Schroder AsiaPacific - Half-year Report
21/05/2024 07:00
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RNS Number : 1585P Schroder AsiaPacific Fund PLC 21 May 2024
Schroder AsiaPacific Fund plc
Half Year Report
Schroder AsiaPacific Fund plc (the "Company") hereby submits its Half Year
Report for the six months ended 31 March 2024 as required by the Financial
Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.
Key highlights
· Over the six months ended 31 March 2024, the Company's NAV per share produced
a total return of 5.7%, slightly ahead of the 5.3% total return from the
Benchmark. The share price produced a total return of 4.4% over the period.
· The Company continued to be active in buying back its shares during the period
and a total of 3,582,000 shares were purchased for cancellation over that time
at a cost of £17,312,000.
· The Company was 2.1% geared at the start of the period, and as at 31 March
2024 this had increased to 3.1%. The Board continues to keep gearing under
consideration and the Manager has access to a £75 million revolving credit
facility, as well as an overdraft facility.
· Whilst prospects for Asian markets remain challenging, with news flow from
China dominating, our portfolio managers are well positioned to find
opportunities to capitalise on the long-term growth drivers of the region.
The Half Year Report is also being published in hard copy format and an
electronic copy of that document will shortly be available to download from
the Company's web pages www.schroders.co.uk/asiapacific
(http://www.schroders.co.uk/asiapacific) .
The Company has submitted a copy of its Half Year Report to the National
Storage Mechanism and it will shortly be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Enquiries:
Schroder Investment Management Limited
Augustine Chipungu (Press) 020 7658 2106
Kerry Higgins 020 7658 6189
Half Year Report for the six months ended 31 March 2024
CHAIRMAN'S STATEMENT
Performance
Over the six months ended 31 March 2024, the Company's NAV per share produced
a total return of 5.7%, slightly ahead of the 5.3% total return from the
Benchmark. The share price produced a total return of 4.4% over the period.
Performance over the period was helped by strong stock selection in Taiwan and
the ASEAN markets of the Philippines and Indonesia. The Company also benefited
from the significant underweight to China. However, this was somewhat offset
by negative stock selection within China.
Further analysis of performance may be found in the Investment Manager's
Review.
Discount management
The Company continued to be active in buying back its shares during the period
and a total of 3,582,000 shares were purchased for cancellation over that time
at a cost of £17,312,000. Since the end of the period, the Company has bought
back an additional 1,375,000 shares as the Board remains active in
implementing its buy-back policy. The Company's shares traded at an average
discount of 11.4% during the period.
The Board continues to monitor the Company's discount levels and regularly
reviews the Company's share buy-back policy.
Gearing
The Company was 2.1% geared at the start of the period and as at 31 March 2024
this had increased to 3.1%. The Board continues to keep gearing under
consideration and the Manager has access to a £75 million revolving credit
facility, and an overdraft facility, which will be used when the Investment
Manager believes that the use of borrowing will be accretive to returns.
Board succession
The Board continues to review its composition and effectiveness as well as
planning for succession. As stated in the Annual Report, Keith Craig, stepped
down from the Board at the conclusion of the Annual General Meeting in January
2024 and was subsequently succeeded as Chairman of the Nomination Committee by
Vivien Gould.
Outlook
Prospects for Asian markets remain challenging, with newsflow from China
dominating the region. The Chinese economy continues to disappoint many
investors, consumer confidence is still extremely weak, the property market is
yet to find a floor and geopolitical tensions weigh heavily on sentiment.
However, expectations for the Chinese economy are now reflected in stock
prices and any positive news could bring opportunity for our Portfolio
Managers. Valuations across the region are trading at long-term averages and
in the broader context of the potential for the easing of global interest
rates and a weaker dollar, the outlook is again better positioned for our
Portfolio Managers to find opportunities to capitalise on the current
conditions.
James Williams
Chairman
20 May 2024
INVESTMENT MANAGER'S REVIEW
As can be seen from the chart, Asian markets showed a positive return over the
six months to end March 2024, finishing up 5.3% in Sterling terms. Although
positive, this performance significantly lagged global equity markets, which
were up strongly over the period driven by continuing disinflationary trends
across major global economies, and the resultant increased confidence that
developed market central banks would be moving into an interest rate-cutting
cycle in 2024.
Mirroring global performance, the strongest sector in Asia over the period, by
far, was information technology ("IT"), where stocks benefited from the
improving cycle, as well as the longer-term benefits to demand of the impact
of Artificial Intelligence ("AI"). The excess inventory, which surged after
economies opened-up post-Covid, has been a major overhang on IT stocks (and
other goods exporters) throughout much of the last two years, as companies
have had to slash prices and production to reduce inventory levels. The
prospect of potentially improving end-demand as interest rates come down,
alongside the hope that destocking is finally coming to an end, proved a
potent catalyst for IT stocks, with anything remotely AI-related seeing
additional gains. This particularly helped Taiwan and Korea, the two Asian
markets most exposed to the sector. Towards the end of the period, Korea was
also supported by investor optimism that a program of corporate governance
reforms proposed by the government may help boost valuations, particularly of
those companies which have historically had questionable capital allocation.
India was the only other major country which outperformed the Benchmark over
the period. It has been a beneficiary of domestic investor flows into the
stock market, a trend which has particularly benefited the small and mid-cap
segments of the market. While these inflows reflect, in part, the confidence
around the growth outlook for the economy over the medium-term, some areas of
the market have started to look quite stretched, with share prices reflecting
very optimistic assumptions.
The major laggard in the region was China. It has been a miserable year for
Chinese stocks, as the ongoing slow recovery from Covid, lack of significant
fiscal stimulus, rock-bottom consumer confidence, and international investor
concerns around geopolitical and domestic regulatory risks all combined to see
the market sell off once again. An announcement in December 2023 of tighter
restrictions on video games led to big falls in several index heavyweights in
that sector. Though the government appeared to backtrack quite quickly
following the negative market reaction, it was another reminder of the
unpredictable policy environment of the last few years in China. On a more
positive note, there was some relief around geopolitical tensions, with the
meeting of presidents Xi and Biden at the November 2023 APEC summit in
California. Despite the handshakes, however, there is little sign of any
easing of US policies towards China and, with a presidential election looming
in the US later in the year, there is little reason to expect much on this
front in the short-term.
Performance and portfolio activity
The Company generated a positive return over the period, with a NAV total
return of 5.7%, against a return in the Benchmark of 5.3%.
Stock selection was meaningfully positive in Taiwan, the Philippines,
Indonesia and Hong Kong. In Taiwan, our IT exposure drove this positive
selection, with 'fabless' chip design company MediaTek and leading-edge
foundry Taiwan Semiconductor Manufacturing Company ("TSMC") the key
contributors, both being viewed as beneficiaries of both the advent of AI and
the more general bottoming-out of the semiconductor inventory cycle mentioned
above. In the Philippines, our holding in global port operator International
Container Terminal Services Inc ("ICTSI") performed very well, partly on
recovering global trade expectations. Bank Mandiri in Indonesia also performed
strongly, thanks to the positive macro backdrop combined with continued strong
operational performance of the bank.
Our significant underweight allocation to China was a major positive
contributor to relative performance. This was to some extent offset by
negative stock selection in that market, though the overall effect on relative
performance was still significantly positive. One driver of the negative
selection in China 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. 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, where the Company has limited exposure as we
see more value in the larger-cap names in sectors such as financials and IT
services.
Our overweight to Hong Kong was a significant detractor from relative
performance, though offset to some extent by positive stock selection with
power tools manufacturer Techtronic Industries, luxury goods brand Prada and
semiconductor fabrication equipment producer ASMPT all outperforming the
market. However, exposure to financials such as insurer AIA and Hong Kong
Exchanges and Clearing were significant headwinds to performance.
From a sectoral perspective, stock selection in and overweight to IT, our
underweight to consumer staples and stock selection in real estate (thanks to
Indian developer Oberoi Realty) all added value, although stock selection in
financials was a drag, due to our holdings in Hong Kong and India.
The geographic exposure in the Company's portfolio continues to be mainly
spread between Taiwan, India, China, Hong Kong, Korea and Singapore. China
remains a substantial underweight but is, in part, offset by the overweight to
the Hong Kong market which, in general, looks more attractive from a valuation
and governance perspective. Elsewhere, we continue to be overweight Singapore,
with positions in banks DBS and Oversea-Chinese Banking Corp, and Singapore
Telecommunications, as well as overweights to some of the smaller markets such
as Thailand (where we added a position in Bumrungrad Hospital), the
Philippines and Indonesia - where we added to Bank of the Philippine Islands
and Bank Negara, respectively. We are underweight India and Korea. In Korea,
we reduced our holding in battery name Samsung SDI as competition in the
sector intensified, exited cosmetics producer LG H&H, which has seen a
disappointing recovery in sales to Chinese customers post-pandemic and added
to memory producer SK Hynix, and car manufacturer Kia. In India, we took some
profits from IT services company Mphasis and added to conglomerate Reliance
Industries.
Financials and IT remain the Company's two largest sector exposures and
overweights, with the IT exposure predominantly coming through positions in
Taiwan, Korea and India. Over the period, we reduced some holdings in
financials, selling names such as insurers Ping An Insurance and Prudential,
as well as trimming Bank Mandiri. In IT, we added Taiwanese names
ASE Technology and foundry United Microelectronics.
Outlook and policy
Most of 2023 and the start of this year have been disappointing for Asian
markets relative to global equities, with the region lagging developed
markets. Much of this performance gap was driven by a divergence in valuation
multiples through the year, with China and Hong Kong in particular seeing
significant de-rating. The Chinese economy's sluggish recovery from zero-Covid
restrictions has disappointed many investors, with consumer confidence still
extremely weak and the property market yet to find a floor. The Hong Kong
market has also suffered not only from the deepening negative consensus views
on China, with many stocks there held by foreign investors as proxies for
mainland growth, but also the high level of interest rates, which are in
effect set by the Federal Reserve due to Hong Kong's currency board system
being fully backed by US dollar assets. These interest rates have been wholly
inappropriate for Hong Kong at this stage of the cycle given the downdraft to
growth coming from the Chinese mainland.
Geopolitics has been another concern overhanging the region, with tensions
around US-China relations, Taiwan, Ukraine and most recently the Middle East
all contributing to investor caution. Positively, despite having the potential
to escalate cross-strait tensions, the recent Taiwanese election passed off
uneventfully with a result which was broadly in line with expectations.
Indonesia also saw a relatively positive outcome with the Presidential race
won by the continuity candidate Prabowo, who had been endorsed by incumbent
Jokowi, without the need for a runoff which we believe would have resulted in
increased uncertainty during this year. Indian elections are still to come in
Asia, and then, of course, we have the US elections later in the year. We
believe there remains the potential for heightened market volatility around
these events particularly as the US elections approach, where rhetoric on
China is likely to heat up once again after a more restrained period recently.
This can already be seen by a number of bills and policies that are aimed at
restricting Chinese growth and influence.
Nevertheless, we believe there are some reasons to be a little more optimistic
on the outlook for the Chinese market this year. Most obviously, consensus
expectations are now very low, compared to the post-reopening euphoria seen in
the market at the start of 2023, and this is reflected in lower valuations
than a year ago. There is clearly therefore scope for better market
performance, should growth surprise on the upside. Although sentiment around
the property market remains very poor, activity in that industry is already
subdued, and consumer confidence is again at extremely depressed levels. That
is not to say that there cannot be further deterioration, of course, but a
large degree of pessimism has already been priced in at this point. Given our
underweight to China, we continue to look for higher-quality stocks that have
sold off to levels which look attractive on a long-term view. However, the
reality is that it has been hard for us to find new names and many concerns
remain when it comes to investing in the Chinese market - poor capital
allocation, structurally lower nominal growth, unpredictable regulatory and
policy shifts, high debt levels - and we remain significantly underweight the
market.
We retain our preference for Hong Kong, where valuations are generally lower
and shareholder returns more of a focus for management teams. Our holdings
here, in aggregate, also have relatively low exposure to the domestic Hong
Kong economy, with several being companies which are more globally or
regionally facing. From a local Hong Kong perspective, although visitor
numbers have picked up significantly since the borders re-opened, the currency
board has meant that interest rates have followed the path of US rates which
has depressed activity. If US rates do start to ease, the corollary for Hong
Kong is expected to be that monetary conditions are likely to also improve
which should be positive for the market.
India remains a bright spot in the region in terms of growth and optimism
among investors, but this has increasingly been 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 benefiting
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.
As noted above, the last 18 months or so have been tough for many Asian
exporters, with excess inventories piling up in a variety of sectors whether
in bicycles, textiles, power tools or semiconductors, to name a few. Of
course, the demand outlook for Asian exports in 2024 remains uncertain, but
the supply-side response of manufacturers, which is more under their control
(i.e. cutting capital expenditure and production), has led to encouraging
progress on destocking across many areas. Should expectations of a US "soft
landing" come to pass, that would likely be positive for Asian goods exports,
which historically has been supportive of Asian markets.
Market weights - Schroder AsiaPacific Fund plc vs. MSCI AC Asia ex Japan Index
Benchmark
NAV weights (%) weight (%)
31 March 30 September 31 March
2024 2023 2024
Taiwan 20.1 15.3 20.5
India 18.2 18.1 20.6
China 16.4 19.1 29.2
Hong Kong 12.0 13.0 4.9
Korea 11.6 11.7 14.9
Singapore 8.1 8.7 3.6
Thailand 3.2 2.0 1.8
Vietnam 3.0 3.2 -
Indonesia 2.8 2.8 2.2
Australia 2.6 3.4 -
Philippines 2.3 1.8 0.7
Malaysia - - 1.6
Other* 2.8 3.0 -
Net cash** (3.1) (2.1) -
Total 100.0 100.0 100.0
Source: Schroders, MSCI, 31 March 2024.
* UK, Italy and other net liabilities.
** Cash less borrowings used for investment purposes.
We remain overweight in IT, which was the best performing sector in 2023 as
valuations moved higher on the back of normalising inventories, as well as the
impact of AI on industry growth rates. Despite this, we view our holdings as
still trading at relatively attractive valuations given the long-term growth
outlook for the sector.
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 more mature markets, such as Singapore, which in general trade
at attractive valuations and decent dividend yields, but also have exposure to
their faster growing hinterland. Direct exposure to faster growing markets,
where credit penetration is relatively low, includes Indonesia and India. We
are also slightly overweight real estate and health care. The latter includes
hospitals in markets such as India and Thailand where medical provision and
penetration remains low by regional standards.
Korea has recently benefited from an expectation that we might see an
improvement in shareholder returns, similar to that which has been seen in
Japan over the last few years. Korea has always looked cheap versus the
region, and this in part has been due to perceived poor corporate governance
and low shareholder returns. The government's 'Corporate value up' programme
is meant to improve that, and companies that could benefit from that have
performed better. We have limited exposure to this area, but have increased
exposure through a holding in automaker Kia.
Turning to the wider region, earnings growth has faced ongoing pressures in
recent periods, as has been seen in earnings revisions trends, particularly in
some of the more cyclical areas (areas where earnings follow the cycles of the
economy) such as amongst the energy and resource names. This year, if
consensus earnings are anything to go by, we believe earnings growth should
recover which should be a positive, albeit we would caution that there is risk
to these earnings numbers.
Overall, aggregate valuations for the region are now trading at around
long-term averages. However, this masks a large variation across individual
markets where Singapore, China and Hong Kong, amongst others, look relatively
cheap versus history, and India relatively expensive. Historically, easing
global interest rates and a weaker US dollar have been positive for Asia
given the knock-on impact to domestic monetary conditions. Therefore, if rates
do start to fall later this year, and it should be said that recent
expectations have seen the timings for cuts shift further out, we believe it
could be a potential catalyst for the markets given where starting valuations
are.
So, in conclusion, although uncertainties remain around China's outlook, the
region's inexpensive aggregate valuations, alongside potentially easing global
interest rates, a weaker US dollar and a potentially recovering goods export
cycle does set up a more constructive backdrop for Asian markets in 2024,
barring a global hard landing, or a more extreme geopolitical risk event.
Schroder Investment Management Limited
20 May 2024
Past performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up
and investors may not get back the amounts originally invested. This
information is not an offer, solicitation or recommendation to buy or sell any
financial instrument or to adopt any investment strategy.
INVESTMENT PORTFOLIO
as at 31 March 2024
Investments are classified by the Investment Manager in the region or country
of their main business operations or listing. Stocks in bold are the 20
largest investments, which by value account for 63.2% (30 September 2023:
63.3% and 31 March 2023: 65.1%) of total investments.
£'000 %
Taiwan
TSMC 88,592 9.9
MediaTek 27,404 3.1
Delta Electronics 11,927 1.3
Hon Hai Precision Industries 10,306 1.2
United Microelectronics 9,913 1.1
Giant Manufacturing 9,795 1.1
Nien Made Enterprise 9,576 1.1
Novatek Microelectronics 6,046 0.7
Total Taiwan 173,559 19.5
India
ICICI Bank (including ADR(3)) 30,831 3.4
HDFC Bank 30,356 3.4
Reliance Industries 18,697 2.1
Apollo Hospitals Enterprise 18,557 2.1
Tata Consultancy Services 18,454 2.1
Infosys 16,636 1.9
Oberoi Realty 13,120 1.5
Mphasis 6,243 0.7
Delhivery 4,324 0.4
Total India 157,218 17.6
Mainland China
Tencent Holdings(1) 50,572 5.7
Midea (including A shares and LEPO(2)) 17,334 1.9
Alibaba(1) 12,814 1.4
Shenzhou International(1) 11,442 1.3
SANY Heavy Industry A 8,787 1.0
Shenzhen Inovance Technology A 8,550 1.0
NetEase(1) 8,154 0.9
Yum China(1,3) 7,882 0.9
Contemporary Amperex Technology A 7,564 0.8
Hongfa Technology A 5,585 0.6
WuXi Biologics(1) 3,189 0.4
Total Mainland China 141,873 15.9
Hong Kong (SAR)
AIA 23,773 2.7
BOC Hong Kong 16,462 1.8
Hong Kong Exchanges and Clearing 14,772 1.7
Techtronic Industries 14,354 1.6
Galaxy Entertainment 9,476 1.1
Swire Properties 7,142 0.8
ASM Pacific Technology 6,878 0.8
Hang Lung Properties 6,134 0.7
Kerry Properties 4,655 0.5
Total Hong Kong (SAR) 103,646 11.7
South Korea
Samsung Electronics (including 85,037 9.5
preference shares)
Kia 8,078 0.9
SK Hynix 5,080 0.6
Samsung SDI 2,839 0.3
Total South Korea 101,034 11.3
Singapore
Oversea-Chinese Banking Corp 22,423 2.5
DBS 19,914 2.2
Singapore Telecommunications 16,627 1.9
Singapore Exchange 10,785 1.2
Total Singapore 69,749 7.8
Thailand
Bangkok Dusit Medical Services NVDR 10,176 1.1
Kasikornbank NVDR 9,254 1.0
Bumrungrad Hospital 8,569 1.0
Total Thailand 27,999 3.1
Vietnam
Vietnam Enterprise Investments(4) 16,179 1.8
Vietnam Dairy Products 4,911 0.6
Mobile World Investment 4,760 0.5
Total Vietnam 25,850 2.9
Indonesia
Bank Mandiri 17,095 1.9
Bank Negara 7,368 0.8
Total Indonesia 24,463 2.7
Australia
Rio Tinto(4) 10,434 1.2
BHP(4) 6,791 0.7
Orica 5,185 0.6
Total Australia 22,410 2.5
Philippines
ICTSI 10,698 1.2
Bank of the Philippine Islands 9,638 1.1
Total Philippines 20,336 2.3
United Kingdom
Schroder Asian Discovery Fund Z Acc(5) 13,467 1.5
Total United Kingdom 13,467 1.5
Italy
Prada(1) 10,953 1.2
Total Italy 10,953 1.2
Total Investments(6) 892,557 100.0
1 Listed in Hong Kong.
2 Listed in Luxembourg.
3 Listed in the USA.
4 Listed in the United Kingdom.
5 Predominantly invested in Asia.
6 Total investments comprises the following:
£'000 %
Equities, including ADRs, LEPOs and NVDRs 844,897 94.6
Collective investment funds 29,646 3.4
Preference shares 18,014 2.0
Total Investments 892,557 100.0
The following abbreviations have been used above:
ADR: American Depositary Receipt.
LEPO: Low Exercise Price Option.
NVDR: Non Voting Depositary Receipt.
INTERIM MANAGEMENT STATEMENT
Principal risks and uncertainties
The principal risks and uncertainties associated with the Company's business
fall into the following risk categories: strategic; geopolitical; market;
investment management; custody; gearing and leverage; accounting, legal and
regulatory change; climate change; third party services; and cyber. A detailed
explanation of the risks and uncertainties in each of these categories can be
found on pages 27 to 29 of the Company's published annual report and financial
statements for the year ended 30 September 2023.
These risks and uncertainties have not materially changed during the six
months ended 31 March 2024. However, the Board undertook a review of the
principal and emerging risks for the Company while reviewing these financial
statements. The Directors noted that geopolitical and climate change risk, in
particular, continue to develop. These matters will be closely monitored and
reported on in the next annual report, as appropriate.
Going concern
Having assessed the principal risks and uncertainties, and the other matters
discussed in connection with the viability statement as set out on page 30 of
the published annual report and financial statements for the year ended 30
September 2023, the Directors consider it appropriate to adopt the going
concern basis in preparing the financial statements.
Related party transactions
There have been no transactions with related parties that have materially
affected the financial position or the performance of the Company during the
six months ended 31 March 2024.
Directors' responsibility statement
In respect of the half year report for the six months ended 31 March 2024, we
confirm that, to the best of our knowledge:
- this condensed set of Financial Statements has been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice,
specifically adhering to Financial Reporting Standard 104 "Interim Financial
Reporting" and the Statement of Recommended Practice, "Financial Statements of
Investment Companies and Venture Capital Trusts" issued in July 2022. It
provides a true and fair view of the assets, liabilities, financial position
and profit and loss of the Company as at 31 March 2024, as required by the
Disclosure Guidance and Transparency Rule 4.2.4R; and
- the half year report includes a fair review of the information
concerning related party transactions as required by Disclosure Guidance and
Transparency Rule 4.2.8R.
The half year report has not been reviewed or audited by the Company's
auditor.
The half year report for the six months ended 31 March 2024 was approved by
the Board and the above Responsibility Statement has been signed on its
behalf.
James Williams
Chairman
For and on behalf of the Board
20 May 2024
STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2024 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the six months For the six months For the year
ended 31 March 2024 ended 31 March 2023 ended 30 September 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at fair value through profit or loss - 43,479 43,479 - 65,764 65,764 - 9,601 9,601
Net foreign currency gains - 810 810 - 858 858 - 293 293
Income from investments 7,006 - 7,006 6,017 142 6,159 23,863 304 24,167
Other income 73 - 73 - - - - - -
Other interest receivable and
similar income 141 - 141 66 - 66 153 - 153
Gross return 7,220 44,289 51,509 6,083 66,764 72,847 24,016 10,198 34,214
Investment management fee (740) (2,221) (2,961) (807) (2,420) (3,227) (1,552) (4,656) (6,208)
Administrative expenses (697) - (697) (677) - (677) (1,409) - (1,409)
Net return before finance costs and taxation 5,783 42,068 47,851 4,599 64,344 68,943 21,055 5,542 26,597
Finance costs (210) (628) (838) (77) (231) (308) (231) (690) (921)
Net return before taxation 5,573 41,440 47,013 4,522 64,113 68,635 20,824 4,852 25,676
Taxation 3 (697) (1,459) (2,156) (624) (175) (799) (1,834) (1,939) (3,773)
Net return after taxation 4,876 39,981 44,857 3,898 63,938 67,836 18,990 2,913 21,903
Return/(loss) per share (pence) 4 3.19 26.12 29.30 2.45 40.24 42.69 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/(loss) after taxation is also the total comprehensive
income/(loss) for the period.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 March 2024 (unaudited)
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 2023 15,480 100,956 4,664 8,704 700,106 21,375 851,285
Repurchase and cancellation of the Company's own shares (358) - 358 - (17,312) - (17,312)
Net return after taxation - - - - 39,981 4,876 44,857
Dividend paid in the period 5 - - - - (18,371) (18,371)
At 31 March 2024 15,122 100,956 5,022 8,704 722,775 7,880 860,459
For the six months ended 31 March 2023 (unaudited)
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 (324) - 324 - (16,050) - (16,050)
Net return after taxation - - - - 63,938 3,898 67,836
Dividend paid in the period 5 - - - - - (19,030) (19,030)
At 31 March 2023 15,756 100,956 4,388 8,704 774,856 6,283 910,943
For the year ended 30 September 2023 (audited)
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 5 - - - - - (19,030) (19,030)
At 30 September 2023 15,480 100,956 4,664 8,704 700,106 21,375 851,285
STATEMENT OF FINANCIAL POSITION
at 31 March 2024 (unaudited)
(Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September
2024 2023 2023
Note £'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 892,557 912,966 874,534
Current assets
Debtors 2,551 3,188 2,812
Cash at bank and in hand 4,956 12,317 6,785
7,507 15,505 9,597
Current liabilities
Creditors: amounts falling due within one year 6 (34,010) (14,464) (28,068)
Net current assets/(liabilities) (26,503) 1,041 (18,471)
Total assets less current liabilities 866,054 914,007 856,063
Non current liabilities
Deferred taxation (5,595) (3,064) (4,778)
Net assets 860,459 910,943 851,285
Capital and reserves
Called-up share capital 7 15,122 15,756 15,480
Share premium 100,956 100,956 100,956
Capital redemption reserve 5,022 4,388 4,664
Warrant exercise reserve 8,704 8,704 8,704
Capital reserves 722,775 774,856 700,106
Revenue reserve 7,880 6,283 21,375
Total equity shareholders' funds 860,459 910,943 851,285
Net asset value per share (pence) 8 569.02 578.15 549.92
Registered in England and Wales as a public company limited by shares
Company registration number: 03104981
NOTES TO THE FINANCIAL STATEMENTS
1. Financial statements
The information contained within the financial statements in this half year
report has not been audited or reviewed by the Company's independent auditor.
The figures and financial information for the year ended 30 September 2023 are
extracted from the latest published financial statements of the Company and do
not constitute statutory financial statements for that year. Those financial
statements have been delivered to the Registrar of Companies and included the
report of the auditor which was unqualified and did not contain a statement
under either section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
Basis of accounting
The financial statements have been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, in particular with Financial Reporting
Standard 104 "Interim Financial Reporting" and with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" issued by The Association of Investment Companies in
July 2022.
All of the Company's operations are of a continuing nature.
The accounting policies applied to these financial statements are consistent
with those applied in the financial statements for the year ended
30 September 2023.
3. Taxation
The Company's effective corporation tax rate is nil, as deductible expenses
exceed taxable income. The taxation charge comprises irrecoverable overseas
withholding tax on dividends receivable, and overseas capital gains tax.
4. Return/(loss) per share
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Revenue return 4,876 3,898 18,990
Capital return 39,981 63,938 2,913
Total return 44,857 67,836 21,903
Weighted average number of shares in issue during the period 153,081,385 158,887,090 157,474,894
Revenue return per share (pence) 3.19 2.45 12.06
Capital return per share (pence) 26.12 40.24 1.85
Total return per share (pence) 29.30 42.69 13.91
5. Dividends paid
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
2023 final dividend paid of 12.0p (2022: 12.0p) 18,371 19,030 19,030
No interim dividend has been declared in respect of the six months ended 31
March 2024 (2023: nil).
6. Creditors: amounts falling due within one year
(Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Bank loan 31,664 12,132 24,579
Securities purchased awaiting settlement - 204 1,422
Other creditors and accruals 2,346 2,128 2,067
34,010 14,464 28,068
The bank loan comprises of US$40 million drawn down on the Company's £75
million multicurrency credit facility with The Bank of Nova Scotia. The
facility is unsecured and drawings are subject to covenants and restrictions
which are customary for a facility of this nature and all of these have been
complied with.
7. Called-up share capital
Changes in the number of shares in issue during the period were as follows:
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Ordinary shares of 10p each, allotted, called-up and fully paid
Opening balance of shares in issue 154,800,716 160,800,716 160,800,716
Shares repurchased and cancelled (3,582,000) (3,240,000) 6,000,000
Closing balance of shares in issue 151,218,716 157,560,716 154,800,716
8. Net asset value per share
Net asset value per share is calculated by dividing shareholders' funds by the
number of shares in issue at 31 March 2024 of 151,218,716 (31 March 2023:
157,560,716 and 30 September 2023: 154,800,716).
9. 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.
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.
The Company's investment portfolio was categorised as follows:
(Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Level 1 892,557 912,966 874,534
Level 2 - - -
Level 3 - - -
Total 892,557 912,966 874,534
There have been no transfers between Levels 1, 2 or 3 during the period
(period ended 31 March 2023 and year ended 30 September 2023: nil).
10. Events after the interim period that have not been reflected in the
financial statements for the interim period
The Directors have evaluated the period since the interim date and have not
noted any significant events which have not been reflected in the financial
statements.
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