TIDMSDP
RNS Number : 8241I
Schroder AsiaPacific Fund PLC
07 December 2022
ANNUAL REPORT AND ACCOUNTS
Schroder AsiaPacific Fund plc (the "Company") hereby submits its
Annual Report for the year ended 30 September 2022 as required by
the Financial Conduct Authority's Disclosure Guidance and
Transparency Rule 4.1.
The Company's annual report and accounts for the year ended 30
September 2022 are also being published in hard copy format and an
electronic copy will shortly be available to download from the
Company's webpages www.schroders.co.uk/asiapacific . Please click
on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/8241I_1-2022-12-6.pdf
The Company has submitted its Annual Report and Accounts to the
National Storage Mechanism, which will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Enquiries:
Kerry Higgins
Schroder Investment Management Limited
Tel: 020 7658 6000
Chairman's Statement
Performance
The year under review saw challenging market conditions in Asia,
in common with markets around the world. The Company's NAV produced
a negative total return of -13.6% for the year under review,
marginally outperforming the Benchmark's negative total return of
-13.9%, while the share price produced a negative total return of
-14.5%.
The faster than expected rises in global interest rates, the war
in Ukraine and the economic impact of continued COVID lock-downs as
well as other developments in China, have dominated Asian markets
this year. There have also been beneficiaries, for example from
rising commodity prices, and there has been a significant
divergence of returns from Asian markets.
More detailed comment on performance and investment policy may
be found in the Investment Manager's Review.
Revenue and dividend
The Company's principal investment objective is to achieve
capital growth, and the Directors continue to distribute
substantially all of the revenue it receives each year. The
Company's revenue return recovered sharply from the previous year,
increasing by 22.3% as portfolio companies increased dividend
payments.
The Directors are recommending a final dividend of 12.00 pence
per share for the year ended 30 September 2022, representing an
increase of 23.7% over the 9.70 pence paid in respect of the
previous financial year.
This dividend will be paid on 10 February 2023 to shareholders
on the register on 30 December 2022, subject to approval by
shareholders at the Annual General Meeting ("AGM") on 1 February
2023.
Gearing
During the year under review, the Company entered into a new one
year revolving credit facility of GBP75 million with The Bank of
Nova Scotia, London Branch which replaced the GBP100 million
facility with SMBC Bank International PLC that was due to expire on
23 June 2022.
At 30 September 2022, while GBP13.4 million of the revolving
facility was drawn down the Company's net gearing position was 0.2%
taking into account cash balances, compared to 0.6% at the end of
September 2021.
The Company also has access to an overdraft facility with
HSBC.
Discount management
The Company continued to be active in buying back its shares
during the year ended 30 September 2022 and a total of 4,060,000
shares were bought back for cancellation at a cost of GBP21.7
million (2021: 1,960,000 million shares were bought back and
cancelled at a cost of GBP11.8 million). Since the year end, a
further 1,690,000 shares have been bought back for cancellation at
a cost of GBP8.0 million.
The discount at the end of September 2022 was 10.8% compared to
9.8% at the previous year end. The average discount during the year
under review was 10.4%.
Overall, the Board's strategy is to limit discount volatility
and to help maintain liquidity in the Company's shares. As such we
believe that it is not necessarily in the best interests of
shareholders as a whole to adopt a rigid discount control mechanism
that seeks to target a defined maximum discount level regardless of
market conditions. Our policy 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 its issued share capital. We propose that the share
buyback authority be renewed at the forthcoming AGM and that any
shares so purchased be cancelled or held in treasury for potential
reissue.
Environmental, social and governance issues ("ESG")
The Manager has always expressed the view that companies with
good ESG often perform better and potentially deliver superior
returns over time. Our Manager has provided more detail in the
Strategic Report on how ESG considerations are incorporated into
the investment process and given details of the Manager's ESG
research capability. This year, our Manager has included graphs
showing the portfolio's scope 1 and scope 2 carbon emissions (as
detailed on page 16 of the published annual report and accounts for
the year ended 30 September 2022). This covers 95% of the portfolio
and 99% of the measured Benchmark. It is interesting to note that
the portfolio generated less scope 1 and scope 2 carbon emissions
than the Benchmark at 30 September 2022.
Management fee
Since 1 April 2021 the management fee has been 0.75% per annum
on the first GBP600 million of net assets and 0.70% per annum on
net assets in excess of GBP600 million.
With effect from 1 April 2023, the Board has agreed with the
Manager to reduce its management fee to 0.60% per annum on net
assets in excess of GBP600 million. In respect of the first GBP600
million of net assets the management fee is unchanged.
Further details may be found in the Directors' Report on page 26
of the published annual report and accounts for the year ended 30
September 2022.
Board succession
As set out in the 2021 annual report, Rosemary Morgan stepped
down from the Board at the AGM in February 2022 and was succeeded
as chair of the audit and risk committee by Julia Goh. Following
Rosemary's retirement, Martin Porter also assumed the role of
Senior Independent Director.
The Board regularly considers its policy on director tenure,
succession planning and its composition to ensure that it has the
appropriate mix of relevant skills, diversity and experience. The
Company has met the Financial Conduct Authority's board diversity
target for listed companies that at least 40% of the board are
women and for at least one member of the board to be from an ethnic
minority background.
Webinar
Last year, the Investment Managers presented to shareholders
using a webinar. We believe shareholders benefited from this,
allowing anyone to watch remotely, and ask questions, without the
need to travel. The Board is planning to continue with the same
format this year, and the Investment Managers will be presenting to
shareholders at a webinar on 17 January 2023 at 2.00 pm. To
register your interest for this webinar please email
sunil.kler@schroders.com .
One advantage of a webinar is that if you are not able to attend
at this time, you will be able to watch it afterwards. It will be
available on the Company's webpages at:
www.schroders.co.uk/asiapacific .
AGM
The AGM will be held on Wednesday, 1 February 2023 at 12.00 noon
at the offices of Schroders at 1 London Wall Place, London, EC2Y
5AU. A presentation from the Investment Managers will be given at
the AGM, and attendees will also be able to ask questions in person
and meet the directors. The presentation will be made available on
the Company's website following the meeting. Details of the formal
business of the meeting are set out in the Notice of Meeting on
pages 62 to 64 of the published annual report and accounts for the
year ended 30 September 2022.
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
in, or email using the details below. The questions and answers
will be published on the Company's webpages before the AGM.
To email, please use: amcompanysecretary@schroders.com or write
to us at the Company's registered office address: Company
Secretary, Schroder AsiaPacific Fund plc, 1 London Wall Place,
London, EC2Y 5AU.
For regular news about the trust, shareholders are also
encouraged to sign up to the Manager's investment trusts update by
visiting the Company's website:
https://www.schroders.com/en/uk/private-investor/fund-
centre/funds-in-focus/investment-trusts/schroders-investment-trusts/never-miss-an-update/.
Outlook
It would be easy to be pessimistic in view of the current
uncertainty seen in markets around the world. There is no question
that the global repricing of the cost of capital which has followed
increased US interest rates continues to be a headwind. It is
unclear when these moves will have had the desired effect on
inflation but there are signs that we may be nearing the end of
this tightening cycle.
In the past few months share prices have continued to adjust and
in many cases now reflect the current economic reality and
aggregate valuations for the region are trading at or below
long-term averages. It is the case now more than ever that Asian
markets will continue to provide opportunities for those who can
identify the winners. We believe that the Company continues to be
well placed to take advantage of these conditions. Our Manager's
ability to invest across the region while focusing on high
conviction, bottom-up stock ideas driven by strong resources on the
ground in Asia gives us confidence that we will return to
generating positive returns for shareholders, once market
conditions start to improve.
James Williams
Chairman
6 December 2022
Investment Manager's Review
The NAV per share of the Company recorded a total return of
-13.6% over the twelve months to the end of September 2022. This
was marginally ahead of the performance of the Benchmark, the MSCI
All Country Asia ex Japan Index, which was down by -13.9% over the
same period. (Source: Morningstar, net of fees, cum income NAV GBP
return).
The past year has been a tumultuous period for markets with a
number of headwinds globally and regionally weighing on sentiment.
Geopolitical tensions worsened with the shock Russian invasion of
Ukraine, as well as ongoing tensions between the US and China and
increasing concerns surrounding Taiwan. Inflation, in part driven
by the war in Ukraine and in part by shortages of both goods and
labour, rose materially and saw aggressive responses from Central
Banks which in turn focused attention back on to the state of the
slowing global economy and its knock-on to earnings. In Asia, the
period was dominated by concerns over the health of the Chinese
economy with its 'zero-COVID' policy exacerbating ongoing worries
over an already weak property market. Increased levels of
regulation in China (particularly amongst the internet names) also
weighed on sentiment. Later in the period, some easing measures
announced by the Chinese government, together with an apparent
shift in focus towards 'stability', looked to underpin
sentiment.
With the rise in and potential for a more sustained higher level
of inflation globally, there was renewed concern over higher
interest rates. This saw some of the more highly-rated growth
stocks come under pressure, especially the less profitable names,
with value stocks outperforming growth stocks over the period.
Towards the end of the period there were some hopes that inflation
was nearing a peak and this would elicit a pivot from the US
Federal Reserve to a more dovish stance. This proved to be
relatively short lived, however.
The divergence of returns across the regional markets continued
to be high, with China lagging for the reasons mentioned above.
Korea, often a market correlated with global growth expectations,
was also weak with the memory sector names deteriorating on
concerns over falling demand as well as some of the more
highly-rated internet names under pressure. Similarly, Taiwan
lagged as information technology ("IT") stocks underperformed owing
to concerns over the impact that a slowing consumer would have on
end demand, as rising inflation crimped real incomes. Of the larger
markets, India and Singapore outperformed. India, being relatively
more insulated from the impacts of slowing global growth combined
with the domestic economy recovering from the impacts of COVID, has
proven to be relatively resilient from a stock market perspective.
Loose domestic liquidity and strong domestic flows into the market
have also been supportive. Singapore was aided by a strong recovery
in the financials sector. The other ASEAN markets also
outperformed, helped initially by the potential for post-pandemic
re-opening, as well as value stocks outperforming, in which they
tend to have higher weightings. Whilst most of Asia is negatively
impacted by rising energy prices Indonesia was a beneficiary.
Sector returns across the region also saw a large spread.
Beneficiaries of rising commodity prices did well, especially
energy names, and higher interest rates meant financials also
outperformed. More defensive areas such as utilities and consumer
staples also held up. Sectors with a high growth component sold
off, including the healthcare names dragged down by the
high-multiple biotechnology stocks, as did a number of the
e-commerce and internet related names largely found in the consumer
discretionary and communication services sectors. Information
technology sold off towards the end of the period as there was
increasing concern over a slowdown in consumer demand at a time
when some of the bottlenecks around supply were clearing.
Performance and Portfolio Activity
The Company's NAV total return of -13.6% over the period was
marginally ahead of that of the reference Benchmark which fell by
-13.9% over the period. As described above, the faster than
expected rise in global interest rates not only impacted markets
but particularly growth names within that. Although the Company is
not an out and out growth fund, its modest growth bias was a
headwind to returns. This was seen most acutely amongst the
internet related names we held in Korea and Singapore which
underperformed materially. Although we benefited from our stock
selection in, and underweight to, healthcare stocks, avoiding some
of the more high rated biotech names, our underweight positioning
in some of the other more defensive areas such as consumer staples
and utilities was a drag.
Positively our overweight to, and stock selection in, financials
added value. This was driven by the positions in banks which in
general benefitted from a firming of interest rate expectations
combined with their lowly valuations. The out of benchmark
Australian resources exposure, including BHP, was also a positive
contributor, thanks to higher commodity prices driven by the global
recovery. Although our overweight to IT was a headwind as the
sector saw negative earnings revisions, our positions added value
thanks to strong stock selection in some of the Taiwanese names,
such as Hon Hai and Delta Electronics, which more than offset the
negative from being overweight the sector.
From a regional perspective, the significant underweight to
China added value, as the ongoing issues highlighted above impacted
the market. Here, the internet names were among those that bore the
brunt of the sell down. In Singapore, our overweight was positive
but stock selection was a drag as the internet name we held there
(Sea) was in part impacted by higher rates, which resulted in a
greater focus on the timeline for profitability from its fast
growing e-commerce business. Korean and Taiwanese exposure was also
a drag, in part due to the markets being quite globally focused
which impacted our IT names. Our lack of exposure to financials in
Taiwan, and our allocation to more domestic growth areas in Korea,
also detracted from relative performance. Our out of index exposure
to Australia and Vietnam was positive, as was stock selection in
Indonesia (Bank Mandiri) but our underweight to some of the other
ASEAN markets, in particular Malaysia and the Philippines,
detracted.
The geographic exposure in the Company's portfolio continues to
be mainly spread between China, India, Taiwan, Hong Kong, Korea and
Singapore. China remains a substantial underweight, despite modest
additions during the year as the market underperformed. In part,
this is offset by the overweight to Hong Kong. Over the period we
also reduced our exposure to some of the more expensive domestic
Indian names that had performed well, whilst adding to some of the
IT services companies there (Infosys and Tata Consultancy Services)
but overall taking us down to being slightly underweight the index
in relative terms. Elsewhere, we added to some of the smaller ASEAN
markets including Vietnam (where we now have local access) and the
Philippines.
As throughout much of last year, portfolio activity tended to
take advantage of the valuation spread that we saw across
industries, reducing those stocks that had performed particularly
strongly and now looked more fully valued in favour of those names
that had lagged and looked more attractive from a valuation
perspective. We continued in aggregate to add to financials, where
we are overweight, with valuations still looking relatively
attractive given higher interest rates and subdued credit costs.
Here we added principally to names in Singapore, including
Oversea-Chinese Banking and United Overseas Bank. Looking
elsewhere, an area where we have reduced exposure is to the
Australian resource names. The sector has performed strongly over
the last year, in part helped by the surge in commodity prices.
Information technology is one of the biggest sectoral exposures
in the fund, along with financials. Although near term earnings
have been seeing downward revisions, we continue to see some strong
long-term drivers for growth around digitisation and the roll out
of 5G and 'Internet of Things' and our focus remains on the
Taiwanese and Korean companies such as TSMC and Samsung
Electronics.
Outlook and Policy
Slowing global and weak Chinese growth, elevated geopolitical
tensions around Ukraine and Taiwan and rising interest rates,
combined with ongoing downward revisions to earnings, mean that
headwinds for markets are likely to continue. However, some areas
of the markets are starting to look more attractive from a longer
term perspective having derated markedly.
Globally, consumption is under pressure as rising prices eat
into real incomes. This, allied with the shift away from
consumption of goods to consumption of services as the majority of
economies open up post-pandemic, has seen the demand for goods
falter. This in turn has started to see inventories accumulate
across supply chains globally, leading to a fear that we will see a
painful period of inventory adjustment on top of an already slowing
global economy. From an Asian perspective, this is likely to have
an impact on exports and from our portfolio's perspective is most
likely to evidence itself in the technology hardware sector. To an
extent, markets have already started to discount this with
technology names in both Korea and Taiwan already underperforming
despite earnings holding up relatively well for now. In our view,
valuations are now starting to factor in a slowdown but not yet a
"hard landing" which, although not our base case, is a possibility.
In general, the stocks we own in this sector are leaders in their
area with high market shares and strong balance sheets on
attractive valuations, so in our view should prove to be relatively
resilient. Although we did take some money out of the sector
earlier in the year, we remain overweight.
The other trend that the pandemic and Ukraine crisis have
reinforced has been the need for increased self sufficiency. The
need for diversified supply chains was something that the COVID
crisis had highlighted, given the disruption the pandemic caused.
With security of supply already a focus in areas such as
semiconductor production, thanks to ongoing US-China tensions and
the concentration of advanced manufacturing in Taiwan, the Ukraine
conflict has also highlighted the vulnerability of nations to
energy supply dependency. The recently concluded Party Congress in
China saw President Xi mention 'security' 91 times in his opening
speech (according to Bloomberg) compared with 55 mentions five
years ago, reinforcing a view that China will continue to intensify
efforts around 'self sufficiency' in core technologies and
strategic industries. All this will likely lead to further
localisation of supply chains and an era of reduced
globalisation.
Geopolitics will continue to remain a risk, including
surrounding Taiwan as highlighted by the recent visit by Nancy
Pelosi to the island, which has resulted in increased tensions
between the US and China. Other actions, such as the recent moves
by the US to restrict China's ability to purchase and manufacture
high-end semiconductors, combined with the mid-term elections in
the US mean it is unlikely we will see any meaningful relaxation in
tensions near term and this is likely to continue to weigh on
sentiment.
From an Asian perspective the biggest impact on growth is coming
from the 'zero COVID' policy in China, where the lockdowns have had
a severe impact on growth as well as exacerbating the weakness in
the property sector. It is not clear how long this policy will
remain in place but for now there is unlikely, in our view, to be
any major volte-face in the near term. The recent Party Congress
gave no indication when the policy might be eased and, whilst
vaccination rates in China are high and comparable to most
developed nations, a large tranche of the elderly still remain
unvaccinated making it difficult for them to open up until this is
rectified. Although a wholesale opening up is unlikely near term,
it is likely that some more incremental easing measures occur. But
in our view, China's consumption and growth will continue to remain
lacklustre as uncertainty over the path of COVID weighs on
sentiment.
Given this, we have started to see a number of actions to loosen
policy including rate cuts, easing of property purchase
restrictions and increases in infrastructure spending and fiscal
incentives. We consider it likely that we will see further easing
measures but, whilst the 'zero COVID' policy remains, their impact
for the large part is likely to resemble pushing on a string.
Nevertheless, given how poorly the market has performed, together
with the move to an easing bias there (whilst most of the rest of
the world are tightening), as well as a tentative easing of the
severity of lockdowns, there is potential for the market to
experience better periods of performance. From our positioning
perspective we have been very underweight China for some time and
although we continue to look for new opportunities given the falls,
we remain so and believe that the challenges that were there for
the market remain.
Longer term - although Xi's confirmation at the Congress as the
Party's General Secretary for his third five year term was not a
surprise, the make up of the Politburo Standing Committee (and
Politburo) was decidedly one-sided being dominated by Xi loyalists,
further cementing his power within the Party. The lack of
countervailing voices within the new PSC potentially heightens
policy risk and likely means that many of the challenges brought
about by increased regulation will persist, with the narrative
around areas such as 'common prosperity' continuing to weigh on the
potential returns of parts of the private sector. All this means
one should not necessarily use a mean reversion argument alone when
it comes to valuation.
Nearer term, although we are likely to see a stabilisation of
the economy, it is hard for it to recover to pre-pandemic growth
rates whilst the strict 'zero COVID' policy remains in place. The
infectious nature of the Omicron variant means it is still likely
we will see ongoing rolling restrictions. However, we could start
to see a relaxation of some of the 'zero COVID' measures after the
party congress but these are likely, in our view, to be incremental
rather than wholesale. All this continues to mean we look for
bottom up stock opportunities in China, consistent with our
process, rather than move money into the market on a macro,
top-down driven allocation.
India has been one of the best performing markets over the
period, due not only to the economy benefiting from a post-COVID
recovery, but also to domestic flows into the market in part on
optimism about economic prospects following progress on reforms.
Whilst on a long term basis the market continues to look
attractive, valuations are now at extremes versus the rest of the
region, which has led us to temper our position in some of the more
domestic orientated names. Historically, the relatively weak
external accounts have seen India suffer in a strong US dollar,
strong commodity price environment and this could yet see domestic
interest rates rise faster than expected, impacting valuations.
Given the long term attractions of the market, we would likely use
any correction in favoured names to increase positions.
Sector-wise, aside from information technology, financials
remain an important overweight. Here banks, in our view, still
remain attractive in aggregate on the back of benefits from rising
rates and low valuations. However, given the backdrop of rising
rates in most markets combined with slowing growth there is a risk
that if rates move up faster than expected it could start to impact
asset quality, offsetting the benefit of expanding margins, so we
remain selective. Underweights are largely found in some of the
more 'defensive' areas such as utilities, consumer staples and
healthcare where valuations are generally, in our view, quite
full.
While recent events described above do not paint a particularly
optimistic picture, this has in part been reflected in market
action with valuations today looking much less frothy than they did
a year ago. Nevertheless, the US Federal Reserve being more
aggressive on rates near term is clearly a headwind, given its near
term impact on growth and earnings. However, this in turn should
start to cap long-term inflationary expectations which will pave
the way for lower rates at some point in the future. Until then, it
is likely that we see further downward revisions to earnings and a
period of inventory adjustment amongst companies to reflect the
slower growth and hopefully put them in a position to start to grow
earnings once more. Given overall aggregate valuations for the
region are now trading at or below long-term averages, this does
set up a more constructive backdrop for Asian markets next year,
barring a global hard landing or a more extreme geopolitical risk
event.
To conclude, it is worth remembering that as investors we buy
companies not countries. We are mindful of the impact political and
macroeconomic factors can have on equities and returns, but we are
bottom-up stock-pickers first and foremost, focusing on the
company's return prospects and valuation. We do not try to pick
companies which will do well based purely on a particular macro
environment which we have forecast; rather we try to pick
well-managed companies which have structural advantages allowing
them to survive (and hopefully thrive!) in as wide a range of
external conditions as possible. Therefore, a focus on attractive
bottom up ideas, in our view, remains essential.
Market Weights - Schroder AsiaPacific Fund versus MSCI AC Asia
ex Japan Index
Net Asset Value Benchmark
Weight (%)
Weight %
30 Sep 2022 30 Sep 2021 30 Sep 2022
Mainland China 18.7 18.3 35.8
------------------ ------------ ------------ ------------
India 17.0 15.2 17.5
------------------ ------------ ------------ ------------
Taiwan 15.0 16.2 15.8
------------------ ------------ ------------ ------------
Hong Kong (SAR) 12.9 12.4 7.4
------------------ ------------ ------------ ------------
South Korea 12.4 16.7 12.2
------------------ ------------ ------------ ------------
Singapore 8.4 7.3 3.9
------------------ ------------ ------------ ------------
Australia 3.8 2.9 -
------------------ ------------ ------------ ------------
Indonesia 2.6 1.4 2.5
------------------ ------------ ------------ ------------
Thailand 2.2 1.6 2.4
------------------ ------------ ------------ ------------
Philippines 0.9 0.1 0.8
------------------ ------------ ------------ ------------
Malaysia - - 1.7
------------------ ------------ ------------ ------------
Other equities* 6.3 8.5 -
------------------ ------------ ------------ ------------
Gearing (0.2) (0.6) -
------------------ ------------ ------------ ------------
Total 100.0 100.0 100.0
------------------ ------------ ------------ ------------
* Vietnam, Italy, Germany, Netherlands and a unit trust
predominantly invested in Asia.
Source: Schroders, MSCI, 30 September 2022.
Schroder Investment Management Limited
6 December 2022
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 amount
originally invested.
Principal and emerging risks
The Board 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
risks affecting the Company's business as an investment trust and
has established associated policies and processes designed to
manage and, where possible, mitigate those risks, which are
monitored by the audit and risk committee on an ongoing basis. This
system assists the Board in determining the nature and extent of
the risks it is willing to take in achieving the Company's
strategic objectives. Both the principal risks and the monitoring
system are also subject to robust review at least annually. The
last review took place in November 2022.
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.
The AIC Code of Corporate Governance requires the audit and risk
committee to also put in place procedures to identify emerging
risks. The actions taken by the Board and, where appropriate, its
committees, to manage and mitigate the Company's principal and
emerging risks are set out in the table below:
Risk Mitigation and management
Strategic The appropriateness of the Company's
investment remit is periodically
The requirements of investors change reviewed and the success of the
or develop in such a way as to Company in meeting its stated objectives
diverge from the Company's investment is monitored.
objectives, resulting in a wide
discount of the share price to The share price relative to NAV
NAV per share. per share is monitored and the
use of buy back authorities is
considered on a regular basis.
The marketing and distribution
activity is regularly reviewed.
The Company engages proactively
with investors.
------------------------------------------
The Company's cost base could become The ongoing competitiveness of
uncompetitive, particularly in all service provider fees is subject
light of open ended alternatives. to periodic benchmarking against
their competitors.
Annual consideration of management
fee levels is undertaken.
------------------------------------------
Investment management and performance Review of the Manager's compliance
with its agreed investment restrictions,
The Manager's investment strategy, investment performance and risk
if inappropriate, may result in against investment objectives and
the Company underperforming the strategy; relative performance;
market and/or peer group companies, the portfolio's risk profile; and
leading to the Company and its whether appropriate strategies
objectives becoming unattractive are employed to mitigate any negative
to investors. impact of substantial changes in
markets.
The Manager reports on macro-economic
events, including regional policies,
quarterly.
Annual review of the ongoing suitability
of the Manager.
Regular meetings with major shareholders
to seek their views with respect
to Company matters.
------------------------------------------
Financial and currency The risk profile of the portfolio
is considered and appropriate strategies
The Company is exposed to the effect to mitigate any negative impact
of market fluctuations due to the of substantial changes in markets
nature of its business. A significant or currency are discussed with
fall in regional equity markets the Manager.
or a substantial currency fluctuation
could have an adverse impact on The Company has no formal policy
the market value of the Company's of hedging currency risk but may
investments. use foreign currency borrowings
or forward foreign currency contracts
to limit exposure.
------------------------------------------
Political The Board monitors global developments
and regularly has discussions with
Political risk includes the impact the Investment Manager and other
of geopolitical risk, regional interested parties. It will continue
tensions, trade wars and sanctions to do so as matters develop in
against companies, in areas in respect of Russia's invasion of
which the Company invests or may Ukraine, tensions between US and
invest, that might have consequences China, developments within China,
for the Company including an adverse increasing energy and food prices,
effect on the value of the Company's global economic growth and the
assets. potential for further geopolitical
unrest. Subject to shareholder
consent, the Board can amend the
investment policy and objective
of the Company to mitigate these
risks.
------------------------------------------
Custody The depositary reports on the safe
custody of the Company's assets,
Safe custody of the Company's assets including cash and portfolio holdings
may be compromised through control which are independently reconciled
failures by the depositary. 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 Gearing is monitored and strict
restrictions on borrowings are
The Company utilises credit facilities. imposed: gearing continues to operate
These arrangements increase the within pre-agreed limits so as
funds available for investment not to exceed 20% of shareholders'
through borrowing. While this has funds.
the potential to enhance investment
returns in rising markets, in falling
markets the impact could be detrimental
to performance.
------------------------------------------
Accounting, legal and regulatory The Board intends to continue to
change operate the Company in full compliance
with the requirements of Section
In order to continue to qualify 1158 of the Corporation Tax Act
as an investment trust, the Company 2010.
must comply with the requirements
of Section 1158 of the Corporation The confirmation of compliance
Tax Act 2010. with relevant laws and regulations
by key service providers is reviewed.
Breaches of the UK Listing Rules,
the Companies Act or other regulations Shareholder documents and announcements,
with which the Company is required including the annual report, are
to comply, could lead to a number subject to stringent review processes.
of detrimental outcomes.
Procedures are established to safeguard
against the disclosure of inside
information.
------------------------------------------
Service provider Service providers are appointed
subject to due diligence processes
The Company has no employees and and with clearly documented contractual
has delegated certain functions arrangements detailing service
to a number of service providers. expectations.
Failure of controls and poor performance
of any service provider, could Regular reporting is provided by
lead to disruption, reputational key service providers and monitoring
damage or loss. of the quality of their services
provided. The Directors also receive
presentations from the Manager,
depositary and custodian, and the
registrar on an annual basis.
Review of annual audited internal
controls reports from key service
providers, including confirmation
of business continuity arrangements
and IT controls is undertaken.
------------------------------------------
Cyber Service providers report on cyber
risk mitigation and management
The Company's service providers at least annually, which includes
are all exposed to the risk of confirmation of business continuity
cyber attacks. Cyber attacks could capability in the event of a cyber
lead to loss of personal or confidential attack.
information or disrupt operations.
In addition, the Board received
presentations from the Manager,
depositary and custodian, and the
registrar on cyber risk.
The Board noted that following
the invasion of Ukraine by Russia,
cyber risk was assessed to be higher,
and the Board sought assurances
from its service providers that
they were as ready as they could
be to manage the increased risk.
------------------------------------------
Climate change The consideration of climate change
risks and opportunities and of
Climate change and climate-related environmental, social and governance
risks could impact the Company's factors is integrated into the
business and affect revenue, expenses, Investment Manager's investment
asset values and the cost or availability process. The Investment Manager
of capital. also considers and evaluates the
approach investee companies take
to recognise and mitigate climate
change risks.
------------------------------------------
Statement of Directors' Responsibilities in respect of the
Annual Report and Accounts
The Directors are responsible for preparing the annual report,
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising Financial Reporting Standard (FRS)
102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland" and applicable law). Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of the return or loss of the Company for
that period. In preparing these financial statements, the Directors
are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting estimates that are reasonable and prudent;
- state whether applicable UK Accounting Standards, comprising
FRS 102, have been followed, subject to any material departures
disclosed and explained in the financial statements;
- notify the Company's shareholders in writing about the use of
disclosure exemptions in FRS 102, used in the preparation of the
financial statements; and
- prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements and the Directors' Remuneration Report
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Manager is responsible for the maintenance and integrity of
the webpage dedicated to the Company. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on
pages 24 and 25 of the published annual report and accounts for the
year ended 30 September 2022, confirm that to the best of their
knowledge:
- the financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law),
give a true and fair view of the assets, liabilities, financial
position and net return of the Company;
- the Strategic Report contained in the report and accounts
includes a fair review of the development and performance of the
business and the position of the Company, together with a
description of the principal and emerging risks that it faces;
and
- the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company's position and performance,
business model and strategy.
On behalf of the Board
James Williams
Chairman
6 December 2022
Income Statement
for the year ended 30 September 2022
2022 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains
on investments
held at fair
value through
profit or loss - (154,731) (154,731) - 132,242 132,242
Net foreign currency
losses - (2,936) (2,936) - (1,028) (1,028)
Income from investments 24,673 - 24,673 20,783 1,615 22,398
Other interest
receivable and
similar income 12 - 12 - - -
------------------------- -------- ---------- ---------- -------- -------- --------
Gross return/(loss) 24,685 (157,667) (132,982) 20,783 132,829 153,612
Investment management
fee (1,728) (5,185) (6,913) (2,026) (6,078) (8,104)
Administrative
expenses (1,437) - (1,437) (1,282) (1) (1,283)
------------------------- -------- ---------- ---------- -------- -------- --------
Net return/(loss)
before finance
costs and taxation 21,520 (162,852) (141,332) 17,475 126,750 144,225
Finance costs (48) (145) (193) (22) (66) (88)
------------------------- -------- ---------- ---------- -------- -------- --------
Net return/(loss)
before taxation 21,472 (162,997) (141,525) 17,453 126,684 144,137
Taxation (1,799) 1,145 (654) (1,373) (5,787) (7,160)
------------------------- -------- ---------- ---------- -------- -------- --------
Net return/(loss)
after taxation 19,673 (161,852) (142,179) 16,080 120,897 136,977
------------------------- -------- ---------- ---------- -------- -------- --------
Return/(loss)
per share 12.04p (99.08)p (87.04)p 9.66p 72.61p 82.27p
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.
Statement of Changes in Equity
for the year ended 30 September 2022
Called-up Capital Warrant Share
share Share redemption exercise purchase Capital Revenue
capital premium reserve reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 September
2020 16,682 100,956 3,462 8,704 27,946 773,466 14,930 946,146
Repurchase
and cancellation
of the
Company's
own shares (196) - 196 - (11,836) - - (11,836)
Net return
after taxation - - - - - 120,897 16,080 136,977
Dividend
paid in
the year - - - - - - (13,346) (13,346)
------------------- ---------- -------- ----------- --------- --------- ---------- --------- ----------
At 30 September
2021 16,486 100,956 3,658 8,704 16,110 894,363 17,664 1,057,941
Repurchase
and cancellation
of
the Company's
own shares (406) - 406 - (16,110) (5,543) - (21,653)
Net (loss)/return
after taxation - - - - - (161,852) 19,673 (142,179)
Dividend
paid in
the year - - - - - - (15,922) (15,922)
------------------- ---------- -------- ----------- --------- --------- ---------- --------- ----------
At 30 September
2022 16,080 100,956 4,064 8,704 - 726,968 21,415 878,187
Statement of Financial Position
at 30 September 2022
2022 2021
GBP'000 GBP'000
Fixed assets
Investments held at fair value
through profit or loss 882,801 1,068,988
Current assets
Debtors 7,920 8,499
Cash at bank and in hand 11,343 7,504
--------------------------------------- --------- ----------
19,263 16,003
--------------------------------------- --------- ----------
Current liabilities
Creditors: amounts falling due
within one year (19,964) (21,162)
--------------------------------------- --------- ----------
Net current liabilities (701) (5,159)
--------------------------------------- --------- ----------
Total assets less current liabilities 882,100 1,063,829
--------------------------------------- --------- ----------
Non current liabilities
Deferred taxation (3,913) (5,888)
--------------------------------------- --------- ----------
Net assets 878,187 1,057,941
--------------------------------------- --------- ----------
Capital and reserves
Called-up share capital 16,080 16,486
Share premium 100,956 100,956
Capital redemption reserve 4,064 3,658
Warrant exercise reserve 8,704 8,704
Share purchase reserve - 16,110
Capital reserves 726,968 894,363
Revenue reserve 21,415 17,664
--------------------------------------- --------- ----------
Total equity shareholders' funds 878,187 1,057,941
--------------------------------------- --------- ----------
Net asset value per share 546.13p 641.72p
These accounts were approved and authorised for issue by the
Board of Directors on 6 December 2022 and signed on its behalf
by:
James Williams
Chairman
Registered in England and Wales as a public company limited by
shares
Company registration number: 03104981
Notes to the Accounts
1. Accounting Policies
(a) Basis of accounting
Schroder AsiaPacific Fund plc ("the Company") is registered in
England and Wales as a public company limited by shares. The
Company's registered office is 1 London Wall Place, London EC2Y
5AU.
The accounts are prepared in accordance with the Companies Act
2006, United Kingdom Generally Accepted Accounting Practice ("UK
GAAP"), in particular in accordance with Financial Reporting
Standard (FRS) 102 "The Financial Reporting Standard applicable in
the UK and Republic of Ireland", and with the Statement of
Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" (the "SORP") issued by the
Association of Investment Companies in October 2019. All of the
Company's operations are of a continuing nature.
The accounts have been prepared on a going concern basis under
the historical cost convention, as modified by the revaluation of
investments held at fair value through profit or loss. The
Directors believe that the Company has adequate resources to
continue operating to 31 December 2023, which is at least 12 months
from the date of approval of these accounts. In forming this
opinion, the Directors have taken into consideration: the controls
and monitoring processes in place; the Company's low level of debt
and other payables; the low level of operating expenses, comprising
largely variable costs which would reduce pro rata in the event of
a market downturn; and that the Company's assets comprise cash and
readily realisable securities quoted in active markets. In forming
this opinion, the Directors have also considered any potential
impact of climate change on the viability of the Company. Further
details of Directors' considerations regarding this are given in
the Chairman's Statement, Investment Managers' Review, Going
Concern Statement, Viability Statement and under the Principal and
Emerging Risks heading on page 21 of the published annual report
and accounts for the year ended 30 September 2022.
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 participants' view of
climate change risk.
The Company has not presented a statement of cash flows, as it
is not required for an investment trust which meets certain
conditions; in particular that substantially all of the Company's
investments are highly liquid and carried at market value.
The accounts are presented in sterling and amounts have been
rounded to the nearest thousand.
The accounting policies applied to these accounts are consistent
with those applied in the accounts for the year ended 30 September
2021.
No significant judgements, estimates or assumptions have been
required in the preparation of the accounts for the current or
preceding financial year.
2. Income
2022 2021
GBP'000 GBP'000
Income from investments:
Overseas dividends 24,091 17,892
UK dividends 582 2,711
Scrip dividends - 180
----------------------------------------------- -------- --------
24,673 20,783
----------------------------------------------- -------- --------
Other interest receivable and similar income:
Deposit interest 12 -
----------------------------------------------- -------- --------
24,685 20,783
----------------------------------------------- -------- --------
Capital:
Special dividend allocated to capital - 1,615
----------------------------------------------- -------- --------
3. Investment management fee
2022 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Management fee 1,728 5,185 6,913 2,026 6,078 8,104
---------------- -------- -------- -------- -------- -------- --------
The basis for calculating the investment management fee is set
out in the Report of the Directors on page 26 of the published
annual report and accounts for the year ended 30 September
2022.
4. Taxation
The Company's effective corporation tax rate is nil, as
deductible expenses exceed taxable income. The tax charge comprises
irrecoverable overseas withholding tax on dividends receivable, and
overseas capital gains tax.
5. Return/(loss) per share
2022 2021
GBP'000 GBP'000
Revenue return 19,673 16,080
Capital (loss)/return (161,852) 120,897
-------------------------------------------- ------------ ------------
Total (loss)/return (142,179) 136,977
-------------------------------------------- ------------ ------------
Weighted average number of shares in issue
during the year 163,346,606 166,499,784
Revenue return per share 12.04p 9.66p
Capital (loss)/return per share (99.08)p 72.61p
-------------------------------------------- ------------ ------------
Total (loss)/return per share (87.04)p 82.27p
-------------------------------------------- ------------ ------------
6. Dividends
Dividends paid and proposed
2022 2021
GBP'000 GBP'000
2021 final dividend of 9.70p (2020: 8.00p)
paid out of revenue profits 15,922 13,346
----------------------------------------------- -------- --------
2022 2021
GBP'000 GBP'000
2022 final dividend proposed of 12.00p (2021:
9.70p) to be paid out of revenue profits 19,296 15,991
----------------------------------------------- -------- --------
The 2021 final dividend amounted to GBP15,991,000. However the
amount actually paid was GBP15,922,000, as shares were repurchased
and cancelled after the accounting date, but prior to the dividend
record date.
The proposed final dividend amounting to GBP19,296,000 (2021:
GBP15,991,000) 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 GBP19,673,000 (2021:
GBP16,080,000).
7. Called-up share capital
2022 2021
GBP'000 GBP'000
Ordinary shares allotted, called-up and
fully paid:
Ordinary shares of 10p each:
Opening balance of 164,860,716 (2021: 166,820,716)
shares 16,486 16,682
Repurchase and cancellation of 4,060,000
(2021: 1,960,000) shares (406) (196)
---------------------------------------------------- -------- --------
Closing balance of 160,800,716 (2021: 164,860,716)
shares 16,080 16,486
---------------------------------------------------- -------- --------
During the year, the Company made market purchases of 4,060,000
of its own shares, nominal value GBP406,000, for cancellation,
representing 2.46% of the shares outstanding at the beginning of
the year. The total consideration paid for these shares amounted to
GBP21,653,000. The reason for these purchases was to seek to manage
the volatility of the share price discount to NAV per share and to
provide liquidity to the market.
8. Net asset value per share
2022 2021
Net assets attributable to shareholders
(GBP'000) 878,187 1,057,941
Shares in issue at the year end 160,800,716 164,860,716
----------------------------------------- ------------ ------------
Net asset value per share 546.13p 641.72p
----------------------------------------- ------------ ------------
9. Transactions with the Manager
Under the terms of the AIFM Agreement, the Manager is entitled
to receive a management fee and a company secretarial fee. Details
of the basis of the management fee calculation are given in the
Directors' Report on page 26 of the published annual report and
accounts for the year ended 30 September 2022. 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.
The management fee payable in respect of the year ended 30
September 2022 amounted to GBP6,913,000 (2021: GBP8,104,000), of
which GBP1,593,000 (2021: GBP1,907,000) was outstanding at the year
end. The company secretarial fee payable in respect of the year
ended 30 September 2022 amounted to GBP150,000 (2021: GBP130,000),
of which GBP38,000 (2021: GBP38,000) 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.
10. Related party transactions
Details of the remuneration payable to Directors are given in
the Directors' Remuneration Report on page 35 of the published
annual report and accounts for the year ended 30 September 2022 and
details of Directors' shareholdings are given in the Directors'
Remuneration Report on page 36 of the published annual report and
accounts for the year ended 30 September 2022. Details of
transactions with the Manager are given in the above note. There
have been no other transactions with related parties during the
year (2021: nil).
11. Disclosures regarding financial instruments measured at fair value
The Company's financial instruments within the scope of FRS 102
that are held at fair value comprise its investment portfolio and
any derivative financial instruments.
FRS 102 requires that financial instruments held at fair value
are categorised into a hierarchy consisting of the three levels
below. A fair value measurement is categorised in its entirety on
the basis of the lowest level input that is significant to the fair
value measurement.
Level 1 - valued using unadjusted quoted prices in active
markets for identical assets.
Level 2 - valued using observable inputs other than quoted
prices included within Level 1.
Level 3 - valued using inputs that are unobservable.
Details of the Company's policy for valuing investments and
derivative instruments are given in note 1(b) on page 46 and 1(g)
on page 47 of the published annual report and accounts for the year
ended 30 September 2022.
At 30 September 2022, the Company's investment portfolio was
categorised as follows:
2022
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments in equities
and equity linked
securities 882,801 - - 882,801
------------------------- ---------- -------- -------- ----------
Total 882,801 - - 882,801
------------------------- ---------- -------- -------- ----------
2021
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments in equities
and equity linked
securities 1,068,988 - - 1,068,988
------------------------- ---------- -------- -------- ----------
Total 1,068,988 - - 1,068,988
------------------------- ---------- -------- -------- ----------
There have been no transfers between Levels 1, 2 or 3 during the
year (2021: nil).
Status of announcement
2021 Financial Information
The figures and financial information for 2021 are extracted
from the published annual report and accounts for the year ended 30
September 2021 and do not constitute the statutory accounts for
that year. The 2021 annual report and accounts 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.
2022 Financial Information
The figures and financial information for 2022 are extracted
from the annual report and accounts for the year ended 30 September
2022 and do not constitute the statutory accounts for the year. The
2022 annual report and accounts 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 2022 annual report and accounts will be
delivered to the Registrar of Companies in due course.
Neither the contents of the Company's webpages nor the contents
of any website accessible from hyperlinks on the Company's webpages
(or any other website) is incorporated into, or forms part of, this
announcement.
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(END) Dow Jones Newswires
December 07, 2022 02:00 ET (07:00 GMT)
Schroder Asiapacific (LSE:SDP)
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