Company Announcements

Annual Financial Report

Source: RNS
RNS Number : 4588I
Schroder AsiaPacific Fund PLC
14 December 2020
 

14 December 2020

 

ANNUAL REPORT AND ACCOUNTS

 

Schroder AsiaPacific Fund plc (the "Company") hereby submits its Annual Report for the year ended 30 September 2020 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 2020 are also being published in hard copy format and an electronic copy 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/4588I_1-2020-12-11.pdf

 

The Company has submitted its Annual Report and Accounts to the National Storage Mechanism and it will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

 

Enquiries:

 

Benjamin Hanley

Schroder Investment Management Limited 

Tel: 020 7658 3847

 

 

Chairman's Statement

 

Performance

 

In my final year as Chairman, I am pleased to report that the year to 30 September 2020 has delivered favourable shareholder returns. The Company's NAV produced a positive total return of 17.7%, outperforming the Benchmark's total return of 12.3% thereby maintaining the Company's record of long-term outperformance against the Benchmark. The share price also produced a positive total return of 19.7%.  

 

A more detailed comment on performance and investment policy may be found in the Manager's Review.

 

Revenue and dividend

 

The pandemic led some companies in the portfolio to cut their dividends, leading to a decrease in the Company's net revenue after taxation of 20.1%, from 9.90 pence per share to 7.92 pence per share.

 

The directors are proposing to distribute all the revenue as dividend, and, after a small transfer from revenue reserves, are recommending the payment of a final dividend of 8.00 pence per share for the year ended 30 September 2020. This represents a decrease of 17.5% over the 9.70 pence paid in respect of the previous financial year.

 

This dividend will be paid on 8 February 2021 to shareholders on the register on 29 December 2020 subject to approval by shareholders at the Annual General Meeting ("AGM") on 3 February 2021.

 

Gearing

 

During the year, the Company maintained its revolving credit facility. At the start of the year the Company was ungeared, with 2.4% net cash and ended the year slightly geared at 0.2%.

 

Discount management

 

The Board continues to follow a flexible strategy towards discount management. The average level of discount during the year under review was 10.7% in line with the Board's long-term target. 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.

 

A total of 650,000 shares were bought back for cancellation during the year under review. Since the year end, the discount has substantially narrowed, and, as at 9 December 2020, stood at 5.82%.

 

At the Company's last AGM, the Company was given the authority to purchase up to 14.99% of its issued share capital. We propose that share buyback authorities be renewed at the forthcoming AGM and that any shares so purchased be cancelled or held in treasury for potential reissue.

 

Portfolio manager succession

 

On 24 August 2020, the Company announced that Matthew Dobbs will retire from fund management in 2021. In accordance with a succession plan agreed with the Board, he will hand over responsibility of the Company's portfolio to Richard Sennitt as manager and Abbas Barkhordar as assistant manager.

 

Richard and Abbas will be assuming formal responsibility for the management of the Company's portfolio with effect from 31 March 2021.

 

The key to these appointments is the continuity of approach they will bring to the investment strategy with Richard having worked with Matthew on his Asian funds for the last 13 years. Abbas has worked at Schroders for 13 years, most recently on Schroders' Frontier Markets Fund.

 

Robin Parbrook, who has extensive Asian investment management experience, will assume investment oversight from 31 March 2021 and take the investment reporting line of Richard and Abbas. 

 

In managing the portfolio, Richard and Abbas will continue to draw upon Schroders' deep resources in Asia and the research team based across the region will continue to play an integral role. Research remains key to Schroders' investment process, and the portfolio managers will continue to work closely with a strong network of regional analysts and their fund management colleagues in 8 offices around the region.

 

Board succession

 

I am pleased to report that following a selection process led by the Senior Independent Director, Rosemary Morgan, the Board has accepted the Nomination Committee's recommendation that James Williams be appointed as Chairman of the Company following my retirement at the AGM. James will serve a maximum of five years and will bring continuity and experience to the position having served on the Board since 2014 and Chairman of the Management Engagement Committee since 2018.

 

Management fee

 

As part of its appraisal of the Manager, the Board has reviewed the management fees and agreed that with effect from 1 April 2021, the management fee will decrease to 0.75% per annum on the first £600 million of net assets and 0.70% per annum on net assets in excess of £600 million. The notice period shall be set at six months. The full details of the new arrangements are set out in the Directors' Report. The effect of the change is expected to generate a saving of around £400,000 per annum.

 

Continuation vote

 

The articles of association contain provisions which require the Board to put to shareholders a resolution at the AGM that the Company continue as an investment trust for a further five years.

 

Over the five year period ended 30 September 2020, the Company's NAV produced a total return of 16.8% per annum, outperforming the Benchmark's total return of 14.2% per annum, while our share price produced a total return of 17.7% per annum. In that period, the Company also joined the FTSE 250, and is the largest investment trust in its sector.

 

The Board believes that the Manager remains well qualified and suitable to manage the portfolio and to assist the Company in meeting its investment objective. The Board also believes that the Company remains well placed as an investment vehicle within its peer group, and that its long-term investment objectives remain appropriate and the structure beneficial to shareholders.

 

The Board therefore unanimously recommends that the Company continue as an investment trust, and the directors intend to vote their shares accordingly.

 

Environmental, Social and Governance issues ("ESG")

 

The issue of how investment managers deal with ESG issues is increasingly important to shareholders. During the year, the Board received presentations on the Managers' integration of ESG analysis into the investment process. The Board will continue to review ESG issues on a regular basis during portfolio reviews with the Manager. The Manager is also one of the Company's key outsourced service providers and the Board is pleased to note Schroders' commitment to being carbon neutral in 2020.

 

Outlook

 

This is the 25th anniversary of the launch of your company. The initial float was £140 million at £1.00 per share. Today, net assets exceed £1 billion and as at 9 December 2020 the share price was £6.09 per share. Since launch, the Company's NAV total return has outperformed the Company's Benchmark by 2.8% per annum (source: Morningstar).

 

The keys to this impressive performance have been a long term commitment to Asia and Schroders. The portfolio manager, Matthew Dobbs, his management team, the research resources in Asia and the support services in London have been first class. Matthew retires in 2021 and the Board wishes him a very happy retirement and looks forward to working with Richard and his team as above.

 

After a very hard year for financial markets, the Company is in good shape and is ready to take advantage of the opportunities in the region over the coming years. You, as shareholders, are participating in a region with outstanding prospects and with a team that is second to none.

 

You can look forward to 2021 with some investment optimism. The latest vaccine news is very encouraging but rollout will take time. 2022 and 2023 may be the years when life in Asia returns to normalcy.

 

I retire as your Chairman at the AGM. It has been a pleasure and privilege to serve and I would like to thank my colleagues, past and present, for their commitment, and to the team for their continuous support. I wish James all the best as your next Chairman, and look forward with confidence to the next 25 years for the Company.

 

AGM

 

The AGM will be held on Wednesday, 3 February 2021 at 12.00 noon. Owing to the continuing restrictions relating to meetings due to the COVID-19 pandemic, shareholders are asked to cast their votes by proxy. To ensure the safety and security of our shareholders, service providers, officers and guests, shareholders are asked to comply with Government requirements and guidelines relating to travelling and meetings. To mitigate the impact of shareholders not being able to meet the Board in person this year, shareholders are encouraged to engage during the webinar, or by post or email as detailed below.

 

The Manager will be presenting at a webinar on 3 February 2021 at 1.00 pm, to give shareholders the opportunity to hear from the portfolio manager, and to ask questions. Shareholders can also sign up using this link: https://feedback.duuzra.com/form/b919fdbb-8fe3-4919-b437-f7658f661622.

 

In addition, the Board would like shareholders to get in touch via the Company Secretary with any questions or comments, so that the Board can answer them in advance of the AGM. The Board will be providing answers to commonly asked questions on the Company's webpages, as well as the answers to questions received from shareholders 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 Company, 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/.

 

Nicholas Smith

Chairman

11 December 2020

 

 

Manager's Review

 

The net asset value per share of the Company recorded a total return of 17.7% over the twelve months to end September 2020. This was ahead of the performance of the Benchmark, the MSCI All Country Asia ex Japan Index, which was up 12.3% over the same period. (Source: Morningstar, net of fees).

 

Despite the global disruption of the COVID-19 pandemic, widely followed Asian equities recorded positive returns for the twelve months under review. This has been thanks to a robust recovery following sharp falls in the first quarter of 2020 as the potential implications of the virus sunk in.

 

While some of the rapid recovery was due to the effectiveness with which a number of regional authorities handled the crisis, the global monetary and fiscal response was also of material impact. Looser credit, led by the US Federal Reserve but mirrored by all the major monetary authorities, resulted in a rapid reversal in the spike in credit spreads. With widespread direct support for both consumers and companies (in Asia primarily focused upon Small/Medium sized Enterprises or SMEs), equities recovered strongly over the Summer, also supported by the weakness in the US dollar.

 

Although China has been at the epicentre of the pandemic, and has also faced mounting pressure from the United States across a range of contentious issues, its economic performance has been particularly notable. Despite relatively mild stimulus measures by global standards (but pretty comprehensive lockdowns), China has led the regional recovery as supply disruptions were speedily resolved, and end demand recovered the bulk of the previous collapse. However, reflecting the global picture, areas such as long-distance travel, entertainment and tourism have proved slower to revive.

 

The overall regional performance disguised a wide dispersion in performance between both countries and sectors. As can be seen in the chart on page 6 of the 2020 Annual Report, two markets were up over 25% in sterling terms, balanced by four down over 20%. The latter were all in ASEAN, and while there were easily identifiable negatives (collapse of tourism and political tension in Thailand, understandable lack of COVID-19 preparedness in Indonesia), much of the disparity can be put down to sectoral exposures. Heavy weightings towards banks, property, telecommunications and energy have hampered South East Asia, while higher exposure to technology and the "new economy" of e-commerce, online gaming, digital payments, social media, electronic vehicles and healthcare have supported China, Korea and Taiwan.

 

As has been evident elsewhere, in many respects the pandemic has accelerated many of the structural changes that have been evident over the last decade. Much of the success with which regional authorities have addressed the crisis have been facilitated by technology, which has also underpinned new ways of doing things, whether it be video conferencing, ordering online or using digital payments.

 

Performance and portfolio activity

 

The Company's performance has been strong versus the Benchmark over the year as a whole. Outperformance was particularly marked in the second half, thanks to strong stock selection, most notably in Singapore, Taiwan, China, Korea and Hong Kong. India was the only area of significant stock selection shortfalls as the bank holdings suffered due to fears of credit losses due to the disruption caused by COVID-19.

 

Country allocation has been less successful due to the overweight in Hong Kong and underweight in China. There was a partial offset from the minimal exposure to emerging ASEAN markets (apart from Vietnam) which performed very poorly.

 

The scale of market correction in the wake of the pandemic occasioned a flurry of activity in the Company, as a number of very attractive long-term opportunities emerged, primarily in the area of information technology, EV (electric vehicle) batteries, e-commerce and selected consumer cyclicals. These purchases were funded from financials, energy and real estate where we judged there to be less immediate upside. 

 

Outlook and Policy

 

The rate of earnings downgrades across the region has slowed recently, but there is still a lack of visibility on the timing of an end to global lockdowns and travel restrictions, and the likely path of the subsequent recovery in activity. This is especially the case now given secondary spikes in infections in several countries, though so far largely outside Asia itself. It is, therefore, no surprise that companies are providing limited guidance on their shorter-term outlooks and continue to plan conservatively. In our interaction with management teams, our focus has been on understanding what measures they are taking to deal with the crisis and how well placed they are to ride out the downturn - operationally and financially. For many companies, this year's earnings are likely to be something of a write-off, so it is important to focus on the longer-term prospects for our investee companies. As performance in the past few months has demonstrated, markets by and large are willing to look beyond this crisis, as long as there is scope for a healthy recovery next year to a more 'normalised' level of profitability.

 

Consequently, aggregate valuations for the region have risen to slightly above historic average levels. This is clearly already pricing in a measure of the recovery in earnings expected into 2021 and the upside for the 'lockdown winners'. There is scope for disappointment, but the ultra-low level of interest rates and bond yields around the world provides support to valuations.

 

Behind the aggregate valuation measures, there is a very wide spread of multiples. This means that valuations in some of the sectors with strong momentum this year - notably selected healthcare, e-commerce, online gaming, 5G equipment, electric vehicle-related and other popular China A-listed shares - are much more stretched. We are also seeing some signs of 'froth' emerging in the very strong flows and performance of new initial public offerings in Hong Kong and South Korea. This froth is also evident in the high levels of retail participation in these deals and in market trading more generally. Although not yet at worrying levels, this sort of optimism does leave markets more vulnerable to disappointment.

 

The obverse of this is that many companies in less "fashionable" sectors are offering great value. However, we must be very selective as some industries are facing severe, even existential, disruption; for example the portfolio has relatively little exposure to hydro-carbon energy and autos, and we continue to take a very selective approach in banks and real estate. Across all sectors we remain sensitive to the long-term sustainability of company business models, working closely with our local analysts and our Environmental, Social and Governance (ESG) team.

 

It has been something of a tradition over the last twenty-five years that these reviews have been coy of making shorter-term forecasts on the likely direction of markets. We have never pretended to have any particular edge in short-term market timing and in penning his last review this writer is not going to change the habits of a lifetime. However, we have passionately believed in the importance and utility of active management, based on the long-term assessment of company fundamentals focusing on quality, good governance, and sustainable business models that we believe under-recognised by the consensus.

 

I am first to acknowledge that much of this "edge" has been due to my knowledgeable, diligent and committed analyst colleagues on the ground in the region, complemented by the excellent global research resources in London including our Global Sector Specialists, the Data Insights Unit and the Sustainable Investment Team. I thank them all, and know that they will provide full support to my successor, Richard Sennitt, who is uniquely qualified to guide the Company through the many twists and turns that Asia will doubtless throw up in the years to come.

 

Matthew Dobbs

Schroder Investment Management Limited

11 December 2020

 

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 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 2020.

 

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.

 

Actions taken by the Board and, where appropriate, its committees, to manage and mitigate the Company's principal risks and uncertainties are set out in the table below.

 

Emerging risks and uncertainties

 

During the year, the Board also discussed and monitored a number of risks that could potentially impact the Company's ability to meet its strategic objectives. These were political risk, climate change risk and COVID-19-related risks. The Board has determined they are not currently material for the Company.

 

Political risk includes Brexit, trade wars and regional tensions. The Board believes that the Company's portfolio of equities in the Asia Pacific region shields the Company from Brexit-related risks. However, currency rates and borrowings drawn down by the Company may be affected by geopolitical developments. The Board is also mindful that changes to public policy in the US, UK, or in the Asia Pacific region, could impact the Company in the future.

 

Climate change risk includes how climate change could affect the Company's investments, and potentially shareholder returns. The Board notes the Manager has integrated ESG considerations, including climate change, into the investment process. The Board will continue to monitor this.

 

COVID-19 risk includes the impact on investment management and service providers, due to the uncertainty caused by the pandemic affecting the value of the Company's investments due to the disruption of supply chains and demand for products and services, increased costs and cash flow problems, and changed legal and regulatory requirements for companies. The Board notes the Manager's investment process is unaffected by the pandemic and it continues to focus on long-term company fundamentals and detailed analysis of current and future investments. COVID-19 also affected the Company's service providers, who implemented business continuity plans in line with government guidelines. All service providers continue to operate on a business as usual basis, despite the need to comply with government restrictions such as working from home.

 

*The "Change" column on the right highlights at a glance the Board's assessment of any increases or decreases in risk during the year after mitigation and management. The arrows show the risks as stable or increased.

 

Risk

Mitigation and management

Change*

Strategic

 

The requirements of investors change or develop in such a way as to diverge from the Company's investment objectives, resulting in a wide discount of the share price to NAV per share.

 

The appropriateness of the Company's investment remit is periodically reviewed and the success of the Company in meeting its stated objectives is monitored.

 

The share price relative to NAV per share is monitored and the use of buy back authorities is considered on a regular basis.

 

The marketing and distribution activity is actively reviewed. The Company engages proactively with investors.

 

è

The Company's cost base could become uncompetitive, particularly in light of open ended alternatives.

The ongoing competitiveness of all service provider fees is subject to periodic benchmarking against their competitors.

 

Annual consideration of management fee levels is undertaken.

 

è

Investment management

 

The Manager's investment strategy, if inappropriate, may result in the Company underperforming the market and/or peer group companies, leading to the Company and its objectives becoming unattractive to investors.

Review of: the Manager's compliance with its agreed investment restrictions, investment performance and risk against investment objectives and strategy; relative performance; the portfolio's risk profile; and whether appropriate strategies are employed to mitigate any negative impact of substantial changes in markets.

 

The Manager also reported on the impact of COVID-19 on the Company's portfolio, and the market generally.

 

Annual review of the ongoing suitability of the Manager.

 

Regular meetings with major shareholders to seek their views with respect to company matters, including the five-yearly continuation vote.

 

è

Financial and currency

 

The Company is exposed to the effect of market fluctuations due to the nature of its business. A significant fall in regional equity markets or a substantial currency fluctuation could have an adverse impact on the market value of the Company's investments.

The risk profile of the portfolio is considered and appropriate strategies to mitigate any negative impact of substantial changes in markets or currency are discussed with the Manager.

 

The Company has no formal policy of hedging currency risk but may use foreign currency borrowings or forward foreign currency contracts to limit exposure.

è

Custody

 

Safe custody of the Company's assets may be compromised through control failures by the depositary.

 

The depositary reports on the safe custody of the Company's assets, including cash and portfolio holdings which are independently reconciled with the Manager's records.

 

The review of audited internal controls reports covering custodial arrangements is undertaken.

 

An annual report from the depositary on its activities, including matters arising from custody operations is received.

è

Gearing and leverage

 

The Company utilises credit facilities. These arrangements increase the funds available for investment through borrowing. While this has the potential to enhance investment returns in rising markets, in falling markets the impact could be detrimental to performance.

 

Gearing is monitored and strict restrictions on borrowings are imposed: gearing continues to operate within pre-agreed limits so as not to exceed 20% of shareholders' funds.

 

è

Accounting, legal and regulatory

 

In order to continue to qualify as an investment trust, the Company must comply with the requirements of Section 1158 of the Corporation Tax Act 2010.

 

Breaches of the UK Listing Rules, the Companies Act or other regulations with which the Company is required to comply, could lead to a number of detrimental outcomes.

 

The confirmation of compliance with relevant laws and regulations by key service providers is reviewed.

 

Shareholder documents and announcements, including the annual report, are subject to stringent review processes.

 

Procedures are established to safeguard against the disclosure of inside information.

è

Service provider

 

The Company has no employees and has delegated certain functions to a number of service providers. Failure of controls and poor performance of any service provider, could lead to disruption, reputational damage or loss.

 

Service providers are appointed subject to due diligence processes and with clearly documented contractual arrangements detailing service expectations.

 

Regular reporting is provided by key service providers and monitoring 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. This included reporting on the arrangements for working during the COVID-19 pandemic lockdown.

 

Review of annual audited internal controls reports from key service providers, including confirmation of business continuity arrangements and IT controls is undertaken.

è

Cyber

 

The Company's service providers are all exposed to the risk of cyber attacks. Cyber attacks could lead to loss of personal or confidential information or disrupt operations.

Service providers report on cyber risk mitigation and management at least annually, which includes confirmation of business continuity capability in the event of a cyber attack.

 

In addition, the Board received presentations from the Manager, depositary and custodian, and the registrar on cyber risk, and the additional steps those companies were taking during the COVID-19 pandemic and the need for employees to work from home.

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Risk assessment and internal controls review by the Board

 

Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key service providers, and ensures regular communication of the results of monitoring by such providers to the audit and risk committee, including the incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the Company's performance or condition.

 

No significant control failings or weaknesses were identified from the audit and risk committee's ongoing risk assessment which has been in place throughout the financial year and up to the date of this report. The Board is satisfied that it has undertaken a detailed review of the risks facing the Company.

 

A full analysis of the financial risks facing the Company is set out in note 19 to the accounts on pages 49 to 54 of the 2020 Annual Report.

 

Viability statement

 

The directors have assessed the viability of the Company over a five year period, taking into account the Company's position at 30 September 2020 and the potential impact of the principal risks and uncertainties it faces for the review period including the impact of COVID-19. This is further detailed in the Chairman's Statement, Portfolio Managers' Review and

Emerging Risks sections of this report. The directors have assessed the Company's operational resilience and they are satisfied that the Company's outsourced service providers will continue to operate effectively, following the implementation of their business continuity plans as required by COVID-19.

 

The Board believes that a period of five years 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. In its assessment of the viability of the Company, the directors have considered each of the Company's principal risks and uncertainties detailed on pages 15 and 16 of the 2020 Annual Report and in particular the impact of a significant fall in regional equity markets on the value of the Company's investment portfolio. The directors have also considered the Company's income and expenditure projections and the fact that the Company's investments comprise readily realisable securities which can be sold to meet funding requirements if necessary. Whilst the Company's articles of association require that a proposal for the continuation of the Company be put forward at the Company's AGM, the directors have no reason to believe that

such a resolution will not be passed by shareholders.

 

Based on the Company's processes for monitoring operating costs, the Board's view that the Manager has the appropriate depth and quality of resource to achieve superior returns in the longer term, the portfolio risk profile, limits imposed on gearing, counterparty exposure, liquidity risk and financial controls, the directors have 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 five year period of their assessment.

 

Going concern

 

Having assessed the principal risks, including the impact of the COVID-19 pandemic 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, the directors consider it appropriate to adopt the going concern basis in preparing the accounts.

 

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 18 and 19 of the 2020 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 30 September 2020

 

 

 

 

 

2020

 

 

 

2019

 

 

Revenue

Capital

Total

Revenue

Capital

Total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Gains/(losses) on investments held at fair value through profit or loss

 

-

135,439

135,439

-

(738)

(738)

Gains on derivative contracts

 

-

766

766

-

2,137

2,137

Net foreign currency (losses)/gains

 

-

(1,085)

(1,085)

-

48

48

Income from investments

 

16,938

-

16,938

20,471

971

21,442

Other interest receivable and similar income

 

16

-

16

138

-

138

Gross return

 

16,954

135,120

152,074

20,609

2,418

23,027

Investment management fee

 

(1,629)

(4,885)

(6,514)

(1,596)

(4,789)

(6,385)

Administrative expenses

 

(1,102)

(10)

(1,112)

(1,069)

-

(1,069)

Net return/(loss) before finance costs and taxation

 

14,223

130,225

144,448

17,944

(2,371)

15,573

Finance costs

 

(22)

(65)

(87)

(78)

(232)

(310)

Net return/(loss) on ordinary activities before taxation

 

14,201

130,160

144,361

17,866

(2,603)

15,263

Taxation on ordinary activities

 

(948)

13

(935)

(1,276)

(525)

(1,801)

Net return/(loss) on ordinary activities after taxation

 

13,253

130,173

143,426

16,590

(3,128)

13,462

Return/(loss) per share

 

7.92p

77.75p

85.67p

9.90p

(1.87)p

8.03p

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 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 2020

 

 

Called-up

 

Capital

Warrant

Share

 

 

 

 

share

Share

redemption

exercise

purchase

Capital

Revenue

 

 

capital

premium

reserve

reserve

reserve

reserves

reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 30 September 2018

16,757

100,956

3,387

8,704

31,575

646,421

17,242

825,042

Repurchase and cancellation of the Company's own shares

(10)

-

10

-

(412)

-

-

(412)

Net (loss)/return on ordinary activities

-

-

-

-

-

(3,128)

16,590

13,462

Dividend paid in the year

-

-

-

-

-

-

(15,910)

(15,910)

At 30 September 2019

16,747

100,956

3,397

8,704

31,163

643,293

17,922

822,182

Repurchase and cancellation of the Company's own shares

(65)

-

65

-

(3,217)

-

-

(3,217)

Net return on ordinary activities

-

-

-

-

-

130,173

13,253

143,426

Dividend paid in the year

-

-

-

-

-

-

(16,245)

(16,245)

At 30 September 2020

16,682

100,956

3,462

8,704

27,946

773,466

14,930

946,146

 

 

Statement of Financial Position

at 30 September 2020

 

 

2020

2019

 

£'000

£'000

Fixed assets

 

 

Investments held at fair value through profit or loss

943,798

799,703

Current assets

 

 

Debtors

6,230

4,325

Cash at bank and in hand

10,009

19,438

Derivative financial instrument held at fair value through profit or loss

-

1,085

 

16,239

24,848

Current liabilities

 

 

Creditors: amounts falling due within one year

(13,891)

(2,316)

Derivative financial instrument held at fair value through profit or loss

-

(53)

Net current assets

2,348

22,479

Total assets less current liabilities

946,146

822,182

Net assets

946,146

822,182

Capital and reserves

 

 

Called-up share capital

16,682

16,747

Share premium

100,956

100,956

Capital redemption reserve

3,462

3,397

Warrant exercise reserve

8,704

8,704

Share purchase reserve

27,946

31,163

Capital reserves

773,466

643,293

Revenue reserve

14,930

17,922

Total equity shareholders' funds

946,146

822,182

Net asset value per share

567.16p

490.94p

 

 

Notes to the Accounts

 

1.       Accounting Policies

 

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 for 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.

 

The Company has not presented a statement of cash flows, as it is not required for an investment trust which meets certain conditions.

 

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 2019.

 

No significant judgements, estimates or assumptions have been required in the preparation of the accounts for the current or preceding financial years.

 

2.       Taxation on ordinary activities

 

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.

 

3.       Dividends

 

Dividends paid and proposed

 

 

2020

2019

 

£'000

£'000

2019 final dividend of 9.70p (2018: 9.50p) paid out of revenue profits

16,245

15,910

 

 

 

 

2020

2019

 

£'000

£'000

2020 final dividend proposed of 8.00p (2019: 9.70p) to be paid out of revenue profits

13,346

16,245

 

The proposed final dividend amounting to £13,346,000 (2019: £16,245,000) 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 £13,253,000 (2019: £16,590,000).

 

4.       Return/(loss) per share

 

 

2020

2019

 

£'000

£'000

Revenue return

13,253

16,590

Capital return/(loss)

130,173

(3,128)

Total return

143,426

13,462

Weighted average number of shares in issue during the year

167,417,847

167,491,812

Revenue return per share

7.92p

9.90p

Capital return/(loss) per share

77.75p

(1.87)p

Total return per share

85.67p

8.03p

 

 

5.       Called-up share capital

 

 

2020

2019

 

£'000

£'000

Ordinary shares allotted, called up and fully paid:

 

 

Ordinary shares of 10p each:

 

 

Opening balance of 167,470,716 (2019: 167,570,716) shares

16,747

16,757

Repurchase and cancellation of 650,000 (2019: 100,000) shares

(65)

(10)

Closing balance of 166,820,716 (2019: 167,470,716) shares

16,682

16,747

 

During the year, the Company made market purchases of 650,000 of its own shares, nominal value £65,000, for cancellation, representing 0.39% of the shares outstanding at the beginning of the year. The total consideration paid for these shares amounted to £3,217,000. The reason for these purchases was to seek to manage the volatility of the share price discount to NAV per share.

 

6.       Net asset value per share

 

 

2020

2019

Net assets attributable to shareholders (£'000)

946,146

822,182

Shares in issue at the year end

166,820,716

167,470,716

Net asset value per share

567.16p

490.94p

 

 

7.       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 41 and 1(g) on page 42 of the 2020 Annual Report.

 

At 30 September 2020, the Company's investment portfolio was categorised as follows:

 

 

2020

 

Level 1

Level 2

Level 3

Total

 

£'000

£'000

£'000

£'000

Investments in equities and equity linked securities

943,798

-

-

943,798

Total

943,798

-

-

943,798

 

 

 

2019

 

Level 1

Level 2

Level 3

Total

 

£'000

£'000

£'000

£'000

Investments in equities and equity linked securities

799,703

-

-

799,703

Derivative financial instruments - forward currency contracts

-

1,032

-

1,032

Total

799,703

1,032

-

800,735

 

There have been no transfers between Levels 1, 2 or 3 during the year (2019: nil).

 

8. Status of announcement

 

2019 Financial Information

 

The figures and financial information for 2019 are extracted from the published annual report and accounts for the year ended 30 September 2019 and do not constitute the statutory accounts for that year. The 2019 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.

 

2020 Financial Information

 

The figures and financial information for 2020 are extracted from the annual report and accounts for the year ended 30 September 2020 and do not constitute the statutory accounts for the year. The 2020 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 2020 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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