TIDMSDP
RNS Number : 8119I
Schroder AsiaPacific Fund PLC
22 June 2017
22 June 2017
Half Year Report
Schroder AsiaPacific Fund plc (the "Company") hereby submits its
Half Year Report for the period ended 31 March 2017 as required by
the UK Listing Authority's Disclosure Guidance and Transparency
Rule 4.2.
The Half Year Report is also being published in hard copy format
and an electronic copy of that document will shortly be available
to download from the Company's website
www.schroders.co.uk/asiapacific. Please click on the following link
to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/8119I_-2017-6-21.pdf
The Company has submitted a pdf of the hard copy format of its
Half Year Report to the National Storage Mechanism and it will
shortly be available for inspection at
www.morningstar.co.uk/uk/NSM.
Enquiries:
Ria Vavakis
Schroder Investment Management Limited
Tel: 020 7658 2371
LEI number: 549300A71N7LE35KWU14
___________________________________________________________________________________________________________________________
Half Year Report and Accounts for the six months ended 31 March
2017
Interim Management Report
Chairman's Statement
Performance
I am pleased to report a total return of 11.8% for both the
Company's net asset value ("NAV") and the share price during the
six month period to 31 March 2017, comparing favourably with a
total return of 10.4% for the benchmark, the MSCI All Countries
Asia excluding Japan Index in sterling terms.
The strong rise in the Company's NAV was due to a combination of
outperformance of the benchmark, a fall in the value of sterling
and a rise in markets. Further analysis of performance may be found
in the Manager's Review.
Gearing
Gearing stood at 0.4% at the beginning of the period and had
increased to 4.0% as at 31 March 2017. Average gearing during the
period was 1.7%. The level of gearing continues to operate within
pre-agreed levels so that net gearing does not represent more than
20% of shareholders' funds.
Discount management
Over the period, the average discount of the Company's shares to
NAV was 12.7%, wider than the longer-term maximum 10% target
adopted by the Board. The Board continues to monitor the level of
discount in light of that of its peer group and prevailing market
conditions. Despite strong performance in regional markets,
investor demand remained mixed and this was reflected in wide
discounts generally across the peer group. A total of 225,000
shares were purchased for cancellation during the period.
Management fee
During the period the Board undertook its annual review of the
management fee and, following discussion with the Manager, agreed a
change in the structure and level of the fee in order to reduce the
level of the Company's operating expenses for shareholders.
The fee structure will remain tiered but in three rather than
four levels, with a reduction in charges, as follows:
The fee will continue to be charged on the value of the
Company's assets under management, net of current liabilities other
than short term borrowings.
A fee of 0.90% will be charged on the first GBP300 million,
reducing to 0.80% on assets between GBP300 million and GBP600
million and further reducing to 0.75% on assets above GBP600
million.
Based on the NAV at 31 March 2017, this change would reduce the
annual fee from GBP6,370,000 to GBP6,197,000.
The reduction in management fee will be effective from 1 April
2017.
Board changes
As disclosed in my last annual statement, Anthony Fenn, the
Senior Independent Director, will retire at the Company's next
Annual General Meeting. The Board has commenced the search for
Anthony's successor, for appointment later this year.
Outlook
Geo-political developments dominate the news but we are
reassured by the continuing success of the
companies in the portfolio. Their growth is in many cases at
lower levels than in their heyday, but across the region they look
competitive. Short-term growth of dividends in aggregate looks
assured, and valuations do not seem expensive. Even allowing for
the fall in sterling over the last year, there are good reasons why
the Company's share price has been at all-time highs.
This is not to deny the challenges facing the region, as
discussed in the Manager's Review. The Board continues to believe,
however, in the virtues of a conservatively-run investment
portfolio of high quality companies, particularly when - as now -
corporate cash flow is rising strongly.
Nicholas Smith
Chairman
21 June 2017
Manager's Review
The net asset value per share of the Company recorded a total
return of 11.8% over the six months to end March 2017. This was
ahead of the performance of the benchmark, the MSCI All Countries
Asia excluding Japan Index in sterling terms, which was up 10.4%
over the same period.
Asian equity markets put in a solid performance over the first
six months of the Company's financial year. However, there has been
considerable volatility. Markets were somewhat subdued in
October/November digesting the strong progress in the summer, and
reflecting concern that rising US interest rates and a stronger
dollar presaged a tightening of monetary conditions. These
incipient concerns seemed confirmed by the US presidential election
result, which triggered expectations of an "America First" policy
of deregulation, tax reform, infrastructure spending, and a more
protectionist trade policy.
Needless to say, Asian markets did not react well, with more
trade-exposed markets, sectors and companies performing
particularly badly. Interest rate sensitive stocks such as real
estate also weakened, although more strongly capitalised banks in
the region did well on anticipation that rising interest rates
would materially enhance their profitability.
The correction proved relatively short-lived. The reality of the
US constitution has meant that substantive action on the Trump
economic programme has been minimal, and a number of pre-election
pledges proved subject to revision post-inauguration. Meanwhile,
there were other supports to the Asian stock markets, including
signs of recovery in global trade, strong data out of China
including leading indicators, producer prices and corporate
profits, and an earnings season which saw generally upward
revisions to investor expectations, the first time for a number of
years that has been the case.
Sterling weakness has continued to have a material impact on
returns, with all the regional currencies rising against the pound
apart from the Malaysian ringgit. In terms of overall returns,
ASEAN emerging markets performed relatively poorly, reflecting to
varying degrees political noise and somewhat becalmed economies. It
is striking that markets perceived as more exposed to a global
economic recovery led the way such as Singapore, Korea and Taiwan,
although for the latter currency strength impacted exporter
returns.
Performance and portfolio activity
The Company's performance was ahead of the Index. The main
contributors were stock selection in Hong Kong, Korea, Indonesia
and China, with lesser contributions from Thailand and Taiwan. The
only significant market where stock selection was below par was
India, where the Company had insufficient exposure to more
economically-sensitive industrial and material names. Country
allocation was a very small negative factor, primarily because of
the overweighting in Hong Kong, which underperformed. In sector
terms, selection in consumer cyclicals, industrials and real estate
were the main positives, along with the overweighting in
information technology and underweights in consumer staples and
utilities.
In terms of positioning changes, we added to Korea, reflecting
better earnings momentum and still attractive valuations, and made
more modest additions to Singapore and Malaysia; the latter through
the bond market as we deemed the currency as oversold but equity
valuations unattractive. Funding the changes came from a modest
increase in gearing and reductions in India and Hong Kong due to
individual stocks reaching our price targets. In sector terms, we
added to banks, funded from reductions in telecoms and
industrials.
Outlook and policy
Recent weeks have seen a distinct moderation in the optimism
about economic growth that dominated the second half of 2016. Bond
yields have retraced much of their rise, commodity prices have
softened, and defensive sectors have recovered some of the ground
lost in 2016. However, the global economy looks in reasonable
shape. Excessive hopes for US growth may be disappointed (partly
because the scope to stimulate an economy near full capacity is by
its nature limited), but there is no reason to expect a sharp
downturn, while other developed economies such as Japan and Europe
appear to be on a broad recovery tack.
Less investor focus in general has been given to the importance
of China in stabilising global growth. The
influence is clear in the strong export numbers in the Asian
region (Taiwan: +13% year-on-year in March; Korea: +14%) and in the
buoyancy (until very recently) of commodity prices. For all the
talk of fiscal packages and monetary measures in the developed
world, the net new stimulus has been almost wholly from China over
the last 18 months. In engineering a strong recovery, China has
done it by the text book: lower interest rates, real estate
stimulus, public investment and continued supply of credit (with
credit continuing to grow over twice nominal GDP) leading to an
impressive recovery in the secondary industry and a swing in
producer prices from -6% year-on-year at the end of 2015, to +7.6%
in March.
Recently the Chinese authorities have signalled a less
pro-growth stance (marginal tweaks up in policy interest rates,
cooling measures for large cities' real estate markets), but the
priority will be to maintain a satisfactory level of growth - not
too hot, not too cold, to use a cliché.
The long-term resolution of China's addiction to credit (lower
growth, debt work-outs etc) has still to be faced, but on a
medium-term time horizon China should be a broadly supportive
influence to global and regional activity.
Trade protectionism remains a salient risk for the Asian
markets, although this comes at a time when more cyclical supports
are healthy, including a slow repair from the crisis conditions of
2015 for a number of emerging markets (Russia, South Africa, Latin
America, Middle East) and steady recovery in Europe, which is at
least as important a destination for exports as the United States.
External balances in terms of current accounts, trade balances and
foreign exchange reserves remain healthy, and provide some cushion
should there be tighter global monetary conditions or a stronger
dollar than we currently envisage. Domestic demand drivers (outside
China) remain muted, however. It probably awaits a more concerted
push on infrastructure spending in places like India and emerging
ASEAN for this to change. Most governments have more fiscal room to
manoeuvre than they did, so it is political will that forms the
main impediment.
Geo-political risk is somewhat elevated for other reasons, most
notably the increasingly disruptive actions of the Democratic
People's Republic of Korea in pursuit of a credible nuclear
deterrent. With the possible return of a more interventionist US
foreign policy, tensions are high as at the time of writing. Much
hangs on the personal relationship between presidents Xi and Trump
given that it is China that has the power to influence the North
Korean regime should it choose to exert it.
At a company level, we take heart from the fact that companies
we favour have been disciplined in terms of capital spending over
recent years, and have used the opportunity to strengthen balance
sheets and
concentrate on raising value-added rather than pursuing
expansion for the sake of it, which is usually at the expense of
shareholder returns. A by-product of this is that corporate free
cash flow is growing considerably faster than reported
earnings.
Schroder Investment Management Limited
21 June 2017
Principal risks and uncertainties
The principal risks and uncertainties with the Company's
business fall into the following categories: strategy and
competitiveness risk; investment management risk; financial and
currency risk; accounting, legal and regulatory risk; custodian and
depositary risk; and service provider risk. A detailed explanation
of the risks and uncertainties in each of these categories can be
found on pages 15 and 16 of the Company's published Annual Report
and Accounts for the year ended 30 September 2016.
These risks and uncertainties have not materially changed during
the six months ended 31 March 2017, with the exception of cyber
risk relating to the Company's key service providers. The Board
considers that this has increased in light of the rising frequency
and success of cyber attacks on businesses and institutions. In
order to ensure that this risk is managed and mitigated
appropriately, the Board is seeking enhanced reporting on cyber
risk controls from its key service providers.
Going concern
Having assessed the principal risks and uncertainties, and the
other matters discussed in connection with the viability statement
as set out on page 17 of the published Annual Report and Accounts
for the year ended 30 September 2016, the Directors consider it
appropriate to adopt the going concern basis in preparing the
accounts.
Related party transactions
There have been no transactions with related parties that have
materially affected the financial position or the performance of
the Company during the six months ended 31 March 2017.
Directors' responsibility statement
The Directors confirm that, to the best of their knowledge, this
set of condensed financial statements
has been prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (UK GAAP) and with the Statement of
Recommended Practice, "Financial Statements of Investment Companies
and Venture Capital Trusts" issued in November 2014 and that this
Interim Management Report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FCA's Disclosure Guidance and
Transparency Rules.
Income Statement
for the six months ended 31 March 2017 (unaudited)
(Unaudited) (Unaudited) (Audited) for
for the six for the six the year
months months ended 30 September
ended 31 March ended 31 March 2016
2017 2016
------------------------
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Gains on investments
held at fair
value through
profit or loss - 75,516 75,516 - 52,416 52,416 - 186,860 186,860
Gains on derivative
contracts - - - - 133 133 - 163 163
Net foreign currency
losses - (374) (374) - (861) (861) - (3,664) (3,664)
Income from investments 5,238 - 5,238 3,802 - 3,802 15,232 220 15,452
Other interest
receivable and
similar income 1 - 1 1 - 1 1 - 1
------------------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Gross return 5,239 75,142 80,381 3,803 51,688 55,491 15,233 183,579 198,812
Investment management
fee (2,979) - (2,979) (2,330) - (2,330) (5,006) - (5,006)
Administrative
expenses (430) - (430) (448) - (448) (855) - (855)
------------------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Net return before
finance costs
and taxation 1,830 75,142 76,972 1,025 51,688 52,713 9,372 183,579 192,951
Finance costs (137) (137) (149) - (149) (304) - (304)
------------------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Net return on
ordinary activities
before taxation 1,693 75,142 76,835 876 51,688 52,564 9,068 183,579 192,647
Taxation (note
3) (309) (11) (320) (234) (82) (316) (1,028) (162) (1,190)
------------------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Net return on
ordinary activities
after taxation 1,384 75,131 76,515 642 51,606 52,248 8,040 183,417 191,457
------------------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
Return per share
(note 4) 0.83p 44.83p 45.66p 0.38p 30.56p 30.94p 4.77p 108.78p 113.55p
------------------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
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 on ordinary activities after taxation is also the total
comprehensive income for the period.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the period.
Statement of Changes in Equity
for the six months ended 31 March 2017 (unaudited)
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
2016 16,780 100,956 3,364 8,704 32,396 487,957 8,164 658,321
Repurchase and
cancellation
of the Company's
own
Ordinary shares (23) - 23 - (821) - - (821)
Net return on
ordinary
activities after
taxation - - - - - 75,131 1,384 76,515
Dividend paid
in the period
(note 5) - - - - - - (7,960) (7,960)
----------------- --------- ------- ---------- -------- -------- -------- ------- -------
At 31 March
2017 16,757 100,956 3,387 8,704 31,575 563,088 1,588 726,055
----------------- --------- ------- ---------- -------- -------- -------- ------- -------
for the six months ended 31 March 2016 (unaudited)
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
2015 16,923 100,956 3,221 8,704 36,301 304,540 7,225 477,870
Repurchase and
cancellation
of the Company's
own Ordinary
shares (35) - 35 - (944) - - (944)
Net return on
ordinary activities
after taxation - - - - - 51,606 642 52,248
Dividend paid
in the
period (note
5) - - - - - - (7,101) (7,101)
--------------------- --------- ------- ---------- -------- -------- -------- --------- ---------
At 31 March
2016 16,888 100,956 3,256 8,704 35,357 356,146 766 522,073
--------------------- --------- ------- ---------- -------- -------- -------- --------- ---------
for the year ended 30 September 2016 (audited)
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
2015 16,923 100,956 3,221 8,704 36,301 304,540 7,225 477,870
Repurchase and
cancellation
of the Company's
own
Ordinary shares (143) - 143 - (3,905) - - (3,905)
Net return on
ordinary activities
after taxation - - - - - 183,417 8,040 191,457
Dividend paid
in the year
(note 5) - - - - - - (7,101) (7,101)
--------------------- --------- ------- ---------- -------- -------- -------- ------- -------
At 30 September
2016 16,780 100,956 3,364 8,704 32,396 487,957 8,164 658,321
--------------------- --------- ------- ---------- -------- -------- -------- ------- -------
Statement of Financial Position
at 31 March 2017 (unaudited)
(Unaudited) (Unaudited) (Audited)
---------------------------------
31 March 31 March 30 September
---------------------------------
2017 2016 2016
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ----------- ------------
Fixed assets
Investments held at fair
value through profit or
loss 751,819 547,275 661,405
--------------------------------- ----------- ----------- ------------
Current assets
Debtors 10,621 1,870 1,654
Cash at bank and in hand 16,850 4,170 18,196
--------------------------------- ----------- ----------- ------------
27,471 6,040 19,850
--------------------------------- ----------- ----------- ------------
Current liabilities
Creditors: amounts falling
due within one year (53,235) (31,110) (22,934)
Derivative financial instruments
held at fair value through - (132) -
profit or loss
--------------------------------- ----------- ----------- ------------
(53,235) (31,242) (22,934)
--------------------------------- ----------- ----------- ------------
Net current liabilities (25,764) (25,202) (3,084)
--------------------------------- ----------- ----------- ------------
Total assets less current
liabilities 726,055 522,073 658,321
--------------------------------- ----------- ----------- ------------
Net assets 726,055 522,073 658,321
--------------------------------- ----------- ----------- ------------
Capital and reserves
Called-up share capital
(note 6) 16,757 16,888 16,780
Share premium 100,956 100,956 100,956
Capital redemption reserve 3,387 3,256 3,364
Warrant exercise reserve 8,704 8,704 8,704
Share purchase reserve 31,575 35,357 32,396
Capital reserves 563,088 356,146 487,957
Revenue reserve 1,588 766 8,164
--------------------------------- ----------- ----------- ------------
Total equity shareholders'
funds 726,055 522,073 658,321
--------------------------------- ----------- ----------- ------------
Net asset value per share
(note 7) 433.28p 309.15p 392.33p
--------------------------------- ----------- ----------- ------------
Notes to the Accounts
1. Financial Statements
The information contained within the accounts in this half year
report has not been audited or reviewed by the Company's
independent auditors.
The figures and financial information for the year ended 30
September 2016 are extracted from the latest published accounts of
the Company and do not constitute statutory accounts for that year.
Those accounts have been delivered to the Registrar of Companies
and included the report of the auditors which was unqualified and
did not contain a statement under either section 498(2) or 498(3)
of the Companies Act 2006.
2. Accounting policies
Basis of accounting
The accounts have been prepared in accordance with United
Kingdom Generally Accepted Accounting Practice and with the
Statement of Recommend Practice "Financial Statements of Investment
Trust Companies and Venture Capital Trusts" issued by the
Association of Investment Companies in November 2014 and updated in
January 2017.
All of the Company's operations are of a continuing nature.
The accounting policies applied to these accounts are consistent
with those applied in the accounts for the year ended 30 September
2016.
3. Taxation
The Company's effective corporation tax rate is nil, as
deductible expenses exceed taxable income. The taxation charge
comprises irrecoverable overseas withholding tax on dividends
receivable, and overseas capital gains tax.
4. Return per share
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
----------------------------- ----------- ----------- ------------
Revenue return (GBP'000) 1,384 642 8,040
Capital return (GBP'000) 75,131 51,606 183,417
----------------------------- ----------- ----------- ------------
Total return (GBP'000) 76,515 52,248 191,457
----------------------------- ----------- ----------- ------------
Weighted average number
of Ordinary shares in issue
during the period 167,592,941 168,873,716 168,605,440
Revenue return per share 0.83p 0.38p 4.77p
Capital return per share 44.83p 30.56p 108.78p
----------------------------- ----------- ----------- ------------
Total return per share 45.66p 30.94p 113.55p
----------------------------- ----------- ----------- ------------
5. Dividends paid
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
GBP'000 GBP'000 GBP'000
------------------------- ----------- ----------- ------------
2016 final dividend paid
of 4.75p (2015: 4.20p) 7,960 7,101 7,101
------------------------- ----------- ----------- ------------
No interim dividend has been declared in respect of the six
months ended 31 March 2017 (2016: nil).
6. Called-up share capital
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
31 March 31 March 30 September
2017 2016 2016
--------------------------------- ----------- ----------- ------------
Ordinary shares of 10p each,
allotted, called-up and
fully paid:
Opening balance of shares
in issue 167,795,716 169,225,716 169,225,716
Shares repurchased and cancelled (225,000) (352,000) (1,430,000)
--------------------------------- ----------- ----------- ------------
Closing balance of shares
in issue 167,570,716 168,873,716 167,795,716
--------------------------------- ----------- ----------- ------------
7. Net asset value per share
Net asset value per share is calculated by dividing
shareholders' funds by the number of shares in issue at 31 March
2017 of 167,570,716 (31 March 2016: 168,873,716 and 30 September
2016: 167,795,716).
8. Financial instruments measured at fair value
The Company's financial instruments that are held at fair value
comprise its investment portfolio. At 31 March 2017, all
investments in the Company's portfolio were categorised as Level 1
in accordance with the criteria set out in paragraph 34.22
(amended) of FRS 102. That is, they are all valued using unadjusted
quoted prices in active markets for identical assets (31 March 2016
and 30 September 2016: same).
9. Events after the interim period that have not been reflected
in the financial statements for the interim period
The Directors have evaluated the period since the interim date
and have not noted any significant events which have not been
reflected in the financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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