which it is approved by shareholders.
(l) Repurchases of shares for cancellation
The cost of repurchasing the Company's own shares including the related stamp
duty and transactions costs is charged to "Share purchase reserve". Once the
"Share purchase reserve" is fully utilised the cost is then charged to
"Capital reserves", both are dealt with in the Statement of Changes in Equity.
Share repurchase transactions are accounted for on a trade date basis. The
nominal value of share capital repurchased and cancelled is transferred out of
"Called-up share capital" and into "Capital redemption reserve".
2. Gains/(losses) on investments held at fair value through profit
or loss
2023 2022
£'000 £'000
Gains on sales of investments based on historic cost 11,251 30,894
Amounts recognised in investment holding gains and losses in the previous year
in respect of
investments sold in the year (8,012) (39,004)
Gains/(losses) on sales of investments based on the carrying value at the 3,239 (8,110)
previous balance sheet date
Net movement in investment holding gains and losses 6,362 (146,621)
Gains/(losses) on investments held at fair value through profit or loss 9,601 (154,731)
3. Income
2023 2022
£'000 £'000
Income from investments:
Overseas dividends 22,761 24,091
UK dividends 1,102 582
23,863 24,673
Other interest receivable and similar income:
Deposit interest 153 12
24,016 24,685
Capital:
Special dividend allocated to capital 304 -
4. Investment management fee
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fee 1,552 4,656 6,208 1,728 5,185 6,913
The basis for calculating the investment management fee is set out in the
Report of the Directors on page 34.
5. Administrative expenses
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000
Administration expenses 1,010 - 1,010 1,052 - 1,052
Directors' fees(1) 198 - 198 193 - 193
Company secretarial fee 150 - 150 150 - 150
Auditor's remuneration for audit services 51 - 51 42 - 42
1,409 - 1,409 1,437 - 1,437
(1)Full details are given in the remuneration report on pages 43 to 45
6. Finance costs
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on bank loans and overdrafts 231 690 921 48 145 193
7. Taxation
(a) Analysis of tax charge for the year
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Irrecoverable overseas withholding tax 1,834 - 1,834 1,799 - 1,799
Overseas capital gains tax - 1,939 1,939 - (1,145) (1,145)
Taxation for the year 1,834 1,939 3,773 1,799 (1,145) 654
The Company has no corporation tax liability for the year ended 30 September
2023 (2022: nil).
The provision for overseas capital gains tax pertains to the deferred tax
liability on the unrealised gain on Indian Securities.
(b) Factors affecting tax charge for the year
The tax assessed for the year is lower (2022: higher) than the Company's
applicable rate of corporation tax for the year of 22% (2022: 19%).
The factors affecting the current tax charge for the year are as follows:
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return/(loss) before taxation 20,824 4,852 25,676 21,472 (162,997) (141,525)
Net return/(loss) before taxation multiplied by the Company's applicable rate 4,581 1,068 5,649 4,080 (30,970) (26,890)
of corporation tax for the year of 22% (2022: 19%)
Effects of:
Capital returns on investments - (2,177) (2,177) - 29,957 29,957
Income not chargeable to corporation tax (5,250) (67) (5,317) (4,670) - (4,670)
Irrecoverable overseas withholding tax 1,834 - 1,834 1,799 - 1,799
Provision for overseas capital gains tax - 1,939 1,939 - (1,145) (1,145)
Unrelieved expenses 669 1,176 1,845 590 1,013 1,603
Taxation for the year 1,834 1,939 3,773 1,799 (1,145) 654
(c) Deferred taxation
The Company has an unrecognised deferred tax asset of £19,912,000
(2022: £17,815,000) based on a main rate of corporation tax of 25%
(2022: 25%). In its 2021 budget, the UK government announced that the main
rate of corporation tax would increase to 25% for the fiscal year beginning on
1 April 2023.
The 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 accounts.
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 deferred
UK capital gains tax on any capital gains or losses arising on the revaluation
or disposal of investments.
8. Return per share
2023 2022
£'000 £'000
Revenue return 18,990 19,673
Capital return/(loss) 2,913 (161,852)
Total return/(loss) 21,903 (142,179)
Weighted average number of shares in issue during the year 157,474,894 163,346,606
Revenue return per share 12.06p 12.04p
Capital return/(loss) per share 1.85p (99.08)p
Total return/(loss) per share 13.91p (87.04)p
9. Dividends
Dividends paid and proposed
2023 2022
£'000 £'000
2022 final dividend of 12.00p (2021: 9.70p) paid out of revenue profits 19,030 15,922
2023 2022
£'000 £'000
2023 final dividend proposed of 12.00p (2022: 12.00p) to be paid out of 18,416 19,296
revenue profits
The 2022 final dividend amounted to £19,296,000. However the amount actually
paid was £19,030,000, as shares were repurchased and cancelled after the
accounting date, but prior to the dividend record date.
The proposed final dividend amounting to £18,416,000 (2022: £19,296,000) is
the amount used for the basis of determining whether the Company has satisfied
the distribution requirements of section 1158 of the Corporation Tax
Act 2010. The revenue available for distribution for the year is £18,990,000
(2022: £19,673,000).
10. Investments held at fair value through profit or loss
2023 2022
£'000 £'000
Opening book cost 758,095 758,657
Opening investment holding gains 124,706 310,331
Opening fair value 882,801 1,068,988
Purchases at cost 168,987 199,803
Sales proceeds (186,855) (231,259)
Gains/(losses) on investments held at fair value 9,601 (154,731)
Closing fair value 874,534 882,801
Closing book cost 751,478 758,095
Closing investment holding gains 123,056 124,706
Closing fair value 874,534 882,801
Sales proceeds amounting to £186,855,000 (2022: £231,259,000) were
receivable from disposals of investments in the year. The book cost of these
investments when they were purchased was £175,604,000 (2022: £200,364,000).
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.
The following transaction costs, comprising stamp duty and brokerage
commission, were incurred in the year:
2023 2022
£'000 £'000
On acquisitions 282 268
On disposals 332 384
614 652
11. Current assets
Debtors 2023 2022
£'000 £'000
Securities sold awaiting settlement 893 5,868
Dividends and interest receivable 1,648 1,778
Taxation recoverable 236 258
Other debtors 35 16
2,812 7,920
The Directors consider that the carrying amount of debtors approximates to
their fair value.
Cash at bank and in hand
Cash at bank and in hand comprises bank balances and cash held by the Company,
including short-term deposits. The carrying amount of these represents their
fair value. Cash balances in excess of a predetermined amount are placed on
short term deposit at market rates of interest.
12. Current liabilities
Creditors: amounts falling due within one year 2023 2022
£'000 £'000
Bank loan 24,579 13,437
Securities purchased awaiting settlement 1,422 4,379
Other creditors and accruals 2,067 2,064
Bank overdraft - 84
28,068 19,964
The bank loan comprises US$30 million drawn down on the Company's
£75 million multicurrency credit facility with Bank of Nova Scotia. The
facility is secured and drawings are subject to covenants and restrictions
which are customary for a facility of this nature and all of these have been
complied with.
Further details of the facility are given in note 20(a)(ii) on page 67.
The bank loan at the prior year end comprised US$15 million drawn down on the
Company's previous £75 million multicurrency credit facility with Bank of
Nova Scotia.
The Company has a £30 million overdraft facility with HSBC Bank plc,
secured by a floating charge.
The Directors consider that the carrying amount of creditors falling due
within one year approximates to their fair value.
13. Deferred taxation
Deferred taxation comprises the deferred tax liability on the unrealised gain
on Indian Securities. Indian capital gains tax arises on disposal of the
underlying asset.
14. Called-up share capital
2023 2022
£'000 £'000
Ordinary shares allotted, called up and fully paid:
Ordinary shares of 10p each:
Opening balance of 160,800,716 (2022: 164,860,716) shares 16,080 16,486
Repurchase and cancellation of 6,000,000 (2022: 4,060,000) shares (600) (406)
Closing balance of 154,800,716 (2022: 160,800,716) shares 15,480 16,080
During the year, the Company made market purchases of 6,000,000 of its own
shares, nominal value £600,000, for cancellation, representing 3.73% of the
shares outstanding at the beginning of the year. The total consideration paid
for these shares amounted to £29,775,000. 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 30 September 2023 Share Capital Warrant Share Gains and Investment Revenue
premium(1)
redemption
exercise
purchase
losses on sales of investments(5)
holding
reserve(7)
£'000
reserve(2)
reserve(3)
reserve(4)
£'000
gains and
£'000
£'000
£'000
£'000
losses(6)
£'000
At 30 September 2022 100,956 4,064 8,704 - 606,111 120,857 21,415
Gains on sales of investments based on the
carrying value at the previous balance sheet date - - - - 3,239 - -
Net movement in investment holding gains and losses - - - - - 6,362 -
Transfer on disposal of investments - - - - 8,012 (8,012) -
Realised exchange losses on cash and short-term deposits - - - - (569) - -
Exchange gains on the credit facility - - - - - 862 -
Overseas capital gains tax - - - - (606) (1,333) -
Special dividend allocated to capital - - - - 304 - -
Management fee, administrative expenses and finance costs allocated to capital - - - - (5,346) - -
Repurchase and cancellation of the Company's own shares - 600 - - (29,775) - -
Dividend paid - - - - - - (19,030)
Retained revenue for the year - - - - - - 18,990
At 30 September 2023 100,956 4,664 8,704 - 581,370 118,736 21,375
Capital reserves
Year ended 30 September 2022 Share Capital Warrant Share Gains and Investment Revenue
premium(1)
redemption
exercise
purchase
losses on sales of investments(5)
holding
reserve(7)
£'000
reserve(2)
reserve(3)
reserve(4)
£'000
gains and
£'000
£'000
£'000
£'000
losses(6)
£'000
At 30 September 2021 100,956 3,658 8,704 16,110 588,024 306,339 17,664
Losses on sales of investments based on the
carrying value at the previous balance sheet date - - - - (8,110) - -
Net movement in investment holding gains and losses - - - - - (146,621) -
Transfer on disposal of investments - - - - 39,004 (39,004) -
Realised exchange losses on cash and short-term deposits - - - - (624) - -
Exchange losses on the credit facility - - - - - (2,312) -
Overseas capital gains tax - - - - (1,310) 2,455 -
Management fee, administrative expenses and finance costs allocated to capital - - - - (5,330) - -
Repurchase and cancellation of the Company's own shares - 406 - (16,110) (5,543) - -
Dividend paid - - - - - - (15,922)
Retained revenue for the year - - - - - - 19,673
At 30 September 2022 100,956 4,064 8,704 - 606,111 120,857 21,415
The Company's articles of association permit dividend distributions out of
realised capital profits.
(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)The warrant exercise reserve is a non distributable reserve and arose via
an apportionment of the premium on the issue of shares with warrants attached.
(4)The share purchase reserve arose following the cancellation of the balance
of share premium in 1998 and was created for the purpose of financing share
buy backs. This is a realised (distributable) capital reserve which may be
used to repurchase the Company's own shares or distributed as dividends.
(5)This is a realised (distributable) capital reserve which may be used to
repurchase the Company's own shares or distributed as dividends.
(6)This reserve comprises 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.
(7)The revenue reserve may be distributed as dividends or used to repurchase
the Company's own shares.
16. Net asset value per share
2023 2022
Net assets attributable to shareholders (£'000) 851,285 878,187
Shares in issue at the year end 154,800,716 160,800,716
Net asset value per share 549.92p 546.13p
17. Transactions with the Manager
Under the terms of the AIFM Agreement, the Manager is entitled to receive a
management fee and a company secretarial fee. Details of the basis of the
management fee calculation are given in the Directors' Report on page 34. Any
investments in funds managed or advised by the Manager or any of its
associated companies, are excluded from the assets used for the purpose of the
calculation and therefore incur no fee. As at the year end, 30 September
2023, the Company held 13,038,886 shares in Schroder Asian Discovery Fund
Class Z Accumulation GBP, with a market value of £14,082,000. During the
year, the Company sold 4,121,977 shares and generated total proceeds of
£4,407,000 from the sales.
The management fee payable in respect of the year ended 30 September 2023
amounted to £6,208,000 (2022: £6,913,000), of which £1,485,000
(2022: £1,593,000) was outstanding at the year end. The company secretarial
fee payable in respect of the year ended 30 September 2023 amounted to
£150,000 (2022: £150,000), of which £38,000 (2022: £38,000) was
outstanding at the year end.
No Director of the Company served as a Director of any member of the Schroder
Group, at any time during the year, or prior year.
18. Related party transactions
Details of the remuneration payable to Directors are given in the Directors'
Remuneration Report on page 44 and details of Directors' shareholdings are
given in the Directors' Remuneration Report on page 45. Details of
transactions with the Manager are given in note 17 above. There have been no
other transactions with related parties during the year (2022: nil).
19. 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 comprise its investment portfolio and any derivative financial
instruments.
FRS 102 requires that financial instruments held at fair value are categorised
into a hierarchy consisting of the three levels below. A fair value
measurement is categorised in its entirety on the basis of the lowest level
input that is significant to the fair value measurement.
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) on page 57 and 1(g) on page 58.
At 30 September 2023, the Company's investment portfolio was categorised as
follows:
2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities and equity linked securities 874,534 - - 874,534
Total 874,534 - - 874,534
2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities and equity linked securities 882,801 - - 882,801
Total 882,801 - - 882,801
There have been no transfers between Levels 1, 2 or 3 during the year
(2022: nil).
20. Financial instruments' exposure to risk and risk management
policies
The investment objective is set out on the inside front cover of this report.
In pursuing this objective, the Company is exposed to a variety of financial
risks that could result in a reduction in the Company's net assets or a
reduction in the profits available for dividends. These financial risks
include 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 Board coordinates the Company's
risk management policy.
The objectives, policies and processes for managing the risks and the methods
used to measure the risks that are set out below, have not changed from those
applying in the comparative year.
The Company's classes of financial instruments may comprise the following:
- investments in shares, warrants, depositary receipts and
government bonds which are held in accordance with the Company's investment
objective;
- short-term debtors, creditors and cash arising directly from
its operations;
- a multi-currency overdraft facility with HSBC Bank plc, the
purpose of which is to assist in financing the Company's operations; and
- a multi-currency revolving credit facility with Bank of Nova
Scotia, the purpose of which is to assist in financing the Company's
operations.
(a) Market risk
The fair value or future cash flows of a financial instrument held by the
Company may fluctuate because of changes in market prices. This market risk
comprises three elements: 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. The Board reviews and
agrees policies for managing these risks and these policies have remained
unchanged from those applying in the comparative year. The Manager assesses
the exposure to market risk when making each investment decision and monitors
the overall level of market risk on the whole of the investment portfolio on
an ongoing basis.
(i) 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 accounts. As a result, movements in
exchange rates will affect the sterling value of those items.
Management of currency risk
The Manager monitors the Company's exposure to foreign currencies on a daily
basis and reports to the Board, which meets on at least four occasions each
year. The Manager measures the risk to the Company of the foreign currency
exposure by considering the effect on the Company's net asset value and income
of a movement in the rates of exchange to which the Company's assets,
liabilities, income and expenses are exposed. The Company may use foreign
currency borrowings or forward foreign currency contracts to limit the
exposure to anticipated changes in exchange rates which might otherwise
adversely affect the value of the portfolio of investments. Income denominated
in foreign currencies is converted into sterling on receipt.
Foreign currency exposure
The fair value of the Company's monetary items that have foreign currency
exposure at 30 September are shown below. The Company's investments (which
are not monetary items) have been included separately in the analysis so as to
show the overall level of exposure.
2023
Hong Kong US South Taiwan Singapore Thai Indian Chinese Other Total
Dollars
Dollars
Korean
Dollars
Dollars
Baht
Rupees
Yuan
£'000
£'000
£'000
£'000
Won
£'000
£'000
£'000
£'000
£'000
£'000
Current assets 201 392 445 629 - 98 66 560 1,492 3,883
Current liabilities
Creditors: amounts falling due within one year - (24,602) (67) (43) - (10) - (22) (1,349) (26,093)
Non current liabilities - - - - - - (4,778) - - (4,778)
Foreign currency exposure on net monetary items 201 (24,210) 378 586 - 88 (4,712) 538 143 (26,988)
Investments held at fair value through profit or loss(1) 227,912 32,412 99,840 129,941 67,562 16,652 146,942 37,363 58,947 817,571
Total net foreign currency exposure 228,113 8,202 100,218 130,527 67,562 16,740 142,230 37,901 59,090 790,583
2022
Hong Kong US South Taiwan Singapore Thai Indian Chinese Other Total
Dollars
Dollars
Korean
Dollars
Dollars
Baht
Rupees
Yuan
£'000
£'000
£'000
£'000
Won
£'000
£'000
£'000
£'000
£'000
£'000
Current assets 493 193 537 1,584 2,795 51 3,067 2,302 3,708 14,730
Current liabilities
Creditors: amounts falling due within one year (33) (13,442) (81) (1,014) (2,785) (5) - - (88) (17,448)
Non current liabilities - - - - - (3,867) - - (3,867)
Foreign currency exposure on net monetary items 460 (13,249) 456 570 10 46 (800) 2,302 3,620 (6,585)
Investments held at fair value through profit or loss(1) 223,210 43,557 108,218 132,334 66,955 19,224 143,762 34,754 47,294 819,308
Total net foreign currency exposure 223,670 30,308 108,674 132,904 66,965 19,270 142,962 37,056 50,914 812,723
(1)Excluding any stocks priced in sterling.
The above year end amounts are broadly representative of the exposure to
foreign currency risk during the current and comparative 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 effect on capital return below
is predominantly due to the change in net monetary liabilities and the effect
on income return is predominantly due to change in dividends, or revenue items
that were subject to foreign exchange rate movement. The sensitivity analysis
is based on the Company's monetary currency financial instruments held at each
accounting date and assumes a 10% (2022: 10%) appreciation or depreciation in
sterling against all 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:
2023 2022
£'000 £'000
Income Statement - return after taxation
Revenue return 2,070 2,224
Capital return (2,931) (558)
Total return after taxation (861) 1,666
Net assets (861) 1,666
Conversely if sterling had strengthened by 10% this would have had the
following effect:
2023 2022
£'000 £'000
Income Statement - return after taxation
Revenue return (2,070) (2,224)
Capital return 2,931 558
Total return after taxation 861 (1,666)
Net assets 861 (1,666)
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 foreign currency is subsumed into market price risk
sensitivity in part (iii) to this note.
(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 interest
rates are re-set.
Management of interest rate risk
Liquidity and borrowings are managed with the aim of increasing returns to
shareholders. The Board would not expect gearing to exceed 20% where gearing
is defined as borrowings used for investment purposes, less cash, expressed as
a percentage of net assets.
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 the credit
facility. However, amounts drawn on this facility are for short-term periods
and therefore exposure to interest rate risk is not significant.
Interest rate exposure
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:
2023 2022
£'000 £'000
Exposure to floating interest rates:
Cash at bank and in hand 6,785 11,343
Creditors: bank overdraft - (84)
Creditors: amounts falling due within one year - borrowings on the credit (24,579) (13,437)
facility
Net exposure (17,794) (2,178)
Sterling cash deposits at call earn interest at floating rates based on
Sterling Overnight Index Average ("SONIA") rates, (2022: SONIA).
The Company has arranged a £75 million credit facility with Bank of Nova
Scotia, effective from 23 June 2023. Interest is payable at the aggregate of
the compounded Risk Free Rate ("RFR) for the relevant currency and loan
period, plus a margin. Amounts are normally drawn down on the facility for a
one month period, at the end of which it may be rolled over or adjusted. At
30 September 2023, the Company had drawn down US$30 million
(£24.6 million) for a one month period, at an interest rate of 6.61% per
annum.
At the prior year end, the Company had drawn down US$15 million
(£13.4 million) on the preceding facility with Bank of Nova Scotia.
The Company also has a £30 million overdraft facility with HSBC Bank plc,
secured by a floating charge.
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 cash/(debt) balances
during the year are as follows:
2023 2022
£'000 £'000
Maximum debit interest rate exposure during the year - debt (17,803) (7,592)
Maximum credit interest rate exposure during the year - net cash 10,933 17,531
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 1.5% (2022: 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 accounting date with all other variables held constant.
2023 2022
1.5% increase 1.5% decrease in rate 1.5% increase 1.5% decrease in rate
in rate £'000 in rate £'000
£'000 £'000
Income statement - return after taxation
Revenue return 10 (10) 119 (119)
Capital return (277) 277 (152) 152
Total return after taxation (267) 267 (33) 33
Net assets (267) 267 (33) 33
Given the increase in UK interest rates, the interest rate sensitivity has
been updated to 1.5%. The prior year disclosure has been updated to 1.5% to
show a direct comparison in the sensitivity. In the prior year report, the
sensitivity was calculated using 1.0%, which was representative of the market
at 30 September 2022. As disclosed in the prior year annual report, an
increase of 1.0% reduced total return after taxation by £22,000 (a decrease
of 1.0% had an equal and opposite effect).
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 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 investment management team has responsibility for
monitoring the portfolio, which is selected in accordance with the Company's
investment objective and seeks to ensure that individual stocks meet an
acceptable risk/reward profile. The Board may authorise the Manager to enter
derivative transactions for the purpose of protecting the portfolio against
falls in market prices.
Market price risk exposure
The Company's total exposure to changes in market prices at 30 September
comprises the following:
2023 2022
£'000 £'000
Investments held at fair value through profit or loss 874,534 882,801
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 on page 15. This shows that
the portfolio comprises investments trading in Asian countries. Accordingly
there is a concentration of exposure to that region.
Market price risk sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to an increase or decrease of 25% (2022: 25%) 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 and adjusting for the change in the management fee, but with all
other variables held constant.
2023 2022
25% increase in fair value 25% decrease in fair value 25% increase in fair value 25% decrease in fair value
£'000 £'000 £'000 £'000
Income statement - return after taxation
Revenue return (328) 328 (386) 386
Capital return 217,650 (217,650) 219,542 (219,542)
Total return after taxation and net assets 217,332 (217,332) 219,156 (219,156)
Percentage change in net asset value 25.5% (25.5%) 25.0% (25.0%)
Based on observation of current market conditions, the market price risk
sensitivity has been updated to 25%. The prior year disclosure has been
updated to 25% to show a direct comparison in the sensitivity. In the prior
year report, the sensitivity was calculated using 20%, which was
representative of the market at 30 September 2022. As disclosed in the prior
year annual report, an increase of 20% increased total return after taxation
by £175,324,000 (a decrease of 20% had an equal and opposite effect).
(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 managed as the Company's assets comprise mainly readily
realisable securities, which can be sold to meet to meet funding requirements
if necessary. Short-term flexibility is achieved through the use of a credit
facility and an overdraft facility.
The Board's policy is for the Company to remain fully invested in normal
market conditions and that borrowings be used to manage working capital
requirements and to gear the Company as appropriate.
Liquidity risk exposure
Contractual maturities of financial liabilities, based on the earliest date on
which payment can be required are as follows:
Three months Three months
or less
or less
2023
2022
£'000
£'000
Creditors: amounts falling due within one year
Bank loan - including interest 24,613 13,473
Securities purchased awaiting settlement 1,422 4,379
Other creditors and accruals 2,067 2,064
Bank overdraft - 84
28,102 20,000
(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. 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.
20. Financial instruments' exposure to risk and risk management
policies continued
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 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.
21. Capital management policies and procedures
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding year.
The Company's debt and capital structure comprises the following:
2023 2022
£'000 £'000
Debt
Bank loan 24,579 13,437
Equity
Called-up share capital 15,480 16,080
Reserves 835,805 862,107
851,285 878,187
Total debt and equity 875,864 891,624
The Company's capital management objectives are to ensure that it will
continue as a going concern and to maximise the capital return to its equity
shareholders through an appropriate level of gearing.
The Board would not expect gearing to exceed 20%. Gearing for this purpose is
defined as borrowings used for investment purposes, less cash, expressed as a
percentage of net assets. If the figure so calculated is negative, this is
shown as a "Net cash" position.
2023 2022
£'000 £'000
Borrowings used for investment purposes, less cash 17,794 2,178
Net assets 851,285 878,187
Gearing 2.1% 0.2%
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 opportunity for issue of new shares; and
- the amount of dividends to be paid, in excess of that which is
required to be distributed.
Annual General Meeting - Recommendations
The Annual General Meeting ("AGM") of the Company will be held on Wednesday,
31 January 2024 at 12.00 noon. The formal Notice of Meeting is set out on
page 73.
The following information is important and requires your immediate attention.
If you are in any doubt about the action you should take, you should consult
an independent financial adviser, authorised under the Financial Services and
Markets Act 2000. If you have sold or transferred all of your ordinary shares
in the Company, please forward this document with its accompanying form of
proxy at once to the purchaser or transferee, or to the stockbroker, bank or
other agent through whom the sale or transfer was effected, for onward
transmission to the purchaser or transferee.
Ordinary business
Resolutions 1 to 12 are all ordinary resolutions. Resolution 1 is a required
resolution. Resolution 2 invites shareholders to approve the final dividend.
Resolution 3 concerns the Directors' Remuneration Report, on pages 43 to 45
and Resolution 4 is a binding vote to approve the amended Directors'
Remuneration Policy as set out on page 43.
Resolutions 5 to 9 invite shareholders to elect or re-elect each of the
Directors for another year, following the recommendations of the Nomination
Committee, set out on pages 41 and 42 (their biographies are set out on pages
32 and 33). Resolutions 10 and 11 concern the re-appointment and remuneration
of the Company's auditor, discussed in the Audit and Risk Committee Report on
pages 37 to 39.
Special business
Resolution 12 - Directors' authority to allot shares (ordinary resolution)
and resolution 13 - power to disapply pre‑emption rights (special
resolution)
The Directors are seeking authority to allot a limited number of unissued
ordinary shares for cash without first offering them to existing shareholders
in accordance with statutory pre-emption procedures.
Appropriate resolutions will be proposed at the forthcoming AGM and are set
out in full in the Notice of AGM. An ordinary resolution will be proposed to
authorise the Directors to allot shares up to a maximum aggregate nominal
amount of £1,534,657 (being 10% of the issued share capital (excluding any
shares held in treasury) as at the date of the Notice of the AGM). A special
resolution will also be proposed to give the Directors authority to allot
securities for cash on a non-pre-emptive basis up to a maximum aggregate
nominal amount of £1,534,657 (being 10% of the Company's issued share capital
(excluding any shares held in treasury) as at the date of the Notice of the
AGM). This authority includes shares that the Company sells or transfers that
have been held in treasury. The Board has established guidelines for treasury
shares and will only reissue shares held in treasury at a price equal to or
greater than the Company's net asset value (inclusive of current year income)
plus any applicable costs.
The Directors do not intend to allot shares pursuant to these authorities
other than to take advantage of opportunities in the market as they arise and
only if they believe it to be advantageous to the Company's existing
shareholders to do so and when it would not result in any dilution of NAV per
share.
If approved, both of these authorities will expire at the conclusion of the
AGM in 2025 unless renewed, varied or revoked earlier.
Resolution 14: Authority to make market purchases of the Company's own
shares (special resolution)
At the AGM held on 1 February 2023, the Company was granted authority to make
market purchases of up to 23,850,695 ordinary shares of 10p each for
cancellation or holding in treasury. 5,005,000 shares have been bought back
and cancelled under this authority and the Company therefore has remaining
authority to purchase up to 18,845,695 ordinary shares. This authority will
expire at the forthcoming AGM.
The Directors believe it is in the best interests of the Company and its
shareholders to have a general authority for the Company to buy back its
ordinary shares in the market as they keep under review the share price
discount to net asset value and the purchase of ordinary shares. A special
resolution will be proposed at the forthcoming AGM to give the Company
authority to make market purchases of up to 14.99% of the ordinary shares in
issue as at the date of the Notice of the AGM. The Directors will exercise
this authority only if the Directors consider that any purchase would be for
the benefit of the Company and its shareholders, taking into account relevant
factors and circumstances at the time. Any shares so purchased would be
cancelled or held in treasury for potential reissue. If renewed, the authority
to be given at the 2024 AGM will lapse at the conclusion of the AGM in 2025
unless renewed, varied or revoked earlier.
Resolution 15: notice period for general meetings (special resolution)
Resolution 15 set out in the Notice of AGM is a special resolution and will,
if passed, allow the Company to hold general meetings (other than annual
general meetings) on a minimum notice period of 14 clear days, rather than 21
clear days as required by the Companies Act 2006. The approval will be
effective until the Company's next AGM to be held in 2025. The Directors will
only call general meetings on 14 clear days' notice when they consider it to
be in the best interests of the Company's shareholders and will only do so if
the Company offers facilities for all shareholders to vote by electronic means
and when the matter needs to be dealt with expediently.
Recommendations
The Board considers that the resolutions relating to the above items of
business are in the best interests of shareholders as a whole. Accordingly,
the Board unanimously recommends to shareholders that they vote in favour of
the resolutions to be proposed at the forthcoming AGM, as they intend to do in
respect of their own beneficial holdings.
Notice of Annual General Meeting
The Annual General Meeting ("AGM") of the Company will be held Wednesday,
31 January 2024 at 12.00 noon to consider the following resolutions of which
resolutions 1 to 12 will be proposed as ordinary resolutions and resolutions
13, 14 and 15 will be proposed as special resolutions:
1. To receive the Report of the Directors and the audited accounts
for the year ended 30 September 2023.
2. To approve a final dividend of 12.00 pence per share for the
financial year ended 30 September 2023.
3. To approve the Directors' Remuneration Report for the year
ended 30 September 2023.
4. To approve the Directors' Remuneration Policy as set out on
page 43.
5. To elect Rupert Hogg as a Director of the Company.
6. To re-elect Julia Goh as a Director of the Company.
7. To re-elect Vivien Gould as a Director of the Company.
8. To re-elect Martin Porter as a Director of the Company.
9. To re-elect James Williams as a Director of the Company.
10. To re-appoint Ernst & Young LLP as auditor to the Company
until the conclusion of the next Annual General Meeting.
11. To authorise the Directors to determine the remuneration of
Ernst & Young LLP as auditor to the Company.
12. To consider, and if thought fit, pass the following resolution as
an ordinary resolution:
"THAT the Directors be generally and unconditionally authorised pursuant to
section 551 of the Companies Act 2006 (the "Act") to exercise all the powers
of the Company to allot relevant securities (within the meaning of section 551
of the Act) up to an aggregate nominal amount of £1,534,657 (being 10% of the
issued ordinary share capital at the date of this Notice) for a period
expiring (unless previously renewed, varied or revoked by the Company in
general meeting) at the conclusion of the next Annual General Meeting of the
Company, but that the Company may make an offer or agreement which would or
might require relevant securities to be allotted after expiry of this
authority and the Board may allot relevant securities in pursuance of that
offer or agreement."
13. To consider and, if thought fit, to pass the following resolution
as a special resolution:
"THAT, subject to the passing of resolution 12 set out above, the Directors be
and are hereby empowered, pursuant to Section 571 of the Act, to allot equity
securities (including any shares held in treasury) (as defined in section
560(1) of the Act) pursuant to the authority given in accordance with section
551 of the Act by the said resolution 12 and/or where such allotment
constitutes an allotment of equity securities by virtue of section 560(2) of
the Act as if Section 561(1) of the Act did not apply to any such allotment,
provided that this power shall be limited to the allotment of equity
securities up to an aggregate nominal amount of £1,534,657 (representing 10%
of the aggregate nominal amount of the share capital in issue at the date of
this Notice); and provided that this power shall expire at the conclusion of
the next Annual General Meeting of the Company but so that this power shall
enable the Company to make offers or agreements before such expiry which would
or might require equity securities to be allotted after such expiry."
14. To consider and, if thought fit, to pass the following resolution
as a special resolution:
"THAT the Company be and is hereby generally and unconditionally authorised in
accordance with Section 701 of the Act to make market purchases (within the
meaning of Section 693 of the Act) of ordinary shares of 10p each in the
capital of the Company ("Shares") at whatever discount the prevailing market
price represents to the prevailing net asset value per Share provided that:
(a) the maximum number of Shares which may be purchased is
23,004,509, representing 14.99% of the Company's issued ordinary share capital
as at the date of this Notice;
(b) the maximum price (exclusive of expenses) which may be paid for a
Share shall not exceed the higher of;
i) 105% of the average of the middle market
quotations for the Shares as taken from the London Stock Exchange Daily
Official List for the five business days preceding the date of purchase; and
ii) the higher of the last independent bid and
the highest current independent bid on the London Stock Exchange;
(c) the minimum price (exclusive of expenses) which may be paid for
a Share shall be 10p, being the nominal value per Share;
(d) this authority hereby conferred shall expire at the conclusion of
the next Annual General Meeting of the Company in 2024 (unless previously
renewed, varied or revoked by the Company prior to such date);
(e) the Company may make a contract to purchase Shares under the
authority hereby conferred which will or may be executed wholly or partly
after the expiration of such authority and may make a purchase of Shares
pursuant to any such contract; and
(f) any Shares so purchased will be cancelled or held in treasury
for potential reissue."
15. To consider and, if thought fit, to pass the following resolution
as a special resolution:
"That a general meeting, other than an Annual General Meeting, may be called
on not less than 14 clear days' notice."
By order of the Board Registered Office:
For and on behalf of
1 London Wall Place,
London EC2Y 5AU
Schroder Investment Management Limited
5 December 2023
Registered Number: 03104981
Explanatory Notes to the Notice of Meeting
1. Ordinary shareholders are entitled to attend and vote at the
meeting and to appoint one or more proxies, who need not be a shareholder, as
their proxy to exercise all or any of their rights to attend, speak and vote
on their behalf at the meeting.
A proxy form is attached. If you wish to appoint a person other than the
Chairman as your proxy, please insert the name of your chosen proxy holder in
the space provided at the top of the form. If the proxy is being appointed in
relation to less than your full voting entitlement, please enter in the box
next to the proxy holder's name the number of shares in relation to which they
are authorised to act as your proxy. If left blank your proxy will be deemed
to be authorised in respect of your full voting entitlement (or if this proxy
form has been issued in respect of a designated account for a shareholder, the
full voting entitlement for that designated account).
Additional proxy forms can be obtained by contacting the Company's Registrars,
Equiniti Limited, on +44 (0)371 032 0641, or you may photocopy the attached
proxy form. Please indicate in the box next to the proxy holder's name the
number of shares in relation to which they are authorised to act as your
proxy. Please also indicate by ticking the box provided if the proxy
instruction is one of multiple instructions being given. Completion and return
of a form of proxy will not preclude a member from attending the Annual
General Meeting and voting in person.
On a vote by show of hands, every ordinary shareholder who is present in
person has one vote and every duly appointed proxy who is present has one
vote. On a poll vote, every ordinary shareholder who is present in person or
by way of a proxy has one vote for every share of which he/she is a holder.
The "Vote Withheld" option on the proxy form is provided to enable you to
abstain on any particular resolution. However it should be noted that a "Vote
Withheld" is not a vote in law and will not be counted in the calculation of
the proportion of the votes "For" and "Against" a resolution.
A proxy form must be signed and dated by the shareholder or his or her
attorney duly authorised in writing. In the case of joint holdings, any one
holder may sign this form. The vote of the senior joint holder who tenders a
vote, whether in person or by proxy, will be accepted to the exclusion of the
votes of the other joint holder and for this purpose seniority will be
determined by the order in which the names appear on the Register of Members
in respect of the joint holding. To be valid, proxy form(s) must be completed
and returned to the Company's Registrars, Equiniti Limited, Aspect House,
Spencer Road, Lancing, West Sussex BN99 6DA, in the enclosed envelope
together with any power of attorney or other authority under which it is
signed or a copy of such authority certified notarially, to arrive no later
than 48 hours before the time fixed for the meeting, or an adjourned meeting.
Shareholders may also appoint a proxy to vote on the resolutions being put to
the meeting electronically at www.sharevote.co.uk
(https://www.sharevote.co.uk) . Shareholders who are not registered to vote
electronically, will need to enter the Voting ID, Task ID and Shareholder
Reference Number set out in their personalised proxy form. Alternatively,
shareholders who have already registered with Equiniti's Shareview service can
appoint a proxy by logging onto their portfolio at www.shareview.co.uk
(https://www.shareview.co.uk) and clicking on the link to vote. The on-screen
instructions give details on how to complete the appointment process. Please
note that to be valid, your proxy instructions must be received by Equiniti
no later than 12.00 noon on 29 January 2024. If you have any difficulties
with online voting, you should contact the shareholder helpline on
+44 (0)371 032 0641.
If an ordinary shareholder submits more than one valid proxy appointment, the
appointment received last before the latest time for receipt of proxies will
take precedence.
Shareholders may not use any electronic address provided either in this Notice
of Annual General Meeting or any related documents to communicate with the
Company for any purposes other than expressly stated.
Representatives of shareholders that are corporations will have to produce
evidence of their proper appointment when attending the Annual General
Meeting.
2. Any person to whom this notice is sent who is a person
nominated under section 146 of the Companies Act 2006 to enjoy information
rights (a "Nominated Person") may, under an agreement between him or her and
the shareholder by whom he or she was nominated, have a right to be appointed
(or to have someone else appointed) as a proxy for the Annual General Meeting.
If a Nominated Person has no such proxy appointment right or does not wish to
exercise it, he or she may, under any such agreement, have a right to give
instructions to the shareholder as to the exercise of voting rights.
The statement of the rights of ordinary shareholders in relation to the
appointment of proxies in note 1 above does not apply to Nominated Persons.
The rights described in that note can only be exercised by ordinary
shareholders of the Company.
3. Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, the Company has specified that only those shareholders
registered in the Register of members of the Company at 6.30 p.m. on
29 January 2024, or 6.30 p.m. two days prior to the date of an adjourned
meeting, shall be entitled to attend and vote at the meeting in respect of the
number of shares registered in their name at that time. Changes to the
Register of Members after 6.30 p.m. on 29 January 2024 shall be disregarded
in determining the right of any person to attend and vote at the meeting.
4. CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so by using the
procedures described in the CREST manual. The CREST manual can be viewed at
www.euroclear.com (https://www.euroclear.com) . A CREST message appointing a
proxy (a "CREST proxy instruction") regardless of whether it constitutes the
appointment of a proxy or an amendment to the instruction previously given to
a previously appointed proxy must, in order to be valid, be transmitted so as
to be received by the issuer's agent (ID RA19) by the latest time for receipt
of proxy appointments. If you are an institutional investor you may be able to
appoint a proxy electronically via the Proxymity platform, a process which has
been agreed by the Company and approved by the Registrar. For further
information regarding Proxymity, please go to www.proxymity.io
(https://www.proxymity.io) . Your proxy must be lodged by 12:00 noon on
29 January 2024 in order to be considered valid. Before you can appoint a
proxy via this process you will need to have agreed to Proxymity's associated
terms and conditions. It is important that you read these carefully as you
will be bound by them and they will govern the electronic appointment of your
proxy.
5. Copies of the articles of association, terms of appointment of
the non-executive Directors and a statement of all transactions of each
Director and of his family interests in the shares of the Company, will be
available for inspection by any member of the Company at the registered office
of the Company during normal business hours on any weekday (English public
holidays excepted) and at the Annual General Meeting by any attendee, for at
least 15 minutes prior to, and during, the Annual General Meeting. None of the
Directors has a contract of service with the Company.
6. The biographies of the Directors offering themselves for
election and re‑election are set out on pages 32 and 33 of the Company's
annual report and accounts for the year ended 30 September 2023.
7. As at 5 December 2023, 153,465,716 ordinary shares of
10 pence each were in issue (no shares were held in treasury). Therefore the
total number of voting rights of the Company as at 5 December 2023 was
153,465,716.
8. A copy of this Notice of Meeting, which includes details of
shareholder voting rights, together with any other information as required
under Section 311A of the Companies Act 2006, is available from the webpages
dedicated to the Company: www.schroders.co.uk/asiapacific
(https://www.schroders.co.uk/asiapacific) .
9. Pursuant to Section 319A of the Companies Act 2006, the
Company must cause to be answered at the Annual General Meeting any question
relating to the business being dealt with at the AGM which is put by a member
attending the meeting, except in certain circumstances, including if it is
undesirable in the interests of the Company or the good order of the meeting
that the question be answered or if to do so would involve the disclosure of
confidential information.
10. Members satisfying the thresholds in section 527 of the Companies
Act 2006 can require the Company to publish a statement on its website
setting out any matter relating to:
(a) the audit of the Company's Accounts (including the auditor's
report and the conduct of the audit) that are to be laid before the Meeting;
or
(b) any circumstance connected with an auditor of the Company ceasing
to hold office since the last AGM, that the members propose to raise at the
Meeting. The Company cannot require the members requesting the publication to
pay its expenses. Any statement placed on the website must also be sent to the
Company's auditors no later than the time it makes its statement available on
the website. The business which may be dealt with at the meeting includes any
statement that the Company has been required to publish on its website.
11. The Company's privacy policy is available on its webpages:
www.schroders.co.uk/asiapacific (https://www.schroders.co.uk/asiapacific) .
Shareholders can contact Equiniti for details of how Equiniti processes their
personal information as part of the AGM.
Definitions of Terms and Alternative Performance Measures
The terms and performance measures below are those commonly used by investment
companies to assess values, investment performance and operating costs. Some
of the financial measures below are classified Alternative Performance
Measures as defined by the European Securities and Markets Authority, and some
numerical calculations are given for those.
Net asset value ("NAV") per share
The NAV per share of 549.92p (2022: 546.13p) represents the net assets
attributable to equity shareholders of £851,285,000 (2022: £878,187,000)
divided by the number of shares in issue of 154,800,716 (2022: 160,800,716).
The change in the NAV amounted to +0.7% (2022: -14.9%) over the year. However
this performance measure excludes the positive impact of dividends paid out by
the Company during the year. When these dividends are factored into the
calculation, the resulting performance measure is termed the "total return".
Total return calculations and definitions are given below.
Total return
The combined effect of any dividends paid, together with the rise or fall in
the share price or NAV per share. Total return statistics enable the investor
to make performance comparisons between investment companies with different
dividend policies. Any dividends received by a shareholder are assumed to have
been reinvested in either the assets of the Company at its NAV per share at
the time the shares were quoted ex-dividend (to calculate the NAV per share
total return) or in additional shares of the Company (to calculate the share
price total return).
The NAV total return for the year ended 30 September 2023 is calculated as
follows:
Opening NAV at 30/9/22 546.13p
Closing NAV at 30/9/23 549.92p
Dividend received XD date NAV on Factor
XD date
12.00p 30/12/22 559.37p 1.021
NAV total return, being the closing NAV, multiplied by the factor, +2.9%
expressed as a percentage change in the opening NAV:
The NAV total return for the year ended 30 September 2022 is calculated as
follows:
Opening NAV at 30/9/21 641.72p
Closing NAV at 30/9/22 546.13p
Dividend received XD date NAV on Factor
XD date
9.70p 30/12/21 636.89p 1.015
NAV total return, being the closing NAV, multiplied by the factor, -13.6%
expressed as a percentage change in the opening NAV:
The share price total return for the year ended 30 September 2023 is
calculated as follows
Opening share price at 30/9/22 487.00p
Closing share price at 30/9/23 486.50p
Dividend received XD date Share price Factor
on XD date
12.00p 30/12/22 501.00p 1.024
Share price total return, being the closing share price, multiplied by the +2.3%
factor,
expressed as a percentage change in the opening share price:
The share price total return for the year ended 30 September 2022 is
calculated as follows
Opening share price at 30/9/21 579.00p
Closing share price at 30/9/22 487.00p
Dividend received XD date Share price Factor
on XD date
9.70p 30/12/21 583.00p 1.017
Share price total return, being the closing share price, multiplied by the -14.5%
factor,
expressed as a percentage change in the opening share price:
Benchmark index
The measure against which the Company compares its performance, which is
deemed to be the most appropriate comparison and which is used for management
information purposes. The Company's benchmark is the MSCI All Countries Asia
excluding Japan Index (with net income reinvested), sterling adjusted. The
Company changed its benchmark with effect from 1 October 2016. Prior to that
date the benchmark was the MSCI All Countries Asia excluding Japan Index (with
gross income reinvested), sterling adjusted.
Discount/premium
The amount by which the share price of an investment trust is lower (discount)
or higher (premium) than the NAV per share. The discount or premium is
expressed as a percentage of the NAV per share. The discount at the year end
amounted to 11.5% (2022: 10.8%), as the closing share price at 486.50p
(2022: 487.00p) was 11.5% (2022: 10.8%) lower than the closing NAV of
549.92p (2022: 546.13p).
Gearing
The gearing percentage reflects the amount of borrowings (i.e. bank loans or
overdrafts) which the Company has drawn down and invested in the market. This
figure is indicative of the extra amount by which shareholders' funds would
move if the Company's investments were to rise or fall. This represents
borrowings used for investment purposes, less cash, expressed as a percentage
of net assets. If the figure so calculated is negative, this is shown as a
"Net cash" position. The gearing figure at the year end is calculated as
follows:
2023 2022
£'000 £'000
Borrowings used for investment purposes, less cash 17,794 2,178
Net assets 851,285 878,187
Gearing/(net cash) 2.1% 0.2%
Ongoing charges
The Ongoing Charges figure is a measure of the ongoing operating cost of the
Company. It is calculated in accordance with the AIC's recommended methodology
and represents the management fee and all other operating expenses excluding
finance costs and transaction costs, amounting to £7,617,000
(2022: £8,350,000), expressed as a percentage of the average daily net asset
values during the year of £888,441,000 (2022: £995,417,000).
Leverage
For the purpose of the Alternative Investment Fund Managers (AIFM) Directive,
leverage is any method which increases the Company's exposure, including the
borrowing of cash and the use of derivatives. Higher Leverage numbers are thus
indicative of higher market risk. Leverage is expressed as the ratio of the
Company's exposure to its net asset value and is required to be calculated
both on a "Gross" and a "Commitment" method. Under the Gross method, exposure
represents the sum of the absolute values of all positions, so as to give an
indication of overall exposure. Under the Commitment method, exposure is
calculated in a similar way, but after netting off hedges which satisfy
certain strict criteria.
How to invest
There are a number of ways to easily invest in the Company. The Manager has
set these out at www.schroders.com/invest-in-a-trust/
(https://www.schroders.com/invest-in-a-trust/) .
Information about the Company
Webpages and share price information
The Company has dedicated webpages, which may be found at
www.schroders.co.uk/asiapacific (https://www.schroders.co.uk/asiapacific) .
The webpages are the Company's primary method of electronic communication with
shareholders. They contain details of the Company's ordinary share price and
copies of the report and accounts and other documents published by the Company
as well as information on the Directors, terms of reference of committees and
other governance arrangements. In addition, the webpages contain links to
announcements made by the Company to the market, Equiniti's shareview service
and Schroders' website. There is also a section entitled "How to Invest".
The Company releases its NAV per share on both a cum and ex-income basis to
the market on a daily basis.
Share price information may also be found in the Financial Times and on the
Company's webpages.
Association of Investment Companies
The Company is a member of the Association of Investment Companies. Further
information on the Association can be found on its website, www.theaic.co.uk
(https://www.theaic.co.uk) .
Individual Savings Account ("ISA") status
The Company's shares are eligible for stocks and shares ISAs.
Non-Mainstream Pooled Investments status
The Company currently conducts its affairs so that its shares can be
recommended by IFAs to ordinary retail investors in accordance with the FCA's
rules in relation to non-mainstream investment products and intends to
continue to do so for the foreseeable future. The Company's shares are
excluded from the FCA's restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
Financial calendar
Annual General Meeting January / February
Final dividend paid February
Half year results announced June
Financial year end 30 September
Annual results announced December
Alternative Investment Fund Managers ("AIFM") Directive
The AIFM Directive, as transposed into the FCA Handbook in the UK, requires
that certain pre-investment information be made available to investors in
Alternative Investment Funds (such as the Company) and also that certain
regular and periodic disclosures are made. This information and these
disclosures may be found either below, elsewhere in this annual report, or in
the Company's AIFM Directive information disclosure document published on the
Company's webpages.
Leverage
The Company's leverage policy and details of its leverage ratio calculation
and exposure limits as required by the AIFMD are published on the Company's
webpages and within this report. The Company is also required to periodically
publish its actual leverage exposures. As at 30 September 2023 these were:
Leverage exposure Maximum exposure Actual
exposure
Gross method 200.0% 1.06%
Commitment method 200.0% 1.04%
Illiquid assets
As at the date of this report, none of the Company's assets are subject to
special arrangements arising from their illiquid nature.
Remuneration disclosures
Quantitative remuneration disclosures to be made in this annual report in
accordance with FCA Handbook rule FUND3.3.5 may be found in the Company's
AIFMD information disclosure document published on the Company's webpages.
Publication of Key Information Document ("KID") by the AIFM
Pursuant to the Packaged Retail and Insurance Based Investment Products
Regulation, the Manager, as the Company's AIFM, is required to publish a short
KID on the Company. KIDs are designed to provide certain prescribed
information to retail investors, including details of potential returns under
different performance scenarios and a risk/reward indicator. The Company's KID
is available on its webpages.
Dividends
Paying dividends into a bank or building society account helps reduce the risk
of fraud and will provide you with quicker access to your funds than payment
by cheque. Applications for an electronic mandate can be made by contacting
the Registrar. If your dividend is paid directly into your bank or building
society account, you will receive an annual consolidated dividend
confirmation, which will be sent to you in September each year at the time the
interim dividend is paid. Dividend confirmations are available electronically
at investorcentre.co.uk to those shareholders who have their payments mandated
to their bank or building society accounts and who have expressed a preference
for electronic communications.
Warning to shareholders
Companies are aware that their shareholders have received unsolicited
telephone calls or correspondence concerning investment matters. These are
typically from overseas-based 'brokers' who target UK shareholders, offering
to sell them what often turn out to be worthless or high risk shares or
investments. These operations are commonly known as 'boiler rooms'. These
'brokers' can be very persistent and extremely persuasive. Shareholders are
advised to be wary of any unsolicited advice, offers to buy shares at a
discount or offers of free company reports.
If you receive any unsolicited investment advice:
• Make sure you get the correct name of the person and
organisation
• Check that they are properly authorised by the FCA before
getting involved by visiting register.fca.org.uk
• Report the matter to the FCA by calling 0800 111 6768 or
visiting fca.org.uk/consumers/report-scam-unauthorised-firm
• Do not deal with any firm that you are unsure about
If you deal with an unauthorised firm, you will not be eligible to receive
payment under the Financial Services Compensation Scheme.
The FCA provides a list of unauthorised firms of which it is aware, which can
be accessed at fca.org.uk/consumers/unauthorised-firmsindividualslist.
More detailed information on this or similar activity can be found on the FCA
website at fca.org.uk/consumers/protect-yourself-scams.
Directors
James Williams (Chairman)
Keith Craig
Julia Goh
Vivien Gould
Rupert Hogg (appointed 1 May 2023)
Martin Porter
Advisers
Alternative Investment Fund Manager (the "Manager")
Schroder Unit Trusts Limited 1 London Wall Place London EC2Y 5AU
Investment Manager and Company Secretary
Schroder Investment Management Limited 1 London Wall Place London EC2Y 5AU
Telephone: 020 7658 6189 AMCompanySecretary@Schroders.com
Registered Office
1 London Wall Place London EC2Y 5AU
Depositary and Custodian
HSBC Bank plc 8 Canada Square London E14 5HQ
Lending Bank
The Bank of Nova Scotia, London Branch
201 Bishopsgate
6th Floor
London EC2M 3NS
Corporate Broker
Deutsche Numis 45 Gresham Street London EC2V 7BF
Independent auditor
Ernst & Young LLP Atria One 144 Morrison Street Edinburgh EH3 8EX
Registrars
Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA
Shareholder Helpline: +44 (0)800 032 0641* Website: www.shareview.co.uk
(https://www.shareview.co.uk)
*Calls to this number are free of charge from UK landlines.
Communications with shareholders are mailed to the address held on the
register. Any notifications and enquiries relating to shareholdings, including
a change of address or other amendment should be directed to Equiniti Limited
at the above address.
Shareholder enquiries
General enquiries about the Company should be addressed to the Company
Secretary at the address set out above.
Dealing Codes
ISIN: GB0007918872
SEDOL 0791887
Ticker: SDP
Global Intermediary Identification Number (GIIN)
SWLQRM.99999.SL.826
Legal Entity Identifier (LEI)
549300A71N7LE35KWU14
Privacy notice
The Company's privacy notice is available on its webpages
Schroder Investment Management Limited
1 London Wall Place, London EC2Y 5AU, United Kingdom
T +44 (0) 20 7658 6000
schroders.com
@schroders
Important information: This document is intended to be for information
purposes only and it is not intended as promotional material in any respect.
The material is not intended as an offer or solicitation for the purchase or
sale of any financial instrument. The material is not intended to provide, and
should not be relied on for, accounting, legal or tax advice, or investment
recommendations. Information herein is believed to be reliable but Schroders
does not warrant its completeness or accuracy. No responsibility can be
accepted for errors of fact or opinion. Reliance should not be placed on the
views and information in the document when taking individual investment and/or
strategic decisions. Past performance is not a reliable indicator of future
results, prices of shares and the income from them may fall as well as rise
and investors may not get back the amount originally invested. Schroders has
expressed its own views in this document and these may change. Issued by
Schroder Investment Management Limited, 1 London Wall Place,
London EC2Y 5AU, which is authorised and regulated by the Financial Conduct
Authority. For your security, communications may be taped or monitored.
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