Annual Financial Report

RNS Number : 8549I

Asian Total Return Invest Co PLC

30 March 2015

 



30 March 2015

ANNUAL REPORT AND ACCOUNTS

Asian Total Return Investment Company plc (the "Company") hereby submits its annual financial report for the year ended 31 December 2014 as required by the UK Listing Authority's Disclosure and Transparency Rule 4.1. 

The Company's Annual Report and Accounts for the year ended 31 December 2014 are also being published in hard copy format and an electronic copy will shortly be available to download from the Company's website http://www.asiantotalreturninvestmentcompany.com. Please click on the following link to view the document:

The Company has submitted its Annual Report and Accounts to the National Storage Mechanism and it will shortly be available for inspection at www.hemscott.com/nsm.do.

Enquiries:

John Spedding

Schroder Investment Management Limited               

Tel: [phone]

Chairman's Statement

Performance

I am pleased to be able to report a substantial improvement in your Company's absolute and relative performance during the last year. In total return terms, the Company's share price outperformed the market, rising by 12.3%, whilst the net asset value ("NAV") advanced by 15.8% in the year to 31 December 2014. This compared with a rise of 9.2% in the Reference Index in sterling terms and an average NAV return of 13.9% from the peer group.

Further comment on performance and investment policy may be found in the Portfolio Managers' Review.

Promotion and discount management

The Board continues to believe that successful promotion of the Company is key, and supports this through a discount management policy. During the year, the Company has been promoted through marketing to discretionary wealth managers, private investors, financial advisers and institutions. The Board, Manager and Corporate Broker have been in regular contact with current and potential shareholders and have developed relationships with adviser and execution only platforms, along with advertising in the trade press and provision of information on the Company's website. The focus of the promotional work this year and in the future is on the distinctive characteristics of the Company's strategy: the focus on total return, with a bias towards small and medium sized companies and a degree of downside protection through the use of derivatives. This differentiates it from the peer group, and the investment opportunity that it therefore offers.

This promotional activity is supported by a discount management policy, which continues to target a discount to net asset value of 5% in normal market conditions, through use of the Company's share buyback authorities. In the year to 31 December 2014 a total of 1,182,000 shares were purchased by the Company to be held in Treasury, in support of the discount policy. Nevertheless, as emerging markets remained out of favour for much of the year, the average discount widened to 6.6% despite the buybacks, although this compared with an average discount of 9.4% for the peer group.

Dividend

The Board has decided to declare an unchanged dividend of 3.25p per share.

The revenue return from the portfolio for the year increased substantially when compared to the previous year, from 1.98p per share in 2013 to 3.07p per share for the year under review. Thus, while the Company will again use its revenue reserves brought forward to fund the uncovered portion of the dividend, the amount of reserves used will be much less than in the previous year.

In order to provide shareholders with the opportunity to vote on the quantum of dividend, the Board is proposing that the dividend will be payable as a final dividend, subject to shareholder approval at the Annual General Meeting, on 30 April 2015 to shareholders on the register on 10 April 2015.

Gearing

The Company may use gearing to enhance performance but net gearing will not exceed 30% of net asset value. The Board has agreed a disciplined framework for gearing, based on a number of valuation indicators.

Whilst the Portfolio Managers did not use gearing during the course of 2014 as their valuation indicators did not warrant such activity, they did begin to gear the Company in January 2015, such that by the end of February, gearing stood at 6.1%. Gearing is obtained through a combination of a revolving credit facility and an overdraft.

The AIFM Directive has introduced a requirement for the Manager to set maximum levels of leverage, using a wider definition than gearing and including the use of derivatives. Full details of this leverage limit may be found on the Manager's website at www.schroders.co.uk/its and in the Strategic Report on page 17 of the 2014 Annual Report.

Fees and expenses

Ongoing charges represented 1.1% of net assets (as defined in the Financial Highlights) in 2014, in line with the average for the Company's peer group. This is an increase of 0.4% compared with 2013, which was due to the expiry of the Manager's six month fee holiday in 2013 and the addition of fees relating to the appointment of a depositary in accordance with the AIFM Directive in July 2014, as reported in the Half Year Report.

Despite the good performance of the Company during the year, the high water mark for payment of the Performance Fee was not achieved and therefore no Performance Fee was paid. The Board continues to keep the level of charges under review, particularly as many investment trusts are dropping their performance fees and reverting solely to Management Fees.

Board refreshment

As part of the long term succession plan of the Board, a number of changes to the Board's composition took place during the year and further changes are planned in 2015.

I am pleased to welcome two new independent non-executive Directors to the Board, Mr Mike Holt and Ms Caroline Hitch. Mr Holt joined the Board on 1 July 2014 and Ms Hitch on 26 February 2015.

Full biographical details of Mr Holt and Ms Hitch may be found on page 22 of the 2014 Annual Report. The elections of Mr Holt and Ms Hitch as Directors of the Company will be proposed at the forthcoming Annual General Meeting. The Board supports their elections and recommends that shareholders vote in favour of the relevant resolutions.

As part of the planned refreshment, Mr Hugh Aldous retired as a Director with effect from 22 October 2014. I would like to take this opportunity, on behalf of the Board, to thank Mr Aldous for his invaluable contribution to the Company during his 11 year tenure as a Director and for his sterling work as Chairman of the Audit Committee. Following Mr Aldous's retirement, Mr Holt was appointed as Chairman of the Audit Committee.

In the last Annual Report, I observed that at least one additional long serving Director would retire at the 2015 Annual General Meeting. Therefore, in keeping with the long term succession plan agreed by the Board, as the longest serving Director on the Board, I will retire at the Annual General Meeting and will not seek re-election as a Director of your Company. I am pleased to confirm that my fellow Director, Mr David Brief, will succeed me as Chairman, subject to his re-election at the Annual General Meeting. It has been my great pleasure to serve as a Director of your Company for over 12 years, including the last 11 years as Chairman.

During this period, there has been significant change in the Company's profile, its investment policy and objectives and, of course, its manager. I believe that these changes have been overwhelmingly positive and that your Company is now well placed to deliver favourable results in the future.

New Zealand Listing

The Company has today announced that it has requested approval from NZX Limited ("NZX") for the listing of its ordinary shares on the NZX Main Board ("NZSX") to be cancelled. NZX has accepted this request and has agreed that the last day of trading of the Company's shares on NZSX will be 5 May 2015, with the shares ceasing to be listed at the close of business on 8 May 2015.

The Company's shares have been listed on the NZSX since 28 November 1994. The Board decided to seek approval to cancel the NZSX listing because the administrative and compliance costs of maintaining a secondary listing in New Zealand have become disproportionate to the net assets of the Company, which reduced by 50% following the tender offer in 2013. There is a small and decreasing number of shareholders remaining on the New Zealand register as well as a reduced number of trades being undertaken on the NZSX.

Following the cancellation of the NZSX listing, the shares held on the Company's New Zealand branch register will be transferred to the Company's UK register and the Company's ordinary shares will only be quoted on the London Stock Exchange.

A letter explaining the details of the transition will be sent to shareholders on the New Zealand branch register with the Annual Report.

Annual General Meeting

The Annual General Meeting will be held at 11.30 a.m. on Wednesday 29 April 2015 at 31 Gresham Street, London EC2V 7QA, the offices of Schroders. One of the Portfolio Managers will attend to give a presentation on the Company's investment strategy and the prospects for Asia. The Annual General Meeting will be followed by a buffet lunch.

Outlook

Despite the quantitative easing undertaken by the USA and UK, and the more recent expansion of money supply by both the EU and Japan, the prospects for global growth remain relatively anaemic, and concerns continue to be expressed regarding deflation, actual or potential, in a number of countries. Until such time as growth recovers more strongly or inflation picks up, it seems, therefore, that the global interest rate environment will remain benign. Indeed, within Asia, there is scope for further interest rate reductions in a number of countries.

Given this background, the search for income will no doubt continue.

Meanwhile, despite the relative fiscal and monetary health of much of the Asian region, with perhaps the exception of China, investment flows into the region remained relatively subdued for much of the year. Nevertheless, your Portfolio Managers have identified companies which have outperformed markets, by focusing on well managed companies with strong balance sheets, excellent earnings prospects and in many cases decent dividend yields. This will continue to be the strategy and we hope that shareholders will continue to endorse it at the continuation vote in 2016. It is to be hoped that Asian markets may become more in demand in this Chinese year of the Goat as global growth and the prospects for regional economies gradually improve. If so, your Company should be well placed to benefit with downside protection having been reduced and gearing now in place.

David Robins

Chairman

30 March 2015

Portfolio Managers' Review

Market background

The performance of Asian equity markets was mixed in 2014 as a confluence of external macro headwinds and domestic politics led to a wide dispersion of returns across the region. Following a tumultuous 2013 during which fears of quantitative easing being reduced by the Fed triggered an exodus of capital from emerging markets, most Asian markets rebounded sharply on the back of continued accommodative monetary policies by central banks globally. Positive sentiment from further quantitative easing by the ECB and Bank of Japan, as well as the push back of interest rate hikes by a dovish Federal Reserve, helped Asian equities extend their upward climb to end the year in positive territory.

Political news flows dominated headlines for most of 2014, with India and Indonesia driving renewed investor interest on expectations that the election of reform-minded leaders would help push through much needed reforms to revive growth. Indian equities enjoyed a broad-based re-rating as a surprisingly strong political mandate for change spurred increased optimism about the longer term potential for the market. In Thailand, a military coup that brought an end to the political impasse helped remove short-term uncertainty in the market, raising hopes that the military-endorsed economic plan would drive a cyclical recovery in domestic growth.

In contrast, the Chinese market was mostly directionless for the first half of the year due to worries over potential defaults and increasing signs of stress in the property market. A weaker macro outlook, coupled with concerns the clamp down on corruption would dent high-level consumption, led to profit taking in most consumer and healthcare stocks. Expectations of monetary easing and State Owned Enterprise (SOE) reforms, however, supported sentiment towards laggard SOEs, with financials and industrial stocks extending a late rally in the last quarter after the People's Bank of China cut benchmark interest rates for the first time since 2012. Investor optimism spilled over to Hong Kong amid the launch of the much-vaunted HK-Shanghai Stock Connect, though initial trading volumes failed to live up to the hype as operational issues remained a concern for most investors.

The Korean market was the worst performing market over the year as weaker than expected earnings results and worries over the impact of the Japanese yen's steep depreciation on export competitiveness led to further earnings downgrades. The market was also weighed down by sharp falls by the Hyundai and Samsung groups (which make up almost half of the local index) as a series of disappointing corporate announcements dampened hopes of any improvement to poor corporate governance practices that continue to plague Korea.

Towards the end of 2014, macro headwinds from plunging oil prices and US dollar strength reignited fears of a global slowdown, with the resource-heavy Australian and Malaysian markets coming under pressure on worries that falling export revenues would weigh on the countries' trade balances. For the broader region, expectations of a start to an easing monetary cycle on the back of moderating inflationary pressures supported sentiment for most markets.

Performance analysis

In 2014, the Company's net asset value gained 15.8% in total return terms, compared to the Reference Index which returned 9.2%.

Holdings across most markets delivered positive absolute returns, with stocks in Hong Kong, Thailand and India recording the strongest gains. Chinese stocks saw mixed performance as robust returns from IT stocks were offset by profit-taking in select consumer and healthcare names.

Amongst the top contributors, ASEAN stocks staged a strong rebound as receding fears over quantitative easing tapering helped drive renewed inflows into the region. Domestic names in Thailand, including Kasikornbank and Hemaraj Land & Development, advanced on the back of improved consumer confidence and solid earnings growth. The Philippine market extended gains amid a robust macro backdrop and the buoyant property sector, driving a strong run in share prices of Ayala Land and GT Capital on expectations of upgrades to their land bank NAVs.

Similarly, Hong Kong stocks recovered from the sell-off in 2013 as interest-rate sensitive stocks rebounded sharply on easing concerns over the impact of rising interest rates. Holdings in the property sector, led by Swire Properties and Hongkong Land, regained ground as earnings growth remained steady, supported by robust occupancy rates in the office sector. Conglomerates Jardine Matheson and Jardine Strategic also outperformed as positive sentiment in Indonesia helped drive a share price recovery in Astra International.

Across other markets, Indian stocks enjoyed a broad-based rally, with domestic names Phoenix Mills, Zee Entertainment and HDFC Bank benefiting from hopes of sustained economic growth recovery amid falling oil prices and a lower inflation outlook. In Taiwan, technology stocks and consumer export names continued their strong momentum driven by solid earnings growth and global market share gains.

Commodity-related stocks were the laggards as Keppel Corporation and Australian-based BHP Billiton retreated on the back of falling oil prices and worries over a weaker global demand backdrop. Chinese consumer names China Lodging Group and Shenzhou International pared gains as investors took profits on concerns over a sluggish macro environment, while health care stocks Mindray Medical and Wuxi Pharmatech fell amid regulatory uncertainty and overhang from the ongoing anti-corruption drive. Amongst stock specific drivers, Hyundai Motor saw its share price plunge as news of its US$12bn land purchase for a new HQ led to renewed concerns about corporate governance.

Overall, capital protection (in the form of put options and short futures on the Australian, Korean and Taiwan markets) pared some gains as equities continued to be supported by loose liquidity conditions globally. For currency hedges, the hedge on the portfolio's Australian dollar exposure recorded gains following a 13% decline in the Australian dollar versus the US dollar over the year. On the whole, given low volatility and cheap put prices, there was only a marginal drag on performance from the hedging strategies.

Portfolio positioning and key transactions

Portfolio activity was fairly even over the year as we took advantage of market volatility to take profits in stocks that have outperformed to reinvest into names that offer greater upside to fair value. In terms of country allocation, there was a notable decline in Korea, as we exited all holdings in Korean stocks (Hyundai Motor, Samsung Electronics and Halla Visteon Climate) due to concerns over poor corporate governance standards. We also trimmed exposure in Indonesian stocks following the market's strong outperformance, paring our positions in Bank Mandiri and Semen Indonesia given rich valuations amid a weaker macro growth outlook. Exposure to the Jardine Group was also gradually reduced as we took the opportunity to lock in some profits in Jardine Matheson and Jardine Strategic after their share prices rebounded to trade close to our fair value targets.

Several new holdings were introduced, with some of the largest purchases in India and Thailand, as well as the technology sector where we are able to find more attractive stock ideas. In India, we added to HDFC Bank and Cognizant Technology Solutions. We invested in the unit trust SISF Indian Opportunities, which offers broad exposure to the domestic economy where we see potential for strong recovery in consumption and investment growth. We also initiated new positions in small to mid-cap companies in Thailand, including Aeon Thana Sinsap and Bumrungrad Hospital, which we like for their solid earnings outlook driven by rising domestic income growth. From a sector perspective, we continue to find good opportunities in the technology space, where we added selectively to Tencent, Delta Electronics and Siliconware Precision on share price weakness.

Overall, there was little change to our preferred areas of investment, with portfolio positions largely focused on globally competitive Asian industrials, technology companies benefiting from the 'Big Data' trends, ASEAN and Indian retail banks and healthcare, as well as Hong Kong property and conglomerate names trading at attractive valuations. As at 31 December 2014, 31.6% of the portfolio was held in companies with a market capitalisation of less than US$3 billion (2013: 13.8%), compared with 5.6% of the Reference Index.

Investment trends and outlook

Going forward, we maintain our view that global growth will remain sluggish amid moderate growth in the US (with little prospect of a major acceleration), a difficult backdrop for Europe and Japan, and a subdued economic outlook for emerging markets. With commodity prices weak and most currencies falling against the US dollar, our base case is that the Fed is unlikely to raise rates by more than 50bps, and we see outside risks of QE4 in the US as deflationary forces continue to build.

The key immediate problem for Asian markets, however, is the likely flux from Emerging Market bonds as the conflux of a strong dollar and collapsing commodities leads to potential corporate and sovereign bond defaults, thus triggering chaotic redemptions from emerging market and Asian bond funds. With the property sector in China facing large oversupply, exacerbated by highly leveraged corporates that exhibit questionable accounting practices, we believe the default by Chinese developer Kaisa Group on its offshore bonds is likely to be the first of many to come.

Meanwhile the China A-share market represents another bubble which, in our view, is at risk of bursting. With the Producer Price Index in China running at -3.3%, financial stress and clear signs of non-performing loans rising, we see few fundamentals underpinning the 60% rally in the domestic market. While we do not anticipate a major financial crisis, with stock brokers universally bullish on China and valuations for certain sectors looking downright expensive, the A-share bubble bursting will be a headwind for markets to get through.

The longer term outlook, however, remains more constructive for the region given generally solid sovereign, corporate and household balance sheets - especially relative to most developed markets - while demographics are also supportive in India and most ASEAN economies. Overall we are a little more bullish given poor sentiment towards Asian equities, relatively low valuations and five years of underperformance, and will likely take advantage of any material market falls to close out the Company's hedges and raise the net long position.

Robin Parbrook, King Fuei Lee

for Schroder Investment Management Limited

30 March 2015

Principal risks and uncertainties

The Board has adopted a matrix of key risks which affect its business and has put in place a robust framework of internal control which is designed to monitor those risks and to enable the Directors to mitigate them as far as possible. The matrix and the monitoring system, which have been in place throughout the year and which are reviewed annually by the Board, assist in determining the nature and extent of the risks the Board is willing to take in achieving its strategic objectives. The principal risks are considered to be as follows:

Investment activity and performance

An inappropriate investment strategy (for example in terms of asset allocation or the level of gearing) may result in underperformance against the market and the companies in the peer group. The Board monitors at each Board meeting the Manager's compliance with the Company's investment restrictions.

Financial and currency risk

The Company is exposed to the effect of market and currency fluctuations due to the nature of its business. A significant fall in regional equity markets or substantial currency fluctuations could have an adverse impact on the market value of the Company's underlying investments. The Board considers the portfolio's risk profile at each Board meeting and discusses with the Manager appropriate strategies to mitigate any negative impact of substantial changes in markets.

The Company invests in underlying assets which are denominated in a range of currencies and therefore has an exposure to changes in the exchange rate between sterling and other currencies, which has the potential to have a significant effect on returns. While the Directors consider the Company's hedging policy on a regular basis, the Company has not hedged any of the portfolio's currency exposure back to sterling to reduce the risk of currency fluctuations and the volatility of returns which might result from such currency exposure. The Manager uses hedging as part of its investment strategy and hedged a portion of the Company's Australian dollar exposure into US dollars during the year.

The Company utilises a credit facility and an overdraft, currently amounting to £50 million, which increases the funds available for investment through borrowing. Therefore, in falling markets, any reduction in the net asset value and, by implication, the consequent share price movement is amplified by the gearing. The Directors keep the Company's gearing under constant review and impose strict restrictions on borrowings to mitigate this risk. The Company's gearing continues to operate within pre-agreed limits so that gearing does not exceed 30% of the net assets of the Company.

The Company may invest in put options and futures on indices in the region, to protect part of the capital value of the assets against market falls.

A full analysis of the financial risks facing the Company is set out in note 21 on pages 55 to 58 of the 2014 Annual Report.

Strategic risk

Over time investment vehicles and asset classes can fall out of favour with investors or may fail to meet their investment objectives. This may be reflected in a wide discount of the share price to underlying asset value. The Directors periodically review whether the Company's investment remit remains appropriate and continually monitor the success of the Company in meeting its stated objectives.

Accounting, legal and regulatory risk

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. Should the Company not comply with these requirements, it might lose investment trust status and capital gains within the Company's portfolio could, as a result, be subject to Capital Gains Tax.

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 and damage the Company's reputation. Breaches of controls by service providers, including the Manager, could also lead to reputational damage or loss. The Company must also ensure compliance with the listing rules of the New Zealand Stock Exchange, until such time as its listing is removed.

Going concern

The Directors believe that, having considered the Company's investment objective (see inside front cover of the 2014 Annual Report), risk management policies (see note 21 to the accounts on pages 55 to 58 of the 2014 Annual Report), capital management policies and procedures (see note 22 to the accounts on page 58 of the 2014 Annual Report), expenditure projections and the fact that the Company's investments comprise readily realisable securities which can be sold to meet funding requirements if necessary, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider that there is reasonable evidence to continue to adopt the going concern basis in preparing the financial statements.

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report, Strategic Report, the Report of the Directors, the Corporate Governance Statement, the Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards 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 judgments and accounting estimates that are reasonable and prudent;

-          state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

-          prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on page 22 of the 2014 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 profit of the Company;

-          the Strategic Report contained in the 2014 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 performance, business model and strategy.

Income Statement

for the year ended 31 December 2014

				2014				2013
				Revenue		Capital	Total	Revenue	Capital	Total
				£'000		£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments held at fair value through profit or loss					-	20,491	20,491	-	(5,141)	(5,141)
Net losses on derivative contracts					-	(718)	(718)	-	(2,755)	(2,755)
Net foreign currency losses					-	(78)	(78)	-	(71)	(71)
Income from investments					3,141	440	3,581	2,741	-	2,741
Other interest receivable and similar income					150	-	150	33	-	33
Gross return/(loss)					3,291	20,135	23,426	2,774	(7,967)	(5,193)
Investment management fee					(229)	(686)	(915)	(266)	(569)	(835)
Administrative expenses					(604)	-	(604)	(581)	-	(581)
Net return/(loss) before finance costs and taxation					2,458	19,449	21,907	1,927	(8,536)	(6,609)
Finance costs					-	-	-	(1)	(2)	(3)
Net return/(loss) on ordinary activities before taxation					2,458	19,449	21,907	1,926	(8,538)	(6,612)
Taxation on ordinary activities					(186)	(28)	(214)	(133)	(103)	(236)
Net return/(loss) on ordinary activities after taxation					2,272	19,421	21,693	1,793	(8,641)	(6,848)
Return/(loss) per share					3.07p	26.28p	29.35p	1.98p	(9.55)p	(7.57)p

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 recognised gains and losses other than those included in the results above and therefore no separate statement of total recognised gains and losses has been presented.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

Reconciliation of Movements in Shareholders' Funds

for the year ended 31 December 2014

	Called-up share capital £'000	Share premium £'000	Capital redemption reserve £'000	Special reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total £'000
At 31 December 2012	7,409	-	8,497	29,182	239,712	13,276	298,076
Repurchase and cancellation of the Company's own shares following a Tender Offer	(3,149)	-	3,149	-	(129,184)	-	(129,184)
Repurchase of the Company's own shares into Treasury following a Tender Offer	-	-	-	-	(22,574)	-	(22,574)
Reissue of shares from Treasury	-	5	-	-	581	-	586
Net (loss)/return on ordinary activities	-	-	-	-	(8,641)	1,793	(6,848)
Dividend paid in the year	-	-	-	-	-	(4,816)	(4,816)
At 31 December 2013	4,260	5	11,646	29,182	79,894	10,253	135,240
Repurchase of the Company's own shares into Treasury	-	-	-	-	(2,182)	-	(2,182)
Net return on ordinary activities	-	-	-	-	19,421	2,272	21,693
Dividend paid in the year	-	-	-	-	-	(2,409)	(2,409)
At 31 December 2014	4,260	5	11,646	29,182	97,133	10,116	152,342

Balance Sheet

at 31 December 2014

	2014	2013
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	150,260	132,609
Current assets
Debtors	440	922
Cash at bank and in hand	1,983	1,824
Derivative finanacial instruments held at fair value through profit or loss	191	310
	2,614	3,056
Current liabilities
Creditors: amounts falling due within one year	(478)	(394)
Derivative financial instruments held at fair value through profit or loss	(54)	(31)
	(532)	(425)
Net current assets	2,082	2,631
Total assets less current liabilities	152,342	135,240
Net assets	152,342	135,240
Capital and reserves
Called-up share capital	4,260	4,260
Share premium	5	5
Capital redemption reserve	11,646	11,646
Special reserve	29,182	29,182
Capital reserves	97,133	79,894
Revenue reserve	10,116	10,253
Total equity shareholders' funds	152,342	135,240
Net asset value per share	208.12p	181.82p

Cash Flow Statement

for the year ended 31 December 2014

	2014 £'000	2013 £'000
Net cash inflow from operating activities	1,727	1,111
Servicing of finance
Interest paid	-	(20)
Net cash outflow from servicing of finance	-	(20)
Taxation
Overseas taxation paid	-	(103)
Investment activities
Purchases of investments	(41,596)	(201,690)
Sales of investments	44,833	361,168
Special dividend received allocated to capital	440	-
Purchases of derivative financial instruments	(3,532)	(3,661)
Sales of derivative financial instruments	2,956	627
Net cash inflow from investment activities	3,101	156,444
Dividend paid	(2,409)	(4,816)
Net cash inflow before financing	2,419	152,616
Financing
Repurchase and cancellation of the Company's own shares following a Tender Offer	-	(129,184)
Repurchase of the Company's own shares into Treasury following a Tender Offer	-	(22,574)
Reissue of shares from Treasury	-	586
Repurchase of the Company's own shares into Treasury	(2,182)	-
Net cash outflow from financing	(2,182)	(151,172)
Net cash inflow in the year	237	1,444

Notes to the Accounts

1.         Accounting Policies

The accounts are prepared in accordance with the Companies Act 2006. United Kingdom Generally Accepted Accounting Practice ("UK GAAP") 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 January 2009. All of the Company's operations are of a continuing nature.

The accounts have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments and derivative financial instruments held at fair value through profit or loss.

The policies applied in these accounts are consistent with those applied in the preceding year.

2.         Income

	2014 £'000	2013 £'000
Income from investments
Overseas dividends	3,136	2,737
Stock dividends	5	4
	3,141	2,741
Other interest receivable and similar income
Stock lending fees	149	30
Deposit interest	1	3
	150	33
Total included in revenue	3,291	2,774
Capital
Special dividend allocated to capital	440	-

3.         Investment management fee

	2014			2013
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Termination fee payable to the previous manager (Henderson)	-	-	-	202	378	580
Investment management fee payable to Schroders	229	686	915	64	191	255
	229	686	915	266	569	835

No performance fee is payable for the year and no provision is required at 31 December 2014 (2013: nil) as the adjusted NAV per share at that date had not exceeded the "high water mark" NAV at the date of the change of Manager, of 212.28p.

The bases for calculating the investment management and performance fees are set out in the Report of the Directors on page 25 of the 2014 Annual Report and details of all amounts payable to the Manager are given in note 18 on page 54 of the 2014 Annual Report.

4.         Dividends

Dividends paid and proposed

	2014	2013
2013 dividend paid of 3.25p (2012: 3.25p)1	2,409	4,816

	2014 £'000	2013 £'000
2014 dividend proposed of 3.25p (2013: 3.25p)2	2,379	2,417

¹The 2013 dividend proposed amounted to £2,417,000. However the amount actually paid was £2,409,000 due to share repurchases after the balance sheet date but prior to the dividend record date.

²The proposed dividend amounting to £2,379,000 (2013: £2,417,000) is the amount used for the basis of determining whether the Company has satisfied the distribution requirements of Section 1158 of the Corporation Tax Act 2010. The revenue available for distribution by way of dividend for the year is £2,272,000 (2013: £1,793,000).

5.         Return/(loss) per share

	2014 £'000	2013 £'000
Revenue return	2,272	1,793
Capital return/(loss)	19,421	(8,641)
Total return/(loss)	21,693	(6,848)
Weighted average number of shares in issue during the year	73,888,645	90,510,583
Revenue return per share	3.07p	1.98p
Capital return/(loss) per share	26.28p	(9.55)p
Total return/(loss) per share	29.35p	(7.57)p

6.         Net asset value per share

	2014 £'000	2013 £'000
Total equity shareholders' funds (£'000)	152,342	135,240
Shares in issue at the year end	73,199,141	74,381,141
Net asset value per share	208.12p	181.82p

7.         Transactions with the Manager

Under the terms of the AIFM Agreement, the Manager is entitled to receive management, secretarial and performance fees.

Details of the basis of these calculations are given in the Report of the Directors on page 25 of the 2014 Annual Report. Any investments in funds managed or advised by the Manager or any of its associated companies, are excluded from the assets used for the purpose of the management fee calculation and therefore incur no fee. The management fee payable in respect of the year ended 31 December 2014 amounted to £915,000 of which £242,000 was outstanding at the year end. The secretarial fee payable for the year amounted to £75,000 and the whole of this amount was outstanding at the year end. No performance fee is payable for the year and no provision is required.

The Manager agreed to waive its management, secretarial and performance fees for six months from its date of appointment on 15 March 2013. Thus the management and secretarial fees payable in respect of the comparative year are based on the chargeable period from 15 September 2013 to 31 December 2013 and amounted to £255,000 and £22,000 respectively. The whole of these amounts were outstanding at the comparative year end. No performance fee was payable for that period and no provision was required.

Prior to the Manager's appointment, Henderson Global Investors ("Henderson") had provided investment management, accounting, secretarial and administration services to the Company. A termination fee amounting to £580,000 was paid to Henderson in lieu of these services to the end of the notice period on 25 March 2013.

8.         Status of announcement

2013 Financial Information

The figures and financial information for 2013 are extracted from the published Annual Report and Accounts for the year ended 31 December 2013 and do not constitute the statutory accounts for that year. The 2013 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.

2014 Financial Information

The figures and financial information for 2014 are extracted from the Annual Report and Accounts for the year ended 31 December 2014 and do not constitute the statutory accounts for the year. The 2014 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 2014 Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

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