Schroder AsiaPacific - Final Results
03/12/2024 07:00
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RNS Number : 5121O Schroder AsiaPacific Fund PLC 03 December 2024
3 December 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
SCHRODER ASIAPACIFIC FUND PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2024
Information disclosed in accordance with DTR 4.2.2
The Company's Annual Report and Financial Statements for the year ended 30
September 2024 is being published in hard copy format and an electronic copy
will shortly be available to view and download from the Company's web pages:
www.schroders.co.uk/asiapacific (http://www.schroders.co.uk/asiapacific) .
Key Highlights
· The Company made a positive return over the period, with a NAV total return of
16.5% though this lagged the benchmark return of 17.3%.
· The share price produced a total return of 15.6% over the year.
· The Company continues its commendable long term record of NAV total return
outperformance of the benchmark which sits at an annualised 2.2% over ten
years.
· The biggest driver of relative performance was stock selection, which was
significantly positive in Taiwan, the Philippines, Indonesia and Hong Kong,
but negative in China, Korea and India.
· The Directors are recommending a final dividend of 12.50 pence per share for
the year ended 30 September 2024, representing an increase of 4.2% over the
amount paid in respect of the previous financial year.
· A total of 8,209,500 shares were bought back for cancellation at a cost of
£41.5 million (2023: 6,000,000 shares were bought back and cancelled at a
cost of £29.8 million), adding 0.6% to the NAV.
Investor presentation
Our Portfolio Managers, Richard Sennitt and Abbas Barkhordar, will be
presenting at a webinar on Thursday, 16 January 2025 at 2.00 pm (which can be
signed up to via the following link: https://www.schroders.events/SDP24
(https://www.schroders.events/SDP24) ).
James Williams, Chairman, Schroder AsiaPacific Fund plc commented:
"Asia Pacific remains an engine of global growth, with robust domestic
consumption, technological innovation, and an increasingly affluent
population. Our focus remains on identifying high-quality companies that can
navigate this evolving landscape, while positioning the portfolio to manage
risk through prudent diversification and active engagement with companies."
The Company has submitted a copy of its Annual Report and Financial Statements
to the National Storage Mechanism and it will shortly be available for
inspection at: National Storage Mechanism | FCA
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Enquiries:
Schroder Investment Management Limited
Charlotte Banks/Kirsty Preston (Press) 020 7658 2106
Kerry Higgins 020 7658 6000
Chairman's Statement
"Your Board remains focused on managing discount volatility and helping to
provide liquidity in the Company's shares."
Performance
For the year ended 30 September 2024, the Company generated a NAV total return
of 16.5%, slightly behind the benchmark, which produced a total return of
17.3% over the same period. The share price produced a total return of 15.6%
over the year. This builds on the Company's commendable long term record of
NAV total return outperformance of the benchmark which sits at an annualised
2.2% over ten years.
Performance during the year was strong in absolute terms and Asian markets
performed well, although lagging behind global markets. Taiwan, with its
information technology focus, and India produced the strongest returns for the
year.
More detailed comment on performance and investment policy may be found in the
Portfolio Managers' Review.
Revenue and dividend
The Company's principal investment objective is to achieve capital growth, and
the Directors continue to distribute substantially all the revenue received
each year. This year the Company's revenue return increased to 12.79 pence per
share (2023: 12.06p).
The Directors are recommending a final dividend of 12.50 pence per share for
the year ended 30 September 2024, representing an increase of 4.2% over the
amount paid in respect of the previous financial year. This dividend will be
paid on 7 February 2025 to shareholders on the register on 27 December 2024,
subject to approval by shareholders at the Annual General Meeting (AGM) on 29
January 2025.
Gearing
During the year, the Company amended and renewed its £75 million one-year
multicurrency revolving credit facility with The Bank of Nova Scotia, London
Branch, on a secured basis. At 30 September 2024, the Company's net gearing
position was 2.6% taking into account cash balances, compared to 2.1% at 30
September 2023.
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.
A total of 8,209,500 shares were bought back for cancellation at a cost of
£41.5 million (2023: 6,000,000 shares were bought back and cancelled at a
cost of £29.8 million), adding 0.6% to the NAV. Since the year end, a further
3,375,000 shares have been bought back for cancellation at a cost of £18.4
million.
The discount at the end of September 2024 was 12.4% compared to 11.5% at the
previous financial year end. The average discount during the year under review
was 11.6%.
Your Board remains focused on managing discount volatility and helping to
provide liquidity in the Company's shares. 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.
Board succession
Following the retirement of Keith Craig at the last AGM in January 2024, the
Board was pleased to announce the appointment of Vivien Gould to succeed Keith
as Chair of the Nomination Committee.
I have now served on the Board for just over ten years and, at the time of my
appointment as Chairman in 2021, it was announced that I would serve a maximum
of five years in the role. Therefore, it is my intention to retire following
the AGM in 2026. As part of its succession planning the Board will carefully
consider my successor.
Board succession has been considered carefully during the year to ensure that
we effectively plan for Board changes in the coming years. Consequently, in
accordance with the Board's succession planning the Board, through its
Nomination Committee, is undertaking a search process to identify a new
non-executive Director using a third-party recruitment firm.
Board performance evaluation
The Company undertook an externally facilitated, Board performance evaluation
during the year under review. The evaluation was conducted by an independent
third party, Lintstock. A separate evaluation of my performance as Chairman
was also carried out and the results considered by the Senior Independent
Director.
The Board has discussed the findings and recommendations of the performance
evaluation, and the overall conclusion was very positive in respect of the
effectiveness of the Board, its composition, the skills, expertise and
commitment of the individual Directors.
Further information on the evaluation of the Board can be found in the
Nomination Committee Report in the Annual Report and Financial Statements.
Details of the Directors experience and background are provided in their
biographies in the Annual Report and Financial Statements.
Webinar
On Thursday, 16 January 2025, the Company's Portfolio Managers will be
presenting to shareholders at a webinar at 2.00 pm on the results for the year
and prospects for Asian markets. To register your interest to attend this
webinar please visit www.schroders.events/SDP24, where the facility to watch
the recorded webinar afterwards will also be available.
AGM
The AGM will be held on Wednesday, 29 January 2025 at 12.00 noon at the
offices of Schroders at 1 London Wall Place, London EC2Y 5AU. A presentation
from our Portfolio 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 in the
Annual Report and Financial Statements.
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 web pages 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.
Shareholder communication and engagement
The Board understands the significance of having regular access to information
for our shareholders. In addition to our Company web pages, we provide
shareholders with the opportunity to subscribe to Company email updates. These
emails feature updates about the Company, along with news, opinion pieces, and
market insights. Details on how to subscribe can be found on the inside front
cover of the Annual Report and Financial Statements.
In advance of the AGM, on 29 January 2025, I will again take the opportunity
to engage with shareholders who hold their shares through a retail platform,
as permitted by section 793 of the Companies Act 2006. The Board encourages
all shareholders to either attend the AGM or exercise their voting rights by
proxy. The Board acknowledges that certain execution-only investment platforms
are now enabling shareholders to vote electronically. We encourage
shareholders to utilise this feature when it is available.
The Board is committed to exercising the highest standard of corporate
governance and accordingly, regularly considers the views of its shareholders,
offering to meet with major shareholders annually. We also seek to engage with
all shareholders where possible and should you wish to contact me, you can do
so via the Company Secretary whose details are set out in the Annual Report
and Financial Statements.
Outlook
As we look to the future, it is impossible to ignore the evolving geopolitical
landscape and its potential impact on investing in the Asia Pacific region.
China, the world's second-largest economy, remains central to the region's
growth story, yet it also presents unique challenges. There has been recent
positive momentum in the Chinese markets and for this to be maintained the
government's ongoing stimulus measures will need to be allocated effectively
to address underlying consumer malaise and demand-side challenges to have a
lasting impact. Rising tensions between China and the United States,
particularly around technology, trade, and Taiwan, continue to generate
uncertainty. The ongoing situation surrounding Taiwan is of particular
concern, given its geopolitical significance and its critical role in global
semiconductor supply chains. Any escalation in tensions could have
far-reaching consequences, not only for the region but for the global economy.
In addition, the re-election of President Trump adds another layer of
complexity to the investment environment. Shifts in US foreign and trade
policy, particularly in relation to China, may influence market sentiment and
the regulatory framework in which companies operate.
On the positive side, several regional elections over the past year in Taiwan,
Korea, Indonesia and India have been relatively smooth, which may help
alleviate some immediate political risks and foster a more stable
environment. Additionally, if the USA can avoid a hard landing and, despite
recent commentary, a decline in US rates leads to a weaker dollar this could
lead to a reversal of recent trends such as the relative underperformance of
growth stocks and the weakness in the Hong Kong market.
As these developments unfold, the Board and our Portfolio Managers remain
vigilant in monitoring the potential impacts on our portfolio.
While uncertainties remain significant, we believe they are balanced by the
region's long-term structural growth drivers. Asia Pacific remains an engine
of global growth, with robust domestic consumption, technological innovation,
and an increasingly affluent population. Our focus remains on identifying
high-quality companies that can navigate this evolving landscape, while
positioning the portfolio to manage risk through prudent diversification and
active engagement with companies.
In closing, I would like to express my sincere gratitude to our shareholders
for their continued support. Despite the geopolitical headwinds, we believe
that the Company is well-positioned to capitalise on the region's growth
opportunities, while managing risks carefully. The Board remains committed to
delivering sustainable, long-term value, and I look forward to the coming year
with cautious optimism.
James Williams
Chairman
2 December 2024
Investment Manager's Review
"The strongest major sector in Asia over the period was Information
Technology, where stocks benefitted from optimism over the increasing adoption
of Artificial Intelligence."
The NAV per share of the Company recorded a total return of 16.5% over the
twelve months to end September 2024. This was behind the performance of the
benchmark, the MSCI All Country Asia ex Japan Index, which rose by 17.3% over
the same period.
Source: Schroders, Morningstar, in GBP, Cum-income fair NAV.
The strongest major sector in Asia over the period was Information Technology
(IT). Here, stocks benefitted from optimism over the increasing adoption of
Artificial Intelligence (AI); the knock-on demand for technology products
being sold by the likes of NVIDIA; and a recovery in the supply-demand cycle
across the wider sector.
From a cyclical perspective, the excess inventory which had built up in the
post-Covid period and which had been a major overhang on IT stocks (as well
as other exporters of manufactured goods) throughout much of the last two
years, finally fell to more typical levels as companies have cut prices and
production to clear inventories.
In addition to the more positive view on the inventory outlook, continued
strong demand for AI chips has driven additional gains in Asian technology
stocks with any exposure to that theme. This particularly helped Taiwan, the
Asian market most exposed to the advanced semiconductor sector. A single
Taiwanese company, Taiwan Semiconductor Manufacturing Corporation (TSMC),
manufactures all of NVIDIA's cutting-edge AI chips.
It is, of course, still very early days when it comes to the adoption of AI
applications, so it remains uncertain to what extent the vast investment being
made in AI by leading technology companies can be monetised. But, for now,
their demand for these highly complex products continues unabated, benefitting
the Asia companies which are at the heart of the global manufacturing supply
chain for advanced logic and memory semiconductors.
After Taiwan, India was the best performing market over the period.
India has been a beneficiary of domestic investor flows into the stock market,
a trend which has particularly benefitted the small and mid-cap segments of
the market. These have markedly outperformed (and now trade at a significant
premium to) large caps.
While these inflows reflect, in part, the confidence around the growth outlook
for the economy over the medium-term, some areas of the market now look very
stretched, in our view. The positive performance of the Indian stock market
has, in recent periods, been driven more by an increase in price-to-earnings
multiples than by growth in company earnings themselves, suggesting that share
prices are now reflecting very optimistic assumptions about future growth and
profitability. This has been accompanied by a pickup in equity issuance and
placements by companies using the favourable conditions to sell stock.
In Singapore, the market saw broad-based strength with the financials sector
doing well as banks benefitted from expectations of a more moderate pace of US
interest rate cuts as the year progressed. Conversely, this "higher for
longer" scenario was somewhat of a headwind for the smaller Association of
Southeast Asian Nations (ASEAN) markets such as Indonesia, Philippines and
Thailand, which have historically tended to perform better during periods of
easier US dollar liquidity.
Korea was another relative laggard over the year. The market was initially
supported by investor optimism around a programme of corporate governance
reforms proposed by the government, modelled on the high-profile recent
campaign in Japan. Investors hoped that improvements in capital allocation,
shareholder returns and fairer treatment of minority investors would help
boost valuations and close the persistent "Korea discount".
While some encouraging steps have been announced by a few companies, overall
the results have thus far been quite disappointing, with structural barriers
to improved returns proving difficult to overcome - not least a preponderance
of family ownership, which is much less present in Japan. An electoral setback
for the ruling party earlier in the year further dented the prospects of
giving legislative backing to the moral suasion of the government.
The market which saw the most extreme swings in sentiment over the year was
China (and, to a lesser extent, Hong Kong). The macroeconomic environment in
China remained weak throughout the period, with slow domestic growth and
depressed consumer confidence weighing on stock prices for much of the year.
However, towards the end of September 2024, announcements from various state
and party institutions led investor sentiment to turn sharply positive on the
expectation of a large, co-ordinated stimulus package involving monetary,
fiscal and regulatory loosening - including some measures to directly boost
purchases of domestic stocks by Chinese institutional investors.
Although details were scarce (not least over the size and nature of the fiscal
stimulus), these announcements led to a very strong stock market rally in
both on-shore and off-shore Chinese stocks, driven by relief that the
government no longer seemed to be willing to accept the economy might sink
into a deflationary spiral.
The market subsequently saw a great deal of volatility (after the end of this
reporting period) as each subsequent statement by authorities was pored over
by investors for clues as to what these policy changes would entail in
reality.
On the more positive side in China, exports have been an important support for
the economy and there was also some relief around geopolitical tensions, with
the meeting of Presidents Xi and Biden at last year's November APEC
(Asia-Pacific Economic Cooperation) summit in California, and the Taiwanese
election that passed off largely uneventfully. Nevertheless, there is little
sign of any easing of US policies towards China, which is perhaps not
unexpected in a US presidential election year.
Performance and Portfolio Activity
The Company made a positive return over the period, with a NAV total return of
16.5% though this lagged the benchmark return of 17.3%.
From an asset allocation perspective, being overweight to Hong Kong was a
significant drag to relative performance (only partially offset by our
underweight to China) and our off-benchmark exposure to Vietnam detracted from
relative performance. Our underweight to Korea, however, was a positive
contributor.
The biggest driver of relative performance was stock selection, which was
significantly positive in Taiwan, the Philippines, Indonesia and Hong Kong,
but negative in China, Korea and India.
In Taiwan, our exposure to technology names drove this positive stock
selection, with leading-edge logic foundry TSMC, 'fabless' chip design company
MediaTek and contract manufacturer Hon Hai all contributing positively from
the tech sector, benefitting to lesser and greater degrees from their exposure
to demand for AI hardware. Electronic paper supplier E Ink also performed
strongly on signs of increased adoption of electronic shelf labels in
retailers such as Walmart. Outside of tech, window coverings supplier Nien
Made also performed well, as lower interest rates were expected to lead to
a demand recovery in the US.
In the Philippines, port operator ICTSI performed well on good operational
execution and recovering global trade, and property developer Ayala Land did
well on a more supportive interest rate outlook. Bank Mandiri was a strong
performer in Indonesia, benefitting from a benign macro environment there and
solid growth backed by their successful digital banking initiatives.
Hong Kong stock selection benefitted from our holding in global
battery-powered tools manufacturer Techtronic Industries, which continues to
see good demand for its leading professional power tools brand, Milwaukee.
Prada, a luxury goods company, and ASM Pacific Technologies, which specialises
in manufacturing semiconductor fabrication equipment, also contributed to
positive selection in Hong Kong. Notably, these companies serve global, not
just domestic Hong Kong or mainland Chinese customers.
Negative stock selection in China was partly driven by our underweight
positioning in the large e-commerce segment, which saw an intense rally in the
final week of the period on the back of the stimulus expectations mentioned
above.
However, some individual holdings also detracted for more stock-specific
reasons, such as apparel manufacturer Shenzhou International, which suffered
from the poor Chinese sales of key customers such as Nike. Another negative
contributor was our holding in WuXi Biologics, a Chinese healthcare services
company that specialises in the outsourced research, development and
manufacturing of biological drugs, which suffered from concerns over the
impact of proposed legislation in the US which may impose restrictions on its
ability to work with US entities.
Korean stock selection faced a significant headwind from our relative position
in the two memory semiconductor names, Samsung Electronics and SK Hynix. Our
preference for Samsung (due to a stronger balance sheet and a history of cost
and technology leadership in the industry) proved costly, as SK Hynix took
a significant lead in the production of High-Bandwidth Memory (HBM),
a previously niche product which has become critical, given its necessity for
the efficient functioning of the leading AI chips from NVIDIA. Samsung has
struggled to close the gap with SK Hynix, and these struggles have raised
investor concerns about the broader leadership and strategy of the group.
Stock selection was also negative in India - as explained above, much of the
outperformance of that market was driven by the small and mid-cap segments of
the market, where the Company has limited exposure as we see better value in
the larger-cap names in sectors such as financials and IT services. HDFC Bank
was a notable laggard in our holdings there, as it has struggled to integrate
its non-bank affiliate while also growing the overall business in line with
peers.
The geographic exposure in the Company's portfolio continues to be mainly
spread between Taiwan, China, India, Hong Kong, Singapore, Korea and several
smaller ASEAN markets. China remains a substantial underweight though is, in
part, offset by the overweight to the Hong Kong market which, in general,
looks more attractive from a valuation and governance perspective. We have
however reduced our China underweight during the year, by adding to several
high-quality stocks which had been sold down to attractive levels during the
period, including videogame developer NetEase, dominant music streaming
service Tencent Music Entertainment, automation equipment supplier Shenzhen
Inovance and leading battery manufacturer Contemporary Amperex Technology
(CATL). We sold out of Ping An Insurance, Hongfa, Yum China and WuXi
Biologics, as well as reducing our weight in e-commerce giant Alibaba. In Hong
Kong, we exited Kerry Properties and reduced Prada, both on a weaker
consumption outlook for China.
Elsewhere, we continue to be overweight to Singapore, with positions in banks
DBS and Oversea-Chinese Banking Corp (OCBC), and Singapore Telecom, though we
exited our holding in Sea Ltd and reduced our Singapore Exchange holding on
strong performance. We are also overweight some of the smaller ASEAN markets
such as Thailand (where we added to healthcare names Bumrungrad Hospital and
Bangkok Dusit Medical Services (BDMS) on strong long-term growth prospects),
the Philippines (where we added Ayala Land and to Bank of the Philippine
Islands) and Indonesia, where we added Bank Negara while reducing Bank Mandiri
on relative valuation. We also have an off-benchmark position in Vietnam,
where we added IT services name FPT Corp due to its long-term competitive
advantages and attractive valuation.
We are underweight in India and Korea. In Korea, we exited our holding in
battery name Samsung SDI as competition in the sector intensified, and
cosmetics producer LG H&H which had seen a disappointing recovery in sales
to Chinese customers post-pandemic, though added to car manufacturer Kia which
has the potential to increase shareholder returns meaningfully. In India, we
sold out of IT services name Mphasis which had performed very strongly and
added to conglomerate Reliance Industries.
From a sectoral perspective, financials and IT remain the Company's two
largest exposures and overweights, with significant underweights being
consumer staples and discretionary. Over the period, we did reduce some
financials holdings, selling names including insurers Ping An and Prudential,
as well as trimming Bank Mandiri. The IT exposure predominantly is due to
positions in Taiwan, Korea and India; during the year we added Taiwanese names
E Ink, semiconductor packaging company ASE Technology and foundry UMC, while
trimming some TSMC on strong performance. Elsewhere we trimmed materials
companies BHP Group and Orica, also following strong performance.
Outlook and Policy
Although Asian markets lagged global equities through the end of last year and
start of this year, over the last six months they have done better, producing
strong absolute gains exceeding global market returns, despite several ongoing
but well-known headwinds.
Amongst these, geopolitics has continued to be a concern in the region, with
tensions around US-China relations, Taiwan, Ukraine and the Middle East all
contributing to investor caution. Although regional elections (Taiwan, Korea,
Indonesia and India) have all passed reasonably smoothly this year, the
re-election of President Trump in the US election in early November 2024 is
likely to result in considerable uncertainty in the trade and geopolitical
background for the region in coming years.
President Trump's policy proposals, on the face of it, appear quite
inflationary (tariffs raising import prices, fiscal loosening) and could
therefore end up with a 'higher for longer' interest rate outlook. This would
likely be a tailwind for many Asian financial stocks, but a headwind for those
countries with weaker external balances, including some of the ASEAN markets.
Although stronger US growth is a positive for exports from Asia, any increase
in tariffs could be an offset to that, particularly if the suggested 60%
tariff on Chinese exports is implemented. This could ultimately end up
benefiting other exporting countries across Asia who will become more
competitive. Given this, China is likely to be more aggressive on domestic
stimulus to try and counter any potential impact from weaker exports. Although
there are clear differences between President Trump's first term and now
(particularly around the starting level of interest rates, as well as the
geopolitical backdrop), it is worth remembering that under President Trump 1.0
similar stimulus measures were introduced together with increased tariffs and
protectionist measures and, despite that, Asia performed well as a region,
albeit after an initial wobble.
Within the region, the Chinese economy remains weak as consumer confidence is
still extremely low, with this increasingly being reflected in poor retail
sales and greater evidence of downtrading. This weak confidence in part
reflects a weaker job market together with falling property prices. All this
has meant the consumer has become more risk averse which has resulted in a
meaningful increase in savings versus consumption.
With China's domestic and external sectors both facing uncertainty, we have
been cautious in adding to our exposure to the market, despite the emergence
of seemingly better value in a number of stocks there during the period.
Consensus expectations had clearly been lowered versus a year ago (at least
until the recent optimism about stimulus), and valuations had become more
attractive, but several companies which disappointed on earnings still
sold-off sharply, suggesting not all the weakness had yet been discounted.
The key domestic overhang remains the property market, where activity and
prices are yet to recover from earlier significant falls. Although the
government has made some announcements to try to put a floor under the
property market, in reality the fiscal sums backing these interventions are
(so far) very small compared to the scale of the problem, and unlikely to make
more than a marginal difference. Given this, and the structural challenges
facing stock-pickers in China (poor capital allocation, structurally lower
nominal growth, unpredictable regulatory and policy shifts, high debt levels),
we remain significantly underweight the market, albeit less so than where we
were 12 months ago.
It is noteworthy that the most recently announced stimulus measures, at the
time of writing, appear more substantive and coordinated and have provoked a
meaningful rally in the stock market. Whilst we also view the stimulus as
positive, in our view, the rally has already started to discount further
easing and, therefore, whatever is eventually announced risks disappointing
investors' expectations.
Aside from the size of any further spending, it is also how it is allocated
that is key, with a need, in our view, to have more of a focus on the demand
side of the economy if the consumer is to get out of its malaise, rather than
continuing to drive up capital investment.
The Hong Kong market continues to suffer not only from the spillover impacts
of a weak China, but also the high level of interest rates, which are
inappropriate for the weak domestic economy. Whilst we have reduced our
overweight to real estate held via the Hong Kong market, we have also taken
advantage of weak stock prices to add to other areas, such as non-bank
financials. US interest rates have now started to be cut, which should help to
ease monetary conditions in Hong Kong and be supportive for the economy and
market, although the pace of such cuts is more uncertain in the wake of the US
election results.
India remains a bright spot in the region in terms of growth and optimism
among investors, but this has been increasingly reflected in share prices,
with the market now looking outright expensive on most metrics.
In the South-East Asian region, we are most exposed to Singapore, which is
benefitting from its increasing status as a regional wealth management hub,
as well as the growth of its ASEAN neighbours. We have also increased direct
exposure to some of the smaller ASEAN markets, such as Thailand and the
Philippines.
From a sector perspective, we remain overweight IT, given our positive view on
the structural growth drivers behind global demand for technology,
particularly advanced semiconductors. Valuations have moved higher on cyclical
improvements as well as the surge in demand for AI-related hardware. However,
we remain comfortable with the valuations of what we hold in the portfolio, at
present but are mindful we do not want to overstay our welcome here.
We also remain overweight to financials - a diverse sector spanning not only
banks, but also insurers and exchange companies. The banks we own are
generally well-capitalised with strong deposit franchises. Many of our
holdings are in the more mature markets, such as Singapore, which in general
trade at attractive valuations and decent dividend yields, but we also have
exposure to their faster growing hinterland. Direct exposure to faster growing
markets, where credit penetration is relatively low, includes ASEAN markets
and India. Should interest rates continue to come down from recent levels,
there may be some concern over the impact that this could have on bank
margins. Though any further cuts are expected to have an impact on margins,
this may also, in part, be offset by lower credit costs, potentially higher
loan growth and an increase in wealth management revenues.
Historically, a weaker US dollar has been positive for Asia, rather than
interest rate cuts per se, although the latter are clearly supportive of
greater liquidity.
The other historically positive driver of Asian markets is the export cycle,
as this tends to be correlated with underlying earnings per share growth and
here we believe there has been an improvement. Inventory excesses from the
post-Covid period have been run down and many industries have become more
disciplined around production and supply additions. This has seen exports
recover for many Asian countries and we believe a soft landing in the US would
be supportive of that trend continuing, albeit at a slower rate. Here, we
believe cuts in interest rates are key to avoid a sharper slowdown in US
demand. Potentially higher tariffs and other barriers to trade under the
incoming US administration could derail the export recovery, however, with
winners and losers hard to predict at this early stage.
We believe aggregate valuations for the region are no longer particularly
cheap and are now trading at slightly above long-term averages. However, this
masks a large variation across individual markets where Singapore, Hong Kong,
Korea, Indonesia and the Philippines, look relatively cheap versus history,
whilst India and Taiwan look relatively expensive. Following its rally, China
is no longer at the lower end of its valuation range having moved into the
middle of its historic range.
In the short-term at least, shifting views on the likely policies of the
incoming Trump administration and ongoing announcements around Chinese
stimulus are likely to lead to heightened volatility in regional markets.
While the outlook for interest rates is more uncertain following the US
election, should they continue to fall, and the US dollar weaken, that could
be a potentially positive catalyst for Asian markets, if history is any guide
to go by. The outlook for exports has also been complicated by the likely
policy changes to come under the incoming US administration. Stimulative
policy leading to higher growth is likely to increase the demand for imported
goods, but tariffs (particularly on China) could offset this to an extent. It
is unlikely, however, that manufacturing of most goods currently being
exported from China would shift onshore to the US - rather, other Asian
countries are likely to be the main beneficiaries of any supply chain
re-alignment.
Richard Sennitt and Abbas Barkhordar
Portfolio Managers
Schroder Investment Management Limited
2 December 2024
Risk Report
The Board itself, and, through its delegation to its 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. The Company has established
associated policies and processes designed to manage and, where possible,
mitigate those risks which are monitored by the Audit and Risk Committee on an
ongoing basis.
This system assists the Board in determining the nature and extent of the
risks it is willing to take in achieving the Company's strategic objectives.
Risk assessment and internal controls review by the Board
Risk assessment includes consideration of the scope and quality of the systems
of internal control operating within key service providers, and ensures
regular communication of the results of monitoring by such providers to the
Audit and Risk Committee, including the incidence of significant control
failings or weaknesses that have been identified at any time and the extent to
which they have resulted in unforeseen outcomes or contingencies that may have
a material impact on the Company's performance or condition.
Although the Board believes that it has a robust framework of internal
controls in place, this can provide only reasonable, and not absolute,
assurance against material financial misstatement or loss and is designed to
manage, not eliminate, risk.
Both the principal and emerging risks and the monitoring system are also
subject to robust review at least annually. The last assessment took place in
November 2024.
During the year, the Board discussed and monitored a number of risks which
could potentially impact the Company's ability to meet its strategic
objectives. The Board receives updates from the Investment Manager, Company
Secretary and other service providers on emerging risks that could affect the
Company. The Board was mindful during the year of the ongoing conflicts in
Israel, which were not seen as new principal or emerging risks but those that
exacerbate existing risks. These 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, 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
in part driven by the results of several significant elections in 2024,
notably in the US.
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.
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 financial statements in the Annual Report and Financial
Statements.
Actions taken by the Board and, where appropriate, its Committees, to manage
and mitigate the Company's principal risks and uncertainties are set out in
the table below.
The "Change" column on the right highlights at a glance the Board's assessment
of any increases or decreases in risk during the year after mitigation and
management. The arrows show the risks as increased, decreased or unchanged.
Risk Mitigation and management Change
Strategy and competitiveness
The requirements of investors change or develop in such a way as to diverge The appropriateness of the Company's investment remit is periodically reviewed
from the Company's investment objectives, resulting in a wide discount of the and the success of the Company in meeting its stated objectives is monitored.
share price to NAV per share. The share price relative to NAV per share is monitored and the use of buy back
authorities is considered on a regular basis. The marketing and distribution
The Company's cost base could become uncompetitive, including fees, against activity is regularly reviewed. The Company engages proactively with
the peer group and against open-ended alternatives. investors.
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.
Investment management
The Manager's investment strategy and levels of resourcing, if inappropriate, Regular review of:
may result in the Company underperforming the market and/or peer group
companies, leading to the Company becoming unattractive to investors. • investment performance;
• NAV and share price performance including discount against the
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.
The Management Engagement Committee reviews annually the ongoing suitability
of the Manager.
Regular meetings with major shareholders are undertaken to seek their views
with respect to Company matters.
Market
A significant fall in regional equity markets and/or currency could have an The Board continues to monitor the market volatility caused by current
adverse impact on the market value of the Company's underlying investments. geopolitical issues and will continue to do so on an ongoing basis.
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 Board
also monitors macroeconomic and market factors, including the impact of
inflation.
Those risks, including market risk, associated with the economic environment
that might impact the Company are also mitigated to some extent by the
Investment Manager. Note 20 to the financial statements provides further
details of the steps taken to mitigate those risks associated with the
portfolio.
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 Portfolio Managers.
The Investment Manager seeks to invest in companies with strong balance sheets
and sustainable business models.
Geopolitical
Political developments globally might materially affect the ability of the The Board continued to monitor key political developments in the Asia Pacific
Company to achieve its investment objective. The region also has its own region, in addition to the Ukraine war and the Middle East.
specific risks which could impact market volatility and sentiment.
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.
Custody and depositary
Safe custody of the Company's assets may be compromised through control The depositary reports on the safe custody of the Company's assets, including
failures by the depositary. cash and portfolio holdings which are independently reconciled with the
Manager's records. The review of audited internal controls reports covering
custodial arrangements is undertaken. An annual report from the depositary on
its activities, including matters arising from custody operations is received.
Gearing and leverage
The Company utilises credit facilities. These arrangements increase the funds Gearing is monitored and restrictions on borrowings are imposed: gearing
available for investment through borrowing. While this has the potential to continues to operate within pre-agreed limits so as not to exceed 20% of the
enhance investment returns in rising markets, in falling markets the impact Company's net assets. Generally, gearing is maintained at relatively low
could be detrimental to performance. levels.
Accounting, legal and regulatory change
In order to continue to qualify as an investment trust, the Company must The Board intends to continue to operate the Company in full compliance with
comply with the requirements of Section 1158 of the Corporation Tax Act 2010. the requirements of Section 1158 of the Corporation Tax Act 2010, compliance
Breaches of the UK Listing Rules, the Companies Act or other regulations with is confirmed by the external auditor.
which the Company is required to comply, could lead to a number of
detrimental outcomes. The confirmation of compliance with relevant laws and regulations by key
service providers is reviewed.
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
ESG requirements including climate change and climate-related risks could The consideration of climate change risks and ESG factors is integrated into
impact the Company's business and affect revenue, expenses, asset values or the investment process and reported at regular Board meetings.
the cost or availability of capital.
The Investment Manager considers and evaluates the approach investee companies
take to recognise and mitigate climate change risks.
The Manager has implemented a comprehensive ESG policy which is outlined in
detail in the Annual Report and Financial Statements.
Third party services
The Company has no employees and has delegated certain functions to a number Service provider appointments are subject to due diligence processes and with
of service providers. clearly documented contractual arrangements detailing service expectations.
Failure of controls, including as a result of fraud, and poor performance of Regular reports are provided by key service providers and the quality of their
any service provider, could lead to disruption, reputational damage or loss of services is monitored.
shareholders' assets.
Monitoring includes an annual presentation to the Chair of the Audit and Risk
Committee and other Directors from Schroders' key risk and internal controls
personnel, the Company's depositary and custodian, HSBC, and the Company's
registrar, Equiniti.
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 are all exposed to the risk of cyber-attacks. The Company's service providers report on cyber risk mitigation and management
Cyber-attacks could lead to loss of personal or confidential information, at least annually, which includes confirmation of business continuity
unauthorised payments or inability to carry out operations in a timely manner. capability in the event of a cyber-attack.
Statement of Directors' Responsibilities in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulation.
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 and applicable law). Under
company law, the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the return or loss of the Company for that period. In
preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable UK Accounting Standards, have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on a going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006.
The Directors are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Manager is responsible for the maintenance and integrity of the web pages
dedicated to the Company. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors' statement
Each of the Directors, whose names and functions are listed in the Annual
Report and Financial Statements, confirm that to the best of their knowledge:
· the financial statements, which have been prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 102 "The Financial Reporting Standard applicable in
the UK and Republic of Ireland" and applicable law), give a true and fair view
of the assets, liabilities, financial position and net return of the Company;
· the Annual Report and Financial Statements includes a fair review of the
development and performance of the business and the position of the Company,
together with a description of the principal and emerging risks that it
faces; and
· the Annual Report and Financial Statements, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
On behalf of the Board
James Williams
Chairman
2 December 2024
Income Statement
for the year ended 30 September 2024
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at fair value through profit or loss 2 - 117,282 117,282 - 9,601 9,601
Net foreign currency gains - 2,917 2,917 - 293 293
Income from investments 3 24,292 117 24,409 23,863 304 24,167
Other interest receivable and similar income 3 264 - 264 153 - 153
Gross return 24,556 120,316 144,872 24,016 10,198 34,214
Investment management fee 4 (1,526) (4,576) (6,102) (1,552) (4,656) (6,208)
Administrative expenses 5 (1,471) - (1,471) (1,409) - (1,409)
Net return before finance costs and taxation 21,559 115,740 137,299 21,055 5,542 26,597
Finance costs 6 (467) (1,400) (1,867) (231) (690) (921)
Net return before taxation 21,092 114,340 135,432 20,824 4,852 25,676
Taxation 7 (1,777) (5,916) (7,693) (1,834) (1,939) (3,773)
Net return after taxation 19,315 108,424 127,739 18,990 2,913 21,903
Return per share (pence) 8 12.79 71.82 84.61 12.06 1.85 13.91
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 in the Annual Report and Financial Statements form an integral part
of these financial statements.
Statement of Changes in Equity
for the year ended 30 September 2024
Called-up Capital Warrant
share Share redemption exercise Capital Revenue
capital premium reserve reserve Reserves reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
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
Repurchase and cancellation of the Company's own shares (821) - 821 - (41,494) - (41,494)
Net return after taxation - - - - 108,424 19,315 127,739
Dividend paid in the year 9 - - - - - (18,371) (18,371)
At 30 September 2024 14,659 100,956 5,485 8,704 767,036 22,319 919,159
The notes in the Annual Report and Financial Statements form an integral part
of these financial statements.
Statement of Financial Position
at 30 September 2024
2024 2023
Note £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 10 955,057 874,534
Current assets
Debtors 11 2,550 2,812
Cash and cash equivalents 11 5,803 6,785
8,353 9,597
Current liabilities
Creditors: amounts falling due within one year 12 (34,901) (28,068)
Net current liabilities (26,548) (18,471)
Total assets less current liabilities 928,509 856,063
Non current liabilities
Deferred taxation 13 (9,350) (4,778)
Net assets 919,159 851,285
Capital and reserves
Called-up share capital 14 14,659 15,480
Share premium 15 100,956 100,956
Capital redemption reserve 15 5,485 4,664
Warrant exercise reserve 15 8,704 8,704
Capital reserves 15 767,036 700,106
Revenue reserve 15 22,319 21,375
Total equity shareholders' funds 919,159 851,285
Net asset value per share (pence) 16 627.02 549.92
These financial statements were approved and authorised for issue by the Board
of Directors on 2 December 2024 and signed on its behalf by:
James Williams
Chairman
The notes in the Annual Report and Financial Statements form an integral part
of these financial statements.
Registered in England and Wales as a public company limited by shares Company
registration number: 03104981
Notes to the Financial Statements
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 financial statements are prepared in accordance with the Companies Act
2006, United Kingdom Generally Accepted Accounting Practice (UK GAAP), in
particular in accordance with Financial Reporting Standard (FRS) 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland",
and with the Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" (the SORP) issued by
the Association of Investment Companies in July 2022. All of the Company's
operations are of a continuing nature.
The financial statements have been prepared on a going concern basis under the
historical cost convention with the exception of investments which are
measured at fair value through profit or loss. The Directors believe that the
Company has adequate resources to continue operating to 31 December 2025,
which is at least 12 months from the date of approval of these financial
statements. In forming this opinion, the Directors have taken into
consideration: the controls and monitoring processes in place; the Company's
low level of debt and other payables; the low level of operating expenses,
comprising largely variable costs which would reduce pro rata in the event of
a market downturn; and that the Company's assets comprise cash and readily
realisable securities quoted in active markets. In forming this opinion, the
Directors have also considered any potential impact of climate change on the
viability of the Company. Further details of Directors' considerations
regarding this are given in the Chairman's Statement, Investment Managers'
Review, Going Concern Statement, Viability Statement and under the Risk Report
heading in the Annual Report and Financial Statements.
In preparing these financial statements the Directors have 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 financial statements are presented in sterling and amounts have been
rounded to the nearest thousand.
The accounting policies applied to these financial statements are consistent
with those applied in the financial statements for the year ended
30 September 2023.
No significant judgements, estimates or assumptions have been required in the
preparation of the financial statements 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 in the Annual Report and Financial Statements.
(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 are classified as financial liabilities at amortised cost. They are
initially measured at the proceeds received, net of direct issue costs, and
subsequently measured at amortised cost using the effective interest method.
(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 financial
statements are presented.
Transactions denominated in foreign currencies are converted at actual
exchange rates as at the date of the transaction. Monetary assets, liabilities
and equity investments 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 financial
statements 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 on investments held at fair value through profit or loss
2024 2023
£'000 £'000
(Losses)/gains on sales of investments based on historic cost (6,055) 11,251
Amounts recognised in investment holding gains and losses in the previous year (4,436) (8,012)
in respect of investments sold in the year
(Losses)/gains on sales of investments based on the carrying value at the (10,491) 3,239
previous balance sheet date
Unrealised gains recognised in respect of investments continuing to be held 127,773 6,362
Gains on investments held at fair value through profit or loss 117,282 9,601
3. Income
2024 2023
£'000 £'000
Income from investments
Overseas dividends 23,399 22,761
UK dividends 893 1,102
24,292 23,863
Other interest receivable and similar income
Deposit interest 191 153
Other income 73 -
264 24,016
Capital
Special dividend allocated to capital 117 304
Total income 24,673 24,320
4. Investment management fee
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fee 1,526 4,576 6,102 1,552 4,656 6,208
The basis for calculating the investment management fee is set out in the
Report of the Directors in the Annual Report and Financial Statements.
5. Administrative expenses
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Administration expenses 1,052 - 1,052 1,010 - 1,010
Directors' fees(1) 216 - 216 198 - 198
Company secretarial fee 150 - 150 150 - 150
Auditor's remuneration for audit services 53 - 53 51 - 51
1,471 - 1,471 1,409 - 1,409
( )
(1) Full details are given in the remuneration report in the Annual
Report and Financial Statements.
6. Finance costs
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on bank loans and overdrafts 467 1,400 1,867 231 690 921
7. Taxation
(a) Analysis of tax charge for the year
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Irrecoverable overseas withholding tax 1,777 - 1,777 1,834 - 1,834
Overseas capital gains tax - 5,916 5,916 - 1,939 1,939
Taxation for the year 1,777 5,916 7,693 1,834 1,939 3,773
The Company has no corporation tax liability for the year ended 30 September
2024 (2023: 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 (2023: lower) than the Company's
applicable rate of corporation tax for the year of 25% (2023: 22%).
The factors affecting the current tax charge for the year are as follows:
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return/(loss) before taxation 21,092 114,340 135,432 20,824 4,852 25,676
Net return/(loss) before taxation multiplied by the Company's applicable rate 5,273 28,585 33,858 4,581 1,068 5,649
of corporation tax for the year of 25% (2023: 22%)
Effects of:
Capital returns on investments - (30,050) (30,050) - (2,177) (2,177)
Income not chargeable to corporation tax (6,073) (29) (6,102) (5,250) (67) (5,317)
Irrecoverable overseas withholding tax 1,777 - 1,777 1,834 - 1,834
Provision for overseas capital gains tax - 5,916 5,916 - 1,939 1,939
Unrelieved expenses for the period 800 1,494 2,294 669 1,176 1,845
Taxation for the year 1,777 5,916 7,693 1,834 1,939 3,773
(c) Deferred tax
The Company has an unrecognised deferred tax asset of £22,206,000 (2023:
£19,912,000) based on a main rate of corporation tax of 25% (2023: 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 financial
statements.
Given the Company's intention to meet the conditions required to retain its
status as an Investment Trust Company, no provision has been made for deferred
UK capital gains tax on any capital gains or losses arising on the revaluation
or disposal of investments.
8. Return per share
2024 2023
£'000 £'000
Revenue return 19,315 18,990
Capital return 108,424 2,913
Total return 127,739 21,903
Weighted average number of shares in issue during the year 150,976,540 157,474,894
Revenue return per share (pence) 12.79 12.06
Capital return per share (pence) 71.82 1.85
Total return per share (pence) 84.61 13.91
9. Dividends
Dividends paid and proposed
2024 2023
£'000 £'000
2023 final dividend of 12.00p (2022: 12.00p) paid out of revenue profits 18,371 19,030
2024 2023
£'000 £'000
2024 final dividend proposed of 12.50p (2023: 12.00p) to be paid out of 18,324 18,416
revenue profits
The 2023 final dividend amounted to £18,416,000. However the amount actually
paid was £18,371,000, as shares were repurchased and cancelled after the
accounting date, but prior to the dividend record date.
The proposed final dividend amounting to £18,324,000 (2023: £18,416,000) 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 £19,315,000 (2023:
£18,990,000).
10. Investments held at fair value through profit or loss
2024 2023
£'000 £'000
Opening book cost 751,478 758,095
Opening investment holding gains 123,056 124,706
Opening fair value 874,534 882,801
Purchases at cost 166,344 168,987
Sales proceeds (203,103) (186,855)
Gains/(losses) on investments held at fair value 117,282 9,601
Closing fair value 955,057 874,534
Closing book cost 708,664 751,478
Closing investment holding gains 246,393 123,056
Closing fair value 955,057 874,534
Sales proceeds amounting to £203,103,000 (2023: £186,855,000) were
receivable from disposals of investments in the year. The book cost of these
investments when they were purchased was £209,159,000 (2023: £175,604,000).
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:
2024 2023
£'000 £'000
On acquisitions 172 282
On disposals 381 332
553 614
11. Current assets
Debtors
2024 2023
£'000 £'000
Securities sold awaiting settlement 916 893
Dividends and interest receivable 1,361 1,648
Taxation recoverable 235 236
Other debtors 38 35
2,550 2,812
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
2024 2023
Creditors: amounts falling due within one year £'000 £'000
Bank loan 29,821 24,579
Repurchase of the Company's own shares into treasury awaiting settlement 825 73
Securities purchased awaiting settlement 2,111 1,349
Other creditors and accruals 2,144 2,067
34,901 28,068
The bank loan comprises US$40 million drawn down on the Company's £75 million
multicurrency revolving credit facility with Bank of Nova Scotia, London
Branch. The facility was secured from 3 July 2024, the amendment and renewal
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) in the Annual Report and Financial
Statements.
The bank loan at the prior year end comprised US$30 million drawn down on the
Company's previous £75 million multicurrency revolving credit facility with
Bank of Nova Scotia, London Branch.
The Company has a £30 million overdraft facility with HSBC Bank plc, secured
by a floating charge. The overdraft facility has not been drawn down in the
current or prior year.
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
2024 2023
£'000 £'000
Ordinary shares allotted, called up and fully paid:
Ordinary shares of 10p each:
Opening balance of 154,800,716 (2023: 154,800,716) shares 15,480 16,080
Repurchase and cancellation of 8,209,500 (2023: 6,000,000) shares (821) (600)
Closing balance of 146,591,216 (2023: 154,800,716) shares 14,659 15,480
During the year, the Company made market purchases of 8,209,500 of its own
shares, nominal value £820,950, for cancellation, representing 5.3% of the
shares outstanding at the beginning of the year. The total consideration paid
for these shares amounted to £41,494,000. The reason for these purchases was
to seek to manage the volatility of the share price discount to NAV per share
and to provide a degree of liquidity to the market.
15. Reserves
Capital & Reserves
Gains and Investment
Capital Warrant losses on holding
Share redemption exercise sales of gains and Revenue
premium(1) reserve(2) reserve(34) investments(5) losses(6) reserve(7)
£'000 £'000 £'000 £'000 £'000 £'000
At 30 September 2023 100,956 4,664 8,704 581,370 118,736 21,375
Losses on sales of investments based on the carrying value at the previous - - - (10,491) - -
balance sheet date
Net movement in investment holding gains and losses - - - - 127,773 -
Transfer on disposal of investments - - - 4,436 (4,436) -
Realised exchange gains on cash and short-term deposits - - - 340 - -
Exchange gains on the credit facility - - - - 2,577 -
Overseas capital gains tax - - - (703) (5,213) -
Special dividend allocated to capital - - - 117 - -
Management fee, administrative expenses and finance costs allocated to capital - - - (5,976) - -
Repurchase and cancellation of the Company's own shares - 821 - (41,494) - -
Dividend paid - - - - - (18,371)
Retained revenue for the year - - - - - 19,315
At 30 September 2024 100,956 5,485 8,704 527,599 239,437 22,319
Capital & Reserves
Gains and Investment
Capital Warrant losses on holding
Share redemption exercise sales of gains and Revenue
premium(1) reserve(2) reserve(3) investments(5) losses(6) reserve(7)
£'000 £'000 £'000 £'000 £'000 £'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 - - - 3,239 - -
balance sheet date
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
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
2024 2023
£'000 £'000
Net assets attributable to Shareholders (£'000) 919,159 851,285
Shares in issue at the year end 146,591,216 154,800,716
Net asset value per share (pence) 627.02 549.92
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 in the Annual
Report and Financial Statements. 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 ended 30 September 2024, the Company held 11,471,124 shares in
Schroder Asian Discovery Fund Class Z Accumulation GBP, with the market value
of £14,500,000. During the year, the Company sold 1,567,762 shares and
generated total proceed of £1,745,000 from the sales.
The management fee payable in respect of the year ended 30 September 2024
amounted to £6,102,000 (2023: £6,208,000), of which £1,590,000 (2023:
£1,485,000) was outstanding at the year end. The company secretarial fee
payable in respect of the year ended 30 September 2024 amounted to £150,000
(2023: £150,000), of which £38,000 (2023: £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 in the Annual Report and Financial Statements and details
of Directors' shareholdings are given in the Directors' Remuneration Report in
the Annual Report and Financial Statements. Details of transactions with the
Manager are given in note 17 above. There have been no other transactions with
related parties during the year (2023: 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) and 1(g) in the Annual Report and Financial
Statements.
At 30 September 2024, the Company's investment portfolio was categorised as
follows:
2024 2024 2024
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities and equity linked securities 940,557 14,500 - 955,057
Total 940,557 14,500 - 955,057
2023 2023 2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities and equity linked securities 860,452 14,082 - 874,534
Total 860,452 14,082 - 874,534
Schroder Asian Discovery Fund Z Acc which is a daily priced collective
investment fund previously included in Level 1, has been reallocated to Level
2. There have been no further transfers between Levels 1, 2 or 3 during the
year (2023: 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, London
Branch, 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 financial statements. 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.
South
Hong Kong US Korean Taiwan Singapore Thai Indian Chinese
Dollars Dollars Won Dollars Dollars Baht Rupees Yuan Other Total
2024 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Current assets 2,389 286 377 592 - - 261 161 767 4,833
Current liabilities
Creditors: amounts falling due within one year (2,111) (29,953) (57) (41) - - - - - (32,162)
Foreign currency exposure on net monetary items 278 (29,667) 320 551 - - 261 161 767 (27,329)
Investments held at fair value through profit or loss(1) 239,262 18,404 71,408 199,309 77,854 33,927 153,715 42,339 76,805 913,023
Total net foreign currency exposure 239,540 (11,263) 71,728 199,860 77,854 33,927 153,976 42,500 77,572 885,694
South
Hong Kong US Korean Taiwan Singapore Thai Indian Chinese
Dollars Dollars Won Dollars Dollars Baht Rupees Yuan Other Total
2023 £'000 £'000 £'000 £'000 £'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
(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% (2023: 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:
2024 2023
Income Statement - return after taxation £'000 £'000
Revenue return 2,116 2,070
Capital return (3,453) (2,931)
Total return after taxation (1,337) (861)
Net assets (1,337) (861)
Conversely if sterling had strengthened by 10% this would have had the
following effect:
2024 2023
Income Statement - return after taxation £'000 £'000
Revenue return (2,116) (2,070)
Capital return 3,453 2,931
Total return after taxation 1,337 861
Net assets 1,337 861
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
multicurrency revolving 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:
2024 2023
Exposure to floating interest rates: £'000 £'000
Cash and cash equivalents 5,803 6,785
Creditors: amounts falling due within one year - borrowings on the credit (29,821) (24,579)
facility
Net exposure (24,018) (17,794)
Sterling cash deposits at call earn interest at floating rates based on
Sterling Overnight Index Average (SONIA) rates, (2023: SONIA).
The Company amended and renewed its £75 million multicurrency revolving
credit facility with Bank of Nova Scotia, London Branch, effective from 3 July
2024. 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 2024, the Company had
drawn down US$40 million (£29.8 million) for a one month period, at an
interest rate of 6.40% per annum.
At the prior year end, the Company had drawn down US$30 million (£24.6
million) on the preceding facility with Bank of Nova Scotia, London Branch.
Further details are given in note 12.
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
multicurrency revolving credit facility have fluctuated. The maximum and
minimum net cash/(debt) balances during the year are as follows:
2024 2023
£'000 £'000
Maximum debit interest rate exposure during the year - debt (27,981) (17,803)
Maximum credit interest rate exposure during the year - net cash 3,671 10,933
Interest rate sensitivity
The following table illustrates the sensitivity of the return after taxation
for the year and net assets to a 1.5% (2023: 1.5%) increase or decrease in
interest rates in regards to the Company's monetary financial assets and
financial liabilities. This level of change is considered to be a reasonable
illustration based on observation of current market conditions. The
sensitivity analysis is based on the Company's monetary financial instruments
held at the accounting date with all other variables held constant.
2024 2024 2023 2023
1.5% 1.5% 1.5% 1.5%
increase decrease increase decrease
in rate in rate in rate in rate
Income statement - return after taxation £'000 £'000 £'000 £'000
Revenue return (25) 25 10 (10)
Capital return (335) 335 (277) 277
Total return after taxation (360) 360 (267) 267
Net assets (360) 360 (267) 267
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
multicurrency revolving 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:
2024 2023
£'000 £'000
Investments held at fair value through profit or loss 955,057 874,534
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 in the Annual Report and
Financial Statements. 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% (2023: 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.
2024 2024 2023 2023
25% 25% 25% 25%
increase decrease increase decrease
in fair in fair in fair in fair
value value value value
Income statement - return after taxation £'000 £'000 £'000 £'000
Revenue return (358) 358 (328) 328
Capital return 237,690 (237,690) 217,650 (217,650)
Total return after taxation and net assets 237,332 (237,332) 217,332 (217,332)
Percentage change in net asset value 25.8% (25.8%) 25.5% (25.5%)
(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
multicurrency revolving 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 Three
months months
or less or less
2024 2023
Creditors: amounts falling due within one year £'000 £'000
Bank loan - including interest 29,861 24,613
Repurchase of the Company's own shares into treasury awaiting settlement 825 73
Securities purchased awaiting settlement 2,111 1,349
Other creditors and accruals 2,144 2,067
34,941 28,102
(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.
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:
2024 2023
£'000 £'000
Debt
Bank loan 29,821 24,579
Equity
Called-up share capital 14,659 15,480
Reserves 904,500 835,805
919,159 851,285
Total debt and equity 948,980 875,864
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.
2024 2023
£'000 £'000
Borrowings used for investment purposes, less cash 24,018 17,794
Net assets 919,159 851,285
Gearing (%) 2.6 2.1
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.
22. Status of results announcement
2024 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Financial Statements for the year ended 30 September 2024 and do
not constitute the statutory accounts for that year. The Annual Report and
Financial Statements include the Report of the Independent Auditors which is
unqualified and does not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The Annual Report and Financial
Statements will be delivered to the Registrar of Companies in due course.
2023 Financial Information
The figures and financial information for 2023 are extracted from the
published Annual Report and Financial Statements for the year ended 30
September 2023 and do not constitute the statutory accounts for the year. The
Annual Report and Financial Statements have been delivered to the Registrar of
Companies and included the Report of the Independent Auditors which was
unqualified and did not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006.
Neither the contents of the Company's web pages nor the contents of any
website accessible from hyperlinks on the Company's web pages (or any other
website) is incorporated into, or forms part of, this announcement.
2 December 2024
For further information:
Kerry Higgins
Schroder Investment Management Limited
E-mail: AMCompanySecretary@Schroders.com
(mailto:AMCompanySecretary@Schroders.com)
Issued by Schroder Investment Management Limited. Registration No 1893220
England.
Authorised and regulated by the Financial Conduct Authority. For regular
updates by e-mail please register online at www.schroders.com
(https://url.uk.m.mimecastprotect.com/s/t7puCxn15T1LlkKtvh4FyxHrZ?domain=schroders.com/)
for our alerting service.
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A copy of the 2024 Annual Report will shortly be submitted to the FCA's
National Storage Mechanism and will be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The 2024 Annual Report will shortly be available on the Company's web pages at
www.schroders.co.uk/asiapacific (http://www.schroders.co.uk/asiapacific) where
up-to-date information on the Company, including daily NAV and share prices,
factsheets and portfolio in formation can also be found.
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