Interim / Quarterly Report • Sep 16, 2022
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
Half year report and accounts for the six months ended 30 June 2022
Schroder Asian Total Return Investment Company plc seeks to provide a high rate of total return through investment in equities and equity-related securities of companies trading in the Asia Pacific region (excluding Japan). The Company seeks to offer a degree of capital preservation through tactical use of derivative instruments.
The Company invests principally in a diversified portfolio of 40-70 companies operating primarily in Asia, including Australasia but excluding Japan. It is intended that the Company will have a bias to investing in small and mid cap companies.
Investments may be made in companies listed on the stock markets of countries located in the region and/or listed elsewhere but controlled from within the region and/or with a material exposure to the region. The Company will focus on investing in companies with sound balance sheets, professional management and capital allocation policies that are aligned with the interests of minority shareholders.
The use of derivatives to protect the capital value of the portfolio or for efficient portfolio management is fundamental to the strategy of the Company's portfolio managers. Such derivatives may include listed futures, call options, long puts, OTC instruments and instruments to hedge currency exposure with board approval. The board will monitor the effectiveness of the underlying process and the use of derivatives.
In order to obtain further exposure to equity indices or individual stocks, the Company may enter into contracts for difference where the underlying investments are not delivered and settlement is made in cash. In extreme circumstances, and subject to board approval, the majority, or even all, of the Company's assets could be held in cash or near cash instruments, with appropriate diversification of cash held on deposit.
The Company may use gearing to enhance performance but net gearing will not exceed 30% of net asset value.
The Company does not tie its portfolio construction to the constituents of any benchmark; instead, the size of stock positions are set on an absolute basis reflecting where the best potential risk adjusted returns are to be found.
| Financial Highlights and Long-Term | |
|---|---|
| Performance Record | 2 |
| Chairman's Statement | 3 |
| Portfolio Managers' Review | 4 |
| Half Year Report | 19 |
| Investment Portfolio | 20 |
| Income Statement | 22 |
| Statement of Changes in Equity | 23 |
| Statement of Financial Position | 24 |
| Cash Flow Statement | 25 |
| Notes to the Accounts | 26 |
| Directors and Advisers | back cover |
| Total returns to 30 June 20221 | 6 months % |
1 year % |
3 years % |
5 years % |
10 years % |
|---|---|---|---|---|---|
| NAV per share2 | (16.4) | (15.1) | 20.9 | 44.4 | 175.4 |
| Share price3 | (18.7) | (18.0) | 15.7 | 41.2 | 197.5 |
| Reference Index4 | (5.9) | (12.8) | 11.6 | 25.8 | 109.8 |
| Peer Group NAV per share2,5 | (8.5) | (10.3) | 29.3 | 48.7 | 180.7 |
1 Total returns represent the combined effect of any dividends paid, together with the rise or fall in the share price or NAV per share. Total return statistics enable the investor to make performance comparisons between investment companies with different dividend policies. Any dividends received by a shareholder are assumed to have been reinvested in either additional shares of the Company at the time the shares were quoted ex-dividend (to calculate the share price total return) or in the assets of the Company at its NAV per share (to calculate the NAV per share total return).
2 Source: Morningstar. Fully diluted NAVs have been used where applicable.
3 Source: Morningstar.
4 Source: Thomson Reuters. With effect from 15 March 2013, the Reference Index has been the MSCI AC Asia Pacific ex-Japan Index (with net income reinvested), sterling adjusted. Prior to that date, it was the MSCI AC Asia ex-Japan Index (with gross income reinvested), sterling adjusted.
5 Source: Morningstar.The arithmetic average of a group of nine comparable Asia (excluding Japan) investment trusts (the "Peer Group").
| 30 June 2022 |
31 December 2021 |
% Change | |
|---|---|---|---|
| NAV per share (pence) | 416.45 | 507.24 | (17.9) |
| Share price (pence) | 403.50 | 506.00 | (20.3) |
| Share price discount to NAV per share (%) | (3.1) | (0.2) | |
| Gearing (%)1 | 9.9 | 8.3 |
1 Borrowings used for investment purposes less cash, expressed as a percentage of net assets.
The first six months of the year produced poor performance from both Asian markets and the Company. Following the unexpected Russian invasion of Ukraine the deteriorating outlook for the global economy significantly impacted Asian stock markets and the Company's relatively large holdings in global
leaders of the technology and semiconductor sectors were particularly hard hit. The Company produced a NAV total return of -16.4%, well behind the -5.9% return from the Reference index.
The share price total return of -18.7% was impacted by the adverse investor sentiment affecting Asian stock markets and the discount to NAV widened from 0.2% at the beginning of the period to 3.1% at the end. The peer group average discount to NAV also widened and ended the period at 10.7%. The peer group average NAV total return for the period under review was -8.5%.
This short term performance, while disappointing, should be viewed in the wider context of long term performance, which remains well ahead of the Reference index and performance has improved since the end of the period. Over the period 1 July to 14 September, the NAV increased by 6.1%, outperforming the Reference index which returned 1.1%.
Further details on the market and portfolio performance may be found in the Portfolio Managers' Review.
The share price traded slightly below net asset value for much of the period, with an average discount of approximately 2.5%. In response, the board utilised its authority to buy back shares to assist discount management and a total of 443,000 shares were purchased during the period and held in treasury for possible re-issue at a future date. Since the end of the period, the Company has continued to utilise its buy back authorities and has purchased a further 1,334,725 shares, which are also being held in treasury.
The Portfolio Managers continued to utilise gearing with average gearing at 9.9% over the period under review. This gearing should continue to be viewed in the context of the use of derivatives, in this case the sale of Taiwanese futures as part of the overall strategy of our Portfolio Managers. The board maintains oversight of the use of gearing and renewed its £50m revolving credit facility at the start of July 2022.
Concern over slowing global economic growth, rising inflation, tight labour markets and high commodity prices continues to overhang the outlook for corporate earnings. In addition, China's zero tolerance covid policy has detrimentally impacted economic activity in the region. However, Asian equity valuations are increasingly attractive and we have confidence that the considerable investment experience of our portfolio managers, supported by an extensive team of Asian based research analysts, makes them well positioned to find the most attractive stock selection opportunities across the region.
Chairman
15 September 2022
The first half of 2022 was a very difficult period for both the Company and Asian stock markets. The Company's NAV fell sharply as many of the company's holdings dropped given fears over the deteriorating outlook for the global economy following Russia's invasion of the Ukraine, and the subsequent impact this has had on energy and food prices, inflation and consumer confidence. The Company has significant positions in best-in-class global leaders listed in Asia such as TSMC (semiconductors), Samsung Electronics (memory chips), Techtronics (power tools), Mediatek (smartphone chipsets) and these stocks in particular pulled back sharply as concerns over global growth rose. This meant the Company materially underperformed the reference benchmark (MSCI AC Asia Pacific ex Japan) over the first half of the year with the Net Asset Value (NAV) falling 16.4% in total return terms. It has been one of the most difficult periods for performance your fund managers have endured in their combined 55 years of investment experience.
Looking into Asian stockmarkets in more detail it was the technology and export heavy Taiwanese and Korean markets that performed worst, dropping 16% and 20% respectively over the first half (in sterling terms). The falls were led by technology stocks where worries over falling consumer demand and rising inventories caused a large pull back. We trimmed the Company's technology positions slightly at the beginning of the year but decided not to sell further given attractive long-term valuations and a secular growth story that remains in our view unchanged as outlined in the outlook section below. Short-term this has proved painful.
Of the other major markets Australia and China fell around 10% in local currency terms in the first half, which meant in GBP terms they were only down slightly given how weak sterling was over the period. Within China we saw quite volatile performances. Technology and internet stocks in particular were initially very weak but then rebounded strongly in May and June on hopes that regulatory pressures were easing and the Chinese economy was set to improve on back of economic stimulus and falling Covid-19 case numbers. As we outline in the Outlook section below we are cautious on the Chinese outlook both for the economy and stockmarket. The Company continues to have around 12- 15% of it's assets in stocks classified as China stocks but this is substantially below the Company's reference benchmark (MSCI AC Asia Pacific ex Japan) weighting in Chinese stocks.
The best performing stockmarket over the first half was Indonesia where market sentiment was helped by rising commodity prices given the Indonesian economy remains quite commodity dependant. The Thai and Hong Kong stockmarket indices also performed relatively well
as both indices have large weightings in banks and defensive utility stocks which helped their performance.
Looking in more detail at the Company's performance over the period it was primarily the technology exposures that led to the falls in NAV. The falls across the sector were broad based and affected all our technology exposures whether they were Korean, Taiwanese or Indian software companies. The company was also hurt by falls in some of export related names like Nien Made (window blinds), Merida (bicycles), Shenzhou (textiles). We should highlight when we are referring to technology stocks we specifically mean semiconductor and software names not internet stocks. The Company does have some exposure to internet names like Tencent, JD.com and SEA but this is not that large and was not a key contributor to the underperformance.
On the positive side our resource exposure in Australia via BHP, Rio Tinto and Incitec Pivot did relatively well, as did our exposure to ASEAN banks via DBS Bank in Singapore and Bank Mandiri in Indonesia. Unfortunately the positives were nowhere near large enough to offset the weakness of our technology and export related stocks. The Company also maintain a relatively low weighting in some of the "hot" sectors like electric vehicles (EV) and solar plays in China where valuations are like expectations very high. In the EV and battery sector in particular we are worried about oversupply and irrational competition.
It was quite an active period for the Company. Given the deteriorating geopolitical and economic backdrop we have spent significant time working with the Schroders research team in Asia to stress test our holdings, going over investment thesis again and doing worse case (or bear case) fair values. This has involved a closer look at balance sheets, cash flows, qualitative assessments of management and an assessment of the risk of geopolitics undermining the investment case. The result of our work was to exit around 12 of the company's holdings – these were mostly in China, Hong Kong and the technology and internet sectors. We added three new names in Australia which we felt were oversold on economic growth concerns – all are industrial companies with a global footprint. Elsewhere the company increased its exposure selectively to financials, and as we switched and consolidated our technology exposure we added to some of our existing technology positions in Taiwan.
The Company was slightly geared on a net basis over the period (the overall geared (debt) position is mostly offset by the sale of Taiwanese index futures). The models we use to determine whether to deploy capital preservation strategies within the company did not work over the period. The long-term strategic models which are based around long-term valuations had moved to a positive position at the end of 2021 (Asian stockmarkets were mostly weak in 2021 and earnings strong), and our tactical (short term) models were neutral. Given the high
cost of deploying capital preservation strategies (use of options) we did not have any cover in place by end of February. Qualitatively your fund managers both started the year reasonably positive, neither the models nor us foresaw the dreadful situation in Ukraine and the further escalation in US-China tensions.
Finishing on a more positive note we believe the Company's stocks are well positioned to weather what we expect could be a tough period for both the global economy and stockmarkets, and we see substantial bottom-up value in Asia stockmarkets for long term investors as we outline in the Outlook section below.
As we write at mid-year 2022 it is clear macro events are likely to have a big bearing on Asian stockmarkets and most of these events are ones we have no real insight on. Will the "zero-Covid" policy in China lead to new and extensive lockdowns and will the Ukraine-Russia war escalate or remain prolonged? Will the consumer in Europe and USA remain resilient (given tight labour markets), despite high oil prices and rising food costs and will China- US tensions over Taiwan and more generally escalate leading to a full-blown trade/cold war?
We really don't know answers to any of these questions. Predicting "black swan" events and endlessly discussing tail risks is, we believe, pretty futile. So instead, your fund managers will try in this report to look through the current maelstrom of economic and geopolitical noise to
discuss where we see the best long-term investment opportunities in Asian stockmarkets, particularly given the big correction in valuations over the last 12 months. This topic could cover a lot of ground and we wrote extensively in the 2021 annual report about the secular trends in the region (available on the company website) so we will aim to keep this relatively short and mostly in chart format.
As mentioned above it has been a difficult period for Asian stockmarkets – as Chart 1 shows the MSCI AC Asia ex Japan index is now back to pre-Covid-19 levels and to similar index levels to five years ago. With broad based foreign investor selling pressure hitting nearly all Asian stockmarkets, a general sense of investor gloom and continuous broker downgrades of many stocks it does feel like we are at a capitulation level in the region. Whether we face a final leg down to the despair level in Chart 1 probably depends on the maelstrom of unpredictable events mentioned above. What we can say however is there is a lot of fear in markets so whilst we might not want to be greedy, our appetites are rising – and in particular using another Buffet maxim, we are now seeing opportunities to "buy a wonderful company at a fair price". This was opposed to 18 months ago when we were often looking at buying "a fair company at a wonderful price".
Chart 2 has two of the valuation indicators we use in the Schroder Asian Total Return Investment Company's hedging process and also as part of our decision making on deploying gearing. As can be seen, the top-down
indicator has now moved into the cheap zone (but not oversold). Meanwhile, our bottom-up indicator (percentage of Asian stocks with upside to our analyst's fair value) is almost touching the BUY level of c.70%. Both indicators have historically been good predictors of 18 month forward returns.
Chart 3 has a more detailed breakdown by sector in Asia. The black spot shows current Price/Earnings (P/E) levels of the various Asian sectors vs peak to trough trends.
What is interesting is most sectors are now cheap/fair vs history. This contrasts with 18 months ago when nearly all sectors other than the out of favour "value" areas (banks, insurance, property etc… ) were expensive. This ties in with Chart 4 where we can see stocks classified as "growth" and "value" by MSCI have now fully mean reverted back to their pre-Covid levels. We have never been too concerned by the classification of stocks we invest in as growth vs value as we want to buy stocks offering us the best long-term sustainable total returns,
but typically we do have a quality and mild growth bias in the company (we don't own value traps like state owned banks and insurers, or utilities with uncertain regulatory frameworks etc… ). At the current time, given the size of the correction, we see the best opportunities in stocks typically classified as more "growth" businesses.
Given the weakness in Chinese stockmarkets over the last 12 months many shareholders have asked why we have not added to our exposure to China. Whilst we would
fully accept there is scope for a short-term rebound in Chinese markets given the extent of the sell-off and negative sentiment, we remain structurally cautious on Chinese equities. This is due to multiple factors. These include more short-term cyclical ones like the weak housing market, continued adherence to "zero Covid" policies, slowdown in exports as global demand for manufactured goods slows or more serious structural factors. The latter include the increasing role of the state in the economy, challenging demographics, elevated debt levels and macroeconomic risks, or geopolitical tensions
and commercial cold wars. Chart 5, which we have borrowed from our colleague Toby Hudson, has a good summary of the Chinese headwinds over the last 18 months. The key point here is whilst some are cyclical, others appear more structural and thus have made Chinese stockmarkets materially less attractive to investors.
Interestingly the country models we use in the Company's process for hedging have also turned more cautious on China despite the market falls. This is
because of the deterioration in both the earnings outlook and the cyclical business factors the model picks up. Perhaps a few more charts help highlight the extent of the near-term economic headwinds. Chart 6 has the official growth and Chinese activity index which are now at a 30-year low. Charts 7,8 and 9, show retail sales and travel, and demonstrate just how weak the economy really is. Clearly this is backward looking but a continued adherence to a "zero-Covid" policy will be likely to make
any consumer recovery muted and, if we have further lockdowns, very stop-start. We expect significant earnings downgrades to come – Chinese equities are almost certainly not as cheap as they optically appear.
But surely China can just pump things up and get the economy moving again? We would caution on this thesis. As Chart 10 shows Chinese property may be slowing but it is from a very elevated level (property sales and starts
are double pre-GFC levels). This is happening at a time when Chinese demographics have turned much less favourable with the workforce now shrinking. Indeed, Goldman Sachs' Jon Ennis is now forecasting a 15% decline in births in China in 2021, which follows an 18% decline in 2020 overall, he expects new births in China in 2023 will be 40% below the level of 2016. A recent study
published by the Lancet predicts that China's population could half by 2100. None of this looks structurally good for a sector that comprises c.20-25% of Chinese GDP.
Half year report and accounts for the six months ended 30 June 2022 9
Chart 10: The Chinese property sector has potentially a long way to fall
Given the weak domestic picture we want to buy stocks when they are genuinely cheap and once the more difficult earnings outlook is fully discounted. In light of the current backdrop we are still not convinced we are there. The better managed consumer, industrial and domestic stocks in China have actually held up reasonably well as fund managers hide in the increasingly small pockets of the market that aren't officially state-owned enterprises (SOEs). The same applies to those companies being regulated such that they become quasi SOEs, which is what we worry is happening in the technology and internet space in China as founders get replaced and Chinese Communist Party Committees play a more prominent role in decision making at companies.
Source: CEIC, Emerging Advisors Group, May 2022
| Company Name | Founder | Current position |
|---|---|---|
| Alibaba | Jack Ma | Stepped down as CEO, Chairman and has left board |
| JD.COM | Richard Liu | Stepped down as CEO, now Chairman |
| Tencent | Pony Ma | Still CEO and Chairman |
| Baidu | Robin Li | Still CEO and Chairman |
| Bytedance (Tik Tok) | Zhang Yiming | Stepped down as CEO and Chairman |
| Kuashiou | Su Hua | Stepped down as CEO, now Chairman |
| Meituan | Wang Xing | Still CEO and Chairman |
| Pinduoduo | Colin Huang | Stepped down as CEO and Chairman |
| Courses Company Cohrecters, Anall 3033. |
The Company does not invest in official SOEs or quasi SOEs (stocks heavily state "influenced") given our views on state owned capitalism. We also don't invest in stocks in sectors facing structural challenges (disruption, regulation, demographics) or ESG headwinds – this removes a significant part of the MSCI China index (by market cap) from our investment universe. Instead, we have a relatively short list of Chinese stocks which we believe still have good long term growth options – some of which we currently own, and others which we have on a watchlist to add to if they fall to levels which offer enough upside to our fair values.
So where do we see the best opportunities in Asia? Chart 12 has the current country, sector allocation for the Schroder Asian Total Return Investment Company. As can be seen technology remains a key position in the company. This is slightly deceptive – as what constitutes a technology company? Nearly all companies we meet claim they have technology or an edge based on technology – do Techtronics, which makes the world's best battery power tools, or Merida which makes, and part owns, cutting edge/high end e-bikes via Specialised count as technology? We would say they do, but MSCI classifies them as industrial and consumer discretionary respectively. Whereas plenty of 'basic box' assemblers of PCs and servers get classified as technology stocks.
| Sector/Country (%) | Australia | China | Hong Kong | India Indonesia Korea | Malaysia Philippines Singapore Taiwan Thailand | United Kingdom |
United States |
France | Vietnam | Cash & Others |
Grand Total |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Communication Services | 1.4 | 4.2 | 0.9 | 2.8 | 9.2 | ||||||||||||
| Consumer Discretionary | 1.8 | 5.5 | 0.1 | 2.7 | 3.4 | 1.4 | 1.7 | 16.5 | |||||||||
| Consumer Staples | 1.0 | 1.0 | |||||||||||||||
| Energy | 0.5 | 0.5 | |||||||||||||||
| Financials | 1.6 | 2.8 | 3.9 | 1.9 | 4.8 | 14.9 | |||||||||||
| Banks | 3.9 | 1.9 | 3.1 | 8.8 | |||||||||||||
| Diversified Financials | 1.8 | 1.8 | |||||||||||||||
| Insurance | 1.6 | 2.8 | 4.4 | ||||||||||||||
| Healthcare | 5.7 | 1.5 | 7.3 | ||||||||||||||
| Industrials | 2.4 | 2.7 | 0.9 | 3.8 | 9.8 | ||||||||||||
| Information Technology | 1.0 | 0.7 | 6.1 | 9.7 | 1.6 | 17.4 | 36.5 | ||||||||||
| Materials | 5.7 | 1.3 | 7.1 | ||||||||||||||
| Real Estate | 2.1 | 2.1 | |||||||||||||||
| Utilities | |||||||||||||||||
| Cash | $-7.6$ | $-7.6$ | |||||||||||||||
| Derivatives | $-5.6$ | 5.6 | $\sim$ | ||||||||||||||
| Collective Investments | 2.7 | 2.7 | |||||||||||||||
| Grand Total | 19.1 | 10.7 | 8.4 | 15.1 | 1.9 | 9.7 | $\overline{a}$ | 3.5 | 9.2 | 19.0 | 1,4 | 1.3 | $\overline{a}$ | 1.7 | 1.0 | $-2.0$ | 100.0 |
| Fund Positioning in % | Stocks (%) | Hedges (%) | Net Long (%) | ||||||||||||||
| Strategic hedges - Notional | $\sim$ | ||||||||||||||||
| Tactical hedges - Notional | $-5.6$ | ||||||||||||||||
| Total Exposure - Notional | 107.5 | $-5.6$ | 101.9 | ||||||||||||||
| Strategic hedges - Delta-adjusted | $\sim$ | ||||||||||||||||
| Tactical hedges - Delta-adjusted | $-5.6$ | ||||||||||||||||
| Total Exposure - Delta-adjusted | 107.5 | $-5.6$ | 101.9 | ||||||||||||||
| Cash | $-7.5$ |
So instead, it is best to look at where we have large exposures in the portfolio. Our principal exposures within technology are Taiwan semiconductors (both foundries and chip designers) and Korean memory chip makers, and Indian IT software and services. This is the part of the technology sector in Asia where we view there is real intellectual property or "IP" and where we expect to see both the strongest growth and most importantly highest returns on capital through the cycle. Technology hardware equipment and assembly we view as manufacturing with often relatively low IP. When we look at parts of the battery and solar industries – the current "hot" tech sectors – we view many of the Asian stocks as hardware assemblers rather than long term high return businesses which is why we remain relatively cautious on these sectors.
Most of our technology holdings have seen significant corrections year to date and as discussed in the
performance section it is these holdings that have proved most painful for short term fund performance. With hindsight we clearly should have taken some profits during the strong run at the end of 2021. Though as Chart 13 shows, Asian technology stocks never really rerated, in particular to the levels we saw in the US technology sector. Whilst we would accept downgrades to earnings forecasts are likely as clearly consumer technology demand (PCs, Smartphones, TV etc… ) is set to weaken, we remain positive on long-term trends regarding semiconductor usage (electric vehicles, high performance computers, digitisation of business, IoT, smart grids, automation etc). Nearly all the secular trends we look at involve the increased use of semiconductors and software. The long-term secular story has not changed even if the short-term headwinds from the consumer side do look worse than we anticipated six months ago.
And what of valuations? As Chart 14 shows, we are now discounting a significant semiconductor downturn, and our key Asian semiconductor stocks are on single digit
PERs and high dividend yields. Stocks we think are anticipating a significant short-term drop in demand and thus earnings.
| Cycle # | SOX P-to-T | Duration | EPS FY1 P-to-T | Duration |
|---|---|---|---|---|
| 2001-2002 | $-80%$ | 35 months | $-81%$ | 15 months |
| 2006-2007 | $-30%$ | 6 months | $-24%$ | 11 months |
| 2008-2009 | $-57%$ | 6 months | $-90%$ | 12 months |
| 2011-2012 | $-26%$ | 6 months | $-25%$ | 10 months |
| 2015-2016 | $-23%$ | 3 months | $-17%$ | 10 months |
| 2018 | $-23%$ | 9 months | $-14%$ | 10 months |
| Performance from | PE(X) | EPS Gr (%) | Yield $(\%)$ | ROE | ||
|---|---|---|---|---|---|---|
| recent high^(%) | 22E | 23E | 22E | 12M | T12M* | |
| TSMC | $-25.0$ | 13.8 | 13.3 | 48.2 | 2.2 | 29.7 |
| Realtek | $-43.0$ | 9.9 | 10.8 | $-2.5$ | 7.8 | 49.3 |
| Novatek | $-59.2$ | 5.6 | 9.1 | $-32.8$ | 19.8 | 70.4 |
| Mediatek | $-40.4$ | 8.7 | 9.4 | 4.3 | 10.5 | 27.7 |
| Samsung Electronics | $-33.2$ | 9.5 | 9.8 | 0.6 | 2.4 | 13.9 |
| LG Electronics | $-49.2$ | 6.9 | 6.2 | 117.1 | 0.9 | 13.3 |
And what of the supply side? Much has been written about the potential large increase in supply of foundry capacity in particular in China. Recent industry developments actually make us more relaxed. Tightening on rules on semiconductor equipment supply to China will make it more difficult for China to compete outside legacy nodes (i.e. less advanced semiconductors). It is also the case that China, even after c.25 years of state sponsorship to build a semiconductor industry, remains a distant player (Chart 15). This is a difficult industry. Korean and Taiwanese players with years of accumulated R&D, strong relationships with customers and equipment suppliers and education systems geared towards the sector have built strong barriers to entry (Chart 15). As
Chart 16 from Goldman Sachs shows they do not expect any great movement in market share in the foundry industry over the coming years (and Goldman Sachs are normally bullish on China). It will also be increasingly difficult for China to buy foreign Intellectual Property (M&A in the sector now almost impossible) or foreign talent (due to Covid-19 policies and increasing rules and pressures in Korea and Taiwan to restrict high tech engineers working in China). We will watch closely as clearly this is a strategic priority for the CCP but the barriers to growing a homegrown cutting edge semiconductor industry have become higher due to geopolitics.
-* TSMC's foundry market share is on the rise
One area of technology we have been looking to add to into the current sector weakness is Indian IT companies. Share prices have been weak due to margin worries as staff shortages and rising salaries have led to disappointing margins despite strong revenues and rising order backlogs. As Chart 17 shows demand has remained
resilient as globally companies continue to invest in digitalisation and the move to the public cloud. If global growth concerns lead to a further sell off we may add further to our position here given the long-term trends and competitive positioning of the best Indian IT service companies are favourable.
In general, we would like to add more to India whether that be consumer stocks, Indian private sector banks or potentially some of the internet names. As we discussed in the 'Year of the Tiger' report whilst we have qualms about Mr Modi, some of his policies and reforms should raise the potential growth rate of the country. India is also likely to benefit both at a foreign direct investment level (FDI) as capacity moves out of China and potentially at a portfolio level as Asian and emerging market funds look to reduce China exposure. Our caution to add to date to Indian exposure has primarily been based on high valuations combined with unrealistic earnings expectations – if we do however see corrections we would expect to add to our Indian weightings.
The other market where we have added to in the current weakness is Australia. Whilst the overall market has held
up reasonably well this has masked some very divergent performances. Resources and financials which comprise around 60% of the MSCI Australian index have done relatively well – whilst some of the internet, healthcare and overseas (mostly US) exposed names have come off sharply. Names we are looking to accumulate on weakness are on-line recruitment business Seek and James Hardie (building materials). Both are now back to pre-Covid levels (Chart 18) despite the fact the outlook for their business both from a competitive position and longterm market demand angle look better than pre-Covid-19 in our view. We also are monitoring names like REA Group and some of the healthcare names in Australia which, whilst not cheap, if markets remain weak may give us that opportunity to buy that "wonderful business at a fair price".
-!""
-"--
And what of the ASEAN 4? Thailand, Malaysia, Indonesia and the Philippines have been markets that have serially disappointed for 25 years. As Chart 19 shows, they are now almost a rounding error in the benchmark. This is a shame as they are the countries often most enjoyable for any fund manager to visit – great food, nice people, wonderful service and usually a more relaxed approach to life.
-!""
-#
-!--
Why have the 'ASEAN 4' disappointed? This is mostly due to institutional failure – or the fact they are perhaps suffering from the middle-income trap. As Chart 20 shows, all are now struggling to grow faster per capita than the USA. Building roads and basic infrastructure only gets you so far. The ASEAN countries suffer from poor educational attainment (Chart 21), low levels of corporate investment due perhaps to corruption and crony capitalism (Chart 22) – meaning we tend to have neither a vibrant economy or stockmarket (Chart 23).
| 1967 | 1980 | 1990 | 2000 | 2010 | 2020 | |
|---|---|---|---|---|---|---|
| China | 97 | 195 | 318 | 959 | 4,550 | 10,435 |
| Korea | 161 | 1.715 | 6,610 | 12,257 | 23,087 | 31,631 |
| ASEAN 4 | 122 | 649 | 900 | 1,248 | 3,617 | 4,654 |
| Indonesia ۰ |
54 | 492 | 585 | 780 | 3,122 | 3870 |
| Thailand ۰ |
167 | 683 | 1,509 | 2,008 | 5,076 | 7,187 |
| Malaysia ٠ |
317 | 1,775 | 2,442 | 4,044 | 9,041 | 10,412 |
| Philippines ۰ |
235 | 778 | 816 | 1,073 | 2,217 | 3,299 |
| % US GDP per Capita | ||||||
| Indonesia ۰ |
1.2% | 3.9% | 2.4% | 2.1% | 6.4% | 6.1% |
| Thailand ۰ |
3.8% | 5.4% | 6.3% | 5.5% | 10.5% | 11.3% |
| Malaysia ۰ |
7.3% | 14.1% | 10.2% | 11.1% | 18.7% | 16.4% |
| Philippines ٠ |
5.4% | 6.2% | 3.4% | 3.0% | 4.6% | 5.2% |
-\$-%
-#
-!--
& -'( )
-#
-!-*- -\$-%
-#
-!-
& -\$-%
-#
-!-*- -) +
-#
-!--
-!""
-#
-!--
Having provided all this negative commentary, we should highlight all is not bad in ASEAN stockmarkets. The ASEAN countries look much less vulnerable to macroeconomic headwinds than they have historically, with relatively low debt levels (especially short-term US\$ debt) and they run current account surpluses. There are also some good, well-run business in ASEAN. Our problem has always been valuations as investors have tended to view the region as high growth when it clearly is not (also scarcity value in ASEAN has meant good business are often pricey). We have several ASEAN consumer names we would like to add to the portfolio, and we will monitor for opportunities to pick up the best names in ASEAN if falls continue.
Overall, we now see some good opportunities in Asian stockmarkets and we are optimistic the Company should make money over the next 12 months – assuming we avoid black swan events and global recession. Valuations are increasingly attractive and reflect in many cases a fairly pessimistic outlook for earnings. China, whilst we are structurally cautious, clearly has the possibility for a short term rebound if Covid policies are relaxed, reformed or successful. However, we believe the best opportunities in Asia in the current sell-off are to pick up best in class businesses/global leaders in Taiwan, Korea and Australia. We also hope further corrections will provide an opportunity to add to Indian and perhaps ASEAN consumer stocks where valuations have, we
believe, historically been set too high on unrealistic earnings expectations.
Robin Parbrook and Lee King Fuei 15 September 2022
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.
The principal risks and uncertainties with the Company's business fall into the following categories: strategic risk; investment management risk; custody risk; financial and currency risk; gearing and leverage risk; accounting, legal and regulatory risk; service provider risk; and cyber risk. A detailed explanation of the risks and uncertainties in each of these categories can be found on pages 43 to 45 of the Company's published annual report and accounts for the year ended 31 December 2021.
These risks and uncertainties have not materially changed during the six months ended 30 June 2022.
However, the board undertook a review of principal and emerging risks for the Company while reviewing these accounts. The directors noted that geopolitical risk and climate change risk continued to develop. In particular, for geopolitical risk, the war in Ukraine was affecting political relationships, supply chains and inflation. In addition, sanctions against individuals and companies, for various reasons, are increasing. There is increasing awareness of the potential effects of climate change on company returns and also the increased risk of cyber attacks. These developments will continue to be monitored and reported on in the next annual report as appropriate.
Having assessed the principal risks and uncertainties, and the other matters discussed in connection with the viability statement as set out on page 46 of the published annual report and accounts for the year ended 31 December 2021, the directors consider it appropriate to adopt the going concern basis in preparing the accounts.
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 30 June 2022.
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 Trust Companies and Venture Capital Trusts" issued in April 2021 and that this half year 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.
Investments are classified by the investment manager in the country of their main business operations. Stocks in bold are the 20 largest exposures to companies, which by value account for 54.4% (30 June 2021: 56.5% and 31 December 2021: 55.5%) of total investments and derivative financial instruments.
| £'000 | % | |
|---|---|---|
| TAIWAN | ||
| Taiwan Semiconductor | ||
| Manufacturing | 40,535 | 8.2 |
| Voltronic Power Technology | 12,133 | 2.5 |
| Mediatek | 11,394 | 2.3 |
| Merida Industry | 7,485 | 1.5 |
| Nien Made Enterprise | 6,954 | 1.4 |
| Advantech | 6,820 | 1.4 |
| Chroma ATE | 6,007 | 1.2 |
| Novatak Microelectronics | 5,051 | 1.0 |
| Sporton International | 4,785 | 1.0 |
| ASE Technology | 3,421 | 0.7 |
| Getac Technology | 3,165 | 0.6 |
| United Micro Electronics | 2,831 | 0.6 |
| Realtek Semiconductor | 1,850 | 0.4 |
| Vanguard International Semiconductor |
174 | – |
| TOTAL TAIWAN | 112,605 | 22.8 |
| AUSTRALIA | ||
| BHP Billiton1 | 12,959 | 2.6 |
| CSL | 9,831 | 2.0 |
| ResMed | 8,709 | 1.8 |
| Aristocrat Leisure | 8,044 | 1.6 |
| Medibank Private | 7,074 | 1.4 |
| Reliance Worldwide | 5,870 | 1.2 |
| Cochlear | 5,808 | 1.2 |
| Seek | 5,744 | 1.2 |
| Orica | 5,437 | 1.1 |
| Incitet Pivot | 4,877 | 1.0 |
| Brambles | 4,522 | 0.9 |
| Woodside Energy | 1,991 | 0.4 |
| TOTAL AUSTRALIA | 80,866 | 16.4 |
| £'000 | % | |
|---|---|---|
| INDIA | ||
| Schroder International Selection Fund Indian Equity2 |
11,676 | 2.4 |
| Infosys (ADR)3 | 11,310 | 2.3 |
| HDFC Bank | 10,622 | 2.2 |
| Tech Mahindra | 7,933 | 1.6 |
| Housing Development Finance | 6,423 | 1.3 |
| Apollo Hospitals Enterprise | 6,377 | 1.3 |
| Info Edge | 3,562 | 0.7 |
| Tata Consultancy | 2,946 | 0.6 |
| Mphasis | 2,378 | 0.5 |
| TOTAL INDIA | 63,227 | 12.9 |
| MAINLAND CHINA | ||
| Tencent Holdings4 | 16,523 | 3.4 |
| Midea A | 10,177 | 2.1 |
| JD.com4 | 8,087 | 1.6 |
| Yum China4 | 7,901 | 1.6 |
| Shenzhou International Group4 | 6,589 | 1.3 |
| NetEase4 | 6,260 | 1.3 |
| TOTAL MAINLAND CHINA | 55,537 | 11.3 |
| HONG KONG (SAR) | ||
| AIA | 14,062 | 2.9 |
| Techtronic Industries | 12,146 | 2.5 |
| Swire Pacific | 5,665 | 1.2 |
| Hang Lung | 4,918 | 1.0 |
| Lenovo | 4,833 | 1.0 |
| ASM Pacific Technology | 3,331 | 0.7 |
| Johnson Electric Holdings | 1,227 | 0.2 |
| TOTAL HONG KONG (SAR) | 46,182 | 9.5 |
| SOUTH KOREA | ||
| Samsung Electronics | 28,396 | 5.7 |
| SK Hynix | 7,718 | 1.6 |
| Samsung SDI | 6,426 | 1.3 |
| TOTAL SOUTH KOREA | 42,540 | 8.6 |
| £'000 | % | |
|---|---|---|
| SINGAPORE | ||
| DBS | 13,518 | 2.7 |
| Singapore Telecommunication | 8,401 | 1.7 |
| Singapore Exchange | 7,846 | 1.6 |
| Venture | 7,046 | 1.4 |
| Sea (ADR)3 | 3,054 | 0.6 |
| TOTAL SINGAPORE | 39,865 | 8.0 |
| PHILIPPINES | ||
| Wilcon | 10,858 | 2.2 |
| International Container Terminal | ||
| Services | 2,970 | 0.6 |
| TOTAL PHILIPPINES | 13,828 | 2.8 |
| INDONESIA | ||
| Bank Mandiri | 8,462 | 1.7 |
| TOTAL INDONESIA | 8,462 | 1.7 |
| FRANCE | ||
| LVMH | 6,975 | 1.4 |
| TOTAL FRANCE | 6,975 | 1.4 |
| THAILAND | ||
| Siam Global House | 6,551 | 1.3 |
| TOTAL THAILAND | 6,551 | 1.3 |
| UNITED KINGDOM | ||
| Rio Tinto | 6,280 | 1.3 |
| TOTAL UNITED KINGDOM | 6,280 | 1.3 |
| VIETNAM | ||
| Vietnam Dairy Products | 4,793 | 1.0 |
| TOTAL VIETNAM | 4,793 | 1.0 |
| IRELAND | ||
| James Hardie Industries5 | 2,715 | 0.6 |
| TOTAL IRELAND | 2,715 | 0.6 |
| TOTAL INVESTMENTS6 | 490,426 | 99.6 |
| £'000 | % | |
|---|---|---|
| DERIVATIVE FINANCIAL INSTRUMENTS | ||
| Index Futures | ||
| FTX TAIEX Future July 2022 | 1,723 | 0.4 |
| TOTAL INDEX FUTURES | 1,723 | 0.4 |
| TOTAL INVESTMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS |
492,149 | 100.0 |
| 1 Listed in the UK. 2 Open-ended collective investment fund. 3 Listed in the USA. 4 Listed in Hong Kong (SAR) 5 Listed in Australia. 6 Total investments comprise the following |
||
| £'000 | ||
| Equities American Depositary Receipts (ADR) Collective investment fund |
464,386 14,364 11,676 |
Total investments 490,426
| (Unaudited) For the six months ended 30 June 2022 |
(Unaudited) For the six months ended 30 June 2021 |
(Audited) For the year ended 31 December 2021 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Note | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| (Losses)/gains on investments held at fair value through profit |
|||||||||||
| or loss | – (97,381) (97,381) | – | 34,350 | 34,350 | – | 35,882 | 35,882 | ||||
| Net gains/(losses) on derivative contracts |
– | 5,578 | 5,578 | – | (8,913) | (8,913) | – | (7,881) | (7,881) | ||
| Net foreign currency (losses)/gains | – | (4,838) | (4,838) | – | 20 | 20 | – | (502) | (502) | ||
| Income from investments | 8,787 | – | 8,787 | 5,199 | – | 5,199 | 12,195 | 3,338 | 15,533 | ||
| Other interest receivable and | |||||||||||
| similar income | – | – | – | 84 | – | 84 | 84 | – | 84 | ||
| Gross return/(loss) | 8,787 (96,641) (87,854) | 5,283 | 25,457 | 30,740 | 12,279 | 30,837 | 43,116 | ||||
| Investment management fee | (417) | (1,250) | (1,667) | (444) | (1,333) | (1,777) | (913) | (2,740) | (3,653) | ||
| Performance fee | – | – | – | – | – | – | – | (133) | (133) | ||
| Administrative expenses | (432) | – | (432) | (389) | – | (389) | (793) | – | (793) | ||
| Net return/(loss) before finance | |||||||||||
| costs and taxation | 7,938 (97,891) (89,953) | 4,450 | 24,124 | 28,574 | 10,573 | 27,964 | 38,537 | ||||
| Finance costs | (87) | (260) | (347) | (64) | (191) | (255) | (122) | (352) | (474) | ||
| Net return/(loss) before taxation | 7,851 (98,151) (90,300) | 4,386 | 23,933 | 28,319 | 10,451 | 27,612 | 38,063 | ||||
| Taxation | 3 | (570) | 1,130 | 560 | (296) | – | (296) | (642) (1,110) | (1,752) | ||
| Net return/(loss) after taxation | 7,281 (97,021) (89,740) | 4,090 | 23,933 | 28,023 | 9,809 | 26,502 | 36,311 | ||||
| Return/(loss) per share | 4 | 6.68p (89.04)p(82.36)p | 3.94p | 23.04p | 26.98p | 9.25p | 24.99p | 34.24p |
The "Total" column of this statement is the profit and loss account of the Company. The "Revenue" and "Capital" columns represent supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no other items of other comprehensive income, and therefore the net return after taxation is also the total comprehensive income for the period.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.
| Note | Called-up share capital £'000 |
premium £'000 |
Capital Share redemption reserve £'000 |
Special reserve £'000 |
Capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|---|---|
| At 31 December 2021 | 5,439 | 113,004 | 11,646 | 29,182 | 370,969 | 21,505 | 551,745 | |
| Issue of shares | 17 | 1,652 | – | – | – | – | 1,669 | |
| Repurchase of the Company's own shares into treasury |
– | – | – | – | (1,838) | – | (1,838) | |
| Net (loss)/return after taxation | – | – | – | – | (97,021) | 7,281 | (89,740) | |
| Dividend paid in the period | 5 | – | – | – | – | – | (9,275) | (9,275) |
| At 30 June 2022 | 5,456 | 114,656 | 11,646 | 29,182 | 272,110 | 19,511 | 452,561 |
| Called-up share capital £'000 |
premium £'000 |
Capital Share redemption reserve £'000 |
Special reserve £'000 |
Capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
||
|---|---|---|---|---|---|---|---|---|
| At 31 December 2020 | 5,047 | 74,075 | 11,646 | 29,182 | 344,467 | 19,131 | 483,548 | |
| Issue of shares | 297 | 29,636 | – | – | – | – | 29,933 | |
| Net return after taxation | – | – | – | – | 23,933 | 4,090 | 28,023 | |
| Dividend paid in the period | 5 | – | – | – | – | – | (7,435) | (7,435) |
| At 30 June 2021 | 5,344 | 103,711 | 11,646 | 29,182 | 368,400 | 15,786 | 534,069 |
| Called-up share capital £'000 |
premium £'000 |
Capital Share redemption reserve £'000 |
Special reserve £'000 |
Capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|---|
| At 31 December 2020 | 5,047 | 74,075 | 11,646 | 29,182 | 344,467 | 19,131 | 483,548 |
| Issue of shares | 392 | 38,929 | – | – | – | – | 39,321 |
| Net return after taxation | – | – | – | – | 26,502 | 9,809 | 36,311 |
| Dividend paid in the year 5 |
– | – | – | – | – | (7,435) | (7,435) |
| At 31 December 2021 | 5,439 | 113,004 | 11,646 | 29,182 | 370,969 | 21,505 | 551,745 |
| Note | (Unaudited) 30 June 2022 £'000 |
(Unaudited) 30 June 2021 £'000 |
(Audited) 31 December 2021 £'000 |
|
|---|---|---|---|---|
| Fixed assets | ||||
| Investments held at fair value through profit or loss | 490,426 | 579,536 | 600,002 | |
| Current assets | ||||
| Debtors | 6,877 | 808 | 667 | |
| Cash at bank and in hand | 4,975 | – | 2,876 | |
| Derivative financial instruments held at fair value through profit or loss |
1,723 | 325 | 182 | |
| 13,575 | 1,133 | 3,725 | ||
| Current liabilities | ||||
| Creditors: amounts falling due within one year | (51,440) | (45,771) | (50,142) | |
| Derivative financial instruments held at fair value through profit or loss |
– | (829) | (730) | |
| (51,440) | (46,600) | (50,872) | ||
| Net current liabilities | (37,865) | (45,467) | (47,147) | |
| Total assets less current liabilities | 452,561 | 534,069 | 552,855 | |
| Non current liabilities | ||||
| Provision for overseas gains tax | – | – | (1,110) | |
| Net assets | 452,561 | 534,069 | 551,745 | |
| Capital and reserves | ||||
| Called-up share capital | 6 | 5,456 | 5,344 | 5,439 |
| Share premium | 114,656 | 103,711 | 113,004 | |
| Capital redemption reserve | 11,646 | 11,646 | 11,646 | |
| Special reserve | 29,182 | 29,182 | 29,182 | |
| Capital reserves | 272,110 | 368,400 | 370,969 | |
| Revenue reserve | 19,511 | 15,786 | 21,505 | |
| Total equity shareholders' funds | 452,561 | 534,069 | 551,745 | |
| Net asset value per share | 7 | 416.45p | 499.72p | 507.24p |
Registered in England and Wales Company registration number: 02153093
| Note | (Unaudited) For the six months ended 30 June 2022 £'000 |
(Unaudited) For the six months ended 30 June 2021 £'000 |
(Audited) For the year ended 31 December 2021 £'000 |
|
|---|---|---|---|---|
| Net cash inflow from operating activities | 8 | 4,104 | 132 | 7,996 |
| Net cash inflow/(outflow) from investment activities | 11,709 | (37,121) | (57,039) | |
| Dividends paid | (9,275) | (7,435) | (7,435) | |
| Interest paid | (330) | (233) | (451) | |
| Net bank loans drawn down | 18,237 | – | – | |
| Repurchase of the Company's own shares into treasury | (1,838) | – | – | |
| Issue of new shares | 1,669 | 29,805 | 39,321 | |
| Net cash inflow/(outflow) in the period | 24,276 | (14,852) | (17,608) | |
| Reconciliation of net cash flow to movement in net funds | ||||
| Net cash inflow/(outflow) in the period | 24,276 | (14,852) | (17,608) | |
| Net bank loan drawn down | (18,237) | – | – | |
| Exchange movements | (4,838) | 20 | (502) | |
| Changes in net funds arising from cash flows | 1,201 | (14,832) | (18,110) | |
| Net debt at the beginning of the period | (45,887) | (27,777) | (27,777) | |
| Net debt at the end of the period | (44,686) | (42,609) | (45,887) | |
| Represented by: | ||||
| Cash at bank and in hand | 1,024 | (20,274) | (23,107) | |
| Bank loans | (45,710) | (22,335) | (22,780) | |
| Net debt | (44,686) | (42,609) | (45,887) |
The information contained within the accounts in this Half Year report has not been audited or reviewed by the Company's auditor.
The figures and financial information for the year ended 31 December 2021 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.
The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies in April 2021.
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 31 December 2021.
| (Unaudited) Six months ended 30 June 2022 |
(Unaudited) Six months ended 30 June 2021 |
(Audited) Year ended 31 December 2021 |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Irrecoverable overseas tax Recoverable corporation tax |
570 | – | 570 | 296 | – | 296 | 634 | – | 634 |
| relating to prior years | – | – | – | – | – | – | 8 | – | 8 |
| Provision for overseas capital gains tax | – | (1,130) | (1,130) | – | – | – | – | 1,110 | 1,110 |
| Taxation1 | 570 | (1,130) | (560) | 296 | – | 296 | 642 | 1,110 | 1,752 |
1 In accordance with accepted accounting practice, a tax charge is presented as a negative in the Income Statement, which is the reverse of above.
The Company's effective corporation tax rate is nil, as deductible expenses exceed taxable income.
| (Unaudited) Six months ended 30 June 2022 £'000 |
(Unaudited) Six months ended 30 June 2021 £'000 |
(Audited) Year ended 31 December 2021 £'000 |
|
|---|---|---|---|
| Revenue return | 7,281 | 4,090 | 9,809 |
| Capital (loss)/return | (97,021) | 23,933 | 26,502 |
| Total (loss)/return | (89,740) | 28,023 | 36,311 |
| Weighted average number of shares in issue during the period | 108,960,402 | 103,869,181 | 106,058,048 |
| Revenue return per share | 6.68p | 3.94p | 9.25p |
| Capital (loss)/return per share | (89.04)p | 23.04p | 24.99p |
| Total (loss)/return per share | (82.36)p | 26.98p | 34.24p |
| (Unaudited) | (Unaudited) | ||
|---|---|---|---|
| Six months | Six months | (Audited) | |
| ended | ended | Year ended | |
| 30 June | 30 June | 31 December | |
| 2022 | 2021 | 2021 | |
| £'000 | £'000 | £'000 | |
| 2021 dividend paid of 8.5p (2020: 7.1p) | 9,275 | 7,435 | 7,435 |
No interim dividend has been declared in respect of the year ending 31 December 2022 (2021: nil).
| (Unaudited) Six months ended 30 June 2022 £'000 |
(Unaudited) Six months ended 30 June 2021 £'000 |
(Audited) Year ended 31 December 2021 £'000 |
|
|---|---|---|---|
| Changes in called-up share capital during the period were as follows: |
|||
| Opening balance of ordinary shares of 5p each | 5,439 | 5,047 | 5,047 |
| Repurchase of shares into treasury | (22) | – | – |
| Issue of shares | 17 | 297 | 392 |
| Subtotal, ordinary shares of 5p each, excluding shares held in treasury | 5,434 | 5,344 | 5,439 |
| Shares held in treasury | 22 | – | – |
| Closing balance, ordinary shares of 5p each, including shares held in treasury | 5,456 | 5,344 | 5,439 |
| (Unaudited) Six months ended 30 June 2022 |
(Unaudited) Six months ended 30 June 2021 |
(Audited) Year ended 31 December 2021 |
|
|---|---|---|---|
| Changes in the number of shares in issue during the period were as follows: |
|||
| Ordinary shares of 5p each, allotted, called-up and fully paid | |||
| Opening balance of shares in issue | 108,774,651 | 100,934,651 | 100,934,651 |
| Repurchase of shares into treasury | (443,000) | – | – |
| Issue of shares | 340,000 | 5,940,000 | 7,840,000 |
| Closing balance of shares in issue, excluding shares held in treasury | 108,671,651 | 106,874,651 | 108,774,651 |
| Closing balance of shares held in treasury | 443,000 | – | – |
| Closing balance of shares in issue, including shares held in treasury | 109,114,651 | 106,874,651 | 108,774,651 |
| (Unaudited) 30 June 2022 |
(Unaudited) 30 June 2021 |
(Audited) 31 December 2021 |
|
|---|---|---|---|
| Total equity shareholders' funds (£'000) | 452,561 | 534,069 | 551,745 |
| Shares in issue at the period end, excluding shares held in treasury | 108,671,651 | 106,874,651 | 108,774,651 |
| Net asset value per share | 416.45p | 499.72p | 507.24p |
| (Unaudited) Six months ended 30 June 2022 £'000 |
(Unaudited) Six months ended 30 June 2021 £'000 |
(Audited) Year ended 31 December 2021 £'000 |
|
|---|---|---|---|
| Total (loss)/return before finance costs and taxation | (89,953) | 28,574 | 38,537 |
| Less capital loss/(return) before finance costs and taxation | 97,891 | (24,124) | (27,964) |
| (Decrease)/increase in prepayments and accrued income | (1,975) | 566 | 698 |
| Increase in other debtors | (6) | (4) | (2) |
| Decrease in other creditors | (250) | (4,416) | (4,233) |
| Special dividend allocated to capital | – | – | 3,338 |
| Stock dividend | – | – | (10) |
| Management fee allocated to capital | (1,250) | (1,333) | (2,740) |
| Performance fee allocated to capital | – | – | (133) |
| Corporation tax recovered, relating to prior years | – | – | 1,312 |
| Overseas withholding tax deducted at source | (353) | 869 | (807) |
| Net cash inflow from operating activities | 4,104 | 132 | 7,996 |
The Company's financial instruments that are held at fair value include its investment portfolio and derivative financial instruments.
FRS 102 requires that these financial instruments are categorised into a hierarchy consisting of the following three levels:
Level 1 – valued using unadjusted quoted prices in active markets for identical assets.
Level 2 – valued using observable inputs other than quoted prices included within Level 1.
Level 3 – valued using inputs that are unobservable.
The following table sets out the fair value measurements using the above hierarchy:
| 30 June 2022 (unaudited) | ||||
|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Financial instruments held at fair value through profit or loss | ||||
| Equity investments and derivative financial instruments | 490,426 | – | – | 490,426 |
| Derivative financial instruments – index futures | 1,723 | 1,723 | ||
| Total | 492,149 | – | – | 492,149 |
| 30 June 2021 (unaudited) | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Financial instruments held at fair value through profit or loss | ||||
| Equity investments and derivative financial instruments | 575,663 | – | – | 575,663 |
| Participatory notes1 | – | 3,369 | – | 3,369 |
| Total | 575,663 | 3,369 | – | 579,032 |
| 31 December 2021 (audited) |
| Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
||
|---|---|---|---|---|---|
| Financial instruments held at fair value through profit or loss | |||||
| Equity investments and derivative financial instruments | 600,002 | – | – | 600,002 | |
| Derivative financial instruments – index put options and index futures | (548) | – | – | (548) | |
| Total | 599,454 | – | – | 599,454 |
1 Participatory notes, which are valued using the quoted bid prices of the underlying securities, have been allocated to Level 2 as, strictly, these are not identical assets.
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.
Sarah MacAulay (Chairman) Andrew Cainey Caroline Hitch Mike Holt
Schroder Unit Trusts Limited 1 London Wall Place London EC2Y 5AU
Schroder Investment Management Limited 1 London Wall Place London EC2Y 5AU Telephone: 020 7658 3847
1 London Wall Place London EC2Y 5AU
HSBC Bank plc 8 Canada Square London E14 5HQ
Scotiabank Europe PLC 201 Bishopsgate 6th Floor London EC2M 3NS
Winterflood Investment Trusts The Atrium Building Canon Bridge House Dowgate Hill London EC4R 2GA
Ernst & Young LLP Atria One 144 Morrison Street Edinburgh EH3 8EX
Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA Shareholder Helpline: 0800 032 0641* Website: www.shareview.co.uk
*Calls to this number are free of charge from UK landlines
Communications with shareholders are mailed to the address held on the register. Any notifications and enquiries relating to shareholdings, including a change of address or other amendment should be directed to the above address and telephone number above.
General enquiries about the Company should be addressed to the company secretary at the Company's Registered Office.
ISIN Number: GB0008710799 SEDOL Number: 0871079 Ticker: ATR
Global Intermediary Identification Number (GIIN) TRPJG6.99999.SL.826
Legal Entity Identifier (LEI) 549300TQNNGZ0JHO2L78
The Company's privacy notice is available on its webpage.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.