TIDMATR
RNS Number : 4029A
Schroder Asian Total Retn InvCo PLC
24 March 2017
ANNUAL REPORT AND ACCOUNTS
Schroder Asian Total Return Investment Company plc (the
"Company") hereby submits its annual financial report for the year
ended 31 December 2016 as required by the UK Listing Authority's
Disclosure Guidance and Transparency Rule 4.1.
The Company's Annual Report and Accounts for the year ended 31
December 2016 are also being published in hard copy format and an
electronic copy will shortly be available to download from the
Company's webpage http://www.schroders.co.uk/satric. Please click
on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/4029A_-2017-3-23.pdf
The Company has submitted its Annual Report and Accounts to the
National Storage Mechanism and it will shortly be available for
inspection at www.morningstar.co.uk/uk/nsm.
Enquiries:
Louise Richard
Schroder Investment Management Limited
Tel: 020 7658 6501
Chairman's Statement
Performance
2016 was an excellent year for sterling-based investors in Asian
equities. The markets made a reasonable return - a total return
from the Reference Index of 7.4% in local currency terms. However
the weakness of the pound in the second half of the year led to
exceptional returns when translated into sterling.
During the year ended 31 December 2016, the Company produced a
net asset value ("NAV") total return of 28.0%, outperforming the
total return of 27.3% from the Reference Index and a total return
of 27.0% from the average peer group NAV. The share price fared
even better, producing a total return of 37.0%, as the discount
narrowed from 10.1% to 4.3%.
The Board was delighted that the excellent performance over the
past few years and the integrity of the investment process led to
Morningstar, the ratings agency, awarding the Company a Gold rating
- its highest level.
Further comment on performance and investment policy may be
found in the Portfolio Managers' Review.
Dividend
The revenue return from the portfolio for the year increased
when compared to the previous year, from 4.43p per share in 2015,
to 5.40p per share for the year under review.
The Board has recommended a final dividend of 4.50p per share
for the year ended 31 December 2016, an increase of 18.4% over the
final dividend of 3.80p per share paid in respect of the previous
financial year.
In order to provide shareholders with the opportunity to vote on
the quantum of the dividend, the Board is again proposing that it
will be payable as a final dividend, subject to shareholder
approval at the Annual General Meeting. The dividend will be paid
on 3 May 2017 to shareholders on the register on 7 April 2017.
Name change
As noted in my half year statement, the Company's name was
changed to Schroder Asian Total Return Investment Company plc on 21
September 2016 to allow it to benefit from market awareness of the
Schroders brand.
Promotion and discount management
The Company has continued to be promoted through marketing to
discretionary wealth managers, private investors, financial
advisers and institutions. The Board, Manager and corporate broker
have been in regular contact with current and potential
shareholders and continue to develop relationships with adviser and
execution-only platforms, along with advertising in the trade press
and provision of information on the Company's website. The
promotional work remains focused on the Company's distinctive
characteristics and differentiators from its peer group, including
the focus on total return, with a bias towards small and
medium-sized companies and a degree of downside protection through
derivatives.
The promotional activity is supported by a discount management
policy, which continues to target a discount to NAV of no more than
5% in normal market conditions, though the Board believes that
overall liquidity and the relative discount to the Company's peers
has also to be considered. During the year under review, the
Company saw steady demand for its shares. The Company's average
discount during the year of 7.4% was significantly narrower than
the peer group average of 10.8% and 200,000 shares were purchased
by the Company to be held in treasury in support of the discount
policy.
At the General Meeting held on 15 November 2016 the Board was
granted authority to reissue ordinary shares from treasury at a
discount of no greater than 4% to the net asset value per ordinary
share. Since that date, the Board has utilised this authority to
issue 100,000 ordinary shares at a discount to NAV. A resolution to
renew this authority will be proposed at the AGM, the details of
which can be found on page 57 of the 2016 Annual Report.
Gearing and the use of derivatives
The Company may use gearing to enhance performance but net
gearing will not exceed 30% of NAV. The Board has agreed a
disciplined framework for gearing to increase market exposure,
based on a number of valuation indicators. Gearing may also be used
in other circumstances and the net gearing stood at 7.0% at the end
of the year, up from 1.0% at the beginning of the year. The gearing
was increased with the aim of purchasing attractive stocks while
simultaneously hedging out some underlying market exposure through
the use of derivatives.
Fees and expenses
Ongoing Charges represented 1.0% of net assets in 2016 (2015:
1.0%), in line with the average for the Company's peer group. The
strong performance during the year triggered the payment of a
performance fee amounting to GBP2.65 million. The total management
fees, including the performance fee, payable for the year were
capped at 2.0% of net assets, in accordance with the fee
arrangements with the Manager.
Corporate governance
The Board has adopted a new policy on succession and
refreshment. This policy has been designed to ensure that the Board
achieves a diverse balance of skills, experience, background and
gender which is appropriately refreshed over time and remains
capable of overseeing the Company's strategic direction and adopted
business model.
The Board believes that it is important for appropriate new
skills to be brought to the Board and, for future appointments,
Directors, including the Chairman, will not normally be expected to
serve for more than nine years, unless exceptional circumstances
such as change of Manager require a transitional period, or in the
circumstances discussed below.
With regards to the position of Chairman, the Board is of the
view that, whilst experience of the Company, its Manager and
investors are key requirements, it would not be beneficial to the
Company for the Chairman to serve for extended periods. Therefore,
should a serving Director be subsequently appointed as Chairman,
such appointment would take effect for an initial term of five
years. Any further term would be considered on a case-by-case basis
and would depend on overall length of service and the prevailing
circumstances of the Company at that time.
The Board will look to refresh one Director every two to three
years. To ensure that the Board has access to the widest choice of
candidates, it will engage third party recruitment agencies for
each new appointment. This is a formalisation of a policy which has
been in operation for a number of years.
All Directors will be subject to re-election by shareholders
every year at the Annual General Meeting.
The Board will also engage an external firm to undertake an
evaluation of the Board and its Committees every few years. The
internal process will continue to operate in the intervening
periods.
Annual General Meeting
The Annual General Meeting will be held at 12.00 noon on
Wednesday, 26 April 2017 at 31 Gresham Street, London EC2V 7QA, the
offices of Schroders, and shareholders are encouraged to attend.
One of the Portfolio Managers will attend to give a presentation on
the Company's investment strategy and prospects for Asia. The
Annual General Meeting will be followed by a buffet lunch.
Outlook
The year under review provided exceptional returns for sterling
investors. 2017 has started on a strong note though the potential
impact of the US president's trade policy on Asia is a new
uncertainty. With sterling at a low point, returns from Asian
markets are unlikely to be as good this year but through careful
stock selection and a tested investment process we are confident
that the portfolio will continue to provide attractive returns in
the medium term with less volatility than the overall market.
David Brief
Chairman
23 March 2017
Portfolio Managers' Review
Market background
Asian equities delivered positive returns for the year 2016 as
accommodative monetary policies by central banks continued to
support investor risk appetite against a backdrop of heightened
political uncertainties. Stock markets however gave back some gains
in the last quarter following Donald Trump's unexpected victory in
the US presidential elections, which raised expectations for a
faster pace of interest rate hikes and hence a stronger US
dollar.
Across the region, Thailand and Indonesia were among the best
performing markets as the smaller ASEAN countries rebounded
strongly at the start of the year on the back of stabilising
currencies and expectations of government stimulus. The Philippines
market however came under pressure following the election of new
President Rodrigo Duterte, which triggered a wave of foreign
outflow on concerns over his unpredictable policies and impact of
his anti-US rhetoric on business relations with its key trading
partners.
The China stock market saw heightened volatility over the year
as worries over the devaluation in the Chinese currency and capital
outflows led to a sharp sell-off in the first quarter. The market
subsequently regained ground as expectations of continued
government support helped boost investor sentiment, driving a share
price recovery in the more cyclical sectors across financials,
materials and commodity-related industries.
Returns for the Indian market were also relatively sluggish amid
weak earnings results and disappointment over the lack of progress
on reforms. The introduction of the demonetisation policy in
November further dragged on returns with the market selling off on
worries over the impact of the liquidity squeeze on near-term
economic activity.
Overall, macro events and political headwinds continued to weigh
on sentiment towards emerging markets, with Asian equities paring
earlier gains to end the year up 7.4% in local currency terms. This
translates to a strong gain of 27.3% in sterling terms, due to the
sharp fall in sterling following the UK's EU referendum.
Performance Analysis
The NAV gained 28.0% over the year, compared to the Reference
Index which returned 27.3%.
Performance was driven largely by positive contributions from
holdings in China, Taiwan and Australia, with strong gains across
technology stocks and resources names. Exporters were the laggards
due mainly to concerns over a slowing global demand backdrop and
the negative impact from Trump's potential protectionism
measures.
Stock selection was a key driver to returns with strong
contribution from technology holdings. Taiwan-based Apple supply
chain stocks were the biggest outperformers, with Largan Precision
and Taiwan Semiconductor Manufacturing rising on hopes of strong
iPhone 7 demand. Korean IT conglomerate Samsung Electronics added
to gains on the back of solid earnings momentum, with its share
price further boosted by announcement of its shareholder return
policy with guidance for higher dividend payouts and share buy
backs.
Positive contribution also came from Chinese internet stocks
Tencent and Alibaba which extended their rally driven by solid
earnings outlook and robust top-line growth. The holding in China
Lodging, a mid-tier budget hotel chain, was up strongly on
continued acceleration in its revenue growth recovery, with margins
supported by gradual consolidation of the economy hotel market.
Across other markets, Australian stocks were some of the top
gainers with resources and materials names rebounding on the back
of higher commodity prices. ASEAN holdings also delivered gains
with positive contribution from laggard names across the consumer,
banks and property sectors.
The hedges (put options on the Australian, Hong Kong, Korean and
Taiwan markets) provided some downside protection against falling
markets during the first and last quarter, although the currency
hedge on the Australian dollar gave back some of the recent gains
amid a modest appreciation of the currency relative to the US
dollar over the period.
Portfolio positioning and key transactions
We continued to view ASEAN markets as expensive and have
continued to trim our exposures there on strength, particularly in
Thailand where we exited positions in power supply components
manufacturer Delta Electronics, automotive bulb maker Thai Stanley
Electric and property stock Land & Houses. We also trimmed
existing exposures in Kasikornbank and Hana Microelectronics to
lock in profits.
Transactions in Taiwan were also used to reduce exposures as we
took profits on camera lens module manufacturer Largan Precision
following its stellar performance, as well as on Taiwan Mobile. In
Hong Kong, we consolidated our real estate holdings in commercial
property investors and developers Hongkong Land and Swire
Properties after selling out of Hysan Development and Cheung Kong
Property, the latter due to a relatively uncertain long term
outlook for its property development business.
Proceeds were redeployed in Australia and Korea, as well as in
China including in its onshore 'A' share market. In Australia, new
positions were initiated in the country's stock exchange ASX, as
well as mining services company Incitec Pivot. We also sold out of
mining giant Rio Tinto to rotate into BHP Billiton on more
attractive relative valuations.
In China, in spite of a challenged macroeconomic backdrop and
our concerns over the sustainability and risks brought about by its
credit-fuelled economic growth model, we are however constructive
on the new economy and services sectors, where we have added new
positions in e-commerce and social media companies Alibaba Group
and Sina Corporation, as well as in private educational services
provider New Oriental Education & Technology Group. In a
broadly expensive onshore 'A' share market, we also found selected
attractive bottom-up opportunities, initiating new positions in
electric appliance manufacturer Midea, as well as video
surveillance solutions provider Hangzhou Hikvision Digital.
Starting the year with no exposures in Korea, we added to the
exposure in technology stocks with a new position in Samsung
Electronics, taking a favourable view on its component businesses
including OLED display and advanced memory chips (3D Nand), where
it has a significant lead. A new position was also initiated in
internet company Naver Corp, as well as automotive equipment
supplier Mando Corp, where we see opportunities for the firm amidst
the growing demand for, and sophistication around, Advanced Driver
Assistance Systems (ADAS).
Our preferred areas of investment and where we see opportunities
to invest with a structural, longer term view, have not changed
materially, as we expect headwinds from demographics, deleveraging
and disruption to slow Asian economic growth in the medium term.
Disruption is however having a revolutionary impact on some
sectors, and we see opportunities in disruptive innovators,
healthcare as well as efficient, low cost and high value-add
manufacturers.
As at 31 December 2016, 24.7% of the portfolio was held in
companies with a market capitalisation of less than US$3 billion
(2015: 34.2%). The decrease was due to sales of small cap positions
in ASEAN and Hong Kong.
Investment trends and outlook
We are cautious on the global backdrop, with our quant models
signalling caution and forecasting limited upside to markets.
Qualitatively we view the US stock market as fully valued and at
the current point do not see the new US administration's policies
as likely to be stock market friendly in the long term, especially
for Asian stock markets if the policies result in higher US
interest rates, a stronger dollar and de-globalisation. Our central
scenario is that reflation is likely to prove temporary and long
term structural factors (particularly high debt levels) mean that
the global economy remains ultimately deflationary. Given this
backdrop we expect a difficult year for markets and if valuations
remain elevated and put options cheap, the portfolio is likely to
hold a material position in put options and potentially cash.
Our base case is that 2017 is not the year that China changes
policy and thus we think it may well end up being a very similar
year to 2016 for both the economy and stock market. In practice
this is likely to mean lots of rhetoric on reform and reining in
the financial bubble, whilst the authorities do very little in any
material way to change policy as this would inevitably lead to a
sharp slowdown and major bad debt cycle. Our best guess is that as
the shadow banking sector grows larger this will finally trigger a
proper bad debt cycle as the ability of the central authorities to
use the large commercial banks to bail out the growing toxic parts
of the financial system are reduced. We expect the better (i.e.
cashed-up) State Owned Enterprises (SOEs) to be called in to do
national service, and commodity and cyclical stocks globally to be
very vulnerable given the prime driver of commodity demand remains
Chinese fixed asset investment. We continue to avoid investing in
all financials, materials and commodity, SOE and related names in
China.
For the rest of the region, we think India remains the best
domestic story in Asia at the moment, with current reforms and
positive demographics in its favour. The key for the stock market
is that Modi continues with his plans to cut red tape, root out
corruption, improve infrastructure and improve the fiscal position
so that we finally see a pick-up in investment. The frustration
remains that share valuations are high so that we struggle to
justify the prices being asked for the better domestic names. We
will continue to look for dips and disappointments to add to
positions.
We are more cautious on the other emerging Asian economies as we
worry that the combined effects of border taxes in the USA (and the
likely strong dollar that would go with it), industrial disruption
and lack of policy leadership in much of emerging Asia is likely to
mean that, with the exception of India and possibly Indonesia and
Philippines, we are set to see a much slower and challenging period
for growth. Stock picking will become more important than ever in
this environment and investors need to moderate their return
expectations.
In terms of our investment positioning, we are sticking with the
internet holdings despite relatively high valuations. We see the
digital disruption continuing across the retail industry with
little sign of relief for many bricks-and-mortar retailers while
the amount of time spent on digital media continues to grow. We
also like healthcare stocks in Australia and selected Australian
financials.
The largest individual exposure remains the technology holdings.
This is the key risk for the coming year. If Trump gets serious on
his border taxes these stocks will likely face weakened demand and
in some cases the need to onshore production back to the US. The
portfolio's exposure is mostly to high value added companies like
Taiwan Semiconductor Manufacturing, Largan Precision, Samsung
Electronics and Hangzhou Hikvision where the threat of US-based
competition is minimal and margins relatively higher. Clearly for
commoditised manufacturers and assemblers operating on thin
margins, the risks are more serious.
Although so many Asian companies operate in "challenged"
sectors, we believe that, through careful stock selection and
management of the market cycle, we should be able to deliver
reasonable returns.
Robin Parbrook, King Fuei Lee
For Schroder Investment Management Limited
23 March 2017
Principal risks and uncertainties
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 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 its 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
February 2017.
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.
A summary of the principal risks and uncertainties faced by the
Company, which have remained unchanged throughout the year, is set
out below. This includes actions taken by the Board and, where
appropriate, its Committees, to manage and mitigate these risks and
uncertainties.
Risk Mitigation and management
Strategic risk
The Company's investment Appropriateness of the
objectives may become out Company's investment remit
of line with the requirements periodically reviewed and
of investors, resulting success of the Company
in a wide discount of the in meeting its stated objectives
share price to underlying is monitored.
net asset value.
Share price relative to
net asset value monitored
and use of buy back authorities
considered on a regular
basis.
Marketing and distribution
activity is actively reviewed.
Investment management risk
The Manager's investment Review of the Manager's
strategy, if inappropriate, compliance with the agreed
may result in the Company investment restrictions,
underperforming the market investment performance
and/or peer group companies, and risk against investment
leading to the Company objectives and strategy;
and its objectives becoming relative performance; the
unattractive to investors. portfolio's risk profile;
and appropriate strategies
employed to mitigate any
negative impact of substantial
changes in markets.
Annual review of the ongoing
suitability of the Manager.
Financial and currency
risk
The Company is exposed Risk profile of the portfolio
to the effect of market considered and appropriate
and currency fluctuations strategies to mitigate
due to the nature of its any negative impact of
business. A significant substantial changes in
fall in regional equity markets discussed with
markets or substantial the Manager.
currency fluctuation could
have an adverse impact Derivative strategy employed
on the market value of by the Manager subject
the Company's underlying to review by the Board.
investments.
Board considers overall
hedging policy on a regular
basis.
The Company's cost base Ongoing competitiveness
could become uncompetitive, of all service provider
particularly in light of fees subject to periodic
open ended alternatives. benchmarking against competitors.
Annual consideration of
management fee levels.
Custody risk
Safe custody of the Company's Depositary reports on safe
assets may be compromised custody of the Company's
through control failures assets, including cash,
by the Depositary, including and portfolio holdings
cyber hacking. are independently reconciled
with the Manager's records.
Review of audited internal
controls reports covering
custodial arrangements.
Annual report from the
Depositary on its activities,
including matters arising
from custody operations.
Gearing and leverage risk
The Company utilises credit Gearing monitored and strict
facilities. These arrangements restrictions on borrowings
increase the funds available imposed: gearing continues
for investment through to operate within pre-agreed
borrowing. While this has limits so as not to exceed
the potential to enhance 30% of net asset value.
investment returns in rising
markets, in falling markets Board oversight of the
the impact could be detrimental Manager's use of derivatives.
to performance.
Accounting, legal and regulatory
risk
In order to continue to Confirmation of compliance
qualify as an investment with relevant laws and
trust, the Company must regulations by key service
comply with the requirements providers.
of Section 1158 of the
Corporation Tax Act 2010. Shareholder documents and
Breaches of the UK Listing announcements, including
Rules, the Companies Act the Company's published
or other regulations with Annual Report, are subject
which the Company is required to stringent review processes.
to comply, could lead to
a number of detrimental Procedures have been established
outcomes. to safeguard against disclosure
of inside information.
Service provider risk
The Company has no employees Service providers appointed
and has delegated certain subject to due diligence
functions to a number of processes and with clearly-documented
service providers, principally contractual arrangements
the Manager, Depositary detailing service expectations.
and Registrar. Failure
of controls and poor performance Regular reporting by key
of any service provider service providers and monitoring
could lead to disruption, of the quality of services
reputational damage or provided.
loss.
Review of annual audited
internal controls reports
from key service providers,
including confirmation
of business continuity
arrangements and follow
up of remedial actions
as required.
Risk assessment and internal controls
Risk assessment includes consideration of the scope and quality
of the systems of internal control operating within key service
providers, and ensures regular communication of the results of
monitoring by such providers to the Audit Committee, including the
incidence of significant control failings or weaknesses that have
been identified at any time and the extent to which they have
resulted in unforeseen outcomes or contingencies that may have a
material impact on the Company's performance or condition.
No significant control failings or weaknesses were identified
from the Audit Committee's ongoing risk assessment which has been
in place throughout the financial year and up to the date of this
Report.
A full analysis of the financial risks facing the Company is set
out in note 21 to the accounts on pages 52 to 56.
Viability statement
The Directors have assessed the viability of the Company over a
five year period, taking into account the Company's position at 31
December 2016 and the potential impacts of the principal risks and
uncertainties it faces for the review period.
A period of five years has been chosen for the purposes of the
assessment of viability as this reflects a suitable time horizon
for strategic planning, taking into account the investment policy,
liquidity of investments, potential impact of economic cycles,
nature of operating costs, dividends and availability of
funding.
The Board believes that the Manager has the skills and depth of
resource to achieve superior returns in the longer-term and that
the portfolio risk profile, limits on gearing, counter-party
exposures, liquidity risk and financial controls are robust. In
addition, the Company's business model and investment policy
provide some resilience to adverse economic cycles. The Directors
have therefore concluded that there is a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period to 31 December
2021.
Going concern statement
Having assessed the principal risks and the other matters
discussed in connection with the viability statement set out above,
and the "Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting" published by the FRC in 2014, the
Directors consider it appropriate to adopt the going concern basis
in preparing the accounts.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report,
Strategic Report, the Report of the Directors, the Corporate
Governance Statement, the Remuneration 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 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 Company's website. 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 21 and 22 of the 2016 Annual Report, 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 risks and uncertainties 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.
Income Statement
for the year ended 31 December 2016
2016 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- --------- --------- -------- --------- --------
Gains on investments
held at
fair value through
profit or loss - 46,666 46,666 - 2,704 2,704
Net (losses)/gains
on derivative
contracts - (485) (485) - 596 596
Net foreign currency
losses - (2,289) (2,289) - (940) (940)
Income from investments 4,765 - 4,765 4,117 - 4,117
Other interest
receivable and
similar income 34 - 34 96 - 96
-------------------------- -------- --------- --------- -------- --------- --------
Gross return 4,799 43,892 48,691 4,213 2,360 6,573
-------------------------- -------- --------- --------- -------- --------- --------
Investment management
fee (317) (950) (1,267) (259) (777) (1,036)
Performance fee - (2,650) (2,650) - - -
Administrative
expenses (564) - (564) (520) - (520)
-------------------------- -------- --------- --------- -------- --------- --------
Net return before
finance costs
and taxation 3,918 40,292 44,210 3,434 1,583 5,017
-------------------------- -------- --------- --------- -------- --------- --------
Finance costs (42) (126) (168) (33) (100) (133)
-------------------------- -------- --------- --------- -------- --------- --------
Net return on
ordinary activities
before taxation 3,876 40,166 44,042 3,401 1,483 4,884
-------------------------- -------- --------- --------- -------- --------- --------
Taxation on ordinary
activities 64 - 64 (165) - (165)
-------------------------- -------- --------- --------- -------- --------- --------
Net return on
ordinary activities
after taxation 3,940 40,166 44,106 3,236 1,483 4,719
-------------------------- -------- --------- --------- -------- --------- --------
Return per share
- basic and diluted 5.40p 55.07p 60.47p 4.43p 2.03p 6.46p
-------------------------- -------- --------- --------- -------- --------- --------
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
items of other comprehensive income, and therefore the net return
on ordinary activities 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 31 December 2016
Called-up Capital
share Share redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- -------- ----------- -------- --------- --------- ---------
At 31 December
2014 4,260 5 11,646 29,182 97,133 10,116 152,342
Repurchase of
the Company's
own shares into
Treasury - - - - (496) - (496)
Net return on
ordinary activities - - - - 1,483 3,236 4,719
Dividend paid
in the year - - - - - (2,379) (2,379)
---------------------- ---------- -------- ----------- -------- --------- --------- ---------
At 31 December
2015 4,260 5 11,646 29,182 98,120 10,973 154,186
Repurchase of
the Company's
own shares into
Treasury - - - - (503) - (503)
Net return on
ordinary activities - - - - 40,166 3,940 44,106
Dividend paid
in the year - - - - - (2,772) (2,772)
---------------------- ---------- -------- ----------- -------- --------- --------- ---------
At 31 December
2016 4,260 5 11,646 29,182 137,783 12,141 195,017
---------------------- ---------- -------- ----------- -------- --------- --------- ---------
Statement of Financial Position
at 31 December 2016
2016 2015
GBP'000 GBP'000
--------------------------------------- --------- --------
Fixed assets
--------------------------------------- --------- --------
Investments held at fair value
through profit or loss 207,947 155,403
---------------------------------------- --------- --------
Current assets
Debtors 1,255 409
Cash at bank and in hand 7,310 6,101
Derivative financial instruments
held at fair value through
profit or loss 2,681 403
---------------------------------------- --------- --------
11,246 6,913
--------------------------------------- --------- --------
Current liabilities
Creditors: amounts falling
due within one year (24,176) (8,055)
Derivative financial instruments
held at fair value through
profit or loss - (75)
---------------------------------------- --------- --------
(24,176) (8,130)
--------------------------------------- --------- --------
Net current liabilities (12,930) (1,217)
---------------------------------------- --------- --------
Total assets less current liabilities 195,017 154,186
---------------------------------------- --------- --------
Net assets 195,017 154,186
---------------------------------------- --------- --------
Capital and reserves
Called-up share capital 4,260 4,260
Share premium 5 5
Capital redemption reserve 11,646 11,646
Special reserve 29,182 29,182
Capital reserves 137,783 98,120
Revenue reserve 12,141 10,973
---------------------------------------- --------- --------
Total equity shareholders'
funds 195,017 154,186
---------------------------------------- --------- --------
Net asset value per share
--------------------------------------- --------- --------
Undiluted 268.07p 211.36p
---------------------------------------- --------- --------
Diluted 267.09p N/a
---------------------------------------- --------- --------
Cash Flow Statement
for the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
-------------------------------------- --------- ---------
Net cash inflow from operating
activities 3,037 2,201
Servicing of finance
Interest paid (161) (131)
--------------------------------------- --------- ---------
Net cash outflow from servicing
of finance (161) (131)
--------------------------------------- --------- ---------
Investment activities
Purchases of investments (61,360) (61,996)
Sales of investments 54,721 59,787
Cash flows on derivative instruments (2,839) 405
--------------------------------------- --------- ---------
Net cash outflow from investment
activities (9,478) (1,804)
--------------------------------------- --------- ---------
Dividend paid (2,772) (2,379)
--------------------------------------- --------- ---------
Net cash outflow before financing (9,374) (2,113)
--------------------------------------- --------- ---------
Financing
Bank loan drawn down 10,776 6,775
Repurchase of the Company's
own shares into treasury (503) (496)
--------------------------------------- --------- ---------
Net cash inflow from financing 10,273 6,279
--------------------------------------- --------- ---------
Net cash inflow in the year 899 4,166
--------------------------------------- --------- ---------
Notes to the Accounts
1. Accounting Policies
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 November 2014. 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 and derivative financial instruments held at fair value
through profit or loss.
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 31 December
2015.
2. Income
2016 2015
GBP'000 GBP'000
--------------------------------------- -------- --------
Income from investments:
Overseas dividends 4,712 4,101
Stock dividends 53 16
--------------------------------------- -------- --------
4,765 4,117
--------------------------------------- -------- --------
Other interest receivable and similar
income
Stock lending fees 30 73
Deposit interest 4 5
Other income - 18
--------------------------------------- -------- --------
34 96
--------------------------------------- -------- --------
4,799 4,213
--------------------------------------- -------- --------
3. Investment management and performance fees
2016 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- -------- -------- --------
Investment management
fee 317 950 1,267 259 777 1,036
Performance fee - 2,650 2,650 - - -
----------------------- -------- -------- -------- -------- -------- --------
317 3,600 3,917 259 777 1,036
----------------------- -------- -------- -------- -------- -------- --------
The bases for calculating the investment management and
performance fees are set out in the Report of the Directors on page
24 of the 2016 Annual Report and details of all amounts payable to
the Manager are given in note 18 on page 50 of the 2016 Annual
Report.
4. Dividends
Dividends paid and declared 2016 2015
GBP'000 GBP'000
--------------------------------------- -------- --------
2015 final dividend of 3.80p (2014:
3.25p), paid out of revenue profits 2,772 2,379
--------------------------------------- -------- --------
2016 2015
GBP'000 GBP'000
--------------------------------------- -------- --------
2016 final dividend proposed of 4.50p
(2015: 3.80p), to be paid out of
revenue profits(1) 3,274 2,772
--------------------------------------- -------- --------
(1) The proposed final dividend amounting to GBP3,274,000 (2015:
GBP2,772,000) 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 by way of dividend for the year is GBP3,947,000
(2015: GBP3,236,000).
5. Return per share
2016 2015
GBP'000 GBP'000
------------------------------------------------------- ----------- -----------
Revenue return 3,940 3,236
Capital return 40,166 1,483
------------------------------------------------------- ----------- -----------
Total return 44,106 4,719
------------------------------------------------------- ----------- -----------
Weighted average number of shares in issue during the
year 72,931,791 73,104,209
Revenue return per share 5.40p 4.43p
Capital return per share 55.07p 2.03p
------------------------------------------------------- ----------- -----------
Total return per share 60.47p 6.46p
------------------------------------------------------- ----------- -----------
There is no dilution to the above returns per share when the
diluted returns are calculated in accordance with the requirements
of IAS 33, as is required by FRS 102.
Details of the potentially dilutive treasury shares in issue are
given in note 15 on page 50 of the 2016 Annual Report.
6. Net asset value per share
2016 2015
---------------------------------------------------------- ----------- -----------
Undiluted
Total equity shareholders' funds (GBP'000) 195,017 154,186
Shares in issue at the year end 72,749,141 72,949,141
Net asset value per share 268.07p 211.36p
---------------------------------------------------------- ----------- -----------
Diluted
Total equity shareholders' funds assuming reissue of any
dilutive treasury 213,790 N/A
shares (GBP'000)
Potential shares in issue at the year end 80,044,055 N/A
Net asset value per share 267.09p N/A
---------------------------------------------------------- ----------- -----------
The diluted net asset value per share assumes that 7,294,914
treasury shares were reissued at a discount of 4% to the net asset
value per share at the year end. At a General Meeting on 15
November 2016, the Company was granted authority to reissue up to
7,294,914 ordinary shares from treasury (representing approximately
10% of the shares in issue as at 15 November 2016), at a discount
of no greater than 4% to the net asset value per ordinary share at
the time of sale. Prior to this, the Company's policy was that
treasury shares would only be reissued at a premium to net asset
value. Since the year end, 100,000 ordinary shares have been issued
at a discount to net asset value under this new authority.
7. Transactions with the Manager
Under the terms of the Alternative Investment Fund Manager
Agreement, the Manager is entitled to receive management,
secretarial and performance fees. Details of the basis of these
calculations are given in the Report of the Directors on page 24 of
the 2016 Annual Report. If the Company invests in funds managed or
advised by the Manager, any fees earned by the Manager from those
investments are rebated to the Company. The management fee payable
in respect of the year ended 31 December 2016 amounted to
GBP1,267,000 (2015: GBP1,036,000) of which GBP358,000 (2015:
GBP247,000) was outstanding at the year end.
The secretarial fee payable for the year amounted to GBP75,000
(2015: GBP75,000) of which GBP19,000 (2015: GBP19,000) was
outstanding at the year end. A performance fee amounting to
GBP2,650,000 (2015: nil) is payable for the year, and the whole of
this amount was outstanding at the year end.
No Director of the Company served as a director of any company
within the Schroder Group at any time during the year.
8. Called-up share capital
2016 2015
GBP'000 GBP'000
------------------------------------------- -------- --------
Allotted, called-up and fully paid:
Ordinary shares of 5p each:
Opening balance of 72,949,141 (2015:
73,199,141) shares 3,647 3,660
Repurchase of 200,000 (2015: 250,000)
shares into treasury (10) (13)
------------------------------------------- -------- --------
Subtotal of 72,749,141 (2015: 72,949,141)
shares 3,637 3,647
12,455,671 (2015: 12,255,671) shares
held in treasury 623 613
------------------------------------------- -------- --------
Closing balance(1) 4,260 4,260
------------------------------------------- -------- --------
(1) Represents 85,204,812 (2015: 85,204,812) shares of 5p each,
including 12,455,671 (2015: 12,255,671) held in treasury. During
the year, the Company purchased 200,000 of its own shares, nominal
value GBP10,000, to hold in treasury for a total consideration of
GBP503,000, representing 0.27% of the shares outstanding at the
beginning of the year. The reason for these share purchases was to
seek to manage the volatility of the share price discount to net
asset value per share.
9. Status of announcement
2015 Financial Information
The figures and financial information for 2015 are extracted
from the published Annual Report and Accounts for the year ended 31
December 2015 and do not constitute the statutory accounts for that
year. The 2015 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.
2016 Financial Information
The figures and financial information for 2016 are extracted
from the Annual Report and Accounts for the year ended 31 December
2016 and do not constitute the statutory accounts for the year. The
2016 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 2016 Annual Report and Accounts will be
delivered to the Registrar of Companies in due course.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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